I was here already but did not want to register as the first, …too much responsibility.

Will we have 800 banks going bust still, my good professor? Are the big banks still insolvent? How about the bear market rally, is it going to end soon?Thanks.

IMAGINE YOU WERE A BANKER IN TODAY’S STAGFLASION RECESSION DEPRESSION OR WHATEVER THE HADES YOU CALL TODAY’S ECONOMIC MESS?If they gave you a big chunk of money, would you be quick to lend it all out or would you keep it in your cash can to insulate yourself from possible more horrifying toxicity in the future?

Why hasn’t President Obama insisted on public hearings over what happened during this financial crisis?Not a single top executive of a Wall Street securities firm responsible for causing the financial crisis has had the courage or the decency to step forward in front of the cameras and explain to the American people in his own words exactly how and why he allowed his firm to cause the crisis. Both Mr. Fuld and Alan Schwartz, the chief executive of Bear Stearns at the end, in their Congressional testimony blamed the proverbial once-in-a-century financial tsunami. Do they or any of theirpeers really think this is true?There may be a way to find out. There is much talk nowadays coming from top bankers — Lloyd Blankfein of Goldman Sachs, Jamie Dimon of JPMorganChase, John Mack of Morgan Stanley and even Ken Lewis of Bank of America — about seeing how quickly they can repay to the Treasury the TARP money Mr. Paulson forced on them. One precondition of their being allowed to repay the funds should be a requirement that each gives a public deposition and explains, under oath, what truly happened and why.

The Economy Is Still at the Brink, NYT

We really need several public hearings outside congress by special independent agencies appointed by the president to determine the causes of financial crisis and econmoic disaster and find the actors who initiated and contributed to the crisis and its mismanagement. Next, appropriate punishment should be awarded to those people. Until then, our country will have no healing process from current and coming pain and suffering.

Returns coming in from European Union elections show most of them (Greece the exception) are showing a heavy turn to the conservatives. Both ends of the political spectrum credit liberal losses to the bailout policies of socialist governments. (See details below in “Conservatives Take Commanding Leads” in today’s San Francisco Chronicle.)These elections are putting the handwriting on the wall for upcoming congressional elections in the U.S. in 2010. In other words, voters understand that “bailout mania and stimulus” is coming from socialist governments run by fascist plutocrats and/or liberals.Did Bush start the bailouts? Absolutely! Paulson and Bush and Bernanke were in there up to their armpits in banker support.And then, of course, the Obama Administration arrived. Obama, with his miler’s physique, picked up the Bush baton, packed his running team with bankers and Clinton big-time spenders, and promptly asked the bankers, how much do you want and when do you want it? And he gave the thumbs up guarantee, we’re with you all the way.What we had in Washington was the Bush Banker Cabal. Now we have the Obama Banker Cabal, with one additional ingredient—every Democrat, liberal, welfare-spending program ever to come down the pike.As the Obama team, rushing forth to tackle and pile atop Joe Middleclass’s back, whispers in his ear, “Joe, thanks for your confidence,” what it is really whispering is, “Get out your checkbook, Joe.”But Joe is whispering back.Said the AP story in the Chronicle:Conservatives raced toward victory in some of Europe’s largest economies Sunday as initial results and exit polls showed voters punishing left-leaning parties in European Parliament elections in France, Germany and elsewhere.Some right-leaning parties said the results vindicated their reluctance to spend more on company bailouts and fiscal stimulus amid the global economic crisis.First projections by the European Union showed center-right parties would have the most seats – between 263 and 273 – in the 736-member Parliament. Center-left parties were expected to get from 155 to 165 seats.Right-leaning governments were ahead of the opposition in Germany, France, Italy and Belgium, while conservative opposition parties were leading in Britain and Spain.Greece was a notable exception, where the governing conservatives were headed for defeat in the wake of corruption scandals and economic woes…Britain, Ireland, the Netherlands and five other EU nations cast ballots over the last three days, while the rest of the 27-nation bloc voted Sunday…http://www.sfchroniclemarketplace.com/c/a/2009/06/08/MN02182I31.DTL

@hlowe – here you go…continued from the last thread…..Independent Contractor.From today’s New York Times Op/Ed page:Senator Tom Harkin has introduced legislation that would require exchange trading for derivatives. Representative Collin Peterson has introduced a bill that would tighten the regulation of derivatives’ clearinghouses. He acknowledges that his bill is not as strong as he would like but that Congressional politics left him no choice, telling The Times, “The banks run the place.” <——http://www.nytimes.com/2009/06/07/opinion/07sun2.html?_r=1&ref=opinionWell, there’s a refreshing bit of truth from a member of Congress!Dr. Roubini continues to make the point that the measures taken by the administration so far are short of what they need to be because they are creating public debt leverage and allowing private debt leverage to continue while not getting bad assets off bank books, leaving zombie banks intact and rendering opaque the insolvency problems that remain, and by failing to reduce the underlying debt load of overburdened American homeowners by cramming down the principal balance of mortgages. All of these perceived deficiencies would appear to be calculated to placate the financial sector. As Dr. Roubini says, it remains to be seen whether the political will exists to take the additional measures needed to get the economy on the road to real recovery.SWKHide reply Reply to this comment By kilgores on 2009-06-07 12:23:24We can pontificate and spout philosophy on this board all day to no avail. It is abundantly clear that the problems are not invisible. What is lacking is ANY call to action, other than polishing up your personal survuival skills and paying off your debts.&%#$@#^%!!! This is OUR country. Let’s get off our collective asses and start doing a few little things that might just mushroom into real change – a movement if you will.Look, people. Nothing is going to change until we change the way elections are held. The financial industry, medical industry, defense industry, mega retailers, and so on can keep finding folks willing to accept their sponsoship up the political ladder. Our elected officials are a lot like NASCAR drivers who work for the prime sponsor and take on lot’s of samller sponsors along the way. If I had my way, members of Congress would be issued uniforms like the military is. Instead of badges, however, they should be required to wear patches indicating sponsorship. That way, it would be easy for the average voter to tell where each elected official has pledged their loyalty. In fact, the patches should be sized according to the percentage of their campaign funds coming from each industry represented.Now, of course I realize this idea will never happen, but I do believe it is worth discussing and promoting because it illustrates the point in a way that most people can quickly grasp, setting the stage for the real meat of the issue that EVERYONE needs to have pounded into their heads – “SPECIAL INTERESTS” ARE BY DEFINITION HARMFUL TO THE GENERAL INTERESTS!!!So, why do we allow them so much influence? The only reason is the huge amounts of money they use to bribe our lawmakers with, in my humble opinion. If we are to save ourselves and the future of America for coming generations, we MUST change this, and here is how it can be done. Start a movement that demands – DEMANDS! – that only registered voters be allowed to make campaign contributions. It is that simple, folks. This is how we get a new and better class of people running for elected office. The situation today is vile, with vested interests running everything by tossing out bags of money to the candidates willing to tow their line, while the truly good candidate gets steamrolled. The quality of person willing to subject themself into the pocess as it stands today is more often than not the very type of person we need least. Get the corporate money, union money, and PAC money of of this and suddenly a Senate race will cost $250,000 intstead of $14,000,000.How about some serious discussion about potential solutions on this board?Independent ContractorHide replies Reply to this comment By 11B40 on 2009-06-07 14:15:35>Instead of badges, however, they should be required to wear patches indicating sponsorship. That way, it would be easy for the average voter to tell where each elected official has pledged their loyalty. In fact, the patches should be sized according to the percentage of their campaign funds coming from each industry represented.This has to be one of the most refreshing and useful ideas I’ve heard in some time!SWKReply to this comment By kilgores on 2009-06-07 16:17:17 Something like that already exists. It is why employers ask their employees to donate to the employer’s preferred candidate. By the way, since the contribution is publicly reported, the employer can check up and see that his instructions were followed.Nice.Capitalizing words like MUST and DEMAND don’t get the job done. The political system is beyond fixing; a “real” solution like debt default is needed. And you are probably a troll sent here to interrupt the discussion.Hide reply Reply to this comment By Guest on 2009-06-07 16:34:18Something like “what” already exists? One of us must have a problem with comprehension.Obviously, capitalizing words got YOUR attention. It may not solve anything, but neither does mental masturbation – especially if there are no fireworks at the end.If the politiacal system is beyond fixing (and it may well be), we are truly screwed, and we have done it to ourselves. Under this Constitutional Republic of ours, we have the power to make changes, but it takes effort and willpower. Adopt this simple mantra – only voters can make contributions. Spread the word. Open the discussion. Start a movement….DO something….or not. Just sit on your ass, remain anonymous, point fingers, and call other people names. Troll. Isn’t that funny. Offer a call to action and get accused of “interrupting” the discussion. Well, yeah, I guess effort does get in the way of pontification.Oh, and by the way, who says trying to clean up the political system is mutually exclusive with other actions. Debt default is another subject to be argued on it’s own merits. Got any ideas of your own about how to accomplish that, “Guest”?Independent ContractorReply to this comment By 11B40 on 2009-06-07 17:47:51Excellent! I agree with SWK. Please repost at the top of next thread.hloweHide reply Reply to this comment By Guest on 2009-06-07 17:31:00

From near the end of the last thread…I keep seeking solutions to work toward, and feel this needs further discussion. There was a time when Americans were not beholden to large corporations. Now, it is not just “American” corporations, but multi-nationals who bribe our politicians and loot our treasury, all the while treating the citizen as a pawn, a number, nothing more than another item to inventory and use at will.SWK lays out the historical record for us below, but what can we DO about it? Change the inertia, adopt slogans, broadcast them widely, start movements. You know, like “no taxation without representation” was the rallying cry for the birth of this Nation. Simple justice is really not so hard to understand when the legalese and obfuscation are peeled away.Independent ContractorVia ZH”Justice Antonin Scalia: The US Constitution is ‘Dead’http://fora.tv/2009/02/23/Uncommon_Knowledge_Antonin_Scalia#Justice_Antonin_Scalia_The_US_Constitution_is_DeadHide reply Reply to this comment By Hayes on 2009-06-07 15:05:13Justice Scalia is famous for his pontifications against the notion of the Constitution as a living document and in support of the doctrines of textualism (looking strictly to the language as expressly set forth in a legal document) and originalism (attempting to discern the original intent of the authors of a legal document in using certain language). Unfortunately, it is difficult to maintain purity of such an ideology in the real world of jurisprudence. Like a fundamentalist who strictly construes Biblical verse only when it comports with a pre-established paradigm of reality, Justice Scalia conveniently sidesteps strict construction of the Constitution when it doesn’t suit him.For example, in White v. Illinois, 502 U.S. 346 (1992), Justice Scalia did not hesitate to turn to sources outside the express language of the Constitution in order to construe its meaning. Likewise, in District of Columbia v. Heller, 554 U.S. ___ (2008), the case in which the Court construed the Second Amendment to establish a personal right to bear arms, Justice Scalia did not confine himself to determining the original intent of the Constitution based on its language, but justified the majority decision, in part, by reference to a historical tradition of gun ownership in the United States and the fact that Americans favor hand guns for self-defense, i.e., he treated the Constitution as a living document, interpreting its text in light of his perception of contemporaneous standards, the very approach he condemns in this video.Perhaps the most egregious instance of the inconsistency in Judge Scalia’s positions can be found in Bush v. Gore, 531 U.S. 98 (2000), in which he abandoned his own well-developed “strict constructionist” approach to the Equal Protection Clause, as well as the Political Question Doctrine, to invalidate the method of recounting ballots sanctioned by the Florida Supreme Court and put President Bush in the White House. Where in the Constitution are handguns mentioned? What is the textual basis for interpreting the original intent of the drafters of the Constitution as encompassing a restriction on the means by which state and federal governments may regulate civilian uses of firearms in light of the “well-regulated militia” language of the Second Amendment?Here’s a classic quote of Justice Scalia, from McConnell v. Federal Election Commission, 540 U.S. 93 (2003):”The incremental benefit obtained by muzzling corporate speech is more than offset by loss of the information and persuasion that corporate speech can contain.”Where in the Constitution is the right of non-natural persons, such as corporations, to freedom of speech recognized? What happened to Justice Scalia’s original intent doctrine in this case? It was conveniently sidestepped, with the result of strengthening the power of monied special interests to subvert the underpinnings of our democratic republic by diluting the power of voting citizens, the REAL people that the Constitution is clearly supposed to protect.Clearly, Justice Scalia himself does not hesitate to abrogate the principles of constitutional construction he routinely advocates as a bulwark against misuse of judicial power. Don’t fool yourself: Justice Scalia is a quintessential example of a judicial activist who claims the Constitution is static (“dead”) but interprets it dynamically (i.e., as a “living” document).SWKHide replies Reply to this comment By kilgores on 2009-06-07 21:01:37Sorry, bad editing on my part. The last two sentences of the third paragraph of my post should have been appended to the end of the second paragraph.SWKHide reply Reply to this comment By kilgores on 2009-06-07 21:04:21@SWK…you appreciated my simple suggestion that we require members of Congress to wear emblemns of sponsorship denoting their major sources of campaign funds, i.e., showing the world where their loyalties really were pledged. YOu noted above the following:”Here’s a classic quote of Justice Scalia, from McConnell v. Federal Election Commission, 540 U.S. 93 (2003):”The incremental benefit obtained by muzzling corporate speech is more than offset by loss of the information and persuasion that corporate speech can contain.”"Is this the case that essentially said money is speech?I believe this gets straight to the heart of the matter. It is all about money, and it is all about giving ‘corporations’ equal LEGAL rights with individual citizens. This is insane, and ultimnately leads to where we are today. What constitutional basis is there for this?As a simple man (some may say simpleton), I also have some opinion about writing laws. I have long held the belief that when a law is drafted there should be an introductory paragraph about why this law is needed, what the intent is, and what is expected to be accomplished with it’s passing. The only reasons our laws tend to be so ambiguous that I can figure is so that lawyers (the primary bill writers) and their clients can game the system for personal reward. Am I wrong?Independent ContractorHide reply Reply to this comment By 11B40 on 2009-06-08 08:09:28In Santa Clara County v. Southern Pacific Railroad Company, 118 U.S. 394 (1886), the U.S. Supreme Court, without any real basis in case law precedent or in the text of the Constitution, determined for the first time that corporations, as non-natural legal persons, have the right to due process under the Fourteenth Amendment (now THAT was judicial ACTIVISM). Over the last 123 years, the courts have progressively recognized an ever-greater scope of rights under the Constitution as benefitting corporations, including limited rights of free speech (see First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978), where in a 5-4 decision the Supreme Court ruled that that corporations have a First Amendment right to make contributions in order to attempt to influence political processes). For a good historical overview through 1933 of how the law on corporations has evolved, you can read the dissent of Justice Brandeis in Louis K. Liggett Co. v. Lee, 288 U.S. 517 (1933). For a timeline of cases expanding corporate personhood, go to http://www.ratical.org/corporations/ToPRaP.html.As for writing laws, the problem is that legislation is written to cover a broad range of fact patterns, and the intent with respect to a given set of circumstances is not always crystal clear from the express language of the legislation itself. It is the job of courts to construe the law in these non-bright-line cases, and judges are often accused of being “activists” simply for doing their job. The courts do often look to recorded legislative histories behind given legislation — e.g., speeches by legislators and commentary submitted during debate — to help inform their decisions in close cases.SWKBy kilgores on 2009-06-08 09:13:39 SWK, dear, your legal briefs are showing A superb critique of Justice Scalia. I am a novice at constitutional law but find it the most fascinating legal subject by far (and with 30 years as a legal assistant, I’ve pretty much seen it all). I’d go to law school just to be able to clerk for a constitutional lawyer, but am too old now, so I must settle for reading the writings of those far more educated than I. Many thanks.Hide reply Reply to this comment By Average Jane on 2009-06-07 22:59:16

@SWK – many thanks for the history. What a great pool of resources on this board!”The courts do often look to recorded legislative histories behind given legislation — e.g., speeches by legislators and commentary submitted during debate — to help inform their decisions in close cases.”Since courts do look back for ‘original intent’, it seems like the concept I suggested above would be even more valid – provide that intent as a pre-amble of sorts when legilation is drafted. I am not a lawyer (among many ohter things), but muddy, vague legislation seems too often to be written that way on purpose. Hence, scoundrels and their defenders (no offense. I have been to court and I like having a good lawyer) slither by and escape responsibility for dastardly deeds far too often. With all due respect, we have way too many lawyer legislators.Independent Contractor

Gee, I was thinking we didn’t have enough lawyers in the legislatures! In my experience, the very worst law is written by non-lawyers without any appreciation of the constitutional context in which they operate and no desire to learn about it.SWK

Thanks MA. Stuck my head back in last week and saw a few of the old “faces”, Pete CA, SWK, Gloomy, PeterJb, and thought I would contribute the odd line.

SWK,Yes, I agree – Obi is logically refreshing. Trouble is his logic is corrupted by his liberal wet dream agenda – in this manner he is out of touch with the dark side of the force whereas Obi-wan-Kenobi was not. This means that logic alone is not sufficient if it does not include sustainability with Nature. His policies are a disaster in the making. Think of the omen “Obama Beach.” Slips-of-the-tongue “oracles” (not logical) will rule the day – heralding that indeterministic, spontaneous Natural way.

But, but, but… Madeoff confessed to his Ponzi scheme, was cross-examined by the FBI to make sure he was really a criminal before charges were filed, then he pleaded guilty before a court of law and behold – what could they do – they sentenced him. THERE IS JUSTICE IN AMERICA – so quit your whining!

Agreed … further if you read the article just past PhilT’s excerpted portion, the authors go so far as to generously suggest full immunity to the named Banking Overlords in exchange for full disclosure about what happened along with truth commissions, etc. – sounds like a recipe for more massive deception and cover-up.Another conundrum occurs earlier in the article when the authors scold the Obama administration for not having appointed, …“Why has Mr. Obama surrounded himself largely with economic advisers who are theoreticians and academics — distinguished though they may be — but not those who have sat on a trading desk, made a market, managed a portfolio or set a spread?In our view, one of the ways out of this economic conundrum is to have experienced traders — not hothouse flowers — design incentives that will encourage the market to have buyers and sellers meet anew around the proper valuations of assets, not some artificial construct of a market propped up by a pliant Financial Accounting Standards Board or government-sponsored programs that appear to be virtually giving money away to hedge funds and private-equity firms so that they will buy assets they would not ordinarily buy. We’re not talking about putting the fox in charge of the henhouse, just putting people who know how markets function in the real world into the important seats in Washington…”To that I ask, what about Paulson, Rubin, etc … definitely not hot-house flowers – hasn’t recent history taught the authors that lesson?Getting at the root of the problem becomes more difficult as more time passes. Only severe measures will make a dent at this late hour.

See what happens when tough questions are attempted – read article linked above.

I like the President’s liberal bent, personally. As for sustainability, well, that’s a tough nut to crack all the way around. I suspect the President’s policies will do rather well, given time, although many of my more conservative friends would disagree with me.SWK

The Baltic Dry Index is the worldwide benchmark for shipping rates of raw materials, and it has registered some eye-popping gains over the past month. The London-based index registered its 23rd straight daily gain on Wednesday, closing at 4,291, its highest mark since September and the longest streak of gains since July 2006. Daily rates for the largest Capesize ships, which typically carry iron ore, rose 6.8% on Wednesday to $93,197. Just five months ago, daily ship-rental rates were hovering just above $2,000, about the price of a great seat on opening day at the new Yankee Stadium….But, evaluation of transport prices must include not only demand (how much cargo there is to be hauled), but also supply (the quantity of carrier capacity). The steady boom of world trade over the past decade prompted a major shipbuilding spree, with many vessels slated for completion in the coming months and years. “There are new and larger ships on order,” notes the source. “I fear that overall rates will not be as responsive to the recovery as a whole.” In other words, just as skyrocketing prices in raw-material transport don’t guarantee a robust global recovery, nor would a sluggish rebound in shipping profits preclude a bullish outlook for the overall economy.http://news.yahoo.com/s/time/08599190286500

Somebody took Professor’s crystal ball away..

First Montana; now Tennessee – Firearms Freedom Act Passes Both Tennessee Housesthe bill states that “federal laws and regulations do not apply to personal firearms, firearm accessories, or ammunition that is manufactured in Tennessee and remains in Tennessee. The limitation on federal law and regulation stated in this bill applies to a firearm, a firearm accessory, or ammunition that is manufactured using basic materials and that can be manufactured without the inclusion of any significant parts imported into this state.”http://iwilldefendtheconstitution.com/node/972

Dollar’s wounds reopenBy W. Joseph Stroupe”Be careful what you wish for, you may receive it.” The adage applies well to the US Federal Reserve as it enters what may turn out to be an entirely new and more dangerous phase of the financial and economic crisis that is still firmly centered in the US – notwithstanding the ongoing Wall Street rally and increased hopes that the worst is now over.The Fed wished away the hysterical risk aversion reflex of global investors, which came to a head in autumn 2008, when big Wall Street banks collapsed, sending shockwaves around the globe. The position of Fed officials is, after all, that this is a crisis sparked mostly by panic-stricken investors who’ve artificially driven the value of America’s innovative financial assets far below their true values, wrongfully smearing massive sums of such assets with the label, “Toxic!”.The Fed believed it could breathe new life into those assets and into America’s asset bubble-based economy by getting credit flowing again and by replacing investor fear with investor confidence – which inevitably translates into a greater appetite for risk. A significant measure of risk appetite is now returning. But the problem is, the US dollar isn’t getting the benefit. Instead, its wounds are only being reopened.As of June 2, the dollar had hit new lows for 2009 against nearly all major currencies, dropping a full 1% against the euro on that day alone, totally ignoring Treasury Secretary Tim Geithner’s statement during his visit to China that the US favors a strong dollar. On May 27, the yield curve on Treasuries steepened to a new record as the difference between the two-year and 10-year notes reached 2.75%, steepening to about 2.78% on June 2.Global investors, both private and official (central banks) are voicing ever more loudly their intensifying fears over exposure to the dollar for anything but the short term and their collapsing confidence in the currency as a safe store of wealth beyond the short term.Let’s back away for a moment to look at this global crisis from a distance. When the US housing bubble began to burst in 2006, inherently risky, innovative financial assets backed by mortgage paper eventually began to be exposed for what they really were (“toxic” assets) and in late July 2007 the now-famous subprime crisis emerged.The contagion of toxicity spread to infect virtually all such innovative assets, wiping out huge sums of wealth and plunging US banks and other financial institutions into crisis and ruin. The damage and destruction quickly spread to the real economy, as a severe and persistent credit seizure virtually shut down lending at all levels.In the mounting storm, panicked, risk-averse global investors sold off emerging-market assets and investments deemed risky and massively piled into the dollar as a safe haven, lifting the currency. The Fed and other central banks began spending many trillions of dollars aimed at stabilizing the wobbling financial system and restoring confidence, which had utterly collapsed. The financial system was barely saved from a complete meltdown by such interventions, which continue to this very day.Ominously, global investors, though giving the dollar the nod as a safe haven in the storm, stampeded into the short end, virtually shunning the longer-dated dollar assets altogether. That fact was a dead giveaway that the dollar’s well-known loss of strategic global appeal as a safe store of wealth had not been in any way resolved, but only papered-over for the moment.Reopened woundsNow, as risk aversion recedes and risk appetite returns, global investors realize they over-sold their non-dollar assets and investments in the emerging markets when the crisis intensified last year. The emerging markets are widely seen as those that will emerge from the crisis first, and assets in these markets are very attractively priced. Hence, investors are now selling their dollars to buy back into such assets deemed much safer stores of wealth than the dollar in the face of the inevitable return of dollar inflation beyond the short term.That is driving up yields on a host of dollar-denominated financial assets such as Treasuries and mortgage bonds and sending the dollar to new 2009 lows.Emerging market indexes and commodities are surging as investor wealth pours in once again. Profligate US spending and skyrocketing deficits, hyper-loose monetary policies in this crisis, and collapsing confidence that the Fed will actually be able to withdraw such policies and excess liquidity when required, are all causing dollar inflation expectations to become deeply rooted in investor psychology.The overpowering perception on the part of global investors that the Fed, Treasury and Administration are losing control of the US fiscal position, and that inflation (more likely hyper-inflation) is virtually becoming inevitable is threatening to wreak irreversible harm upon US finances and upon the dollar itself.Angela Merkel, the German chancellor, issued on June 2 a stern warning along these very lines, a warning that was remarkable for its stark honesty and its unprecedented violation of the cardinal rule of German politics that says German politicians never comment on monetary policy of the central bank. Her break with that rule indicates Berlin is extremely concerned about the dangerous and risky hyper-inflationary and currency-debasing monetary policies being undertaken in this crisis. Chancellor Merkel launched her attack on the US Federal Reserve, the Bank of England and on the European Central Bank. She said:“What other central banks have been doing must stop now. I am very skeptical about the extent of the Fed’s actions and the way the Bank of England has carved its own little line in Europe.”Even the European Central Bank has somewhat bowed to international pressure with its purchase of covered bonds. We must return to independent and sensible monetary policies, otherwise we will be back to where we are now in 10 years’ time.”On June 3, Fed chairman Ben Bernanke himself issued a warning that long-term deficits threaten the very financial stability of the US. He further said:“In recent weeks, yields on longer-term Treasury securities and fixed-rate mortgages have risen … These increases appear to reflect concerns about large federal deficits …”He went on to somewhat minimize the role of investor concern regarding US spending, seeking to lay the record steepening of the bond yield curve off on other factors. It seems that Fed officials don’t want to see the full and stark truth about how global investors are rapidly losing confidence in the US fiscal position and in the dollar.In a similar vein, Richard Fisher, president of the Dallas Federal Reserve Bank, issued a warning on May 23 against monetizing US debt through Fed purchases of Treasuries, agencies and other assets. He warned that this risky policy is making global investors increasingly nervous. He further warned that the Fed’s challenge is to reassure the markets that the Fed isn’t simply making itself “the handmaiden” to fiscal profligacy, almost as if the promise itself is enough. He said:“I think the trick here is to assist the functioning of the private markets without signaling in any way, shape or form that the Federal Reserve will be party to monetizing fiscal largess, deficits or the stimulus program.”But investors are drawing that very conclusion as they judge the Fed, not by its reassuring words, but rather by its ever more risky policies and actions. And with huge new sums of Treasuries flooding the market as the Treasury issues trillions of dollars in new debt this fiscal year alone, investors are demanding higher yields/lower note prices before they purchase the assets.In all likelihood, the Fed will be required to significantly step up its own purchases of the longer-dated Treasuries in an effort to keep escalating yields from getting out of control and completely negating its efforts to keep monetary policy hyper-loose. But such a dollar-debasing move (the printing of yet more huge sums of dollars) will only further convince investors that hyper-inflation is inevitable, and that realization will further weaken the appeal of the dollar today, sending it immediately lower.It certainly appears as if the Fed doesn’t get it; officials definitely seem to think they can reassure global investors merely by repeating the assurances quoted above, but without actually changing course in any meaningful way. They absolutely aren’t listening to the wisdom and warning of Angela Merkel and those like her.The question is whether central banks which already have large holdings of dollars, such as China’s central bank, will dramatically increase their exposure to the risky dollar in an effort to stem its decline in order to keep their holdings from being eroded away.Considering the record level of angst over their already-large exposure to the dollar, it appears highly unlikely they will significantly increase their exposure now, when dollar risks are dramatically increasing. Note the June 2 comments of the official state media, China Daily, in this regard, in its article entitled, “Geithner Sells a Devalued Dollar”: Another reason for the dollar’s weakness is the grim prospect facing US public finance. Investors are worried about the US government’s record budget deficit. The Barack Obama administration may have to issue a mammoth $3.25 trillion of T-bills to fill the financial black hole of such a massive deficit. This is bound to scare investors away from the dollar-denominated long-term treasury bills.When the interest rate is virtually zero and other traditional options have been exhausted, the Federal Reserve has no choice but to resort to “quantitative easing” and buying of T-bills. But it will swell the supply of base money, and thereby heighten the risk of devaluation of the dollar. Though the devaluation of dollar may be good news for US exports, it will erode investor confidence, and might even lead to the collapse of the dollar’s hegemony.Savvy investors are doing precisely what Bill Gross, founder of the largest bond fund in the world, PIMCO (Pacific Investment Management Company), advised them to do on June 3. He warned that US finances are seriously deteriorating and that investors should rapidly diversify their dollar holdings before central banks inevitably do so. Gross has significantly reduced US government bond holdings of all flavors within his Total Return Fund, following his own advice to global investors.Beginning of the end for the bubble?The present trend of selling dollars to buy hard assets, though still a fledgling trend, carries significant risks of turning into a veritable stampede some distance down the present path. How so? How might this mounting trend out of the dollar into hard assets begin to significantly feed upon itself to become a stampede?Assuming that the ongoing emerging market rally is for real, as evidence strongly indicates it is, then every dollar sold to buy into that rally weakens the currency further. As investors carefully monitor the ever-declining value of the dollar, they will seek to hedge their losses by selling dollars for hard assets, which will only further increase the supply of dollars and further weaken the currency.Few investors will have the stomach for riding the dollar down too far if the dollar’s decline accelerates too much, or even if it remains somewhat gradual but does not turn around soon. Thus, the cycle feeds upon itself, potentially becoming a stampede out of the dollar, risking a rupture of the Treasuries bubble and a catastrophe for US finances as yields and interest rates spike, out-of-control monetary tightening takes over and an even more massive credit seizure grips the US.Since so much wealth is at present parked in short-dated Treasuries, investors who refuse to roll over their holdings into new Treasuries but instead demand to refund their Treasuries so as to buy something else, could place the US Treasury in a profound bind if the current fledgling trend does turn into anything remotely resembling a stampede.That is especially so if global investors keep refusing to purchase the longer-dated Treasuries, thus denying the Treasury a critical source of dollars with which to issue refunds demanded by investors who aren’t rolling over into new notes or bonds.The real question here, when considering a possible rupture of the Treasuries bubble, is whether the ongoing dollar-selloff/dollar weakness cycle will feed upon itself to a sufficient degree that the dollar’s decline becomes accelerated and chaotic, or whether it will possibly remain more gradual and orderly. The answer to that question depends upon investor psychology and events that may affect that psychology.If a dollar panic gets underway, then we’ll be looking at a stampede and a full-blown rupture of the Treasuries bubble, as well as a concomitant dollar crisis, renewed US financial collapse and a subsequent full-blown economic depression.Thus, the stakes are unimaginably high for the US as regards maintaining global confidence in dollar assets. In a perverse sort of way, the global crisis we’ve already endured, one that emanated from the US, has produced just what the dollar needed – extreme risk aversion and a massive flight into the dollar. But the currency is now beginning to lose the contest for global appeal as investors begin to give the nod to hard assets. Can the dollar stem its losses and hold onto what remains of investor appeal? Could it even recover its losses?http://www.atimes.com/atimes/Global_…/KF05Dj01.html

A few data points….A friend at BAC indicated that they are not writing new commercial loans – too busy in damage control for the ones they already have and need the liquidity to maintain a cushion.Recently read an article about BNP Paribas – same themeA middle market commercial property investor who’s office is in my building is ready to “crawl out of his skin” trying to find a deal. He has $$$ on the sideline, but he’s finding 3 scenarios: 1) lenders are bending over backwards to prevent foreclosing on properties that should have been REO 6 months ago 2) owners that are solvent and who would otherwise sell are holding on to unrealistic prices, 3) total crap that needs to be razed.The big REITs seem to be issuing equity every other day for “general corporate purposes”In the meantime, I am getting CRUSHED by SRS. I know the market can stay irrational longer than I can remain solvent. How much longer? Do I double down? Triple down?Real estate isn’t like unallocated gold certificates – TPTB can’t issue/redeem to manage the perceived supply. There is negative adsorption, falling demand, and credit lines being pulled or curtailed for tenants, and yet the value of equity in the leveraged REIT world continues to defy all logic.Ask Ben to pass the Koolaid. Randle McMurphy couldn’t have been more frustrated when he learned that Nurse Rachet had the authority to keep him against his will…forever. A lobotomy almost seems preferable.

Excuse me, but why do all the arguments regarding the downside of Chrysler’s stay involve threats that Fiat will back out.First, there are the comments about there being no other bidders for Chrysler and they will have to be liquidated. Hmmm can somebody quote me exactly how much cash or equity that Fiat is bringing with their “bid”? I think it’s approximately ZERO!Oh that’s right, Fiat brings their “magic” to the table! Yes they can build a small fuel efficient car with their “magic”. Excuse me, but how did we put a value on that magic? This is the biggest rip off to the American worker, the American Engineer, and the American Citizen that I have ever seen.The Supreme Court needs to look at the legal merit of the senior creditors and ignore the waves sloshing around the White House. Obama will someday privately thank the Supreme Court for nixing the deal before it becomes Obama’s Fiat fart!Wouldn’t it just be better to give the valued parts of Chrysler to GM and Ford rather than give it to Fiat! We are giving it to Fiat so what’s the hang-up about giving it to GM/Ford. Oh, that’s right GM/Ford don’t have the “magic”.

Just dropping a line to say it’s good to see both of you here in the comments. I checked in yesterday, but waited for the Professor to put up a new thread rather than add to the 750+ comments on the other.Humans are optimists by nature, and most want to believe in the beneficience of those in power, and also believe in their ability to shape events. Sadly, I fear the deflationary retrenching and dollar destabilisation just ahead will dispel the confidence we are seeing today.The stalemate over health reform in the US is a perfect example. It is inhumane to deny healthcare to such a huge proportion of the citizenry, yet it is justified by faith in “capitalism” as preferable to “socialism” no matter the cost in human suffering – and economic dislocation with 65 percent of bankruptcies due to medical costs. Instead of looking at global models of health provision to see what works best, the political discussion is about a shift from fragmented private insurance to a public insurance “option” – not whether insurance is a suitable or efficient means of meeting needs with remedies.In the same way, people are reluctant to see the theft of their pensions and household wealth by Wall Street as anything but temporary, believing that their previous good fortune to leverage up in a credit expansion can be restored with a bit of monetary excess and fiscal irresponsibility. Instead of looking at global models of measurable development and sustainable job creation, they wishfully believe that if enough jobs are cut from manufacturing, banking, government and education that by some alchemy everyone can be miraculously employed again at even higher salaries.We are in the eye of the storm, a brief period of calm. But there is not just one storm, because the deflationary collapse of the US economy, and soon the collapse of dollar hegemony, will surely trigger other storms. In the meanwhile, I guess we should enjoy the summer, hug our kids, dance, sing and celebrate small miracles of everyday life. At least these are free, and so immune to either inflation or deflation.

it fell and broke apart

Fiat once sold cars in this country. Their repair records and longevity were abysmal. I don’t see how they can rescue anyone. You can’t sell junk in the competitive US market and expect to survive. They didn’t.This fiasco, like the bankster bailout, was and is designed to rescue the moneyed interests -not the industry.

It pays awfully well to own the Fed and the Treasury… and will pay even more as the US morphs into a financial monopoly dominated and controlled by Goldman Sachs…under the guise of “crisis”:”Wall Street M&A Winners Led by Morgan Stanley”June 8 (Bloomberg) — When Pfizer Inc., the world’s largest drugmaker, decided to buy Wyeth last year, it didn’t turn to its usual advisers at Lazard Ltd. and Bear Stearns Cos. Instead, Pfizer executives called bankers at Goldman Sachs Group Inc. and JPMorgan Chase & Co.The $65 billion takeover, this year’s largest, helped Wall Street’s top three merger advisers — Morgan Stanley, which worked with Wyeth, Goldman Sachs and JPMorgan — tighten their grip after the collapse of non-government credit markets and subsequent liquidity squeeze wiped out Bear Stearns, Lehman Brothers Holdings Inc. and Merrill Lynch & Co.Morgan Stanley, Goldman Sachs and JPMorgan, all based in New York, have captured 36 percent of the market in 2009, up from 24 percent last year and the highest for any six-month period since the second half of 2001, according to data compiled by Bloomberg.“The financial crisis has made people much more conscious of the need for size and stability,” said Felix Rohatyn, 81, a former partner at Lazard who’s now president of Rohatyn Associates LLC in New York. “In many ways, this crisis was more positive for the big firms than for the little ones.”The gains come after Goldman Sachs and Morgan Stanley, the two biggest U.S. securities firms that dominated the global business of arranging mergers and acquisitions, converted to banks in September, raising doubts about the future of a model that combined advisory work with trading and lending. JPMorgan is gaining market share after standing out as the only one of the five largest U.S. banks to avoid reporting a quarterly loss during the two-year economic slump.http://www.bloomberg.com/apps/news?pid=20601109&sid=aJkG8nL3PWLQ

Yes, Fiat is a curious choice … if you wanted to really save the auto maker and its jobs, wouldn’t you give the pieces of Chrysler et al to a successful auto maker like Toyota? There’s a deeper political agenda at work here.

Okay, I can go along with this:Can you imagine what a craven, bumlicking ass-goblin you’d have to be to get a job working for the Wall Street Journal, not mention up front that you used to be a Goldman, Sachs managing director, and then write a lengthy article calling your former boss a “national hero” — in the middle of a sweeping financial crisis, one in which half the world is in a panic and the unemployment rate just hit a 25-year high? Behavior like this, you usually don’t see it outside prison trusties who spend their evenings shining the guards’ boots. I can’t even think of a political press secretary who would sink that low. Hank Paulson, a hero? Are you fucking kidding us?”http://trueslant.com/matttaibbi/SOOOooooo, what’s new?Ho hum

Ritholtz vs. CNBCDealBreaker, Charlie Gasparino & Mehttp://www.ritholtz.com/blog/2009/06/dealbreaker-charlie-gasparino-me/How to Fix Financial Televisionhttp://www.ritholtz.com/blog/2009/06/how-to-fix-financial-television/

the truth is Obama and Democrats are lying to tax payers. those soul-less and heartless politicians.

But have they rescinded the Madoff rule for market makers? NO.

probably because toyota doesnt want it – garbage. I doubt tiger woods stands around wishing he could putt like steve stricker.

NEW THREAD

I want to elaborate further on this point about WHY the markets aren’t following fundamentals.If the financial sector is responsible for 40% of GDP, and the financial sector and its speculative behavior via shorting stocks nearly collapsed the financial system as many firms took the same trade, how will these firms maintain a market for themselves if there’s no longer a viable system? It’s in their own best interest to insure the financial system remains intact so they can carry on with business as usual. In my opinion it’s very elementary.

Baltic Dry Index looks like a pump job;http://www.mgn.com/news/dailystorydetails.cfm?storyid=9975“The fundamentals still overwhelmingly point to a world economic recession with tremendous job losses and we suspect that will put a real dampener on the current burning hot BDI.” “

JP, NEVER add to a losing trade. Averaging down is a mugs game.

There’s a lotta talk about how unfair it is that corporations are treated as persons legally. But, in none of the bove discussion do we read about the advantages this system of law has afforded our society. Now the Supreme Court has decided the advantages far out weigh the disadvantage, so, in the interest of full disclosure, can any of you bright minds list the advantages? Hint: under our current rule of law, we have built the strongest economic capitalist system so far devised. Are we proposing to throw that all away?

yea…and while we are at it, a public hearing about the 9-11 demolition of the twin towers and World Trade Center 7. They had enough time feeding us BS about airplanes and terrorists and all other hyped up stuff. Time for the government to “come out clean”.

Dr. Roubini is staying honest and I was just playing above post -American financial news is presented …well, like the betting parlour inthe movie Stingfor example, Paul Krugman says the world is facing a decade of global recessionand that the US will (technically) not be in recession soon (for aperiod of time)SPIN: Paul Krugman says USA is out of recession!!!(this is the only bit of what he said that gets broadcast)why isn’t the mass media ever examined for its presentation of financial news?(instead of only how they cover Pres. Obama)

Placing my limit orders now hoping they trigger tomorrow on a dip! Buy buy buy!

Morbid, you’re taking away all the fun!