Interesting to see that Anthony Bolton at Fidelity yesterday now refers to Dr. Roubini U shaped global recession as consensus pessimistic view. That things always look FABULOUS at the top of the cycle when most are claiming “it IS different this time and, at the bottom of a cycle “things will look darker for longer” which Bolton, in his own esteemed past, has now painted himself as an interesting contrairan long term equity fund manager. Yes Sir. It is now time to consider those sectors that have been hurt the most for those that have time to wait ( as he has proven in his past). Roubini, Shiller, Mayo, Whitney,et al are all in the same camp and, have taken the playing field to a relatively pessimistic outlook through 2010. P.S. Not saying Bolton is right. He was pitching bank stocks as early as 2007 so, double dip here we go again. Just that: the above-mentioned points he made in Hong Kong recently ring true. The world is filled with pessimism. Close to pandemic level 6. Lots of cash and, for those that have 10 years to live and, invest or longer valuations are not at all bad. Makes sense to me.

“Money for NothingBy PAUL KRUGMANPublished: April 26, 2009On July 15, 2007, The New York Times published an article with the headline “The Richest of the Rich, Proud of a New Gilded Age.” The most prominently featured of the “new titans” was Sanford Weill, the former chairman of Citigroup, who insisted that he and his peers in the financial sector had earned their immense wealth through their contributions to society.”Read the rest here:http://www.nytimes.com/2009/04/27/opinion/27krugman.html?partner=rssnyt&emc=rssAs long as this attitude by the financiers & bankers doesn’t change, we’ll need economists like Roubini more to warn us about imminent financial disasters.It seems paychecks to the bankers are returning to the pre-crisis levels. Read the rest of the article. If the real workers like Roubini, Krugman or farmers, engineers, doctors, scientists were in the heart of modern economy, not much of this would have happened. I hope Geithner changes the fundamentals of financial services & banking industry.

lets be realists here. Dr. Roubini knows what he is talking about. He wants recovery too. Look at the actions of Banana Ben Bernanke. Obama and his 3.7 Trillion budget. Democrats wasting money on a photo shoot of Air force one. YOu should see what the democrats have done To CA. They have ruined it. NOBODY WANTS TO SEE this type of unemployment. If we go to the L- type recession : watchout,you better be dug in deep. Two quarters of worst in 50 years. watch for more.

One point five.

My view here is that Roubini is correct, the US will stabilise. What then? As long as China is importing jobs from America and exporting products, the US economy (minus its debt jetfuel) will stagnate. No jobs = No growthThe reality is that as long as the Chinese maintain a currency peg to the USD, they will keep importing jobs because they pay lower wages, and jobs will leave America and the middle class will deteriorate. So, for Americans and America to re-emerge stronger economically, the dollar must fall and fall hard vs all currencies around the world. When this happens, imports become expensive and US exports become cheaper for the rest of the world. This will re-ignite jobs for America’s working and middle classThe obstacle here is the holders of wealth. This 5% of the population that holds 40% of the worlds wealth hold that wealth in US Dollars. If the dollar goes down, they lose. They will fight for every inch of ground to not give up a strong dollar. So its basically American workers vs wealthy. Who’s going to win. Will CHANGE really come to America? To me, Obama’s moves so far don’t paint a very positive picture

Its a 5-10 year modern times depression…(which i define as no food shortages more or less, 40-50 million people on food stamps, only 15-25 million out of work, only 60 million or so without health care, Govt constantly bailing out companies and americans, State and local budgets bankrupt).NOJOBS and any new JOBS only pay 9-15.00 an hour. It will take 10 years to fix housing, debt, healthcare, JOBS and thats if the PTB make every right decision. we will limp along with the same myriad of issues the whole time I beleive. -2% gowth 1 year, 1% the next, down 1.15 the next, up 2% the enxt and so on.. Everything needs to be RESET and no one is accepting that, not Avg. Americans or the PTB. Again thier are NO JOBS i can see on the horizon… and at any time during the next 10 years it could be a 1929-30 style depression with food shortages, rioting, increased crime, unemployment of 25-30%…So folks get used to our new way of life…

And for those that thought otherwise… its a shame that the few PTB that say the right things get brushed aside….. We are Totally being SETUP by the Banks so that they and thiers may continue thier ways… I’m amazed at thier brazeness still…. i suspect that eventually people wills tand up, the questions is When?Senator Admits That Bankers Own Capitol Hillhttp://www.businessinsider.com/senator-admits-that-bankers-own-capitol-hill-2009-5The defeat of Obama’s mortgage cramdown bill has been chalked up to the power of the banking lobby. Despite the populist appeal, several Democrats became convinced that the law would decrease the availability of mortgages at precisely the time the government is trying to expand lending.Rhode Island Senator Sheldon Whitehouse said the banks were being “Greedy, stubborn and unreasonable.”More blunt was Senator Dick Durbin of Illinois who said, earlier this week: “And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.”"None of this is really an indictment on the banks, of course. It’s a critique of Congress, which has let itself be sold. It wasn’t ridiculous for the Senate to vote down the cramdown bill — it had a lot of flaws, and even many critics on the left. What is ridiculous is that a Senator would vote against the bill at the behest of a certain lobby — one which played a central role in the current crisis — rather than vote agaisnt the bill just because they were convinced that it would’ve been bad policy.Meanwhile, to get more sense of the post-vote spin, check out NYT which says the bill would’ve allowed judges to “fix” a mortgage contract, and it also says that with only 45 votes, the bill fell well short of a filibuster-proof majority. Hello, it fell well short of just a regular old-fashioned majoriy.

Too much debt to me means TBTS: (Too Big to Succeed) While I have tremendous respect for NR, I just can’t agree with his assessment of early-mid 2010 stabilization and recovery. The fork in the road decision point in this crisis was to either classify businesses as TBTF or not. We picked TBTF road and have simply piled on more and more DEBT in the hopes that sometime in the FUTURE (that could be in 10 or more years), these bankrupt companies will recover and that will be good for all of us. The normal, common sense choice would have been to let the insolvent, poorly managed, hyper leveraged companies fail like thousands of others and allow them to be replaced by new companies and new people perhaps with more fiscal responsibility. If unparalled amounts of DEBT proves to be the solution in this crisis, then I think it best that the owners of this country (the people) demand a U.S. printing press for each household and once and for all put an end to budgets, poverty, unaffordable education and healthcare and whatever else economically enslaves it’s citizens!

>None of this is really an indictment on the banks, of course. It’s a critique of Congress, which has let itself be sold. It wasn’t ridiculous for the Senate to vote down the cramdown bill — it had a lot of flaws, and even many critics on the left. What is ridiculous is that a Senator would vote against the bill at the behest of a certain lobby — one which played a central role in the current crisis — rather than vote agaisnt the bill just because they were convinced that it would’ve been bad policy.I couldn’t have said it better myself. I am personally incensed by the fact that the vote didn’t really even come close. 12 Democrats voted against it? On the basis of the financial industry’s argument that it would cost the industry more money and make housing more expensive? Baloney! There is no legitimate basis for exempting first mortgages on primary residences from cram downs by federal bankruptcy judges. That’s just a product of legislative sycophancy to their corporate banking campaign patrons. It’s about time to break the yoke the financial sector has placed on the shoulders of ordinary citizens and small businesses in this country.SWK

Dear Professor:”will not be over in Q3 but will last until the beginning of 2010…. – including a brutal shedding of employment that shows no sign of letting up – will take much longer to truly heal the financial markets, the financial institutions and the real economy. “SOooooo, the accelerating “brutal shedding of employment (jobs)”, that has just started to bite into the fabric of the “real economy” will so easily and quickly, er rapidly, reverse because Messrs Geithner and Benanke – er, design flaws and all – so as, with a tender kiss and some cash for the boys, to bring Grace and civility to the naughty awol status quo?Methinks, Dear Professor, that you don’t understand much about phenomenal dynamics.I’ll give you another scenario for consideration: Go and interview all those people in the cardboard camps scattered throughout the USA and I bet that you will find that most of them have become comfortable with their current position – away from the debt collectors, the slicks, the whankers and their henchmen, the tax man, the repos man and all the other ugliness that they have had to bear and feel alive again for the first time – for many ages.I’ll bet that these people are helping each other; are finding values in communities of the same ilk, comfort and indeed relief in not having that which previously they couldn’t do without, without the pressures brought about by the slick trades run amok and more than probably don’t give a flying whatever, about the secondary economy anymore – er, and will come to find a new direction in life and its strange ways. These people, I’ll wager are finding a new way of life and that will trend away from slickville and all its virtual wealth, shiny baubles and the indebtedness of “them”.Or, don’t expect these people too easily, or too quickly to return to the beloved targeted “status quo” or slick heaven.Relationship IS the Universal language where values are the binding force.Ho hum

April 30 (Bloomberg) — Consumer spending in the U.S. fell more than forecast at the end of the first quarter as mounting job losses threatened to weigh on a projected economic recovery later this year.Purchases decreased 0.2 percent in March, the first drop this year, the Commerce Department said today in Washington. Other reports showed wages and benefits rose at the slowest pace on record and firings continued, straining American workers.

Is the recession over? We are being told it will end possibly by june of this year?2008 GDP = $14.3 TRILLION2009 GDP (assuming THE NEED for 4% growth) = $14.9 TRILLION2010 GDP (assuming THE NEED for 4% growth) = $15.5 TRILLION2008 GDP (roughly $14.3 Trillion) Breakdown by component:$10.1 Trillion Consumer Spending (71%)$2 Trillion Business Investment (14%)$-600 Billion Import/Export (-5%)$2.9 Trillion Government Expenditure (20%)OK, let’s conservatively assume a 25% contraction in personal consumption expenditures over the next 2 years (-12.5%/annum). I am basing my estimates of a 25% contraction in consumer spending upon the following:Overall numbers of unemployed going forwardAverage percent decline in value of housingPercentage (or ratio) of consumer debt to consumer spending (Remember, consumer debt of roughly $2.5 TRILLION comprises 25% of the consumer expenditures portion of GDP and 17% of overall GDP.)So, a 25% contraction in consumer expenditure over the next 12-24 months means:2009 Consumer Spending as a measure of GDP = $8.75 Trillion2010 Consumer Spending as a measure of GDP = $7.5 TrillionNow, we also need to realize the business investment will contract roughly at a level that shadows a drop in consumer spending.2009 Business Investment as a measure of GDP = $1.75 Trillion2010 Business Investment as a measure of GDP = $ 1.4 TrillionExports will not increase. If anything, we will continue to see a contraction in the relationship between imports and exports. For the sake of my argument, however, I will keep the ratio at roughly -5%, or -$500 Billion.So, let’s look at 2010:GDP (assuming THE NEED for 4% growth) = $15.5 TRILLIONConsumer Spending = $ 7.5 TrillionBusiness Investment = $ 1.4 TrillionImport/Export = $-500 Billion7.5 + 1.4 – .5 = 8.415.5-8.4 = 7.1CONSERVATIVELY, the government will need to spend roughly $7 TRILLION in 2010 to “produce” 4% GDP growth. That $7 TRILLION will represent roughly 45% of GDP.In 2010, the government expenditure portion of GDP will have risen from it’s current level of about 20% to 45%, or from $2.8 TRILLION to $7 TRILLION. All of this spending MUST occur so that the government can claim that we are, in fact, growing GDP year-on-year and that the “Recession” is over. I have a few questions:What’s the government spending those $7,000,000,000,000 on?How’s the government getting the money to spend?Where is the money coming from?What does the government think 2011 and 2012 will look like?I have my opinions. What are yours?

Congrats Nouriel!!!You deserve the praise. Not many “could” connect the dots. In hindsight, it seems easy, but as forethought it was brilliant. (Don’t discount that 1 iota!)You really went out on an edge, by deviating so far from the general populace, with views that could’ve stood to ostracize and discredit your reputation. At the time, 2006-2007, the market and the media blasted you. (the disconnect in the markets results were making your call look ridiculous!!! On the surface that is.)) You fought back and didn’t back down. I remember quite vividly the regular shellacking you were receiving throughout this time …and it seems that you have either shrugged it off or forgotten it.Another person that I feel deserves quite a bit of praise is Patrick Byrne. He stepped out on that same ledge as you. What you had the foresight to see in the Fixed Income Markets… He had the foresight to see in the equity Markets. He “connected many of the dots” in the fraud and manipulations that were taking place on our exchanges… and the Media and political “capture” that had taken place. His stance on these frauds led the general public to think he was nuts. The media (especially the “captured media”) was printing articles about him and cropping spaceships above his head!!!His crusade against Naked Short Selling started in 2005. For the past 4 years, he was mocked by everyone, stating that this practice didn’t exist, and even if there were a “few” cases of it, it really couldn’t effect the market.…Well how far we have come in hindsight! Our Government was forced to put a stop to Naked Short Selling (a practice that supposedly “did not exist”) as a major part of the emergency bailout legislation!!!…and even better… TODAY starts the first day of the Treasury Market Practice Group’s (TPMG) new policy with regards to charge a claim on ANY failed US Treasury Notes/Bonds/Bills.This is huge news in the settlement/custody business!!! (…and it should NOT have been implemented on a FRIDAY!!! Idiots!)To the laymen, this is a move by the treasury to curb naked shorting of the UT Tearury. (what a long way Patrick Byrne has come. Fighting a battle over a practice that “doesn’t exist”, to now see the US Treasury put in curbs to defend against it.)I wrote a lengthy 12 page article for the Global economonitor on this whole process (Patrick Byrne / Deep Capture / Short selling / TPMG) and submitted it yesterday. I’m assuming it will be up today? …and I will provide the link once the RGE staff gets it up.All the best,Miss America

I agree with the readers who are expressing reservations about Prof Roubini’s optimism here. To some extent it may depend upon the timeframe that is being looked at. But i don’t see how the USA generates any kind of real recovery from the actions that have been taken by Paulson & Geithner. Therefore, an L-shaped decline seems more believable to me. But keep in mind that the long-term slope of the bottom leg of the L is downwards, and there will be up’s and down’s. Nothing is ever steady.Instead, I agree with the thoughts being put forward by John Hussman. See especially his latest article at http://www.hussmanfunds.com When we bail out banks with trillions of dollars that we don’t have, that is a massive future lien against the tax earnings of our country. Personally, I am skeptical that it can ever be covered, given that our manufacturing base has shrunk to around 10% of our economy in America. But in the next few years if the Gov’t does intend to pay these debts, then they must obtain the money through high taxation rates on individuals and corporations. Or they must inflate the money supply at pretty horrible levels (double-digit inflation, at least). If they do decide to tax, this would cause a heavy burden on the profitability of US companies, thereby causing at least a decade of low P/E ratios. Hence, it would be reasonable to expect a long period of serious asset deflation, similar to Japan’s experience (please note that I said asset deflation … and not monetary deflation. The distinction is important). And as for consumers, I just don’t see how they could carry a heavy tax burden and maintain any kind of reasonable spending.A long period of asset deflation, combined with strong monetary inflation, should cause a significant drop in the US dollar. Long term that is. The exact outcome depends on China’s strategy with its own currency. But the USA will be left in a world of hurt through what has been done. We might wind up with a future where many of our companies have been bought by foreigners. In that case Americans will be working for foreign taskmasters – not a pleasant outcome. But it’s also possible that we may find ourselves drowning in “stagflation on steroids” or even an outright inflationary depression. Compared to some other parts of the global economy, I still think our economy will be burnt toast.PeteCA

MA,Your observations and praise of Dr. R are spot-on. I’ve been a close “watcher” for several years now and have often wondered what the landscape would’ve looked like without those like Dr. R who were brave enough to call everyone’s attention to the brewing financial tsunami.Many here are deeply indebted to the good Dr. for his wisdom and bravery, without which, many wouldn’t have gotten out before last fall’s market implosion.Like most here, I also appreciate your insights. Would you be so kind and provide a few comments from your perch; perhaps a few comments on flows, where they’ve been going, what they’ve been chasing, have they been prudent plays (return/risk), the disparity between the Dow and Main St. etc.Looking forward to your latest Global Eco post.ATB,TA

Prof Roubini .. by the way. I should have said Congratulations on your selection for Time magazine. I didn’t mean to detract from the compliment, through long-winded discussions here on the blog.Well done in fighting for the truth!PeteCA

US economy is DEAD. US of A killed its own self.Curiosity killed the cat.Stupidity killed the country.

I second those sentiments.SWK

Miss America here. Here’s the latest:http://www.rgemonitor.com/globalmacro-monitor/256591/where_is_superman__is_he_deep_capturedIt is a bit long…Actually it’s very long. It took a long time to put together! Feel free to skip over some of the general recap at the beginning. The meat of the article resides in the topics:Deep CaptureDTCCTPMGIf you want to save a bit of time, those are the focal points to hit. …but feel free to read the whole thing. (I really need an editor that could cut my work in half)p.s. There’s a decent rant on Hank Paulson in there.All the best,Miss America

Sadly, I’m not surprised, but I am disgusted. You’re right: ‘legitimate’ is the key word here. So much gobbledegook out of the industry and those 12 elected representatives…SWK

This article sounds like a obituary — of what Roubini knows better. It sure looks like the Professor is preparing for a BOOM. I hope he is going to explain in detail how the next bubble will materialize, so we can all ride it and profit from it.

DR R. eneded on this note: “The toxic mess and damage caused by this leverage-driven financial crisis and economic recession – including a brutal shedding of employment that shows no sign of letting up – will take much longer to truly heal the financial markets, the financial institutions and the real economy.”I have said before DR R. has earned every acolade over the past few years for his common sense approach to articulating the problems.Congratulations on your acknowlegment by main strea media and other accopmlished economists for telling it like it is and being right!But that being said, i beleive you are prudent in taking a breath and hanging on the fence to see which way things will go. It will allow you to be right again, good or bad and maintain your well earned respect. However when i read between the lines of what you are saying i sense you see more severe problems ahead but are having a tough time figuring what data the PTP/US GOV’t are putting out is legit or true. I beleive you have your suspisions, but you are going slow and rightfully slow. I feel you ahve a much better handle on the rest of the world though.Again congrats Professor!

Great Read MA!

It’s a continuing W until we flat line.So WWWWW__________

Great post. Rings true.

its a new fancy accounting Trick….. simliar to three card monty…

Which is why we’ll be in recession again before too long if there is a “recovery”! I really believe this is what’s happening. As you said, people that still have jobs are gaining confidence (based off of BS, but they don’t know any better) and they are going to start spending and taking on debt. They’ll be able to use debt b/c their balance sheets are still in tact and they still have steady income. This will be a temporary recovery though because it won’t be sustainable b/c of all the debt – gov’t and consumer, declines in demand from continued job loss, etc.

Nice post.

which will only make it more painful when the bottom falls out again, leaving those who believe the stock market is the economony bewildered and befuddled.

W, U, L, V – whatever it is, its bad and not getting better… It’sal smoke and mirrors….Can’t really blame Oabma and the govt for trying to instill confidence, but how does confidence equate to the abilty to hold cold, hard, green cash to pay for things…. people cannot pay for things anymore… current prices for everyhting sold in the US is not supported anymore by wages earned, let alone by unemployed people…

…yep WWWWWWW3….

a couple things:1) It is rare to see someone accept such praise with such humility. It is very revealing of Dr. Roubini’s character to see him name so many of his colleagues at the exact moment that he could be soaking up the spotlight.with that being said:On the face of it, it looks like Dr. Roubini has either consciously or unconsciously aligned himself with this administration and their policies. Here’s the line that gives it away:”…a crisis that it had inherited from the previous administration.” This is straight out of the Obama playbook. And for somebody as intellectually honest as Dr. Roubini, I think it can be said with a fair degree of certainty that the words chosen were not chosen by accident.I’ve seen several posts that mention that Dr. Roubini has ties to Summers and Geithner. We have to remember that, no matter how analytical we believe we are, emotional ties *always* outweigh analytical concerns. Many of the posters have expressed doubt in Dr. Roubini’s forecasts – did anyone else notice that he eased off the pedal when the new administration came in? He’s invested – not with his money, but with his feelings. Don’t discount the importance of that. And don’t blame him, either – I doubt that it’s even on a conscious level.Again, Dr. Roubini, congratulations. Best of luck in the future – we need more men like you to keep our eyes and ears open

Simon Johnson has a new piece out. Here’s an excerpt:”Mancur Olson famously argued that crises can break the power of vested interests. That’s possible, but only happens when the crisis brings the right kind of reformer to power. More often, crises lead to greater concentration of economic power and political influence.”I like Johnson because he has broad perspective, a philosophical approach, technical knowledge, and a bit of humor. Beyond that, he presents his facts and opinions, and lets the reader decide. He’s my Dr. Roubini for the political aspects of the crisis.

And as GDP declines so do JOBS!About That GDP Inventory Decline…http://www.businessinsider.com/henry-blodget-about-that-gdp-inventory-decline-2009-5An executive who works for a massive global industrial company observes that the much-celebrated decline in inventories in the GDP numbers should not be taken as a sign that GDP is suddenly about to start accelerating:I watched with some amusement as analysts decided that reduced Inventories in the GDP data boded well for future GDP figures. While, all else equal, certainly lower would be better, the fact is we are slashing inventories (and trying to do so even more) because there are no orders. None. We do take “orders” (non-binding, no cash down payment) which are what is optimistically shared with the Street but binding orders with cash down payments do not exist today, haven’t for over 8 months now. When one lands it is company news and because a government entity somewhere backed it. And trust me, if we aren’t getting orders neither are the next 5 guys.I suppose either the analysts – and the market, which has been juicing our stock (thanks for that) – are correct and the orders are about to start rolling in, or they are going to be somewhat disappointed later this year when our backlog starts to run dry. I hope they’re right. But I assure you the absolute last thing that’s going to happen is for us to start *growing* inventories without the orders – that strategy can only possibly be conceived in a cubicle somewhere, occupied by someone that never worked in a real job.

Why nuts? Any one can see that a system based on constant growth ignores finite resources.

ok but here is another issue that no one is talking about: since obviously true infinite growth is not possible, why do governments like that one in USA – and others – like to claim (by posting numbers to that effect) that their economy grew N% as compared to previous [year, quarter, etc]?Obviously it is not normal for the economy of a country to grow continuously each year for the rest of eternity. But what is more important is that there seems to be a mentality that claims that it is wrong if the economy does not grow. My point is, this mentality is wrong. “No growth” is normal and should be expected.The government should not feel that they have to fake the numbers to show growth where there is none.

My bad. I wasn’t relating the question to Dr. Roubini’s post, and assumed mistakenly that someone had posted something about derivative instruments.Yes, in ordinary terms, when economists speak about second derivatives with respect to a downturn in economic activity, they are discussing the rate of the downturn. The idea is that as the rate of the downturn slows and approaches zero — in inflection point in mathematical terminology — the downturn may be getting close to bottoming out, unless it hits zero and then continue to plunge again. If a bottom is hit, then the downturn becomes an upturn, and the sign of the second derivative goes from negative to positive, i.e., a curve measuring economic activity stops going down and turns up.SWK

With the exception of the banking system, I think so. Obama came to office primed on education, healthcare, climate, energy, Iraq, and Afghanistan; not the banking system. He said as much in this week’s press conference. Initial steps on banking were weak – with some correction recently. Statements from Geithner and Bair at the FDIC open the door to more drastic action with regard to the bank holding companies. The slow, careful roll on torture is an example – that is being now being left open to investigation by Holder and others. But whether he can overcome the bank lobby and revailing “wisdom”, I don’t know. The results, and actions from, the stress tests will be a clue. I do wish he would spend an hour, alone, with Dr. Roubini.

Don’t miss Miss America’s post on the “Deep Capture”concept. You may also want to see Deep Capture the Movie on the http://www.deepcapture.com site.The fact that financial groups have regulatory capture, selected media capture, and overall congressional lobbying capture just hints at the idea that this same Dynamic is also present in Pharmaceuticals, Defense Spending, and other powerful interest groups. When you connect the dots of all these WEBS OF DEEP CAPTURE OF OUR SYSTEM, we will realize that we now have a society that is formed by Predatory groups not necessarily working in unison, but whose influence and power is totallyparasitic and prejudial to our future. The loopholes of financial innovation allow the financial deep capture version of this pathology to escape scrutiny and prosecution. We either all work towards developing a CIVIL CONSCIENCE to protect the concept of a functioning republican democracy or we can continue to allow the Oligarchical Corporate FascistSystem to continue. The true underlying problem withthe societal pathology is the fundamental concept that SELF INTEREST THAT CONFLICTS WITH PUBLIC GOOD is fair game in a market. Until we change this societal mindset, we are heading towards destruction.IF WE CAN MAKE MONEY OFF OF A PUBLIC HARMING OPPORTUNITY, WE HAVE NOT REGULATED OUR SYSTEM CORRECTLY.

Maybe we are entering a time where “just getting by” is thriving. Take a look around.

The Bush Administration did and the Obama Administration is doing what the Fed does, creating bubbles.They create money and they transfer the money to the big banks – and they’ve been doing it in earnest ever since the Greenspan era,and even more so now that the investment banks have lost really big on gambling. If you study what a gambler does,it’s exactly what these big banks are doing–when down they keep putting in more and more money and when that’s not enoughthey pressure everybody to pay, and then, when that’s not enough, they begin to steal.This is not what you call “Republican” or “Democrat.” It’s a whorehouse and all the voters can do is elect the piano player every four years.It’s all about the big banks taking money from the taxpayer. It’s all based on a web of lies made out of whole cloth – created explanations to“buy down the debt,” to “take the toxic debt off the rolls,” to “write down the mortgages”—and all it means is that the big banks are going to takehonest dollars from people who earned them and paid their mortgages and transfer them to themselves. And that’s what you call stealing.It would be somewhat less offensive if the money weren’t given back to the stealers. But does it go to the government so it can build roads?Do the Treasury and the Fed take this money and build a hospital with it, or help people with handicaps? No, the government gives the moneyto the banks. It’s incredible.Well, Roubini is on their side. He needs to face the fact that he won’t get his face on the front of Time Magazine as Man of the Year.That will be Obama. There is only so far one can go sucking up to the banks. After you get labeled, you’re no longer of any value to them.Roubini is one of the few praising Geithner—a politically naive move these days. But, THEN, to go back and praise his workat the New York Fed! That’s beyond the pale.

What do you think Dr. Roubini would imaprt to OBama during that hour?

I am not sure that Mr. Roubini fully understands that bailing out america to avoid a depression is not the first point although very important as innocent people suffer.Many of the elderly with 0 interest rates are in a depression although he never mentions much about them.The other point- to bring back the country we all dreamed about means cleansing the system of the leverage and corrupt Bankers, Wallstreet, Fed, and political forces that supported it.How he defends Geithner is unbelievable as he is part of the cause, after what he did in LTCM.Bye for now,

IMHO Prof Roubini has lost his cutting edge analysis – he now sounds like all the other bobble heads. I’ve found the only reason I keep coming back to this website is the blogs. Here I find interesting commentary and links. The good professor needs to go back to his original thinking and may be off to put out better quality work less frequently rather than drivel every day.

Great summary, Pete. But, a question. Do you see asset deflation because nothing sells, and monetary inflation because the government just keeps printing in face of it? In that case, wouldn’t my current “saved” dollars be able to buy more later as in the Great Depression? Yet I see the Chinese, the international bankers, the government et al. moving in with their massive dollar reserves to compete with mine. I just don’t see how the government can continue to print itself money without prices of everything hyperinflating. And if that hyperinflation doesn’t include wages, it seems the entire nation goes into paralysis.

I agree with your post, PeterJB. But it’s going to take a barrelful of sugar to help this medicine go down. And stay down.

I keep hearing the term “second derivative” — I do havea physics and math background I I believe in this case its use to indicate pending improvement in whatever is beingmeasured is INCORRECT.The use of a second derivative to indicate a changing rate in the current slope does NOT necessarily indicate anychange in the data — specifically when the RANGE of thedata is limited by what it being measured.For an ‘improving’ second derivative to have the meaningits being used for the data set REQUIRES the slope could continue — even into NEGATIVE values. That is veryunlikely when deal with prices of things.In fact, one example of a ‘constant’ rate would be an exponential one — going asymptotic to a value — like zero.When checking much of the ‘improving’ data I have found that the newly reported values are still BELOW thisexponential curve. This actually indicates things are getting WORSE.I don’t have a lot of real raw data to do such comparisonsbut I’m wondering if those who do can do some checking.

You really need an editor who could cut your work.

>In fact, one example of a ‘constant’ rate would be an exponential one — going asymptotic to a value — like zero.Talk about an L-shaped recession!I think the hope among the optimists is that while things may be getting worse — the slope is still negative — things are not worsening as quickly as they were, and they’d like to think this probably — if not necessarily — implies a bottom followed by a recovery. As you’ve correctly pointed out, however, a curve can approach zero for a very long time, and a changing slope doesn’t necessary imply early recovery.SWK

Street observations from San Diego and a question for Dr. Realist.Today I looked at a Bank Owned 4 plex, near Balboa Park. $3,200.00 potential monthly income, asking $581,000. Property Taxes approx 1.2% of assessed value. Six brokers with their buyers were also looking during my trip. Tenant was rudely telling me that she is tired of people looking at the property day and night. Other three units vacant, and property has been on the market 3days and I expect they will get multiple offers. A Victorian home in the same area that has been on the market for years and priced at $1,100.000 has finally gone into escrow.Homes throughout San Diego priced properly priced under $500,000 are selling within a month and some within days.At this pace, the available entry level homes are dwindling and the banks shadow inventory will be welcomed to the market, otherwise prices may actually rebound some.Flip side is that rental properties are finally coming down in price and vacancies are rising while homelessness is increasing.When the public at large finds out that prices have bottomed, many on the sidelines will likely jump in.Having sold my primary residence last December just to be safe, I am surprised that interest rates have stayed down and am surprised at the market uptick. I cannot see the future like last year when it was obvious prices would come down. At this point it seems as though interest rates are likely to stay low for a long while and the real estate industry will continue to see a lot of first time buyers piling into the market.Higher priced homes now going down in value and staying on the market for much longer.My local home depot has been much busier during the last 3 weeks than any time during the previous 6 months.With Obama’s gift at communication and consumer confidence up, entry level housing could very well have bottomed here and elsewhere. One question I have is can the spread that the banks are making at present enable them to absorb losses without coming back to the well?For some info on Phoenix: April Phoenix Home Sales Reach Boom Time Levels check out today’s http://housingdoom.com/“Who’d have thought?Speculators and prospective home owners came out in droves to buy homes in the Phoenix area.”Dr. Realist, do you have a clue as why interest rates would rise anytime soon?hlowe

hlowe: Option-ARM’s and adjustable rate mortgages are due to start re-setting around mid-2009, with the pace of activity accelerating significantly in 2010. And the process won’t be over until at least 2011. We’re talking about a large volume of liars loans that was sold into the market. How many of those people will be able to hold onto their property, and how many will walk? I don’t know, but suspect the impact won’t be trivial. If people buying now are happy with what they’re getting, good for them. But it’s certainly plausible that there will be further downwards pressure on market prices for US homes.How long interest rates stay low – depends oupon how long the Fed is willing to commit to buying US debt. And how much money they are willing to invest in the buybacks. We’re going to find out pretty quickly. Watch $TYX.PeteCA

http://www.ritholtz.com/blog/2009/05/jim-welsh-letter-may-2009/Perspective – A way of regarding facts and judging their relative importance.by Jim Welsh’s of Welsh Money Management, in his April 23, 2009 Investment letter “The Financial Commentator”

Yes I am familiar with the Alt-A and Option arms problem as I posted http://www.doctorhousingbubble.com/notice-of-financial-default-california-develops-a-mortgage-tsunami-patter-reminiscent-of-the-2007-subprime-collapse-alt-a-and-option-arms-unite/the other day.By the way Mish has a similar post today.Thing is, many are not selling their homes because “they” feel they should wait until the value comes back, thus those foreclosures will likely continue to comprised the significant portion of the available inventories. Interest rate @5%=$535.00/month on $100,000 loan, so unless rents drop significantly, it will make sense for the 1st timers to buy. So lets see how high unemployment gets, and dollar strength. Soros today on Bloomberg said he knows were the dollar is headed but will not tell us.hlowe

Pete, a lot of the option ARMs were tied to Libor which is actually at a good rate these days. I read something today that stated a lot of these folks could refi with a much lower interest rate. It’s the neg-ams that will be in trouble.I’m seeing more “sold” signs than I’ve seen in a while and these properties are not foreclosures. Priced at just below “bubble” prices, I think the Sheeple are hurrying up to take advantage of the $8,000 tax credit. And since prices have come down a little bit from the bubble, everyone thinks they’re getting a bargain. But unemployed people don’t pay mortgages. I just can’t understand why people would get themselves far into debt again because of a perceived “bargain.” These prices are no bargain compared with historical valuations.I’m sorry, but We the People are really, really stupid. I’m sitting here thinking that the 90% out there who don’t think much beyond what Fox News tells them to think are going to ruin it for the rest of us who have indeed recovered from having our heads stuck in our nether region.Price to income. Price to income. And, as MM CA puts it so succinctly: NO JOBS.It just doesn’t add up.

You’ve noted THE issue, he affect of zero/negative growth. It’s much bigger an impact than people realize. I’d say that it’s really the end of the Ponzi scheme: no more ways to pull “wealth” into the game.Soon the government will have to start hacking itself. Services will be cut to the bone. I can only hope that the big handouts to corporations, especially defense contractors, will get a big axe. It is inevitable that this happens.Mark

For now. I think once the shadow real estate overhang looms later this year combined with credit lines cut we ain’t just tappin’ da brakes were slammin’ ‘em.

1892 ! Fascinating, timeless. What has changed?

My observation… He has become famous off this crisis, right or wrong and to me it does seem he is hedging hisnew found stardom/respect…. and yes too many people like it both ways… Ever hear of hedge funds? what do you think has gotten us inthis mess… its the american way to hedge it seems… not my way, but…. i call it like i see it and i see thingsfar worse than DR R. is seeing them these days and if i am wrong at least it will be for the better…

GOVERNMENT MOTORS: ONLY THE BEGINNINGby William L. AndersonMay 1, 2009 — The news that Chrysler is going to file for a Chapter 11 bankruptcy is a small dose of reality in a cycle of Alice-in-Wonderlandreports that have been filtering from Washington over the “restructuring” of the American automobile industry. Unfortunately, even a real-livebankruptcy is going to be so politicized that the outcome will be pretty much what the Obama administration has been demanding all along: agovernment-union partnership of domestic automobile companies.This really is the beginning of what we are going to see across the country, and the government’s “new” relationship with GM (now to be”Government Motors” or “Gettlefinger Motors,” after the head of the United Auto Workers) is a beginning, not an end. And it certainly isnot a solution to the real economic crisis that is upon us.It is difficult to know where to begin in this ongoing sorry saga, but I will start with the current arrangements that the Obamaadministration is seeking. In its “New Deal” with GM (which actually managed to be profitable during the Great Depression, ironically),the government will seek a 50 percent ownership, the United Autoworkers 40 percent, and the real owners and bondholders of the company,a mere 10 percent. Perhaps there is some rough justice here, as the entities that are most responsible for the company’s demise now willbe the primary residual claimants for GM’s upcoming losses.Well, one would hope for a “rough justice” outcome, but I suspect that there are some other things that the government and UAW have planned that will beupcoming to change the odds of the survival of GM and even Chrysler, which ultimately will have the government and the UAW as their main partners.First, we turn to the recent events in Congress, as the U.S. Senate, once Al Franken is confirmed, will have a Democratic supermajority, thus eliminatingany checks and balances that body once had.The most important outcome, as least as far as the auto industry is concerned, will be the passage of the “Card Check” bill that organized labor and itswholly-owned subsidiary, the Democratic Party, have craved. This is an upcoming law that will permit labor unions to target any business it wants andorganize it once a certain number of workers have signed cards calling for a union election.Because labor activists will be able to target employees all the way to their homes and because the government will encourage lawless and thuggishbehavior (because government knows no other behavior), union organizing of businesses will be a mere formality. Certainly, the first targets (otherthan Wal-Mart) will be the many U.S. subsidiaries of foreign automakers, which have been operating profitably in this country for many years.One of the enduring myths of the present era has been the Big Lie that auto manufacturing plants cannot be profitable without ultra-cheap labor. Whenone sees the well-paid autoworkers that are with Nissan in Smyrna, Tennessee, or the Honda workers in Marysville, Ohio, it is apparent that employeesat these places are doing just fine. However, the UAW has a wonderful plan for their lives, as the union has coveted these places for years, but couldnot organize them…This is, as Lawrence Reed has described, an attempt to impose “economics by coercion.” It is the substitution of brute force for consumer choice, but itwill be hailed as a “consumer triumph” by all of the “consumer advocates” from Ralph Nader to the Consumers Union, not to mention the Usual Suspects ofGovernment Propaganda from Rachael Maddow and Keith Olberman to a government-supported New York Times.There is no good way to describe what we are seeing except to say that it only is the beginning of the “restructuring” of the American economy…William L. Anderson, Ph. teaches economics at Frostburg State University in Maryland.http://lewrockwell.com/anderson/anderson247.html

A,I pointed out the same thing a couple of weeks ago in the form of a short quiz on derivatives, which pointed out that if you throw a ball up in the air the second derivative of the height function is negative as the ball goes up and when it falls back down. I think Nouriel must read these posts, because I noticed in one of his recent write-ups he did mention this time that the first derivative was negative even as the second derivative was turning positive. Now of course Nouriel knows calculus, but at least he felt the need to address this concern.

From the Survival Podcast–May 1Modern Survival PhilosophyI thought is was a good idea to add a page on the site about the core philosophy I have about being survival minded and modern survivalism. My hope is that individuals from those areas will enjoy this site but that the “average Joe” and the “average Jane” will also get a great deal from my site and podcast as well.The core of my philosophy about being prepared, life style planning, self sufficiency and energy independence can be summed up with in the following 10 core values…1. Everything you do to “prepare” for emergencies, disasters or economic turmoil should be blended into your life in a way that improves your life even if nothing disastrous ever occurs.2. Debt is financial cancer! Minimize it, pay it off early and stay away from credit cards.3. Growing your own food is for everyone not just people that want “organic” fruit and vegetables. To produce your own food, even as little as 10% of what you use reduces your dependence on “the system”. If nothing else gardening is good for your emotional and physical health and increases the value of any property.4. Tax is theft, the best way to combat it is to understand every legal deduction you can take or create. In general I think “the system” is bad but when it comes to taxation either learn the system or hire a damn good accountant to work it for you. Every dollar you keep can be used to improve your self sufficiency, every dollar taken from you can be used to make your dependence on the government stronger.5. Food stored is an exceptional investment. Food is increasing in cost faster than just about any investment right now and certainly faster than the rate of inflation. You simply can’t loose by storing additional food that you use on a regular basis.6. Plan for disaster in the following order of priority – Personal-Localized-Regional-State-National-Global. Despite the real possibility of a true economic melt down or catastrophic terrorist attack or some other major global disaster the most probable “disaster” for any individual is personal. Loss of a job, loss of a family member, a fire or localized weather event are the most probable threats to impact any individual. So plan and prepare for those first, then continue to build going forward.7. Renewable energy is great if you do it in a way that saves you money (short or long term) but your solar panels are not going to save the planet. Man made global warming is a scam designed to force the U.S. into a global taxation system. If you want to promote solar, wind, hydro, etc. the best way is to develop it in a more cost effective manner. Fuel efficient vehicles are also great. I personally drive a 2006 Jetta TDI diesel that puts many hybrids to shame at 44 MPG! That’s doing 80MPH on average by the way. I bought it because it was affordable, well built and incredibly engineered and cost me a lot less to run even with diesel being a lot more expensive than gas. The lesson is that the best way to promote “green energy” is via economics.8. Owning land is true wealth. I advise people to strive to own land in the country where taxes are low and restrictions are limited. Even if you live in the city finding, buying and improving land within 3-5 hours of your primary residence makes a lot of sense. If you can use it to get out of the city at some point so much the better.9. In addition to food, water and other common survival stores use common sense methods of hedging against “disaster”. Pragmatic things like, cash emergency funds, good insurance and secondary income streams are not just for people in “the system”. These types of protection can make you life a lot less miserable when something goes wrong. Make them part of your planning.10. Your personal philosophy is more important for you than mine! You are the master of your own life and if you don’t agree with my views, great, define, understand and implement your own. The biggest thing you can do is understand that you are in control of your life and that what you do matters. Those two factors have the greatest impact on individual survival across every demographic you can imagine.http://www.thesurvivalpodcast.com/modern-survival-philosophy

Pleasse think about this: NO ONE CAN PREDICT THE FUTURE. So…….shouldn’t we all quit worshipping at the shrine of the Great Roubini?After all, the truth is that he just happened to make a right prediction at the right time. Let’s try to be sober about the coming months/years.ANYTHING CAN HAPPEN. Something so wonderful that it is well beyond our ability to imagine….CAN HAPPEN. Simiarly, the Obama mightreally hit the fan and it could all be over for a very long time. Or, (and this is much more likely) the economy and the stock market might justcontinue bumping along this current bottom for a while. The point is: no one knows how to predict the future. Use your common sense.Gain all the wisdom you can. Pray, ask God for wisdom, read His Word, especially James and Proverbs. Above all, do what is right.If there is any predictor of the future it is this:If you do what is right, God will protect you. If you do the wrong, you are doomed to failure.

Lower interest rates won’t have much impact on resetting ARMs. Most pay interest only. The reset rate may be as low or lower, but the loan will become fully amortized, making most monthly payments higher. If they are underwater, they will likely walk rather than pay more for their mortgage each month.

SO is the Poker game really over for the US or can we bluff our way out to win? Do we have any more chips to play? China seems to be holding the best cards.

Speaking of the most uncomfortable issues:In Canada a BoD (body Corporate) can have person(s) assassinated but nobody can be held responsible from that Board – by Law.(I know)”Thus corporations finally claimed the full rights enjoyed by individual citizens while being exempted from many of the responsibilities and liabilities of citizenship. Furthermore, in being guaranteed the same right to free speech as individual citizens, they achieved, in the words of Paul Hawken, ‘precisely what the Bill of Rights was intended to prevent: domination of public thought and discourse.’ The subsequent claim by corporations that they have the same right as any individual to influence the government in their own interest pits the individual citizen against the vast financial and communications resources of the corporation and mocks the constitutional intent that all citizens have an equal voice in the political debates surrounding important issues.”: — David C. Korten – Source: in his book, When Corporations Rule the World, 2001http://www.informationclearinghouse.info/article12998.htmHo hum

I do, I do. If the way they’ve handled the stress tests, as just one other example, with all the leaks and innuendos, thehemming and hawing, and postponing and rescheduling, and announcing and renouncing, and promising and reneging doesn’t provewe’re in a deeper mess than they’ll ever dare admit, I don’t know what does.

A few months ago Nouriel Roubini was predicting a near depression, then he changed his prediction to an “L” shaped recession. Now he has once again flipped predictions and says it will be a “U” shaped recession. When the stock market went up in March, Roubini said it was a Bear market rally, and that the banks stress tests would cause another drop soon. That prediction hasn’t come to pass yet either. Maybe by the 4th of July, Nouriel will predict the recession to be over ! LOLThe fact is, nowhere in Roubini’s solutions to the crisis does he mention the long term negative consequences of his, and Obama’s, policies. Which is INFLATION…and potentially even HYPERINFLATION. The federal government, and big government liberal economists such as Roubini, quickly congratulate themselves for stopping what they viewed as a potential depression, yet will never admit to the possibility that their solutions will create a long term debt problem far worse that the recession we are currently in. Inflation, and the devaluation of the dollar will ultimately reduce consumer purchasing power, further eroding the middle class. But Nouriel doesn’t seem to care about that as much as he cares about saving the big banks on Wall St with taxpayer funded bailouts to banks that got us in this mess to begin with.

The bazookas, missiles, rockets, artillery, etc are in many ways the roots to the current economic disaster.Printing money and adding on more debt with interstrates set by decree will only worsen the problem.Roubini is and has always been a part of the problem since he beleive in the magics of low interestrates set by decree andthe mighty printing press.

http://digg.com/d1q5kKLink to above with apologies – the tears are running and I just wet my pants laughingHo hum

And PeterJB helped a little I think. I’m so upset I can’t sleep. Maybe the laughs will help and I can try again.

Quote from the article:”The amount of excess capacity that has been created by the depth of this economic contraction is unprecedented. What most inflation bugs and investors fail to understand is how long it will take to work off the current over hang of excess capacity. If the output gap grows from the current 7% to 10% next year, Goldman Sachs estimates it could be 2015 before all the excess capacity is used up, and that’s if GDP grows 4.75% per year!”So much for the ‘green shoots.’

The Friedman comment reminds me of what the Bolsheviks were saying as they were coming to power.The problem will only persist as long as there’s a huge concentration of power. It’s the same system after all.Do people demand a really just system? Well, we’ll arrange it so that they’ll be satisfied with one that’s a little less unjust … They want a revolution, and we’ll give them reforms — lots of reforms; we’ll drown them in reforms. Or rather, we’ll drown them in promises of reforms, because we’ll never give them real ones either!! – DARIO FO, Accidental Death of an AnarchistMark

It certainly is convenient to ignore the massive supply overhang left in outer SD co. areas not to mention the inland empire (where forward water supplies are a concern) , the central valley and the sacramento valley and lets not forget eastern contra costa. There are easily a 1/4 million homes going begging right now, however “unofficial” just in Ca. When an analysis is done on the present tax burden for these props. (AV, Mello Roos, all overlapping facilities, etc…)It is simple to conclude that it will take years to work this inventory off. Hell, many of these homes don’t come near the credit analysis projections extolled by the Mello Roos infrastructure bond documents used to sell this crap to investors. And when I say investors I mean a goodly portion of California municipal bond funds. So are you seeing a tangle weave yet?

Yes-correct thesis about inventory.

All i know was i was invested in foreign Stocks and foriegn instruments and i got in june 2008 based on what DR Rsaid was coming. I had been in foreign investments for over 5 years without wavering based on DR Rand i avg 35% a year. so when i was finally pulled out in June, “only down 18%” i was ok with that.DR R was right on in my opinion the last 6 years and for that he deserves credit.When he goes bullish so to speak on a particular area of investing everyone will know it.He is not there now and i believe its because as much and as smart he and his folks are, this hasturned into a guessing game on who and what you can trust to make any decsion. There are jsut toomany segments of the US and world economies that are broke. And I know on thing and that isthere are NOJOBS in this country presently.

But it was the German people, the “Good Germans,” who allowed Hitler to stay in power. Although usually bloody, it is always possible to “correct” these problems (such as through revolution).Mark

From Bloomberg: Munger describes ipretty good. Same thing most people on here have been sayingall along.Berkshire’s Munger Says ‘Venal’ Banks May Evade Needed ReformShare | Email | Print | A A ABy Christine Harper, Betty Liu and Erik HolmMay 2 (Bloomberg) — Berkshire Hathaway Inc. Vice Chairman Charles Munger, whose company is the largest private shareholder in Goldman Sachs Group Inc. and Wells Fargo & Co., said banks will use their “enormous political power” to prevent changes to the industry that would benefit society.“This is an enormously influential group of people, and 90 percent of that influence is being spent to gain powers and practices that the world would be better off without,” Munger, 85, said yesterday in an interview with Bloomberg Television. “It will be very hard to accomplish the kind of surgery that would be desirable for the wider civilization.”Munger said policy makers should seek to impose limits on banks that are deemed “too big to fail” after financial institutions worldwide suffered more than $1 trillion in losses. The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the recession.“We need to remove from the investment banking and the commercial banking industries a lot of the practices and prerogatives that they have so lovingly possessed,” Munger said. “If they are too big to fail, they are too big to be allowed to be as gamey and venal as they’ve been — and as stupid as they’ve been.”Omaha, Nebraska-based Berkshire Hathaway, run by Munger’s long-time business partner Warren Buffett, nevertheless is a large investor in some of the biggest U.S. banks.Goldman SachsBerkshire paid $5 billion in September for preferred stock and warrants in New York-based Goldman Sachs, which was the world’s most profitable and highest paying securities firm before converting to a bank holding company. Goldman is now the fifth-biggest U.S. bank by assets.Berkshire’s second-largest holding by market value after Coca-Cola Co. is Wells Fargo, the sixth-biggest U.S. bank. Berkshire also owns stakes in Bank of America Corp., the biggest U.S. bank by assets, as well as U.S. Bancorp, M&T Bank Corp. and SunTrust Banks Inc.Munger said the financial companies spent $500 million on political contributions and lobbying efforts over the last decade. They have a “vested interest” in protecting the system as it exists because of the high levels of pay they were earning, he said. The five biggest U.S. securities firms, only two of which still exist as independent companies, paid their employees about $39 billion in bonuses in 2007.“They would like to get back as closely as possible to business as usual, and they have enormous political power,” he said.

Man made global warming is a scam designed to force the U.S. into a global taxation systemIt’s mentalities like this that are certain to doom us.Mark

Do you have a reference to his ever calling an “L” shaped recession? I was only aware of him waffling between “V” and “U,” mostly tipping toward “U” (which he appears to be more firmly planted in).Mark

Is Munger just covering his butt for when the time comes that the torches and pitch forks come out? Was he saying anything BEFORE all this exploded?Mark

I tend to agree with this.

Reposting from the previous thread:Finally, discussions are turning toward growth and consumption!GDP Growth of 6.3% Might Vanish Into Thin Air: William Pesek[Excerpt:]May 1 (Bloomberg) — Jared Diamond’s obsession with the number 32 should worry Asia.The Pulitzer Prize-winning geographer last month lit up the blogosphere anew with his contention that rich nations use 32 times more water, fuel and food than developing countries and produce that much more greenhouse gases and plastics, too.“The world has serious consumption problems, but we can solve them if we choose to do so,” Diamond said at a conference in Lexington, Kentucky. “The time to begin is now.”That’s truer than ever as Asian leaders converge on Bali for the Asian Development Bank’s annual meeting. No one believes Earth can withstand billions of Asians consuming the way the West does in the decades ahead.—Mark

Hopefully the Swine flu will target these a-holes.

i was obama supporter but now it seems to me he is shallow and is beieng led.

or maybe fair consumption(distribution)

I mean a metaphor for the current state of the economy and government stimulated market:”the paint is sprayed on dead grass and dirt, giving the illusion of a healthy lawn for three to four months”

That’s the best solution yet.

Appalling. Kerry’s response was the worst of all. He is a lawyer and knows full well that bankruptcy judges already have extensive “cram down” powers — the authority to change the terms of private contracts — and that the exceptions (e.g., for first mortgage debt and student loan debt) are few and far between, and not for any remotely logical reason (unless the initial postulate is that banks should be protected from bankruptcy judges with respect to these transactions — it’s certainly not about helping the debtor to get a fresh start).SWK

Is there any evidence yet in H1N1 swine flu victims of a cytokine storm?The job of cytokines is to send a signal to immune cells like T-cells and macrophages that there is an invader in the body such as a swine flu virus. They also tell the immune system to produce more cytokines. Normally, this feedback loop is self-limiting but in some instances production goes into overdrive – a cytokine storm. The overstimulation of the immune system can cause a dangerously high fever and damage internal organs, the lungs in particular. It is believed that during the 1918 Spanish flu epidemic, the death rate was extremely high because the virus somehow triggered a cytokine storm.But, to address the question, no, there is no evidence of a cytokine storm in people who contracted swine flu. Their symptoms are similar to seasonal influenza – sudden high fever, cough, and breathing problems in severe cases.NOT ACCORDING TO ASSOCIATED PRESS!!!!

Q: At the end of a recent interview with Science magazine, Dr. Donis of the CDC states that the USA has received 300 samples of this virus from Mexico. Why has the CDC failed to publish the sequences of any of these 300 Mexican samples Dr. Donis says have been received from Mexico? Doesn’t this seem to be an intentional act?A: I’m not sure. It’s been suggested that the Mexican government wants to keep rights to the use of the viruses as a vaccine and therefore do not want the sequence released. I suspect we’ll find out in the coming week.http://www.virology.ws/Why have the sequences not been published?

The stock markets are being manipulated via the Supplemental Liquidity Program (SLP), I posted a link a few posts above.During the forced-selling episodes we experienced last fall, it seems apparent to me that the bulk of global investments were held by many hedge funds that were responsible for over 40% of stock markets’ movements. Since hedge funds have had to deleverage, market liquidity has massively shrunk and now that lost liquidity is being artificially created by the SLP. The true purpose of this Fed program is to help boost consumer confidence via a rising stock market, artificial as it may be.So how does one feel about investing in an artificially supported market and what will happen if and when the Fed weans the markets off this liquidity support? I believe that the Fed will not let this market get ugly again in the face of bad news, and the news really isn’t getting better but in many ways is getting worse. The pros say “Don’t fight the tape” and I tend to agree with them. Sure, we all know that fundamentally the market makes no sense as this rally has been fueled on low volume and the liquidity will remain until money starts moving off the sidelines and into the markets again.We are being fooled once again by TPTB and as wrong as it is to artificially support markets, the Fed will win, the smart money knows this. In this case, the fluid global market IS the Fed, and they will stop at nothing to keep the markets moving higher.

Tamiflu stockpiles vary widely throughout worldBy GREGORY KATZ – 19 hours agoLONDON (AP) — Poor countries likely to suffer most in a swine flu outbreak have the smallest stockpiles of antiviral medicines to fight it.Affluent countries like Japan, Britain and the United States have enough Tamiflu and similar medicines to reach about a quarter to half their populations, while developing countries like Guatemala, Indonesia and India have enough for only 2 percent of their people or less.The disparities are not surprising given the high cost of stockpiling and maintaining expensive medicines for future epidemics that may never develop, especially when many are already coping with high rates of malaria and HIV. But experts fear the countries with low supplies may suffer higher death rates if swine flu becomes more lethal outside of Mexico, where it has already killed more than 150 people.Elspeth Garman, an Oxford University professor of molecular biophysics who co-authored an influential 2001 report urging Britain to stockpile antivirals, said having low supplies creates severe political problems because the government has to determine who gets access to scarce tablets.TAMIFLU AND RELENZA ARE THE NEW GOLD!

huge politics with respect to sequences e.g. data ownership – in 2006 a collaborative effort was announced called GISAID (gisaid.org) to facilitate sharing of gene sequences. Things have improved greatly in recent years but it is not an open and transparent process as one would expect.http://www.ncbi.nlm.nih.gov/Genbank/index.htmlhttp://www.insdc.org/page.php?page=home&sid=a7eae2d2db1cdfe2b5cc93db2c20410betc etc…

I fully agree with you and Banks should not get the chance to do this crap over again.

Guest, thank you for your riposte, but I really do not recall the hue and cry about the Bush policies from the Republican leadership (Tom DeLay? Not a word.) Ron Paul is an exception, to be sure, and I respect some of his views, but he was marginalized, as you know. He was and is right about a lot of things.And for the record, I do not like one-party control of Congress, the White House and the Supreme Court.There are very few leaders in Congress and they are consistently muzzled, to the detriment of We The People.

Here’s a link to an article by Robin Stein, The Ascendency of the Credit Card Industry, on the website for a Frontline documentary, The Secret History of the Credit Card, that gives a great and concise background explaining how the credit card industry evolved to become so profitable at the expense of consumers:http://www.pbs.org/wgbh/pages/frontline/shows/credit/more/rise.htmlThe industry attempts to justify its gluttony with the mantra that its “innovations” provided a “consumer benefit” by expanding the availability of credit to high-risk consumers (translation: it sold credit to people who really couldn’t afford credit to enrich itself at their expense and keep them in perpetual debt). No wonder there are probably 50 million Americans out there today that will never be able to pay off their credit card debt.SWK

Isn’t it the case, though, that Japan didn’t experience any significant inflation after injecting a huge amount of liquidity into its economy throughout the 1990s when it was facing deflation and a protracted L-shaped recession? For this reason, I continue to question the conclusion reached by some that all of the fiscal stimulation currently being implemented by the U.S. government will necessarily result in substantial inflationary effects down the line.SWK

Oh, come on. You can disagree with Dr. Krugman, but you can’t deny his contributions to the field of economics. Really!SWK

I oive in New Hope and the high school has seen huge expenditures on everything but teaching… it is now in the red and the whole township is in the red. what used to be a quaint shopping district is now closed 3 days a week with limited hours… the whole are which is a very tony place has fallen victim to the economy… But those teachers pensions in a once proud school that cares most about its sports programs rather than the quality of its education is failing its student poulation miserably. I know , I was a parentand am glad my child it out of that teachers and adminstrators country club. Many of the new Hope Kids are going to BCCC which is a great conmmunity college bot because they have to but because they cant even get into the state university system… sad but true.

Obsevation:00′: Gov’t invented and perpetuated a way for me to get rich. Fin. Services Stk Broker 1986-2008,RE Broker 1980-2008,Bot/Sold Gold Coins 1989-2008. Retired’09: Gov’t inventing ways for me to get poor.So how does a guy who went to Columbia/Harvard and becomes Pres. of US decide that the last eight years were without opportunity?

Cure for swine flu or any flu – a strict diet of raw organic green vegetable juice fast freshly made. Viruses and cancer live off of sugar period, deprive them of sugar and you’ll barely notice you have a virus. No sugar means no fruit no bread or wheat no starches like potatoes no rice etc. basically just green vegetables and raw nuts and seeds a diet like this for a week will make it impossible for a virus to do any damage because it can’t replicate. A green juice fast will really send a flu or virus on its way packing. A flu and coco cola is playing with your life. I would say that 95% of cancer patients would survive if they understood this concept- sugar kills!

High LifeMR. RAT GOES TO WASHINGTONby Taki Theodoracopulos on April 24, 2009A recent profile in a New York glossy described him as a member of Wall Street aristocracy, a man to whose parties the rich and powerful trip overthemselves to attend, a networker nonpareil, in short, the greatest big hitter who has ever graced this poor earth of ours. Leave it to acelebrity-obsessed rag to get it so wrong. His name is Steve Rattner, and he looks like a rodent, except that he wears glasses. He is to Wall Streetaristocracy what Paris Hilton is to discretion, a shifty little balding man whose business moves are even shiftier. He is Obama’s chief adviser indealing with Detroit, the “Car Tsar,” in fact.It was at a dinner and I was seated in the same table as the Rat and Mrs. Rat, a woman who calls herself Maureen White, socialite. It was the firstand last time I set eyes on them. Madame Rat was quite unpleasant, making it obvious my wife and I were below her standards. The Rat was just ashostile, but kept his opinions to himself. The Rattners made their names by getting on every city committee imaginable. It is the quickest way upcafé society, and they took full advantage of it. The Rat comes from a modest background but learned early on to hook up with movers and shakers, aspeople who buy influence are known as in this town. His top catch was Arthur Sulzberger, publisher of the New York Times, the paper Rattner went towork for but eventually left for the greener pastures of banking. He remained tight with Sulzberger, a man who inherited a great fortune and isabout to turn it into a very small one, and this friendship led to people like Michael Bloomberg, Mort Zuckerman, Richard Holbrooke, the Clintonsand others too fishy to name in this here column.The reason I’m writing about this social climber is because of his involvement in a scandal of gigantic proportions, yet as recently as last Fridaya White House spokesman said President Obama had full confidence in the Rat. I find this very strange. I know a man is innocent until proved guilty,but I also know about Caesar’s wife. A new administration that is printing trillions of dollars and taxing everyone to the limit cannot affordshifty types like Steve Rattner cutting corners. After leaving journalism, the Rat joined Lazard Freres and became Felix (the Fixer) Rohatyn’sminion. He angled for the top spot after Felix’s departure, but the big boss, Michel David Weill, never trusted him and told him it was no go.Rattner quit and began a fund of his own, Quadrangle, around the year 2000. It was meant to invest in media properties, and it did. It boughtFelix Dennis’s semi-porn ladmags, Maxim, Blender, and Stuff, mags I have never read but, once upon a time, were big money makers. This was a bust,and the Quadrangle Group had to call upon other investors, drawing on Rattner’s social and political connections. One of the investors was Cerberus,a giant private equity firm which had bought Chrysler some time back. Here comes the first tricky part. When the porn business continued to do badly,Rattner played hard ball with Cerberus after defaulting on the loan at Alpha Media (“A payer he is not,” was the way someone described Mr Rodent.)Then, out of the blue, Rattner was named Obama’s front man to deal with the auto mess, which to my mind is a bit like sending Ezra Merkin orWalter Noel to deal with Madoff’s victims. My question is how can Chrysler get a fair deal—not that it should after the lousy cars it’s madethese last 75 years—from a man that owes it a fortune? Rattner, of course, left Quadrangle once he got the Washington job, not that it means much.He still has his equity in the group and knows which side his bread is buttered on.Now for the big one: In a 123-count indictment issued last month, two people were accused of selling access to investment firms in the New Yorkstate—get this—122 billion dollar pension fund. In other words, two men working for the comptroller took back kickbacks in the millions whilegiving access to the pension fund to—yes, you guessed it—Quadrangle Capital, whose head Steven Rattner even runs Mayor Mike Bloomberg’s money.Quadrangle won $100 million worth of business from the pension fund, and most likely kicked back around ten million. Rattner is supposedlyco-operating fully and basically has not broken any laws. Before accepting the Obama offer Rattner was angling for Treasury, but wiser headsprevailed. What I’d like to know is why are the people who took the bribes facing ten years, and those who offered them and benefited as aresult are only getting a brief write up in the Spectator and Takimag? (The Times, to her credit, has reported on the story at length)Mind you,the bigger the corner cut, the less bent people are likely to resign. Rattner should never have gotten the job of Car Tsar, and thenew administration should have appointed someone with less access to billionaires who became billionaires on the back of Wall Street andWashington insiders. It goes to the heart of public integrity, but integrity is a word few know how to spell nowadays. The Ratshould resign and go back to hustling and social climbing in New York.http://www.takimag.com/index.php/blogs/article/mr._rat_goes_to_washington

No jobs trillions lost no credit yea sure inflation’s just right around the corner.

From Der Speigel online:

Scattered violence erupted in Berlin and Hamburg late Thursday night as demonstrators clashed with police. The rumpus was a warm-up for the May Day riots that have become a predictable tradition in German cities. more… >

CHOREOGRAPHY OF CONFRONTATION – May Day Clashes Start Early in Berlin

looks like level 6 sometime SundayFrom The Sunday TimesMay 3, 2009New swine flu alert despite doubts over level of dangerTHE World Health Organisation (WHO) is poised to declare a global swine flu pandemic despite suggestions by scientists that the H1N1 virus responsible may be no more dangerous than the average annual flu season. …

Thought some of you would like to know what many of our thinkers have been saying recently.http://www.nytimes.com/2009/05/02/business/02nocera.html?8dpcExample:” Next panel: Robert A. Eisenbeis of Cumberland Advisors gives a talk titled “Are things really that bad?” His answer is, no. “We are far from the Great Depression,” he declares, and he has the charts to prove it. When measures like gross domestic product and corporate profits are charted against other recessions, this one looks pretty bad. But when they are charted against the Great Depression, they look like a piffle. In the depths of the Depression, for instance, G.D.P. dropped by a staggering 50 percent, compared with the current drop of 2 percent or so. “The people who are fear-mongering are not looking at the data,” Mr. Eisenbeis concludes.”“The scale of the crisis has overwhelmed the response,” Mr. Krugman says. To the extent there are green shoots, he added, “it means that things are getting worse more slowly.” Mr. Roubini practically scoffs at the notion that we might see positive economic growth in the second half of the year. Mr. Soros says that “we are currently facing a deflationary situation. But when credit restarts, the fear of deflation will be replaced by fear of inflation, and there will be pressure for interest rates to rise.” Something to look forward to, I suppose.”Complaining about bailing out the banks and all the moral hazard that has been created is popular, but those complaining should at least acknowledge the devastation had nothing been done. Unfortunately many, whose jobs have been saved by bailouts, listen to the conservative right who have found their conservative economic religion again and will blame the current administration for the pain we will be going through in the future, not the least of which is to pay for these bailouts. Seems as though not enough information has been provided to the masses about the alternative road. Parallel universe to see the different paths would be cool.hlowe

Goldman Sachs has responded to the Zero Hedge claim that they are dominating NYSE volume with over a billion trades/day.The latest post on ZH gives TD’s juicy rebuttal.

thanks here is the link to the actual articlehttp://zerohedge.blogspot.com/2009/05/observations-on-nyse-program-trading.htmlalso some other posts at ZH that are interestinghttp://zerohedge.blogspot.com/2009/05/white-house-threatened-to-destroy.html

Still asking for the reference…Mark

Outrageously simplistic comment.

I am reminded of something I like to call the ‘Greenland Effect’. In global warming scenarios, some ecologists believe that we would head into an ice age, yes, an ICE AGE. The ocean, just off the coast of Greenland, causes very dense water to drop down (since ice floats above water that is about 4.5 degrees C). This is the end (or beginning) of the oceanic current that goes all the way into the Pacific Ocean (via the Indian Ocean). Some theorists suggest that this cycle will shut off if the rise in global climate change continues. Here is the problem: if there is a negative feedback loop on the cold water dropping (near Greenland), then if it shut off, thereby stopping the flow of warmer waters towards Greenland (precipitating the ice age), wouldn’t that just start it up again?If I have lost you, think of it this way: Cold water drops down near Greenland. This causes the waters of the oceans to move, distributing the warmth from the tropical regions. If the overall planet temp rises, then the water near Greenland will not drop. If that happens, then warm water will not go to Greenland (via the Gulf Stream). Then Greenland (and all polar regions) freeze. But this should cause the water to begin dropping near Greenland, eliminating the problem causing the freezing. So the suggestion by these ecologists is silly, because the system has a self-correcting stop-gap.Now, with the suggestion of hyper-inflation due to too much debt to equity. If the equity that is lowering is in real estate, then when inflation hits, the real estate will rise in nominal value precipitously. This should (at least partially) alleviate the problem with lower consumption because people usually will spend about 6% of their net worth (according to some statistics I saw recently).I am not suggesting that uncontrolled spending is a great solution. I agree that some inflation is almost certainly going to occur. I am only pointing out that if this deflation is caused by falling housing prices, then the inflation of which you are warning should be alleviated partly by rising housing prices (and rising consumer demand).

Probably the best analogy yet!Mark

How is this bear market rally shaping up compared to past rallies?Chart of the DayLooks like it’s just about run its course…Mark

Where is your proof that banks are holding properties? What bank wants to be on the hook for taxes, insurance, and maintenance on a property for some purported price increase?

It definitely is.

But true, only someone with a medical background would find it an outrageous comment. How would pharmaceutical companies and doctors get paid if this truth were made popular in the media? Their entire industry would shrivel down to a much smaller level. Food companies would be devastated etc. The entire pharmaceutical industry is based on let us eat our processed sugar based American diets and then take a drug to cure our ailments once we’re sick from them.

right here… http://www.countrywide.com/purchase/f_reo.aspNot sure what country you live in but there is 20 million unocupied housing units and most owned by banks.and Banks are not payingthe taxes either…. and very few maintian them and when they do, they do so at the minimum and only on those they feel cango back up the quickest. and as the guest below says, some are servicing the loans so as nto to show a loss and againon properties they perceive as having value in the future.

How is that different from Japan’s experience?SWK

Swine H1N1 Transmission From Human to SwineRecombinomics Commentary 07:10May 3, 2009The pigs in Alberta were thought to be infected by a farm worker who returned from Mexico on April 12 and began working on the farm two days later. Officials noticed the pigs had flu-like symptoms April 24, Evans said.Approximately 10 percent of the 2,200 pigs on the farm have been infected, Evans said.The above comments describe the transmission of the H1N1 swine flu from an infected farm worker to swine in Alberta, Canada. This efficient transmission from human to swine suggests that much of the speculation in the past week is overly optimistic.The virus is swine, WHO newspeak notwithstanding, and contains six swine gene segments as well as a human PB1 and an avian PB2 that have been in swine for more than a decade. Therefore, although swine to swine transmission is not unexpected, the trans mission from human to swine is striking. The H1N1 is called swine H1N1 for scientific reason. It is not a “nickname” as some media accounts mis-report, but a descriptive name that defines its normal host. The species differences in sequence are easily determined, and species jumps are rare, but can be deadly. Usually the virus replicates most effectively in is host species.The jump to humans is cause for concern. The last time as swine flu jumped to human and was efficiently spread in the new host was in 1918.The fact that the virus can jump from human to swine as well as swine to humans suggests this virus is not going to fade away. It has already moved into the southern hemisphere. Suspect cases have been reported in Brazil, Australia, and New Zealand, where the seasonal flu season is just beginning.Co-circulation of human and swine H1N1 provide significant opportunities for adaptation to the human host via recombination. Two polymorphisms are already fixed in seasonal flu, H274Y for Tamiflu resistance, and E627K in PB2 which allows the virus to more efficiently replicate at lower temperatures.These changes can lead to adaptation in humans, as well antiviral resistance. Therefore, the evolution of the H1N1 over the summer will be closely monitored. The current H1N1 has already acquired tandem human H1N1 polymorphism in HA, which may have led to the species jump from swine to human.Thus, the efficient transmission from swine to human and vice verse, raises concerns that further adaptation to humans can lead to a fall pandemic similar to 1918. The species jump indicates the virus can adapt to a new host, and additional acquisitions over the summer continue to be a cause for concern.

Excerpts from “It Depends on Meaning of Usury as U.S. Credit Cards Average 14%” (April 30, 2009)The average annual percentage rate offered to new card customers in the U.S. was 14.2 percent in April, up from 13.8 percent a year earlier,according to IndexCreditCards.com, which surveys the industry to track rates.Banks can borrow at interest rates that are almost as low as Treasury yields because of new Federal Deposit Insurance Corp. guarantees. A programannounced in March lets investors borrow from the government to buy asset-backed bonds, including securities based on credit card debt.The retreat occurring in credit cards is like nothing [Robert Hammer, chief executive officer of Thousand Oaks, California-based creditcard advisory firm R.K. Hammer Investment Bankers] has seen in his 30-year banking career, he says. “They are shooting themselves in both feet,”he says. “They are saying, ‘We aren’t going to take risk.’”A Moody’s Investors Service estimate of credit card charge- offs, or debt that issuers deem uncollectible, jumped to an annualized rateof 8.8 percent in February, the highest in 20 years of data. That may rise to 10.5 percent by mid-2010, especially if the U.S. unemploymentrate continues its rapid climb, Moody’s analyst Will Black says. “This recession is so big that it’s affecting issuers and cardholders on ascale not seen before,” he sayshttp://www.bloomberg.com/apps/news?pid=20603037&sid=a4tXvQTb.j0Q&refer=home

A corroborative thought: Henry Paulson, former CEO of Goldman Sachs, is the man who as president ofNature Conservancy turned that once environmental group into a series of cattle ranches around theworld for Goldman Sachs fast food.From: “Goldman Sachs White House: Capitalism and Slaughterhouses”:Goldman Sachs White House and USDA protect meat industry and theirfilthy meat –[quote]U.S. may withhold names of retailers in all but ‘greatest risk’ meatrecalls 26 Mar 2008 Under pressure from the food industry, theAgriculture Agribusiness Department is considering a proposal not toidentify retailers where tainted meat went for sale except in cases ofserious health risk, The Associated Press has learned. Had that beenthe rule in place last month, consumers would not have been told iftheir supermarkets sold meat from a Southern California slaughterhousethat triggered the biggest beef recall [143 million pounds] in U.S.history.[/quote][url]http://www.legitgov.org/#breaking_news[/url][B]ANALYSIS[/B]The Goldman Sachs White House (Robert Rubin formerCEO of Goldman Sachs named Secy of Treasury, replacedby Henry Paulson, formerCEO of Goldman Sachs named Secy of Treasury,(also the man who as president of Nature Conservancy turnedthat once environmental group into a series of cattle ranchesaround the world for GS fast food) is one factor in thedecision. The American Meat Institute’s pupil Ann Veneman, formerUSDA Secretary, is now contaminating the diets of the world’schildren at UNICEF, while her predecessor in the Clinton regime,Dan Glickman, like her, hid the great incidence of not only Mad Cowbut Mad Pig, Mad Lamb, Mad Sheep, Mad Deer, Mad Chicken, MadFish, Mad Turkey etc from the American and world’s public througha variety of methods including the misdiagnosis of Mad Cow deathsas meningitis, brain tumors, Alzheimer’s, etc.Previously the USDA, FDA, CDC and other pawnshttp://cbusimc.org/node/13462By the way, the links won’t pull up: if you type in Goldman Sachs White House: Capitalism and Slaughterhouses … Google now says siteis off-line, so you must click cached for “a snapshot of the page as it appeared on Apr 24, 2009 04:52:07 GMT.”

I’ll give you this piece of paper and you work hard and clothe and feed me.. Oh and I want a big house and big car and I want to travel and enjoy my life… And you just keep taking these piece of paper promises that some day, way off in the future, my grandchildren will work hard and pay your grandchildren back.. OK!Printing money does not an economy make!70% of our economic activity is by the consumer. Our monetary system is based upon debt. To increase the velocity of money, which relates directly to increasing economic growth, personal debt has to be increased. Refinancing a foreclosure for half the original amount is not an increase in the total personal debt. Just because the government issues debt, that doesn’t relate to any direct real increase in the velocity of money. Why? Because it has to get into circulation and there are few ways this happens. None of them as direct as a consumer borrowing to buy a house or car or running up charges on their credit cards.The idea that all the increased federal indebtedness is going to cause inflation is not born out by the facts. Slowing retail sales, including autos and falling house prices suggest that personal debt is still falling and deleveraging is continuing. Deleveraging is a name for collapsing debt which relates directly to collapsing velocity of money. Another indicator of the shortage of actual money in the system is that interest rates have started to rise. Another is the dollar has remained fairly strong. Gold has not skyrocketed upward. There are not yet any indications that an increase in federal debt is increasing the velocity of money where it counts, in the public arena.What is going on with all the trillion$ that the government is creating via new debt? I see it just filling the huge black holes left when highly leveraged finance meets consumer deleveraging and soon to meet commercial real estate and commercial loan deleveraging.It is going to pay the highly leveraged debts the financial institutions owe to the private equity groups, the pension funds, the insurance companies, money borrowed from MM funds, foreign investors including FCBs and ETAL.And of course to run their very expensive hedge funds. All of those who put us into this mess are still getting paid their outrageous incomes too.. So in the end, little of the increases in federal indebtedness are actually increasing the money supply where it counts, among the consumers because when every one was living way beyond their means, spending borrowed money on consumption and not investment, that money was spent and did its thing then. Now we have to still pay for that previous spending plus the current bills, so all these trillion$ are actually doing is barely propping up a dysfunctional system.As the federal indebtedness grows, there will be a point where the increased costs meet the decreased tax income from the dying consumer activity and we will have a failure at the national level. It is not mathematically possible to have decreased income and increasing costs forever. It is called insolvency and the public has been learning about it for a few years now. At some point our government is going to find out what Argentina found out a few years back and at that time, so will the citizens.

One hundred percent, Anonymous. 100%.

Someone last week, when this happened, says he reduces the size of the type. But I don’t see anything on my computerthat allows that. (?)

Chrysler Drags U.S. Auto Sales to 34% Drop, Trailing EstimatesMay 1 (Bloomberg) — U.S. auto sales tumbled 34 percent in April, the 18th straight monthly decline, as Chrysler LLC’s slide toward bankruptcy helped shrink the industry more than analysts estimated.Chrysler’s U.S. deliveries fell 48 percent in joining Toyota Motor Corp., Ford Motor Co. and Nissan Motor Co. with decreases that were worse than analysts expected. General Motors Corp. and Honda Motor Co. sales dropped less than projections.April ended with Chrysler’s Chapter 11 filing, the swine flu outbreak and GM still racing to beat a June 1 deadline to restructure without ending up in court, tempering any benefits from rising consumer confidence.“The cloud of bankruptcy is still very much hanging there,” said Rebecca Lindland, an IHS Global Insight analyst in Lexington, Massachusetts. “We can’t just see these little glimmers of hope in consumer confidence. We need to see an actual sustained recovery in the economy.”April sales ran at a seasonally adjusted annual rate of 9.3 million units, according to industry research firm Autodata Corp. of Woodcliff Lake, New Jersey. That missed the 9.9 million estimate of 7 analysts surveyed by Bloomberg.Lindland said she expects the rate to fall to 9 million in May and June. The March rate was 9.9 million, after February’s 9.1 million came in as the lowest since 1981. Sales totaled 13.2 million in 2008, and averaged 16.8 million this decade through 2007.Industrywide deliveries slid to 819,171. Ford slumped 32 percent, Toyota tumbled 42 percent and Nissan fell 38 percent. GM decreased 34 percent, and Honda dropped 25 percent from a year earlier.Automakers took comfort from the 34 percent industrywide decline, which was the smallest this year.http://www.bloomberg.com/apps/news?pid=20601087&sid=aodlqcd_2_6Y

g,it happens occasionally and i live with ittill the next post comes out at which point itis usually corrected. some have called itside winder, i like that.right now mine is fine?

“The Clinton Bubble” by ROBERT SHEER | Truthdig.com April 28, 2009Has TIMOTHY GEITHNER ever had lunch with a non-megamillionaire who has lost his job or home because of the banking meltdown? I ask that question afterreading the list of the treasury secretary’s luncheon dates when he was head of the New York Federal Reserve, a list that the government was forcedto provide in response to a lawsuit.During those years when he was supposed to be supervising Wall Street, he supped most often in the top-echelon dining room of some bank or at the homeof one of the financial moguls who created the mess that has now bankrupted billions throughout the world. One of his frequent luncheon buddies wasSanford I. Weill, who as chairman of Citigroup lobbied successfully for the reversal of key regulations that dated back to the New Deal era. Thatchange permitted Weill’s oligarchy to become “too big to fail.”Another preferred dining companion was Robert Rubin, who as Bill Clinton’s treasury secretary pushed through Weill’s favored deregulation—a disastrous“reform” that lies at the heart of the current mess—and who went on to become chairman of Citigroup, where he presided over a downfall of the companythat required a $45 billion taxpayer bailout. Geithner had worked for Rubin at the Treasury Department, and it was Rubin who got him his job at theNew York Fed and hooked him up with Barack Obama.Geithner has since pushed the Obama administration to approach the banking crisis not in response to the needs of destitute homeowners but rather fromthe side of the bankers who are seizing their homes. Instead of keeping people in their homes with a freeze on foreclosures, he has rewarded theunscrupulous lenders who conned ordinary folks.He still wants to give more money to Citigroup, which has just been found woefully short of cash by Treasury’s auditors, and has not stopped Fannie Mae,Freddie Mac and some other big banks ostensibly under government influence, and indeed sometimes ownership, from recently ending their temporarymoratoriums on housing foreclosures. Geithner has been in the forefront of coddling the banks in the hopes that welfare for the rich will trickle downto suffering homeowners, but that has not happened.As The New York Times revealed this week in a devastating exposé of Geithner’s record: “An examination of Mr. Geithner’s five years as president of theNew York Fed, an era of unbridled and ultimately disastrous risk-taking by the financial industry, shows that he forged unusually close relationshipswith executives of Wall Street’s giant financial institutions. His actions, as a regulator and later a bailout king, often aligned with the industry’sinterests and desires, according to interviews with financiers, regulators and analysts and a review of Federal Reserve records.”MOST REVEALING WAS THE TIMES’ DISCOVERY THAT GEITHNER SHOCKED A MEETING OF TOP GOVERNMENT OFFICIALS, CONVENED BYTHEN-TREASURY SECRETARY HENRY M. PAULSON TO DEAL WITH THE FINANCIAL CRISIS, WHEN “[H]E PROPOSED ASKING CONGRESSTO GIVE THE PRESIDENT BROAD POWER TO GUARANTEE ALL THE DEBT IN THE BANKING SYSTEM…”Now I know that the conventional wisdom among Democrats is that the Clintonistas were wildly successful in running the economy when they had their turn,and that Rubin and his protégés Lawrence Summers and Geithner deserve a lot of the credit. But that view is dead wrong. The seeds of the current economicchaos were planted in those years, in which Wall Street lobbyists were given everything they wanted in the way of radical deregulation, and hence was bornthe madcap world of credit swaps and other unregulated derivatives.The result was a Clinton bubble, which saw the rise of a new superrich class that vastly skewed income distribution in favor of what was termed the“working rich” by Emmanuel Saez, who deservedly just won the top prize for young economists, the American Economic Association’s John Bates Clark Medal.Members of the “working rich” are well represented in the top 1 percent of income “earners,” who, according to a study by Saez, “captured about half ofthe overall economic growth over the period 1993-2006.” The record is clear that from the first year of the Clinton reign, the new class of superrich,including many Wall Streeters, benefited as much as the other 99 percent of the nation’s population did from the policies that Clinton put in place andGeorge W. Bush accelerated.To add salt to the wounds of those left out of the bubble, the Clinton administration summarily ended the federal poverty program in the name of aso-called welfare reform that “devolved” programs for the poor to the tender mercy of the states. The meanness derby between the cash-strapped statesis on, and the poor, a category that includes a growing number of folks who only recently were judged “middle class,” are abandoned.What is involved here is an extreme case of government-condoned “moral hazard” offering outrageous compensation to the superrich for screwing uproyally. Where is the socially conscious Obama we voted for? E-mail him and ask.http://www.truthdig.com/report/item/20090428_the_clinton_bubble/

Make that SCHEER — sorry!

We’ve become an oligarch run country and Roubini and Krugman are as much to blame as anyone, they both nibble at the fringes of the oligarch’s power in terms of any legitimate counter. They’re quickly reeled back into line if they become too much trouble they’re opposition is moderate and used only to legitimize the financial oligarch’s position and avoid potential scandal. The opposition is mostly moderate and tightly regulated by the media. Roubini wouldn’t be in the position he is if he weren’t one of them. Make no mistake about it, it is a war between the rich and working class and if you think Roubini and Krugman is on the workers side you haven’t been paying attention to their moderate and regulated criticism.

“toilets, with two flushing modes…”Colleges Flunk Economics Test as Harvard Model Destroys Budgets (a very long article; excerpts reflect a lesson on debt)May 1 (Bloomberg) — On a Thursday morning in March, the $32 million School of Management building at Simmons College in Boston is all butdeserted. Three students lounge in armchairs facing floor-to-ceiling windows that look over the quad with its winding walkways and greeninglawn; another makes photocopies.“This building is always empty,” says Raya Alazzouni, a sophomore from Saudi Arabia who’s studying graphic design and taking courses in themanagement school.Simmons, home to 4,700 students, opened the 66,500-square- foot (6,200-square-meter) center in January, two months before the U.S. stock markethit its lowest point in 12 years. Even before the ribbon cutting, enrollment in the management school had been dropping.Now, the vacant halls are reminders of the new math confounding U.S. colleges. Students, pummeled by scarce loans and savings plans that have fallenas much as 40 percent, are heading for less expensive schools. The perks designed to lure them during boom times — from hot tubs to dorm-suitekitchenettes, to in-room cable TV — are crushing universities with debt. Even projects like Simmons’s “green” management building, with itsrain-absorbing roof patio and toilets with two flushing modes, can turn into burdens as schools struggle with rising expenses, plummeting endowmentsand needier applicants.‘Spending Binge’“The spending binge by colleges and universities was part of the same trend that created the bubble in the rest of the economy,” says Ronald Ehrenberg,an economics professor at Cornell University in Ithaca, New York, and author of “Tuition Rising: Why College Costs So Much” (Harvard University Press,2000). “Now we’re seeing it burst.”From Harvard University to California’s 3 million-student community college network, the American system of higher education is in turmoil. The economiccrash is upending each step in the equation that families use to determine where students will spend four of their most formative — and expensive –years. Today is the deadline that most schools set to receive a decision from accepted applicants.Independent colleges that lack a national name or must-have majors are hardest hit. Many gorged on debt for construction, technology and creaturecomforts. Now, as endowments tumble and bills mount, they’re struggling to attract cash-strapped families who are navigating their own financial woes.Shutter Their DoorsSuch mid-tier institutions may be forced to change what they do to survive. In the best case, they’ll merge with bigger schools, sell themselves tofor-profit organizations or offer vocational training that elite colleges eschew, says Sandy Baum, a senior policy analyst at the College Board. In theworst case, they’ll shutter their doors for good.Standard & Poor’s predicts bankruptcies will rise from the typical one or two schools that fold each year.“Small colleges with no reputation could go out of business,” Baum says. “They’re very tuition-driven, so if they can’t get tuition revenues, they’llbe in really bad shape.”College of Santa Fe, a private liberal arts institution, is one casualty. On March 24, the 1,900-student school in New Mexico announced it was closing.The reasons: It couldn’t pay its $30 million in debt, and talks to join with New Mexico Highlands University, a state school, broke down.Richard Kneedler, a former president of Franklin & Marshall College, a Lancaster, Pennsylvania-based college founded in 1787 with financialsupport from Benjamin Franklin, says many small schools face the same predicament.Schools in DangerKneedler says 207 independent colleges, or almost a third of the 678 he analyzed, don’t have enough capital to keep going for the long haul — a35 percent surge from a year ago. These schools are at risk of closing during a prolonged crisis. Failures would rise further if the recession persistsbeyond 2009, says Kneedler, who’s now a management consultant at Towson, Maryland-based Yaffe & Co.“If the markets normalize in a year, most might survive,” he says. “If we’ve got a second year like this, the number of schools in danger will multiplyby 10.”Simmons, founded in 1899, educates a mix of 1,900 female undergraduates and 2,800 graduate students. Its women-only undergraduate liberal arts programaccepts 56 percent of applicants; top-tier schools accept fewer than 20 percent. Simmons has five graduate schools, from the 200-student School ofManagement to the 1,100-student College of Arts & Sciences Graduate Studies.Colleges like Simmons — mainly undergraduate schools offering some master’s degree programs — are in the worst financial shape, according toKneedler’s analysis. They turned to borrowing for the amenities they used to entice students to small programs. Now, they’re drowning in debt, Kneedlersays…Like the housing bubble, Simmons’s woes started with easy credit. The school borrowed more than $140 million, tripling its debt in the seven yearsthrough 2008. It added classrooms connected via wireless networks. It renovated its library. And it spruced up its student center with a coffee barand mix-your- own-milkshake cafeteria…Simmons raised annual tuition and living expenses to $41,500 in 2008, 22 percent above the $34,132 average for private colleges. Sarah LawrenceCollegein Bronxville, New York, the costliest U.S. school, charged $53,166 last year.Then credit markets collapsed. Simmons — and even better- known schools such as nearby Boston University — felt the aftershocks. Like manynow-struggling companies and municipalities, Simmons had sold variable-rate bonds and hedged against rising interest rates through swap agreements,which fixed interest costs for the school.When rates fell, Simmons owed more than $10 million on the swaps. When it refinanced the bonds, it had to accept more than triple the interest rate ithad been paying before the crisis. Drinan expects to settle the swap with bankrupt Lehman Brothers Holdings Inc. at a lower cost.Wall Street provided the tools for schools to take advantage of cheap credit. Bankers introduced college finance executives to the interest-rate swapsand similar innovations that are now costing colleges, says Andrew Evans, vice president for finance at Wellesley College in Massachusetts.Investment Banks“All these investment banks were offering a wide variety of products,” he says. “It’s not like the schools and universities thought of thesethemselves.”Last fall, Moody’s Investors Service and S&P downgraded Simmons’s debt by one grade to three grades above junk, citing projected budget deficits. Sincethen, Simmons has trimmed its $100 million budget by $5 million. It wants to cut another $2 million by June. It boosted tuition and living expenses by5 percent to $43,500 for the 2009-10 school year. The president’s residence, a two-story redbrick mansion 3.5 miles (5.6 kilometers) from campus, is forsale for $2.2 million…Even Cambridge, Massachusetts-based Harvard, whose endowment almost tripled to $36.6 billion in the past decade, is offering buyouts to 1,600nonfaculty employees.In mid-April, Harvard’s Faculty of Arts and Sciences said it would slash 19 percent, or $220 million, from its $1.15 billion budget over two yearsbecause of endowment losses. Harvard’s holdings plunged 22 percent in the second half of last year, leaving a $52 million budget gap.In December, falling interest rates had already forced Harvard to sell $500 million of bonds to cover swaps it had bought to protect against risingrates.Harvard will have to sell more assets to meet its obligations to private equity firms in coming years, says Steven Davidoff, a law professor at theUniversity of Connecticut, who has studied the school’s endowment. Private equity firms require commitments from investors for moremoney when buying opportunities pop up.Across the Charles River, Boston University, with more than 30,000 students, has frozen staff hiring and salaries. It spent more than $500 millionin the past five years on a 6,300-seat ice hockey arena, home to the 2009 men’s national champions, and dorms with two- to four-bedroom suites.Another centerpiece, the $100 million fitness center, features a 35-foot (11-meter) rock- climbing wall, indoor track, Olympic-size pool and hot tub…About 20 percent of private colleges reported that fewer students returned this past September compared with the previous year…More students will start undergraduate careers at community colleges. About three-quarters of such colleges say enrollment increased at least5 percent this year from a year earlier, according to a survey published on March 17 by the League for Innovation in the Community College…http://www.bloomberg.com/apps/news?pid=20601109&sid=aoglHAxZffTI&refer=home

Nouriel, you seem to be understanding the present crisis fairly well, but Peter Warburton’s book Debt & Delusion published in 1999 was remarkably predictive of the current crisis. I have kept a copy by my bed ever since and dipping into the text has been like reading the future. Unfortunately the debt and delusions are greater than ever.

Taleb does not belong on the list; he brings nothing new to the table. Tail risk is well known and well discussed in financial circles. Stating there are ‘fat tails’ just states the catastrophe will happen some time; it does not forecast anything.

Yippee. I just bought one of Amazon’s few remaining copies of Warburton’s five-star book (got a new copy for $75! Better than the used for $232!). Here were the reviews on Amazon AND a “product description from Warburton! Thanks, Psi!!Editorial Reviews”… a classic ‘Financial Reality Bites’ read of the highest order.” — John Mackenzie, Safehaven.com, May 8, 2005″A great book…about this present generation’s massive debt…[and] about how Western Civilization has become too dependent on debt.” — David N. Vaughn, Gold Letter, Inc., February 6, 2004″An undeservedly obscure work of financial economics, Peter Warburton’s Debt and Delusion… has become a cult classic among financial contrarians.” — Robert Blumen, Mises.org Daily Articles, August 11, 2004″What happens if there’s an end to this booming economy? That question is clearly answered [in Warburton's] Debt and Delusion.” — J. Tim Thompson, The Trumpet, March/April 2000Product DescriptionIt’s been almost seven years since I wrote Debt and Delusion. So naturally, readers have a right to ask, “Why produce an updated version at this time?” There are at least three reasons, the cheapest of which is that the author is surprised and flattered to find that it is in demand and there has long ceased to be any supply.More than that, like an abandoned mine, the book stands as a monument to what was already known about the global credit expansion and the strains in the financial system before the halving of equity market prices from the early 2000 peaks. Most importantly, and sad to say, this equity market trauma foreshadows even more disastrous results of the financial folly that has reached proportions unimaginable in the summer of 1998. And so, the primary function of the book — “as a timely warning of the perils that lie ahead” — remains valid.Debt and Delusion exposes serious flaws in the development of the global financial system starting in the early 1990s, singling out the world’s largest central banks for special criticism. Their negligent oversight has permitted an explosion of corporate and household credit that has fueled a succession of false markets in stocks, bonds, and property. Alarmed by the monster so created, the U.S. Federal Reserve has spent much of the past five years staving off the evil day when foolish lending turns into bad debt.Far from being the architects of economic stability and low inflation, the world’s central bankers have ushered in a new era of financial fragility and latent instability. Innovations in the use of derivatives, structured products, and other complex financial instruments have been applauded by the central banks on narrow technical criteria. But these supposed bastions of conservatism have failed to comprehend the wider implications for financial stability.From poorly documented home loans to sub-prime auto loans to subordinated corporate debt and junk bonds, permanently easy access to credit has compromised economic management in the U.S., U.K., and other English-speaking nations and has fostered an illusion of prosperity and well being.Lamentably, this staggering collective flight from reason has been endorsed by the economics establishment.The failure of many of the finest economic minds to engage with the rapid evolution of our financial structures and institutions has led to a superficial assessment of this unprecedented credit experiment. Only now, as various credit markets face the inevitable tests of higher interest rates and the realistic pricing of credit risks, is the threat of a pandemic of debt-related distress beginning to be taken seriously. Government budgets, already strained by the weight of social support, have limited scope to respond.In short, tougher economic times lie ahead, when personal debts will hang more onerously than for 75 years. Debt and Delusion recommends a hasty! reappraisal of the debt requirements of corporations and households alike.Peter WarburtonSeptember 2005http://www.amazon.com/Debt-Delusion-Threaten-Economic-Disaster/dp/0977079333/ref=ed_oe_h

I too am waiting for the right time, but not sure if this is it as. In the event of hyperinflation, I do think California (prop 13) is the place to be if you own real estate.

I don’t get it! After separating the collateral from the securitized debt, it seems the banks get to keep the foreclosed properties for resale while simultaneously reaping the harvest of bailout money for the “toxic assets” they kept on their books. Can this be true? “Grapes of Wrath” comes to mind.

“Automakers took comfort from the 34 percent industrywide decline”?Huh? This was good news?So gosh, if people aren’t buying autos, how in the hell are they going to afford mortgages?

It is said (by Benjamin Friedman among others) that growth is needed in order to maintain a decent and tolerant society. Too much negative growth tends to lead to revolution. McCain might actually have won the last election if it wasn’t for the downfall of Lehman. 2 or 3 years of negative GDP growth who knows what would happen.Although I do think that the US has tons of accumulated wealth – it would have to be spread around….

It reminds me of Guest’s quote early in the blog: “The debt bomb…is a de facto controlled demolition of the u.s. and g7 economies by theprivately owned central banks. The demolition cartel knows exactly what they are doing, creating vulnerabilities as a diversion to theirconfiscation as we fight amonst ourselves for their amusement.Exponentional compound interest income via fractional reserve lending, massiveredistibrution of wealth via foreclosure are only two of the tools in their bag of tricks.”

There are only three possible states:1) Growth2) Static3) DeclineBecause nature (time) doesn’t sit still, “static” really doesn’t exist, except for a significantly irrelevant time slice.That leaves only the states of “Growth” or “Decline.” Obviously, Decline is growth, but in reverse. The principles apply to both then. You cannot have a never-ending rate of growth or decline. Sooner or later both will cap (or crash).Friedman apparently overlooked a very fundamental issue. I’d also take issue that growth maintains a decent and tolerant society by pointing out that crime rates tend to be higher in large cities: growth in cities never cures its ills.Only growth in wisdom (the mental) can be viewed as a true positive.McCain winning the election? Did you not get what the election was all about? They didn’t pick Palin for nothing: TPTB had NO interest in McCain; Palin was strung around his neck like a dead albatross. The entire globe would be lit up now had McNasty come to power: and, if there’s anything positive that can be said about TPTB, it’s that they didn’t want to see that; war, contrary to popular (nationalist) myth, isn’t good for business (only the war contractors).Mark

Facts George, facts…Mark

And I’m in your fan club as well, AJ Mark

Paper and plastic were never going to hold up in the long-run…Mark

Interesting that this estimation missed by 6%. I think that this number will tend to be a constant, just like 3% growth used to be: my guess is that it matches up with the loss of 3% growth plus a decline in oil production by 3%.Remember what 6% growth/decline means: a doubling/halving in about 12 years.Mark

WOW!Mark

China has ‘canceled US credit card’: lawmaker3 days agohttp://www.google.com/hostednews/afp/article/ALeqM5i4estRSYeFBIII9kezxnP4jgoGZQWASHINGTON (AFP) — China, wary of the troubled US economy, has already “canceled America’s credit card” by cutting down purchases of debt, a US congressman said Thursday.China has the world’s largest foreign reserves, believed to be mostly in dollars, along with around 800 billion dollars in US Treasury bonds, more than any other country.But Treasury Department data shows that investors in China have sharply curtailed their purchases of bonds in January and February.Representative Mark Kirk, a member of the House Appropriations Committee and co-chair of a group of lawmakers promoting relations with Beijing, said China had “very legitimate” concerns about its investments.”It would appear, quietly and with deference and politeness, that China has canceled America’s credit card,” Kirk told the Committee of 100, a Chinese-American group.”I’m not sure too many people on Capitol Hill realize that this is now happening,” he said.The Republican lawmaker said that China was justified in concerns about returns from finance giants Fannie Mae and Freddie Mac, which were bailed out by the US government due to the financial crisis.Kirk said he was the first member of Congress to tour the Bureau of Public Debt, which trades bonds, and was alarmed at how much debt was being bought by the US Federal Reserve due to absence of foreign investors.”There will come a time where the lack of Chinese participation may have a significant impact,” Kirk said.”We should track that, because up until last month they were the number one provider of currency to the United States and now they’re gone.”With China’s economy also hit by the global economic crisis, Premier Wen Jiabao has openly voiced concern about the status of his country’s investments in the United States.China has also floated replacing the dollar as the key international currency with a basket of units bringing in the euro, sterling and yen.

How come Buffett’s all over the news lately? Helping steer the herd?Mark

Congratulations Prof. Roubini! Completely deserving – please do not dilute your contribution. We all stand on the shoulders of giants like you.Thank you with a kowtow.Best,P1AQL.

Yeah, even children pee in pools, but that doesn’t make it right.Economics is at best Voodoo. At worst it’ll be the mechanism that destroys the world.Mark

Nothing spells failure like excess!Wasn’t it Harvard that was publishing an economics newspaper back just before (or after?) the 1929 stock market crash stating that things were looking up, and soon afterward they ceased publication (for obvious reasons)?Mark

OK, then please remove him.Thank you.Mark

Great comments!Mark

Crystal ball:HOW MANY YEARS LEFTAnyone still want to argue that we can once again ramp up growth?Mark

I don’t believe that plugging commercial crap is allowed under posting rules.Mark

No JOBS!nice read here: http://www.huffingtonpost.com/dave-johnson/todays-housing-bubble-pos_b_195217.html?ref=patrick.netAs long as a house is considered an “investment” instead of a place to live for a long time, we will continue to be in a world of hurt. Real estate does not always go up.Here is why prices can’t go up any time soon: There is a huge inventory of unsold houses. The houses that were built in the last decade are too big for regular people to be able to afford to heat and cool — and energy prices are going up. The water for the lawns will cost more and more. The gas to get to the malls and any jobs that might exist (good luck) will cost more and more. The “boomers” are retiring and selling their houses. The median price in many areas is still way above affordability by a medium-income family. You won’t get sufficient “positive cash flow” over your payments from the rent you’ll receive if you are renting the house.The psychology of this is just like the stock market bubble. Things won’t get better until the bubble mentality of “it always goes up” is shaken out of people. Like I said the other dayIn 1999/2000 I had a bunch of stock in a dot com. It made its way up to $35 a share. When it fell to $30 then $25 then $20 I held on because it had just been $35. When it hit $12 I thought it was really cheap but when it hit $.50 I thought that was too high. It landed at $.05 but then the company went out of business.Think about the psychology of this. When it fell to $12 I thought it was cheap because of how high it had been but when it hit 50 cents a share I thought it was too expensive because I had left the past behind and I could finally see where it was GOING. And that is where it went.Unemployment in my area is 11.2% and people are “snapping up” houses that are “cheap” at $580,000 because they were at $850,000 a year or two ago. But the median income here can’t support that. It couldn’t even support $350,000 before unemployment went up.Here’s the thing. After the stock market crash the Fed intentionally created the housing bubble to prop up the economy for a few more years. Now the consequences have arrived. If you are thinking of buying a house as an “investment” ask yourself who is going to buy it from you at a higher price, and how they are going to get that money. Will that housing demand come from a healthy job market in which people are getting raises?Don’t bet on it.

Don’t ever give up on your mantra of non-sustainable growth. The world seems collectively anchored to the paradigm of growth and it takes repetition to drum this message home.(Did you happen to notice the absence of Lithium on this chart?)

Roubini’s message to MSM and to this bite-sized blog is muted by the limits of concision (N.Chomsky/Necessary Illusions). Opinions in the media must be expressed in 600 words or less. So, he can’t blurt out ‘the U.S economy is going to be lost in a decade of stagflation/L shaped whatever’. How does anyone substantiate that in a few sentences/seconds of air time?? The limits of concision permit him to say ‘this recovery is not going to happen as quickly as you think it is….because….. and may……. (inaudible)’NR’s detailed analysis is private and likely beyond my comprehension. For more in depth /independent analysis I chew on the lengthy tomes of C.K Liu(AToL) for example.I can’t fathom why NR is (provisionally) supporting the Bernanke team who is figuratively pouring kerosene on the fire. But we all know that without that tepid support for TPTB he would be quickly shuffled off to the lunatic fringe in American media and would get zip exposure.In the end he does manage to slip in a trump card.“The toxic mess and damage caused by this leverage-driven financial crisis and economic recession – including a brutal shedding of employment that shows no sign of letting up – will take much longer to truly heal the financial markets, the financial institutions and the real economy.”My gut feels better. Besides, not even his friend Taleb would argue with that order of prediction in a ‘dynamical’ system.

Hi to all. We are back in Caracas preparing for our trip to the US. We decided to visit despite the flu scare but will travel with masks and hand disinfectant. On another subject we just had a 5.3 earthquake at 4am today.A few good reads:http://www.businesscycle.com/news/press/1408/http://www.hussman.net/wmc/wmc090504.htmhttp://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2009/IO+May+09+Gross+2+2+4.htmThe ECRI people see recession ending soon but it is not clear what the effect on the market will be. Short term, we may see a rally but long term prospects don’t look that great.I significantly reduced equity exposure exactly 2 weeks ago, and since then the SP500 has moved up by about 3%.

Worried about the bank stress tests, our automakers filing bankruptcy, state budgets bankrupt, layoffs: the crazy stock market sure isn’t!

MM”Will that housing demand come from a healthy job market in which people are getting raises?”IMO,1st No, it will come from low interest rates and tax incentives given to 1st timers.2nd In some years Yes. At some point inflation will kick in and we will see a price spiral upward in commodities, then wages then commodities then wages…Study the seventies. The internet stocks were Not producing income, and yet people were buying them for unreal reasons. To make life easy for yourself, buy real estate when interest rates are high in the future.Not all regions are equal and black swans are not included above.hlowe

Further to my earlier post L recovery, can only be transformed into a U and thus re-instate GDP to $ 14 trillion, by pumping in new money. This is what Ben and Tim seem to doing now. But this will be at the cost a raging inflation and debasement of the Dollar down the line. You mitigate the pain of busting of one bubble by blowing another one.

Great statement:”It’s frustrating, but we are wasting trillions of dollars that could bring enormous relief of suffering, knowledge,productivity, and innovation in order to defend bondholders of mismanaged financials, and nobody cares because hey, at least the stock marketis rallying. If one thing is clear from the last decade, it is that investors have no concern about the ultimate cost of the wreckage as longas they can get a rally going over the short run”Thanks for the post.

I repeat:it has been a U shape bull market.

why not a V?

or a W? There’s is absolutely no way to know it’s a U and not a W. All signs lead to a W IMO.

Sondra,Thank you very much for your write up. I’m full time 9-5, and Mr Mom after that… so I don’t really have that much free time to write and research for my articles. This article took me nearly a month to put together. (literally, I chopped 20 pages down to 12. I wish I could’ve written in in 4 pages or less so more people would’ve been inclined to read it… but I just couldn’t cut many more details out that I felt needed to be said.)Anyhow, you put a big smile on my face seeing that someone appreciated it the way you did.All the best,Rich H Miss Americap.s. I always let people know when I plan to switch my 401k strategy. (401k since I don’t invest anywhere else) I plan on switching back to safe. MMKTs. For no other reason then “buy the rumor, sell the news”. I’ll wait this stress test out.

NO! It won’t mitigate the current housing down turn, it will exacerbate it and cause a faster collapse because as uncontrollable costs go up, this puts a squeeze upon the disposable incomes. Taxes are also raising.. The beer I like has gone up over $2/ 6pk in last 6 mo. Alcohol taxes and higher costs for ingredients.The only way house prices can go back up is for wages/incomes of the common worker to go up. Interest rates are already at historic lows. What else are you going to do to stop the decline when that hasn’t.More consequences for monetary expansion which will eventually result in either price stabilization of commodities or a rise in their price will also effect energy and then other places like health care and insurance… All of which lowers the real effect of earned incomes, leaving the average consumer with more bills to pay than income, leading to more defaults and a faster decline in house values and destruction of the real economy.

This financial crisis has caused a lot of morons and crackpots a chance to come out of the woodwork. Unfortunately, they can just type any stupid idea that comes into their head, and a lot of people actually listen to them.

Difference being as I have personally seen an experienced with 100% certainty everything I’m saying and I can say without one doubt what so ever that you are talking b.s. (your biased opinion only). I know for fact you’re saying what you believe where as I’m saying what I have seen a thousand times over with no exception.

seconded – you need an editor

Is this a saber-rattling Gingrich rally? Oil led commodity reflation. I’m thinking deflation v. inflation debate is nearing its end, deflation won a few battles, but inflation about to win the war. No pun intended.

Will get back to you tonight.PeteCA

HolaDr. Roubini (and George Soros) have underestimated market psychologygreed versus fearfear drove the sellers out of the markettwo weeks ago – just when you got out of the market – voernment leaders started sending signals of “glimmers” “bottoming” – China convinced Asia it would lead Asia into a recovery and the New World without the United Statesthe ASEAN currency meeting strengthens regional currency/stabilityworld greed is winning:”buy, buy,buy” – “make money, hurry” – “get in while it’s low”desire always will overcome common sense

REAL change can only come from below, never from above.

Thoughts from David Rosenberg (Chief economist at Merrill Lynch / Bank of America) as he prepares to join Gluskin Sheff (http://www.gluskinsheff.com) in Toronto. This guy is as good – read his comments very carefully.via ZH

“We are in year 9 of an 18-year secular bear marketThe S&P 500 peaked in real terms back in August 2000. Adjusted for the CPI, it is down 58% since that time. So, we would say that we are in year 9 of what is likely to be an 18-year secular bear market, because if you look at long waves in the past, they tend to last about 18 years with near perfection.What happened during the last secular bear marketAs an example, go back to the last secular bear market, and you will see that the S&P 500 peaked, again in real terms, in January 1966 and bottomed in July 1982, 18 years later. But there were plenty of mini-cycles in between. In fact, there were four recessions and three expansions during that entire 18-year period and unless you were a completely passive investor, you definitely wanted to be in the game during the three expansions because the S&P 500 rallied an average of 50% during those phases. Again, it is important to note that these were rallies youcould rent, not own, but they did last an average of 20 months. So, it’s not exactly as if they have an extremely short shelf life.Playing a game of devil’s advocateWith all this in mind, we went through an exercise over the weekend and played a game of devil’s advocate. If Rosie had to face off against Rosie, what would we say if we were forced to take the other side of the debate, keeping in mind that in fact, we may be overly bearish at the present time. And believe it or not, we did manage to come up with some pretty compelling material.Past the half-way point in the recessionFirst, our in-house model of predicting where we are in the cycle, for the first time, gave us a signal late last week that we are past the half-way point in the recession. Considering that the stock market bottoms 60% of the way through, this is an encouraging signpost.We’ve worked through the effects of the Lehman collapseSecond, our propriety proxy for private sector interest rates has come down from 8.11% at the nearby peak to 7.18% now despite the backup in Treasury yields, to stand at their lowest since last September. The TED spread is back to where it was last September, as are most credit spreads. The VIX has finally broken to 35, back to where it was last September. 10-year TIPS breakeven levels, which were predicting deflation at the end of last year, are now forecasting 1.5% average inflation rates for the next decade. Again, we last saw this in September of last year. This is interesting because even though the economy and the markets were clearly in the doldrums back in September, the fact that so many market barometers are back to where they were then means that at the very least, we have worked through the ill-effects of the post-Lehman collapse.Stock market has lagged relative to other asset classesAll an equity bull really has to do is point to the fact that the S&P 500 last September was trading around 1200. The only difference is back then we were looking at it from the perspective of being 20% off the highs whereas a move back to September levels, which, after all, would only mimic what many other market indicators have accomplished, would be viewed as an 80% surge off the lows not to mention another 35% potential upside from where we are today. Even the CRB raw industrials are now back to where they last October when the S&P 500 was hovering around the 950 level. So again, if we were equity bulls, and maybe we should be, we would simply point out that of all the asset classes that have bounced back to life, the stock market has actually been a laggard.Three indictors that suggest cyclical bear market is overThird, we found three indicators that have stood the test of time and strongly suggest that the cyclical bear market in equities and the economy have drawn to a close: the ISM, the Conference Board’s coincident-to-lagging indicator and the University of Michigan consumer sentiment survey. The ISM bottomed in December 2008 at 32.9 and is now 40.1. Going back to 1950, we found that recessions end within three months of the ISM hitting bottom, and never by more than six months. The coincident-to-lagging ratio just turned in successive lows of 89.6. The data go back to 1960 and we found that recessions ended within two months of this indicator, 100% of the time. And, the U of M consumer sentiment index bottomed at 55.3 last November. As we saw on Friday it had rebounded to 65.1 as of the end of April. The data show recessions end typically within six months of the bottom in this key leading indicator, and not once was the lag longer than eight months.We could be on the precipice of a cyclical upturnThis is not to say that our secular views have changed. However, we could well be on the precipice of a cyclical upturn, and whether it is sustainable or not may have to be a story for another day. We don’t see as many green shoots as others do, but then again, we endured more than a year of jobless recoveries following the market lows of 1990 and 2002.The most glaring exampleThe most glaring example of all is the fact that the S&P 500 bottomed in the summer of 1932 and yet by the end of the 1930s, seven years after ‘New Deal’ stimulus, the unemployment rate was still 15%, consumer prices were deflating at a 2% annual rate, and let’s face it, the Great Depression did not actually end until 1941. But for investors, the worst was over in the summer of 1932 in the immediate aftermath of the acute government intervention at the time. Whilethere were recurring setbacks along the way, including the severe bear market of 1937-48, the fundamental lows had already been turned in long before.Investors have been able to price out financial tail risksFast forward to March 2009, and the same mantra was heard – ‘nationalization’, ‘depression’ and ‘deflation’. As was the case with FDR’s early days as President, what the last half of Obama’s first ‘100 days’ managed to accomplish was to eliminate these words from the investment lexicon. The degree of intervention from the Treasury and the Fed has been so intense that investors have been able to price out financial ‘tail risks’ that had dominated the market landscape through much of the first quarter.The market is gravitating to a new meanSo, the way to look at the situation is that by removing the ‘tail risks’ of an outright systemic financial collapse, the market has gravitated to a new ‘mean’ (in the sense that at any given point in time, market prices reflect some expected distribution of possible outcomes – a very bad potential outcome has been taken out of the probability distribution, at least according to Mr. Market). This is why if the bulls have a solid argument, it is the prospect that the S&P 500 can indeed approach those pre-Lehman levels, which back in September, seemed rather bearish, but is only bullish today benchmarked against where we are.Still not sold on the bull case for equitiesDespite all these powerful arguments, we are still not totally sold on the bull case for equities. Valuation is not compelling, in our view. Sentiment has completely swung towards a bullish consensus (which is a contrary negative). Home prices and employment are still in freefall, the former undermining the balance sheet and the latter exerting a drag on the income statement and suggestions that a mild improvement in the negative growth rate is something to be excited about seems off base.Difficult to ascertain who the marginal buyer will beIt seems hard to believe that after being burned by two bubbles seven years apart that the baby boomer is going to line up at the trough one more time. So, it’s difficult to ascertain who the marginal buyer is going to be. Disposal of durable goods assets to pay off a record household debt burden seems like a multi-year deflation story as far as we are concerned. Since the boomer household is income constrained and underweight fixed-income securities on its balance sheet, we believe that demand for high-quality bonds is going to strengthen in coming years. Government policy will remain highly pro-cyclical but there is no match for the contractionary effects from a shrinking US household balance sheet.Deflation will win out over inflationWe are concerned that deflation will win out over inflation this time around. While the data cited above are indeed impressive in terms of their track record, since this is not a manufacturing inventory recession but rather a downturn deeply rooted in asset deflation and credit contraction, we may find out that the economic releases that were tried, tested and true in the other post-war cycles may not be appropriate today given the overpowering secular trends of consumer deleveraging and frugality.”

Interesting article as the author covers both sides of the bull vs bear argument. I would add that one can use history as a guide, not a rubber stamp of the future and that if Americans are left with much fewer high paying jobs, lower credit scores and access to credit and have ANY sense of the future tax burden on themselves and their kids, then we will not be returning to the “buy anything and everything you don’t really need” just because you can do it on credit. As for the market, it can go as high as GS and the other manipulators need it to go until they decide the party’s over: the days of P/E ratios and valuations are over for at least the next 5 years; everything is now based on hype and “don’t miss the next great stock opportunity” as BUBBLE CREATION has now become the financial sector’s PRIMARY OBJECTIVE: this allows them maximum gain while the general public and government are left holding the bag. As the rock band, REM so clearly sings in their song “Bad Day”: “we’re sick of being jerked around, wear it on your sleeve… save my own ass, screw these guys, smoke and mirrors lockdown…”!

Agree. It looks like greed is back. And as I have said many times before, dow under 8000 and SP500 under900 feels cheap to the crowdI am afraid the “smart” investors (Hussman, Gross, etc.) won’t look good in the short term. It

車厂倒下,大銀行資不低債, 長息上升, 金價在高位, 一片混亂.這是一個不死不生的狀態.

New thread

All governments lie – I.F. StoneDo people demand a really just system? Well, we’ll arrange it so that they’ll be satisfied with one that’s a little less unjust … They want a revolution, and we’ll give them reforms — lots of reforms; we’ll drown them in reforms. Or rather, we’ll drown them in promises of reforms, because we’ll never give them real ones either!! – DARIO FO, Accidental Death of an AnarchistAs far as Obama goes, read this article by Chris Hedges (one of the few folks out there that I trust):Buying Brand ObamaMark

Well if Guest can’t be bothered to respond, I will. It took me a while to find out about Brix, but it’s a very intersting topic. Healthier food does make healthier people, but I don’t think you can hang the cure for cancer on it. Maybe the prevention?Question for you Mark about Brix, since you’re on about sustainability. What I’ve read of Brix measurements, most are linked to the mineral content of soil and thereby food. Artificially enhancing the mineral content of the soil would give you healthier food, but won’t you hit a point there are no more easily accessable minerals to relocate from point B to point A? Has there been any study of the energy constraints and sustainability of improving the brix of food on a large scale?I love this blog! Even if it’s not economics, I still learn something new every time I read here.Thanks Mark

Real resources YES. Real Labor NO. Real Products (only as a piece of tangible matter). The labor in China would be considered criminal in the U.S. and the products are inferior one time use dollar store quality. Before people make positive statements about China they should read the “International Herald Tribune” and visit web sites like “Asia Times”. They steal and sell children for as low as $2500.00. Capitalism in China is an illusion. China is like one huge sleeper cell. The caution flag should remain out at all times with these bullies and criminals. Contracts in China are not worth the paper they are written on. The popularity of investing in China reminds me of the “Jet Setters” and Mod clothing of the sixties (just a short lived passing fad). The social and political risk associated with the promotion of China is severly understated. A society with true democratic ideals would have nothing to do with growing the economy of China. It was greed that got us into our current financial situation and it will be greed that catches us asleep at the switch when the Chinamen say ” So sorry ! Game over!.PS. Why no mention of John Talbott as a great thinker ??

The article was well worth your time, Rich. Many thanks! A fan.

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