And its consequences:Unfair Wealth Redistribution

Roubini most important statement:”The long-term consequences of the resulting surge in fiscal deficits are serious. If the deficits are monetized by central banks, inflation will follow the short-term deflationary pressures; if they are financed by debt, the long-term solvency of some governments may be at stake unless medium-term fiscal discipline is restored.”How to control this mess?PeteCA, Remember our discussion about control systems and Pilot Induced Oscillations?

So, if we have deflation, what little money I happen to possess will become more valuable. Where is the problem in this?

I do indeed. And I still think it’s very relevant.PeteCA

and flood the labor market with workers for less pay. I am left in the cold. A tradesman with no trade left.

I’m still having a massive problem getting over the fact that when the Fed/SEC/etc… had questions… It was common for them to tap Madoff for answers. (especially on things like stopping ponzi’s)Is it all fiction?Miss America

Where does integrity come from? I would suggest it going to have to come from a shift in our ideals and values as a society. Madoff and Wall street are a microcosm or a reflection of a society as a whole that has lost its way by placing too much value on possessions. I suggest the answer to the fraud problems we face is actually a very personal one, by changing what’s of value to yourself is how you can make the biggest difference.

According to Dr. Roubini, we are on the brink of a deflationary spiral that with falling demand, excessive inventory, stagnant wages and rising unemployment is highly likely to take us over the edge into full fledged deflation. In addition, Dr. Roubini says that we are getting close to being snared by a liquidity trap where Fed policy rates are near zero and further action becomes ineffective in stimulating the economy. And, then there is the horror of “debt deflation” where the burden of debt on the debtor actually increases, making it that much more difficult to make economic progress.Dr. Roubini, for all his pessimism regarding the current direction of the economy seems oddly optimistic about the ability of central banks and governments across the globe to pull a rabbit out of the hat. He seems to believe that most countries, including the US will be on the road to recovery by 2010. He seems to believe that the same folks who got us into this mess are capable of quickly getting us out. This doesn’t quite add up in my mind. Here’s my question: Given what is currently happening in the US and globally, what is the probability of significant economic recovery in the US by 2010?

FAMC,Its worse than that. Because we are running up the deficits right now and none of it is going to actually stimulate anything. It’a all going to just cover the gigantic excesses and looming defaults of the overlarge and increasingly irrelevant financial industry. Consider:- The Fed has an alphabet soup of programs designed to make themselves the lender of first reaort. This will only continue and get bigger.- US debt is the safe haven of those currently in cash. Therefore the US is the world’s bank- Meanwhile, we are handing out the bailout money to banks, insurers, all kinds of financial institutions. Soon we will be trying to bail out losers in hedge funds.Our deficits increase for the sole means of protecting those who caused the mess from suffering its consequences. There is no insistence upon transparency, no forcing of the realization of losses, no shutdown of zombie entities.So in the end, the unstable control system effects (likened to a pilot induced oscillation, or PIO, look it up) will be felt in a cycle of hyperinflation, and we will have gotten nothing for our deficits and ‘crazy’ actions that caused it. Roubini is too optimistic.How to control the mess? – first quit feeding the control inputs in the wrong direction – the financial industry.ex VRWC

Really real, like the latest US president getting shoes thrown at his head and everybody except bribed leaders sympathetic towards the journalist making there probably one of the best statements ever made.Shoes finally beating cruise missiles, weapons of mass ego destruction finally uncovered.Welcome to reality with banks stealing money and ordinary citizens encouraged to borrow themselves into bankrupcy.Que encore?

While shopping in our local Wal-Mart this past Sunday I noticed signs in different places in the store in front of empty shelves that stated; due to problems with our suppliers we are out of this product, please ask store associate for other options. (Not the exact wording but close.) These signs were in both the stores I went into this weekend. Signs of suppliers not able to raise capital for production, or not willing to produce the goods for deflated pricing?

I agree by adjusting our values would contribute to avoiding fraud problems. But we don’t all share the same values – partly the results of our situations in life. We all have different levels of responsibilities and obligations.But an address of the overall value-base of the system should be examined. Right now corporations operate under the objective of maximizing investor returns, or at least appearing to in the case of Madoff. Such value-base is a major contributor to the fraud that has perpetrated the system, weakened or eroded it’s integrity, and threatens an entire global economy.Madoff and WallStreet are microcosms, like you said, but I think they represent a very small, albeit powerful and with superior presence, than society on a whole. We should have a more ecological approach to both finance and economics. Selfish profiteers of now are endangering the entire system and the future for those who came after.So you’re correct – a more value based system is what we need…but with different, more ecological, values.

Interesting. What kind of items? I have hear or seen this in the deep south. Where are you seeing it?There is one odd thing in my local Wal-Mart. No inexpensive 30 gal trash bags for the last two months? Plenty of larger string bags, lawn bags, and sandwich bags though.

The financial industry is already dead. Its future is baked in the cake.Trust – this evaporated a while back. Madoff is only confirmation of the moral and financial bankruptcy at the heart of the system The only trust left is in bailouts now. The only optimism in a herd mentality of following the latest hoped for government tossout or speculation of a rate cut or easing.We have so far to fall.

Inflation/deflation is a macroeconomic trend primarily resulting from monetary policy.Price decreases in a specific item or class of items like cell phones, or DNA sequencing, is call increased productivity.Price increases in a specific item or class of items called and asset bubble.So gasoline was an asset bubble, but now it’s increased productivity

6″ stilettos are more aerodynamic, accurate and deadly!

BrainTrust: More on the “what’s the problem” front. From Brad Setser’s blog, which centers on central bank (currency, trade flow) policy:

# December 16th, 2008 at 2:39 am Ying responds:Mercantilism and consumerism go arm in arm as twins. The separation between consumers and producers make people hard to understand the other side of the story. The dimension of distance is not only a geographic one, but also a mental distance. It creates an understanding gap – a gap of information, awareness and responsibility towards each other. Most US consumers are completely ignorant about the devastating environmental impact towards other people, other land on other side of the planet caused by innocent indulgence in consumption. Most Chinese producers have no ideas that they took American manufacturing jobs away from American workers. In reality, pension funds in the US funded multinational firms which in turn made heavy investment in China and other developing nations. Ask how much GM invested in China. If any American wants to blame anyone or country for the crisis, he or she should really look at its own system and fix it. It’s not Mercantilist country that destroyed the United States. It’s the systemic policy choices the United States made in the last decades that leads to the current financial crisis.

I find this post fascinating because the people most hurt by our current trade and industrial policy are the ones that made it happen.Few of us understood the consequences of these actions (foreign investment) – either at the time they occurred, or the present time, when the consequences are becoming more apparent. You may argue that ‘rich people shipped jobs overseas’, but ‘rich people’ are having their portfolios hammered right now.They didn’t really understand the phenomenon, either.What does that tell you?Here’s the link to Brad Setser’s blog, so you can see the full context of the posting.

A road to recovery based on what?What do you think the basis of the US economy going forward should be? It has been:- Dot com bubble- Housing bubbleAll of this overlaid by a financial industry bubble, feeding a credit bubble upon which US collective spending rested for years and years. All of this also resulting in a trade and wage imbalance.Will all of bubbles now these burst and the imbalances correcting, I don’t see where a recovery comes from. We cannot go back to the status quo, it no longer exists. I don’t think just trusting in cyclical forces will do it, there has to be some basis.Sorry, I think this is much longer term correction. a 2010 recovery seems awfully optimistic.

Most US consumers are completely ignorant about the devastating environmental impact towards other people, other land on other side of the planet caused by innocent indulgence in consumption.Bingo, bingo, bingo. Setser is so right on. If you could all have accompanied me to China, you would have this driven home to you, oh so clearly.Our consumption and capital hot money inflows have to them been the equivalent of a silver strike in an old mining town. That is what China is, a boom town based on the silver strike of US consumption. A big, environmentally disastrous, hypercapitalistic boom town. Where the vein just played out.ex VRWC

@Kerwin: “At the end of this do we expect things to return to the status quo, or should we expect a major shift in the consciousness and integrity of financial institutions and players?This sole superpower is headed toward a battle in its downward spiral between the people who want to rule and the other people who don’t want to be ruled. The battle is centered in New York and London. But the ruler wannabes don’t have the conditions of the 18th century whereby they could kill people.The United States, as we know it, is coming to an end. As the current financial system crashes and burns, the new financial system in the future won’t have dictatorial government power. The people won’t have it.The criminals are conducting a daylight robbery. That means they won’t have a place to go with their stolen goods and power because all the world is watching and opposed.I’m one of the few people who believe as I do, that reads Krugman. I do so to see what the opposition is saying. His article today says that the European Union economy is just as bad as the U.S.’s, but that the largest economy within Europe is resisting the Keynesian “cure”. That country, Germany, doesn’t want to suffer Keynes and end up like the rest, with its currency and economy wiped out. Merkel and the Germans, who went through the “cure” in the 1920s, simply are saying “no” to the billion dollar “stimulus packages” and the trillion dollar bailouts.The financial system that everyone is trying to “save,” is going to crash. The economy itself is sound, but badly needs a course correction. Liken the nation’s situation to a little town with one bank and the banker is stealing all the money. Eventually, the bank gets disposed of and the little town starts again to rebuild itself.The country’s financial system is a global Ponzi scheme of taking money from one and giving it to another –- protected against default by the American workingman. That “system” is now on its last hurdle, in the last canyon. Some rich people will get away, yes, but the financial “system” itself won’t get away. The story will have a different ending. Why? Because this is not just another boom and bust economic cycle: it involves foreign systems and massive corruption and the world sees it.But, you say, the economy is still running, isn’t it? Yes, but that is simply testimony of how strong the economy was before. You can run a car that runs out of oil for a short while, but it is going to stop.This is the end chapter

Seen it with Mobil 1 oil at 2 stores. Employee said that they’ve been out since the hurricane.

This logic depended on the Fed funds rate being the real operating rate. In practice, the effective Fed funds rate is currently already zero. What happens today with Fed rates is probably irrelevant. Bernanke may do other things, but rates don’t do much in his toolbox right now. Just my opinion. Be careful of the market – they may just be sucking people in … so they can sell on the news.PeteCA

The Germans lived through economic hell. They don’t want to go back there. Can you blame them?PeteCA

watch this market move in advance of the fed decision

Looking up your reference to Seldes, I found this reference on Google to a post from “Mom” on RGE Monitor this past September 24. Here is the basis of it:May I recommend you get your hands on The George Seldes Reader, Dear Americans, and get up to speed easily with the nasty history of fascism in this country…To this day I am the only person I know who has ever read about this: In 1918, Seldes interviewed Field Marshall Von Hindenburg (the supreme commander of the German forces). This report could have changed the world’s views about Germany prior to World War II and thus may have changed the course of history had the Allies not censored it.How come all the opprobrium falls on Hitler, and not on the complicit American and British (amongst others) Banksters and businessmen who funded his rise to power? Do Americans remember that Hitler was TIME magazine’s man of the year back in Presscot’s day??Also, get thee to William Blum’s website Killing Hope. Read Killing Hope, sign up for Bill’s monthly anti-empire reports….What we don’t know can’t hurt THEM. And by THEM I mean billionaires, period. The kind that come in all stripes and flavors and shades. No one self-earns a billion. Billionaires are simply in possession of other-earned wealth, and the result of that is they have to live on a very unhappy planet now wired to blow.What America’s working people don’t know, cannot hurt the wealthpower giants nor the billionaire wannabees nor those eager or willing to carry their damn water for them…i could spit nails or die laughing at this species some days, honestly. the damn foxes who plunder the henhouse are the ones who get on teevee and say they’ll fixz it up in a jif. that’s how the plan works, which you know once you learn to see the patterns. they create the problem they come up with the solution to resolve it for you with. you get the shaft coming and going, the money keeps funneling to one point of concentration: those who have all the money…”http://www.rgemonitor.com/roubini-monitor/253713/the_unraveling_of_the_shadow_banking_system_moves_to_hedge_funds_as_schmalpha_replaces_alpha

Why is Goldman stock rallying 11% despite larger than expected loss? Am I missing something?Oh, they are buying back their own shares with the 10 billion in tax payer money. Never mind then…

What now?Where do we go from here?Now we have free money

Investors in US assets will keep doing this until they get burnt. I give you exhibit A: Bernard Madoff.Humans have a way of learning only from tragedy.By they way, Pete… You might enjoy watching documentaries about the great African migration. It amazes me how investors behave just like the Wildebeests at the river. They sense that there is danger, but after the first few jump in, the whole herd follows in. The lions and the crocodiles will have a feast (just like the crooks in our world). Amazingly, the wildebeests hardly remember what had happened earlier and jump in again and again after a few minutes. Sounds familiar?? I thought so.

Guest:I hope you stick around to help the BrainTrust people pick through the rubble and devise a “new” economy. You have done a great job of describing what has happened to date.I hope you’ll consider doing just as good a job re-assembling the broken pieces into tomorrow’s economy for the American Workingman – more appropriately, maybe, for the World’s Workingman.

Well put – what does you crystal ball say for today?

The FED or “Fraternity of Economic Dumbells” has done it again: creating a financial black hole that the equity market vacuum will first suck up all of the Bears money before they take even more of the Bulls! It’s just a matter of time!

“We live in a world of euphemism. Undertakers have become ‘morticians,’ press agents are now ‘public relations counselors’ and janitors have all been transformed into ‘superintendents.’ In every walk of life, plain facts have been wrapped in cloudy camouflage.“No less has this been true of economics. In the old days, we used to suffer nearly periodic economic crises, the sudden onset of which was called a ‘panic,’ and the lingering trough period after the panic was called ‘depression.’“The most famous depression in modern times, of course, was the one that began in a typical financial panic in 1929 and lasted until the advent of World War II. After the disaster of 1929, economists and politicians resolved that this must never happen again. The easiest way of succeeding at this resolve was, simply to define ‘depressions’ out of existence. From that point on, America was to suffer no further depression. For when the next sharp depression came along, in 1937-38, the economists simply refused to use the dread name, and came up with a new, much softer-sounding word: ‘recession.’ From that point on, we have been through quite a few recessions, but not a single depression.” | Dr. Murray Rothbard, “Economic Depressions: Causes & Cures.” 1969

Why do equity markets react so positively to the FED cut? The Fed statement was clear about the direction to hell for the economy, meaning that future corporate earnings will sink to record low levels and consequenly the current value of most equities is overestimated because it doesn’t take into account those futures losses or negative growth assets… I understand the theory that says that stocks go up when rates are cut (DDM model Div./Rate) but the present case growth will be negative, dividends inexistant, etc… so there is no rational behind any increase in equities today for me. And even if US Treasuries only earn between 0% (3m) and 2.9% (30y) it is still far better than the negative return of equities (inexistant div. + negative capital gain) so once again I don’t understand the rush in equities today. Could anybody help me understand investors’ mind?

That way they don’t have to pre-announce their dividend cut for 2010

3:04 p.m.[GS] Goldman Sachs shares rise 15%, to $76.10

Dec. 16 (Bloomberg) — Treasuries rose, pushing yields to record lows, after the Federal Reserve cut the main U.S. interest rate to a range of zero to 0.25 percent and said central bankers will do whatever is necessary to ease the longest recession in a quarter-century.“The tone of the statement is consistent with an economy in one of the deepest downturns in the 20th century,” said Jane Caron, chief economic strategist in Burlington, Vermont, at Dwight Asset Management Co., which oversees $70 billion. “There is a dire tone in this statement.”http://www.bloomberg.com/apps/news?pid=20601009&sid=acJaAVRY9cJ0&refer=bondApparently we have begun to time travel. We need Einstein to return from the dead to tell us where in the space-time continuum Bernanke has taken us.

Get your dow 10,000 caps ready cause the red phone says their is some more sheeple rapin to do before they slam this to new lows!!

Dec. 16 (Bloomberg) — The dollar fell to a two-month low against the euro as the Federal Reserve cut the target lending rate to a range of zero to 0.25 percent, making the greenback the lowest-yielding currency among industrialized nations.The U.S. dollar dropped for a fifth day versus the euro, the longest stretch of losses since February, as the central bank said in its statement that it will do whatever is needed to ease the recession. European Central Bank President Jean-Claude Trichet said yesterday there’s a limit to how far the bank can cut interest rates and signaled it may pause in January.“Sell dollars,” said Scott Ainsbury, a portfolio manager who helps manage $14.6 billion in currencies at New York-based hedge fund FX Concepts Inc. “We have a zero interest-rate policy. It didn’t do very well for Japan over the years, did it?”

Also sinking deeper and deeper into that financial black hole where no bottom splash can be heard are: savings/pension/wage values destroyed by price inflation particularly for food, gas, health insurance and non-competitive monopolies; normal house appreciation once tagged somewhat to inflation; taxpayers forced to support a broadened base of delinquent homeowners, a growing bureaucracy, first-time home buyers, F&F subsidized mortgages, the jobless because of manufacturing base destruction and lower-wage replacements, and the passed-on cost of programs for low-income immigrant and illegal immigrants– health care, utililties and property tax subsidies, food, housing, child care, schools, transferred tax cash for number of children, police, and prison systems.All this, for the survival of the investment bankers and…financial power.

Dow up 600 points today on what, confirmation the world is ending????

Rest assured, Big Ben aka “the Lizard of Oz” isn’t taking us down the Yellow Brick Road!

Thanks for correcting that – I missed it.I linked this a couple of times already, I hope it is not getting old. It is a blog I did about my trip: A Dragon on WInter’s Eve You asked:Why can’t China “de-couple” and point production toward its own people? I still don’t understand why that can’t happen. Can/will you shed light on that? You are correct, they have to turn inward now to pick up the slack. I don’t know that any consumer economy can pick up their overcapacity. This is their planned next step, however it is not as simple as that. There is a wide gulf between the poor and the emerging middle class, between the farmer and the city dweller, between the burgeoning regions and the backwaters. To increase consumption of the poor, however, requires some kind of infrastructure, some kind of modernization. A society has to grow into modernization, you cannot jump start it in just a few years. But the results of modernization in China have, in ways, been devastating already. I tried to touch on this a little in the blog, I can write more.

Fed cuts to 0. 350+ gain on the Dow. Dollar-Yen at 89 now. Oil-Dollar inverse relationship broken. Even the lowly pound is creaming the dollar. Can’t they see what they are doing? Another line of cocaine, another short lived high, a bigger crash on the horizon.

Once again, with infaltion and interest rates falling faster than earnings revisions, stock earnings streams become more valuable. In my estimation, using data through today, and using bullshit estimates from wall street, the S&P is worth 1060 today, 16% above where we are today. Now, we can rally until rates and inflation level out or until earnings estimates plummit. Using no growth for the S&P earnings for 2009, fair value drops to 762. The momentum will continue until a great force says no more…

:00 p.m.Fed official says econ. outlook similar to private sector4:00 p.m.Fed sees economic weakness in Q4 and Q1: officialLies! Damn Lies!!4:00 p.m.Fed sees slow recovery after mid-year 2009: official4:00 p.m.Fed policy to lower credit spreads in debt markets: official4:00 p.m.Deflation is not major threat, Fed official says4:00 p.m.Fed action not same as Japan quantitative easing: official4:00 p.m.Fed not trying to target mortgage rates: official

Se posts JimmyTheBanker on 2008-12-16 14:59:23 for your answer if you trust this person.

ex VRWC:Thanks very much for that link. I immensely enjoyed reading your work. I’ve not seen much on that topic, by one of your background. Outstanding read.2nd tier question. I refer to these two passages in your piece:

As I reflect on China, what occurs to me is that China needs, most of all, to develop a modern, sustainable, localized community structure. Development focused on moving the population out of the vast urban centers and into smaller, green communities would seem to be a good way forward. As I contemplate this, I cannot escape the thought that the current needs of China are ten years too early for the technology required to build such sustainable infrastructure. Needing to move quickly, China may be forced to stay its course. As in other aspects of the global crisis, the timing is terrible.

And then, in the context of whether the China will be able to adapt to changing conditions as quickly as the U.S.:

For it occurs to me that, to effectively apply government stimulus, and to grow domestic demand and raise up local communities, local focus will be required. In democratic America, this happens through the workings of democracy at every level of government, answerable to the people it serves. Govrenment flexes, innovates and adjusts to meet local needs. It is not clear that the Chinese way will provide what is needed, for China has not grown up in a democratic tradition and its experiment with capitalism is facing its most severe test yet.

I’m not as confident as you are that the U.S. government, at any level, really understands where and how to apply resources to re-start demand. What I see so far ($700B to IBanks) is horrendous, and I see nothing of great imagination or efficacy proposed at any level – national, state or local. Can you cite any examples?In a way, China’s problem is much simpler than ours. They have millions of farmers to equip with simple tools. Our farmers have the best equipment in the world. Every part of our economy has virtually the best (if you use fossil fuels) and most efficient gear in existence.We have a horrendous over-supply problem – the same one we faced at the outset of the first depression, and we don’t really understand how to balance over-supply with high incomes.The Chinese have a much simpler job to do: re-tool their factories toward increasing domestic productivity in several key economic sectors: energy, transportation, housing, agriculture, and education. I’m not sure if the cultural constraints they face are any more daunting than the ones we face.Given what you’ve seen of the China problem (very well-framed), can you put forth a similar definition of what the American economy must do to adapt?Additional productivity may actually not be the answer; we don’t need more productivity, as the labor component of our production is already too low to support high labor rates – there’s not enough demand for labor, hence all the make-work and “services”.And the services don’t add any value. They’re dead-weight.I think we have a more severe problem than China.What is your perspective?

This also lends to the stock rally, stocks usually bottom 6 months before the end of a recesssion.WASHINGTON (MarketWatch) A senior Federal Reserve official said Tuesday that economists at the central bank basically agree with Wall Street economists about the depth and duration of the recession. The official said that growth would be weak over the final three months of this year and into next year, with a slow recovery starting after mid-year. Deflation is not a major concern for the central bank, the official said. The Fed has changed tactics of its monetary policy to target specific debt markets with wide spreads, the official said. Programs already announced can be expanded and new programs may be forthcoming, the official said. It may be possible to expand the purchase of debt below the AAA rating with the cooperation of Treasury. Such programs may have to await the next administration, the official said.

Unfortunately, Dr. Roubini has helped set the trajectory for this economic disaster: he called for massive and creative monetary intervention, he has consistently called for a rate cut to zero; he wants stimulus-packages-the-bigger-the-better; he has been a cheerleader for massive bailouts; he fears deflation like a vampire fears the cross, he has never once offered succor or restitution to exploited savers or pensioners or “workers”; he admonished Americans to get over the done deal that this land of liberty has crossed over the bridge of free enterprise with its onus of moral hazard into the brave new economic world of a global financial superpower. His mantra has been: Print. Print. Print. Save the financial system — at any political cost. His economic hero is John Maynard Keynes. He longs for a replay of FDR’s New Deal.Well, he’s got it. Let’s see where he goes with it now.

The Fed is saying loud and clear that the train is leaving the track and they have applied all measures possible to keep it from flipping into the ravine, Please fasten your seat belts. This plan depends on the consumer; they will have to start borrowing in large numbers to buy homes, electronics and all the stuff they were buying before. These same people who need to borrow and buy are going bankrupt as we speak. This marks the beginning of do or die for the economy, I just don’t know if the number buyers are available in the economy or those who can borrow even want to. Time will tell.

Depression possible: Canadian PMTORONTO, Dec 16 (Reuters) – Canadian Prime Minister Stephen Harper, in perhaps his bleakest comments yet on the global economy, said the future has become increasingly hard to read and conceded a depression could occur….

The stock market is rejoicing today as never before while everything else either has gone to deathbed, or will there be soon. Deathbed markers have been attached to heads of:Executive brach (incompetent)Lesiglative branch (as corrupt as Wall Street)Judicial branch (like three monkeys — they don’t care for the eligibility of the Oval office-occupant)Fed (will loan $125 if someone can pay back $100 at some future date)Jane & John Q (pray for the messiah to save them)Me? Born to work and pay tax for all of the above.American with a Constitution — RIP.

Amen.

Gotta’ say that da Boyz at the the Fed are gettin’ just a little nervous. I expected them to drop rates to practically zero and to print money hand-over-fist. But I NEVER thought they’d go as far as auctioning off Al Greenspan’s baby pages on E-Bay. My-oh-my, the stuff that passes for collateral these days PeteCA

I have it! Let’s put US manufacturing to work. FED ATM’s on every corner. The best money printing technology money can buy! They can pay for themselves!Try thinking about that one for a few minutes. Your brain will explode!

Read my posts from the previous threads and you will see I still have the golden touch:-) I wonder how long the run will last. I hope all understand this sort of comment is focused on speculation as opposed to long term investing.With the economy and markets, there are two things that need to be considered:1. Expectations about the economy2. What will actually happenOn 1., I don’t have to tell you what the talking heads are saying: “Recession over by the end of Q109″. I think Goldilocks will stick to this view until strong evidence to the contrary is provided by the data/news.On 2., the FED has done a LOT of things. Yes, the US consumer still has as incredibly heavy lead weight tied to her neck but with ALL that has been done, I still think we will have a pretty bad recession perhaps worse than 74, but, IMO, even this early, one can start ruling out depression like scenarios, at least with the amount of information we have today (Do not underestimate the FED/the power of liquidity the way I did in the fall of 98 when I was heavily short and didn’t cover as my calculations indicated that what AG was doing would not work; I was mistaken!)Bottom line, based on expectations and also what may actually materialize, which will probably turn out to be a bit better than what is priced in stocks today, conditions are in place for a year end rally. This said, I don’t plan to participate in the equity markets in a significant way during the holiday season. Even if this turns out to be a mistake I want to have a peaceful holiday season:-)

ex VRWC:When you get a moment, please drop me a line at outerbeltway at yahoo dot com.You are another of those people I’ve been searching for.Tks.

ex VRWC somewhere above about USD/oil relationship. My play with USO didn’t work out today but I will give it some time. I will do some more research and add to my position is granted.

Good analogy. I would add that the wildebeest are accompanied by the Zebra who herd them into the Mara River giving the lions and crocodiles a feast. Then the Zebra wade in afterwards.

Maybe we could outsource our corporate, civil and educational leaders oversea.) They are pretty popular with foreign journalist.

The price has already discounted due to the expected loss. Anyway,I am of the opinion that it is just stock price manipulation.

Just took a small postion (about 2% of assets each) in USO and XLE. Just on feeling, I have no strong conviction. Just follwing my instings since I’ve had the Golden touch since the November low:-)Reply to this comment By Octavio Richetta on 2008-12-16 08:56:14___________nice move -What happened today was off the scale in economic/seismic terms – I think you are correct vis a vis rally time – but the unintended consequences are already beginning e.g. the expense ratio for money market funds and FX markets and USD-JPY 89.0200 -I guess this better work and if it does Bernanke can replace Greenspan in this picutreAs an aside I was speaking just a while ago with my Real Estate agent in down Naples and told her the good news that the target rate is now now zero and mortgages should go below 4% — her initial response was not what I expected – it was one of worrygo figure

Should one buy longer-term Treasury bonds like ben is doing? or should i buy freddie and fannie like ben? or what about getting in on securitized student loans,car loans and the like? Bens doing it. its easy money right? blow that bubble to kingdom come benny! you can do it – get all that money out there that is just itching to go somewhere.the last great bubble of the united states of america! Coming soon!but wait – no one trusts you.well, that is except those of whom you serve. and you already gave them a pile of money.and in other news:the worlds poor will soon starve so those few can maintain a broken system! watch commodities again!good luck with that, TPTB.signed-the pitchforksp.s dont use the “if you are not for us you are against us” psychology with investors. you are essentially asking me to kill via starvation this time. its not smart money – a pile of dumb money is going into this crap. fuck you. capitalism is dying and it is taking way too long.

K,True, I don’t mean to oversimplify, just to imply that we have gone off track in our attempts to avoid what was clearly coming our way with these latest bubbles.I like your thinking that we can get back on track, but my main problem is we cannot turn this corner until we address, fully, the ‘financial irresponsibility and lack of oversight’. And our current approach is to try to cover this up and smooth it over with massive liquidity injections, easing, bailouts, etc, and hope for a cyclical upturn to make it all go away.Until we move beyond these things, they will remain a dragging weight around our collective necks. I know its a pessimistic view, but I am afraid its just realistic. Do you think otherwise? Do you think we have adequately addressed the excesses that got us into this? Or even had a start at transparency?

Tough question, would you rather be here or japan:-)?

So now that Shorts have covered why not go in on a Short ETF like SDS? This thing is primed to capitulate in the next couple of weeks.

I think the US dollar should depreciate by 80% further spreading the woes by ripping off the rest of the world. Is this the precipitation to the 3rd World War?

see my response above – the guy stocking shelves in my local grocery store nailed it (as you have)

Well put, Guest. Take a name and post under it. Dr. Roubini was prescient, but I don’t think he thinks beyond the current system. Maybe those of us that try just lack his big brains and therefore cannot understand the futility of our hopes.But I don’t think it is political cost. I think is is real, economic cost to you, me, our children, their children, and people all over the world. Would that the cost could just be a political cost, I could live with that.

Peter JB, have you ever seen this flash video called The Cheerful Robots?from asadi dot orgif you wait just a second after it finishes, it’ll bring the man’s site up, and there’s a wealth to explore including other good flash videos. Cheerful Robots is pretty short, and quite pertinent.

g,.”you can’t eat your home and have it too.”.so true. unforgettable. thanks.

Did anyone see Dr. Bernanke’s visual presentation of Today’s FOMC actions? In case you missed it, here it is. It perfectly summarizes his thinking.http://tinyurl.com/6yyrxs

I FIGURED IT OUT BEN-CAN I HAVE MY PHD! Since I first entered the workforce nearly 25 years ago, I have been hearing about the terrible consequences of excess govt spending on the federal, state and local level. That of course was played against the shameful state of never having enough money for healthcare, education, infrastructure, social security, etc. Now, in today’s Fed meeting, BEN made it perfectly clear to everyone by saying that they will do everything and anything possible with no limits to pull us out of this recesssion!What does that mean? How about nearly interest free loans and unlimited assets to the banks and all those deemed “too big to fail”. All of a sudden, there is virtually UNLIMITED amounts of money the Fed will print with not a mention of the potential inflation and currency devaluation time bombs that are hidden right around the corner. We have former Fed officials and economists saying this is the best way forward! Where is Congress’ voice in all of this? So, tonight, I’m issuing PHD’s in economics, finance, business, whatever you like; all you have to do is answer one question: how do you FIX a massive govt and corporate debt problem, high unemployment, high foreclosures, low stock and commodity markets, low consumer confidence and moderate to severe recession all in one shot? If your answer is: PRINT, BABY PRINT OR SHOW ME THE MONEY then congratulations DOCTORS!

Move over, brother. We’re in the same boat, headed upstream and Bernanke’s swipted the oars.

Ph.Ds for saleMarie Theriault-Sabourin is a manager in the registrar’s office at Algonquin College in Ottawa. She has a master’s degree in business administration.Quami Frederick used her bachelor’s degree to get into Toronto’s Osgoode Hall law school and was offered a job articling with a Bay St. law firm.Armed with his Ph.D in political science, police tactical trainer Augustus Michalik counts various Canadian and U.S. law enforcement agencies as his clients.The problem is, their university degrees are fake….

That’s not all we will sacrifice.

Day after day we despise and deride the superwealthpowerful ones for their lack of a single scruple, yet day after day we dangle the carrot of limitless personal fortunes in front of them, still convinced they haven’t a scruple, and expect them to resist the temptation.so just WHO is the irrational party?are we truly insane?is this not global insanity writ large?is the answer not as simple as: come to our senses and stop dangling the carrot?doesn’t the crime disappear when and only when the motive for the crime disappears???

Good Article:LEAP/E2020 anticipates than the unfolding global systemic crisis will experience in March 2009 a new tipping point of similar magnitude to the September 2008 one.Global systemic crisis – New tipping-point in March 2009: ‘When the world becomes aware that this crisis is worse than the 1930s crisis.http://www.leap2020.eu/GEAB-N-30-is-available!-Global-systemic-crisis-New-tipping-point-in-March-2009-When-the-world-becomes-aware-that-this_a2567.html

@ ex VRWC,I agree with what you allude to – we haven’t began to address the fundamental reasons that got us to this desperate state nor have we began to see any transparency. Just take a glance at the TARP to see what the approach has been. This was passed with little to no oversight where the banks responsible for the mess got billions in order to keep credit going and who still are not lending. Case in point would be Bank of America and the company Republic Windows and Doors in Chicago causing the Illinois governor Blagojevich to call for the government agencies of Illinois to suspend business BoA. In addition to the TARP the FED has also reduced interest rates to near 0% – making money more readily available. The lack of transparency was revealed in the case of B. Madoff.All in all, the issues have not been addressed as the focus has been on clogging the hole of value-losing assets and to get credit flowing again – all within an ailing system.I believe a more systems approach is needed. Instead of attacking sections of the system, we need to address the system as a whole. On top of trying to clog the leak and get credit flowing, regulations and transparency should also be on the fore-front. A system that functions on confidence levels, which sways easily to which ever direction the wind blows, is one that’s founded on an unstable foundation.

test

if you’re not part of the solution, you’re part of the problem.if you’re part of the wrong solution to the problem, you’re part of the problem.if you’re part of the right solution to the wrong problem, you’re part of the problem.it’s not about answers to the wrong problem – it’s about ASKING THE RIGHT QUESTIONS.so somebody tell me again:what was the very good reason we ever had, for allowing unlimited personal fortunes?

Today’s action by the Fed is being seen in many quarters as a panacea – perhaps so, but I suspect there is a long list of side effects some of which can be fatal and many of which are unknown (if in fact this is even the correct medicine) – Watching the evening news I wonder what impact today’s actions will have on the sentiment of the all important consumer – In my view if the consumer was nervous and cautious last week, they are now terrified e.g. Obama’s words “we are running out of amunition” – the words of worry expressed earlier today by my real estate agent on the Feds actions come to mind – one more anecdoteI myself am now giving serious second thoughts to expenditures that were all but a done deal just 2 days ago (and I follow this stuff) – I think cash is the place to be for now (thanks PeteCA for your comments above)and while I also agree with OR, JimmytheB, CM and others that rally time is here – that to me is a short term trade (nothing wrong with that)Finally the Asian markets seem somewhat less than impressed – it will be interesting to see how the markets in NA play out on Weds

@OR – as I had suggest above – this new post on CRNegative Yields on Money Market Fundshttp://www.calculatedriskblog.com/2008/12/negative-yields-on-money-market-funds.html

yes, MrC, we tie the poor man’s legs together before the race, then boo him for losing.something wrong with HIM, we tell ourselves.

I was about to post that one:-) BTW, IMO, all the stuff the FED is doing will not change the long run picture given by shilling in his latest letter (e.g., GDP growth tipping 2% at most for the foreseable future). Would you lend any money at any interest rate to someone who is not productive enough to pay? People no longer want to mortgage their future. They now want productive work!

Sonanos, only the fewthousandpersons on earth actually controlling a nukebomb or 3 – plus Dr. Helen Caldicott – are aware that world war 3 is veryvery possible. Everyone else isunconcerned,not going there,listen-to-meit. can’t. happen.Didn’t you get the memo?

SO, A GENERAL STRIKE IT IS!we need to pick a date and other details.

Hussman this week is a bit more bearish. He is now in line with our views that the market will make new lows on economic weakness. However, this makes me wonder if we should take him as a contrarian indicator in the short term as, despite all his metrics on market action, I have never been very impressed with his near term market commentary; IMO, he does much stronger on the long term fundamentals.It will be interesting to see what he says next week. I have to say again that what the fed is doing is very powerful in terms of enticing speculators to play the game of risk. And people used to talk about the Greenspan put. Compared to Benny’s put, AG’s put looks more like a call:-) Benny has certainly outdone his boss!What I don’t think Benny can do is make the little guy regain her confidence. The confidence that seems reflected in the market in days like today doesn’t belong in main street.http://www.hussman.net/wmc/wmc081215.htm

g, i could say fear, divergent interests (former free and bountiful environment), adulation, envy, advantage, employment, education, indoctrination, disability, niavete, old age, orglobal genocide. “culture” with a small c..”what was the very good reason we ever had, for allowing unlimited personal fortunes?”.when you say “we”, do you mean me and you? or do you mean the human species? or the “founding fathers”? or the queens subjects?i think i get the point here but to be clear concerning a literal answer to the questionrequires more specificity.the world has changed, what was once good for humanity may now be deadly. what was once perceived as necessity may now be obsolete or forbidden. and then their are those things that never change, like change itself.perhaps unlimited personal fortune served humanity better than the alternatives and therefore manifest and succeeded. maybe we are at the point of human evolution, consciousness, where we can see this and recognize that it no longer is the better alternative.but for that to happen we have to be able to present a more appealing alternative.can anyone do that? can any group do that? chain,chain,chain…….speculation in housing market and it’s intersection with finance for example. the industry developed to meet the needs of a population and economy that does not exist. not only did that speculation prove to be a failure, the imbalanced monetary system that drove it may fail..some think it should.. the auto industry. made cars people don’t want. with money they didn’t have..systems may fail. some think it should… the civilian government committed the armed forces to fight and occupy foreign countriesbased on a speculation of cheap and plenty oil supply. this infinitely costly effort mayfail and some think should. fail. so maybe all this failing is really just success.. it seems the concentration of wealth and associated speculative agendas are having a terrible time of it and i think their “luck” will remain poor given they are being bailed out..if people cannot come up with a more appealing alternative at this time and communicate that to their neighbors i think the change we seek will remain unrealized. perhaps for all our lives and our children’s lives.

no thanks – no bloody revolution for me, thanks. the only revolution worth having is the lasting one, and that’s the peaceful one where all that gets murdered is the wicked-bad idea to allow overpayunderpay. nothing changes until ideas change. nothing changes until THAT idea changes. the attack point is the space between people’s ears – a race between education and catastrophe this is – and think Kent State – the frightened government will use force, so be careful out there – your strike better be massive in numbers – they’re smart enough to be afraid of numbers – british left India because Gandhi showed them the numbers of people he could summon to the street with his words – give the working people the reasoning, the economic clarity they don’t have yet – yeah, that’s the ticket

First rule of holes:stop digging

g, you think we’re funny now? wait till you see the size of the bathtub this tarpprogram money is building.

It is crazy that conspiracy theories have been given such a bad name, especially when some (ok at least one I know of: 9-11) of these are founded on sound scientific principles.After all a “conspiracy” is defined as a plan by a limited group of people to commit an illegal act. In other words, if it was known by everyone it would not be a “conspiracy”, would it? What I mean is that there is nothing unusual, inherently wrong, illogical or otherworldly with conspiracies.Modern media tries to portray conspiracies as something that exists only in fantasyland. This is the case especially in U.S., where this behaviour is likely dictated on the journalists from above. And those above of course do what they feel they have to in order to protect themselves from scrutiny.Conspiracies have in fact been part of human behaviour since time immemorial, at least as long as there has been human governments. Sudden (read: “unexpected” as in “not known to public”) change has typically come through a conspiracy. Just one example of this is the Bolshevik coup in Russia that previous poster refers to.

I have actually been to the place you mention – where the wildebeest cross the river. You wouldn’t believe the size of the crocodiles – it’s mind boggling.PeteCA

There is no bailout of the banking system…this is a transfer of money from the government/taxpayers to the ultra-wealthy banking elite.Many of these people are taking the money and running before the whole system comes crashing down, leaving for Thailand or South America or some other place where the living is cheap with their millions/billions and hoping to ride out the coming storm.

And Bush has succeeded in something no previous Prez ever managed: in uniting mankind.http://www.presstv.ir/detail.aspx?id=78628&sectionid=351020201

I was discussing this with a colleague today. He was telling me a story he heard on the radio of a teacher in Seattle that designed, built, and landscaped his home of 20 years. He was laid off and was foreclosed on. The man had 20 years of equity in the home and is destitute.This is WRONG.The Primes are going to get sucked into this financial disaster.This is going to be the “tipping” point, realization that things must “change” and not only in rhetoric.When established residents of communities start to see their respected, hard working friends / neighbors being foreclosed on and evicted, they will realize, this is WRONG.Unlike the subprimes, option arms, alt-A’s, who new deep down they were “gaming” the system and were happy to walk away. The Primes are not going to be as willing to leave their homes. Their friends and neighbors are going to realize, am I’m next and decide it’s time to make a stand because what they see happening around them is WRONG.This I see as the breaking point. 3-6 months out.Unemployment, IMO, is going to EXPLODE. This is when the Primes are sucked into the disaster. Until now, they’ve been insulated, mostly experiencing the collapse on TV and in their 401k.I agree with the article, realization of the depth and longevity of the crisis is going to reach critical mass within 6 months.IMO, “crazy” policies are going to have to be implemented, right or wrong to cushion the financial fallout.Savers, investors, bankers, wealth is going to have to realize retaining 1/2 of something is going to be better than salvaging nothing out of this mess. The social/ political consequences of this disaster could very well be catastrophic.The US faces an ENORMOUS challenge, as does the rest of the world. We do not need 40,000,000 homeless people in shelters while confronting a deppression.IMO, a “foreclosure holiday” leading to a “Reverse Mortage Equity Option” has to be implemented to enable relief for home owners that are in distress that want to keep their homes. ASAPDeclare CDS side bets and related instruments null and void, only available to participating parties. ASAPDevalue the USD 25%. ASAPTotal Financial Transparency for ALL institutions including the fed. ASAPIMO, there’s gong to be a train wreck. The question is, are there going to be any survivors.

The purpose of the bailouts and so on is to get us throught the inauguration. The administration is struggling for an orderly transition of government, continuity of government. If not for the bailouts, the system would have fallen apart – bank runs, empty shelves, social disorder, martial law.

$700 Billion Bailout Celebrated With Lavish $800 Billion Executive Partyhttp://www.theonion.com/content/news/700_billion_bailout_celebrated

Dr Doom,If the dollar is projected to tumble against all other major currencies, how could commodities prices still fall further?

” Finance is too important and unstable to be left to the bankers.”http://regulation.revues.org/document5843.html#texteSee the very lost sentence… and add – and the politicians and all that is attached to them all.Ho hum

Guest:Please explain “Reverse Mortgage Equity Option”.

This is what Medic has been saying. It’s great way to transfer Baby Boomer wealth to Generation X. But we will have to improve on the idea so the “retiree” does not linger as long, consuming money in their paralyzed condition, as this last one did.

Pete CA, thanks for the excellent post -get into the mentalality of someone near or in retirement-”I need the money. I can’t take a chance on the stock market crashing.”= no more $ into stox, sell, sell, sell”I had to run to the banks to save my $. These bozos don’t know whatthey’re doing.”understanding this mentality is not rocket sciencebut is rarely discussed anywherePete: recently the inverse correlation between the dollar and gold has been perfectthe dollar drops 1% and gold rises 1%what do you make of this so perfect correlation?

yes, please tell us – how did you correlate these two objectives?

I love that song!

Wells Fargo Home Mortgage as of 12/17/2008 08:01 AM Eastern 30-Year Fixed 4.875%

A gift from Your Congress: Off-Shore Trolling Profits for the “Global-for-Profits/US-for-Losses Corps: Bailout Payments and Joblessness for the American People: Scorched Earth for the National Economy. Merry Christmas! from your Representatives:GM Mexican Plants Expand as Carmaker Seeks Funds for RescueDec. 17 (Bloomberg) — General Motors Corp., the biggest automaker in the U.S. and Mexico, increased production of $12,625 Chevrolet Aveos south of the border while seeking a bailout to keep domestic plants from closing.The Detroit-based company and competitors such as Ford Motor Co. shifted more manufacturing to Mexico this year to capitalize on wages less than an eighth of those in the U.S. and factories that make fuel-efficient models. Through November, Mexican plants turned out 5 percent more vehicles than a year earlier, versus an estimated decline of 30 percent in the U.S.http://www.bloomberg.com/apps/news?pid=20601109&sid=aImmc_hK.uGE&refer=home

Equity aint’mesured in years but in loan balance vs value of home. e.g., if he had a balloon mortgage, interest only mortgage then he would have equity as dictated by the down payment. But given that you say he got the home 20 years ago he probably had a more conservative type of loan. Seems to me your friend always had more home than he could afford. This is of course an opinion as I am on the cheap side when it comes to housing, kinda WB style, which isn’t necessarily right.

is Toronto TSX down?

Sshhh. You’re not supposed to ask those kind of questions.Anyway, trust your own brain on this one.

U.S. Stocks Fall on Concern Fed Is Running Out of Ammunition (Last Updated: December 17, 2008 09:49 EST)Dec. 17 (Bloomberg) — U.S. stocks fell and the Standard & Poor’s 500 Index retreated from a five-week high on concern the Federal Reserve has few tools left to combat the recession after cutting its benchmark interest rate to as low as zero.Morgan Stanley lost 4.8 percent after its $2.2 billion fourth-quarter loss was worse than analysts estimated as investment-banking fees dwindled. Citigroup Inc. and JPMorgan Chase & Co. declined more than 2 percent. Apple Inc. slid 6 percent after the maker of the iPhone said Chief Executive Officer Steve Jobs won’t speak at the Macworld Expo, spurring concern that the leader’s health is deteriorating.“Following interest-rate cuts you always see an initial reaction and then you get back to your senses,” said Joost Van Leenders, strategist at Fortis Investments in Amsterdam, which oversees $305 billion. “All the structural indicators, such as the economic cycle and profit outlook, remain negative.”The S&P 500 lost 0.8 percent to 906.36 at 9:49 a.m. in New York. The Dow Jones Industrial Average slipped 60.05 points, or 0.7 percent, to 8,864.09. The Russell 2000 Index of small U.S. companies retreated 0.3 percent.The S&P 500 declined after a 5.1 percent rally yesterday spurred by the Fed’s rate cut and its plan to use “all available tools” to revive the economy. The central bank’s decision came after simultaneous recessions in the U.S., Europe and Japan dragged the S&P 500 down almost 45 percent from its 2007 record.Europe’s Dow Jones Stoxx 600 Index slid 0.7 percent, as BNP Paribas SA tumbled as much as 19 percent after saying losses at its securities unit since October more than wiped out the division’s profit for the first three quarters of the year…http://www.bloomberg.com/apps/news?pid=20601087&sid=aNRrHRFtRpdc&refer=home

“until there are true signs — toward the end of next year — that the global economy may recover in 2010.”What could be the process of that recovery ?Would’nt it be easier to imagine a deepening crisis ?

data problems – on the exchange

Madoff Enjoyed $50 Pedicures, 9.8 Handicap, Boat Called ‘Bull’http://www.bloomberg.com/apps/news?pid=20601109&sid=aQv4Kmx.cs78&refer=homeDec. 17 (Bloomberg) — Two weeks ago, Bernard Madoff stopped by the Everglades Barber Shop off Worth Avenue in Palm Beach, Florida, for the usual: a $65 haircut, a $40 shave, a $50 pedicure and a $22 manicure. …What a f*cking faggot!

VRWC:That was a very nice write up about China that helped me better understand their plight. Thank you!

great post. I’m just not sure TPTB are going to allow it to happen. The rich elite are NOT going to sit back and let change that adversely affects them happen without a helluva fight. Look back in history, when A Jackson was fighting the second Bank of the USA (which he eventially won) he was almost murdered by an assassin that tried to shoot him with two pistols! Both mis-fired! This assassin later told his captors that he was paid by the bankers in London and they told him they would protect him.

mortgage rates going to zero. dollar going to zero. asset prices must go up. let’s just say this works for holiday banter. home prices rebound, stocks NOMINALLY skyrocket Bovespa-style which will get all of the moronic non currency literate dumb ass sheeple Americans high again. will people then be allowed to borrow again versus their equity in their home to buy $100/ gallon milk, a pair of shoes for $500 and a gallon of gas for $20?future? – introducing for the 8th time the 401K debit card and for the first time bogus home equity card, this time of reflation around the government has rolled out cards allowing funds to be transferred straight from the cards to buy goods and services…based on what i see happening i think i prefer war to hyperinflationary mass global starvation and poverty. anyone else care to chime in on that?

OPEC should just stop producing and exporting altogether at these rates

from Bennet Sedacca (Atlantic Advisors Asset Management) said: The “Fed has declared war on prudence and savers and rekindled the ‘Moral Hazard Card’ except this time, I believe they have created the largest moral hazard ever seen. Of note is that this intervention has occurred in the third week of the month (options expiry for the greatest impact, playing games with an already dysfunctional system that they created) and may force prudent, risk-avoidance types, to take risk, at precisely the wrong time.

It appears that the government may be buying equity assets ‘secretly’. Given that it would cost them fraction of what it cost to shore up credit markets, it makes sense that the government prop up the equity market which restores confidence. And crisis of confidence this is.I have no evidence to back up my claims, but given that all other markets are heading south and equity market (which is the most opaque and obfuscated of all) is holding up, I can think of no other large player willing to put up money.Equities should be trading at a massive premium to credit. Equity is subordinate to debt and equity holders lose everything when a company goes bust. But now it seems that equities are trading ok whereas credit (much of it is backed by the Govt.) is trading cheaply.

I amm green in my XLE but still red in USO. The XLE USO trade is at break-even so far. I will let it roll but if all the Fed stuff doesn’t work, which is highly likely, this trade could become a big losser if one lets it roll too long.

The possibility of some (central) bank to issue unlimited quantities of money is absolutely ridiculous. How about bartering?Lets trade with cattle, silver, gold, you choose.This legal “couterfeited-like” tender “dollar” will face its fate next year. Wait and see.

And what is the point?So a few can feel powerful at the expense of the many?Or because they are soooo disconnected to the real world that they have NO clue?Or because they were born/indoctrinated into privilege that they actually believe they have a special rights? (which they do, not under the Constitution but because we allow it.)Our founding fathers put in place heavy inheritance taxes to prevent this kind of institutionalized wealth but we have flittered away the benefits of what they gave us. Now we either get them back or we go down as a once was and the majority of our population becomes indentured slaves…. The uber rich have always justified themselves above the rest of us, nothing has changed except time.

Why Did the Fed Nationalize US Mortgages?Lately I’ve been doing a little thinking about the Fed.Specifically, why did Bernanke decide to effectively start nationalizing US mortgages? That is what they are doing – if the Fed prints $$ and buys US bonds directly. By forcing down the rate on the US bond to 3-3.5%, they make it possible for the Gov’t to offer mortgages at 4.5%.But why did they do this?After all, the US home price market is well into correction territory now. Down something like 20%, it is maybe halfway to Shiller’s target (40% drop). So if home prices are corecting through free market action, why should the Fed get involved?Previously I speculated that the reason was that the Fed is terrified that another 20% drop in home prices will gut the remaining banks on Wall St. It could, of course. Take a look at Bank of America’s stock price today. Then consider what some further big reductions in Level-2 and Level-3 assets might do. So that was my rationale for understanding Bernanke. And it could well be a prime motivating factor.But it dawned on me that maybe Ben and Hank have actually done something smart here.Yep, you did hear me say that.Don’t get me wrong. I’m not happy about the US economy. But check the reasoning.It’s been well known that if China starts dumping US treasuries and bonds that the US credit market will be in deep trouble. In fact, the Chinese don’t even have to start selling their bonds. They only have to stop buying new ones. And they have issued this threat several times – in an effort to force Washington to change its financial behavior. To no avail, I might add.Very recently Chinese spokesmen announced that China might need to “save itself”. A grim warning. Translation: Very likely China will stop adding US bonds and treasuries, and might even dump some holdings. In this nasty recession, it’s every man for himself now. Even if it kills the other guy.Such a move would be catastrophic for the USA right now. It would force bond yields to bounce upwards, driving a stake into the US mortgage market. It occurred to me that Ben and Hank figured all of this out, and decided they MUST insulate the US housing market from any adverse moves by China. So they have effectively nationalized the mortgage system. They are artificially keeping rates at the long end of the curve low, and stopping any sudden spikes in the yields.If this is true … it’s actually a smart move by the Boyz in the Fed and the Treasury. It at least gives them a little bit of control in the situation. It’s better than seeing a crash in bond prices, and the huge knock-on effect on the US housing market.Finally, none of this means I like what’s happening. The US economy is still on the road to Dante’s inferno. It just means that Ben and Hank have a little room to tweak the air conditioning unit in Hell. That’s all.PeteCA

USD index cliff diving!http://quotes.ino.com/chart/?s=NYBOT_DX&v=dmaxnow at 79; it was 88 in 11/21! A weak USD would make the world recession a lot worse.

Morning, CM – I agree that today will likely be green based on typical action day after response to fed BS down early and then reverse – could you briefly (please) explain the phrase “close the downside SSO gap at $27″Thanks

PeteCA,CNBC was gossip,CNN posted “news”CNBC already corrected:”OPEC oil ministers agreed on Wednesday to remove a record 2.2 million barrels per day from oil markets in a race to balance supply with the world’s rapidly crumbling demand for fuel.”

the good old debt super cycle theory Link “

You have called this from the get go -

A weak dollar makes U.S. made products and services must cheaper for export, thus benefiting the multinationals. This benefit pales to the liability of decreased buying power of the American consumer and is in effect, an inflationary measure. But, this is how 3rd world countries get started!

Looks like a bungee dollar, hope they have good quality elastic.

we never heard much about Hank’s recent trip – no news is bad news

Americans going to work for 3rd world countries. Shoe throwers must like that prospect!

This is not absurd because many americans only worked trading assets and left the hard work to chinese and other 3rd world coutries.Now americans will have to work for we 5rd world people.:-)

Hello Hayes,if you look at an hourly chart of the SSO, there is a “gap” down in price which usually indicats traders got cuaght on the wrong side of the trade and it usally represents too much supply at that level. Once stocks get back to those levels (close the gap) and traders can be made whole, they exit poitions, they feel lucky to break even and it begets more selling. SO, todays direction, green or red, should be determined by what happens at that $27 level in the SSO. If we bust thorugh it on volume, daytraders will rocket the market higher and vice versa.

why be afraid, when we could simply be fair and have nothing to fear? “Love casts out all fear” is a very, very condensed wisdom. we need to unpack that packed sentence.

That is genius. That had not even begun to cross most of our minds. I have to stew on that for a while.

Of course not. That’s why The Poodles That Beg are going to have to be got rid of.Have the rich elite’s got the belly for a helluva fight.

Diversity=life—uniformity = death. It is so in nature. Economic activities are not merely metaphors of living systems, they are integral components of living systems. There is little discernable difference between cash flow and energy flow or surplus production and biomass. Living systems depend on a dynamic equilibrium between central and local feedback mechanisms, with neither ever gaining total control. High productivity and low diversity are characteristics of young, unstable, ephemeral systems. Sustainability comes with development of high diversity, higher accumulation of biomass reserves, lower productivity and the development of decomposition energy flows that are almost equal to the production flows. So it is in living systems, so it must be in economics. Again, they are not metaphors of one another. They are one and the same.