Dr. Dah,
Anyone with an ounce of common sense can see that we are where we are because of the federal reserve. A lot of blame is pointed at Greenspan but don't forget the last couple of years of his tenure Ben Helicopter Bernanke was Greenspan's right hand man. His helicopter comment is just one reason many people concluded a long time ago that he was completely ignorant to what was going on.
CR is too gentlemanly to excerpt this, but I'm not: Simply put, debates about the Fed Funds target are nothing more than academic masturbation.
and The alternative is what I suspect Bernanke cannot elucidate a coherent policy strategy to his organization because no such strategy exists. What does exist is a potpourri of policy responses that amounts to providing liquidity at all costs, the outcome of Bernankes research on the Great Depression. Beyond this, the Fed is stuck in a netherworld of dual policy targets not ready to admit the loss of the interest rate target, not ready to adopt a formal policy of quantitative easing.
Prof. Duy thinks that there is a solution, but it's not clear to me why there must be a (relatively) easy one. I don't have the academics confidence that assets over-priced by trillions of dollars can be evaporated without a huge blow-up.
Honestly if he had a plan wouldn't it be apparent? I know he was supposed to be this depression specialist but come on, everything for months has been confusion and missed opportunity. I'm not saying that he's stupid by any means, but perhaps what "has" to be done is not something politically viable or something the treasury sec. will go along with.
The guy is still new on the job, the economy falls apart, and Wall Street and Paulson tell Bernanke "listen to us, we know what to do".
Bernanke, instead of falling back on his academic training, panicked and started giving free candy to Wall Street. Once he started, he didn't know when to stop throwing good money after bad.
The poor guy let Paulson talk him out of everthing the Fed had. Once the dust settles he is going to realize he was played like a flute.
This might be why he backed the TARP - Paulson and others dictated a policy that conformed with their ideology and/or interests, and he dutifully followed along. And now he's stuck because to say "Oops" would throw everything into chaos, and a new policy won't have executive support until Jan 21. Thus the public dithering.
Just a theory. Incompetence is usually the best explanation screw-ups.
I'm more inclined to think that Bernanke took the job, found out that there is no solution, and now is just trying things out because he can't come out and tell everybody we're well and truly screwed. He's got to keep the happy face on and hope a miracle happens.
I'm more inclined to think that Bernanke took the job, found out that there is no solution
But he took the top job back in Feb 2006. Acting then, there would have been an relatively easy solution to the "problem" - whether it was the housing bubble or the credit bubble. Why didn't he do it then?
The only cure for a bubble is to prevent it from happening. Richebacher.
What did AG at the end and then BB do? They slowed the growth in the monetary base. BB slowed it even more. This is what everyone missed, incl GS and Peter Schiff and Jim Rogers and you name it.
It was the clearest recession call any Austrian Economist could see. The problem was that people were looking at M3 and expecting hyperinflation. Instead the multiplier was going bust.
The narrow money camp spotted it and shorted GS 200 oil call to the ground.
Timidity often occurs when semi-rational people meet sociopaths, who are rational to the extreme.
They should have done the new,new TARP a year ago during the 1st credit crunch: dilute out current shareholders by stocking up on preferreds dollar for dollar, give everybody 10 minutes to explain why they shouldn't be fired, go into quasi austerity mode.
Strongly suggest that anybody even thinking about applying to the TARP at any time needs to put all bonsuses into escrow for Sept 1 07 forward, accessible after a year.
Offer horrible terms so the bastards have to right their own ship and not game the system.
Bernanke is bailing with all four limbs While Lurch fiddles @ the treasury.
Don't need to. "Buddhist economics" and " The Great Reckoning" already said it. Our modern economic system is founded on several assumptions about human nature and reality that fail under certain conditions.
The system has become increasingly bizarre and disconnected since the early 1990s.
A gold standard doesn't stop bubbles are delusions but it makes it goddamn hard to grow them so large they destroy the entire financial system. You need paper money to do that.
Anyone who knows banking and knows the history of the Depression knows that the current crisis was tailor made for an FDR type Bank Holiday whereby the solvent were maintained and the insolvent liquidated.
Didn't Bernanke study the banking crisis during the Great Depression ? So why didn't he clean up the banking system with a bank holiday or Swedish Plan? Cronyism at its worst.
The reason Bernanke does not know what to do is that he based his entire academic career and study on a perfectly flawed assumption.
Clowns like Bernanke think the errors that lead to the Depression were policy moves committed in the 30's. In fact, the error that created the depression was the unsustainable credit boom, and associated speculation, etc, that ocurred in the 20's.
The current situation is laying to waste the FED arguement that you should not stop bubbles, but just clean up after the fact.
But what do you do when the whole system is a bubble. Emerging market debt, internet stocks, RE, bonds...these were all bubbles that occured within the framework of a giant all encompassing credit bubble. The collapse of that bubble is, literally, the collapse of the system.
There is only one solution to this problem....don't create it in the first place.
Some might see it as ironic that most of those with insights on how to cope with the sort of unraveling that is taking place now have moved on to the next life.
Nonetheless, there are some people living nowadays who were around 80 or so years ago. Individuals who understand what it's like to live in dire poverty. Who know how to scrimp and save. Who are familiar with the social consequences of a calamitous downturn in the economy.
In "Memories of the Depression Still Sear," the Wall Street Journal speaks with a few of these old-timers about how it was way back when.
As hard times return, witnesses to the 1930s recall lessons they learned
When the Great Depression hit, people came to the front porch of William Hague's home near Pittsburgh pleading for food. One well-dressed young woman asked Mr. Hague's mother if she would hire her for $2 a week. Why would she work for so little? his mother asked. "We have nothing to eat at home," she replied.
Mr. Hague, 89, was just 10 years old during the Crash of 1929. His father was a prosperous small-town lawyer and the family led a relatively privileged life during the Depression years. Yet even as Mr. Hague found success as an editor and author he says he remained careful about food and money. He monitors the news intently, on the lookout for signs of "trouble." Now that trouble has come, he says he wonders if younger generations have the mettle to survive tough times.
"We had unlimited prosperity for more than 60 years," says Mr. Hague, who lives in an independent senior residence on Manhattan's East Side. "I don't know if people are ready for hard times."
There are 11.5 million Americans who are 80 and older, according to the U.S. Census Bureau. The period from the Crash of 1929 to the start of World War II shaped their lives, affected how they raised their children, and influences their reactions to today's economic turmoil.
The memories aren't all negative. For many, President Franklin D. Roosevelt "was like a god," recalls Mr. Hague, and there was hopefulness amid the desperation. "People had confidence in the American way -- which I am not sure they have now."
James Dickinson, 87, is Mr. Hague's friend and neighbor at the James Lenox House. Mr. Dickinson once worked on Wall Street, and for him the recent stream of economic calamities has been like watching a "horror movie," he says. "The horror is the people being pushed into unemployment," he says. "Bank managers, mutual-fund managers, hedge-fund operators, technical support people -- the horror is there are no jobs for these people."
Mr. Dickinson also grew up near Pittsburgh, but in an impoverished household where his widowed mother had to scrape by with help from relief. As a boy, he would accompany his mother as she stood on lines to get government food relief. The supplies were barely enough to live on: powdered milk, dried fruits, margarine, raisins, he recalls. Often, he found himself with men who had lost jobs in the steel mills and were devastated at being dependent on handouts.
Mr. Dickinson went on to work in Wall Street brokerage houses, he says, and retired as a manager of human resources. He says during the last five years, he annoyed his friends with repeated warnings that a day of reckoning was coming.
'This recession is like a picnic compared to what we had back then," says Dorothy Womble.
Mrs. Womble, 89, lives at a residence for low-income seniors and the disabled in New York's Harlem neighborhood. She grew up in a small house on a dirt road in Winston-Salem, N.C. People around her were so poor, she says, "They couldn't even get money to get seeds" to plant vegetables.
She can still picture the strangers who wandered through with nothing but a bundle on their backs. Her family also struggled, though her dad was able to hold onto his job on the railroads. Even so, says Mrs. Womble, no matter how little people had, they shared it with one another -- and that is one of her defining memories of the period, as much as the dire poverty. Her mother, for instance, used to share precious supplies of flour.
When FDR was elected in 1932, there was a "big jubilee" in the neighborhood, Mrs. Womble says. "It wasn't a big celebration like it was on 42nd Street" in New York this year, she says. But when people heard Roosevelt became president, "everybody came out and they were laughing and clapping their hands."
Her neighbor at Logan Gardens, Gloria O'Loughlin, 88, was a girl in Harlem during the Great Depression but has the same memory of people giving each other what they could. "If you were sick, they helped you. If you were hungry, they'd feed you. That was the Harlem I knew," she says.
Ms. O'Loughlin, one of the first women to drive a yellow cab in New York City, was born in Harlem and says she plans to die there. The Depression hit the neighborhood hard. While unemployment in the U.S. was about 25%, it was closer to 50% in Harlem. All over the streets, she saw men selling apples for five cents each.
At home, there was barely enough to eat. Her mother baked "Johnny Cakes," a kind of pancake made with flour and yeast and served with butter. It was a way to fill an empty stomach and stave off hunger. "You got used to eating what you got," Ms. O'Loughlin says starkly.
To survive, her family received a form of welfare that entailed standing on lines for supplies. Simply being on the line was embarrassing, and she and her sister used to argue about whose turn it was to go.
Marion Leonard, 99, was shielded from the worst of the Great Depression. Still, in 1931, she took a sailing trip around Puget Sound on a yacht belonging to her husband's uncle. From the boat, she could see hordes of unemployed men standing at the dock staring and staring at her. Ms. Leonard recalls she ran and hid in a stateroom out of embarrassment. She also witnessed great poverty as she drove across the country with her new husband in a $100 Ford.
Ms. Leonard still recalls how kind people were as she and her husband drove from town to town -- people were anxious to rent rooms for a couple of dollars, both because they needed the money and because they wanted to help. The experiences helped compel her to devote her life to social change and environmental activism.
Now, living in Vermont, she thinks only someone in Roosevelt's mold can rescue America from its slump. "I keep thinking, why doesn't someone do what Roosevelt did -- shut down and start from scratch and give everyone jobs," she says. "He put a lot of people -- young people, older people -- immediately in jobs. There were artists painting murals inside post offices and young kids out in the woods clearing away the brush."
Farmer Richard G. Hendrickson, 96, has been predicting another Great Depression for years, even decades. He warned family members and friends that America's profligate ways would bring back the hard times he had experienced in the 1930s when he watched his father almost lose the family farm.
He repeated the dire prediction so frequently, says his wife, Lillian, 90, his own children thought he was "getting old."
Mr. Hendrickson lives today on a farm in Bridgehampton, N.Y., a short walk from the one his family nearly lost. He can easily conjure up the day seven decades ago his dad faced financial ruin because of debt he had incurred on the farm. Three men in fancy "business suits and vests" descended on his family's property: The president of the local bank, the president of the lumber company, and the head of the feed company.
With his father in the room, the men sat silently in the living room for what "seemed like an eternity," Mr. Hendrickson says. Though shy, he decided to make a bold personal appeal. "If it makes any difference, I like outside work," he remembers saying. "And I think if we are given some more time, I believe we can keep our head above water and make the farm pay." He then stood up and walked out.
His father later got a loan from a bank in Springfield, Mass., he remembers, and the farm stayed with the family.
Bridgehampton, Mr. Hendrickson says, was a farming community so breadlines weren't an issue. Even so, there were signs of widespread misery. At one point, he recalls, the government set up a Civilian Conservation Corps encampment about a mile and a half from the farm. Men of varying ages lived in communal housing and were given jobs as part of Roosevelt's efforts to get the country working again. The men, who typically wore overalls, were a moving sight, and stood out in the small farming community.
One Sunday, he and his first wife picked up one of the CCC workers and drove him to church. He told them he had come all the way from Michigan.
Long after the Depression, Mr. Hendrickson worked as if he were about to lose the farm. For years, he worked seven days a week, his only son, Richard H. Hendrickson, 68, says. The elder Mr. Hendrickson worked day, evening and night.
Mrs. Womble's son, Larry Womble, believes that his mom's Depression-era experiences, as well as those of his grandparents, deeply influenced the way he was brought up. Being frugal was a cardinal value, as was avoiding excess. But so was sharing with those who had even less.
"As a little boy I used to hear them in the room talking about how they were able to survive the Depression," says Mr. Womble, a Democratic state representative in Winston-Salem. "We shared whatever we had. When people didn't have rent money, we took up donations and helped them pay the rent, when someone died without a burial, we took up a collection."
His grandparents and mom would often cite a favorite proverb: "They used to say, 'Even in good times, a squirrel will hide his nuts because wintertime is coming.'
Oh my. Take a moment and consider the 3-month Treasury Bill (IRX) and you'll notice the yield reached its recent high on 10/21. From 10/21 on, the yield has taken a dive from the overwhelming demand. What day is 13 weeks from 10/21? 1/20/09 -- Obama will be in a precarious position from day one!
As car sales plummet, one UK website is offering 2 for 1 car deals on new autos.
Simon Empson of Broadspeed.com launched his novel idea earlier in November a 2 for 1 deal on Dodge Avenger SXT 2.4i models for 20,000 pounds (30,000 USD). He said the phone rang off the hook, his website crashed and he was sold out within four hours. He is repeating the offer in another campaign, with the Kia Magentis, hoping to achieve the same sort of success.
I'm optimistic that the US will be able to feed, house, and clothe it's citizens because the resources are available.
However, I think it's obvious that the potential exists for things to get much worse than they were during the great depression.
IIRC somewhere around 30% of the population lived on small farms during that time. I don't have statistics(would be interested if anyone does), but I suspect a large portion of those farms had zero mortgage debt.
People that are unleveraged and somewhat self sufficient ARE the safety net for the society as a whole. These are the people that can continue their day to day work no matter what happens to the banking system, interest rates, credit availability, etc.
These days the vast majority of the population is highly dependent on complicated systems of production that are interlinked by our system of credit.
The potential for the supply of essential goods to drop in the face of abundant resources and demand(including demand by those that can no longer pay) is much greater than during the great depression.
It's fine to have hope, faith, and/or optimism that this downturn won't be as painful as the great depression, but only a liar or a fool would make the case that our advanced, productive economy is immune from widespread starvation, social unrest, etc.
First, there was no "solution" to the great depression - maybe the government made it worse (I don't know). Massive malinvestment occured (stock bubble) and lots of money was lost. Long story short - same thing this time. I don't think government can make it better, although I believe it can make it much, much worse.
My not so unique insights from 35 years experience in the federal government is that managers fail to explicitly say what they are doing for several reasons:
They don't know what they are doing.
They don't know why they are doing it.
They are ashamed of what they are doing.
They know what they are doing will get them into trouble because it is either illegal, immoral, or stupid.
They are lazy.
The Fed's problem is that the whole concept of a Fed Reserve is bogus. It is based on politics and not science. For a time, the Fed can choose winners and losers, but, they can never explicate what they are doing.
What I've noticed in the last 10 days roughly is that state Fed commentary is increasingly independent, ie off message. Hoenig, and yesterday Kohn and Lacker spring to mind. No wonder the FOMC minutes have that series of "some members" clauses.
Lacker was particularly interesting, saying liquidity is not the problem, but creditworthy borrowers were in short supply. Have to agree. Link's on kaboomberger somewhere.
In it's own way, the Fed, qua members, are criticizing the current plan. Does that mean unity or a coherent policy? No, not at all, but Duy is quite right on confusing statements. However the question then becomes why, to what end, and what's the alternative? I suspect Duy's call for specific bond target announcements would be a bridge too far, largely for the reasons that Kohn alluded to yesterday; caution, debate, data quality, modeling confusion, impact of intervention, negative collateral consequences and trade-offs. These are fairly compelling constraints for quasi central bankers wanting to get it right if they act.
The problem may be, however, that the Fed internal conversation, and the public conversation, have both reached their limits of utility and persuasion on current methods, and either or both of the absence of a forward policy or just its perception have taken hold. And then there's the dissonance with the Treasury.
And too, Federal managers just plain lack the courage to tell the truth. I've never lost a job for lying, cheating or stealing, although I've done all three. I've lost several for telling the truth.
In the final analysis, it's the character not the intellect of the fed members that has failed us. However, well it has done for their friends.
"Bank managers, mutual-fund managers, hedge-fund operators, technical support people -- the horror is there are no jobs for these people."
Is this facetiousness?
OK, maybe I forgive the technical support people, because I am one. But the others don't have the luxury of the Good German defense. They weren't just following orders. And even if they were, they had the freedom to do otherwise, and chose not to.
Comrade Counterpointer, good find. I think I'll frame that for my office wall. If it weren't so true it wouldn't be so funny. Perhaps this is why so many of our leaders are humorless.
They fear being the butt of a joke above all else? Even above the destruction of the country, one suspects.
The problem is indeed that Benanke isn't pursuing a coherent policy. As Poole says, the Fed is trying to "force lots and lots of reserves into the banking system with the expectation that banks will start to trade them for a higher-yielding asset,". But, with interest rates artificially low, asset prices remain inflated, meaning banks know they will fall eventually, meaning there is nothing banks can count on to be higher-yielding, so they are forced to sit on their money. The Bloomberg article mentions this in passing; when central banks adopt quantititative easing policies (a euphemism for inflation) they normally abandon interest rate targets.
Bernanke is trying to maintain elevated real asset prices (which require low real interest rates) and to inflate (which requires high nominal interest rates) and in a liquidity trap that's impossible. This wouldn't be a desirable combination of goals outside of a liquidity trap either, because keeping real interest rates low in an inflationary environment would produce a rapid acceleration of inflation and quickly move us to the point that inflation became a big problem.
It's strange that a compentent academic like Bernanke would thrash around so. Dr. Duy does a very good job dissecting Bernanke's apparent policies, or lack thereof. Great article.
Yesterday morning I said that it was going to be an ugly day. A turning point, ugly kind of day. While not truly exceptional in some ways; it was in one way historically. The Big Three went back without the bailout.
PeakVT - bring up the Asia stock numbers on kaboomberger and you'll see virtually nothing but red.
ASX is interesting. Financials pounded, understandably, but mining too. So... retreat from mining, which is a call on primary factor inputs to stuff that gets made with metals, which means projected demand must be tanking for light industrial products and capital goods / heavy plant, plus dryships collapsed yet again, umm... where does much of this stuff get made these days? Remind me who buys it?
Comrade Counterpointer(Excellent) writes: What I've noticed in the last 10 days roughly is that state Fed commentary is increasingly independent, ie off message. Hoenig, and yesterday Kohn and Lacker spring to mind. No wonder the FOMC minutes have that series of "some members" clauses.
Agreed. About to run, back shortly, but -- there's definitely a revolt of sorts going on.
I don't know if they're trying to force Ben's hand or stake out their own turf as people who "called" it or just feeling like they have to seek their own destiny on a rudderless ship. Definitely some kind of public punctuation to the previous context tho.
Zoom: thanks for the posts. I have one depression era relative still alive, and she tells how she got a clerical gov't job when she was 18 and provided for an extended family of eight.
People are much different today. Our welfare society has created people who stay at home and raise families on the gov'ts dollar, no incentive ever to work or share.
Public works projects? Please. Lets see 15,000 mortgage brokers go build a dam in the Arizona sun.
We are really screwed. Expect repeated stimulus packages with money that isn't there. More debt to fix the problem of too much debt. That'll work.
The comments to the article make a good point: there's no clear definition of quantitative easing that I have seen. Some seem to refer to it as a catch-all phrase for liquidity measures once the Fed Funds rate hits zero, others seem to limit it to printing money to buy bonds.
GM's cars are above average in quality and have been for over a decade. They are way ahead of Nissan and in the ballpark with Honda (they were ahead a few years back, although GM has slipped some lately). My husband notices the "Japanese car delusion" at work all the time - his coworkers keep having major repairs and recalls on their Japanese cars all the while talking about how great their quality is. The gap between Detroit and Japanese quality is marginal but people's beliefs haven't caught up to reality. No doubt this is because cars in general have become quite good, so foreign car buyers never bother to learn that domestic cars have improved so.
"People had confidence in the American way -- which I am not sure they have now."
Good point.
The 'American Way', or at least our old-school perception of it, has become so distorted by the last few decades of political clownery. Leaders interested in nothing more than their legacy & lining their own pockets. Washington hijacked by Wall St.
What I was truly disappointed in (but not surprised by) is that almost all incumbents were reelected.
Could the long bond yield be crashing partly because the Fed itself is printing money to buy them? Bernanke said he would do that if necessary.
It's possible, although if Bernanke is inflating he should announce it. Otherwise, when the news gets out, we get a "casino effect" where there's a increased transfer of wealth from those betting on deflation to those betting on inflation, creating unnecessary and wasteful bankruptcies and belt-tightenings, like what you see with a default with CDS consequences. There would still be a casino effect if the policy is announced; but milder because we wouldn't see an initial fall in bond rates.
"As car sales plummet, one UK website is offering 2 for 1 car deals on new autos."
We hardly use the one we have, a 2004 Civic with 28 K on it. We live in DC, which has an adequate public transportation system. It's seldom necessary for us to go more than five miles from home, and when I occasionally go 'downtown' I never drive.
I see a distinct lack of leadership from the Federal Reserve, and it suggests that Bernanke has used up his bag of tricks.
There is no way to make illusions of wealth real.
There is no way to make good on debt obligations by repaying them with fictional wealth.
There is no way to stop insolvency when borrowers have converted real credit in to worthless bubble assets.
Bernanke has no way of conjuring up the wealth that everybody believed existed but in fact never did.
Bernanke has no way of easing the credit crisis or the crisis of confidence because these are crises of trust, created by years of mass deception and betrayal. And there is nothing Bernanke can do to make the lies real.
Any "tricks" necessarily involve further betrayal and deception, and future credit crises.
Ultimately the only way to end the credit crisis is to get rid of the bad debt by taking the losses in a transparent and equitable manner via explicit default, and by only allowing the creation of new debt that can be repaid with real wealth. No more new debt to be repaid by improbable outcomes, clever financial trickery, or periodic pleas of desperation.
The credit crisis will begin to ease when we start making promises we can keep.
The credit crisis will begin to ease once we only borrow things we fully intend to return.
The credit crisis will begin to ease only when we start valuing honesty over economic growth.
Nothing else will restore credit except creditworthiness.
After working for 15 years in higher ed with day to day contact with students unfortunately I have to say that today's young people have not been prepared to cope with the possibility of a Depression-like unraveling. They have been mainly prepared to conform. And they have also been incessantly flattered that the future is going to conform to THEM -- their wants, passions, ideas and general wonderfulness.
We've raised a generation of trained seals - trained to conform to a world that will no longer exist.
You'll see a few of the brighter ones ditch the conformity route quickly, but unfortunately a lot of them are going to be easy prey for charlatans and strongmen of various types.
.........white knight for Citi.........Alwaleed Plans to Boost His Stake in Citigroup to 5%....
.........http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aIaq0ZvEbRyc...................
My opinion - and everybody is entitled to it, of course - is that it makes little difference what Bernanke does in this situation. By 2007 the problems were completely baked in. Bernanke may have tools to partly ease a normal recession and may think he has tools to loosen credit, but he has no game against credit collapse and debt deflation. And Hank is simply a looter; he ought to head for Somalia when the administration changes.
"I understand the Federal Reserve Chairman Ben Bernanke is considered something of a sacred cow, our one point of light in an uncertain world. An academic who cannot be questioned by other academics. A smart person who has mastered the Great Depression and therefore knows what to do, and is providing the leadership to do it."
That there are people out there who actually thought this is the problem.
B.S. Bernutty is a know nothing navel gazing Keynsian, who couldn't get himself out of a wet paper bag intellectually.
Why anyone should think otherwise of ANY one championing central planning of ANYTHING is beyond me.
@Mal,
Post Modern higher Education has been subverted to be more Technical Education and less Classical Education where one is taught to think. The problem is most of the people who believe they have rejected conformity still do not know how to think, let alone think on their feet.
Balance sheets aren't transparent. No one knows who is broke, and who isn't, and Benanke never demanded a come-to-Jesus accounting.
None of the players are transparent. I watched the Big 3 execs, the UAW, and the Republicans on TV, then I saw wonderboy Andrew Sorkin debate a Detroit guy on Charlie Rose last night. One thing I figured out. The wonderboy didn't have his figures right, and it became clear he had a hidden agenda. So, obviously, does Paulson, who's letting his buddies back the truck up to the Treasury and hoover out every last dollar. Everybody has a hidden agenda, and nobody knows who to believe.
Someone said earlier, we need a bank holiday now. Yup. Financial crises--unlike economic crises--simply aren't that hard to fix. You just have to be willing to separate the lambs from the goats, and consign the goats straight to hell. But our leaders' solution is instead to give the goats lambskin suits.
Transparency hasn't been part of American culture for quite a few years. Everybody is allowed to spin. Reporting doesn't need to be accurate, just "fair and balanced."
Now the most valuable asset in any market--trust--is gone.
Mal: My favorite Alvin Toffler's The Third Wave quote: Mass education taught ... covert curriculum ... of three courses: one in punctuality, one in obedience, and one in rote, repetitive work.
[This is one reason to homeschool, to raise non-conformist citizens....]
Comments on CR have grown steadily more doomish as the days go by. Does anyone think CR could become a contrarian indicator, or are we all still too well informed for that to be the case?
IMO, a quickening of info in the 21st century has made it so everyone will know they are heading into hard times even before they begin to really suffer.
As for the comments of the depression era survivors, we are not the people we were in 1929. Needless to say we are not ready to handle what those folks had to handle. I say, God help us, and I am an anti-theist!
Once the trick has been revealed, it doesn't matter how much more gold paint you slosh into the system - you can't make the "wealth" come back.
There's a reason why there's so much gold paint flowing around.
Nobody is pretending the wealth of the working class or middle class is coming back soon. Everybody knows they're screwed.
It's the wealth of the elite that's still being protected. The rich have always had most of the money. Now they have pretty much all of it. And they aim to keep it.
This is a fool's errand. Our distribution of wealth upward is without parallel unless you go back to, yes, 1929. The Depression flattened the distribution by destroying the wealth of the rich. This needs to happen again for recovery to occur--the fake wealth of the rentier class must be openly destroyed.
This process gets just a little bit harder when the rentier class owns the Treasury, the Fed, Wall Street, Main Street, Washington and the media, however.
The True Policy of the Federal Reserve is and always has been: the transfer of wealth to the elite. Bubble followed by collapse is a deliberate matter of policy. Same as in 1929.
I sound like an automotive industry lackey but I really think yesterday was huge. Sending the Medium 3 home with out money is going to be seen in time as a historical turning point. Equivalent to going into Iraq. I know, it seems laughable to compare the two.
Yet, I really believe it will be seen as a turning point, not just for the economy, but for America. Why? Because they are going to fail. When they do the results are going to be far reaching and ugly. It will also signal the end of an era, a mindset, and a culture.
Higher education has become too complex. What was once a laudable impulse to admit the truly bright of all backgrounds into the social elite - via college - has become a general piling-on. The problem is not so much that smart people aren't getting in to school (except for the very poor) but that too many mediocre people are getting in now. (And not even paying for it - borrowing and defaulting - which is distorting the system further.) A lot of energy is being expended for little lasting value. I was watching a TV show the other day where two college men didn't even know where or what Cambodia is. It makes you wonder what ELSE they don't know.
The coming implosion of the higher ed industry should be interesting. I say that with trepidation, of course, since I'm part of it.
I disagree strongly with this assertion.
Somehow we've come to this idea that young people are suddenly taught to conform.
HOWEVER: this has been this way for time eternal. conform or die.
what do you think people were like in 1900? do you think it was encouraged to challenge the church? to come out as gay? to leave an abusive relationship? to leave your family and set out on your own? of course not. Kids of the early 1900's were little conformist drones.
what has changed is the standards to which they conformed vs our standards of today. the "greatest" generation had a strong preponderance of christianity, frugality, charity, humility, and other traits too numerous to describe.
and they had these traits out of NECESSITY.
but the roaring 20's were nothing like that. The 30's had a way of doing that to people.
the same will happen again. the current crop of kids (which by the way extends from age 0 to about age 60 or so) have a culture of "me first" and also consumerism. JUST LIKE those people of the 1910-1920's.
but if times change quickly, so will our kids.
will they replicate what was done in the 1930s? quite possibly. or what was done in Rwanda? also possible.
but I find this idea that people of times past didn't conform to be hilarious at best, arrogant at worst.
ps when I said higher ed is too complex, maybe I meant it has become too specialized to give people true coping skills. It could be that a crisis would give certain individuals the chance to exercise talents that have been suppressed by the march to conformity. but that's what a refined education was supposed to do in the first place; not "mold and prepare" students to "take their places" in phantom industries like green tech, which was supposed to take over the world while the lower classes cheerfully served us coffee.
Higher Ed is doing exactly what public schooling is supposed to be doing: keeping the rabble in check, in line, and committed to conformity. Industrial and post industrial societies need large sections of society to be ready to pee into cups on demand. Plus higher ed postpones the entry into the job market of same section of society. Between that and the military, you got the unemployment numbers covered.
All the lip service to independent thinking or higher order thinking is just edu babble for knowing where to put your no. 2 pencil bubble.
Yes and the people of the '30s also subscribed in great numbers to -isms like fascism and communism. And went off to fight wars -- not all of them "good" -- in great numbers. I think there's been a lot of priming for that going on.
OK, I can't believe at this point I still need to explain this. Bernanke was speaking in honor of Milton Friedman when he made the helicopter comment. This was appropriate, for those who missed the point, BECAUSE HE WAS QUOTING MILTON FRIEDMAN! "Helicopter Ben" was the result, but it was the result of the mindless quest for a snappy sound bite. It is, to anybody who knows anything about the progress of economic thought in the 20th century, Friedman's Helicopter.
For good or for ill, Bernanke has demonstrated leadership all over the place at the Fed. Liquidity facilities. Expanded collateral for borrowing at the Fed. Quantitative easing, whether mentioned in the minutes or not. Telling Congress the Fed might begin to ease before inflation had peaked (as it nearly always does, by the way, but Bernanke had the spine to actually say so. Transparency, you know.) I just don't understand people who are more impressed by the impression of a resolute voice and a fist thumped on the hearing room table than by real decisive action. That elevation of surface over substance is, after all, a big part of what got us 8 years of W as president.
And thanks, by the way, to sdtfs for having something sensible to say about the Duy article. There are situations to which there are no good solutions. There are times when muddling through is the best you can do. Sometimes, huge mistakes are made even with the best of intentions. Is any of these true of the present situation? I don't know. Neither does anyone else commenting here.
The strongest large banks have been forced to pick up weakened banks and their toxic assets, until no strong banks remain. JPM picked up BS and Wamu. BAC picked up CFC and MER. WFC picked up WB. No strong large banks remain. What idiocy.
BB should remember the medical principal. "First do no harm."
Now it looks like he is embarking on a QE exercise. See long bond yields down and gold up as the markets begin to suspect his plan to flood the economy with dollars. Where is Paul Volker's good sense when it is needed.
I've likened our current situation to terminal lung cancer.
the treatment was to never smoke. once you have terminal lung cancer, there is nothing that can be done.
so the doc might do chemo and radiation as PALLIATIVE measures, or they might try experimental treatments just to see, or just to plain old supportive care. but the patient will die or live on their own.
when they do die or live on their own, many laypeople blame the doctor, and offer up other things that "could" have worked (like accupuncture or herbal meds or alternative medicine as example). but there really is no solution
the solution was to never smoke.
the only flaw in my analogy: in this case the doctor helped give the patient cigarrettes the 5 years prior to diagnosis.
If I could go back and give my thirteen year old self some advice, the main thing I'd tell him would be to stick his head up and look around. I didn't really grasp it at the time, but the whole world we lived in was as fake as a Twinkie. Not just school, but the entire town. Why do people move to suburbia? To have kids! So no wonder it seemed boring and sterile. The whole place was a giant nursery, an artificial town created explicitly for the purpose of breeding children.
Where I grew up, it felt as if there was nowhere to go, and nothing to do. This was no accident. Suburbs are deliberately designed to exclude the outside world, because it contains things that could endanger children.
And as for the schools, they were just holding pens within this fake world. Officially the purpose of schools is to teach kids. In fact their primary purpose is to keep kids locked up in one place for a big chunk of the day so adults can get things done. And I have no problem with this: in a specialized industrial society, it would be a disaster to have kids running around loose. ...
Adults have no immediate use for teenagers. They would be in the way in an office. So they drop them off at school on their way to work, much as they might drop the dog off at a kennel if they were going away for the weekend.
What happened? We're up against a hard one here. The cause of this problem is the same as the cause of so many present ills: specialization. As jobs become more specialized, we have to train longer for them. Kids in pre-industrial times started working at about 14 at the latest; kids on farms, where most people lived, began far earlier. Now kids who go to college don't start working full-time till 21 or 22. With some degrees, like MDs and PhDs, you may not finish your training till 30.
Teenagers now are useless, except as cheap labor in industries like fast food, which evolved to exploit precisely this fact. In almost any other kind of work, they'd be a net loss. But they're also too young to be left unsupervised. Someone has to watch over them, and the most efficient way to do this is to collect them together in one place. Then a few adults can watch all of them.
Substitute "college" for "high school" and "kids" for "unemployable young people" and by Jove I think you've got it.
(and anyone who works in higher ed knows that babysitting services for these 18+ year old "children" known as college students are getting more popular... they call them "amenities" and "prevention programs" etc)
k harris, you're living in a delusional world. We're in Kondratieff winter, and have been for many years now. Fed policy is aimed at staving off the inevitable bust, but they can only do it by creating new money, bebasing the currency, and in the process transferring massive amounts of wealth away from the middle class. That is the primary purpose of the Federal Reserve system. They create the bubble, then gain massive political support to try and stop the bust. In the process they enact policies that transparently enrich the elite. They get real assets while the middle class is destroyed. We are currently in the middle of the period they spent decades building up. This is where the rich really get rich. And yet we still have pathetic fools worshipping the Federal Reserve system. You people make me sick.
YTL,
I think your last post hit on my feelings about this downturn.
Some sort of downtown needed to happen - our financial markets, culture and attitudes were built on unsustainable growth, which was fueled by excessive debt. Now that we've reached this point, there is very little anyone can do to "make it all OK."
It is highly likely, given the advancements in technology since the GD, that, even if this is GD 2.0, it will look much different than the GD. Either way, the structures, models and companies that are left standing on the other side will be stronger.
Will the transition be painful, maybe even fatal, to people and companies - without a doubt. Is this a good thing - no. But at this point, it is too late to do anything other than try to make sure that you are one of the people or companies that is still standing on the other side.
To expect a government bailout to save you, suggests that you probably aren't in the best position to be one of those surviving people or companies.
there is a strong inherent desire in the human animal to conform. this starts immediately by the way (right at birth)
as time goes on each human can make their own decisions about how far or little to conform.
to what they conform depends on their environment and genetics then.
in the roaring 20's consumerism was in, so that's what people conformed to.
in the 30's austerity was necessary, so that's what people conformed to.
today it's consumerism again... hence we conform to that. but it is not education's "fault" in and of itself.
I say this because we have all been educated similarly and also differently. I went to a "top" school, and at that school you could major in "water" as example or "lesbian studies" or you could make up whatever major you wanted (although it had to be rigorous). one of my friends majored in "green" (it focused on living a sustainable existence, and this was 20 years ago when the movie "Wall Street" was all the rage)
Majoring in lesbian studies or "green" or "water" will hardly make you conform in the way you all throw this around. sure, it made my lesbian friend conform to the ideals of lesbianism I guess, and my green friend conform to the ideals of sustainable living... but it's not what you're talking about.
you're hating the tool.
the problem is that kids are taught BY THEIR PARENTS to conform and NOT take things like lesbian studies and "green" and "water". instead take Econ or go PreMed or PreLaw.
answer honestly: how many times have you shook your head at a "poly-sci" major?
Higher ed
In the Soviet Union, they had a saying: "they pretend to pay us, and we pretend to work".
In higher ed, I agree with Yearning to Learn, and I think this is the scenario: "we pretend to conform, and they pretend to teach us". In other words, what the students are learning very well is that the schools (and our other institutions) are corrupt. This is a necessary step toward the eventual overhaul of these institutions, and these young people "taught to conform" are the ones best placed to do the overhauling.
Your precious pen name bespeaks an emotional need to seem transgressive, to stand out from the crowd. "Wow, look at Iconoclast! I'm all original in my thinking. Everybody who isn't original just like me makes me sick." And, no surprise, your comment seems to show the same need. Well, I hope the pose helps you through the day.
It is the pre-med, pre-pharm students I find the most CONformed. And the most uneducable. And the most suffering from the assumption of their own worth. I had a pharm senior (native speaker; went to "good" high school; made "a's"--I looked it up!) yesterday turn in an 8 page ethics paper that was completely unreadable. I mean, on the sentence level: unreadable. On the paragraph level: unreadable. Unrecognizable as English. On the meaning level: what meaning? This is not an isolated data outlier. This is the norm.
Well, the Fed's power has been underestimated by many who lived to regret it. The Fed could buy all the bonds in Christendom (and Islam-dom and ...) It does not because ... (take this as homework).
1st
125 visitors stuck on an old post. Must be interesting.
Hormigas y Cucarachas
YouTube - Japanese ATM
A leader in that kind of position needs to look and act like he's absolutely confident of what he's doing. Even if he's scared sh**less on the inside.
Bernake just seems... timid. He doesn't seem to have the temperament for the job.
Dr. Dah,
Anyone with an ounce of common sense can see that we are where we are because of the federal reserve. A lot of blame is pointed at Greenspan but don't forget the last couple of years of his tenure Ben Helicopter Bernanke was Greenspan's right hand man. His helicopter comment is just one reason many people concluded a long time ago that he was completely ignorant to what was going on.
I have more confidence in Calculated Risk... even though he's just a riddle, wrapped in mystery, inside an enigma, sitting at a computer.
Whoooooooocodddddanode!
CR is too gentlemanly to excerpt this, but I'm not:
Simply put, debates about the Fed Funds target are nothing more than academic masturbation.
and
The alternative is what I suspect Bernanke cannot elucidate a coherent policy strategy to his organization because no such strategy exists. What does exist is a potpourri of policy responses that amounts to providing liquidity at all costs, the outcome of Bernankes research on the Great Depression. Beyond this, the Fed is stuck in a netherworld of dual policy targets not ready to admit the loss of the interest rate target, not ready to adopt a formal policy of quantitative easing.
Prof. Duy thinks that there is a solution, but it's not clear to me why there must be a (relatively) easy one. I don't have the academics confidence that assets over-priced by trillions of dollars can be evaporated without a huge blow-up.
Honestly if he had a plan wouldn't it be apparent? I know he was supposed to be this depression specialist but come on, everything for months has been confusion and missed opportunity. I'm not saying that he's stupid by any means, but perhaps what "has" to be done is not something politically viable or something the treasury sec. will go along with.
Bernanke got screwed.
The guy is still new on the job, the economy falls apart, and Wall Street and Paulson tell Bernanke "listen to us, we know what to do".
Bernanke, instead of falling back on his academic training, panicked and started giving free candy to Wall Street. Once he started, he didn't know when to stop throwing good money after bad.
The poor guy let Paulson talk him out of everthing the Fed had. Once the dust settles he is going to realize he was played like a flute.
Bernanke just seems... timid.
This might be why he backed the TARP - Paulson and others dictated a policy that conformed with their ideology and/or interests, and he dutifully followed along. And now he's stuck because to say "Oops" would throw everything into chaos, and a new policy won't have executive support until Jan 21. Thus the public dithering.
Just a theory. Incompetence is usually the best explanation screw-ups.
Thread music seems appropriate:
The B-52's - Legal Tender
We're in the basement,
Learnin' to print,
All of it hot...
I'm more inclined to think that Bernanke took the job, found out that there is no solution, and now is just trying things out because he can't come out and tell everybody we're well and truly screwed. He's got to keep the happy face on and hope a miracle happens.
Sorry, but Bernanke has been at the fed since 2002. He IS part of the problem.
What happens if GS and JPM take those reserves and starts buying stocks and commodities?
I'm too scared now.
Correct. BB also convinced AG of keeping rates low. The Great Depression Theory of his.
Fuck the eminent front. Fuck the "confidence" charade. Government officials should only ever tell the truth.
I'm more inclined to think that Bernanke took the job, found out that there is no solution
But he took the top job back in Feb 2006. Acting then, there would have been an relatively easy solution to the "problem" - whether it was the housing bubble or the credit bubble. Why didn't he do it then?
Ben is a patsy.
Peak VT.
It was the clearest recession call any Austrian Economist could see. The problem was that people were looking at M3 and expecting hyperinflation. Instead the multiplier was going bust.
The narrow money camp spotted it and shorted GS 200 oil call to the ground.
picosec writes:
125 visitors stuck on an old post. Must be interesting.
picosec | 11.20.08 - 1:49 am |
Not being ADD helps. You know, a topic that actually engages you to think rather than being focused on being first/nemo/pig.
I'm sure that by the time this publishes, I will not be the 16th poster but the 70th. Good God, I miss the old days.
Timidity often occurs when semi-rational people meet sociopaths, who are rational to the extreme.
They should have done the new,new TARP a year ago during the 1st credit crunch: dilute out current shareholders by stocking up on preferreds dollar for dollar, give everybody 10 minutes to explain why they shouldn't be fired, go into quasi austerity mode.
Strongly suggest that anybody even thinking about applying to the TARP at any time needs to put all bonsuses into escrow for Sept 1 07 forward, accessible after a year.
Offer horrible terms so the bastards have to right their own ship and not game the system.
Bernanke is bailing with all four limbs While Lurch fiddles @ the treasury.
Hell of a job Bernanke!
"read it all"
Don't need to. "Buddhist economics" and " The Great Reckoning" already said it. Our modern economic system is founded on several assumptions about human nature and reality that fail under certain conditions.
The system has become increasingly bizarre and disconnected since the early 1990s.
A gold standard doesn't stop bubbles are delusions but it makes it goddamn hard to grow them so large they destroy the entire financial system. You need paper money to do that.
Anyone who knows banking and knows the history of the Depression knows that the current crisis was tailor made for an FDR type Bank Holiday whereby the solvent were maintained and the insolvent liquidated.
Didn't Bernanke study the banking crisis during the Great Depression ? So why didn't he clean up the banking system with a bank holiday or Swedish Plan? Cronyism at its worst.
Come to think of it ...
Why haven't all the Economic Blogs been exploring FDR's Banking Holiday or the Swedish Plan ?
There have been a few articles but really, where's the beef ?
The reason Bernanke does not know what to do is that he based his entire academic career and study on a perfectly flawed assumption.
Clowns like Bernanke think the errors that lead to the Depression were policy moves committed in the 30's. In fact, the error that created the depression was the unsustainable credit boom, and associated speculation, etc, that ocurred in the 20's.
The current situation is laying to waste the FED arguement that you should not stop bubbles, but just clean up after the fact.
But what do you do when the whole system is a bubble. Emerging market debt, internet stocks, RE, bonds...these were all bubbles that occured within the framework of a giant all encompassing credit bubble. The collapse of that bubble is, literally, the collapse of the system.
There is only one solution to this problem....don't create it in the first place.
Professor Stiglitz' on "Financial Alchemy"
The Big Picture
How It Was Way Back When
Some might see it as ironic that most of those with insights on how to cope with the sort of unraveling that is taking place now have moved on to the next life.
Nonetheless, there are some people living nowadays who were around 80 or so years ago. Individuals who understand what it's like to live in dire poverty. Who know how to scrimp and save. Who are familiar with the social consequences of a calamitous downturn in the economy.
In "Memories of the Depression Still Sear," the Wall Street Journal speaks with a few of these old-timers about how it was way back when.
As hard times return, witnesses to the 1930s recall lessons they learned
When the Great Depression hit, people came to the front porch of William Hague's home near Pittsburgh pleading for food. One well-dressed young woman asked Mr. Hague's mother if she would hire her for $2 a week. Why would she work for so little? his mother asked. "We have nothing to eat at home," she replied.
Mr. Hague, 89, was just 10 years old during the Crash of 1929. His father was a prosperous small-town lawyer and the family led a relatively privileged life during the Depression years. Yet even as Mr. Hague found success as an editor and author he says he remained careful about food and money. He monitors the news intently, on the lookout for signs of "trouble." Now that trouble has come, he says he wonders if younger generations have the mettle to survive tough times.
"We had unlimited prosperity for more than 60 years," says Mr. Hague, who lives in an independent senior residence on Manhattan's East Side. "I don't know if people are ready for hard times."
There are 11.5 million Americans who are 80 and older, according to the U.S. Census Bureau. The period from the Crash of 1929 to the start of World War II shaped their lives, affected how they raised their children, and influences their reactions to today's economic turmoil.
The memories aren't all negative. For many, President Franklin D. Roosevelt "was like a god," recalls Mr. Hague, and there was hopefulness amid the desperation. "People had confidence in the American way -- which I am not sure they have now."
James Dickinson, 87, is Mr. Hague's friend and neighbor at the James Lenox House. Mr. Dickinson once worked on Wall Street, and for him the recent stream of economic calamities has been like watching a "horror movie," he says. "The horror is the people being pushed into unemployment," he says. "Bank managers, mutual-fund managers, hedge-fund operators, technical support people -- the horror is there are no jobs for these people."
Mr. Dickinson also grew up near Pittsburgh, but in an impoverished household where his widowed mother had to scrape by with help from relief. As a boy, he would accompany his mother as she stood on lines to get government food relief. The supplies were barely enough to live on: powdered milk, dried fruits, margarine, raisins, he recalls. Often, he found himself with men who had lost jobs in the steel mills and were devastated at being dependent on handouts.
Mr. Dickinson went on to work in Wall Street brokerage houses, he says, and retired as a manager of human resources. He says during the last five years, he annoyed his friends with repeated warnings that a day of reckoning was coming.
'This recession is like a picnic compared to what we had back then," says Dorothy Womble.
Mrs. Womble, 89, lives at a residence for low-income seniors and the disabled in New York's Harlem neighborhood. She grew up in a small house on a dirt road in Winston-Salem, N.C. People around her were so poor, she says, "They couldn't even get money to get seeds" to plant vegetables.
She can still picture the strangers who wandered through with nothing but a bundle on their backs. Her family also struggled, though her dad was able to hold onto his job on the railroads. Even so, says Mrs. Womble, no matter how little people had, they shared it with one another -- and that is one of her defining memories of the period, as much as the dire poverty. Her mother, for instance, used to share precious supplies of flour.
When FDR was elected in 1932, there was a "big jubilee" in the neighborhood, Mrs. Womble says. "It wasn't a big celebration like it was on 42nd Street" in New York this year, she says. But when people heard Roosevelt became president, "everybody came out and they were laughing and clapping their hands."
Her neighbor at Logan Gardens, Gloria O'Loughlin, 88, was a girl in Harlem during the Great Depression but has the same memory of people giving each other what they could. "If you were sick, they helped you. If you were hungry, they'd feed you. That was the Harlem I knew," she says.
Ms. O'Loughlin, one of the first women to drive a yellow cab in New York City, was born in Harlem and says she plans to die there. The Depression hit the neighborhood hard. While unemployment in the U.S. was about 25%, it was closer to 50% in Harlem. All over the streets, she saw men selling apples for five cents each.
At home, there was barely enough to eat. Her mother baked "Johnny Cakes," a kind of pancake made with flour and yeast and served with butter. It was a way to fill an empty stomach and stave off hunger. "You got used to eating what you got," Ms. O'Loughlin says starkly.
To survive, her family received a form of welfare that entailed standing on lines for supplies. Simply being on the line was embarrassing, and she and her sister used to argue about whose turn it was to go.
Marion Leonard, 99, was shielded from the worst of the Great Depression. Still, in 1931, she took a sailing trip around Puget Sound on a yacht belonging to her husband's uncle. From the boat, she could see hordes of unemployed men standing at the dock staring and staring at her. Ms. Leonard recalls she ran and hid in a stateroom out of embarrassment. She also witnessed great poverty as she drove across the country with her new husband in a $100 Ford.
Ms. Leonard still recalls how kind people were as she and her husband drove from town to town -- people were anxious to rent rooms for a couple of dollars, both because they needed the money and because they wanted to help. The experiences helped compel her to devote her life to social change and environmental activism.
Now, living in Vermont, she thinks only someone in Roosevelt's mold can rescue America from its slump. "I keep thinking, why doesn't someone do what Roosevelt did -- shut down and start from scratch and give everyone jobs," she says. "He put a lot of people -- young people, older people -- immediately in jobs. There were artists painting murals inside post offices and young kids out in the woods clearing away the brush."
Farmer Richard G. Hendrickson, 96, has been predicting another Great Depression for years, even decades. He warned family members and friends that America's profligate ways would bring back the hard times he had experienced in the 1930s when he watched his father almost lose the family farm.
He repeated the dire prediction so frequently, says his wife, Lillian, 90, his own children thought he was "getting old."
Mr. Hendrickson lives today on a farm in Bridgehampton, N.Y., a short walk from the one his family nearly lost. He can easily conjure up the day seven decades ago his dad faced financial ruin because of debt he had incurred on the farm. Three men in fancy "business suits and vests" descended on his family's property: The president of the local bank, the president of the lumber company, and the head of the feed company.
With his father in the room, the men sat silently in the living room for what "seemed like an eternity," Mr. Hendrickson says. Though shy, he decided to make a bold personal appeal. "If it makes any difference, I like outside work," he remembers saying. "And I think if we are given some more time, I believe we can keep our head above water and make the farm pay." He then stood up and walked out.
His father later got a loan from a bank in Springfield, Mass., he remembers, and the farm stayed with the family.
Bridgehampton, Mr. Hendrickson says, was a farming community so breadlines weren't an issue. Even so, there were signs of widespread misery. At one point, he recalls, the government set up a Civilian Conservation Corps encampment about a mile and a half from the farm. Men of varying ages lived in communal housing and were given jobs as part of Roosevelt's efforts to get the country working again. The men, who typically wore overalls, were a moving sight, and stood out in the small farming community.
One Sunday, he and his first wife picked up one of the CCC workers and drove him to church. He told them he had come all the way from Michigan.
Long after the Depression, Mr. Hendrickson worked as if he were about to lose the farm. For years, he worked seven days a week, his only son, Richard H. Hendrickson, 68, says. The elder Mr. Hendrickson worked day, evening and night.
Mrs. Womble's son, Larry Womble, believes that his mom's Depression-era experiences, as well as those of his grandparents, deeply influenced the way he was brought up. Being frugal was a cardinal value, as was avoiding excess. But so was sharing with those who had even less.
"As a little boy I used to hear them in the room talking about how they were able to survive the Depression," says Mr. Womble, a Democratic state representative in Winston-Salem. "We shared whatever we had. When people didn't have rent money, we took up donations and helped them pay the rent, when someone died without a burial, we took up a collection."
His grandparents and mom would often cite a favorite proverb: "They used to say, 'Even in good times, a squirrel will hide his nuts because wintertime is coming.'
Financial Armageddon: How It Was Way Back When
Past time to be talking. Time to start preparing.
Oh my. Take a moment and consider the 3-month Treasury Bill (IRX) and you'll notice the yield reached its recent high on 10/21. From 10/21 on, the yield has taken a dive from the overwhelming demand. What day is 13 weeks from 10/21? 1/20/09 -- Obama will be in a precarious position from day one!
Times of Malta.
As car sales plummet, one UK website is offering 2 for 1 car deals on new autos.
Simon Empson of Broadspeed.com launched his novel idea earlier in November a 2 for 1 deal on Dodge Avenger SXT 2.4i models for 20,000 pounds (30,000 USD). He said the phone rang off the hook, his website crashed and he was sold out within four hours. He is repeating the offer in another campaign, with the Kia Magentis, hoping to achieve the same sort of success.
timesofmalta.com - Articles
Thoughts everyone.
I'm optimistic that the US will be able to feed, house, and clothe it's citizens because the resources are available.
However, I think it's obvious that the potential exists for things to get much worse than they were during the great depression.
IIRC somewhere around 30% of the population lived on small farms during that time. I don't have statistics(would be interested if anyone does), but I suspect a large portion of those farms had zero mortgage debt.
People that are unleveraged and somewhat self sufficient ARE the safety net for the society as a whole. These are the people that can continue their day to day work no matter what happens to the banking system, interest rates, credit availability, etc.
These days the vast majority of the population is highly dependent on complicated systems of production that are interlinked by our system of credit.
The potential for the supply of essential goods to drop in the face of abundant resources and demand(including demand by those that can no longer pay) is much greater than during the great depression.
It's fine to have hope, faith, and/or optimism that this downturn won't be as painful as the great depression, but only a liar or a fool would make the case that our advanced, productive economy is immune from widespread starvation, social unrest, etc.
First, there was no "solution" to the great depression - maybe the government made it worse (I don't know). Massive malinvestment occured (stock bubble) and lots of money was lost. Long story short - same thing this time. I don't think government can make it better, although I believe it can make it much, much worse.
My not so unique insights from 35 years experience in the federal government is that managers fail to explicitly say what they are doing for several reasons:
The Fed's problem is that the whole concept of a Fed Reserve is bogus. It is based on politics and not science. For a time, the Fed can choose winners and losers, but, they can never explicate what they are doing.
I'm sorry for our republic.
What I've noticed in the last 10 days roughly is that state Fed commentary is increasingly independent, ie off message. Hoenig, and yesterday Kohn and Lacker spring to mind. No wonder the FOMC minutes have that series of "some members" clauses.
Lacker was particularly interesting, saying liquidity is not the problem, but creditworthy borrowers were in short supply. Have to agree. Link's on kaboomberger somewhere.
In it's own way, the Fed, qua members, are criticizing the current plan. Does that mean unity or a coherent policy? No, not at all, but Duy is quite right on confusing statements. However the question then becomes why, to what end, and what's the alternative? I suspect Duy's call for specific bond target announcements would be a bridge too far, largely for the reasons that Kohn alluded to yesterday; caution, debate, data quality, modeling confusion, impact of intervention, negative collateral consequences and trade-offs. These are fairly compelling constraints for quasi central bankers wanting to get it right if they act.
The problem may be, however, that the Fed internal conversation, and the public conversation, have both reached their limits of utility and persuasion on current methods, and either or both of the absence of a forward policy or just its perception have taken hold. And then there's the dissonance with the Treasury.
That'll play so nicely internationally.
CC
So the good professor catches up to what people who were paying attention figured out years ago.
And too, Federal managers just plain lack the courage to tell the truth. I've never lost a job for lying, cheating or stealing, although I've done all three. I've lost several for telling the truth.
In the final analysis, it's the character not the intellect of the fed members that has failed us. However, well it has done for their friends.
What's a republic?
"Bank managers, mutual-fund managers, hedge-fund operators, technical support people -- the horror is there are no jobs for these people."
Is this facetiousness?
OK, maybe I forgive the technical support people, because I am one. But the others don't have the luxury of the Good German defense. They weren't just following orders. And even if they were, they had the freedom to do otherwise, and chose not to.
Today, I have no tears for mutual fund managers.
kidbuck - there's a Yes, Minister episode which captures this well, in which Sir Humphrey runs this series of lines, from memory:
Hoocoodanode!?
I missed adding accompaniment to the previous comment:
YouTube -
CC
americans can always sell readymade homes to indians and transport it here.it will reduce their forclosed properties. ha ha
Comrade Counterpointer, good find. I think I'll frame that for my office wall. If it weren't so true it wouldn't be so funny. Perhaps this is why so many of our leaders are humorless.
They fear being the butt of a joke above all else? Even above the destruction of the country, one suspects.
"Bernanke is an idiot" - Jim Rogers
YouTube - "Bernanke is an idiot" - Jim Rogers on Bloomberg 2008.01.18
Virtually no one in the CR discussions saw Bernanke as infallible from day one.
The problem is indeed that Benanke isn't pursuing a coherent policy. As Poole says, the Fed is trying to "force lots and lots of reserves into the banking system with the expectation that banks will start to trade them for a higher-yielding asset,". But, with interest rates artificially low, asset prices remain inflated, meaning banks know they will fall eventually, meaning there is nothing banks can count on to be higher-yielding, so they are forced to sit on their money. The Bloomberg article mentions this in passing; when central banks adopt quantititative easing policies (a euphemism for inflation) they normally abandon interest rate targets.
Bernanke is trying to maintain elevated real asset prices (which require low real interest rates) and to inflate (which requires high nominal interest rates) and in a liquidity trap that's impossible. This wouldn't be a desirable combination of goals outside of a liquidity trap either, because keeping real interest rates low in an inflationary environment would produce a rapid acceleration of inflation and quickly move us to the point that inflation became a big problem.
It's strange that a compentent academic like Bernanke would thrash around so. Dr. Duy does a very good job dissecting Bernanke's apparent policies, or lack thereof. Great article.
I thought I hit pause on the economic disaster pr0n before I went to bed, but there's even more red numbers than before. Oh, well.
Yesterday morning I said that it was going to be an ugly day. A turning point, ugly kind of day. While not truly exceptional in some ways; it was in one way historically. The Big Three went back without the bailout.
Today is going to be ugly also. Very ugly.
PeakVT - bring up the Asia stock numbers on kaboomberger and you'll see virtually nothing but red.
ASX is interesting. Financials pounded, understandably, but mining too. So... retreat from mining, which is a call on primary factor inputs to stuff that gets made with metals, which means projected demand must be tanking for light industrial products and capital goods / heavy plant, plus dryships collapsed yet again, umm... where does much of this stuff get made these days? Remind me who buys it?
Bloodbath.
CC
Saudi Arabia is green! International Markets Home - Markets Data Center - WSJ.com
PeakVT - what a relief. Those futures numbers should turn right around.
Oh wait.
CC
Benanke is just puppet .
Comrade Counterpointer(Excellent) writes:
What I've noticed in the last 10 days roughly is that state Fed commentary is increasingly independent, ie off message. Hoenig, and yesterday Kohn and Lacker spring to mind. No wonder the FOMC minutes have that series of "some members" clauses.
Agreed. About to run, back shortly, but -- there's definitely a revolt of sorts going on.
I don't know if they're trying to force Ben's hand or stake out their own turf as people who "called" it or just feeling like they have to seek their own destiny on a rudderless ship. Definitely some kind of public punctuation to the previous context tho.
Date \tET \tRelease \tFor \tActual \tBriefing.com \tConsensus \tPrior
Nov 20 \t08:30 \tInitial Claims \t11/15 \t??\t505K \t503K \t516K \t
Nov 20 \t10:00 \tLeading Indicators \tOct \t??\t-0.7% \t-0.6% \t0.3% \t
Nov 20 \t10:00 \tPhiladelphia Fed \tNov \t??\t-30.0 \t-35.0 \t-37.5
watching the futures just slays me
watching the futures just slays me
Had a little BatSignal(tm) between 3 and 4 am.
Watch for creative new words....
My US Culture is so VAIN....If no answer, Create NEW WORDS....
Any other shorties getting concerned the government may step in (ala September's NO SHORTS FOR YOU) rules and cause an artificial spike here?
even though i am bearish, and an admittedly crappy trader, i gotta think the risk:reward on the short side is outta hand right here.
unrelated: i cant believe the relatively small amount of attention being given to C right now.
A bit of unintentional headline humor:
NYT: Stocks Are Hurt by Latest Fear: Declining Prices
Could the long bond yield be crashing partly because the Fed itself is printing money to buy them? Bernanke said he would do that if necessary.
.........any Gm update?..............
Zoom: thanks for the posts. I have one depression era relative still alive, and she tells how she got a clerical gov't job when she was 18 and provided for an extended family of eight.
People are much different today. Our welfare society has created people who stay at home and raise families on the gov'ts dollar, no incentive ever to work or share.
Public works projects? Please. Lets see 15,000 mortgage brokers go build a dam in the Arizona sun.
We are really screwed. Expect repeated stimulus packages with money that isn't there. More debt to fix the problem of too much debt. That'll work.
Sheik was just on CNBC saying he was buying back C shares.
.........any Gm update?..............
Still making shitty cars? (check)
Still paying too much for labor? (check)
Still flying private jets? (check)
Still not planning for BK? (check)
Sheik was just on CNBC saying he was buying back C shares.
Averaging down.... it's not just for breakfast any more!!
........Eric,,,thanks a lot...
The comments to the article make a good point: there's no clear definition of quantitative easing that I have seen. Some seem to refer to it as a catch-all phrase for liquidity measures once the Fed Funds rate hits zero, others seem to limit it to printing money to buy bonds.
GM's cars are above average in quality and have been for over a decade. They are way ahead of Nissan and in the ballpark with Honda (they were ahead a few years back, although GM has slipped some lately). My husband notices the "Japanese car delusion" at work all the time - his coworkers keep having major repairs and recalls on their Japanese cars all the while talking about how great their quality is. The gap between Detroit and Japanese quality is marginal but people's beliefs haven't caught up to reality. No doubt this is because cars in general have become quite good, so foreign car buyers never bother to learn that domestic cars have improved so.
"People had confidence in the American way -- which I am not sure they have now."
Good point.
The 'American Way', or at least our old-school perception of it, has become so distorted by the last few decades of political clownery. Leaders interested in nothing more than their legacy & lining their own pockets. Washington hijacked by Wall St.
What I was truly disappointed in (but not surprised by) is that almost all incumbents were reelected.
Could the long bond yield be crashing partly because the Fed itself is printing money to buy them? Bernanke said he would do that if necessary.
It's possible, although if Bernanke is inflating he should announce it. Otherwise, when the news gets out, we get a "casino effect" where there's a increased transfer of wealth from those betting on deflation to those betting on inflation, creating unnecessary and wasteful bankruptcies and belt-tightenings, like what you see with a default with CDS consequences. There would still be a casino effect if the policy is announced; but milder because we wouldn't see an initial fall in bond rates.
"As car sales plummet, one UK website is offering 2 for 1 car deals on new autos."
We hardly use the one we have, a 2004 Civic with 28 K on it. We live in DC, which has an adequate public transportation system. It's seldom necessary for us to go more than five miles from home, and when I occasionally go 'downtown' I never drive.
Public transportation infrastructure needed?
I see a distinct lack of leadership from the Federal Reserve, and it suggests that Bernanke has used up his bag of tricks.
There is no way to make illusions of wealth real.
There is no way to make good on debt obligations by repaying them with fictional wealth.
There is no way to stop insolvency when borrowers have converted real credit in to worthless bubble assets.
Bernanke has no way of conjuring up the wealth that everybody believed existed but in fact never did.
Bernanke has no way of easing the credit crisis or the crisis of confidence because these are crises of trust, created by years of mass deception and betrayal. And there is nothing Bernanke can do to make the lies real.
Any "tricks" necessarily involve further betrayal and deception, and future credit crises.
Ultimately the only way to end the credit crisis is to get rid of the bad debt by taking the losses in a transparent and equitable manner via explicit default, and by only allowing the creation of new debt that can be repaid with real wealth. No more new debt to be repaid by improbable outcomes, clever financial trickery, or periodic pleas of desperation.
The credit crisis will begin to ease when we start making promises we can keep.
The credit crisis will begin to ease once we only borrow things we fully intend to return.
The credit crisis will begin to ease only when we start valuing honesty over economic growth.
Nothing else will restore credit except creditworthiness.
These things are what creditworthiness is.
After working for 15 years in higher ed with day to day contact with students unfortunately I have to say that today's young people have not been prepared to cope with the possibility of a Depression-like unraveling. They have been mainly prepared to conform. And they have also been incessantly flattered that the future is going to conform to THEM -- their wants, passions, ideas and general wonderfulness.
We've raised a generation of trained seals - trained to conform to a world that will no longer exist.
You'll see a few of the brighter ones ditch the conformity route quickly, but unfortunately a lot of them are going to be easy prey for charlatans and strongmen of various types.
.........white knight for Citi.........Alwaleed Plans to Boost His Stake in Citigroup to 5%....
.........http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aIaq0ZvEbRyc...................
My opinion - and everybody is entitled to it, of course - is that it makes little difference what Bernanke does in this situation. By 2007 the problems were completely baked in. Bernanke may have tools to partly ease a normal recession and may think he has tools to loosen credit, but he has no game against credit collapse and debt deflation. And Hank is simply a looter; he ought to head for Somalia when the administration changes.
Ben is also a CHUMP!
Jobless claims........
542.
505 expected.
"I understand the Federal Reserve Chairman Ben Bernanke is considered something of a sacred cow, our one point of light in an uncertain world. An academic who cannot be questioned by other academics. A smart person who has mastered the Great Depression and therefore knows what to do, and is providing the leadership to do it."
That there are people out there who actually thought this is the problem.
B.S. Bernutty is a know nothing navel gazing Keynsian, who couldn't get himself out of a wet paper bag intellectually.
Why anyone should think otherwise of ANY one championing central planning of ANYTHING is beyond me.
Nostrovia,
continuing jobless claims at 4.01 Millio
AC - you've long been one of my favorite CR posters but, even by your standards, that last comment was fantastic.
A clear and complete explanation of why the Fed is powerless to stop the madness, summarized in less than 200 words.
Bernanke can't restore the wealth. Nobody can ... because the wealth was never real to begin with.
It's like a medieval exchequer trying to fool his king by putting gold paint on bars of lead.
Once the trick has been revealed, it doesn't matter how much more gold paint you slosh into the system - you can't make the "wealth" come back.
But don't tell Bernanke - he's too busy drowning the system in gold paint.
Wow, look at the futures ticks and see if you can guess when the initial claims number bomb was dropped.
mal: you are right on, my wife is a professor at an obscure southern university ansd she has observed the very same thing
oh, and since whomever it is that's supposed to do this isn't, then I will:
down goes.... nope, not gonna do it
what mook said
Frasier has left the building?
Nostrovia,
@Mal,
Post Modern higher Education has been subverted to be more Technical Education and less Classical Education where one is taught to think. The problem is most of the people who believe they have rejected conformity still do not know how to think, let alone think on their feet.
CR, great article.
ac, transparency is indeed the key here.
The Fed's purposes aren't transparent.
Balance sheets aren't transparent. No one knows who is broke, and who isn't, and Benanke never demanded a come-to-Jesus accounting.
None of the players are transparent. I watched the Big 3 execs, the UAW, and the Republicans on TV, then I saw wonderboy Andrew Sorkin debate a Detroit guy on Charlie Rose last night. One thing I figured out. The wonderboy didn't have his figures right, and it became clear he had a hidden agenda. So, obviously, does Paulson, who's letting his buddies back the truck up to the Treasury and hoover out every last dollar. Everybody has a hidden agenda, and nobody knows who to believe.
Someone said earlier, we need a bank holiday now. Yup. Financial crises--unlike economic crises--simply aren't that hard to fix. You just have to be willing to separate the lambs from the goats, and consign the goats straight to hell. But our leaders' solution is instead to give the goats lambskin suits.
Transparency hasn't been part of American culture for quite a few years. Everybody is allowed to spin. Reporting doesn't need to be accurate, just "fair and balanced."
Now the most valuable asset in any market--trust--is gone.
Can Invaleed save City?
Did you guys see the Op Ed in the journal about how auto bailout would be a free trade disaster?
Whooooa, I believe dubya coined it right! This sucka's GOIN' DOWN~!
Mal: My favorite Alvin Toffler's The Third Wave quote: Mass education taught ... covert curriculum ... of three courses: one in punctuality, one in obedience, and one in rote, repetitive work.
[This is one reason to homeschool, to raise non-conformist citizens....]
More important than GM, it the ability of our multinationals to push product abroad.. the US protecting GM does nothing to help this.
Comments on CR have grown steadily more doomish as the days go by. Does anyone think CR could become a contrarian indicator, or are we all still too well informed for that to be the case?
IMO, a quickening of info in the 21st century has made it so everyone will know they are heading into hard times even before they begin to really suffer.
As for the comments of the depression era survivors, we are not the people we were in 1929. Needless to say we are not ready to handle what those folks had to handle. I say, God help us, and I am an anti-theist!
Once the trick has been revealed, it doesn't matter how much more gold paint you slosh into the system - you can't make the "wealth" come back.
There's a reason why there's so much gold paint flowing around.
Nobody is pretending the wealth of the working class or middle class is coming back soon. Everybody knows they're screwed.
It's the wealth of the elite that's still being protected. The rich have always had most of the money. Now they have pretty much all of it. And they aim to keep it.
This is a fool's errand. Our distribution of wealth upward is without parallel unless you go back to, yes, 1929. The Depression flattened the distribution by destroying the wealth of the rich. This needs to happen again for recovery to occur--the fake wealth of the rentier class must be openly destroyed.
This process gets just a little bit harder when the rentier class owns the Treasury, the Fed, Wall Street, Main Street, Washington and the media, however.
Also, did you see how the "Culture of Machismo" contributed to the crisis.. pretty funny..
hanz and franz with piece from bloomberg
Nothing found for 2008 11 Line-of-the-day-culture-of-machismo
The True Policy of the Federal Reserve is and always has been: the transfer of wealth to the elite. Bubble followed by collapse is a deliberate matter of policy. Same as in 1929.
I sound like an automotive industry lackey but I really think yesterday was huge. Sending the Medium 3 home with out money is going to be seen in time as a historical turning point. Equivalent to going into Iraq. I know, it seems laughable to compare the two.
Yet, I really believe it will be seen as a turning point, not just for the economy, but for America. Why? Because they are going to fail. When they do the results are going to be far reaching and ugly. It will also signal the end of an era, a mindset, and a culture.
Higher education has become too complex. What was once a laudable impulse to admit the truly bright of all backgrounds into the social elite - via college - has become a general piling-on. The problem is not so much that smart people aren't getting in to school (except for the very poor) but that too many mediocre people are getting in now. (And not even paying for it - borrowing and defaulting - which is distorting the system further.) A lot of energy is being expended for little lasting value. I was watching a TV show the other day where two college men didn't even know where or what Cambodia is. It makes you wonder what ELSE they don't know.
The coming implosion of the higher ed industry should be interesting. I say that with trepidation, of course, since I'm part of it.
They have been mainly prepared to conform
I disagree strongly with this assertion.
Somehow we've come to this idea that young people are suddenly taught to conform.
HOWEVER: this has been this way for time eternal. conform or die.
what do you think people were like in 1900? do you think it was encouraged to challenge the church? to come out as gay? to leave an abusive relationship? to leave your family and set out on your own? of course not. Kids of the early 1900's were little conformist drones.
what has changed is the standards to which they conformed vs our standards of today. the "greatest" generation had a strong preponderance of christianity, frugality, charity, humility, and other traits too numerous to describe.
and they had these traits out of NECESSITY.
but the roaring 20's were nothing like that. The 30's had a way of doing that to people.
the same will happen again. the current crop of kids (which by the way extends from age 0 to about age 60 or so) have a culture of "me first" and also consumerism. JUST LIKE those people of the 1910-1920's.
but if times change quickly, so will our kids.
will they replicate what was done in the 1930s? quite possibly. or what was done in Rwanda? also possible.
but I find this idea that people of times past didn't conform to be hilarious at best, arrogant at worst.
re: college admissions.
UC might limit freshman enrollment
UC is considering limiting freshman enrollment in fall - Los Angeles Times
ps when I said higher ed is too complex, maybe I meant it has become too specialized to give people true coping skills. It could be that a crisis would give certain individuals the chance to exercise talents that have been suppressed by the march to conformity. but that's what a refined education was supposed to do in the first place; not "mold and prepare" students to "take their places" in phantom industries like green tech, which was supposed to take over the world while the lower classes cheerfully served us coffee.
Higher Ed is doing exactly what public schooling is supposed to be doing: keeping the rabble in check, in line, and committed to conformity. Industrial and post industrial societies need large sections of society to be ready to pee into cups on demand. Plus higher ed postpones the entry into the job market of same section of society. Between that and the military, you got the unemployment numbers covered.
All the lip service to independent thinking or higher order thinking is just edu babble for knowing where to put your no. 2 pencil bubble.
but if times change quickly, so will our kids.
Yes and the people of the '30s also subscribed in great numbers to -isms like fascism and communism. And went off to fight wars -- not all of them "good" -- in great numbers. I think there's been a lot of priming for that going on.
again... this idea of new-found conformity is rediculous.
what do you think happened way back when?
if your father was a farmer, you were a farmer (CONFORM!)
if you were a girl, you were a wife (CONFORM!)
if you were black, god help you (CONFORM!)
it is the complexity of our system that allows us to NOT conform if we choose not to conform.
but the people of today WILLINGLY conform to a different set of virtues than was present 100 years ago.
Has cnbc run out of fresh bottom callers and will they need to go back recycling to the beginning of their list that began calling SPX 1200
Higher Ed is doing exactly what public schooling is supposed to be doing: keeping the rabble in check, in line, and committed to conformity.
Well, I guess privatizing and deregulating THAT is going to turn out as well as privatizing and deregulating everything else has turned out...
Higher Ed is doing exactly what public schooling is supposed to be doing: keeping the rabble in check, in line, and committed to conformity
rediculous.
OK, I can't believe at this point I still need to explain this. Bernanke was speaking in honor of Milton Friedman when he made the helicopter comment. This was appropriate, for those who missed the point, BECAUSE HE WAS QUOTING MILTON FRIEDMAN! "Helicopter Ben" was the result, but it was the result of the mindless quest for a snappy sound bite. It is, to anybody who knows anything about the progress of economic thought in the 20th century, Friedman's Helicopter.
For good or for ill, Bernanke has demonstrated leadership all over the place at the Fed. Liquidity facilities. Expanded collateral for borrowing at the Fed. Quantitative easing, whether mentioned in the minutes or not. Telling Congress the Fed might begin to ease before inflation had peaked (as it nearly always does, by the way, but Bernanke had the spine to actually say so. Transparency, you know.) I just don't understand people who are more impressed by the impression of a resolute voice and a fist thumped on the hearing room table than by real decisive action. That elevation of surface over substance is, after all, a big part of what got us 8 years of W as president.
And thanks, by the way, to sdtfs for having something sensible to say about the Duy article. There are situations to which there are no good solutions. There are times when muddling through is the best you can do. Sometimes, huge mistakes are made even with the best of intentions. Is any of these true of the present situation? I don't know. Neither does anyone else commenting here.
BB has done serious damage to the banking system.
The strongest large banks have been forced to pick up weakened banks and their toxic assets, until no strong banks remain. JPM picked up BS and Wamu. BAC picked up CFC and MER. WFC picked up WB. No strong large banks remain. What idiocy.
BB should remember the medical principal. "First do no harm."
Now it looks like he is embarking on a QE exercise. See long bond yields down and gold up as the markets begin to suspect his plan to flood the economy with dollars. Where is Paul Volker's good sense when it is needed.
"Well, I guess privatizing and deregulating THAT is going to turn out as well as privatizing and deregulating everything else has turned out..."
The for-profits (online paper mills, for example) are just better at squeezing the margins and making the squeeze look like progress.
k harris:
great post.
I've likened our current situation to terminal lung cancer.
the treatment was to never smoke. once you have terminal lung cancer, there is nothing that can be done.
so the doc might do chemo and radiation as PALLIATIVE measures, or they might try experimental treatments just to see, or just to plain old supportive care. but the patient will die or live on their own.
when they do die or live on their own, many laypeople blame the doctor, and offer up other things that "could" have worked (like accupuncture or herbal meds or alternative medicine as example). but there really is no solution
the solution was to never smoke.
the only flaw in my analogy: in this case the doctor helped give the patient cigarrettes the 5 years prior to diagnosis.
Crude prices fall below $50 a barrel for first time since May 2005
On the subject of education, babysitting and conformity, this is a seminal essay:
Why Nerds are Unpopular
If I could go back and give my thirteen year old self some advice, the main thing I'd tell him would be to stick his head up and look around. I didn't really grasp it at the time, but the whole world we lived in was as fake as a Twinkie. Not just school, but the entire town. Why do people move to suburbia? To have kids! So no wonder it seemed boring and sterile. The whole place was a giant nursery, an artificial town created explicitly for the purpose of breeding children.
Where I grew up, it felt as if there was nowhere to go, and nothing to do. This was no accident. Suburbs are deliberately designed to exclude the outside world, because it contains things that could endanger children.
And as for the schools, they were just holding pens within this fake world. Officially the purpose of schools is to teach kids. In fact their primary purpose is to keep kids locked up in one place for a big chunk of the day so adults can get things done. And I have no problem with this: in a specialized industrial society, it would be a disaster to have kids running around loose. ...
Adults have no immediate use for teenagers. They would be in the way in an office. So they drop them off at school on their way to work, much as they might drop the dog off at a kennel if they were going away for the weekend.
What happened? We're up against a hard one here. The cause of this problem is the same as the cause of so many present ills: specialization. As jobs become more specialized, we have to train longer for them. Kids in pre-industrial times started working at about 14 at the latest; kids on farms, where most people lived, began far earlier. Now kids who go to college don't start working full-time till 21 or 22. With some degrees, like MDs and PhDs, you may not finish your training till 30.
Teenagers now are useless, except as cheap labor in industries like fast food, which evolved to exploit precisely this fact. In almost any other kind of work, they'd be a net loss. But they're also too young to be left unsupervised. Someone has to watch over them, and the most efficient way to do this is to collect them together in one place. Then a few adults can watch all of them.
Substitute "college" for "high school" and "kids" for "unemployable young people" and by Jove I think you've got it.
(and anyone who works in higher ed knows that babysitting services for these 18+ year old "children" known as college students are getting more popular... they call them "amenities" and "prevention programs" etc)
k harris, you're living in a delusional world. We're in Kondratieff winter, and have been for many years now. Fed policy is aimed at staving off the inevitable bust, but they can only do it by creating new money, bebasing the currency, and in the process transferring massive amounts of wealth away from the middle class. That is the primary purpose of the Federal Reserve system. They create the bubble, then gain massive political support to try and stop the bust. In the process they enact policies that transparently enrich the elite. They get real assets while the middle class is destroyed. We are currently in the middle of the period they spent decades building up. This is where the rich really get rich. And yet we still have pathetic fools worshipping the Federal Reserve system. You people make me sick.
YTL,
I think your last post hit on my feelings about this downturn.
Some sort of downtown needed to happen - our financial markets, culture and attitudes were built on unsustainable growth, which was fueled by excessive debt. Now that we've reached this point, there is very little anyone can do to "make it all OK."
It is highly likely, given the advancements in technology since the GD, that, even if this is GD 2.0, it will look much different than the GD. Either way, the structures, models and companies that are left standing on the other side will be stronger.
Will the transition be painful, maybe even fatal, to people and companies - without a doubt. Is this a good thing - no. But at this point, it is too late to do anything other than try to make sure that you are one of the people or companies that is still standing on the other side.
To expect a government bailout to save you, suggests that you probably aren't in the best position to be one of those surviving people or companies.
back to the side note on conformity:
I think people are causing cause an effect.
there is a strong inherent desire in the human animal to conform. this starts immediately by the way (right at birth)
as time goes on each human can make their own decisions about how far or little to conform.
to what they conform depends on their environment and genetics then.
in the roaring 20's consumerism was in, so that's what people conformed to.
in the 30's austerity was necessary, so that's what people conformed to.
today it's consumerism again... hence we conform to that. but it is not education's "fault" in and of itself.
I say this because we have all been educated similarly and also differently. I went to a "top" school, and at that school you could major in "water" as example or "lesbian studies" or you could make up whatever major you wanted (although it had to be rigorous). one of my friends majored in "green" (it focused on living a sustainable existence, and this was 20 years ago when the movie "Wall Street" was all the rage)
Majoring in lesbian studies or "green" or "water" will hardly make you conform in the way you all throw this around. sure, it made my lesbian friend conform to the ideals of lesbianism I guess, and my green friend conform to the ideals of sustainable living... but it's not what you're talking about.
you're hating the tool.
the problem is that kids are taught BY THEIR PARENTS to conform and NOT take things like lesbian studies and "green" and "water". instead take Econ or go PreMed or PreLaw.
answer honestly: how many times have you shook your head at a "poly-sci" major?
Higher ed
In the Soviet Union, they had a saying: "they pretend to pay us, and we pretend to work".
In higher ed, I agree with Yearning to Learn, and I think this is the scenario: "we pretend to conform, and they pretend to teach us". In other words, what the students are learning very well is that the schools (and our other institutions) are corrupt. This is a necessary step toward the eventual overhaul of these institutions, and these young people "taught to conform" are the ones best placed to do the overhauling.
Toto has pulled the curtain...
I'd be happy if we did as well as Japan.
YTL,
Thanks.
Iconoclast,
Your precious pen name bespeaks an emotional need to seem transgressive, to stand out from the crowd. "Wow, look at Iconoclast! I'm all original in my thinking. Everybody who isn't original just like me makes me sick." And, no surprise, your comment seems to show the same need. Well, I hope the pose helps you through the day.
YSTL, did you go into shorts?
this idea of new-found conformity is r[i]diculous.
I agree.
But a large number of our high-school graduates are not equipped with the knowledge or perspective to be meaningfully different.
It is the pre-med, pre-pharm students I find the most CONformed. And the most uneducable. And the most suffering from the assumption of their own worth. I had a pharm senior (native speaker; went to "good" high school; made "a's"--I looked it up!) yesterday turn in an 8 page ethics paper that was completely unreadable. I mean, on the sentence level: unreadable. On the paragraph level: unreadable. Unrecognizable as English. On the meaning level: what meaning? This is not an isolated data outlier. This is the norm.
I mean, on the sentence level: unreadable. On the paragraph level: unreadable. Unrecognizable as English.
Can you post a snippet? I've always been curious to see what teachers think is so bad.
AC - you've long been one of my favorite CR posters but, even by your standards, that last comment was fantastic.
A clear and complete explanation of why the Fed is powerless to stop the madness, summarized in less than 200 words.
Ditto. That really was a great post AC.
Well, the Fed's power has been underestimated by many who lived to regret it. The Fed could buy all the bonds in Christendom (and Islam-dom and ...) It does not because ... (take this as homework).
... because the fed is at the wrong end of the leverage lever.