The unemployment rate rose to 9.8 percent in September, the highest since June 1983, as employers cut far more jobs than expected.The report shows that the worst recession since the 1930s is still inflicting widespread pain and underscores one of the biggest threats to the nascent economic recovery: that consumers, worried about job losses and stagnant wages, will restrain spending. Consumer spending accounts for about 70 percent of the nation’s economy.Most analysts expect the economy to continue to improve, but at a slow, uneven pace. Government stimulus efforts, such as the Cash for Clunkers auto rebates, likely boosted the economy in the July-September quarter, but economists worry that growth will slow once the impact of such programs fades.http://news.yahoo.com/s/ap/20091002/ap_on_bi_go_ec_fi/us_economy

Professor -With all due respect (and believe me it’s sincere) I would love to know just where you see growth coming from?I mean, unemployment and under-employment are still on the rise; housing is still on the down swing; the banks are still insolvent; the consumer is STILL underwater. If the economy is 70% consumer-driven, where is the growth coming from?We don’t manufacture much, we still import nearly all our oil. We can’t even be assured the health care system remains on stable footing.Perhaps I’m missing something – could you tell us just where the hell you see potential? From here, it just looks like it’s getting worse.

Rethink Afghanistan: Filmmaker Robert Greenwald Launches Film Opposing Escalation of War

there is no growth anywhere in the world. it’s all stimulus driven growth… GDP is contracting in the US at a still neg 6% rate if you take out the stimulus…. Everything is all smoke and mirrors, guess’es and hope…. Things are much worse then they were last fall…. look at the unemployment numbers, food stamp numbers, state budget deficits, people without health coverage, massive and rising foreclosures, Tanking home prices, rising Credit card defaults, 3.5 Trillion dollar toxic balance sheets of the banks, 13 trillion deficit, 2 trillion dollar annual deficit, Destroyed and still tanking auto industry, pension funds aboout to go bust, and many many more problems….Average Joe American Wake up, take the blinders off… Even Obama has a scared look latley… i wish i ahd fixes, but there jsut dont seem to be any….

When private credit breaks down, substituting sovereign credit for private credit won’t lead to potential growth.How can Prof.Roubini not see this ?The economy could only grow as it did during the last three decades (at an average growth called “potential growth”) when total credit was doubling every 7 to 8 years, ie growing at more than 3 times the pace as output. In the US for instance, during the last eight years, private credit including all outstanding liabilities doubled from $ 25 trillion to $ 50 trillion, and sovereign credit doubled from $ 5 trillion to $ 10 trillion.So for the US economy to continue growing in the next 8 years as it did in the past, we need to pile on another $60 trillion of debt. As private credit has already broken down and can’t add a $ more as businesses and households are already too leveraged and every $ of additional credit gets destroyed with more than a $ of default (private credit is actually falling), the sovereign is going to have to substitute all of it and more, ie pile on at least another $ 60 trillion of debt all by itself. Which is obviously ridiculous, as in the end, whatever sovereign debt is owed is owed by all households.The only thing that can be achieved by substituting the fall in private credit with an equivallent rise in sovereign credit is to postpone the credit and economic collapse. During that time you get a Japanese L shaped recession (or mutlitple small Ws, 2 or 3% growth for a year or two followed by 2 or 3 % decrease for a year or two, which is the same), no growth, no collapse either, which is what our leaders probably want to achieve as their ultimate goal is to kick the can as far as possible so that it doesn’t explode whilst they are in charge.In the end, American households will have to REALLY deleverage (not simply transfer some of their debt to the sovereign which is exactly equivallent with not deleveraging).This is quite straight forward, so Prof.Roubini, please, let me know where is the flaw in this reasoning, as it seems you have become very hesitant to pronounce yourself for anything since the last 6 months.Where is the Prof.Roubini of the past ?

come on now, dont squeeze in the children into the number. 31 mil? you kidding?

Second Thoughts On The “Cash For Junkers” ProgramI’m not at all convinced the these letter-shaped recovery discussions are to the point. It seems to me that the government and the FED have so screwed up and distorted the economy that they are forced to stick with their odd-ball manipulation of markets and trillion dollar funny-money (stimuli) gifts to the rich until the money gives out. Big Ben and Obama have a blind faith that they can avoid a depression by destroying the US monetary system. I don’t think they can. When their pigeons come home to roost, you’ll need more than a alphabetic letter or two (and even more than in an alphabet soup) to describe the resulting chaos.Just looking at things from the outside, you would think that the “cash for junkers” program was an outstanding success. It got people to spend money, it created jobs, and it stimulatedproductivity–things that none of the previous efforts and expenditures had succeeded in doing. So why did Obama and Big Ben ad hoc drop the program like a hot potato. I think that the program was too successful, too expensive, and that these two financial wizards just got cold feet about the costs. (I also think that in the future if their only response to emerging financial crisis problems is to give out money and there is no crash, the “junkers” program will not in final perspective seem all that expensive.) It seems to me that in the final analysis, the junker program did much more harm than good–it just wasted much money without doing any lasting good for the economy.So what could we learn from the “junkers” program flop?1. Obama and Big Ben (I could include others as well) really don’t know what they’re doing, and are between a rock and a hard place.2. There is a saying: “The good that men do die with them. The evil that they do live long after them”. The same seems to be true about stimuli programs when the funding stops.

And what about the jobs?This is a bit short sighted I’m afraid. What we’re seeing is a paradigm shift driven by a loss of resources.US is massively in debt and will NOT be able to consume such that it would create any meaningful number of jobs. And let’s face it, the rest of the world isn’t exactly in the position to consumer more US products either.

“If thou won’t spend it, I shall spend it for thou”Uncle Sam

And please keep in mind – in the unlikely event of a real market crash then a stop-loss will not protect your position. You can lose a lot of profits, and a lot of asset values, in a real crash. That’s because your stop position will be “stopped out” and you cannot sell your holdings until the market settles at some lower point. Therefore, if you are at all worried then its better to extract (at least some) profits while you can easily do it. However, I am not saying this because I believe that a crash will occur – no-one can know that. It’s just a prudent reflection during the “haunted” month of October PeteCA

I think that, given the overall contraction, people are just accepting to minimize their losses.Have to wonder whether this is a way to kill individual currencies and to go with a global one. I’m sure that there will be an attempt, but in the end, without a truly sustainable economy (based on sustainability of natural resources against our population base), it too will fail.

Robert Reich agrees with you as he said `this yesterday:”Which brings us to the obvious question: Who’s going to buy the stuff we make or the services we provide, and therefore bring jobs back? There’s only one buyer left: The government.Let me say this as clearly and forcefully as I can: The federal government should be spending even more than it already is on roads and bridges and schools and parks and everything else we need. It should make up for cutbacks at the state level, and then some. This is the only way to put Americans back to work. We did it during the Depression. It was called the WPA.Yes, I know. Our government is already deep in debt. But let me tell you something: When one out of six Americans is unemployed or underemployed, this is no time to worry about the debt.When I was a small boy my father told me that I and my kids and my grand-kids would be paying down the debt created by Franklin D. Roosevelt during the Depression and World War II. I didn’t even know what a debt was, but it kept me up at night.My father was right about a lot of things, but he was wrong about this. America paid down FDR’s debt in the 1950s, when Americans went back to work, when the economy was growing again, and when our incomes grew, too. We paid taxes, and in a few years that FDR debt had shrunk to almost nothing.You see? The most important thing right now is getting the jobs back, and getting the economy growing again.”People who now obsess about government debt have it backwards. The problem isn’t the debt. The problem is just the opposite. It’s that at a time like this, when consumers and businesses and exports can’t do it, government has to spend more to get Americans back to work and recharge the economy. Then – after people are working and the economy is growing – we can pay down that debt.But if government doesn’t spend more right now and get Americans back to work, we could be out of work for years. And the debt will be with us even longer. And politics could get much uglier.”http://robertreich.blogspot.com/

Thanks PB! It’s good to know that others can recognize the absurdities.

It’s not that the government is not spending enough–it’s that they’re spending it on BofA and world domination.

If you look at some of the amounts that the Govt/Fed is spending over two years :$ 0.7 trillion for bailing out the banks (TARP; PPIP, etc..)$ 0.75 trillion for the stimulus$ 1.25 for buying back mortgages and MBSThat’s enough for 21.7 million jobs at 60K /year over two years. Instead, most of that money is going in the pockets of the wall street cronies shareholders and bondholders.Enough is enough.

Some probelms have no solution

Professor Roubini,I am an individual subscriber to your service. I say this to point out that I am a believer in your ideas – I spent a lot of my own money to hear your opinion.However, your most recent statement of being receptive to an increasing growth trend seems counter intuitive to me. What I enjoyed in the past from you was a willingness to be rigidly focussed on the facts and how those impacted the economy. Many of the issues you have cited in the past, still exist today. The most striking in my mind is the rising default on debt. It is getting worse, and yet I hear nothing from you. You were a voice of reason in the cacophony of the mainstream media. Your primary thesis for the start of this was defaulting debt. Now simply because M2M has been suspended and the Fed is temporarily harboring these bad assets on their balance sheet, it simply vanishes ?I mean the inconsistencies with your previous stance are startling. Who cares that the market is rallying ? The underlying fundamentals are simply not there. These are the same fundamentals you used to cite as being drags on the economy.The major portion of the stimulus is over. The premise behind the stimulus is that organic growth (in other words the consumer) will fill the gap as the stimulus diminishes. With no relief on debt (your arguement); continually rising defaults (your arguement); significantly rising unemployment (my arguement); there will be no organic growth from the consumer to increase aggregate demand.I am not a permabear. I know that I sound like it right now. I, like you, want to be a realist. I want things to get better, because I want my kids to have a brighter future. But, just because the government wants to “grow” their way out of it, because it is the painless solution, without any fundamental change to economics, I can’t go with the herd. I have to stick with the Roubini, who was right at the start of this. Not the one, who is comprising his original points of view now.

You are absolutely correct. Reich is wrong. FDR spent more each year expecting consumers to fill the gap. In 1937 after 5 years of spending, when he cut back on spending, the economy tanked. It wasn’t until he started shipping supplies to Britain that the economy picked up again. Plus, WWII destroyed production in most developed countries – except the US. We supplied the world for quite some time. After 60 years of peace, we have a lot of competitors, and a complacent population and government.Let me say this as forcefully as possible – Robert Reich is wrong.

Amen! Prof Roubini’s recent opinions appear to be tailored so not to contradict the current Administration’s economic propoganda.War is not peace, slavery is not freedom, and massive debt is NOT recovery!

More NO JOBS! They are Starting to cover thier tracks now with all thier BS Data manipulation lies…. They know the truth will come out… it comes out in tanking Tax revenues at state, local and federal levels… if they all go down 20-30% would;nt that mean unemployment is approaching those numbers…I wonder how these 824K Average Joe Americans feel to be a correction statistic…Merry F..king XMAS Averaje Joe!BLS Discloses It Has Overrepresented Payroll Data By 824,000 Or 15%Submitted by Tyler Durden on 10/02/2009 11:25 -0500BLS Bubble Bureau of Labor Statistics Employment Government Insider Selling Jobs Moral Hazard Non Farm Payrolls Obama Payroll Data REIT Survey Unemployment Unemployment Insurance USA part of today’s BLS announcement that has not received much attention is the BLS’ own disclosure that it “may” have lost an additional 824,000 jobs in LTM period ended March 2009, in addition to the already disclosed 4.8 million job losses. From the BLS:In accordance with usual practice, the U.S. Bureau of Labor Statistics is announcing its preliminary estimates of the upcoming annual benchmark revision to the establishment survey employment series. The final benchmark revision will be issued on February 5, 2010, with the publication of the January 2010 Employment Situation news release.Each year, the Current Employment Statistics (CES) survey employment estimates are benchmarked to comprehensive counts of employment for the month of March. These counts are derived from state unemployment insurance tax records that nearly all employers are required to file. For national CES employment series, the annual benchmark revisions over the last 10 years have averaged plus or minus two-tenths of one percent of total nonfarm employment. The preliminary estimate of the benchmark revision indicates a downward adjustment to March 2009 total nonfarm employment of 824,000 (0.6 percent).Table B shows the March 2009 preliminary benchmark revisions by major industry sector. As is typically the case, many of the individual industry series show larger percentage revisions than the total nonfarm series, primarily because statistical sampling error is greater at more detailed levels than at a total level.

Well said !And I’d like to add the following…I am a small investor, I consider myself one of the lucky ones as I have a decent amount of savings and am debt free, all I want is to be able to preserve the value of those savings in order to fund my retirement which will be in about 15 years.That’s why, like probably many here, I am particularly not interested to know whether you believe growth next year will be 0%, 1% or 3%. It makes no difference. We already know that there is going to be some sort of “official” recovery next year, they’ve pumped in such gigantic amounts of money in order to stop this thing from collapsing that it would be very surprising if the economy doesn’t look better from the data point of output (GDP growth) and if the bleeding in job destructions doesn’t (temporarily) recede next year.But for how long ?If you add everything up, stimulus, bail-outs, fed balance sheet increase, we’re talking more than 20% of GDP spent over an 18 month period to get this economy running again, Of course it’s going to have some effect, we already know that. But what we want to know is what you believe will be the consequences of this for the medium and long term :- is the fundamental problem that led us into this crisis that of over leveraged households, and businesses ?- if yes, why do you assume that simply transfering some of that debt from the private to the sovereing solves the problem ? If households were overleveraged, why would they be less leveraged if the sovereign is holding a larger share of that debt. Who else if not all households are liable for that sovereign debt ?- has a collapse of private credit that would lead us into a great depression 2.0 really been averted, or simply postponed to as long as the sovereign has enough credibility and can exert enough inflationary forces to stop total credit from deflating, as it did in 1929-1933 ?- what will be the consequences on the dollar from all these actions and will we be able to keep the value of our savings from falling during the next decade or so ?You were one of the very few (non Austrian) economists that foresaw this crisis. Your analysis was very often brilliant, now you seem to be lost, confused, when sharing your views about the medium term. As if you have lost a sense of what is relevant.

No children…Read it and weep..

We are over 20% U6 already…they just added 830k more unemployed yesterday in a yearly revision so as not to llok stupid when the annul number comes out in Feb.

NO JOBS, NO JOBS, NO JOBS- so what’s the fix? Here is one:Ask yourself how much have we injected into saving, fixing , bailing out Banks, Wall Street, Auto’s, Fannie, Freddie, China? By most estimates it is TRILLIONS… is it 4 trillion, 6 trillion, 11 trillion – probably something in those numbers. Now what have they all done with that money? Most of the recipients of the “Trillions” have themselves made massive job cuts and layoffs. That alone tells me they don’t feel they will need the workers moving forward to service the economy because they also see no JOB Creation.So back to the fix:There are probably 50 consistent posters on this site and another 50 or so who all contribute. Everyone writes well, thinks intelligently, comes across as caring for the country and its people, seems smart, seem like they have business back rounds… another words, Good people. So take those 100, Make Average Joe the CEO, start a company and ask Obama for 1 Trillion in hard cash to run a business that actually creates jobs. Here is what 1 trillion can create:My Plan Annual Cost Employees Salary Bene$1,000,000,000,000 $70,000 14,285714 $50,000 $20,000$2,000,000,000,000 $70,000 28,571429 $50,000 $20,000My Plan Annual Cost Employees Salary Bene$1,000,000,000,000 $84,000 11,904762 $60,000 $24,000$2,000,000,000,000 $84,000 23,809524 $60,000 $24,000Now we have just employed over 14 million at 50K annual salaries, with full health, 20 paid vacations days, 401k/pension contributions – another full benefits. Cost 1 Trillion. I threw in scenario’s for what 2 trillion would do and also if everyone made 60K annually. Most fortune 500′s average about 30-40% in fringe costs. Smaller companies less. so i took the highest rate of 40%. Make sure everyone is covered and not on the cheap. So everyone is already poking holes… What about overhead costs, facility costs etc…it all depends on what these folks do. Right now they are employed doing nothing… so there are no fixed costs other than small administration costs for payroll and benefits. How about a Green energy company producing solar, wind, alternative products for commercial and residential consumers throughout the country. It includes installing and maintaining these products… Get Boone Pickens to run it and have Roubini manage the $$$$ Remember everyone makes the same salary for now.Now figure that income taxes on this company and all the workers could effectively return 150 Billion – 250 billion back to the Gov’t annually. But the first three years of this effort, those taxes that would be paid have to be used for the overheads required to run a company this big. For the company buy the materials needed. Revenue generation/prices for the products and services would be made affordable to all.to sum it up- give me, give us 1-2 trillion and we could create anywhere from 11 million to 28 million jobs depending on the amount received and salaries paid.But no instead, we have chosen to go down the roads of protecting and funneling Trillions the PTB that could care less about JOBS and JOB creation.The above is just to point out how the money should be used and sure anyone could poke holes in it, but its rough and high level. But I am convinced I could find 100 people from this site and across the country that could make something similar work..

Here are some other thoughts on where we are, this time from David Rosenberg (a long article and well worth the read):THUD, DUD AND CRUD – David Rosenberg Friday October 2 (PDF warning)

Roubini has been bought out by the Odinga/TaxCheat/Helicopter/Corrupt US Corp. America camp. He is keeping one foot in their camp and the the other in the “reality-stalking-in-your-face” camp. He has already earned his fortunes. He doesn’t want to tarnish his former image by forecasting any more doomy/gloomy predictions.

“This ain’t THEN”g-no this is NOW! and yes there are solutions! Fight you young men and women! wake up!! Fight! Mother nature IS dictating for us to contract like you say..that would mean decentralization of energy something the power companies are not too fond of. Also locally grown organic agriculture. An anathema to Big Agriculture who are destroying our top soils and poisoning our groundwaters with pesticides and inorganic fertilizers- an extremely serious matter.”Globally, it’s clear we are eroding soils at a rate much faster than they can form,” said John Reganold, a soils scientist from Washington State University. “It’s hard to get people to pay much attention to this because, frankly, most of us take soil for granted.”The Earth is covered with an average of only three feet of topsoil, the layer of dirt that provides the nutrients for most of the planet’s land vegetation, and is critical for producing food from agriculture. Healthy topsoil is a home to billions of beneficial microorganisms per handful, in addition to nutrients, fungi and worms that are critical to healthy plant life. But it forms very slowly, at a rate of only an inch or two per several hundred years. And around the world, topsoil is vanishing much faster than it forms.”The estimate is that we are now losing about 1 percent of our topsoil every year to erosion, most of this caused by agriculture,” said David Montgomery, a geologist at the University of Washington and the author of the book “Dirt.”The National Academy of Sciences estimates that U.S. cropland is eroding at 10 times the rate that it forms, and the United Nations has warned that soil degradation is a global crisis.”http://www.naturalnews.com/023451.html

An ‘agenda’ to provide health care to all Americans? Maybe it would be beneficial to those who need it the most? We lost 44,000 people in america last year because they didn’t have health care! The disrespect you show by your rant to our President is appalling.

Pete,A few weeks ago you agreed with another poster that we were in a bull market, now you’re saying we’re in a bear market. What has changed your mind?Being the contrarian as usual, I did a bit of profit taking on a couple of individual stocks early last week and then watched them pull back about 10-12%. I have since bought back in, and the price action on these stocks in the past 2 days shows there’s a lot of net buyers, not sellers.I think buying or selling right now depends on the stocks one is holding and watching the action of each stock. For those that are invested in the broader market, I’m neutral on buying or selling right now but expect to see another dip next week, especially if CIT ends up filing for bankruptcy.

SEPTEMBER 2009 JOB LOSSES AT ONLY 247K?????We’re letting in 160K legal immigrants in each month with 15 million [its probably more like 30 million IMO] unemployed backlog….and job losses ???? each month [my guess is 300K-900K, the 247K figure is WAY too rosy] per the following “incomplete BLS analysis” available to date:This is for Aug 2009 [the 213K BLS wild guess month], not Sep 2009′s 247K per month wild guess, article in part:”…Table C. States with statistically significant employment changes from July 2009 toAugust 2009, seasonally adjustedJuly August Over-the-month2009 2009 p change pAlabama……………………………………. 1,909,800 1,895,800 -14,000Georgia…………………………………….. 3,888,400 3,853,400 -35,000Hawaii………………………………………. 601,000 594,500 -6,500Illinois……………………………………….. 5,667,600 5,648,400 -19,200Kansas……………………………………… 1,342,200 1,335,900 -6,300Maryland…………………………………… 2,548,500 2,536,500 -12,000Michigan……………………………………. 3,864,000 3,821,100 -42,900Minnesota…………………………………. 2,654,400 2,644,100 -10,300Mississippi…………………………………. 1,118,400 1,108,800 -9,600Montana……………………………………. 438,700 443,800 5,100North Dakota……………………………… 371,500 368,700 -2,800Ohio…………………………………………. 5,127,400 5,097,300 -30,100Oregon……………………………………… 1,631,500 1,624,900 -6,600Tennessee………………………………… 2,664,200 2,649,100 -15,100Texas……………………………………….. 10,406,500 10,344,300 -62,200Washington……………………………….. 2,864,200 2,851,800 -12,400p = preliminary….”The rest of the URL:http://www.bls.gov/news.release/pdf/laus.pdfBTW, the total job losses for Aug 2009 per the Table C above is 290.1K, yet excludes 26 job loss states….LOLIndiana is one of the excluded states from Table C and was shedding jobs at 14,800/mo from Aug 2008-Aug 2009 [see Table D in BLS report URL above].Until I see 50 state visibility in the BLS data, I see the 216K for Aug 2009 a completely wild guess, let alone the 247K they came up for Sep 2009 [not yet analysed since the latest Sep18 2009 report] as anything credible either.Are they lying about America’s monthly job losses [as horrifying as their lies are] to justify high legal immigration rates? I think they are. You can’t prove me wrong….LOL

You think NR should continue the beat to your anti – anti drums? The numbers speak for themselves. He’s interpreting them and giving us reasonable scenarios to think about. Don’t try to force a conclusion.

http://finance.yahoo.com/news/Administration-eyes-ways-to-apf-186653936.html?x=0&sec=topStories&pos=main&asset=&ccode=HAHAHA, Obama’s only growth policy is socialistic free lunch growth policy. Shame on Obama.

I think you’re repeating yourself. You need to pass-on that thing you’re smoking so we can see the same illusions.

Cyclical bull market in a secular bear market is effectively what I hear you’re saying and I tend to agree with this theory as well. I am not so sure that this current bull run is over and done with yet.

Not to be contrarian, but MM CA, why should they do this?The real solution is to let the business cycle simply run its course. The economy desperately needs a recession. We NEED a down cycle to clear out unproductive, legacy, failing businesses and business models and to consolidate resources for real growth.It’s like a person who goes for 24 hours without sleep. You can give them amphetamines, but their productivity isn’t the same. 48 hours in, you need serious stimulants just to keep them from falling over. 72 hours and you’d better turn to crystal meth. After a week on meth, the person might still be awake, but they are simply insane. You probably should have let them sleep after being awake for the first 24 hours if you actually need them to be productive long-term.Here we are in the economy at the point where more bubbles have formed and burst than at any time in history, and yet the economy has not been allowed to reset for any of them. What’s left is an insane economy. Totally irrational. The markets reflect this. The confusion of anyone on the street (and everyone that calls me) asking how they can just protect their assets – nevermind asking how to get any return on investment – screams out that the system has gone to the point where it is insane. It NEEDS SLEEP, we need a downturn very badly.Of course, the counterpoint is that we may already be past the point of maximum consequence. If the person in my analogy, is already at the point where they are fatally sleep-deprived, then there is no additional harm that can be piled on, so they may as well keep doing drugs until they actually die. Here, the USA may already be fatally wounded with a dollar collapse unavoidable, and such massive poverty on the way that the dissolution of the union is imminent. The world may be at the point where a globally devastating uprising is unavoidable, in which case, continued spending to buy more time before the end is without consequence.If we aren’t at the point of maximum consequence yet, we will be soon. Adding new programs to burn money will get us over that threshold with certainty.I don’t know. It seems so obvious that it is depressing. Just like people need sleep, economies need cycles. Why fight the inevitable, when the only possible outcome is disaster?Blah, where is morbid? (…and honestly, where is Dr. Roubini. Whoever is around him and reads this board needs to shake him and tell him to wake the F up again. Without repeating the posters above, I will add this tidbit: You got status because you saw this meltdown coming. So did I. So did Warren Brussee, and several other brilliant authors and economists. Now, you are alone saying that a total systemic meltdown has been averted and we are in for anemic growth? If that’s really what you think, I’m afraid that my respect for your analysis is gone. You need to read some of Warren’s updates, or mine, or other posters on this board. You really need to answer the questions being posted here, or change your tune back to recognizing that we are in an artificial “Bubble” of stimulus that is presaging a massive, unprecedented financial collapse. Otherwise, when history of this is written, you will be forever remembered as being on the wrong side – having called one part right and then selling out… *rant off* Think about it, please).–Brian

Earlier Comment on This Thread: “I wonder what percentage of those who are in the market right now have fully hedged their portfolios with the adequate puts… “——————————————————Response: In the spirit of playing around with ideas, let’s think about this a minute.First, the idea of using PUTS to fully hedge your position is a really good idea. That is – provided the market functions in a normally. And most likely thay is exactly what the market will do … exhibit normal amounts of volatility.But what happens in the rare event of a real market crash? Actually this strategy of hedging with PUTS can fail. Let’s see why. Go back to the 1987 crash and look at what happened. At that time people were into a concept called “portfolio insurance”. This brilliant scheme was heavily marketed by managers in the fund business (for retirement investors). The proposition was that reitrement investors were almost “guaranteed” a respectable gain on their money – no matter what happened. How? Well, basically if the market was a in a bull phase then the retirement fund would hold LONG positions on stocks, and hedge against losses with PUTS in the futures market. In the event of an unexpected market drop, the PUTS would cover any losses.But the trouble with this scheme is that essentially means the futures market would need to cover ALL the losses in the main stock market. Imagine if EVERY investor in the stock market was fully hedged using PUTS. Then everybody would expect to get paid back – in the event of a sudden market drop. Is this realistic … answer is NO. The futures market cannot cover ALL the losses in the main stock market, and somebody HAS to lose! No big surprise if you think about it … it’s never possible to remove risk from investing. If people invent an ingenious way to guarantee earnings for practically everybody, then the end result is that you force the market itself to crash. Which is exactly what did happen. The early signs that something was badly wrong in the 1987 crash actually occurred in the Chicago futures markets.So why can’t the futures market cover such losses? Basically because the formulas used to price CALLS and PUTS are all based on statistics. It’s all done on statistical estimates of risk in the market, which really boils down to estimating the current volatility. If every investor (in a bull market) buys PUTS when the options price is low (market is going up and the volatility is low), and then the futures market suffers a horrendous loss if the stock market crashes – this scenario exceeds the possible payout that the futures market can deliver. The system is overwhelmed.Do these conditions exist today? I’ve got no idea … I haven’t checked the futures positions for the Dow and S&P. My guess is that probably we don’t have the same conditions as existed in 1987 – but I don’t know for sure.This is primarily an academic discussion. But the moral is … if you are really truly worried about the possibility of a market crash then the best alternative is just to extract enough profits (by selling stock holdings early in the game – so you can sit on the sidelines “fat and happy”. It’s all about risk and reward – and peace of mind.PeteCA

Excellent Summation of were we are, how we got here and likely outcomes. For those wanting a fresh look at the macro picture, this is a great piece of work. Edward Harrison, does a great job threading the thoughts of many we respect and those of our government to make sense of why we are were we are. Perhaps you will gain some appreciation of Michelle and others who have kept it all in perspective.http://seekingalpha.com/article/164452-recession-is-over-depression-has-just-begunhlowe

Very well done and reasoned argument MM CA, but it seems that the disagreementis not about reasoned argument. Rather the argument is “I want what is mine andI’ll take what is yours if I can get away with it.”This is class warfare. No more, no less.

Brian … think about this.What has the US Gov’t got right now? Answer: Risk-free debt at extremely low interest rates. The ideal solution for any government that’s drowning in excess spending – and planning to add another $9 trillion in debt in the next few years right? No wonder Geithner and Bernanke are heroes to Obama. So why is the US debt risk-free? Well apparently because the Fed really can buy whatever purchases of UST’s are necessary (overtly and covertly) and no-one is going to hiccup about this. Not really. Ohhh, they may jawbone a bit – they ain’t gonna upset the applecart. And apparently also the dollar is not going to crash, because the G-20 wants a smooth transition. So … no threat to the US dollar and no threat to US bonds. Risk-free borrowing by the US Gov’t. It must be a nice world.What happens when the world’s biggest debtor gets a risk-free deal? Answer: Risk gets tranferred to other unexpected places in the global economy – that’s what happens. Other places that Bernanke, Geithner, JPM and Goldman cannot control or engineer. Other places where the credit markets and the derivatives markets will fall apart.PeteCA

“it’s never possible to remove risk from investing.”Indeed, the core of the matter and it is not possible to remove risk from life itself due to the fact that the human mind remains in a primitive state, albeit in evolutionary dynamic, and we do not comprehend very much about the physics of our temporal state but we encapsulate the insolence that we know it all.Risk can be reduced but never removed. Besides, with the elements of risk, there would no longer be any challenges, mental interests, nor fun.Ho hum

i think not

“As far as we can discern, the sole purpose of human existence is to kindle a light of meaning in the darkness of mere being.”C.G. Jung’ Said, with tongue in cheek and mischievous humour, I’m sure; aye, to be sure. LOLHo hum

ChrisL,Thank you for being here! I’ve really been impressed with your contributions. Very few seem to be able to ask/point out the really hard, fundamental questions/points.

And, what exactly would you do with extra money? You’d still be pushing on a string! The issue is CONSUMPTION! The consumer is dead, cutting taxes for small businesses won’t resurrect her/him!Why is it that the “solutions” from the Right always fall apart after only peeling away one layer?

It’s a dying paradigm. Without the ability to continue pushing transportation TBTB will lose their control! No longer can they sucker us into this meme!There’s a lot to be said of this saying:My grandfather rode a camel. My father rode in a car. I fly a jet airplane. My grandson will ride a camel.For my part of the world one would need only change “camel” to “horse” and it would fit. However, I think a “bike” will be the next step.

My fear is that we don’t have the minds to properly turn this thing away from the cliff. Too many special interests. Too many people will get burned in the turn, and politicians cannot stand such heat.But… In a way it’s a call for sacrifice for constructive purposes, much like WPA and WWII were. Regardless of their real effectiveness (which I hold suspect), they did challenge the collective mindset.Only if we toss away our marketing mentality and our TV/entertainment culture can we possibly face what needs to be done. Not until we can see that a more egalitarian society is necessary (yes, gasp, less stratification!) will we be able to settle things down. The notion of everyone climbing over everyone else isn’t the exact formula for creating a sustainable society.And, there has to be more reverence toward the land.

Janet Tavakoli Interviewed by Max Keiserhttp://www.zerohedge.com/article/janet-tavakoli-why-meltdown-risk-now-greater-it-was-2007Janet Tavakoli: SEC – Slumbering Esquire’s Club! Ha!Me: JPM is leverage something like 850 times its tangible assets to the tune of $80 trillion, but no worries, ’cause the Fed will re-create it! (And you thought the USA’s $11 trillion was high.)Janet Tavakoli: Says it’s way too much debt. Its impossible to monetize that much dough. I was expecting the USA to take the deflationary hit. It should have put banks into receivership last year?!?Me: This is the is weak link in her argument – a rational government. With the financial industry’s deep capture of Washington, the government is a walking zombie. It will continue on an irrational path until the parasite has been removed.Janet Tavakoli: Current monetization is trying to prop up slumping GDP. The basic problem is that there is too little world-wide cash trying to pay way too much debt. But, pumping in extra dollars to hold and restore existing debt will only lead to more defaults.Only one possible outcome, deflation.Me: I see a more plausible outcome, a stubborn, irrational government that refuses to surrender to deflation, stumbles across a tripwire into subsequent hyper-inflation and eventual collapse.

Yes, excellent article. There’s one flaw in his observations though, and that’s that there will EVER be a 3% uptick in growth for one year, which would be, as he states, the trigger for ending the QE.What I gleaned was that devaluation of the USD is the ONLY way forward. It would be the only way to increase exports; unfortunately, devaluing the USD would make a lot of those importing countries holding USD poorer, less able to pick up the necessary consumption.I sense that this is all circular, water flowing down a drain…

I’m fed up with hearing ignorant morons talk about “Obama’s socialistic policies”.Obama is not more socialist than Reagan, Bushes, Clinton, Thatcher, Blair, Milton Friedman, Robert Lucas, Greenspan, Bernanke were or are socialists.It’s evident to anybody with a brain that Obama is only following in the footsteps of his predecessors and trying to protect a system called finance led crony capitalism.It has nothing to do with socialism, but is a particularly perverted version of capitalism which took over the world gradually starting at the end of the American and British stagflationary lost decade of the 70s.It is an era which saw, starting in the USA and the UK and gradually expanding in the rest of the world, balooning the size of the financial, Insurance, Real Estate (FIRE) sectors and the explosion of private debt, as new engines of growth.This completely artificial finance-led growth hormone called “leverage” is like a potent addictive drug : it feels good for a while, but if you take it away you feel so depressed that you must take some more and if you continue like this it eventually kills you. It is an era where the creativity and inventiveness of the majority of the best and brishtest of our generation were diverted to what is called “financial innovation”. In other words, trying to find ways to make the leverage drug more efficient at growing the economy, giving us a longer “high” and postponing the unavoidable depression.Obama, and all other world leaders for that matter, have absolutely not the will, nor the capability to take away the drug, change anything with this system of finance led crony capitalism. For evidence of that, just look at how they all use the same code words, buiding back confidence, stimulating consumer demand, who all mean the same, take more drugs, pile on more debt !The most critical issue of our time is not whether we need capitalism or socialism or another “ism”. What we need is to wake up, realise our profound addiction, and find a way to take away the leverage drug. Then we will need to find new leaders who are ready to implement this, as we cannot wait for the current ones to do anything to stop our addiction.We need to revert to a version of capitalism where the FIRE sectors remain sufficiently small and where debt grows in line with output, not three times faster. But until we reach that stage, we’re going to have to feel the depression, there is no way around it.So how do we get the people to understand that too much debt is slowly killing us. And let’s move away from all these diversions, “too much government debt is killing us”, or socialistic policies, or keynesianism, or God knows what is killing us.It’s too much debt, private plus public. Puncto.

I dont think so… In this forum there is a consensus…NR use this forum… He see bad times coming… He know how “the things are made”… If a class war is going on, better be neutral… Otherwise he may be appointed guilty… Its just too dangerous to him make predictions…

And Jaynes was marginalized. How sad.Thanks Peter JB and all that hangs off you.I can move on. There’s nothing here to see. ;o)We’re a funny lot. I enjoy the humour in it all. It’s priceless, economically speaking.

Can you say UNSUSTAINABLE?That is the “summary” it seems to me.

Professor Roubini,While I think changing an opinion is an important facet of being objective, it should be done after a thorough review of the facts. Your about face has none of your earlier assessment of the facts.Just 3 months ago, you wrote this:A sharp contraction in jobs and labor income has many negative consequences on both the economy and financial markets. There are at least five important ones that we will discuss next:First, falling labor income implies falling consumption for shopped-out, saving-less and debt-burdened households, which have already been hard hit by a massive loss of wealth (as the value of equities and homes has sharply fallen) and a very large rise in their debt ratios and debt servicing ratios. With consumption accounting for 70% of GDP in the U.S. and also a high share of aggregate demand in other advanced economies, this implies that the recession will last longer, and that economic recovery next year will be anemic (less than 1% growth in the U.S. and possibly even lower growth rates in Europe and Japan).Second, job losses will lead to a more protracted and severe housing recession, as joblessness and falling income are key factors in determining delinquencies on mortgages and foreclosure; by the end of this year about 8.4 million U.S. individuals with mortgages will be unemployed, unable to service their mortgages and likely to default. Also, with falling incomes, uncertainty about future employment and weak consumer confidence the number of households who are willing to buy a new home or can qualify for a mortgage is smaller. Home prices have already fallen about 27% from their peak; they are still falling – year over year – by 18%. So, the cumulative fall in home price is likely to end up being 40% to 45% from the peak. Large job losses also lead to less demand for commercial real estate (office space and factory floors) and thus likely to worsen the accelerating slump in this sector.Third, if you plug an unemployment rate of 10% to 11% into any model of loan default rates and losses given default, you get ugly figures not just for residential mortgages (both prime and subprime), but also for commercial real estate, credit cards, student loans, auto loans, etc. The U.S. stress tests assumed that the U.S. unemployment rate will average – in the most adverse scenario – 10.3% in 2010. But at the current rate of job losses the unemployment rate will be above 10.3% already at some point this fall. Thus, banks losses on their toxic assets and their capital needs will be much larger than recently estimated, which will worsen the credit crunch and the ability of households and firms to borrow to finance consumer durable spending, residential home purchases and capital spending by the corporate sector.Fourth, rising job losses lead to greater demands for protectionist measures, as governments are pressured to save domestic jobs. The sharp fall in global exports and imports has already been severe even without a massive surge – so far – in protectionist actions. But, as job losses mount and a glut of global manufacturing capacity needs to be worked out, these pressures will escalate. While the G20 committed in the fall to avoid protectionist actions, by early 2009 already 17 out of the 20 countries in this group had undertaken over 50 policy measures that are protectionist. This rise in protectionism threatens to aggravate the damaging contraction of global trade.Fifth, the higher the unemployment rate goes, the wider budget deficits will become, as automatic stabilizers reduce revenue as labor income falls and increase spending (for example, on unemployment benefits). Thus, an already unsustainable U.S. fiscal path, with budget deficits above 12% of GDP this year and public debt expected to double as a share of GDP from 40% in 2008 to 80% by 2014, becomes even worse.What has changed ? My opinion is that because you did not anticipate such a robust bounce, you feel as if something underlying the economy is occurring. Your original opinion is still intact. This is not 2003, when the consumers levered to the hilt to drive the market further.At least if you are going to change your direction of thought, please provide us with some basis in fundamentals.

http://www.bloomberg.com/apps/news?pid=20601009&sid=av0iV2v.oBLUStupid Obama doesn’t realize the gov need to balance budget by cut spending. even IMF says. We elected a moron.

October 2, 2009The Recovery That Isn’tFor those market boosters who are prattling on about the possibility of a “jobless recovery,” I offer an invitation to join me for a breakfast of “fat-free bacon,” “eggless omelets,” and “no-carb bread.” As unappetizing as such a meal may sound, it would nevertheless offer more substance than the oxymoronic concept of an economic resurgence without job creation.Those who do cling to the absurd belief that, absent exponential productivity gains, the economy can expand while workers are being laid off will undergo a massive test of their convictions now that it’s clear the employment picture is bleak. Today’s weaker-than-expected report on non-farm payrolls revealed that employers shed 263,000 jobs in September. The losses propelled the headline unemployment rate to a 26-year high of 9.8%. U6, the Bureau of Labor Statistics’ most complete measure of unemployment, has risen to a dismal 17%. This figure includes those people who want to work full time, but have simply given up looking, or who have accepted part-time work in the interim. As it is similar to the methodology used during the Great Depression, U6 offers better historical perspective on the severity of our current crisis.Taken together with yesterday’s larger-than-expected pickup in unemployment claims (first time claims rose by 17,000 to 551,000), today’s report makes it certain that the job market is still contracting, even while some indicators like GDP and consumer confidence are moving in the opposite direction.There is no question that the sense of panic has temporarily subsided. In recent interviews, Treasury Secretary Geithner has been almost giddy in his descriptions of the recovery – all the while crediting his own policies for averting disaster. Americans are once again taking the government’s bait by spending money they don’t have to buy things they can’t afford. Evidence of this trend was contained in data released earlier this week which showed that even while income growth was largely stagnant, U.S. consumers showed the biggest month-over-month increase in personal spending in ten years! With the same report showing a 25% drop in the savings rate, the source of the spending money is clear. But depleting savings and increasing borrowing does not a recovery make.To really recuperate, the government must allow market forces to restructure our economy. The government and individuals must rein in their spending; we must replenish our stock of savings, allow interest rates to rise, asset prices to adjust to economic reality, insolvent businesses to fail, and wages to reflect productivity. To accomplish these goals, subsidies that distort market forces must be removed and regulations that undermine our competitiveness must be repealed.None of this can be accomplished without a degree of short-term economic pain. However, if we endure it, the payback will be a real recovery with plenty of new jobs that don’t rely on government stimulus money. If we refuse to allow the economy to experience a real recession, we will never have the benefit of a real recovery. Instead, we get the “jobless recovery,” a veneer of apparently positive indicators that merely obscures the underlying rot.Over the last few decades, our industrial job market has atrophied while service- and public-sector jobs have grown unsustainably. We must restore balance. New jobs will have to come from areas that produce goods; bloated service and government sectors must be allowed to shrink. By propping up the sectors that need to contract, and running staggering budget deficits, the government cuts off the capital necessary to fund sectors that need to expand.In truth, many of the service-sector jobs that exist today, such as real estate sales, mortgage finance, home improvement, and auto sales, were created in an environment of ever-increasing home equity, rising stock prices, and almost unlimited access to cheap consumer credit. With home equity gone, stock markets flat, and credit depleted, Americans find themselves needing to save rather than spend. But Washington has put through policies that have counteracted our good instincts.While we were focusing our economy on consumer spending, much of the rest of the world was saving for the future. As such, we must begin to produce more for export, so that we can sell goods to those who have the savings to pay for them. That is the only way we can repay our debts, replenish our savings, repair our infrastructure, and rebuild our industrial base.Another prerequisite to any real economic expansion is the potential for business owners to earn profits. With increased regulation and higher taxes on the way, these incentives are being diminished. In fact, via a phenomenon called ‘regime uncertainty,’ our current policy path is actually encouraging businesses to contract in order to prepare for a more hostile business environment.Robust economies utilize all spare capacity, or restructure it for better use. Having 17% of our able-bodied population sitting at home or working part-time at Cinnabon indicates that our present policies are weakening the economy – even if GDP is growing. There is no “jobless recovery,” only senseless cheerleading.

For Those of You on Your Way to Church This Morning …a note from Michael Moore – Sunday, October 4th, 2009Friends,… bla bla bla …Amidst all the Wall Street bad guys and corrupt members of Congress exposed in “Capitalism: A Love Story,” I pose a simple question in the movie: “Is capitalism a sin?” I go on to ask, “Would Jesus be a capitalist?” Would he belong to a hedge fund? Would he sell short? Would he approve of a system that has allowed the richest 1% to have more financial wealth than the 95% under them combined? I have come to believe that there is no getting around the fact that capitalism is opposite everything that Jesus (and Moses and Mohammed and Buddha) taught…. bla bla bla …=================Jesus H. Christ! How can a brilliant film maker like Michael Moore be so confused? Our current economic crisis is NOT about capitalism. It is about adult supervision. The laws are on the books, but our fraudulent government is not enforcing them. Let’s see there is anti-trust laws, there are anti-fraud laws, there are literally hundred of banking regulations that have been violated. There is the Prompt Corrective Action federal banking law. There are hundreds of SEC regulations, and the Commodity Futures Trading Commission (CFTC) regulations.All of these regulations and laws are being ignored and all Micheal Moore can do is ask the question: Is capitaltism a sin? WTF! (To my wife: Honey let’s start packing, our time to leave the country has been pushed up.)

A rambling rant on Earth’s magnetic field reversal and extinction.

Correction. Isn’t this a JOBLOSS recovery?

From Reggie Middelton – Sorry for the long post, but Reggie uses the FDIC’s own words to show how we are facing the $3.6 trillion in banking losses Roubini has described.Before we move on to the Bloomberg article that sparked this blog post, let’s excerpt some key snippets from the latest FDIC memorandum to its Board of Directors. It is written in the coded language of regulator-ese, but I will translate for you in bold font :1. The FDIC not impose additional special assessments in 2009. Because we have hit them pretty hard already and they are already broker than we are!2. The FDIC maintain assessment rates at their current levels through the end of 2010 and immediately adopt a uniform 3 basis point increase in assessment rates effective January 1, 2011.3. In October 2008, the Board adopted a Restoration Plan to return the Deposit Insurance Fund (DIF or the Fund) to its statutorily mandated minimum reserve ratio of 1.15 percent within five years. In February 2009, given the extraordinary circumstances facing the banking industry, the Board amended its Restoration Plan to allow the Fund seven years to return to 1.15% percent. We’re in trouble and need more time. We will crush an already insolvent banking system (despite the proclamations to the contrary by the government and bank management) if we attempt to return the fund to a prudent level in less than 7 years. Its getting worse quickly even as the bank stocks skyrocket over 100% – just a few months ago we thought we could do it in 5 years.Pursuant to these requirements, staff estimates that both the Fund balance and the reserve ratio as of September 30, 2009, will be negative. This is technically and effectively insolvent! This reflects, in part, an increase in provisioning for anticipated failures. In contrast, cash and marketable securities available to resolve failed institutions remain positive.Staff has also projected the Fund balance and reserve ratio for each quarter over the next several years using the most recently available information on expected failures and loss rates and statistical analyses of trends in CAMELS downgrades, failure rates and loss rates. Staff projects that, over the period 2009 through 2013, the Fund could incur approximately $100 billion in failure costs. Staff projects that most of these costs will occur in 2009 and 2010. Approximately $25 billion of the $100 billion amount has already been incurred in failure costs so far in 2009. Staff projects that most of these costs will occur in 2009 and 2010. So, only 25% into this mess by the FDIC’s own calculations, and they are already negative and insolvent. They believe the worst is yet to come (versus Bernanke, Paulson and Geithner saying the worst is behind us), and that worse will come rather quickly. To make things worse, as you read the article excerpted below, the FDIC doesn’t even seem to have a firm graps on the risks, as they were blindsided by a nearly billion dollar failure that wasn’t even on thier problem bank list, and this was last Friday! You all know who has been the most bearish on the financial sector through all of this.If the Board imposes no further special assessments and leaves existing risk-based assessment rates in place, staff projects that the Fund balance would become significantly negative in 2010 and may remain negative until 2013. According to these projections the reserve ratio would not return to the statutorily mandated minimum reserve ratio of 1.15 percent until late 2018. ‘Nuff said!The projections in the preceding paragraphs address the effect of projected failures on the Fund balance (its net worth, which is assets minus liabilities), not the cash balance of the Fund, which provides needed liquidity. Staff has also estimated the FDIC’s need for cash to pay for projected failures. At the beginning of this crisis, in June 2008, total assets held by the DIF were approximately $55 billion, and consisted almost entirely of cash and marketable securities (i.e., liquid assets). As the crisis has unfolded, the liquid assets of the DIF have been used to protect depositors of failed institutions and have been exchanged for less liquid claims against the assets in failed institutions. As of June 30, 2009, while total assets of the DIF had increased to almost $65 billion, cash and marketable securities had fallen to about $22 billion. The pace of resolutions continues to put downward pressure on cash balances. While the less liquid assets in the DIF have value that will eventually be converted to cash when sold, the FDIC’s immediate need is for more liquid assets to fund near-term failures. Translation: We were forced to accept the trash assets from the fail banks that we could not convince the private sector to accept, as we mean (by using the term “less liquid claims”) that these assets are effectively unmarketable, and must be traded at an extreme discount which renders them for all intents and purposes of the fund, effectively worthless in comparison.Staff ‘s projections take into account recent trends in resolution methodologies, such as the increasing use of loss sharing—especially for larger institutions—which reduce the FDIC’s immediate cash outlays, and the anticipated pace at which assets obtained from failed institutions can be sold. If the FDIC took no action under its existing authority to increase its liquidity, the FDIC’s projected liquidity needs would exceed its liquid assets on hand beginning in the first quarter of 2010. Through 2010 and 2011, liquidity needs could significantly exceed liquid assets on hand. So, not only are we balance sheet insolvent, we will be cash flow insolvent within one quarter.Imposing an additional special assessment as provided for in the May 2009 final rule would bring in approximately $5.5 billion in revenue to the Fund; imposing two (one at the end of September, one at the end of December) would bring in approximately $11 billion in revenue. Given staff’s projections, neither amount would prevent the Fund from becoming significantly negative or prevent the Fund’s liquidity needs from exceeding its liquid assets on hand in 2010. Even combining these special assessments with higher risk-based assessment rates would not solve these problems, unless rates were set very high or more was collected in special assessments. Furthermore, any additional special assessment or immediate, large increase in assessment rates would impose a burden on an industry that is struggling to maintain positive earnings overall. Translation: Damn, even if we hit the banks at the continuing rate that we have already elevated the special charges to, we are still insolvent. No matter if hit them much harder, insolvent we will still be. The only way out of this is the same accounting game that the banks pulled. Hopefully, we will be able to fool somebody. See below.An alternative—borrowing from the Treasury or the Federal Financing Bank (FFB)— would also increase the liquid assets available to fund future resolutions but would not increase the Fund balance as there would be a corresponding liability recorded. Hey, wait a minute here. How is this any different from asking the banks to prepay their insurance premiums. In the prepay scenario, there will be an increase in cash (an asset) as well as an associated liability (unearned insurance premiums). Do the FDIC folk believe me to be as dense as some of those bank investors that really believe that banking industry is solvent. I posit this query to all interested pundits: how can the banking industry be solvent if the banking industry insurance fund is insolvent, and by their very own admission, very insolvent!Staff projects that failures will peak in 2009 and 2010 and that industry earnings will have recovered sufficiently by 2011 to absorb a 3 basis point increase in deposit insurance assessments. Adopting a uniform increase in assessment rates of 3 basis points now, effective January 1, 2011, should ensure that the prepaid assessments would address current liquidity needs without materially impairing the capital or earnings of insured institutions. Advance adoption of the rate increase also should help institutions plan for future assessment expenses. So, whatcha sayin’ is that we all know the banks are playing accounting games, we will just go along and play the games with them. Fu$% the economic earnings and cash, as long as we don’t harm the accounting earnings, all will be fine. The problem with this is economic earnings actually mean cash and real capital. Accounting game or not, if you hit an insolvent bank hard for cash, it will give it to you and maybe even be able to gloss it over with pretty accounting tricks to make it look like its making some money, but in the end all you will be doing is using that money that you took from the bank to eventually take IT over. Garbage in, garbage out – old school programming! There is more, but I am sure you’ve got the message by now. Now, on to the article of the day…Banks Have Us Flying Blind on Depth of Losses: Commentary by Jonathan Weilhttp://www.bloomberg.com/apps/news?pid=20601039&sid=aHU4bso2L2aE

unwinding indeed – the theory of how the few effect the large.Kaupthing, the bank at the heart of the Icelandic financial collapse, lent billions of pounds to companies linked to a key director and top shareholders, according to leaked internal documents.Kaupthing was one of three Icelandic banks that collapsed last OctoberThe papers appear to cast light on Kaupthing’s highly unusual lending practices just two weeks before the Icelandic system failed last October, wiping out millions of pounds of savings deposited by UK local authorities and charities.It reveals that its highest loans, totalling more than €6.4bn (£5.45bn), was given to companies connected to just six clients, four of whom were major shareholders in the company. Kaupthing granted some of these loans with partial or no collateral, the largest of which was given to Exista, its biggest shareholder with a 22pc stake.The bank, which had a huge retail depositor base in the UK, was also lending millions of pounds to individuals and holding companies so that they could buy shares in Kaupthing itself – effectively propping up its own share price.http://wikileaks.org/wiki/Kaupthing_leak_exposes_loansKPMG and PwC Reykjavik offices are raided by Icelandic policePolice have raided the offices of KPMG and PricewaterhouseCoopers (PwC) in Reykjavik, seizing documents and computer data as part of an investigation into alleged criminal activity at three collapsed Icelandic banks.By Rowena MasonPublished: 9:30PM BST 01 Oct 2009

Well, folks, the Great American Consumer has woken back up. At least here in Minnesota. Last weekend and this past weekend two of the largest malls in the Twin Cities metro area were absolutely swarming with people. Carrying packages, so they’re obviously buying stuff.And the median home price is still hovering around $190,000 (well above historical average).Projected state budget deficit for the next biennium is around $7 billion.What recession? We’re partying like it’s 2006 around here!

Average Jane, can you give us a confirmatory?

Is her “cash flow” versus debt argument appealing?She sees deflation and a possible “meltdown” but does not offer any details on what it means other than another credit freeze.She also believes that only large banks can offer credit. These guys have been creating money out of thin air (fractional lending) for decades, so what’s the big deal. Let solvent banks continue to issue credit.I think she also admits that there is nothing that will stop the Treasury and Fed from pumping money to prop up the status quo – as much as it takes.

you bear just refuse to acknowledge bullish news, sad just sad.

What happened last year? Are you referring to the event in Iceland??

MorbidMy only contention with your point of view on pop reduction isthat it should not be up to the humans to decide. You and I both knowthat nature will act in that regard when critical mass is reached and itrust the nature to do the right thing.

That was me posting as Guest–forgot to sign; sorry. . .

The consumer may be waking up but it’s likely more of an addiction to consume rather than improvement in household debt. Many small businesses in upper middle class areas of Thousand Oaks/Simi Valley/Westlake California have either closed up shop or on the verge. Even the Halloween stores are noticing a large drop in sales. Furthermore, while NR does not seem to think inflation is much of a threat, the consumer has steadily been paying significantly more for food as portion size decreases (i.e. 32 oz container of yogurt reduced to 24 oz) while price remains the same. This insidious type of inflation will continually lower people’s purchasing power without them directly realizing it-until it’s too late of course!

FIRST!

Don’t forget ice cream. Breyer’s: same price for 3/4 of a half gallon as it used to be for a half a gallon (let’s change the container size and hope nobody notices).SWK

Jesus didn’t object to people making money. He objected to their turning the House of God into a crass marketplace. You can’t worship God and mammon, but that just means you have to keep money in its proper perspective.SWK

In the beginning Roubini was talking about “pushing on a string.” Seems that we/he lost sight of this, that it’s STILL _THE_ issue!All that’s going on while the ship sinks is a rearranging of the deck chairs such that the elites feel like they’ve escaped getting wet- HA!

well said gi would argue that rebuilding our infrastructure is our way out of debt and not dreamy hopey crap as you put it. I think it was the point of Reich’s article that by making a new WPA we could get ourselves out of debt eventually by getting people to work. and why not dream anyway and act on those dreams? our big and medium size cities are literally choked in traffic. it is dreamy hopey crap when one realizes the power centers and ideologies that oppose this kind of thing but I agree with you 100 percent that we transport our selves too much. thank you for your response

lol

While we were focusing our economy on consumer spending, much of the rest of the world was saving for the future. As such, we must begin to produce more for export, so that we can sell goods to those who have the savings to pay for them. That is the only way we can repay our debts, replenish our savings, repair our infrastructure, and rebuild our industrial base.

More string pushing! All sounds well until you figure that the rest of the world ain’t consuming either!And, the amount of change will have to be HUGE. We’d have to more closely resemble China!I like Schiff, but he’s just another cog in the failing machine…

It’s all a government plot! It is now known that longevity goes up during depressed times. People stop spending on self-destructive things. They stop worrying and give up on achieving the American dream. They get more sleep instead of dashing off to work to make enough money to service their debts. They talk to each other more. They touch each other more. They dream more and they live longer.The government knows all this and attempts to counter it with a stimulus. They’re killing us! With each basis point jump in GDP, thousands of grandparents are wiped out! It’s Vonnegut’s Monkey House all over again. All of my investments in Depends, Nursing homes and HMO’s are in jeopardy.We must organize to increase liars’ loans, executive compensation for failing investment banks, off shore tax havens, federal deficits and anything else that will keep our economy in the toilet. Our lives depend on it.

Reich is wrong.But it is also becoming painfully obvious that a sizeable number of the US populace is going to have to reconcile itself to life in Pimco’s “New Normal” as the rest of the world has arbitraged away a lot of the good life that was enjoyed over the past several decades compounded with the recently heard crescendo that was the Baby Boomer generation borrowing and spending the last of their children’s and children’s children’s wealth for years to come, which is now being followed with a Coup de Grace compliments of the Big O and his gangsters.FA Hayek had it right, we’re on the road to serfdom.

If we live longer in depressions, that will just deplete Social Security, Medicaid and pensions that much faster. We’re all doomed!

Yep. The media is so “in the tank” for the Big O that the recovery starts with a change in the rate of acceleration of job losses rather than with an actual reversal of losses.

unemployment and under-employment = 17%+ unemployment. Ant things aren’t getter better.

I would tend to dispute the suggestion that we live better lives during depressions. At least in the 1930s, I understand, malnutrition got so bad that something like 40% of draftees by 1940 were deemed unfit for service and labeled 4-F. Of course, there were virtually no government social safety nets when the Great Depression started, so you may have a point: we might actually start living healthier lives and re-evaluate some of our priorities away from crass consumerism and insatiable material consumption. Here, here to that prospect!SWK

…..so don’t read R’s predictionswe can certainly so without your paragraph long rant

this the lead story in today’s NY Times-http://www.nytimes.com/2009/10/05/business/economy/05simmons.html?hp”How so many people could make so much money on a company that has been driven into bankruptcy is a tale of these financial times and an example of a growing phenomenon in corporate America.Every step along the way, the buyers put Simmons deeper into debt. The financiers borrowed more and more money to pay ever higher prices for the company, enabling each previous owner to cash out profitably.”Tell me now what do these well heeled financiers make?

Guys -I think the partisanship needs to take a breather. Look, the media is in the tank for all leaders in this country – they don’t care which party is in power, they follow the leads they are given, don’t look behind the curtain, and tell the rest of us exactly what TPTB want us to hear. They bang the patriotic drum and seek to keep us uninformed and docile.Believing it’s one party or the other ignores the other half of the problem. It’s not about WHO’S in power, it’s about them KEEPING the power.

http://finance.yahoo.com/news/Treasury-to-say-3-more-funds-rb-1392681732.html?x=0&sec=topStories&pos=3&asset=&ccode=HAHAHA, liquidity pumping continues, PRINT DOLLAR PRINT DOLLAR, HAHAHAHA

Precisely.

Here’s what we learned- giving the average American a cash incentive to spend is harder than giving wall street cash incentives to lend.

http://www.cnbc.com/id/15840232?play=1&video=1275511738IMF to be the new central bank. Dollar to be devalued gradually. Won’t work. Market will collapse the dollar when this is understood.

Who pays this women’s health costs? … is it cheaper to put someone in a coma or prevent this in the first place?http://www.nytimes.com/2009/10/04/health/04meat.html?em==============job killers ?http://www.nytimes.com/2009/10/05/business/economy/05simmons.html?em

no exit strategy forever, dont want exit strategy forever.

NEW THREAD

Your “consumers” are massively in debt. Small businesses, just like big businesses now, won’t hire until things look better. And, when That might be? When the “consumer” is no longer under a mountain of debt!It’s a circular function aided by diminishing resources. Pushing on a string!

No, it’s ABOUT power!Decentralize it! If the power ring isn’t there we won’t have all these egotistical maniacs grabbing the power and running us over with it!

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