I actually listened to him speak this morning. He said the goal was to provide enough capital via preferred shares to survive "stress conditions", then only convert it to common stock in the event those conditions materialize.
When asked, "so you do believe some institutions are too big to fail", he said "yes".
And thus the unsecured debt (and even the preferred stock) of every major financial institution is now backed by the full faith and credit of the United States. Wonder how that will work out.
"But how does Bernanke know the solution before the data is available from the stress tests?"
He was given the results before they started. So we release a bunch of petty criminals to reduce state budgets, that leaves us with tons of space to fill it with banksters and corrupt politicos. Rather than claw backs, we can just fund their stay with their own money. I think that is a compromise to which everyone can agree.
It is nice to know that he is prepared to make sure that taxpayer money pours into the subordinated common shareholder equity JUST PRIOR TO LIQUIDATION.
CR's comment: But how does Bernanke know the solution before the data is available from the stress tests?
It's a hypothetical at this point, but it seems to me he is assuming some banks are seriously insolvent and some are not. The stress test results should clarify things. In the meantime no one is writing blank checks.
The underlying belief appears to be that systemic collapse is mitigated by making whole the correct institutions--bond holders in this case among the management and executives, as well as the institutions themselves. Another mal-investment.
I read somewhere this morning that "too big to fail" is code for "too big to liquidate." Oh! That was in connection with Continental Illinois, the 1st "too big to fail" bank. At "The Big Picture."
Alternate proposal. Issue new common shares to the government. They get more capital, current shareholders aren't directly diluted (because billions in new capital help the long term prospects of the bank).
Then, as voting shareholders, the Fed Govt can do things like limit bonuses, reduce marketing expenditures. Does anyone else find it really bizarre how much some banks are spending on marketing while shutting down credit cards and credit lines for other seemingly good customers?
(for the uninitiated:
One of the most expressive expletives I've heard, and one with a touch of archaism. The word "corruption" here doesn't refer to bribery and graft, but rather to necrosing and decaying flesh. ("Corruption" is also used to refer to rot and decay in the King James Bible.) Hence, this is an invocation of biochemical heck breaking loose -- somewhat reminiscent of the offensive medieval habit of catapulting filth and rotten corpses into a city which one is besieging.)
This could make sense, but the terms of conversion matter a lot. If we convert the Citi preferred dollar for dollar at today's price, the government already owns more than 90% of Citi.
I suspect that's not how the conversion will be set up.
Why don't I just walk into a Citibank branch and throw a couple of hundred dollars at the teller? At least I'll get the satisfaction of spitting on their floor before I leave.
Wonder how that will work out. Nemo | Homepage | 02.24.09 - 2:25 pm | #
Easy... "But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost."
The elephant in the room is that we have already poured more than enough money into these banks to own them outright -- speaking of a bigger than 51% stake, considering current market cap. If there is any question the people should be asking is why aren't we running the banks? Just replacing management might boost confidence.
So, a "worse" scenario than this one, but not the worst possible scenario, and still handing money to rich bastards instead of dealing with the problem head on.
Oh, and remember, it's not the common shareholders who have the most to lose. It's the banks' bondholders and other lenders, the FDIC, and to a lesser extent swap counterparties.
Angry Saver(Unrated) writes: We are practicing CRONY capitalism.
That's right. once again public-private partnership shows, as in Japan, that nobody will force insolvency on their golf pals. The country may fall to ruin, but your fraternity brother will not go bankrupt.
denriddy -- Wow, you stepped it up a notch from the usual charge of socialism. Facism? Really? I hear a lot of opposition and criticism, not things I think you hear in fascist state. And, we as a people are actually gaining control over the most powerful companies in the world. Yes, they may be insolvent but letting them fail without attempting to get them healthy or some control when they do die will do much more damage.
And thus the unsecured debt (and even the preferred stock) of every major financial institution is now backed by the full faith and credit of the United States. Wonder how that will work out. Nemo | Homepage | 02.24.09 - 2:25 pm | #
So basically the strategy is to wave a giant magic wand made out of generations of future indentured servitude??
So basically the strategy is to wave a giant magic wand made out of generations of future indentured servitude?? Joanna | Homepage | 02.24.09 - 2:36 pm | #
"But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost." Comrade Bear (tj & the bear) | 02.24.09 - 2:31 pm | #
Haha... that just never gets old.
"In the case of civil unrest following natural disasters or politically unpopular decisions the U.S. government has a technology, called a neutron bomb (or, today, the biological equivalent) to pacify as many US citizens as it wishes at essentially no cost."
In another change, the legislation bans Mexican-licensed trucks from operating outside commercial zones along the border with the United States. The Teamsters Union, which supported Obama's election last year, hailed the move.
I never knew that bank bondholders were "sacred cows."
Angry Saver | 02.24.09 - 2:36 pm | #
They'll be hamburger too - eventually. Might be due to currency devaluation & inflation but they too will go through the grinder - eventually. No one will be spared I'm afraid.
CR: My guess is that he doesn't know for sure that they are solvent, but he knows that the results of letting some fail at this moment in time will have catastrophic results. So, it might be an extremely expensive (to us the taxpayers) way to buy time until the situation is more clear and we can best find our way out of this mess.
....do you realize nothing short of a revolution will stop this spending madness? Not Washington, not any part of the FedGov, possibly a courageous State - but not likely.
Black Star Ranch(Excellent) writes: ....do you realize nothing short of a revolution will stop this spending madness?
Nah, you never see a revolution in a settled state like this. It will keep going til thy lose the ability to raise funds due to sovereign credit crisis. See John Law for details.
Why do you think it's a platform of one of our two major parties to make it as difficult as possible to limit breeding?
Peasant Darkness | 02.24.09 - 2:45 pm | #
Because the USMC is always in the mood for some good cannon fodder?
Why do you think it's a platform of one of our two major parties to make it as difficult as possible to limit breeding? Peasant Darkness | 02.24.09 - 2:45 pm | #
Just add religion, and you can con most people into faith-based ignorance. Much easier to die now and get your reward in heaven. Hope deferred.
But I think this generation somehow was led to believe they were/are just special enough to have meaning as individual human beings, not just a crop of economic cannon fodder........silly silly peasants.
But how does Bernanke know the solution before the data is available from the stress tests?
And when did the Fed Chairman become the go-to guy for what the Treasury does?
Ah hell, checks and balances are overrated, right? The Fed's balance sheet doesn't matter and the Treasury can write checks in whatever amounts it wants.
Heard a private presentation from an economist at a mid-sized bank recently. He considers nationalization of Citi and BOA to be a baseline assumption at this point, and thinks the market has already reached that conclusion, so what's the point of the delay?
It does appear that Bernanke has realized that dollars printed into existence will behave differently than dollars that have been lent into existence. So that's something, and explains why he is so desperate to keep the banks in the equation.
I don't think this is fascism, because real fascism tends to be more direct and effective. This seems to be the opposite - kabuki is a pretty good term for it. The immediate problem is that the fake process is getting sillier and is rapidly reducing the credibility of the government.
Let's just get this dam CDS nightmare over with - and move on. If a few of the wrong CDS players turn crispy critters - well, at least a few of 'em got burned.
Bernanke can suck my knob. Seriously, this guy needs some high velocity brain surgery. Central Banks should never have a bigger market cap than the country in which they reside (too big to bail), but that's exactly the problem in Europe and perhaps here in the USA as well.
WASHINGTON (MarketWatch) - Federal Reserve Board chairman Ben Bernanke said Tuesday that other programs have jumped ahead of the idea of the central bank buying longer-term Treasurys.
Bondholders always win. From a very old NYMag column:
Consider, by contrast, the passage from Bob Woodward's The Agenda in which Clinton asks the rhetorical question "You mean to tell me that the success of the economic program and my re-election hinges on the Federal Reserve and a bunch of fucking bond traders?"
"We do have a couple of other things going on right now," Bernanke said, specifically mentioning the Fed's purchases of mortgage-backed securities and plans to start buying other consumer loans.
It's exactly as was said - the fed can keep the long term yield down, the fed can prop up ABS, the fed can keep mortgages down, but it can't do it all at once.
Hoopajoops LTD(Excellent) writes:
WASHINGTON (MarketWatch) - Federal Reserve Board chairman Ben Bernanke said Tuesday that other programs have jumped ahead of the idea of the central bank buying longer-term Treasurys.
There is a big risk here that Bernanke is doing damage.
Clearly, the credit collapse and debt destruction mechanism is not understood by economists - the proof is that they could not predict it.
It is possibly that by his frenzied action to prevent recognition of default, loss and debt destruction, Bernanke is preventing the normal recovery process and extending the period of recession or depression.
The question from China's perspective is at what point do they believe that US borrowing and pouring money into the financial sector is a black hole. That continuing to do so will not actually cause consumers (dodos?) to return. When? And when they reach that conclusion, it ends with an eviscerated USD. After all else has been eviscerated.
Can't maintain both when they are of the same leveraged pool. Give it ~ a month
What are the odds the S&P500 goes up 10%, above 800, within a month? within February?
AUD/JPY: 59.14 -> 63.12 (+6.7%)
GBP/EUR: 1.1245 -> 1.1271 (~ 0%)
Keep in mind the window offered was 2 months and this is 5 days later, the reason behind the GBP/EUR is waiting for an exceptional event.
As for yesterday's gold/equity comments, S&P500 is at 769 (+3.4%) for now with the possibility of 800 before month's end less crazy. Gold is at 969 (-2.3%).
Just posting this update to keep track, and keep myself honest through feedback. I'd like to think I'm not just a broken weathervane that only points in one direction. To that effect I've said both S&P500 at 600 by year end 2009 when earnings forecasts were still above $90, explained how and why default rates will be greater this time by an order of magnitude as a proportion of those with negative equity, fervently called the Nov-Dec rally ahead of time with reasoning, disagreed with CR on auto+truck sales, came to verbals blows with yves smith who believed that trade declines were because of Letters of Credit, etc
These comment threads have gotten markedly more negative since I stopped reading them last year. Yeesh, it feeds onto itself. \t Jay | \t \t \t \t02.24.09 - 2:56 pm | #
The question from China's perspective is at what point do they believe that US borrowing and pouring money into the financial sector is a black hole. blackhat | 02.24.09 - 2:56 pm | #
That's what I've been wondering every time I reread that quote about how much they hate us, but feel they have no other choice but to keep buying our treasuries. At some point they are going to call it quits and then we'll see just how much they do hate us....
"But how does Bernanke know the solution before the data is available from the stress tests?"
Faith in the invisible hand.
Heard a nice one on NPR this morning. They were interviewing a few people including a "senior business reporter". This reporter seemed quite distressed about the government leaning on Wells Fargo to stop a sales conference in Vegas. He brought it up at least twice. He went on and on about how great the sales staff at Wells Fargo is and how awful of an idea it was to interfere with them. Their stock price had beat the s&p500 for a long time, their sales staff had a high score on some performance metric. Obviously the managers of Wells Fargo are veritable superheroes, how dare the fedralgubmint poke its nose into them! If you listen to this guy it doesn't sound at all like Wells Fargo had just received $25 billion from the federal government to keep itself from collapsing. That is somehow off in a parallel universe which has no bearing on the competence of management or the effectiveness of this sales force.
I have a friend who works at the Wynn and the weekend the WF party was cancelled he was told not to come into work for that weekend, and he was just one of a few dozen told to stay home with no pay.
So their seems to be a disconnect from realty on your part as well.
The reason we don't have pre-privatization is because the banksters haven't yet figured out how to profit from it.
Yes they have.
First they have to loot the public via stocks and housing. Then they loot the government via bailouts. At each step so far, bankers reap huge bonuses and dividends. Finally the banksters IPO the banks back to themselves as they are the only group with any money.
How do they get away with such a scam? Easy. At each step, the bankers promise to make the public wealthy. It never fails.
Why aren't the Republicans up in arms over all the taxpayer money that has gone into these bailouts? They scream and scream about 1% of the stimulus package while trillions are flying out the "bailout" backdoor.
well, the zombies are clearly feeding on something but I'm still not entirely convinced they haven't discovered another food source. Because I'm not discovering a lot of fresh IQ-spoor recently.
And thus the unsecured debt (and even the preferred stock) of every major financial institution is now backed by the full faith and credit of the United States."
Bizarre. Maybe even grotesque. One can only conclude that to the understanding of B. the consequences of not backing these institutions would be cataclysmic. Is the free market dead? If so, what has succeeded it?
"Management at AIG has calculated exactly how much money the Treasury and Fed will have access to after all of the TARP, financial stimulus, and mortgage bailout projects have been funded. The insurance company then plans to ask for whatever is left to fund its deficits so that it can stay in business, effectively making the federal government insolvent. "
Completely OT, but I just saw this magazine at work yesterday & thought some folks here might find something useful in it - Make: Technology on Your Time The first magazine devoted entirely to DIY technology projects, MAKE Magazine unites, inspires and informs a growing community of resourceful people who undertake amazing projects in their backyards, basements, and garages.
wally writes:
There is a big risk here that Bernanke is doing damage.
Clearly, the credit collapse and debt destruction mechanism is not understood by economists - the proof is that they could not predict it.
It is possibly that by his frenzied action to prevent recognition of default, loss and debt destruction, Bernanke is preventing the normal recovery process and extending the period of recession or depression.
wally | 02.24.09 - 2:55 pm | #
It is not true that "economists" shouldn't couldn't know about the extremely destructive role of financial/banking crisis, check this link to a recent paper by Rogoff (ex-IMF Economics Director) and Reinhart:
There is no one that can convince me that Dr. Bernanke does not know about this.
So the only explanation is, this idea, and the assumptions supporting them as laid out by the US Treasury, the OTS, FDIC and the FED, are just a corrupt, blatant attempt to transfer wealth from the middle/lower class worker to a very few number of well connected individuals, dometics and foreign (i.e. in China and the Gulf states).
I teach at an MBA program and any professional that understands the concept of optimal capital structure knows that you DO NOT exercise the option to convert a convertible preferred into a common stock UNLESS the option is clearly valuable, so no one can convince me that Geithner, Bernanke, Bair and the others do not know about this. This is just plain stupidity, gross incompetence, or just again, corruption.
So Wally is correct in his diagnosis, on the basis of the historical experience of what happened in decades of financial banking crisis, and Bilbo is absolutely wrong. There is no logical reason to do what these unelected officers are doing with our taxpayers monies!
Bilbo and others need to have a serious conversation with their finance graduate school professors.
The question from China's perspective is at what point do they believe that US borrowing and pouring money into the financial sector is a black hole. That continuing to do so will not actually cause consumers (dodos?) to return. When? And when they reach that conclusion, it ends with an eviscerated USD. After all else has been eviscerated.
--bh blackhat | 02.24.09 - 2:56 pm | #
They're in it with us; They've got to drink the KoolAid too, or their system bites it as well.
The question from China's perspective is at what point do they believe that US borrowing and pouring money into the financial sector is a black hole. blackhat | 02.24.09 - 2:56 pm | #
That's what I've been wondering every time I reread that quote about how much they hate us, but feel they have no other choice but to keep buying our treasuries. At some point they are going to call it quits and then we'll see just how much they do hate us.... Joanna | Homepage | 02.24.09 - 2:58 pm | #
That day happens when we no can longer import their goods OR they find a more lucrative export market to exploit. Watch that & you'll see when they call it quits.
Joanna: "The first magazine devoted entirely to DIY technology projects, MAKE Magazine unites, inspires and informs a growing community of resourceful people who undertake amazing projects in their backyards, basements, and garages."
From the link: an electrostatic generator built entirely from Home Depot parts
There you have it... Van der Graf saves home depot earnings. Of course, I will be first in line for that, but no matter.
Why aren't the Republicans up in arms over all the taxpayer money that has gone into these bailouts? They scream and scream about 1% of the stimulus package while trillions are flying out the "bailout" backdoor. Myr | 02.24.09 - 3:03 pm | #
Hernan El Perro, The logic is more along the lines of it doesn't matter if you remember to wipe your shoes at the door, if the house ends up burning down anyways.
They're in it with us; They've got to drink the KoolAid too, or their system bites it as well.
xxxxx
It's true until it's not. It's two people with one jug of water in the middle of the desert, and there's enough water for one to make it to civilization. There will be divergance. Their system more closely resembles post-soviet society post-collapse and is much more resilient, despite all the challenges. Higher population in the rural areas capable of subsistence farming that take little from the central government anyway. So, no, they will unhitch wagon. They are locking in pipelines of commodities and energry resources independant of US. They are planning for the contingency of unhitching.
Editoral: Obama faces tough decision on helicopters - The Delaware County Daily Times (delcotimes.com) Editoral: Obama faces tough decision on helicopters Sunday, February 22, 2009 6:08 AM EST In the very near future, President Barack Obama will make a decision that will either propel his already glowing star higher, or send his administration plummeting.
The president will soon have to decide whether or not the U.S. should continue a six-year-old project to build state-of-the-art presidential helicopters. At $400 million apiece, the Marine One helicopters, slated for a 2010 delivery, are very expensive.
The program is currently bogged down in a contracting quagmire because the original $6.1 billion contract has ballooned to $11.2 billion. The Pentagon notified Congress that it was so far over budget that the law required a review.
The decision to continue or halt the program will definitely challenge Obama's mettle as well as his desire to rein in military contracting expenses.
With America's economy heading down the tubes, maybe now isn't the time to spend more than $11 billion on 28 helicopters.
On the positive side, the new copters will provide the president with a flying Oval Office and give him more protection â even from nuclear attacks â than any previous Marine One helicopters.
rewards existing shareholders at the expense of taxpayers. Bernanke is a tool like most of the rest.
Just more of the same old wine in new bottles. Party on....you bet ....
As CNBC Sucks said over at Big Picture ....Any recovery - such as that proposed by Bernanke today - between now and when we truly fix our structural problems is just another reflation of indebted consumption. It is false hope and false basis for any genuine, sustained growth in the value of equities.
I don't believe in the conspiracy hypothesis, that this is a conspiracy to transfer wealth to a small and select class. That would have the effect of freezing the system into stasis. What would the motive be?
I would believe in an incompetence hypothesis, and greed on a less universal level. I would believe in a Tragedy of the Commons hypothesis.
I would believe that there is no operating intelligence capable of comprehending and operating the global economy so that it doesn't seize up.
Deliberate premeditated destruction of the global economy? What for?
Bilbo and others need to have a serious conversation with their finance graduate school professors. Hernan El Perro | 02.24.09 - 3:08 pm | #
I think in Bilbo's case he should probably start with a talk with his middle school history teacher, and work his way up to grad school as age and maturity allows.
I posted earlier regarding a Reuters story saying that the Asian portion of AIG might be sold. If AIG owned what amounted to the pension system of China then I start understanding the reasoning behind the US pumping money into AIG as long as China kept buying treasuries and agency debt.
If China(through state controlled companies) buys AIG's business in Asia then what?
They are locking in pipelines of commodities and energry resources independant of US. They are planning for the contingency of unhitching. blackhat | 02.24.09 - 3:13 pm | #
Without inciting too much doomerism, in a way this is what we should be doing on a household level. Since it seems we have only ourselves to rely on, once our tax dollars are exposed as so much pony poo.
The real problem with that is where are they going to export to? The only area on the same scale, consumer-wise, sucks...(Europe)..
They have to keep the export train flowing....but I don't know to whom.
Ciao
MS
MS | 02.24.09 - 3:11 pm | #
blackhat writes:
They're in it with us; They've got to drink the KoolAid too, or their system bites it as well.
xxxxx
It's true until it's not. It's two people with one jug of water in the middle of the desert, and there's enough water for one to make it to civilization. There will be divergance. Their system more closely resembles post-soviet society post-collapse and is much more resilient, despite all the challenges. Higher population in the rural areas capable of subsistence farming that take little from the central government anyway. So, no, they will unhitch wagon. They are locking in pipelines of commodities and energry resources independant of US. They are planning for the contingency of unhitching.
--bh
blackhat | 02.24.09 - 3:13 pm | #
MS, Blackhat, you guys are unto something, check this link to the most recent post by B Setser and the accompanying discussion/comments and I believe Blackhat's scenario is the correct answer, remember, the Chinese are known for long term planning
anon There is a long list of interested buyers for AIG's Asian units. It's been a few months and they apparently can't get "fair value" for it in their opinion, so they would rather sell it direct to the US government at an inflated price
The real problem with that is where are they going to export to? The only area on the same scale, consumer-wise, sucks...(Europe)..
They have to keep the export train flowing....but I don't know to whom. MS | 02.24.09 - 3:11 pm | #
To us - for the short run anyway and in the long run we are all dead, right?
I think the whole 'Hillary Goes To China' thing was about BOTH sides calling each others bluff and realizing they have no choice but to keep on keeping on. My guess is we will all be SURPRISED by just how strong the Chinese sovereign demand for US paper will be over the next few quarters AND how WEAK the RMB becomes AND how strong their exports to us remain. It will all be surprisingly surprising.
When do we all recognize it is over? I don't know but my guess Hillary made nice with Hu and it is all behind us now.
Worse than that, though, are the falling wittiness-per-post and illumination-per-post ratios, which are cliff-diving. Sebastian | 02.24.09 - 3:17 pm | #
I lay that at your doorstep Seb. Having you capitulate caused the witty ones to lose a lot of material.
If it takes half a billion to make a helicopter that illiterate drones with $5K RPGs can shoot down, who's going to win the next war? debtinator | 02.24.09 - 3:18 pm | #
There is a long list of interested buyers for AIG's Asian units. It's been a few months and they apparently can't get "fair value" for it in their opinion, so they would rather sell it direct to the US government at an inflated price EvilHenryPaulson | 02.24.09 - 3:20 pm | #
If the U.S. buys it, that would eliminate the potential income tax problem.
\tIf it takes half a billion to make a helicopter that illiterate drones with $5K RPGs can shoot down, who's going to win the next war? debtinator | 02.24.09 - 3:18 pm | #
Whoever is collecting the profits from the 5K RPGs and the 1/2 billion helicopter. As usual.
Sorry, haven't been able to read the comments; posting during a boring antitrust lecture.
Normally I agree that the BK process in determining who gets what, and to punish the investors for their speculation. Personally, I agree that banks should be put into receivership if they are insolvent. This position is not surprising given that: I don't have a pension, have very minimal insured property, and am not that impacted by college endowment funds.
Because so much of the bank debt is, in fact, owned by the aforementioned institutional investors, the government has decided that it will channel all of its resources at what it perceives to be the bottleneck--the banks; in their mind, it's better to deal it on Wall Street, somewhat isolated from the average person's life, rather than at the institutional level. So there will be no nationalization. At worse, one firm (most likely C) will go into conservatorship and will then become the feast strengthening its brothers (e.g. Smith Barney sale to MS).
The first magazine devoted entirely to DIY technology projects,...
Joanna
.
Like Popular Mechanics and Popular Science. I remember the day the Altair was on the cover, I thought that was the beginning of a new world. And so it proved.
Everyone who skipped down the comments should go back and read "some investor guy" @ 2:29.
Why is it that normal people can come up with useful solutions, but the people in charge can't do as well?
OT - I've put up a new version of CR Companion that fixes several editor bugs. Here's the direct link. You can install it right over the previous versions.
The reason we don't have pre-privatization is because the banksters haven't yet figured out how to profit from it. Rob Dawg | Homepage | 02.24.09 - 2:44 pm | #
"Post-Soviet business oligarchs includes relatives or close associates of government officials, even government officials themselves as well as criminal bosses who achieved vast wealth by acquiring state assets very cheaply (or for free) during the privatization process controlled by the Yeltsin government. Specific accusations of corruption are often levelled at Anatoly Chubais and Yegor Gaidar, two of the 'Young Reformers' chiefly responsible for Russian privatization in the early 1990s. According to David Satter, author of Darkness at Dawn, "what drove the process was not the determination to create a system based on universal values but rather the will to introduce a system of private ownership, which, in the absence of law, opened the way for the criminal pursuit of money and power." In some cases, outright criminal groups in order to avoid attention assign front men to serve as executives and/or 'legal' owners of the companies they control."
"Anatoly Borisovich Chubais (Russian: ÐнаÑоÌлий ÐоÑиÌÑÐ¾Ð²Ð¸Ñ Ð§ÑбаÌйÑ) (born June 16, 1955, Borisov, Belorussian SSR, Soviet Union) is a Russian politician and business manager who was responsible for privatization in Russia as an influential member of Boris Yeltsin's administration [1]. From 1998 to 2008 he was the head of the state owned electrical power monopoly Unified Energy System. The 2004 survey by PricewaterhouseCoopers and Financial Times named him the world's 54th most respected business leader[2]. Survived an assassination attempt in 2005. Currently he is the head of the Russian Nanotechnology Corporation (since 22 September 2008)[3] and a member of the Advisory Council for JPMorgan Chase (since 26 September 2008)[4]"
"Yegor Timurovich Gaidar (Russian: ÐгоÌÑ Ð¢Ð¸Ð¼ÑÌÑÐ¾Ð²Ð¸Ñ ÐайдаÌÑ; Russian pronunciation: [jɪËgor tʲɪËmurÉvʲɪtÉ gÉjËdar]) (born March 19, 1956) is a Russian economist and politician... His most well-known decision was to abolish price regulation by the state, which immediately resulted in a major increase of prices and amounted to officially authorizing a market economy in Russia. He also cut military procurement and industrial subsidies, and reduced the budget deficit. Gaidar was the Minister of Economic Development from 1991 until 1992, and Minister of Finance from February 1992 until April 1992.
He was appointed Prime Minister under President Boris Yeltsin in 1992 from June 15 until December 14, when the anti-Yeltsin Congress of People's Deputies refused to confirm him in this position and instead chose Viktor Chernomyrdin."
and they have already started to invest their huge financial resources in gobbling up commodities i.e. Rio Tinto's very recent investment Hernan El Perro | 02.24.09 - 3:18 pm | #
Then they don't export to us - the RMB skies on them and they aren't competitive HERE.
EvilHenryPaulson writes:
Hernan El Perro,
The logic is more along the lines of it doesn't matter if you remember to wipe your shoes at the door, if the house ends up burning down anyways.
EvilHenryPaulson | 02.24.09 - 3:11 pm | #
Oh well of course I really was not implying that they were applying some form of logic reasoning to solve this problem, but rather this is (not wearing tin foil hat yet) going to result, as laid out, in an effective transfer of wealth that is NOT just and economically efficient.
by the way, I admire your very well reasoned and on topic posts EHP, I have been only a lurker for a few years here but now this situation has woken up my natural rebellious Latinamerican spirits...when are we marching to DC???
best regards,
MLM said: "I lay that at your doorstep Seb. Having you capitulate caused the witty ones to lose a lot of material."
I'm afraid you're right, LOL! I try to make up for it by occasionally telling "Sebastian" jokes on myself, but it's not that easy to come up with ones that are both clever and funny.
It's hard to get excited about a bounce in a market with such a clear down trend. For some people I'm sure it's a welcome relief. I hope that they don't lose their shirts betting on a change in the trend, though.
Bernanke was duty-bound to give the best spin he could muster on the economy today to prevent panic from spreading in the financials. The advance of Obama's speech for tonight is that it ends on a hope-inspiring note. For me, the proof will be in the closing numbers on Friday.
I just hope the message is not in a Reverend type tone, otherwise I am not watching.
Every time I hear Obama speak, I feel I should add in a "Hallelujah" at the end of each sentence.
"Completely OT, but I just saw this magazine at work yesterday & thought some folks here might find something useful in it - Make: Technology on Your Time
The first magazine devoted entirely to DIY technology projects, MAKE Magazine unites, inspires and informs a growing community of resourceful people who undertake amazing projects in their backyards, basements, and garages.
Joanna | Homepage | 02.24.09 - 3:06 pm | # "
Ever heard of Maker Faire? That's where all these folks show up and show off. An amazing weekend exposition, sponsored by the magazine; I go every year and I highly recommend it. This year's will be in San Mateo (SF Bay Area) in May. They seem not to be doing one in Austin this year.
Pavel Chichikov writes:
I don't believe in the conspiracy hypothesis, that this is a conspiracy to transfer wealth to a small and select class.
Deliberate premeditated destruction of the global economy? What for?
Pavel Chichikov | 02.24.09 - 3:17 pm | #
Hi Pavel,
You're one of my fav posters. Well, sometimes you can't avoid but putting on the fabled tin foil hat, just because it looks fashionable, isn't it? especially when the masters of the financial universe look so totally out of control and incompetent. Greed, hubris, yes sure. Put yourself in their shoes, you are not destroying the world, you are just saving yourself and your loved ones, how's that? wear the hat Pavel and I promise you that your life will be changed (Toadies song as background)
best regards,
--
Bernanke is smart enough to know who his real bosses are and how to serve them the best. All of the rogue economists, with access to the public, are serving the same interests. Propaganda must be maintained at the high pitch.
Then they don't export to us - the RMB skies on them and they aren't competitive HERE. dryfly | 02.24.09 - 3:25 pm | #
Was just thinking about this dryfly. What are the chances that the Chinese could borrow against their Treasurys and use that money to buy Rio shares? Seems to me they could do it, either directly with the Fed, or through any number of intermediaries. This would solve the exchange rate problem for them, at approximately 0% interest.
And everybody's happy! More dollars in circulation, RMB still pegged. Wonder if this was on Hillary's agenda.
All my greatest fears for our financial system have been confirmed. They are doing exactly as I have foreseen and exactly what I want, in order to insure total economic destruction which is my orgasmic hope.
Only with a hot poker financial enema will the American dumb asses get it.
mock turtle writes:
no it aint gonna be like japan in the 90s
...
it will be far worse, and different
.
It's an ill wind indeed that blows no one any good. I'm thinking this storm will wash away a lot of the old capitalism, but some of the newer ideas will have an advantage. Cars may be in trouble, but net shopping should do even better. Any company that 'consumes debt' will struggle, but small companies that bootstrap themselves and sell direct to the consumer might do o.k. I guess I'm not an uber-doomer, what can I say.
where does the US consumer get the purchasing power from with wealth evaporation in housing and equities, unemployment and greater numbers of retirees, not to mention over-indebtedness? might pinch the China trade bubble
MP, antidotial but interesting, It's become common in a few grocery stores that used to stock decent wine to find bottles seriously reduced. I used to be amazed to pick up a $25 bottle for $12. Last weekend I picked a lovely reserve Sauvignon blanc for $4.99, K&L was asking 35 last I checked. Stores are blowing out the good stuff as the market shrinks. This seems to be a BA thing. No deals like that in Sacramento but Sac is the home of JoeCheapChardonnay, YMMV
Ever heard of Maker Faire? That's where all these folks show up and show off. An amazing weekend exposition, sponsored by the magazine; Bob Dobbs | Homepage | 02.24.09 - 3:29 pm | #
I'm in the PNW, but will keep my eyes peeled for one up here, or check the magazine for a schedule.
Oh well of course I really was not implying that they were applying some form of logic reasoning to solve this problem, but rather this is (not wearing tin foil hat yet) going to result, as laid out, in an effective transfer of wealth that is NOT just and economically efficient. Hernan El Perro | 02.24.09 - 3:26 pm | #
On the contrary, I think they are acting logically. Americans are a minority holder of USD denominated financial assets. Worse comes to worse, they crash the dollar Americans keep the real assets, and when it comes to paper they write off more debt than they lose.
Until that time, they are content to spend frivolously beyond carrying capacity. They don't expect to ever pay the debt off, at least not near face value.
If they did not spend as such, the American financial system would collapse and cause immediate capital flight and unilateral dollar depreciation, along with a myriad of concurrent political and social injuries.
They are going for broke, and should they win some slim bets they expect to be in a stronger position relative to the rest of the world having maintained financial systems intact.
There is the option for defaulting on one hand, devaluing outstanding debt on the other, and a increasingly narrow balance between the two. The longer the US can stay on the knife's edge, the greater chance other countries falter first and the US becomes stronger post-reset in the world's financial system.
I realize in the now it is a disgusting unmerited transfer of wealth, but I am skeptical that it is a lasting one. For the financial system to find stability the commoner must do better relative to the elite. There is much depth to the concept that those who benefited most from the credit bubble on the way up, must incur the most pain on the way down. The economy has both social and financial components. If the financial one is restricted, and the elite attempts to block the system from re-balancing then the social economy becomes the outlet and that is what we know of as revolutions.
All the talk about China really does nothing to take into account that it's entire economy depends on someone buying cheap crap.....
I know Chinese and for a couple of years, all people would ask me was if I was moving there to work and make a lot of money. I would tell them the only way to make money there is when you get there, send stuff back.
I keep hearing this line that China would also suffer. Does America have a lock on financial wizards? You know, all those very smart guys that everyone brags about.
This thing has progressed more or less on a predictable debt line. Surely, China's experts would have extrapolated a counter formula by now to shelter and balance their financial future.
Looking at the current trend, those American "smart guys" aren't working in America's best interests.
Bernanke is smart enough to know who his real bosses are and how to serve them the best. All of the rogue economists, with access to the public, are serving the same interests. Propaganda must be maintained at the high pitch.
Jas \t Jas Jain Jas Jain | Homepage | 02.24.09 - 3:34 pm | #
Jas has been having an influence on my communication style in our meetings and teleconferences at work:
"Those morally bankrupt gangsters in Boise told me they'd have this sh*t completed and deployed by this morning. Never trust a dope with something that requires a brain."
I wrote a bit more in my CR inspired doomer p0rn sage of life after the "American Apocalypse."
His tent, being the executive model, had plywood sides. I thought about it for a second or two, and decided what the hell. I stood off; at an angle from what I figured was his front door. I knocked. Nothing. So I did it again, but louder. I was rewarded by a roar of Who the fuck is that! followed by the sound of a loud ripping fart. I didnt say anything. My guess is that it was the smell of that long, ripping, cheesy fart that made him stick his head out the door. He immediately lost it.
I swung that saber more like a bat, and put my hips into it. His head actually bounced. Very cool actually, especially as it landed eyes side up. I wish I hadnt worn the mask. I would have liked for him to have seen my face.
I looked in cautiously. The girl was gone. Just as well. That might have been awkward.
"Retailers Home Depot Inc., Nordstrom Inc. and Macys Inc. reported fourth-quarter earnings that beat analysts estimates after they curbed costs and inventory."
"anon writes:
What's up with Michael and the hot poker in the booty? Kinky but it seems you only get to do it once, and the hemorrhoids, my goodness!
anon | 02.24.09 - 3:37 pm |"
Only with a red hot poker financial enema will the American dumb asses get it.
And this is good news?! Nordstrom earnings down 68% Associated Press Tuesday, February 24, 2009 New York â- Retailer Nordstrom Inc. reported late Monday that its fourth-quarter earnings fell 68 percent largely due to heavy discounting over the holiday shopping season and said its earnings for the year could miss Wall Street estimates. The Seattle-based chain said Monday that it earned $68 million, or 31 cents per share, in the quarter that ended Jan. 31. That compares with $212 million, or 92 cents per share, a year earlier. Sales in the quarter fell 8.5 percent to $2.3 billion from $2.5 billion. Analysts surveyed by Thomson Reuters forecast earnings of 30 cents per share on revenue of $2.28 billion.
Hoops, K&L wasn't where I spotted it sadly. It was at a grocery store of all places (no I'm not saying where >; ) If K&L was blowing stuff like that, I'd be whipping out the cards and cell phone.
That chart was sobering!
Dave of SV | 02.24.09 - 3:42 pm | #
Clever. Beer has been losing market share to wine and liquor for years. Plus a cheap vodka at $8 gives more buzz then a 6 pack at the same price. Jug wine has also gone upscale into box wine. I believe the buzz for the buck says more then decreased beer consumption.
(OT) Help for this market coming from all directions now.
NYSE considers relaxing its one-dollar rule
Tuesday February 24, 3:29 pm ET
By Madlen Read, AP Business Writer
NYSE considers relaxing rule that requires listed companies' shares to trade above $1
NEW YORK (AP) -- With many major companies trading in penny-stock territory, the New York Stock Exchange is considering relaxing a rule that requires shares to trade above a dollar.
"That's something that we're considering, given the market environment," said NYSE Euronext spokesman Raymond Pellechia..."
As they say, e fructu arbor cognoscitur (Reuters) . . . ING, which has extensive U.S. banking and insurance operations including online bank ING Direct, has received 1 billion euros in savings each week since Jan. 1, Jue said.
anon writes:
War. History is clear that when the economic incentive to play nice has disappeared then war follows.
This is what scares me the most. So many people think that the New Deal brought the country out of the depression, but its effects were debatable, at best. (Many of the years of highest unemployment during the GD were in the later part of the 1930s)It wasn't until the country ramped up for WWII that we finally snapped out of it.
War need not be the outcome of a worldwide economic depression, but it is certainly a logical outcome. In ordinary times, war is bad for business and international trade. But when business isn't doing well, it not only removes the economic disincentive against war, it is usually accompanied by economic incentives FOR war. The best (and most logical) way to deal with large populations of restless, unemployed young men is to train them how to fight, and send them off to war. Not only does this keep them occupied at minimal cost to the government (it is easier to pay for MREs and tents than provide subsidies for more expensive civilian alternatives, like food stamps and houses), but there will also be natural level of attrition due to, well, death.
While something like this is more likely in poorer countries with less to lose, history has shown us that this will frequently draw in first world countries. Take, for example, the obvious example of India/Pakistan. It is unlikely that such a conflagration would fail to have consequences for other nations in the region. And while the world is occupied with two nuclear powers duking it out, maybe China decides it's a good time to quietly act on its long-held claim to Taiwan.
The most horrible aspect of all of this is how entirely plausible it all is in the context of a worldwide economic downturn. After all, the last time there was a global depression, Germany's seizure of a small section of Czechoslovakia began a string of events leading to the largest and bloodiest armed conflict in human history. It seems unthinkable now to so many people, but then, we are only a year or two into this. I'm sure there were plenty of people who even in 1930 and 1931 thought things would turn around and they would all be back to the roaring twenties soon enough.
Hell, we haven't even begun to feel the consequences of what has just happened yet -- over two million people have been laid off in the past few months, with more to come, but they will have unemployment and COBRA and what have you for many months yet to come. What happens if a year from now when they are still unemployed and those checks stop coming? What happens two, three, four years from now?
In other words, Japan in the 90s.
speech rally
shakes fist
emo!
Excellent proposal. When do we vote?
CR,
Right. One fix fixes the problem. The other redistributes wealth to a problematic group of people.
Second point: Exceptionalism has become the norm.
--bh
There are no Bad Banks, just Bad Scenarios.
Bernanke isn't exactly good at judging "worst-case scenarios".
i'm stressi
I actually listened to him speak this morning. He said the goal was to provide enough capital via preferred shares to survive "stress conditions", then only convert it to common stock in the event those conditions materialize.
When asked, "so you do believe some institutions are too big to fail", he said "yes".
And thus the unsecured debt (and even the preferred stock) of every major financial institution is now backed by the full faith and credit of the United States. Wonder how that will work out.
Darn..
I look at the market bounce today and the term irrational exhuberance comes to mind.
"But how does Bernanke know the solution before the data is available from the stress tests?"
He was given the results before they started. So we release a bunch of petty criminals to reduce state budgets, that leaves us with tons of space to fill it with banksters and corrupt politicos. Rather than claw backs, we can just fund their stay with their own money. I think that is a compromise to which everyone can agree.
CR:
But how does Bernanke know the solution before the data is available from the stress tests?
Gee, CR, how could that be? You don't think they picked the answer before they picked the test, do you?
BAC, C, and WFC all up at least 12%.
is the guv included in those institutions that are too big to fail?
It is nice to know that he is prepared to make sure that taxpayer money pours into the subordinated common shareholder equity JUST PRIOR TO LIQUIDATION.
It's time to storm the hill.
Thread music:
The Cranberries, Zombie!
YouTube - The Cranberries - Zombie
CR's comment:
But how does Bernanke know the solution before the data is available from the stress tests?
It's a hypothetical at this point, but it seems to me he is assuming some banks are seriously insolvent and some are not. The stress test results should clarify things. In the meantime no one is writing blank checks.
The underlying belief appears to be that systemic collapse is mitigated by making whole the correct institutions--bond holders in this case among the management and executives, as well as the institutions themselves. Another mal-investment.
Since when does Bernanke set policy for Treasury? Methinks he doth o'erstep his bounds.
So if the 19 largest institutions need more than the $350 billion remaining in the TARP fund, where exactly is the money going to come from?
Will the Congress really appropriate more money for this farce? Or will the Fed just print it?
Bernake:
If we fuck around long enough, we're hoping it'll just fix itself.
I read somewhere this morning that "too big to fail" is code for "too big to liquidate." Oh! That was in connection with Continental Illinois, the 1st "too big to fail" bank. At "The Big Picture."
Just so I understand this correctly. The more money they lose and closer they get to bankruptcy the more equity ownership the taxpayers will assume?
Let us offer this deal to Buffet and see how he reacts.
Alternate proposal. Issue new common shares to the government. They get more capital, current shareholders aren't directly diluted (because billions in new capital help the long term prospects of the bank).
Then, as voting shareholders, the Fed Govt can do things like limit bonuses, reduce marketing expenditures. Does anyone else find it really bizarre how much some banks are spending on marketing while shutting down credit cards and credit lines for other seemingly good customers?
Let the fleecing continue, an insolvent banking system turned into and insolvent country.
The beard can not be trusted!
Shit,piss and corruption
(for the uninitiated:
One of the most expressive expletives I've heard, and one with a touch of archaism. The word "corruption" here doesn't refer to bribery and graft, but rather to necrosing and decaying flesh. ("Corruption" is also used to refer to rot and decay in the King James Bible.) Hence, this is an invocation of biochemical heck breaking loose -- somewhat reminiscent of the offensive medieval habit of catapulting filth and rotten corpses into a city which one is besieging.)
This could make sense, but the terms of conversion matter a lot. If we convert the Citi preferred dollar for dollar at today's price, the government already owns more than 90% of Citi.
I suspect that's not how the conversion will be set up.
Why don't I just walk into a Citibank branch and throw a couple of hundred dollars at the teller? At least I'll get the satisfaction of spitting on their floor before I leave.
Anyone notice Ben nearly shit himself when Shelby drudged up the Basel II regime. Thought he was about to crawl under his desk and go fetal.
Wonder how that will work out.
Nemo | Homepage | 02.24.09 - 2:25 pm | #
Easy... "But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost."
The elephant in the room is that we have already poured more than enough money into these banks to own them outright -- speaking of a bigger than 51% stake, considering current market cap. If there is any question the people should be asking is why aren't we running the banks? Just replacing management might boost confidence.
I say let the bondholders eat the losses.
After banks write-off bad debt and restructure, private capital will become available.
The old system works. Bankruptcy is supposed to inflict financial pain/losses. It's called capitalism!
We are practicing CRONY capitalism.
So, a "worse" scenario than this one, but not the worst possible scenario, and still handing money to rich bastards instead of dealing with the problem head on.
habit of catapulting filth and rotten corpses into a city which one is besieging
zendiet | 02.24.09 - 2:30 pm |
how about catapulting toxic assets at taxpayers
WTF? I thought Bernanke and Krugman were friends.
Or has Bernanke been lunching too much with wealthy entrenched bankers?
As suspicious as I am of nationalization, I'm even more suspicious of bankers resisting "pre-privatization" while accepting bailouts.
Maybe Bernanke is a big proponent of the "corporate welfare state".
"When asked, "so you do believe some institutions are too big to fail", he said "yes"."
....meaning: they will spend while the last building falls down around their feet......be ready to gather up the children.
This is the bad bank plan, in action.
Oh, and remember, it's not the common shareholders who have the most to lose. It's the banks' bondholders and other lenders, the FDIC, and to a lesser extent swap counterparties.
Angry Saver(Unrated) writes:
We are practicing CRONY capitalism.
That's right. once again public-private partnership shows, as in Japan, that nobody will force insolvency on their golf pals. The country may fall to ruin, but your fraternity brother will not go bankrupt.
He was given the results before they started.
double inverse recession | 02.24.09 - 2:26 pm | #
Obviously - I'm surprised nobody called him on it UNLESS maybe the senators were in on it too. Ya think?
Kabuki Congress...
maybe they should throw a few CDO tranches on the floor of the hearing room and see what they smell like
meaning: they will spend while the last building falls down around their feet....
Black Star Ranch | 02.24.09 - 2:34 pm | #
Exactly my read of the situation.
Ponies for the cronies! It makes so much sense...
denriddy -- Wow, you stepped it up a notch from the usual charge of socialism. Facism? Really? I hear a lot of opposition and criticism, not things I think you hear in fascist state. And, we as a people are actually gaining control over the most powerful companies in the world. Yes, they may be insolvent but letting them fail without attempting to get them healthy or some control when they do die will do much more damage.
And thus the unsecured debt (and even the preferred stock) of every major financial institution is now backed by the full faith and credit of the United States. Wonder how that will work out.
Nemo | Homepage | 02.24.09 - 2:25 pm | #
So basically the strategy is to wave a giant magic wand made out of generations of future indentured servitude??
So if things go well, we taxpayers get our money back but participate in none of the upside.
If things go badly, we plug the hole with taxpayer dollars.
I'm with Dawg. Nice proposal; when do we vote?
House Democrats propose $410 Billion spending bill
I never knew that bank bondholders were "sacred cows."
I always knew that Goldman was sacred. We have to protect the financial CIA.
This. Is. Fascism.
.....the biggest importance is NOT the Country, but the financial survival of The Elitists.
I approve of the meme "Ponies for the Cronies."
So is there a div associated with the preferred?
Will the govt be shorting the common?
Didn't they say the stress test will take 2 yrs?
"But how does Bernanke know the solution before the data is available from the stress tests?"
HOOCOODANODE? lol
So basically the strategy is to wave a giant magic wand made out of generations of future indentured servitude??
Joanna | Homepage | 02.24.09 - 2:36 pm | #
That's an exceedingly optimistic outlook.
"But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost."
Comrade Bear (tj & the bear) | 02.24.09 - 2:31 pm | #
Haha... that just never gets old.
"In the case of civil unrest following natural disasters or politically unpopular decisions the U.S. government has a technology, called a neutron bomb (or, today, the biological equivalent) to pacify as many US citizens as it wishes at essentially no cost."
The Latest from Mish:
Bernanke's Hide and Seek Delaying Tactics
Time to change my rating there, ac.
o bankster left behind
In another change, the legislation bans Mexican-licensed trucks from operating outside commercial zones along the border with the United States. The Teamsters Union, which supported Obama's election last year, hailed the move.
to pacify as many US citizens as it wishes at essentially no cost."
ac | 02.24.09 - 2:37 pm | #
Because, everyone knows there's nothing so peaceful as a corpse.
I never knew that bank bondholders were "sacred cows."
Angry Saver | 02.24.09 - 2:36 pm | #
They'll be hamburger too - eventually. Might be due to currency devaluation & inflation but they too will go through the grinder - eventually. No one will be spared I'm afraid.
CRbot(Irritating) writes:
\tThe Latest from Mish:
Bernanke's Hide and Seek Delaying Tactics
Time to change my rating there, ac.
CRbot | Homepage | 02.24.09 - 2:37 pm | #
Keep begging and see where that gets you.
200 point pump
CR: My guess is that he doesn't know for sure that they are solvent, but he knows that the results of letting some fail at this moment in time will have catastrophic results. So, it might be an extremely expensive (to us the taxpayers) way to buy time until the situation is more clear and we can best find our way out of this mess.
"But how does Bernanke know the solution before the data is available from the stress tests?"
Seems like a stupid question.
GAME OVER.
Bernanke:
"The country has been ceded to the Banksters. The Banks are more important than the Union."
THIS IS A VERY DARK DAY.
.
....do you realize nothing short of a revolution will stop this spending madness? Not Washington, not any part of the FedGov, possibly a courageous State - but not likely.
No one will be spared I'm afraid.
dryfly | 02.24.09 - 2:39 pm | #
And that's the realistic outlook.
If we fuck around long enough, we're hoping another bubble will form and we can call it good.
GAME OVER.
Bernanke:
"The country has been ceded to the Banksters. The Banks are more important than the Union."
THIS IS A VERY DARK DAY.
bobn | Homepage | 02.24.09 - 2:40 pm | #
Agree. Damn fascist clown is destroying our once-proud nation. Is anyone going to be organizing a protest?
CR- "If the banks are seriously insolvent, this sounds like the zombie bank approach and rewards existing shareholders at the expense of taxpayers."
CR, you're being far too charitable.
Dryfly is right. The banks will end up hamburger and no one will be spared.
Where's my can of whoop-ass?
when the tide goes out, you see where loyalties lie.
What happens to hope, deferred?
Banana Republic.
from the press luncheon at the WH today with Obama-
on the economic system:
we'll do what we have to do
on nationalization:
it's not off the table
Obama's job description:
a series of judgement calls
on tonight's big speech:
he and only he will roll out details
on Santelli:
he obviously didn't read the mortgage plan
on the markets:
the president is acutely aware of what the market is doing
on the banking system:
they'll do what is required
Because, everyone knows there's nothing so peaceful as a corpse.
FaradayShieldedHeadgearBrigade | 02.24.09 - 2:39 pm | #
So I guess taxpayers (formerly known as consumers) have moved from preferred to common to soon-to-be corpses?? Good thing peasants come in bulk.
here are no bad banks, just bad tax payers.
Yes, we have no bananas, we have no bananas, today.
DriveThru Republic?
"when the tide goes out, you see where loyalties lie"
BB has his princeton thong on today
I did not know smoking in bed was such a problem.
Where's my can of whoop-ass?
mp | 02.24.09 - 2:41 pm | #
Would love to hear that Conjure has developed a taste for Central Banker balls.
"Bankster Nation."
The reason we don't have pre-privatization is because the banksters haven't yet figured out how to profit from it.
from the press luncheon at the WH today with Obama-
Pinocchio | 02.24.09 - 2:42 pm | #
Meaty commentary. It might take me all day to comprehend those profound missives.
Good thing peasants come in bulk.
Why do you think it's a platform of one of our two major parties to make it as difficult as possible to limit breeding?
Is the Fed itself "too big to fail"?
It already has in every meaningful sense of the word.
Added to GS shorts today, and MKL.
Black Star Ranch(Excellent) writes:
....do you realize nothing short of a revolution will stop this spending madness?
Nah, you never see a revolution in a settled state like this. It will keep going til thy lose the ability to raise funds due to sovereign credit crisis. See John Law for details.
It doesnt have an ownership implication until such time as those losses which are forecast in the bad scenario actually occur
Ha! And they say Heath Ledger was good as The Joker...
Nothing goes down in a straight line fellas.
Market opens in 15 minutes.
Why do you think it's a platform of one of our two major parties to make it as difficult as possible to limit breeding?
Peasant Darkness | 02.24.09 - 2:45 pm | #
Because the USMC is always in the mood for some good cannon fodder?
You may kiss my harvard ring.
Why do you think it's a platform of one of our two major parties to make it as difficult as possible to limit breeding?
Peasant Darkness | 02.24.09 - 2:45 pm | #
Just add religion, and you can con most people into faith-based ignorance. Much easier to die now and get your reward in heaven. Hope deferred.
But I think this generation somehow was led to believe they were/are just special enough to have meaning as individual human beings, not just a crop of economic cannon fodder........silly silly peasants.
Bilbo writ: Facism? Really?
You don't fly much, do you, Billybob?
And, we as a people are actually gaining control over the most powerful companies in the world.
Snakefeathers. You don't have a mote of "control" over a single one of these companies, and you never will.
Yes, they may be insolvent but letting them fail... .
BZZZZZZZZZZZT! Free clue: "insolvent" = FAIL.
But thanks for playing.
Zero.......How many banks will fail the stress test Alex.
But how does Bernanke know the solution before the data is available from the stress tests?
And when did the Fed Chairman become the go-to guy for what the Treasury does?
Ah hell, checks and balances are overrated, right? The Fed's balance sheet doesn't matter and the Treasury can write checks in whatever amounts it wants.
Stresstesting taxpayers?
Heard a private presentation from an economist at a mid-sized bank recently. He considers nationalization of Citi and BOA to be a baseline assumption at this point, and thinks the market has already reached that conclusion, so what's the point of the delay?
It does appear that Bernanke has realized that dollars printed into existence will behave differently than dollars that have been lent into existence. So that's something, and explains why he is so desperate to keep the banks in the equation.
I don't think this is fascism, because real fascism tends to be more direct and effective. This seems to be the opposite - kabuki is a pretty good term for it. The immediate problem is that the fake process is getting sillier and is rapidly reducing the credibility of the government.
it finally hit me why were rallying so strongly...
Tiger's Back!
Tiger Woods Returns to Golf Course - NYPOST.com
check the correlation since his surgery!
Nemo sed: Nice proposal; when do we vote?
When the shootin' starts.
Wired web site has a couple of articles on financial transparency and engineering. Wired News
Let's just get this dam CDS nightmare over with - and move on. If a few of the wrong CDS players turn crispy critters - well, at least a few of 'em got burned.
Bernanke can suck my knob. Seriously, this guy needs some high velocity brain surgery. Central Banks should never have a bigger market cap than the country in which they reside (too big to bail), but that's exactly the problem in Europe and perhaps here in the USA as well.
I say let the bondholders eat the losses.
Angry Saver | 02.24.09 - 2:32 pm | #
Too bad Bill Gross is calling the shots, and not you.
steelhead writes:
Wired web site has a couple of articles on financial transparency and engineering. Wired News
Yeah, excellent article about correlation, "cuppola," Li's equation.
WASHINGTON (MarketWatch) - Federal Reserve Board chairman Ben Bernanke said Tuesday that other programs have jumped ahead of the idea of the central bank buying longer-term Treasurys.
we're gettin a bart simpson haircut forming on the dow!
Eric,
Sorry about that airplane thing - I suffer from a low threshhold for humor.
Bondholders always win. From a very old NYMag column:
Consider, by contrast, the passage from Bob Woodward's The Agenda in which Clinton asks the rhetorical question "You mean to tell me that the success of the economic program and my re-election hinges on the Federal Reserve and a bunch of fucking bond traders?"
The angry rioting mobs won't appreciate the people responsible for this blatant theft. But we still have some time...
Might be going on here also
Savers withdraw record amount from banks - Telegraph
haha, to mp's credit:
"We do have a couple of other things going on right now," Bernanke said, specifically mentioning the Fed's purchases of mortgage-backed securities and plans to start buying other consumer loans.
It's exactly as was said - the fed can keep the long term yield down, the fed can prop up ABS, the fed can keep mortgages down, but it can't do it all at once.
Lolling that I bought some TBT today. What luck.
The zombies are coming. I am moving to the nearest mall.
Hoopajoops LTD(Excellent) writes:
WASHINGTON (MarketWatch) - Federal Reserve Board chairman Ben Bernanke said Tuesday that other programs have jumped ahead of the idea of the central bank buying longer-term Treasurys.
Interesting.
I apologize if this has already been posted, but consumer confidence at new record low at 25.0 down from 37.4 in January.
Consumer Confidence
if you bank at a zombie bank, what happens when you go to the atm?
There is a big risk here that Bernanke is doing damage.
Clearly, the credit collapse and debt destruction mechanism is not understood by economists - the proof is that they could not predict it.
It is possibly that by his frenzied action to prevent recognition of default, loss and debt destruction, Bernanke is preventing the normal recovery process and extending the period of recession or depression.
if you bank at a zombie bank, what happens when you go to the atm?
Comrade Elmer Fudd | 02.24.09 - 2:55 pm | #
In the daylight, nothing. At night, zombies eat your brains.
if you bank at a zombie bank, what happens when you go to the atm?
Comrade Elmer Fudd | 02.24.09 - 2:55 pm | #
Instead of real money they dispense pretty pieces of colored paper.
These comment threads have gotten markedly more negative since I stopped reading them last year. Yeesh, it feeds onto itself.
if you bank at a zombie bank, what happens when you go to the atm?
Comrade Elmer Fudd | 02.24.09 - 2:55 pm | #
It eats your brains?
The question from China's perspective is at what point do they believe that US borrowing and pouring money into the financial sector is a black hole. That continuing to do so will not actually cause consumers (dodos?) to return. When? And when they reach that conclusion, it ends with an eviscerated USD. After all else has been eviscerated.
--bh
um, have we confirmed the continued existence of enough brains for zombies to eat?
off-topic; re: my spur of the moment forecasts
02.18.09 - 4:20 am
Speaking of currencies, buy GBP/EUR or AUD/JPY will do well in the next couple months.
Not the first time I said the present commodity bump was premature, it will come later
02.23.09 - 4:10 pm & 02.23.09 - 7:46 pm
Either Gold falls or Equities rise.
Can't maintain both when they are of the same leveraged pool. Give it ~ a month
What are the odds the S&P500 goes up 10%, above 800, within a month? within February?
AUD/JPY: 59.14 -> 63.12 (+6.7%)
GBP/EUR: 1.1245 -> 1.1271 (~ 0%)
Keep in mind the window offered was 2 months and this is 5 days later, the reason behind the GBP/EUR is waiting for an exceptional event.
As for yesterday's gold/equity comments, S&P500 is at 769 (+3.4%) for now with the possibility of 800 before month's end less crazy. Gold is at 969 (-2.3%).
Just posting this update to keep track, and keep myself honest through feedback. I'd like to think I'm not just a broken weathervane that only points in one direction. To that effect I've said both S&P500 at 600 by year end 2009 when earnings forecasts were still above $90, explained how and why default rates will be greater this time by an order of magnitude as a proportion of those with negative equity, fervently called the Nov-Dec rally ahead of time with reasoning, disagreed with CR on auto+truck sales, came to verbals blows with yves smith who believed that trade declines were because of Letters of Credit, etc
Felix Salmon at wired. On point.
These comment threads have gotten markedly more negative since I stopped reading them last year. Yeesh, it feeds onto itself.
\t Jay | \t \t \t \t02.24.09 - 2:56 pm | #
And you were expecting what?
The question from China's perspective is at what point do they believe that US borrowing and pouring money into the financial sector is a black hole.
blackhat | 02.24.09 - 2:56 pm | #
That's what I've been wondering every time I reread that quote about how much they hate us, but feel they have no other choice but to keep buying our treasuries. At some point they are going to call it quits and then we'll see just how much they do hate us....
Any chance this market crashes in the last hour? Or do we put our rally caps on and go for another 200 points?
Luckily everything is contained and the worst case is already known so there won't be any need to add future capital.
We've got a pullback. Time to load up or dump the truck. Who knows?
Where's my can of whoop-ass?
mp | 02.24.09 - 2:41 pm | #
I believe Conjure is preparing to open it with his bear fangs...
"But how does Bernanke know the solution before the data is available from the stress tests?"
Faith in the invisible hand.
Heard a nice one on NPR this morning. They were interviewing a few people including a "senior business reporter". This reporter seemed quite distressed about the government leaning on Wells Fargo to stop a sales conference in Vegas. He brought it up at least twice. He went on and on about how great the sales staff at Wells Fargo is and how awful of an idea it was to interfere with them. Their stock price had beat the s&p500 for a long time, their sales staff had a high score on some performance metric. Obviously the managers of Wells Fargo are veritable superheroes, how dare the fedralgubmint poke its nose into them! If you listen to this guy it doesn't sound at all like Wells Fargo had just received $25 billion from the federal government to keep itself from collapsing. That is somehow off in a parallel universe which has no bearing on the competence of management or the effectiveness of this sales force.
Scav,
They clearly have been well fed since September. I thought Jan 20th would bring real change, but those brains were apparently even tastier.
Eric,
Sorry about that airplane thing - I suffer from a low threshhold for humor.
Popeye | 02.24.09 - 2:52 pm | #
?
Gavshire,
I think we trek back to 8000 within the week. I have no real basis for this belief, but for some reason I just expect it.
can of spinache for pops?
Geez, another 50 or so points and my books will be delta neutral. Then it's just theta kicking me in the nuts.
it's a clawback--to 7300
ding ding ding
hey jefff,
I have a friend who works at the Wynn and the weekend the WF party was cancelled he was told not to come into work for that weekend, and he was just one of a few dozen told to stay home with no pay.
So their seems to be a disconnect from realty on your part as well.
The reason we don't have pre-privatization is because the banksters haven't yet figured out how to profit from it.
Yes they have.
First they have to loot the public via stocks and housing. Then they loot the government via bailouts. At each step so far, bankers reap huge bonuses and dividends. Finally the banksters IPO the banks back to themselves as they are the only group with any money.
How do they get away with such a scam? Easy. At each step, the bankers promise to make the public wealthy. It never fails.
Why aren't the Republicans up in arms over all the taxpayer money that has gone into these bailouts? They scream and scream about 1% of the stimulus package while trillions are flying out the "bailout" backdoor.
Jay writes:
These comment threads have gotten markedly more negative since I stopped reading them last year. Yeesh, it feeds onto itself.
yeah, while the news just keeps getting better and better
well, the zombies are clearly feeding on something but I'm still not entirely convinced they haven't discovered another food source. Because I'm not discovering a lot of fresh IQ-spoor recently.
And thus the unsecured debt (and even the preferred stock) of every major financial institution is now backed by the full faith and credit of the United States."
Bizarre. Maybe even grotesque. One can only conclude that to the understanding of B. the consequences of not backing these institutions would be cataclysmic. Is the free market dead? If so, what has succeeded it?
\tWhy aren't the Republicans up in arms over all the taxpayer money that has gone into these bailouts?
Myr | 02.24.09 - 3:03 pm | #
Because [snicker] it's going to be [chortle] paid back! [guffaw]
Robert "Doom is Nigh" blog: AIG's Distress: Are There Enough Fingers for This Dike?
If you not read the time story about AIG If the first paragraph to be down right scary.
"Management at AIG has calculated exactly how much money the Treasury and Fed will have access to after all of the TARP, financial stimulus, and mortgage bailout projects have been funded. The insurance company then plans to ask for whatever is left to fund its deficits so that it can stay in business, effectively making the federal government insolvent. "
market up 200 at the open.
"Faith in the invisible hand."
What is the Invisible Hand up to these days?
Fill in the blank, "The Invisible Hand ________"
so AIG is the doomsday machine?
Completely OT, but I just saw this magazine at work yesterday & thought some folks here might find something useful in it - Make: Technology on Your Time
The first magazine devoted entirely to DIY technology projects, MAKE Magazine unites, inspires and informs a growing community of resourceful people who undertake amazing projects in their backyards, basements, and garages.
Looks like AllenM was right.
the invisable hand is scooping out your brain and stuffing it in it's invisable mouth
wally writes:
There is a big risk here that Bernanke is doing damage.
Clearly, the credit collapse and debt destruction mechanism is not understood by economists - the proof is that they could not predict it.
It is possibly that by his frenzied action to prevent recognition of default, loss and debt destruction, Bernanke is preventing the normal recovery process and extending the period of recession or depression.
wally | 02.24.09 - 2:55 pm | #
It is not true that "economists" shouldn't couldn't know about the extremely destructive role of financial/banking crisis, check this link to a recent paper by Rogoff (ex-IMF Economics Director) and Reinhart:
The Aftermath of Financial Crises
There is no one that can convince me that Dr. Bernanke does not know about this.
So the only explanation is, this idea, and the assumptions supporting them as laid out by the US Treasury, the OTS, FDIC and the FED, are just a corrupt, blatant attempt to transfer wealth from the middle/lower class worker to a very few number of well connected individuals, dometics and foreign (i.e. in China and the Gulf states).
I teach at an MBA program and any professional that understands the concept of optimal capital structure knows that you DO NOT exercise the option to convert a convertible preferred into a common stock UNLESS the option is clearly valuable, so no one can convince me that Geithner, Bernanke, Bair and the others do not know about this. This is just plain stupidity, gross incompetence, or just again, corruption.
So Wally is correct in his diagnosis, on the basis of the historical experience of what happened in decades of financial banking crisis, and Bilbo is absolutely wrong. There is no logical reason to do what these unelected officers are doing with our taxpayers monies!
Bilbo and others need to have a serious conversation with their finance graduate school professors.
The question from China's perspective is at what point do they believe that US borrowing and pouring money into the financial sector is a black hole. That continuing to do so will not actually cause consumers (dodos?) to return. When? And when they reach that conclusion, it ends with an eviscerated USD. After all else has been eviscerated.
--bh
blackhat | 02.24.09 - 2:56 pm | #
They're in it with us; They've got to drink the KoolAid too, or their system bites it as well.
"so AIG is the doomsday machine?"
That's it!
Someone has shown Bernanke Kuzma's mother.
AIG wrote billions in insurance policies in China.....ever wonder why they are so keen to keep them from going under?
Denniger has a piece on it....
Ciao
MS
The question from China's perspective is at what point do they believe that US borrowing and pouring money into the financial sector is a black hole.
blackhat | 02.24.09 - 2:56 pm | #
That's what I've been wondering every time I reread that quote about how much they hate us, but feel they have no other choice but to keep buying our treasuries. At some point they are going to call it quits and then we'll see just how much they do hate us....
Joanna | Homepage | 02.24.09 - 2:58 pm | #
That day happens when we no can longer import their goods OR they find a more lucrative export market to exploit. Watch that & you'll see when they call it quits.
Ponies for the cronies!
FaradayShieldedHeadgearBrigade | 02.24.09 - 2:35 pm | #
By monies of the prolies.
Joanna: "The first magazine devoted entirely to DIY technology projects, MAKE Magazine unites, inspires and informs a growing community of resourceful people who undertake amazing projects in their backyards, basements, and garages."
From the link: an electrostatic generator built entirely from Home Depot parts
There you have it... Van der Graf saves home depot earnings.
Of course, I will be first in line for that, but no matter.
Hoopajoops LTD(Good) writes:
Lolling that I bought some TBT today. What luck
#
I sold both FAZ and SRS at pre-market. Loading back up on both now.
We'll see where it goes, but right now future Dash generations are pretty well set
Fill in the blank, "The Invisible Hand ________"
....is giving your shorts a wedgie.
"Looks like AllenM was right."
Oh, please. This is going to be a grinder all the way down. Look at the history.
2007 1/2 point drop in interest rates = 500 point rally. 2009 promise to back every major financial institution gets 200 pts.
Why aren't the Republicans up in arms over all the taxpayer money that has gone into these bailouts? They scream and scream about 1% of the stimulus package while trillions are flying out the "bailout" backdoor.
Myr | 02.24.09 - 3:03 pm | #
We're waiting for you to pick up your arms first
Hernan El Perro,
The logic is more along the lines of it doesn't matter if you remember to wipe your shoes at the door, if the house ends up burning down anyways.
dry-
The real problem with that is where are they going to export to? The only area on the same scale, consumer-wise, sucks...(Europe)..
They have to keep the export train flowing....but I don't know to whom.
Ciao
MS
" Nemo writes:
In other words, Japan in the 90s.
Nemo | Homepage | 02.24.09 - 2:22 pm | # "
But... we are not Japanese. Japanese stop at the red light at crosswalks even when no cars are in sight.
Even if it happened, it wouldn't play out the same.
"Looks like AllenM was right."
Well JP predicts huge volatility, so if your prediction of up or down isn't working out, then just wait around a little bit and it will happen.
They're in it with us; They've got to drink the KoolAid too, or their system bites it as well.
xxxxx
It's true until it's not. It's two people with one jug of water in the middle of the desert, and there's enough water for one to make it to civilization. There will be divergance. Their system more closely resembles post-soviet society post-collapse and is much more resilient, despite all the challenges. Higher population in the rural areas capable of subsistence farming that take little from the central government anyway. So, no, they will unhitch wagon. They are locking in pipelines of commodities and energry resources independant of US. They are planning for the contingency of unhitching.
--bh
Would expect him to say anything less from a bank employee?
Gawd this bs market makes me angry..
Looks like AllenM was right.
anany | 02.24.09 - 3:07 pm | #
Oh come on! Post with your regular name
I normally would have just ignored your post, but it's already got more than it's fare share of attention.
Editoral: Obama faces tough decision on helicopters - The Delaware County Daily Times (delcotimes.com) Editoral: Obama faces tough decision on helicopters Sunday, February 22, 2009 6:08 AM EST In the very near future, President Barack Obama will make a decision that will either propel his already glowing star higher, or send his administration plummeting.
The president will soon have to decide whether or not the U.S. should continue a six-year-old project to build state-of-the-art presidential helicopters. At $400 million apiece, the Marine One helicopters, slated for a 2010 delivery, are very expensive.
The program is currently bogged down in a contracting quagmire because the original $6.1 billion contract has ballooned to $11.2 billion. The Pentagon notified Congress that it was so far over budget that the law required a review.
The decision to continue or halt the program will definitely challenge Obama's mettle as well as his desire to rein in military contracting expenses.
With America's economy heading down the tubes, maybe now isn't the time to spend more than $11 billion on 28 helicopters.
On the positive side, the new copters will provide the president with a flying Oval Office and give him more protection â even from nuclear attacks â than any previous Marine One helicopters.
Gawd this bs market makes me angry..
Gubbmint Cheese | 02.24.09 - 3:15 pm | #
You're not short, are you? Another 25 points on the DOW and I won't be.......
fare -> fiar
shrug I blame it all on crcompanio
Agree with JP. Volatility occuring because of the shrinking investment pool.
Look at the DOW graph for the depression. Many histronic up days. Followed by many down.
fundementals didn't change. Nor did the perception of fundementals if you believe markets are leading indicators.
--bh
Just more of the same old wine in new bottles. Party on....you bet ....
As CNBC Sucks said over at Big Picture ....Any recovery - such as that proposed by Bernanke today - between now and when we truly fix our structural problems is just another reflation of indebted consumption. It is false hope and false basis for any genuine, sustained growth in the value of equities.
The US financial system in an image
timmay to ppt: eat the shorts
Eric-
you won't be short for much longer if 25 more points shakes you out.....
Ciao
MS
I don't believe in the conspiracy hypothesis, that this is a conspiracy to transfer wealth to a small and select class. That would have the effect of freezing the system into stasis. What would the motive be?
I would believe in an incompetence hypothesis, and greed on a less universal level. I would believe in a Tragedy of the Commons hypothesis.
I would believe that there is no operating intelligence capable of comprehending and operating the global economy so that it doesn't seize up.
Deliberate premeditated destruction of the global economy? What for?
Jay said: "These comment threads have gotten markedly more negative since I stopped reading them last year. Yeesh, it feeds onto itself."
Worse than that, though, are the falling wittiness-per-post and illumination-per-post ratios, which are cliff-diving.
Sebastia
If it takes half a billion to make a helicopter that illiterate drones with $5K RPGs can shoot down, who's going to win the next war?
Bilbo and others need to have a serious conversation with their finance graduate school professors.
Hernan El Perro | 02.24.09 - 3:08 pm | #
I think in Bilbo's case he should probably start with a talk with his middle school history teacher, and work his way up to grad school as age and maturity allows.
I posted earlier regarding a Reuters story saying that the Asian portion of AIG might be sold. If AIG owned what amounted to the pension system of China then I start understanding the reasoning behind the US pumping money into AIG as long as China kept buying treasuries and agency debt.
If China(through state controlled companies) buys AIG's business in Asia then what?
They are locking in pipelines of commodities and energry resources independant of US. They are planning for the contingency of unhitching.
blackhat | 02.24.09 - 3:13 pm | #
Without inciting too much doomerism, in a way this is what we should be doing on a household level. Since it seems we have only ourselves to rely on, once our tax dollars are exposed as so much pony poo.
MS writes:
dry-
The real problem with that is where are they going to export to? The only area on the same scale, consumer-wise, sucks...(Europe)..
They have to keep the export train flowing....but I don't know to whom.
Ciao
MS
MS | 02.24.09 - 3:11 pm | #
blackhat writes:
They're in it with us; They've got to drink the KoolAid too, or their system bites it as well.
xxxxx
It's true until it's not. It's two people with one jug of water in the middle of the desert, and there's enough water for one to make it to civilization. There will be divergance. Their system more closely resembles post-soviet society post-collapse and is much more resilient, despite all the challenges. Higher population in the rural areas capable of subsistence farming that take little from the central government anyway. So, no, they will unhitch wagon. They are locking in pipelines of commodities and energry resources independant of US. They are planning for the contingency of unhitching.
--bh
blackhat | 02.24.09 - 3:13 pm | #
MS, Blackhat, you guys are unto something, check this link to the most recent post by B Setser and the accompanying discussion/comments and I believe Blackhat's scenario is the correct answer, remember, the Chinese are known for long term planning
Brad Setser: Follow the Money » Blog Archive » China’s record demand for Treasuries (and all US assets) in 2008
and they have already started to invest their huge financial resources in gobbling up commodities i.e. Rio Tinto's very recent investment
Still short.. don't care about this rally.. but it does piss me off.
I wonder how much of this extreme volatility is being driven by the ultra etfs. Look at the volumes:
http://finance.yahoo.com/etf/browser/tv?f=0&c=0
FAS has 137 million shares traded today.
Have the ultras made the market even more of a casino than ever? By helping to amplify moves, they invite gamblers looking for big payoffs?
anon
There is a long list of interested buyers for AIG's Asian units. It's been a few months and they apparently can't get "fair value" for it in their opinion, so they would rather sell it direct to the US government at an inflated price
km4 | 02.24.09 - 3:17 pm |
but first we must re-confiscate some of those Treasuries and cash held by our rich. Without the re-confiscation, we have no capital and no chance.
Guess that's not going to happen !
Joanna,
Yep. That's my choice. Keep the day job, but prepare for off-the-grid living.
--bh
this is like old times, maybe hank took a day out of retirement with his bazooka
War. History is clear that when the economic incentive to play nice has disappeared then war follows.
The real problem with that is where are they going to export to? The only area on the same scale, consumer-wise, sucks...(Europe)..
They have to keep the export train flowing....but I don't know to whom.
MS | 02.24.09 - 3:11 pm | #
To us - for the short run anyway and in the long run we are all dead, right?
I think the whole 'Hillary Goes To China' thing was about BOTH sides calling each others bluff and realizing they have no choice but to keep on keeping on. My guess is we will all be SURPRISED by just how strong the Chinese sovereign demand for US paper will be over the next few quarters AND how WEAK the RMB becomes AND how strong their exports to us remain. It will all be surprisingly surprising.
When do we all recognize it is over? I don't know but my guess Hillary made nice with Hu and it is all behind us now.
EvilHenryPaulson | 02.24.09 - 3:20 pm | #
AIG is the US government.
Worse than that, though, are the falling wittiness-per-post and illumination-per-post ratios, which are cliff-diving.
Sebastian | 02.24.09 - 3:17 pm | #
I lay that at your doorstep Seb. Having you capitulate caused the witty ones to lose a lot of material.
If it takes half a billion to make a helicopter that illiterate drones with $5K RPGs can shoot down, who's going to win the next war?
debtinator | 02.24.09 - 3:18 pm | #
Please see Russia in Afghanistan, 1980.
A lot of commodities -- not gold -- appear to have reverted to mean. That may explain China's stockpiling.
Homebuilders are soaring?
This does not compute.
How could this be?
Who sed dat?
There is a long list of interested buyers for AIG's Asian units. It's been a few months and they apparently can't get "fair value" for it in their opinion, so they would rather sell it direct to the US government at an inflated price
EvilHenryPaulson | 02.24.09 - 3:20 pm | #
If the U.S. buys it, that would eliminate the potential income tax problem.
"AIG is the US government."
dug on that intelligence agency angle a while back, forgot about that
\tIf it takes half a billion to make a helicopter that illiterate drones with $5K RPGs can shoot down, who's going to win the next war?
debtinator | 02.24.09 - 3:18 pm | #
Whoever is collecting the profits from the 5K RPGs and the 1/2 billion helicopter. As usual.
Sure wish I'd loaded up on IYR yesterday afternoon.
Oh wait...
Dear Mr. Bernanke:
Ben, Joe Sixpack isn't buying six-packs. If this doesn't worry you, it should. Think pitchforks and pikes. Check out the graph.
Seize the damned banks, Ben. Do it now.
Regards,
Conjure Bag
U.S. Consumers Driven Away From Drink Spending: Chart of Day - Bloomberg.com
Sorry, haven't been able to read the comments; posting during a boring antitrust lecture.
Normally I agree that the BK process in determining who gets what, and to punish the investors for their speculation. Personally, I agree that banks should be put into receivership if they are insolvent. This position is not surprising given that: I don't have a pension, have very minimal insured property, and am not that impacted by college endowment funds.
Because so much of the bank debt is, in fact, owned by the aforementioned institutional investors, the government has decided that it will channel all of its resources at what it perceives to be the bottleneck--the banks; in their mind, it's better to deal it on Wall Street, somewhat isolated from the average person's life, rather than at the institutional level. So there will be no nationalization. At worse, one firm (most likely C) will go into conservatorship and will then become the feast strengthening its brothers (e.g. Smith Barney sale to MS).
For better or worse that's the way it is.
Half of modified mortgages go sour in 6 months
GOP lawmakers take issue with loan modification plan - MarketWatch
the US government currently owns 80% of AIG.
The first magazine devoted entirely to DIY technology projects,...
Joanna
.
Like Popular Mechanics and Popular Science. I remember the day the Altair was on the cover, I thought that was the beginning of a new world. And so it proved.
Everyone who skipped down the comments should go back and read "some investor guy" @ 2:29.
Why is it that normal people can come up with useful solutions, but the people in charge can't do as well?
OT - I've put up a new version of CR Companion that fixes several editor bugs. Here's the direct link. You can install it right over the previous versions.
The reason we don't have pre-privatization is because the banksters haven't yet figured out how to profit from it.
Rob Dawg | Homepage | 02.24.09 - 2:44 pm | #
I believe these Russian guys might have some advice for them.
"Post-Soviet business oligarchs includes relatives or close associates of government officials, even government officials themselves as well as criminal bosses who achieved vast wealth by acquiring state assets very cheaply (or for free) during the privatization process controlled by the Yeltsin government. Specific accusations of corruption are often levelled at Anatoly Chubais and Yegor Gaidar, two of the 'Young Reformers' chiefly responsible for Russian privatization in the early 1990s. According to David Satter, author of Darkness at Dawn, "what drove the process was not the determination to create a system based on universal values but rather the will to introduce a system of private ownership, which, in the absence of law, opened the way for the criminal pursuit of money and power." In some cases, outright criminal groups in order to avoid attention assign front men to serve as executives and/or 'legal' owners of the companies they control."
"Anatoly Borisovich Chubais (Russian: ÐнаÑоÌлий ÐоÑиÌÑÐ¾Ð²Ð¸Ñ Ð§ÑбаÌйÑ) (born June 16, 1955, Borisov, Belorussian SSR, Soviet Union) is a Russian politician and business manager who was responsible for privatization in Russia as an influential member of Boris Yeltsin's administration [1]. From 1998 to 2008 he was the head of the state owned electrical power monopoly Unified Energy System. The 2004 survey by PricewaterhouseCoopers and Financial Times named him the world's 54th most respected business leader[2]. Survived an assassination attempt in 2005. Currently he is the head of the Russian Nanotechnology Corporation (since 22 September 2008)[3] and a member of the Advisory Council for JPMorgan Chase (since 26 September 2008)[4]"
"Yegor Timurovich Gaidar (Russian: ÐгоÌÑ Ð¢Ð¸Ð¼ÑÌÑÐ¾Ð²Ð¸Ñ ÐайдаÌÑ; Russian pronunciation: [jɪËgor tʲɪËmurÉvʲɪtÉ gÉjËdar]) (born March 19, 1956) is a Russian economist and politician... His most well-known decision was to abolish price regulation by the state, which immediately resulted in a major increase of prices and amounted to officially authorizing a market economy in Russia. He also cut military procurement and industrial subsidies, and reduced the budget deficit. Gaidar was the Minister of Economic Development from 1991 until 1992, and Minister of Finance from February 1992 until April 1992.
He was appointed Prime Minister under President Boris Yeltsin in 1992 from June 15 until December 14, when the anti-Yeltsin Congress of People's Deputies refused to confirm him in this position and instead chose Viktor Chernomyrdin."
and they have already started to invest their huge financial resources in gobbling up commodities i.e. Rio Tinto's very recent investment
Hernan El Perro | 02.24.09 - 3:18 pm | #
Then they don't export to us - the RMB skies on them and they aren't competitive HERE.
It is a huge Catch 22 for them.
EvilHenryPaulson writes:
Hernan El Perro,
The logic is more along the lines of it doesn't matter if you remember to wipe your shoes at the door, if the house ends up burning down anyways.
EvilHenryPaulson | 02.24.09 - 3:11 pm | #
Oh well of course I really was not implying that they were applying some form of logic reasoning to solve this problem, but rather this is (not wearing tin foil hat yet) going to result, as laid out, in an effective transfer of wealth that is NOT just and economically efficient.
by the way, I admire your very well reasoned and on topic posts EHP, I have been only a lurker for a few years here but now this situation has woken up my natural rebellious Latinamerican spirits...when are we marching to DC???
best regards,
Run....... you fools!
Market's going up for awhile, gang. The overall trend is still down, however.
MLM said: "I lay that at your doorstep Seb. Having you capitulate caused the witty ones to lose a lot of material."
I'm afraid you're right, LOL! I try to make up for it by occasionally telling "Sebastian" jokes on myself, but it's not that easy to come up with ones that are both clever and funny.
Sebastia
It's hard to get excited about a bounce in a market with such a clear down trend. For some people I'm sure it's a welcome relief. I hope that they don't lose their shirts betting on a change in the trend, though.
Bernanke was duty-bound to give the best spin he could muster on the economy today to prevent panic from spreading in the financials. The advance of Obama's speech for tonight is that it ends on a hope-inspiring note. For me, the proof will be in the closing numbers on Friday.
I just hope the message is not in a Reverend type tone, otherwise I am not watching.
Every time I hear Obama speak, I feel I should add in a "Hallelujah" at the end of each sentence.
it was pretty funny when seb took his sabbatical and there were fake seb's for a while
Ken Cooper: a lot of CR Companion users who paste links, paste links with embedded spaces, which makes the links bogus.
"Completely OT, but I just saw this magazine at work yesterday & thought some folks here might find something useful in it - Make: Technology on Your Time
The first magazine devoted entirely to DIY technology projects, MAKE Magazine unites, inspires and informs a growing community of resourceful people who undertake amazing projects in their backyards, basements, and garages.
Joanna | Homepage | 02.24.09 - 3:06 pm | # "
Ever heard of Maker Faire? That's where all these folks show up and show off. An amazing weekend exposition, sponsored by the magazine; I go every year and I highly recommend it. This year's will be in San Mateo (SF Bay Area) in May. They seem not to be doing one in Austin this year.
Maker faire is amazing to behold. A must do
When do we all recognize it is over? I don't know but my guess Hillary made nice with Hu and it is all behind us now.
dryfly | 02.24.09 - 3:21 pm
That would make for a pretty W.
I'd send Hillary to the other side of the planet if I were Prez, too.
Ponies for the cronies, presents from the peasants.
Big in Japan, alright!
Ken Cooper: a lot of CR Companion users who paste links, paste links with embedded spaces, which makes the links bogus.
Spaces are not allowed in URLs per spec.
Replace them with %20 to make them legal.
dem bulls do ru
(OT) Comrade Elmer Fudd said: "...it was pretty funny when seb took his sabbatical and there were fake seb's for a while"
Yeah, I read their stuff. They don't have a talent for comedy.
S.
o it aint gonna be like japan in the 90s
why
because japan in the 90s was an island in a deflationary spiral surrounded by a sea of growth
and as a high value added export economy they could muddle on thru
here, to day in the US and in the world its a far different paradigm
so i say NO NO NO what we are facing will not be like japan in the 90s
it will be far worse, and different
Ben Bernanke makes me moist and hot. Just look at me. That's what I call stimulus.
Pavel Chichikov writes:
I don't believe in the conspiracy hypothesis, that this is a conspiracy to transfer wealth to a small and select class.
Deliberate premeditated destruction of the global economy? What for?
Pavel Chichikov | 02.24.09 - 3:17 pm | #
Hi Pavel,
You're one of my fav posters. Well, sometimes you can't avoid but putting on the fabled tin foil hat, just because it looks fashionable, isn't it?
especially when the masters of the financial universe look so totally out of control and incompetent. Greed, hubris, yes sure. Put yourself in their shoes, you are not destroying the world, you are just saving yourself and your loved ones, how's that? wear the hat Pavel and I promise you that your life will be changed 
(Toadies song as background)
best regards,
When do we all recognize it is over? I don't know but my guess Hillary made nice with Hu and it is all behind us now.
dryfly | 02.24.09 - 3:21 pm | #
Oh, but if that were true. The world has slowed to a crawl and the hamsters have jumped from their tracks.
Unintended consequences are spreading like the tidal waves from a 3 mile asteroid hitting the Atlantic.
--
Bernanke is smart enough to know who his real bosses are and how to serve them the best. All of the rogue economists, with access to the public, are serving the same interests. Propaganda must be maintained at the high pitch.
Jas
Sebastian lurking?
agree mock turtle. Japan was a net creditor not debtor nation as well. Here, much worse.
--bh
Then they don't export to us - the RMB skies on them and they aren't competitive HERE.
dryfly | 02.24.09 - 3:25 pm | #
Was just thinking about this dryfly. What are the chances that the Chinese could borrow against their Treasurys and use that money to buy Rio shares? Seems to me they could do it, either directly with the Fed, or through any number of intermediaries. This would solve the exchange rate problem for them, at approximately 0% interest.
And everybody's happy! More dollars in circulation, RMB still pegged. Wonder if this was on Hillary's agenda.
All my greatest fears for our financial system have been confirmed. They are doing exactly as I have foreseen and exactly what I want, in order to insure total economic destruction which is my orgasmic hope.
Only with a hot poker financial enema will the American dumb asses get it.
WOW! We're all bulls, today. Dow up 250! Geez.
Looks like another pull back. Load or dump the trucks? That is the question.
My god, cnbc is falling all over themselves saying how awesome Bernake is.
Thanks Ken Cooper.
What's up with Michael and the hot poker in the booty? Kinky but it seems you only get to do it once, and the hemorrhoids, my goodness!
All the talk about China really does nothing to take into account that it's entire economy depends on someone buying cheap crap.....
That's pretty much at it's end game at this point. Wouldn't you agree?
Ciao
MS
mock turtle writes:
no it aint gonna be like japan in the 90s
...
it will be far worse, and different
.
It's an ill wind indeed that blows no one any good. I'm thinking this storm will wash away a lot of the old capitalism, but some of the newer ideas will have an advantage. Cars may be in trouble, but net shopping should do even better. Any company that 'consumes debt' will struggle, but small companies that bootstrap themselves and sell direct to the consumer might do o.k. I guess I'm not an uber-doomer, what can I say.
Game Blouses.
Market's going up for awhile, gang. The overall trend is still down, however.
reptillian
It was all too easy to predict a 250 bump today. It was written in the stars.
By monies of the prolies.
double inverse recession | 02.24.09 - 3:09 pm | #
By monies of the bonees.
you won't be short for much longer if 25 more points shakes you out.....
MS | 02.24.09 - 3:17 pm | #
No shaking out, just the gamma causing my calls to get longer and longer.
Ken Cooper--can you please make something that will read CR to me so that I can get some work done?
CR skype? Horrors, I shudder to think...
where does the US consumer get the purchasing power from with wealth evaporation in housing and equities, unemployment and greater numbers of retirees, not to mention over-indebtedness? might pinch the China trade bubble
I love Kermit, I love irrational exuberance
time to take money off the table?
"Keep begging and see where that gets you.
ac | 02.24.09 - 2:39 pm |"
So I provide a free service, that you asked for, and this is what I get?
That's gratitude for you.
MP:
Ben, Joe Sixpack isn't buying six-packs. If this doesn't worry you, it should. Think pitchforks and pikes. Check out the graph.
That chart was sobering!
MP, antidotial but interesting,
It's become common in a few grocery stores that used to stock decent wine to find bottles seriously reduced. I used to be amazed to pick up a $25 bottle for $12. Last weekend I picked a lovely reserve Sauvignon blanc for $4.99, K&L was asking 35 last I checked. Stores are blowing out the good stuff as the market shrinks.
This seems to be a BA thing. No deals like that in Sacramento but Sac is the home of JoeCheapChardonnay, YMMV
Ever heard of Maker Faire? That's where all these folks show up and show off. An amazing weekend exposition, sponsored by the magazine;
Bob Dobbs | Homepage | 02.24.09 - 3:29 pm | #
I'm in the PNW, but will keep my eyes peeled for one up here, or check the magazine for a schedule.
Pavel, i too don't believe in conspiracy theories, if only because incompetence and greed are much better explanations.
Anyway IMHO any stock market rally is going to be short lived.
The pun, it hurts, make it stop!
Oh well of course I really was not implying that they were applying some form of logic reasoning to solve this problem, but rather this is (not wearing tin foil hat yet) going to result, as laid out, in an effective transfer of wealth that is NOT just and economically efficient.
Hernan El Perro | 02.24.09 - 3:26 pm | #
On the contrary, I think they are acting logically. Americans are a minority holder of USD denominated financial assets. Worse comes to worse, they crash the dollar Americans keep the real assets, and when it comes to paper they write off more debt than they lose.
Until that time, they are content to spend frivolously beyond carrying capacity. They don't expect to ever pay the debt off, at least not near face value.
If they did not spend as such, the American financial system would collapse and cause immediate capital flight and unilateral dollar depreciation, along with a myriad of concurrent political and social injuries.
They are going for broke, and should they win some slim bets they expect to be in a stronger position relative to the rest of the world having maintained financial systems intact.
There is the option for defaulting on one hand, devaluing outstanding debt on the other, and a increasingly narrow balance between the two. The longer the US can stay on the knife's edge, the greater chance other countries falter first and the US becomes stronger post-reset in the world's financial system.
I realize in the now it is a disgusting unmerited transfer of wealth, but I am skeptical that it is a lasting one. For the financial system to find stability the commoner must do better relative to the elite. There is much depth to the concept that those who benefited most from the credit bubble on the way up, must incur the most pain on the way down. The economy has both social and financial components. If the financial one is restricted, and the elite attempts to block the system from re-balancing then the social economy becomes the outlet and that is what we know of as revolutions.
So I provide a free service, that you asked for, and this is what I get?
CRbot | Homepage | 02.24.09 - 3:42 pm | #
I haven't seen any Barry Ritholtz links.
Deflationary Jane, K&L Wine Merchants is on my way to work. I'll have to stop by and pick up the cheap jug wine you've spotted. Thanks for the tip.
All the talk about China really does nothing to take into account that it's entire economy depends on someone buying cheap crap.....
I know Chinese and for a couple of years, all people would ask me was if I was moving there to work and make a lot of money. I would tell them the only way to make money there is when you get there, send stuff back.
I keep hearing this line that China would also suffer. Does America have a lock on financial wizards? You know, all those very smart guys that everyone brags about.
This thing has progressed more or less on a predictable debt line. Surely, China's experts would have extrapolated a counter formula by now to shelter and balance their financial future.
Looking at the current trend, those American "smart guys" aren't working in America's best interests.
Bernanke is smart enough to know who his real bosses are and how to serve them the best. All of the rogue economists, with access to the public, are serving the same interests. Propaganda must be maintained at the high pitch.
Jas
\t Jas Jain
Jas Jain | Homepage | 02.24.09 - 3:34 pm | #
Jas has been having an influence on my communication style in our meetings and teleconferences at work:
"Those morally bankrupt gangsters in Boise told me they'd have this sh*t completed and deployed by this morning. Never trust a dope with something that requires a brain."
Cheap wine is no antidote.
And what's wrong with a mix of stupidity, greed, incompetence and conspiracy?
Oh, you must mean a grand over-arching conspiracy... only on a cosmic type scale I'd venture.
I wrote a bit more in my CR inspired doomer p0rn sage of life after the "American Apocalypse."
His tent, being the executive model, had plywood sides. I thought about it for a second or two, and decided what the hell. I stood off; at an angle from what I figured was his front door. I knocked. Nothing. So I did it again, but louder. I was rewarded by a roar of Who the fuck is that! followed by the sound of a loud ripping fart. I didnt say anything. My guess is that it was the smell of that long, ripping, cheesy fart that made him stick his head out the door. He immediately lost it.
I swung that saber more like a bat, and put my hips into it. His head actually bounced. Very cool actually, especially as it landed eyes side up. I wish I hadnt worn the mask. I would have liked for him to have seen my face.
I looked in cautiously. The girl was gone. Just as well. That might have been awkward.
must.....get.....$2.50 print....on....C
Ciao
MS
Now cnbc is pitching chinese internet stocks. Is this part of some quid pro quo on them buying bonds? We need another bubble quick! Barf
scone
i think (guess) we come out the better for it on the other side...i tend towards optimism long term
but the immediate term forecast is...pain, lots of pain, and "we" collectively deserved it
for believing in all that hidden hand of laissez faire capitalism non sense
as opposed to moderately regulated capitalism and markets
Ken Cooper--can you please make something that will read CR to me so that I can get some work done?
Bubbles | 02.24.09 - 3:39 pm | #
Live podcasting of post & comments??
"I haven't seen any Barry Ritholtz links.
fafhrd | 02.24.09 - 3:44 pm |"
Sigh, yes indeed. I shall have the code janitor get on that right away.
Any other requests?
Retailing slightly less doomesque:
"Retailers Home Depot Inc., Nordstrom Inc. and Macys Inc. reported fourth-quarter earnings that beat analysts estimates after they curbed costs and inventory."
Home Depot, Nordstrom, Macy’s Earnings Beat Estimates (Update2) - Bloomberg.com
Although I have to say J.C. Penney and Kohl's just suck. I expect them to be deadjim in the near future.
Half of modified mortgages go sour in 6 months
The fed and the government are making things way worse by interfering with the market. Only a minority realize any benefit while the majority suffer.
Quite frankly, many underwater homeOWERS are better off defaulting.
"Keep begging and see where that gets you.
ac | 02.24.09 - 2:39 pm |"
So I provide a free service, that you asked for, and this is what I get?
That's gratitude for you.
\t CRbot
CRbot | Homepage | 02.24.09 - 3:42 pm | #
Now, now, please don't take my harsh word seriously... we all very much appreciate what you're doing for us.
Seriously.
"anon writes:
What's up with Michael and the hot poker in the booty? Kinky but it seems you only get to do it once, and the hemorrhoids, my goodness!
anon | 02.24.09 - 3:37 pm |"
Only with a red hot poker financial enema will the American dumb asses get it.
I thought what I said is actually very profound.
Place your Obama-skies-em-or-crushes-em bets now folks.....
a new version of CR Companion
Ken Cooper | Homepage | 02.24.09 - 3:25 pm | #
Thanks, Ken!
It's what Timmay says......O is irrelevant at this point.
Ciao
MS
And this is good news?!
Nordstrom earnings down 68% Associated Press Tuesday, February 24, 2009 New York â- Retailer Nordstrom Inc. reported late Monday that its fourth-quarter earnings fell 68 percent largely due to heavy discounting over the holiday shopping season and said its earnings for the year could miss Wall Street estimates. The Seattle-based chain said Monday that it earned $68 million, or 31 cents per share, in the quarter that ended Jan. 31. That compares with $212 million, or 92 cents per share, a year earlier. Sales in the quarter fell 8.5 percent to $2.3 billion from $2.5 billion. Analysts surveyed by Thomson Reuters forecast earnings of 30 cents per share on revenue of $2.28 billion.
Joanna writes:
Ken Cooper--can you please make something that will read CR to me so that I can get some work done?
Live podcasting of post & comments??
I seriously would pay for that.
I have tried using the reader function on my computer, but it reads every name and datestamp and drives me crazy.
Sigh, yes indeed. I shall have the code janitor get on that right away.
Any other requests?
CRbot | Homepage | 02.24.09 - 3:46 pm | #
Yes, I'd like to know where to get a code janitor.
Place your Obama-skies-em-or-crushes-em bets now folks.....
hasn't he crashed it every other time, market's just not his crowd
Hoops,
K&L wasn't where I spotted it sadly. It was at a grocery store of all places (no I'm not saying where >; )
If K&L was blowing stuff like that, I'd be whipping out the cards and cell phone.
Now cnbc is pitching chinese internet stocks.
If you think our system is opaque and rigged....
CR writes:
"But how does Bernanke know the solution before the data is available from the stress tests?"
The same way Shelia Bair said large U.S. banks have adequate regulatory capital.
There is no stress test. It is all just a fiction. Just like there is no bank losses and no recession.
It is all in your head!
I sense that some old-fahioned conservatives are taking profits.
"Yes, I'd like to know where to get a code janitor.
JP | Homepage | 02.24.09 - 3:50 pm | #"
Git yer fresh Code Janitors at Rent A Coder: How Software Gets Done -- Home of the worlds' largest number of completed software projects
If you're betting on Wal-Mart: When the high-end ratchets down, the discounters will be squeezed of any profits too.
I haven't seen any Barry Ritholtz links
fafhrd | 02.24.09 - 3:44 pm | #
Yeah, and he's the Paul to your Ringo - or vice versa!
That chart was sobering!
Dave of SV | 02.24.09 - 3:42 pm | #
Clever. Beer has been losing market share to wine and liquor for years. Plus a cheap vodka at $8 gives more buzz then a 6 pack at the same price. Jug wine has also gone upscale into box wine. I believe the buzz for the buck says more then decreased beer consumption.
Bernanke got the answer sheet from the new stringent stress tests. He's cheating. USA suffering from massive grade inflation.
No one and nothing can fail any more. Survival without regard to health. Darwin might not offer this system much in the way of hope.
(OT) Help for this market coming from all directions now.
NYSE considers relaxing its one-dollar rule
Tuesday February 24, 3:29 pm ET
By Madlen Read, AP Business Writer
NYSE considers relaxing rule that requires listed companies' shares to trade above $1
NEW YORK (AP) -- With many major companies trading in penny-stock territory, the New York Stock Exchange is considering relaxing a rule that requires shares to trade above a dollar.
"That's something that we're considering, given the market environment," said NYSE Euronext spokesman Raymond Pellechia..."
Expired
Sebastia
As they say, e fructu arbor cognoscitur
(Reuters) . . .
ING, which has extensive U.S. banking and insurance operations including online bank ING Direct, has received 1 billion euros in savings each week since Jan. 1, Jue said.
"With many major companies trading in penny-stock territory"
lolrofl
How is the volume today?
anon writes:
War. History is clear that when the economic incentive to play nice has disappeared then war follows.
This is what scares me the most. So many people think that the New Deal brought the country out of the depression, but its effects were debatable, at best. (Many of the years of highest unemployment during the GD were in the later part of the 1930s)It wasn't until the country ramped up for WWII that we finally snapped out of it.
War need not be the outcome of a worldwide economic depression, but it is certainly a logical outcome. In ordinary times, war is bad for business and international trade. But when business isn't doing well, it not only removes the economic disincentive against war, it is usually accompanied by economic incentives FOR war. The best (and most logical) way to deal with large populations of restless, unemployed young men is to train them how to fight, and send them off to war. Not only does this keep them occupied at minimal cost to the government (it is easier to pay for MREs and tents than provide subsidies for more expensive civilian alternatives, like food stamps and houses), but there will also be natural level of attrition due to, well, death.
While something like this is more likely in poorer countries with less to lose, history has shown us that this will frequently draw in first world countries. Take, for example, the obvious example of India/Pakistan. It is unlikely that such a conflagration would fail to have consequences for other nations in the region. And while the world is occupied with two nuclear powers duking it out, maybe China decides it's a good time to quietly act on its long-held claim to Taiwan.
The most horrible aspect of all of this is how entirely plausible it all is in the context of a worldwide economic downturn. After all, the last time there was a global depression, Germany's seizure of a small section of Czechoslovakia began a string of events leading to the largest and bloodiest armed conflict in human history. It seems unthinkable now to so many people, but then, we are only a year or two into this. I'm sure there were plenty of people who even in 1930 and 1931 thought things would turn around and they would all be back to the roaring twenties soon enough.
Hell, we haven't even begun to feel the consequences of what has just happened yet -- over two million people have been laid off in the past few months, with more to come, but they will have unemployment and COBRA and what have you for many months yet to come. What happens if a year from now when they are still unemployed and those checks stop coming? What happens two, three, four years from now?