So this is what our true consumption rate should look like. How does the world keep everyone gainfully employed when each person must be constantly more productive in order to have a growing economy??
A typical mortgage is 8 years old and paying down about 1/2% of the balance per month. 1/2% of $9T is $50b being paid down monthly, $150b quarterly. Very very roughly. Thus it appears that MEW is still substantially ofsetting any actual progress in paying down housing related debt.
I am presuming that negative equity extraction occurs when you refinance and actually take out a smaller loan to replace the old one? Or am I missing something?
Have to wonder if this is a result of people not making the mistake of withdrawing equity, or if they don't have any equity to withdraw.
Home sales in most areas are still dropping but I'm surprised why so many others just don't stop buying houses right now and wait until it's clear what's happening in the Real Estate market.
I am presuming that negative equity extraction occurs when you refinance and actually take out a smaller loan to replace the old one? Or am I missing something? \t KStev | 12.19.08 - 11:45 am | #
CR explains it. Foreclosures turn 120% mortgage debt into 0% debt and regular people making regular payments regularly are buying down a small percent of their outstanding balance every month.
Damned homeowners! What kind of fool pays down a mortgage! Don't these people know that they need to buy a bigger, more expensive house, or the economy will collapse?
Czar Paulsen has announced that negative MEW is bad for the economy. The government is going to unveil the trouble equity extraction plan (TEEP). Under the TEEP the secretary of the treasury will have authority to trade money from the wallet's of Americans in exchange for valuable consumer items purchased at "above distressed prices".
Darn, I was going to use my HELOC to buy his and hers Chevy Avalanches just in time for Christmas. I guess she'll have to settle for two movie tickets and the all you can eat buffet. Again.
Eric,
VIX is strongly tied (due to the calculation method) to SPX intraday range. The last few sessions have seen the range tighten considerably from the levels over the last month.
CR - is there a good link to this ongoing data release? I've looked all over the Fed's website and can't find the release of this. The original paper is easy to find, but not where the data is updated. Subscription from the Fed perhaps?
--question what exactly the difference is between Bernie Madoffs Ponzi pyramid and the ones executed by the respective governments. A Ponzi scheme relies on neverending future payments, on a limitless stream of new 'clients' coming in. How does that differ from governments spending today what only our children, and their children, can pay back (if they can at all)? Well, except for the scale, of course. When it comes to sheer amounts, Madoff is an amateur compared to Paulson and Bernanke.
Actually, closing the old atm will be a good thing-- the planet can take a short breath.
Now it will be up to China and the rest of the world to expand their domestic economies and stop relying on exports to us. One silver lining of sorts is that, since we used to import so much, we are now exporting a significant share of our economic contraction.
Lower gas prices, ARM resets and fiscal policy will help, but we will not recover until the $ has fallen substantially and we resume exporting and stop importing (e.g. until the cost of an imported Toyota is so high that we buy either a domestic model or a car from the formerly-big three.)
May I suggest that the nature of the crime will change... citizen energyecon | Homepage | 12.19.08 - 11:50 am | # Are you suggesting that some of that MEW over the last few years was fraudulent?!! I am shocked!
Considering home prices are still falling and overall CHANGE IN equity levels are still negative that says A LOT.
dryfly | 12.19.08 - 11:49 am | #
Dry, I'm not so sure that's what's happening. There are a lot of input in both the numerator and denominator here. I don't think home prices are being track ala C-S. I think this is a pure loan balance and LTV static calculation.
Now it will be up to China and the rest of the world to expand their domestic economies and stop relying on exports to us. BSNEATH | 12.19.08 - 11:51 am | #
Ya I'm sure that's exactly what China plans to do - that's why they hope to devalue the RMB by something like 30% in 2009.
Negative MEW: Get used to it. Two examples: the mortgage taken out to purchase a home is less than the one retired at sale/foreclosure. Home equity lines shut down; thus the change in MDO is all from repayments.
DIP,
Do you think Bush had a change of heart in the last 24 hrs? Bush/Paulson want access to the second $350B give away. I bet the democrats will bitch and complain, but will let Paulson have his money.
Dry, I'm not so sure that's what's happening. There are a lot of input in both the numerator and denominator here. I don't think home prices are being track ala C-S. I think this is a pure loan balance and LTV static calculation. Rob Dawg | Homepage | 12.19.08 - 11:53 am | #
That would be interesting if it was - then it would be a less than useful statistic. NUS - Negatively Useful Statistic?
It should be pretty easy 'money mass balance'. Hard to see how they could muddy that one up. But anything is possible.
I bet the democrats will bitch and complain, but will let Paulson have his money. REBear | 12.19.08 - 11:57 am | # Yup. And if not to Paulson, then to Geithner, again with minimal to no oversight. Crooks.
Did I ask you before if you ever tooled around up at Lake Isabella? \t citizen energyecon | Homepage | 12.19.08 - 11:53 am | # You mean New Randsburg on the Kern?
People have always underestimated the amount MEW contributed to spending.
Paulson and gang think that the actual price of homes is relevant. It's not.
We have to get to a world where house prices are RISING...whether it is with the rate of inflation or higher.
To get to a healthy housing market ASAP, unfortunately you need to get the collapse to happen and go as deep as possible.
You don't do this by LOWERING mortgage rates. All this does is slow the decline or perhaps flatten house prices. You still get 0 to negative MEW if house prices aren't rising.
If they realized this they would want HIGHER mortgage rates. This would cause house prices to collapse quickly, would allow cash buyers to soak up very cheap inventory without having to compete with people who have no money but good credit and misplaced hope, and would also mean that house prices would start RISING from the bottom as defaults became rare and wouldn't cost much when they did happen, and future buyers could afford to pay more because the cost of borrowing would get cheaper and cheaper.
Eric, VIX is strongly tied (due to the calculation method) to SPX intraday range. The last few sessions have seen the range tighten considerably from the levels over the last month.
Mr. Sparkle | Homepage | 12.19.08 - 11:49 am | #
Right.... isn't it just a 30 day forward looking implied vol on SPX, taken directly from exchange-quoted options?
I was more looking for the underlying reasons.
Although I guess if you told me VIX was in the mid-40s, without telling me that's DOWN from 80, I'd consider it high.
" reptillian writes:
It wasn't that long ago that "MEW" and "HELOC"s were known as 2nd mortgages. Someone who got a 2nd mortgage was considered to be in financial trouble.
reptillian | 12.19.08 - 12:00 pm | # "
That, or putting a kid through college, or starting a business......
The VIX calculation uses options on SPX for front and 2nd month out. The # of terms is not static however so if the range is large, the number of contracts catching a bid increases, which determines the # of terms summed. One afternoon I actually read the VIX white paper from CBOE - it was very interesting.
I've found the VIX correlates very well with the average 5 day intraday % range.
Do you think Bush had a change of heart in the last 24 hrs? Bush/Paulson want access to the second $350B give away. I bet the democrats will bitch and complain, but will let Paulson have his money. REBear | 12.19.08 - 11:57 am | #
It's a blessing come true - the dems don't want to have to deal with the problem - the more Bush/Paulson do now the longer they can be blamed going forward into the next administration. The dems don't have a clue what to do either - so let Paulson do whatever he wants now - then blame him all through 2009 if it doesn't work.
The VIX calculation uses options on SPX for front and 2nd month out. The # of terms is not static however so if the range is large, the number of contracts catching a bid increases, which determines the # of terms summed. One afternoon I actually read the VIX white paper from CBOE - it was very interesting.
Mr. Sparkle | Homepage | 12.19.08 - 12:06 pm | #
Ah..... they must have changed it since I last looked (circa 1999).... back then, it was simply a box of the (static number of) closest terms. I can see how the new method would change it. Thanks!
Line these bastards up and shoot them in their heads:
An insurance company with a potential $25 million liability from a 2007 Houston office fire is claiming smoke that killed three people was "pollution" and surviving families shouldn't be compensated for their losses...
Great American Insurance Company is arguing in a Houston federal court that the section of the insurance policy that excludes payments for pollution like discharges or seepage that require cleanup would also exclude payouts for damages, including deaths, caused by smoke, or pollution, that results from a fire.
No prob. After listening to so many people assert that the VIX is screaming the market would do this or that, I decided to actually check into the numbers and original source myself.
I still am curious if the subordination of the other bond holders is a credit event, just seems like it would be...in which case, this is kabuki designed to put the onus of failure on the UAW...
Throughout history, there have been bull markets in raw materials every 20-30 years. Supply and demand regularly get out of balance, leading to recurring periods of rising (and declining) prices. Natural resources have been in a bear market for about 25 years now (e.g. sugar peaked in 1973, oil in 1981, etc.). Declining markets attract little in the way of increased productive capacity, and this bear market is no different. Virtually no one has built an offshore drilling rig, or opened a lead mine, or developed a sugar plantation during this period.
rent_to_own: You missed the "this is IT! Really, this time the USD is gonna crater" thread a while back.
Pissed Off In California | 12.19.08 - 12:14 pm
I missed the thread, too.
Still, this is IT. Really, this time the USD is gonna crater.
Only once this financial catastrophe has destroyed your wealth, your confidence in your government and man's ability to be confined by rule of law; and only until war, pestilence, and the loss of loved ones will we come to see the wisdom in hard law, hard punishment, and hard money. Gold is the only thing which might have restrained the ridiculous credit expansion by economic hitmen. At least it would have confined the losses to those whose poor judgement urged them.
Instead you are being looted via currency, gov't treasury bonds, taxation, loss of employment, loss of available goods and services.
Why? In order to make whole the monied malefactors.
In our system, malice-aforethought and evildoing IS punished! The punishment is just meted upon the whipping boys, as the princes regale themselves with other's spilled blood. The prudent, humble, wise souls that well husband their substance are stripped by roving brigands. Their cupboards are laid bare not because of their failures, but because stewards without honor found plunder easier than creative production. Ever it has been so.
Never has it concluded well.
"Angry Saver writes:
Absent the bogus and unsupportable credit created due to the housing bubble, GDP would have been negative since at least 2000."
I disagree. Without the unsuppportable credit, millions of people would have pursued different jobs, rather than realtor, mortgage broker, construction worker, or MBS investment banker. Different jobs would have led to a more productive economy.
Which makes me wonder, where are the big programs to get get those people into different occupations? The construction workers might get a boost through the Obama infrastructure plan. I don't know what the most common alternate careers are for realtors.
For mortgage brokers, many of them appear to have been bagging groceries as their prior job (not kidding, cited in several articles). In Florida, the prior job of many of them was prisoner (also not kidding, wish I was). It's kind of the reverse of what many people here suggested. Instead of "those people should go to jail" it was "when those people get out of jail they should become mortgage brokers". Borrowers Betrayed: Thousands with criminal records work unlicensed as loan originators - The Miami Herald
During more than four years in bankruptcy, the International Brotherhood of Teamsters, whose members sell and deliver Interstate's Wonder bread and Hostess Twinkies, has been the most vocal critic of Interstate's restructuring proposals. Officials once said the union would rather see the company go out of business than to work with its current management.
The Teamsters, Interstate's largest union, a year ago went so far as to break off communication with the wholesale baker in a fight over additional concessions Interstate wanted.
Instead, it decided to negotiate contract changes directly with Ripplewood Holdings, the company that has agreed to buy Interstate out of bankruptcy.
But a revised reorganization plan filed in court Thursday by Interstate proposes that the employees of its four largest unions get an ownership stake in the reorganized company, assuming it grows, in exchange for agreeing to additional concessions.
The "employee equity sharing plan," while not described in detail, would give most union employees "stock appreciation rights" similar to those being made available to executives like CEO Craig Jung, whom the union earlier vilified.
It was, in fact, the Teamsters that floated the idea with Ripplewood of union employees sharing in the success of the company if they consented to further cuts in compensation.
Eric, any more details on UAW request for reversal in contract? Pissed Off In California | 12.19.08 - 12:11 pm | #
Here ya go...... from Save Auto Jobs: UAW statement on approval of bridge loans "While we appreciate that President Bush has taken the emergency action needed to help America's auto companies weather the current financial crisis, we are disappointed that he has added unfair conditions singling out workers," said Gettelfinger. "These conditions were not included in the bipartisan legislation endorsed by the White House, which passed the House of Representatives and which won support from a majority of senators. "We will work with the Obama administration and the new Congress to ensure that these unfair conditions are removed," said Gettelfinger, "as we join in the coming months with all stakeholders to create a viable future for the U.S. auto industry."
Won't it just chafe our hides when the Chicomms start dumping Treasuries to finance the containment of and ultimately quelling of their domestic civil unrest. And if we "complain?" Why they'll just sell more and blame their home troubles on those capitalist dogs and use nationalism and foreign adventurism to press ttheir goals. We don't want China looking to its own short term interests. Go thing they take a slightly longer view (generations) than our Wall Street masters (quarters).
"Citigroup's CEO is being paid $216 million this year, yet Corker made no demand that he take a whack in pay," Jim Hightower writes, even though Citi alone has accepted bailout funds worth over three times what the entire auto bailout would cost.
The chief difference between Detroit's labor costs and those of its Japan-headquartered competitors is several decades of built-up pension plans. But as Hilzoy writes in a post for The Washington Monthly that the package was already so acquiescent to Republican demands that no serious conservative negotiators would have demanded further concessions.
So the Greater US Ponzi Scheme has shut down, finally!
No.
Housing and Wall Street ponzi finance is simply being replaced with government ponzi finance.
Simulus Package = Ponzi Package
BTW I wouldn't make this accusation if our government, consumers, and industry had shown the willingness and ability to pay down debts prior to this recession. In that case stimulus might be justifiable.
However, given that we've been funding our economy over the past 25 through ever increasing amounts of debt one must conclude that our economy has become dependent on ponzi finance.
I'm surprised why so many others just don't stop buying houses right now
But then they won't be getting in on the ground floor for the big run-up when housing recovers! HAHAHAHAHAHAHA!
Unfortunately, I live in California, so it's possible the rest of the country thinks something different. (They do on everything else) However, the people I am in contact with are certainly of the mindset that - were they able to buy - the current state of affairs represents an opportunity.
And maybe it does, although I certainly don't think so.
Living in California, one gets exposed to a lot of wealth. The only way J6P has a chance of obtaining that - in his eyes - is through asset appreciation because labor will never get him there. Thus, the ongoing interest in housing.
After all, despite all of this recent unpleasantness, J6P still wants to be rich.
WHERE ARE THE ECONOMIC VIGILANTES?
AT WHAT PRICE MORAL OUTRAGE?
The entire world peers at our collapsing industries, serial mega-bailouts, fee based officialdom, cankerous corruption, paralyzing debt structure, incapacity for austerity or self-control. They see a nation morally bankrupted. They see a sovereign state in desperation. They see a sovereign too proud to acknowledge humiliation. Seeking benefit in lies, hoping the good honor of its past generations will fool a few more greater-chumps to pony up cash.
Our constitutional republic was once a beacon to the world, a triumph of human organization. No longer. It has become a laughing stock and complete dissolute.
"Citigroup's CEO is being paid $216 million this year, yet Corker made no demand that he take a whack in pay," Jim Hightower writes, even though Citi alone has accepted bailout funds worth over three times what the entire auto bailout would cost.
Citibank is also firing a huge chunk of their workers. Is GM or Chrysler going to do that?
callous writes:
Living in California, one gets exposed to a lot of wealth. The only way J6P has a chance of obtaining that - in his eyes - is through asset appreciation because labor will never get him there. Thus, the ongoing interest in housing.
Good point! credit rationing or credit deflation take your pick doesn't bode well for speculative bets but many believe that with BB at the controls deflation cannot exist in America..hubris knows no end and as you pointed out Calif is ground zero..
A friend of mine asked me recently how much MEW I had taken out, assuming, of course, that I had. He's neck deep in debt, has a 50" LCD TV, drives a late-model Mercedes Benz. He was a bit shocked to learn that I prefer equity over debt and my 19in TV, old BMW.
They are despicable animals who procreate nothing but neocons, theocons and wannabe facsists.
sportsfan | 12.19.08 - 12:51 pm | #
Yes indeed.
I am eagerly looking forward to investigations, and prosecuting whatever crimes turn up. I will gladly put every criminal Dem in jail, but the entire leadership of the GOP belong in prison.
I noticed that you also noticed VIX getting crushed today.
Any idea why? (Other than standard going down the slope on an up day)?------------------------------------------
Almost every year end, trading slows down. People enjoy the holidays, do holiday shopping, party, etc, rather than trade. Frequently the result is lower volatility.
The highly evolved flying dinosaurs used their telepathic powers to capture our primitive knuckle dragger brains so that we could be fooled into digging up all the oil and coal, dumping it into the air. They did this by convincing us that by driving around in circles in fast machines, we too would live like the flying dinosaurs. The resulting emissions would warm the Earth so much that the other remaining land dinosaurs could attack and eat all the lethargic warm blooded mammals which replaced the previous populations of ruling dinosaurs millions of years ago when the Ice Ages made the Earth too cold. I expect that the most cold blooded killers will win out, as usual...
Black Star Ranch writes:
......as if there are no Demo crooks? Give me a break! Start seeing reality - they're all miscreants
I would agree there are many, many Demo crooks ... but these crooks are in league with conservative Republicans. See the difference?
It is very valuable to criminals to have an "Opposition" Party that takes impeachment off the table once the electorate pours its money and time into getting them elected. Bribing the Tribunes will always be a problem.
We should be suspicious of ALL politicians, but support the few honest ones. But watch them too, because power does corrupt--it isn't a myth.
DIP,
Do you think Bush had a change of heart in the last 24 hrs? Bush/Paulson want access to the second $350B give away. I bet the democrats will bitch and complain, but will let Paulson have his money.
REBear | 12.19.08 - 11:57 am | #
I think Bush is a tool.
They will do practically anything to get the money from our pockets into their wallets.
The Democrats are part of the problem - not the solution.
I doubt he prosecutes anyone for anything, absolving even treason.
sportsfan | 12.19.08 - 1:03 pm | #
The left needs to force him.
It was the unprosecuted misdeeds of Watergate (most got off easy) and Iran-Contra that enabled the current BS to happen.
hell, BUsh hired Iran-Contra criminals into his administration! Clinton's biggest mistake was taking a "bygones" approach at the beginning. Obama will not follow in his footsteps.
Please stop referring to Obama's "stimulus" plan. Call it what it is: government spending financed mostly by borrowing from abroad. Whether it stimulates anything except the level of US govnt. debt outstanding is an open question. The experience of last year's rebate checks suggests it will not stimulate the economy for more than a few weeks. And it will leave us even deeper in debt to the rest of the world. Consumer spending needs to decline: it has been way too high relative to disposable income for a long time.
" YLSP writes:
Czar Paulsen has announced that negative MEW is bad for the economy. The government is going to unveil the trouble equity extraction plan (TEEP). Under the TEEP the secretary of the treasury will have authority to trade money from the wallet's of Americans in exchange for valuable consumer items purchased at "above distressed prices".
YLSP | 12.19.08 - 11:49 am | # "
The TEEP will work with the PATRIOT Act's banking records to randomly access your account, randomly access an ATM somewhere in the country, and spit your money onto the sidewalk.
But the fucking Republicans have destroyed this entire country out of a sense of entitlement and personal greed.
They are despicable animals who procreate nothing but neocons, theocons and wannabe facsists.
You may be correct that Republicans have messed things up, but that is because they acted like Democrats and started handing out money to anyone who moaned and groaned for it in order to solve problems.
They should have acted more like the "neocons" that you profess they are, and let the mismanaged and poorly run companies fail.
Gary says: "Clinton's biggest mistake was taking a "bygones" approach at the beginning. Obama will not follow in his footsteps.
At least, not if I can help it."
I'm on Gary's side. Investigate and prosecute the criminals.
The Dems are no answer unless we make them be. They are just as sold out (I believe Nader told the truth) but the saving grace for the Dems is that their paid role was "Good Cop."
Now it will be up to China and the rest of the world to expand their domestic economies and stop relying on exports to us. One silver lining of sorts is that, since we used to import so much, we are now exporting a significant share of our economic contraction.
i agree
and fortunes will be made producing what they want , that we have a comparative advantage to create
House prices going up parabolically while incomes are declining. "No problem", says A Greenspan, because their wealth is increasing with equity appreciation.
Magical perpetual economic motion machine. How can we entrust the nation's financial decisions with imbeciles like this?
That chart (MEW extraction) scares the living hell out of me. The 91 recession sucked (when MEW extraction was negative) and we haven't even reached the bottom of it and lookie at what happened from 2001 to 2007. The next few years are gonna be disgustingly ugly....
Terrance says: "You may be correct that Republicans have messed things up, but that is because they acted like Democrats and started handing out money to anyone who moaned and groaned for it in order to solve problems."
This is a specimen of CONservatus Idioticus. This type of thinker tries to get out of its trap using the bait which attracted it in the first place.
Who cooked up the Big Ponzi that's crashing the global economy? All the little ponzis were spinoffs of the RE/CRE bubble.
The ineptitude theory is a tough one to sell. That's like selling the fire pulverizes steel theory.
Maybe it was all the Realtors and buyers fault. Doesn't quite explain it all.
Maybe the central bank has no idea what they are doing even with the lessons of the first Great Depression.
That's a tough one to get your mind around.
Maybe we are being deceived by the government, banks, central banks, and the media that this latest credit freeze and Crash was planned for the sake of Big Player profits as the middle class goes down the drain.
That would eliminate the buffoonery theory we all believe.
If this Bust was planned or allowed, that would change assumptions about the benevolence of our political leaders and economic elites.
It's easier to believe this whole thing was a random Black Swan event or boneheaded deregulations with no malicious or avaricious intent or extreme prejudice.
It's easier to get sucked into a Grand Ponzi or a spin off ponzi if you basically trust the system even if you don't know what the system really is and are just going with your social and political conditioning and socialized assumptions.
Bank of America sent me a tersely worded letter this week, shutting down my heloc, calling all monies ($0), and chastising me for not notifying them about changing title to my home. I was a bit surprised, but figured it might just be a form letter sent to marginal accounts in these credit challenged times.
Of course, I've never accessed the account in the 28 months I've had it (I took it because they gave me a free safe deposit box), and according to them I've got a fico score of 854.
Upon further review of the closing documents, it seems the Bank used my neighbors house as collateral for my loan ($150k). I wonder what corporate genius is trying to bury that mistake.
"They should have acted more like the "neocons" that you profess they are, and let the mismanaged and poorly run companies fail......
Terrance | 12.19.08 - 1:13 pm | # "
Wrong! They should have acted like conservatives. Neocons (i.e. new conservatives) are basically old style democrats that are strong on conservative foreign policy. The neocon movement was the beginning of the end for the current conservative wave.
Not One Cent:
You need to go easy on HP: after all, it's own fault we're not spending money we don't have because we already spent it earlier when we didn't have it.
the guest says: It's easier to get sucked into a Grand Ponzi or a spin off ponzi if you basically trust the system ..."
Well, a Confidence game is one which tries to elicit such trust as you speak of. The whole Conservative movement was a con, a very well-paying one too.
It is a nationalist trick to get everyone with money on board the Special Me train and to hell with everyone else.
Are people understanding that this was a huge Con job? I'm don't want to disparage the intellects of my fellow citizens, but it's taking kind of long to see the truth. Especially since our own Greatest Generation became liberals after fighting against the outgrowth of earlier Conservatives in Europe.
The Dems are no answer unless we make them be. They are just as sold out (I believe Nader told the truth) but the saving grace for the Dems is that their paid role was "Good Cop."
We have to make them play that role for real.
Now that the Dem's are in power, who plays the role of "Good Cop"?
This is a positive story. People are paying off debt instead of getting deeper in. We hear a lot of people seeing we need to get the debt flowing again, but debt is what caused this problem. We have to deleverage whether we want to or not. The economic problems are slowly being worked through.
Is you math correct? When I plug a 30 year fixed rate, $9 trillion mortgage number into Excel, I get a $54 Billion monthly payment, and, at 8 years out, $39.6 billion is interest and $14.4 billion is principle, which would imply $43 billion / quarter in "negative withdrawl".
not at all. barely longer than the gettysburg address.
anyone who can't read it and understand it in under 5 minutes isn't educated. that isn't necessarily their fault, especially if they are dyslexic, of course.
Gary, JR: BOL on prosecutions. Obama won't respond to pressure from the left. What's the alternative for the left if he doesn't? Revolution? Not gonna happen.
The Dems in control won't go after the Repubs formerly in control. They will figure that they're in charge so now it's their turn to loot whatever the greediest crowd in history may have left behind.
Treason used to be something serious. Today treason gets you a TV show on Fox. Revisionist history is all the rage, you know. Iran Contra became patriotism at its finest.
I'm going to sign off for now and let the market mavens watch their ticks go up and down for the next few hours. They prefer not to be interrupted during the "business" day. Markets: the new opiate of the masses.
Friday, December 19, 2008, 9:39am PST
Wells Fargo economists see recession's end in late 2009Silicon Valley / San Jose Business Journal
The deepest and longest recession since the 1930s will end in the second half of 2009, Wells Fargo & Co. economists said in their annual forecast.
The third quarter of next year will be better than expected by many, said chief investment strategist Jim Paulsen. Its like youre at a cookout and youre trying and trying to get your charcoal going and you keep squirting on lighter fluid and all of a sudden it goes poof!
Paulsen said fear mongering by government officials who were trying to sell the $700 billion Troubled Asset Relief Program in the fall made the situation much worse, freezing everyone in their tracks and bringing on economic paralysis.
@bearly
I'm starting to believe most of the blogs and media and government 'sources' are covering up the process involved in these Crash bubble credit cycles. If we get another Depression it's time to question assumptions about how this mess came about again and how it's being 'managed' again. Once bitten, twice shy. The second time down the drain within 80 years by the same monetary and fiscal 'management teams' might be a matter of 'fallout' info control and management.
This graph doesn't account for all of the interest that people are paying on borrowed debt in negative equity situations (or does it?). Boy, it sucks to be them. Credit card debt is averaging 12k per household, and there's a "negative" home ATM.
"Real patriots who may resist the intrigues of the favorite are liable to become suspected and odious, while its tools and dupes usurp the applause and confidence of the people, to surrender their interests.
kind of sounds like Jas there, don't he? did Georgie have some tin foil to go with the wooden teeth?
It's more accurate to say they are aggressive interventionists / American hegemonists, with a particular interest in the middle east.
There is a weird range of bedfellows including American Exceptionalists, greedy bastards who want the oil, the AIPAC crowd, end-of-days Christian fundamentalists like Hagee, and even Saudi elites.
I would argue that the neocon foreign policy is neither "strong" nor conservative. But I agree with your general sentiment. That old crapsack Scoop Jackson was a neocon progenitor.
FOR IMMEDIATE RELEASE
December 19, 2008 For Information: (202) 874-5770
For Copies: (202) 874-5043
OCC Enforcement Actions WASHINGTON The Office of the Comptroller of the Currency (OCC) today released new enforcement actions taken against national banks and individuals currently and formerly affiliated with national banks. A list of enforcement actions previously disclosed and copies of the actual documents are available from the OCC's Communications Division by writing to: Comptroller of the Currency, Public Information Room (1-5), Washington, DC 20219. Requests made by facsimile transmission should be sent to (202) 874-4448. Please include the identifying enforcement action number when placing an order. Enforcement actions are also listed monthly in OCC Interpretations and Actions. Subscriptions to that publication are available from the OCC's Communications Division. The OCC also maintains a searchable database of all public enforcement actions taken since August 1989 on its Internet Web site located at OCC search here.
Cease and Desist Orders
No. Name/Bank/City Date
California
2008-149 Tomatobank, National Association, Diamond Bar 11/19/2008
Georgia
2008-150 First Security National Bank, Norcross 11/18/2008
Kansas
2008-151 The First National Bank of Anthony, Anthony 11/20/2008
Civil Money Penalty Orders
No. Name/Bank/City Date
Florida
2008-152 Eastern National Bank, Miami 10/24/2008
Formal Agreements
No. Name/Bank/City Date
Florida
2008-153 Flagship National Bank, Bradenton 11/20/2008
2008-154 Riverside National Bank of Florida, Fort Pierce 10/28/2008
Massachusetts
2008-155 The Milford National Bank and Trust Company, Milford 10/29/2008
North Carolina
2008-159 Wachovia Bank, National Association, Charlotte 12/08/2008
Removal / Prohibition Orders
No. Name/Bank/City Date
South Dakota
2008-156 Yumiko Edwards, Wells Fargo Bank, National Association, Sioux Falls 11/4/2008
Terminations of Existing Enforcement Actions
No. Type/Bank/City/Old EA# Date
District Of Columbia
2008-157 FA, City First Bank of D.C., National Association, Washington (EA# 2006-16) 10/23/2008
Missouri
2008-158 FA, Old Missouri National Bank, Springfield (EA# 2006-35) 10/27/2008
I would not feign to be a necessary interpreter to the clear words of our first and easily greatest president. He was truly a moral authority in a deeply immoral world.
If people 'pay off debt' on bubble priced RE/CRE prices that still are falling in value, that will be a loss on top of a loss. The whole bubble pricing scheme or Grand Ponzi needs to be deconstructed from the bottom up.
" bgates writes:
"Real patriots who may resist the intrigues of the favorite are liable to become suspected and odious, while its tools and dupes usurp the applause and confidence of the people, to surrender their interests.
bgates | 12.19.08 - 1:33 pm | # "
So does it bother you that BHO took donations from foreigners during his campaign for POTUS? or am I reading that incorrectly?
Pluto says: "Does the Illinois governor count as a Demo crook?"
HELL YES Blago is a crook. What kind of question is that?
Blago is a crook who needs jail time. Sorry, but I'm a liberal and that means America comes first, and criminals have no place in office. I'm American first, how about you?
The CONservatives put their fantasy "team" first and to hell with America. For instance, Blago was on tape saying that the Obama people would give him nothing but appreciation. So end of story ... unless you are a CON.
You may be correct that Republicans have messed things up, but that is because they acted like Democrats and started handing out money to anyone who moaned and groaned for it in order to solve problems.
wrong...
you got it back wards
democrats acted like republicans in drinking from the "more derregulation is always mo better" koolaid
schumer is a dem and aprime example
then
repubs spent money like dems but forgot the tax side of the equation
so what we got was we dont need no stinkin regulation from republicans coupled with lower taxes always better and sprinkle in a hefty helpin of hey lets give massive no bid contrats to our friends.
get a clue, read blood money, and "the wrecking crew"
--
review from the wapo
miller'(s) (blood money) Miller, an investigative reporter for the Los Angeles Times, fills in the missing piece: the staggering incompetence and corruption of the U.S.-led reconstruction effort, which may have done almost as much as anything else to turn the Iraqi population against its occupiers. Despite headlines in recent years about Halliburton's hefty revenues, this has been, in general, the less-covered dimension of the Iraq adventure. At its heart, Blood Money is the tale of how Washington left a country desperately in need of rebuilding to the whims of money-hungry private contractors, and of how the lack of clear lines of authority doomed efficiency, effectiveness and accountability from the start.
The result? "In almost every way the rebuilding has fallen short," Miller writes, despite some successes, such as the reconstruction of thousands of Iraqi schools and the vaccination of tens of thousands of Iraqi children. "After three years Iraqis have less power in their homes than under Saddam. Hospital neonatal units lose electricity, and doctors watch children die . . . . Oil production is far below its prewar peak. Poor Iraqis in Baghdad slums suffer through outbreaks of easily preventable diseases like hepatitis for lack of clean water or health care." And what bothers him most now, he says, is that the Bush administration seems about to give up on the reconstruction, slashing its funding even as it extends the U.S. troop presence in Iraq.
How did the country that authored the Marshall Plan botch Iraq? By way of explanation, Miller brings to life the villains and heroes of the often arcane reconstruction effort. His villains include politically connected contractors such as Mike Battles and Scott Custer, whom the former inspector general of the U.S. Army's Fifth Corps calls "rip-off artists" and who, Miller reports, never endured "any serious effort" from the Bush administration to recover the taxpayer dollars they were responsible for; senators such as Ted Stevens (R-Alaska), who, Miller writes, inserted language into the $18.4-billion Iraq-reconstruction bill of November 2003 guaranteeing "special contracting privileges for a group of constituents [the Alaska Native Corporations] that supplied Stevens . . . with votes" ; Coalition Provisional Authority (CPA) administrator Bremer, whom Miller accuses of simply not paying attention while such depredations were happening under his nose; and even Laura Bush, who championed an extravagant showcase hospital on the outskirts of Basra that Miller reports drained money and attention away from the small-scale health clinics that Iraqis really needed.
" Gary writes:
.....
It's more accurate to say they are aggressive interventionists / American hegemonists, with a particular interest in the middle east.
.......
I would argue that the neocon foreign policy is neither "strong" nor conservative......
Gary | 12.19.08 - 1:34 pm | # "
Thanks; You penned much better than I. I had a hard time coming up with that expression, but at least you get my gist. Neocon ARE NOT conservatives!
There's two choices now.
Wear an 'intelligent' research tin foil hat and wake up or wear a dunce cap and go back to sleep and dream of the Tooth fairy & Santa.
I would not feign to be a necessary interpreter to the clear words of our first and easily greatest president. He was truly a moral authority in a deeply immoral world.
bgates | 12.19.08 - 1:36 pm | # "
I didn't originally ask for an interpretation, just a pointer or two to the sections you found most pertinent or profound. Not much to ask.
" bgates writes:
"So does it bother you that BHO took donations from foreigners"
if it wasn't for "donations from foreigners" the revolutionary war would have been a much more difficult campaign.
bgates | 12.19.08 - 1:40 pm | # "
We're talking about an election where it's illegal to take donations from foreigners (and immoral if you agree with Washington), not a revolutionary war. You're being for to evasive. What are you hiding?
krugman's a major douchebag who believes the only economy is a command economy. bearly | 12.19.08 - 1:24 pm | #
A true douchebag focuses his criticism on one of the very few voices in mainstream media who has been consistently right. Gary | 12.19.08 - 1:37 pm | #
Being right on what's coming down the pike in now way implies the solution he is prescribing will work. Krugman, roubini and others have all called this will ahead of time.
On the other hand it is a very open question whether keynsian solutions will work with the debt level we already have, with the level of corruption we have in Washington and Wall-Street.
But the good news is I'm already starting to read/hear both on NPR, main-stream TV and WSJ the revisionist history making occuring that will re-write why and how Paulson/BB did what they did.
Kind of like the re-writing of history that has occured with the New-Deal.
We're gonna get to see this time around whether the New-Deal failed because enough money wasn't applied soon enough. And the best thing about the keynsians is that EVEN if it doesn't work a SECOND time they'll just say that it would have worked this time if we had thrown enough money at the problem soon enough.
the final third deals with foreign policy. this is pretty off-topic, even for a semi-troll like myself.
washington couldn't have specifically seen our current problem, insofar as the constitution mandated gold and silver currency. he wouldn't have been able to comprehend a future where we were stupid and strange enough to print up "federal reserve notes", let alone that his portrait would be so attached to this piece of fantasy.
bgates says: "[Warren is] the world's pastor, his book has sold zillions, and many preachers all over the globe literally use a weekly cheat sheet from him."
Modern Pharisees. Read the Gospels yourself, it isn't long.
If you are a CON, you will piss your pants if you understand it. But you won't want to read or understand, THAT's why the Pharisees remain in business.
Notice how all these right-wing Churchy-folks certainly went along with the CON, didn't they? Could even say they started it.
I wouldn't look to a CONservative to get me into heaven.
It is good to see MEW numbers drop and even turn toward accumulation. I see that as a necessary thing - and a good thing - given the imbalances, but it is amazing how hard our government is fighting it.
..... he wouldn't have been able to comprehend a future where we were stupid and strange enough to print up "federal reserve notes", let alone that his portrait would be so attached to this piece of fantasy.
bgates | 12.19.08 - 1:48 pm | # "
Yet he was undoubtably familiar with, if not part in parcel in, the Continental, as in "not worth a Continental".
that's an interesting question. i've often considered the morality of the actions of my father's godfather, who died flying over the channel 60 years ago. he was possibly firebombing cities. did the women and children in those parts of Prussia deserve that fate? Or those in the tokyo fires a year later? It is a horrible decision to make.
gelboak writes:
Rob Dawg:
Is you math correct? When I plug a 30 year fixed rate, $9 trillion mortgage number into Excel, I get a $54 Billion monthly payment, and, at 8 years out, $39.6 billion is interest and $14.4 billion is principle, which would imply $43 billion / quarter in "negative withdrawl".
Not all loans are in year 8, just typically. My math however is doubly incorrect because the older loans are also much smaller. I'm much too high but I suspect you are a little low. BTW it turns out I was using a slightly dated figure for Total outstanding it is $11.1T now.
i see from the first graph that MEW has never been negative for two successive quarters until this year. I wonder how long MEW will remain below zero...
I don't sense any real urgency on the street from people who haven't lost their jobs. The consensus is that this is all going to pass soon. Just a blip. I was talking with a co-worker about how all the local fabric stores seemed to close in the last 5 years, and I said, Just when people might be more interested in making clothes again. Co-worker looked at me like I was slightly nuts. "This won't last long enough for that," she said.
At the university where my brother works, there's still a relentlessly chipper can-do whistling past the graveyard. Rumor has it though that even some of the wealthier students are having trouble making next semester's bill.
I think there's going to be a huge and ugly attitude crash starting in February when the Christmas and Obama excitement fades and reality sets in.
"Pissed Off In California writes:
krugman's a major douchebag who believes the only economy is a command economy.
bearly | 12.19.08 - 1:24 pm | #
A true douchebag focuses his criticism on one of the very few voices in mainstream media who has been consistently right.
Gary | 12.19.08 - 1:37 pm | #"
...which is exactly why my next treatise is entitled "Why 'Douchebag' ought to be used more often in civilised conversation."
"At the university where my brother works, there's still a relentlessly chipper can-do whistling past the graveyard. "
At the University of Washington, where I'm at, panic is starting to take hold. We get constant emails telling us of forthcoming budget cuts of anywhere from 10-15% (or more). I lost a grant last week, a buddy of mine lost another, and his wife was on the verge of being fired from the uni when he interceded and aggressively stopped that from happening.
Unless Chrysler's labor costs can achieve parity with the foreign transplants, and without the restructuring of Chrysler's debt, Chrysler cannot be restored to long-term health and the government loan will be unlikely to be fully repaid," Cerberus said.
Kyle writes: Wow, it's like a love-fest today with all the liberal elitists coming out to post."
Hey CON! How's your glorious revolution going? Oh and you're name-calling again. How expected of you.
And liberals are "elitist" ... why? Oh, that's right, just because you are a CON and as such you can't name anything correctly or with integrity.
Well, looking down on people is a CONs job, as you just illustrated. But when are CONs right about anything? If their ideas actually worked, they would have by now.
Friend's Hub works at night at a company that makes hugh construction equipment...Had a meeting last night, just to reassure everyone their job was gonna be there even tho they had just closed a plant in a neighboring state. Thirty minutes later he comes around and updates cell phone numbers.
ADoesn't matter if he voted left or right. Reality is Reality
Good luck with that!
the douche | 12.19.08 - 1:44 pm | #
Yes, your glib remarks are ever so much more helpful.
POIC, it is a myth that the new deal didn't work. Stay away from anything by worthless hack Amity Shlaes at all costs.
Some of the posters here actually want armageddon to happen. Anyone who reads "The Road" and gets their inner survivalist fantasist all excited is truly disturbed.
waitaminute, if you couldn't already tell, it is a favorite, along with the short forms "douche" and "d-bag", as in "That d-bag Kyle is so f'ing stupid, he voted for Bush twice!"
Unless Chrysler's labor costs can achieve parity with the foreign transplants, and without the restructuring of Chrysler's debt, Chrysler cannot be restored to long-term health and the government loan will be unlikely to be fully repaid," Cerberus said.
cd | 12.19.08 - 2:06 pm | # "
The funny part is that Cerebus is "willing" to give equity to workers. That's almost as good as giving bonuses to brokers in the form of worthless derivatives.
[ that EVEN if it doesn't work a SECOND time they'll just say that it would have worked this time if we had thrown enough money at the problem soon enough]
Well throwing money wouldn't create a terrible problem, if we had any. We already have more obligations than the USA can honor. Unless you really believe we can grow our way out of the hole faster than the interest on the obligations can cannibalize that accumulation.
Really instead of calling these stick save attempts bailouts they should be called increased future claims on wealth. If we have no wealth in the future there are simply more claims against nothing.
It's easy to see why Keynesian policies are bad for an economy, but given the current conditions, wouldn't Keynesian policies be better than doing nothing? It seems to me that letting the market correct itself means certain disaster, where a Keynesian stimulus means some unknown but - hopefully - less severe outcome.
"POIC, it is a myth that the new deal didn't work. Stay away from anything by worthless hack Amity Shlaes at all costs."
Sorry, not a myth. Very open to interpretation. Very good arguments on both sides of the equation as to how well it worked. I'm sure the truth is somewhere in the middle, which doesn't give me a good feeling this time around.
I think by boycotting GM and Chrysler and buying Ford perhaps the consumer can do what the politicians couldn't. Create one healthy company out 2 1/2 sick ones plus save the tax payer a lot of money.
Do you honestly think that Obama is going to pull the plug on these guys. Given the tremendous back bone that Congress has demonstrated if you were a dealer, bond holder or union worker why would you make any concessions?
Conjure says, "The US economy now enters a dangerous new phase."
How so? The markets bumped their head on 8800 and didn't pop. They can drift higher through the holiday week.
The two debt companies disguised as automakers got a deal similar to what other debt companies got. They now take their loot and go "black box" for 12 weeks with their survival plans.
I have no idea who Amity Shlaes is.
Pissed Off In California | 12.19.08 - 2:12 pm | #
Do yourself a favor and keep it that way
I would also argue that the spending we did on WWII counts as a major stimulus. Of course in those days, the rich chipped in and we had a truly progressive tax scheme to pay for it all (including over time).
The only thing lacking today has been (a) leadership and (b) the will to do something. Both of those factors have changed significantly over the past 6 months.
NO ONE ON EARTH has been more wrong than the free-market, de-regulationist pure capitalism shills. It's time we tried something different.
It's easy to see why Keynesian policies are bad for an economy, but given the current conditions, wouldn't Keynesian policies be better than doing nothing? Speed | 12.19.08 - 2:11 pm | #
I'm no 'Austrian' but I'd feel a lot better about current Keynesian policy if they practiced it during the 'boom' half of the cycle as aggressively as the 'bust'. When I see our leaders really running surpluses and pulling money out of the system IN THE RECOVERY to avoid a future bubble - THEN I'll be more comfortable about government's ability to effectively 'manage' fiat money w/out catastrophe. Right now it is stimulate in the good times and even more stimulation in the bad.
In short Keynesian policy could maybe work but only if it's run by those with the discipline and the cold hearts of the 'Austrians'.
"NO ONE ON EARTH has been more wrong than the free-market, de-regulationist pure capitalism shills. It's time we tried something different."
Oh that I totally agree with. Unfortunately if you peek behind the curtain in the Obama team and Wall-Street has it's henchmen there, as they have in previous administrations. Summers, Geithner, Rubin and others were all for de-regulation and securitization when the going was good.
A bit of revisionist re-write going on there as well unfortunately.
We get better discussions in the evening. I was hoping to hear some real arguments against Keynesian policy rather than the usual vitriol, of which I'm also guilty. The obvious knee-jerk reaction to reckless spending is denunciation. But in relation to any other ideas, such as doing nothing, it's worth considering.
I think Keynes works in an environment where the consumer is spending below their capacity- i,e aggregate demand has fallen.
The current situation is exactly the opposite. Consumer have been spending well above their means sustained through unsustainable asset bubbles and loose lending standards.
The situation can only rectified when spending has been reduced to a lower sustainable level and the rest of the economy has adjusted to it. I think the analogy to a hangover is the most appropriate. The "cure" is not more alcohol but palliative stuff- fluids and asprin. In the current circumstances that would expansion of Section 8, food stamps, Medicaid, college tuition and a vast expansion of the number of police.
The exchange, if it occurs, could result in some credit default swaps (CDS) insuring ResCap's debt moving to GMAC.
If this happens, holders of ResCap's debt that also bought protection on the debt with CDS that do not tender their bonds may be left with large mismatches in the value of the two securities.
As of Wednesday only 58 percent of bondholders had agreed to tender their debt, below the 75 percent GMAC has said it needs to go ahead with the exchange.
Reports have also surfaced that the exchange is in trouble. Pacific Investment Management (Pimco), the world's biggest bond fund, doesn't plan to participate in the exchange, The Wall Street Journal reported on Thursday.
Keynesianism's biggest problem is (contrary to Laissez Faire) its teleological enforcement of the hypothetical "right" level of aggregate demand, fighting a downward change as "below" equilibrium rather than as the new equilibrium.
About amity - she does tell a great story of FDR buying gold to fight deflation - morning meetings to discuss the upcoming increase - FDR suggests 21 cents - when asked why 21 cents he said it was 3x7 - a lucky number (sorta like $700 trillion?)
Although one can't know the "right" level of demand like so many things in life one can usually tell the "wrong" level of demand.
By any objective measure (except new age economists "this time is different")it was clear that the U.S. Consumer was consuming too much- declining wages, rising debt, aging population, bubble asset prices and irresponsible lending.
Anonymous writes:
"America has the financial system of a banana republic."
Do not forget the "political system" (the congressional oversight, the laws making it perfectly legal).
In fact, what seems not too much being appreciated here is the "collusion" of the mortgage brokers(financial), the securitizers (financial), the regulators (political) and congress (overseers and legislators).
That collusion describes the corruption going on in the american system.
I think that lot is like generals fighting the last war. The only person who gets it in the Obama administration is Volker. I hope Obama will have the good sense to listen to the one person who doesn't have to cover up their past mistakes. Volker has the advantage of not having been part of the shell game of the last 15 years.
I figure if Obama has taken a liking to Pastor Rick, then there IS some hope....
Black Star Ranch | 12.19.08 - 1:40 pm | #
Yeah lots of hope in inviting a bigot to be the spritual presence for the inaguration. Obama promised to be the president of all the people, and contrary to the beliefs of Pastor Rick, Gays are people too, and are entilted to basic human rights. Iut was a big mistake by Obama. Notice he didnt decide to invite someone who thought that slavery is ok, since it is endorsed by the bible.
That Krugman Op-Ed was a good one, IMO. I sent it on to some friends who are beginning to understand what's been happening. Also sent on the info. on the "bailout" money being funneled through Cerberus. Nothing is what it appears to be on the surface. It is fascinating when the kabuki is unmasked. Of course, it's also depressing as well.
Consumer have been spending well above their means
The crucial element is "has been" that is, they aren't anymore. A year from now, it might seem like a good idea to encourage spending, but by then it will be too late.
This is a consumer driven recession, regardless of why it is - mortgages, MEW, etc.
Well sure. That's why consumer spending is holding up so well...
Good thing mortgage equity extraction doesn't correlate with consumer spending... oh wait
Lets go out and buy GM cars!
How can extraction be negative? Isn't that like saying your are alive but you are dead?
Seriously, though, this is terrible news. If enough people start acting responsibly with their finances, the entire system will collapse.
We must reverse this trend immediately.
Breaking news:
Bush:MEW bailout announed
So this is what our true consumption rate should look like. How does the world keep everyone gainfully employed when each person must be constantly more productive in order to have a growing economy??
"But this suggests that the Home ATM is closed, and MEW is no longer supporting consumption." CR
Crime will be the result.
Per Bloomberg: Bush to name consumer czar. Consumers will be given bridge loans until March.
Is a bridge loan something like, "If you believe that figure... I've got a bridge to sell you?"
Wow - is that a giant sucking sound I'm hearing?
Though as a quibble - how can you have negative extraction? Technically, that is.
A typical mortgage is 8 years old and paying down about 1/2% of the balance per month. 1/2% of $9T is $50b being paid down monthly, $150b quarterly. Very very roughly. Thus it appears that MEW is still substantially ofsetting any actual progress in paying down housing related debt.
Hey Gav....
I noticed that you also noticed VIX getting crushed today.
Any idea why? (Other than standard going down the slope on an up day)?
Seems to me there's more uncertainty than ever. OTOH.... lower vols means puts are on sale.
crispy&cole: Cynical minds think alike?
I am presuming that negative equity extraction occurs when you refinance and actually take out a smaller loan to replace the old one? Or am I missing something?
We need laws to put an end to this.
Foresight and responsible behavior cannot be tolerated in a ponziconomy.
Make it stop!
We need a MEW Czar.
Have to wonder if this is a result of people not making the mistake of withdrawing equity, or if they don't have any equity to withdraw.
Home sales in most areas are still dropping but I'm surprised why so many others just don't stop buying houses right now and wait until it's clear what's happening in the Real Estate market.
rent_to_own writes:
Though as a quibble - how can you have negative extraction? Technically, that is.
I have the same question about "negative impact" although I can come up with a technically OK definition
"Thus it appears that MEW is still substantially ofsetting any actual progress in paying down housing related debt." Interesting point Rob Dawg.
How can extraction be negative? Isn't that like saying your are alive but you are dead?
Elvis | 12.19.08 - 11:36 am | #
Considering home prices are still falling and overall equity levels are still negative that says A LOT.
The equity balance...
Delta Equity = Property Price Increase + Payment Principal Paid In - Cash Equity Withdrawl (from sale, cashout refi or HELOC)
Means people who are still current are paying in like crazy AND NOT using their existing equity as a piggy bank anymore.
And we wonder why consumer spending fell off a cliff.
I am presuming that negative equity extraction occurs when you refinance and actually take out a smaller loan to replace the old one? Or am I missing something?
\t
KStev | 12.19.08 - 11:45 am | #
CR explains it. Foreclosures turn 120% mortgage debt into 0% debt and regular people making regular payments regularly are buying down a small percent of their outstanding balance every month.
Damned homeowners! What kind of fool pays down a mortgage! Don't these people know that they need to buy a bigger, more expensive house, or the economy will collapse?
Czar Paulsen has announced that negative MEW is bad for the economy. The government is going to unveil the trouble equity extraction plan (TEEP). Under the TEEP the secretary of the treasury will have authority to trade money from the wallet's of Americans in exchange for valuable consumer items purchased at "above distressed prices".
Darn, I was going to use my HELOC to buy his and hers Chevy Avalanches just in time for Christmas. I guess she'll have to settle for two movie tickets and the all you can eat buffet. Again.
Considering home prices are still falling and overall equity levels are still negative that says A LOT.
dryfly | 12.19.08 - 11:47 am | #
Error - should read...
Considering home prices are still falling and overall CHANGE IN equity levels are still negative that says A LOT.
Eric,
VIX is strongly tied (due to the calculation method) to SPX intraday range. The last few sessions have seen the range tighten considerably from the levels over the last month.
CR - is there a good link to this ongoing data release? I've looked all over the Fed's website and can't find the release of this. The original paper is easy to find, but not where the data is updated. Subscription from the Fed perhaps?
Crime will be the result.
Elvis | 12.19.08 - 11:40 am | #
May I suggest that the nature of the crime will change...
--question what exactly the difference is between Bernie Madoffs Ponzi pyramid and the ones executed by the respective governments. A Ponzi scheme relies on neverending future payments, on a limitless stream of new 'clients' coming in. How does that differ from governments spending today what only our children, and their children, can pay back (if they can at all)? Well, except for the scale, of course. When it comes to sheer amounts, Madoff is an amateur compared to Paulson and Bernanke.
Actually, closing the old atm will be a good thing-- the planet can take a short breath.
How can extraction be negative? Isn't that like saying your are alive but you are dead?
Negative equity extraction is kind of like a double negative. It's a fancy way of saying people are building up mortgage equity.
As I understand it this means people are paying down their debt.
Again, paying down debt is an abomination. It is an affront to all that is holy and good.
It must be stopped at all costs.
Substantially lower gas/energy prices should offset some of the impact of the housing atm being shutdown?
Now it will be up to China and the rest of the world to expand their domestic economies and stop relying on exports to us. One silver lining of sorts is that, since we used to import so much, we are now exporting a significant share of our economic contraction.
Lower gas prices, ARM resets and fiscal policy will help, but we will not recover until the $ has fallen substantially and we resume exporting and stop importing (e.g. until the cost of an imported Toyota is so high that we buy either a domestic model or a car from the formerly-big three.)
May I suggest that the nature of the crime will change...
citizen energyecon | Homepage | 12.19.08 - 11:50 am | #
Are you suggesting that some of that MEW over the last few years was fraudulent?!! I am shocked!
"Honey, how did the gold mining go today?"
"Not so, good. I extracted negative 3 nuggets."
"Oh, you must be tired. Let be get you a negatively full plate of food and a negative cup of coffee."
When will it all end.
YouTube - Tom Petty And The Heartbreakers - The Waiting
The difference between the government Ponzis and the Madoff Ponzi is that one gets to use a gun on new "investors".
So the Greater US Ponzi Scheme has shut down, finally!
CR,
Have you ever done a chart or analysis comparing the MEW growth with GDP growth? Would be interesting to see the corelation.
Ted
Considering home prices are still falling and overall CHANGE IN equity levels are still negative that says A LOT.
dryfly | 12.19.08 - 11:49 am | #
Dry, I'm not so sure that's what's happening. There are a lot of input in both the numerator and denominator here. I don't think home prices are being track ala C-S. I think this is a pure loan balance and LTV static calculation.
Hey c&c,
Did I ask you before if you ever tooled around up at Lake Isabella?
Now it will be up to China and the rest of the world to expand their domestic economies and stop relying on exports to us.
BSNEATH | 12.19.08 - 11:51 am | #
Ya I'm sure that's exactly what China plans to do - that's why they hope to devalue the RMB by something like 30% in 2009.
Marketwatch:
11:47 a.m.
Treasury wants the rest of the bank bailout funds
When did the URL website change from blogspot.com to calculatedriskblog.com?
GSH: Yes and by February Obama's "stimulus plan" will be $2T...
Negative MEW: Get used to it. Two examples: the mortgage taken out to purchase a home is less than the one retired at sale/foreclosure. Home equity lines shut down; thus the change in MDO is all from repayments.
repost -
DIP,
Do you think Bush had a change of heart in the last 24 hrs? Bush/Paulson want access to the second $350B give away. I bet the democrats will bitch and complain, but will let Paulson have his money.
Dry, I'm not so sure that's what's happening. There are a lot of input in both the numerator and denominator here. I don't think home prices are being track ala C-S. I think this is a pure loan balance and LTV static calculation.
Rob Dawg | Homepage | 12.19.08 - 11:53 am | #
That would be interesting if it was - then it would be a less than useful statistic. NUS - Negatively Useful Statistic?
It should be pretty easy 'money mass balance'. Hard to see how they could muddy that one up. But anything is possible.
"Treasury wants the rest of the bank bailout funds
Girl Scout Heroin | 12.19.08 - 11:55 am | # "
Only if Henry Paulson gives up his manparts as collateral.
Hey kids take a look at the "Selling on Strength" block trades atm...hedgies getting that call?
Money Flows: Selling on Strength - Markets Data Center - WSJ.com
There's a lot of area under that curve for '03-'07. What will we use to replace it? Tax rebates?
I bet the democrats will bitch and complain, but will let Paulson have his money.
REBear | 12.19.08 - 11:57 am | #
Yup. And if not to Paulson, then to Geithner, again with minimal to no oversight. Crooks.
On the up side it will be easier for unions to organize now that people have to live off thier wages.
Did I ask you before if you ever tooled around up at Lake Isabella?
\t citizen energyecon | Homepage | 12.19.08 - 11:53 am | #
You mean New Randsburg on the Kern?
"Though as a quibble - how can you have negative extraction? Technically, that is.
rent_to_own | 12.19.08 - 11:42 am | # "
I think that negative extraction is a double negative meaning insertion. Thus, people are now inserting home equity rather than extracting it.
Treasury wants the rest of the bank bailout funds
Girl Scout Heroin | 12.19.08 - 11:55 am | #
In other news kids all over America want two Christmas trees - so as to have even more room for presents.
USD/EUR 1.38 versus 1.44 2 days ago
USD/CAD 1.22 versus 1.19 2 days ago
USD/JPY flat in the 88 range
Oil in the mid 30's
Yep sure looks like dollar is falling apart right on schedule /snark
It wasn't that long ago that "MEW" and "HELOC"s were known as 2nd mortgages. Someone who got a 2nd mortgage was considered to be in financial trouble.
People have always underestimated the amount MEW contributed to spending.
Paulson and gang think that the actual price of homes is relevant. It's not.
We have to get to a world where house prices are RISING...whether it is with the rate of inflation or higher.
To get to a healthy housing market ASAP, unfortunately you need to get the collapse to happen and go as deep as possible.
You don't do this by LOWERING mortgage rates. All this does is slow the decline or perhaps flatten house prices. You still get 0 to negative MEW if house prices aren't rising.
If they realized this they would want HIGHER mortgage rates. This would cause house prices to collapse quickly, would allow cash buyers to soak up very cheap inventory without having to compete with people who have no money but good credit and misplaced hope, and would also mean that house prices would start RISING from the bottom as defaults became rare and wouldn't cost much when they did happen, and future buyers could afford to pay more because the cost of borrowing would get cheaper and cheaper.
Eric,
VIX is strongly tied (due to the calculation method) to SPX intraday range. The last few sessions have seen the range tighten considerably from the levels over the last month.
Mr. Sparkle | Homepage | 12.19.08 - 11:49 am | #
Right.... isn't it just a 30 day forward looking implied vol on SPX, taken directly from exchange-quoted options?
I was more looking for the underlying reasons.
Although I guess if you told me VIX was in the mid-40s, without telling me that's DOWN from 80, I'd consider it high.
Absent the bogus and unsupportable credit created due to the housing bubble, GDP would have been negative since at least 2000.
There is no such thing as a jobless recovery. GDP has been measuring the rate at which we impoverish ourselves. Our debts since 2000 are not wealth.
We had a short term recovery on wall street at the expense of most everyone else.
Our economic "growth" is a sham.
One more thought - Bernanke is a dingbat.
But...but...can't we keep this going with zero or better yet, negative interest rates?
Regards to all!
Uncle of mine built Paradise Cove motel and restaurant there, cousin runs it now - they've been in the area for something like 50+ years...
" reptillian writes:
It wasn't that long ago that "MEW" and "HELOC"s were known as 2nd mortgages. Someone who got a 2nd mortgage was considered to be in financial trouble.
reptillian | 12.19.08 - 12:00 pm | # "
That, or putting a kid through college, or starting a business......
Treasury wants the rest of the bank bailout funds
Wanting bailout funds is SO in now.
energyecon - Never been there
boycott GM and Chrysler:
Blogger: Blog not found
Serioiusly, anyone have a feel for dollar volumes on block trades...watch it off and on but don't recall ever seeing this...
Money Flows: Selling on Strength - Markets Data Center - WSJ.com
Eric,
That's how it is always explained.
The VIX calculation uses options on SPX for front and 2nd month out. The # of terms is not static however so if the range is large, the number of contracts catching a bid increases, which determines the # of terms summed. One afternoon I actually read the VIX white paper from CBOE - it was very interesting.
I've found the VIX correlates very well with the average 5 day intraday % range.
Do you think Bush had a change of heart in the last 24 hrs? Bush/Paulson want access to the second $350B give away. I bet the democrats will bitch and complain, but will let Paulson have his money.
REBear | 12.19.08 - 11:57 am | #
It's a blessing come true - the dems don't want to have to deal with the problem - the more Bush/Paulson do now the longer they can be blamed going forward into the next administration. The dems don't have a clue what to do either - so let Paulson do whatever he wants now - then blame him all through 2009 if it doesn't work.
What, just up the Kern River as Rob Dawg was kind enough to point out? lol
Nice desert foothills kind of country, I think the reservoir is Sierra snowmelt and was down quite a bit last I saw...
The VIX calculation uses options on SPX for front and 2nd month out. The # of terms is not static however so if the range is large, the number of contracts catching a bid increases, which determines the # of terms summed. One afternoon I actually read the VIX white paper from CBOE - it was very interesting.
Mr. Sparkle | Homepage | 12.19.08 - 12:06 pm | #
Ah..... they must have changed it since I last looked (circa 1999).... back then, it was simply a box of the (static number of) closest terms. I can see how the new method would change it. Thanks!
UAW to ask Obama to reverse terms of deal.
That took what, two f'in hours?
Chapter 7, here we come!!!!!
rent_to_own,
No. The insanity was not passing Schwarzenaeger's reforms. Propositions 74-76 would at least have done some good for the CA budget.
Line these bastards up and shoot them in their heads:
An insurance company with a potential $25 million liability from a 2007 Houston office fire is claiming smoke that killed three people was "pollution" and surviving families shouldn't be compensated for their losses...
Great American Insurance Company is arguing in a Houston federal court that the section of the insurance policy that excludes payments for pollution like discharges or seepage that require cleanup would also exclude payouts for damages, including deaths, caused by smoke, or pollution, that results from a fire.
Eric,
No prob. After listening to so many people assert that the VIX is screaming the market would do this or that, I decided to actually check into the numbers and original source myself.
"Nice desert foothills kind of country, I think the reservoir is Sierra snowmelt and was down quite a bit last I saw...
citizen energyecon"
Ever read the "King of Cotton?" You should. Gives you a good history of the Inland Empire.
I still am curious if the subordination of the other bond holders is a credit event, just seems like it would be...in which case, this is kabuki designed to put the onus of failure on the UAW...
Sugar down 7% today and when sugar falls 7%, shit happens!
Bloomberg.com:
Commodity Futures
Anyone have popeye's phone number?
Eric, any more details on UAW request for reversal in contract?
...no better time to start manufacturing "highly complex items" again, like, scissors, staplers, pencils, pens, candles, matches.....
Couldn't find a single pair of scissors "Made in the USA" last week. What a sorry state of affairs.
rent_to_own: You missed the "this is IT! Really, this time the USD is gonna crater" thread a while back.
Throughout history, there have been bull markets in raw materials every 20-30 years. Supply and demand regularly get out of balance, leading to recurring periods of rising (and declining) prices. Natural resources have been in a bear market for about 25 years now (e.g. sugar peaked in 1973, oil in 1981, etc.). Declining markets attract little in the way of increased productive capacity, and this bear market is no different. Virtually no one has built an offshore drilling rig, or opened a lead mine, or developed a sugar plantation during this period.
Meow.
If you haven't already, Krugman speaks the truth today
and is worth a read.
So does "positive injection" mean taking out a HELOC?
Times must be changing...
17.4B is only good for 3 hours
Could this means 850B stimulas covers 6 day pump-up?
Blood Beach
What terrible movie. But it reminds me of our markets.
The tag line:
Just when you thought it was safe to go back in the water, you can't even get there
Photos from Blood Beach
I'm with Nemo and AC. This is bad.
Ok, I hoped for neutral MEW. Negative MEW means negative consumer spending growth. This is turning too ugly too fast.
Its like celibrating oil being below $40/bbl. Don't... that is an ugly indicator. Oh... I'd like it to stay at $50/bbl... but it is scaring me...
Got Popcorn?
Neil
I can't bring myself to read Krugman anymore.
He sees all the problems except one - that his proposed solutions are really just more problems.
Eric, any more details on UAW request for reversal in contract?
Pissed Off In California | 12.19.08 - 12:11 pm | #
Just saw it while glancing at the Financial Infotainment Channel.
Goldman, UBS, Deutsche, Morgan Stanley Lowered by S&P
Goldman, UBS, Deutsche, Morgan Stanley Lowered by S&P (Update3) - Bloomberg.com
Eric, thanks.
rent_to_own: You missed the "this is IT! Really, this time the USD is gonna crater" thread a while back.
Pissed Off In California | 12.19.08 - 12:14 pm
I missed the thread, too.
Still, this is IT. Really, this time the USD is gonna crater.
Gary Shilling writes off all of 2009 and won't speculate on 2010. Uses the "d" word. Yahoo Tech Ticker
"Still, this is IT. Really, this time the USD is gonna crater."
Except deleveraging continues, competetive currency devaluation has started and the beggar-thy-neighbour trade policy has started.
Other than that, yes I do agree on your statement (:
Only once this financial catastrophe has destroyed your wealth, your confidence in your government and man's ability to be confined by rule of law; and only until war, pestilence, and the loss of loved ones will we come to see the wisdom in hard law, hard punishment, and hard money. Gold is the only thing which might have restrained the ridiculous credit expansion by economic hitmen. At least it would have confined the losses to those whose poor judgement urged them.
Instead you are being looted via currency, gov't treasury bonds, taxation, loss of employment, loss of available goods and services.
Why? In order to make whole the monied malefactors.
In our system, malice-aforethought and evildoing IS punished! The punishment is just meted upon the whipping boys, as the princes regale themselves with other's spilled blood. The prudent, humble, wise souls that well husband their substance are stripped by roving brigands. Their cupboards are laid bare not because of their failures, but because stewards without honor found plunder easier than creative production. Ever it has been so.
Never has it concluded well.
Last time I looked, Congress didn't have enough votes to pass a bailout for the Defunct Three.
. . . competetive currency devaluation has started . . . .
When it comes to devaluation, no one can hold a candle to the good ol' USA.
We're gonna trash that suckka.
"When it comes to devaluation, no one can hold a candle to the good ol' USA.
We're gonna trash that suckka."
Yawn, wake me up when that happens. Too bad the rest of the world aint going along with the plan.
Funny how everyone looks out for themselves when the shit hits the fan. Too bad BB didn't figure that into his equation.
Last time I looked, Congress didn't have enough votes to pass a bailout for the Defunct Three.
Speed | 12.19.08 - 12:23 pm | #
Didn't have the votes for cloture and didn't want to filibuster all through the holidays. Wait until 2009 before being sure there aren't enough votes.
"Angry Saver writes:
Absent the bogus and unsupportable credit created due to the housing bubble, GDP would have been negative since at least 2000."
I disagree. Without the unsuppportable credit, millions of people would have pursued different jobs, rather than realtor, mortgage broker, construction worker, or MBS investment banker. Different jobs would have led to a more productive economy.
Which makes me wonder, where are the big programs to get get those people into different occupations? The construction workers might get a boost through the Obama infrastructure plan. I don't know what the most common alternate careers are for realtors.
For mortgage brokers, many of them appear to have been bagging groceries as their prior job (not kidding, cited in several articles). In Florida, the prior job of many of them was prisoner (also not kidding, wish I was). It's kind of the reverse of what many people here suggested. Instead of "those people should go to jail" it was "when those people get out of jail they should become mortgage brokers". Borrowers Betrayed: Thousands with criminal records work unlicensed as loan originators - The Miami Herald
During more than four years in bankruptcy, the International Brotherhood of Teamsters, whose members sell and deliver Interstate's Wonder bread and Hostess Twinkies, has been the most vocal critic of Interstate's restructuring proposals. Officials once said the union would rather see the company go out of business than to work with its current management.
The Teamsters, Interstate's largest union, a year ago went so far as to break off communication with the wholesale baker in a fight over additional concessions Interstate wanted.
Instead, it decided to negotiate contract changes directly with Ripplewood Holdings, the company that has agreed to buy Interstate out of bankruptcy.
But a revised reorganization plan filed in court Thursday by Interstate proposes that the employees of its four largest unions get an ownership stake in the reorganized company, assuming it grows, in exchange for agreeing to additional concessions.
The "employee equity sharing plan," while not described in detail, would give most union employees "stock appreciation rights" similar to those being made available to executives like CEO Craig Jung, whom the union earlier vilified.
It was, in fact, the Teamsters that floated the idea with Ripplewood of union employees sharing in the success of the company if they consented to further cuts in compensation.
UAW to ask Obama to reverse terms of deal.
Eric | 12.19.08 - 12:08 pm | #
Calling Big Foot, calling Big Foot.
More on the Bush Bailout of GM and Cerberus, I mean Chrysler:
Emptywheel » Page not found
FYI, Cerberus is basically Dan Quayle and John Snow and a bunch of other well-connected GOP crooks.
"Ooh, ooh that smell
Can't you smell that smell?
Ooh, ooh that smell
The smell of death [deleveraging] surrounds you."
Where is the public, rational discussion on the subject of debt creation, income, and GDP? That would involve too much reality.
Eric, any more details on UAW request for reversal in contract?
Pissed Off In California | 12.19.08 - 12:11 pm | #
Here ya go...... from Save Auto Jobs: UAW statement on approval of bridge loans
"While we appreciate that President Bush has taken the emergency action needed to help America's auto companies weather the current financial crisis, we are disappointed that he has added unfair conditions singling out workers," said Gettelfinger. "These conditions were not included in the bipartisan legislation endorsed by the White House, which passed the House of Representatives and which won support from a majority of senators. "We will work with the Obama administration and the new Congress to ensure that these unfair conditions are removed," said Gettelfinger, "as we join in the coming months with all stakeholders to create a viable future for the U.S. auto industry."
Won't it just chafe our hides when the Chicomms start dumping Treasuries to finance the containment of and ultimately quelling of their domestic civil unrest. And if we "complain?" Why they'll just sell more and blame their home troubles on those capitalist dogs and use nationalism and foreign adventurism to press ttheir goals. We don't want China looking to its own short term interests. Go thing they take a slightly longer view (generations) than our Wall Street masters (quarters).
Weekly Audit: A Year of Bad Decisions Economy Newsladder
The Media Consortium: Weekly Audit: A Year of Bad Decisions Economy Newsladder
"Citigroup's CEO is being paid $216 million this year, yet Corker made no demand that he take a whack in pay," Jim Hightower writes, even though Citi alone has accepted bailout funds worth over three times what the entire auto bailout would cost.
The chief difference between Detroit's labor costs and those of its Japan-headquartered competitors is several decades of built-up pension plans. But as Hilzoy writes in a post for The Washington Monthly that the package was already so acquiescent to Republican demands that no serious conservative negotiators would have demanded further concessions.
Do you imagine 4 x $150 billion/quarter is how Krugman came up with his stimulus plan for $600 billion?
The Painfully Unwatchable White House Christmas Video
Jeffrey Feldman: The Painfully Unwatchable White House Christmas Video
I do recall someone advertising the Fast Crash scenario.
So the Greater US Ponzi Scheme has shut down, finally!
No.
Housing and Wall Street ponzi finance is simply being replaced with government ponzi finance.
Simulus Package = Ponzi Package
BTW I wouldn't make this accusation if our government, consumers, and industry had shown the willingness and ability to pay down debts prior to this recession. In that case stimulus might be justifiable.
However, given that we've been funding our economy over the past 25 through ever increasing amounts of debt one must conclude that our economy has become dependent on ponzi finance.
I'm surprised why so many others just don't stop buying houses right now
But then they won't be getting in on the ground floor for the big run-up when housing recovers! HAHAHAHAHAHAHA!
Unfortunately, I live in California, so it's possible the rest of the country thinks something different. (They do on everything else) However, the people I am in contact with are certainly of the mindset that - were they able to buy - the current state of affairs represents an opportunity.
And maybe it does, although I certainly don't think so.
Living in California, one gets exposed to a lot of wealth. The only way J6P has a chance of obtaining that - in his eyes - is through asset appreciation because labor will never get him there. Thus, the ongoing interest in housing.
After all, despite all of this recent unpleasantness, J6P still wants to be rich.
FYI, Cerberus is basically Dan Quayle and John Snow and a bunch of other well-connected GOP crooks.
Gary | 12.19.08 - 12:30 pm | #
Is there any single instance of anyone other than a GOP crook receiving a single dollar from this administration?
I'm beginning to think that "Republicans are TRAITORS" has it right in his handle.
Here's what all the unemployed and freshly graduated lawyers should be doing. Charge one month's mortgage amount from people in foreclosure.
'Angel' of foreclosure defense bedevils lenders - Mortgage Mess- msnbc.com
There will not be a tsunami of refinancing, because people are broke!
WHERE ARE THE ECONOMIC VIGILANTES?
AT WHAT PRICE MORAL OUTRAGE?
The entire world peers at our collapsing industries, serial mega-bailouts, fee based officialdom, cankerous corruption, paralyzing debt structure, incapacity for austerity or self-control. They see a nation morally bankrupted. They see a sovereign state in desperation. They see a sovereign too proud to acknowledge humiliation. Seeking benefit in lies, hoping the good honor of its past generations will fool a few more greater-chumps to pony up cash.
Our constitutional republic was once a beacon to the world, a triumph of human organization. No longer. It has become a laughing stock and complete dissolute.
Speed writes:
Last time I looked, Congress didn't have enough votes to pass a bailout for the Defunct Three.
math quibble: $64.1 billion is only 0.6% of personal disposable income (table 10).
Paulson Asks For Rest Of $700 Billion TARP Funds
Paulson Asks For Rest Of $700 Billion TARP Funds
Anonymous writes:
"Citigroup's CEO is being paid $216 million this year, yet Corker made no demand that he take a whack in pay," Jim Hightower writes, even though Citi alone has accepted bailout funds worth over three times what the entire auto bailout would cost.
Citibank is also firing a huge chunk of their workers. Is GM or Chrysler going to do that?
......as if there are no Demo crooks? Give me a break! Start seeing reality - they're all miscreants
CR thanks again, excellent chart and info.
oh. nevermind. annualized
Paulson Asks For Rest Of $700 Billion TARP Funds
That was the deal. Dems get to back their supporters in Detroit, while Reps go out handing bonus money to WS.
If you are not union or super rich, you are screwed.
UAW to ask Obama to reverse terms of deal.
Eric | 12.19.08 - 12:08 pm | #
If Obama reverses the deal, is the money due back in the governments hand immediately? With interest?
Black Star Ranch,
There are Democratic crooks, no doubt.
But the fucking Republicans have destroyed this entire country out of a sense of entitlement and personal greed.
They are despicable animals who procreate nothing but neocons, theocons and wannabe facsists.
callous writes:
Living in California, one gets exposed to a lot of wealth. The only way J6P has a chance of obtaining that - in his eyes - is through asset appreciation because labor will never get him there. Thus, the ongoing interest in housing.
Good point! credit rationing or credit deflation take your pick doesn't bode well for speculative bets but many believe that with BB at the controls deflation cannot exist in America..hubris knows no end and as you pointed out Calif is ground zero..
REBear writes:
If you are not union or super rich, you are screwed.
That is redundant.
crispy,
heads up..
your blog is down via link above, blogger says you can buy the name?
A friend of mine asked me recently how much MEW I had taken out, assuming, of course, that I had. He's neck deep in debt, has a 50" LCD TV, drives a late-model Mercedes Benz. He was a bit shocked to learn that I prefer equity over debt and my 19in TV, old BMW.
oops
Bakersfield Bubble
--
And born-and-bred American dopes think that Oh-Mama!'s stimulus plan will "jolt the economy into recovery."
Gangistan is desperately raping the country and Dopeland is full of politically impotent watchers from the sidelines.
America is headed for "Cliff Diving."
Jas
Couldn't find a single pair of scissors "Made in the USA" last week.
Black Star Ranch | 12.19.08 - 12:12 pm | #
Fisk
when people used to say that house prices will always rise i always told them that if so I can buy any time with no risk so what's the rush.
We get crooks in office because the majority of people vote for the candidate who spends the most money.
Notice the subtle hint in media reports that the candidate who raises the most is clearly more deserving of office?
As long as more than fifty percent believe that we are screwed.
They are despicable animals who procreate nothing but neocons, theocons and wannabe facsists.
sportsfan | 12.19.08 - 12:51 pm | #
Yes indeed.
I am eagerly looking forward to investigations, and prosecuting whatever crimes turn up. I will gladly put every criminal Dem in jail, but the entire leadership of the GOP belong in prison.
Does this explain the markets flatline for the last hour or so...
Undersea sub-cables have just broken...
Interoute, the internet networks company, reports that three of the four internet sub-cables that run from Asia to North America have been damaged.
Is the internet going down? Undersea sub-cables have just broken... - Tech Central - Times Online - WBLG
Bigger question who/why broke the cables.
Detroit bailout..
just checked credit apps being pulled ntwide today...
more apps being pulled at import dealers 4-1 ratio....
it's early though...
I noticed that you also noticed VIX getting crushed today.
Any idea why? (Other than standard going down the slope on an up day)?------------------------------------------
Almost every year end, trading slows down. People enjoy the holidays, do holiday shopping, party, etc, rather than trade. Frequently the result is lower volatility.
Why not "improved net worth" instead of "Equity Extraction Strongly Negative" (double negative)?
Every time Bernanke reads that Americans are paying off debt, he cries, "I'm melting!....Melting!"
Gary,
The only problem is that Obama wants to bring us all together.
I doubt he prosecutes anyone for anything, absolving even treason.
Bigger question who/why broke the cables.
LAM | 12.19.08 - 1:01 pm | #
Time to afix tinfoil hat. Remember this happened in or near the Persian Gulf last year?
Isn't it obvious?
The highly evolved flying dinosaurs used their telepathic powers to capture our primitive knuckle dragger brains so that we could be fooled into digging up all the oil and coal, dumping it into the air. They did this by convincing us that by driving around in circles in fast machines, we too would live like the flying dinosaurs. The resulting emissions would warm the Earth so much that the other remaining land dinosaurs could attack and eat all the lethargic warm blooded mammals which replaced the previous populations of ruling dinosaurs millions of years ago when the Ice Ages made the Earth too cold. I expect that the most cold blooded killers will win out, as usual...
E. Swanson
Finally some solid analysis!
Black Star Ranch writes:
......as if there are no Demo crooks? Give me a break! Start seeing reality - they're all miscreants
I would agree there are many, many Demo crooks ... but these crooks are in league with conservative Republicans. See the difference?
It is very valuable to criminals to have an "Opposition" Party that takes impeachment off the table once the electorate pours its money and time into getting them elected. Bribing the Tribunes will always be a problem.
We should be suspicious of ALL politicians, but support the few honest ones. But watch them too, because power does corrupt--it isn't a myth.
repost -
DIP,
Do you think Bush had a change of heart in the last 24 hrs? Bush/Paulson want access to the second $350B give away. I bet the democrats will bitch and complain, but will let Paulson have his money.
REBear | 12.19.08 - 11:57 am | #
I think Bush is a tool.
They will do practically anything to get the money from our pockets into their wallets.
The Democrats are part of the problem - not the solution.
more apps being pulled at import dealers 4-1 ratio....
it's early though...
cd | 12.19.08 - 1:02 pm | #
thanks cd
I doubt he prosecutes anyone for anything, absolving even treason.
sportsfan | 12.19.08 - 1:03 pm | #
The left needs to force him.
It was the unprosecuted misdeeds of Watergate (most got off easy) and Iran-Contra that enabled the current BS to happen.
hell, BUsh hired Iran-Contra criminals into his administration! Clinton's biggest mistake was taking a "bygones" approach at the beginning. Obama will not follow in his footsteps.
At least, not if I can help it.
i re Great American and "pollution loss":
As I recall, Great American is affiliated with AIG.
Need we say more...
Please stop referring to Obama's "stimulus" plan. Call it what it is: government spending financed mostly by borrowing from abroad. Whether it stimulates anything except the level of US govnt. debt outstanding is an open question. The experience of last year's rebate checks suggests it will not stimulate the economy for more than a few weeks. And it will leave us even deeper in debt to the rest of the world. Consumer spending needs to decline: it has been way too high relative to disposable income for a long time.
Anyone have popeye's phone number?
Yup 1-866-"A-gah-gah-gah-gah-gah-gah!"
Frank Says He’s Writing Measure to Tap $350 Billion
Congress Ready to Tap $350 Billion in Aid, Frank Says (Update3) - Bloomberg.com
" YLSP writes:
Czar Paulsen has announced that negative MEW is bad for the economy. The government is going to unveil the trouble equity extraction plan (TEEP). Under the TEEP the secretary of the treasury will have authority to trade money from the wallet's of Americans in exchange for valuable consumer items purchased at "above distressed prices".
YLSP | 12.19.08 - 11:49 am | # "
The TEEP will work with the PATRIOT Act's banking records to randomly access your account, randomly access an ATM somewhere in the country, and spit your money onto the sidewalk.
That'll learn you.
sportsfan writes:
But the fucking Republicans have destroyed this entire country out of a sense of entitlement and personal greed.
They are despicable animals who procreate nothing but neocons, theocons and wannabe facsists.
You may be correct that Republicans have messed things up, but that is because they acted like Democrats and started handing out money to anyone who moaned and groaned for it in order to solve problems.
They should have acted more like the "neocons" that you profess they are, and let the mismanaged and poorly run companies fail.
In both the auto and financial industries.
Gary says: "Clinton's biggest mistake was taking a "bygones" approach at the beginning. Obama will not follow in his footsteps.
At least, not if I can help it."
I'm on Gary's side. Investigate and prosecute the criminals.
The Dems are no answer unless we make them be. They are just as sold out (I believe Nader told the truth) but the saving grace for the Dems is that their paid role was "Good Cop."
We have to make them play that role for real.
So what is the consensus about the GEAB?
Chicken Little or prescient?
http://www.leap2020.eu/GEAB-N-30-is-available!-Global-systemic-crisis-New-tipping-point-in-March-2009-When-the-world-becomes-aware-that-this_a2567.html
BSNEATH wrote: @ 11:51
Now it will be up to China and the rest of the world to expand their domestic economies and stop relying on exports to us. One silver lining of sorts is that, since we used to import so much, we are now exporting a significant share of our economic contraction.
i agree
and fortunes will be made producing what they want , that we have a comparative advantage to create
" I Believe CR and Krugman writes:
So does "positive injection" mean taking out a HELOC?
I Believe CR and Krugman | 12.19.08 - 12:15 pm | # "
No, "positive extraction" mean taking out a HELOC.
House prices going up parabolically while incomes are declining. "No problem", says A Greenspan, because their wealth is increasing with equity appreciation.
Magical perpetual economic motion machine. How can we entrust the nation's financial decisions with imbeciles like this?
Neil writes:
I'm with Nemo and AC. This is bad.
times two
That chart (MEW extraction) scares the living hell out of me. The 91 recession sucked (when MEW extraction was negative) and we haven't even reached the bottom of it and lookie at what happened from 2001 to 2007. The next few years are gonna be disgustingly ugly....
Eric, no idea on the Vix. Just lots of people drinking the koolaide? I'm looking forward to loading up on more puts in the next couple weeks.
Terrance says: "You may be correct that Republicans have messed things up, but that is because they acted like Democrats and started handing out money to anyone who moaned and groaned for it in order to solve problems."
This is a specimen of CONservatus Idioticus. This type of thinker tries to get out of its trap using the bait which attracted it in the first place.
Who cooked up the Big Ponzi that's crashing the global economy? All the little ponzis were spinoffs of the RE/CRE bubble.
The ineptitude theory is a tough one to sell. That's like selling the fire pulverizes steel theory.
Maybe it was all the Realtors and buyers fault. Doesn't quite explain it all.
Maybe the central bank has no idea what they are doing even with the lessons of the first Great Depression.
That's a tough one to get your mind around.
Maybe we are being deceived by the government, banks, central banks, and the media that this latest credit freeze and Crash was planned for the sake of Big Player profits as the middle class goes down the drain.
That would eliminate the buffoonery theory we all believe.
If this Bust was planned or allowed, that would change assumptions about the benevolence of our political leaders and economic elites.
It's easier to believe this whole thing was a random Black Swan event or boneheaded deregulations with no malicious or avaricious intent or extreme prejudice.
It's easier to get sucked into a Grand Ponzi or a spin off ponzi if you basically trust the system even if you don't know what the system really is and are just going with your social and political conditioning and socialized assumptions.
JR writes:
I would agree there are many, many Demo crooks ... but these crooks are in league with conservative Republicans. See the difference?
Does the Illinois governor count as a Demo crook? Or anyone that has ever been invovled with running Chicago?
Bank of America sent me a tersely worded letter this week, shutting down my heloc, calling all monies ($0), and chastising me for not notifying them about changing title to my home. I was a bit surprised, but figured it might just be a form letter sent to marginal accounts in these credit challenged times.
Of course, I've never accessed the account in the 28 months I've had it (I took it because they gave me a free safe deposit box), and according to them I've got a fico score of 854.
Upon further review of the closing documents, it seems the Bank used my neighbors house as collateral for my loan ($150k). I wonder what corporate genius is trying to bury that mistake.
"They should have acted more like the "neocons" that you profess they are, and let the mismanaged and poorly run companies fail......
Terrance | 12.19.08 - 1:13 pm | # "
Wrong! They should have acted like conservatives. Neocons (i.e. new conservatives) are basically old style democrats that are strong on conservative foreign policy. The neocon movement was the beginning of the end for the current conservative wave.
this matches anecdotals on home-as-atm
Not One Cent:
You need to go easy on HP: after all, it's own fault we're not spending money we don't have because we already spent it earlier when we didn't have it.
I mean we are being asked to jump back into this Grand Ponzi right now...
Quick note
krugman is on cspan with a talk at the press corps i believe
Good. The madness begins to end.
"on conservative foreign policy"
true conservatives follow the words of washington's farewell in spirit
krugman's a major douchebag who believes the only economy is a command economy.
the guest says: It's easier to get sucked into a Grand Ponzi or a spin off ponzi if you basically trust the system ..."
Well, a Confidence game is one which tries to elicit such trust as you speak of. The whole Conservative movement was a con, a very well-paying one too.
It is a nationalist trick to get everyone with money on board the Special Me train and to hell with everyone else.
Are people understanding that this was a huge Con job? I'm don't want to disparage the intellects of my fellow citizens, but it's taking kind of long to see the truth. Especially since our own Greatest Generation became liberals after fighting against the outgrowth of earlier Conservatives in Europe.
then I command krugman to give his pseudo-Nobel winnings...
" the only economy "
i'm sure he also has some opinions about GGP. that's a column i'd like to read.
" bgates writes:
"on conservative foreign policy"
true conservatives follow the words of washington's farewell in spirit
bgates | 12.19.08 - 1:23 pm | # "
That's a long winded speech. Perhaps you could direct us to a few choice passages in particular?
That White House Christmas video is begging for a Mystery Science Theater remake.
JR writes:
The Dems are no answer unless we make them be. They are just as sold out (I believe Nader told the truth) but the saving grace for the Dems is that their paid role was "Good Cop."
We have to make them play that role for real.
Now that the Dem's are in power, who plays the role of "Good Cop"?
This is a positive story. People are paying off debt instead of getting deeper in. We hear a lot of people seeing we need to get the debt flowing again, but debt is what caused this problem. We have to deleverage whether we want to or not. The economic problems are slowly being worked through.
Anyone see the movie Burn After Reading? I thought George Clooney did an excellent impersonation of Krugman.
Rob Dawg:
Is you math correct? When I plug a 30 year fixed rate, $9 trillion mortgage number into Excel, I get a $54 Billion monthly payment, and, at 8 years out, $39.6 billion is interest and $14.4 billion is principle, which would imply $43 billion / quarter in "negative withdrawl".
"That's a long winded speech. "
not at all. barely longer than the gettysburg address.
anyone who can't read it and understand it in under 5 minutes isn't educated. that isn't necessarily their fault, especially if they are dyslexic, of course.
Gary, JR: BOL on prosecutions. Obama won't respond to pressure from the left. What's the alternative for the left if he doesn't? Revolution? Not gonna happen.
The Dems in control won't go after the Repubs formerly in control. They will figure that they're in charge so now it's their turn to loot whatever the greediest crowd in history may have left behind.
Treason used to be something serious. Today treason gets you a TV show on Fox. Revisionist history is all the rage, you know. Iran Contra became patriotism at its finest.
I'm going to sign off for now and let the market mavens watch their ticks go up and down for the next few hours. They prefer not to be interrupted during the "business" day. Markets: the new opiate of the masses.
This seems like rubbish ... but what do I know?
Friday, December 19, 2008, 9:39am PST
Wells Fargo economists see recession's end in late 2009Silicon Valley / San Jose Business Journal
The deepest and longest recession since the 1930s will end in the second half of 2009, Wells Fargo & Co. economists said in their annual forecast.
The third quarter of next year will be better than expected by many, said chief investment strategist Jim Paulsen. Its like youre at a cookout and youre trying and trying to get your charcoal going and you keep squirting on lighter fluid and all of a sudden it goes poof!
Paulsen said fear mongering by government officials who were trying to sell the $700 billion Troubled Asset Relief Program in the fall made the situation much worse, freezing everyone in their tracks and bringing on economic paralysis.
Wells Fargo economists see recession's end in late 2009 - Silicon Valley / San Jose Business Journal:
@bearly
I'm starting to believe most of the blogs and media and government 'sources' are covering up the process involved in these Crash bubble credit cycles. If we get another Depression it's time to question assumptions about how this mess came about again and how it's being 'managed' again. Once bitten, twice shy. The second time down the drain within 80 years by the same monetary and fiscal 'management teams' might be a matter of 'fallout' info control and management.
RhodesianGreenbackinAZ writes:
This seems like rubbish ... but what do I know?
Give yourself credit--you at least know rubbish when you see it.
This graph doesn't account for all of the interest that people are paying on borrowed debt in negative equity situations (or does it?). Boy, it sucks to be them. Credit card debt is averaging 12k per household, and there's a "negative" home ATM.
"Real patriots who may resist the intrigues of the favorite are liable to become suspected and odious, while its tools and dupes usurp the applause and confidence of the people, to surrender their interests.
kind of sounds like Jas there, don't he? did Georgie have some tin foil to go with the wooden teeth?
" bgates writes:
....
anyone who can't read it and understand it in under 5 minutes isn't educated. ...
bgates | 12.19.08 - 1:29 pm | # "
I've heard it said that if you can't explain it to an 8 year old, you don't really understand it your self. Show me that you understand it please.
"are strong on conservative foreign policy"
It's more accurate to say they are aggressive interventionists / American hegemonists, with a particular interest in the middle east.
There is a weird range of bedfellows including American Exceptionalists, greedy bastards who want the oil, the AIPAC crowd, end-of-days Christian fundamentalists like Hagee, and even Saudi elites.
I would argue that the neocon foreign policy is neither "strong" nor conservative. But I agree with your general sentiment. That old crapsack Scoop Jackson was a neocon progenitor.
FOR IMMEDIATE RELEASE
December 19, 2008 For Information: (202) 874-5770
For Copies: (202) 874-5043
OCC Enforcement Actions WASHINGTON The Office of the Comptroller of the Currency (OCC) today released new enforcement actions taken against national banks and individuals currently and formerly affiliated with national banks. A list of enforcement actions previously disclosed and copies of the actual documents are available from the OCC's Communications Division by writing to: Comptroller of the Currency, Public Information Room (1-5), Washington, DC 20219. Requests made by facsimile transmission should be sent to (202) 874-4448. Please include the identifying enforcement action number when placing an order. Enforcement actions are also listed monthly in OCC Interpretations and Actions. Subscriptions to that publication are available from the OCC's Communications Division. The OCC also maintains a searchable database of all public enforcement actions taken since August 1989 on its Internet Web site located at OCC search here.
Cease and Desist Orders
No. Name/Bank/City Date
California
2008-149 Tomatobank, National Association, Diamond Bar 11/19/2008
Georgia
2008-150 First Security National Bank, Norcross 11/18/2008
Kansas
2008-151 The First National Bank of Anthony, Anthony 11/20/2008
Civil Money Penalty Orders
No. Name/Bank/City Date
Florida
2008-152 Eastern National Bank, Miami 10/24/2008
Formal Agreements
No. Name/Bank/City Date
Florida
2008-153 Flagship National Bank, Bradenton 11/20/2008
2008-154 Riverside National Bank of Florida, Fort Pierce 10/28/2008
Massachusetts
2008-155 The Milford National Bank and Trust Company, Milford 10/29/2008
North Carolina
2008-159 Wachovia Bank, National Association, Charlotte 12/08/2008
Removal / Prohibition Orders
No. Name/Bank/City Date
South Dakota
2008-156 Yumiko Edwards, Wells Fargo Bank, National Association, Sioux Falls 11/4/2008
Terminations of Existing Enforcement Actions
No. Type/Bank/City/Old EA# Date
District Of Columbia
2008-157 FA, City First Bank of D.C., National Association, Washington (EA# 2006-16) 10/23/2008
Missouri
2008-158 FA, Old Missouri National Bank, Springfield (EA# 2006-35) 10/27/2008
So we have shifted from +$800 million per year in 2006 to -$200 million per year in MEW. A trillion here and a trillion there....
WOW
"Show me that you understand it please."
I would not feign to be a necessary interpreter to the clear words of our first and easily greatest president. He was truly a moral authority in a deeply immoral world.
If people 'pay off debt' on bubble priced RE/CRE prices that still are falling in value, that will be a loss on top of a loss. The whole bubble pricing scheme or Grand Ponzi needs to be deconstructed from the bottom up.
" bgates writes:
"Real patriots who may resist the intrigues of the favorite are liable to become suspected and odious, while its tools and dupes usurp the applause and confidence of the people, to surrender their interests.
bgates | 12.19.08 - 1:33 pm | # "
So does it bother you that BHO took donations from foreigners during his campaign for POTUS? or am I reading that incorrectly?
krugman's a major douchebag who believes the only economy is a command economy.
bearly | 12.19.08 - 1:24 pm | #
A true douchebag focuses his criticism on one of the very few voices in mainstream media who has been consistently right.
Pluto says: "Does the Illinois governor count as a Demo crook?"
HELL YES Blago is a crook. What kind of question is that?
Blago is a crook who needs jail time. Sorry, but I'm a liberal and that means America comes first, and criminals have no place in office. I'm American first, how about you?
The CONservatives put their fantasy "team" first and to hell with America. For instance, Blago was on tape saying that the Obama people would give him nothing but appreciation. So end of story ... unless you are a CON.
Terrance wrote @ 1:13
(responding to sports fan who blamed republicans)
You may be correct that Republicans have messed things up, but that is because they acted like Democrats and started handing out money to anyone who moaned and groaned for it in order to solve problems.
wrong...
you got it back wards
democrats acted like republicans in drinking from the "more derregulation is always mo better" koolaid
schumer is a dem and aprime example
then
repubs spent money like dems but forgot the tax side of the equation
so what we got was we dont need no stinkin regulation from republicans coupled with lower taxes always better and sprinkle in a hefty helpin of hey lets give massive no bid contrats to our friends.
get a clue, read blood money, and "the wrecking crew"
--
review from the wapo
miller'(s) (blood money) Miller, an investigative reporter for the Los Angeles Times, fills in the missing piece: the staggering incompetence and corruption of the U.S.-led reconstruction effort, which may have done almost as much as anything else to turn the Iraqi population against its occupiers. Despite headlines in recent years about Halliburton's hefty revenues, this has been, in general, the less-covered dimension of the Iraq adventure. At its heart, Blood Money is the tale of how Washington left a country desperately in need of rebuilding to the whims of money-hungry private contractors, and of how the lack of clear lines of authority doomed efficiency, effectiveness and accountability from the start.
The result? "In almost every way the rebuilding has fallen short," Miller writes, despite some successes, such as the reconstruction of thousands of Iraqi schools and the vaccination of tens of thousands of Iraqi children. "After three years Iraqis have less power in their homes than under Saddam. Hospital neonatal units lose electricity, and doctors watch children die . . . . Oil production is far below its prewar peak. Poor Iraqis in Baghdad slums suffer through outbreaks of easily preventable diseases like hepatitis for lack of clean water or health care." And what bothers him most now, he says, is that the Bush administration seems about to give up on the reconstruction, slashing its funding even as it extends the U.S. troop presence in Iraq.
How did the country that authored the Marshall Plan botch Iraq? By way of explanation, Miller brings to life the villains and heroes of the often arcane reconstruction effort. His villains include politically connected contractors such as Mike Battles and Scott Custer, whom the former inspector general of the U.S. Army's Fifth Corps calls "rip-off artists" and who, Miller reports, never endured "any serious effort" from the Bush administration to recover the taxpayer dollars they were responsible for; senators such as Ted Stevens (R-Alaska), who, Miller writes, inserted language into the $18.4-billion Iraq-reconstruction bill of November 2003 guaranteeing "special contracting privileges for a group of constituents [the Alaska Native Corporations] that supplied Stevens . . . with votes" ; Coalition Provisional Authority (CPA) administrator Bremer, whom Miller accuses of simply not paying attention while such depredations were happening under his nose; and even Laura Bush, who championed an extravagant showcase hospital on the outskirts of Basra that Miller reports drained money and attention away from the small-scale health clinics that Iraqis really needed.
" Gary writes:
.....
It's more accurate to say they are aggressive interventionists / American hegemonists, with a particular interest in the middle east.
.......
I would argue that the neocon foreign policy is neither "strong" nor conservative......
Gary | 12.19.08 - 1:34 pm | # "
Thanks; You penned much better than I. I had a hard time coming up with that expression, but at least you get my gist. Neocon ARE NOT conservatives!
Lets
see:
for 2006 MEW about 120B/q or half a trillion bucks.
Total GDP was 13 trillion
So we have deflated the GDP by 4%.
That's a pretty fair hit
duh...I just realized the Rick Warren everyone was whining about was my old Pastor from Saddleback Church
I figure if Obama has taken a liking to Pastor Rick, then there IS some hope....
"So does it bother you that BHO took donations from foreigners"
if it wasn't for "donations from foreigners" the revolutionary war would have been a much more difficult campaign.
There's two choices now.
Wear an 'intelligent' research tin foil hat and wake up or wear a dunce cap and go back to sleep and dream of the Tooth fairy & Santa.
"my old Pastor"
he's the world's pastor, his book has sold zillions, and many preachers all over the globe literally use a weekly cheat sheet from him
The 'two-party' debate is for suckers.
" bgates writes:
I would not feign to be a necessary interpreter to the clear words of our first and easily greatest president. He was truly a moral authority in a deeply immoral world.
bgates | 12.19.08 - 1:36 pm | # "
I didn't originally ask for an interpretation, just a pointer or two to the sections you found most pertinent or profound. Not much to ask.
Transitive Property
The consumer is dead. This is a consumer-led recession in a consumer-driven economy. The economy is dead.
JR writes,
'criminals have no place in office...'
Good luck with that!
Smart home owners, extracting as much equity as possible before the crash.
" bgates writes:
"So does it bother you that BHO took donations from foreigners"
if it wasn't for "donations from foreigners" the revolutionary war would have been a much more difficult campaign.
bgates | 12.19.08 - 1:40 pm | # "
We're talking about an election where it's illegal to take donations from foreigners (and immoral if you agree with Washington), not a revolutionary war. You're being for to evasive. What are you hiding?
krugman's a major douchebag who believes the only economy is a command economy.
bearly | 12.19.08 - 1:24 pm | #
A true douchebag focuses his criticism on one of the very few voices in mainstream media who has been consistently right.
Gary | 12.19.08 - 1:37 pm | #
Being right on what's coming down the pike in now way implies the solution he is prescribing will work. Krugman, roubini and others have all called this will ahead of time.
On the other hand it is a very open question whether keynsian solutions will work with the debt level we already have, with the level of corruption we have in Washington and Wall-Street.
But the good news is I'm already starting to read/hear both on NPR, main-stream TV and WSJ the revisionist history making occuring that will re-write why and how Paulson/BB did what they did.
Kind of like the re-writing of history that has occured with the New-Deal.
We're gonna get to see this time around whether the New-Deal failed because enough money wasn't applied soon enough. And the best thing about the keynsians is that EVEN if it doesn't work a SECOND time they'll just say that it would have worked this time if we had thrown enough money at the problem soon enough.
I meant FAR TOO evasive
Avalon Project - Washington's Farewell Address 1796
the final third deals with foreign policy. this is pretty off-topic, even for a semi-troll like myself.
washington couldn't have specifically seen our current problem, insofar as the constitution mandated gold and silver currency. he wouldn't have been able to comprehend a future where we were stupid and strange enough to print up "federal reserve notes", let alone that his portrait would be so attached to this piece of fantasy.
xxxxx:
"for to"
improper use of pronouns...5-yrd penalty...
"Pissed Off In California writes:
.... Krugman, roubini and others have all called this will ahead of time."
And Tanta
bgates says: "[Warren is] the world's pastor, his book has sold zillions, and many preachers all over the globe literally use a weekly cheat sheet from him."
Modern Pharisees. Read the Gospels yourself, it isn't long.
If you are a CON, you will piss your pants if you understand it. But you won't want to read or understand, THAT's why the Pharisees remain in business.
Notice how all these right-wing Churchy-folks certainly went along with the CON, didn't they? Could even say they started it.
I wouldn't look to a CONservative to get me into heaven.
When does 'ignorance' or 'apathy' or 'blind faith'(true believers) become a form of complicity or obstructing justice?
xxxxx writes:
"Pissed Off In California writes:
.... Krugman, roubini and others have all called this will ahead of time."
And Tanta
...and Taleb
It is good to see MEW numbers drop and even turn toward accumulation. I see that as a necessary thing - and a good thing - given the imbalances, but it is amazing how hard our government is fighting it.
Bush mulls speech to 'leave behind some lessons learned'
Title: how to be create a kleptocracy in America and not go to jail.
" bgates writes:
The page cannot be found washing.asp
..... he wouldn't have been able to comprehend a future where we were stupid and strange enough to print up "federal reserve notes", let alone that his portrait would be so attached to this piece of fantasy.
bgates | 12.19.08 - 1:48 pm | # "
Yet he was undoubtably familiar with, if not part in parcel in, the Continental, as in "not worth a Continental".
the guest@1:18
sometimes you just dont want to go there!
I for one hope the consumer dies because they just flat out took over the country for the last 7 years..
I hope being a citizen becomes cool again...
everything I look at but don't need is butter and I can survive on bread..
no more butter for me outside of a hot brunette lady....
" I Believe CR and Krugman writes:
So does "positive injection" mean taking out a HELOC?
I Believe CR and Krugman | 12.19.08 - 12:15 pm | # "
No, "positive extraction" mean taking out a HELOC.
xxxxx | 12.19.08 - 1:14 pm | #
Note to self: when making dumb jokes, remember to use emoticons.
"When does..."
that's an interesting question. i've often considered the morality of the actions of my father's godfather, who died flying over the channel 60 years ago. he was possibly firebombing cities. did the women and children in those parts of Prussia deserve that fate? Or those in the tokyo fires a year later? It is a horrible decision to make.
A 'controlled opposition' and that is what is 'allowed' into the media just barely scratches the surface of this credit freeze/bubble Bust IMO.
""not worth a Continental"
good point, perhaps he'd know exactly what's going on. but he'd be mystified at treasury prices, all the same. why are continentals so dear?
"Note to self: when making dumb jokes, remember to use emoticons.
I Believe CR and Krugman | 12.19.08 - 1:51 pm | # "
Note to self: Lighten up
gelboak writes:
Rob Dawg:
Is you math correct? When I plug a 30 year fixed rate, $9 trillion mortgage number into Excel, I get a $54 Billion monthly payment, and, at 8 years out, $39.6 billion is interest and $14.4 billion is principle, which would imply $43 billion / quarter in "negative withdrawl".
Not all loans are in year 8, just typically. My math however is doubly incorrect because the older loans are also much smaller. I'm much too high but I suspect you are a little low. BTW it turns out I was using a slightly dated figure for Total outstanding it is $11.1T now.
Most of the time nobody wants to go 'there'.
More than dollar strength ... Brazil has a huge crop and much less sugar going to alternative fuels in this deflationary environment
Anonymous writes:
Sugar down 7% today and when sugar falls 7%, shit happens!
Bloomberg.com cfutures.html
looks like VIX, TED and Libor are all improving, but a2/p2 and abx are struggling
CR it may be time for a neww indicators post
"Brazil has a huge crop and much less sugar"
PBR has also lost quite a bit of market cap
i see from the first graph that MEW has never been negative for two successive quarters until this year. I wonder how long MEW will remain below zero...
I don't sense any real urgency on the street from people who haven't lost their jobs. The consensus is that this is all going to pass soon. Just a blip. I was talking with a co-worker about how all the local fabric stores seemed to close in the last 5 years, and I said, Just when people might be more interested in making clothes again. Co-worker looked at me like I was slightly nuts. "This won't last long enough for that," she said.
At the university where my brother works, there's still a relentlessly chipper can-do whistling past the graveyard. Rumor has it though that even some of the wealthier students are having trouble making next semester's bill.
I think there's going to be a huge and ugly attitude crash starting in February when the Christmas and Obama excitement fades and reality sets in.
the guest writes:
JR writes,
'criminals have no place in office...'
Good luck with that!
Thank you. Just because these CONservatives turned out to be rotten con-men doesn't mean that decent government is impossible.
Some people have been calling this correctly from the beginning: how about supporting those folks? No, not Pelosi or Reid. But there are some.
"Pissed Off In California writes:
krugman's a major douchebag who believes the only economy is a command economy.
bearly | 12.19.08 - 1:24 pm | #
A true douchebag focuses his criticism on one of the very few voices in mainstream media who has been consistently right.
Gary | 12.19.08 - 1:37 pm | #"
...which is exactly why my next treatise is entitled "Why 'Douchebag' ought to be used more often in civilised conversation."
Wow, it's like a love-fest today with all the liberal elitists coming out to post.
At least with the know-it-all leftists in charge now, I'm looking forward to a wonderful, prosperous upcoming four years.
Krugman might be right.
We can either spend like mad or save like mad.
If we spend like mad, it will create employment even if it does inflate the currency.
If we save like mad, unemployment will go vertical, and Depression^2 is certain.
Conjure says, "The US economy now enters a dangerous new phase."
I resent that my name is being used so flippantly in modern discourse, not to mention being attached to that douchebag Krugman.
Mortgage debt on nonfarm homes (billions):
CY03: 7212.7
CY04: 8245.1
CY05: 9349.5
CY06: 10417.0
CY07: 11126.2
3Q08: 11131.0
mal:"I think there's going to be a huge and ugly attitude crash starting in February"
oh great...cheer us up, why don't ya'?
"At the university where my brother works, there's still a relentlessly chipper can-do whistling past the graveyard. "
At the University of Washington, where I'm at, panic is starting to take hold. We get constant emails telling us of forthcoming budget cuts of anywhere from 10-15% (or more). I lost a grant last week, a buddy of mine lost another, and his wife was on the verge of being fired from the uni when he interceded and aggressively stopped that from happening.
How come we dont have this belgian thingy going for us...
Belgian government resigns over Fortis affair: report
Belgian government resigns over Fortis affair: report - MarketWatch
Troy:
Is this because of bank's own a lot?
Lionel writes:
At the University of Washington, where I'm at, panic is starting
at least you got WaMu...
Cerebus backstop coming from chrysler financial...
that's so funny because that abs paper they carry is full of 130% ltv's on worthless cars and 580 fica credit junkies...
Cerberus willing to give up its equity stake in Chrysler - MarketWatch
Unless Chrysler's labor costs can achieve parity with the foreign transplants, and without the restructuring of Chrysler's debt, Chrysler cannot be restored to long-term health and the government loan will be unlikely to be fully repaid," Cerberus said.
Kyle writes: Wow, it's like a love-fest today with all the liberal elitists coming out to post."
Hey CON! How's your glorious revolution going? Oh and you're name-calling again. How expected of you.
And liberals are "elitist" ... why? Oh, that's right, just because you are a CON and as such you can't name anything correctly or with integrity.
Well, looking down on people is a CONs job, as you just illustrated. But when are CONs right about anything? If their ideas actually worked, they would have by now.
Friend's Hub works at night at a company that makes hugh construction equipment...Had a meeting last night, just to reassure everyone their job was gonna be there even tho they had just closed a plant in a neighboring state. Thirty minutes later he comes around and updates cell phone numbers.
ADoesn't matter if he voted left or right. Reality is Reality
Good luck with that!
the douche | 12.19.08 - 1:44 pm | #
Yes, your glib remarks are ever so much more helpful.
POIC, it is a myth that the new deal didn't work. Stay away from anything by worthless hack Amity Shlaes at all costs.
Some of the posters here actually want armageddon to happen. Anyone who reads "The Road" and gets their inner survivalist fantasist all excited is truly disturbed.
waitaminute, if you couldn't already tell, it is a favorite, along with the short forms "douche" and "d-bag", as in "That d-bag Kyle is so f'ing stupid, he voted for Bush twice!"
Who shot JR?
" cd writes:
Cerebus backstop coming from chrysler financial...
that's so funny because that abs paper they carry is full of 130% ltv's on worthless cars and 580 fica credit junkies...
IIS 7.5 Detailed Error - 400.0 - Bad Request dist=hplatest
Unless Chrysler's labor costs can achieve parity with the foreign transplants, and without the restructuring of Chrysler's debt, Chrysler cannot be restored to long-term health and the government loan will be unlikely to be fully repaid," Cerberus said.
cd | 12.19.08 - 2:06 pm | # "
The funny part is that Cerebus is "willing" to give equity to workers. That's almost as good as giving bonuses to brokers in the form of worthless derivatives.
[ that EVEN if it doesn't work a SECOND time they'll just say that it would have worked this time if we had thrown enough money at the problem soon enough]
Well throwing money wouldn't create a terrible problem, if we had any. We already have more obligations than the USA can honor. Unless you really believe we can grow our way out of the hole faster than the interest on the obligations can cannibalize that accumulation.
Really instead of calling these stick save attempts bailouts they should be called increased future claims on wealth. If we have no wealth in the future there are simply more claims against nothing.
CR
This is a beautifully written piece by Krugman. I think well worthy of a mention in the blog.
OP-ED COLUMNIST; The Madoff Economy - NY Times
It's easy to see why Keynesian policies are bad for an economy, but given the current conditions, wouldn't Keynesian policies be better than doing nothing? It seems to me that letting the market correct itself means certain disaster, where a Keynesian stimulus means some unknown but - hopefully - less severe outcome.
reality is:
an 80 year old little lady who fed kids at a high school for 25 years having to live on the shitsandwich she's been served by this govt..
now apply that to millions....
" Samdog writes:
then I command krugman to give his pseudo-Nobel winnings...
Samdog | 12.19.08 - 1:27 pm | # "
I want to know if Krugman blew his prize money covering his yard in concrete to stimulate his neighborhood economy.
I would hat to hear that he is "hoarding" a positive net worth.
"POIC, it is a myth that the new deal didn't work. Stay away from anything by worthless hack Amity Shlaes at all costs."
Sorry, not a myth. Very open to interpretation. Very good arguments on both sides of the equation as to how well it worked. I'm sure the truth is somewhere in the middle, which doesn't give me a good feeling this time around.
I have no idea who Amity Shlaes is.
Lionel writes:
At the University of Washington, where I'm at, panic is starting
----------------------------
UC & CSU are getting a bit jumpy, too. I guess anything where funding comes from the state of CA should be.
xxxx:
I wondered if the Credit Suisse playbook would die uncirculated but, yes, it looks like Cerberus has borrowed a page.
May the example become more prevalent when bonuses are calculated everywhere.
I think by boycotting GM and Chrysler and buying Ford perhaps the consumer can do what the politicians couldn't. Create one healthy company out 2 1/2 sick ones plus save the tax payer a lot of money.
Do you honestly think that Obama is going to pull the plug on these guys. Given the tremendous back bone that Congress has demonstrated if you were a dealer, bond holder or union worker why would you make any concessions?
Conjure says, "The US economy now enters a dangerous new phase."
How so? The markets bumped their head on 8800 and didn't pop. They can drift higher through the holiday week.
The two debt companies disguised as automakers got a deal similar to what other debt companies got. They now take their loot and go "black box" for 12 weeks with their survival plans.
What the new here that triggers a new phase?
ew thread. C'mon over
The market is a mirage of water in the desert. Money is the sand.
mp conjure Now What!
I have no idea who Amity Shlaes is.
Pissed Off In California | 12.19.08 - 2:12 pm | #
Do yourself a favor and keep it that way
I would also argue that the spending we did on WWII counts as a major stimulus. Of course in those days, the rich chipped in and we had a truly progressive tax scheme to pay for it all (including over time).
The only thing lacking today has been (a) leadership and (b) the will to do something. Both of those factors have changed significantly over the past 6 months.
NO ONE ON EARTH has been more wrong than the free-market, de-regulationist pure capitalism shills. It's time we tried something different.
It's easy to see why Keynesian policies are bad for an economy, but given the current conditions, wouldn't Keynesian policies be better than doing nothing?
Speed | 12.19.08 - 2:11 pm | #
I'm no 'Austrian' but I'd feel a lot better about current Keynesian policy if they practiced it during the 'boom' half of the cycle as aggressively as the 'bust'. When I see our leaders really running surpluses and pulling money out of the system IN THE RECOVERY to avoid a future bubble - THEN I'll be more comfortable about government's ability to effectively 'manage' fiat money w/out catastrophe. Right now it is stimulate in the good times and even more stimulation in the bad.
In short Keynesian policy could maybe work but only if it's run by those with the discipline and the cold hearts of the 'Austrians'.
I can't believe no one responded to a pro-Krugman post. Maybe I'm filtered.
Now What!
They start bailing out retailers.
"NO ONE ON EARTH has been more wrong than the free-market, de-regulationist pure capitalism shills. It's time we tried something different."
Oh that I totally agree with. Unfortunately if you peek behind the curtain in the Obama team and Wall-Street has it's henchmen there, as they have in previous administrations. Summers, Geithner, Rubin and others were all for de-regulation and securitization when the going was good.
A bit of revisionist re-write going on there as well unfortunately.
Samdog writes:
Lionel writes:
At the University of Washington, where I'm at, panic is starting
at least you got WaMu...
Samdog | 12.19.08 - 2:04 pm | #
During the boom years, WAMU as funding all kinds of projects at UW. Now, not so much.
Speed,
Few are "listening" anymore. Everyone posts and posts. CR disconnect has occurred.
We get better discussions in the evening. I was hoping to hear some real arguments against Keynesian policy rather than the usual vitriol, of which I'm also guilty. The obvious knee-jerk reaction to reckless spending is denunciation. But in relation to any other ideas, such as doing nothing, it's worth considering.
I'm listening Speed!
Hey - re: Amity Shlaes.. I've got his book on GD1 but haven't had a chance to go through it.. what's the skinny?
gc
Speed writes:
I can't believe no one responded to a pro-Krugman post. Maybe I'm filtered.
why bother? we're all socialists now...
I can't believe no one responded to a pro-Krugman post. Maybe I'm filtered.
Speed | 12.19.08 - 2:19 pm | #
Speed, just read it.
Maybe that anonymous dickwad from earlier this week will now STFU with his baseless Krugman bashing.
gc
Gubbmint Cheese | 12.19.08 - 2:28 pm | #
"He" is a she. Don't waste your time, it is a rightwing screed.
Put a wig on James Glassman or Larry Kudlow, add a dash of Jonah Goldberg and you've got Amity Shlaes.
Conjure says, "Krugman is dead nuts on."
"America has the financial system of a banana republic."
Speed-
I think Keynes works in an environment where the consumer is spending below their capacity- i,e aggregate demand has fallen.
The current situation is exactly the opposite. Consumer have been spending well above their means sustained through unsustainable asset bubbles and loose lending standards.
The situation can only rectified when spending has been reduced to a lower sustainable level and the rest of the economy has adjusted to it. I think the analogy to a hangover is the most appropriate. The "cure" is not more alcohol but palliative stuff- fluids and asprin. In the current circumstances that would expansion of Section 8, food stamps, Medicaid, college tuition and a vast expansion of the number of police.
The exchange, if it occurs, could result in some credit default swaps (CDS) insuring ResCap's debt moving to GMAC.
If this happens, holders of ResCap's debt that also bought protection on the debt with CDS that do not tender their bonds may be left with large mismatches in the value of the two securities.
As of Wednesday only 58 percent of bondholders had agreed to tender their debt, below the 75 percent GMAC has said it needs to go ahead with the exchange.
Reports have also surfaced that the exchange is in trouble. Pacific Investment Management (Pimco), the world's biggest bond fund, doesn't plan to participate in the exchange, The Wall Street Journal reported on Thursday.
UPDATE 2-GMAC may swap ResCap bonds for GMAC unit equity
| Reuters
Maybe PimpCo is going to stick a fork in these guys.
Krugman might be right.
We can either spend like mad or save like mad.
If we spend like mad, it will create employment even if it does inflate the currency.
If we save like mad, unemployment will go vertical, and Depression^2 is certain.
You spend like mad and i'll save like mad.
Don't believe krugman's economics but that was a nice piece he wrote.
Keynesianism's biggest problem is (contrary to Laissez Faire) its teleological enforcement of the hypothetical "right" level of aggregate demand, fighting a downward change as "below" equilibrium rather than as the new equilibrium.
About amity - she does tell a great story of FDR buying gold to fight deflation - morning meetings to discuss the upcoming increase - FDR suggests 21 cents - when asked why 21 cents he said it was 3x7 - a lucky number (sorta like $700 trillion?)
No MEW because no mortgage equity! 12 million upside down in their mortgages right now and 2009 will be much worse. Good grief!
"This is a positive story. People are paying off debt instead of getting deeper in."
Let's call this so called debt paydown what it really is--default. The gubmint would like you to believe it's one and the same.
"I'd feel a lot better about current Keynesian policy if they practiced it during the 'boom' half of the cycle..."
That's a pretty good summation of where we are and why - we have no policy; we only react in a manner to please short-term interests.
"America has the financial system of a banana republic."
Absofuckingultly!
otonecent-
Although one can't know the "right" level of demand like so many things in life one can usually tell the "wrong" level of demand.
By any objective measure (except new age economists "this time is different")it was clear that the U.S. Consumer was consuming too much- declining wages, rising debt, aging population, bubble asset prices and irresponsible lending.
Yahoo finance[Faux?] video - Don't wait for prices to drop because it will screw up the economy.
"crazyvermonter writes:
notonecent-
Although one can't know the "right" level of demand like so many things in life one can usually tell the "wrong" level of demand.
By any objective measure (except new age economists "this time is different")it was clear that the U.S. Consumer was consuming too much"
Apparently it is not clear to everyone because Krugman/Bernanke/Bush/Obama think we are borrowing/consuming too little.
Citibank is also firing a huge chunk of their workers. Is GM or Chrysler going to do that?
Christopher | 12.19.08 - 12:47 pm | #
Already have and yes there will be more cuts
Anonymous writes:
"America has the financial system of a banana republic."
Do not forget the "political system" (the congressional oversight, the laws making it perfectly legal).
In fact, what seems not too much being appreciated here is the "collusion" of the mortgage brokers(financial), the securitizers (financial), the regulators (political) and congress (overseers and legislators).
That collusion describes the corruption going on in the american system.
otonecent
I think that lot is like generals fighting the last war. The only person who gets it in the Obama administration is Volker. I hope Obama will have the good sense to listen to the one person who doesn't have to cover up their past mistakes. Volker has the advantage of not having been part of the shell game of the last 15 years.
I figure if Obama has taken a liking to Pastor Rick, then there IS some hope....
Black Star Ranch | 12.19.08 - 1:40 pm | #
Yeah lots of hope in inviting a bigot to be the spritual presence for the inaguration. Obama promised to be the president of all the people, and contrary to the beliefs of Pastor Rick, Gays are people too, and are entilted to basic human rights. Iut was a big mistake by Obama. Notice he didnt decide to invite someone who thought that slavery is ok, since it is endorsed by the bible.
That Krugman Op-Ed was a good one, IMO. I sent it on to some friends who are beginning to understand what's been happening. Also sent on the info. on the "bailout" money being funneled through Cerberus. Nothing is what it appears to be on the surface. It is fascinating when the kabuki is unmasked. Of course, it's also depressing as well.
I got booted out of blogspot. Can't get back in.
Consumer have been spending well above their means
The crucial element is "has been" that is, they aren't anymore. A year from now, it might seem like a good idea to encourage spending, but by then it will be too late.
This is a consumer driven recession, regardless of why it is - mortgages, MEW, etc.
speed-"A year from now, it might seem like a good idea to encourage spending, but by then it will be too late."
why do you think it would be too late? I would think that would be the perfect time.