if Obama wants bankruptcy for GM and Chrysler, will this not trigger the $1 Trillion in Credit Default Swaps now – on corporate Chrysler and GM debt?

The report on OCC Derivatives holdings at US banks can be found at the following link:OCC Derivatives at US Banks for 4Q of 2008There’s some pretty interesting reading. Yes, it appears that Goldman has been piling up new derivatives deals recently. But what I found noteworthy is that over 30% of the credit default swaps held by these banks are on sub-investment grade assets.Sure gives you that warm comfy feeling.PeteCA

so with the oversubscribed CDS they would likely settle in cash instead of bond delivery… but for $1 Trillion in notional it probably means there are $200- 300 Billion in netted out amounts so someone or some bank is likely to have be bailed out once the event (bankruptcy of GM and or Chrysler) happens?

Someone pays cash, most likely. But it depends a lot on what the real losses to the bond holders are. How much are the assets of GM and Chrysler really worth?Look at it on the bright side. At least Obama has found religion and realizes that the bankruptcy process might in fact be the best way to go.PeteCA

wow, its GREENSOYLENT GREENTHE GRASS IS GREENER ON THE OTHER SIDEIM A NEWBIE, GREEN

The Thing is now in the U.S. Treasury, consuming everything we have. It’s all in the final chapter in “The Rape of America.” An excerpt – “It’s not about ability. We just need to keep at it…on a scale that will make it work”:Treasury Secretary Geithner: “Congressman this plan will work. This plan because of the authority provided not just by Congress but the treasury and the Fed gives us broad ability to do what you need to do to get through a financial crisis like this. It just requires will; It’s not about ability. We just need to keep at it. We just need to work with Congress to make sure we do this on a scale that will make it work.”"http://globaleconomicanalysis.blogspot.com/2009/03/geithners-plan-can-succeed.html (posted by Hayes on previous thread)

This is a profit-making suckers’ rally in a bear market based on government announcements that have nothing to do with recovery or what the future economy is going to be. The insiders pump the bank stocks up, they sell them, they make money and they drop them again. Over and over and over again. Last week’s run-up on a suckers’ rally will drop again because of the gravity. You can’t have a government announcement every day.The market primarily is very worried about the direction the government is taking. How could anyone possibly go into a long-term investment now when the government says it is looking for sweeping changes in the financial system, and sweeping changes in how it deals with the economy? Only a fool would jump in these shark infested waters unprotected…or a sucker to be taken unawares.

Sorry old chap … I don’t get your jargon.[yet another great skit].PeteCA

Geithner out? According to this report.http://www.housingwire.com/2009/04/01/geithner-out-at-the-treasury-source/

You’re right. There are no profits in this market. Look how the market manipulators try to finagle Roubini’s statements with their headlines: “Nouriel Roubini Sounds, GASP, Positive About Economy!”..based on this:“To be clear: Roubini is NOT predicting an imminent recovery. He thinks that most economists are still way too bullish, that the stock market will retest its lows, and that unemployment will eventually rise over 10%. He just thinks that the quarter that is now ending, Q1, will be the worst rate of decline in the economy and that things will gradually stop deteriorating and then get better from here.”What they’re hoping to do is to take a lot of people with the oversold stocks they are hawking.

I, too, think the headline writers often are using Roubini: There can be a big difference in what they blare in neon and what Roubini says!

MORE FUEL TO THE BANKSTER BAILOUT USELESSNESSMarch saw 742,000 more Americans at the unemployment lines. Its getting worse, not better.

From the Tech Ticker artcile:”We’ll still be in a recession through 2009, says Roubini (in contrast to most economists, who think the economy will be growing nicely by Q4). But then, finally, the economy will begin to recover.”Can some one tell me who are the economists that think “the economy will be growing nicely by Q4″? I find it hard to believe that the majority believes this.

THE BUDGET WE SHOULD PASS!!!!http://online.wsj.com/article/SB123854083982575457.html#mod=todays_us_opinion

maybe he’s sad he didn’t get offered a cabinet position.

Obama Said to Conclude Bankruptcy Best Option for GM, Chrysler @ Hayes on 2009-03-31 20:15:55(prev. thread)Perhaps the auto industry and the way that the Administration postures in resolving it, will give the Administration a blueprint and more leverage to ultimately do the same with the largest Banks.

Taleb on Turbo’s plan, M2M, G20 etc etchttp://www.bloomberg.com/avp/avp.htm?N=av&T=Taleb%20Says%20Geithner%20Bank%20Plan%20Is%20Too%20Limited%2C%20Will%20Fail&clipSRC=mms://media2.bloomberg.com/cache/v1p0xhiQAGB8.asf

Max Keiser for Emperor of the World!!http://blip.tv/file/1925570

weird – the link title got changed to the keyword…

NOURIEL, YOU HAVE A LOT OF EXPLAINING TO DO:Comment today: “We may have seen the lows on the S&P 500 (or close to it)”http://finance.yahoo.com/tech-ticker/article/223197/Roubini-Go-Ahead-Keep-Dreaming-of-That-%22V-Shaped%22-Recovery?tickers=xlf,%5Edji,%5EgspcComment from 2 weeks ago:”So, in conclusion and caveat emptor for investors: Dear investors, do enjoy this dead cat bounce and bear market sucker’s rally; most likely most of you will jump the ship as soon as this rally loses its steam; and your attempt to jump ship will make the next round of the bear market bust even faster. Today short-selling covering is leading to a more pronounced bear market rally; at some point in the future the capitulation of investors trying to sell their equities at the peak of the latest bear market rally will make the next round of the bear market bust faster and more pronounced. So, don’t wait too long until you jump ship while the financial Titanic hits the next financial iceberg: you may get squeezed and crashed in the rush to the lifeboats.http://www.rgemonitor.com/roubini-monitor/255995/reflections_on_the_latest_dead_cat_bounce_or_bear_market_suckers_rallyYOU HAVE MADE THIS DRAMATIC REVERSAL IN OPINION WITHOUT EXPLAINING WHAT HAS CHANGED IN THE LAST TWO WEEKS. EITHER MAKE A COGENT EXPLANATION OR RISK SUSPICION THAT YOU HAVE LET YOUR FRIENDS AT TREASURY MUZZLE YOU!!

Let’s see here: WE MAY HAVE a recession, v or L, a depression, a new stock market low, already seen the low….. My point is whenever ANYONE says “we may have”, It simply means “I don’t know”. Unless, someone attaches a percentage to their predictions i.e 90% probability we have seen the low in the S&P, then this banter simply becomes a guess or “hedging one’s bet” at best. I have never considered NR an accurate predictor of market levels but it does not change at all the respect I have for him.

NOURIEL TAKE A LESSON FROM THIS…..Financial Terrorism and Youby Sean Brodrick 04-01-09Sean BrodrickCan we just drop the pretense and start calling the bank bailout what it is: Financial terrorism.Terrorism can be defined as achieving one’s aims through fear. And it sure seems to me that bankers and their friends in government are extorting money from the taxpayers (you and me) with a threatening “or else” that goes something like this: “Give us the money or the entire financial system will implode.”And as we fork over the extortion money, these corporate gangsters put us on the hook for trillions of dollars MORE.Obama’s bailout of AIG is just one example of Washington robbing you of your hard-earned money under the pretext of ‘fixing’ the problem.Obama’s bailout of AIG is just one example of Washington robbing you of your hard-earned money under the pretext of “fixing” the problem.For example, AIG posted the largest quarterly loss in American corporate history — $61.7 billion — for the final three months of last year. That means the company lost more than $27 million every hour. That’s $465,000 a minute, or $7,750 a second.As a result of its losses, AIG has been awarded hundreds of billions of taxpayer dollars. Otherwise, we’re told, the company’s collapse could devastate the economy.And that’s just ONE of the companies robbing you of your hard-earned money under the pretext of “fixing” the problem.In fact, one of the ways we know this is financial terrorism is that the steps being taken to “fix” the problem aren’t fixing a single thing.The Roots of the CrisisGo Back to 1999Glass-Steagall was passed after the Great Depression, the last time outrageous financial chicanery brought our country to its knees economically. This law placed a barrier between everyday banking, such as lending and deposit-taking, and riskier areas, such as derivatives trading.But the law was repealed in 1999, thanks to lobbying by the very companies we’re bailing out now. And the effort was midwifed by Phil Gramm, a laissez-faire-lovin’ Republican senator from Texas who co-authored the Gramm-Leach-Bliley Act that repealed many key provisions of Glass-Steagall.Gramm quit the Senate to go work for UBS AG, one of the beneficiaries of the repeal. I believe that kind of thing — passing a law to help a future employer — should be illegal. We can only be thankful that Gramm didn’t go on to higher office — he was an advisor to McCain’s Presidential campaign and probably would have ended up as Treasury Secretary had McCain won.But this isn’t just a Republican problem. Oh, if it were only that simple. You see, there were shady characters on both sides of the political aisle in this terrorism caper.Instead of Gramm, we got Tim Geithner as Treasury Secretary. He’s a protégé of Robert Rubin, former co-CEO of Goldman Sachs and one-time Treasury secretary in the Clinton administration, who went on to work for Citigroup after whole-heartedly supporting the Glass-Steagall repeal. Due to the current financial crisis, Citigroup lost $27.7 billion last year and has needed $45 billion in government funds to stay afloat.Internal SponsorshipFor the first time ever, we’re inviting you to joinNATIONAL PRESS BRIEFING next Tuesdayas we tell Washington:STOP THE INSANITY — NOW!Washington and Wall Street THINK they have the solution to the current financial crisis — they want YOU to foot the bill! Think that’s unfair? So do we!Join us for an online national press briefing where we plan to tell Washington exactly what we think about their bailout strategy, as well as give you the steps to take for your own personal bailout.Click here for more information …But Wait, It Gets Better!Clinton had more than one Treasury Secretary. And the last one was Lawrence Summers. At the time Glass-Steagall was repealed, Summers said:“Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century. This historic legislation will better enable American companies to compete in the new economy.”Good thing Summers isn’t around anymore, eh? After making such a colossal mistake, he wouldn’t dare to show his face. Oh wait — would you believe he is now the Director of the White House’s National Economic Council?In other words, one of the persons who got us into this mess is now in charge of fixing it! Isn’t that like hiring an arsonist to put out your house fire?And people wonder why I’m pessimistic.You may have heard Washington officials say on TV: “No one could have foreseen what would happen.”Except that someone did foresee EXACTLY what was going to happen. When Glass-Steagall was up for discussion, Senator Byron Dorgan (D-North Dakota) made an impassioned speech on the floor of the Senate, asking his colleagues NOT to repeal the regulation. He said:“I think we will look back in 10 years’ time and say we should not have done this but we did because we forgot the lessons of the past, and that which is true in the 1930’s is true in 2010. I wasn’t around during the 1930’s or the debate over Glass-Steagall. But I was here in the early 1980’s when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness.”Only eight senators opposed the Gramm-Leach-Bliley repeal of Glass-Steagall:* Richard Shelby (R-AL)* Barbara Boxer (D-CA)* Richard Bryan (D-NV)* Byron Dorgan (D-ND)* Russell Feingold (D-WI)* Tom Harkin (D-IA)* Barbara Mikulski (D-MD)* Paul Wellstone (D-MN)If your senator was around in 1999, and he or she isn’t on that list, you can be fairly certain that your senator does the bidding of the Wall Street banksters, not you.While Wellstone is dead, I find it interesting that none of these other, prescient senators have been tapped by President Obama to fix the crisis. Instead, all roads to high-level White House financial appointments seem to lead through Goldman Sachs.The Goldman FixIs in …The original plan to bail out AIG was dreamed up last fall at a meeting run by then-Treasury Secretary Hank Paulson. Paulson had been CEO of Goldman Sachs before becoming Treasury Secretary. Also attending the meeting was Lloyd Blankenfein, the current CEO of Goldman Sachs and Tim Geithner, then head of the New York Fed.Paulson and Geithner set the stage for Goldman: AIG was not going to fail.Paulson and Geithner set the stage for Goldman: AIG was not going to fail.AIG was not allowed to fail — remember Geithner has taken both bankruptcy and nationalization off the table. So AIG’s trading counterparties are being paid 100 cents on the dollar.Much of the $170 billion bailout AIG has received has gone to pay off obligations to Wall Street banks, such as Goldman Sachs. Goldman has maintained that it got no bailout money from the Treasury, apart from the $25 billion it was “forced” to take. But in fact, it received at least $13 billion through AIG!It’s almost as if Goldman knew that the money would be coming.Along with Goldman, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank and Barclays are all recipients of AIG’s payments to its former trading partners.Former New York Attorney General Elliot Spitzer — who knows a thing about financial shenanigans — recently wrote:“The appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.”You can read Spitzer’s two articles on the AIG fiasco HERE and HERE.So here’s where an administration’s spokesperson says on TV: “Well, it’s a mess, but we’re doing our best to fix it.”Are they? Let’s look at the track record (in both the Bush and Obama administrations) …* No serious attempt at re-regulation. You’d think the first order of business would be to reinstate Glass-Steagall. The Obama Administration hasn’t done that. In fact, while Secretary Geithner recently proposed “sweeping” changes to Federal regulation of the financial system, Glass-Steagall wasn’t part of the package.* Goldman Sachs’ unprecedented access to the corridors of power in D.C. continues. Another former Goldman Sachs employee, Gary Gensler, has been nominated to head the Commodity Futures Trading Commission.* Not even a token attempt at justice. Where are the indictments? Why aren’t we seeing Wall Street executives frog-marched to the paddy wagons? And don’t tell me about Bernie Madoff — he was a rogue operator who turned himself in, not the head of one of the major Wall Street banks that have ripped us off through systematic pillaging. Indeed, everything I see tells me that our government is a willing co-conspirator with the robber barons.* The looting continues. In just one example, Citibank and Bank of America are now using the TARP funds they received not to extend more loans as they were supposed to, but to buy up more of the toxic debt they’re supposed to be getting rid of! Why? Because they know that, under Geithner’s plan, they will be able to sell the toxic debt at a substantial profit as the government props up the market for those troubled assets. These banksters are speculating with the same taxpayer money that was supposed to pull them back from the abyss.* The threats continue. In the Bush administration, Treasury Secretary Paulson was able to get his original bailout package passed by Congress in a very simple manner. According to Representative Paul Kanjorski, the Capital Markets Subcommittee Chair, Paulson told them, with a great sense of urgency, that there was an electronic run on the banks. And if Congress didn’t go along with Paulson’s rescue plan, Kanjorski recalled being told, “It would have been the end of our economic system and our political system as we know it.”Well, it’s déjà vu all over again. Geithner recently told the House Committee on Financial Services: “The U.S. Government does not have the legal means today to manage the orderly restructuring of a large, complex, non-bank financial institution that poses a threat to the stability of our financial system.”Geithner could be sincere, in which case, we are in a very dire situation indeed. I’m just not sure he’s the right man to reform the system, because I can’t tell whose side he’s on.After all, last week, the Obama administration urged the U.S. Supreme Court to stop New York and other states from enforcing their fair-lending and other consumer-protection laws against federally chartered banks, including JPMorgan Chase and Wells Fargo & Co. This is the same position that the Bush administration had and a slap in the face for consumer and civil-rights groups.Our government is going to have to choose whose side it is on. It’s a choice that — if not correct — could bring this country to the brink of anarchy.Could We Go the Way of Argentina?Desmond Lachman — former chief strategist for emerging markets at Salomon Smith Barney and a long-time official with the IMF — recently wrote in The Washington Post that comparing the economic crisis in the U.S. to Japan’s “lost decade” was wrong. Instead, he said a better comparison is to Argentina, Russia, Thailand, and other countries that collapsed both economically and politically, weighed down by their own corruption.He wrote:“Watching Goldman Sachs’s seeming lock on high-level U.S. Treasury jobs as well as the way that Republicans and Democrats alike tiptoed around reforming Freddie Mac and Fannie Mae — among the largest campaign contributors to Congress — made me wonder if the differences between the United States and the Asian economies were only a matter of degree.”From what we’ve seen so far, the only response to the catastrophic collapse of major American financial institutions is to try and reinflate the balloon with our tax dollars. There is no serious attempt at reform. And without that, there can be no real recovery. And Lachman’s words could come back to haunt us.Physical gold can be a good investment for economic hard times. But it isn’t the only investment you might consider.Physical gold can be a good investment for economic hard times. But it isn’t the only investment you might consider.What to Consider Investing in When YourGovernment Is in Danger of Collapsing …Physical gold and silver are good investments for economic hard times. But they aren’t the only investments you might consider. Cash is king, at least in the short run. And I’ve spoken to people from Argentina who said what saved them during their country’s collapse was getting their money out of the country — in other words, investing abroad.The trouble is, this time around, the entire world seems to be going down together.Land is also a good investment, at least if you think the markets are approaching a bottom. My crystal ball is cloudy on that one.As for the market, I think certain commodities, especially precious-metals related issues, still have a lot of promise. And if the markets tank, you can always play that move with inverse ETFs.I think the best lesson is to be diversified. Spread your assets out. You can hope for a speedy recovery, but be prepared for a long-term downturn. When the government isn’t seriously addressing the problems we face, that’s probably the best you can do.All the best,Sean

The problem with small local banks is that they kept money local. You don’t realize the problem this can be when one area is wealthy and another poor but has potential. The large banks did open up credit in very positive ways by allowing the transfer of money across the country and ultimately across the world.The problem was that the repeal of Glass Steagal and the creation of the toxic assets and breaking down the walls of conflict of interest.I wouldn’t throw out the baby with the bath water but we do need to have transparency, regulators do need to do their jobs and any secularized instrument that is to complex for me to understand needs to be outlawed.

Just when you thought it couldn’t get any creepier…this from Henry C.K. Lui latest:”The connection between Obama and Geithner goes back a long way, to an earlier generation. During the early 1980s, Geithner’s father, Peter, oversaw the Ford Foundation’s microfinance programs in Indonesia being developed by Ann Dunham-Soetoro, Obama’s mother.”And the plot thickens….

Small world.

EM, what is your take on Goldman? The Professor had said at one point that the model (they used) was broken. This was before they became a bank holding company. They supposedly swam in the same toxic cesspool as other investment banks. Yet it seems that they are benefiting mightily from the crisis. Is Goldman actually the strong hand?

small, incestual world

We are a debt based economy and by the end of 09 we should be deeper in debt and therefore we will be growing nicely by using that logic. That is the reasoning I have been taught to believe. Up is now down and so on.

Oh I get it. This is his April Fools column. U instead of L. I get it.

“Sold Out: How Wall Street and Washington Betrayed America”

I have little on GS except that they seem to be in the middle of this administration and the last one with people who were trained and worked there. Paulson, Summers, Geithner and even Rubin all worked there. My intuition is that they are very involved in every thing that is going on, including the moves away from mark to market and transparency but I have nothing proving that. They are very smart and are keeping a low profile.I would say that JPM and GS are both the strong players with insider knowledge and a win at all costs attitude.We may never know who pushes the buttons and pulls the levers. But we sure can see the damage!

@ ptmFrom Joseph Mason on the Finance & Markets Monitor:

“According to Banc of America securities this week, those emergency-lending programs have roughly doubled the monetary base over the last year and stand to increase it another threefold in the near future…”

Is this possible? Doubled the monetary base? Or, has he misspoken? Doubled the Fed’s balance sheet – sure. But that’s not the same.Brad Setser seems confident the debt can be sold to private hands.

Testing the previous lows? What a joke!! We are in the middle of a massive depression. We are going to blow through thoughs lows like one of those bunker buster bombs they used in Iraq. If NR can’t see that, then he has been bought off or has lost his way.

Chris Martenson:Social Security Stunner; Bankruptcy of Nation Moved Up Several YearsWednesday, April 1, 2009, 1:35 pm, by cmartensonWell, Obama is talking tough with the Big Three, even letting on that the bankruptcy of GM and Chrysler is a very real possibility and may happen soon.Since these are bankrupt companies, I suppose this makes a certain amount of sense, leaving aside the perplexing silence on why a similar approach is not being taken with insolvent banks. I guess it’s possible that manufacturing paper profits is now “more American” than fashioning real goods out of hard materials.But it goes further than this. The current administration might as well be worrying about the fact that the US government itself is hurtling towards bankruptcy.Not only are debts exploding – moving smartly past “unsustainable” and into “ruinous” – but revenues (tax receipts) are falling like a rock.Yesterday it was reported that the difference between Social Security income (taxes) and outlays (benefits payments), which is known in Washington-speak as “the SS surplus”, would shrink to zero next year.The U.S. recession is wreaking havoc on yet another front: the Social Security trust fund.With unemployment rising, the payroll tax revenue that finances Social Security benefits for nearly 51 million retirees and other recipients is falling, according to a report from the Congressional Budget Office. As a result, the trust fund’s annual surplus is forecast to all but vanish next year — nearly a decade ahead of schedule — and deprive the government of billions of dollars it had been counting on to help balance the nation’s books.First of all, let’s clear something up. As we’ve covered here repeatedly, there is no such thing as the Social Security “Trust Fund”. A “trust fund” implies that there are funds held in trust somewhere. Instead the Social Security account consists of several 3-ring binders filled with government IOUs which will have to be repaid by taxpayers (surprise!).In case you missed it in the Crash Course, here it is again – a picture of Bush physically standing next to the entire SS “trust fund”.I am not kidding. That’s the trust fund. Right there in that snazzy filing cabinet.You could replicate the entire thing with about a $300 shopping trip to Staples, unless you wanted the fancy locking cabinet too. Then you might have to expend closer to $700 in total.Next, it was only last year that I was writing about the impeding fiscal calamity that was awaiting us all in 2017 when the outlays for Social Security were slated to exactly match receipts. Now that date could be as early as 2010, apparently.In the chart above (source), I want you to note the extreme deterioration in surplus funds between the 2008 and 2009 forecasts. Can you spot the trend?Here’s a prediction – these too will be revised to the worse in about 6 months. I base this prediction on my belief that more people will opt for retirement than are currently projected and that entitlement program tax receipts will be below current projections. Also, nearly every prediction by the CBO has been revised to the worse over the past year so I am “riding the trend” with this prediction.In the projections for the table above, the CBO has assumed no cost of living adjustments (COLAs) in 2010, 2011, or 2012 and a return to economic growth next year. If either of those assumptions proves wrong, the table above gets smoked to the downside. I give that a better than 90% chance of happening.From a budget-busting perspective, last year where the US government had a $73 billion Social Security surplus to spend, this year it will be a paltry $16 billion and next year it will be a number indistinguishable from zero. It is hard to overstate the importance of this shift.This means several things. Instead of $703 billion coming in over the next 10 years, the current (overly optimistic) projection calls for only $83 billion. This means at least another $620 billion in fresh borrowing will have to occur.More importantly, this means that the United States eventual date with bankruptcy has been moved forward by about 8 years or so. It also means that instead of being some future problem, a few administrations down the road, it is a near certainty that the current administration will have to confront some very difficult funding decisions that will be forced by the inability to borrow enough to pay for everything.This isn’t necessarily a bad thing. For those who question the wisdom of having troops stationed in 150+ countries the funding crisis will translate into reduced foreign troop levels. The constantly expanding budgets of federal agencies tasked with keeping track of average Americans will face stiffer competition.Here’s another entirely silly paragraph in the article:While the new numbers will not affect payments to current Social Security recipients, experts say, the disappearing surplus could have considerable implications for the government’s already grim financial situation.Here’s how Maincooncat expertly encapsulated the folly of that last sentence:If there’s no longer going to be a surplus and the US government is insolvent how is this not going to affect payments to current recipients? Through more borrowing obviously, which simply dilutes the worth of future payments. So it patently will affect payments.Yes indeed, good question, how can future payments not be affected? It’s a complete mystery to me why members of the media can manage to understand how a company overissuing common stock is dilutive to existing shareholders but cannot manage to understand that a country overissuing its common stock (the dollar) is dilutive to existing holders. But time and time again, this proves utterly elusive as a concept, especially in the Washington Post which has never, in my experience, managed to draw this connection.And here’s another “winner”:Many liberal analysts reject the notion that Social Security needs fixing, arguing that the system is projected to fully support payments to beneficiaries through 2041 — so long as the Treasury repays its debts.My comment: Well, then, “liberal analysts” need to go back and take some basic accounting courses. The idea that it’s somehow possible for an entity to owe itself money, especially a government, is patently ridiculous. If it were possible to owe oneself money, then we’d all be fantastically rich. Let me put it this way, if you cannot figure out how to loan yourself money then the government cannot do it either. The Treasury is no more capable of “repaying its debts” than it is capable of reversing the flow of time.This next piece from the article captures this busted logic with comic perfection:And at some point, perhaps as early as 2017, according to the CBO, the Treasury would have to start repaying the billions it has borrowed from the trust fund over the past 25 years, driving the nation further into debt or forcing Congress to raise taxes.I am struck nearly speechless at the gigantic gap in logic on display in this sentence. “…repaying the billions it borrowed” by going “further into debt.”This isn’t that hard, folks. It is not possible to “pay off your debts” by borrowing money. The only source of funds the government has is either printing, which is a thinly disguised tax on all holders of money, or taxes which are, um, taxes and come from taxpayers. More borrowing is just pushing the obligation to repay off onto future taxpayers. It’s really that simple.The honest way of phrasing this would be “future taxpayers will have to cover the spending excesses of current and prior generations and will either do this directly or indirectly depending on whether the government elects to cover the shortfalls with taxes or printing, respectively.”Conclusion: The United States government has a date with a fiscal emergency that will not differ appreciably from the current predicament in which GM finds itself. This future crisis will look like, act like, and feel like a bankruptcy. With history as our guide, we can be almost completely certain that political and monetary leaders will prefer a policy of printing over taxation and that this will ultimately result in a crisis of the currency involved.There’s still time to do the right thing at the policy level, but not very much.We are only a few years away, at most, from an irretrievable mismatch between our fiscal policies and reality.http://www.chrismartenson.com/blog/social-security-stunner-bankruptcy-nation-moved-several-years/15944

A CRAZY SOLUTION for a crazy government: Why not take the trillions used for the corporate bailouts and SHORT the market (using futures contracts for max leverage of course)? When it drops 90%, the govt will have more money than it knows what to do with and the worst of the TBTF parasitic corps will have become corpses-R.I.P.! Heck, this is what Goldman and other hedge funds have been doing.

Asian Stocks Gain as U.S. Data Points to Recovery for Economypril 2 (Bloomberg) — Asian stocks climbed as better-than- expected auto sales and economic reports in the U.S. lifted confidence the world’s largest economy will stage a recovery.http://www.bloomberg.com/apps/news?pid=20601087&sid=aJklHVIrNveA&refer=home

and from the archives there is this from Europe:”Measured in terms of sheer pessimism, December, 1930, was probably the blackest month in German history since 1923. Some time in January, however, a change occurred, and, during the last month or so, it has been possible to observe a growing feeling that the worst is over – at least for the time being. It is as yet impossible to speak of a revival of optimism, although a marked rise on the Stock Exchange from teh lowest levels has taken place.”http://62.190.209.167/Economist/results-view.asp?searchText=Recovery%20&searchDate=1931&resperpage=10&respage=9&restotal=448&resnumber=95&DocId=579207&Index=D%3adatabaseuserdataeconnew&HitCount=3&hits=f+5e5+5e9+&bhcp=1 (p.489-90)

Great description of the bailouts for the Wall Street banks … “visually very colorful and beautiful, thematically,dark” !!! PeteCA

Hayes,I like your PK quote. This is precisely the type of statement I tend to rely on as a contrarian indicator.The chart on industrial production Professor Krugman puts up is known as a time series (i.e., data over time). In his post, he does not offer anything else than time itself to explain the behavior of the data in the time series, when we all know there are actually very good reasons for the chart having the blip around 1931 and then resuming the nosedive*. Professor Krugman should know better than that, shame on him! There is no excuse for sloppy blogging when you are a Nobel prize winner.* http://www.amatecon.com/gd/gdoverview.html…“In 1988, the Council of Economic Advisors proclaimed that the Smoot Hawley Tariff Act was “probably one of the most damaging pieces of legislation ever signed in the United States.” The act was passed in June of 1930 and increased tariffs to a tax of 50 percent on goods imported into the United States. Since this occurred after the onset of the Depression, it’s hard to see how it could have caused it. However, since the real effect of the increased tariffs was to increase prices and increase price rigidity, it is easy to see how the Act could have exacerbated the Depression. Enacting the tariff was exactly the wrong thing to do and about 1,000 economists signed a petition begging Congress not to pass it. Eventually, 60 other countries passed retaliatory tariffs in response. “…”The third mistake the Fed made was in early 1931. The Fed raised interest rates, exactly the wrong thing to do during a contraction. Ironically, the country’s gold stock was increasing at this point all on its own, so doing nothing would have increased the money supply and helped the recovery. “Hope the blog cops pick diz one for the honor roll:-)BTW, at turning points data tends to be “dirty” and “noisy”. That is precisely the nature of a turning point. Follow the work of Kasriel at NT. He is doing extremely good systematic work on tracking the recession and trying to pick the turning point.

You are talking your book OR.There is NOTHING in the data series that points to any sustainable turnaround as yet. Even the ECLI reports only showed a positive blip because of 2 items; increased Govt expenditure and share price increases. Is that reason for optimism??It’s a dead cat bounce alright and far from being contrarian , you are on the mainstream side, along with Cramer.How does it feel being lined up alongside Cramer, with all his brilliant calls?

but alas, it is not something we do not know already GSMi guess a line has been crossed

That’s because the job losses are, sadly, a tertiary event during a severe contraction. The job losses will continue for some time to come, even after the “economy” recovers. I have been through this three times since I have been working (a caddy in 1967). This is by far the worse.

i like the sound of thathave more time to prepmaybe this “imaginary” recovery isnt that bad after allperspective perspective

More likely the debt problem is going to be like a Category 7 inflationary upheaval.

good point!unintended consequences may follow stiffing the GM bond-holders

Of course it’s cyclical! We’re in an inter-glacial period, soon to be followed by a glacial period: this happens every 10,000 to 12,000 years.The idea of being responsible for our nests is good, but, as is the case with greed, this will turn into another misdirected scheme.Mark

I urged him years ago. He is perhaps the ONLY politician whose track record proves that there is intelligence behind his decision-making. He is far wiser than the rest… Unfortunately it’s all too late: the corruption is now killing the patient.Mark