Segundo

The ‘Dilema of Thrift’ or the ‘Paradox of Thrift’ could prolong and deepen the recession. Where individuals (who have a job and any discretionary income left after paying off debt by selling assets), desire to make up for losses by saving. This is noble for the individual and family, but shen undertaken by society in aggregate, saving shrinks the economy by contracting spending and therefore growth. Therefore, length and depth of US/EU consumer-led global recession is prolonged.

Any suggestions on books or studies of the Japanese bubble and bust in the ’90s?Is that similar to what we are going in to?I have been reading up on the depression and come away convinced that that really is not an historical analogy, what is happening now is completely different. Bernanke apparently thinks he is staving off a repeat of the GD. As the cliche has it, he is a general fighting the last war, not the current one.

First

Start your own blog please on your own web site…

I agree that this will happen and will have a slowing effect on any recovery. I was lucky enough to pull out of the market near the top a year and a half ago. I have a secure job (tenured professor) and a good income, no debt other than a primary mortgage (low fixed rate), and I’m saving every penny. I’ve begun to tighted the vise until it hurts…and I expect many others (particularly those on this blog) are doing the same. I’m not expecting a recovery anytime soon and this kind of behavior will elongate any consumer led recovery. I’m thinking about may family and providing for my small kids. Thanks to ALL here who have helped me get my thinking straight over the past few years!!!!

JESUS IS COMING BACK SOON ANYWAY?James Watts said that in the 80s too; as he was Hades bent to destroy the American environment, but Jesus hasn’t come back soon. Maenwhile our fish, trees and economy are going down the proverbial drain from uncontrolled population growth.Great take Peter, and yes America signed a fantastic diversity Immigration Act in 1965, yet simultaneously also protected the environment from immigration overpopulation with Earthday 1970 mandates; to limit and control growth.In my opinion, the present cause of the economic mess is clear: we clearly lowered our domestic fertility rate to positive levels in the 70s/80s, then used that as a lame excuse to add too many anyway. Similar to the brainless knee jerk reaction to federal budget surpluses in the 90s being totally wiped out by drunken sailor spending after 2000.The laxing of Freddie and Fannie to a socialistic/Communistic instrument in the late 1990s; to allow subprimes to the added population growth was the fiery match to the present economic mess, GW Bush or not. Let’s be pragmatic.

We need to think of what is best for the economy and the populace as a whole, the government under the new administration should penalize savings to the extent that those with income and savings would be made to spend it or tax it from them in different ways that would be good for the state as a whole. Those who own companies should also be mandated to hire as many people as possible and limit the amount of expansion for the company if it does not include new employment with wages paid to equal 75% of corporate profit. If we want to fix this problem then we need to provide thru legislation and or taxes the fix that would be best for the state as a whole. It would be easier to do this if we favor large corporations weeding out the small businesses with the mind set of work hard and horde all the profits, small businesses will be reluctant to work with the new administration and government. The larger corporation’s would be much easier to control at the government level making the new government the new union for all Americans. Nationalization should be the goal, it would provide for the best outcome for the most disadvantaged in our society. Under the new administration this will be possible for the first time in our country’s history.

Dear ProfessorU are turning out to be the modern day Nostradamus, with one important differece – Nostradamus was speaking in abstract language subject to many interpretations. You are plain and simple.Could you please for a change don the hat of a doctor of medicine and be prescriptive?? Devote an article on what shoud be done by the global authities and separately, please do tell what lay people in US and elsewhere should do to protect themselves from the oncoming earthquate. How the lay people should go about their lives/familis and savings.God Bless you, Sir

Such a child- no wonder no one wants you here….Name one : “No wonder you’ve been banned from so many other blogs!!!”

Excellent compilation of diverse views on what the G20 should adopt as policy at its meeting this weekend, published by the EU. Don’t miss Buiter’s reform proposals, although many others are thoughtful and compelling too.http://www.voxeu.org/index.php?q=node/2543

Credit losses will be well above $1 trillion and closer to $2 trillion ….gold will also fall as deflation sets in; the US dollar may weaken further in the next 6 to 12 months as the factors behind the recent rally weather off while medium term bearish fundamentals for the dollar set in againIf central banks are forced to inject trillions of $ in the system… How cannot you imagine that the $ will collapse ?Gold woul the be a refuge against this expected depreciation of the $…I thing gold will raise in the near future as $ will loose its value.

NR, thank you for your thoughts. I find myself looking for your direct comments daily and, even though the analysis is disheartening, it is comforting to read what I considered unvarnished truth. I see the downside risk, thanks to your insightful analysis. It’s a sad commentary that the educated, wall street insiders and media type spin the rhetoric to encourage the “average joe” to keep their investments in equities. A lot of people have and are losing thier life savings based on mass media advice. I supose the alturistic justification these people pose is that if everyone leaves the market,given the reality of the situation, the economy will collapse. As the saying goes, the rich get richer and the poor get poorer, in good and bad times. I hope for a two year recession, even if a slow recovery follows. I fear a decade long depression.

Watz going on with treasury quotes today??? Are they trading. I would think it is impossible there is no change in any of them if they are trading!http://www.bloomberg.com/markets/rates/index.html

Are you insane?

That was my first assumption – but it had too much possibility for how some people think to not discount it as merely humor.

bank holiday today

I guess they needed a time out. Down here there are plenty of bank holidays so that people cannot get their money out/pay interest one more day:-)

Ha ha ha. Best thing I’ve read all day. Thanks.

What figures are you comparing them too?

To the Professor and other informed professional who are yet to jump of a bridge/highrise window in lower Manhattan, we the people need to know more about theCDS weapons of mass destruction

Come on, there is a lot of manufacturing in the US- Weapons!

Putting the gloom and doom aside for a moment, let’s talk about how to stimulate jobs. How about a dual package of job credits and bring back the capex credits of the past. The government could even provide “training” grants directly to employers. This coupled with intelligently designed credit and tax policy could pull us from the brink and get the economy and the country back on its feet.What do you think? You economic geniuses.

so enough to keep AIG in business for another 6 months. Comforting

I’d like to throw a piece out there regarding the China initiatives as of late.I think we can view China’s actions as an attempt a decoupling. Nouriel rightly pointed out many moons ago that the world would not decouple in this crisis. However, as I told him then and will say again here, while China may not decouple, it will be hurt relatively less so than the US, Europe, Japan, etc. So while China has not decoupled in Nouriel’s terms, it is trying to find another track to travel down.Over at The Big Picture Barry Ritholtz has a piece where he postulates that China’s actions are smoke/mirrors. While I generally like and agree with many of Barry’s viewpoints, this is one I will defer on. His basic premise is that the private sector is small in China, which I assume to mean that any state investment simply recycles basically back into state coffers. He also adds that they will be hurt in their endeavors because they don’t have the world’s reserve currency.My takeaway is that China’s driving force is not to pad the pockets of the private wealthy, but rather to keep the masses content enough to keep them in power. The investment package announced by China over the weekend aims directly at this goal. The other fact of China not having the reserve currency is both positive/negative. This is negative in the sense that under traditional terms it means that they have to manage imports/exports through the dollar network. However, it is positive in the sense that China has amassed quite a stable of secured commodities under their control whereby the dollar can be bypassed. Furthermore, they can offer exports to other countries in either dollar or yuan terms. By taking the dollar out of a good chunk of the import picture, China does not have to worry about the time value volatility in the dollar. All it has to do is offer short term dollar based deals to those that wish to purchase in dollars while possibly offering longer term deals for those that wish to purchase in non-dollar terms.In my mind China has thrown the switch and is laying new track.

The jobs most in demand are those of meeting the needs of people.Back to the basics of life?

“Economic fundamentals are strong”Bwahahaha… ROTFLOL and WMP(wetting my pants)

an orderly hedge fund liquidation that finished at 2pm just in time for the Fannie announcement

So many bailouts. Will not interestrates go up when close to all countries in the world are joining the US bailoutmania. Where are they going to get the money in a global economy that is due for a hardlanding

Unless trust fully collapse, people rush to get 1rst paper out of their electronic banking balancesheets, provoking new banks failures and bankrupcies…

China has played the hand dealt it well, agree? It has kept it’s focus on trade agreements for natural resources. It has resisted antagonizing regional power centers.And has used it’s dollar diplomacy to enhance it’s future trades relations. It is becoming more trusted.

Seems almostby design in some ways …

Skype. It’s free and it has great teleconferencing.Skype conference calls can include Skype subscribers and ordinary phone numbers, although call quality is much better if everyone is online.

“They are playing chess, while we are playing checkers”A quote from a marine friend of mine who went from the front lines in Iraq to briefing the toop brass at the pentagon. He’s seen the briefs, because he wrote them.

Ok they just gave away like a trillion dollars to the financial casinos, what’s another 1 or 2 hundred billion to the big 3? At least they make something we all can use. And there quality is alot better, probably quality / cost equal to asian that is a little lesser quality at an equivalently lesser price.

LB:There’s another interesting dimension to Buiter’s proposals. He mentioned that U.K. and U.S. should not have mount as big a stimulus package as other countries with big trade surpluses or high savings rates (China and Germany, for example), because “they can’t”.The reason that U.K. and U.S. have no savings and no trade surplus is because we’ve consumed more than we’ve produced for years.Grasshopper, shivering in the cold of January, is asking Ant to give up some grain, because Grasshopper was partying during July, and didn’t bother with that whole “preparation” thing.Have you overheard any of the political dialogue, and would you mind sharing an anecdote or two?

price to earnings

China’s stimulus package may help them but won’t help the world so much until they revalue the Yuan up by 20-30% against the dollar. They will have to do this to stimulate their economy and give their citizens increased purchasing power. Imagine the effect on world growth by giving 1b+ Chinese 30% more purchasing power.Unfortunately, this will blow up the a large part of Chinese export industries but will be good for the rest of the world.The cause of this recession at its core is the emergence of China and the economic rebalancing that has to occur because of it. Up to now, the Chinese have taken all the good, by pegging to the US dollar without the downside. This will reverse its course over the coming years.

…cool then i’ll get one of those reverse mortgages? he he he

John,I think that you have lost it or are playing some sort of weird devil’s advocate; too bad as I have enjoyed your posts and ideas – but this post makes no sense whatsoever…Physics, John; there are always Causes where it takes an incisive mind and some level of integrity to get beyond the superficial; and where most can’t get and see beyond their own penises er, ego’s and totally lack integrity; its become the ‘Merican (and worldly) way like lying and a total indulgence in Bernaysian spin. IOW one can’t see the realty for the s&%t.Don’t expect this coming collapse to be over in 2009 – this impact will be felt for 5 to 10 years – because? Because there is no “leadership” – anywhere – to confront the real issues just small time hoods and ratbags; fools and charlatans, liars and pretenders; parasites, and ghouls; etc., etc., etc.Just wait until the Obama reality bites in ‘six pack’ ‘Merica; then you will see socio-economics at large and at work; it is called “revolution” which etymologically means to “Grace the Word of God”.Ho hum

A credit crisis arises when the equilibrium between lenders and borrowers is broken. This happens because the wealth of the borrowers shrinks at a level where they cannot afford to pay their liabilities anymore. That is, there is a “relative” wealth shift in an economy implying that a portion of the system (borrowers) lives on a lower valued collateral. If the default value of the borrowers is not reflected to the lenders, then, debt gets monetized. This is what’s happening today, since the liquidity injection of the government officials helps the lenders rather than borrowers.The injection is an indirect monetization of the debt since the losses are not fully reflected to the amount of money sitting in the bank deposits. As a result, there is a high probability of higher interest rates in the future since lending cannot pick up from a lower rate in a system where borrowers are weaker than they previously were, and lenders are relatively wealthier. This situation will eventually be reflected to consumers because borrowing rates for businesses will also be higher. The aforementioned fact is also equivalent to a northwest movement in an aggregate demand and supply curve if one factors in the supply contraction with the upcoming corporate defaults in the short and medium run, and higher cost of borrowing in the long run. This is equivalent to rising prices. As some (or most) of us may know, countries generally try to measure the price increase through CPI figures, and factor these figures in the Fisher’s equation for rate decisions.I don’t think that the central banks can definitely control the interest. This is because; the expected inflation rate in the Fisher’s Equation is not merely a CPI number but rather a number, which is the outcome of the monetary circulation in a system. CPI is used a proxy, however it doesn’t’ seem to reflect the truth (I suggest as an evidence the shadow statistics we see on the Internet nowadays). In order to control the monetary circulation the central banks need to control the profit and loss mechanism in a system. Well…For this to happen, we need to see central bankers sitting in corporate boards for the decision making process. However, in reality this is not the case. As a result, in a system where the shift in wealth has already happened I still don’t see how the central banks can affect the system by pumping money since it doesn’t circulate in the right way. More clearly think of it in the following way:In a simplistic scenario, central banks print money based on the value of the government securities. The value of these securities depends on the government’s income, which are taxes. The government collects direct and indirect taxes, which depend on the value of the assets and the income in our simplistic system. The value of the assets and income is, in turn, dependent on the monetary circulation since this circulation denotes the prices. Today, because the circulation is hampered, we are in a deflationary period. However, it is hampered due to wealth concentration. As a result, net borrowers in such a system will have to live with higher interest rates in the future. The US Government will also be included in the net borrower set since its revenue from taxes will be decreased and expense due to excess borrowing will be increased. This implies, lower value for the printed money, and thus inflation! I don’t think Professor’s Keynesian approach to the solution of today’s matter is valid since this is not a recession arising from the consumers, but rather from the payment inability of the net borrowers.

Interestingly, FDIC head Sheila Bair immediately called it “a step in the right direction but falls short of what is needed to achieve widescale modifications of distressed mortgages, particularly those held in private securitization trusts.”(PS – Sheila you can keep your job after Jan 20)_________________Sen. Chuck Schumer (D-N.Y.) is not impressed with the new mortgage modification plan unveiled today by industry and the Bush administration.Instead, he said lawmakers need to change the bankruptcy code to allow judges to reduce mortgage payments and keep people out of foreclosure, a proposal that industry fought to defeat several times this past year.

China: we are screwed-> they are SCREWED commodities keep nosediving.

Benny’s infamous quote on subprime:The subprime mess is grave but largely contained, said Federal Reserve Chairman Ben Bernanke Thursday, in a speech before the Federal Reserve Bank of Chicago. While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S.economy, he said. The speech was the Chairman’s most comprehensive on the subprime mortgage issue to date.”Given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited,” Bernanke said.(never mind on the economy – my note)http://blogs.money.aol.ca/2008/03/17/ben-bernanke-quote-after-sub-prime-takes-down-bear-stearns/

Bernanke Believes Housing Mess ContainedEvelyn M. Rusli, 05.17.07, 4:21 PM EThttp://www.forbes.com/markets/2007/05/17/bernanke-subprime-speech-markets-equity-cx_er_0516markets02.htmlThe subprime mess is grave but largely contained, said Federal Reserve Chairman Ben Bernanke Thursday, in a speech before the Federal Reserve Bank of Chicago. While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S. economy, he said. The speech was the Chairman’s most comprehensive on the subprime mortgage issue to date.“Given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited,” Bernanke said.In March, Bernanke had said that the problems in the subprime market would only “reduce somewhat the effective demand for housing.” But on Thursday Bernanke’s language was sharper.“We are likely to see further increases in delinquencies and foreclosures this year and next,” Bernanke said. “Although a leveling-off of sales late last year suggested some stabilization of housing demand, the latest readings indicate a further step-down in the first quarter.”The bleak forecast weighed on Wall Street, as the S&P 500 edged 2.03 points down, or 0.1%, to 1,512.11. (the good old days of low volatility – my note)Although Bernanke does not want to “curtail responsible subprime lending,” he called on regulatory agencies to increase oversight over the lending industry to prevent abusive practices. Because of the great demand for mortgage-backed securities in the last few years, many lenders weakened their underwriting standards and recklessly granted loans to borrowers. As housing prices weaken and interest rates rise, many of these high-risk borrowers are now defaulting on their loans because they cannot qualify for new loans.Foreclosures and delinquencies have skyrocketed since 2006, with the rate of serious delinquencies among subprime borrowers currently standing at 11 percent.Recent economic indicators seem to support Bernanke’s forecast of a depressed housing market. On Wednesday, the Commerce Department reported that building permits fell 8.9% in April— the worst decline in almost two decades. Foreclosures also surged 62% this April, versus April 2006, says RealtyTrac, an online company that tracks foreclosures.There are signs of self-correction in the lending market, Bernanke said, but the Fed, Congress, and other regulators will need to step in. In a fragile balancing act, regulators will have to “walk a fine line” to clamp down on bad practices and not stifle responsible lending or close off all refinancing options for borrowers.“The first line of defense against improper lending,” Bernanke said, is “effective disclosures,” or improved transparency between lender and borrowers. If consumers are more educated about the loans they are applying for, and what options are available, it is less likely that high-risk borrowers will find themselves entangled in impossible loans. Regulators should also outline “sharply” drawn rules that prohibit clearly abusive practices and offer “principles-based guidance combed with supervisory oversight.”Even as the housing industry stumbles through its correction, major financial institutions should be spared. “Importantly, we see no serious broader spillover to banks or thrift institutions from the problems in the subprime market; troubled lenders, for the most part, have not been institutions with federally insured deposits,” Bernanke said.(ca

The reason PE ratios stayed fairly high during the 30′s was that earnings were dropping so fast. Stock prices of course, dropped just as fast as we can see by the almost 90% drop from 1929 to 1932. If we drop 85% from 14,000 that leaves us at 2100. That takes us to where a long-term mean reversion suggests we should be, given an over-correction to the down side.Ultimately PE ratios are misleading and we should be looking at book value as a more consistent way to measure value in a stock’s price.The book value of the DJIA is almost 3 while history says that 1.5 is a typical valuation. We should expect it to drop substantially below that during times of recession or depression.It is important, if you wish to get through this period without losing everything you have, to deal with facts beyond those we have been brainwashed to believe by analysts on CNBC and a two decade bull market.Almost any valuation, properly done, leads us to the conclusion that the market is headed substantially lower, assuming you believe we are in a true secular bear market.

Since the S&P 500 index didn’t really get off the ground until the mid-1950′s, I don’t know how useful the data from the 20′s really is.If it’s a back-extrapolation to the 1920′s, the data results may suffer from survivorship bias by only counting those companies that survived to the 1950′s.I’m not sure if this is the case with the data that you’re looking at but it’s something to keep in mind.

New reality show: Benny and Hanky fight the plunging DOW:It seems there is no well thought-out strategy to improve the economy. Ontead, the modus operandy seems to focus on impacful press releases put toghether in haste. Such mop up jobs are effective in cornering the shorts for shorter and shorter periodsof time (even us shorties are dumb but just as cats can we can also learn some) but do nothing in improving the long term fundamentals.Pardon me; but is this the way to run a country?

Between 1930 and 1940 , during the depression, the yield on 10 year or longer Treasury bonds declined gradually from slightly under 4% to around 2%. Those low interest rates would support higher P/E’s during the 1930′s. Does anyone on this blog really think that long term Treasuries are going down to 2% in the next 10 years?

me tink

It’s hard to put any credence into what Bernanke says when “the Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.” (Bloomberg)And when Catherine Austin Fitts, former Assistant Secretary of Housing and Federal Housing Commissioner, charges that “the allegations of mortgage collateral fraud are true…that a significant number of Fannie Mae or Freddie Mac mortgages that serve as collateral for U.S. mortgage-backed securities markets are not real. They do not exist…” That Chase [now JP Morgan Chase] as the lead HUD servicer and the other big banks implementing HUD fraud were using the same home to create ten or more mortgages that were placed into different pools.“This was why we would see the same house default two, three, or four times in a year… FHA mortgages had to be churned through multiple defaults to generate the cash to keep all these fraudulent pools afloat…”Is this why Bernanke won’t open his books?Or is this the reason? Fitts: “This issue of collateral fraud was repeated in other markets. As I started to learn more about precious metals and the commodities markets, I would hear story after story about precious metals arrangements in which what investors really had was a bank credit—there was no bullion behind the arrangement…”Could it be there are no assets behind the collateral the central bank is accepting? That there’s no Wiz behind the Wizard-of-Oz smokescreen? Hmmmm?

While the European markets were slumping last week, Bank of England cut the interest rates by 150 Bps. This was a record cut but markets couldn’t turn higher. I think this is because no matter what you do, the mood will be dark if there is a chaos. This will mean that your bullets will be wasted. So contain the crisis first, do the damage control and when the waves die, attack!I think whatever governments will do, should be against containing the mortgate and credit crisis first. The valuable money should be spent there. Then the stimulus should follow…

Or a bank?

Start your own website or blog please…

China does not need to “print” quite the contrary, if anything they would need to “scan”. China is running budget surplus, and more importantly, most of the stimulus plan will be executed through taxes; forgone revenues, so no need to “print”.OTH, I don’t believe China would resolve to selling US bonds, because if once they do, those Treasuries will be worth as much as some Merrill CDO’s; You imagine China financing 75% of the purchase of some of its super senor US Treasuries to Taiwan for a 22 cents on the dollar. Once/if that happens, it would be a trigger of a global deleveraging process of new kind. China would not do that until it is forced or ready to do so.

I am not a fan of Ryskamp but there is a underlying point within his ranting that I think valid.A few weeks ago NR was taking about the very real possibility of depression / total systemic chocolate sauce.His tune has changed slightly; now stating this has been somehow averted. I find this hard to accept. I only see the FED etc using smoke and mirrors to hide bankruptcy.I think it good that Ryskamp questions NR’s intent/arguments – going against a very supportive fan-base on this blog (me included). Especially as it seems possible NR has connections to the new adminstration.And we are witnessing the havoc economists with connections to US adminstrations can create.It is unfortunate that Ryskamp is abusive/manic/??? as this rightly or wrongly means that valid points are maybe not getting made.

I agree with your view and asked a similar question last week about whether trade barriers might successfully be used to promote manufacturing if unemployment got beyond 10%. (I didn’t get much response.) IMO manufacturing provides the true value added and unless more is done in the US it will be hard to return to prosperity. Same goes for the UK, but it has a much smaller market and would have to compete with the Germans and others within the EU.Because we are attempting to keep wages and benefits higher than in the China and other low cost producers, it seems that we may have to re-introduce some protection. The argument that free trade benefits all only works where there is a true comparative advantage (i.e. one country can produce a product inherently better than others). If the comparative advantage only arises because of cheap labor, the subsequent production and trade may reduce wages and jobs in the country that has higher wages. This free trade policy worked in the consumption economy of the past 20 years but it may not work going forward.I would be interested to hear opinions on this from you and others.

Touche

Prescription for solving an unsolvable equation? Well, at least not by those who led us into this and maybe not by anyone. You wish for something greater than man. Keep praying though!There are three possibilities with debt. You pay it down /off. You repudiate it, default and bankruptcy. OR that which is wished for, you make it smaller via inflating the currency. The first is beyond the congregate capability and the last won’t work in the manner being attempted because they are creating more debt trying to inflate away the debt that already can’t be afforded. Well there are four and the forth is to refinance under better terms but I think most debt has asset values that are near or already underwater making this option not viable without writing down huge losses. But this doesn’t really fix the economic under pinings. To move on we need undervalued assets that both can be leveraged but also produce income. What we have are assets that are so leveraged that they are a drag on the system, rather than a benefit.Thus leaving the only viable course in current circumstances IMHO and that will be default and bankruptcy.Putting off the pain in the case of excessive debts really doesn’t make anything better. It just puts off some of the pain into the future and adds more pain to be reckoned with.So that is all that is going on, those in charge think they have to do something and so they are, even though it is really nothing. But the majority of the pain will be under someone else’s watch, not theirs. They hope!Unless there is a real plan to allow the system to crash and have a plan in place as to how to start it back up quickly. This would be the best in the long run IMO as it would allow the asset values to be available below real economic value and allow a relatively quick recovery. BUT it would require both very gutsy and really smart leadership. We’ll see!

Excellent post.

Think I should sell home (so cal) and rent for a while, but concerned about safety of to much cash sitting in the bank. Is anyone else in this predicament?Sentimental value is difficult to deal with when you know values will continue down and logic yells get out of the way.(“Whenever it starts looking like things are at their most bleak, PERCEPTION needs to change!” Any news?)hlowe

Don’t think about this as the comical farce it is but as a way for the government to maintain employment.After all, think of all the people employed in work that is marginally productive.This gives the bail out of GM, Ford and Crysler a new look. It is all about keeping the populus employed and not rioting it the streets….Oh! Is this the US or China? Seems like the same strategy. Doesn’t it?

Now that’s what I pay taxes for…;^)

We need to re-employ millions more in the agricultural sector because those are jobs which actually produce things we human beings need to survive.Agricultural jobs are far superior to all of these stupid “service sector” jobs which produce nothing of real value for anyone.

Fred, that’s exactly what my parents said until Mom had a stroke (she had none, none of the usual indicators for having one), and they were faced with $70,000 a year in nursing home costs and $12,000 a year in prescription drugs. The guv’mint took every single cent they had and thankfully Mom passed away after a year and a half and gutting what they thought would be their nice tidy retirement account. Dad’s living on Social Security and he’s okay but only just because they paid their house off with his retirement after he got laid off at age 55.Nice thought, Fred, to “take care of yourself before you expect the government to take care of you,” but how about those unexpected life and/or medical events, hmmm?

Totally agree. In the UK we have money being poured into the banks and then the government begging the banks to start lending again, but they just keep the money to recapitalise. Let the banks go bust, and lend through those which are now state-controlled. Now is not the time to be prissy about state ownership.

How about if the government undertakes to buy any property going to foreclosure, at say 90% of outstanding mortgage debt, and then renting the house to the occupiers at a percentage of income?This would directly attack the roots of the crisis (mortgage default), ensuring that people do not lose their homes, prop up the lenders whilst also giving them a haircut, and pump money into the economy where it is most needed.

lol

MARTIN ARMSTRONG’S LATEST TECHNICAL THESIS (from Jail)http://www.contrahour.com/contrahour/files/ItsJustTimeMartinArmstrong.pdfhttp://seekingalpha.com/article/103613-on-martin-armstrong-s-it-s-just-timeWell worth reading!!

They can’t sell US Treasuries, nobody would buy them at face value. They are stuck with them, basically a worthless investment because they pay very low interest rates and the Yuan appreciates against the dollar by more than the interest anyway.Basically, an investment which is guaranteed to decline in value which cannot be sold.

Skype was found to be “extracting data” a while back. Not sure if they’ve “fixed” this (came clean?).Yahoo Messenger works well.

Why? We don’t need to move people all over the place! Perhaps goods, to an extent, but not people! This is the source of our flawed paradigm! It’s an energy disaster!Rather than building up yet more transportation infrastructure that’ll become obsolete, invest in local communities making them become more self-sufficient!

Because that creates the incentive for every mortgage holder who is underwater (20% of all mortgages I believe) to stop making payments and intentionally go into foreclosure.If you owe more than your home is worth, and you can give that home back to the bank with the assurance that you won’t be evicted, and that your monthly payments will be lowered, everyone would do it and the housing market would collapse, with the govt. and banks going down with it.

China didn’t create this mess! It’s over-leveraging (and the FED) that’s responsible!I’d further state that it was the “grand thinkers” who were trying to kill communism by subverting it with capitalism that’s speeded this all up. NOTE: communism would have come to the same fate, but just not as fast (capitalism is much more efficient).And in the final analysis it’s going to all collapse because that’s what happens to all populations that exceed the carrying capacity of their environment.

That presoposes that the housing market will not recover. If that is the belief of the federal government then this is all for naught anyways. For far less than has already been invested that 20% of mortgages (primary homes only) could have been bought by the government for 60% of value, rented to the home owner (revenue stream) and resold when/if the housing market recovers, (recovery of investment). They banks get guaranteed 60% of value already more than they are expecting and the prior homeowner has a place to live. It’s all moot because the government obviously has no faith that housing market will recover in a forseable time table.

Right on, Jane! Compassion will always be more important than ideology.SWK

Ditto. They say Social Security is the third rail, and I’d say homes are the first rail.

This above is a very important comment, not shrouded in left/right conspiracy speak but instead a clear observation of what we are in the midst of.In the truest sense of Kuhn’s concept, we are in the midst of paradigm shift that by definition will alter/redefine the way of life (political, social, economic) for much of the world.

$1 trillion deficits for 2009 and 2010 seems very optimistic to me. I can’t help foresee deficits in the range of $2 trillion or more, given the scale of the bail-outs and the fiscal stimulus needed, and the weakness of Gov income in a deep recession.And they say NR is a perma-bear… that’s unfair.

Even though I normally articulate analytical economic and financial management comments in response to Nouriel’s blogs, your comments about being “sickened with those liars, morons” accurately expresses my “gut reaction” to the past American government mismanagement of the economy as well.

I found my twin (your words fit me perfectly). I knew that there was an exact copy of me somewhere in this world. (If you tell me you have 4 kids, I am going to freak out.)I also would like to express a heartfelt thanks to Dr. Roubini and all the posters on this site. You have saved my family from significant loss.

Great name, Cahill. Coincidentally, it is my middle son’s middle name (my wife has Cahills on her paternal grandmother’s side).Some time ago, I took a graph of the Case-Schiller index and extrapolated it out based on the average time it took for the housing bubbles in the 1970s and 1980s to fall back to trend relative to the time it took for those bubbles to reach their respective peaks. What I got was a recovery for the current bubble sometime between 2010 and 2012. I assumed I must have done something wrong, though I never could figure out anything apparent. Given how persistently sticky down housing prices seem to be, I’m wondering if maybe it WILL take another two or three years for the housing market to recover.SWK

Consider the (repugnant) option of WAR, with those holding our debt, making default and repudiation palatable to the voting public…SCARY!!!

Here’s what the reality is:http://www.law.harvard.edu/news/2007/07/17_warrentestimony.htmlEven many affluent denizens of the upper middle class are only one accident or disease away from the poor house.SWK

All the caves are taken by the bears!!!

This hits a sore spot. I very much agree with your thoughts.It would be a good idea to take the bitter medicine now, (let the zombie companies die) instead of taking 2 Tylenols and heading to bed, hoping everything will be normal in the morning (no pale skin, dark circles around eyes, blood smears around mouth, etc.).But the vested interests are too tight. Politicians from the states where the old way of auto manufacturing reigns will want to protect their seats by siding with the companies that didn’t care (or were systemically unable) to see more than 2 weeks into the future. And those involved in the various industries and the Fed want to keep it that way. I’m thinking the multiple bailouts are bad, bad news, worse in the long term than a string of serial bankruptcies would be – however difficult for all of us.So, more pain for the rest of us for a very long time. And the world is watching. Shameful.

Fiscal crisis indeed.And the basic global macroeconomic imbalance still has to be addressed, i.e: the overconsumption in the US x the oversaving in Asia basically. Now that the US consumers are tightening their belts, who on earth is going to fill the gap? the pospect is gloomy, for no country, even China, can in a few months replace the american consuming machine. Chine is even reporting record commercial surpluses, which underlines a worsening of the problem. Don’t you think? what’s the way out of this? how to avoid the dared ‘deep, protracted recession’ N.R. expects? looks L shaped to me… Am I delusional? drowning in despair? please I need to hear some comforting lines

Isn’t the very definition of the U.S. government an ongoing state of fiscal crisis?Sorry, felt the urge to indulge in a bit of snark. I agree with your comments.

…ongoing, ongoing, till when? GM is talking overtly of its inability to remain as an ‘ongoing concern’… US gov next?

It was just a bit of dark humor. I think we all understand that this sort of thing cannot “go on”.

Whatever we do, we have to commit to it wholly. If we take a protectionist stance then we have to focus our attention to internal development of our industrial base and manufacturing and become self sufficient as a nation. Once we reach that point we can open up trade and drop the tarrifs. I don’t think we will go down that road since the US did that during the great depression and it didn’t improve matters, even though that was a much different scenario in regards to our economic structure.

I hope our policies are as effective as China’s have been. I hope our government will be half as competent as theirs recently has been.

Yves,The asian way will be to make work for the masses and put money into thier pockets that way. My understanding of the package is that it is heavy on all kinds of infrastructure and rural development.This also addresses the need to keep as many rural folk as possible busy rather than have them flooding the cities.My take is that only so much is being done for the exporters in terms of added export credit’s, better borrowing terms and lower interest rates. The thrust of the package is towards major project/construction type activity that will be employment and materials heavy.Along with the mothballing of most future new commodity related capacity, this stimulous could provide a price floor for many commodities. Now, if the US were to go crazy with it’s own stimulous package…..?

There’s another word for a mass default on debt.It’s called a Jubilee. It is a good idea at this time.Suddenly we would be out from under those constraints and able to enjoy the infrastructure we have built for ourselves. A visitor from outer space would wonder why so many are suffering when we have so much.

http://www.forbes.com/business/2008/11/11/bonds-credit-economy-biz-wall-cz_mc_1111bonds.html?feed=rss_businessCredit Markets Dip Into AbsurdityMatthew Craft, 11.11.08, 07:05 PM ESTBlame forced selling, not approaching apocalypse, for the madness in the bond markets.To judge from the crystal ball of debt markets, next year will bring some incredible calamity, maybe a depression, maybe worse. Bond prices suggest nearly one in five companies with high-yield debt could slip into bankruptcy with certain loans fetching just 70 cents on the dollar. The differences between corporate bonds and Treasurys now stretch beyond some investors’ beliefs.”Spreads are more than ridiculous,” said David Kotok, chairman of Cumberland Advisors in Vineland, N.J. “Either we have dysfunctional credit markets evidenced by absurd pricing, or the market pricing is accurately forecasting the Great Depression of 2009, ’10, ’11, ’12 and ’13.”With three-quarters of high-yield bonds trading at distressed levels, the market implies a one-year default rate of 18.5%, according to Garman Research. That’s worse than most expectations and higher than previous peaks of 13% in 1991 and 11.5% in 2002. Standard & Poor’s forecasts a 7.6% default rate in a year from now. The rating agency’s worst-case scenario has the default rate hitting 9.6% at the end of 2009.

Good luck scaling THAT up! The ONLY viable solutions come from nature, and in approximate scale as well…

Nope, EAT them!* Kind of like “Eat the Rich.” The day’s rapidly approaching…* 2/3rds of the world’s population lives on $3/day or less. Insects factor into much of the world’s population’s diet. Best start getting used to eating bugs…

Ah, but remember the power of propaganda! Just heard on NPR (National Pentagon Radio) that the auto companies are now stating that they’d use the bailout money to “re-tool” in order to make “more energy efficient vehicles.” WTF were they doing with all that money they were racking in making SUVS?The Obamatrons will lap this up! “Yeah, I demand that I get my [subsidized] 60mpg car, so that I can be ‘green’!”

Don’t miss this video!http://finance.yahoo.com/tech-ticker/article/125352/Bail-Outrage-Misuse-of-Funds-Lack-of-Transparency-a-National-Disgrace?tickers=GS,MS,JPM,BAC,C,WFC,XLFBail-Outrage: Misuse of Funds, Lack of Transparency a National DisgracePosted Nov 11, 2008 03:37pm EST by Aaron Task in Newsmakers, Recession, BankingRelated: GS, MS, JPM, BAC, C, WFC, XLFMany Americans are understandably outraged by the bailout fever that has gripped Washington this year. But even those who believe the bailouts are a “necessary evil” would have a hard time defending some of the bailout-related items that have come to light in recent days, including:Financial institutions using TARP bailout money to pay executive bonuses. The firms, of course, say it’s “different” money and bonuses are key to retaining top employees. But if you need to come to the government for a handout, shouldn’t your executives forgo a bonus? Or shouldn’t the government make canceling bonuses a condition of getting aid, as is the case in Europe?The Fed refusing to reveal who received almost $2 trillion in non-TARP loans, or what collateral it has accepted from “emergency” loans made to struggling firms, as Bloomberg reports.The Treasury Department providing a tax break to banks involved in acquisitions that could amount to $140 billion. The Washington Post reveals the change to the tax code was issued on Sept. 30, while Congress was debating the $700 billion TARP bill.The bailouts are bad enough. But this kind of chicanery and lack of transparency makes me recall a line from another time when fear and deceit dominated Washington: Have they no shame, at long last?Obi gonna do anything about this? Actually, the question should be are we gonna do anything about this?

Here’s the value of the FED:“http://www.antiwar.com/rockwell-fff.php”

we are the worldwe are the childrenlets make it a better placeso lets start GIVINGLOL

It is not a question of forced selling. Think about it. The system is running out of money supply. Corporations WILL default if this is not resolved. Prices are a function of available credit. Forced selling is just a symptom of the underlying problem. We are heading to a depression. And there will be more defaults that you can imagine. The pricing is not absurd now. It was absurd in 2006 and early 2007.

“The third rail” is electrified on British railways. Touching it implies instant electrocution for anyone on the tracks. The first and second rails are just there for the wheels of the train to run smoothly.Apologies for being a pedant about the stretching of the metaphor.I agree that many Americans and British are watching their home values, pensions and savings all evaporate simultaneously into the ravenous maw of political and banking corruption and are near the edge of revolt.

If they’re helping Motor City, shouldn’t they do something for Motown?

How about NBA, NFL, NHL or just NL? It is so unfair that the wealthy bankers get a bailout but not the wealthy ballchasers. Does it have to come to the point where, if you are a professional athlete, you have to buy your own stadium?

The system is running out of money supply.

Are they not printing enough money?Maybe U.S. should allow people to print money at their home printers?

I think the problem with US is the same as what makes project management difficult: the darn PEOPLE. And they are everywhere on this planet. aaaaerrgh.

Yes, what prescience. Go ahead and put the protections in place so we can purge the economy of all those un-necessary … nay, evil jobs that produce “nothing.” And since most of the incumbents in those jobs have relatively few useful skills, just about the only place we will be able to use them is on the farms. That fits in well with a go-green policy of parking all the tractors and combines, as we can use all those free-hands to do the work that was taken away from them years ago by the machines.It also fits well with fixing the “suburbia problem,” as we needed in any case to deal with the millions sitting around their under-water-mortaged homes and we need the farmland. So we bulldoze all the McMansions and put the former occupants to work in their new, sustainable collective communities.Yep, let’s force march the masses back to the farms where they should have stayed years ago.

This is the best idea i have ever heard. This must be started right away. Of course i first need a tax rebate to purchase the paper and ink.

I am agree with your gut feeling, we share it.I think the economy is in really bad shape, it might be in much worse shape than nouriel thinks.nouriel has been bearish so far but now he seems too cautious to me. after reading this I feel as if his critique is only financial. He points out how the initial package was inefficient, and he has been right all along, 300 bn were not enough and then he suggested 1 trillion, now we are up to 2 trillion. When will it stop? Fannie and Freddie run through hundreds of billions in months. I have no clear understanding on what they did with the cash, but I bet they cleared off the negative positions they were in. A question. who is accountable in this case? when a bridge goes down the engineer who goes to jail gets sued and he risks years in jail and here? who is gonna reimburse those among us who lost so much.In Nouriel’s analysis there seem to be a disconnect between financial instruments and companies that manufacture goods or offer services, and the general public. they will greatly suffer from the credit cruch, much more than Nouriel hints. I think that things are much worse than they surface (who would want to say, I am in trouble in a period like this?) since companies not only lost credit but lost also financial assets and that people, many people, lost so much money in the process. Not many people have much money or money might be tied up to illiquid assets. so again, there is information asymmetry. Many more financial institutions are gonna go belly up, many companies are not going to survive and many fellow citizens are on the verge of bankruptcy. The question is how many is many? The truth is, economist may be able to estimate it but in case the estimate is flat out wrong what are the implications on the economic outcome? Do big variations of certain fundamentals cause avalanche effects on the financial systems? In terms of dynamical systems, how far are we from the equilibrium point? are we far off now from the stability region? what is the impact of an error in a certain parameter estimation?Truth is that no one knows what will happen, I bet the recession will be much more severe than Nouriel described it; I think he’s being accommodating to much of the press who told him he’s too bearish.3 years + L shaped nearing a depression. That’s my guess and I am being optimistic.

Yes, Bob Geldorf should organize a concert and call it “Bailout the World”!

THE reality is that the majority of the world lives on $3/day or less and has almost ZERO access to health care.The real law (speaking of Harvard Law) is the law of averages… ours is going down.

It’s funny how the serious talk about drawing a line in the sand starts with the worker though not surprizing that’s the only rhetoric I’ve ever heard the past 20 years from over zealot proven wrong phoney capitalist. Michigan has 9% unemployment already and that’s only because Walmart hires a lot of people. I can’t wait for all the snobs on the west coast and east coast to loose their totaly unneeded service based jobs in droves. In fact if your’e one of the people which 1/2 of you probably are that work for the government or medical industry you need to keep your mouth shut because you’re already an un-needed government sloth wait untill 3 million factory workers stop paying taxes and fica.

Obama’s Car Puzzle (WSJ Nov. 12)“You have in GM’s Volt a perfect car of the Age of Obama — or at least the Honeymoon of Obama, before the reality principle kicks in.Even as GM teeters toward bankruptcy and wheedles for billions in public aid, its forthcoming plug-in hybrid continues to absorb a big chunk of the company’s product development budget. This is a car that, by GM’s own admission, won’t make money. It’s a car that can’t possibly provide a buyer with value commensurate with the resources and labor needed to build it. It’s a car that will be unsalable without multiple handouts from government…

Why should any banker be making a spread off of self-interest compromised/tied into banks Fed targeted interest rates? FED should be audited and contolled to mathmatical interest rates and underwritting standards. Any deviance or special circumatance should be act of congress. Then banks should be socialized that follow strict computerized underwritting standards. We certainly don’t need a lot of self-interest based human inteference. Oh but I know what would we do with out the private bankers profound wisdom and experience and expert underwritting… uh get ripped off a lot less.

We are the envy of every bank and bussiness, we are what every bussiness strives to become, we are the epitome of banking success and bussiness success, we are beaneath whom Marx claims too be a capitalist, too:We are the big bank and the big company who has aqcuired the “too-big-to-fail” status.

Good points: until we have a system that values transparency, fairness and simplicity executed by honest leaders, the American public will be continually pickpocketed until America achieves full 3rd world status! Can you imagine what the founders of our country would say today?!

I agree with you on the uncertainty.You touch on an important point: sensitive dependence upon initial conditions. Put more simply, any financial projections will be extrememly dependent upon the accuracy of it’s initial assumptions.Since our economic and financial models do not have complete data on every person and don’t have an accurate projection of each person’s future (unless we throw out free will), the model forecasts could be wildly wrong just because the built-in assumptions are incomplete/wrong.Unfortunately, data will only tell you in hindsight when you’ve switched from one “equilibrium point” to another – the model’s won’t be able to accurately forecast that. If, as we suspect, the U.S. and world economies have undergone one of these switches, you might as well toss the models out the door.

An interesting perspective (from NC) “Goldman big winner in government’s revised bailout of AIG”

Another link courtesy of NCNo change, no hope: Obama’s Transition Economic Advisory Board (Financial Times FT.com)

Does anyone here think that this is bigger than simply a medical/insurance issue? I’m thinking that this issue is tied to the larger issue of systemic unfairness in our current global economic system.Maybe it’s time to rethink the whole economic model from the bottom up.(1) What do we need?(2) What is the best way to meet that need?

Actually, I have only two small kids, however I do teach business statistics!

Don’t foget SEX!!!

Balance Sheet Recession (Richard Koo) is a great book about Japan in the 90s.

Shouldn’t they be selling horse carriages!!!

I predict other’s will predict that professor will predict depression within the next 1-2 months!!!

PPT has drawn a line in the sand early today…

Quote from Best Buy. This should rally stocks green!’The most difficult climate we’ve ever seen’

Paulson is speaking and FDIC / Fed making joint statement – If its like the housing announcement we should run towards zero by 10:30am when Paulson assures us things are under control.

let’s frame this and see how well Jimmy fares in his predictions.The guy obviously did well back in his days with Soros and he is no doubt a smart guy. But I don’t think he is a good forecaster/timer of markets. It is really amusing to see how whenever he is interviewed, he makes it sound like he got out right on time out of whatever is nosediving and got into whatever is doing well.He was bitching about the USD like hell and deep into commodities and then it turns out he got out of commodities and bought short term USD treasuries right when the USD started appreciating and commodities plumeting! I just don’t buy it. I agree with some of his views but to me he is a freaking clown.

Thanks!… you’re cute, I’ll do what you suggest… in foetal position, naturally

Exactly. Put goverment there and we will feel more and more helpless regarding this. When the humongous democratic goverment comes, from small-town bussinesses to the top banks all will be smiling and raising hands for a bail-out. The goverment will be everywhere and so will many Paulson’s and Goldman Sachs.

As the professor has stated numerous times, here comes the next BIG problem…. I have a Black Card and they imposed a limit on me 3 weeks ago. I think i will cancel it to a Gold card and save the $2500 a year…http://www.clusterstock.com/2008/10/the-coming-credit-card-busthttp://www.clusterstock.com/2008/11/american-express-axp-seeking-3-5-billion-from-tarpThe Coming Credit Card BustJohn Carney | Oct 29, 08 8:46 AMOne of the worst kept secrets in the economy has been that consumer credit is overdue for it’s own subprime meltdown. After years of cheap credit that fueled a boom in consumer spending, credit card companies and retailers providing credit to customers are seeing a spike in defaults. They’re reacting by pulling back on available credit and raising rates, making consumers less able to pay bills by moving balances to the next card.And, of course, you can’t use your house as the last line of credit defense anymore now that banks have pulled back on home equity lines of credit. You already know how this story plays out: higher default rates encourage tightened credit conditions which raise defaults and diminishes consumer spending, which in turn leads to layoffs, higher defaults, tighter credit, and so on and so on. Retail credit has driven itself right off the cliff, just like housing credit.Eric Dash at the New York Times lays out the frightening scenario:The pullback is affecting even creditworthy consumers and threatens an already beleaguered banking industry with another wave of heavy losses after an era in which it reaped near record gains from the business of easy credit that it helped create.Lenders wrote off an estimated $21 billion in bad credit card loans in the first half of 2008 as more borrowers defaulted on their payments. With companies laying off tens of thousands of workers, the industry stands to lose at least another $55 billion over the next year and a half, analysts say. Currently, the total losses amount to 5.5 percent of credit card debt outstanding, and could surpass the 7.9 percent level reached after the technology bubble burst in 2001.“If unemployment continues to increase, credit card net charge-offs could exceed historical norms,” Gary L. Crittenden, Citigroup’s chief financial officer, said.Faced with sobering conditions, companies that issue MasterCard, Visa and other cards are rushing to stanch the bleeding, even as options once easily tapped by borrowers to pay off credit card obligations, like home equity lines or the ability to transfer balances to a new card, dry up.Big lenders — like American Express, Bank of America, Citigroup and even the retailer Target — have begun tightening standards for applicants and are culling their portfolios of the riskiest customers. Capital One, another big issuer, for example, has aggressively shut down inactive accounts and reduced customer credit lines by 4.5 percent in the second quarter from the previous period, according to regulatory filings.

Because it is much cheaper or efficient to move people and goods over rails than each person having their own vehicle. With limited energy/resources/capital, efficiency is better.One type of insanity is to do the same thing over and over expecting different results. If we are going to solve our problems, we need to look at what solves them, not what feels good or what we would wish could be.When you are in a hole, the first thing you need to do to get out is STOP Digging it DEEPER!Rails are the more efficient transportation which saves on energy. How do we get self sufficient in energy IF we are unwilling to do the things that make sense and reduce our demand?

A key find among the possible missing links, this, London Banker, and keen detection above. Your expertise and prowess at this point in history are making a difference.

With the Dow breaking down through 8500 this morning, we’re basically going through a key level of support here. It signals a key breakout to the downside. Looks like we’re headed to the next major downside target.PeteCA

The opportunity costs are beyond comprehension.

Watch this clip… he makes Nouriel look liek a bullhttp://www.gotoguy.com/?p=526

Where is the Treasury getting all this f567ing money?? WHy are bond yields not soaring?? Somthing stinks about all of this. When is the globe going to catch on that the biggets wealth transfer in history is going on right under their noses?

I smell french fries, but that doesn’t make any sense.

Naaa, Nancy Peolosy will demand we save the dow today!

Now you are on the right track.FairnessEfficiencyMy wife calls it the “drive-thru” mentality. We need to stop thinking we are entitled to whatever we want and that we should have it in 90 seconds or less.There is a big difference between NEED and WANT.The system is already broken……….

So in other words, Bernanky and Paulson lied to congress, knowing exactly what hot buttons to push with the whole “mortgage rescue” BS, and once they have the money…BAMM!!! it goes to all their friends who need it! How is it, that every single tax payer in the US is not just going ballistic right now????!!!!

A link to Karl Denninger this morning, commenting on a news article that execs from AIG had a big splash at the Pointe Hilton Squaw Peak resort in Phoenix – for a cost of $343,000. And this happened last week, apparently. I guess they were celebrating the recent handouts of taxpayer dollars. Christmas does come early for some folks.http://www.321gold.com/editorials/denninger/denninger111208.htmlPeteCA

Not to mention … that when all the bad assets got tossed into the giant financial dumpster at the Fed – no-one was prosecuted on Wall Street. The best way to hide evidence of securities fraud is to throw everything together into one large pile. Who can trace it??? Paulson has engineered the “Great Escape” for a mob of banksters who were panicked that they would be convicted of wide-ranging charges including mortgage fraud, securities fraud, and concealment of evidence.PeteCA

Double bottom in, Pelosy said so!!!

It’s estimated to cost between $30,000 and $35,000; about 2x too much.How many years before it is actually released?

well done

You act like it’s been a fair and even fight? Workers are scrounging for crumbs while CEO’s have made off with trillions and the workers have a “me first” attitude you say? I say knuckle head!

Every time Paulson shows up, regardess of what it is, it’s bad news: his announcement ideas are new inventions to mask over the latest tragedies. Every time he shows up, it means things are worse.

Good read!That’s just brilliant of Obama to call in many of the architects of the current system to fix it!

PPT PPT PPT PPT PPT PPT HUGE BUYING NOW!!!

To pick all of these retreads, is the worst thing Obama could have done. Obama doesn’t have anybody new that I know of, except Emanuel and Axelrod. Instead of “tried and true,” most of these retreads are “tried and false.”

@ Guest on 2008-11-11 18:56:36″Why do we need all of these parasitic “banks” who are the middleman between the FED and the people who need loans, etc…who not abolish all of these parasite-middlemen and have the FED loan directly to the people who need it?”I suggested here in the past that perhaps new sound banks could be formed and we could let the zombie banks collapse. The present system is “putting new wine in old jars”. Then I thought maybe one of the SWFs could do this on the down low by enticing customers with better rates. Now, who knows?@Wolf in the WildsI think it is just self interest. The Chinese will devote resources to make themselves more self-sufficient in energy and improved infrastructure will set the less developed parts of the country up for the next level of growth: domestically generated growth.Smart prudent Chinese seem to be on the right track. Too bad for the U.S. that our leaders seem to be both incompetent and corrupt.Guest on 2008-11-12 10:31:09SGG is that you? I’ve been kind of missing SGG.

I read in the WSJ a couple months ago that the cost for the VOLT was going to be around $47,500 – the cost you cite is what the consumer was expected to pay after a government tax break and other incentives.The car is supposed to be in the market place in 2010.I say this is an excellent time for GM to finally get rid of the unions that have so hamstrung them. They should file for bankruptcy immediately – that would really shake things up. Are they going to bailout the $35b for the retirees health care promised to the union members too. I would not like my tax dollars doing that. Let’m sink and let the retirees get under Obi’s new health care plan.

I wonder what happens when PPT starts selling the stuff they’ve been buying lately

When a felon’s not engaged in his employment,Or maturing his felonious little plans,His capacity for innocent enjoymentIs just as great as any honest man’s.W.S. Gilbert:”The Pirates of Penzance, II”

I agree. I am a “knuckle head.”I also agree that it hasn’t been a fair fight up until now. You have no argument with me on that point, either.All I’m trying to say is that the way out of this mess won’t be guided by the goal of bringing “them” down. Instead, I’m for focusing on bringing the working class up.Besides which, if all of those folks in “unneeded service jobs” do lose their jobs, who is going to buy the products that the folks in “needed jobs” do produce?Using your logic, if 3 million factory workers no longer paying taxes and fica will hurt the economy, then 100+ million service sector employees losing their jobs would be a LOT worse – wouldn’t it?And, do you honestly think that the CEO of one of these companies is actually going to be hurt if their company does go under??Again, I don’t disagree with you that the system has been unfair. I just disagree on where the focus of our energy should be placed as we move forward.

The VOLT does not seem to be feasible. It could be subsituted by many other things;conventional hybrids, diesel, stripped down sub compacts, DIY hybrid to plugin hybrid.The VOLT ROI is not good at those price points.

@OBGreetings today from KY! … Great link, this feeds right into my post on the previous thread. This indeed is just one of the elephants in the room; who’s going to buy all the debt we’re creating! Brad Setser has a post here at RGE and also at Brad’s site that speaks to China’s possible initiatives in buying Treasuries. He takes the opposite view in China’s case based on both a time differential on import funding and export payments that give China a net windfall, and secondly on an offset due to a contraction of private investment that would free up surplus savings that China would then have available. I think Brad is very insightful in the foreign funds flow field, and while I understand his argument, I’m not convinced he is reading this one right.I’m more in tune with the article you mentioned in your link and it closely follows my thinking in the previous thread.

One way to increase the government savings rate, of course, is to increase taxes, but that is an unlikely course of action during a severe recession.Monetization of debt remains a possibility, and to some extent would only continue the current trend. Total Federal Reserve Bank credit outstanding has more than doubled in the year to November 6, 2008, rising by $1.2 trillion to $2.06 trillion. This reflects loans, securities purchases, and related actions by the Fed to bail out the financial system. If the deflation persists, the Federal Reserve may be compelled to purchase US government debt.Another possibility is that risk appetite among investors at home and abroad will continue to fall, inducing a portfolio shift towards Treasury securities. In this case “crowding out” will occur through risk-preference. It will not be so much that competing borrowers are crowded out of the lending market, but that investors will stampede away from risk. In this scenario, even a very low federal funds rate will not help to restore economic activity.The point of lowering the risk-free rate is to push investors towards riskier assets. In a normal business cycle, falling output leads to lower yields on low-risk bonds, which in turn encourages investors to add risk to their portfolios by investing in businesses. If the safest of all investments, namely US Treasuries, suddenly offer much higher real yields, comparable to the boom years of the late 1990s, why should investors take risk?In any of these scenarios, the result of global de-leveraging is dire: the more the US government tries to bail out businesses and households, the more bailing out the economy will need. The Bush administration’s response to the financial crisis, and the likely content of the Obama administration’s economic program, will deepen and prolong the economic downturn…..Even the best-designed economic policy would be hard-put to provide growth incentives without a substantial increase in the savings rate and a corresponding reduction of consumption, implying a very sharp economic contraction. If the Treasury tries to spend its way out of recession, the results are likely to be very disappointing.

An interesting tidbit that I picked up though is the implication that the FED is and has been keeping rates low not to aid bank spreads so much as to stay below the return on riskier assets. This is the ‘normal’ use of the FED rate, but is kind of lost in all the interest rate spreads news! Quite frankly, the government didn’t want a rush to Treasuries because this is a drag on other investments. However, since there has been a rush to Treasuries, in reality, we are causing the bailout by buying Treasuries. The government has attempted to diminish the drag by re loaning those monies back into the system via the bailout facilities! Therefore, the size of the bailout will be proportional to the amount of domestic funds invested into Treasuries! It’s as if the government has become our broker in reverse! If we won’t pick our own investments through a broker, they by golly the government will take our money (through Treasuries) and pick investments for us! Hey, we even get to insure our own investments! Sweet!Is this possible? Are we in effect forcing the bailout by becoming risk-averse?

Some thoughts on the auto industry bailout:A PP stated that a bailout of the auto industry would enrage the public, as bailouts pile on top of bailouts. Alternately I would suggest that NOT bailing out the auto industry could be as politically dangerous when you consider that we are talking about spending tens of billions to salvage a poorly run blue collar industry vs. HUNDREDS of billions to salvage a poorly run AND often crooked white collar industry.If the auto industry does in fact support 1 in 10 U.S. jobs as the media has been flogging, then the loss of the sector could quickly send the U.S. into double digit unemployment with all that entails in private sector economic contraction and public spending expansion.Also, manufacturing does have some flexibility. In war times past manufacturers have changed their lines to create very different machinery. If you believe that cars are a malinvestment then these production facilities could, with restructuring, be used to build buses and/or trains. Particularly in Detroit where the infrastructure is presumably in place to build and ship large objects.That said, it is time for government to get its hands dirty. Throwing buckets of cash at banks and corporations and hoping everything will be fine is a waste of resources.The $25 billion bailout isn’t a done deal at this time and Bush may veto it if Congress tries to pass it in this lame duck session. If, as suggested in the comment here, the U.S. only has 10 trillion to work with, then our leaders damn well better be smart about it.A Proposal For GM:With a cash burn rate of $1.15 billion a month and a market value of $1.7 billion it appears the company could be bought by the government outright and run for a year for about $15 billion. Ownership would give the government power to fire under performing leadership and put a new team in place.Overpaid union workers could be offered the option of taking a buyout, or, individuals could abandon their contract to work at a lower rate of pay more in line with foreign competitors with the incentive of an ownership stake. Ownership would gradually move from the government to company employees based on the rate at which profits repay the government’s investment. A direct stake in the success of the company would give workers an incentive to excel and stick it out through hard times.Temporary government ownership/restructuring would allow legacy costs to be washed out of the company. Government ownership would also allow for redirection of manufacturing if such is needed. If the company folds anyway the final costs shouldn’t be any higher than those of bankruptcy now.Indeed, this type of temporary nationalization which gradually converts to employee ownership might work in many situations.

Okay- just want to conduct an informal poll-How many here who celebrate Christmas, plan to cut back on holiday gift spending?I for one do probably by more than half.

yeah, like a house or something!

And what about the poor Mafia!? They’ve been losing money too! There’s less to shake down when people have less!

Debt loss is ephemeral, extra money is physical. The Fed and Congress have not even warmed up yet in their Christmas gift giving. We have two or more years of this ahead. I would not be so quick to call deflation.

@K in TXI think I’m the PP you refer to. while I don’t disagree with your white vs blue collar argument, it misses my point that it will become a blue vs blue fight neighbor vs neighbor. Currently, the blue is pissed at the upper white bailouts, but by design there is very little daily contact with the current bailout set. Nobody to physically look in the eye and spit on so to speak. Also, nobody to curdle your stomach each time you pull out of the driveway.As to the gov. running the auto companies … just look to Conrail and Amtrak! As for ESOP’s just ask the folks at Weirton Steel how that worked out! As for washing away legacy costs, you go up to Detroit and tell them that all they have achieved over the decades is for naught.K in TX I appreciate your thoughtful comments on this site, but I think this is a bigger can of worms than many realize. Thus my warning to Obama earlier.For the record, I don’t have a good answer either.

Please send $500,000 ASAP I’ll get started!

This is truly the end of an age, at least in the USA. It reminds me of a Leo Buscaglia quote: “nobody leaves this world alive.” Socially and economically, we are going to find out what death and transfiguration are like.In the meantime the cries for justice or for a return to sound principles seem strange. It’s too late. Nobody is going to turn the ship around. The thieves will depart, the rest of us will be left. Maybe we will finally cease our contempt for the poor, because we will be of them.America is now a poor country. It will have to find some kind of virtue because it can no longer afford its vices.

If SGG were here he’d be saying 865 saved again!!!!!

As hard as it is for most to stomach, no matter what happens here just as K in TX said the union contracts have to be renogiated to be more in line with the foreign competitors employee Americans here in the U.S. There is no point in buying out the companies or bailing them out if we keep using the same broken model. The UAW will throw a tremendous fit, but it’s either negotiate or be simply sidestepped as the whole industry crumbles. But none of this can or will happen till the government comes clean with how bad this is and realistic numbers, models and plans on how to get moving again.

“Them” are sure fightin hard to keep this market together today-this was just the 4th test of this level today and SUPRISE! we held.

An accountant of all people should know how to count the hundreds of thousands of job losses to the big 3 over the past 20 years and the countless give backs and also part makers that have successfully gotten rid of their unions. Even the big 3 union workers have had to make huge sacrifices compared to what they were getting a few years ago and now are almost even in pay scale with foreign auto makers, plus new hires are at like 14 dollars per hour. It’s health care that’s been hurting the big 3 but even that was dished off to the unions. The big 3 have been the canary in the coal mines sort of speak the last 20 years as they have suffered in pay and numbers so to have the pay scales for all manufacturing workers and workers in general. If you can find a job in a parts manufacturer(which you can’t) it’s for 8-10$ per hour no benefits and every other day you hear rumors of moving shop to Mexico as many have. As Union workers lose their pay in holy sacrifice to rich capitalist so to does an accountants services become worth less. We’ve become a society that foolishly believes we can live off of rising stocks and asset holdings. This attitude has been taught through the media and every business school/economics teacher in the country. Call it the magic of compound interest/ponzi scheme, and I would imagine accountants especially buy into this as I’m sure it was some Harvard accountant who devised all these exotic derivatives no one can understand so we could all earn free money. So when the free money ends take your pound of flesh again out of the underpinnings to the nations economy- the worker.

here we go again

Which foreign employees will we match the pay scale of? The ones in Japan or the ones in Kenya? It makes a big difference.

Doesn’t matter.Won’t work!Can solve a problem without understanding it.Those who have a lot to lose and have been architecturally involved have neither incentive nor desire to solve it as the only real solution is for them to lose a lot of money, power and prestige and they will not be able to do that, even if they had the integrity, which I do not believe they have. Or the insight. They are going to do the same as they have and expecting different results. All the while the pain goes on and on.The system needs to reset at a lower level so that assets become economically useful again. The architects only want us more indebted so that we can prostrate our allegiance to them. The people at the top know they are the best and the brightest and deserve to be in charge and have all the trappings of their royal positions.To them, we on the other hand are nothing more than serfs who work hard so that they can live in their cloud cities.But I’ll say it again, won’t work. This time they went to far and took to much and the foundations of their power is collapsing and there is nothing they can do about it.

and saved again

What does 4 to 6 times equate to?

Saved again! Wow!

Wednesday, November 12, 2008Wall Street Bonuses Expected To Come This Season Despite Bailout

I expect brisk sales of pitchforks and torches this holiday season!

Tief* Gabelli just dropped by Bloomberg TV to cheer-lead stocks a little.* Why is he a tief? Hint: Check out the expense ratio for his funds.

Berkshire Hathaway Inc. watch: Trading at around 100K USDhttp://finance.google.com/finance?tkr=1&q=NYSE:BRK.AWhen this puppy breaks down it is gonna breakdown fast!!!

Nowhere to run: republicans and democrats ore one of the same. Perhaps they should join into one party: The Communist Party of the USA and do away with democracy!

This just in: GE capital approved for temporary liquidity (e.g. one of those non bank financials that Paulson referred to) Also Buffett = AMEX Buffett = WB (Wells Fargo) – My guess is Buffett is going to have to write another editorial for the NY Times if he wants any more favors.

Nasdaq @ 1510 approaching October intra-day lows — watch out for 1493

SCORE CARD:We the People: $300Government Financial Complex: $3,000,000,000,000

I could certainly use a little?

GM is in the process (if it survives) of replacing its “current high-paid work force (earning $78.21 in wages and benefits – about $162,676 annually ) and replacing “many of them with low-paid non-core, non-assembly line new hires (costing $25.65 in combined wages and benefits [$53,352]),” in a contract negotiated about a year ago – after the final straw broke the camel’s back. The excerpt below is from “United Auto Workers (UAW) Sellout at GM and Chrysler,” by Sephen Lendman|Global Research (October 22, 2007). How much government interference there was in forcing the companies to bow to former Union demands, I do not know:Other terms agreed to in the contract include a two-tiered wage and benefit package. Under it, new skilled assembly-line workers will get $26 to $32 in hourly wages [$54,080 to $66,560 for 40-hour week] but less in benefits than current ones for a total compensation package of around $45 an hour [$93,600] compared to about $73 an hour [$151,840] for existing skilled workers. In addition, a new non-core worker group, comprising up to one-third of GM’s workforce, will get around $27 an hour [$56,160] in wages and benefits. Both core and non-core employees will henceforth receive less in active-worker-health-care benefits with GM saving billions from the arrangement.The company told Wall Street investors October 15 its 2007 labor costs will drop from $12.6 billion last year to $10.1 billion in 2007 (45% below 2003 wages and benefits paid) with “significant” further declines from 2008 to 2011. Further, GM estimates it will reduce its long-term healthcare obligation to workers by $47 billion and expects over the next four years to retire up to 75% of its current high-paid work force (earning $78.21 in wages and benefits) and replace many of them with low-paid non-core, non-assembly line new hires (costing $25.65 in combined wages and benefits).Employee buyouts, early retirement offers and other downsizing efforts are coming that will let the company eliminate expensive workers and replace them with cheaper new ones. The contract runs four years and includes three lump-sum bonuses but no wage increases so annual cost of living adjustments won in 1948 are ended that over time will cost workers much more.http://www.globalresearch.ca/index.php?context=va&aid=7148

Definitely cutting back…Was in Best Buy last night, I would have thought that it was closed, not many people at all compared to usual…took forever to get things settled, apparently they have cut back on employees…I don’t recommend shopping at Best Buy at all. Have had the worst retail experience of my life in the past two months…the nightmare is nearly over now though…just a warning…

5. Airlines.6. The very rich.7. The ultra rich.8. The mega rich.9. The mega ultra superrich.

Went to popular appliance store Saturday afternoon there were 10 sales people playing cards at the front entrance, maybe me and one other shopping.

It is never the time to be prissy about state ownership.

The Dow just jumped like 60 points…if you blinked you missed the jump! Buyers panic underway. No way the powers are going to let these levels be breached-it will show that the skeletons in the closet are for real…

Keeping your eyes on the ball: Despite all the the talk about trashed USD; with billions flying by like dishes being thrown by an angry spouse, it is worth recalling that:@ 700USD/ounce; one billion USD ($1,000,000,000) is equivalent to 40,500 kilos of gold.Rounding down to 40 metric tons we see that a billion USD buys you a truckload of gold; and that is a pretty heavy truck!So AIG reported quarterly loss this week – 29 billion? – is equivalent to 29 truckloads of gold.SO what is a trillion?one thousand truckloads of gold (since one trillion is 1000 billion USD)!So if Nouriel says losses from this crisis are two billion, the this mess is bery big!How much gold is there above ground now? Is, 2 trillion USD (80,000 MT of gold) more than all the gold on earth (above and below ground)?http://www.answerbag.com/q_view/420344there is approximately 525,000 M/T of gold in and on the earths crust. many people have tried to state a value and the biggest mis-calculation that i have seen has been in the fact that there are 32.105 troy ounces in a Kilo and only 1000 kilos in a metric tonnes. that mean that a M/T at today prices of around 800 USD per ounce would be1 MT = 1000 Kg = 32105 oz/T * 800 USD =$25,684,000 USDthat means the cash value of the roughly 425,000 M/T would be $10,915,700,000,000 the other 100,000 M/T is still yet to be mined at an annual production currentky of 2,500 M/T. So 2trillion USD represents about 15% (60/525) of all the gold on earth above and below ground!The gold above earth is worth about 11 trillion USD.So lets check how this compares with the total US debt:http://www.washingtonpost.com/wp-dyn/content/article/2008/05/16/AR2008051603461.htmlThe downside is that the final four or five percentage points of financial-sector GDP expansion in the 1990s and 2000s involved mischief and self-dealing: the exotic mortgage boom, the reckless bundling of loans into securities and other innovations better left to casinos. Run-amok credit was the lubricant. Between 1987 and 2007, total debt in the United States jumped from $11 trillion to $48 trillion, and private financial-sector debt led the great binge. So it looks like total US debt (public and private sector) is 48 trillion. No wonder we left the gold standard a long time ago!Public sector debt is currently about 11 trillion:http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htmDate Dollar Amount09/30/2008 10,024,724,896,912.4909/30/2007 9,007,653,372,262.4809/30/2006 8,506,973,899,215.2309/30/2005 7,932,709,661,723.5009/30/2004 7,379,052,696,330.3209/30/2003 6,783,231,062,743.6209/30/2002 6,228,235,965,597.1609/30/2001 5,807,463,412,200.0609/30/2000 5,674,178,209,886.86

Yes Cahill is definitely one of the better names out there. Its an Anglicisation of the Irish name ‘Cathal’ which meant warrior in Gaelic.I assume if you’re in the US you pronounce it K-Hill.Whereas in ireland it would be Ca-hill (Cathal is pronounced with a silent ‘T’. as in Ka-Hul).Anyway back to the eh economy thing.

more banks going under and more bailouts to the banks paid for by the US consumer

I read about ten pages yesterday but stopped when he said that Karl Marx is directly responsible for most white collar crime.At least Ryskamp’s posts aren’t 72 pages long!!

4:12 p.m.National Semiconductor lowers second-quarter sales outlook

They’ll just list the lettuce in the MLS and hope someone else cuts it so they can collect the commission.

OK, OK, OK, I didn’t get it all in a single day: Monday evening when the AIG news came out I said:BRKA will soon trade under $100K. It is trading at a ridiculously high level.The Amex shocking news will be the catalyst.I will take a closer look when I drops under $80K.Hide reply Reply to this comment By Octavio Richetta on 2008-11-10 19:06:47Maybe WB needs to write another Op-Ed in the NYTimes telling everybody it’s time to get back in the market.I am getting a feeling that the markets are starting to realize that the patient’s condition is starting to rapidly deteriorate. I think Tuesday is going to be a bad day as it starts to sink in that the disease may not have a cure.Hide reply Reply to this comment By Guest on 2008-11-10 20:02:01I have a feeling tomorrow will be a record down day for the dow and I have not checked futures, asia, etc. yet…Reply to this comment By OR on 2008-11-10 20:23:24 Total DOW loss in the last two days: 411.30+170.36= 581.66If we add monday’s loss: 661.15 drop or 7.39%http://finance.google.com/finance?client=ob&q=INDEXDJX:DJIhttp://finance.google.com/finance/historical?q=INDEXDJX:.DJISo as far as AMEX being the catalyst; I have a hint for you: Paulson’s talk today.

Hear! Hear! It remains to be seen how much our wealth is affected long-term, but I agree wholeheartedly with your sentiments.The idealism of the 1960’s and ‘70’s was replaced by the “meism” of the ‘80s that has persisted until now. And I hope this economic crisis will finally cause us to reject the false hope for happiness through materialism and replace it with a much more deeply satisfying joy of contentment, compassion, and caring for each other in this oftentimes painful world.

Will probably spend less, but waiting until retailers are desperate and giving stuff away.

Julian Roberson at Bloomberg tv. Now that is a man to respect; not Jim Rogers.

DOW largest daily losses:October 15 second largest: 733http://www.dailybreeze.com/ci_10732437September 29: 774http://finance.google.com/finance/historical?q=INDEXDJX:.DJI&start=25&num=25

@ Guest,I do not deny that things have changed in the last 2 to 3 years and rightfully so to some degree. Historically the big 3 squandered away opportunity and holdings to the unions. Now i don’t think that paying manufacturing employees $8-10 is reasonable either, that’s not what i was talking about at all. But in the past someone with no experience making in excess of $50K a year for manufacturing seems excessive does it not? I have no problem with a specialist making that much. There was good and bad historically. And no as an accountant I absolutely detested the economic model used by the markets. That my friend was a creation of attorneys and finance experts. Polling accountants you would most likely find in general we did not see the sustainability of profit margins that large. I made a very similar argument a few days ago on a previous thread. I don’t mean to be rude or condescending in any way. As a matter of fact i worked 40 hours a week while putting myself through college and I assure unless you consider overnight janitor, ups truck loader or warehouse stocker a true service industry job I spent my time in the trenches. My only true argument is that if we bail out the big 3 they must have a plan to become sustainable again in the future, if they can not do that then we need to find alternate uses for the manufacturing facilities that bring value to the country and the employees.

AfA:To bottom.SWK

S&P Oct 10 intra-day low 839 – S&P Oct 27 closing low 848 — and the current S&P futures S&P futures 843 – we are very close to the edge -

Because it is much cheaper or efficient to move people and goods over rails than each person having their own vehicle. With limited energy/resources/capital, efficiency is better.The question isn’t public or private, it’s: Why the need for transportation at all?I’m not being flip. This is the fundamental question that we’ve got to be asking ourselves. I won’t give up on this: just like the question of how we can achieve perpetual economic growth in a finite world; finally people (here) are starting to contemplate this question.

Seadragon,Where can we find commentary by Andy Xia?

You’re spot-on. I’d note, however, that perhaps the real underlying problem isn’t that the assets are over-valued, but rather it’s that they have no value? No value going forward into the future, and that’s what people are coming to grips with.Look at the things that are failing:1) Big houses;2) Big cars (SUVs);3) Big travel (airlines are crumbling);4) Big entertainment (from TVs to sports).And so forth and so on… “BIG” is dying because it’s about excess, excess in a energy and resources depleting world…

Credit card debt is the new subprimeNothing original in this remark as the Professor has been saying credit card debt is the next shoe to fall for a long time. Just thought that the analogy summarizes it in a few words. It is funny that Benny and Hanky apparently found out just recently (Hint: AMEX bank news and Paulsons shift on TARP today)

That will happen anyway when no one has a job.

@ Guest on 2008-11-12 12:48:29Wow. Fourteen dollars an hour for a new hire?I make eleven dollars an hour as a lab tech, a position that required a BS in a hard science and three years experience. I won’t be making fourteen an hour for another four years or so. (assuming current raises hold) Guess it’s all about where you are.

Time for a reread from Benson’s Economic & Market Trends Archives | January 9, 2006“Beyond Keynes to Inflation” by Richard BensonOrthodox economic training in the United States in the post-World War II world, centered on the observations of John M. Keynes who claimed that to keep an economy rolling, spending (aggregate demand) needed to be kept alive at all costs. The biggest post-depression fear was that saving too much could cause spending to fall short and recession, or worse, could befall the economy (from 1929 to World War II, the worse did happen). The Keynesian trick used for our central bank was to cut interest rates to a level low enough to encourage businesses to spend excess savings. Low interest rates encourage low financing costs and urge businesses to recycle savings into productive investment, which keeps the economy humming especially if consumer spending is weak.In the hallowed Ivy League halls of academia (where this author spent too many happy years before having to work for a living), they preach that it is the government’s duty, and the central bank’s mandate, to spend and print money to keep the economy afloat. The Keynesian trick is certainly easier to pull off when there is some inflation and the Fed can drop interest rates. Interest rates that are below the rate of inflation clearly subsidize old and new borrowers alike, and give an extra boost to the economy. Subsidized borrowers borrow and always find ways to spend money. Even though this economic stimulus trick consisted of a little extra government spending, recycled savings, and credit creation, recycled savings gave the economy the biggest boost, with credit creation adding some inflation to the spending mix. Then, everything began to change.In the late 1990’s, this economic model was scrapped. After Alan Greenspan gave his famous “irrational exuberance” speech about the stock market, he stopped being rational and prudent, and became rational and profligate. He discovered that the stock market bubble – fostered by too much easy credit – made consumers feel really wealthy. By letting money and credit run wild the economy roared, and rising stock market prices created such a false sense of wealth that consumers stopped saving. By 2000, Americans had hardly saved anything and domestic savings to recycle didn’t exist. Around this time, Mr. Greenspan declared that “bubbles should not be popped” but the Federal Reserve’s job would be to clean up the mess if the bubbles collapsed on their own. So, how does a popped bubble get cleaned up? With easy money, of course!Cleaning up the first bubble required dropping interest rates to virtually nothing and creating an even bigger bubble in housing. The real estate bubble was far more powerful for spending because of the asset-backed and mortgaged-backed debt markets, which allowed for the virtual unlimited creation of new mortgage credit and money.Moreover, it was seductive telling a potential homeowner to feel comfortable about spending a lot of money to buy a home because property values were always going up. By 2004, it was time to help another sitting President to get re-elected. The housing market was booming and home equity extraction added about $800 billion (a year) to spending, even though this spending left a massive trail of debt.In looking back now, you can’t help but notice how the economic model has changed. For decades, America had an economic model built around recycling savings into investment. In a few short years, those savings have simply vanished and our society has become comfortably cavalier about borrowing far more than they earn.The first bubble in stocks taught Americans how not to save. The second bubble in housing taught them how to live off their house and spend even more than they make. From a macro-economic perspective, our country no longer has savings to recycle as part of a stimulus package. Instead, we are left with a massive debt to foreigners and it’s growing at the rate of $700 billion a year. America’s net debt to the rest of the world is approaching $3 trillion, with no end in sight.It is important to note that the incoming Fed Chairman, Ben Bernanke, is the top academic student of the previous depression and a true believer in the power of the press; the Federal Reserve’s printing press, that is. Mr. Bernanke believes we will always need some inflation, and the inflation and growth of money and credit must be kept alive. Despite the fact that total debt to GDP is now 310 percent (well in excess of the 290 percent it was before the 1929 crash), he is determined to keep debt and inflation growing. (For a balanced economy, total debt to GDP is about 150 percent). Today, it takes $4 of new debt to create just one new $1 of real GDP. Under Bernanke’s watch, the Federal Reserve will have a lot of printing to do.[Guest note: it now takes $5 of new debt]From an historical economic perspective, we are clearly in the middle of a very interesting time. Our post-World War II economic model is totally broken. If our economic model is built on spending, where will the new spending come from? The Achilles’ heel for our economy is the fact that wages have not kept up with inflation and the average American worker has little or no savings, nor can they afford to service their debt and pay for the rising cost of living.Without constant monetary stimulus, the credit-based U.S. economy would die. Our current economic model is similar to the one used by banana republic countries that are running hyperinflation* and end up in hock to the IMF:*Hyperinflations are caused by extremely rapid growth in the supply of “paper” money. They occur when the monetary and fiscal authorities of a nation regularly issue large quantities of money to pay for a large stream of government expenditures. In effect, inflation is a form of taxation where the government gains at the expense of those who hold money whose value is declining. Hyperinflations are, therefore, very large taxation schemes.America is now extraordinarily vulnerable to the whims of foreign governments. What if our creditors demanded a higher rate of interest? Perhaps they already have, and the Federal Reserve will have to raise interest rates higher than the capital markets currently expect.What about the housing bubble? Mr. Bernanke may be left with only one course of action: Given housing price inflation of 50 to 100 percent in some areas over the past few years, the Fed’s goal for the next several years will be how to get inflation up without crushing housing prices because of rising interest rates. A housing price crash could severely affect the financial markets in our country and take the economic system down with it. Mr. Bernanke has spent his entire adult life studying to prevent this from happening and I suspect he will do everything in his power to keep inflation going. When everything else is inflated, housing prices (at their current levels) won’t appear to be so over-valued. Getting money into the hands of consumers who can’t tap their savings (because most Americans don’t have any), or use their credit cards (because they’re over-extended – welcome to the new bankruptcy law), or draw cash from the home equity loan ATM installed on the side of their house (housing prices are stagnant or falling), will be a real challenge. To get money into the consumer’s hands, the Fed will have to print more money and encourage the creation of more debt. Mr. Bernanke’s illusion about dropping “money from helicopters” may actually come to pass as a direct way to distribute money to the consumer to service old debts and keep spending alive. The new economic model should be “inflate, or face deflationary collapse”…For 2006 and beyond, I expect the inflationary war on savers will continue, and I just don’t see how financial assets – stocks and bonds – will keep up. The preservation of real wealth at a time when the Federal Reserve will be dedicated to building debt, money and inflation, is not going to be an easy task; Good luck investing in the New Year!http://www.sfgroup.org/Beyond%20Keynes.htm

bring on the nasal trust spray!!!!!!!!!!!…and there goes mr shiftyshouting,my tent stock is gonerisk reward swallowedbitten then chewedspitten’ cashto the vulture kingsawash with something newmay all the gods bless themhope endeavours don’t devourwon’t want em’ to chokein the world finest hour.

“Paulson Now Admits Mendacity” by Yves SmithAs readers may have noticed, we have gotten exercised about how brazenly the Treasury has been in lavishing cash on favored interests. Felix Salmon took up the theme, admittedly with less choler:”There does indeed seem to have been a visible change in Treasury policy since the election. Until that point, it cared a little about optics. Now, it’s giving monster bailouts to the likes of AIG and American Express; it’s dragging its feet on homeowner relief; and in general Hank Paulson’s Wall Street buddies seem to be getting much better access than anybody in Detroit. And no one’s even trying very hard to defend these actions in public: they know they’ll be out of a job in January anyway, so they’re just doing what they want to do and what they feel is right, without caring much whether anybody else agrees with them.”Ed Harrison provided an alert on another bit of Treasury dishonesty, although the admission was coded, so you’d have to be paying attention to catch it. From the text of Paulson’s remarks today:”During the two weeks that Congress considered the legislation, market conditions worsened considerably. IT WAS CLEAR TO ME BY THE TIME THE BILL WAS SIGNED ON OCTOBER 3RD THAT WE NEEDED TO ACT QUICKLY AND FORCEFULLY, AND THAT PURCHASING TROUBLED ASSETS – OUR INITIAL FOCUS – WOULD TAKE TIME TO IMPLEMENT AND WOULD NOT BE SUFFICIENT GIVEN THE SEVERITY OF THE PROBLEM. (emphasis added). In consultation with the Federal Reserve, I determined that the most timely, effective step to improve credit market conditions was to strengthen bank balance sheets quickly through direct purchases of equity in banks.”Either way you cut this, it’s a lie. Either Paulson let his intentions be misrepresented via his silence, or he is now falsely claiming to have changed direction earlier than he did. Nouriel Roubini has claimed that Treasury was resisting the idea of inserting language that would allow for capital injections into banks but that some members of Congress thought it was necessary, and put statements into the Congressional record via floor debates to allow for that interpretation. Roubini further contends that Paulson changed his mind only as a result of the adverse market reaction after the bill was signed.But if Roubini is wrong and Paulson’s statement is accurate, it is still completely in keeping with the conduct of an Administration that told the public that there were weapons of mass destruction in Iraq. The bill was drafted to be extraordinarily vague and sweeping, and yet did not clearly give Paulson the authority he now says he realized back then that he needed while it was still being renegotiated…http://www.nakedcapitalism.com

I think this bears repeating from Guest’s post above:Tallying up the “true” cost of the bailout is difficult, and won’t be known for months if not years. But considering $3.5 trillion is about 25% of the U.S. economy ($13.8 trillion in 2007) and the U.S. deficit may hit $1 trillion in fiscal 2009, hyperinflation and/or sharply higher interest rates seem likely outcomes down the road.At the very least, the possibility of the U.S. losing its vaunted Aaa credit rating — which determines the Treasury’s borrowing costs — cannot be discounted.Moody’s has already said it’s not in jeopardy of being lowered. But we really can’t put much stock in what Moody’s — or S&P or Fitch — say after the subprime debacle, can we? More importantly, the price of credit default swaps on U.S. government debt has been on the rise since the bailout train got rolling, as Barron’s reports.http://finance.yahoo.com/tech-ticker/article/126117/Cost-of-the-Bailout%3A-%243.5T-So-Far%2C-But-Real-Cost-May-Be-Much-Higher

Julian Robertson Bloomberg Interview (Nov 12 – video)Julian Robertson Sees `Long, Tough Period’ for Americans: VideoNov. 12 (Bloomberg) — Julian Robertson, founder of hedge fund Tiger Management LLC, talks with Bloomberg’s Matt Miller and Michael Buteau in New York about the U.S. economy and stock market, the Kiwi Challenge golf tournament held at Robertson’s Cape Kidnappers and Kauri Cliffs golf resorts and the performance of MasterCard Inc., Visa Inc., Google Inc. and Baidu.com Inc. (Source: Bloomberg)

Curiouser and curiouser. Who are Macky and Obi?

I can’t say how much the rail companies get out of this, but I do know that they allow only the bottom end of the prime scheduling to Amtrak.It’s not that Amtrak is poorly managed, or “politics” as you say, but rather it’s due to the inherent nature of the business- it ships people around: and face it, there’s not a big demand for people I’d argue that the commercial airline industry is subsidized more than Amtrak.

AJ:Be assured that we are all working on it. The velocity of intellectual adaptation here is astonishing.London Banker has many a time expressed his optimism that the solutions will come bottom-up, and I am convinced he’s right.I hope someday soon we can channel the frustration and the intellectual firepower that is present here among the RGE regulars, and focus it more effectively upon the problems so that we might soon make the leap from talk to action.You’ve heard me advocate for some type meeting or conference-calling mechanism that’ll enable us to apply more force against these problems. I hope each of you gives that notion more thought, and we soon get to the next natural step in the evolution of a group.We must unite. Somehow, we must unite. We don’t need leadership so much as we need cooperation.Average Jane, I’ve said it before, I’ll say it again: you are anything but Average. Enthusiasm and determination are crucial elements of success, and you’ve got that in spades.Are you any good at putting together a team? If not you, who is?Stand up, and let’s get busy. Can anyone here find the time to coordinate some type of virtual or actual meeting?

This is a cool post!It is amazing that human beings are pretty much the same everywhere (In Venezuela people thought Chavez was Santa too:-) but it is amazing that it would also happen here in the US.

Regarding the prior posts re rates of pay in the Big 3 auto companies — the current pay rates, negotiated in 2007, are about $48/hour including beneifts. The Big 3 can easily pay these rates and remain competitive.It’s not the current workers’ pay that is the problem — it’s the RETIREES –There are between 300,000 and 400,000 current Big 3 retirees and their spouses and surviving spouses – all receive lifetime pensions and health care. Recently, the Big 3 reduced health care payments to white-collar retirees who are eligible for Medicare to $150 per month per person. However, the union retirees have not had similar reduction in their Mercedes-level health care, paid for entirely by the company, with a very small co-pay.In Detroit, autoworkers typically retire in their early- to mid-50′s, after 30 years with the company. They then receive lifetime retirement pensions and health care, resulting in payments to them, spouses and surviving spouses for 30+ years.The white collar pensions plans are now grossly underfunded. Recent JP Morgan estimates show that GM’s retirement plan is currently underfunded by approx $18 Billion, resulting from recent market declines.The additional $25 Billion now requested by the Big 3 is a request from the UAW. The UAW insists that it needs the $25B bailout to pay its retiree health care costs. This money would not contribute to the survivability of the Big 3 as employers, since it would go strictly to the UAW retirees, and not to operational costs of the companies. TI don’t know how Congress can approve a bailout of $25B to save UAW retirees — what about United Mine Workers, United Steel workers, Teamsters, and all the rest of us who are non-union, all of whom have unfunded retiree pension and health care obligations?Summary: The Big 3 cannot be competitive until they find a way to significantly reduce or eliminate their retiree costs, such as through bankruptcy modification of labor contracts. Then, they can easily be competitive while paying fair wages and benefits to current workers.

Speaking of the regulars, I miss Gloomy. Where are you?

Time to tithe for NR?

LOL! Thanks for that comment

Treasury, Fed Consider New Plan to Aid Auto, Credit Card Loanshttp://www.bloomberg.com/apps/news?pid=20601087&sid=aEQ6bh4FcrlY&refer=worldwideThe program may be the most explicit move by Paulson and Fed Chairman Ben S. Bernanke to support consumer, non-housing lending, after previous actions aimed at mortgages and corporate borrowing. Paulson indicated that the government would be taking on risk from the debt.“They’re talking about something that consumers can respond to more directly” than the injections of capital into financial companies, Martin Feldstein, the Harvard University economist and former head of the National Bureau of Economic Research, said in a Bloomberg Television interview.The US consumer is a dead addict. He is addicted to shopping but cannot shop from the grave.Based on the information of the last few days (AIG, AMEX, Paulson today) I am too starting to think the Professor’s latest predictions are too conservative. Time to join Risky Jhonny’s ultra bear camp.

He is too gloomy to post:-)

Mark, I haven’t ever heard of prime scheduling. The freights don’t run many trains on a strict schedule. They have a departure day from a specific yard and an arrival day at another specific yard. There are certain captive unit trains that are truly high balled, but that is the limit of freight schedules. In fact it’s this fact that causes most problems. You’re trying to stuff ‘high speed’ scheduled service into a chaotic system. If something goes amiss on either side it cascades quickly.

Jubilee!

Dear RGE Monitor faithful,The “solution” to this economic mess is quite simple. The real answer to the economic problems that we face is engraved on one of our most cherished symbols of freedom….The Liberty Bell.Leviticus 25:10 “And ye shall hallow the fiftieth year, and proclaim liberty throughout all the land unto all the inhabitants thereof: it shall be a jubile unto you; and ye shall return every man unto his possession, and ye shall return every man unto his family.”You see, Professor Roubini has advocated that the U.S. consumer needs debt reduction. The average American family is way over leveraged. This is EXACTLY what Lev. 25:10 states…..”jublie” (often spelled jubilee) must be proclaimed. Do a little homework of your own if you are interested in this topic. Simply stated, when “Jubilee” is declared, ALL DEBTS are forgiven.This needs to happen in our nation….yea, I know, I’m crazy….but I think our form of an “economy” is quickly reaching its end. The amount of debt is about to topple our whole nation over…..debt reduction is coming no matter what. It can be “proclaimed” as stated on our Liberty Bell, or, it can come by a complete devaluing of the U.S. dollar.This debt reduction can be somewhat orderly by “proclamation” or VERY disorderly by dollar devaluation.I doubt it will be “proclaimed”……but jubilee will come anyway.

News behind it:10% downward revision in Q4 revenue forecast (can you guess the impact this will have on earnings. Hint: Think fixed costs and lower revenue per unit)The company now expects fourth-quarter revenue to be $9 billion, plus or minus $300 million, lower than the previous expectation of between $10.1 billion and $10.9 billion. Revenue is being affected by significantly weaker than expected demand in all geographies and market segments. In addition, the PC supply chain is aggressively reducing component inventories.via CR

The same people who deny trickle down economics embrace trickle down bailouts.

If there is such a thing as the PPT they took the rest of the day off

Serfs aren’t allowed anywhere near the officeof the administration.More likely they’d take out innocent people just trying to pay their bills, besides obama will soon resolve any beretta issue.

@ Anonymous on 2008-11-12 20:11:38″Summary: The Big 3 cannot be competitive until they find a way to significantly reduce or eliminate their retiree costs, such as through bankruptcy modification of labor contracts. Then, they can easily be competitive while paying fair wages and benefits to current workers.”Anonymous, this is the legacy cost I was referring to. It must be unloaded to allow the companies to compete. And I’m not an unbiased bystander as my father is a GM retiree. Being biased I would prefer to see eventual employee ownership as I hate to see the current/recent management and ownership personally benefit from shafting their retirees.Either U.S. automakers go through formal bankruptcy to unload their pensions, or the government steps up to shoulder the burden voluntarily. Retirees will have a less generous package in any case.From my father’s anecdotes retired line workers have fairly short lifespans following retirement. The work they do is more physically taxing than most jobs. It could be that a 15 year nationalization period might put the company “over the hump” as far as retiree costs go.Though I avoided mentioning it in my prior post it seems to me that the U.S. is at a crucial juncture regarding healthcare. Not having single payer healthcare places U.S. manufacturers at a disadvantage vs. manufacturers in other Western countries. It was fairly recently that I read of a foreign automaker establishing their new plant in Canada rather than the U.S. for just this reason. Unburdening the auto industry of this expense should be huge for them. As a bonus, perhaps it would stem the tide of consumer bankruptcies since filing bankruptcy currently offers little help with one’s primary residence mortgage.@ Cahill on 2008-11-12 14:16:20This is also what I meant by competitors – foreign owned factories operating in the U.S.@ AllFor or against my thoughts, thanks for participating in discussion. I post ideas because I despise the thought that nothing can be done. I’m deeply pragmatic and cry “try something dammit!” Perhaps it’s a character flaw.At a gut level I feel that GSM is right and the problem is simply too big to solve – the hole is too deep. But my head isn’t willing to give up the fight.

Jane,Every single one of these problems has been debated in the past. The Federalist and Anti-Federalist papers contain the debate. The result was the Constitution. The answer is there for anyone with not only the capability to understand it, but the courage to be guided by it – to paraphrase Congressman Davey Crockett.Don’t just read it. Break it apart. Read the Federalist Papers, Joseph Story’s Commentaries on the Constitution, the Decalaration of Independence for starters. Dogear them. Analyze them. You’ll find their solutions then just as applicable today. Precedents may be set by new technology, but principles never change – and never is a long time.

OR,I think you are right. Yesterday’s actions confirmed my view that we are heading towards armageddon, and it may not be a financial one. The actions of the policy makers and the ideas behind these policies will eventually (and it may happen sooner rather than later) lead to a currency crisis like no other, and the likelihood of a global military conflict has increased dramatically. The logic is straigt forward. Reckless bailouts will be funded by printing money, which in turn is an effective default on US govt debt. Also, the world WILL stop accept USD as the currency for settlement. When that happens, the US will be forced into bankruptcy and it will go to war to defend its hegemony. I am not looking forward to the next few years.

Yes, Kerk. Yes. Our beloved Constitution. Let’s retrieve it from the shredder and painstakingly put it back together. We’ve got the tape around here somewhere, don’t we?

prophecies coming true..so Reagan was right, we ARE that generation

Now it’s the e-bully pulpit (or is that the bully e-pulpit?)Obama to pioneer Web outreach as presidentBy BETH FOUHY, Associated Press Writer Beth Fouhy, Associated Press Writer – Wed Nov 12, 6:10 pm (excerpt)NEW YORK – Transition officials call it Obama 2.0 — an ambitious effort to transform the president-elect’s vast Web operation and database of supporters into a modern new tool to accomplish his goals in the White House. If it works, the new president could have an unprecedented ability to appeal for help from millions of Americans who already favor his ideas, bypassing the news media to pressure Congress.”He’s built the largest network anyone has ever seen in politics, and congressional Republicans are clueless about the communications shift that has happened,” Democratic strategist Joe Trippi proclaims. The results, he says, “will be amazing to watch.”Change has come to America!And it’s not just a slogan.

Thank you, Medic. I knew you’d have the poop on this. You are absolutely right. I have seen firsthand the billing nightmares that our “competitive” healthcare system “provides” for us in my professional life. And don’t even get me started on the third-party administrators. Gawd help us all.I did a bit of research and am wondering if some type of initial conference call would be the best way to get a starter group going. I am in the Dark Ages here with dial-up service (refuse to pay $60 a month for DSL) and just have your basic IBM Thinkpad laptop so no computer firepower. There are companies out there that offer conference calling with a toll-free 800 number where you can dial in an access code. With one company I found, the cost is 10 cents per minute per participant, volume up to 150 callers for maximum 5 hours. Does that interest anyone? Other ideas?

Sir, can you spare some CHANGE!!!

As bad as the US economy is right now – Russia is much worse. Russia is currently fighting an imminent collapse in its stock market, and a serious collapse in the ruble.Keep in mind … Russia didn’t cause this global crisis. There is really only one way out for the Russians. They badly need for the price of oil to go up. And they need it to happen ASAP. Even waiting for OPEC is probably too slow. We’ll see what Mr. Putin does about this. But I have commented on this situation before.[Also, it's a well-known phenomenon for the oil price to rise after a US election - esp. if the Republicans didn't get elected].PeteCA

So what do you expect, Russian reinvasion of Georgia or goading Iran to make a preemptive strike against Israels preemptive strike?

“For our sake let’s hope the network controls Obama vs the other way around”I’m not sure I’d feel comfortable with that either. You should already know that the most active and controlling networks are the ones who have a clear project. Can we stipulate that Bush tried to control/attract neocons and he ended up being controlled by them?I’d say again, that in the case of Obama, I’d be more afraid for him than of him.

There IS an other way, Pete: Just let oligarchs and stock markets collapse and then re-nationalize the economy. Putin doesn’t need a stock market, he needn’t bailout his super-riches, like Paulson does, he needn’t please the shareholders, he can just return to the well known russian business model: The czar gives, and the czar takes, as everything belongs to the czar.

Maybe Roubini meant a lowercase L shaped recession?

I miss SSG, gave me a needed laugh! BOOM! SSG where are you??

From “http://www.chicagotribune.com/news/local/chi-amtrak-26-sep26,0,3195108.story”:Freight railroads routinely violate a federal law requiring that track preference be given to Amtrak trains, according to an analysis released this week by the inspector general of the U.S. Department of Transportation.

Hmm… both Gloomy and SSG gone? Did these opposing forces cancel themselves out into oblivion?

lol – good one!

and ye shall return every man unto his possessionSo, if I go and steal from someone and then claim that it’s MY possession then I get to keep it?

Good call Wolf! Fundamentals!

It is possible….If you understand military science,the US will do anything to get out of this mess…But the problem is…who is the enemy? EU? Russia?China?Wait for someone like Hitler to arrive?hero

People are everywhere but they are certainly not evenly distributed. For the first time in history more than 50% of global population live in cities. I have a map of Armenia on the wall opposite me (I work at a mobile company and they are planning the network) -it looks like a galaxy map. Thin threads of roads connect clusters of towns like gravity has warped galxies into threads and clusters. How amazing that things on such massively different scales could look so similiar even though seperate forces are at work. My conclusion is that humans naturaly ‘gravitate’ towards each other.Getting back to global macro-economics I suspect that our behaviours are far more driven by herd behaviour than many of us truely realise and that this crisis will be comparable to others in the past. The only thing that has changed in 10,000 years is the magnitude of the screw up.

I think Mr. Guertler is german.

Always look forward to reading Mark Gilbert’s commentaries…“Credit-Crunch Villains Pass the Buck, Party On: Mark Gilbert”

But Lord Sidcup british, I presume.

You are a flippin’ idiot!!! 110x over

As oil prices keep sliding, world depression takes a hold, and deflation makes 2 million bucks feel like 4 the offer starts looking rather attrative.http://news.aol.com/political-machine/2008/11/11/porn-king-offers-palin-starring-role/Here is the letter:Dear Governor Palin:Please let this writing serve as an official request. In light of the recent election results, Cezar Capone Productions would like to make you a formal offer of $2,000,000 to star in an adult “MILF” production.I am sure you are unaware that Cezar Capone is the KING of all “MILF” films. This one time offer also guarantees that you can walk away from our beautiful set with a newer and sexier wardrobe to make up for the $150,000 worth of clothes you had to give back to the GOP.You may be asking yourself why you should even consider such a crazy proposition?The answer is simple; this film will be shot in high definition, and be a glossy, adult production starring a beautiful mother recognized by all of America as well as the rest of the world -the most desirable woman over 40! The film will be distributed internationally on DVD, as well as the website will reside on palinsupermilf.comPlease do not take this offer in jest, as it is completely legitimate, we at Cezar Capone are prepared to put the money in escrow immediately.We have taken into consideration that there may be some hesitation to star in an adult production with male talent other than your husband so we are also prepared to kick in an extra $100,000.00 for your husband Todd to star in the movie with you, along with a brand new Arctic Cat snowmobile for him to sweeten the deal.We are anxiously awaiting your reply.Sincerely,Cezar Capone

Unfortunately for you, there is also a biblical law that states:”thou shall not steal”…..so the answer is “no”.

But many who are going to be recipients of the “jubilee” have, in effect, stole. So, then what?

New thread

How can you steal what isn’t real? If all valuables have been distorted to artificial highs then how can that be stealing the value wasn’t real and the real theft came from pushing up prices with phony money. The little guy gets ripped off through inflation and then gets blamed for debt relief.

We voted for republicans the past 30 years put you guys in charge and now it Obama and the democrats fault. You were given the ball for 30 years and have dropped it.

OK, you win. Nothing’s real. Move along everyone, nothing to see here…

Putin is sophisticated, and so is Medvedev. I don’t think they want to see their country go back to the stone age of the old Soviet Union. A collapse of the stock market and ruble could enable them to further centralize power, but I don’t think they necessarily see that as an objective. What’s happening in Russia right now is very disruptive to Putin’s vision of a modern energy-based empire. I’m not at all sure they would just ride this all out. But you do raise one point. The economic instability in E. Europe does offer a way for them to further extend economic control in those states. However, they need to be in good financial shape themselves to exploit this advantage.My general point here is that financial instability opens up the possibility of political instability.PeteCA

The problem is political.Some of the big decisions have yet to be made by China, Russia, Europe, the Gulf, etc. But a perceived failure by the Democrats will push the US even more to the right than the Bush regime. If that happens, then the last eight years would be seen as a cakewalk.All the pieces are in place for swing to the hard right in the next few years. This hasn’t changed with the Obamacrats.The US has lots of authoritarian structures in place, monopoly media / bank / corporate ownership, and imperial overextension with lots of damaged and deluded troops. The Obamacrats want to save US hyperpower when they need to radically change course to insure that there isn’t a social upheaval toward the extreme right with disastrous consequences for everyone. It ain’t your daddy’s fascism, but it sure looks like a relative.That’s why people such as Roubini need to tell the truth up front and loud. He’s comfortable enough so he shouldn’t be cautious for egotistical reasons. More lies and hedging about the catastrophe will just add to the potential for greater violence and potentially war.

AfA I see your point. My assumption is that Obama’s network would be vast as described and made up of ordinary citizens. Hopefully, such a large group’s actions would be in better interests than such a small, narrowly focused neocon group.

This is a naive and biased comment in many ways. What about slaves or colonization? Isn’t that the point with Obama (I didn’t vote for him BTW…) that it’s been unequal for non-”whites”? If you were seen as black, it was collective punishment, unequal, and you yourself were property, you didn’t get to hold any.As for the tax structure, it needs to go back at least a hundred years and tax property and finance more not consumption and savings. Isn’t the global problem a CONSUMER led recession? Lighten the burden on the average person.Plus, part of the problem is the Constitution, frankly. It’s the outmoded structures of US government including four year terms, electoral votes, no parliament, etc. that has led to lassitude while the crisis at home and abroad deepened. If these guys had been kicked out a few years back and a vote called then there would be a better chance to fix things. Now it’s too late. There need to be changes to the Basic Law (a.k.a. Constitution) to improve the US political economy.

@ Theta. UNIONIZE.Ex.:1. $60,000 for a literacy tutor at an elementary school. Good benefits, job security. Masters level.2. $45,000 for a new social science / humanities university professor. Weak benefits, weak job security. Ph.d. level.On the whole, #1 is unionized, #2 isn’t.For the Americans: You can still have capitalism with unions. Look at France and Germany. But it is better for the majority.

Thanks.

lllll-shaped “recession”followed by ______ shaped then WWWWW.

Hi Frankigia,Thanks for your comments. I believe the the internet is bringing to light some of this information assymetry – certainly not all, and only to the few who search for coherent information. However, I believe that due to the continued worldwide growth in consumption, our natural resources will follow the same path as peak oil – ie, we will have peak steel, or peak copper etc. As a result we will have declining wealth or at best – not increasing wealth. And since our monetary system (ie. debt based money creation) is based on continued growth – we will be required to move back to the gold standard (or something equivalent) or face massive debt we will never pay off. The psychological shock to modern society – that will be forced to move back to a more local society (rather than globalised) – will drive the market down big time. I believe in the human condition – and so I’m sure we’ll find a way to deal with this, but only after we will have learned out lesson: ie. not to take our modern lifestyle for granted. As always, it will then be the start of a new beginning!ze100

As the advanced economies advanced their production basis to economies such as the chinese, thus turning it into an ‘emerging economy’, we altogether had to invent ourselves as ‘worth it’, because what we should do was scratch each other’s backs and buy the cheap stuff, manufactured by near-slaves in Asia.As the particpating countries had no common attitude to currency policies and monetary policies, this globalisation scheme led to run away trade deficits. The US has an outstanding record for buying more and scratching each other’s backs more among the advanced economies.So what can Obama do? The world has been kept spinning for the last decades through the spending in advanced economies. This is over for good. Will it be possible for the US to raise custom walls? Yes and no. Yes, beacuse it won’t really matter, as the american average household has already spent 10.5 years ahead of their income. No, because the US cannot fund its own deficit due to having no savings whatsoever. Trying to keep foreign goods out of the US would not only completely destroy the US position on ‘free trade’ and ‘free markets’ but could also be met by a reaction like ‘we won’t buy your debt’.There is no easy way out of this – because the basic thing here is, that the work we could do 10 years ago is now impossible due to the competition on a global level.Then China should raise its salaries … but did I hear someone whisper that the advanced economies should lower their salaries to stay competitive?At the strat of thes globalisation scheme, a much talked about issue was ‘ a race to the bottom’ – meaning a competition on a global scale between the cheap labor in yhe east and the expensive labor in the west.This was momentarily called off by the loose lending caused mainly by the trading deficits, that needed recycling in the US – everybody got rich in a hurry. Now this has shown to be noting but a giant inflated bubble – and unles the participants in the globalisation scheme can work out a way to dela with currency policies and monetary policies we are now at the brink of that race to the bottom.I would very much like Mr. Roubini to give his comment on the globalisation …

Globalisation caused run away trade deficits due to no common policies agreed upon as for currency and monetary policy among the participating countries.US bought Chnese manufactured goods for dollars. The money went back to US as a loan to pay for the goods … and Greenspan poured the dollars back into the US, creating a giant price inflation in houses, thus creating a giant debt bubble, that is now deflating.The Chinese has launched a plan to spend 20% of one year’s GDP to expand railrods etc in the parts of China, which is still impoverished. This may be the first step to reverse the globalisation scheme … or it can be seen as a first step towards turning the chinese into consumers.And don’t forget India – inside this giant is a middle class the size of Europes.We are on the brink of a global restribution of wealth. Thank God the ’cause I’m worth it’-trip is over in the socalled advanced economies.

Have you all forgotten? Go and read history. Each and every fascist regime that ever existed emerged from the political left. You just said yourselves that in the US the authoritarian structures are already in place — well, now you have the authoritarian leftwing political structure being drawn up alongside it.

Before I read your email I thought about the record deficit of the US for the month of October was more than the 8100 tons of gold that is suppose to be in the US reserve. It’s only worth about 1/4 of a trillion dollars. Our deficit for October is over 250 billion.

I have to add more on my, I am on the gold standard email. Recent news is that Iran is converting some of their cash reserves to gold. Also, rumors has it that the Gold Futures COMEX may default in Dec with the high volume of traders taking physical delivery of their gold. I don’t believe the COMEX will default, but I believe a few will take delivery. I wish Dr Roubini take a closer look at the gold market. He may get a different opinion on gold. He may decide the US dollar will erode much faster.

I believe his name is Andy Xie (not Xia). Just google on Andy Xie economist. Lots of stuff come up.

Hi there, a very good read and it sometimes just takes someone to post something like this to make me realise where I’ve been going wrong! Just added the site to my bookmarks so will check back now and then. Cheers.