first

first?

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a2JR6EoGlQ1cZentner Says Holiday Sales May Be Worst in 20 Years: VideoNov. 14 (Bloomberg) — Ellen Zentner, a senior U.S. economist at Bank of Tokyo-Mitsubishi UFJ Ltd., talks with Bloomberg’s Erik Schatzker and Kathleen Hays in New York about October U.S. retail sales data released today, and outlook for the economy, inflation and consumer spending. Retail sales fell 2.8 percent, the fourth consecutive drop and the biggest since records began in 1992, the Commerce Department said. (Source: Bloomberg)

The above so-called “firsts” are all fake — I am the real “FIRST.”

なるほど

Apparently, some people, here, can’t handle reality. You want ideas? Here’s some: Pay down your debts, save some money, exercise some discipline and stop being so absurdly pretentious. “Coriolus,’” gimme a break.

This will seem obvious, but declaring a firm date for pulling out the troops from Iraq – together with a timetable for drawdown in Afghanistan – would probably do more to boost the markets in the short term than anything else. It seems as though economic policy per se should avoid the death of a thousand cuts we’re getting now, pending a comprehensive approach. At root this isn’t a banking problem or a credit problem – it’s a Washington problem. What’s required is a) peace b) limiting spending c) raising revenue and d) a recognition by the political class that the free ride for the dollar and the us consumer are over.This would staunch the bleeding. We can talk about redirecting the agenda toward people power and local power once these are accomplished.

That’s what Miss America is for.Timing calls and forward moves.Also see the the working brain trust that Outerbeltway is putting together.

GM Ford – even if they beg, borrow and steal $$$$$ to keep making cars – WHO WILL BUY THEM ANYMORE?———

Sounds like a bunch of average joes in a coffee shop in December of 1929 wondering when the turn around will come. They then(and you now) had(have) no idea how bad it is going to get. The answers are:Pay down your debtPlant a gardenPay down your debtConnect with family and friendsPay down your debtKnow the difference between wants and needsFind a career that fills a needPay down your debtDrive an old car, wear old clothes, barter, thrift store shop, fix your crap yourself when it breaks, ectOh, and did I mention PAY DOWN YOUR DEBT!

zzzzz yawn

Given the right fair price I would.

I doubt that the propensity to save is a function of skin color or that it is a permanent obstruction to rebalancing trade.

Generally when you buy a house, even with a 20% downpayment, you are underwater or nearly so, because of the costs to sell the house and move. If I’m underwater by $10k, $20, or $30k, it’s not enough for me to walk away. It would be interesting to note how many of the households that are underwater will be in a position where it is worth their while to walk away.

If nothing has changed, why should he say anthing else?

Leaps in human self-understanding occur during times of ebullient growth; personal development is best nurtured by a steady, slow pace. At all other times, raise the masses’ cultural level by limiting the number of tv commercials and funding PBS!

NR, could you please give your best estimate of unemployment will be in 2009? I think all of us understand that government intervention is the only possible slowdown to the speed and depth of unemployment. That said, this would be most helpful.Thanks

I have been reading this blog for some time trying to make sense of events. Prof. Roubini has some excellent facts in this article that even non-financial or in-curious people can be horrified at such as the collapse in HELOCs. At any rate, I have determined that there is a solution to all of this, it is ugly and unpalatable but it exists:Step 1 – Prez Obama rescues the auto industry with a package. He is too smart to piss money away so he immediately protects our investment with significant tarriffs / % sales limits on imports or cars lacking a significant US / Canadian assembly and parts component.Step 2 – Massive US infrastructure programs announced, much of to accomplish mundane tasks like fix bridges or the city of Atlanta water system. Universal health care guarantee enacted by law. Fed prints money to finance its new commitments / investments as foreign governments have stopped buying T bills.Step 3 – This ignites a protectionist trade war, which we are happy to enter as the US is a huge economic area with natural resources and natural scale. Most other countries lack these features or their people are not blessed with initiative.Step 4 – Trade war accelerates and we see a huge dislocation in the US economy as localized manufacturing starts to flourish and employ people along with the public works. Many are not happy but the goal is to get the populace constructively employed and self-reliant.Step 5 – The US treasury receipts diminish to a critical level, say 70-80% of current receipts or an amount approaching current debt service requirements. US immediately suspends interest payments on debt held by non-US citizens and forces US citizens to accept lower returns on T-bills held under a patriotic war-bond type program.Step 6 – As a cumulative impact of these steps, the US inflates currency such that externally held debt starts to depreciate rapidly in real terms. It is also illiquid and of little value to foreign governments.Step 7 – Distressed foreign countries approach US to re-ignite free trade and revise tarriffs import restrictions in exchange for massive debt forgiveness.Step 8 – President Obama signs into law an act requiring the US to balance its budget forevermore with exemptions for periods of economic contraction, where limited stimulus will be allowed.New world order established.

You have a point – it is good to keep highlighting what many in ‘the market’ seems to dodge, or can’t speak out loud of due to their roles – there is also a balance not to strike too much panic in the process.First time i hear G Bush say in public over a year ago ‘this is a well contained problem, not to worry’ i got convinced this will be a mess

Here’s a plan for those who are looking- wouldn’t a move to a consumption tax rather than an income tax be a step on the right track toward rebuilding a strong economy? The prof has argued that the current model of the american consumer driving the world economy, and the unending deficits here and surpluses abroad are unsustainable. So, if the Fair Tax was implemented and corporate taxes eliminated, isn’t it possible that manufacturers would flock here and be could build a more balanced sustainable economy for the long run? I don’t get why this tax plan is the exclusive domain of the right wing folks that look like they live in a wax museum. Under this plan, all payroll taxes would be eliminated and everyone would get a check every month to offset the consumption taxes paid on the basic necessities equalling about $500 per month for a family of 4. Now if that’s not progressive, I’m not sure what is. http://www.fairtax.org

He meant 20 Billion I believe

Riding on two rails: national/protectionist in order to achieve a favorable international restructuring. The deal needn’t be approached by trade war brinksmanship – also once that genie is let out of the bottle, there will be no putting it back it. The Europeans will invite the Asians to dump dump dump US debt and we’ll be in a shooting war more likely than a trade one.We’re not – yet – in a hell of unemployment and unused capacity. We are most definitely in one of credit default. Besides, Obama will go along with the free traders. That’s the reigning orthodoxy that unites the moderate left, the center, and the right. The national socialist solution has no public face or voice other than Dennis Kucinich.

If you follow this blog-you’ve done all of that. No debt, save money….. I mean solutions for “the country”–national solutions or ideas.I hear talking heads say (just yesterday)we need to make housing affordable and stimulate spending and credit cards blah blah. I think that “solution” is part of what got us here in this mess–but that doesn’t keep people from proposing it on national TV as a solution.My idea: JOBS. People will, eventually, spend money if they have a secure job that pays a decent salary. Until that is done-all the cheap cars in Detroit won’t get people to buy cars.

J. Ryskamp, you are a wilderness searching for a prophet.

If copper goes to 2 cents/pound so will lithium.Then, john, you can afford your medication.

Jealousy reeks throughout all your posts, you should acting like an important contributor without the hatred and 9th grade vocabulary…. Start your own web site and I’m sure all ayour follwers from here will follow you to that….

Jealousy reeks throughout all your posts, you should acting like an important contributor without the hatred and 9th grade vocabulary…. Start your own web site and I’m sure all ayour follwers from here will follow you to that….

Or a nut without a tree.

I am not “lashing out” at nouriel, he is obviously doing something important and picking up the ball where no one else is. I am just saying that the plot has gotten thicker not only on the numbers side, but also on the philosophical side. This is natural for me to say since I am trained to think this way. I do not care for prognostications over how to “fix” this problem. Rather I want to see more basic inquiries into the concepts themselves, from this empirical data. If NR is not the one to do that I fully understand as he is not trained for that, but it is high time that other civil servants like novelists and philosophers get off their asses and work this recession.

Why can’t you post like this more often? People don’t care that you’re against the grain, but man is it an improvement when you are clear and concise… develop your arguments… present a trail of logic that a reader can follow… avoid resorting to calling everyone “dog” and “pig.”

The joys of deflation. (Maybe his head will deflate as well.)

“British Troops Out of Iraq by End of 2009: Iraqi Official” I hope the US is out by then.

Are you referring to the post below? If not, what is the idea you refer to?

I recognize that the history books criticize depression era leadership over this issue. However, as always, the facts and circumstances are not the same. In the 1930′s the US was not trading with nations like China. I posited this prediction of one version of the future not because I advocate or believe in it but rather I went through a logical deductive thought process to arrive at a potential solution. The current solution set – do the same only more is obviously not credible. Debate welcomed!!

John Ryskamp is permanently banned from this site and blog. His vulgar, crass, insulting, demeaning, scatological and foul language is unacceptable. He will not be allowed to comment on this blog forum any longer. He is banned for good.I respect strong debates and views very different from mine as well as strong criticism of my views and of others here. But i don’t tolerate vulgarity and personal insults.This is a rule for all here.Nouriel Roubini

Outerbeltway, doing more of the same does not seem to be working but this does not validate protectionism.Protectionism at this time will probably initiate counter protection and will hinder global coordination.

I agree totally NR… Great call! Im sure he will surface as aguest though…I wrote earliar…Jealousy reeks throughout all your posts, you should acting like an important contributor without the hatred and 9th grade vocabulary…. Start your own web site and I’m sure all ayour follwers from here will follow you to that….Hide reply Reply to this comment By MM CA on 2008-11-14 11:51:12MMwhom are you addressing here?Hide reply Reply to this comment By Guest on 2008-11-14 12:18:55It was for Ryskamp, but seems his post has been removed… lol…Reply to this comment By MM CA on 2008-11-14 12:27:53

Agree! Wouldn’t it be nice if we didn’t have all the super chains and went back to our locally owned banks, restaurants, hardware stores, etc. without all the CEOs, stockholders, etc. This is what the country was built on; we are not suppose to have monopolies for good reasons-they have an unfair advantage in pricing, control, exploitation and political influence. The current model is not sustainable as in any Ponzi scheme, you eventually run out of money!

Good job, professor! You are da man.

I agree the economists still refer to this as an equation when I suspect it’s become much bigger and worse than that. It is time for for philosophical debate but remember this is a place where a lot of number guys come but you make a good point their numbers are becoming less significant as the problem grows larger and certainly more ideology must be mixed into the discussion. Economist like to ignore that economy is really a psychological phenomena or at least down play its significance because it’s difficult to predict and depicts vulnerability something humans like to shy away from.

As you say, protectionism is not all or nothing and facts are facts. If the major holders of our debt realize it is impaired, and by now they have or soon will, then they have only themselves to blame, caveat emptor. It will be in everyone’s interests to re-set the playing field (a sort of cram down Chapter 11, a re-boot if you will). Tariffs used selectively where competiition is deemed unfair will not be well received but they will be understood. The concept is to re-introduce fiscal discipline and fairness into the economic debate. It was never fair to ask our blue collar brethren (and, yes I do consider my countrymen to be brethren) to compete with emerging nation workers making a pittance, nor was it moral for us college educated types to sit on our high horse and justify it in the name of capitalism and creative destruction. The free market will survive, it just won’t be driven by the global search for lowest cost. If we don’t recognize this then we cannot save our automotive industry (see British Leyland for reference).

At least he knows what’s going on and their ramifications. Not so Paulson and Bernanke. If NR was in charge things wouldn’t have spun so far out of control.

id prefer suburban areas. bigger waste of space and energy there. definitely a huge U.S. liability for generations to come. raze them and save on costs of maintenance and heating/cooling – going forward nobody should live in places that wasteful of energy on a square footage basis. those building are not remotely efficient and it is not acceptable for them to have a life expectancy longer than 10 to 15 years.Imagine the costs of living in these homes in the future. not to mention the compounded loss of tillable acreage that very well may be needed again for regional economies.city planners and architects have failed miserably since the 70′s energy shock and the opportunity to turn around the 50′s suburban development concept.they are not true “homes” – they cannot even “outlive” their own mortgages therefor they are almost worthless.Just another “liability” related to housing.

Probably not, or it wouldn’t make sense given that home prices are still elevated and falling.There is a real fallacy in home equity. Even a lot of it generally doesn’t make you rich. I have a lot equity in my home, but if I want to cash it out and move to another home, I either rent, and pay considerably more a month on a gross and net after-tax basis for an apartment that is not as nice as my home, or I buy another house at what looks to be still a high price. If I wait for the market to come down, so does my equity. Equity is like water in a beaker. The market goes up, my beaker is full, but I have to exchange it for a like beaker, so I have no real gain. The market goes down, my beaker is less full, but I can still exchange it for a like beaker.

There probably is a tipping point in negative home equity where many people walk away. It would be interesting to know what that is.

Once again the greedy pigs want easy answers. This man has told us almost exactly what’s coming and if you haven’t cut your spending, paid off your debt and shorted the stock market you get what you deserve.Where we go from here is to change, just as those who lived through the despression changed; some had to be forced into change while others’ started saving early on.

Though no model of efficiency, new suburban homes even with minimum standards far exceed that of old housing in many distress urban areas. These old houses have outdated and dangerous wiring, leaking plumbing, insufficient insulation and bad windows, as well as old inefficient heating and air conditioning systems. In addition they are often plagued with roach, rat, and gang infestations.

Anyone who reccomends more spending to an already “Shopped out, debt burdened,” person with no savings, can’t be taken seriously.

Thank you!

I am just wandering, who is making money out of this mess?

Energy. Green or otherwise, if the US can be be the frontrunner in developing new energy ideas and bringing them to market we can get moving again. But there has to be some concerted effort between the government, big oil (I know everyone hates to hear that but they have the deep pockets, engineers and facilities), and the small but hopefully able to grow manufacturing sector. We have to make it feasible for the world so everyone wants a piece of it. We have to become the new middle east of energy resources. Otherwise we are just a tired worn out nation with nothing to offer the rest of the world but the leasing of our military. Cold hard facts

the growing population and its infinitely stimulated hunger for the materialistic worldbecame the biggest threat to first of all itself and then to the planet! We thoughtour political and philosophical problems were over after the collapse of Communism. Some evendeclared the end of history… But history never ends! Our relationships with each otheras human species and our relationship with our planet is now much more intense, much more complex and much more dangerousthan ever as a result of Globalisation. So I assume we’ll continue making history… May be not by wars but by playing with the delicate balance of the planet or with global social, economic or cultural crisis.Before one starts tinkering about “philosophical” solutions for the misery of human kind, he has to first explainhow 9 billion people in 2050 will be sheltered, given access to clean water and have a decent income???? So let’s start from the basics and then move on to philosophy!The above lines are just what came to my mind after reading some of the comments about the desire to have philosophical discussion. Personally I love philosophy but when it comes to talking about people who are about to lose their life savingsand don’t know how they will feed their kids let alone giving them a future then, we have to be realistic. No matter what the philosophy will be, it has to provide an answer to; how to find an equation that balances income, saving, credit, debt and their relationship with the planet. Now to me, this looks like pretty difficult question and I don’t know if we’ll ever find an eternal solution to this. I think we’ll continue to “react” to the whatever mess we’ll create and then solve it and then move on to the next one… and most probably the previous solution will be the reason for the next failure!

hedge funds

What is going to happen is that the unsustainable debt is going to keep unraveling until it is below economic value. Then, after assets have been re-valued at a much lower, sustainable level, the economy will pick up and we will start to recover.The quickest way to recovery is to quicken the devaluation and re-valuation of debts.Unfortunately, those in charge are also those who will lose the most. SO they are doing every thing they can think of to re-inflate the debt bubbles…All I can say is GOOD Luck!

Where is SGG when you KAFRIGGIN’ need him…..amusing little bloke

Maybe you don’t understand what I mean by philosophy. I do not mean ideology, I mean a rigorous analysis of the conditions of possibility of whatever the given mode of subjectivity is. This is called transcendental critique and its genealogy begins with Immanuel Kant. This is what all modern philosophers of a certain tradition attempt to do. This is not about the story that comes after we all have warm homes and hearths to enjoy; although that might help the institutions of philosophy employ philosophers it has little to do with their ideas. This is about creating new modes of thinking which will allow us to get out of the ridiculous aporias we are trapped in.

What will I say? I’ll say ‘Thank God’!

I had figured this economic downturn is an opportunity for just such a shift. If enough people support their local businesses then the super chains etc. will have to downsize. My money is in a local bank, I eat local and buy local produce or grow my own.”You must be the change you wish to see in the world.” – Mahatma Gandhi

This guy Ackman said in Charlie Rose that he was slightly negative as of 11/13. The link below says he is at around 2-3% YTD. So if he is supposed to be one of the wiz kids in the business; that tells you a lot about how difficult it has been to make money this year. Me, as of yesterday, I am up 5.9% YTD. I have been as high as 7.8% and have never been negative despite the 30% short position I held until recently. I fiddled with a 15% long position around the time of the election and closed it, loosing about 80 basis points in the process. Since 10/21 I’ve been long about 7% commodities (another poor move) and that has cost me another 80 basis points.This market is a tough horse. Even the gauchos with big cojones are having trouble taming it.http://www.hedgefund.net/publicnews/default.aspx?story=9465

Absolutely correct professor. Intelligent discussion, even when spirited, always requires proper decorum and respect. Thank you.

YES!

As commented above, I have just over the last couple of days revisited Descartes, Hume, and Hobbes. It is truly facinating to overlay philosophy with what we are experiencing and hope to experience on the other side of this challenging period. I hope we take the opportunity to ford the chasm to new understanding between ourselves and others. What a great opportunity if we discard our pleonexia and shed sweat instead of blood to solve our opportunities.

pure flipping madness right now – is this finally the part where Bernanke fires his bazooka and the loud bang is followed by an even louder one when the market crashes ? dow futures down another 100 after the close… one last dramatic scary retest before rally or 2008 crash v2.0 ?

People say JOBs as if it were easy to just create a meaningful job. Where do you think jobs come from?Putting people to work doing something that has economic value is not very easy when the cost per person for their overhead is many times the cost of labor in less restrictive and less developed parts of the world. Here the costs are outrageous. Dealing with all the government agencies that all want a piece and the tax people and all the rules and restrictions.Job cost is part of what caused many jobs to leave the US. It didn’t make economic sense to have jobs here vs. China, India, Brazil, Mexico, even Canada can produce cheaper than we can.. So if we raise the price or restrict the imports, then because our costs per unit are higher, that means fewer units per person or higher expenses.. That means our standard of living decreases.Just the same thing that is happening thru market forces… I just don’t see a way of short circuting markets in the long run. Balance will be sought after, no matter what people or governments do. Once the system gets way out of balance, chaos will pop its head up and things will spin out of control until things slow down and a new order is found. We are just living thru this..Add the cost of health care in the US to the cost of jobs, which is the most expensive place in the world to be well. And we have developed a system that is unsustainable and out of balance. On almost all fronts.Unfortunately just putting people to work so that they can have income is what the USSR did and we know how that worked out. Command and Control doesn’t work. That was part of why the Japanese corporate system produces beter products than ours. We are already over our heads in debt. So Yeah, let’s go borrow some more money to create meaningless jobs so we can get money into the hands of those who have been displaced by changing times… Then they can pretend to work and the governemtn can pretend to pay them. Those in power need to let the system correct.

I would not have chosen those four examples. I would have said Kant, Hegel and maybe the next generation which does not like Hegel (Battaile, Benjamin, Adorno) and looks for a way out of dialectic.But I appreciate the sentimentIf we are going back that far, we should look for a minute at Spinoza, he might have some words for the panicky crowd.

no we’ll be down 337 on the Dow and 80 on Nasdaq

No, i understand you perfectly. You are the type sucker people like me prey upon. You say, “i want to wait to sell until i get back to even”….hahaha….you will watch it go down and down and down and then pull the trigger near the bottom. Additionally, you reference investing for the long term. What a joke. Follow this path and you will be swept away in the deflationary crash that is just beginning. Do yourself a favor, go to all cash on Monday. You have no business in these markets.

Sheesh! My screen shows Dow futures down 459 now and S&P down 46!Is that what is was on the close or after the close? Did some bad news break that I missed?There is only one word to describe what we are experiencing: BRUTAL!, or any synonym thereof.It has got to be excruciating for bulls and bears alike. I assume only the best (luckiest?) of traders can profit in this kind of environment.GLTA.

I say we rally early next week on hype sure to come out of G20 on coordinated stimulus. These World leaders know they have to produce something tangible as the whole world is watching. Then we go to new lows shortly thereafter. Looking for 6700 INDU, 713 SPX and 1104 NDX…..then we will have a substantial rally that may last a month or two as people feel they have double discounted the bad news. This will set up just a horrific 2009 as the news on the macro front continues to get worse and worse with little to no end in sight..

I would not call consistent trading lucky. Most good traders do not use stop/losses as they destroy value. I have been way short since middle of year. If I covered my shorts every time there was a reaction then I would make no money. It all depends where you entered the trade. It is gruelling but not lucky. It is usually rank amateures who ascribe to luck….

value. I have been way short since middle Congratulations! What are you waiting to take some profits:-)

Where Has All the Bailout Money Gone?Bankers ask senators for patience as they explain that they’ve just begun to use the government’s equity purchases for lending.http://www.cfo.com/article.cfm/12622095/c_12622615?f=home_todayinfinance

I was talking about short-term trading not “short since the middle of the year” trading.Congrats and good luck going forward.

Amazing. Ackman negative. Goes to show how tought it is … he’s pretty bright. So think about it. He would have been better just sitting in T-bills, right? Point being – how long before a whole bunch of hedge fund investors figure out that they can achieve the same thing by buying their own T-bills??? We’ll find out next week … when hedge funds sell off to cover redemptions.PeteCA

Why don’t we just fix the root of the problem, housing, and be done with it? A good suggestion would be for the government to subsidize and decrease in mortgage rates as Yardeni and others have suggested.Let’s be honest, our government has been underwriting the housing market since the Great depression with all sorts of programs, including FNMA and FreddieMac.By offering a 4% re-fi rate, for example, we would be liquifying those most needing it. This idea works a helluva lot better than this “stabilize the banks” baloney – and probably lot less expensively. Plus it stimulates the economy which is what we need.Some of you might point out that this is socialistic, but let’s be real. The housing market for decades has been socialistic if we are honest with ourselves.What do you think???

I have not heard a solution for how someone who has saved their whole life is compensated for that savings with a consumption tax. After all they already paid taxes once, on much of their savings. In a consumption tax they would pay again when making a purchase. Seems to benefit those who spent more of their money, so again the savers would be bailing out the spenders. If I have this wrong please comment.

http://www.ft.com/cms/s/0/ffda8156-b1c1-11dd-b97a-0000779fd18c.htmlNew wave of CDOs at risk of defaultBy Paul J DaviesPublished: November 13 2008 23:55 | Last updated: November 13 2008 23:55Synthetic CDOs, the risky and complex debt products that are based on pools of corporate credit derivatives, are under increasing pressure after suffering a wave of default-related losses on top of general credit market deterioration.Synthetic collateralised debt obligations based on exposure to corporate bonds through the derivatives market have already seen $24bn of losses from the recent defaults of Lehman Brothers and other financial institutions, according to analysts at JPMorgan.Deals worth $103bn have been left in what the analysts call a “binary” position and could see a quick descent into losses if more defaults materialise, the analysts said. Between $32bn and $56bn of these mezzanine, or middle ranking, tranche deals are at risk of high capital losses with the next default.JPMorgan estimates there are about $757bn outstanding of synthetic CDO tranches based solely on corporate debt derivatives, many of which were created and sold during a boom in issuance through 2006-07.Synthetic corporate CDOs were instrumental in driving down spreads, or risk premiums, on credit default swaps during the height of the credit bubble, because the banks that created these products hedged them by selling contracts for protection against default on hundreds of individual companies referenced in the CDOs.The main concern for credit markets is that a flight by investors away from CDOs would lead to a reversal of this process, whereby banks would be forced to buy back huge volumes of protection and so push spreads dramatically wider from their already elevated levels.The JPMorgan analysts expect the rate at which investors look to unwind their trades will remain slow and gradual for now, in part because there are no market value triggers to cause a run for the door.“Having said that, the size of this market remains significant and investors experience of the first capital losses could be a turning point in their decisions around holding these trades,” said Yasmine Saltuk of JPMorgan.At the moment, market value losses exceed credit losses by most estimates. Analysts at Citigroup put market value losses on an estimated $584bn of outstanding synthetic CDOs at $67bn by November 10. This is a recovery from the $81bn loss position on October 24 when CDS spreads were around their widest.The private nature of the CDO industry makes estimating even just the size of the market difficult, hence the difference between the Citi and JPMorgan estimates.Ms Saltuk and her team estimate market value losses on about $436bn of remaining mezzanine tranches to be in the region of 30-40 per cent, or up to $174.4bn.Michael Hampden-Turner of Citi is more sanguine about the pace of unwinds, saying that investment grade defaults in the near future are not likely to be as numerous as during the recent weeks of extreme financial crisis. “The pace of [CDO] unwinds and restructuring has increased, but it still remains low and orderly given the overall size of the market,” he said.

Dumbell

How about getting the US troops out of Germany, Japan, Korea, Poland, UK, etc.? How about ending the War on Drugs? How about ending programs not enumerated in the Constitution? How about if we try BK for insolvent companies?

Good point, the retailers put christmas stuff out in September before Halloween. It’s crazy, they need to push some other model other than x-mas where people spend too much on useless gifts.

Meaningful Jobs where already created, they were just exported to 3rd world countries to circumvent labor and environmental controlsto the benefit of a few upper management (who incidentally benefit the most from the government taxpayer supplied bailout) at the cost of everyone else.So what’s better cheap stuff and no jobs ordecent jobs and regular priced stuff.

Bless you!SWK

This is why we are in the mess we are in: discreet, complex, opaque, highly leveraged financial instruments that very few people understand become hidden ticking time bombs. Talk about a war!

And then there is the issue of the tax bill that you get when you walk away from the house (the difference between what you owe and what the bank gets for the house, plus costs). It’s not that easy to walk away from the IRS.

Wow a place where renting is more expensive than owning. I did not know that type of place existed. Where is this place?

It seems our Government and corporations never learn the old adage: “an ounce of prevention is worth a pound of cure”! We have known about these problems since the 70s and have deliberately moved at a snail’s pace to run the marathon and now they cry “it’s too expensive”!

Or Hanky Panky picks our pockets to purposely put the people in the poor house.

Odds are better at the casino, and they usually have reasonable buffets.

I maybe missing something here, but NR above has provided timelines and quantity to this economic decline. Now, if one is braindead and cannot now pick up and actually run with that very valuable ball, then I really am sorry. If you can make your way to this blog and not able to work with that info, your out of your depth my freind and good luck to you.In short you better learn how to help yourself real fast. Waiting for it to be served up on a plate may see you mown down by this monster. Get moving chakira.

Why not?

And don’t worry prosperity is just around the corner because the fundamentals are sound.

Here, here!!

Funny – been there, done that 2x. Changed teams – got a toaster and no more alimony possibility in the future. Oh yeah.

sometimes but often it was about cost analysis. Corporation do not exist for charity. They are exits to make profit. If your competitor finds a way to do the job cheaper and undersell you, you’d better do the same or you will be out of business. It is to simplistic to just blame the upper management. People buy Kirkland jeans instead of the Carhartt because they are more affordable.When the trade agreements were passed thru Congress, they, the Marie Antoinettes, never thought about the real big picture. They just took there campaign contributions and said Eye!Same story for the bail outs. Do you think Congress actually has a clue as to the consequences? No, they take the story from the story board and say Eye!

So then, tahutch, what would you do with prudent people like me, who’ve stayed on the sidelines watching in horror as home prices went to three, four, five and six times my salary and who, like I have, prudently NOT BOUGHT A HOME I KNOW I CAN’T AFFORD? And home prices are only starting to come back down to earth and I’m faced with a 7% interest rate? Honestly, dear. Penalizing the prudent is just NOT the way to do this. If those who went for broke now can get a 4% interest rate, then I want it too. Sheesh. The problem is, home prices went way, way, way too far above a simple wage earner’s salary, for heaven’s sake. Double sheesh.

LOVE it, SWK. “Hey. There’s a hole in the boat.” Hilarious!

AJ:Kinda sums up all the belated comments by these purportedly knowledgeable financial big shots, doesn’t it? SWK

Some Nobel prize winners have described the fame accompanying the receipt of the award as a drag on their inventiveness and future accomplishments. Not our pompous Paul Krugman, this year’s economics Nobel star. With this many big new ideas since the ceremony he should be crowned U.S. Money Czar and save us all before it’s too late. Just kidding. Now comes David Beito’s point by point analysis of Krugman’s poison; here’re a few excerpts from:“Krugman’s Prescription for Disaster”Paul Krugman calls for Obama and his advisors to push an expanded version of the New Deal… According to Krugman, they should boldly throw caution to the winds and “figure out how much help they think the economy needs, than add 50 percent. It’s much better in a depressed economy, to err on the side of too much stimulus.”Obama should reject this advice. If he listens to Krugman, the likely result will be a wave of stagflation that makes the experience of the 1970s look mild by comparison. Such a prescription would both continue and accelerate Bush’s fiscally reckless policy of propping up malinvestments through massive increases in spending, deficits, and easy credit by the Federal Reserve. As the continuing fall of the stock market and the rise of unemployment indicate, more bailouts and more “shock socialism” do not work. Obama made a fatal mistake in failing to oppose the aptly described billionaire bailout…More troubling, at least for opponents of war, is Krugman’s dubious contention that “What saved the economy, and the New Deal, was the enormous public works project known as World War II, which finally provided a fiscal stimulus adequate to the economy’s needs.” The evidence does not support the view that that war was beneficial for the economy. In a seminal article for the Journal of Economic History, Robert Higgs convincingly challenged the Keynesian theory of World War II as put forward by Krugman and others.While unemployment disappeared during the war, it was hardly a step forward. Moving men and women from the unemployment lines to the killing fields of Anzio did not represent economic progress in any meaningful sense. During the war, Americans at home suffered from rationing, shortages, more accidents on the job, longer hours, and many other measures of economic deprivation. Moreover, as Higgs points out, “real personal consumption declined. So did real private investment. From 1941 to 1943 real gross private domestic investment plunged by 64 percent; during the four years of the war it never rose above 55 percent of its 1941 level; only in 1946 did it reach a new high.”According to Higgs, genuine prosperity did not begin to return until the last months of 1945 and 1946. This prosperity occurred under a policy of reverse Keynesianism…http://www.lewrockwell.com/orig8/beito4.html

Excellent.

Actually, I do have to eat that cake. I love chocolate.

From: The Good News: It’s Not About Race by William Norman GriggTo judge from the composition of the Obama transition team, the Exalted Apostle of Change (we pause to tug on our forelock) is interested in little more than the standard politics of corporatist plunder. Obama’s signature touch is to transpose that agenda into the key of cultural Marxism, as opposed to the pious militarism that remains in favor with what remains of the Republican Party.For Obama, the collapse of our financial system was a politically fortuitous event. For reasons that defy rational understanding, the public perceives Obama as a transcendent figure who can cast his gaze upon the turbid markets and command them, “Peace – be still.”The fact that the markets have reacted to Obama’s election with something less than confident relief has yet to register with the True Believers, who likewise remain untroubled by the fact that those whom The One has gathered as his inner circle of disciples include many of the architects of our ever-deepening financial catastrophe.Rahm Emmanuel, the issue of terrorist loins and one-time servant of an obnoxious foreign power chosen to be Obama’s Chief of Staff, made a cool $200 K in 2001 through a sinecure at Freddie Mac; this happened at a time when that government-sponsored entity (GSE) was one of the chief engines inflating the Housing Bubble. Three of Obama’s key economic advisers – Anne Mulcahy, Richard Parsons, and William Daley – enjoyed similar posts at Fannie Mae.Clinton-era Treasury Secretary Robert Rubin, another prominent figure in the Obama transition team, was a master chef at cooking the books on behalf of Citigroup and a consulting gourmet for Enron when that company’s degenerate corporate elite was looking for just the right recipe to use in swindling its shareholders. And more than a third of the spots on Obama’s transition team – which is a farm club for both ambassadorships and more consequential executive branch posts – are the most successful “bundlers” of corporate donations to His Holiness’s campaign.Already assuming the mien of a dictator before formally inheriting the mantle of dictatorship, Obama, asserting the suppositious authority of the non-existent “office” of president-elect (a status he won’t actually enjoy until after the Electoral College meets next month), Obama “is pushing Congress this year to approve as much as $50 billion to save cash starved U.S. automakers and appoint a czar or board to oversee the companies,” according to a Bloomberg report.This proposed nationalization of the auto industry, which has the support of the Wee Emperor, has been urged upon Obama by two of his key advisers, former Federal Reserve commissar Paul Volcker and former Treasury Secretary Lawrence Summers – two veterans of the entrenched Establishment Obama supposedly seeks to de-throne.In defining how Obama will rule, his practical connections to the entrenched corporate socialist oligarchy are much more important than his cultural Marxist background. There is little danger of Obama instigating a proletarian revolution; as John Derbyshire wryly pointed out, Obama can’t incite a worker revolt to seize control over the means of production, since all of our factories have already moved to China.Besides, what’s the point of staging a revolution from below to consolidate power in the state, when the Bush administration has already done all of the heavy lifting? The most tangible accomplishment of a generation of Republican rule is the creation of an apparatus of regimentation and wealth redistribution that Lenin would have coveted.There is not a particle of hyperbole in that statement. Witness the observation offered by Jeb Mason, the Treasury Department’s liaison to corporate lobbyists seeking a portion of the $700 billion in “bailout” boodle. Under siege by supplicants, Mason, a 32-year-old GOP apparatchik who served under the feculent Karl Rove, commented to a friend: “This must have been how the Politburo felt.”As I’ve noted before, the mechanism of wealth redistribution from the middle and working classes into the hands of corporate parasites is now fully autonomous: With the Treasury Secretary and the Fed Chairman able to create “money” in any volume they please, and disburse it as they see fit, with no oversight or accountability, Congress really doesn’t have a role – other than that of misdirecting the public.Those actually in charge of looting the country before its collapse – whether in the commanding heights, like Comrade Bernanke and Herr Paulson, or in the trenches, like K-Street Pimp Jeb Mason or the Wall Street bagman bearing the deliciously Dickensian name Neel Kashkari – are entirely unaccountable. From their perspective, the uninitiated have no right so much as to know how much is being spent, let alone for what, and for whose benefit, the sums are being spent.The $700 billion that raised the public’s ire and attracted the attention of corporate lobbyists is merely a small bucket drawn from the immense pool of “liquidity” flowing from the Fed. The ruling economic Triumvirate has actually taken on $5 trillion in liabilities since the financial collapse began last March, and I would be surprised if that figure didn’t at least double before Obama, sitting astride his magic unicorn, stages his triumphal entry into the Imperial Capital next January…http://www.lewrockwell.com/grigg/grigg-w58.html

I’ve gotta stop reading articles like this before I go to bed….Great article, though. Thanks for passing this along!

Where is the $2 Trillion going to come from??????? WE DON’T HAVE IT!!!!! Our nation is up to its eyeballs in debt!!

Another breaking News from Gloomberg:The Credit Default Swaps contracts (CDS) on Santa Clause & Co. (SCC) jumped to a new record today. The over-the-counter contracts traded as protection against potential default were quoted today 50% upfront as investors started to speculate about the rising risk of default by the company.”The CDS action today shows that the holiday season will be very difficult” said an analyst at Credit Suisse.”The credit markets are dysfunctional, the fundamentals of our company are strong and we are keeping our gifts expectations for this year” said SCC CEO.SCC is also applying for a bank charter before the end of this month to have access to the TARP. Treasury Secretary Henry Paulson expressed his worries about the systemic risks posed by a potential bankruptcy of Santa Clause. “We are going to allocate as much money as needed so that Santa Clause distributes enough presents this Christmas to our Wall Street friends” he said.

You will note the disclaimer at the end of the article — he is a staff (not faculty) member at Wharton. This article has received more blog exposure than most and appears to have been quite prescient, to say the least.

Actually, I love the Peter Schiff video at the bottom right. In case this moved, check outPeter Schiff Was Right 2006 – 2007

Isn’t a big fat depression tailor made for a big fat liberal (or in this case a tall skinny one?). The Big O can follow Krugman’s advice and spend spend spend and if it doesn’t work blame it on Krugman! Personally I think the dude’s blessed with impeccable timing!

I really can find very little with which to disagree in this very well written essay. I must confess, though, to being less than starry-eyed about our newest Elected Leader. The Audacity of Hope? Perhaps so, perhaps not. But one must admit that many of the populace find Obama to be compelling–witness the masses in tears after every well delivered speech the man has made. We are quite simply starving for leadership. Right, Peter JB? And perhaps we’re just getting crumbs in return. We shall see, shan’t we?

Indeed, my dear. And you too are a treasure.

THE BASIC WORLD MACRO-IMBALANCE PROBLEM IS NOT BEING ADDRESSED, AND IT WORSENS BY THE DAY: THE US HAVING BRUTALLY SLAMMED THE BRAKES ON CONSUMING, THERE’S A BLACK HOLE OF SURPLUS CAPACITY WORLDWIDE WHICH IS DRAGGING THE RECESSION DEEPER.THE PROSPECT OF A DEPRESSION IS NOT FARFETCHED AT THIS POINT, SINCE ALL OVER THE WORLD CONSUMERS ARE RETREATING IN FEAR.ONLY VERY AGGRESSIVE FISCAL POLICY ON A G7 OR G20 CONCERTED BASIS CAN BEGIN TO REVERSE THIS VICIOUS CIRCLE.THIS, NATURALLY, ASSUMING THE CENTRAL BANKERS ARE ALREADY DOING THEIR BIT, AND WILL FEARLESSLY DEPLOY THEIR ULTIMATE WEAPON, QUANTITATIVE EASING; I.E, PRINT MONEY AND IRRIGATE THE ECONOMY.

THE BASIC WORLD MACRO-IMBALANCE PROBLEM IS NOT BEING ADDRESSED, AND IT WORSENS BY THE DAY: THE US HAVING BRUTALLY SLAMMED THE BRAKES ON CONSUMING, THERE’S A BLACK HOLE OF SURPLUS CAPACITY WORLDWIDE WHICH IS DRAGGING THE RECESSION DEEPER.THE PROSPECT OF A DEPRESSION IS NOT FARFETCHED AT THIS POINT, SINCE ALL OVER THE WORLD CONSUMERS ARE RETREATING IN FEAR.ONLY VERY AGGRESSIVE FISCAL POLICY ON A G7 OR G20 CONCERTED BASIS CAN BEGIN TO REVERSE THIS VICIOUS CIRCLE.THIS, NATURALLY, ASSUMING THE CENTRAL BANKERS ARE ALREADY DOING THEIR BIT, AND WILL FEARLESSLY DEPLOY THEIR ULTIMATE WEAPON, QUANTITATIVE EASING; I.E, PRINT MONEY AND IRRIGATE THE ECONOMY.

Who cares about what Moody’s says, anymore. The rating agencies are made irrelevant. The market, once it realizes the depth of the problems, would reprice and downgrade what has to be no matter what S&P says.Remember the monolines? How long it took the rating agencies to downgrade them? The markets, both equity and credit, were merciless, driving their stocks to pennies and their credit spreads to 4 figure bps.@ABWho loses? Everybody in the medium term.”Joe citizen takes the voucher to his bank, the bank reduces his home loan, credit card, car loan, etc. The bank takes the voucher to the government and they issue low interest super senior preferred treasury bills to the bank.” The bank make a loss, driving down the price of the bills and up the yields. Now the government has ask foreigners to lend some more. But since “Credit rating of US govt tbills goes down, foreign owners of Tbills very unhappy – who cares”. Those foreigners will tell them “go .. yourself”. In that case the government has no solution but to levy more tax on Joe by about the same amount of the voucher value or higher …

1250 quadrillion dollars of bad paper (derivatives, CDSs, CDOs, etc.) floating around out there! Global Warming! Peak Oil! Ocean fisheries collapsing faster than people pensions! GM and Ford $truggling to $urvive! Chrysler headed for extinction! The allergy $eason; the tax $eason; the hurricane $eason; the flu $eason… not to mention AIDES, SARS, West Nile Virus, and the bird flu. 2012!Man! All this Shit is happening… and I’m still struggling with Y2-K.

I got it. This is why I was feeling something was missing today, an ALL CAPS post More seriously, isn’t that dangerous? I mean flooding a dry land market with new liquidity doesn’t it pose the risk of soil erosion – bringing the whole foundations down?The water – cash – would not be absorbed by the soil but rather flow away to join the next infectious and idle lakes (banks vaults)

Oh, please not that. It reminds me of someone I hate – public enemy #1 – hint:He has, in many ways, humiliated this nation with some of the problems that have taken place here.Kiddin, thanks AJ for the compliment. You are just a reserve.

Would you please develop?

I thought Japan was a counterexample!

come to my suburban home down south and i’ll blow your head off with my shotgun. raze your own damn house.

Dude- you better start working on Y3K, like NOW!!

For those who didn’t understand blindman please allow me to translate…I think the basic concept is “*Insert Platitude Here*” Sadly, blah blah blah, humanity sucks, blah blah blah, truth. Excuse for simplemindedness and inability to argue further.P.S. Certitude in the style and tone of Dubya followed by made up platitude relating to how fucked we all are.

Or, maybe, we just need to make more babies?

chakira,Neither a novelist nor a philosopher could ever dream up a more sublime comedy of errors than our present predicament.

One cannot predict the future. Period. Yes, there are likely outcomes, but in general the levels of details that one would have to flesh out in order to come out ahead put one in a higher risk camp. And maybe it works out, maybe not. Consider the hit that a lot of the hedgies took when the government stepped in during the middle of the game and changed the rules (on shorting). Perhaps not quite a Black Swan, but if one has to run around worrying about these kind of things happening then it’s a bit difficult to feel confident that one can project the future.If you bet against the rich and start to win they’ll change the rules.In another recent thread someone stated that you can win if you don’t play. Not sure about this, though I have had a similar saying: You can’t lose if you don’t play! The longer we play this system the longer we lose… Roubini still thinks that this is cyclical thing; in a way yes, but it’s really part of a larger cycle bounded by the availability of cheap energy (fossil fuels).

Isn’t it the best occasion/ environment to restart to WONDER.Wonderful.

This is false. WWII didn’t CURE anything. War is destruction, not construction!What you saw was a fascist rallying which resulted in the appearance of betterment. Had the US invested those military dollars in civilian production the economic recovery would have happened much quicker and would have been longer-lasting (not to mention it probably would have kept us from becoming the military-industrial complex that we are now, with the resultant profligate spending).

FOOD, SHELTER, WATER… Yup, concentrate on THE fundamentals! Help others and be thankful when you can say that you’ve got these fundamentals met.P.S. Try biking and walking!

Growth just for growth’s sake is not the answer.What other sake can growth be for?Growth = overshoot = death.There is no such thing as sustainable or smart growth. Refer to Dr. Albert Bartlett’s presentation “Arithmetic, Population and Energy”.

I’ll miss JR’s views, but most certainly NOT his way of delivering them. I hope that others here heed this warning of non-tolerance of abusive language. Thank you Nouriel for taking this step: it’s sad that you had to intercede.

Green is a technology. Oil is a resource.When you absolutely have to burn something you reach for oil… OK, poor attempt to add humor…The technological economic advantage only lasts for so long, until others develop competing technologies. One can point to China’s ability to reverse engineer just about anything.Resources, however, can’t be replicated. And resources are the only leveragable trade goods.Don’t get me wrong, green stuff is good, but it won’t elevate the US back to economic prominence (esp. given current debt levels and the need for IT to consume much of any green energy product to reduce energy imports). Oh, and green technologies don’t necessarily mean green fabrication (energy intensive and hazardous waste).

Yeah, my (new) girlfriend was down about 14% on some money market funds (Canadian). She asked me what she should do. She talked to someone at the investment agency and was told that she should keep her money with them; and, as I has asked her to find out, she asked them what percentage was invested in equities. The answer? 14%! Interesting, roughly the very same amount that the funds dropped! So, this really means that their entire equities investment was bust!I told her that she’d be better off in a GIS (Canadian). She locked in at 4% for two years.As a complete novice I’m just about even over the course of the last two years. Cash (USD), PM and foreign currencies. Will sit still for a while.

WiseGuy, I’m really appreciating your wisdom! Just when I’m thinking that no one else is really getting it… Thanks for giving me hope that there really is intelligence on this planet!

LOL!

You need to watch this one. It is a bit old, but it is lots of fun and it will bring you up to speed!http://www.youtube.com/watch?v=2I0QN-FYkpw

“Octavio, in shorting, it is not enough to be right; you need to have a catalyst that makes the market realize they were wrong so that they come in line with your views; only then, you make money.”For this crisis (i.e., the subprime crisis since “we are all subprime”), the catalyst were the events of the summer of 2007, starting with the collapse of the two BS funds. However, the equity markets still managed to get into record territory in October 2007. Yes, Virginia, shorting stocks ain’t an easy game.

I believe that it is fair to say that we have now reached the stage of full system collapse?One positive to this financial and economic system collapse is that maybe policy makers will be forced to extrapolate the current collapse to the ecosystem. We can recover from an economic system collapse. We can probably not recover from an ecosystem collapse.Obama should pull Gore into his government team in a newly created function to push through very dramatic and all-changing environmental changes.

And free beer, and waitresses with low cut blouses

Not a good omen, Elton John’s Funeral for a Friend just came on the radio…

Should I be buying down outerwear or sunscreen?SWK

That will never happen. Period.SWK

JPM is big in the the CC business http://www.chase.com/PFSCreditCardHome.html so the house of Morgan wins again:-)

Afa This one is for you. Check out the bold stuff:http://online.barrons.com/article/SB122670697439329829.html?mod=b_hps_9_0001_b_this_weeks_magazine_home_left&page=spSATURDAY, NOVEMBER 15, 2008INTERVIEWSifting Cautiously Through the RuinsHoward Marks, Chairman, Oaktree Capital ManagementBy LAWRENCE C. STRAUSSAN INTERVIEW WITH HOWARD MARKS: All we know is that “nobody knows.”TEXT SIZE PRINT EMAIL DIGG SINGLE PAGE REPRINTS GET RSS Subscribe NowWith these readers:Or copy the rss link:DURING HIS 40-YEAR CAREER, HOWARD MARKS has developed a reputation as a shrewd investor, most notably in distressed debt. Marks, 62, is chairman of Oaktree Capital Management, a multistrategy Los Angeles-based money manager with roughly $60 billion in assets. Besides being known for his investment acumen, Marks has developed a following for his memos to clients, in which he holds forth on topics ranging from fighting forest fires to Chuck Prince’s rocky tenure at the helm of Citigroup.Ian White for Barron’s”Everything is cheap. The question is: ‘What is the cheapest and what do you feel more comfortable with?’” –Howard MarksIn a 2005 interview with Barron’s, Marks asserted that many hedge funds would suffer from mediocre returns, not high-profile blowups.We recently caught up with him, first in early September, and again this month, to glean his observations about topics including the financial meltdown — which he thinks has produced some investment opportunities for careful investors.Barron’s: What’s your read on the financial carnage?Marks: We went through several years with the market swinging in one direction, and that was toward innovation, leverage and risk-taking. And those are the culprits for how we got here. The subprime crisis, No. 1, exposed the folly of those things and, No. 2, exposed and added to the swinging of the pendulum of the economy back from euphoria. What we are seeing today is a continuation of that.What caused this mess?Too much capital was available. Providers of capital ignored risk and competed to make loans and investments. Their competition took the form of demanding too little return, too little risk compensation and too little safety. So the stage was set for massive losses when the environment turned negative. Investor [and Barron's Roundtable member] Marc Faber — and I paraphrase — said there was a surplus of dollars that led to a shortage of sense. There were incredible excesses in terms of innovation and leverage, which stemmed from a lack of concern over risk and what you didn’t know. But cheap money made all things seem appropriate.What are some examples?The shortest-term money is invariably the cheapest, because of the upward slope of the yield curve. So, it is always most attractive to borrow short rather than long. In a very narrow sense, it looks seductive. Just thinking about Treasuries, you could always make money by borrowing short and buying long-term bonds, because the yield curve is upward-sloping.But it can’t be that it always works, because there is no free-money machine. So there must be some risks in the overall proposition that are not captured merely by the yield curve. And those risks are that on a bad day, you could be asked to repay your borrowings, or you could be unable to roll over your borrowings. So to repay your borrowings, you have to sell assets. But assets could be either not sellable or only sellable at losses or prices well below what you think they are worth or what they are really worth.You look at this and say: “OK, I can borrow money short-term at 3%, and I can buy 30-year bonds at 6%. I’m going to make 3% a year forever.” That will work in the long run, if you can survive to enjoy the long run. It reminds me of one of the greatest adages in this business: Never forget the six-foot-tall man who drowned crossing the stream that was five feet deep, on average. It is not sufficient to get through on average. You have to get through every day.What went wrong with risk management?First of all, you need a risk manager who knows the business — not somebody who knows everything about statistics but who has never been in the job. And you had risk managers who were statisticians. They could tell you what should happen most of the time.But what should happen most of the time is a heck of a lot different from what will happen on a bad day. So they extrapolate history, but the trouble is that history changes.One of the great lessons is beware of platitudes, such as “There has never been a national decline in home prices.” If you believe that there has never been a national decline in home prices and that there never could be, then you bid home prices up to levels that don’t allow for the risk of widespread losses, because you concluded it could never happen. Then the fact that they are at those new high prices introduces, in itself, the risk of a national home-price decline.So the actions of people relying on history change history, and that is what people lose track of.How did you and your colleagues at Oaktree react to the conditions that led up to the credit crisis?I wrote a memo to our clients a few years ago titled “It Is What It Is.” It said the first job of a money manager is to understand the environment you are operating in and its ramifications, and to act accordingly. We don’t make predictions around here, and we didn’t predict the things that are happening now. We said, though, that we were living in extremely bullish, euphoric and overconfident times, in which prospective returns are low and risk premiums are low, and that it wasn’t a time to take risk.There’s been a lot written about how retail-mortgage underwriting standards deteriorated. What about standards for underwriting deals?We were in a period in which people weren’t afraid of losing money; what they were afraid of was missing out on deals. So the competition to make deals got stronger and stronger, and people wanted to preserve and increase their share of the deal market.If you are a car manufacturer and you want to sell more cars, you would try to make a better car. But if your product is money and everybody’s money is the same, how do you increase your market share? You participate in an auction in which one person says, “I will take [returns of] 7%,” and another person says, “I will take 6%,” and another person says, “I’ll take 5%.” So it is a race to the bottom. And since everybody’s money is the same, for the most part, the way you compete is by making your money cheaper, and this cheap money is what drove markets.When we spoke two months ago, you said it wasn’t the day after Christmas in terms of buying opportunities. What do you see now?It is hard to say. If the world turns out to be reasonable, or at least within the context of what people are girding for today, then things are cheap. We know the world is going to get a lot worse over the next one, two or three years, but we don’t know by how much. So, to say that things are cheap today is what I would call the perceived merits. But there are a lot of shoes yet to fall, and the merits could certainly deteriorate in the next year or so. I wrote a memo to my clients in September titled “Nobody Knows,” and I stand by that title. If you are a smart person, that’s all you can say.Are you putting new money to work?We have a lot of dry powder, and we are spending some of it on a steady, gradual basis. There is enough out there to buy, and we could spend it all in a couple of weeks. But we want to leg into this, and that’s why we are doing it gradually.What particular areas of opportunity do you see?Most of the opportunities are in financial institutions, some of which have been tarred with a uniform brush. In times of crisis, markets don’t make fine distinctions between the good companies and the bad companies. The other area is the debt of buyouts, many of which probably were done at too high a price or with too much debt.What’s your assessment of bank loans?Bank loans are ground zero for the imbalance of selling over buying. These loans were perceived two years ago as ultrasafe, low-yielding investments, so nobody bought them for cash. They were primarily bought on significant leverage. Now a lot of those leveraged holders have to liquidate in order to reduce leverage, and so there is a technical imbalance. Since these loans are still pretty good instruments, their yields are still the lowest among the types of securities I’m talking about. But they are very attractive on a risk-return basis.What about junk bonds?High-yield bonds were not held on as much leverage, so they are not under the same pressure as bank loans. However, they are still under great pressure — everything is under pressure today, and everything is cheap.The spread for the average high-yield bond over Treasuries is around 1,400 basis points [14 percentage points]. And the spread on our portfolio over Treasuries is the highest it has ever been in 30 years. You might argue that the economic conditions are the worst they have been in 30 years, and I wouldn’t disagree. But, historically, when you bought at very high spreads, you made very good money.It sounds like being selective in terms of which bonds you buy is paramount.Yes, you have to be selective, and you have to diversify. Diversification is the key to high-yield bond investing, and that’s why individuals generally should not do it on their own. That’s true of all these areas, because one of the essential keys to prudent risk-bearing is diversification.What about opportunities in distressed investing?You have debt securities producing very, very high yields — if they pay their interest and principal. They haven’t shown intractable fundamental problems yet, so we are buying selectively and we are diversifying. The conditions for successful distressed investing certainly would seem to be in place today. We had a few years of imprudent lending, and then we’ve had events transpire putting that lending to the test. And we’ve had a collapse of risk tolerance and very serious technical conditions. So you put that combination together, and prices can go lower and things can get worse, but this looks like a good time for distressed investing.How do you define the various assets that cover the distressed sector?It is bank loans and high-yield debt where there is fundamental concern about the issuer. There’s not just generalized risk about the environment, but specific credit concerns about the issuer in that a lot of people believe it won’t pay the loan’s interest and principal.Are there any other areas that look interesting right now?Convertible bonds. You have a reduction of leverage in general. In this case, there is the technical factor, notably that in recent years a predominant portion of the buying of these bonds has been done by arbitrageurs, convertible arbitrageurs and hedge funds. They try to consistently create small, low-risk spreads. To turn a small, low-risk spread into a high return, they use a lot of leverage.So No. 1, the [Securities and Exchange Commission] rules interfered with their ability to short [stocks]. No. 2, these investors had to be leveraged. No. 3, the premise of the arbitrage is that if there is a problem, the convertible bond will hold up better than the stock.So, you go long the bond and short the stock. And the trouble is when you have these technical conditions, the relationships that should hold don’t. And the bond falls more than it should, relative to the stock.What’s the upshot of all that?Convertible-arb investors have reported terrible performance, so they are having capital withdrawn and they are deleveraging. As a result, they are forced sellers, which has made that market very cheap, as well. So everything is cheap. The question is: What is the cheapest and what do you feel more comfortable with?’You’ve said that the biggest threat to hedge-fund investors is disillusionment with returns — not major blowups.I imagine people are disillusioned, because in the past few years, they did not receive any astronomical returns. Any hedge-fund manager should produce either very high returns in the good times or great risk control in the bad times. And the greatest of the managers will produce both. Few investors got great returns in the past three or four years, when all the money was flowing into hedge funds. Now they are seeing that only the best hedge-fund managers have produced strong performance in earlier years without giving it back this year.Will there be a winnowing?Surely. The hedge-fund managers who were really risk-conscious and controlled the amount of money they took in will come through this period well. They probably will be offered more money, which they will probably turn down, because turning down money is a key to success.Where does that leave the whole alternative-asset phenomenon?There is no such thing as a free lunch. And, certainly, nothing is good because you put a label on it, be it growth stocks, or small-cap stocks, or hedge funds, or private equity. And when people start saying that something is good because of what it is called, then they are setting themselves up to lose money. Chances are they will overpay and be disappointed.Thanks very much, Howard.

Ups! I changed my mind. Didn’t make anything bold. It is all good:-)

To “?”: I’ve owned my home since 1999. My mortgage payment (principal, interest, taxes) is less than rent on a comparable (actually not as nice) unit even before the tax benefit of the mortgage. If I want to take my equity out, I can get a home equity loan, something I’m against; move to a rental and get less home for more money; or sell my home and buy another one. In the last option, unless I move to an area where housing costs are significantly lower or I downgrade, I am in much the same position that I was before I moved. Unless I put all the equity I had from my former residence into my new one, I will have a higher mortgage (assuming I buy a comparable residence) and the equity I keep from the sale of my first home is much the same as a home equity loan, except I got it from the market. While there is a certain amount of wealth in having home equity, there is also a certain fallacy in the idea of home equity as wealth.

Yes, OR, I am waiting to take profits. I believe markets have another down leg before beginning what many will call a tradeable bounce which could last thru end of year into early next. This is the 7th time this year I have heard we have reached bottom form CNBC and the like. Enough with the drivel. We will go lower and quite possibly much lower than most people think possible in the near term. Longer term, as an asides, I will begin to buy stocks once I walk into a bar or restaurant and no longer see them playing CNBC……this culture will have to be broken just like any other huge bubble. The pyschology has definitely changed and will only get worse. I defy anyone to tell me how to model default rates in a depression….they can’t……

My observation is that the Pimco crew are smart guys but their greatest talent is in marketing – they present themselves as neutral and unbiased, a rock of stability in a storm. Gross is the master, with his stamp collector manner, he comes across as a champion for the little guy.His understudy, El-Erian, is learning fast, presenting himself as everyone’s favorite professor able to translate the complex into understandable components. Just 6 weeks ago while El-Erian was on the interview circuit, he was telling the world that EEV (emerging markets) was the place to be – and he was correct, a 35% bounce from $34 to $22.

So is Pimco co-chief-investment officer Mohamed El-Erian. “Is there a cyclical case now for emerging markets? Yes there is,” he says. El-Erian, a recognized expert on emerging-markets, says Washington’s bailout plan could spark a rally in emerging markets more acute than any domestic bounce. He suggests buying MSCI Emerging Markets (ETF: EEM).

El-Erian (Barrons Sept 28)

The bailout money is being managed by a 35 years old inexperienced kid! So of course it was going to be wasted. I think this financial crisis kind of showed that a bad education and its overvalued diplomas and graduates can harm the world a lot. You know what I am talking about: MBA education and its “bright” kids! The culture of “get rich quick” and its overvalued institutions lead many untalented “chumps” to critical positions. Now we are seeing what the consequences are…I think they couldn’t approach the crisis like engineers to understand what it is and its implications structurally. Here is what I think:-The issue started with sub-prime mortgages not being paid. The credit crisis and recession were the result of the mortgage crisis.-Given the above diagnosis, one would think about 3 options to fix the issue:1-I either increase the income of these mortgage payers so that they are able to pay and hence the losses will stop.2-Or I could reduce the debt burden of these households so that they could pay their mortgages.3-Or I buy all mortgages and mortgage backed assets from financial institutions and manage the risky mortgages myself as a government by forming a new organization to do this. This would mean that financial industry would continue function as it is at least. Meanwhile I would try to talk to homeowners and try to find a way to arrange the payments so that they could afford.It looks like they tried to do the option 3 but if it was so obviously difficult to find and price mortgage backed assets then they should have tried the option 2 from the beginning. That would be the logical answer from the start. I think that’s what they are trying now but I think it is too late already. Prof. Roubini had suggested something like option 2 when they had announced the first bailout package. So some people could see this… Not a rocket science!So I am kind of convinced that Paulson and his team is surprisingly untalented.Add to this the power of wall street elite, the wrong decisions that have been made so far have been low IQ and partly biased. One of the problems of capitalism is that the poor man has not a seat in the decision table. His influence is as big as his pocket!

Can someone tell me:What is wrong with Jublie as the total answer to this delima?What i mean is cancel all debts and start over immediately rather than allowing the economy to do the same thing of a period of years.

Yeah! I made good money with EEV. It was my best short this year by far. Wish I had shorted more:-)

You must be driving a Hummer. Or is it a Denali?

I must admit that I am impressed by the sheer number of comments in reply to the words of Mr. Roubini. The thoughtfulness of most of the comments is also impressive. My thoughts on were we go from here is simple. We are all waiting for the bottom of which no one knows. The desire to have an easier life will not disappear no matter how far down the valuation of assets goes. It will take many more articles and thoughtful responses for DEMOCRACY to develop a reply to the new economic landscape which WILL result from the mismanagement. For a history of part of the mismanagement see: http://www.motherjones.com/news/feature/2008/07/foreclosure-phil.html

No. Elijah Cummings is the chump – for voting in the rescue plan in the first place. What made Congress think they’d get anything different than what;s really happening right now?PeteCA

Depression or Economic Collapse Coming ?What’s most noticeable right now ($INDU, 3-year plot, on http://www.stockcharts.com) is just how fast the market is sinking. Rebounds in the bear market have been weak, volatile, and without staying power. At the same time, consumer spending is literally imploding. Please note Tony Charniaslki’s comments at the link below, showing that year-over-year consumer spending in Sept was down almost 8% when adjusted for inflation. This means the October drop is probably much worse.http://www.financialsense.com/fsu/editorials/cherniawski/2008/1114.htmlThe possibility for a depression in America must be taken quite seriously at this stage.Even more seriously, the possibility of some form of financial collapse in the USA the next 3 months cannot be ruled out. Seen in this light, the meeting of the G20 nations is a critical event. But I have little hope that this meeting will produce the kind of concrete results that can avert major problems. More likely there will be bickering, finger pointing, and an annoucement of an agreement to “work together”. It’s too late for that kind of result at this stage. The world needs a global alternative for the US dollar right NOW … not a concept for how things might work. Right now global leaders are not displaying any vision at all. They are looking much more like a bunch of lemmings wearing dark sunglasses.Meanwhile, for the average American the facts are clear. None of our leaders have any idea what to do about this crisis. They are throwing darts at a dartboard. This especially applies to Congress. Americans are headed – in the immediate future – into an economy with a major loss of jobs and no easy way out. See this article …http://cbs2chicago.com/local/daley.city.layoffs.2.863161.htmlPeteCA

Slashing military spending by 2/3 and spending some of that peace dividend on public transit and subsidies to renewable energy & home insulation would probably help too.

Krugman on Liquidity Trap (or my title – “A Justification for the coming huge Obama stimulus package”)November 15, 2008, 8:00 amMacro policy in a liquidity trapThat’s the title of a new report from Jan Hatzius et al at Goldman Sachs (not available online). The Goldman guys, like me, come up with scary figures about the size of the gap in demand that needs to be filled — figures that suggest the need for a fiscal stimulus that’s enormous by historical standards. Their approach is different, and probably better than mine; I’ll get to that in a bit. But I want to talk conceptual stuff for a moment……What’s the answer? Huge fiscal stimulus, to fill the hole. More aggressive GSE lending. Maybe a “pre-commitment” by the Fed to keep rates low for an extended period — that’s a more genteel version of my “credibly promise to be irresponsible.” And maybe large-scale purchases of risky assets.Krugman November 15No question that huge huge stimulus is coming shortly after Jan 20 – the question is how to invest around that directly as MA suggest via Alt-E and indirectly e.g. shorting the dollar perhaps???

Also check out under the Spotlight Issues heading at the top of the main RGE page the title:Liquidity Trap Possibility: What’s the Solution?

Step 3 – how will the US pay for oil imports?

@ OR: “But going back to the stupid question, there is a good reason why over 90% of the headlines are negative: The truth about the economy has come out. There is not a “greater” contrarian truth out there. The pure truth is that things are really bad. Being contrarian at this time just because you think being a contrarian is cool because of so much pessimism out there, will get you killed.” 03:56:44These views of economist Paul Craig Roberts on the “difference” in this economic crisis are of major importance, IMO. In 1993 the Forbes Media Guide ranked Dr. Roberts as one of the top seven journalists in the United States. No one has been a stronger critic of Bush’s economic policies than Roberts.”America’s Economic Crisis Is Beyond The Reach of Traditional Solutions” |By Paul Craig RobertsBy most accounts the US economy is in serious trouble. Robert Reich, an adviser to President-elect Obama, calls it a “mini-depression,” and that designation might be optimistic. The Russian economist, Mikhail Khazin says that the “U.S. will soon face a second ‘Great Depression.’” It is possible that even Khazin is optimistic.I cannot predict the future. However, I can explain what the problems are, how they differ from past times of troubles, and why traditional remedies, such as the public works programs that Reich proposes, are unlikely to succeed in reviving the U.S. economy.Khazin points out, as have others, such as University of Maryland economist Herman Daly and myself, that consumer debt expansion is the fuel that kept the U.S. economy alive. The growth of debt has outstripped the growth of income to such an extent that an increase in consumer credit and bank lending is not possible. Consumers are overburdened with debt. This fact takes monetary policy out of the picture. Americans can no longer afford to borrow more in order to consume more.This leaves economists with fiscal policy, which, as Reich realizes, also has problems. Reich is correct that neither a reduction in marginal tax rates nor a tax rebate is likely to be very effective. Reich, a Keynesian, has an uncertain grasp of supply-side economics, but as one who has a firm grasp, I can attest that marginal tax rates today are not the stifling influence they were prior to John F. Kennedy and Ronald Reagan. As Art Laffer said, there are two tax rates, high and low, that will produce the same tax revenues by expanding or contracting economic activity. Marginal tax rates are no longer in the higher ranges. As for a tax rebate, Reich is correct that in the present situation a tax rebate would be dissipated in paying off creditors.Reich sees the problem as a lack of aggregate demand sufficient to maintain full employment. His solution is for the government to spend “a lot” more on infrastructure projects on top of a trillion dollar budget deficit –”repairing roads and bridges, levees and ports; investing in light rail, electrical grids, new sources of energy.” This spending would boost employment, wages, and aggregate demand.I have no opposition to infrastructure projects, but who will finance the baseline trillion dollar US budget deficit plus the additional red ink spending on infrastructure? Not Americans. The US savings rate is zero or negative. Home mortgage foreclosures are in the millions. Officially, US unemployment is 10 million, but if measured by pre-Clinton era standards unemployment is much higher. Statistician John Williams, who measures the unemployment rate by the pre-Clinton standards concludes that the rate of US unemployment is about 15 percent. President Clinton “reformed” the unemployment statistics by ceasing to count discouraged workers as unemployed.For years, the US government’s budget has been dependent on foreigners financing the red ink. Countries such as Japan and China and OPEC suppliers of oil to the US have huge export surpluses with the US. They recycle the dollars by buying US Treasury bonds, thus financing the US government’s red ink budgets.The open question is: how much longer will they do so?Foreign portfolios are overweighed in dollar assets. Currently the dollar’s value is benefitting from the financial crisis, as investors flee to the reserve currency. However, sooner or later the huge outpourings of dollar debts will cause foreign creditors to draw back. Already China, America’s largest creditor, has sent a signal that that time might be drawing near. Recently the Chinese government asked, as they do indirectly through third parties, “Why should China help the US to issue debt without end in the belief that the national credit of the US can expand without limit?”Is the rest of the world, which has demanded a financial summit to work toward a new financial order, going to permanently allocate the world’s supply of capital to covering American mistakes?If not, the bailout and the stimulus package will have to be financed by printing money.And the bailout needs are growing. Car loans and credit card debt were also securitized and sold. As the economy worsens, credit card and car loan defaults are rising. Moreover, AIG needs more money from the government. Fannie Mae’s loss has widened to $29 billion despite the $200 billion bailout. General Motors and Ford need taxpayer money to survive. General Motors says that its GMAÇ mortgage unit “may not survive.” Deutsche Bank sees General Motors shares “as likely worthless.”Shades of the Weimar Republic.What Reich and the American economic establishment do not understand is that the recession paradigm does not apply. There are no jobs waiting at US manufacturers for a demand stimulus to pull Americans back into work. The problem is not a liquidity problem. To the contrary, there have been many years of too much liquidity. Credit has grown far more than production. Indeed, US production has been moved offshore. Jobs that used to support the growth of American incomes and the tax bases of cities and states have moved, along with US GDP, to China and elsewhere.The work is gone. All that are left are credit card and mortgage debts.Anyone who thinks that America still has a vibrant economy needs to log onto http://www.EconomyInCrisis.org and face the facts.Economists associate economic depression with price deflation.However, traditionally, debts that are beyond an economy’s ability to service are inflated away. This suggests that the coming depression will be an inflationary depression. Instead of falling prices mitigating the effects of falling employment, higher prices will go hand in hand with rising unemployment–a situation worse than the Great Depression.The incompetent Clinton and Dubya administrations, unregulated banksters and Wall St criminals, greedy CEOs, and a no-think economics profession have destroyed America’s economy.What is the remedy for simultaneous inflation and unemployment?Three decades ago the solution was supply-side economics. Easy monetary policy had pushed up consumer demand, but high tax rates had curtailed output. It was more profitable for firms to allow prices to rise than for them to invest and increase output.Supply-side economics changed the policy mix. Monetary policy was tightened and marginal tax rates were reduced, thus stimulating output instead of inflation.Today the problem is different. The US has abused the reserve currency role, thus endangering its credit worthiness and the exchange value of the dollar. Jobs have moved offshore. The budget deficit is huge and growing. If foreigners will not finance the widening gap, the printing presses will be employed or the government will not be able to pay its bills.The bailout funds have been wasted. The expensive bailout does not address the problem of falling employment and rising mortgage defaults. Treasury Secretary Hank Paulson could not see beyond saving Goldman Sachs and his bankster friends. The Paulson bailout does nothing except take troubled assets off banks’ books and put them on the overburdened taxpayers’ books, thus endangering the US Treasury’s credit rating.What the Bush Regime has done is to stick the taxpayers with the banks’ mistakes. An intelligent government would have used the money to refinance the troubled mortgages and stop the defaults. By saving the mortgages from default, the banks’ balance sheets would have been made secure. By failing to deal with the subprime crisis, Bush and Congress have added a financial crisis to the exhaustion of consumer demand and the problems of financing huge trade and budget deficits.Belatedly, Paulson has realized his mistake. On November 12, Paulson announced, “We have continued to examine the relative benefits of purchasing illiquid mortgage-related assets. Our assessment at this time is that this is not the most effective way to use [bailout] funds.”The financial crisis has cost taxpayers far more than the amount of the bailout. Americans’ savings and pension funds have been devastated. Americans in investment partnerships, who have been required by IRS rules to pay income taxes on gains in the partnerships’ portfolios, have had the accumulated multi-year gains wiped out. They have paid taxes on years of “capital gains” that have disappeared, thus doubling their losses.America’s economic troubles will rapidly accumulate if the dollar loses its reserve currency role. To protect the dollar and the Treasury’s credit standing, the US needs to curtail its foreign borrowing by reducing its budget deficit. It can do this by halting its gratuitous wars and slashing its unnecessary military spending which exceeds that of the rest of the world combined. The empire has run out of resources, and the 700 overseas bases must be closed.Can Americans afford massive infrastructure spending when they cannot afford health care? In Florida a Blue Cross Blue Shield group policy for a 60-year old woman costs $14,100 annually, and this is a policy with deductibles and co-payments. Supplementary policies from AARP to fill some of the gaps in Medicare can cost retirees $3,300 annually. When one looks at the economic situation of the vast majority of Americans, it is astonishing that the Bush regime regards wars in the Middle East and taxpayer bailouts of Wall Street criminals as a good use of scarce resources.US corporations, which have moved their production for US markets offshore in order to drive up their share prices and provide their CEOs with multi-million dollar bonuses, can be provided with a different set of incentives that encourage the corporations to bring employment back to the US. For example, the corporate income tax can be restructured to tax corporations according to the value-added in the US. The higher the value-added in the US, the lower the tax rate; the lower the value-added, the higher the tax rate.Cutting the budget deficit by halting pointless wars and unnecessary military spending and reducing the trade deficit by bringing jobs back to America are simple tasks compared to confronting inflationary depression.The world has had enough of American irresponsibility and is taking away the reins. At the November 15 economic summit, the world will begin the process of imposing a new financial order on the US in exchange for continued lending to the bankrupt “superpower.”With bailouts eating up the world’s supply of capital, continued foreign financing for Washington’s wars of aggression is out of the picture.Paul Craig Roberts was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President Francois Mitterrand.http://www.vdare.com/roberts/081112_financial.htm

Pete,I couldn’t agree more. Thats why I keep reposting the leading economic indicators and begging people to tell me why this DOESN’T mean we are going into The Greater Depression.By all factual indicators we are in serious, serious trouble in 3-6 mos.

not addressed to me and notwithstanding his credentials, Roberts has some interesting perspectives on a variety of topics -Gullible Americans by Paul Craig Roberts

“Now we are being told another improbable tale. Muslim terrorists in London and Pakistan were caught plotting to commit mass murder by smuggling bottles of explosive liquids on board airliners in hand luggage. Baby formula, shampoo and water bottles allegedly contained the tools of suicide bombers. … More probable explanations of the “plot” are readily available. According to the August 11 Wayne Madsen Report, informed sources in the UK report that “the Tony Blair government, under siege by a Labor Party revolt, cleverly cooked up a new ‘terror’ scare to avert the public’s eyes away from Blair’s increasing political woes. British law enforcement, neocon and intelligence operatives in the US, Israel, and Britain, and Rupert Murdoch’s global media empire “

All the charges were dropped against every single person arrested in this farce. Roberts was right. This “plot” was cooked up in the White House and Number 10 Downing Street – not in the madrassas.

“God, what a bunch of uneducated trailer trash we’ve been!”Not really. I would rather call it Hummer and Denali trash.

Obviously one of the very possible outcomes of the current mess is combination of depression and inflation. This presents a requirement for a different approach in preparing yourself for the upcoming situation.I personally believed that the most probable course would be depression with deflation. Such belief made me take steps to ensure that my investments are basically in treasuries and other types of government bonds all with very low returns but safely placed in short term bonds.With possibility of depression – inflation combination I am not sure that this is the best approach. Or maybe it is not so bad provided that I closely watch the developments and move the money from bonds to equities when the signals of the government created inflation become more obvious.I would very much appreciate if some of you with more insight than me (which really means most of the people on this site) would give me advice.Thanks

@ORGross Bill “Says Consumer Lenders Attractive After TARP Shift”.Do you think that BG is making the same mistake one more time (I do not know if he is investing accordingly)?And BTW, thanks for the referenced article. Didn’t you want to highlight phrases such as:”So the actions of people relying on history change history, and that is what people lose track of.”

Ha! Just a six-year-old Toyota Camry, my friend, which I am pleased to say I gets well over 22 miles to the gallon. I also live in a modest home. I don’t believe in conspicuous consumption or living a flashy lifestyle. All of my income goes to supporting my wife and three sons, one of whom is a special needs child who will never be capable of independent living and for whom I must sock away funds to ensure he will receive the care he needs long after I am dead and gone.Oh, and lest my foregoing post have been misconstrued — I hope not — I am, in fact, quite concerned about global warming and the apparent human contribution to it. I find myself arguing with supporters of Senator Inhoff quite frequently. My previous post regarding down or sunscreen was referring to the hypothesis that an increase in global warming could interfere with thermohaline currents and, paradoxically, precipitate the sudden onset of a new ice age. If that’s true, I guess I’ll need down jackets and stuff; otherwise, I’ll stick to breathable lightweight linen trousers, guayabera shirts, open sandals, and Panama hats (pretty much standard garb for us Floridians). SWK

True – for several possible reasons. One option open to the US Gov’t is a direct devaluation of the US dollar. One day they just come out and make the statement of a devaluation. This would cause an instant loss to all foreign holders of the dollar. For this reason, I remain amazed at how many foreign investors are still piling into American T-Bills. At this stage they are taking a risk. They would be much smarter to diversify into assets in other currencies. And as you say … a collapse in the dollar ia a real risk. Unfortunately, as you know the dollar has actually been going in the other direction (UP) due to deleveraging, which is causing investors to sell assets (e.g, commodities) and buy dollars. But what happens when this trend reverses. Answer: Instability in the global currency system. A shockwave as the dollar collapses. This is what the G20 should be trying to avoid at all cost … but they are moving too slowly.PeteCA

War? Ever heard of fission?

This is happening with state and local governments all across the country. Here in Florida, where the state constitution requires that the state budget be balanced, the Legislature is in apparent denial over an anticipated shortfall in state revenue of over $1 billion:http://www.tampabay.com/news/politics/state/article895271.eceGovernment services and facilities will be disappearing soon. We’re seeing state, county, and municipal parks closing for lack of funds, unprecedented adverse impacts on state schools and universities, and on and on.SWK

It would be great to hear comment or speculation from the professor as to what he feels will be the outcome of the g20 meeting, but anyones opinion or insight would be valuable?

Yes, big lies appear to work better than small ones on the weak minded. And they are still at it, driving the biggest wedges between people in this country since Vietnam. The latest is that Obama will take people’s 401Ks to pay down the national debt! And wingnuts everywhere are buying all the guns and ammo they can cram into their gun safes before the new Prez repeals the 2nd amendment! Can you believe people are really so naïve?

And where is you head..? Likely up your ass, Talk about a self-centered diatribe.Ever considered that his warnings have saved many retirees and others their life savings just to mention one aspect.People need to WAKE-UP…and if one recognizes the import of the crisis and acknowledges that there is an moral obligation to inform others unless of course, you are not part of this society.Go flog your BS somewhere else..T

“Sean Hannity” this guy deserves the electric chair!

hugs and kisses:)))

I’m new here and I agree. Thanks Dr. Roubini. Your website must be good – it attracts good posts by people that can spell or at least have heard of spell checkers!

G20 ended.Review: http://online.wsj.com/article/SB122675491756631041.html?mod=djemalertNEWS“As G-20 crisis talks came to an end in Washington, world leaders in a statement pledged to take all steps necessary to stabilize the financial system. The statement noted five common principles on fixing the financial system. G-20 leaders agreed to meet again by April 30, 2009.”We are saved. All’s fine again.

I had missed this little Gem from last Tuesday:”Merrill Lynch Chief Executive John Thain said the global economy is in a deep slowdown and will not recover quickly, and the environment recalls 1929, the advent of the Great Depression.”http://www.cnbc.com/id/27661583

My understanding is the great depression was marked by 25% unemployment and projections now are only for 9-10%. What I don’t get though is how can they make those pronouncements. For 1. I expect a great number of illegal workers are unemployed and not able to make unemployment benefit claims. Have they been counted so far? If not the real total would be much higher. Although they aren’t legal and send some of their money home, they still were contributing to the economy and illegal jobs lost are still jobs lost and should be counted. Apparently the credit cards will be ok as long as unemployment doesn’t get over 10% (so says Cramer) but how can anyone say it won’t. Also, this seems to run so very very deep due to globalization. I and millions of americans don’t buy crap at Walmart and suddenly Chinese factory workers are being laid off. The recession hasn’t hit India but what’s going to happen to India when all the employees imported to work at the malls and hotels and business offices in Dubai get sent home because their real estate bubble is bursting; what jobs will they go back to? What’s going to happen when all the Brits who invested in the Dubai building spree lose 30% of their investments? Life savings will be wiped out and there won’t be jobs for retirees to go back to. Maybe that’s no big deal if you have a government pension to live off of but people in the US don’t generally have that. It seems almost viral and like the current models aren’t going to be able to deal with it all.Plus not only are the state government budgets supposed to be balanced but the worst thing you can do is raise taxes in a depression which all these state governments are going to have to do because they won’t have the money from residential taxes to meet obligations in coming years. Our county is looking at laying people off. We have bonds that we may not be able to sell for existing projects and new stuff’s on hold (which frankly is a good thing-exorbitant spending on schools are bankrupting our county in my opinon).Re higher education, my guess is higher education which was going to be facing huge retirements in coming years just won’t replace those positions. Maybe colleges and universities will all turn into “community” colleges where students go to school over the internet because they literally won’t be able to keep dorms and classroom buildings manned and heated with students and families unable to afford tuition. Also you’d have to be psychotic to take out an undergrad student loan in the face of rapidly rising unemployment and possibly a deflationary environment. You can’t get rid of student loan debt through bankruptcy. All those incoming freshmen this year will get one little tutorial before they sign for their loans. Talk about a bait and switch-oh, wait I forgot, “education debt is good debt”. Yep good debt when salaries are rising and you can get a job after you graduate. Maybe taking your chances and going off to Afghanistan for 4 years and waiting for the price of everything to come down including tuition would be more of a bargain. Very sad but me thinks (and me paid off 8% loans from 2000-2005 using home equity proceeds from a house sale and the best divorce that ever happened to me) probably true…Students as much as homeowners have been being sold a bill of goods as far as education loans are concerned and they are in as bad a position maybe worse than renting adults vis a vis making up their minds. Really you’re 18 and your parents can’t pay for college but you’re desperate to get out of the house. Of course you sign on the dotted line. You see freedom but what you’re getting if your lucky is a modern day indenture. What you’re getting if you aren’t lucky and there’s not a job for you and deflation? I don’t know. It almost seems Dickensian. Will the debts of the children every be repaid? Or will they like the mortgagees get refinancing at better rates and loan forgiveness. Might want to think about that now…

Full text of G-20 Recomendations:http://www.nationalpost.com/news/world/story.html?id=964033They don’t meet again until spring… do they actually believe we can wait that long… The US is operating with its hands tied behind its back because of the the change in power…. so we all wait while Rome burns so they can have thier inaugrial ball parties…

In statistics, there is something called the null hypothesis which represents that which is assumed true unless strong statistical evidence to the contrary is found in the data.http://en.wikipedia.org/wiki/Null_hypothesisThis concept can be applied to the US economy. For the US economy the null hypothesis will soon be that we will assume things will get worse/are worse than we are told until we see strong evidence to the contrary.Even though people should have had enough of Goldilocks by now there are still plenty of talking heads advertising a short V-shaped recession. Jee, there may even be a few who still doubt we are in a recession:-)http://en.wikipedia.org/wiki/Null_hypothesis

I’ll admit that I don’t know much compared to most of the posters on this site, but my understanding about the unemployment figures is that they are generally about twice what is ‘reported’. This is an excerpt from an article posted just a bit further down the page:”Officially, US unemployment is 10 million, but if measured by pre-Clinton era standards unemployment is much higher. Statistician John Williams, who measures the unemployment rate by the pre-Clinton standards concludes that the rate of US unemployment is about 15 percent. President Clinton “reformed” the unemployment statistics by ceasing to count discouraged workers as unemployed.”

This post confirms what I have been thinking for some time. All current proposals for stimulus are doomed to fail because they are aimed at preserving something that cannot be preserved: i.e. the excessive and unsupported consumption economy in the United States. It’s quite clear that our desire to consume has exceeded our ability to produce for some time, likely by somewhere between five and ten percent of GDP. Until this imbalance is fixed, increases in consumption will not solve our problem.The political culture is dominated by a desire to push consumption to the highest levels possible as evidenced by Pres. Bush’s “go out and shop” following 9-11 and the current focus on saving an outmoded automobile industry.Instead of subsidizing unaffordable consumption, fiscal policy must be reoriented to investments that will restore national productivity and prepare the U. S. to compete in the 21st Century global economy, including:1. Creation on a modern transportation infrastructure structured to minimize energy use. This will likely entail a significant move to urbanism and a recognition that the current long-distance commuter culture is not sustainable in the long term.2. Development of a sustainable energy infrastructure.3. Massive investments in workforce retraining and a reorientation of the failing primary and secondary educational systems.4. Creation of an efficient digitally based health care system and creation of a national system of preventive care.5. A significant increase in the current level of investment in basic scientific research.6. Aggressive build out of broadband infrastructure to provide utility-like universal access to a minimum of 40 megs at the household level.7. Infrastructure investments to support all of these efforts, not a blind focus on rebuilding the current automobile/long haul over the road truck focus of the current transportation system.In order to offset the deflationary forces built into the long term downward adjustment in consumption expenditures, the scope of these programs must be set at a level more often association with a national war mobilization.This will take a major realignment of political priorities and real leadership from the top, including a new-found willingness to “tell it like it is”.

Talk at the local flea market is not that they are buying guns because of Obama’s presidency, it’s because they think the unwashed masses, hordes of homeless are going to descend on anyone that has anything left in six to 12 months from now…and this is in a conservative, right wing leaning county.

Which one of all the John Slaters that pop-up in a Google search is you?:-)

Don’t worry, Fascism will come back into style and the South will rise again.

Last year I said here that my only equity recommendation was Hormel – that Spam consumption would soar as the economy worsened. Since then I’ve updated periodically with Hormel’s outperformance. Today I can do so again:

New York Times:In a factory that abuts Interstate 90, two shifts of workers have been making Spam seven days a week since July, and they have been told that the relentless work schedule will continue indefinitely.Spam, a gelatinous 12-ounce rectangle of spiced ham and pork, may be among the world’s most maligned foods, dismissed as inedible by food elites and skewered by comedians who have offered smart-alecky theories on its name (one G-rated example: Something Posing As Meat).But these days, consumers are rediscovering relatively cheap foods, Spam among them. A 12-ounce can of Spam, marketed as “Crazy Tasty,” costs about $2.40. “People are realizing it’s not that bad a product,” said Dan Johnson, 55, who operates a 70-foot-high Spam oven.

To SWK / Kilgores.Copy of my response to your post much higher in this blog.Thanks for the explanation and kudos to your life philosophy. If only more Americans could think like that.I myself try to live a similar life: I live in a small apartment in central London that i financed with 55% equity at the time of purchase (and the mortgage is on a cheap tracker rate that keeps going down!!). I have no car, and always try to take public transportation.And this despite having spent the past 8 years working “on Wall Street” in New York and London.I also spent a lot of time in Dallas and got utterly sick of the McMansion / Denali mentality. (Not to mention the mandatory piano in the entrance hall of the mansions where of course nobody knows how to play nor has any interest in playing the piano.)I am sick of people generalizing wall street bankers. Trash the bosses, not the people taking the sh*t. I can guarantee you that the majority of the investment bankers have not made the money you read about and are now in very serious trouble given that they are getting fired and have no prospects of landing another job in finance.Main Street people driving the Denalis and enjoying the McMansions and raking up the credit card debt and brainlessly polluting the suburbs in their massive SUVs are equally guilty.And on another note- the hedge fund hearing on the Hill a couple of days demonstrates how Congress just has no clue … And this is very scary.Obama should not only include Gore but also Clinton and a bunch of financial experts into his team. The rumors of the past 48 hours (Clinton as secretary of state) have been hopegiving. I hope that he assembles a real pipartisan star team. Maybe even including Lieberman.

Legalizing, regulating and taxing drugs would be a great source of income for the Country

Inflation, deflation, T bills the place to be, etc.? Find some answers here. Excellent article.http://www.atimes.com/atimes/Global_Economy/JK13Dj01.html

Thank you for your remarks, tahutch. Truly I understand your point (yeah, the 4% spread with 10-yr versus 7% mortgage rate–what an absolute crock) but what I don’t think you understand is this is wider and deeper than you think. I’m in a major metro area in the upper Midwest that saw home prices rise 64% in less than five years. And wage earners like me did not see my wages rise to that level. Yet home sales went through the roof. So there were many tens of thousands of folks who, while perhaps not going for broke, took on mortgages that were still far above their ability to repay, particularly if the principal was three or four times’ annual salary. So while I’d agree that perhaps there were not so many of us making $50K a year that went out and bought a half million dollar home, there were plenty of us middle class making $50K a year that bought a quarter million dollar townhome. And prices have stayed stubbornly high in this particular metro area. (The Scandinavians here are notoriously obstinate.) That’s my point, my dear. I just could not make those kinds of numbers work for myself, but tens of thousands of others thought they could because as you know, a house is an “investment.” Yikes. My Dad is a retired loan officer and he simply could not believe the banks were making loans like this. He consistently told me home prices were unmanageable, that two and a half times’ my annual salary was the high end of the affordability spectrum, and I best sit tight. So I did. And I’m still waiting for home prices here to come down to that level of affordability.

Yes, you and we do have much reason for hope that we will indeed transform ourselves into a more sustainable culture, relying less on material consumption and more on spiritual growth for our happiness.And yes, President Obama will assemble a “team of rivals” — just as Lincoln did.As I have said before, change HAS come to America, and it is not just a campaign slogan.http://www.change.gov/The cynics scoff, but I firmly believe this guy is the real deal. He is not just another ego driven politician without true values and principles. He really does want to change America and his whole career has been in that direction. His foregoing a lucrative career on Wall Street to work for $35K as a community organizer in Chicago and all that has followed tells me he sincerely wants to help the poor and middle-class people, and to make the USA a leader of the world rather than the ruler or policeman of it.I also believe he knows protecting our global ecosystem is a necessity and will act accordingly.

I heard a blurb on local radio yesterday that Minnesota might be looking at a $2 billion deficit the next biennium.And I said months ago that the next middle class piggybank to raid will be the public retiree/pension funds. Watch. I know many retired professors, teachers, highway workers. It will be very ugly.

Oh, and thanks, OR. Always helps to have the perspective of a disinterested third party! SWK

” also spent a lot of time in Dallas and got utterly sick of the McMansion / Denali mentality. (Not to mention the mandatory piano in the entrance hall of the mansions where of course nobody knows how to play nor has any interest in playing the piano.)”Reminds of of my sister in law; she has both the Mcmansion and the piano at the entrance to match. And she lives in Texas (Austin):-)

Nice article. I can almost say that I’ve understood it, despite my lack of formal study of economics, + I finally understand the economic framework of Reagan’s tax cut policies. Thank you OR.

More importantly, are these enough to compensate for reduced or closed credit lines?I am not saying this is a good or bad thing.

My usual comments involve either the economy or the stock markets; however, to the extent that people here are discussing solutions, I thought I would add to that discussion a bit.In the discussion of infrastructure build-outs as stimulus, there are assumptions that everyone seems to make that are inappropriate.I will not be discussing the value of an infrastructure program as stimulus, since that would be a much longer post. If one accepts that infrastructure projects are valuable as a stimulus, or if you presume that the government will undertake such projects whether they are truly stimulative or not, then it is critical that we not engage in building infrastructure al la 1932. In other words, yes, roads a bridges are important, but in the next century we need:1) Water Desalination! Massive buildouts to prevent chronic droughts and destruction of farmlands resulting from climate changes.2) Atmospheric CO2 and CH4 removal systems and CH4 recapture systems.If we are thinking of dumping trillions into make-work projects, let’s at least get something out of it. Carbon Dioxide and Methane gas will destroy the global economy within 20 years even if it was to be saved from the current crisis. There are known methods of removing these gases from the atmosphere, but they would require huge public works projects and expenditures. This seems like a perfect fit. The rewards would be saving the planet from biosphere collapse.Water wars will ravish the globe within the next 20 years. Western and Southern states are already experiencing massive water shortages that threaten crops and, ultimately, entire cities and those states’ economies. As the drought spreads over time (from global warming) a lack of water will devastate the entire USA. Massive coastal desalination facilities would be hugely expensive, but would pay a dividend of potable water and water for irrigation for generations. Water will become more expensive than oil within 20 years. Imagine the economic value of having unlimited supply.These are two legacies that can be left by us to future generations that would at least let them know that in this time of crisis, we thought about them and the future.Less roads and more productive investment!–Brian

Reason 21: “Everyone can still get a student loan” (but only a lucky few will have a good enough job with which to pay it back) http://www.latimes.com/business/la-fi-loans11-2008nov11,0,275802.story

Krugman is foreshadowing what will become policy; he’s simply softening up the the media/public and trading on his newly “earned” designation. The spending program that Obama will unveil will be overwhelming and it’s best to clear the field in advance. The question is since we know this is coming how can it be played.

Everyone is so against me for being antiNR when I hardly am.I just think we need a supplematary analytic direction which is not neccesarily able to be provided by NR. But he is as far from wrong on his own points so far as almost anyone could be and deserves tremendous credit.

Why is someone googling names?

Your one eyed enthusiasm worries me KJF. You have extremely high hopes of BO.Likewise millions more like you.

A reverse Louisian Purchase?

If you want to govern like Lincoln, bring in Ron Paul as Treasury Secretary.

IMO, it is time to care less about who is liberal and who is conservative, and to instead work together to stabilize our economy and to resolve the war or terror in a way that focuses on the gang of criminals who attacked us instead of attacking entire countries such as Iraq while bin Laden slipped out the back door in Afghanistan.I completely agree with your statement above – and I do apologize for the sarcastic innuendo – PS I am not an American and generally lean well left of center on most issues – I just don’t like Obama as in I don’t trust him. Let’s hope I’m wrong.

Anxiety in Japan/“Elderly crime increasinghttp://www.bloomberg.com/apps/news?pid=20601109&sid=as80aWlHdA1M&refer=homeThe number of households on welfare reached 1.1 million last year, an increase of 300,000 since 2001,The government aims to cut 220 billion yen ($2.3 billion) from social welfare spending in each of the five years starting 2006 as it seeks to balance the budget by 2011. As part of this plan, the government introduced a new health insurance system that would raise premiums for some elderly patients….stimulus: cutting from social and giving to ?

OR -In the scientific method, every theory sets out to disprove the null hypothesis. A theory can never be proven, only disproven, in the strict sense. Our null hypothesis would be that the economy is fine.

To a blind person, one eye is a miracle.OrOne does not eyes to have vision.I have never been this enthusiastic about any politician or about the prospects for change in this country, but I really do sense this guy is different, just like I felt Gorbachev was different when he first came to power and lo and behold, he was! And the Soviet Union unraveled!As for change here in the USA, I usually don’t expect much from presidents. But in this case, we have moved so far to the right over the past 28 years and to an extreme in the last 8 years, that I feel a palpable change is quite possible now as we (Obama) begin(s) to swing the pendulum back to the left.I may be disappointed, of course, and my conclusion is based mostly on my feeling that comes from reading his books and hearing him speak for the past two years now. To paraphrase W, when I look into his eyes, I see sincerity, the real deal. But as Chancellor Sutler said in V for Vendetta, “If there is one thing I am sure of Inspector Finch, it is that this government does not depend on your feelings.”But I hope I am right because, God knows, we do need change in this country.

Your interpretation is correct With regard to PV cells, they’re not as exempt as you might think: don’t overlook their manufacture in this equation!

http://www.mergers.com/toughtimes

I like Maulding, but why is he still pushing the same broken button, asking that question “Can We Actually Muddle Through?”?Well, you can always try to muddle through against the torrent at the edge of a fall, but it won’t matter much.

Oh, I’m perfectly serious about PV technology — I certainly wouldn’t begin to dismiss improvements in it as a means of developing meaningful alternative energy sources. I’m a registered patent lawyer, and I am quite interested in this particular area at the moment! SWK

Do you think economic growth equals “uneconomic churn?”

WB, BG …Are we living through the few days subsequent to meteor hitting earth and before dinosaurs start going extinct?

I think the business of student loans is, and has been, a horrid scam unwittingly supported by well-meaning (and some not-so-well-meaning) legislators. How many other forms of debt are deemed not dischargeable in bankruptcy? Not many.The interest and fees racked up by private financial institutions for loans that fall into default when graduates can’t earn enough to repay them, or when good paying jobs are lost, are simply obscene. Young people come out of school so saddled with debt that their choices with respect to career and family become unduly circumscribed. Society loses out because graduates are driven to the jobs that will pay them the most, since they cannot afford low-paying but socially needed and personally rewarding careers that they might otherwise be inclined to pursue.Some learning institutions have gained from the student loan system, too. They look the other way while students who are often young and naïve get saddle themselves with educational debt, while the institutions proceed to build on the backs of those students, and at their expense, wonderful new facilities using the monies paid by the students as tuition and fees.If the government ever wanted to get serious about supporting higher education to make the U.S. competitive in the world economy, it would cut out the middleman and offer such loans on an interest-free basis, and provide a means of allowing graduates who find themselves without sufficient income to repay their loans a means of reducing the principal balance through public service, whether military or civil. in the meantime, my advice is to steer clear of borrowing to finance one’s education, even if it takes 10 or 12 years to graduate.SWK

You mean that ..?Yeah, this site has the privilege of being an artistic expression whiteboard of diverse schools.PeterJB’s style happens to be influenced by a mixture of impressionism, baroque and dadaism.

Et tu, Brute?

‘Big Chill’There’s no way forward without likes of ‘Ryskamps’.If this forum is offended by Ryskamp … then you lose.Just my thoughts.

Something missing from this model pete – I don’t see any banks on the island. So where are they getting the cash to pay for the ever inflating table ?I suggest one of them becomes a banker & offers attractive cheap rate loans to the other 2 guys to fund the operation.Better still, from a macro-economic POV, TWO of them could become bankers, they can then sell off these questionable loans to each other, as a hedge against the possiblity the last remaining antique dealer might default.O shoot….. of course they will also need a CENTRAL bank to guarantee them…. ( Don’t want any runs on the banks..)Ok, there’s this old joke about 3 bankers stranded on a desert island with only one sub-prime portfolio between them…….

I see that you “under-stand” – excellent start.Ho hum

“Facts and Figures, Whys and Means” |HellasiousFact 1: There is too much debt in the economy to be properly serviced by the earned income generated. Total debt has doubled as a percentage of disposable income in the past 25 years.Why did it happen? Because wages and salaries (i.e. earned income) were kept artificially low in the name of “competitiveness”, while consumption was boosted through ever increasing debt.What does it mean? Assuming even more debt and/or replacing private debt with public, as is currently happening, cannot resolve this fundamental problem. Instead, debt must be liquidated.Fact 2: Saving has disappeared in the US. Every penny earned is consumed.Why did it happen? The stagnation of real wages and salaries meant that less income could be saved and had to be consumed to maintain the American Lifestyle. In addition, way too much social emphasis was placed on consuming vs. producing.What does it mean? The US economy cannot finance itself internally and has to rely on foreign investors and lenders. Unless reversed, this trend spells big trouble geopolitically.Fact 3: There was wholesale removal of manufacturing from the economic base after 2000 (aka China’s “miracle”). Millions of well paid jobs were replaced by service sector jobs, many in the very low-pay area of leisure and hospitality (waiters, chambermaids, etc.).Why did it happen? Because neo-liberal and neo-con policy makers made a conscious decision to replace manufacturing with its pesky labor unions and associated politically troublesome middle class, with an indentured social class of dependent service workers…What does it mean? The imminent end of the US as a superpower. Supercomputers and fuel cells are not developed by a java-and-jelly donut economy. Globalization means that education, knowledge and technology are, in fact, fungible and transferable. In the absence of a local base of utilization high value-added jobs are free to go where they please.Conclusionsa) Debt must be liquidated and earned income increased.b) Saving must be increased by reducing consumption in order to fund investment (preferably in energy infrastructure) and to reverse the loss of geopolitical importance.c) Manufacturing must be emphasized in order to regain technological leadership.http://suddendebt.blogspot.com/

On this planet it is only our context and manner of thinking that changes and we are at the point of a major change of direction, shift if you prefer, in mental focus.We have the choice of following the quantitative path of least resistance or alternatively, we could rise to a deterministic direction of our own making, which is founded in the philosophies and physics; a qualitative shift.There is no doubt that as we prefer “leadership” to be drawn from the infinite ranks of the “incompetent and stupid” – in religious loyalty to the faith of our feverish categorization of state “democracy” (which is actually a “republic” in the instance of the USA, and colony in the instance of Australia, etc., etc.), the route we will take is that of ‘least resistance’ as ‘denial’ is the game we can all play.And its easy to get a consensus and a Nobel Prize and or a knighthood, etc…So, expect mileage to vary and for many, like me, to do (doing) very well; thank you… but I do feel sorrow for those innocent victims of “leadership” who prey on the gullible and trusting… and expect also, just more of the same ad nauseum.Ho diddly hum

US $15,500,000 ??? That’s the kind of salary that would enable you to worry about this particular crisis just in a nice comfortable theoretical sense isn’t it ?…

well it’s true they all seem to go up in smoke eventually.

Another Jubilee fan on board? This is getting spooky…

Sooo, what do you think would happen, O People of the Blog, if every person who owns a credit card in America (estimates, anyone?) were told it (or they) were being taken away?Would you, too, feel just that little frisson of panic?

I’m still here, though not always easy to find. All my posts are available at:http://www.rgemonitor.com/financemarkets-monitor/author_name/lbanker3/London-BankerOr you may find it easier to follow at LondonBanker.blogspot.com where I post for the ex-RGE and non-RGE crowd.

His ideas though unorthodox were welcome, his demeanor and insults were not

I understand. Should he/she conform?

GSM,Although I think it is past time for any finger pointing, I believe that the “original” sins (and mistakes) are really few. In a closed surface, with enough heat, a matter seemingly as hollow as air can tear up steal. Pressure is what sets the initial motion, what happens next is just a cascade of events, chain of reactions. If the hot air did not release its pressure the way it did (lousy lending, underwriting, packaging, slicing, dicing, securitizing, rating, buying, speculating, leveraging, regulating …) it would have done so otherwise, with the end results, not necessarily less dramatic.I’m not saying the others (like the ones you mentioned) are blameless, what I am saying is that, for me, for a global and radical change to occur, the heat is more responsible than the air, or to be more accurate the ones who set the heat. The rest, well, if subpoenas and regulations do not take their course, then the markets will deal with them.Do you think the big 3 rating agencies will get out of this unscratched with the same business model, and we are not even done yet?The heat for me were the fiscal and monetary policies – to keep it brief.

Why shouldnt he pick the esteemed Prof. Roubini who has shown himself to be as astute as any macroecon person?Roubini should AT LEAST get treasury.

Because chakira, despite the enormous respect I’m sure we all have for NR, what is needed is someone of known stature tested by fire.When the s**t is really hitting the fan, you want someone at the healm who has been there and done that. Someone, who by virtue of his very presence, inspires calm and confidence. Someone who it is obvious all can believe in.Really, I do think it is that critical.

Roubini:Why do you persist on denying the fact that we are in serious danger of experiencing a depression?

Shshshshhhhhhhhhh

Just saw this… thought I’d share. It’s funny and has a quick Roubini shout out in the middle of it. Very amusing.http://www.youtube.com/watch?v=bNmcf4Y3lGM

the imagination needs to catch the up with the situation and provide us with new ways of thinking and creating wealth.I think that our imagination (virtual over the physical) IS the reason we’re in the mess that we’re in. It’s led us to this dream state in which we have discounted the value of actual physical resources (including environmental impacts).New exploitable resources are become scarcer and scarcer.Further, maintenance of existing complex system is requiring increasingly more input, which means decreased probability of the creation of significant “new” wealth.

If not these vehicles then others… Greed cannot be purged from man. It was greed that got us here. Demands for ever-increasing returns. Consolidation of power always braids its own hanging rope…

I’d add that this scenario of the US citizen saving $1 trillion/year is highly unlikely given his/her personal debt levels.It’s liquidation time. Wasn’t this what Reaganomics was really aiming for? I suspect that it’s the bad medicine that we refused to take…

Hence the 1st Infantry 3rd BCT defending the homeland in full battle rattlehttp://www.armytimes.com/news/2008/09/army_homeland_090708w/

WASHINGTON (AP) — President George W. Bush underscored how dire the economic crisis has become when he told world leaders that he had agreed to a $700 billion rescue plan for financial institutions only after he’d learned the U.S. was at risk of sinking into a “depression greater than the Great Depression.”http://finance.yahoo.com/news/World-leaders-at-economic-apf-13587128.htmlThose of you keeping score on what he says. How late was GWB saying the economy was fine?

They never learn.http://norris.blogs.nytimes.com/2008/11/13/they-missed-the-start-now-they-see-the-end/

First came the banks looking for a federal rescue plan to stay afloat. Next it was the automakers seeking a bailout. And now state governments say they, too, need emergency federal assistance to remain solvent.http://www.washingtonpost.com/wp-dyn/content/article/2008/11/15/AR2008111502380.htmlWat a buncha sissies! Here in Amerika, we are quick learners on the way up. Everybody learned to live well beyond their means and now that some belt tightening is needed, most lack the cojones to endure some hardship. How about trying to learn a few quick survival skills in the way down?LB, spam is too expensive. Beef bone with all the meat that remains attached to them after they remove the expensive cuts, potatoes, cabbage, onions and carrots makes great soup. It is more nutritious and cheaper than Spam and has no Nitrates! Yes but you have to cook it; Spam comes in a can.My father made it through WWII and I was married to an Armenian for almost 10 years. I learn a thing or two about belt tightening from them!

And BTW, the addicted Amerikan consumer didn’t stop spending because he is more conscious about the hardship that is coming. He had to max out credit in order to stop. He could slowdown, he had to crash against the wall. The recent cut in home equity and CC lines of credit made consumption come into a halt a lot faster. I wonder how many now “up against the wall” bought ipods, iphones, the latest blackberry, on their maxed out credit cards. Wat a buncha irresponsible sissies!

I agree with the premise. But on the other hand false hope can suck a lot of energy Again, no matter how smart someone is they cannot overcome the facts…

Easy OR… much was accomplished through the finest marketing/propaganda forces that have ever existed. This becomes clearer after watching The Century of the Self. But granted, it’s up to the individual to be aware of his/her surroundings…BTW (as a US citizen) – I have never owned a credit card. Never purchased a new car. With zero debt I’m looking at relocating to another country, one that’s more fiscally responsible.

When my father was a kid, he got an orange for Christmas. It was an exotic product and had its true value(worth decades of memories). Now, one out of three oranges in his fruit bowl will probably be thrown away. No one no longer knows any value of anything because of so many misallocations of credit and subsidies.Things should be restored from the base not from the top. In Europe farmers look to the subsidies to decide what to plant or even destroy.Subsidies granted by the same central planners that didn’t see the financial meltdown coming.If we don’t bring back logic to man, we’ll never be able to have fair trade and balance.

Nouriel has already commented on his take of the G20 committing themselves to a common solution. With this article “20 reasons…”, am I reading this right ? Central planning has just been elevated from each countries’ interest to the world’s interest thus weakening the effectiveness of the whole. Do I have 20/20 vision on this professor ?

Two scenarios posted here; the one above noted the difference between a gradual decline in sales versus a sudden collapse and an earlier one posted about providing a national sales tax holiday (for cash purchases) with the Government reimbursing the states, could be combined. Would this provide a way to soften the collapse of sales this year and allow for incentive buying of the type of tax rebate recommended by the IMP?

“Aggressive build out of broadband infrastructure to provide utility-like universal access to a minimum of 40 megs at the household level.” This one scares me. Has anyone noticed the correlation of bandwidth capability to unconstitutional acts against the citizens by ubiquious (sp?)governmental entities.OH-WELL-I-AM, misspelled on purpose.

Ron Paul is real.