Payable in hoopajoop.

picturerock writes:

so what's next? What else could possibly happen?

Global nationalizing of banks.

And it's whispered that soon, if we all call the tune, then the piper will lead us to reason.

the amount of govt intervention wordlwide is nothing short of stunning. the fact that the us bailout bill allows for 250k in deposit insurance and yet no one took issue with this is simply mind-boggling. what the fk? the 100k limit saw the fdic holding less than 0.5% of reserves against all insured depostis..now the fdic cap reserve ration is nearly at 0.00%. its all such a fkn ponzi scheme..it makes me sick...and the govt's desparate acts are all based upon : :you common people dont know how bad this could be if we dont act. and we do know." please...i sense a revolution coming.

What about the EMU? Member governments just can't pass $700 billion bailout bills without breaching their fiscal limits under the EMU?

For the irony file...and you just can't make this stuff up!

UPDATE 2-China to launch stocks margin trade, short sales
By Samuel Shen and Lu Jianxin

SHANGHAI, Oct 5 (Reuters) - Chinese regulators, seeking to support the equities market in the face of global financial turmoil, said on Sunday they would soon allow investors to buy stocks on margin and to conduct short-selling of stocks.

The reforms, which have been approved by the cabinet, will initially be conducted on a trial basis by a small number of brokerages and gradually expanded to other securities firms, the China Securities Regulatory Commission said in a statement.

The introduction of short-selling in China would contrast with regulatory moves in much of the rest of the world. In response to the global crisis, U.S. and British regulators last month temporarily banned short-selling of financial stocks, while Australia, Singapore and Taiwan restricted the practice.
UPDATE 2-China to launch stocks margin trade, short sales
| Reuters

BERLIN, Oct 5 (Reuters) - The German government will guarantee private deposit accounts as part of its reaction to the banking crisis, a finance ministry spokesman said on Sunday.

"The state guarantees private deposits in Germany," ministry spokesman Torsten Albig said.

A second ministry spokesman said the guarantee was unlimited.

German govt to guarantee deposit accounts-ministry
| Reuters

This is gonna force France and UK to follow suit.

Except the money isn't there. They're just making up shit in 4 AM meetings high on Red Bull and bratwurst pizza.

karelian,

It is grimly humorous...

Competitive devaluation by the ECB?

Actually, this is unlike irland 'just' about private saving accounts and not all deposits. Essentially they said they would backstop their FDIC equivalent (Einlagensicherung) which was more or less implied before but has now been made explicit. Smart move IMHO which will calm down things quite a bit w/o letting the banks from hook.

bearly,

That was my hunch, a coordinated cut is a lock now...just will it have any effect at all?

So 6PM EST is the most likely time for the global coordination announcement?

G writes:
On the topic of Europe, can anyone comment on France's decision on buying 30000 houses directly? Would that be better or worse than buying MBS, such as in US?

It's not a housing problem.

I find it surprising that Hypo Real Estate needs that much money.

Most articles quote it's subsidiary, DEPFA Bank as cause of all troubles. I thought, that DEPFAs business model was dealing with ultra-safe government bonds...

There was also no disclosure about any significant losses in the mortgage sector..

If it is true that there are no major losses at the parent company, Hypo Real Estate, it could mean that the banking crisis starts to take any victims now (even the solid banks)...

Have a look at DEPFAs last presentation:

http://www.depfa-pfandbriefbank.com/pf/media/Pfandbriefbank_Presentation_080729.pdf

Most Americans don't have any money to speak of in their banks? Besides who wants to stand in a line in some suburban bank branch.

Looks like the Germans got ahead of things with some "concrete measures".

You can rely on them to do things first.

can someone post some Widspread Panic thread music, please?

Comfortably Numb.

YouTube - Pink Floyd The Wall - Pink Floyd - Comfortably Numb

cd .... thanx.

I always liked the new deal stuff like FDIC. Surprised that the Europeans waited until a difficult weekend to do it in a rush.

Frankly, I don't get the $250k except as a response to the mm fund guarantee.

Even your typical "high net worth" person didn't have much trouble with the $100k limit with the various loopholes and ability to get it on multiple accounts at multiple banks.

A lot of people could get $1 million with banks within a mile of where they live. I suppose the so called "walks" on U S banks may be a factor.

The $100k limit wasn't a problem for normal people, although I was shocked to see the schoolteacher, etc. that had non insured deposits at indimac.

Мираж - БРОСЬ!

YouTube - Мираж - БРОСЬ! (russian music video)

kevin de bruxelles:

Sounds like full panic mode. Anyone know Deutschbank's leverage?

alex writes:

Only one currency that matters: GOLD

Not enough of it to go around am afraid.

Max writes:
Sounds like full panic mode. Anyone know Deutschbank's leverage?

50:1

Ok, don't nobody bankrupt them again, you know what happened the last 2 times.

A family member asked me WTF is going in with this financial crisis. My summary was:

"The meltdown has already begun. Now The-Powers-That-Be are trying to avoid total chaos."

Mayor Bloomberg happens to be in Germany during this announcement. Bloomberg backstopping Hypo

the statements by finance officers in Germany are not a real guarantee... more like a presse release

More importantly:
Germans seem to be unimpressed, if you read the comment threads to the second link people are saying "this means panic is here, so 1st thing tomorrow AM I'll go to my bank to withdraw my savings"

somehow I don't think that was quite the intent of Chancellor Merkel.

“We now represent the safest place to deposit money in Europe with a AAA guarantee from a country with the lowest national debt to GDP ratio of any AAA country,” wrote Michael Fingleton, Jr, an Irish Nationwide executive, in an e-mail to employees of a large investment bank. An Irish Nationwide employee confirmed that it was offering UK customers 6.75 per cent interest for a six-month bond with a minimum investment of £20,000.

Here we go. Irish and now German competitive national deposit guarantees.

Gunboat economics. You can sink on land.

We have a massive current global shortage of cash (supply) which is needed for present value obligations, but this problem is the result of leverage related to bad bad that were made on future obligations. Hence, we are now in the process of paying off future debts with money that doesn't exist today.

Beginning of the end for the Euro?

Thread music for all threads could be the olde British folk song "And a begging I will go".

if the Treasury had stepped up and guaranteed deposits sooner (which is what is most important to consumers) then I don't know if we'd be talking bailout. banks wouldn't have to worry about consumers ACATing their accounts elsewhere and could continue to leverage in order to borrow.

what i don't have information on is the composition of depository accounts. what is the average size, who owns (consumer or institution, etc.). anyone know?

The thing that scares the hell out of me isn't some Muslim Terrorist, it's a German Populist. And Max, my German friends "get it", and only too well! If anyone is living in "Fantasy Land", it's the Spanish, Italians and rest of piss-ant Euroland, who have been for years the beneficiaries of the Germans eternal atonement for Nazism and WWII. Except the Germans are finally getting sick & tired of the Spanish dumping all their toxic paper on Brussels. Let's pray that the recent elections held by the Germany's Teutonic neighbor, the Austrians, do not portend a frightening trend.

A major component of this credit bubble is the stealth bubble in auto loans which goes with credit cards, overvalued homes and a synthetic yield curve that has distorted the reality of real cash versus synthetic derivatives that were used to make future obligations. This is a time of excess greed that used leverage to buy too much with too few real dollars!

At the end of the day, you can apply all the econometric analysis you want, the math is simple, you can’t beat a “liquidity trap”, all the rhetoric and analyses on the planet will not solve one the most massive liquidity traps in history. Perhaps more debt will defer or smooth out the insolvency issues for a time but more debt can not and will not solve the liquidity trap which necessarily requires a reversion to the mean. And all you lovers of Buffet ought to go read his simple article on Squanderville from 2003 (which apparently the bottom feeder is now ignoring for his own financial gain), more production, less consumption and less debt are the only answers; which I do not see ever happening especially if you listen to your Politico heroes.

LOL! WINNAR!

Hawley Smoot writes:
But look at the bright side of this!

Ben Bernanke will be the world's leading expert on TWO Great Depressions.

Golly! I can't wait to read his next book!
Hawley Smoot | 10.05.08 - 12:40 pm | #

Can we put Volker back in right now please?

Damned if you do, damned if you don't - a quick summation of the German situation from my perspective. Once BaFin and friends started really looking HRE's books, the cat was no longer possible to strangle in the bag.

Which meant that either a major German financial institution would blow up, destroying confidence in the banking system, or else the government could pronounce there was no reason to panic, at which point, people would.

My wife wants to walk to the ATM tonight, testing the maximum withdrawal limit. When we get back, I might have a bit more information about the current state of bank finances in Germany.

I do believe that there will be a major withdrawal of money from banks in the next couple of days, which will be a real blow - Germans save money in a similar fashion to Japanese, and having their money removed from the system is likely to be very, very noticeable on a global scale, not merely national.

FYI: In monetary economics, a liquidity trap occurs when the nominal interest rate is close or equal to zero, and the monetary authority is unable to stimulate the economy with traditional monetary policy tools. In this kind of situation, people do not expect high returns on physical or financial investments, so they keep assets in short-term cash bank accounts or hoards rather than making long-term investments. This makes a recession even more severe, and can contribute to deflation.

Austrian economists challenge the idea that Japan experienced a liquidity trap, instead contending it suffered from the bust portion of a business cycle brought on by monetary inflation, which could only be cured by allowing the bust to liquidate the malinvestments made during the boom. Austrians contend that busts are necessary corrections to booms and that artificial credit expansion or other government interference will only make the bust longer or delay an even bigger bust. Thus, they blame Japan's rigorous government interference in the market for causing the bust to last throughout the decade.

with tyhe 'global' credit turmoil, have there been any affects in the abu dhabi Builbing Boom?

FYI: The NRO versus Bernanke
Economist's View: The NRO versus Bernanke

" Although he didn’t discuss money in the Journal editorial, a June New York Times article noted Bernanke’s belief that the gold standard made the Great Depression worse. Plus, in a 2002 speech, he lauded the ability of the government to use the printing press to “generate higher spending and hence positive inflation.” If his adherence to a Phillips Curve orthodoxy made his belief in a price-rule already seem shaky, his direct comments about money should remove all doubt. … [J]ust as important will be Bush’s Federal Reserve appointments, foremost of which will be Alan Greenspan’s replacement … For his views on taxes and growth-limits alone, Bernanke would be a big step in the wrong direction. For his views on money, Bernanke has the potential to be very dangerous.

Google translates this as follows:
\t
The German government wants to respond to the crisis in the financial sector, private deposits with banks generally guarantee.

"The State guarantees private deposits in Germany," said the spokesman of the Finance Ministry, Torsten Albig, on Sunday in Berlin. In government circles, it was a complement, this guarantee applies indefinitely. Finance Minister Peer Steinbrueck had previously said that the German savers need to not a single euro fear of their deposits. Even Chancellor Angela Merkel had assured the government will for the safety of deposits provide.

In 2004 and 2005, long-term interest rates remained remarkably low
despite improving economic conditions and rising short-term interest rates,
a situation that then-Federal Reserve Board Chairman Alan Greenspan
dubbed a “conundrum.”

Now pay attention to the peas and shells:

". For example, a new appreciation of lower macroeconomic volatility or
reduced monetary policy uncertainty could alter assessments of the amount of interest
rate risk faced by investors. Alternatively, risk aversion may have been reduced as
new global investors entered the market. Indeed, this is one interpretation of the
explanation suggested by Bernanke (2005), who argued that “over the past decade
a combination of diverse forces has created a significant increase in the global supply
of saving—a global saving glut—which helps to explain both the increase in the U.S.
current account deficit and the relatively low level of long-term real interest rates in
the world today.” In any case, it is likely important to allow for time variation in risk
premiums in understanding the recent behavior of the bond rate"

http://www.imes.boj.or.jp/english/publication/mes/2006/me24-s1-6.pdf

There has not been a run on American Banks because the depositors above $100,000.00 run electronically, silently. No messy lines. Thats why the banks close so suddenly. A run takes literally a few minutes/hours to get out of control. Before it over there wont be any mutual funds either. Money Markets are just the first and fastedt ones to fall. Then the run on bond and equity funds begins. Nouriel Roubini is an optimist.

BankWars wrote:
Why has not there been more bank runs in the US?

BankWars, is that like the Susan Koman Breast Cancer Run or more like a mini-Triathalon?

Rates are not the issue, risk premiums are the issue. The Fed and Treasury have already thrown $1.5 Trillion at this problem with negative "real" interest rates to no effect, in fact the credit spreads are rising and in some cases no offers even exist.

Endgame ?

Any opinions on how it plays out. It just looks like they sovereign nations are cookie cutting policy from each other.

EU still has rate cuts. However impact is limited.

Do we go round the houses and still end up at the Swedish solution. I worry its just too big and out of reach now.

Deutschland is already supporting most of the rest of the EU through subsidies and has continued to write more checks than it can cash.
The sum of worthless paper underlying the EU economies is staggering.

Was this simply a planned disaster, so that the people are at the mercy of the federal governments, which are pawns of the banks, to get the world under a single, global currency?

"Let's pray that the recent elections held by the Germany's Teutonic neighbor, the Austrians, do not portend a frightening trend."

Yeah. We just took note of that result.

"Remember, the signature of chaos, in the Mandelbrot sense, is the breakdown of volatility, rendering the standard deviation mathematically infinite, which simply means the observed levels fluctuate violently and have no bounds."

If true in this case, hopefully confined to economies. But it never is, is it?

Backing up AustinTex here, aside from my concerns that the solution to inadequate capital in the entire system including the governments is to raise capital, this has clearly gone far beyond the kind of problems they used to cut rates for. A FF cut just looks out of touch - like trying to stop a flood with a mop. Not the way to go. Even if it would work, there are confidence issues now, and people will want to see something different.

Columbus Day

A year ago, on a blog, we wondered if China was aiming for a Brent Woods II, they are gonna get it.

One tiny little difference between Germany and USA. They make a lot of stuff, AMERICANS DON'T. Only 13.5 million out of 157 million American workforce are working in the manufacturing sectors. About 50 million are basically just shuffling dollars back and worth. They are useless eaters now.

USA, the barren wasteland of empty shopping malls and mcmansions.

Kafka writes:
"And all you lovers of Buffet ought to go read his simple article on Squanderville from 2003 (which apparently the bottom feeder is now ignoring for his own financial gain), more production, less consumption and less debt are the only answers; which I do not see ever happening especially if you listen to your Politico heroes."

Maybe not production, but less consumption and less debt are about to kick in bigtime.

Its too late for Germany to invade Poland, Poland has already invaded the rest of Europe. UK and Ireland is full of booming Polish communities. Most of whom seem to be very hard working and in many cases doing the work the upper crust locals deem beneath them.

It's interesting that the crisis seems to be reaching at least one climax just as the 3Q sales warnings are about to begin this coming week. Companies waited until last week of September to see if trends were improving or last-minute orders coming in.

We might see a wave of substantial warnings beginning to build this week and then crest the following.

Mmmm - this is improving Airbus competitiveness radically. If euro crashes, their export prospects to Asia are gonna be a lot better.

Though nobody will be ordering, of course.

I mean Brenton Woods, whoops

Weird FYI Of Day: Levy flights,poetically named after the French mathematician Levy, are a kind of randomwalk. Brownian motion, the best-known kind of random walk, is the specialcase of a walk in which the sizes of the steps are normally distributed. Levy,in contrast, studied patterns in which the step lengths follow a Levy probabilitydensity function, which is a family of distributions characterized by power-lawtails. Levy flights have many applications in physics and even in economics.Levy distributions have a number of interesting characteristics (ben-Avrahamand Havlin, 2000; Shlesinger et al., 1993). Their variance or second moment isinfinite, in contrast to the finite variance of a normal distribution and Brownianmotion. Levy flights lead to what is called anomalous diffusion or superdiffusion.Not surprisingly, because of the power-law distribution of step lengths, Levyflights produce fractal patterns in space (Mandelbrot, 1983).
http://www.ccs.fau.edu/~liebovitch/past.pdf

BankWars wrote:
Why has not there been more bank runs in the US?

It's because accounts are insured for $250,000 by the FDIC. You'll probably get your money back if your bank goes BK.
I believe I read that the limit was raised to discourage withdrawals. I suspect many people had accounts over 100,000 and began withdrawing uninsured funds and, perhaps, some insured funds. Now since the money is insured up to $250,000, the hope is that deposits under that amount will stay at that bank. This should avert a run on the bank.

Friedman doomed Iceland:

Friedman visited Iceland in the autumn of 1984, met with prominent Icelanders and gave a lecture at the University of Iceland on the Tyranny of the Status Quo. He participated in a lively television debate on August 31, 1984 with leading socialist intellectuals, including President Ólafur Ragnar Grímsson.[43] When they complained that a fee was charged for attending his lecture at the University and that hitherto, lectures by visiting scholars had been free-of-charge, Friedman replied that previous lectures had not been free-of-charge in a meaningful sense: Lectures always have related costs. What mattered was whether attendees or non-attendees covered those costs. Friedman thought that it was fairer that only those who attended paid.

Friedman made a great impact on a group of young intellectuals in the Independence Party, including Davíð Oddsson who became Prime Minister in 1991 and began a radical program of monetary and fiscal stabilization, privatization, tax rate reduction (e.g., lowering the corporate income tax rate from 45% to 18%), definition of exclusive use rights in fisheries, abolition of various government funds for aiding unprofitable enterprises and liberalization of currency transfers and capital markets. In 1975, Iceland had the 53rd freest economy in the world, while in 2004, it had the 9th freest economy, according to the Economic Freedom of the World index designed by Canada’s Fraser Institute. According to the index designed by the Heritage Foundation, Iceland as of 2008 has the 5th freest economy in the world. Davíð Oddsson was Prime Minister for thirteen and a half years, to 2004. The present Prime Minister, Geir H. Haarde supports similar policies.[

Anonymous writes:

Friedman doomed Iceland.

Oh I thought Bobby Fischer did that seems i was mistaken.

It's at times like this that I wish I had something intelligent to say.

"The present Prime Minister, Geir H. Haarde..."

Strange name for an Icelander. Like this?:

Keir Hardie

Hi,

I have some money in Iceland and after this scary news, am removing my deposit ASAP...the quesion is where? UK or USA (I have accounts in both countries)? Any thoughts?

Also thinking of converting the savings into brick and mortar. Again - UK or USA?

Also thinking of converting the savings into brick and mortar. Again - UK or USA?

Neither.

JS185 writes:

If we take our money out of banks by paying down debt that is manageable, will this help or hurt the current situation?

Your situation or the banks?

Do you have money in Iceland or in an Icelandic bank with UK or other European presence. If its a local branch then it will 'potentially' be covered by country banking insurance code.

KAputhing is covered in the UK to FSA limit, ICESAVE is covered to Icelandic limits

The effect on banks?

Minutely worse.

so, anyone want to prognosticate on xlf tomorrow?

JS185 writes:

Due to reduced income stream and higher concentration of bad assets as a % of total assets? Any other considerations I am missing?

Are you and your hordes planning a bank run?

This country is so screwed. You just can't mke this kind of shit up.

Truth that can be understood.

I think the move by Germany will have the folowing effect: Everyone will lose confidence in stocks AND bonds. The rush to cash and Treasuries will likely cause a precipitous fall of the Dow. Any guesses out there?
Given the warning that Rep. Sherman received in his closed door session of Congress it seems like 1,000 point drops have been painted as a real possibility by those in power.
Duke
but how is us going to pay the chinesse when they will not be able to nationalize through DTCC all bonds and stocks?

I've got 10 months to go on my 4.25% Wachovia CD's. Only stocks left are gas and electric utilities. No debt.

I do have some cash left at my Ameritrade account and in my bank. No debt to pay off so I am like a deer in the headlights. I see a disaster coming but don't know which way to go.

Are commodities finished? If so that will aid the deflationary outlook. OTOH I am just appalled at the fiscal picture in the US/UK/Eurozone.

Singapore dollars?

Iceland will be OK. If things really go out of control, other Nordics will step in to help.

Norway is filthy rich, loaded with oil money. Denmark, Finland and Sweden are also quite rich nations and suffered their bank fiascos already back in 90's. Actually, Nordic banks probably are among the safest banks in the world.

well,,,shoot,, i was hoping for a ' black swan event',,,,,,

Back from a pleasant stroll in the windy dark rain, and my wife pulled out 1,000 euros from the ATM. At first, the machine said 2,000 was the maximum withdrawal, but when entering the amount, only 1,000 was offered. Which was taken as another omen of the bank collapse by my now thoroughly unnerved wife (who is a financial programmer for ERP software), but which I said probably reflects the amount of money left in the machine.

Another financial crisis resolved through a few calming words - I'm ready to handle bigger problems, for just a small, 7 figure fee.

Are commodities finished? If so that will aid the deflationary outlook. OTOH I am just appalled at the fiscal picture in the US/UK/Eurozone.

Singapore dollars?

Commodities are definitely not finished. Energy looks good, all depends on your time horizon.

Would look to emerging economies it at all possible.

Singapore dollars are a proxy of sorts for the USD but i guess anything is better. And their banks are relatively safe with little toxic assets.

Addie Polk, a 90 year old Akron, Ohio woman whose house was being foreclosed by Fannie Mae, shot herself in the chest when the sheriff's deputies attempted to evict her.
Fannie Mae announced later that day it's dismissing its foreclosure action, forgiving Polk's mortgage and allowing her to return to the Akron home where she's lived since 1970.

A Fannie Mae spokesman says the incident "certainly made our radar screen."

Polk has refinanced several times since taking out the loan in 1997. She remains hospitalized, but is expected to recover from chest wounds suffered last week.
Now, let's take a moment to analyze this.
A 90 year old woman who has refinanced her home several times in the last few years (Why is a 90 year old woman refinancing her home so many times in so few years?) shoots herself when the sheriff's deputies come to evict her. (Where did a 90 year old woman get a gun, was it registered, was she sane ?)
Do the local authorities try to help her move to a less expensive home she can afford and get her mental help ?

Many assumed the US would fall first and furthest.

What if we turn out to be the best of a bad lot?

That might make us first again... relatively speaking.

Sorry Ben, we have squandered any advantage you left us.

"I will be surprised if other Scandinavian banks help Iceland. What is in it for them?"

I meant other Nordic governments and individuals, not banks. Iceland is a very tiny nation, 300 000 people.

Icelands mining operations are a world order asset, someone will see money on the table...

"under a single, global currency?"

there are currently 4 global currencies - dollars, euros, gold and light sweet crude.

a quarter in each is pretty sufficient for a doomsayer. these days, xfe, gld and uso make that relatively easy.

Iceland is so tiny even Norway is a goliath in comparison. They will bail out their kinsman as they have so much money in their SWF and they've got to put in somewhere.

A vote for Obama is a vote for Volcker.

Is this true? Has O made any hard-and-fast statements?

Js, the answer is no.

Volcker endorsed Obama and acts as an adviser to the Obama campaign.

But no, Obama has not stated categorically that Volker will get the job.

I'm just delighted to have a little something to contribute to this forum.

A 90 year old woman who has refinanced her home several times in the last few years (Why is a 90 year old woman refinancing her home so many times in so few years?)

Could be because once the sharks smell blood they don't let up 'till the last morsel is gone. I refinanced once and the calls from brokers became relentless and ever more seductive.

Also, I don't see anything out of the ordinary in her having a loaded gun. I'm more surprised she didn't turn it on a banker or sheriff. My 85 year old MIL always kept a gun in her night stand. She grew up in a generation that still believed it had a right to defend home and hearth.

Sorry Ben...

"Iceland is so tiny even Norway is a goliath in comparison. They will bail out their kinsman "

Yup, like US would bailout Canada if their banks were in trouble...dream on.

"maybe like a Texas cowboy might help someone from Kansas"

that's a horrible metaphor. most americans would love to have texas secede. same goes for FL and CA.

bgates writes:
"maybe like a Texas cowboy might help someone from Kansas"

that's a horrible metaphor. most americans would love to have texas secede. same goes for FL and CA.

Indisputable what 8 years of cowboy rule will do.