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stinky
it was fundatmentals on the way up, and a tax cut/stimulus on the way down. I get it now.
CR, What are your thoughts on the trade deficit for 2009, after all the recent changes?
in general I agree
however, two things
1.) unlike an actual stimulus check (which I am not necessarily in favor of, mind you) the savings from lower gas prices/lower oil prices are not immediate, and are unknown. Thus, I would argue their unpredictability makes them less stimulatory.
2.) since the savings of $900 occur over 12 months, the effect lags significantly
overall, I see savings of $900 as a very thin silver lining on this cumulonimbus cloud
Did low prices help the depression?
I bought 200 of DIG @ $26 this week. WTH.
So why doesn't PCE show any impact from MEW zeroing out?
I think the real question is something like, "will Americans ever start saving"?
WASHIHGTON: The United States has imposed sanctions on firms in China, Russia and Venezuela for alleged sales of weapons or sensitive technology to Iran, North Korean and Syria, according to a State Department document.
We have forgotten that they fund our debt?
WASHIHGTON: The United States has imposed sanctions on firms in China, Russia and Venezuela for alleged sales of weapons or sensitive technology to Iran, North Korean and Syria, according to a State Department document.
We have forgotten that they fund our debt?
"will Americans ever start saving"?
What I find odd is that the Japanese have an excellent savings rate -- $5T in the bank -- yet also have a national debt of 200% of GDP.
Something's not right with that picture.
"will Americans ever start saving"?
Why should we - we're going to lose it thorugh taxes or inflation.
EVERY oil shock since 1970 has been followed by a recession shortly after.
We are watching what happens when price is used to reduce oil consumption instead of sensible CAFE standards- the bottom falls out of the auto industry.
Gas going down...Time to buy a Hummer
Well the "perfect storm" was built on the fact that oil would be $200 a barrel and the dollar would plunge as a currency. However, we seem to have swindled death and got a little reprieve from the worst case scenario. And remember that a drop in fuel costs helps everyone...you, me, the trucker, the importer, the exporter, the supermarket, etc. This will have a significant impact on the current situation and will at the very least make the landing "softer". lol
Interesting Times writes:
Did low prices help the depression?
Interesting Times | 10.25.08 - 11:38 pm | #
No - because they were so closely coupled to falling wages & very significant job loss. My grandfathers were an example - one lost his job then found part-time work for the remainder of the 30s (at about 1/5th of what he made prior) the other continued working full time but for about half of what he was making in the late 20s.
It was the falling ratio of income to prices that made the depression so damned difficult & painful.
patientrenter, I think the trade deficit will continue to decline in '09 - especially now that oil prices are falling. We really need to see how bad the global slowdown really is. I'm also a little concerned that a lower trade deficit might lead to higher interest rates in the U.S. ... something we can discuss later.
12many dopes, this is just PCE for gasoline and oil products. Overall PCE is slowing (and will decline in real terms in Q3).
Best to all.
dryfly - Thanks for that great response (as always), but it was a rhetorical question
Several oil analysts who predicted earlier this year that oil would reach $200 by year's end have recently said that oil could drop to $50 a barrel.
I will totally make investment decisions based on analysts.
If gasoline drops $1.50 the $900 [the average driver] saves would amount to a big stimulus package. According to Ed Leamer, director of the UCLA's Anderson Forecast, the current price slide could drop another $200-to-$250 billion into consumers' pockets
That's a real bad analogy because it really isn't 'net stimulus'... its diverted consumption (or diverted savings if folks actually save which I doubt though believe they should). I was with guys from Texas all week and that point was driven home over and over.
High oil prices might suck for California, Michigan, New England, etc. but they were HUGE stimulus for Texas and Wyoming (and W Canada too).
This might show up as more savings, as opposed to other consumption, but rebuilding savings is probably a necessary step towards rebuilding household balance sheets.
Why would we save? For 2.5% of taxable interest? Might as well accept 0% on a Toyota Camary and bank that gas savings tax free.
Instead of looking for a bottom in the stock market, people should be looking for a bottom in energy prices. Some of this is due to demand destruction, but a good portion is due to strength in the dollar. Both have been overplayed.
The very fact that so many people are crowing about cheaper gas may in fact be a huge contrarian indicator.
Oh, and the "Perfect Storm" wasn't contingent upon Peak Oil, it's just an aggravating factor.
sensible CAFE standards
Your "sensible" CAFE standards kill and maim thousands of Americans every year.
People buy small cars even though they can be deadly - USATODAY.com
Hey Honey I just got fired. But the good news is that gas prices are going down.
Yes, it'll be much cheaper trekking down to the unemployment offices.
It makes driving to the Employment Security Administration to file for unemployment a little cheaper each week.
Interesting Times writes:
dryfly - Thanks for that great response (as always), but it was a rhetorical question
Interesting Times | 10.25.08 - 11:49 pm | #
It was one of the best rhetorical questions I've seen around here in quite some time. That's why I made a thoughtful response (instead of a quick little SA quip). It deserved better than just smart ass.
Can we haz moving averages puleeze.
Okie dokie, lets take the last gasoline price rise from say $2.50 to $4.00 and multiply times gallons used times time, both up and back down.
No one bought a years gasoline at $4.00. A few months perhaps.
How can you save from what you didn't spend? So, we will save 50 bil. No more.
Fizzy cold Coke to TJ.
ope, consumer wont be positively impacted by falling oil price.
Remember, energy costs are not included in CPI or inflation.
Why would we save? For 2.5% of taxable interest? Might as well accept 0% on a Toyota Camary and bank that gas savings tax free.
I assume CR means 'saving' as in 'not consuming'... not necessarily saving as in 'put in bank'.
Mavericks don't worry about the price of gas, anyway.
I assume CR means 'saving' as in 'not consuming'... not necessarily saving as in 'put in bank'. - dryfly
That's what I thought as well but given the disincentives in place that discourage true saving I provided a different but likely alternative of inducing more consumption (an increasing negative trade balance) as a perverse possibility.
More deflation: NASDAQ suspends listing requirements! I always wanted a portfolio of penny stocks I could short into the abyss...
Nasdaq has suspended exchange delisting rules
Hattip bondheads.com
Americans cant save. They are taxed to death.
They save in 401ks, thats it. Period.
How do I kNow this? cause I know ho hard it is to save. We make 190,000/yr, have $500 house payment, no car payments, and must put 3 kid in private school cause public is shit here, we struggle to save 800/mo after taxes.
Your "sensible" CAFE standards kill and maim thousands of Americans every year.
Hmmm, why do I think that you'd believe that "Guns don't kill people, people do."
New slogan "Guns don't kill people, CAFE standards do."
Comrade Bear (tj & the bear),
Oh, and the "Perfect Storm" wasn't contingent upon Peak Oil, it's just an aggravating factor.
Oil was barely in my thinking when I turned bearish in 2004. That was just an added bonus. My main concern was debt and the thought that we were simply borrowing our recovery.
Payback is a b**ch.
patientrenter, I think the trade deficit will continue to decline in '09 - especially now that oil prices are falling. We really need to see how bad the global slowdown really is. I'm also a little concerned that a lower trade deficit might lead to higher interest rates in the U.S. ... something we can discuss later.
If the merchantilists throw in the towel and decide they can no longer 'buy growth' via dollar peg manipulation then we will see interest rates sky. Couple that with tight policy & we'll see a real credit crunch.
And gov't won't be able to do a lot about it IF they can't borrow cheaply themselves.
"If the merchantilists throw in the towel and decide they can no longer 'buy growth' via dollar peg manipulation then we will see interest rates sky. Couple that with tight policy & we'll see a real credit crunch.
And gov't won't be able to do a lot about it IF they can't borrow cheaply themselves."
I've bet good money, that is exactly what is going to happen.
Haven't we had a negative savings rate for some time? I think since about 2000.
Don't we have to reduce our extraneous consumption, given flat or decreasing wages, in order to get to, first flat savings rate, then a positive rate?
dryfly,
That day is coming, and that's when things get really interesting.
Per CR's estimate, the "$300-$350B" level takes us back just two years. That's still historically high (until '08 came along).
Regarding saving vs. spending...all the mainstream media financial advisers are now telling everyone how to spend less. Seems like a more serious/persistent downturn is a self-fulfilling prophesy.
by mercantilists do you mean China?
Seems like a more serious/persistent downturn is a self-fulfilling prophesy.
No, because that presumes our problems would go away if we all just started thinking happy thoughts.
The media, as always, is just way behind the curve as usual. This "frugality" message is so far overdue it's beyond ridiculous.
If you take the Telegraph article
from the last thread seriously and I do (not necessarily because of Ambrose), I don't think we are accounting properly for the serious loss of upcoming production.
All these assumptions about future oil prices assume a steady state of the financial system which obviously is highly questionable at this point. IMO it is the deterioration of the financial system that has brought us these low prices.
The problem is that we are facing serious threats to stability in emerging countries and some of these are significant producers of oil. I don't think we can look at these components anymore in isolation, the system simply isn't stable enough anymore. Unless these producer countries are stabilized there will be one or more that will go into the equivalent of failed state status and then we will need a lot of good luck to get any decent level of oil production and any prior assumptions about price will be irrelevant.
We are at a very dangerous inflection point here.
It appears that this 'savings' assumes consumption stays at current levels, but that is very questionable.
I'd wait to eat that saving dessert until the main course has been consumed.
Once more about gasoline prices.
The benefit will be psychological like taking an anvil off your chest.
The actual money benefits to consumers is somewhat real but mostly ephemeral.
Filling the twin turbo will now cost only $40 instead of $66. Now I can drive 140 instead of 95. Gotta love it!!!
Economics is a game of monetary illusion buffeted by bipolar psychology. It lays out well in cycles but is sometimes too subtle to be reconized.
...as always... as usual.
I see I've accidentally strayed into the Department of Redundancy Department. Geez, and I'm only on my second beer.
I've bet good money, that is exactly what is going to happen.
Blackhalo | 10.26.08 - 12:05 am | #
If somehow the eurozone holds together and it becomes the 'alternative' to BW2 then it might happen (where Treasury couldn't borrow).
My guess is when all is said and done the dollar keeps 'reserve status' only because the other alternatives are worse and the result of this recession will be WORSE currency manipulation - meaning even more buying of worthless paper - not less of it.
We might be at the end of this insanity (voluntary developing world slavery)... but I'll have to see it with my own eyes first.
BTW - everyone has been talking about how BRICs have been 'sinking'... did it ever occur to folks that maybe their policy people WANT their currency to tank? To save jobs? If their markets go in the tank with them so be it - that is a small price to pay for keeping people in the sweatshops and not out in the street.
I could tell you some anecdotal stories of the '97 plunge that would make your hair catch on fire - where Asian factories w/ their gov't prodding & 'support' literally gave product away at below material cost to keep the plants from shutting down & sending thousands more into the street.
You wonder why China et al have those huge reserves? Might not JUST be for currency peg manipulation...
We'll know we are 'there' when we start seeing that happen again.
I don't mean to rain on the parade but it was thet Ed Leamer guy of the Anderson forcast who said just a year ago that there wasn't gonna be any recession.Going forward we have more job loss and a consumer with debt overload who is feeling more poorer by the day from house price depreciation and a stock market crash. It feels a little bit like your trying to throw us a bone, CR. -For the record I've always respected your opinions, as well as those of your readers. I just feel that the effect of even half price gas now would be negligable.I mean, what are consumers gonna do with that bit of gas savings anyway?-probably spend it on more meat!
Imelda Blahnik writes:
by mercantilists do you mean China?
Imelda Blahnik | 10.26.08 - 12:08 am | #
China is among them but by no means alone. I'm not sure the BoJ isn't the worst culprit - just more subtle & careful to politically stroke Washington. China is the enfant terrible of the club though - for now. They get all the attention.
Frugality is a self reinforcing process up to a point. The local news just ran a color story of how thrift store shopping is the new chic. While consumption is likely to be somewhat inelastic until things get bad the shift in consumption is gonna hurt manufacturing when we buy last years' polo shirts for $2 at St. Vincent dePaul.
For many reasons, we cannot rely on historical paterns. By definition, if we are in a singular mess, former data does not apply.
How much has the energy sector lost in market valuation since the fall of oil prices? Energy was the only thing holding up the market before.
XOM alone has lost around $100 billion in market cap.
Reverse Wealth effect strikes back!
Rob Dawg writes:
Frugality is a self reinforcing process up to a point. The local news just ran a color story of how thrift store shopping is the new chic. While consumption is likely to be somewhat inelastic until things get bad the shift in consumption is gonna hurt manufacturing when we buy last years' polo shirts for $2 at St. Vincent dePaul.
Rob Dawg | Homepage | 10.26.08 - 12:24 am | #
Go to a thrift store and you'll see that what they sell hasn't been made here in almost a generation (clothes, electronics, brick-a-brack)... stuff we still make (food, infrastructure, health care, aerospace) isn't in there... yet.
Though stories from mp & his kid in the used machine tool biz indicates to me we might not be too far off of that.
Go to a thrift store and you'll see that what they sell hasn't been made here in almost a generation (clothes, electronics, brick-a-brack)...- dryfly
I was thinking more about the short circuited supply chain Baltic Dry freight through Nordstrom's parking valet.
Anything but working hard and saving money.
Anything but that.
dryfly, my guess as to why interest rates might go up if our trade deficit comes down is:
I don't see currency manipulation, or its absence, having to play a role
My thought in reading the word 'savings' was what dupes we are. Speculation and propped-up spending puffed up the price of fuel to the unreal and then a correction back to real makes us feel thankful we are saving. We consumers are easy marks.
Too much damage. Maybe if the oil run up had been prevented in the first place the real estate bubble would not have collapsed the real economy. Oil inflation resulted in general commodity inflation and just killed the household budget. Recovery will take a long time since the commodities are still too expensive, energy is still too expensive for that matter and we can expect further demand destruction.
The consumer is tapped out, frightened into conservation across the board by the financial crisis and the panicked politicians. Consumer credit has become more expensive in the last year and for many unavailable. The still small retreat in direct energy costs are not enough to stimulate spending. Credit card defaults are rising not just because of constrained household budgets, but also because the actual interest expense has increased to intolerable levels by dysfunctional banks trying to squeeze profit out of any place they can. Due to the predatory nature of the credit card industry consumers who carry appreciable balances may be paying APR's that are wealth destroying. See Residual Interest for more on legal ways that the credit card industry is charging wealth destroying interest.
Maybe if the oil run up had been prevented in the first place the real estate bubble would not have collapsed the real economy.
Um, no -- bubbles always burst.
whyzirp, I think you may have cause and effect reversed. Lower current and anticipated demand - what you call 'damage' - is what's causing oil prices to drop. Oil prices would never have come down if demand had stayed level.
The point is that demand/consumption had to come down. Excess consumption here in the US, and not production, is what fed the housing bubble, through vast amounts of trade deficit money coming back as investment dollars looking for borrowers... any borrowers.
the real estate bubble would not have collapsed the real economy.
yeah, the RE bubble would have caused no harm if loans were underwritten against verified income and qualified on the back-end rates and not the teaser rates.
but, of course, the bubble never would have gotten going if the traditional lending standards hadn't been jettisoned in 2003.
Someone will start a new war once oil hits $50. Heck, it could be US. Or the Saudis will import Nigerian rebels to blow up their own pipelines. Or Russia will invade the Ukraine to get two results.
Seinfeld episode reference (Kramer playing Newman in a game of risk on the subway): "Ukraine is weak"
through vast amounts of trade deficit money coming back as investment dollars looking for borrowers... any borrowers
... which included Casey Serin.
Since one can argue that saving money on fuel is like a tax break or stimulus to the consumer, it makes it more likely that the stimulus package congress will pass will focus on infrastructure and investment.
I just knew something "new" (to me at least, and probably to 99.99% of people). Did you guys know this: A Trading Strategy with Guaranteed No Loss (it does not involve zero-coupon bonds or notes/etc).
Why is it that they (the bankers on wall street) hide such things from us?
Hint: if you can figure it out on your own, it involves two trades one of which is an options trade.
If you cannot figure it out or simply should know more, head to the site below.
Stock Trading | Forex | Financial Markets: A Trading Strategy with Guaranteed No Loss, for Unusual Times
I don't see currency manipulation, or its absence, having to play a role
I do.
Your point #2 - why do they buy UST instead of invest in say 'oil wells' or their own production capacity?
They do it to keep their currency cheap (do the math yourself - they HAVE to recycle the dollars or their currency skies killing off the exports).
This is 'cycle' is no accident.
:::
Now having said that - your point #1 could happen - if they export less to SOMEBODY and if not us whom?
You think the politburo in Beijing is going to look favorably at that? How would you reverse it? [Hint: cut price] How can you cut price across the board? Drive down your currency vis-a-vis your most important trading partner? How do you do that?
Like I said - the irony of all this might be INCREASED buying of UST - not less.
Sorry, Your analysis misses some very important points. If oil falls below about $60/bbl, production reductions, particularly in this hemisphere will cause prices to rise again. So, any economic stimulus provided by cheap energy would be short-lived. What should concern people is that price volatility makes it very hard (and risky) to define the benefits of wellfield development. Exactly how to cure this ill is well beyond my imagination, but if these wild price swings continue, it could seriously reduce resource exploitation - causing long-term shortage well before resource exhaustion. Then prices will soar.
jim | 10.26.08 - 12:50 am | #
Thanks jim! I'm going to be rich with no risk! Glad someone finally clues me in.
Look, Craigs List may be the national garage sale. Used goods at cheap prices. Like todays market, forced sales out of desparational motives.
For now, we may be a used goods society. But it will not last.
Society is not all that fragile. I may not know my neighbors well but if there is trouble there, the community reacts. Always to the good.
Jas would love this:
The Video Church and the programming of the dopes: Frank Zappa on Prosperity Theology.
YouTube -
All that is old is new again.
Look, Craigs List may be the national garage sale.
Hmmm, am I the only one who only checks out the FREE stuff? I don't even want the stuff, I just can't stand seeing the waste.
dryfly, I understand what you're saying. What I said was based on a hypothetical - the US trade deficit shrinking. That in turn implies hypotheticals about how authorities in the big exporting countries with cheap managed currencies would react.
In reality, these countries may fight like hell to prevent their export shrinking, and so our trade deficit may not shrink very much. And the hypothetical may not be realized as a result.
dryfly or others, how come China and Japan have permitted the bubble to burst as sharply as it has?
Wouldn't it be very much in their interest, and within their power, to prop up US asset values enough to mitigate the drop in demand for their imports here in the US?
mb writes:
Americans cant save. They are taxed to death.
They save in 401ks, thats it. Period.
How do I kNow this? cause I know ho hard it is to save. We make 190,000/yr, have $500 house payment, no car payments, and must put 3 kid in private school cause public is shit here, we struggle to save 800/mo after taxes.
your house is too expensive, you eat out too much and your car is too big and you live too far from work.
THere are ways to live cheaper. We have just forgot how to.
in the 1960s a family of four could live in 10000 and the kids could go to college at a good public university in the 1970s on an income in the 20000s.
Things are just much more expensive and we live less efficiently for little gain in quality of life.
I am quite frustrated with supply versus demand based arguments for oil price manipulations.
This market is the most manipulated market in history with the possible exception of gem quality diamonds. It is controlled by a well known cartel (OPEC) and has been characterized by a boom and bust pattern for its entire history. There is no free market pressure on the oil price, there is only an extortionate cartel that manages to push the price of a vital commodity so high as to collapse the world economy again and again resulting in demand destruction.
Cartels do this, or their agents do this. Don't drag market pressures in to explain the politically motivated acts of a bunch of pirates.
whyzirp, I too would prefer not to send my money to people I don't really like. But, although oil suppliers collude, they do not exercise 100% power over the market. Don't let your dislike of the people or situation cloud your judgment of what is happening. Especially if you have money riding on your making a correct analysis.
dryfly or others, how come China and Japan have permitted the bubble to burst as sharply as it has?
If you're referring to the housing bubble burst, the cause was organic. The debt burden grew too large to service for those carrying it.
rich and Ross, yesterday you'd both mentioned that PMs would be a wise place to park money over the next few years. Ross, I believe you suggested PMPIX. I'm trying to get my head around this. Won't deflation rein in PM prices in general?
EVERYBODY'S BUSINESS; You Don't Always Know When the Sky Will Fall - NY Times
Ben Stein
You Dont Always Know When the Sky Will Fall
Its clearly not a stimulus. People will pay down debts. Banks will hoard. Governments will collect less taxes. Less roads get built.
And people in oil, solar, wind farms etc will lose jobs.
"This market is the most manipulated market in history with the possible exception of gem quality diamonds. It is controlled by a well known cartel (OPEC)..."
Zirp,
If OPEC had as much control over oil prices as you imagine, they would have kept them in a range where all OPEC members can make money but prices aren't high enough to lead to demand destruction -- that would be about $100 per barrel now.
Short answer:
Less benefit than a depreciating dollar would have to boosting exports in the medium-long term.
In the short term, another $3,000 (?) per average family to spend
Troy, pls define the next bubble and regulate it. The cause is FED and 10:1 leverage at banks. Why are you not complaining about global rice regulation? That's serious, mcmansion is not.
2. Japanese debt. Cause is Keynesian infra projects '92-03. Soon coming to USA and Europe.
The people are morons. They deserve no better. Short it.
Max,
Offering to lend money to people is usually very easy. Repayment is the hard part. China and Japan have been lending us vast amounts for years with diminishing chances of their getting it back. Why would they suddenly require full repayment on new loans now?
Actually, a crisis is the perfect time to make changes that would otherwise never make it through they political system.
Thus, among other changes - I would impose a flexible gas/diesel tax that would make gasoline prices stay no lower than $5.00 gallon. This tax increase could be offset with increases in the Earned Income Credit - but they would provide a strong and consistent signal that gasoline consumption is disfavored and "green" energy is supported (e.g., electric cars).
Not only would the environment improve (if you believe the warming argument), but also it would weaken the radical states in the world that want to use oil revenues to build nukes/support terrorism, etc.
We've been down this road in the 1970s and we blew it - let's get it right this time.
I would impose a flexible gas/diesel tax that would make gasoline prices stay no lower than $5.00 gallon. This tax increase could be offset with increases in the Earned Income Credit - but they would provide a strong and consistent signal that gasoline consumption is disfavored and "green" energy is supported (e.g., electric cars).
65% of LA Basin electricity is from coal. Green? You probably think the extra taxation should go to transit for similar reasons.
So Larry Kudlow is now writing for CR? Good god, I thought this level of discourse was CNBC only. Shortly after the election the price of oil will explode, numb nuts.
The media, as always, is just way behind the curve as usual. This "frugality" message is so far overdue it's beyond ridiculous.
Comrade Bear (tj & the bear)
You have an excellent point there. People are in debt exhaustion. They must bring expenses down to incomes. The debt bubble is over. If they are to retire, they will have to save (invest).
The Duessenberry effect has been broken. People are reducing their standard of living down to their new incomes/costs. That is a powerful change in US psychology.
But the downside isn't done. The various governments have not reduced spending to sustainable levels. Cest la vie.
2009 is going to be very interesting. You cannot push a rope... the US consumer is done. Spending incentives do not work once the Duessenberry effect is broken.
Got Popcorn?
Neil
Cynical Yes writes:
"... Shortly after the election the price of oil will explode, numb nuts."
Why do you think so?
The last time before elections it dropped and after elections it rose. I always thought the drop was because the Democrats could have won, and the rise was because they didn't. But this may be just naive of me to think so.
Why would they suddenly require full repayment on new loans now?
Is that what's happening? AFAICT, the US hasn't defaulted on our sovereign debt yet.
Homeowners can't even make their monthly nut, let alone "full repayment."
Calculated Risk writes:
...I'm also a little concerned that a lower trade deficit might lead to higher interest rates in the U.S. ... something we can discuss later.
This is I think a huge issue, and one most people are I think totally overlooking.
With oil exporting nations having no petro dollars to recycle into the long end of the US treasury curve (they basically have nothing to recycle at their current capital spend rates with oil at or below $80, so they will need to both curtail spending and stop buying treasuries), we could see the long end of the curve go up.
This in turn may have radical consequences for the world economy, but my obvious guess at one of the smaller knock on effects would be that the US housing market would over correct to the downside.
Should that happen, I would guess that any "gains" we would see from consumers spending their new found gasoline rebate would be dwarfed by the wealth effect of further erosion in the US housing sector, as well as the hit to the economy from yet further banking sector write-downs etc. etc.
Of course, should the powers that be, be unsuccessful in re-inflating the money supply, thawing the credit markets and stemming widespread price deflation, we could see yet more assets sold off and more bids put on the 30 year bonds, completing our transformation into Japan (sadly with worse food).
Agreed about the fact that everyone is overextended - consumers, business frims (especially financial), state and local governments (with unfunded pensions) and the national governments (not just the U.S.).
The next President and all of us with have to exhibit the ethic of living within our means - the problem is that is what Hoover did - so, we have to do the stimulus thing for a short time, and in a big way.
I would make aid to state and local governments contingent on their having business plans that solve their underlying problems, much as I wouldn't give a dime to GM unless they blew-up their existing business model -
Ruh roh:
Reporting negative GDP
GDP Probably Contracted as Spending Fell: U.S. Economy Preview - Bloomberg.com
I don't see how the consumer can do anything but retrench,'' Robert McTeer, former president of the Fed Bank of Dallas, said in an Oct. 24 Bloomberg Television interview.If they all do it at the same time, it will really tank the economy.''
High oil prices might suck for California, Michigan, New England, etc. but they were HUGE stimulus for Texas and Wyoming (and W Canada too).
I was going to say the same thing. Many people who work for oil and gas companies are going to be unemployed.
Dawg - no, I don't believe in mass transit - doesn't fit lifestyles and is vulnerable to terriorist attack - and always comes in way over budget.
Financial Crisis Spreads To Emerging Markets | Newsweek World | Newsweek.com
Newsweek
'A Full-Blown Crisis
Emerging markets were supposed to save the world with their fiscal responsibility. So much for that.
Great quote, Dawg!
``If they all do it at the same time, it will really tank the economy.''
What other choice do they have?
This is a bit of perverse logic ...the price of oil has dropped so steeply in part BECAUSE of the forward looking projections based on slowing global demand. Now we are all saying that this drop will help- so why not stop all consumption and let it drop to $10 !!
Its a silly circular argument. There is a price level that x% global growth can support-and thats the equilibrium- any fall below that may , just may be construed as beneficial .
But what will become of the burgeoning petro-dollars from the oil producing states that was finally funneling back to fund the US deficit ?
The currency recycling is perhaps the key issue now. The money goes out of consumer's hands to the middle east, which in turn sends it back to buy our government debt. The day we can't sell our debt is when the whole house of cards falls apart. It isn't gone yet, but that firehose could be slowing to a trickle.
Viki writes:
....
Its a silly circular argument. There is a price level that x% global growth can support-and thats the equilibrium- any fall below that may , just may be construed as beneficial .
Viki, I suggest you pick up George Soros' latest book "The New Paradign for Financial Markets". It's not an easy read, and he lays it on pretty thick about all of the right moves he's made over the years, but he lays out a very good case for essentially answering your question, and saying that there is no true equilibrium point.
The price of gas at the pump is too volatile to feed into medium-term projections. It's too exposed to 101 sources of exogeneity.
And it won't mean jack when the disjuncture comes.
CC
I'd just like to thank whoever posted the link to John Taylor Gatto's website... very interesting read...
Two noticeable themes here and OCR (outside CR) lately:
a) The D Bomb is being dropped with more and more frequency.
b) More frequent references to the idea that we should limit government to the state or municipal level, or that individual states and clusters of states should secede. In many instances this proposed as a means of solving the homogeneity issue. Troubling because it seems to have racial overtones and also because it would amount to the wealthy, having generated their assets on the back of others, suddenly slam the gate shut.
Hmm...
But won't a reduced oil price result in reduced receipts to oil producers, hence reduced recycling of petrodollars back into US Treasury Bonds?
Scenario:
Oil price drops.
US consumers use the $ saved to pay down their credit cards.
Petrodollar inflows decrease.
Net outcome: further contraction.
http://i.realone.com/assets/rn/img/6/0/3/7/23317306-23317312-slarge.jpg
God bless our great central planners.
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Gonna be grim for awhile.
CRVIX @ 3
mb writes:
Americans cant save. They are taxed to death.
They save in 401ks, thats it. Period.
How do I kNow this? cause I know ho hard it is to save. We make 190,000/yr, have $500 house payment, no car payments, and must put 3 kid in private school cause public is shit here, we struggle to save 800/mo after taxes.
mb | 10.26.08 - 12:01 am | #
Oh, please. If you can't save more than this then you are one of Jas's dopes.
When I worked I made 1/2 of your income, when I had a house payment it was $300 more than your claimed house payment.
I saved $800 in cash, $600 in 401K(with $300 company match) each month.
You are spending $8k per month on what, exactly?
Please.
Troll, go home.
One question I have had about the current economic crisis is how important are the moneys we are spending to conduct war in the ME impairing our ability to deal with this problem. CR mentions that the reduction in oil costs will save our economy $12 billion per month and that this could possibly be a significant amount in helping us out of this mess. Coincidentally, the current wars in Iraq and Afghanistan is costing us somewhat more than $12 billion per month.
Is it possible that our wars could be costing us more than we can afford? Are we ready to risk bankrupcy in order to pursue these foreign adventures? This is a political question. How much are we really willing to pay to police the world?
You are spending $8k per month on what, exactly?
I am not the original poster but I imagine that 3 kids in private schools if they are expensive might amount to $70k a year or more and that is of after-tax money, so $120k+ of pre-tax money.
shorter ben stein: I would have been right about everything I ever wrote except the fed caused the entire catastrophe because they didn't save lehman (last week it was because black people got loans). And why can't people just dip into their savings like I can? and, the oil companies are just victims like everyone else, please stop mentioning their windfall profits.
Why does this guy still get paid to write articles?
b) More frequent references to the idea that we should limit government to the state or municipal level, or that individual states and clusters of states should secede. In many instances this proposed as a means of solving the homogeneity issue. Troubling because it seems to have racial overtones and also because it would amount to the wealthy, having generated their assets on the back of others, suddenly slam the gate shut.
Uncle Billy, Rater Hater | Homepage | 10.26.08 - 2:45 am | #
Uncle Billy, I haven't really picked up that vibe but I could be obtuse.
I really hope you're wrong, otherwise the USA is really in for some seriously hard times.
Yes, I regret the overuse of the word "really" but my vocabulary is limited. My apologies.
GE is in trouble. This is real bad.
They be taking FED money now by selling CP to them.
And they are still paying dividends, ridiculous!
You are spending $8k per month on what, exactly?
I am not the original poster but I imagine that 3 kids in private schools if they are expensive might amount to $70k a year or more and that is of after-tax money, so $120k+ of pre-tax money.
anonymous | 10.26.08 - 3:55 am | #
Then the original poster is an over-striver.
It's still rediculous spending.
It would cost less to move to a better neighborhood and let the kids attend good public schools.
I am not a teacher but do you realize that many private schools pay their teachers less than public school teachers make. What makes you think that private schooling is a better option? Granted, in bad neighborhoods you'd rather your child go to private school, but in good neighborhoods, why?
After reading CR's article, I was interested in seeing how base metals are doing. It's amazing how prices for steel, copper, nickel and aluminium have collapsed in the past 60 days as well. Example, Al: $1.25 /lb on 26 Aug to $0.86, Cu: $3.50/lb to $1.72. Ni has dropped from a high of around $24.00/lb in June 2007 to $4.27/lb on Friday. (The page cannot be found
More signs of demand destruction in other areas of the economy.
Despite Turmoil, Wall Street Bonuses Survive
Despite Turmoil, Wall Street Bonuses Survive - ABC News
Yes, you read right. While the outlook is pretty grim, at least compared to last year's $33.2 billion bonanza, compensation consultants expect a 30% to 50% decline in payouts this year, but billions will still flow.
Check out 1:56 a.m.
Bailout/Bloodbath Burnout? « naked capitalism
Fricassee as high flattery!
More signs of demand destruction in other areas of the economy.
China was and still is driving the demand for base metals. And you are right, the demand destruction there is more than anyone has expected.
On the flip side, when they decide to boost domestic spending and their infrastructure, prices will go up.
After the elections things are going to get interesting.
individual states and clusters of states should secede... Troubling because it seems to have racial overtones and also because it would amount to the wealthy, having generated their assets on the back of others, suddenly slam the gate shut
What are you talking about? The Federal gov't is out of control at this point. Why would anyone stay bound to an entity ringing up $400 billion in debt per month that's also deploying troops around the country?
Secession is the peaceful answer for dissenters to choose a different path. The other choices are violence or complicity to madness.
Which of those three do you favor, Uncle?
After the elections things are going to get interesting.
I agree. Everything that Paulson, Bernanke and Bush et al. have done seem calculated to put off the day of reckoning until somewhere after Nov. 4. Things are collapsing quickly, but +/- $1 trillion in extra government cash injected into the system may buy enough time for all of them to get out of office before the total melt-down.
Alaska, Hawaii, Oregon, Idaho, New Hampshire, Maine, Wyoming.
If secession comes, it will be like the fog, as a "let's not give our money to Uncle Sam" notion takes hold. Not by states saying "bye"
"Country First"?
Maybe family, neighborhood, city, state first, since DC has seen fit to sell these ancient entities/concepts out for sake of BFNYC and DC et al.
Simple self-preservation.
But then, BH, cracker, mock turtle, unirealist and the rest of us out PNW way see things differently (certainly not the same) than others elsewhere.
I don't believe it has anything to do with racial homogeneity. Except where races are already concentrated by cultural choice.
There isn't a gate or fence big enough or hard enough to protect the wealthy in a crunch. Who will defend them (private armies) when their own private armies' families are at risk? Where will the rich get supplies after the initial stockpile runs out? Where will they hide that their angry neighbors can't locate them? The rich can't hide and they know it. But they can morph into less greedy humans while there is still time.
dp writes:
I think the real question is something like, "will Americans ever start saving"?
When interest rates on savings show a reasonable positive rate of return? Why should Americans invest when the Treasury is already investing Trillions for them?
For now, I just plan to live off of my investments.
Hey Hank, when do I get my first dividend check?
Sorry Ben, we couldn't keep it.
We are watching what happens when price is used to reduce oil consumption instead of sensible CAFE standards- the bottom falls out of the auto industry.
It was CAFE standards that brought us the SUV craze. Good old fashioned station wagons and full size sedans that sat people in comfort were outlawed by the greenie geniuses that wanted to control our lives. Thus, we got mini cars suitable for runts, midgets, and people of generally low self esteem. Because SUVs were built on a truck chassis they were exempt from CAFE standards.
What business is it of anyone's how much my fuel bill is? I don't ask how much extra their medical bills are from the added injuries they suffer from driving mini cars.
Sorry Ben, what's a republic?
"Thus, we got mini cars suitable for runts, midgets, and people of generally low self esteem."
Does high self esteem mean that you must drive a large car? Own a Great Dane? Eat four pound steaks? Live in a hundred room mansion? Bet on dinosaur races?
"I don't ask how much extra their medical bills are from the added injuries they suffer from driving mini cars."
Drive carefully and stay away from the other cars. Then it probably won't matter how large your vehicle is.
There is no cushion: Look at the rise of USD; It's exponential. Once something goes exponential it's alle over - in this case the "USD-strength" comes from unwinding of hedge-funds and "Short USD / Long Anything" positions.
Once unwinding is complete, bye bye Currency Strength and Hello to USD 10++ Gasoline!
And people in oil, solar, wind farms etc will lose jobs.
Don't forget biofuels! Government mandated that all of these "alternative energy sources" be used - and subsidized the malinvestment with tax dollars.
Just triple the subsidy and solar, ethanol, and wind look reasonable again. It's a small price to pay so that eco-snobs can feel good again.
Sorry Ben, we were too intent on taxing our neighbors to maintain a republic.
I'm just about sleepy and just about done here. . .
Next energy revolution: truer independence, your dwelling and land as food producer and clean energy gatherer/storer,
a hybrid household.
You read it here first, today (first time today I mean). Oh well
Pavel:
Does high self esteem mean that you must drive a large car? Own a Great Dane? Eat four pound steaks? Live in a hundred room mansion? Bet on dinosaur races?
Props to Pavel.
I want to bet on dinosaur races though.
Lower oil prices will not lead to more consumer spending. I have a rate of change curve at my site that correlates consumer spending with real oil prices. Changes in consumer spending lead changes in oil prices by anywhere from 12-24 months. Oil prices fall because activity in the economy has fallen. You can clearly see on this that falling oil prices do not lead to increasing consumer spending. It's pretty obvious why really. Consumer spending is falling because of lower real incomes, higher unemployment, and less perceived wealth. Therefore there isn't as much money to spend. This brings down oil prices. While it is true that for a someone who has seen real wages stay stable and has not lost their job that a fall in oil may lead to more spending on something else it does not hold in aggregate.
AnonyMiss,
Because someone says something you don't like or disagree with, does not make them a troll.
anonmiss,
Some private schools go up to 20K+ a year. He said he has 3 kids.
My heart bleeds for the people who can't save any of their $200k/yr income because they're forced to send their kids to preschool at the 92nd street Y.
"The last time before elections it dropped and after elections it rose. I always thought the drop was because the Democrats could have won, and the rise was because they didn't. But this may be just naive of me to think so."
The drop was manufactured by the administration. The method was visible in the public domain. The guilty parties were elevated to cabinet rank. Details:
Nothing found for 2006_09_01_archive
completing our transformation into Japan (sadly with worse food).
Peter-san
The set of countries with worse tasting food than Japan is quite small -- England, perhaps a few others. I remember once where the least appalling thing on the menu in the lunch shop in the skyscraper where I worked in Nishi-Shinjuku was a watermelon and spaghetti sandwich on sourdough.
Wasn't bad, especially considering the alternatives.
This is a political question. How much are we really willing to pay to police the world?
That depends upon my mood of the day. Do I feel like being bent over and reamed by a Wall Street Banker or by an Arab/Muslim peasant?
Sorry Ben, it was broke before I got here.
More cost savings: With equities so low, those holding mutual funds wont be paying as much in fees.
They save in 401ks, thats it. Period.
Soon to be nationalized, too.
sdtfs wote:
Your "sensible" CAFE standards kill and maim thousands of Americans every year.
Hmmm, why do I think that you'd believe that "Guns don't kill people, people do."
sdtfs, Hmmm, why do I think that you'd agonize over statistical studies that might say there would be two extra deaths per year from not eating organic, free range tofu at Whole Foods but don't care and wouldn't sue if and extra couple of thousand die from Politically Correct cars. God the religious left dries me nuts. kumbaya!
"I want to bet on dinosaur races..."
'As they thunder around the turn...'
Two brontosaurs neck and neck would be quite a sight.
Anonymous writes: On the flip side, when they (China) decide to boost domestic spending and their infrastructure, prices will go up.
"The Chinese Communist Party says it plans to double by 2020 the per capita income of its farmers, which amounted to $605 last year."
China to double farmers' per capita income - UPI.com
Just how much can a country whose citizens make less than $6,000 per year boost domestic spending?
Governments and their plans are soon parted.
Barley wrote:
They save in 401ks, thats it. Period. Soon to be nationalized, too.
I pointed that out to one of the local "maserati marxists" whom I saw at whole foods here in Chapel Hill today. He got quite...real quiet. Ah such is life in the peoples republic of chapel hill.
"...if and extra couple of thousand die from Politically Correct cars. "
People die on the road mostly because they lack skill and caution. Try staying awake, too.
"...whom I saw at whole foods here in Chapel Hill today."
What were you doing in Whole Foods, eh?
"...the least appalling thing on the menu in the lunch shop in the skyscraper where I worked in Nishi-Shinjuku was a watermelon and spaghetti sandwich on sourdough."
Sounds soggy. What was the worst thing on the menu?
"maserati marxists"
lol
(MarketWatch) -- California Public Employees Retirement System, the largest U.S. pension fund, is selling stocks to ensure it has enough cash to meet obligations to private-equity firms and real-estate partners, The Wall Street Journal reported on Saturday. Calpers had $188.8 billion under management as of Wednesday; it normally keeps less than 2% of its assets in cash but has had to raise that level, the Journal reported. The Calpers board's investment committee met last week to discuss ways to raise cash
Anecdotally, people are driving a lot faster now than they were when gas was $4 a gallon. Lots more cars on the road now, too.
Does high self esteem mean that you must drive a large car? Own a Great Dane? Eat four pound steaks? Live in a hundred room mansion? Bet on dinosaur races?
As a general rule, if one needs the force of government behind one's argument, then it is probably a weak argument.
I don't have to drive a large car any more than I have to wear jeans that fit or buy furniture that fits. But, only men who have lost all sense of self worth willingly allow someone else to dictate their choices in cars or pets.
Sorry Ben...
I think the painfully learned frugality lessons will not be unlearned in 10 seconds. Not that many people have lost their jobs--yet.
And isn't it true that the "savings rate" doesn't include a whole bunch of things that might fairly be called savings, by normal people's standards, altho not by the govt definition?
We paid our house off 'way early. Money used to do so wasn't put in a bank account. I rather think that the mtg paydown isn't counted and the savings in the bank thing is.
True? I am willing to stand corrected.
It's not exactly equal, since we mightnot be able to borrow to pull the money back out again. But it's not nothing.
But, only men who have lost all sense of self worth willingly allow someone else to dictate their choices in cars or pets.
Andrew Ryan: I am Andrew Ryan, and I'm here to ask you a question. Is a man not entitled to the sweat of his brow? 'No!' says the man in Washington, 'It belongs to the poor.' 'No!' says the man in the Vatican, 'It belongs to God.' 'No!' says the man in Moscow, 'It belongs to everyone.' I rejected those answers; instead, I chose something different. I chose the impossible. I chose... Rapture, a city where the artist would not fear the censor, where the scientist would not be bound by petty morality, Where the great would not be constrained by the small! And with the sweat of your brow, Rapture can become your city as well.
Andrew Ryan: A man chooses. A slave obeys.
Just how much can a country whose citizens make less than $6,000 per year boost domestic spending?
Governments and their plans are soon parted.
Much more than what most western economies can now with the exception of maybe Canada which hasn't been hurt too much.
Remember they actually have savings as opposed to the US.
If they don't at least cushion this downturn then things'll be real bad.
"But, only men who have lost all sense of self worth willingly allow someone else to dictate their choices in cars or pets."
The pet police forced us to buy a border terrier. They also told us that if we didn't buy a sub-compact car the dog's feet would not be able to reach the pedals.
We had to do what we were told. Otherwise, they would have taken away our pet Aldebaran Tortoise.
"Andrew Ryan"
Ayan Rand inside out?
"Anecdotally, people are driving a lot faster now than they were when gas was $4 a gallon. Lots more cars on the road now, too."
Anecdotally, fewer and fewer people, at least in DC, are obeying the rules of the road, like stopping at stop signs. We've had pedestrians killed here because cars that should have given them the right of way in zebra crosswalks ran them over.
It looks as if social discipline is breaking down, not a good omen if we have to face an emergency situation.
We have a bunch of turtles here that like to eat my green beans that I have to evict from my garden each year. You can have as many as you want. Not that I've planted any green beans yet. Blogging here has been my green bean planting.
They get to be 5 pounds or more and I'm sure would be a good substitute for the Aldebarans. They try to pee on me and wave their stubby legs frantically when I remove them. For real.
We have a bunch of turtles here that like to eat my green beans that I have to evict from my garden each year.
When life gives you turtles, make turtle soup. They are quite good i hear.
Pavel:
Ayan Rand inside out?
Yah. It's a reference to a very popular video game (BioShock) about a "free market" society (Rapture) that turns out to be anything but. Andrew Ryan is the Howard Hughes-like figure who built Rapture.
Very well-crafted, with a lot of apt parallels to the modern world.
"You can have as many as you want. Not that I've planted any green beans yet. Blogging here has been my green bean planting. "
Dear Liz,
We don't really have one of those 300 pound Aldebaran tortoises that live for a hundred years or more. I would guess that it's illegal for a private person to own one. However, we can go to the National Zoo if we want to see them.
Tortoises make good pets. If you own a reptile, though, make sure that it's tested for salmonella. Little kids are especially vulnerable because they put their fingers in their mouths.
The Car Info Blog
I don't own my turtles; they live outside wild and free. I didn't know that Aldebaran turtles existed--thought it was a reference to star wars.
Also, I think the turtles in my back yard are supposedly endangered and so you aren't supposed to eat them. Couldn't prove any endangerment by me!!
lawyerliz:
They're probably tortoises not turtles, but what do i know.
If I'm unemployed, how can I save money on gas by driving to a job that I don't have?
LawyerLiz said: "the turtles in my back yard"
Gopher Tortoises?
Terry--that sounds right.
While gas prices are falling now is the time to raise
the gasoline tax and lower the payroll tax/raise the
minimum wage to offset the gas tax increase. This would encourage conservation and provide a wage increase to the average worker.
They are probably box turtles. I have a few that lumber up into my yard when it rains. I usually give them a piece of bread and some lettuce and off they go back to the woods.
I think gopher tortoises sounds like it's been mentioned locally. Strangely the bunnies and the raccoons and possums don't seem to go after the garden.
My best girlfriend in West Va truly hates deer.
My best girlfriend in West Va truly hates deer.
We call them rats with antlers.
That sharp red spike on CR's chart is the price of a commodity that did not suddenly become scarce in the time the price spiked. Nor did demand rise in an exponential fashion. In fact what did happen during the spike was the beginning of a global slowdown as a result of the real estate crashes and the impairment of the banks.
This is a manipulated, cartel run market. The game is rigged. You will see an oil price collapse if the damages to the real economy are sufficient, but that is the result of the destruction of the buying power of the end consumer by the predatory pricing of the monopoly. Some producers will have to sell at any price and they will break from the herd.
My point is that you really can't count on the price staying at any particular level, high or low. Last time they did this there was a virtual collapse of the oil price and we saw extremely cheap prices. That may happen again, but even now OPEC is making noises about further production curbs. Its about geopolitics, not a free market commodity.
To be blunt about it, we killed too many Jihadi's in the "surge" and they were mostly Saudi. While I doubt the official Saudi government approved, some of those Saudi citizens who died where the sons of powerful people who were able to manipulate the oil market. They got their revenge, but revenge is a bitter drink as they will soon see.
This is a manipulated, cartel run market. The game is rigged.
You mean by the banks.
Gulf Bank May Have Loss as Derivatives Contracts Sour
Gulf Bank May Have Loss as Derivatives Contracts Sour (Update3) - Bloomberg.com
Gulf Bank KSC, Kuwait's fourth- biggest lender by market value, may suffer losses after some clients defaulted on derivative contracts linked to the euro, sparking concern regional banks may be further hit by the global financial crisis.
The losses were incurred on currency derivatives after a decline in the value of the euro versus the dollar, state-run Kuwait News Agency said today, citing central bank governor Salim al-Sabah. Gulf Bank will have to absorb the losses until an agreement can be worked out between the bank and its clients, the news agency cited the central bank governor as saying.
I have been trying to figure out scenarios based on what I have read here and other places for the next year. There is so many possible varibles that it makes my head ache.
So i have given up.
This will sound insane but I have visions. Sound cool? I hate it. They scared the crap out of me when I was a kid. Freaked me out as a teenager. As an adult I have learned to block them out pretty much.
This is why I am here. What would cause what I have seen? I still don't know. Basically I see places now, and the same place in the future. What that usually amounts to is the 3rd world with a lot less people. My neighbor unpainted, bushes growing untrimed, the streets silent. The strip shopping center a ratty trading/buying center. A lot less people. Weird, I know.
CR, I'm assuming that "other energy goods" also includes utility bills? If so, I think Leamer's $200-250B stimulus number is spot-on. The Mall here was jam-packed again this weekend, as it has been since the gas price tumble. Retailer discounting has helped as well. The pace of the gas price fall is slowing, but it seems to drop every day. Yesterday, I saw one station at $2.08/gallon. Natural gas rates have went down on utility bills. Cross-fingers for a mild winter.
-11 Visitors Online
ova, write a book. Maybe it will be the next nineteen eighty four.
KeyCorp, Zions and Capital One are some of the banks that will receive cash under the U.S. government's second round of capital infusions, a source familiar with the Treasury Department's thinking said on Sunday.
No books. I think any cartel/plot is going to find even the best plan does not survive contact with billions of people.
@nova: What would cause what I have seen?
Ummmm, a pandemic?
I think no matter how smart we think we are; all we can do is peer into a dimly lit cave and pretend we know what shadows are saying. Many are those whose arrogance ended up kicking them in the groin.
"... I wouldn't give a dime to GM unless they blew-up their existing business model"
Should we reward failure?
Brothers,
plusgoodnews from the Ministry of Truth.
Victory is near!
It has been announced that we are within measurable distance of final Victory over our Eternal Enemy, the barbaric terrorist hordes of Eurasia.
News from the Indian front reveals that Big Brother himself has overseen a vast strategic deployment of our superiour forces by the Ministry of Peace to out-flank our sworn enemies of the Eurasian terrorists.
All that is required now is to be doubleplus vigilant of
unpatriotism in the homeland,
which can only lead to horrible subversive Thought-Crime,
that insidious cancer that grows in our less-patriotic brothers
who have been corrupted by the evil lies of our enemy, Bin-Laden Goldstein.
The Ministry of Plenty has also announced that all level five citizens
have been rewarded with an increase in chocolate rations from fifteen to twenty grams per week, and these loyal brothers will also be recieving
an additional patriot-implant recalibration in preparation for the next Hate-Week,
to ensure all of our brothers remain loveful of our glorious leader, BB
Praise be to the Party and to the Paulson,
and our beloved and fearless protector Big Brother, he brings us Joy and Victory!
Be wary of Cash-Crime, my brothers, all currency is now mandated by law to be digitally contained on your patriot-implant, for the continued security of our Great Nation.
We must fight the evils of Cash-Crime
because Cash will lead to reflections outside of party needs,
this results in unpartiotism and treacherous thought-crime
Report any suspicious activities to the Ministry of Love for extra rations!
and young patriots, it is your duty to denounce your parents to the thought-police
if they have been unpatriotic or subject to thought-crime, choco-rations will be provided.
In our world, there will only be Triumph and self-abasement,
everything else we will destroy.
Remember, next week is Hate-Week!
In other news, it looks like that conference call on Friday was pure, unadulterated bullshit. Citadel is toasted crispy crunchy.
Your point #2 - why do they buy UST instead of invest in say 'oil wells' or their own production capacity?
Probably a dead thread by now, but when BWI and BWII were being created, the world was a very different place. Emerging countries (or more accurately, their leaders) were faced with a conundrum: buy rock-solid UST or invest in the infrastructure in an unstable community.
You couldn't do the latter until your security was relatively guaranteed, which of course was heavily dependent on the former. Uncle Sam needed a way to pay for guns and butter; the emerging markets were it.
Pavel Chichikov writes: The pet police forced us to buy a border terrier.
Not in so many words Pavel.
But here's my possibly convoluted logic:
First, the government makes or keeps you poor. Then, you can't find an apartment to rent that accepts dogs over 25 pounds.
Second, I tried to move to New Jersey. But the only apartment that accepted cats demanded that I amputate their toes at the first knuckle. (declaw)
A government that makes you poorer limits your choices.
Still waiting for my first Goldman Sachs dividend.
Nova--I have dreams in which I see cities--the architecture is incredibly detailed. I wish my waking mind was as smart as my sleeping mind. Perhaps nova, the chemistry which separates your waking from sleeping mind is not so strong from the rest of us. (My daughter actually is an architect.)
Ancient Egyptians thought the ka went wandering at nite, and often it's like that for me.
Dreams have been inspirational for ages. In another place and time you'd be in high demand for your visions.
At the appropriate place and time, I'd go with the flow, and see where it led me.
Perhaps you could draw what you see?
Does high self esteem mean that you must drive a large car? Own a Great Dane?
I work with a pet rescue group, and two emerging trends are occurring. First and not unexpected, a lot of people are giving up their dogs. But the biggest problem are all the breeders who are surrendering their dogs. WTF, $2000 for an English bulldog?
Hey, nova, maybe you saw a vision of the Citadel offices on Monday morning? Mushroom cloud time!
Speaking of outlook for Monday, anybody heard from idoc lately? Seems like a long time since he's posted...
.
From Setser:
And while we are on the topic of stabilizing speculation, China could also shift some of its portfolios from dollars to euros and pounds and Brazilian real and Australian dollars and Russian rubles. This is the time to diversify not when the dollar is under pressure! Dollar strength amid US weakness strikes me as a growing problem....
The argument that China needs liquidity and only Treasuries are liquid doesnt really work Chinas Treasury holdings are already so large that they are effectively illiquid, especially in the current market environment.
The drums of global coordinated currency intervention keeps getting louder and louder...
The financial system is plagued with another ponzi scam; Synthetic CDO's.
Synthetic CDOs Slit Many Banking Throats
"...Even as some lending markets begin to recover from last month's demise of Lehman Brothers Holdings Inc., the securities firm's default -- together with those of other U.S. and European banks -- is causing new dislocations in the multitrillion-dollar market for complex investments known as synthetic collateralized debt obligations."
Having visited India extensively twice, I do believe there are visionaries and seers in the world, and you may be one. So, your visions are meaningful to me.
The fact that you see a world in which there are so few people on the streets doesn't mean many people were killed. They are in hiding, afraid to go out.
What I believe from visions such as yours is to own real things, not paper. The most important real things to own are food, water, land, gold, silver, oil and gasoline. I think Mad Max had it about right.
If you recall, in Mad Max, a lot of people were in hiding. Keep posting your visions here, because they may be profitable.
The Notorious A.I.G. writes:
@nova: What would cause what I have seen?
Ummmm, a pandemic?
Supply line disruption of the JIT society IMO. Abetted by amateurish attempts to stabilize the situation by LEO who want to put the country under "lockdown" to stave off chaos and incidentally take the key out of the economy and throw it in the ocean with a cinderblock attached.
My rough loss estimate is 70%.
Basically I see places now, and the same place in the future. What that usually amounts to is the 3rd world with a lot less people. My neighbor unpainted, bushes growing untrimed, the streets silent. The strip shopping center a ratty trading/buying center. A lot less people. Weird, I know. - nova
Lathe of Heaven. You can call me Dr. Haber if you wish Mr. Orr.
I used to work for Citadel.
Let's just say that I am not surprised by the turn of events.
Are your visions nightmarish emotionally speaking or neutral?
I think most of the people here would like to hear more.
And we will certainly still respect you in the morning. You established your credentials long ago.
As soon as people catch on to the fact that there is/was nothing exceptional about the Citadel situation we can expect to be dealing with a serial hedge fund default scenario. Take 'em over, settle them out and shut 'em down on the taxpayer dime.
Former Citadel Employee writes:
I used to work for Citadel.
Let's just say that I am not surprised by the turn of events.
Former Citadel Employee | 10.26.08 - 11:05 am | #
How long do they have??
How long do they [Citadel] have??
crispy&cole
WAG: close of Lehman settlement contracts on Tuesday.
Comrade Bear (tj & the bear) writes:
The currency recycling is perhaps the key issue now.
I 100% agree - it could go away, could stay the same or even increase depending on how aggressively the merchantilists contest market share in NAFTA Zone. If they throw in the towel in NAFTA Zone there will be no reason to 'cycle money' & we'll see some big changes as a result.
I have no idea what will happen - I couldn't imagine they'd have offered us 'seller financing' at these kinds of terms for this long let alone that it would continue.
Gosh, all a spokesperson has to say is we are fine and everybody concludes that that the reverse is true. Correctly no doubt.
That being the case, why do they bother? Why don't they say things are bad, but we believe we will just barely survive. That might actually get believed by a few.
I guess it's like trotting Bush out. Running on automatic pilot.
I'd like to add that there is something different about this crisis than others before.
It is now possible for the masses to convert financial and paper assets into hard assets quickly and conveniently.
ETFs have made this possible. I know there's debates about whether the gold and silver ETFs really do own vaults full of bullion, or whether you could access your share of the bullion in a pinch. But I personally don't care about those arguments.
Since the advent of the gold/silver and commodities futures ETFs just 4-5 years ago, we have not yet seen a stampede out of financial assets/paper into hard stuff. But the barriers to a stampede have totally fallen. It would be possible for hundreds of billions of dollars a day to flow in that direction, via ETFs alone.
The ETFs would, at least temporarily, become by far the largest buyers and owners of these assets. The hyper demand they create could cause very sharp price increases. The ETFs are passive, dumb. They don't care what price they are paying to own gold, silver, grain, oil, etc. The mad psychology of crowds moving in one direction would be the price-setter.
@crispy - Well, it's out in the mainstream media now (WSJ) that the feds were/are crawling their asses. My guess is they're fucked as soon as the markets open tomorrow.
Hedgefund Redemptionfest 2008, Catch the Spirit!
Cerberus is the one I am watching...they have a lot of neo-con connections and I am sure they are trying to get a bailout before Jan 2009 takeover by the dems...
My guess is they're fucked as soon as the markets open tomorrow
Yeah, the dealbook coverage of their CC reminded me of the Lehman Brother sunday CC...just buying time before they fold
I think IF Citadel goes under. There could be large problems in the stock markets. They are the LARGEST market makers in the Equity Options, according to the WSJ. We might finally get our crash.
Who knows what is exactly is going to happen with so many cross currents.
Cerberus is so 'effin arrogant they won't go down without threatening to take the economy with it. They made some colossally bad bets with leverage and lost. I don't think there is enough time to fix them before events overtake any plan.
Basel Too,
I work with an animal rescue group myself...dogs are being abandoned in near-record numbers, but horses as well.
Cerberus is fucking desperate to dump Chrysler. Good luck with that.
I have never understood why people bought such things in the first place.
I think that for most people risk is a total mystery. Either they don't think anything is risky--a majority I would say--or they get bent out of shape over things that aren't very risky at all. Like flying vs driving.
I suppose this carries over into the financial system.
I also suppose this also carries with it some sort of evolutionary benefit, 'cause it's otherwise so dumb.
@ former Citadel employee
Yep, I'm headed out to buy some Depends Undergarments this afternoon because I expect to shit myself tomorrow morning.
fried,
Sadly that is becoming a major problem where I live:
Difficult economy increases the need at Ojai shelter» Ventura County Star
At the Humane Society, the 37 horses are a great financial burden at a time when donations are down, said shelter Director Jolene Hoffman.
I looked a piece of toast this morning and saw Ken Griffin's image. Can I sell it on Ebay?
Citadel collapses no later than 10/31/08, CDS exposure. And it will be a full fledged bankruptcy, so all those counterparties can kiss their "assets" goodbye. I love a financial product where the losers cant pay the winners, so everyone on earth loses! Rock on Harvard, these pampered boy geniuses have brought down western civilization.
@ former Citadel employee
What's the typical lockup period at Citadel?
What's a lockup period?
The Notorious A.I.G. writes:
Cerberus is fucking desperate to dump Chrysler. Good luck with that.
Just like homeowners they are still in the denial stage asking a wishing price. Next they bargain and eventually they try to sell for whatever the market will bring but that will ultimately fail as they cannot bring the necessary cash to the table.
I think consumption turns UP. I already know from a car dealer friend that SUV & Truck sales have gone parabolic when compared to the abysmal figures over the summer...
How are they getting financing?
What's a lockup period?
lawyerliz
15 to life if there's any justice. [sorry, couldn't resist]
lawyerliz writes:
What's a lockup period?
Lock up period
From Wikipedia, the free encyclopedia
Jump to: navigation, search
A lock up period is a predetermined amount of time following an initial public offering during which employees and close associates of the company who are given shares are not allowed to sell those shares. Generally, a lock in period is a condition of exercising an employee stock option.
A lock up period may also be referred to as a lock in, locked in, lock out, locked out, or locked up period. Any one of these variations may be hyphenated, such as "lock-up period", and variations with out or up may also be joined to form one word, such as "lockout period".
Ok, dawg, hahahaha. Now, what is a lockup period? A period before you can redeem?
@ Liz - Lockup period is the amount of time you have to wait before the investor can redeem. Three years in some cases at Citadel, if I remember correctly.
I think consumption turns UP. I already know from a car dealer friend that SUV & Truck sales have gone parabolic when compared to the abysmal figures over the summer...
bearly
Ask about gross dollar volume, terms and margins.
Ok, 2 disagreeing definitions. Sorta.
Just who is to blame for this global meltdown, the clown or the bookie, and who is the clown and who is the bookie?
Basel Too writes:
Your point #2 - why do they buy UST instead of invest in say 'oil wells' or their own production capacity?
Probably a dead thread by now, but when BWI and BWII were being created, the world was a very different place. Emerging countries (or more accurately, their leaders) were faced with a conundrum: buy rock-solid UST or invest in the infrastructure in an unstable community.
You couldn't do the latter until your security was relatively guaranteed, which of course was heavily dependent on the former. Uncle Sam needed a way to pay for guns and butter; the emerging markets were it.
Basel Too | 10.26.08 - 10:39 am | #
Dead thread but always an on-topic topic...
Point is that isn't why they buy those assets now - its to continue to export to us so they can employ their migrant labor (migration from rural to urban)... if their currency gets strong then that ends.
They would be a LOT better off if they used the gains from export to invest in agriculture to support their own urban growth.
I mean what a cock up a few months ago - they run huge mfg goods surpluses to us via cheap manipulated currency then bitch they can't buy our food stuffs 'cause their currency is too weak (food commodity inflation). Remember the food riots & rice hoarding?
And barely anyone in the economics covering media called them (or us) out on it.
Currency manipulation as a form of gov't subsidy & intervention is every bit as distorting as direct gov't 'demand economy' intervention. But you'll never hear the neocons bitch... either they don't get it or they benefit from it. I can't say I know which.
@Liz, yep, 3 years lock up at Citadel, according to this old Bloomberg story from 2005.
There are huge numbers to blame on all sides.
And it seems that the rest of the world did really dumb stuff too.
OT-Phil Matier was interviewing the US Attorney in San Francisco a few minutes ago.
The US Attorney said that they were going to be prosecuting folks who lied on their mortgage paperwork. If it was just some poor shlub was got in over his or her head by lying about income to buy an overpriced tool shed with running water, the Feds would cut them a deal: "plead guilty to a felony, but no jail time".
(sorry no links yet. CBS5 hasn't posted the Matier video.)
Neil wrote:
I agree, and the change would be a highly beneficial one if not for the last part you mentioned. The response of the US government to this psychological change is a foregone conclusion- you will see massive governmental expansion funded by taxes and even more deficit spending.
Several commenters and CR have worried about who will buy US government debt if there is a decrease in repatriated dollars. I predict that you will see a change in the 401K system where everyone has to put most or all of their tax-deferred monies into government bonds (this is already being discussed in Congress amongst the Democrats). In other words, private capital will be squeezed out by hook or by crook to keep borrowing costs of the government as low as possible for as long as possible. The system will still blow up, eventually, but the government might buy itself about 10 years of expansion before the debt crushes it.
Your has dropped 100K in value.
Your 401K is now 201K.
You see the slowdown where u work.
You r not sure if u will have ur job next month.
But you saved a few hundred on your gas bill.
Let's part like it is 2005!!
The precipitous fall in driving, as we saw in a previous post, reflects the consumer sentiment.
He is'nt going anywhere in his car.
There is no exit from Citadel. Lock up period is meaningless. Get in line down at the Federal Courthouse.
Also, one of the beautiful things about Bankruptcy is it makes these bastards transparent. For the first time we will get to see "inside" a hedge fund. Should be interesting. I am assuming this ones so far underwater that and huge that even Buffet cant help.
[Ask about gross dollar volume, terms and margins.]
No question his sales are way down... 50% off YoY. But the product mix has shifted back to gas guzzlers which is the point I was trying to make.
He says financing is largely why his sales are so slack. He is doing grass roots marketing to keep the game going rather than media ads that have been useless. Interesting times...
Speaking of lock ups and failing hedgies, anyone else see this story in the London Times?
Hedge funds stop cash withdrawals.
Uh oh, spaghettios!
Looks like Mish is reporting what my contacts told me last week:
"I have a source at GE Capital who writes "Sales personnel are not allowed to make any more loans this year, and are being told to try to get their customers to pay off their loans. All prepayment penalties are waved for closing loans and GE Capital is about to launch a new incentive scheme for the salespeople that makes it worth their while to get their customers to agree to participate.""
The Notorious A.I.G. writes:
@Liz, yep, 3 years lock up at Citadel, according to this old Bloomberg story from 2005.
It changes with the market conditions. If they need capital then lockup periods can be reduced. If they are flushed or having a great year then you have to almost beg them to put your money in with very onerous terms.
Where as typical Hedge Funds charge 2%/20%. Citadel charges whatever it costs to run their funds. This can be much more than 2% in some years.
Sales personnel are not allowed to make any more loans this year
Now that sounds like a secure job if I ever heard of one.
Implications for already diminished petrodollar recycling?
Gulf Bank May Have Loss as Derivatives Contracts Sour (Update3)
By Arif Sharif and Fiona MacDonald
Oct. 26 (Bloomberg) -- Gulf Bank KSC, Kuwait's fourth- biggest lender by market value, may suffer losses after some clients defaulted on derivative contracts linked to the euro, sparking concern regional banks may be further hit by the global financial crisis.
The losses were incurred on currency derivatives after a decline in the value of the euro versus the dollar, state-run Kuwait News Agency said today, citing central bank governor Salim al-Sabah. Gulf Bank will have to absorb the losses until an agreement can be worked out between the bank and its clients, the news agency cited the central bank governor as saying.
The defaults will have ``no major'' financial effect, Chief Executive Officer Louis Myers said today. He declined to comment on the size of the losses. Gulf Bank may have incurred losses of as much as 200 million dinars ($746 million) from derivatives contracts used for speculative trading or hedging, Ibrahim Dabdoub, chief executive officer of National Bank of Kuwait SAK, Kuwait's biggest bank, said in an interview to Al Arabiya TV.
Banks in the six Gulf Arab states, including Saudi Arabia and the United Arab Emirates, have largely sidestepped the $681 billion of losses and writedowns that banks across the world have taken following the collapse of the U.S. subprime-mortgage market. Gulf Bank joins lenders including Gulf International Bank BSC, which has written down $1 billion, and Abu Dhabi Commercial Bank PJSC and investment bank Shuaa Capital PSC, which between them have written down $174 million.
Bigger Issue
This is certainly unwelcome news,'' Ali Khan, head of equities trading at Arqaam Capital Ltd., said in a phone interview from Dubai. <b>If this trend were to gain momentum and other banks started reporting similar defaults then we would have a much bigger issue to deal with,'' he said.
Gulf Bank May Have Loss as Derivatives Contracts Sour (Update3) - Bloomberg.com
My source told me they are trying to reduce their portfolio by 20% before year-end, they will do this my not renewing revolvers with car dealers, rv dealers, constrution lines and any other industry that is f'd
c&c
If GE Capital is trying to reduce its portfolio by 20% in the next two months, there is no industry that isn't f'd.
Where as typical Hedge Funds charge 2%/20%.
I thought that the deal for most hedge funds was 2% management fee paid monthly or quarterly / 20% profit reallocation (i.e., performance fee) with portfolio expenses (auditing, legal expenses, etc.) billed through to the partnerships.
From an old thread: We were discussing CALPERS and capital calls. I mentioned that hedge funds would go the route of VCs in the tech wreck by reducing funds under management (= lower fees for managers). From the UK timesonline link above:
Poor performance has also spurred London-based Centaurus Capital into action. It is proposing to return 30% of cash to investors in its Alpha fund and lock up the rest of the money for two years with reduced fees.
We have officially hit the bargaining phase of impending death of hedgies.
The oft quoted low U.S. savings rate is a red herring. The calculation is misleading at best. Here is a good article on the topic: Hey, Big Spender Is our low national savings rate a real problem or a false alarm? - April 1, 2002
for example: Virtually all of my after tax income ($400,000/year) comes from capital gains, and I spend only $80,000/year on personal expenditures. My real savings rate is (320,000/400,000)= 80%, but from the perspective of the Commerce department calculation I have no income and a negative $80,000/year savings (effectivelly wiping out the savings of an entire zip code in NM).
Clearly price increases drove consumption down. If you guys think price declines don't drive consumption higher, you're nutz.
Norka West writes:
I thought that the deal for most hedge funds was 2% management fee paid monthly or quarterly / 20% profit reallocation (i.e., performance fee) with portfolio expenses (auditing, legal expenses, etc.) billed through to the partnerships.
Yeah but Citadel is special. You need to work for them or deal with them to see why it would cost so much to run their operations. They treat their employees very well.
Looks like Obsidian Monday on the way - very hard, very black, and very brittle.
The hedgies with 3-month lockup that started getting a redemption wave in the mid-Sept panic have only 7 weeks to pad the cushion, from whoever trusts their assertions. If Citadel goes, after the blandishments in the conference call, I suspect it'll mean generalized run.
That said, the kaboom candidates are too numerous to find a center of gravity at the moment. Forex, COMEX, CDOs, WaMu CDS settlement, corp defaults Asian equities, whatever.
Nova's visions can be seen in the dead mall in Woodbridge, VA, with the dead carnival parked there, and in several sth PA towns too.
It's not impossible.
CC
Hank won't let Citadel tank. They learned the lesson with Lehman. So we are probably looking at some type of zombie...
I know its wishful thinking but I'd think its good for all incumbents not to have a 1000 down day or even another 1000 down week in the stock market pre-election. There's a reason they all approved of the bailout... and now can feign shock/anger when Hank bails out hedge funds... but deep down inside they know it'll buy them at least 2 more years.
If GE Capital is trying to reduce its portfolio by 20% in the next two months, there is no industry that isn't f'd. - MLM
Not true. They are throwing money at medical device suppliers and leasing companies for but one instance.
ova, on "visions"-- don't worry about 'em. My Ma had an Irish friend who was a psychic (yeah-yeah I know, but she really was. When I was a teen, she used to visit our house & it flipped me out because whenever I'd come home wearing an innocent smile on my face & say "oh hi, Miss Pat" I felt like she knew exactly whatever I'd been up to the night before. She had this very disconcerting habit of, in the middle of a conversation about whatever-- suddenly grabbing your hand & saying things like "who do you know with the initials D B??-- with a motorcycle?-- don't ride with him!" oooh... ---& me & my lying girlfriends would say "but we don't ride motorcycles with boys---" & then we'd all go hide in the basement & smoke pot, totally freaked out because we sure as hell did know who D.B. with the motorcycle was...) It happened too often to be coincidence-- but to get to the point, I asked her once what it was like-- how she experienced what she "saw", & she said it was like a fast-moving split-movie screen, with different scenes, simultaneous & sometimes superimposed on one another-- so even she said that her visions could be very wrong & subject to confusion/misinterpretation. (FWIW to you, nova.)
JD Wrote:
My real savings rate is (320,000/400,000)= 80%, but from the perspective of the Commerce department calculation I have no income and a negative $80,000/year savings (effectivelly wiping out the savings of an entire zip code in NM).
I'm gonna go out on a limb here and say that JD ain't the peak of the bell curve on personal savings profile...
YLSP writes:
Hank won't let Citadel tank. They learned the lesson with Lehman. So we are probably looking at some type of zombie...
I know its wishful thinking but I'd think its good for all incumbents not to have a 1000 down day or even another 1000 down week in the stock market pre-election. There's a reason they all approved of the bailout... and now can feign shock/anger when Hank bails out hedge funds... but deep down inside they know it'll buy them at least 2 more years.
I disagree. The more carnage on the streets the more it helps Obama. Not that he currently needs it.
Hey, a lot of the congress critters from both sides of the aisle are invested in these limited partnerships.
Thanks for not flaming me.
I just realized that in my neighborhood at 1/2 the pop is recent, within 5 years, immigrants. Nothing new there but what occured to me is how many will go home when life gets difficult and jobs scarce?
My entire county (Fairfax) fits that demographic. These are not all lawn mower riders. I would. Back to the extended family. Enough to leave some RE, both residential and commercial, holes. It is not like the US ever experienced reverse migration before.
Yeah, JD, that's what I thought.
I'm already sick of this of this line of reasoning that lower energy prices will have a stimulus effect. It leaves out the fact that the working and middle class in the US have already been financially hollowed out by the housing crisis, spikes in energy & food cost, stagnant wages and now job insecurity among both blue & white collar employees.
We have ample evidence that credit cards are being used for basic purchases like food so a little extra change from lower energy prices will not have a stimulus effect. If anything it will be used to pay off debt. This is the fallacy of econometric modeling with all things being equal, the baseline assumptions are wrong.
"``If this trend were to gain momentum and other banks started reporting similar defaults then we would have a much bigger issue to deal with,'' he said."
I would consider this statement in light of the "never just one cockroach" maxim.
Nova--the most valuable information is the least likely. If any visions at all are accurate--just one in the history of mankind--it means a whole lotta physics needs to get examined.
Gosh, a lotta posters are being nice to Jas, who is decidedly showing another side to his character (Dale Carnegie!!) why should they be mean to you?
Not true. They are throwing money at medical device suppliers and leasing companies for but one instance.
Rob Dawg | Homepage | 10.26.08 - 11:52 am | #
Absolutely - was at a med device show last week. It is hotter there than ever. Of course no one was asking how these devices will get paid for - who will be the insurer of last resort - the Europeans I talked to knew & understand... Americans? Not so much.
I have a hard time picturing them bailing out a hedge fund. They can make the case that it will decimate the financial markets if they don't, but there would be an incredible popular revolt.
Congresspersons losing a whole lotta money. What a delightful thought.
yancey ward-- 'changes in 401K's where everybody has to put some tax-deferred monies into gov't bonds'-- yeah, woud bet you nailed that one-- it'd be very attractive to Congress cuz they'd pull out the buying "War bonds" example--
the Paulson:-- that was brilliant---
S Korea:
South Korea on Sunday announced a government guarantee worth up to 100 billion dollars on foreign borrowing by its banks in a bold move to stabilise turbulent financial markets.
Separately, it will supply 30 billion dollars from foreign reserves as soon as possible to local banks and exporters to ease a dollar shortage which has been driving down the won.
A very innovative part of the program:
The government said it would provide tax incentives for long-term holdings for funds, to stabilise the stock market and asset management companies
404 Not Found
but there would be an incredible popular revolt.
There was against the original bailout, too. Other than a quickly-reversed onetime stand by House Republicans, nothing happened.
Currency manipulation as a form of gov't subsidy & intervention is every bit as distorting as direct gov't 'demand economy' intervention. But you'll never hear the neocons bitch... either they don't get it or they benefit from it. I can't say I know which.
Dryfly:
Yes, I was just trying to establish some historical context. And true, currency and structural manipulation is still alive and well, which is why the Plaza Accord failed miserably despite efforts by several FCBs.
While I understand that currency imbalances are significantly influenced by mercantile aspirations, the issue of security is still percolating in the background. After the Asian currency crisis, one of the mandates by the IMF and World Bank, both of whom are heavily staffed by the true neo-cons (not Karl Rove, DeLay, etc but instead Feith, Wolfowitz, etc) was to accumulate massive reserves in order to stave off any repeat. The MO chosen was for the emerging markets to accumulate massive reserves (e.g. UST). Of course, the reserves should have been diversified. Some of the emerging markets (e.g. China, Singapore) could handle it. Others emerging markets (e.g. Eastern Europe, South Korea) could only via loose and fast mercantile policies, subprime if you will.
And I truly do think that the neo-cons "get it" and do benefit from it. I, and several others here, have mentioned the sham that was the Clinton balanced budget, essentially financing the majority of it via short term debt at abnormally low rates because of the emerging markets zest of UST. The USG is sitting on the largest mortgage reset in the history of the world, which is precisely why all the populist pandering goes absolutely nowhere.
The implications of the cash-rich emerging markets diversifying their reserves and surpluses to intervene in the currency crisis are huge. For the past 2 years, I've been telling everyone I know to sell securities, pay off their debt, and buy other people's debt. While I'm still sure on the first one, I don't know about the latter two.
They can make the case that it will decimate the financial markets if they don't, but there would be an incredible popular revolt.
Revolt will start en masse when Wall Street bonuses, supported by the taxpayers' money, are announced in December.
But why would this administration care?
"I have a hard time picturing them bailing out a hedge fund. ... there would be an incredible popular revolt."
Like during the TARP debate, where the switchboards jammed with 150:1 calls against? So what.
How many guillotines? Zero
Until this answer changes, they will do whatever they want.
Rob Dawg - my point was that such deleveraging in size/speed will have ripple effects everywhere, even in what appear to be protected areas (like health care).
"Commercial Finance financing receivables, before allowance for losses, totaled $187.9 billion at December 31, 2007"
GE 2007 Annual Report: Financial Position: Working Capital, Assets, Receivables
Pavel,
Apatosaurus (IPA: /əˌpætəˈsɔrəs/), also formerly known as Brontosaurus
FFDIC:
Thank you for the link to article to B. Stein's screed about more personal saving.
In response I sent following:
Dear Mr. Stein:
I agree with your bromide about encouraging saving, but it is a hollow recommendation in the face of government policy and its persistent war on savers. Just listen to the conversation: its always about monetary and fiscal stimulus (which theoretically benefits employment, i.e. votes) but artificially depresses interest rates. In order to avoid wealth destruction in the face of lurking inflation (it will return to the conversation soon enough) savers are forced to invest outside fixed income instruments into things like equities, commodities, real estate, and ... well you get the picture.
My question is this: in our political conversation - which influences these policies - who represents savers? Forget all the hand waving about "we must save more". Please show me one government policy or political constituency that forcefully advocates and promotes this economic interest.
Thank you,
Well, for whatever it's worth, according to that (in)famous email sent by Fuld, his impression from speaking with Paulson is that the folks at US Treasury "want to kill the bad HFnds + heavily regulate the rest."
Excellent currency crisis post on naked capitalism (hat tip as ever to Yves)
"Currency crisis is gathering storm" « naked capitalism
Many taxpayers can look at the companies that have received bailout money and say, "I bank with JP Morgan Chase, Bank of America, etc. My brokerage account is at Morgan Stanley." How many can say they are stashing money with Citadel? It might be different. Of course, this would not be the first time I've overestimated the American people.
Everyone be quiet, I believe CR is asleep.
MLM,
Incontrovertible axiom: "Lenders lend."
GE will in particular lend when they are the manufacturer of the medical devices and they are the lending arm as well. I got pushed out of an awesome leaseback funding opportunity when the device maker was bought by GE who then offered below prime rate terms that I didn't want to match. They did no due dilly, they just had a decision chart that said lend cheap in the following circumstances. The same kind of nonsense we saw in sure thing housing loans 3 years ago.
GE won't stop lending until it gets burned and by then it will almost be too late. Think GM and GMAC except bigger.
Investment muyth number 12433, "stocks are a hedge against inflation."
@ Bond Girl - I'm inclined to agree. Having already done one big bailout "for the good of the economdy", it's hard to imagine them finding a make a hedge bailout politically palatable.
The coming week is going to be fun.
Wu-tang had it right all along: Cash Rules Everything Around Me. C.R.E.A.M. Get the money. Dolla dolla bill yall!
Basel Two - the other dirty secret about "Clinton's Balanced Budget" was that it was balanced on the backs of blue collar workers - the dollar manipulation it 'encouraged' via treasury buy drove the dollar way above 'productivity or interest rate parity'... as you probably know I'm in mfg and I can't count the times I ran into dirt floor third world factories that were 'more competitive' than modern US factories due to 'currency exchange' alone.
And don't tell me it was 'labor rates and regulations'... that dog might hunt for neocons but it doesn't for me. I know the operations inside both & the environment they operate in & the relative cost inputs (hell there was no labor in the NAFTA Zone plants for the most part - they are all nearly 'lights out' except for white collar staff). Believe me it was dollar cycling currency peg manipulation that drove the 'relative advantage'. Ricardo must be spinning in his grave.
ew thread
For all of you "real" men out there, this is the only vehicle you should choose to drive. Keep those big government a-holes out of our garages!
YouTube - canyonero
While gas prices are falling now is the time to raise the gasoline tax and lower the payroll tax/raise the minimum wage to offset the gas tax increase. This would encourage conservation and provide a wage increase to the average worker.
Lowering the payroll tax is a great idea. Anytime.
Raise the gas tax? It would probably encourage less driving, thus lowering the revenues for road repair. If it happened to raise revenues then they probably would be confiscated and wasted on some stupid attempt at social engineering.
Has the minimum wage ever been shown to do anything but displace the lowest paid workers and/or cause wage inflation that makes everything more expensive for everyone, and proportionately more so for the lowest paid?
Sorry, Ben but most people were happy to trade a republic for a democracy.
crispy&cole: My source told me they are trying to reduce their portfolio by 20% before year-end, they will do this my not renewing revolvers with car dealers, rv dealers, constrution lines and any other industry that is f'd
Rob Dawg: GE won't stop lending until it gets burned and by then it will almost be too late.
I believe we can just about figure out what time it is by connecting the dots.
ova:
This will sound insane but I have visions. Sound cool? I hate it. They scared the crap out of me when I was a kid. Freaked me out as a teenager. As an adult I have learned to block them out pretty much.
It's not insane to have visions - we all have them, just normally during sleep and we forget them. I don't think there's anything supernatural - I've had visionary dreams but when I record them I come to realize they're my creations, and reflect my desires and knowledge.
FWIW, literally envisioning possible scenarios is part of how the mind is supposed to work. Tesla claimed he could envision machines in his mind, set them running, and then examine them for wear or defects.
Do your visions tend to come true? If so it's a kind of gift. If not then they're like nightmares - disturbing but of no relevance besides the emotional. It sounds like you have a pretty good grip on them.
The drop in oil prices is called...DEFLATION. Oil is priced in US Dollars, and US Dollars are becoming more valuable because the rest of the world is going down the crapper.
I already know from a car dealer friend that SUV & Truck sales have gone parabolic when compared to the abysmal figures over the summer...
Are you serious?? Geeze. We really are born and bred dopes.
"Pavel,
Apatosaurus (IPA: /əˌpætəˈsɔrəs/), also formerly known as Brontosaurus"
Many thanks. I had a good idea that wasn't the current name, but couldn't think of the new one.
Nova,
I wrote the following at the beginning of this month. There's another which is more symbolic, and one more which I will not post.
WHAT IS THIS SLUM ?
What is this slum?
An alley crammed with old defective parts,
It is your life
The wretched failures and the paltry arts
Inside, the ancient exiles
And the silent mournful young,
Decrepit furnishings
But no sweep-out provision for the donkey dung
A kind of human stable
But no sign of any infant king,
No kings, no shepherds praise,
No angels from the stratosphere proclaiming
No one bears, is born here
And no promise given to the bitter end,
Time exhausted
Bankrupt, fails and has no other years to spend
Only one condition,
Hope, commences when the daylight burns
The feeble winter sunlight
And the winter solstice turns
\t\t\t\tPavel
\t\t\t\tOctober 3, 2008
"Many thanks. I had a good idea that wasn't the current name, but couldn't think of the new one."
Wasn't there some embarrassment when after printing a stamp it was discovered that the Brontosaurus had been reconstructed from the bones of more than one creature?
Stray thought: When it comes time to redesigning the new economy/economies, I vote we make it more like a mac than a pc.
Stray thought #2: Visions and economics. Makes complete sense.
Oil will now go up because of technical level and also because of this NEWS:
The first bullets of the war on Syria/Iran have just been fired(also means market will be up as this indicates US still has money and defense business is back).
details below.
MarketWarnings: US attacks Syria october 26, 2008). Is iran war next?
Better link:
8 reportedly killed in U.S. raid inside Syria
Syrian news sources say the attack also wounded 14 people near the Iraqi border. U.S. military representatives do not deny the raid.
U.S. raid in Syria raises tensions - Los Angeles Times
Anderson is looking for new ideas to help dig him out of the hole he dug for himself with crappy calls... who cares?
The time is ripe for another Middle East conflict to stop the slide. The price of oil could be $20 by the end of the week if trends mean anything. It has nothing to do with supply and demand, and everything to do with deflation of the US dollar. God, I love deflation. I hope to be buying gumballs for a penny soon.
This is why I am here. What would cause what I have seen? I still don't know. Basically I see places now, and the same place in the future. What that usually amounts to is the 3rd world with a lot less people. My neighbor unpainted, bushes growing untrimed, the streets silent. The strip shopping center a ratty trading/buying center. A lot less people. Weird, I know.
nova | 10.26.08 - 10:16 am | #
Peak oil would do it if you are talking nationally, of course it could just be local, sort of like you had the vision back in 1965 and it was in Detroit.
b) More frequent references to the idea that we should limit government to the state or municipal level, or that individual states and clusters of states should secede. In many instances this proposed as a means of solving the homogeneity issue. Troubling because it seems to have racial overtones and also because it would amount to the wealthy, having generated their assets on the back of others, suddenly slam the gate shut.
Uncle Billy, Rater Hater | Homepage | 10.26.08 - 2:45 am | #
Not allowed, that point was rather diffinitively settled in the 1860's.
Going back to the turtle menace thing, I have a coyote three doors up living under a nice deck I can ship you, if you need. You know, nothing in nature is wasted.
Gosh since data in our BLS always lags reality if you are unemployed I bet you save a record amount of gas. What do people think we are walking to work?
See, SEE?! The oil price hikes were caused by liberals that hate America and want Americans to drive those pansy europeans cars. Well, REAL Americans know that they deserve to drive SUV's. It looks like the unpatrotic negativism of the liberal media brought down GM, and America.
(kidding of course, but how can you tell).