There is hereby appropriated to the Trust Fund an amount sufficient to pay to the general fund of the Treasury the difference between
(A) the market value of the outstanding
repayable advances, plus accrued interest; and
(B) the proceeds from the obligations
issued by the Trust Fund to the Secretary of
the Treasury under paragraph (2)(A)(i).
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
Human Action: A Treatise on Economics
Ludwig von Mises (1881-1973)
And with the what, 5 trillion that comes with the Bail GS' Ass out bill, we're talking real money ? Until of course, the Dollar tanks to 1/10000 of a peso.
That is a lot of six million dollar men. Just think if the US had used that money to build an army of Steve Austins. We would now control the world and its natural resources. If Jimmy Carter only had vision in the late 1970s we wouldn't be worrying about the economy right now. That damn Jimmy.
Bill Bonner: "For the last 15 years, the U.S. money supply has grown about twice as fast as GDP. Federal government liabilities, meanwhile, have grown three times as fast. It now has more financial obligations than assets. It is, effectively, broke."
"I am trying to decide if we have gotten our money's worth."
Nemo | Homepage | 10.01.08 - 3:21 pm
You remind me of a question I had for you regarding the TARP bailout.
Why does Buffett keep saying he supports it if Treasury Dept. pays market prices for the assets.
Didn't he hear Bernanke say it won't work unless they pay more than market prices?
An apt quote from Greenspan while testifying about his concern of the US paying down our deficits fully:
1/25/2001
But continuing to run surpluses beyond the point at which we reach zero or near-zero federal debt brings to center stage the critical longer-term fiscal policy issue of whether the federal government should accumulate large quantities of private (more technically nonfederal) assets. I believe, as I have noted in the past, that the federal government should eschew private asset accumulation because it would be exceptionally difficult to insulate the government's investment decisions from political pressures. Thus, over time, having the federal government hold significant amounts of private assets would risk sub-optimal performance by our capital markets, diminished economic efficiency, and lower overall standards of living than would be achieved otherwise.
So, not only has he completely dug us into this credit hole, not only did his testimony help further the Bush tax cuts that balooned the budget deficit... but his fear about the government accumulating assets comes true as we pass the $10T debt milestone - as opposed to holding a fiscal surplus.
Why does Buffett keep saying he supports it if Treasury Dept. pays market prices for the assets.
Didn't he hear Bernanke say it won't work unless they pay more than market prices?
An excellent question, and I do not know the answer. It is possible that Buffett (and Paulson?) have something different in mind than Bernanke.
I think it depends on which problem you think you are solving. Is the problem that the market for these assets is illiquid, because no institutions are buying? (Solution: Buy at market prices but in government quantities, as Buffett describes.) Or is the problem that the banking system as a whole is functionally insolvent? (Solution: Recapitalize the banking system.)
I am not convinced anybody except Paulson himself knows which of these problems -- or both, or neither -- are actually supposed to be solved by the TARP. It certainly was not made clear during their week's worth of testimony.
OT: Forgive if someone has touched on this. A front page Business Week article "Municipal Bonds Freeze Up" came up at 1:30pm today. Last night my sister in-law who is a partner at crowe chizek was talking about sudden problems at the florida state pension and local (lakeland) municipal level due to Lehman swaps (NaN dividing by zero, no counterparty what do we do now problems---way over my head). Not to mention exploding interest charges.
Credit crisis equals debt crisis. It does not make sense to take on debt unless the cost of the debt will be cheaper than your future earnings. They will have to kill the dollar in order to save it.
Just think of all the distressed asset money that was raised.
Well, that is 10s of billions of private equity appetite facing 100s of billions of institutional dumping.
I would actually be OK with the plan the way Buffett described it. But not the way Bernanke described it. And the bill leaves the entire thing up to Paulson and whoever Paulson's successor is (Phil Gramm?).
I just called Norm and talked to this guy: Colin Sheldon, now a 29-year-old legislative assistant to U.S. Rep. Norm Dicks, was all of 22 when he ran his mother's campaign against Craswell, drawing on experience he'd gained working on Dicks' 1990 campaign.
anybody catch the short sale ban is to continue past Oct 2nd?...saw the story by Charlie Gasbag-arino on CNBC.com. Thought that would spark some to admit the gov't is doing everything it can to prop up crap. Like the saying goes: "I didn't know you could stack $hit that high..."
When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. Were still dancing.
Good thing the honourable politicans are having emergency meetings to figure out how to cut back and pay it off and avoid those crisis points of Social Security and Medicare that Greenspan warned about.
This chat room reminds me of that scene in 2001, A Space Odyssey. You know, where the monkeys are sitting around starving in the dark wondering where their next meal will come from.
.....Then the obelisk appears to propel their sorry ape asses into space.
(fade to Roger Waters) Mother will they drop the bomb?
A bailout editorial cartoon that I've shown others to explain what'sreally going on has a map of the U.S marked lower ninth ward with a $.7trillion levy around wall street and a giant cat 5 headed our way.
This only matters if we were ever going to pay it back. Sorry China! HAHAHAHAHA!
Being slow to the capitalism game, they have been slow to clue in on that. Too bad, I think if they'd clued in three years ago, the u.s. would be in far better shape.
When the dealer cuts off the junkie for both their own good, you know times have gotten strange.
I just occurred to me that this Bailout Proposal is being engineered just like the same pool of assets which created this mess, i.e, we have massive Fannie pools of obligations that are linked to other pools and classes that are backed by pools of collateral, which are all guaranteed and insured by pools of risk free pools that connect unlimited money to unlimited defaults. The scale of this asset pool problem will not be solved by pouring liquidity into a bottomless pit of debt.
In a related note, Sec. Paulson aanounced that the portrait of Sec. John Sherman has now been valued at $10.01 trillion, under new guidelines issued by the SEC today. "See, it all works out," Paulson was quoted as saying.
If memory serves, 300 billion has been pledged to private equity funds in 2008 alone. That money could be used to buy A LOT of MBSs.
Well, I admit I do not have actual numbers. I have been assuming Buffett was right when he described (one of) the problems as institutions deleveraging globally, and not enough private capital "levering up" on the other side of the trades.
I find it stunning that the bill has gone from 3 pages to 300 pages and still does not specify at all how the assets will be priced. Would love to be shown wrong.
Whoever said the USA is losing it's pre-eminent position in the world is clearly wrong. 10T in debt means we ARE Number 1 at something still.
USA! USA! We're number One
Of course last week I told my friend who managed to last from a 200 employee company until he was the last employee before it shut down to look on the bright side because that meant he really was "Number 1".
Congrats also to CR on the 10T call. I rewound Bloomberg--no comments there-Obviously no one wants to rock the boat before tonight. Thanks again for this blog - a rare oasis of sanity.
american taxpayer writes:
This only matters if we were ever going to pay it back. Sorry China! HAHAHAHAHA!
Sshh. Don't tell them. Maybe we can borrow another 10 trillion before they find out.
american taxpayer | 10.01.08 - 3:56 pm | #
Good point and I would like to add that the next US president/VP don't really bother about the medium/long term future (the first one for medical reasons, the second one for religious ones!!)
I say she actually loses money on the deal. She has to pay $850 in taxes, and she actually has to courage to say that she has no intention of moving to Saginaw.
Now, if she fails to sell the house, she'll be on the hook for future real estate taxes. She has to get at least $1,000 for it now, otherwise she'll lose on the deal. LOL.
asl hearts lenin writes:
HP and BB have been swearing under oath every month for two years that everything was ok. Why would anyone believe them now?
Jim Rogers, Rogers Holdings
Because this nation is full of MORONS, and we deserve what we have coming to us.
And for the record, I think the Chinese are even more MORONIC than we are. I'm going to start telling everyone that. I used to think the Chinese were intelligent, but it's clear that they're dumber than dirt.
We really should thank them for being stupid enough to subsidize us, and continuing to do so.
I find it stunning that the bill has gone from 3 pages to 300 pages and still does not specify at all how the assets will be priced. Would love to be shown wrong.
The treasury is going to over-pay for the assets. I have no doubt about this. It's the only way the proposed plan can have any positive impact on bank balance sheets.
This is bailout of the wealthy and well connected.
The New York State Banking Department and the Federal Deposit Insurance Corporation (FDIC) today announced the lifting of a 2006 order to cease and desist issued upon consent with Bank of Tokyo-Mitsubishi UFJ Trust Company.
The order was entered into due to identified weaknesses in the bank's Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) compliance program. The order was lifted upon determination that the Bank of Tokyo-Mitsubishi UFJ Trust Company had addressed the issues.
All of us have to learn to live within our means....business and families. Debt is like nuclear waste, it's not going away and there is only so many places you can store it.
This notion that banks are going to loosen end user credit after a bailout is a farce.
Banks may start lending to each other, but they won't lend to borderline consumers or businesses. Consumers are tapped out. On the supply side we have enormous excess capacity. No bank is going to throw good money after bad.
We will see a serious adjustment regardless of any bailout.
Comrade Scared Shitless said: "And for the record, I think the Chinese are even more MORONIC than we are. I'm going to start telling everyone that. I used to think the Chinese were intelligent, but it's clear that they're dumber than dirt..."
In the meantime, a million Chinese a month are rising out of poverty, largely as a result of doing business with the U.S.
stock_regulator writes:
you all should be writing and calling Shelby urging him to filibuster tonight. That is a better use of time then posting on here.
He needs 39 other Senators to pull it off. I doubt he has even 10 unfortunately.
When asked about the $10 Trillion national debt,
Palin replied, "Wait, is that bigger than a billion?"
McCain, on the other hand, was nonchalant. "Heck, billion, trillion, it's all the same to me," he said, "Just ask me about foreign policy. I can invade Eye-ran better than anyone else!"
See: The best known form of imprinting is filial imprinting, in which a young animal learns the characteristics of its parent. It is most obvious in nidifugous birds, who imprint on their parents and then follow them around. It was first reported in domestic chickens, by the 19th century amateur biologist Douglas Spalding. It was rediscovered by the early ethologist Oskar Heinroth, and studied extensively and popularised by his disciple Konrad Lorenz working with greylag geese. Lorenz demonstrated how incubator-hatched geese would imprint on the first suitable moving stimulus they saw within what he called a "critical period" of about 36 hours shortly after hatching. Most famously, the goslings would imprint on Lorenz himself (more specifically, on his wading boots), and he is often depicted being followed by a gaggle of geese who had imprinted on him. Filial imprinting is not restricted to animals that are able to follow their parents, however; in child development the term is used to refer to the process by which a baby learns who its mother and father are. The process is recognised as beginning in the womb, when the unborn baby starts to recognise its parents' voices (Kissilevsky et al, 2003).
Paradise Lost is an epic account of the Fall of Man. Milton begins his poem by invoking the aid of the (Holy) Spirit for his task, and sets forth the purpose of his song: that ... I may assert the Eternal Providence and justify the ways of God to man. Paradise Lost - Wikipedia, the free encyclopedia
Banks are expecting taxpayers to save them from the consequences of poor financial decisions. Yet at the same time, behind a veil of secrecy, they have been eroding tax revenues by designing and marketing tax-avoidance schemes.
A recent investigation by the US Senate permanent subcommittee on investigations found that major financial institutions have "devised complex financial structures to enable their offshore clients to dodge US dividend taxes". The offshore dodges are estimated to cost the US Treasury around $100bn a year in lost tax revenues. The Senate subcommittee highlighted the use of stock swaps and stock lending transactions to avoid taxes on dividends paid by US companies. Its report focuses on transactions devised and carried out by Lehman Brothers, Morgan Stanley, Deutsche Bank, UBS, Merrill Lynch and Citigroup....
"Florida has been unable to borrow money for nearly three weeks, said Ben Watkins, director of the division of the state's Division of Bond Finance." today's Lakeland Ledger. State debt--24 billion increasing by 2 billion a year.
The offshore dodges are estimated to cost the US Treasury around $100bn a year in lost tax revenues.
Some of these were structured notes linked to stock indices. Some that were sponsored by Lehman (rated investment grade no less) are now worht pennies on the dollar.
I read a book the other day called Predictably Irrational, b yDan Ariely, who teaches behavioral economics. In this, he has experiments about cheating, and how people are hesitant to cheat with cold hard cash -- but cheating is easier when steps are placed in-between you and the loot. He uses Ken Lay and Enron as example of off shore entities and SPEs and structure which removes the inclination to be honest.
This is what TARP is all about -- it creates distance from the piles of shit that smell and it creates the illusion that there is an honest structure, it engineers the mechanisms where people can't watch the peas and shells.
The impulse to steal $700 Billion or $7 Trillion that is removed into a structure, will be a new form of government, which will allow corporations to be unaccountable in this socialization of gambling debts -- which will become a burden to taxpayers in America from this day forward. America was just sold for $700 Billion, and Congress and The senate sold it to wall street!
Canadian watching with popcorn writes:
Oh my...Gone are the days when the US could go into debt with abandon, without considering who would end up footing the bill.
As you know, the Constitution requires that all revenue measures must begin in the House of Representatives. Because the House did not pass a version of the bill, in order to consider the Treasury proposal the Senate had to take a totally unrelated bill and "amend" it by in effect adding the text of the Treasury plan. They obviously have added a few provisions, but most of the totally irrelevant material was from the unrelated House bill and will be removed when the Senate bill is sent back to the House of Representatives,
He talks about the collusion of social norms with market norms, i.e, "social relationships are not east to reestablish". Once the bloom is off the rose -- once a social norm is trumped by a market norm -- it will rarely return."
Buffett: I DON'T HAVE 700 BILLION. WE WOULD BUY AT MARKET PRICES, WE WOULD BUY THE MORTGAGE DEBT IOF WE HAD THE BORROWING CAPACITY OF THE GOVERNMENT. IF WE COULD DO THE DEAL THAT IS AVAILABLE TO THE UNITED STATES GOVERNMENT AND HAVE STAYING POWER, WE WOULD MAKE SIGNIFICANT MONEY. IF THEY BUY THE ASSETS AT MARKET PRICE, I WOULD LOVE TO HAVE 1% OF THE PROFIT OR LOSS THAT RESULTS FROM BUYING THESE ASSETS FROM TROUBLED FINANCIAL INSTITUTIONS.THEY'RE COMPETITION IN BUYING THESE IS A BUNCH OF HEDGE FUNDS AND THE GOVERNMENT WITH ITS BORROWING COSTS, IF THEY BUY THEM AT MARKET, THEY WILL REALIZE A SIGNIFICANT PROFIT OVER TIME. I WOULD LOVE TO HAVE ONE PERCENT OF THE ACTION. I CAN'T AFFORD ANY MORE THAN THAT. THE KEY IS BUYING AT MARKET PRICES.
Anonymous writes:
Bill Bonner: "For the last 15 years, the U.S. money supply has grown about twice as fast as GDP. Federal government liabilities, meanwhile, have grown three times as fast. It now has more financial obligations than assets. It is, effectively, broke."
Anonymous | 10.01.08 - 3:29 pm | #
Why ya'all goin' Bonner on me? You guys are so negative. What's another $10 trillion in debt. WE can play this game forever.
mp
I think there will be consequences for you, assuming you are American, that US paper is worthless.
There may be more foreigners here watching than Americans.
Vega writes:
.
Who else here thinks we are in Depression now?
.
vega, when you add the property deflation to the credit freeze and spice it with the energy crisis, I think it's a done deal.
Buffett: WE WOULD BUY AT MARKET PRICES...MARKET PRICE...AT MARKET...THE KEY IS BUYING AT MARKET PRICES.
My boy Henry says that market prices won't adequately capitalize the financial industry. Both he and his nice friend Ben say that the taxpayers have to pay "hold to maturity" prices, or otherwise mark up the prices paid, so as to make sure that the financial companies stay solvent.
Henry is looking out for mainstream America by first helping out the nice boys on Wall street. Then the Wall street boys can help us buy a car, and Christmas won't be canceled...or something like that.
Anonymous writes:
What did Rick say this time? Love that guy!
Comrade Scared Shitless
Said the illiquid assets the gov will buy is basically 'crap' in not so many words.
Anonymous | 10.01.08 - 4:18 pm | #
Isn't that the truth.
Heck, banks can't sell overpriced craptacular homes for 300K that oringinall went for 750K. What makes the goobs in goobermint think they can do, and to us and foreignors no less? People are smart (and have figured out that housing is tanking, VERY BIG!).
"....Were the auditors stupid? No, just too trusting. After all, no one wants to think the client is a crook. But it happens too often. That's why the profession requires the auditor to be skeptical."
Excerpt from the article entitled "So Thats Why They Call It a Pyramid Scheme," by Joseph T. Wells, published in the Journal of Accountancy in October 2000. This article won the Lawler Award for best article in the Journal of Accountancy in 2000.
Am I supposed to feel sorry about that?
mp
No, but should you be fluttering around foot loose and fancy free? No, unless you are, you know, kind of silly.
ALL of the state muni bonds are getting hammered. It's not a function of which state. It does seem to be a function of the general flight to treasuries in the credit freezeup.
Yields are spiking as though munis were tax-exempt junk bonds, regardless of duration.
Things may settle back down again once the new Fed insurance for money markets kicks in. (Another great extension of moral hazard, sigh...)
This is a topic that deserves a lot more attention.
Canadian watching with popcorn writes:
mp
I think there will be consequences for you, assuming you are American, that US paper is worthless.
There may be more foreigners here watching than Americans.
Foreigners don't care, and China will continue lending us money. Face it, all the other countries are Stupid, and you are all beholden to us, the wise Americans.
We'll continue running the debt up, to subsidize our lives, and countries like China will continue buying our Treasuries, and keep us afloat.
I really feel like a chump for saving, living within my means, taking out a mortgage I could afford, and not going into credit card/heloc debt. I admit that I was mistaken, and should have been spending like a drunken sailor.
Everything I learned as a Economics major was garbage, and a waste of my time. It has made my life so much less enjoyable than it could have been.
Kona said: They obviously have added a few provisions, but most of the totally irrelevant material was from the unrelated House bill and will be removed when the Senate bill is sent back to the House of Representatives
It will not be removed unless the House intends to send the bill BACK to the Senate again.
Remember your civics classes, kids. Wasn't this on "Schoolhouse Rock"? Both chambers need to pass the SAME bill before it can become a law.
So if the House cuts those arrow shaft provisions, the Senate will need to vote once more. That is so not in the cards here.
Besides the obvious insights good data analysis can provide, a recurrent theme from this blog that will be drilled in my head forever is the importance of self-reliance. I really need to diversify my skill sets and income sources ... maybe come up with a business plan at some point that is actually aligned with the new future of what this country will need.
Yep, thatz what I offerred. I think just waiting a couple more months when credit completely disappears for the average consumer, will be the time to go shopping for big ticket items.
The bailout bill is the wrong solution. Why don't you take your time and come up with the right solution? Look at the markets. Does it really look like an emergency? How can you possibly not understand after 8 years how Bush plays you guys with this last-minute panic fakery? Do you like this abuse you get from the White House? Are you ever going to push back against it? Forget McCain, I think it's you Democrats who have POW syndrome.
The only possible explanation I can think of for this madness on the Democrats part in supporting this thing is you are expecting McCain to win and are planning on setting him up for Great Depression II to happen on his watch. I sure you'd be smart enough to not dump that on Obama's presidency. No?
Can we at least get some tiny assurance that someone there in Washington understands that they helped caused this problem with bad policy? Instead of addressing the reality of the situation, you are all seemingly bent on rewarding the criminals who caused the problem. Wall Street has taken the country hostage and you're letting them get away with it. They took those financial risks because they knew they could coerce you into spending someone else's money fixing it. Do you have any idea how maddening this all this? Have we reached the point where our representatives owe the people zero and owe Wall Street and corporations everything? A little revolution is getting to be in order here. The ghost of Andrew Jackson has been rattling around the blogs reminding people that this is not at all how our great country is supposed to work.
Too strong, or too wheedling?
I know no one will read it, but it makes me feel better to get it right. And a fax is cheaper than more booze.
"According to the Detroit Free Press, the seasonally adjusted annual SAAR for the past decade has ranged between 14 million and 17 million vehicles. Since December, the SAAR has been in a free-fall, and September now looks like its going to hit 13 million annualized sales. Edmonds.com noted that the last time fewer than 1 million new vehicles were sold in a month was February 1993.
In a related Reuters story, a new study says that nearly 1 in 5 car dealerships could fail:
"As many as 3,800 U.S. car dealerships could fail this fall and into 2009 -- nearly one in five -- because of weak sales, increased operational costs and the credit crunch, according to a forecast released on Wednesday. "An increasing number of dealers are simply closing their doors because sales have plummeted, credit has dried up, the overall retail environment is increasingly challenging and potential investors are sitting on the sidelines," said Paul Melville, a partner with Grant Thornton LLP, which issued the forecast."
All those dealers closing shop will add to the CRE glut...
If the house passed the original bill being used by the Senate, the two bills go to a conference committee from both chambers, who will add or subtract from both original bills, and then send one identical bill to both chambers.
Remember, the details of the conference bill, even though it technically is a compromise of the individual bills, could contain elements not present in either bill.
That conference bill is what would go for a pass/fail vote in both chambers.
Fraud Guy If the house passed the original bill being used by the Senate, the two bills go to a conference committee from both chambers, who will add or subtract from both original bills, and then send one identical bill to both chambers.
I think you're making my case for me, FraudGuy. What happens after the conference committee?
Both chambers STILL vote again. Conf. cmte or no, Senate still votes again. And a conference committee is no more in the cards than a Senate vote. The House wants to go home and campaign.
Audit firms are generally tools of management...and the grunt work where the hard questions need to be asked are assigned to rookies fresh out of school. So we the accountants being audited have to explain how some accounting practices work. The audit firms train their staff on your company's nickel. Audit partners then have plausible deniability if issues come up later.
Auditors from lenders are a different story...they've been around the block and know what questions to ask. But lender audits aren't available to shareholders.
Remember REAL ID--failed both chambers when by itself, it was added to a (IIRC) appropriations bill while in conference committee by a staffer for Spector, and passed that way. Who knows what will show up from that committee, and how fast and carefully it will be examined.
You thought this bill was bad--we unfortunately have probably seen nothing yet.
Fraud Guy: I appreciate your insight. The workings of Congress are so sneaky that no mere mortal could ever comprehend it. But I do agree with margin call that the coming election is going to put tremendous pressure on it all. How quickly do you think a bill could be pushed through committee and back out to the floor for a House vote?
Vega writes:
"Who else here thinks we are in Depression now?"
We are in a worldwide credit collapse, leading to a depression, but 'if you can keep your wits about you while all others are losing theirs', maybe you haven't heard the news.
No question that all sorts of crazy stuff happens in conf. committee. It is a completely non-transparent process. I didn't follow the specifics of REALID, but I don't doubt you.
My only point before was that there's so much pressure to get out of town right now. Campaigns need to run, next week is Yom Yippur, etc. etc., that the House doesn't really have any choice but to vote this bill out as they get it. There just isn't time to screw around over arrow shafts.
Plot this pattern over millennia, and I would bet that the cycle is increasing in frequency at a geometric rate, much like advances in computer technology.
"I think there will be consequences for you, assuming you are American, that US paper is worthless."
Canadian,
there will be plenty of consequences for Canadians as well. You remember the carnage on the Toronto exchange on Monday. Unfortunately, I don't see how Canada escapes the US spiral into the mud.
I wish you good luck regardless.
The real milestone was that, for the first time in history, the national debt increased by over $1 trillion in the span of one fiscal year - at least $400 billion more than the previous record.
Don't go into the dealership, first shop internet (more so for Mercedes)
See if you can get low ball quote by getting 3-4 dealers competing for you..If you have cash, your advantage, (If) get financing before you go in, then see if they can beat it...
Wait for the end of the month, preferrably during weekday...Ask for sales manager...
Used anything is really cheap right now or try using a high end broker who knows the auctions well..
"Senate Majority Leader Harry Reid, D-Nev., pressed for passage, with the alarming news that one of the country's premier insurance companies was about to go bankrupt if the crisis was not quickly resolved."
Vega writes:
.
Who else here thinks we are in Depression now?
It depends on when they measure the beginning. In my opinion the Economic Trainwreck that started in summer 2007 will last for at least 3 more years. The trainwreck will probably continue as more cars jump the track -- more foreclosures, soaring walkaways, falling auto sales, increasing layoffs, bank closures, surging Federal deficits, etc. The worst-case scenario involves the collapse of the dollar and an international refusal to lend to America. The emerging crisis of Medicaid and Social Security will probably become rolled into the cyclical depression.
I don't think the $700 billion "rescue" will help, and is more likely to make the depression worse by hastening the collapse of the US Treasury's credit rating.
Dear economic passengers,
The Lifeboat 'Rescue Plan' is nearing completion. Seating will be by invitation only however numerous trailing lifelines are hoped to be deployed for the masses. This vessel provided courtesy of your US Treasury.
Making Miracles with Paper.
First
And they say nobody rings a bell at the top.
I am trying to decide if we have gotten our money's worth.
Great call CR
Wish you had been wrong.
I'm going to party like it's 1929
Thank god my wooden arrow investment will be safe
There is hereby appropriated to the Trust Fund an amount sufficient to pay to the general fund of the Treasury the difference between
(A) the market value of the outstanding
repayable advances, plus accrued interest; and
(B) the proceeds from the obligations
issued by the Trust Fund to the Secretary of
the Treasury under paragraph (2)(A)(i).
Are we going to pass out party favors?
Will the MSM cover this historical event?
....and 49 cents.
I got that covered.
I'm selling bananas for a trillion a piece. Want some?
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
Human Action: A Treatise on Economics
Ludwig von Mises (1881-1973)
Palin Appeared To Endorse Hamas In Couric Interview
YouTube - Palin Appeared To Endorse Hamas In Couric Interview
Why stop at 10 trillion? Let's go for 11 (there's a Spinal Tap joke in here somewhere).
Again: Thank God deficits don't matter.
10 trillion in assets? wow!
Yay! Another milestone in the disastrous Bush presidency attained.
And with the what, 5 trillion that comes with the Bail GS' Ass out bill, we're talking real money ? Until of course, the Dollar tanks to 1/10000 of a peso.
That is a lot of six million dollar men. Just think if the US had used that money to build an army of Steve Austins. We would now control the world and its natural resources. If Jimmy Carter only had vision in the late 1970s we wouldn't be worrying about the economy right now. That damn Jimmy.
Can I get an earmark for farmers affected by the southern pine beetle ?
Bail-out Bill, Sell-out Hank, and Miss-out Joe walk into a bar...
Attention! Henceforth all international trade settlements will be denominated in bananas. We
will become the Switzerland of the West.
I think we should all call congress and congratulate them on this rare feat!
Whoohoo! We win!!! $10 trillion. Do I get my pony now?
Bill Bonner: "For the last 15 years, the U.S. money supply has grown about twice as fast as GDP. Federal government liabilities, meanwhile, have grown three times as fast. It now has more financial obligations than assets. It is, effectively, broke."
Elvis --
This one's for you.
YouTube -
CR
What is your position on this bill again? Thanks.
Comrades Bagholders,
This bill needs the word hoopajoop in every sentence.
Comrade Bear,
Yeah, had same when I was a kid.
Nostrovia,
GAO Debt_to_GDP_Forecast
I think they have the timing slightly wrong, but the shape of the curve(exponential) is spot on.
I think we need to price this in Euros. Then we are well below the debt ceiling, problem solved.
YEA!!!!!!!!!!!
10 Trillion ain't no thang
If it was 10 Quadrillion I would be worried!
It's all good. Measured in ounces of gold, the debt has actually gone down under W.
USA! USA! USA!
"I am trying to decide if we have gotten our money's worth."
Nemo | Homepage | 10.01.08 - 3:21 pm
You remind me of a question I had for you regarding the TARP bailout.
Why does Buffett keep saying he supports it if Treasury Dept. pays market prices for the assets.
Didn't he hear Bernanke say it won't work unless they pay more than market prices?
Even though this rapid increase in the debt is being driven by the Fed's liquidity initiatives (and should be paid back
Even if it is paid back, there is no way we EVER go below 10 trillion again. EVER.
Nemo,
The strange thing is, I made the same sound when I run. Do you think it is possible my mother had an affair with Steve Austin?
Does the deficit hit 11 trillion this evening or tomorrow morning when Hank gets his money?
someone go fix all the debt clocks.
U.S. National Debt Clock
An apt quote from Greenspan while testifying about his concern of the US paying down our deficits fully:
1/25/2001
But continuing to run surpluses beyond the point at which we reach zero or near-zero federal debt brings to center stage the critical longer-term fiscal policy issue of whether the federal government should accumulate large quantities of private (more technically nonfederal) assets. I believe, as I have noted in the past, that the federal government should eschew private asset accumulation because it would be exceptionally difficult to insulate the government's investment decisions from political pressures. Thus, over time, having the federal government hold significant amounts of private assets would risk sub-optimal performance by our capital markets, diminished economic efficiency, and lower overall standards of living than would be achieved otherwise.
So, not only has he completely dug us into this credit hole, not only did his testimony help further the Bush tax cuts that balooned the budget deficit... but his fear about the government accumulating assets comes true as we pass the $10T debt milestone - as opposed to holding a fiscal surplus.
Priceless!
Nemo, displaced as first, this is a sign!
This is just awful. Now I need a new calculator - again.
Too bad the calculators are made in China.
psychodave --
Why does Buffett keep saying he supports it if Treasury Dept. pays market prices for the assets.
Didn't he hear Bernanke say it won't work unless they pay more than market prices?
An excellent question, and I do not know the answer. It is possible that Buffett (and Paulson?) have something different in mind than Bernanke.
I think it depends on which problem you think you are solving. Is the problem that the market for these assets is illiquid, because no institutions are buying? (Solution: Buy at market prices but in government quantities, as Buffett describes.) Or is the problem that the banking system as a whole is functionally insolvent? (Solution: Recapitalize the banking system.)
I am not convinced anybody except Paulson himself knows which of these problems -- or both, or neither -- are actually supposed to be solved by the TARP. It certainly was not made clear during their week's worth of testimony.
OT: Forgive if someone has touched on this. A front page Business Week article "Municipal Bonds Freeze Up" came up at 1:30pm today. Last night my sister in-law who is a partner at crowe chizek was talking about sudden problems at the florida state pension and local (lakeland) municipal level due to Lehman swaps (NaN dividing by zero, no counterparty what do we do now problems---way over my head). Not to mention exploding interest charges.
Check this out:
Apparent Steve Fossett belongings found - CNN.com
Fossett's belongings found.
"$10 Trillion"
The mind wobbles. - Kelly Bundy
Congrats everyone!
Credit crisis equals debt crisis. It does not make sense to take on debt unless the cost of the debt will be cheaper than your future earnings. They will have to kill the dollar in order to save it.
Elvis --
The strange thing is, I made the same sound when I run. Do you think it is possible my mother had an affair with Steve Austin?
Doesn't count if you make the sound with your own voice. (I do the same thing.)
Anybody else trying to watch the Senate proceedings? I liked the 2-minute limits on the House speeches better.
Why do they do this?
Or is the problem that the banking system as a whole is functionally insolvent?
This is the one that seems most probable.
The free market has had more than enough time to price this garbage. Just think of all the distressed asset money that was raised.
Sarah Palin's retarded son is going to prove to be the brains of her family!
Some of the worst news out today (ISM, Ford, etc) and the Dow is stuck at -35 or so.
Angry Saver --
Just think of all the distressed asset money that was raised.
Well, that is 10s of billions of private equity appetite facing 100s of billions of institutional dumping.
I would actually be OK with the plan the way Buffett described it. But not the way Bernanke described it. And the bill leaves the entire thing up to Paulson and whoever Paulson's successor is (Phil Gramm?).
Hugh G. Rection writes:
Sarah Palin's retarded son is going to prove to be the brains of her family!
Hugh G. Rection | 10.01.08 - 3:42 pm | #
No call for that...attack her not her so
I just called Bernie Sanders' office, and said that I applaud the Senator for doing the right thing.
He is a definite No, and she said he will be speaking in about an hour.
I just called Norm and talked to this guy: Colin Sheldon, now a 29-year-old legislative assistant to U.S. Rep. Norm Dicks, was all of 22 when he ran his mother's campaign against Craswell, drawing on experience he'd gained working on Dicks' 1990 campaign.
No comment!
Buh Bye common shares owning-taxpayers
$10T and we still have not seen the full effects of FDR
Why isn't Darth Cheney presiding? Fearful John Q. Public will storm the Bastille?
anybody catch the short sale ban is to continue past Oct 2nd?...saw the story by Charlie Gasbag-arino on CNBC.com. Thought that would spark some to admit the gov't is doing everything it can to prop up crap. Like the saying goes: "I didn't know you could stack $hit that high..."
Big ?, please don't feed them.
And the bill leaves the entire thing up to Paulson and whoever Paulson's successor is (Phil Gramm?).
Nemo
Or Paul Volcker on the other side. LOL I suspect WS will vote for McCain.
When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. Were still dancing.
National Debt Exceeds $10 Trillion
Good thing the honourable politicans are having emergency meetings to figure out how to cut back and pay it off and avoid those crisis points of Social Security and Medicare that Greenspan warned about.
This chat room reminds me of that scene in 2001, A Space Odyssey. You know, where the monkeys are sitting around starving in the dark wondering where their next meal will come from.
.....Then the obelisk appears to propel their sorry ape asses into space.
(fade to Roger Waters) Mother will they drop the bomb?
A bailout editorial cartoon that I've shown others to explain what'sreally going on has a map of the U.S marked lower ninth ward with a $.7trillion levy around wall street and a giant cat 5 headed our way.
Congratulations CR. Now let's see if we can make the monicker you assigned ("Ten Trillion Dollar Man") stick.
On Wikipedia, I learned that a "monicker is considered by a professional clown to be sacrosanct by the traditional code of non-infringement."
Thus we will have to (a) make the monicker widely known, and (b) enforce its non-enfringement. Are we up to the task?
anybody catch the short sale ban is to continue past Oct 2nd?...
So tax payers get common shares at pumped up prices? neat!
Bid of $1.75 on eBay gets abandoned Saginaw home
Yahoo! 404 - Page Not Found
(and should be paid back),
you don't really believe that, do you?
oh man this is awesome!!
just like when i drank 18 beers for my 18th birthday!
10 trillion dollar party at my house!!!!!!!!!!!!
"But as long as the music is playing, you've got to get up and dance. Were still dancing."
It is hard to dance when the music is Taps.
This only matters if we were ever going to pay it back. Sorry China! HAHAHAHAHA!
mazal tov ve siman tov!!!
"should be paid back"?
BWAHAHAHAHA. Na ga happen.
If the bailout bill passes and the debt ceiling is raised to $11.3T, then Bush will be the six trillion dollar man.
This only matters if we were ever going to pay it back. Sorry China! HAHAHAHAHA!
Being slow to the capitalism game, they have been slow to clue in on that. Too bad, I think if they'd clued in three years ago, the u.s. would be in far better shape.
When the dealer cuts off the junkie for both their own good, you know times have gotten strange.
Just in time for the start of FY2009!
Hugh G. Rection writes:
Sarah Palin's retarded son is going to prove to be the brains of her family!
Hugh G. Rection | 10.01.08 - 3:42 pm | #
Another name for you--Big D***Head
JJL writes:
This only matters if we were ever going to pay it back. Sorry China! HAHAHAHAHA!
Except that they own less than a third of it. The bill will pass and who'll be laughing then. Shouldn't you be calling your congressman?
http://www.denninger.net/letters/genesis.pdf
Well, that is 10s of billions of private equity appetite facing 100s of billions of institutional dumping
Nemo,
If memory serves, 300 billion has been pledged to private equity funds in 2008 alone. That money could be used to buy A LOT of MBSs.
Did nobody else pick this up but CR today?
This only matters if we were ever going to pay it back. Sorry China! HAHAHAHAHA!
Sshh. Don't tell them. Maybe we can borrow another 10 trillion before they find out.
What is Buffet up to? He must be pretty sure this bill is going to pass.
Buffett to buy $3B of GE preferred stock
Expired
I just occurred to me that this Bailout Proposal is being engineered just like the same pool of assets which created this mess, i.e, we have massive Fannie pools of obligations that are linked to other pools and classes that are backed by pools of collateral, which are all guaranteed and insured by pools of risk free pools that connect unlimited money to unlimited defaults. The scale of this asset pool problem will not be solved by pouring liquidity into a bottomless pit of debt.
Amen and God Bless America
This only matters if we were ever going to pay it back. Sorry China! HAHAHAHAHA!
They are in the denial phase.
@Nemo | Homepage | 10.01.08 - 3:36 pm
Thanks. You added loads more value than Becky Quick.
note to self: add "Nemo" to Ctrl-F list.
In a related note, Sec. Paulson aanounced that the portrait of Sec. John Sherman has now been valued at $10.01 trillion, under new guidelines issued by the SEC today. "See, it all works out," Paulson was quoted as saying.
Whereismyretirement writes: "What is Buffet up to? He must be pretty sure this bill is going to pass."
He said as much to CNBC. He said, if it doesn't go through, the purchase will have been a BIG mistake.
You can infer that therefore, the bailout will go through.
Big 'ifs', but the job to angle for right now is T-Sec for Obama. You would be THE MAN.
Chris Dodd is a bum. The guy was on the take from Countrywide - the friends of Angelo Mozillo plan.
Dodd's father, also a U.S. Senator, was censured by congress for financial improprieties.
The apple doesn't fall far from the tree.
What a sham.
Whoever invented the IOU should be given a Nobel prize in economics.
I'm not sure Dodd has an IQ higher than room temperature. Seriously.
He grows up in a super well connected family and ends up going to the University of Louisville for a law degree.
Come on.
Angry Saver --
If memory serves, 300 billion has been pledged to private equity funds in 2008 alone. That money could be used to buy A LOT of MBSs.
Well, I admit I do not have actual numbers. I have been assuming Buffett was right when he described (one of) the problems as institutions deleveraging globally, and not enough private capital "levering up" on the other side of the trades.
I find it stunning that the bill has gone from 3 pages to 300 pages and still does not specify at all how the assets will be priced. Would love to be shown wrong.
And ironically it's Dodd's lack of intelligence that makes him a formidable political foe....
Whoever said the USA is losing it's pre-eminent position in the world is clearly wrong. 10T in debt means we ARE Number 1 at something still.
USA! USA! We're number One
Of course last week I told my friend who managed to last from a 200 employee company until he was the last employee before it shut down to look on the bright side because that meant he really was "Number 1".
Are there laws against sending hatemail to congress? If so, how far can one go without breaking the law? Are we allowed to use profanities?
I'd like to say this milestone is unintended consequence #1 from the bailout, but since they haven't passed the bill yet, well...
I bet if Congress works real hard, they can reach $11T by the end of the year.
They are over-achievers in this department.
It's 100 times better now.
I'm starting the wooden arrow society. Membership starts at 10T. Takers?
Congrats also to CR on the 10T call. I rewound Bloomberg--no comments there-Obviously no one wants to rock the boat before tonight. Thanks again for this blog - a rare oasis of sanity.
It's 100 times better now.
100 times a negative number is ...
"We've got 10, anybody 15? 12.5? Come on folks this auction needs to get above the reserve price before Bush leaves office"
[12]
Twelve, 13.5?
[13] Thirteen, how about 14, we're almost there.
Goldman: [15.2]
15.2 to Goldman, going once, going twice, sold to Goldman at 15.2
american taxpayer writes:
This only matters if we were ever going to pay it back. Sorry China! HAHAHAHAHA!
Sshh. Don't tell them. Maybe we can borrow another 10 trillion before they find out.
american taxpayer | 10.01.08 - 3:56 pm | #
Good point and I would like to add that the next US president/VP don't really bother about the medium/long term future (the first one for medical reasons, the second one for religious ones!!)
RE writes:
Bid of $1.75 on eBay gets abandoned Saginaw home
Yahoo! 404 - Page Not Found odd_cheap_home
I say she actually loses money on the deal. She has to pay $850 in taxes, and she actually has to courage to say that she has no intention of moving to Saginaw.
Now, if she fails to sell the house, she'll be on the hook for future real estate taxes. She has to get at least $1,000 for it now, otherwise she'll lose on the deal. LOL.
Maybe it's like a video game or an odometer and it rolls over and we don't owe anything anymore? No?
Well, then, I'm out of ideas.
THE OVERALL THEORY OF
***ECONOMIC DEVELOPMENT****
The FIRST generation builds it.
The SECOND generation maintains it.
The THIRD generation destroys it.
The FOURTH generation starts over.
Overalls to overalls in three generations.
HP and BB have been swearing under oath every month for two years that everything was ok. Why would anyone believe them now?
Jim Rogers, Rogers Holdings
At what point should we just stop counting?
I think there's going to be a worldwide solution to this mess, and it will be the "Third" of its kind, if you know what I mean...
mp writes:
THE OVERALL THEORY OF
***ECONOMIC DEVELOPMENT****
The FIRST generation builds it.
The SECOND generation maintains it.
The THIRD generation destroys it.
The FOURTH generation starts over.
Overalls to overalls in three generations.
Sounds like an ancient proverb.
Businesses don't last more than 3 generations, but which generation is this now?
Sorry China! HAHAHAHAHA
They might have been playing a different game.
China speeds pace of military buildup - Washington Times
old link
Rick Santelli at CNBC is going to get fired one day for telling the truth.
asl hearts lenin writes:
HP and BB have been swearing under oath every month for two years that everything was ok. Why would anyone believe them now?
Jim Rogers, Rogers Holdings
Because this nation is full of MORONS, and we deserve what we have coming to us.
And for the record, I think the Chinese are even more MORONIC than we are. I'm going to start telling everyone that. I used to think the Chinese were intelligent, but it's clear that they're dumber than dirt.
We really should thank them for being stupid enough to subsidize us, and continuing to do so.
I find it stunning that the bill has gone from 3 pages to 300 pages and still does not specify at all how the assets will be priced. Would love to be shown wrong.
The treasury is going to over-pay for the assets. I have no doubt about this. It's the only way the proposed plan can have any positive impact on bank balance sheets.
This is bailout of the wealthy and well connected.
Anonymous writes:
Rick Santelli at CNBC is going to get fired one day for telling the truth.
What did Rick say this time? Love that guy!
Bob Jensen's Updates on the Accounting and Finance Scandals
Many of the scandals are documented at Bob Jensen's Links to Fraud Documents
Resources to prevent and discover fraud from the Association of Fraud Examiners --- The page cannot be found
Self-study training for a career in fraud examination --- Association of Certified Fraud Examiners - Fraud Training & Education
What did Rick say this time? Love that guy!
Comrade Scared Shitless
Said the illiquid assets the gov will buy is basically 'crap' in not so many words.
Ministry of Truth said: "Did nobody else pick this up but CR today?".
I'm not sure what the story is.
The national debt is reaching new highs, but so is nominal GDP. So?
Sebastia
Criminals (with money) are forgiven:
Banking Department and FDIC Lift Order Against Bank of Tokyo-Mitsubishi UFJ Trust Company
Bank of Tokyo-Mitsubishi UFJ Trust Company Meets Required Anti-Money Laundering and Bank Secrecy Act Standards
The New York State Banking Department and the Federal Deposit Insurance Corporation (FDIC) today announced the lifting of a 2006 order to cease and desist issued upon consent with Bank of Tokyo-Mitsubishi UFJ Trust Company.
The order was entered into due to identified weaknesses in the bank's Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) compliance program. The order was lifted upon determination that the Bank of Tokyo-Mitsubishi UFJ Trust Company had addressed the issues.
Sometimes I wonder if the Chinese are building up their military because they knows they will need it to collect on all the debts.
We really should thank them for being stupid enough to subsidize us, and continuing to do so.
Thank the world, cause someone has to buy it for the system to function.
"Businesses don't last more than 3 generations, but which generation is this now?"
Guess.
Nemo writes:
Sometimes I wonder if the Chinese are building up their military because they knows they will need it to collect on all the debts.
Worry more about putin in the backyard first if you been following the latest news.
Said the illiquid assets the gov will buy is basically 'crap' in not so many words.
Anonymous
Like I said, Love that guy. But in the current environment, you lose points for being correct.
I'm sure the other cheerleaders on that network, could not conceptualize what he was talking about.
mp writes:
"Businesses don't last more than 3 generations, but which generation is this now?"
Guess.
It was a rhetorical question.
Guess.
mp
Not a tough guess. Hope we leave enough resources for our children and grandchildren to rebuild.
All of us have to learn to live within our means....business and families. Debt is like nuclear waste, it's not going away and there is only so many places you can store it.
You can tell how things are going, by the number of posts Sebastian makes in a given day.
I guess today, all is well, and there's nothing to see here.
You guys can do something patriotic for your country which is stop paying taxes if the bailout passes through..
no money, no bailout.. easy
This notion that banks are going to loosen end user credit after a bailout is a farce.
Banks may start lending to each other, but they won't lend to borderline consumers or businesses. Consumers are tapped out. On the supply side we have enormous excess capacity. No bank is going to throw good money after bad.
We will see a serious adjustment regardless of any bailout.
Comrade Scared Shitless said: "And for the record, I think the Chinese are even more MORONIC than we are. I'm going to start telling everyone that. I used to think the Chinese were intelligent, but it's clear that they're dumber than dirt..."
In the meantime, a million Chinese a month are rising out of poverty, largely as a result of doing business with the U.S.
We should be so dumb.
S.
Worry more about putin in the backyard first if you been following the latest news.
Anonymous
I'm not worried about that, because Governor palin is watching the Alaskan border for us.
Listening to C-Span:
The senators are full of it ...
"a million Chinese a month are rising out of poverty, largely as a result of doing business with the U.S."
Gosh, Seb, I hope they're grateful.
you all should be writing and calling Shelby urging him to filibuster tonight. That is a better use of time then posting on here.
SR
"a million Chinese a month are rising out of poverty, largely as a result of doing business with the U.S."
Chris Dodd must be their hero.
"The senators are full of it ..."
BS is their lifeblood. It is what got them where they are and what keeps them there.
stock_regulator writes:
you all should be writing and calling Shelby urging him to filibuster tonight. That is a better use of time then posting on here.
He needs 39 other Senators to pull it off. I doubt he has even 10 unfortunately.
When asked about the $10 Trillion national debt,
Palin replied, "Wait, is that bigger than a billion?"
McCain, on the other hand, was nonchalant. "Heck, billion, trillion, it's all the same to me," he said, "Just ask me about foreign policy. I can invade Eye-ran better than anyone else!"
The Senators have Mark Foley Disease:
See: The best known form of imprinting is filial imprinting, in which a young animal learns the characteristics of its parent. It is most obvious in nidifugous birds, who imprint on their parents and then follow them around. It was first reported in domestic chickens, by the 19th century amateur biologist Douglas Spalding. It was rediscovered by the early ethologist Oskar Heinroth, and studied extensively and popularised by his disciple Konrad Lorenz working with greylag geese. Lorenz demonstrated how incubator-hatched geese would imprint on the first suitable moving stimulus they saw within what he called a "critical period" of about 36 hours shortly after hatching. Most famously, the goslings would imprint on Lorenz himself (more specifically, on his wading boots), and he is often depicted being followed by a gaggle of geese who had imprinted on him. Filial imprinting is not restricted to animals that are able to follow their parents, however; in child development the term is used to refer to the process by which a baby learns who its mother and father are. The process is recognised as beginning in the womb, when the unborn baby starts to recognise its parents' voices (Kissilevsky et al, 2003).
wally writes:
"The senators are full of it ..."
BS is their lifeblood. It is what got them where they are and what keeps them there.
And yet the same people buy that BS. Everyone gets what they deserve eventually.
mp, have you read the Fourth Turning?
Fourth Turning
And yet the same people buy that BS. Everyone gets what they deserve eventually.
Anonymous
Some of us are getting what we don't deserve. Being responsible and honest counts for Nothing these days. Sad state of the world we live in.
Perhaps the human race needs to be wiped off the planet, so God can start over.
curious-er :
Excellent points. But the other side will try to subsidize and socialize the way out of it.
Same difference.
That works out to $179,933.78 per person who voted for W. in 2004, in case you were wondering.
Let's not forget 6 trillion in FNM/FRE debt!
Uncle Billy are you there?
Paradise Lost is an epic account of the Fall of Man. Milton begins his poem by invoking the aid of the (Holy) Spirit for his task, and sets forth the purpose of his song: that ... I may assert the Eternal Providence and justify the ways of God to man.
Paradise Lost - Wikipedia, the free encyclopedia
Sincere congratulations! Take the rest of the day off.
Bailout equals 7 years of tax breaks created by same banks that cost the US Treasury around $100bn a year:
http://www.trinity.edu/rjensen/fraudrotten.htm#DerivativesFrauds
Banks are expecting taxpayers to save them from the consequences of poor financial decisions. Yet at the same time, behind a veil of secrecy, they have been eroding tax revenues by designing and marketing tax-avoidance schemes.
A recent investigation by the US Senate permanent subcommittee on investigations found that major financial institutions have "devised complex financial structures to enable their offshore clients to dodge US dividend taxes". The offshore dodges are estimated to cost the US Treasury around $100bn a year in lost tax revenues. The Senate subcommittee highlighted the use of stock swaps and stock lending transactions to avoid taxes on dividends paid by US companies. Its report focuses on transactions devised and carried out by Lehman Brothers, Morgan Stanley, Deutsche Bank, UBS, Merrill Lynch and Citigroup....
A little humor for today...
YouTube - Hitler gets a margin call
What government is proving here, is that markets are not rational, and thus not free, thus, this mkt is open to manipulation and fear mongering!
@Whereis..
No, I haven't, but the thinking appears similar.
Whereis..., I internalized all of this many years ago and realized then that this was a fait accompli.
"Florida has been unable to borrow money for nearly three weeks, said Ben Watkins, director of the division of the state's Division of Bond Finance." today's Lakeland Ledger. State debt--24 billion increasing by 2 billion a year.
What government is proving here, is that markets are not rational, and thus not free, thus, this mkt is open to manipulation and fear mongering!
Kona
People get the market they deserve?
The offshore dodges are estimated to cost the US Treasury around $100bn a year in lost tax revenues.
Some of these were structured notes linked to stock indices. Some that were sponsored by Lehman (rated investment grade no less) are now worht pennies on the dollar.
Caveat Emptor.
tom servo--that was great--thanks
Whereis..., I internalized all of this many years ago and realized then that this was a fait accompli.
mp
The same. I am now backtracking and learning the reasons for what I knew to be truth.
Oh my...Gone are the days when the US could go into debt with abandon, without considering who would end up footing the bill.
SPIEGEL ONLINE - Druckversion - The End of Arrogance: America Loses Its Dominant Economic Role - SPIEGEL ONLINE - News - International
I am American. I am entitled to a new car, a big house, all my kids to go to college... yup i'm entitled to it all.
Some strange ads on CR today.
What's with the Honda Accord ad in Portugese? "Eleva a segurança a outro nível."
CR - you never did publish the results of your reader survey, did you? Who knew there were so many Brazilians here!
I read a book the other day called Predictably Irrational, b yDan Ariely, who teaches behavioral economics. In this, he has experiments about cheating, and how people are hesitant to cheat with cold hard cash -- but cheating is easier when steps are placed in-between you and the loot. He uses Ken Lay and Enron as example of off shore entities and SPEs and structure which removes the inclination to be honest.
This is what TARP is all about -- it creates distance from the piles of shit that smell and it creates the illusion that there is an honest structure, it engineers the mechanisms where people can't watch the peas and shells.
The impulse to steal $700 Billion or $7 Trillion that is removed into a structure, will be a new form of government, which will allow corporations to be unaccountable in this socialization of gambling debts -- which will become a burden to taxpayers in America from this day forward. America was just sold for $700 Billion, and Congress and The senate sold it to wall street!
I wouldn't be surprised if there are a lot of Brazilians here. They are big bagholders of US debt.
Canadian watching with popcorn writes:
Oh my...Gone are the days when the US could go into debt with abandon, without considering who would end up footing the bill.
That's incorrect. Those days are just beginning.
Florida has been unable to borrow money for nearly three weeks, said Ben Watkins, director of the division of the state's Division of Bond Finance
Florida is a bad credit risk. No income tax and an economy that was based on housing is a bad combination imo.
From nakedcapital poster, maynardGKeynes said...:
As you know, the Constitution requires that all revenue measures must begin in the House of Representatives. Because the House did not pass a version of the bill, in order to consider the Treasury proposal the Senate had to take a totally unrelated bill and "amend" it by in effect adding the text of the Treasury plan. They obviously have added a few provisions, but most of the totally irrelevant material was from the unrelated House bill and will be removed when the Senate bill is sent back to the House of Representatives,
Appropriate audio clip:
got wavs? - Lost_In_Space: felt_good.wav
Buffett now says he wants 1% of the bail-out action if the vehicle buys at market prices.
Searching for link.
With friends like these... :-
US 'casino' mentality blamed for planet's meltdown
Yahoo! 404 - Page Not Found
One last comment on Ariely's book:
He talks about the collusion of social norms with market norms, i.e, "social relationships are not east to reestablish". Once the bloom is off the rose -- once a social norm is trumped by a market norm -- it will rarely return."
That is all about TARP!
From CNBC...
Buffett: I DON'T HAVE 700 BILLION. WE WOULD BUY AT MARKET PRICES, WE WOULD BUY THE MORTGAGE DEBT IOF WE HAD THE BORROWING CAPACITY OF THE GOVERNMENT. IF WE COULD DO THE DEAL THAT IS AVAILABLE TO THE UNITED STATES GOVERNMENT AND HAVE STAYING POWER, WE WOULD MAKE SIGNIFICANT MONEY. IF THEY BUY THE ASSETS AT MARKET PRICE, I WOULD LOVE TO HAVE 1% OF THE PROFIT OR LOSS THAT RESULTS FROM BUYING THESE ASSETS FROM TROUBLED FINANCIAL INSTITUTIONS.THEY'RE COMPETITION IN BUYING THESE IS A BUNCH OF HEDGE FUNDS AND THE GOVERNMENT WITH ITS BORROWING COSTS, IF THEY BUY THEM AT MARKET, THEY WILL REALIZE A SIGNIFICANT PROFIT OVER TIME. I WOULD LOVE TO HAVE ONE PERCENT OF THE ACTION. I CAN'T AFFORD ANY MORE THAN THAT. THE KEY IS BUYING AT MARKET PRICES.
Via naked capitalism, the amount of that debt which is held by foreign investors:
St. Louis Fed: Series: FDHBFI, Federal Debt Held by Foreign Investors (Discontinued Series)
$10 Trillion, shmillion.
Just wait until Zimbabwe/Argentina/Weimar hyperinflation kick in.
Now where's that $1 quadrillion dollar note I left lying around the house? I need to bo buy a can of pepsi!
.
Who else here thinks we are in Depression now?
.
Hey Wamu pre-approved me for 30K, maybe I should see if I could add to their BK...
Anonymous writes:
Bill Bonner: "For the last 15 years, the U.S. money supply has grown about twice as fast as GDP. Federal government liabilities, meanwhile, have grown three times as fast. It now has more financial obligations than assets. It is, effectively, broke."
Anonymous | 10.01.08 - 3:29 pm | #
Why ya'all goin' Bonner on me? You guys are so negative. What's another $10 trillion in debt. WE can play this game forever.
Nagging Nertles.
""a million Chinese a month are rising out of poverty, largely as a result of doing business with the U.S."
And if they don't increase the value of the yuan and start creating domestic demand, amillion a month will start going back into povery
congratulations, everyone. we couldn't have done it without you.
THE OVERALL THEORY OF
***ECONOMIC DEVELOPMENT****
The FIRST generation builds it.
The SECOND generation maintains it.
The THIRD generation destroys it.
The FOURTH generation starts over.
Overalls to overalls in three generations.
mp | 10.01.08 - 4:12 pm | #
My father lived in an apartment
I live in a 3BR/2BA ranch.
My son lives in a 5BR Mcmansion with granite and jennair and owns 3 investment condos in South Beach.
His son will live in an apartment.
Gone With The Wind- end of the movie
YouTube -
What shall I do, oh Rhett..
Frankly my dear, I don't give a shit...
mp
I think there will be consequences for you, assuming you are American, that US paper is worthless.
There may be more foreigners here watching than Americans.
Vega,
I do because of Industry I am..Auto....
Just got off phone with top 10 dealer
group regional..Stressing over firings he needs to get done this week...
above comment- better term would be layoffs....
"Who else here thinks we are in Depression now?"
The US economy is not yet in a depression, but it is at the gate and the gatekeeper is beckoning.
Vega writes:
.
Who else here thinks we are in Depression now?
.
vega, when you add the property deflation to the credit freeze and spice it with the energy crisis, I think it's a done deal.
.49
this is the problem !
US 'casino' mentality blamed for planet's meltdown
Yahoo! 404 - Page Not Found 20080...ointing_fingers
Anonymous
HA HA!!
"I think there will be consequences for you, assuming you are American, that US paper is worthless."
Sorry, but my US holdings are minimal at this point.
Sure, I'll suffer. Unfortunately, others will suffer more.
Am I supposed to feel sorry about that?
Buffett: WE WOULD BUY AT MARKET PRICES...MARKET PRICE...AT MARKET...THE KEY IS BUYING AT MARKET PRICES.
My boy Henry says that market prices won't adequately capitalize the financial industry. Both he and his nice friend Ben say that the taxpayers have to pay "hold to maturity" prices, or otherwise mark up the prices paid, so as to make sure that the financial companies stay solvent.
Henry is looking out for mainstream America by first helping out the nice boys on Wall street. Then the Wall street boys can help us buy a car, and Christmas won't be canceled...or something like that.
o
Anonymous writes:
What did Rick say this time? Love that guy!
Comrade Scared Shitless
Said the illiquid assets the gov will buy is basically 'crap' in not so many words.
Anonymous | 10.01.08 - 4:18 pm | #
Isn't that the truth.
Heck, banks can't sell overpriced craptacular homes for 300K that oringinall went for 750K. What makes the goobs in goobermint think they can do, and to us and foreignors no less? People are smart (and have figured out that housing is tanking, VERY BIG!).
Can we please get back to stuffed toys now!
YouTube - Odd cat behavior
A Convicted Felon Speaks Out about White Collar Crime
"....Were the auditors stupid? No, just too trusting. After all, no one wants to think the client is a crook. But it happens too often. That's why the profession requires the auditor to be skeptical."
Excerpt from the article entitled "So Thats Why They Call It a Pyramid Scheme," by Joseph T. Wells, published in the Journal of Accountancy in October 2000. This article won the Lawler Award for best article in the Journal of Accountancy in 2000.
http://www.aicpa.org/PUBS/JOFA/oct2000/wells.htm
how many more days until the shooting war with Iran starts?
mp,
Make that hell no, particularly when you and Conjure have been banging the fire alarm for over the past year...
Conjure ,
Can I buy you a shot of Vodka?
cd,
I visited a lotus dealership and a mercedes dealership during the last week.
Never felt such desperation to sell a car. I remember getting attitude from the dealership when I purchased my Acura in 2000.
Any insider tips on squeezing the most on a purchase in these times?
Won't need that if this passes today .
"how many more days until the shooting war with Iran starts?"
Am I supposed to feel sorry about that?
mp
No, but should you be fluttering around foot loose and fancy free? No, unless you are, you know, kind of silly.
Mission Accomplished!
"Any insider tips on squeezing the most on a purchase in these times?"
Show green. That alone is worth a 10% discount.
just received a email from contact in korea,wanting to know if i knew anything about a under the table transfer of 800 billion us to china,,,
if anyone has a link to this ,,,thanx..
@godhatesfangs, and @AngrySaver -
ALL of the state muni bonds are getting hammered. It's not a function of which state. It does seem to be a function of the general flight to treasuries in the credit freezeup.
Yields are spiking as though munis were tax-exempt junk bonds, regardless of duration.
Things may settle back down again once the new Fed insurance for money markets kicks in. (Another great extension of moral hazard, sigh...)
This is a topic that deserves a lot more attention.
Canadian watching with popcorn writes:
mp
I think there will be consequences for you, assuming you are American, that US paper is worthless.
There may be more foreigners here watching than Americans.
Foreigners don't care, and China will continue lending us money. Face it, all the other countries are Stupid, and you are all beholden to us, the wise Americans.
We'll continue running the debt up, to subsidize our lives, and countries like China will continue buying our Treasuries, and keep us afloat.
I really feel like a chump for saving, living within my means, taking out a mortgage I could afford, and not going into credit card/heloc debt. I admit that I was mistaken, and should have been spending like a drunken sailor.
Everything I learned as a Economics major was garbage, and a waste of my time. It has made my life so much less enjoyable than it could have been.
Kona said:
They obviously have added a few provisions, but most of the totally irrelevant material was from the unrelated House bill and will be removed when the Senate bill is sent back to the House of Representatives
It will not be removed unless the House intends to send the bill BACK to the Senate again.
Remember your civics classes, kids. Wasn't this on "Schoolhouse Rock"? Both chambers need to pass the SAME bill before it can become a law.
So if the House cuts those arrow shaft provisions, the Senate will need to vote once more. That is so not in the cards here.
"No, but should you be fluttering around foot loose and fancy free?"
Canadian..., I work my ass off. So does son of mp. Conjure works almost 24-hour days. We are far from footloose.
We've made significant investments in productive assets, which we hope will pay off in the long run.
We are about the long run.
Besides the obvious insights good data analysis can provide, a recurrent theme from this blog that will be drilled in my head forever is the importance of self-reliance. I really need to diversify my skill sets and income sources ... maybe come up with a business plan at some point that is actually aligned with the new future of what this country will need.
Am I supposed to feel sorry about that?
mp
We can only do our best. If times get real bad, sorry and charity isn't whats needed. I would say empathy and compassion may be in more demand.
We cannot pave the world with leather so that our feet may feel more comfortable but maybe we can and ought to wear leather soles instead.
My two cents.
mp,
"Show green. That alone is worth a 10% discount."
Yep, thatz what I offerred. I think just waiting a couple more months when credit completely disappears for the average consumer, will be the time to go shopping for big ticket items.
This is a topic that deserves a lot more attention.
Wisdom Seeker | 10.01.08 - 5:02 pm
Thanks, I thought so.
Dear Senator Schumer,
The bailout bill is the wrong solution. Why don't you take your time and come up with the right solution? Look at the markets. Does it really look like an emergency? How can you possibly not understand after 8 years how Bush plays you guys with this last-minute panic fakery? Do you like this abuse you get from the White House? Are you ever going to push back against it? Forget McCain, I think it's you Democrats who have POW syndrome.
The only possible explanation I can think of for this madness on the Democrats part in supporting this thing is you are expecting McCain to win and are planning on setting him up for Great Depression II to happen on his watch. I sure you'd be smart enough to not dump that on Obama's presidency. No?
Can we at least get some tiny assurance that someone there in Washington understands that they helped caused this problem with bad policy? Instead of addressing the reality of the situation, you are all seemingly bent on rewarding the criminals who caused the problem. Wall Street has taken the country hostage and you're letting them get away with it. They took those financial risks because they knew they could coerce you into spending someone else's money fixing it. Do you have any idea how maddening this all this? Have we reached the point where our representatives owe the people zero and owe Wall Street and corporations everything? A little revolution is getting to be in order here. The ghost of Andrew Jackson has been rattling around the blogs reminding people that this is not at all how our great country is supposed to work.
Too strong, or too wheedling?
I know no one will read it, but it makes me feel better to get it right. And a fax is cheaper than more booze.
Here come the extortionists:
404 - Not Found - sacbee.com
Obama up now, selling us down the river.
McLame should be on soon, to poke more holes in the raft just to be sure we don't make it.
From Ritholz:
"According to the Detroit Free Press, the seasonally adjusted annual SAAR for the past decade has ranged between 14 million and 17 million vehicles. Since December, the SAAR has been in a free-fall, and September now looks like its going to hit 13 million annualized sales. Edmonds.com noted that the last time fewer than 1 million new vehicles were sold in a month was February 1993.
In a related Reuters story, a new study says that nearly 1 in 5 car dealerships could fail:
"As many as 3,800 U.S. car dealerships could fail this fall and into 2009 -- nearly one in five -- because of weak sales, increased operational costs and the credit crunch, according to a forecast released on Wednesday. "An increasing number of dealers are simply closing their doors because sales have plummeted, credit has dried up, the overall retail environment is increasingly challenging and potential investors are sitting on the sidelines," said Paul Melville, a partner with Grant Thornton LLP, which issued the forecast."
All those dealers closing shop will add to the CRE glut...
Too strong, or too wheedling?
I know no one will read it, but it makes me feel better to get it right. And a fax is cheaper than more booze.
Peasant Darkness
But they'll recycle the paper after your letter goes through the shredder, 5 seconds after they receive it.
You would get a better response if you were not an insignificant peasant.
We've got your 401k's and retirement funds. Give us the money, or we shoot it in the head.
Peasant Darkness,
My two cents is ditch the paragraph about setting McCain up for GDII. Unless you're going to fax them your tinfoil hat, too.
Otherwise, let him have it. Remember, Schumer works for you. Theoretically.
Margin Call of Cthulhu,
Actually, no.
If the house passed the original bill being used by the Senate, the two bills go to a conference committee from both chambers, who will add or subtract from both original bills, and then send one identical bill to both chambers.
Remember, the details of the conference bill, even though it technically is a compromise of the individual bills, could contain elements not present in either bill.
That conference bill is what would go for a pass/fail vote in both chambers.
You would get a better response if you were not an insignificant peasant.
Supreme executive power derives from a mandate from the masses.
Not from some farcical aquatic ceremony.
Although Paulson may very well believe the second.
Pray for a filibuster.
Go fili, go fili, go fili...
I never used 401Ks because I considered them inflexible. Paid a lot of taxes as a consequence, but am now glad I did it that way.
"probably will have enormous problems even with this bill"--Obama
Obama : "We don't have time"
"The time to act is now"
this guy is really good in bumper sticker sloagns but he will win because Mccain can not offer economic leadership.
Fraud Guy
If the house passed the original bill being used by the Senate, the two bills go to a conference committee from both chambers, who will add or subtract from both original bills, and then send one identical bill to both chambers.
I think you're making my case for me, FraudGuy. What happens after the conference committee?
Both chambers STILL vote again. Conf. cmte or no, Senate still votes again. And a conference committee is no more in the cards than a Senate vote. The House wants to go home and campaign.
me,
Audit firms are generally tools of management...and the grunt work where the hard questions need to be asked are assigned to rookies fresh out of school. So we the accountants being audited have to explain how some accounting practices work. The audit firms train their staff on your company's nickel. Audit partners then have plausible deniability if issues come up later.
Auditors from lenders are a different story...they've been around the block and know what questions to ask. But lender audits aren't available to shareholders.
Margin Call of Cthulhu,
Remember REAL ID--failed both chambers when by itself, it was added to a (IIRC) appropriations bill while in conference committee by a staffer for Spector, and passed that way. Who knows what will show up from that committee, and how fast and carefully it will be examined.
You thought this bill was bad--we unfortunately have probably seen nothing yet.
Otherwise, let him have it. Remember, Schumer works for you. Theoretically.
Thanks for the help.
Yeah, theoretically. Theory is thin on that one.
Man, I wish at least one of the finalist prez candidates sounded reasonable on this issue. Really drives home how badly our selection process sucks.
I miss Spitzer more than ever. God he was good at pizzing wall street off. I could use a heapin' helpin' of that right now.
Your Ponies All Belong To Us Now
Fraud Guy: I appreciate your insight. The workings of Congress are so sneaky that no mere mortal could ever comprehend it. But I do agree with margin call that the coming election is going to put tremendous pressure on it all. How quickly do you think a bill could be pushed through committee and back out to the floor for a House vote?
at least he has been a bit honest
Guess there's a limit to name length.
I miss Spitzer more than ever. God he was good at pizzing wall street off. I could use a heapin' helpin' of that right now.
Peasant Darkness
And Wall Street showed him exactly what happens to people who fuck around with them.
Tony Soprano would be proud.
mykillk:
I think turn time could be under a day if they are ready for it.
Vega writes:
"Who else here thinks we are in Depression now?"
We are in a worldwide credit collapse, leading to a depression, but 'if you can keep your wits about you while all others are losing theirs', maybe you haven't heard the news.
Why are the treasury folks not listening to Stiglitz and Krugman...
Fraud Guy,
No question that all sorts of crazy stuff happens in conf. committee. It is a completely non-transparent process. I didn't follow the specifics of REALID, but I don't doubt you.
My only point before was that there's so much pressure to get out of town right now. Campaigns need to run, next week is Yom Yippur, etc. etc., that the House doesn't really have any choice but to vote this bill out as they get it. There just isn't time to screw around over arrow shafts.
peAkcredit,
I concluded in Dec 2005 that we would end up in depression as the housing bubble collapsed.
I have been years ahead of the news.
Yal -
Obama is not perfect.
McCain is an absolute train wreck.
Pick one.
mp, have you read the Fourth Turning?
The Fourth Turning by William Strauss and Neil Howe htm...th_turning.html
Whereismyretirement | 10.01.08 - 4:28 pm | #
Plot this pattern over millennia, and I would bet that the cycle is increasing in frequency at a geometric rate, much like advances in computer technology.
How bout we just say the depression started today?
McCain/Palin would be the last straw
for the budget and the whole economy
Very interesting link...
- NY Times
"I think there will be consequences for you, assuming you are American, that US paper is worthless."
Canadian,
there will be plenty of consequences for Canadians as well. You remember the carnage on the Toronto exchange on Monday. Unfortunately, I don't see how Canada escapes the US spiral into the mud.
I wish you good luck regardless.
If the car dealerships fold, what will fill the radio ad void?
The real milestone was that, for the first time in history, the national debt increased by over $1 trillion in the span of one fiscal year - at least $400 billion more than the previous record.
Vega,
Don't go into the dealership, first shop internet (more so for Mercedes)
See if you can get low ball quote by getting 3-4 dealers competing for you..If you have cash, your advantage, (If) get financing before you go in, then see if they can beat it...
Wait for the end of the month, preferrably during weekday...Ask for sales manager...
Used anything is really cheap right now or try using a high end broker who knows the auctions well..
"Senate Majority Leader Harry Reid, D-Nev., pressed for passage, with the alarming news that one of the country's premier insurance companies was about to go bankrupt if the crisis was not quickly resolved."
-what major insurance company is going bankrupt?
cd,
Good points.
Thanks
Vega writes:
.
Who else here thinks we are in Depression now?
It depends on when they measure the beginning. In my opinion the Economic Trainwreck that started in summer 2007 will last for at least 3 more years. The trainwreck will probably continue as more cars jump the track -- more foreclosures, soaring walkaways, falling auto sales, increasing layoffs, bank closures, surging Federal deficits, etc. The worst-case scenario involves the collapse of the dollar and an international refusal to lend to America. The emerging crisis of Medicaid and Social Security will probably become rolled into the cyclical depression.
I don't think the $700 billion "rescue" will help, and is more likely to make the depression worse by hastening the collapse of the US Treasury's credit rating.
Dear economic passengers,
The Lifeboat 'Rescue Plan' is nearing completion. Seating will be by invitation only however numerous trailing lifelines are hoped to be deployed for the masses. This vessel provided courtesy of your US Treasury.
Making Miracles with Paper.
Wait until we get the final bill for the bailout - or the second bailout, and the third...
Buyer Beware! JPMorgan Sees WaMu Value Decline « Your Mortgage or Your Life…
How bad will the crap be that we as taxpayers end with?
This is just a massive bank takeover by a small cartel led bt Goldman Sachs and JP Morgan! Who is next!