Prof RoubiniNo … they don’t!!!Desperate times do not justify desperate measures.Desperate times deserve well-considered measures.Throwing the kitchen sink at this economic problem is NOT going to work. It hasn’t so far, has it?If we do things as you’re suggesting, this country is going to wind up in anarchy and civil unrest. The failure of the Fed’s solutions so far proves ONE important thing … the Fed should no longer be in charge of the recovery of this country. That’s it.America needs to stop bailing out failed sectors of our economy. They were going to fail anyway. If we spend any money at all, it should be on economic activities that offer a real chance of success.People everywhere need to understand one clear thing. This crisis didn’t just happen. It represents terrible leadership over a long period of time. It represents the wrong policy decisions, made blindly and without considering re-direction. It is not reassuring that Mr Obama is apparently accepting economic advice that continues the current bad thinking. I hope he recognizes the mistake and changes it fast.PeteCA

100% in equities? Perhaps his 401K is inconsequential – he has always been clear and upfront that he is not “active” in the market but this is at the very least curious – no wonder he wants the stimulus package – he’s talking his own book (just kidding)

But wouldn’t the increase in unemployment without bailouts also lead to anarchy and civil unrest?Curious to see why one solution (bailout) is more likely to lead to that situation then the other solution (no bailout).None of our options seem to be all that great.

Where is the usual “Uno” this morning? Might have taken too much last night.

Bingo Rubster!As I stated about the 401k a while back, I went equities 100% too. But after the triple dip I shifted back to safe.Once the Gov’t gets the Principal reduction of debt going, I will officially shift back to Equity. The Gov’t hast to go bottom up. (…and since that Prin Redux might take a little time to take affect… a stimulus package might float the boat in the interim???)I also agree with the “replacing current management” theory… but I think that needs to be looked at across the system. I also believe an investigation or 2 needs to start IMMEDIATELY, to keep “risk” takers in check!!! The media, and the people should be DEMANDING THIS RIGHT NOW!WHERE ARE THE SCREAMING MAD???Miss Americap.s. Don’t forget to visit:http://www.rgemonitor.com/globalmacro-monitor/254664/reckless_endangermentIf you stop in… Sign in, and I’ll do my best to address your concerns and give my opinions.p.p.s. Be active folks. Participate in knowledge sharing. Luck favors the prepared! Keep tabs on Outerbeltays braintrust platform, and take heed to good advice from poaters like PeteCA (with regards to preparing yourself.)

The big issue in all of this is that demand cannot be stimulated if we are all feeling either satisfied (all of our needs and many of our wants are already met) or scared (our immediate needs are met and I’m too scared to ask that my wants be satisfied). Thanksgiving is bad for business because it reminds us how well off many Americans are and gratitude and satisfaction might just spur us to consume less. LIVE! ENJOY! But our system is in NO WAY designed to deal with gratitude and complacency, it is designed to only consume, consume, consume. Either it ends now, or it ends later, but either way it appears that consumer society is just not sustainable “as is.”

@ ptm (previous thread): “The one problem with Ron Paul is how would he regulate the creation of credit? My guess is that he would not regulate it and we would end up right back in the same mess, but with a gold-backed currency.”Ron Paul has answered that. He’s said that you can’t just cut excess all at once; it has to be let down efficiently, gradually. In other words, he would not go against the economy cold turkey.And he would regulate the financial mechanisms: the role of government is to prevent damaging monopolies, but not with pretend regulations. His approach would be to have the government regulate, rather than have the banks regulate to prevent competition. Look who’s making the rules. Do you think government is making the rules? The banks make the rules.The main point is, Ron Paul would start back in the direction toward sound money rather than continue in the direction away from it. Each step the government takes now, takes us farther away. He would stop the direction and turn back toward sound money and the U.S. Constitution.The difference with Paul is that he has the courage of the Founders. He is willing to tackle the problems – on all fronts — without listening to a voice from the back room. His frequent record of standing – oft alone — against both political parties when the chips were down indicates that there are few in government that have this courage. And it appears, from the appointments made so far, there is no one in the Obama administration with the courage.If you look back into Ron Paul’s economic and political positions, you will see that he was on target as to America’s direction and what is now happening.

There really are only two asset classes: at-risk assets, and no-risk assets. Being flexible and adjusting a portfolio’s asset mix to favor one or the other really has worked the best through thick and thin. Check out the small number of flexible asset allocation funds that really have been prepared for this downturn. It turns out that small, nimble money managers have proven to be much more effective at navigating troubled markets, and are much more likely to be the best solutions going forward.

“I know what you are thinking: this time it’s different.Hmmm… where have I heard that before?”_____I think I heard that on November 4 – sadly you are correct and that is why I think it is different this time – the same bad actors who got us here are still in charge:)

Commodities down with equities. The dollar will weaken.Next person that interviews the professor PLEASE ask why gold will go down in the face of a weakening dollar?hlowe

brilliant move as they testify

They had to find some place to hide all of that bailout money.

PeteCA – what do you make of today’s markets – when the clock strikes 3 which way will it go?

This time its readily observable would be a better way to look at it.Have you not noticed the automakers saying they won’t survive another 30 days? The Baltic Dry Index at 666? Global worldwide rate cuts?This situation is not just another recession. It is a massive correction of imbalances in so many different ways.I urge you to take in one of the many good sites that really do a good job of illustrating what we really face. Try DanW’s post on TAE from yesterday as a good starting point – “Its not a slow down, Barack”: the automatic earth Our pessimism comes from knowing too much this time, I’m afraid.

It’s the same as bailing out water from a boat that has a huge leak. The thing is still going to sink anyway, but by the time it does, you’ll be so exhausted from bailing that you’ll be unable to swim to shore and save yourself.Which choice is better?Bailout = failure down the road – any future capital to work with to fix thingsNo Bailout = failure now + possibility of future capital to fix thingsWe’ve been trying to keep the boat patched for years now. Sooner or later, the patches become completely ineffective, and you just have to abandon the boat and use whatever funds you have left to work on making a new boat.If I get jumped on for this opinion, so be it, but in my eyes, there is no amount of money that can be thrown at this magnitude of a problem that is going to restore things to any semblance of the way it once was. All we’re doing with these bailouts is destroying any possible means we might have had of supporting ourselves through and rebuilding after the disaster.I still wish someone would explain to me how it is that we can fix loads of debt with more loads of debt. And how a consumer-driven economy can survive without the consumer. If someone can explain that to me, then I will change my opinion on all of the bailouts.

Having watched the executives from the Big Three on C-Span last night, I’m not sure GM’s Wagoner could run a soup kitchen correctly. Of the three he seemed the least sharp, shockingly so, and had an air of a sense of entitlement to being bailed out. Must be the too big to fail thing. But all three should probably be replaced. Not one among them had the good sense or courage to fly to the meeting on a cheap coach class ticket, surely a more efficient and cost-effective use of their time than driving. If the legislators overseeing the bailout are too limited to see that, perhaps they should be replaced as well. Where is the common sense in all of this?

Common Sense has been on the Endangered Species list for years. At the corporate and government level, it’s been extinct for quite some time now.

Interesting he is also quite bearish on the dollar

In past recessions we had a promising future in bubbles like Tech and housing we also had a higher savings rate with real pricing power in our homes. I think most in the Armageddon camp see the basic problem as where will the next bubble come from since our service based economy is so dependent on them and what benefits will it offer the widest range of people, and where does the economy go if there is not another bubble of the size and scope of the housing bubble. America’s savings rate is low and the general population is shopped out as the professor said and they feel the need to save for an uncertain future. This recession also impacts the world in a way the last recessions did not. January of 2009 will be an important month to watch, retailers who are holding on hoping for a consumer save this Christmas will be hard pressed to stay in business when this doesn’t happen. Also the stigma associated with bankruptcy is abating, in general People would tell you any and all bad news associated with their lives with one exception their finances, most would pretend they were financially sound when in fact they were not. This practice is now ending along with the shame of bankruptcy, bankruptcy is now looked at as the smart thing to do, freeing your family from the home you find yourself upside down in. This is happening now and the number will grow as it is becoming an accepted practice.This time is different it is more severe and the end is not in sight. The fundamentals that brought us to this point have not changed and the decent will continue and when we reach the bottom what force will bring us back up and to what level and how long will it take to get there.

which i wish that he could explain – especially in light of his cries of deflation brought on in part by de-leveraging. has he seen the end of the tunnel? Is the explosion about to happen?

COMP now green!! Rest of indexes to follow-ready for the last hour explosion???!!!

they are not going to wait until 3pm to take this down to 8100 dow futures.

It’s got to be a frustrating day for shorts.

Maybe it’s true that As General Motors Goes So Goes the U.S.A.

Guest, you are like a little salmon swimming up stream! You are fighting a rigged game. Dow is up 300 points off the lows and it wll close up 500 pints today. Sorry

Dow is up 100 points-unbelievable-simply unbelievable.

or do we get a headfake?

The government is in absolute panic mode to stop asset defaltion. Spreads get too high and the markets finally price in credit risk, hell, we’ll print money and buy the long end of the curve until we get 4% mortgage rates. The stock market finally starts to price in reality, the government doesn’t like that either, so we print money and give it to Golman in endless streams until the shorts are gone and the longs can buy at will. Gold telling the truth and it gets uncomfortable, hell, the government will print some more money and whack the gold markets into contango for the first time ever. Now the bailout train is leaving the station. They are going to start extending loans to hedge funds on Monday…

The equity market is a lie. The PPT, with Bernanke and Paulson plunging fiduciary media into every dark hole they create, in some ways reminds you of the French Revolution. You can’t believe how bad it’s getting and then they do something else insane to make it even worse — something nonsensical like changing the calendar and calling the months by different names. It’s a spiral down and they are pulling everything they can grab onto down with them. .And that’s why the market should not be used as a measure of the health of the country: the market isn’t fixing the economy. It is a lie. Maybe it’s making some feel better but it is not making Americans feel better. They are watching their situation, not the market. The investment banks want to hold onto the 401k money and I believe this, in part, is one of the reasons for the massive machinations being used to keep the markets propped.The market and financials are feeding off bailouts by debt dumping on the taxpayers. Bernanke’s haywire pumping policies are cannibalizing the economy. Prices of production factors are coming down from their excessive boom heights because they have to adjust to the real state of market data. All government and banking cartel attempts to prevent or delay this merely prolongs stagnation.

You think this has been amazing, watch what happens in 8 minutes!

That’s pedophiles you’re thinking of.

‘The Panic Of 1907′ And Lessons For Today

Dr. Robert Bruner, Dean of the prestigious Darden Business School and Charles C. Abbott Professor of Business Administration at the University of Virginia, has written, what I consider a must-read book for the president elect and his financial team. Dr. Bruner’s latest book, The Panic of 1907, has similarities to today’s financial crisis.The book, which is a quick easy read that layman will understand and appreciate, tells a story of loose lending, high leverage, unrealistic expectations, which resulted in a combined private/government bail out of some of the biggest names on Wall Street. I interviewed Dr. Bruner because people need to realize that the U.S. has been through similar events not once, not twice but at least six other times and this won’t be the last time. I am 47 and I remember the ’70s and 18 percent interest rates, the crash of 1987, the Savings & Loan debacle and the Internet bubble. There is light at the end of the tunnel and it isn’t a train. Read more

Someone reported last week that CNBC’s Rick Santell made a comment that the government had found a way to leverage the Tarp money, Has anyone else found out any more on this?

here is the link

Thank you. That post right there on the Dark Pools shows exactly why we need to completely disassemble the current Wall St banking system. Even in the midst of one of America’s biggest financial crises, these guys are still trying to figure out how to do an end-run around the system.PeteCA

I expect a lot of resistance around this 800 level (or close) on the S&P 500. Let’s see how this plays out. The global economic system is not out of the woods yet – there are still big troubles ahead. As for today, I won’t make any predictions on the market. But suffice it to say that the most important data today was the unemployment number, and so-called economists were expecting a job loss of 340,000. Instead, we got over 500,000.PeteCA

Guest – you have it nailed correctly. No arguement with your analysis.

No volume – another unsustainable rally

KJ – I agree with you on most of your other points. But I have to disagree with your dismissal of manufacturing.The manufacturing process itself spurs innovation. In fact, the most important part of innovation is not simply thinking of new products — rather it’s making an existing idea or prototype truly useful and useable. That type of inspiration only happens when you get your hands “dirty” in the actual production of a product.Mind you, this manufacturing could be macro-scale (autos, trains, windmills) or nano-scale.No one’s going to keep paying us to dream up “pie-in-sky” ideas in the hopes that one or two might make it off the ground. We’ll get paid (and keep working) by developing and refining ideas that work on the ground. Again, that type of development will only occur from insights you’ll get by being directly involved in the manufacturing process.

16 years for trying to take your stuff back; and the judge and jury were impartial-right!

The problem with any vice (cheating, stealing, market manipulation, etc) is that once you get away with it, you continue to do it! The elite remain above the law and until people wake up, nothing but 3rd world status will come to the U.S.!

Come on! Sing with me! “We’re off to see the wizard, the wonderful wizard of Oz…”

And who is going to decide what manufacturing is to be saved?My argument is that by providing a blanket statement such that you have you are keeping things open for massive misappropriations of capital (resources etc.). But hey, maybe I can get your children to subsidize a new Hummer for me or something…You’re essentially mandating something, which means that the government will take on the responsibility. Look how well the government has done with the banking industry. And now you want it doing the same with the manufacturing sector?Chrysler should have been allowed to restructure on its own back in the early 80s. And now here we are again talking of bailing them out! How much longer, how much more of your children’s future do you want to hock so that we can keep an unsustainable concern going?I have not, nor will I ever, suggest that manufacturing isn’t needed. But I do NOT want the government deciding what is or isn’t needed.

Shhhhhhh!

and so another conspiracy theory starts

I don’t fervently believe in anything other than facts (though always with a skeptical eye).Look around you and ask whether you think we can perpetuate all of this?Growth is NOT sustainable, so any increases in “lifestyle” (using the traditional [distorted] measurements) is not going to happen. As nothing stays static, we will not embark on decades of stagnation. It then follows that the ONLY direction is that of heading in the direction of “caves” and “igloos,” not away from them.Scaling up any alternative meme is not only going to NOT happen, but it’s only going to make the suffering of the decline that much worse.People don’t need to hurl themselves all over the place on a regular basis. And, sooner rather than later, we’ll also find that a more localized production of food will be the norm.Food, Shelter, Water. Transportation isn’t one of these essentials (because we have feet!).

WHAT DIFFERENCE DOES IT MAKEAmericans currently only buy 20 mpg +/-2 mpg cars from Toyota/Kia, etc; as they do from Chrysler/GM, etc. Are you or Michael Moore [he drives a 20 mpg Ford mini van last I heard] going to change which brand, mass transit or what mpg Americans pick? LOLWe drive the brands our fathers drove and tell everyone they’re the best; even if the defect rates are low on all foreign/domestic makes/models [around 1-2 defects].Don’t hand me [an engineer] globalist tripe that somehow foreign is better than domestic or more fuel efficient. I’m too pragmatic to swallow that hogwash. They’re all about the same, and they look alike too.Also, don’t hand me that globalist tripe that building foreign cars in America is the same as the Big Three; with its engineers, accountants and other college professionals based in America [not Japan and South Korea]. Just having non-union foreign car factory rats [about $10/hr] in America does our college kids, teh housing market and America’s R&D absolutely NO GOOD.

Bingo – not that we didn’t know this was coming but the reality that the taxpayer is now officially the proud owner of some the toxic waste from the lucky 17 obviously goosed the markets – too bad Bloomberg published this article after 3pm -Meanwhile as the banksters jet off to somewhere warm for the weekend – the gang of three from Detroit will be wheeling there back home…

4:07 p.m.[SPX] S&P 500 hit with weekly loss of 2.3%4:06 p.m.[INDU] Dow Jones Industrial Average down 2.2% for the week

I was asked to stop with the caps! Sheesh, make up your minds!

@ Guest -If I didn’t want to be picked on, I wouldn’t make any comments here, now would I? Besides which, I get picked on more by my 8 year-old son at home than any of the posters here could ever hope to do – and he’s MUCH louder at it too! Thanks for the comments, Guest, and for keeping me thinking!

Talking of unemployment:”Today, the BLS reported a statistically-significant, seasonally-adjusted jobs loss of 533,000. The figurewould be 732,000 Net of Revisions, and is down a totalof 873,000 Net of Concurrent Seasonal Factor Bias.”The SGS Unemployment chart has been updated at:http://www.shadowstats.com/alternate_dataHo hum

@Mark -Actually I was figuring that I should have the power to decide who is saved. But that’s just me going off on one of my power trips again.I don’t believe in a central authority to decide what gets manufactured either.However, given that a large chunk of our manufacturing is currently done in China, we basically have a state-controlled manufacturing system already.Problem is, it isn’t controlled by our state right now.

Speaking of sanity and reason:”Today’s leaders, who all belong to the collapsing world (including Barak Obama (3)), cannot possibly imagine how to solve the problem, just like central bankers in 2006/2007 could not possibly imagine the scope the unfolding crisis could reach (4). It is their world which is disappearing under their eyes, their beliefs and their illusions (sometimes similar) (5). According to our team, a 20 percent renewal of worldwide leaders is required to begin to see sustainable solutions (6) appear. This is indeed, according to LEAP/E2020, the « critical mass » needed to permit any fundamental change of perspective in a complex not very hierarchical human group. Today we are still far from reaching this critical mass: in order to contribute to finding solutions to the crisis, those new leaders must accede power in full awareness of the crisis’ specific nature.”http://www.leap2020.eu/GEAB-N-29-is-available!-Phase-IV-of-the-Global-Systemic-crisis-Breakdown-of-the-Global-Monetary-System-by-summer-2009_a2435.htmlHo hum

Ups! last line: use economics/economy instead of “economically”

http://www.bloomberg.com/apps/news?pid=20601085&sid=aiPYnwFaSa08&refer=europeAmatuers. Paulson can teach them a lesson.

Okay, so a car company wants me to spend up to what is concievably a year’s salary on a vehicle. Why should I give them my money, when what they have produced has been unadulterated crap that falls apart within months of it leaving the car lot? I’ll stick to my Toyota until they can compete thanks. My 1994 4-Runner (I live in a remote Northern Canadian town) has had nothing but regular maintenance ie., oil changes and it has not had ONE thing go wrong with it. It starts like a top when it’s -40 and the body integrity is like new. I know someone driving a 1983 Toyota corolla. Same story. I do not see that vintage Chevette or the like out there. If these companies want my money they have to earn it buy producing quality goods, not out of some misplaced sense of loyalty. I will buy when they can produce, and I will be happy to do so. Compare the average Toyota worker with the average worker in Detroit and I think you will understand the root of the problem and how it’s going to be very hard to solve quality issues. Any of you who have travelled to Japan knows what I am talking about, attention to detail pervades almost every aspect of their culture. You can’t tell me that someone who has to learn ~25,000 characters to be literate isn’t going to be a little more on the ball that “Joe six-pack”. I am not meaning to slam N. American culture or engage in a debate regarding the relative pros and cons, but what I am saying is a car made by Buddy et al in Detroit has less chance of attaining high quality standards as a car made in Yokohama by Toshio et al.

As soon as we find the fake bottom in this rigged market and start believing what we are told to believe things will get better faster. The government guaranties that the next bubble will be bigger and better than ever. The government will have something in place for people to buy into as soon as possible preferably before the baby boomers start to retire in mass, even though they will have lost much of their wealth during this shallow dip in this free and open market that is of course too big to fail. Baby boomers all over this debt ridden country should fear not for AARP will go to congress and demand the government bail out the baby boomers, as the consequences of letting them fail would be to great and would have catastrophic consequences on the overall service based economy.If we can get a 260 point rally when 500,000 jobs are reported lost then you should believe anything is possible. Come on people get it together.

“The government guaranties that the next bubble will be bigger and better than ever. The government will have something in place for people to buy into as soon as possible..”They already do. The government is investing our funds on our behalf. It is called The Bailout Bubble.

Why does Roubini recommend TIPS if concerned with DEflation?

because they can’t go below zero (a flaw in their design)

So which does Roubini prefer BIL or TIP etf?

ONE CAR DOES NOT MAKE LEGAL STATISICSIf that were true, try using Microsoft’s quality measure on automobiles:http://autos.msn.com/?pkw=PI&vendor=Paid+Inclusion&OCID=iSEMPIIt takes the conglomerate of expert and user pragmatic reviews from many sources, not just user reviews from Consumer Reoports. You’ll find users rate their cars much higher than experts….but we all do that, lol…You’ll find them all about the same [especially the high user ratings], actually look up Chevy Malibu and compare it to Toyota Camry; if you want to be horrified this afternoon….lolI’m sure WSJ would agree with me too. They recommend buying 2-3 YO good used cars that devalue the most [you'll find domestic brands the best, using that WSJ criteria by the way].

I disagree with your premise that Americans don’t just watch the market. Sadly I think many do just that. The DOW is posted everywhere, on every news channel, in every newscast. The DOW was being constantly read out in congress during the TARP debates.If there were such a thing as an overall economic index, it would be going catastrophically down, but people don’t necessarily have the knowledge to piece together everything.Sadly I think the reality hits some when they receive their pink slip. And, even then, I fear they do not really know how long they most likely are going to be out of work.

I have played very small positions for the past six weeks on S&P proxies and have managed to be on the wrong side of just about every trade – I have concluded it is pure gambling – I admire OR for his insight e.g. when he went long financials two weeks ago and also the advice of MA – the technicians who do a pretty good job on the daily calls – but for now I sit in cash ( a little less than I started with six weeks ago but at least I am up single digits for the year ) My focus is on what I think will be a currency crisis coming to a country(ies) near you and how to best postion for that.

Breakeven inflation rates for long-dated TIPS

Over the past six months, a shrinking number of asset classes have been meeting the basic investment threshold of retaining their principal value. It may not be a stretch to leave shorter-term inflation-indexed securities off that list, given growing fear that some deflation will already be evident by the time the shortest-term Treasury Inflation-Protected Securities, or TIPS, mature on Jan. 15, 2009, says Jackson of Riversource Investments.That begs the question of how much of the current flight to principal preservation is rational, says Jackson.It’s logical to assume breakeven inflation rates for TIPS with maturities out to one year, but “now it’s getting to the point where even 10-year TIPS have negative breakeven inflation priced into them,” he says incredulously. “We’re in a recession. Maybe it’s really deep, but is it enough to produce eight years of net deflation?”That’s the conclusion you come to when you subtract the real yield on inflation-protected bonds from the nominal yield on regular Treasury notes, which translates to a yield that’s barely keeping up with inflation. Jackson says it’s clearly an overreaction born of fear when inflation expectations that show up in research surveying everything from economists’ views to consumer sentiment aren’t even close to zero.The debate between those warning about deflation caused by sharp economic contraction and those more concerned that ongoing liquidity injections will ignite inflation is far from settled. Some market strategists project a period of initial deflation that gives way to accelerated inflation by 2010.Most of the demand for Treasuries has been in the short end of the yield curve, which is reflected in yields around 1% for the two-year note and 0.04% for the three-month note.

http://www.newschannel5.com/Global/story.asp?S=9443652

pjb, priceless!! for everything else, master card.

Rothbard, 1983:After Fed inflation led to the boom of the 1920s and the bust of 1929,well-founded public distrust of all the banks, including the Fed,led to widespread demands for redemption of bank deposits in cash,and even of Federal Reserve notes in gold.The Fed tried frantically to inflate after the 1929 crash,including massive open market purchasesand heavy loans to banks. These attempts succeeded in drivinginterest rates down, but they foundered on the rock of massivedistrust of the banks. Furthermore, bank fears of runs as well asbankruptcies by their borrowers led them to pile up excessreserves in a manner not seen before or since the 1930s.Finally, the Roosevelt administration in 1933 took Americaoff the gold standard domestically, so that within the UnitedStates the dollar was now fiat paper printed by the FederalReserve. The dollar was debased, its definition in terms of goldbeing changed from 1/20 to 1/35 gold ounce. The dollarremained on the gold standard internationally, with dollarsredeemable to foreign governments and central banks at thenewly debased weight. American citizens were forbidden to owngold, and private citizens’ stocks of gold were confiscated by theU.S. government under cover of the depression emergency. Thatgold continues to lie buried at Fort Knox and in other depositoriesprovided by the U.S. Treasury.Another fateful Roosevelt act of 1933 was to provide federalguarantee of bank deposits through the Federal Deposit InsuranceCorporation. From that point on, bank runs, and bank fearsthereof, have virtually disappeared. Only a dubious hope of Fedrestraint now remains to check bank credit inflation.The Fed’s continuing inflation of the money supply in the1930s only succeeded in inflating prices without getting theUnited States out of the Great Depression. The reason for thechronic depression was that, for the first time in American history,President Herbert Hoover, followed closely and on a largerscale by Franklin Roosevelt, intervened massively in the depressionprocess. Before 1929, every administration had allowed therecession process to do its constructive and corrective work asquickly as possible, so that recovery generally arrived in a year orless.But now, Hoover and Roosevelt intervened heavily: to forcebusinesses to keep up wage rates; to lend enormous amounts offederal money to try to keep unsound businesses afloat; to provideunemployment relief; to expand public works; to inflatemoney and credit; to support farm prices; and to engage in federaldeficits. This massive government intervention prolonged therecession indefinitely, changing what would have been a short,swift recession into a chronic debilitating depression.

Correct, Mark. This is the only real issue. When the Club of Rome (very much the representatives of business and govt) in 1970 issued an analysis entitled “The Limits of Growth”, the result was such an outcry at the very thought that resource depletion could hit the wall that they were obliged to repudiate their report.A lot of the differences in one set of recommendation or another (setting aside rigid idealogy for the moment) going forward depends upon the scale of the problem being addressed, and the time frame in question. Those – like Professor Roubini and other qualified, serious analysts – who focus mostly on minimizing the extremely nasty impact (foreclosures, business bankruptcies, trade shrinkage, and unemployment) of this credit contraction are not ignorant of larger, longer-term issues but their recommendations are for addressing the her and now. Others point to the credit bubble (mislabeled “the Great Moderation” when it was producing profits and jobs) that created this crisis and correctly forsee that re-incarnating our massive and collapsing debt structure will (even if it ameliorates short-term pain) prolong or enshrine unstable financial and production systems (as happened in Japan). What I suspect you’re seeing, Mark, and I hope many others are looking at this as well, is that neither the past of over-borrowing/overproduction/overconsumption, nor the present of contracting borrowing/production/consumption, nor a future of re-expanding borrowing/production/consumption are stable scenarios. World population continues to increase, while world resources do not; world consumption per capita (the truly holy grail of almost everyone) continues to increase, while world resources do not. From a global-scale very long-term perspective any restoration of the pre-contraction expansion will keep returning us to the same knife edge: massive inflation in the cost of disappearing resources that fuel expansion, or contracting economic activity with the happy deflation of resource cost but also with the unhappy deflation of profits and jobs. I fear we have are experiencing the tipping point where short-term frantic activity to maximize borrowing/production/consumption and prevent contraction at all costs will simply result in wild swings between inflation and deflation in growth that make ordinary business cycles look like a completely flat surface. Neither Professor Roubini, nor Congress, nor the Fed, nor the incoming Obama administration have any interest in serious planning to meet the long-term instability of the era we have entered. They are fiddling with monetary and fiscal short-term crisis management while the global stability of resource utilization goes up in flames.

@KJ -I still think that the more distance you put between yourself and your manufacturing plant, the less “feel” you have for your product.After college, I worked for a couple years in a door and frame manufacturing facility. Even folks who worked in the office had regular exposure to the manufacturing plant on a regular basis. That close contact between shop and office helped to keep ideas in the office grounded in reality.I do agree that the service/information sector of our economy is important. However, we may start losing important pieces of that too if we continue to lose our manufacturing base.Is an iPod popular just due to the code it runs on? No, it’s popular because there was an excellent marriage between the code and physical design.It seems to me that innovative products like the iPod will be more likely to be designed in an environment which already manufactures similar product and, therefore, has a feel for the product.

The quality gap has been closing substantially at this point it’s mere perception and reputation, once you get a rep it’s a hard thing to shake. When you buy a Japanese car the profits go to Japan, when you buy an American car those profits in general stay here so it’s a symbiotic relationship for you and the American car companies, buying American helps ensure you’ll have a job in the future-rocket science stuff.What’s interesting and most people forget about this but the only and I repeat only reason Japan started building cars in the U.S. was because they were getting national pride back lash in the 80′s because of the loss of jobs in the U.S. and that was hurting their car sales, so what’s gonna happen when the big 3 fold and our only option is to buy Japanese cars? They’re going to pack their bags and move their factories back to Japan because the Japanese know how to take care of their own. Here we back stab each other until there no one left standing.

thank You

If you’re simply trading – as opposed to serious long-term investments – then remember the old rule. Don’t invest anything that you can’t afford to lose.PeteCA

Yes exactly, unfortunately what’s happened in this country is a lot of white collar people got decent paying jobs in finance/insurance/tech companies etc. over the last 15 years and believed they were fully insulated from a manufacturing economy, but what they still haven’t been awakened to yet because the recession has only started is that most of their jobs were created with excessive credit- they’re jobs weren’t real. So now all these white collars that think they’re so insulated from the manufacturing woes are heading for a severe rude awakening soon. My prediction is that these privileged areas of the country who felt and feel immune will actually sustain the greatest amount of job losses. The depression will hurt those who have been the most shielded yet really the most deceived-they will have the greatest room to fall.

Mark -I’m in agreement with you on the need for more locally-sustainable economies.I agree also that growth is not sustainable. The “growth at all costs” mindset has produced the sick economy we’re living in today.What’s wrong with a stable, profitable company with happy workers? Nothing — except:(a) it’s stock will get hammered until(b) it gets bought out by a larger, growth company who will(c) move the operations out of the area and then(d) serve the market less effectively than the smaller companies it absorbed.However, I still don’t see how lack of growth and more locally-sustainable economies are going to ELIMINATE the need for transportation.Just because we won’t be growing doesn’t mean we won’t be moving.

Happy Holidays, Mark!

Oh bull, it’s in the spirit of man kind to spread out and explore new territory, people crave open space. 90% of these enviro guys who talk about mass transit and the need for urban communities ironically dream of living in wide open scenic rural areas with panoramic views.

KJ, let’s go through your examples:MSFT: When is the last time that they innovated something? Vista? Please, what they have is a monopoly, but they have long lost any ability to innovate.INTC: Same as above. All they do is spitting out ever faster processors, which no one would need if it weren’t for MSFT ever crappier OSs. Gamers are the only ones to get any “benefit” from their new processors. Talk about a productivity driver.WMT: Innovations? Selling ultra-cheap stuff made in China, underpaying your workers (even those that get killed in the process) and providing them no benefits. We sure do not need any more of these innovations.ORCL: It was funded by the USG, and half of their revenues still come from the USG. There are products out there that are just as good, and are essentially free, but they have, should we say, a captive audience. Just compare the edge they had 10 yrs ago and the one they have today over MySQL.GOOG: Kudos to them for figuring out how to make money from the Internet. Still waiting for another great idea.APPL: Here I agree with you, but if Jobs’ pancreatic cancer comes back (and unfortunately it usually does, even for the very lucky few that had a surgical option) you can kiss goodbye to Apple tooCSCO: They have shown an amazing ability to stay ahead, but they are destined to be beaten as you can’t push upmarket forever (SGI docet)AMZN: Great company, but they are destined to remain a 4% margin company.Biotech: Pharma has hit a wall. They have picked the low hanging fruit, and now they are struggling like crazy to crank out any new successful drug. A lot more basic research needs to be done, which of course only the govt funds. Unfortunately under W the USG budget for research has shrank (in real term) by approx. 40%.

Do you really feel that the privileged will feel any noticeable pain from this downturn?It seems like the poor are always the ones to feel the most pain – even when times are “good.”The poor continue to carry most of the “risk” from our economic games while partaking in very few of its “rewards.”

SoftwareEngineer, I’ve worked for a few years for a European software company that supplies virtually all the big players in the automotive/aerospace industry worldwide. Having visited both the engineering design at Honda, Toyota, and Ford, I have to respectfully tell you that you don’t know what you are talking about. There is an abyss, in terms of both the quality of the people involved and the investments made (the former is mostly a consequence of the latter). Would you care to compare the technological content of a Formula 1 car with that of an Indy/Nascar car? Needless to say, there is no American manufacturer in F1. Do you wonder why the only American participant in the last two America’s Cup races had to rely on an European partner (BMW, for crying out loud) for fluido/structural design?The cars that the Japanese and the Europeans import here might not appear vastly different to you because: 1) you’re looking only at the bottom end of the market (i.e., low tech), and 2) a lot of the most innovative products are not imported here, e.g., in the last ten years most of the innovation had taken place in diesel engines, but the diesel fuel sol here is too low quality to be used in those car (which incidentally have the same fuel efficiency of a Prius, hence the limited success of the latter outside the US)

Privileged was a poor choice of a word I meant those who feel privileged, a seemingly high percentage of average ordinary white collar working class feel privileged, act privileged but are just ordinary. It’s the emperors wear no clothes syndrome, those who are doing slightly better than the peasants act and talk like the king hoping this will somehow make them into kings. So they see themselves as separate from the peasants when in reality they’re much closer to the peasants in stature than they are to they king.

What? Comparing Indy/Nascar cars to domestic vehicles like it’s somehow analogous of the big 3 vs. their foreign counter parts. You once visited a few auto design centers and this is how you garnered your expertise to make such qualified assessments? Dude you’re a retard.

And yet millions of us worker bees have our hard-earned IRA dollars in the casino. I can’t afford to lose it, yet I am. Worker bees are dying, folks.

Over time, I’ve been pondering an idea that we should have leaderless organizations and countries.I’m not implying anarchy, mind you. However, I just find that no one person or persons can effectively “lead” others for any sustainable period of time.I don’t think it’s a lack of leadership ability in the current crop of humanity. Rather, it seems to be simply the way things are and always have been.I think we, humans, work best when ideas and processes start from the “bottom” (loaded word, I know, but I’ll use it for now).There may still be a need for facilitators and/or coordinators for these ideas and processes. However, these facilitators would not be labeled with loaded titles such as “president” or “manager.”Maybe it’s because it’s late and I’m ready for sleep, but this seems to make sense. For those of you who are more awake than I am, please let me know why I’m off-base on this.G’Night!

We’re being affected by Colony Collapse Disorder.

Ah, poor soul. Where do you think that most advanced technologies are tested in? What are you, a high school drop-out? The US is falling behind, and very rapidly. Incidentally, there is virtually no design engineer at Ford that is a native English speaker. But of course that also does not mean anything… wake up and look around.

The innovation at Wal-Mart that I was referring to was the extensive implementation of computers and networking in their stores in the ‘80s and ‘90s. I was taught in college, but don’t have personal knowledge of it, that HQ in Bentonville could monitor activity at every store, from inventory to its ambient temperature. Plus they implemented a perpetual inventory system that automated purchasing by setting up automatic, direct, electronic ordering from vendors. Thus, the early and innovative use of computers and networking helped them lower costs and eat K-Mart’s lunch.Also, my examples were just that, examples to show that we still have been innovating up to the present and there is no reason to think we will not continue to do so. Yes, Americans may have grown more lazy in recent decades, but laziness is the mother of invention, no?”I don’t think necessity is the mother of invention. Invention . . . arises directly from idleness, possibly also from laziness. To save oneself trouble.”— Agatha ChristieWho makes the best programmers? Lazy people, who don’t want to do the same thing over and over again so they program it.

OB, the problem is that a lot of the smart people could not get decent paying jobs in academia/industry, and went to work for Wall Street. There are literally thousands of physicists and mathematicians working for investment banks/hedge funds/etc. But there is no real alternative for them. Just look at the large hadron collider. US physicists had an alternative proposal, but the US would not fund it. Or look at our Moon “project”. Regardless of the fact that IMO it is a huge waste of money/effort, the sad thing is that we went there 40 years and now we do not have the knowledge/capability of going back. And we even destroyed the plans for the old capsule/missile because it was to expensive to preserve them. We essentially have to start from scratch, and we’ll end up building something very similar (it was an incredibly efficient design).Another issue you need to consider is that a lot of Americans over the past decade or so have gotten degrees in finance/law, but very few in science. Most of the PhD students in science are foreigners, and a huge chunk are Chinese or Indians, which most likely will get better opportunities home than here. And they will go back, and take their knowledge with them. I was just speaking with an Indian doctor a couple of weeks ago, and to my dismay he told me that a young doctor with a US degree is paid better in India than here (and I am talking in real terms, not adjusted for cost of life). The reason: overhead (facilities, nurses, administration, compliance) is much lower in India, and so the doctor pockets a much large portion of the bill, and of course he/she does not need tens of thousand of dollars in liability insurance.Honestly, I think that the only field in which we still have a clear hedge is biomedical research, but if we do not act defensively quickly we’ll loose that too.

Needless to say, we have our biggest hedge in the defense industry. The problem is that our allies are not interested in buying our advanced weapons. We don’t want to sell them to our enemies now, do we?

Actually it’s just being reported in the WSJ, they actually retained them two weeks ago..

Or maybe you guys know little about consequences…or maybe you just don’t care? The old “rules” of free enterprise, little government intervention and “free markets” don’t apply in a financial crisis.It’s clear you guys care more about “fairness” about who gets a bailout rather than consequences.

w, i too should be dreaming. instead, let me say this. have you ever seen a triptych? one of those 3 panel presentations. center piece and one on each side, left and right. somehow, this is like our situation. i’m just not sure how.anyway, a person is an individual and then they encounter the social function. this requires, of that individual, a compromise for the sake of social survival. no problem. enter “lcd” as pjb calls it. structure and function creating a dual unit system but it is “infectious” and contaminates the species. this function then becomes uniquely recognizable among those so infected and becomes a point of conformity or commonality.what was the point? oh yea. this commonality becomes grounds for exploitation, if mastered, by the few. say 5%. but the title or position then masters the individual and they cease to function as an individual human being and become an image or icon or poster child or representative for an infectious abstraction that permeates a culture. they represent the form but do so from a substance less abstraction. they come off phony. you can see it every day. in the end, 80 to 95 percent of the people want the bread and the circusunder the protection of a mirror image of their own fears mastered.i know, i should have been dreaming too.but don’t for a second think that this is not related to economics. as it is today it just isn’t crazy or real enough to be predicatively profitable.in conclusion, i agree with what you said. we don’t need professional exploiters, we need adequately rewarded and competent public servants. i’ll hear from you later?

I would like to discuss very briefly not just the effects but also the cause of all this financial and economic turmoil. I think it can literally be pinned on The Executive Branch and also The Legislative Branch of our Federal Government. The current administration wrote a budget that was deep in the red, for too long. It was in the red by 700 to 950 billion per year for eight years! The Congress validated, approved, and ratified the budget that was deep in the red, and this was totally irresponsible, and was total financial negligence. The House Ways and Means are at fault, as are all the other government scoundrels (even the judicial branch). Then this red ink government budget, that was written in the red and approved by the entire idiotic congress eight times in a row, this forced the Federal Reserve to force the Treasury to issue fixed income, Government Bonds, Notes, and Bills, in an effort to finance the (wrongful and for no reason) war against a single terrorist Osama Bin Laden and the mountains of Afghanistan and Iraq. This borrowing crowded out borrowing, and crowded out investment, and wrecked the exchange rate of the US Dollar, depreciating it over the past eight years (despite recent strength). It incited the credit crunch, because all that money (literally trillions) was sponged up and had to be loaned to the sovereign entity of the USA, rather than going to things like housing both commercially and residentially (the real estate mess is because of too much crowding out of investment and borrowing! Yes!). Eventually, the crowding out of investment and crowding out of borrowing made housing depreciate. With housing depreciating, foreclosures increased, both the prevalence and probability and frequency of foreclosures increased. Layoffs increased too, and the labor force has and is shrinking, as unemployment increases. People lost homes, and values deteriorated substantially. After that the Credit Default Swaps and the Collateralized Mortgage Obligations began to lose value rather rapidly, due to their z-tranche style durations. This hurt items on the balance sheets of the vast majority of all the major financial institutions, eventually this impacted their earnings statements rather hard, a knock-out-punch!. It wasn’t necessarily a liquidity issue, it was a balance sheet issue, and a market that began to resemble a bubble, financial shares plummeted as their earnings crashed. The banks (meaning all the financial institutions and the entire financial sector) decided to hang on to their CMOs and CDSs rather than initially dump these CMOs and CDSs, this produced further unrealized losses on items on their balance sheets. Eventually, the stock market suffered globally, as the panic on banks, brokerage, and insurance, and reinsurance shares plummeted. Bank, brokerage, and insurance company shares plummeted— taking the stock indices with it, then all other sectors common stock plummeted as well. Funny how everyone just wants to blame bankers, when it’s the executive branch and the legislative branch that financed a war for no reason (it certainly was political risk!!! yes, even the USA has political risk galore too!), which required the government to borrow excessively and recklessly which crowded out investment and borrowing, which incited a credit crunch, and financial turmoil and economic turmoil. I find it rather pathetic and lame as hell beyond belief that the entire negligent Congress wants to try to finance a bailout of the financial sector (and other sectors now too, like automobile manufacturing, etc.) via the use of some more excessive and reckless borrowing (700 billion or so they say, at least at first, and it may very well be much more, maybe 4 trillion and 500 billion). Just wait until taking over the banking industry means that it will be taking over insurance indirectly, and then it will be taking over medical care, and healthcare too! Where will it borrow from? It will have to print the money! Just wait until M1 figures start to rise rapidly. Rapid inflation here we come! It was reckless and excessive borrowing that got us into this trouble, and now they want to recklessly and excessively borrow some more, digging us into the red some more, to try to help the situation. PATHETIC! Also, if they take over the financial sector, they will be indirectly taking over the entire medical care sector and healthcare, this will produce massive and huge deficits. I am strongly against any type of bailout engineered by the negligent (as hell) congress… what they should do is regulate themselves!!! They should design and engineer, and write and draft budgets that are balanced (yes balanced, even the government scoundrels in the middle east can manage balancing their budgets!). Yes, a balanced budget from now on going forward, or how about one that is in the green, a budget in surplus. They should not overspend, and crowd out investment and borrowing— or the coherence of the USA will cease to exist. They are pushing the USA towards a total default of US Treasury Securities and a default of the US Dollar if they do not constrain their (reckless) spending. They should try to be responsible. Where will this 700+ billion dollar bailout come from? Will they tax us? Will they borrow it? Will they print the money?? All three either together in any way, or any combination of the three will have dreadful long term consequences. They should literally do nothing. I hope to god their stupid as hell future “bailouts” fail! Let the banks fail, they took risk investing in CMOs, and those risk takers should fail. Also, let the car manufacturers fail too, afterall they were never profitable over the past thirty years or so. Maybe there will be bank-runs and more bank/brokerage/insurance failures! Maybe there will be lots of financial sector failures. There could be riots. Eventually, new banks, with responsible boards will come out of the woodwork. The Congress should do it’s best to clean up it’s own act, and that means it should never approve of massive government budgets in the red, ever again! It also should not tax the hell out of everyone, so no higher taxes, no no, lower tax rates increase government revenue, I love dynamic scoring. It should also not print money excessively. How can the Government pretend so seriously, that more borrowing of 700 billion dollars (printing of money, or taxing) is the solution to our problems, when it (where ‘it’ is reckless and excessive borrowing) is the entire reason we’re in such a difficult mess right now?!?!?! Maybe the Government should just tell everyone that they vow to stop borrowing excessively (which certainly has crowded out borrowing and investment), maybe the Government should tell everyone to keep their head up, and pretend their home is rising in value?! When and if the GSEs fail (all the Government Sponsored Enterprises), when they fail, they will have to transfer approximately 5 trillion dollars of debt to the sovereign entity of the USA, this will be very harmful for the US Dollar! I expect the US Dollar to continue to fail miserably, and to depreciate a lot going forward. Also, when and if the negligent congress takes over the financial sector (with their stupid “bailout”), then they just take over healthcare and medical care indirectly, by taking over insurance (banks and also brokerages) then they will have some more totally MASSIVE deficits to finance going forward annually. The stupidity of the Congress (the legislative branch) and the executive branch (the president) has never ceased to amaze me! Before ya know it, President Bush will be responsible for not only declaring war on the mountains of Afghanistan and Iraq at a cost of 6 trillion dollars (the debt outstanding rose from like 5 to like 10.6 recently, and don’t forget the debt service due!), but since the GSEs failed as a result of that, there’s another five, and then medical care will cost TONS also annually… Bush should be remembered for increasing the USA’s Total Government Debt Outstanding from approximately 4.5 trillion to approximately 15 (from 10.6+GSE failure) trillion or more, plus interest due too. Oh, and I forgot!!! WHO IS GOING TO BAIL OUT THE FEDERAL RESERVE?? WHO IS GOING TO BAIL OUT THE TREASURY??? No where to run, and no where to hide is what money thinks anymore— the times will keep on a’gettin’ tougher.”RAH RAH RAH, … AMERICA!!!”~ Cheerleader, busting at the seams, sweaty, with the wind blowing her hair around, and great sunlight on her fantastic smile, cheering with pom-poms!!!~ Andrew G. Bernhardt, St. Louis, MO

Another point that I didn’t make clearly enough. The new successful companies I referred to are American but do business worldwide; just as the internet itself is used worldwide, and we know who invented that, Al Gore right here in the USA. We don’t buy PC operating systems developed by a Japanese or European company. But people in Europe and Japan buy Windows, and Macs too I assume. Amazon, Google, Ebay, and Yahoo operate worldwide, I believe. But how many internet companies and search engines, that are foreign owned, do we use regularly in America? CPU chips made by Intel and AMD are used in PCs manufactured around the globe.Other wildly successful startup companies in recent years like Facebook and My Space are American. What foreign companies have had similar success? There probably are some but I can’t remember their names. How many of them do we use here? But how well know do you think Facebook and My Space are known in Europe and elsewhere around the world?

Neither does anyone except Payam.

Bernanke wants to make sure we have no choice but to keep bailing so our betters can enjoy things a bit longer. He has said at least twice that he’s counting on the strong US economy to pull the banks through.Whether we like it or not.

Roubini seems to be ignoring the CDS problem, he talks about everything but that.But that is now the essential problem. We should not take our eye off the ball.

I am not a loser, in fact my trading results have been favorable. I am not even talking my book when I say the banks should get no more, it would help my property values if they did. But it is just wrong.Could you be polite please, Payam? If you can say something coherently to show that we are wrong, please go ahead!

America can rebuild from scratch, without this banking system; perhaps, only without this banking system. I’m willing to give it a try, to start all over again – if it will put this once grand old republic back on her feet.James Madison warned of “The pestilent effects of paper money.”George Mason of Virginia said that he had a “mortal hatred to paper money.”Constitutional Convention delegate Oliver Ellsworth from Connecticut thought the convention “a favorable moment to shut and bar the door against paper money.”The Constitution limited congressional authority to deal with the issue of money and mandated that only gold and silver could be legal tender. Madison argued the moral case for such. Paper money, he said, destroyed…”the necessary confidence between man and man, on necessary confidence in public councils, on the industry and morals of people and on the character of republican government.”Rep. Ron Paul has warned that ”debasing the currency as a deliberate policy is economically destructive beyond measure.” And that “doing it without consideration for the rule of law undermines the entire fabric of our Constitutional Republic…“When the government can replicate the monetary unit at will without regard to cost, whether it’s paper currency or a computer entry, it’s morally identical to the counterfeiter who illegally prints currency. Both ways, it’s fraud.”Fraud! America cannot restore her former glory saddled with a banking system based on… fraud. If the current financial “system” is imploding, then, I say: Good Riddance!

Me-no-like-eee-United-States! ME-NO-LIKEEEE-U-NITED-STATES!!!

Many recent commenters in the last couple months have pointed out that the Doctor’s predictions suddenly seem a lot less Doom-oriented. (F.eks => the above is the first post in a long time where I see the word “depression’ being used — and NR rejects it as the likely outcome.I find extremely negative predictions ( http://cynicuseconomicus.blogspot.com/ )much more persuasive and realistic. But I’m not an economics expert by any stretch.So;I wonder if a kind of negative groupthink exists among the posters here (me included).My mind generally produces ‘glass-half-empty’ type thoughts. So perhaps its was natural that NR’s negative analyses instantly struck me as ‘true’ when I started reading during the summer.Now I find his prognostications strangely positive. Is it possible that this blog is a magnet for negative-thinkers who are now disappointed that NR is not negative enough?Anyway, OB is right and showing the way; it is time for action.

“Something has to break and break big”I put my money on government intervention in CDS obligations, leading to a meltdown in derivatives and a dislocation in the major banks.However I am not sure it will be this. I think a metastasizing currency crisis in a major player could come first. I am watching the UK nervously.ex VRWC

I don’t think they were fudged. I think they likely will be revised upwards later.I think we are in this deep, unfortunately.I am not a conspiracy theorist for things like this. I think their is plenty of culpability plainly visible on the surface without thinking about conspiracies.

Lord Sidcup -I agree.It’s best if we focus on the problem at hand and determine the best solution — whether that solution is “capitalist” or “socialist” or “left” or “right”Will we still get things wrong? Sure.However, when you’re trying to fix a problem, it’s best not to limit your tools from the start by being idealogically blinded to all the options at hand.

I’ve wondered that, too.I imagine many of us have been drawn to this blog because either we’ve “felt the pain” of this economic downturn well ahead of most folks in this country or because we have a “glass half-empty” mentality — or possibly both.However, the “truth is out there” — and sometimes it doesn’t agree with our pre-conceived notions. As long as we’re all open enough to recognize those truths when they present themselves – we’ll do alright.I’m with you and OB. I’m tired of whining and screaming about it and want to do something positive.

Jesus the Government is grossly negligent, is guilty (in my eyes) of total negligence, conspiracy to commit fraud, waste, and government waste, malfeasonce, misfeasonce, and war-crimes including violations of The Geneva Conference for prosecuting a head of state (e.g. Saddam Hussein) and others!

What about the profits going back to Japan’s headquarters and most of their engineering and accounting etc. being operated out of Japan. As I said earlier Japan started building cars in the U.S. to quiet down a nationalistic response to foreign imports it was a token gesture to pacify the people/fools until they could finally put the big 3 out of business. The Japanese government was largely helpful to the Japanese auto companies, first they subsidized them so they could afford to take losses on their early cars in the late 70′s early 80′s(called dumping) in order to gain market share and brand loyalty. Then they engineered in collusion with Wall Street bankers a rigged currency to give them a competitive advantage with their exports. The free market zealots forget history when it plays against their collapsing theories.

How about demographics?Harry Dent in his book The great boom ahead wrote:”The Mother of all Depressions would begin around 2010″.Daniel Arnold predicted (based on the same ideias) a depression from 2013 to 2025. Arnold compared an inflation adjusted DJIA curve with 45-49,49-54 years old population curve. Arnold is wrong now because, based on his ideas, the crisis would start later. Now his demographics curve is increasing.But:Although demographics is not the only factor (the economy is a lot more complex than this), it is however, another factor to stress the system.

True but the implication of my argument being that it’s being born out of necessity means that despite the prevailing and vastly dominate Liaise faire economic spell we’ve been under for 20 years, necessity and humanness is in a sense over riding the dominate ism’s. Ism’s are broad general terms that can save a lot of typing at the risk of being misunderstood that I don’t mind taking. Also keep in mind the prevalence of liaise faire in the hearts and minds of people was almost entirely created by loaded emotive based rhetoric- Sean Hannity/Rush Limbaugh, most of our contemporary economists, business majors, presidents (any one who profited) etc. could we not stand to use an equally emotive based battle cry to balance the equation for fairness. Unfortunately intellectuals acting like adults don’t move the populations opinions as much as terms that are loaded with emotive do. I guess I’m taking the ends justifies the means argument which I don’t usually take but there are exceptions…

a, i hear you. we lost our balance and now we are falling face first.

The Problem – Nov. 14, 2008Stock market slump pressures life insurers

SAN FRANCISCO (MarketWatch) – The recent stock market slump is pressuring the earnings and capital of leading life insurers and may force some to either raise new capital or succumb to a downgrade from rating agencies, UBS analyst Andrew Kligerman said on Friday.A 22% drop in the Standard & Poor’s 500 index so far in the fourth quarter “has real, material negative ramifications” for the sector, Kligerman wrote in a note to investors.The declines reduce the value of investment-related accounts run by life insurers, depressing fee income. It also increases statutory reserves that some of these companies have to set aside to support variable annuity businesses, the analyst explained. Read more

The Solution – Dec. 5, 2008Insurance Rally

Dec. 5 (Bloomberg) …The S&P 500 Financials Index added 8.6 percent for the steepest advance among 10 industry groups, as insurance companies climbed 14 percent collectively. Prudential jumped 35 percent to $28.52. MetLife gained 22 percent to $30.76. Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. each climbed at least 4.1 percent.Hartford, Prudential, MetLife, Lincoln National Corp. and money manager Ameriprise Financial Inc. would benefit if the National Association of Insurance Commissioners opts to relax capital requirements for managers of variable annuities, UBS’s Andrew Kligerman wrote in a report today. The association is likely to reach a decision by year-end and could announce one as early as Dec. 9, Kligerman said.Annuities are retirement products that guarantee buyers income for life in return for an up-front payment.Financial stocks in the S&P 500 last week traded for an average of 0.8 times book value, the lowest in at l3 years. Banks are posed for their worst annual drop on record and have plunged 66 percent since reaching an all-time high in February 2007. Read more

So as we think of Friday’s rally, not only do we have the reality of the Feds first actual purchase of toxic waste but something even more profound. The insurance companies will be changing regulations to reduce capital requirements for Variable Annuities. Consider the opportunities for all financial institutions with this creative approach being taken by the insurance industry…this is truly inspiring stuff.

Relaxing capital requirements is clearly not the right way for them to go. But clearly the insurance industry is headed into rouger waters also. What we’re looking at – in the longer term -is that some insurance companies may need to default (fully or partially) on their insurance obligations. OR the insurance industry will march up to the doors of Congress and ask for a bailout also.PeteCA

g, seems like more risk taking in a risky environment, what is inspiring about it? i don’t get it.

Yes this is the next great wave. It goes right along with all the cries of ‘suspend mark to market’. Of course annuities of most forms are sitting broke and worthless just like any other form of investment these days. The financial advisors say ‘its OK, they are state insured’ but where are the states supposed to come up with the money to make these contracts whole when they are proven to be bankrupt? In the end it comes out of the same Federal bailout pot, or states cut to the bone. Either way everyone loses.Meanwhile the markets rushes herd-like to any glimmer of a hope, no matter how morally bankrupt or financially reckless.When can we have some real oversight and transparency please? Anyone? How long do we allow the corrupt to just make the rules as they go along, while the life savings and national treasure of Americans are destroyed?

Thanks for the compliment! Lots of things to be worrying about now before one starts worrying about the USD. ECRI’s FIG (future inflation gauge) tells the story.Several links read them all. Deflation/recession, if not worse, taking hold WW. I expect the USD to get close to parity vs. the Euro by mid-2009 or sooner! Forget gold. Too volatile and may be below 500 by mid-2009. I am not an expert in neither precious metals nor currencies. This is my feel from al the stuff I read.http://www.businesscycle.com/news/press/1235/Recession Picking up Speed | December 06, 2008 | PBSWLI Suggests Deepening Recession | December 05, 2008 | ReutersUS Inflation Pressures Fall to 47-Year Low | December 05, 2008 | ReutersEZ FIG hits 33-month low | December 05, 2008 | ReutersIs this Eye of the Storm? | December 05, 2008 | CNBC

I wonder if this figures into the talk of a prepackaged bankruptcy? Meaning that somehow, a prepackaged bankruptcy might give some kind of an out on CDS contracts? I am not a lawyer nor do I know much about bankruptcy law. Are CDS payable if the party goes bankrupt? I would assume they would. However, could a bankruptcy judge void such an obligation? Ccomments welcome from someone smart in such things.I did find this link: CDS on GM

Not seen by me yet

Yes, I agree fully. What amazed me was the extreme difficulty in finding the information I was seeking. Correct me if I am wrong, but it seems to be somewhat restricted, and the data I found is so old. The Federal Reserve has massive information on home equity, but I can find little on equities, anywhere. Additional information on equities holdings (both private and 401k) and classified by households is useful, given, as you say, the daily emphasis placed by Bernanke, the Treasury, Congress, the financials and Big Media upon the DOW, the S&P, and the Nasdaq. Follow the money, they say. Well, I would like to, but I need more clues.I’m sure the Treasury, the Fed, and the big investment houses know to a cent who has what, how much, and where. So why not share?

inspiring to the banksters and their political handmaidens – just think of the possibilities and potential for other troubled sectors and institutions – with the wave of a magic regulatory wand the troubled Insurance sector is suddenly the darling of equity investors with rejuvenated balance sheets -Who knows maybe we can even kick start the housing sector by waving a similar magic wand that lowers standards to qualify for a mortgage, thereby allowing more people to own homes –

Michigan pretty much the same cost.

m, for the last month or so reading your posts has, for me, been educational, inspiring and thought provoking. thank you for your efforts and for sharing your insights and thoughts…remember ” life is a path lit only by the light of those i’ve loved.” tom waits.annddd . another one.. ” always keep a diamond in your mind.” t.w. peace.

Current valuation of asset classes are undergoing significant changes due to leverage, availability of credit and consumer demand. Because confidence fuels consumption, a silver bullet is being crafted to buy undervalued assets, repair these assets, then market these to consumers at bargain prices. One example is: purchasing foreclosed inventory, hiring contractors to renovate these homes, then sell these properties at cost to first time homebuyers at very significantly reduced fixed interest rate mortgages at step increases over a ten year period. The federal government will recoup the original price paid plus contractor costs plus interest on loans backed by the full faith of our treasury. Each state will have municipal bond auctions as capital base to purchase houses and pay contractors. All bonds sold will be AAA rated and will carry a yield of 1 1/2 % below a five year step loan average. Bond income to individual states and mortgage interest income to the federal level. Other programs have already been implemented such as purchasing undervalued securities at bargain prices to hold to different maturities. By this time next year we will see improvement in the economy.

You raised an important alarm bell. A little research – this was done in Canada a month or so ago: Canada adjusts regulatory requirements Canadian regulator discusses insurance capital requirements Two things from these links ( also from your link)- this seems to be another form of a mart to market versus mark to model debate in this case tied to commercial real estate- in America the states seem to have some say in how all this is sorted out. Therefore I don’t think this would be so simple a change in the US.In any case, whether the rules are changed to allow the insurers to avoid capitalization problems due to equity volatility and/or periodic economic cycles, if the doom about the commercial real estate securitization market is for real (ie commercial real estate is truly one of the the next shoes to drop), then insurers will have insolvency on their hands.Conclusion: changing these rules is just another way to double down on a bad hand in the hope the economy avoids deflation. If it fails it makes the collapse that much worse.

Posted above in response to a question from Guest on the USD this is OR’s response – I re-posted here as others may be interested as well (I have a lot of time for someone who got an 11%+ return in 2008 — Thanks OR

Thanks for the compliment! Lots of things to be worrying about now before one starts worrying about the USD. ECRI’s FIG (future inflation gauge) tells the story.Several links read them all. Deflation/recession, if not worse, taking hold WW. I expect the USD to get close to parity vs. the Euro by mid-2009 or sooner! Forget gold. Too volatile and may be below 500 by mid-2009. I am not an expert in neither precious metals nor currencies. This is my feel from al the stuff I read.http://www.businesscycle.com/news/press/1235/Recession Picking up Speed | December 06, 2008 | PBSWLI Suggests Deepening Recession | December 05, 2008 | ReutersUS Inflation Pressures Fall to 47-Year Low | December 05, 2008 | ReutersEZ FIG hits 33-month low | December 05, 2008 | ReutersIs this Eye of the Storm? | December 05, 2008 | CNBCReply to this comment By OR on 2008-12-06 09:45:25

The last two days’ traffic on this blog has been remarkable in quality and intensity, even for this blog. Some of you have outdone yourselves. I’ve excerpted below a few of the particularly outstanding pieces for your re-reading pleasure.I re-post these works here because I think they bear directly on the “What’s the problem with the economy” issue.From a post by AnonymousAlexander Tyler, a Scottish history professor at the University of Edinburgh, had this to say about the fall of the Athenian Republic some 2,000 years earlier:“A democracy is always temporary in nature; it simply cannot exist as a permanent form of government.’ ‘A democracy will continue to exist up until the time that voters discover they can vote themselves generous gifts from the public treasury.” From that moment on, the majority always vote for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.”The average age of the world’s greatest civilizations from the beginning of history, has been about 200 years’. ‘During those 200 years, those nations ALWAYS progressed through the following sequence:1. from bondage to spiritual faith;2. from spiritual faith to great courage;3. from courage to liberty;4. from liberty to abundance;5. from abundance to complacency;6. from complacency to apathy;7. from apathy to dependence;8. from dependence back into bondage;Where does the USA sit now?From a post by GuestEconomist Ludwig von Mises points out in “Human Action”: “The wavelike movement affecting the economic system, the recurrence of periods of booms which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.””[W]e are free to call an improvement in the quality and an increase in the quantity of products economic progress… The boom squanders through mal-investment scarce factors of production and reduces the stock available through over-consumption; its alleged blessings are paid for by impoverishment. The depression, on the other hand, is the way back to a state of affairs in which all factors of production are employed for the best possible satisfaction of the most urgent needs of the consumers.”From a post by PeterJBThere are exactly 5% of the population (human) at all times that are potentially individuals and not inclined to join gangs, er, groupings; this is the crucial and critical threshold group for human autopoiesis.[Since you were wondering, here’s the definition of autopoiesis]From a post by BlindmanThinking for oneself in America has now become like anything else that requires nurturing and caring: a threatened commodity. The tragedy here isn’t just that we don’t insist upon thinking for ourselves. It’s that we don’t comprehend what we sacrifice when we fail to think.

Sidebar: The Cheek of the BrainTrustMany RGE blog regulars may wonder where these “BrainTrusters” get the cheek to:* Call themselves a “BrainTrust”* Take up valuable blog bandwidth with organizational issues concerning a group that may never accomplish anythingHere are the answers to your questions.The Cheeky “BrainTrust” NameWe called ourselves “BrainTrust” in a fit of whimsy. Yes, it’s true that several of the RGE blog’s strongest contributors have participated in the formation and direction-setting of the BrainTrust.But it’s also true that we have not successfully recruited all of the blog’s strong thinkers and hopeful people yet, so the moniker “BrainTrust” is not yet really deserved.To address this deficit, we will continue to recruit each of you that demonstrates an intention to advance the common good by contributing your best thinking. Once we achieve that goal, we’ll have fairly earned our name. Give us a bit of time and we’ll get there.Using Blog Bandwidth to Conduct DebatesThe second offense of pretension is the use of blog bandwidth for a purpose that’s not directly related to identifying the mechanism and scale of the West’s economic dislocation.We are not so interested in the mechanisms of decay. We “get” that. Instead we seek to become significant actors in the shaping of tomorrow’s economy. At some point, and maybe soon, the world’s focus will shift from “what’s happened to our economy?” to “what should our new economy consist of?” The BrainTrust is a group of people that are thinking about the “what’s next” economy.Who is to say from whence the core ideas of the next economy will emerge? Do you think it’s silly to expect those ideas to emerge bottom up, from the likes of us?We don’t think it’s silly at all. In fact, we think it’s likely that the core ideas of the new economy will come from people like us, if not from us in particular. Is it not worthwhile to expend a small bit of this blog’s bandwidth to explore this possibility?Shouldn’t you consider joining the BrainTrust?Pretensions aside, I hope you’ll consider piling on this bus at your earliest opportunity. There’s plenty of room. It’s been fun so far, and we’re hardly out of the gate. We invite all of you to join in as we convert intentions into actions. Participate in our debates, and make yourself a player by voting on the key decisions the group makes as we define ourselves and make our strategy.

Obama Provides Details of His Plan to Create 2.5 Million Jobs By Hans Nichols

Dec. 6 (Bloomberg) — President-elect Barack Obama promised to make the “single largest new investment,” in America’s roads, require public buildings to be more energy-efficient, and to modernize health care with electronic medical records.Using his weekly radio address to unveil five components of his plan to save or create 2.5 million jobs, Obama pledged that he would not “do it the old Washington way.”

and this from the Washington Post Obama’s Jobs Lowball

Three days after the president-elect announced in a radio address that he had directed his “economic team” to devise a plan “that will mean 2.5 million more jobs by January of 2011,” he said at a news conference that he favored measures “that will help save or create 2.5 million jobs.” To the extent that his ambition is clear, it is notably modest.It is, however, unclear. How will anyone calculate the number of jobs “saved”? In what sense saved? Saved from what? Saved by what? By government action, such as agriculture subsidies or other corporate welfare? What about jobs lost because of those irrational uses of finite economic resources? Should jobs “saved” by, say, protectionist policies that interfere with free trade be balanced against jobs lost when export markets are lost to retaliatory protectionism? …

I meant to say 2.5x more than a pair of pantyhose

Whats wrong with our economy?Let me add this to the mix:Out notion of economic globalization is wrong. It identifies globalization with a corporate profit motive under the guise of free trade.Instead, I submit that a new view of economic globalization should be considered, one that seeks instead to raise the common standard of living, avoid trade imbalances, foster joint global cooperation on factors common to all mankind, and maximize each global players strengths.This really builds on what Lord Sidcup says above, so consider this a seconding of his post with more detail.

Dr. Roubini, according to “Tech Ticker,” says that “those worried about moral hazard and issues like free enterprise are fighting the last war.”There’s already massive amounts of government intervention in the economy, we’ve [crossed] that bridge,” he says. “The question now is, what are we doing to do right? If it takes an auto czar to really structure these firms, so be it.”So be it, Nouriel? I repeat those brave and determinate words of America’s first well-known naval fighter in the American Revolutionary War as his ship was sinking: “”We have just begun to fight.”Says Ramona Walhof, “The soldiers and the revolutionary army knew that they were fighting for their freedom, for their lives in a very real sense–the kind of lives they wanted to live.”According to the John Paul Jones Cottage Museum, Scotland: “The ‘Serapis’ had superior fire power and Jones had to manoeuvre skilfully to bring his ship alongside and lash her to the ‘Serapis’. During the dreadful 3 1/2 hour fight on a millpond sea, the ‘Alliance’, part of Jones’ squadron, fired at the ‘Bonhomme Richard,’ holing her so badly that she later sank. Over half of the crews of the two ships, including Jones himself, were either killed or wounded and many men were horribly burned. It was during this battle when asked if he wished to surrender that Jones gave the reply “I have not yet begun to fight.” Jones had to transfer his crew to the ‘Serapis’ and together with her sister ship the ‘Pallas’ which had captured the ‘Scarborough’ he sailed to the Texel in Holland with over 500 prisoners…”In 1913 the body of the ‘Father of the American Navy’ was finally laid to rest in a magnificent marble sarcophagus, modeled on the tomb of Napoleon, in the chapel crypt of Annapolis Naval Academy.http://www.jpj.demon.co.uk/jpjlife.htmhttp://www.nfb.org/images/nfb/Publications/fr/fr5/Issue2/f050203.html

Things haven’t gotten bad enough for the Screaming Mads YET.All things in their own time.

Thanks, OuterBeltway. A powerful replay. And for your unswerving endeavor — to hold the torch of political and economic liberty aloft.

g, the magic wand will just be used to beat our brains from inside of our skulls. i don’t see the magic in it..this trick already failed. you’re pulling my leg or pushing on a string, i could never figure out which is witch.<(:.,.equity investors are now gambling and praying for free tarp baby money which i think will just compound the existing debt which is already unbearable, that’s it. investment is dead. the magic wand will transfere poorly gambled money back into the hands of the crooked cassino operators. imo.the patient is in a coma and on life support. the chest goes up and down but there is no color in the cheeks. there are blockages that only surgery can remove as the blood thinner drugs have no appreciable affect other than causing random systemic bleeding while the anesthatist has realized he has misplaced the nitrous oxide and is instead using mustard gas? the surgeon is wearing a santa outfit and is drunk in the laundry room with a hooker who calls him number 8. and that is not even the worst of our problems.so where can i get a magic wand? do they make them in pakistan or africa? china, india, japan, eurozone seem to be all out?the idea of inflating and spreadingpsychologically unacceptabe levels of debt seems to be in the cards. debt based financial system. we saw savings become debt. cash became credit. pay with plastic. short term finance with leverage. long term finance through internationally “respectable” arrangementsturn into loansharking of teacher’s retirement funds in wiscon, jefferson county, alabama, mass transit authority in new york and new jersey and who knows what else? the f.b.i. is investigating?we saw productive corporate entities destroyed by leverage, raiders with intent to capture value using “inovative” debt instruments, “investment” with other peoples debt. and now what? more debt and less regulation with less transparency. it isn’t even a system anymore. it is an ongoing, broad daylight, bank robbery but we trust the bank robbers because we suspect they have our interests at heart? we won’t find this in the law, the numbers or the charts of economic indicators but we can see it right in front of our face, it is our nose that has been stolen.what i have just written is insane. sadly, it appears to be true. insurance?i don’t know why anybody would pay for insurance in this economic environment?why insure anything when you can just replace it with more debt???????no one seems to know what anything is even worth? are people and things over insured or underinsured? will the population be able to afford to own anything and if it can’t why would it be insured? why own when you can travel and live like a king on endless credit?it’s getting where it is much cheaper to live on a cruze boat than to live in a retirement community, never mind a health assisted living arrangement, and the food, service, environment and company is much better.HAHAJAJajajaJAJAJajajj.melt down………….somebody said it…what a messssssss.i fear the praying upon the weak, disabled, the elderly and the compromised has left the station. the great slaughter of the babby boomers has begun. what they saw happen to their parents should be taken as a warning.just a thought. buyer beware, read the label and then do your own research.

Latest from Maulding on the velocity of money. He had breakfast with the Professor Friday morning. He quotes a couple of the scary deflation paragraphs from the Professor. Once again the Professor analysis’ does not jibe with his conclusions. It is an MD telling you well you have metastasized liver cancer but I would not be too worried about it.http://www.investorsinsight.com/blogs/thoughts_from_the_frontline/archive/2008/12/05/the-velocity-factor.aspx

Abelson on the recent rallyhttp://online.barrons.com/article/SB122852239295784329.html?mod=9_0031_b_this_weeks_magazine_columns…It wasn’t, we hasten to add, the revelation that the bankruptcy predators are bucking the recessionary trend that lit a fire under the stock market. It was, perversely, the absolutely awful employment report that provided the spark.The notion is-and it’s hardly what might be called new or even novel — that the economy is in such terrible shape that Uncle Sam, who has already coughed up or pledged $2 trillion or more to get it back on its feet, has no choice but to print as many trillions more as it takes to do the trick.We don’t doubt that the printing presses will be working overtime and the money will flow in torrents out of Washington. We do doubt that it’ll be anywhere near as effective as the suddenly wild bulls think. All you can say for sure is that a handsome heap of dough already has been committed without a shred of evidence that it has had any significant impact except to provide an excuse for the long-anticipated bear-market rally.Such a rally, to shamelessly repeat what we’ve said scores of times before, can go on for a spell and put up some impressive points. It usually ends in tears. And, in any case, given the sad condition of just about every facet of the economy, this is no time, if you’ve survived as investor, to be a hero….And from the same piece, never forget WS/the banksters are not your friends:…As Henry points out, there’s no way around it: We’ve got to kick our addiction to debt if the world is to regain some semblance of financial sanity. On that score, we might interject, one can detect a kind of grim upside to the economic horror afflicting us: It’s already done wonders in raising the consciousness of just plain folks — if not necessarily that of Washington and Wall Street — to the perils of sinking deep into debt.Henry lays out with admirable coherence and relative brevity the various likely consequences of the hellish economic and financial bind we find ourselves in. We were particularly struck and disturbed by what he deems the most profound long-term effect of the credit crisis: The sharp acceleration in a trend that has already reached epic proportions — the concentration that’s radically changing finance as we’ve known it.The mighty wave of acquisitions, shotgun mergers and the like that has swept over the field has greatly increased the domination of the top 15 institutions, which now hold over half the nonfinancial debt in this fair land. “These were the very firms,” Henry reminds us, “that played a central role in creating debt on an unprecedented scale through a process of massive securitization via complex new credit instruments” and who “pushed for legal structures that made many aspects of the financial market opaque.”He warns that in the years ahead, these financial goliaths “will limit any chance for the U.S. to move toward greater economic democracy,” and they are riddled with conflicts of interest springing from their multiple roles “in securities underwriting, in lending and investing, in the making of secondary markets and in the management of other people’s money.”Henry also balefully predicts that “through their global reach, these sprawling firms will transmit financial contagion even more quickly,” and “when the current crisis abates, the pricing power of these huge financial conglomerates will grow significantly, at the expense of borrowers and investors.”Back to the future?

Oh, and now I have another theory…Did I mention the completely insane prices on Luxury hotels in Colorado ski resorts this winter.Last year nothing at the Park Hyatt under 450 or so. This year on expedia a cheapy room mid-december is $132.Last year the resort was FLOODED with foreign money scraping up bargains which makes sense if we were really already in a recession American’s stayed home last year but people with Yen and Euros showed up to take their places….Now that the dollar has strengthened due to deleveraging the foreign money which was propping tourism up stays home. That coupled with the financial industry losing jobs causes the bottom to seriously drop out on high end tourism and retail. No demand equals plunging prices.Perhaps all I was seeing this past year that looked like status quo affluence was Tyson’s Corner retail treading water based on the huge #s of foreign visitors with money to burn still making frequent visits to the US capita. Maybe our great U.S. capital didn’t have the buying power I thought and it was all the rich foreign visitors driving up the prices. Now if they have to watch their spending and the locals do too that yanks the rug out from under the Westins and the Ritz Carltons and Neimans and Saks and AT etc…So what is the point? I suppose I’m struggling with where are we in this cycle? I think we’re going to see massive devastating devaluation that will take down most everything-Luxury now, TJ Maxx later.Those in debt will be screwed. Those holding debt will also be screwed.My plan is to resist the temptation to buy bargains and save for a fence. Maybe when this whole thing’s done I can grow veggies and dairy cattle and sell ice cream and tomatoes by the side of our road…I’m figuring we’ll still have roads for the electric cars to run on right???

Gene always manages to put a positive spin on whatever job numbers you give him, no matter how dreadful they may be; so I was dying to see his take on Friday’s report. Wanna have some fun? Read on…http://online.barrons.com/article/SB122852246162784361.html?mod=9_0031_b_this_weeks_magazine_columnsSATURDAY, DECEMBER 6, 2008ECONOMIC BEATThe Year-Old RecessionBy GENE EPSTEIN | MORE ARTICLES BY AUTHORRecession? It’s official.…The Bureau of Labor Statistics reported Friday that nonfarm payroll jobs fell by a stunning 533,000 in November, with downward revisions to the previous two months’ figures running 199,000. Confirming the weakness, the unemployment rate rose another two-tenths of a percentage point, to 6.7%, after jumping four-tenths of a point the previous month.So if there is any small comfort to be taken in the shock and awe of the past three months, it’s that the pattern reflects a kind of catch-up. Over the full 11 months since the 2008 recession officially began, payroll employment has slid 1.4%, which is not quite as bad as the average of the past two recessions. For example, 11 months after the start of the 2001 recession — three months after it officially ended, in fact — payroll employment had fallen 1.6%. (Diz paragraph should win some kind of prize for stupid analysis/conclusions)More precisely, however, the past three months of misery in the labor markets has roughly paralleled commensurate shocks in the credit markets. And credit shocks seem connected to a similar pattern in the purchasing managers’ index for both manufacturing and services.The PMI for manufacturing was neutral to mildly contractionary until September of this year, when it suddenly began to plunge. The manufacturing PMI for November, released last week, reached depths not seen since the severe recessions of the 1970s and 1980s. The services PMI has shown an even more stunning reversal, running about neutral in September, then plunging in October, before matching the deep-recession reading of the manufacturing PMI by November.Everything seems to hinge, then, on credit flows. Despite new commitments of various kinds from the Federal Reserve and Treasury (including a mortgage bailout — see How to Solve the Foreclosure Crisis), you’d have to scratch hard to find meaningful improvement, with the exception of some further decline in mortgage interest rates.It seems plain by now that the credit markets will respond only to government action, having grown weary of government talk. But as talk does become action, there is still a possibility that the next three months won’t be quite as bad as the past three.There was even some bad luck in the calendar-driven delay of Thanksgiving. Retailers’ Black Friday didn’t occur until Nov. 28, five days later than last year and four later than the year before. These delays, certainly large enough to cause a delay in holiday hiring, could be a key reason for the seasonally adjusted decline of 91,000 in retail employment for November. (Gene, please, stop trowing eggs at yourself:-)The late Thanksgiving, then, could mean some rebound in retail employment in December. For such small favors, we might all give thanks.Diz economists are most certainly an odd bunch when it somes to drawing conclusions from data/analysis. It looks like Gene is suffering from the same disease as the Professor.

The only thing that will work to fix America’s housing crisis is burning down houses — there is a HUGE oversupply of houses in the USA and no buyers because everyone is broke and/or the houses are located far out of town away from many jobs in the distant suburbs.

My email to Holly on her latest stupid weekly column:SATURDAY, DECEMBER 6, 2008COMMODITIES CORNERStock Rally Will Reheat CocoaBy HOLLY HENSCHEN | MORE ARTICLES BY AUTHORWhat’s putting the steam in cocoa.Wow! A piece on Cocoa? I got into commodities via PCRDX on October 21 and bailed out yesterday at a total loss of almost 30%! And commodities were not precisely at their highs when I got in:-)Why don’t you write on the likely causes for such a broad-based cliff diving in commodities? of course, you will mention the economic slowdown but you may also want to consider that investors may be reconsidering one of the most popular investing mantras of recent times: Using commodities as an asset class that provides effective diversification. Investors as opposed to users of commodities seem to be bailing out.Octavio Richetta

“That goes for the rest of you as well. You losers don’t know shit. Just keep your mouths shut.”You’re a comedian.

g, yes. you have hit the nail on the head and bingo. the premise that the solution is to be found within the framework of the problem employs an irrational assumption. the solution may lie outside but that is not what n.r. does. people should not forget that r.g.e. monitor is a market consulting, advisory institution and, i think, a business. it does unbelievable analysis and offers it freely. it provides this “meeting place” for interested party’s. it is not in the business of governing or telling anyone what is right or wrong. it is in and part of the global system, as it is, and makes no declaration as to what “it” should be. that is up to other persons or entities.an analyst analyses what is, not what could be, otherwise he/she would be a proponent and biased. or a philosopher, or investor, or something else. the man has to make a living in THIS system, along with everyone else.it is because the system is failing that we half full mentality people have arrived at dr. dooms blog. many opinions exist as to what should be done and what is the root cause but there is global agreement that something is tragically wrong. this, i think, has been true for a long time but we americans have been blind to it as we were easily satisfied, distracted and self absorbed. this has not changed for much or most of the population yet..industries cater to satisfying the symptoms of this mental state or stage or profile. aannndd.the customer is always right!the service sector economy with credit is hearing a knock at the door, or is it the snarl of a wolf? either way it is a noise of our own making.i think the word is narcissistic which i believe stems from a fundamental self loathing manifesting as public displays of control, obscene wealth, overreaching power and what is associated with “success”. we, the people, have simply lost our way and need to find it again or, for the first time..our way?..my guess is no one will show us or come and hand it to us, no one will sell it to us, no one will manufacture it for us and then pay for the shipping. we will not go to africa and find it in the ground and we cannot borrow it from anyone because there really isn’t even anyone who knows what “it” is.the other thing is it can never be had by violence or demanded from someone, or decreed from on high..this is not dr. doom’s problem. it is america’s problem and it is our problem.ps.dr. d. has laid out a systematic course of action for recovery of THIS system. he did not pass judgement on the quality of the system or the relative justice or injustice of it in it’s working or disfunctional form. that is up to the people.pss. i read his prescription, i don’t see “authorities” following it too closely which disturbs me for a few reasons. first, i don’t think the system works in the first place as many in this blog have beautifullydescribed and second, if dr. d. has concluded rightly that the situation is dire and certain drastic measures are called for and the “authorities” obviously do NOT hear it or CAN’T hear it then we will be facing something like the wolf and the snarl and to halloween we go.

I’d rather that they bail out banks indirectly, by helping some people stay in their houses, rather than directly so the banks are more bold about throwing people out in the street.Bailouts should flow from the bottom up. Clearly the top down model has failed, banks are not lending. Now it’s our turn, they got too many turns already.

I can only speak about my current 2006 Chrysler SRT8. It’s more or less equivalent (but less plush) than a Mercedes costing twice as much. I’ve had Mercs. No problems, just regular maintenance on schedule, excellent service experience.Good cars, good people. I like Chrysler. Can’t speak from personal experience about Ford and GM.

NEW THREAD (PS to those who are First – it might be nice if you take a second and let the others know that there is a new thread)

watch your manners. we welcome all viewpoints here.

I can’t really comment about most of these studies because I’m not in the demographic, but the AICPA study seems a little screwed up to me. A new study commissioned by the AICPA shows that the target group for the Feed the Pig campaign–Americans aged 25-34–faces an uncertain financial future unless they change their ways. Dr. Christopher Thornberg and Dr. Jon Haveman, economists with Beacon Economics in Los Angeles, found that this group is simply not saving enough to fund their retirement needs. Complicating matters even more, their median net worth, which was $6,788 in 1985, plummeted to $3,746 by 2004 I can’t get access to the full paper, but this statement makes no sense. Their target demographic is 25-35, and yet the leading edge of the demographic would have been thirteen in 1985. How many thirteen year olds have a median net worth of $6,788 and how many thirteen year olds are actively contributing to their retirement? That’s not even considering that the low end, the 25 year olds were only four. Incidently the ‘new study’ was done in 2006, so it’s now two years old.Oh, and yeah, I don’t know anyone my age that actually contributes to a 401K. Most of us view them as a scam.

Its a message…

NEW THREAD

I will get some first hand information from my hosts here.Interesting you mention about taking on own responsibility. I also got this point in my discussions. In a centrally planned (ie communist) government, risk taking at the lower levels is low, leading to a certain kind of paralysis and ineffectiveness.The problem for all of us now is, we seem to be collectively placing all of this hope in government fiscal (as opposed to monetary) stimulus. A government stimulus will not be as efficient of a generator of economic activity as a free market composed of motivated individuals and corporations.

Bingo.Since the gov’t will spend lots and lots of money, it should be spent as an investment rather than a bailout – future vs. past.

strictly speaking, that is not a new Roubini thread. Many (like me) saw it earlier and ignored it.

It’s better to be a pessimist. If you are wrong, then things aren’t as bad as you thought they were.

Amen. Our area didn’t have much of a bubble and I keep reading local columns calling a bottom for home prices here, but the average home price is still five times median income for the area.

They know that reducing the principal(amount of homeowner’s mortgage liability) is the right thing to do; this is essentially what they have been doing for every institution they deem “too big to fail”! The only problem is the average American doesn’t fall into that category until a threshold is crossed (maybe 5 million foreclosures, bankrupt city and state govts, 10% unemployment, etc). Policy decisions by those in power are always made to benefit the elite with the belief that the masses “will eventually get use to the lower standard of living”. I wonder what would happen if EVERYONE STOPPED PAYING THEIR MORTGAGES until the elite and our govt started to really listen to the public’s concerns and institute real change?

Sidcup – How does a bank function like a utility? Seeing if I can find Taleb’s interview now…

Why put an “auto czar” in place?*** You think these companies need money, but you don’t think that they can manage it correctly or effectively! (Isn’t that a wise man’s exact logic for NOT giving them the money)***You know that this money is not going to do squat; the companies know it’s not going to do squat. They both know they are GOING TO NEED a fall guy to blame when it all goes down. (This is the taxpayer’s notice that we’re giving them the money to say we tried our best, but we’re sure as hell not going to take the heat if this doesn’t pan out)

With deflation everybody wait to buy something. When deflation stops, there is a run to products, and production is cripled, then we got high inflation. Is this correct?

And you need either another drink or a class in ESL. I’m guessing both.

What is ESL?

@Guest -You’ve obviously spent a lot of time pondering this idea. I think it’s an idea that we need to come back to again and again over time. For now, I can’t add anything more intelligent than what you’ve posted yourself. Thanks for your insights!

brain drain?Sun’s counterfeit ring, the brash 26-year-old York University grad claims, has forged hundreds of college and university degrees in the past four years. He started the business while a visa student at York.”Three (degrees) per week, a good week, I get four,” Sun told the Star’s undercover operative of the high demand for his bogus degrees.His work is top-notch. His prices are higher than those charged by diploma mills advertising on the Internet because his fakes are of superior quality, for real universities, printed on thick, watermarked paper, and stamped with university seals.For the $4,000 Sun also provided two copies of grade transcripts in sealed York University envelopes ready to hand to prospective employers.”Once you crack the watermark you can forge anything,” Sun boasted to one of two operatives the Star used during a two-month investigation. “You can print money.”University of Toronto and York University degrees are the most sought after by his clients, mainly students who don’t want to study, or immigrants returning to China who need a diploma to land a well-paying job. Sun said the price for a bachelor’s degree, MBA or PhD is the same. For him, it’s the same amount of work, paper and ink.”I have friends from China who spend three years here, didn’t want to go to school, but got York and U of T degree (from him) then got a job,” Sun boasted. “There are many of them. It’s funny.”"My quality is the best. You can’t even distinguish. The paper, its weight, quality, pattern, colour, fonts, layout, logo design, stamp, seal are the same as the real thing.”"You will get your return,” Sun said to the operative’s comment that $4,000 was a lot of money. “If you pay 30 years of tuition fees, you still have to study for 30 years.”Sun advertises his fake degrees on an Internet bulletin board. He did not ask to see any identification before undertaking to make an MBA degree for one of our operatives, who went by the name Calvin Wai Tak Lee. After email and telephone exchanges, Calvin Lee met Sun in the Shoppers Drug Mart parking lot at Yonge St. and Finch Ave. two weeks ago. Our operative gave him a date of birth, the requested graduating year (2006), plus a $400 cash down payment.Three days later, Calvin Lee had his Master of Business Administration from York’s prestigious Schulich School of Business, bearing the embossed slogan “with all the honours, rights and privileges which appertain to this degree.” The degree was delivered at a meeting that began in Sun’s white Toyota Yaris in the same parking lot.Bearing a graduation date of June 2006, the degree carries the university’s crimson seal and the forged signatures of then-Chancellor Peter Cory and President Lorna Marsden. Cory is a former Justice of the Supreme Court of Canada and Marsden is a former Canadian senator.For the $4,000 Sun also provided transcripts detailing two years of alleged study in marketing courses at Schulich, awarding Calvin Lee an A in Organizational Behaviour, but only a C+ in Strategy Field Study.Shown the bogus degree and transcripts, York University Registrar Joanne Duklas was both impressed by the quality of the forgeries and outraged that anyone, especially a former student, would undertake such “nefarious” work.”As a group, registrars of schools are appalled by this behaviour and find it unacceptable,” said Duklas, whose forged signature is on the transcripts.So confident was Sun about the quality of his work that before taking his payment, he drove Calvin to the York University bookstore at the Keele St. campus to compare his newly minted forgery to framed samples on display there.Back in the car, Sun demanded the remaining $3,600 before turning over the degree, stashing the cash in an empty Godiva chocolate box and shoving it under his car seat.As he drove the Star’s operative back to the Shoppers’ lot, Sun sought to involve our operative in another of his scams, asking Calvin (who was posing as a banker) if he could put him in contact with someone at the bank who deals with mortgages and loans.”Some people want to return to China, sell their passports, SIN cards, and we can use their names to go to the bank and get loans,” Sun explained. “Once you get the money in hand …”When they reached Shoppers, two Star reporters confronted Sun as he was about to drive off. Startled, Sun said little, then grudgingly handed over the box of money when asked by the Star.”I’m just doing research,” Sun said several times, when told that he had been the subject of the newspaper’s probe into fake university degrees.”I reserve the question,” Sun said several times, when asked to explain his actions.”Can I go now?” he asked, then sped off in the Yaris in the direction of his luxury condo two blocks away on Greenview Ave. Property records show that he paid $410,000 for the unit and it is mortgage free. At a previous meeting Sun had arrived in a $60,000 BMW 525xi, bearing the vanity plate A 001. Subsequent phone calls to Sun’s cellphone have gone unanswered.Sun’s own York University degree is real. He graduated from the Atkinson School of Administrative Studies in 2007 with a Bachelor of Human Resources Management and upgraded it to an honours degree this year, the university confirmed. But in discussions with our operatives, Sun played down his academic achievements, saying his degree has been of limited use to him. In China, as it is in Canada, it’s who you know and your work experience that counts, he said.”I’ve forgotten everything (I learned) in school. All theoretical. Nothing useful.”Sun came to Canada as a visa student years ago and took courses at Humber College before enrolling at York. Known to friends, clients and in Internet chat rooms as “Randy,” he has advertised on the Internet for years, primarily on YorkBBS.ca, a bulletin board popular with Chinese visa students. He calls his company Golden China Overseas Studying.That’s where a Mandarin-speaking Star operative saw his ads, not only for diplomas, but automobile insurance, student cards and other types of identification.Contacted by email, Sun boasted openly of his ability to produce degrees from most Canadian universities, with the exception of the University of Western Ontario in London. A University of Toronto degree would have to carry a graduation date prior to June of this year. U of T has started using holographs on its diplomas, which are harder to copy, but Sun said recently he is now in a position to fabricate the new U of T degrees, for $6,000.”We have the watermark paper, we have the seals,” Sun said. “My quality is very, very, good. As close as you can get to the real thing.”Besides the degrees, he offered for sale numerous other counterfeit documents, which could push the price to more than $10,000. These include forged letters from the Chinese Consulate in Toronto and the Chinese Ministry of Education in Beijing attesting the client as a bona fide student in Canada.”I can get all these documents pretty fast,” Sun said in an email prior to the first of three face-to-face meetings with the Star’s operatives. “If it is not urgent, give me a week. The pivotal question is, when you will need it?”He does not provide samples of his work, he said, because he can’t take a chance of being caught with any evidence or have his work fall into the hands of his competitors. “I used to show samples to all customers. One evening I was in a parking lot at Finch and Leslie. I was showing samples. Not even five minutes, police came to us. I was quick. I put them away. Police said someone called police and reported you selling fake documents. I said, no, I’m here chilling out with friends.”Since then I don’t carry any samples with me.”Chinese employers rarely check the authenticity of foreign degrees, he told one of our operatives. Even if they do, universities don’t normally give out information over the phone, preferring a faxed request, he said. In that case, the applicant should provide the employer with a fax number in Toronto. Confirmation of the degree will then be faxed to China on the university’s letterhead. For his protection, and that of his clients, Sun claims he purges all client information from his laptop, and shreds all documents a week after the transaction is sealed and delivered.”The last person you want to see, after you buy a degree from me, is me,” Sun told one of our operatives.The bogus-degree market is a billion-dollar industry, authorities say, with hundreds of Internet sites pumping out an estimated 200,000 fake diplomas a year around the globe. Fake degrees pose a security risk in the hands of potential terrorists, who might use them to gain entry into North America or advance into sensitive jobs. Two of the terrorists involved in the Sept. 11, 2001, attacks entered the United States on student visas.”The dangers posed by a diploma mill are real,” says University of Illinois Professor George Gollin, who has studied the problem for years. “It is bad enough that persons using fake degrees obtain undeserved status or swindle unwitting victims, but there is a real danger when phony physicians treat the sick, untrained engineers design bridges or teachers with purchased credentials instruct our children.”In April 2007, York Regional Police arrested five Chinese visa students alleged to be operating a “full-service” forgery mill in the basement of a house in Markham.The gang had produced “hundreds, if not thousands” of top-quality degrees, passports, visas, driver’s licences and marriage certificates and sold them on the Internet. Among the hundreds of documents seized by police were degrees from U of T, York, Western, Carleton, Acadia, Brock, Seneca College and George Brown, as well as stamps used to produce the university seals and blank watermarked transcripts…”http://news.therecord.com/News/article/455411

A “controlled” depression – only if the U.S. is luckyA Japan-type scenario is becoming more and more likely as both Paul Krugman and Nouriel point have now argued. My view is that Japan was/is a controlled depression. The key thing that defines a depression is a liquidity trap which is a result of persistent asset price deflation. It is unlikely that the U.S. can control things as the Japanese did because of three factors: 1) Japan benefited from a large export sector and generally strong global demand. This time the U.S. is facing a global recession and its export sector is very weak by comparison to Japan in the first place; 2) Japanese households have a high savings rate (14%) that just drifted down slightly over the long period of stag-deflation (to use Roubini’s term). In the U.S. the savings rate was until very recently negative; 3) Japanese corporate structure allowed bad debts to be hidden and corporations to stagger on while they tried to write off huge losses due to falling asset markets. In the U.S. we see speculative attacks on any institution that show weakness forcing its hand e.g. the recent near bankruptcy of Citigroup is an example. The “bailouts” are at best “patching holes” as described by Merdith Whitney, a well-known U.S. banking sector analysis (see article at the bottom). This reminds me of the Japanese situation, where as fast as the banks wrote off bad debts new ones appeared. All in all I would argue that a Japan-type scenario is the best case one can hope for and that something as “controlled” as was seen in Japan is unlikely to be the case in the U.S.

The Financial system looks to be a Big Black Hole.I think, in 1-2 years, the question will turn out to be “who the hell on this earth going to bailout USA debts”.If nobody cannot be found, the solutions might be:a) Increase TAX leads to lower economic activity, increasing depression……b) Press more dollars leads to hyper-inflations… everything may loose its meaning even deflation……c) Deafault on debts, leads to wars……..I think, trying to bailout the Financial System was wrong and the start of a journey that will lead to a big big failure…., 100 years later, they will call that the FED and treasury in 1929 has reacted to the problem better than in 2008…

Equally as important as involvement furnishing a springboard for creativity is the providing of work for our citizens.

The Zune concentrates on being a Portable Media Player. Not a web browser. Not a game machine. Maybe in the future it’ll do even better in those areas, but for now it’s a fantastic way to organize and listen to your music and videos, and is without peer in that regard. The iPod’s strengths are its web browsing and apps. If those sound more compelling, perhaps it is your best choice.

A beautiful blog , it has long sought a paper com this ….