Well, Longfellow convinced me that it's time to leave my dark and dreary computer cubicle and look for some green shoots on a beautiful Bay Area afternoon.
I'm starting to get a feel for the next cycle. It will be full of more stupid ass bubbles, carry trades, financial engineering, etc. This is because nothing has changed; same clowns still running the place, USD still the reserve currency, etc. Since there is no essential structural change resulting from this crisis (which is really weird, but not so weird when you consider that this is because it occurred mostly in politically stable countries), there will be no real political or cultural changes from it.
Which means the same games and more bubbles. It is why the economic will recover despite more of the same BS going on. By 2012 we will be talking about how all the bankers are up to their crazy shadow banking gangster shit once again. I'll bet my 401k on that one.
Remember that after the Winter Solstice (late Dec.), it takes lots of days getting longer (with more sunshine) before the earth awakes again in the mid-Spring timeframe, depending on location location location. The US economic cycle is quite likely even longer. Sunshine is good. Warmer days and green sprouts take lots longer.
Which is worse, I don't agree. I see the credit idiots either not paying or not being able to
pay. The system we see hasn't changed, but deep underground, the people are doing what they can, which is nothing.
The banks are not lending, not even guaranteed FHA loans.
Rob Dawg, seems like California's budget is being cut at the state and local govt level, with the full bite scheduled over the next few months. My assumption is that, when the bite grows big enough for a penalty to be seen to have been applied, there will be a federal bailout for the balance, some time around October. Is that your prognosis?
Liz: I'm sure you know that banks are placed to PUT money, not looks for loans
Recapitalization via profits takes a long time. Stealing, fraud, and manipulation is quicker, but often that takes bank capital on hand (just to keep the Fed, SEC, and FDIC away from the door).
LL, why would any bank not make an FHA loan? They get fees, I assume, and taxpayers bear all of the risk, I assume. Bad for taxpayers, and good for banks. What am I missing?
"The Federal Reserve — the quasi-autonomous body that controls the US’s money supply — is a “Ponzi scheme” that created “bubble after bubble” in the US economy and needs to be held accountable for its actions, says Eliot Spitzer, the former governor and attorney-general of New York.
snip.
Spitzer — who built a reputation as “the Sheriff of Wall Street” for his zealous prosecutions of corporate crime as New York’s attorney-general and then resigned as the state’s governor over revelations he had paid for prostitutes — seemed to agree with Ratigan that the bank bailout amounts to “America’s greatest theft and cover-up ever.”
Advocating in favor of a House bill to audit the Federal Reserve, Spitzer said: “The Federal Reserve has benefited for decades from the notion that it is quasi-autonomous, it’s supposed to be independent. Let me tell you a dirty secret: The Fed has done an absolutely disastrous job since [former Fed Chairman] Paul Volcker left.
At the time, Spitzer had been raising the alarm about sub-prime mortgages. In the wake of the economic meltdown triggered last fall by sub-prime loans, some observers have suggested that Spitzer may have been targeted by law enforcement because of his high-profile opposition to Wall Street financial policies.
Investigative reporter Greg Palast wrote that federal agents’ revealing of Spitzer’s identity as a call-girl customer was no coincidence.
snip
Spitzer recently told Bloomberg News that President Obama’s regulatory reforms of the financial sector are “irrelevant” because regulatory agencies have not been enforcing corporate laws to begin with.
“Regulatory agencies already had the power to do everything they needed to do,” he said. “They just affirmatively chose not to do it.”
Can we make it to 10 posts without a mention of Professor Gates? Yes!!!!
I am trying to decide which of these three indicators is most vulnerable to further weakness when the public loses faith in "green shoots."
I am going to guess vehicle sales because the absolute numbers are fairly large, and the supply of good used cars is just going to keep rising.
But I also think residential construction remains vulnerable. The market still appears to be driven by need-to-build rather than need-to-buy. And prices are dropping below cost of completion in more and more regions.
I'm saying the system at the top hasn't changed. The Goldman Sachs Financial Terrorist Crime Syndicate is still Geithner and Obama's boss. I don't think I'll be carrying currency that says "SDR" on it in 5 years. Oil still mostly priced in dollars, etc.
Whether or not the recession ends this quarter I find fairly irrelevant. It will end because corporate profits increase on US cost cutting and emerging markets growth. And perhaps a dip in oil prices due to a glut in contango. None of that would help US housing, which will eventually find a bottom sometime during the next decade due to population growth absorbing supply. We stopped building houses in 2006 in Cali cold turkey....that didn't even happen in the early 90s in the same manner, eventually it will catch up. Once housing prices stop dropping lending will pick up again. As noted earlier recovery can begin but a growth recession can last awhile. The growth recession will exacerbate job loss for years. We will have successsful corporations (particularly multinational ones) and a damaged consumer for a very long time.
volker the viking, yes, but I found myself using his words, so I figured a little credit was due.
As far as being an "inveterate optimist" ... guilty as charged. I warned readers that I was in optimist in 2005 - while I was predicting a housing collapse, house prices falling 40% or more in some areas, consumer spending declining because of the end of MEW, etc. and housing leading the economy into recession. Everyone laughed in 2005 when I wrote I tended to be an optimist!
Back then I was offered some writing opportunities at some "Doom and Gloom" publications - and I explained I'm not really a Doomer ... I tend to be a little too upbeat (a problem I'm aware of). They laughed - "You'd never know that from your writing!" But that was a different time ...
I still think there are plenty of problems ahead - and there are plenty of sites that think auto sales and new home sales will crash from here. But I can only write what I think ... and if I'm wrong, I will say so.
lawyerliz, nothing has changed. I was writing about a possible bottom for the economy in January and February - I thought people were way too pessimistic. How many times did I write "No Great Depression 2"? Now I think many people are too optimistic - expecting an immaculate recovery. I think it will be very sluggish.
Is a Little Sunshine for economy a euphemism for green shooties ?
CRE getting crushed ( you just said this again right ?)
RRE still tanking e.g. 4.3 million units added to rental inventory + vacant U.S. homes at 18.7 million
Wages deflating so Consumer spending going down
Unemployment continues to grow with U6 likely at 20% across USA
Underemployment is growing faster than unemployment
I put a bid on a rental property the other day. My Realtor thought I was nuts as to what was happening locally so I took a couple of properties I found on the state property tax site titled in mortgage companies and FNMA. HUD has listed 2 properties this year. my point was shadow inventory and hiding the truth from the public to support the claim "It's Different Here". Now she is very interested on what is going on.
From the previous thread: The percentage of adults who are working has fallen from 64 at the end of the Clinton era to only 59.5 now. Some of those dropouts are retirees, but some may be responding to the economy’s declining dynamism.
This is actually incorrect. BLS publishes labor force participation data, and it shows that the labor force participation rate for the cohort "55 years and older" has been increasing since 1992, when it was 30%; now it is 40%. Among other things it also speaks about the quality of our retirement system.
The labor force participation ratio for the cohort "25 to 54 years" has been relatively flat at around 83%
The labor force participation ratio for the cohort "16 to 24 years" has declined significantly from 65% in the late 1990s to 58%.
The recently implemented increase of minimal age is not going to help this cohort.
albrt, what price for land do you include in your cost of completion? If you set it at zero (extreme, I realize, but you could choose instead to set it at the value at the lowest point in the last 15 years, if you prefer), then I suspect that new home prices are still higher than cost by a margin in most places.
I think we'll also see the dollar tank, which will help US companies profitably and wreck US consumers. Since this reduces bank debt loads and seems like something the financial oligarchy could engineer, it seems like it is almost inevitable.
@MrM (profile) wrote on Sun, 7/26/2009 - 2:19 pm
From the previous thread:
The percentage of adults who are working has fallen from 64 at the end of the Clinton era to only 59.5 now. Some of those dropouts are retirees, but some may be responding to the economy’s declining dynamism.
I think CR said he sees the decline hitting the bottom in Q3 but he did not say much about what happens next. In the previous posts I think he argued the economy would be moving sideways for a while. It is quite optimistic, as he himself freely acknowledges. A number of people smarter than me are quite concerned about double dip, similar to what happened in the 1930s ...
I think a strong US recovery is several years off. On the plus side, it may be a slow, but long expansion. That depends of whether we can crash the currency enough to mitigate our heavy debt loads and effectively reduce it with stoking inflation.
The actual recession is ending but the growth recession will last awhile. You either have to wait out the US growth recession or move to Asia or South America to work (I did the latter...much more opportunities here).
I said cost of completion because many builders who own land are essentially valuing sunk costs at zero. Which is economically rational, provided you are getting enough back-door bailouts in the form of massive tax refunds, etc. But look at where the land is located. I'm in Arizona, and the developments are mostly in remote areas, surrounded by acres and acres of foreclosed houses and empty strip malls. The comp prices are indeed way below the cost of completion. There are a handful of developments in favorable locations that still pencil out, but I think those are going to decrease, not increase over the next few years.
i agree and once tried to explain it to a friend who was very religiously right-eous
i said look, you child needs a brain surgeon to remove a growth
who do you want to perform the operation
the surgeon who does ok and is a boyscout in his private life
or the scoundrel, who gambles, breaks the speed limit and plays around on the side but is a virtuoso with the scalpel and leads the medical team in successful surgeries
I see - we were talking about slightly different things - you referred to employment to population ratio and I quoted labor force participation rates.
Here are the seasonally adjusted employment-population ratios
Total adult population (16 years and older): June-1999 64.2%, June-2009 59.5%
16 to 24 years: June-1999 58.7%, June-2009 47.3%
25 to 54 years: June-1999 81.4%, June-2009 76.0%
16 to 24 years: June-1999 31.1%, June-2009 37.4%
I think the consensus is that the downward plunge has slowed, and will come to a stop soon. Some in the traditional financial community (CNBC, your stockbroker neighbor with the 401k etc) expect a traditional roaring recovery. But those who saw the imbalances that finally led to the crash building slowly through the early and middle part of this decade see that we haven't reversed them. We still consume more than we produce and engage in misallocation of capital through TBTF private profits and socialized losses..... And now we have a new problem that goes well beyond the TBTF organizations - moral hazard. We've made it very clear to the whole population that debt does not need to be repaid, that loans do not need to be underwritten (they just need to be guaranteed by a govt agency)....
The next 10 years will probably see slower growth than 1995-2005.
The Federal Reserve — the quasi-autonomous body that controls the US’s money supply — is a "Ponzi scheme" that created "bubble after bubble" in the US economy and needs to be held accountable for its actions." ..... Eliot Spitzer (spot on but he has his own troubles with escort services )
@ MrM (profile) wrote (in reply to...) on Sun, 7/26/2009 - 2:34 pm
I see - we were talking about slightly different things - you referred to employment to population ratio and I quoted labor force participation rates.
Here are the seasonally adjusted employment-population ratios
William Greider gives us some great food for thought on on the Federal Reserve....
During the past year, the Fed has flooded the streets with money--distributing trillions of dollars to banks, financial markets and commercial interests--in an attempt to revive the credit system and get the economy growing again. As a result, the awesome authority of this cloistered institution is visible to many ordinary Americans for the first time. People and politicians are shocked and confused, and also angered, by what they see. They are beginning to ask some hard questions for which Federal Reserve governors do not have satisfactory answers.
Where did the central bank get all the money it is handing out? Basically, the Fed printed it, out of thin air. That is what central banks do. Who told the Fed governors they could do this? Nobody, really--not Congress or the president. The Federal Reserve Board, alone among government agencies, does not submit its budgets to Congress for authorization and appropriation. It raises its own money, sets its own priorities. Among its functions, the Federal Reserve directly regulates the largest banks, but it also looks out for their well-being--providing regular liquidity loans for those caught short and bailing out endangered banks it deems "too big to fail." Critics look askance at these peculiar arrangements and see "conspiracy." But it's not really secret. This duck was created by an act of Congress. The Fed's favoritism toward bankers is embedded in its DNA.
This awkward reality explains the dilemma facing the Fed. It cannot stand too much visibility, nor can it easily explain or justify its peculiar status. The Federal Reserve is the black hole of our democracy--the crucial contradiction that keeps the people and their representatives from having any voice in these most important public policies. That's why the central bankers have always operated in secrecy, avoiding public controversy and inevitable accusations of special deal-making. The current crisis has blown the central bank's cover. Many in Congress are alarmed, demanding greater transparency. More than 270 House members are seeking an independent audit of Fed accounts. House Speaker Nancy Pelosi observed that the Fed seems to be poaching on Congressional functions--handing out public money without the bother of public decision-making.
No wonder Ben Bernanke has his underwear all in a bunch about anyone trying to encroach on 'the turf' of the semi-quasi private-political-government (Goldman Sachs Club) secret payoff organization.
Taking a look at consumer spending if the savings rate stays at 7% an increase from 0% in 2007 one could expect a permanent impact on GDP in the order of over 700 billion dollars each year. I see the argument for positive year over year growth in the Fall but I don't think that will happen either. Business always tails off in the fall and I wouldn't be surprised if it happened again.
I took a day trip last week with the family to Mystic Ct. Very nice place if you are into boats and nautical history. Anyway a jackknifed tractor on i95 had traffic backed up so we pulled off at a Tanger Outlet in Westbrook, CT to kill some time on the way home.
Granted it was mid-week but it was a ghost town. Roughly 10% of the storefronts had a "A new Tanger store coming soon" sign in the window.
I see the argument for positive year over year growth in the Fall but I don't think that will happen either. Business always tails off in the fall and I wouldn't be surprised if it happened again.
I think folks are expecting increase in GDP is going to be due to G (govt spending) not any other term.
Government can make artificial demand is Cash for Clunkers but this will only hurt real demand down the road.
The reason why car makers are struggling is overcapacity. Even if auto sales bottom at 10 mill Plants will still have to be closed and automakers will still go BK as they cannot downsize quickly enough to meet the new reality.
km4, I know that conspiracy theories are very enjoyable. And various whipping boys are good at different moments. Early in the crisis, rating agencies were fun, then Cayne, then Fuld, then Paulson, now it's Goldman. Maybe Bernanke is up next. But there were many people involved, and a lot of cooperation amongst all the parties, including homeowners, voters, and Congress.
I do not see the Federal Reserve as operating against the direction from Congress and Treasury. If Bernanke were to start a major move in opposition to the wishes of Barney Frank, for example, or Chris Dodd, hearings would be scheduled within the month, and the media would be scraping up his body parts from the floor of the hearing room. the hearings we get to see now are theater, the result of consensus amongst the major players, so each can position themselves in public where they need to be.
How is it a good thing when someone buys a repo at a screaming deal, and the guy who lost it moves in with the in-laws and loses everything. This is worse than a wash as the new guy is going to punch in the words "home appreciation" into wikipedia and find no definition for the word any longer.
Bloomberg survey puts Q2-2009 GDP growth at -1.5%, and that is before the stimulus kicked in (although it does include that one-time government transfers in April-May)
The world’s largest economy shrank at a 1.5 percent pace following a 5.5 percent drop in the first three months of 2009, according to the median forecast of 66 economists surveyed by Bloomberg News ahead of Commerce Department figures due July 31.
Liz or CR,
An OT question. On BFF my 89 yr.old CRE banker neighbor told me that banks aren't foreclosing on very many loans they actually own (it's all shadow inventory)... He says that he FCs are owned by Fannie, Freddie, hedgefunds, etc., but not banks, because too many banks would be under capitalized, be BK, and be closed by the FDIC if they had to write down any mortgages. Old Al has been right so far. Is he right again?
+1 There is no conspiracy just the normal order of gov't in plain sight before our eyes. No cloak and dagger are needed when you can turn on Cspan and see the fraud perpetuated in the open
Conspiracy, conspirator or conspire may refer to:
Types of conspiracies
* Cabal, an association between religious, political, or tribal officials to further their own ends, usually by intrigue
* Conspiracy (civil), an agreement between persons to deceive, mislead, or defraud others of their legal rights, or to gain an unfair advantage
* Conspiracy (crime), an agreement between persons to break the law in the future, in some cases having committed an act to further that agreement
* Conspiracy (political), a plot to overthrow a government
""If there's a blue pill and a red pill, and the blue pill is half the price of the red pill and works just as well, why not pay half price for the thing that's going to make you well?" -- President Obama"
That trailer has been there pretty much every weekend lately.
It's the only way they can get people to shop in the outlet stores.
"the hearings we get to see now are theater, the result of consensus amongst the major players, so each can position themselves in public where they need to be.", said patient renter
agreed
the entire political process and the 4th estate has become one big kabuki dance
the american people, for the most part get the mushroom treatment
@ patientrenter (profile) wrote on Sun, 7/26/2009 - 2:56 pm
Hmm ////well then tell Neil Barofsky who is part of the TARP watchdog.
A career prosecutor, Barofsky is a life-long Democrat who donated money to Obama's presidential campaign. But ever since he was appointed to head the oversight office created by Congress when it enacted TARP -- an office designed to ensure transparency and accountability at the Treasury Department and in the banking industry -- he has repeatedly clashed with Obama's Treasury officials over their lack of transparency in how the trillions of dollars in TARP-related funds are being sent to and used by the banking industry.
Barofsky details the war being waged by the Obama administration -- especially the Treasury Department -- on his independence, as well as their constant and multi-faceted campaign to impede his efforts to bring transparency to what is being done with these vast amounts of money (those obstructionist actions are consistent with the efforts of Senate leaders to block a vote on Ron Paul's bill to audit the Fed, a bill which now has truly bi-partisan and trans-ideological support among a majority of House members). As a hard-core Obama supporter, Barofsky is quite obviously dismayed at what he describes as the failure to adhere to transparency pledges in these areas. Barofsky is particularly worth listening to because his integrity, apolitical independence, and prosecutorial tenacity in imposing accountability are exactly what our political culture so woefully lacks.
Push is now coming to shove, and the 'Golden Triangle' of the Federal Reserve, the Treasury and the White House is about to implode. It is past time for reform, and it is past time to 'tear down that wall Mr. Obama' and let the sun shine in (S604 Bernie Sanders Sunshine Auditing the Federal Reserve Act).
The propaganda machine is in full swing: The recession is over, everyone dance in the streets, Goldman Sachs rules the world, bonuses for everyone on Wall Street and 'trust the Federal Reserve' because they did such a great great job pulling thr woll over the eyes of the American public!
The lies, the cover up, the bullshit of it all??????
volker, I am thinking that most mortgages have been securitized. Then maybe I should ask whether the smaller banks hold many mortgages that aren't securitized. Al apparently thinks they do.
patientrenter (profile) wrote on Sun, 7/26/2009 - 2:10 pm
Rob Dawg, seems like California's budget is being cut at the state and local govt level, with the full bite scheduled over the next few months. My assumption is that, when the bite grows big enough for a penalty to be seen to have been applied, there will be a federal bailout for the balance, some time around October. Is that your prognosis?
I took some undeserved crap in a previous post for calling July 15th for the California crisis to come to a head even though that was exactly the day the State ran out of cash and the leadership went to round the clock bargaining so I'm hesitant. That said the Feds had better have a prepackaged bailout plan sooner than October. When the August disbursements to the municipalities don't go out it'll be lawsuits and layoffs everywhere. Call it Labor Day. The only thing that I'm not sure about is if Rahm will try to use the situation to introduce a VAT.
As I posted multiple times a few months ago, the slavish behavior of the executive branch in response to barked orders from their GS masters was a credible threat towards the current administrations popularity (and, perhaps more seriously, threatens the Democrats at their core).
Now, O's popularity is dipping under 50%. The problem is that the bright young people who voted for him are the exact same kinds of people to actually read and understand that Matt Taibbi piece.
Democracy occasionally - though rarely - functions. We'll see if O comes to his senses and stops answering "how shiny" with every request for a shoeshine from Lloyd and Jamie, though that possibility is seeming more and more remote every day.
km4, it's not all sweetness and light in that consensus. Bernanke wants more power. So do Frank, Dodd, Summers, Geithner, Bair, Barofsky.... But the point is that the overall marching orders are understood by all the major players, and they are all making sure not to be the one that causes it to fail. They'll fight like cats and dogs to get the most for themselves and their own interests, but not enough to upset the apple-cart. It's pretty obvious that reinflation is the overall goal, and money will be poured in - as much as it takes, for as long as it takes - until that happens. No one is quite sure what to do after that, and the consensus breaks up some then, but until then they are all lined up, and will only fight over the smaller or future items.
CR
Being unemployed I certainly hope you are right about the end to the "recession". My own experience which of course is highly tainted by my own position but also by considerable insider knowledge of what's going on in corporate America tells me we are in Great Depression II. If I had any money, I'd even bet on it
How do you think the Feds are going to bail out California without making it appear the rest of the States are expected to pay and/or inducing another dozen to follow the lead?
I'm sure the temporary tax surcharge will be called anything except VAT but VAT it has to be. Everything else is insufficient to the task.
Without going conspiratorial, what do you make of the incredible level of cooperation between central banks around the world?
They meet, collaborate, plan, and execute hundred billion swap lines, intervene in currency markets on each others behalf, sign accords on gold sales, etc.
These are done in secret meetings mostly without oversight from their respective governments, though the true level of independence of each central bank varies.
Lots of Plaintiffs like Deutchebank, as trustee for xyz 1232 fund.
Lots of Plantiffs like plain old Everhome Bank. Which could hold an
assignment of mtg or closed the thing themselves, but have assigned
the income privately.
Lots of incompetence. Lots of doing nothing. Lots of starting and then
stopping. Lots of not enough employees to supervise.
Wave 2. coming. Sure autos and housing will moderate, but next comes wave 2.
So far net state and local government employment has stayed constant with last year (June to June). Given all the budget woes at the state and local level it is hard to imagine how employment will not contract here over the next few months.
Accommodation and food services (which now employs almost as many people as does manufacturing) has only seen a 2% drop in employment over the last year, although the accommodation part has declined 8%. Still that is less than the decline in occupancy rates for hotels and much less than the decline in RevPar.
LL: " The little
electrons dance more and more sloooowly."
I believe that can be overcome, Liz. For example, we have seen people more ready to buy stocks and MBS and othe risky assets in just the last few months. It took a few trillion dollars total being poured in, month after month since the middle of 2007, but it eventually shows up. And there really is no practical limit to how many more trillions there are from that source - the US govt.
On a micro level, consider the 3% down FHA loans, with the 8K tax credit. It's little or no money down, with no real penalty to the borrower for a failure to repay, and possibly huge upside. If that doesn't generate enough borrowing, then you can always extend the program. Any system that allows people to buy an asset using almost nothing but cheap borrowed money, with no real recourse, will generate borrowing. So it's always possible.
Rob Dawg, thanks for your update. I don't see a VAT in direct response to CA. But to justify a special bailout, I see them waiting until there are pictures on the nationwide news of CA people lining up for food. A month of that, and a special bailout (with a smaller amount of money for responsible states) will be easier to pass.
He says that he FCs are owned by Fannie, Freddie, hedgefunds, etc., but not banks, because too many banks would be under capitalized, be BK, and be closed by the FDIC if they had to write down any mortgages.
That's what i'm hearing about portfolio loans held by community banks in S. Carolina. Why would banks want any REO's in this market? Foreclosing would incur legal costs, as well as tax, insurance, and HOA liabilities for the bank. better off to cross your fingers, hope for a rebound.
of course, this is the type of doubling-down, regulatory forbearance that Congress had sought to avoid after the S+L crisis.
As far as being an "inveterate optimist" ... guilty as charged. I warned readers that I was in optimist in 2005 - while I was predicting a housing collapse, house prices falling 40% or more in some areas, consumer spending declining because of the end of MEW, etc. and housing leading the economy into recession. Everyone laughed in 2005 when I wrote I tended to be an optimist!
Even Roubini was saying there would be no global recession a while back, so he's an optimist in that way too.
As the old saying goes:
"The bears are always way too early and way too optimistic."
@ patientrenter (profile) wrote on Sun, 7/26/2009 - 3:16 pm
km4, it's not all sweetness and light in that consensus. Bernanke wants more power. So do Frank, Dodd, Summers, Geithner, Bair, Barofsky.... But the point is that the overall marching orders are understood by all the major players, and they are all making sure not to be the one that causes it to fail. They'll fight like cats and dogs to get the most for themselves and their own interests, but not enough to upset the apple-cart. It's pretty obvious that reinflation is the overall goal, and money will be poured in - as much as it takes, for as long as it takes - until that happens. No one is quite sure what to do after that, and the consensus breaks up some then, but until then they are all lined up, and will only fight over the smaller or future items.
Yes I generally agree....and it's just plain nefarious or perhaps just laughable being that the USA is essentially broke.
Who loses BIG ?
as mmckinl (profile) wrote on Sun, 7/26/2009 - 3:14 pm says
Notice how no one is talking about Re-enacting Glass Steagall ?
The tax payer is and will remain the bag holder for the Banksters ...
They are having trouble getting fhas to appraise out. I had one scheduled for
last week, where the fha appraiser had oked the amount but the bank demanded
a 2nd fha appraisal anyway. It's downright weird. Come to think of that is there something
moving under the surface, where banks don't want to make either Fha or SBA loans. warning. Is it that the banks don't quite think the guarantees will be
honored????
Comrade Coinz, what do I make of the cooperation amongst central banks? A conspiracy? Not really. To see what they are doing and planning, you just have to pay attention to the right columnists in the FT, WSJ, NYT, and reports from actual central banks and central bankers and their conferences. Or in the published reports of conversations amongst legislators and economists and the CBer's etc.
I would be shocked - I mean really shocked - if Barney Frank or Chris Dodd, or Larry Summers couldn't get almost any info they wanted about those discussions. I feel almost certain the major actions are taken only after consultations with key Congressmen and Treasury and WH people. But those folks don't want to be held accountable for all of the Fed's actions, so they all agree it's just consultations, not a required approval process. That's the way the world works.
The economy is in a state of churn in my opinion. GD2 is NOT off the table in my view. The hope is public sector spending will jump start private investment and consumer spending will return in a healthy way. The last 8 years of a credit bubble slash consumer glut driven economy will not return for a generation at least, if ever in our foreseeable future. The market will eventually get that. Of course, who cares what I think and i am not paid for my opinion. But as one person who has lived through a number of recessions and localised RE bubbles, that's my view.
On a micro level, consider the 3% down FHA loans, with the 8K tax credit. It's little or no money down, with no real penalty to the borrower for a failure to repay, and possibly huge upside. If that doesn't generate enough borrowing, then you can always extend the program.
I know about 5 people who decided to bite the bullet instead of renting. Next spring, they'll all receive fat refunds. I'm thinking that Cash-4-Clunkers should provide "housing credit" anticipation loans.
@ ac (profile) wrote on Sun, 7/26/2009 - 3:37 pm
Notice how no one is talking about Re-enacting Glass Steagall ?
And nobody's talking about splitting up Goldman Sachs either.
I'm sure somebody told Obama:
"If you mess with us we'll crash this economy so fast you won't even have time to think the word 'impeachment' before you're out on the street."
Yes the definition of faustian bargain on steroids so just more happy talk from MSM about green shooties as Joe and Jane Q. Middle Class Public sink further and further and further...
I would be shocked - I mean really shocked - if Barney Frank or Chris Dodd, or Larry Summers couldn't get almost any info they wanted about those discussions.
From the Alan Grayson footage of him questioning Bernanke on the swap lines, it is clear that Alan Grayson doesn't have all the information he wants.
But he is not Frank or Dodd, so maybe he is not important enough.
Not that setting up the swap lines was the wrong thing to do.
"point is we have not built in a margin of safety."
When, for the most part, have people ever built in such a margin? When, except in a few fortunate places and times, have they ever had much of a margin to build with?
Because Pavel, a lot of people will have run out of unemployment by then,
and a lot of people will be getting, or have gotten their walking papers from
state and local government, and Cali's smoke and mirrors will have reached
the breaking point by them. Also, it's a year and a half after I fully expected that
I would have to close down my ofc and hunker down in Merritt Island, and
typically my clients take a year and a half to go under after they hit the skids,
after that is I thought they just couldn't go on any more.
These times were characterized by lower crime, less inequality,
lots of creativity, a more stable family and lower rates of bastardy,
as well as steady prices. Well, not exactly steady, but oscillating around
a mean very nicely.
My gut says another wave down is coming as well. My 401k savings remains in money market earning nothing (since mid-July 2007) because of it. I sometimes worry that I've missed the next train leg up in equities (obviously, the march lows would have been a nice time to get in), bravo to CR for timing both the crash and the uptick - that guy is good. I want to start diversifying into the market at some point (I'm 34, so plenty of time), but the game feels so darn rigged right now, still. I think we'll have an October surprise as Liz says. The bad stuff always seem to happen in the Fall, for some reason. I really would like one more leg down out of the way, back to Dow 6000-7000, before I move my money back in. Then I'll be ready to gamble up.
CR, love the analaysis. it's spot on. however, the us is still f'd.
By f'd, i mean an end to her hegemony, declining standard of living for her people, increased threats both economic and miltaristic, and an inevitable currency collapse. i predict that the us will go down in history as the most feeble and short-lived global empire ever erected.
I'm on some kind of email list for a local realty company. I get emails of local properties for sale, and then updates when they are sale pending or sold.
This morning there were another ton of sale pendings and solds. Properties seem to be flying off the shelves here.
Don't know if this is just a green shoot that will wilt in the heat of the sun, or whether it is a true indicator of change.
The economy is in a state of churn in my opinion. GD2 is NOT off the table in my view.
Yep, that's one of the lessons from the Great Depression is that people really thought it was over in 1931. Even the "smart" people were talking about the "Depression of 1929-1931" as a historical event.
In this case however, there are many more signs of trouble ahead. Again, the real estate bubbles in places like Korea and China, the hot money flooding back into places like Latin America and Australia, the renewed carry trades in the dollar and the yen, a US stock market that once again is above fair value (where cyclical lows are typically 50% below fair value) all point to a future problems.
The simple fact is that we could be looking at another crash that this time occurs in an environment of double digit unemployment.
Such an event would economically and psychologically devastating and could result in a complete loss of faith in modern finance, business, and government.
It's important to remember that the Great Depression in America didn't result in the same sort of cultural calamity and human catastrophe that the hyperinflation in Germany did.
There are worse outcomes than the Great Depression.
We don't have much of a 325-800k market. Edit: Well, we don't have much of a 500-800k market anyway.
But when I noticed this morning, properties were in the high 100's to almost 300 range. I'd say most properties are in the low to mid 200s.
We have not gone back to 2002 levels yet. A low priced house selling for $100k in 2002 went up to about $200 in peak and is now down to about $130-140.
"Is it that the banks don't quite think the guarantees will be
honored???? "
very few banks are actually in the business of banking at this point. most are trying to just capture a little yield between short fed discount money and longer t-notes while doing as little as possible and staying as far off the radar as possible.
Let's not mince words here folks -- the "Greater Depression" is not only still inevitable, it's happening in just the order history would suggest it should. The schedule is never as fast as we'd expect, but then again, history shows that, too. Declines never occur uninterrupted, nor are they ever without government interventions that lead to blatantly misleading economic indicators.
Even among the CNBC "green shoots" crowd there is not a single industry identified that is expected to drive future economic growth. Nobody knows where any new jobs are going to come from, and all government except DC is either firing or furloughing. Those that have lost jobs are starting to lose their UE benefits in huge numbers, and those that still have jobs are cutting back their spending.
Corporate America recognizes this. The only reason anyone's reporting "profits" is because they've been dramatically cutting costs, but that's not a formula for future growth.
Yes, we may see a tiny positive GDP number in Q3, but the next wave down later this year will be beyond brutal.
You really need to organize those poems and guest post'em over at "afterthecrash.net". Great stuff. The last one sounded perfect for nova's (recently relocated) American Apocalypse series.
I agree that we'll likely see weakness in growth for several years. I don't see much chance of a plunge into a Depression. I do know that some folks here have invested in mental or even physical preparation for a total collapse in society, so they are anxious to see it play out. But, being realistic, our modern society is very productive, and the lower it runs below its full potential, the less it takes to make it rebound. if we had a disastrous dip to 50% of our current GDP, even a couple of monkeys could make it rebound. People don't want to become poor, or stay poor. They will work feverishly to make themselves more productive and more rewarded.
But I know a few here are economic survivalists, and are hoping the world changes to fit their vision, instead of having to do things the other way round!
"The per capita income for the county was $15,495. About 17.60% of families and 22.90% of the population were below the poverty line, including 31.70% of those under age 18 and 9.90% of those age 65 or over."
Heckuva job, AARP! And you KNOW those numbers have ballooned this year. I hope that not just every Californian, but every American is proud of the fact that almost half of the kids in a large county in the middle of our most populous state goes to bed hungry every night.
Now that the water is cut off, the central valley is exactly two kinds of people - jail guards and everyone else.
Done.
Post industrial economy. Roger that.
Neo-feudalism. Roger that.
A real estate driven economy, not industrial - roger that.
Fed = bondage. Roger that. Loan other countries' central banks loans and force them to sell off public assets like railways and hwys to maintain the Fed debt service (are you listening Canada?) Roger that.
I do know that some folks here have invested in mental or even physical preparation for a total collapse in society, so they are anxious to see it play out.
I don't see a total collapse in society, and I'm certainly not anxious to go there. There's nothing on the other side of that fence that could possibly appear greener.
OTOH, we have ample evidence that we're on the verge of an EPIC FAIL, and I'm not about to pretend that this is just another economic cycle where growth automatically follows contraction just because.
It is everywhere. Housing, stocks, bonds, cars, Motorcycles. Any return in prices or demand will quickly hit the supply ceiling. The supply must be worked out over time but in the case of housing and stocks the supply may never be fully worker out.
There an interesting dissonance in the comments. Even reading several years worth of comments you'd incorrectly assume many here are bears. The vast majority are merely bearish. I'm only bearish despite being that way since October 6th, 2005. I'm really hoping this October can be the time to change my outlook to long term careful investor but the last 18 months have made me pessimistic as to the government responses being able to stay out of the way long enough to allow market mechanisms to find a sustainable level. The problem is that there's a blind spot for the PTB. They cannot get past the fact that not liking the answer is not the same as the answer being wrong.
Done.
Post industrial economy. Roger that.
Neo-feudalism. Roger that.
A real estate driven economy, not industrial - roger that.
Fed = bondage. Roger that. Loan other countries' central banks loans and force them to sell off public assets like railways and hwys to maintain the Fed debt service (are you listening Canada?) Roger that.
~~~~
Yep, you got it ...
The problem with their plan is that the wealth being produced is immediately intermediated with debt patronage
so that the entire financial system is sucking the life blood out of the economy ... The Fed's $13 trillion transfusion will only last so long
What are you guys talking about I thought it was cool to disrespect Russia (I pretty much missed the cold war). Yea! Give it to em Biden! As for the response the only thing I heard was KGB. We need to speed up our missile defense program, nuclear missiles are about to start flying!
I think you're only referring to 'long term outlook for equities' by that term (bear), Rob. It is a little more nuanced than that for most of the crew here. Or at least I hope it is - owning thousands of shares of SRS and thinking bad thoughts about The Man hasn't been a particularly sharp investment approach since March.
I agree that Americans at large have grown impatient with the notion of repaying each current $1 of debt to others by virtue of producing $1 more than they spend, and giving the extra production to the creditor. So the non-repayment will take the form of bankruptcies, loan restructurings, defaults, and, for govt and all other debt, a haircut from higher inflation. And some will be repaid. We're not total deadbeats!
You don't invest in a collapse you hedge. I anticipate the SP 500 at below 720 and GDP down more than 9%
Was Long the market from 2003-2007 but was always bearish long term and I believe that we peaked in real terms back in 2005. The rest was inflation driven growth IMO. Growth still is inflation driven and will be from now on.
Yeah, I'm personally a very optimistic person, and will always see bright things ahead for myself and my family regardless where the economy goes.
That said, my bearishness stemmed from 2003, when research confirmed by suspicions of a new housing bubble. Little did I know how vast & deep our problems were until then. The events since (in general terms) have not been a surprise, and have done nothing but reinforce my expectations for the future.
"People don't want to become poor, or stay poor. They will work feverishly to make themselves more productive and more rewarded." said patient renter above
all that is true, but
what must be remembered is that the united states and its people became affluent because of a rare confluence of events, hard work, inventiveness , some good luck
dont kid yourself...there are many many people around the world who hate being poor and work very very hard every day...and remain poor
we have gutted our economic engine and are in serious serious trouble
Liz,
An acquaintance was a Deputy Director at the SBA until recently. He told me they've been gutting the SBA for a decade. I don't think they have any budget to do many loans these days. Neither party seems to make any association between job creation and small business and that's not changing any time soon.
we have ample evidence that we're on the verge of an EPIC FAIL
TJ - Care to elaborate what you mean by ample evidence? IMO the most likely scenario is a grinding downward trend for the next few quarters interrupted by a few quarters of positive growth as all that debts and overconsumption getting worked out of the system (a US version of lost decade of sorts).
However, I do not think the government will allow an epic fall and the government does have a lot of levers...
mmckinl, yes, I know the banksters don't want to take their losses - I am inside the industry. What I am looking for is the source of your certainty about a near-collapse of economic wellbeing and activity. I am hoping that you will describe the trajectory that you see taking us there. I am hoping to engage you on the specifics. Then either I will learn something new, or you will, or we both will. A good outcome, no matter what.
mmckinl, your scenario is hard for me to understand. Can you describe it more, or give an analogous historical sequence?
~~~~
Sure Germany under Hitler a la 1938 ... the Great German economic miracle was about to implode because of debt ...
Hitler needed the war for plunder to pay for his military buildup ... when he saw that the pillage of the Jews , Sudetenland and Austria would not be enough
I hate to be the bearer of bad news - well, not really - but I don't see a whole lot of good down the road. Locally (NE WI for those scoring at home), I'm hearing layoff notices are coming soon. 2,500 jobs at one place unless labor gives up being paid to work. Unemployment is running out for many people. While California has averted bankruptcy for the time being, at least a half dozen states are in as bad of shape or worse shape than California. Munis are being forced to layoff. Many of them are not in a position to bond projects. This is at a time when many of the water systems across the country will need major capex. Oh, and this rally is occuring with gas prices at a lull. Once we actually do have expansion, let's see how well the consumer and industry hold up against $3.50/gal gas and deisel, which between the Indians and the Chinese will become a more scare product.
Not really. My blog post of 2 days ago discussed at length the SFR rental market for a community in California. I'm thinking there will be a small window of low rates and low prices before the inflation pressures take over. I certainly don't want to be stuck with too many dollar equivalents either. I won't bet against the market; too many magnets under the wheel, too many zeros, too many hangers on to tip and bribe. Lots of people have joined me in those attitudes. The new economy is going to be glorious. We just need to let go of the old economy first. There are no safe steps.
Didn't realize that the losses were this bad: As the economy has worsened, loans more than 60 days past due, in foreclosure or held for sale have increased to 35.6% as of May from 33.5% a year earlier for FHA and VA loans issued in 2006. For loans issued in 2007, such serious delinquencies have risen to 44.5% as of May from 41% a year earlier. Moody's Downgrades $4.5 Billion Of Bonds With FHA, VA Mortgages
as to the government responses being able to stay out of the way long enough to allow market mechanisms to find a sustainable level.
My feeling is that no matter what the government does, the market will find that "sustainable level". It may take a little longer, but it'll get there.
"and the government does have a lot of levers... "
yes, they have the lever that shovels billions a day into aig/fre/fnm and arranges sweetheart marriages for the biggest banks with a similar pricetage... too bad they don't have a lever to give a small fraction of that money to the states
mmckinl, OK, now I see why you see a catastrophe looming. The US beginning WW3 in search of resources and peoples to plunder would definitely qualify. I guess I'd just comment that I don't see it as likely.
"The new economy is going to be glorious. We just need to let go of the old economy first. There are no safe steps. "
I know you're being more than a little snarky, but I actually think you're completely right. It will just take 20 years to get to that point. The main pressures are demographic, we need the 90s babies to hit peak earnings. The 80s babies are a decent demographic chunk, but the professionals in that generation which would lead the way are under too much debt and malinvestment to ever recover.
mmckinl - The Versailles treaty was a big part of the German national psyche after WWI. It was among factors that led to the economic crash of the Weimar Republic in the 1920s, which left its own psychological scars. All of these factors are absent from the modern US situation. Where are the parallels?
Economic systems, when they lose updraft, do not grind downward floating like a leaf - they fail. In this case, were it an avalanche we are discussing, we have seen the first crumblings of small dusty snow sliding forward and down, signalling a teutonic shift about to give way.
The parallels don't exist insofar as those war debts were dissolved by a crashed currency.
We don't have that option - we'll be paying our yield on time, with a real commitment to crushing our own consumers under deflation before failing to pay our foreign masters with a substantive currency.
Me neither. 40% is amazing. But they've opened the FHA spigots anyway, which goes to prove that there was never any commitment to solid home loan underwriting in Washington DC.
As Liz says, the market will head south again later this year, and Yes, we'll hit new lows for sure. Historically markets bottom around a single-digit P/E, and we're still far north of that.
We'll get a Treasury auction failure sometime in the next 18 months, 24 max. There's just no way demand matches supply, and current estimates of the supply are low. Could be that the failure isn't an obvious one, though; the Fed may have no option but to print the difference. Regardless, the dollar will start it's final death spiral.
Best case housing will decline to '96 prices, probably lower, leaving most mortgaged homeowners underwater. We won't see a bottom without a capitulation that may not come for another 2+ years, and then the market will be flat for a decade thereafter.
Another 900+ bank failures on the way, but FFDIC already told you that, too.
I am very optimistic. I know what the average guy can do when they put their mind and back in to it. I just don't see that happening as long as the hand outs keep coming. No lesson learned from the passed has sunk in to many. Bottom 2012.
mmckinl, OK, now I see why you see a catastrophe looming. The US beginning WW3 in search of resources and peoples to plunder would definitely qualify. I guess I'd just comment that I don't see it as likely.
~~~~
That's just the analogy ... a War is just politics by other means ... we have already seen the pillage of the middle class ... it won't be enough ... stay tuned ...
However, I do not think the government will allow an epic fall and the government does have a lot of levers...
Go back a few years and you'll hear people state that the government wouldn't let the DOW drop below 10K, wouldn't allow home prices to drop 30%, etc. I keep saying the same thing now that I said then (which you can look up) -- they really don't have a choice in the matter.
I thought, based on my limited knowledge, especially Irving and his writing on debt deflation, that once the monster awakens - it does not stop until it is satiated.
and the Nikkei is what percent of 20 years ago? Yes, Japan is a good example, and they were savers. It has kept them alive, however, they are on the slope with all of us. At least they are Industrialised and will sell to emerging economies, who will inturn trade energy and commodities to China and India.
mmckinl - The Versailles treaty was a big part of the German national psyche after WWI. It was among factors that led to the economic crash of the Weimar Republic in the 1920s, which left its own psychological scars. All of these factors are absent from the modern US situation. Where are the parallels?
~~~~
The parallels are economic .... as in debt ... Hitler was of course financed by banks !
When I first saw the world trade towers burning I thought to myself, you know that might as well be a foreign country to me, I was mesmerized , too bad they didn't hit the New York stock exchange while they are at it, the subsequent invasion of Goldman sachs headquarters for profiteting off it would be a big plus in my book.
I think the main question is not the government's ability to affect price levels of certain asset class, be it equities or home prices, but the government's ability to affect the aggregate level of economic activity in the country. In this regard the government, while not omnipotent, is still quite potent, especially in the medium term (fiscal and monetary policies have substantial lags).
OK, now that we've reached goodwin's point: I suddenly realize that I don't know how Germany went from hyperinflation to Hitler-led manufacturing society. ANyone know?
DOW below 10K definitely is not an epic fail, and was not intended to be an example of one. I was answering patientrenter's question on some future events.
Regarding the government's ability to affect the economy, it's strictly a "kick the can" maneuver, putting off today's problems for greater ones tomorrow.
Oh yeah, that's real...
A friend from SCruz sent me a less edited link a couple of days ago... if you think that's particularly over the top for public statement, you must be one of those east coasters that believes in slavery, because your vegetables don't grow on trees, and you don' t use machines so that you can not work. I thought she was actually quite politically balanced, embracing the free markets, small business, GWB, and all.
The spiteful, bad smelling (and I don't even mind patchouli), rambling lunatics are the real problem.
Not much worse than the sweater puppies who get paid to do financial analysis on CNBC.
I mean... she works for free :^)
The government will flood the Treasury market with a record amount of new debt this week, topping $200 billion.
The improvement in risk appetite this year has left its mark on the Treasury market's performance: government debt has lost 4.76% through Thursday after a return of more than 10% last year, according to Barclays data
We are talking about real economic activity measured (however imperfectly) by GDP. Nikkei is not relevant, IMO.
Yes, Japan is a good example, and they were savers.
Yes, this is a big one. As the US population frantically turns from overspenders to savers, it certainly drags down the US economy.
OTOH, I do not expect that foreign savers will go on strike and one fine day will decide they do not want US debt any more. Instead, I expect them to continue moving toward the short-term part of the yield curve, pushing long-term yields up. That's why I expect a prolonged downward grind, not an epic fall.
House Bill Extends Higher Loan Limits The previous $417,000 limit was temporarily increased to $729,750 for mortgage buyers Fannie Mae (FNM: 0.57 0.00%) and Freddie Mac (FRE: 0.592 -1.33%) and mortgage insurer the Federal Housing Administration (FHA), as part of the nearly $800bn American Recovery and Reinvestment Act of 2009 that President Obama signed in February.
But that temporary increase is set to expire at the end of the year unless Congress extends it. The committee’s bill would provide that extension until September 2010, the end of the 2010 fiscal year.
The bill calls for the FHA to insure $400bn in single-family loans, as well as provides Ginnie Mae the authority to guarantee up to $500bn in mortgage-backed securities.
another Trillion in off-balance sheet liabilities.
Regarding the government's ability to affect the economy, it's strictly a "kick the can" maneuver, putting off today's problems for greater ones tomorrow.
Yep, hoping that in the meantime the economy somehow will recover "because it always does"
I don't want to put words in your mouth, 'cause I must admit, that might be something to see ( Good God! Here come those damned Vikings again!!). But a tectonic shift would be even more dramatic, no?
mock turtle (profile) wrote on Sun, 7/26/2009 - 6:34 pm
what must be remembered is that the united states and its people became affluent because of a rare confluence of events, hard work, inventiveness , some good luck
dont kid yourself...there are many many people around the world who hate being poor and work very very hard every day...and remain poor
we have gutted our economic engine and are in serious serious trouble
We have just reached a point where the financial (speculative) economy went from being an engine that grew manufacturing and technology into its own system for itself. The economic miracle works because it helps produce value from speculation sufficiently that the money "borrowed" from the future tends to get paid back and then some. We've gutted our manufacturing capacity - "green" might replace some of the work we've lost but will not be very profitable. Health care will bubble by simple demographics combined with our general poor health, but again is not a game-changing industry. The only way to get things onto a sustainable track is to create a new speculative flow out of genuine innovation, not trickery/theft/deception, or government mandate, and let the financial "parasite" hook on to it to open the flood of speculative capital in a way that benefits the real economy MORE than it benefits the financial economy.
You could've said that the US was simply suffering another GD -- an especially severe and protracted economic downturn -- and that we'd emerge on the other side relatively unscathed.
However, given that GD involved a very different country that we have now -- one with ample resources, few obligations, and much greater prospects -- we're in seriously bad shape. The FIRE economy was a last ditch effort to sustain the ponzi economy of the late 20th century, but now we've reached our Minsky Moment (otherwise known as "peak debt") and must face the consequences.
Too much of what we've had is (and always was) unsustainable. Our "Epic Fail" will be the collapse of the dollar, as it represents all that cannot and will not be sustained.
As others have stated above, there's a glorious new economy out there, but getting there's going to be a cast-iron bitch.
And what if foreign CBs simply don't have a surplus to invest in our paper? Not really an asset class decision then...
Countries with current account surplus like China, Japan, oil-exporting countries, Germany have to place it somewhere. Your question assumes their economies collapse. Well, yeah, that would be rather disastrous.
Yes...war was a necessity with it's "policy" that we seem to be mirroring at present. IF they didn't then the populace would have needed trucks instead of wheel-barrows (for the money)
Remember late '02? Albeit ours was on a much smaller scale........I hope that's not where we are headed now.....again.
For those debating the demand for Treasuries, I'd suggest revisiting that Sprott paper posted on ZH a week or so ago. Unless the rest of the world wants to jump from the frying pan totally into the fryer, there simply isn't anywhere near the demand to match the supply.
Black Star Ranch (profile) wrote on Sun, 7/26/2009 - 7:19 pm
"......to create a new speculative flow out of genuine innovation" = The Game Changer
Yep... and therein lies the whole problem. These superwealthy elites somehow "forgot" that return requires risk. Billionaires can well afford highly speculative gambling on new technologies that may or may not change the world, just as easily as they can gamble on whether J6P with $35k income can afford to mortage away his life making regular payments on his $150k domicile. Both are gambling, both can potentially deliver high returns and are risky, but one has just a bit more social value and it's not the political farce of an "Ownership Society" based on lifelong debtorship.
"Your question assumes their economies collapse. "
Nope. Just assumes that they would rather spend a surplus on domestic stimulation/welfare than stash it in our cash, if they have one at all. Not a wild or pessimistic conjecture in the slightest.
I thought Germany and Japan were collapsing? Are they not on track for a -6 GDP drop?
They sure did suffer significant drops in GDP given the export-driven nature of their economies and the fact that the US and other traditional importers are not buying as much as before. However, their current accounts are still in surplus. This is how their economies are built - they produce a lot more than consume, so to say.
No, seriously, history is always hopping off one rail and onto another. Who would have predicted 20 years ago that the major creditor nation would be China and expect to be believed? It's always happening that way.
Who would have believed in the mid-80s that by 1992 there would be no more Soviet Union?
Many examples might come to mind of improbables or unthinkables in history.
Nope. Just assumes that they would rather spend a surplus on domestic stimulation/welfare than stash it in our cash, if they have one at all. Not a wild or pessimistic conjecture in the slightest.
They would need to change their economic models quite substantially, make them a lot less export oriented. Of course it can be done, but not in a span of 2-3 years.
I think the world realizes that refusing to buy T bills means an end to US hegemony. And, believe it or not, much of the world wants the US to remain a hegemonic power. I have met many in Asia (S Korea, Japan, Malaysia) that bank on it. As far as global superpowers go, we are a relatively benign one, certainly better than the USSR or China. Lots of countries, from the EU states to the Gulf states, benefit from having the US around to intervene in places like Bosnia. That, in and of itself, probably accounts for a lot of support in the Treasury market.
obviously we will never "run out" of oil...there is just less and less of it and epecially less and less of the oil that is economically attractive to recover
this means the end of "cheap" oil and at some point transportation expenses start to chip away at the cheap labor advantages of 2nd world nations
resulting in a shif back to home industires
also peak oil should continue to accelerate the tech revolution in nuclear, wind, solar, tide, etc
An economic "Game Changer" would have to subject itself to today's business models including profit ratios, etc. I don't see most modern day "entrepreneurs" designing, initiating production, producing, marketing, distributing and providing product according to old school margins and tolerances.
I'm still not sure if the "IT revolution" was truly an economic game-changer (and it was my area of grad study) but the primary advantages of IT were realized in process automation, electronic funds transfer and other very "boring" and well-defined areas of business. We're going to see that in health care, and the gains will be substantial, but it is Automation, which means gains from efficiency which don't usually generate new business or open new markets to the firm implementing them. It's a sad fact given all the hype surrounding Information Technology but history bears out that there are a few key players that emerge from thousands of unsuccessful ventures and they tend to lock in most of the firms. Non-IT firms are generally conservative with IT investments and tend to rely upon known knowns and industry-tested best practices. I don't see why health care is going to be any different.
Many examples might come to mind of improbables or unthinkables in history.
What would be a good example of an unthinkable in the current environment.
Dow below 5K or U3 above 12% in 2015 doesn't cut it.
Desintegration of the USA a la Orlov USSR-type scenario?
Fall similar to that of the Roman Empire?
We always tend to apply what has already happened in one countries to new ones, but coming up with new "unthinkable" scenarios is difficult
The black death was the gift that kept on giving. Kept the population down
for centuries. Indirectly caused the Renaissance and Reformation. Kept
laborers reasonably well paid.
Unfortunately there was that dying in hideous pain thing.
Black Star Ranch (profile) wrote on Sun, 7/26/2009 - 7:40 pm
An economic "Game Changer" would have to subject itself to today's business models including profit ratios, etc. I don't see most modern day "entrepreneurs" designing, initiating production, producing, marketing, distributing and providing product according to old school margins and tolerances.
Agreed. Nope, the philosophy still seems to be "build it and they will come" for the most part.
A serious outbreak of the virus in the country’s overcrowded prison system would cause particularly severe problems. An Irish Prison Service (IPS) spokesman said: "At a corporate level, the IPS is acutely aware of the possible adverse impact of a swine flu outbreak at prison level and an IPS Contingency Planning Group is considering necessary steps which may have to be considered in the event that significant numbers of cases occur within the prison system, either involving staff or prisoners." Prison staff face jail quarantine over flu | Irish Examiner
Better be working on your immune systems kids; the clock is ticking!!
The Government has warned that 65,000 could die, 350 a day, over the next few months. The eventual death toll could reach 750,000. Young children, pregnant women and people with underlying medical conditions are most at risk.
Official figures released last week show youngsters under 16 are almost twice as likely to die from swine flu than others.
The reason for that is under-developed immune systems and the other possibility that most kids sit around on their asses eating sugar and getting fat as the pigs that started this at the farms...
I disbelieve the number. Annual GDP is what, $14B? Total borrowing = 15x GDP?!
Sounds bogus.
Edit: What is the interest on that alleged $213T? If it were all 3%, $6B of the GDP is purely interest payments.
(As if 3% is a realistic number. Avg should be much higher.)
So the wiki link is claiming that the majority of our economy is interest payments. Riiiiight.
TJ and mmckinl, I had to take a break for a little dinnertime snack - fresh tomatoes and basil, with olive oil. I am not trying to pin you down, TJ or mmckinl, just get a better idea of what you mean by a collapse, and then debate the likelihood of the trajectory.
I lived through the downturns of the early 1980's and late 1970's and 1974-5, and I really don't see what's happening now as being a lot worse. Is it possible that you were young back then, and not fully tuned into the worry and pain of adults at the time? There were gas lines, short time, really major physical dislocations. Now we have what looks to me to be nothing worse than what happened back then. And I suppose my point is that these were just normal recessions, and had normal recoveries. The 1974 downturn didn't really end until 1983-4. What's strange and unusual is the recessions of the last 20+ years. Vigorous govt action has softened their impact. We're now all accustomed to recessions that are just minor blips. That doesn't mean that a real recession inevitably leads to an "out of control" spiral. It just leads us back to what happened after virtually all other historical recessions - a recovery.
As for Japan, Japan's GDP is no less now than it was 20 years ago. People refer to it as a disaster, but in fact their economic activity did not drop off a cliff, nor did their wealth. Sure, stagnation doesn't feel as good as a boom, but it's also a lot better than a real long-term bust - when average incomes fall significantly and stay down.
LONDON (Reuters) - The United States and the United Kingdom stand on the brink of the largest debt crisis in history.
snip
To understand the scale of the problem, and why it leaves so few options for policymakers, take a look at Chart 1 (here), which shows the growth in the real economy (measured by nominal GDP) and the financial sector (measured by total credit market instruments outstanding) since 1952.
In 1952, the United States was emerging from the Second World War and the conflict in Korea with a strong economy, and fairly low debt, split between a relatively large government debt (amounting to 68 percent of GDP) and a relatively small private sector one (just 60 percent of GDP).
Over the next 23 years, the volume of debt increased, but the rise was broadly in line with growth in the rest of the economy, so the overall ratio of total debts to GDP changed little, from 128 percent in 1952 to 155 percent in 1975.
The only real change was in the composition. Private debts increased (7.8 times) more rapidly than public ones (1.5 times). As a result, there was a marked shift in the debt stock from public debt (just 37 percent of GDP in 1975) toward private sector obligations (117 percent). But this was not unusual. It should be seen as a return to more normal patterns of debt issuance after the wartime period in which the government commandeered resources for the war effort and rationed borrowing by the private sector.
From the 1970s onward, however, the economy has undergone two profound structural shifts. First, the economy as a whole has become much more indebted. Output rose eight times between 1975 and 2007. But the total volume of debt rose a staggering 20 times, more than twice as fast. The total debt-to-GDP ratio surged from 155 percent to 355 percent.
Second, almost all this extra debt has come from the private sector. Take a look at Chart 2 (here). Despite acres of newsprint devoted to the federal budget deficit over the last thirty years, public debt at all levels has risen only 11.5 times since 1975. This is slightly faster than the eight-fold increase in nominal GDP over the same period, but government debt has still only risen from 37 percent of GDP to 52 percent.
snip
THE DEBT MOUNTAIN
The data in Table 1 (here) makes clear the rise in private sector debt had become unsustainable. In the 1960s and 1970s, total debt was rising at roughly the same rate as nominal GDP. By 2000-2007, total debt was rising almost twice as fast as output, with the rapid issuance all coming from the private sector, as well as state and local governments.
This created a dangerous interdependence between GDP growth (which could only be sustained by massive borrowing and rapid increases in the volume of debt) and the debt stock (which could only be serviced if the economy continued its swift and uninterrupted expansion).
I'm sorry I missed the game of blame assessment from earlier threads. Notice how it is shrinking down to blame your neighbor?
The comment about the interest being paid on the national debt has reached the point it could pay for the housing cost of our nation gives one pause to think. I chuckle when I read the comments regarding paying for the crap bought by the average person when the crap bought with our national debt falls firmly in the poor decision making category. I'm going to stick with blaming lenders for their poor lending standards, the government for never passing on overpaying for everything and the capture of our political system by special interest lobbying.
Collapse. Examine your personal budget. Look at the YoY increases in necessary costs(fixed costs). Look at your wage and how it has been impacted by the recession. Pay close attention to inflation in your fixed costs. The smart companies are there and they aren't dropping their rates regardless of their inputs. Food, energy, shelter, health have all seen higher then CPI cost increases for years. Now we face devaluation of the dollar, what happens to those fixed costs? If we see wage deflation continue unabated with a decrease in accepted value of the dollar and increased fixed costs won't more default be the end result. Maybe greed of mandated costs with an icing of debt servicing/higher taxes will bring a grand cry of "uncle!" from the masses.
The citizens of this country have been put up against the wall. Very unsettling looking at the creditors all demanding payment. What is Uncle Sam going to do when he's put against the wall? Look right and left and see the country standing shoulder to shoulder with him? Maybe then change will happen. Until then count on the "kitchen sink" approach to continue in solving the Pandora's Box of problems facing us. Of course hope was the final evil let out of the box:
"Hope was personified in Greek mythology as Elpis. When Pandora opened Pandora's Box, she let out all the evils except one: hope. Apparently, the Greeks considered hope to be as dangerous as all the world's evils. But without hope to accompany all their troubles, humanity was filled with despair. It was a great relief when Pandora revisited her box and let out hope as well."
I think hope is the first evil to be put back and then maybe the realities of the world can be dealt with...not betting on it.
"Peak oil -> higher oil prices, but little additional production-> stagnant wages -> little discretionary income -> cutbacks in buying many discretionary items -> layoffs (restaurants, newspapers, many businesses)-> more loan defaults -> banks not in a position to lend as much because of losses on loans -> debt harder to obtain -> lower demand -> lower prices on other commodities, like food -> more defaults and layoffs -> banks in even worse shape -> etc.
These cycles are leading to a huge unwind of debt that has barely begun. There are also a large number of derivative contracts outstanding, and some of these may generate huge payments (as has already happened at AIG). These also have barely begun to unwind.
It is not too hard to envision a situation where the worldwide banking system collapses, and it is necessary to start over, perhaps almost from scratch, with new currencies and new international treaties. As the result of such changes, there is at least the possibility that the world's financial system may function at only a minimal level, and world oil production will take place at only a very low level."
There are some I know (unnamed) who are making so far on part time work (unreported of course), child support and unemployment. with some help from mom (not me). Well the dad
is paying hardly anything now and the unemployment is coming to an end.
Multiply by thousands and thousands. They aren't gonna be buying new cars or
purses. No siree Bob.
As I have posted, I had my doom moment in Oct or Nov of 2007. The securitization
train had stopped. Mtg broker buddies with what they considered good deals couldn't
get them through. And I read Countrywide had a quarter trill in foreclosures. (I wonder
what the total is now.?)
After 10 seconds of deepish thought after hearing the Countrywide thing, I concluded that
we were up the creek, and the banks couldn't take the losses; this wasn't subtle or rocket
science it was brick falling on your head obvious.
Tried spreading the word, sold most stocks, and all I got was eye rolling.
I no longer believe what any guru says.
The weather people have much more of a handle on weather--that is, not much, but a little,
that all these gurus do.
The only think I don't understand is why anybody believes or thinks that confidence is a
good thing. I think extreme skepticism is a good thing. None of these people want to do
anything other than make money without contributing any value.
Alright, with patientrenter back to continue the "epic fall" discussion, I can go watch what those vampires are up to
For those still interested in Treasury sales, here is the latest from Bloomberg
The U.S. more than doubled bond and note offerings to $963 billion in the first half of 2009 in an effort to end the recession and finance a budget deficit that the Congressional Budget Office projects will reach $1.85 trillion this year. It may sell another $1.1 trillion in the second half, according to London-based Barclays Plc, another primary dealer.
Including bills, the Treasury has raised $1.046 trillion in new cash this year, according to government data.
“There’ve been very valid concerns about whether the market would be able to take down that kind of supply consistently,” said Christopher Sullivan, who oversees $1.5 billion as chief investment officer at United Nations Federal Credit Union in New York. “Given the demand seen at many of the auctions, that fear has been a little bit misplaced.”
At the six sales of two-year notes this year, investors offered an average $2.81 of every $1 of debt sold, compared with $2.34 during the same period last year. For five-year notes, the so-called bid-to-cover ratio has risen to $2.22 in six sales, up from $2.07 last year.
...
Demand from international investors has increased along with the sales. The government relies on foreign buyers to finance the budget deficit and almost 50 percent of the $6.6 trillion in marketable Treasuries are held outside the country, up from 35 percent in 2000, U.S. figures show.
Indirect bidders, a class of investors that includes central banks, purchased 67.2 percent of the record $27 billion in seven-year notes sold on June 25, or double the amount of bids at the last sale in May, according to the Treasury.
The ratio was the highest since 2004 on the sale of $37 billion in five-year notes the day before, while the $40 billion in two-year notes auctioned on June 23 attracted the highest percentage of indirect bids for that maturity in at least six years.
Like other government trust funds (highway, unemployment insurance and so forth), the Social Security and Medicare Trust Funds exist purely for accounting purposes: to keep track of surpluses and deficits in the inflow and outflow of money. The accumulated Social Security surplus actually consists of paper certificates (non-negotiable bonds) kept in a filing cabinet in a government office in West Virginia. These bonds cannot be sold on Wall Street or to foreign investors. They can only be returned to the Treasury. In essence, they are little more than IOUs the government writes to itself. Social Security and Medicare Projections: 2008 - Brief Analysis #616
lawyerliz (profile) wrote on Sun, 7/26/2009 - 7:55 pm
The only think I don't understand is why anybody believes or thinks that confidence is a
good thing. I think extreme skepticism is a good thing. None of these people want to do
anything other than make money without contributing any value.
+1
Money for nothin' and chicks for free; that ain't workin!
They don't need to wait, the can file a 2008 amended return (1040X) and get the credit in short order ( ~6 weeks).
BTW - re a grandchild being on the deed to get first-time HO credit; the home being purchased must be the claimant's principle residence for three years to qualify.
Will be interesting to see how IRS checks/responds to instances where this isn't the case.
Liz, if we all decided to default tomorrow on all our debts, then the economic system would collapse. As you well know, the legal system couldn't keep up with such a shock. So we could all default on all our debts if we wanted to. But we would be moving our society into a chaotic direction. Is that what we want? If we don't, then we need to exercise restraint and start believing again in old-fashioned truths, like "there's no free lunch", and "responsibility should be rewarded and irresponsibility punished". It's dull and boring, but letting the dam burst and going with unlimited moral hazard is not going to end well.
patientrenter (profile) wrote on Sun, 7/26/2009 - 8:02 pm
If we don't, then we need to exercise restraint and start believing again in old-fashioned truths, like "there's no free lunch", and "responsibility should be rewarded and irresponsibility punished". It's dull and boring, but letting the dam burst and going with unlimited moral hazard is not going to end well.
Could not agree more. You can be the first to convince the power elite, celebrities and the financial oligarchs that they have to play by the spirit of the rules because it's in society's best interests. Then the people will easily follow suit.
No I agree it's not. The hub and I owe hardly anything and intend to pay what
we owe. Some of what I said was snark. But. . .
But what I see is millions and millions tempted into debt slavery. Debt slavery is worse
than moral hazard in my book. People who can only pay cash for things will quickly
learn not to spend too much.
I calculate that the national debt is 1000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000. Why so big? Because we should count the obligations for our kids' education, and their retirement, and their kids, an so on. That could be infinite, but I wanted to be optimistic, so I assumed the world would end eventually:)
My, you have been busy these last few hours.
So what is your call for the end of the recession?
It looks like we've got the Double Carry Trade going on with the dollar AND the yen now, with traders flipping back and forth between the two.
Things may be looking up for the economy in the short term, but the cancer is spreading fast and furious just as before.
Will car sales or foreclsures impact GDP? Just kidding...
Longfellow is dead. Dead as disco.
And you, sir, are an inveterate optimist.
I like the dreary in Raven more.
As I pore over the forgotten lore. . . .
Well, Longfellow convinced me that it's time to leave my dark and dreary computer cubicle and look for some green shoots on a beautiful Bay Area afternoon.
Besides, it's currently US-0, Mexico-3.
It is dreary here as I rains. . .again.
The aquafer had better at least be getting recharged!
ac-
I'm starting to get a feel for the next cycle. It will be full of more stupid ass bubbles, carry trades, financial engineering, etc. This is because nothing has changed; same clowns still running the place, USD still the reserve currency, etc. Since there is no essential structural change resulting from this crisis (which is really weird, but not so weird when you consider that this is because it occurred mostly in politically stable countries), there will be no real political or cultural changes from it.
Which means the same games and more bubbles. It is why the economic will recover despite more of the same BS going on. By 2012 we will be talking about how all the bankers are up to their crazy shadow banking gangster shit once again. I'll bet my 401k on that one.
Taking care the the budget in California:
YouTube - TERMINATOR 2 MiniGun
If only everything were so simple...
Nemo, sometime in Q3. Although I can see Roubini's argument.
picosec, yes, enjoy the sunshine.
Here is a short video of what I saw yesterday:
YouTube - The Wedge Newport Beach Video - July 25, 2009
Wild stuff ...
best to all
Remember that after the Winter Solstice (late Dec.), it takes lots of days getting longer (with more sunshine) before the earth awakes again in the mid-Spring timeframe, depending on location location location. The US economic cycle is quite likely even longer. Sunshine is good. Warmer days and green sprouts take lots longer.
Which is worse, I don't agree. I see the credit idiots either not paying or not being able to
pay. The system we see hasn't changed, but deep underground, the people are doing what they can, which is nothing.
The banks are not lending, not even guaranteed FHA loans.
CR is predicting a 2nd half recovery???
Rob Dawg, seems like California's budget is being cut at the state and local govt level, with the full bite scheduled over the next few months. My assumption is that, when the bite grows big enough for a penalty to be seen to have been applied, there will be a federal bailout for the balance, some time around October. Is that your prognosis?
Ummm, October is when I think the S is really gonna hit the f.
At supersonic speeds.
Liz: I'm sure you know that banks are placed to PUT money, not looks for loans
Recapitalization via profits takes a long time. Stealing, fraud, and manipulation is quicker, but often that takes bank capital on hand (just to keep the Fed, SEC, and FDIC away from the door).
LL, why would any bank not make an FHA loan? They get fees, I assume, and taxpayers bear all of the risk, I assume. Bad for taxpayers, and good for banks. What am I missing?
liz: you and I agree on so many things
if my wife or your husband ever finds out about us....
I don't understand it at all. That's what the local newspaper said.
Maybe they fired everyone who knew how.
i hate to rain on the bankstas sunshine
but the sheriff is back
"The Federal Reserve — the quasi-autonomous body that controls the US’s money supply — is a “Ponzi scheme” that created “bubble after bubble” in the US economy and needs to be held accountable for its actions, says Eliot Spitzer, the former governor and attorney-general of New York.
snip.
Spitzer — who built a reputation as “the Sheriff of Wall Street” for his zealous prosecutions of corporate crime as New York’s attorney-general and then resigned as the state’s governor over revelations he had paid for prostitutes — seemed to agree with Ratigan that the bank bailout amounts to “America’s greatest theft and cover-up ever.”
Advocating in favor of a House bill to audit the Federal Reserve, Spitzer said: “The Federal Reserve has benefited for decades from the notion that it is quasi-autonomous, it’s supposed to be independent. Let me tell you a dirty secret: The Fed has done an absolutely disastrous job since [former Fed Chairman] Paul Volcker left.
Raw Story » Spitzer: Federal Reserve is ‘a Ponzi scheme, an inside job’
heres more
At the time, Spitzer had been raising the alarm about sub-prime mortgages. In the wake of the economic meltdown triggered last fall by sub-prime loans, some observers have suggested that Spitzer may have been targeted by law enforcement because of his high-profile opposition to Wall Street financial policies.
Investigative reporter Greg Palast wrote that federal agents’ revealing of Spitzer’s identity as a call-girl customer was no coincidence.
snip
Spitzer recently told Bloomberg News that President Obama’s regulatory reforms of the financial sector are “irrelevant” because regulatory agencies have not been enforcing corporate laws to begin with.
“Regulatory agencies already had the power to do everything they needed to do,” he said. “They just affirmatively chose not to do it.”
read the full story at 'raw story" link above
Down boy down.
I am much too old for you and I am not Ninon de Lenclos. (sp)
The Sptiz can fool around all he wants; I want him back.
Can we make it to 10 posts without a mention of Professor Gates? Yes!!!!
I am trying to decide which of these three indicators is most vulnerable to further weakness when the public loses faith in "green shoots."
I am going to guess vehicle sales because the absolute numbers are fairly large, and the supply of good used cars is just going to keep rising.
But I also think residential construction remains vulnerable. The market still appears to be driven by need-to-build rather than need-to-buy. And prices are dropping below cost of completion in more and more regions.
Liz-
I'm saying the system at the top hasn't changed. The Goldman Sachs Financial Terrorist Crime Syndicate is still Geithner and Obama's boss. I don't think I'll be carrying currency that says "SDR" on it in 5 years. Oil still mostly priced in dollars, etc.
Whether or not the recession ends this quarter I find fairly irrelevant. It will end because corporate profits increase on US cost cutting and emerging markets growth. And perhaps a dip in oil prices due to a glut in contango. None of that would help US housing, which will eventually find a bottom sometime during the next decade due to population growth absorbing supply. We stopped building houses in 2006 in Cali cold turkey....that didn't even happen in the early 90s in the same manner, eventually it will catch up. Once housing prices stop dropping lending will pick up again. As noted earlier recovery can begin but a growth recession can last awhile. The growth recession will exacerbate job loss for years. We will have successsful corporations (particularly multinational ones) and a damaged consumer for a very long time.
volker the viking, yes, but I found myself using his words, so I figured a little credit was due.
As far as being an "inveterate optimist" ... guilty as charged. I warned readers that I was in optimist in 2005 - while I was predicting a housing collapse, house prices falling 40% or more in some areas, consumer spending declining because of the end of MEW, etc. and housing leading the economy into recession. Everyone laughed in 2005 when I wrote I tended to be an optimist!
Back then I was offered some writing opportunities at some "Doom and Gloom" publications - and I explained I'm not really a Doomer ... I tend to be a little too upbeat (a problem I'm aware of). They laughed - "You'd never know that from your writing!" But that was a different time ...
I still think there are plenty of problems ahead - and there are plenty of sites that think auto sales and new home sales will crash from here. But I can only write what I think ... and if I'm wrong, I will say so.
lawyerliz, nothing has changed. I was writing about a possible bottom for the economy in January and February - I thought people were way too pessimistic. How many times did I write "No Great Depression 2"? Now I think many people are too optimistic - expecting an immaculate recovery. I think it will be very sluggish.
best wishes
Is a Little Sunshine for economy a euphemism for green shooties ?
CRE getting crushed ( you just said this again right ?)
RRE still tanking e.g. 4.3 million units added to rental inventory + vacant U.S. homes at 18.7 million
Wages deflating so Consumer spending going down
Unemployment continues to grow with U6 likely at 20% across USA
Underemployment is growing faster than unemployment
Perhaps you meant Sunshine of Your Love
YouTube - Cream Sunshine of Your Love
Albrt--shame on you.
I put a bid on a rental property the other day. My Realtor thought I was nuts as to what was happening locally so I took a couple of properties I found on the state property tax site titled in mortgage companies and FNMA. HUD has listed 2 properties this year. my point was shadow inventory and hiding the truth from the public to support the claim "It's Different Here". Now she is very interested on what is going on.
From the previous thread:
The percentage of adults who are working has fallen from 64 at the end of the Clinton era to only 59.5 now. Some of those dropouts are retirees, but some may be responding to the economy’s declining dynamism.
This is actually incorrect. BLS publishes labor force participation data, and it shows that the labor force participation rate for the cohort "55 years and older" has been increasing since 1992, when it was 30%; now it is 40%. Among other things it also speaks about the quality of our retirement system.
The labor force participation ratio for the cohort "25 to 54 years" has been relatively flat at around 83%
The labor force participation ratio for the cohort "16 to 24 years" has declined significantly from 65% in the late 1990s to 58%.
The recently implemented increase of minimal age is not going to help this cohort.
albrt, what price for land do you include in your cost of completion? If you set it at zero (extreme, I realize, but you could choose instead to set it at the value at the lowest point in the last 15 years, if you prefer), then I suspect that new home prices are still higher than cost by a margin in most places.
Liz-
I think we'll also see the dollar tank, which will help US companies profitably and wreck US consumers. Since this reduces bank debt loads and seems like something the financial oligarchy could engineer, it seems like it is almost inevitable.
cr: that's okay, my remark was tongue in cheek (mostly)
we need optimists
I too believe that all is well long term
problem is, what the heck is long term anymore?
@MrM (profile) wrote on Sun, 7/26/2009 - 2:19 pm
From the previous thread:
The percentage of adults who are working has fallen from 64 at the end of the Clinton era to only 59.5 now. Some of those dropouts are retirees, but some may be responding to the economy’s declining dynamism.
Ahhh sorry it's correct if you look at aggregate.
CR is predicting a 2nd half recovery???
I think CR said he sees the decline hitting the bottom in Q3 but he did not say much about what happens next. In the previous posts I think he argued the economy would be moving sideways for a while. It is quite optimistic, as he himself freely acknowledges. A number of people smarter than me are quite concerned about double dip, similar to what happened in the 1930s ...
How about a little thread music?
YouTube - Good Day Sunshine- The Beatles
I think a strong US recovery is several years off. On the plus side, it may be a slow, but long expansion. That depends of whether we can crash the currency enough to mitigate our heavy debt loads and effectively reduce it with stoking inflation.
The actual recession is ending but the growth recession will last awhile. You either have to wait out the US growth recession or move to Asia or South America to work (I did the latter...much more opportunities here).
patientrenter -
I said cost of completion because many builders who own land are essentially valuing sunk costs at zero. Which is economically rational, provided you are getting enough back-door bailouts in the form of massive tax refunds, etc. But look at where the land is located. I'm in Arizona, and the developments are mostly in remote areas, surrounded by acres and acres of foreclosed houses and empty strip malls. The comp prices are indeed way below the cost of completion. There are a handful of developments in favorable locations that still pencil out, but I think those are going to decrease, not increase over the next few years.
How about a little thread music?
I was expecting the ending dance from Little Miss Sunshine. (Which, if you haven't the it.... see the movie.... f'ing hilarious).
Sorry to disappoint.
Yes, it is 'classic'.
I'm not as optimistic.
http://research.stlouisfed.org/publications/net/20090701/netpub.pdf
In this report you can see the chart of corporate profits to GDP. The ratio is still high, especially on a net after tax basis.
I would think eps still have more to fall. If they increase in the short term, it would be more accounting gimmicks.
lawyerliz
i agree and once tried to explain it to a friend who was very religiously right-eous
i said look, you child needs a brain surgeon to remove a growth
who do you want to perform the operation
the surgeon who does ok and is a boyscout in his private life
or the scoundrel, who gambles, breaks the speed limit and plays around on the side but is a virtuoso with the scalpel and leads the medical team in successful surgeries
he didnt get it
"he didnt get it"
most don't
I see - we were talking about slightly different things - you referred to employment to population ratio and I quoted labor force participation rates.
Here are the seasonally adjusted employment-population ratios
Total adult population (16 years and older): June-1999 64.2%, June-2009 59.5%
16 to 24 years: June-1999 58.7%, June-2009 47.3%
25 to 54 years: June-1999 81.4%, June-2009 76.0%
16 to 24 years: June-1999 31.1%, June-2009 37.4%
I think the consensus is that the downward plunge has slowed, and will come to a stop soon. Some in the traditional financial community (CNBC, your stockbroker neighbor with the 401k etc) expect a traditional roaring recovery. But those who saw the imbalances that finally led to the crash building slowly through the early and middle part of this decade see that we haven't reversed them. We still consume more than we produce and engage in misallocation of capital through TBTF private profits and socialized losses..... And now we have a new problem that goes well beyond the TBTF organizations - moral hazard. We've made it very clear to the whole population that debt does not need to be repaid, that loans do not need to be underwritten (they just need to be guaranteed by a govt agency)....
The next 10 years will probably see slower growth than 1995-2005.
The Federal Reserve — the quasi-autonomous body that controls the US’s money supply — is a "Ponzi scheme" that created "bubble after bubble" in the US economy and needs to be held accountable for its actions." ..... Eliot Spitzer (spot on but he has his own troubles with escort services )
bourbon edit.
@ MrM (profile) wrote (in reply to...) on Sun, 7/26/2009 - 2:34 pm
I see - we were talking about slightly different things - you referred to employment to population ratio and I quoted labor force participation rates.
Here are the seasonally adjusted employment-population ratios
Yes and thx for your research
The next 10 years will probably see slower growth than 1995-2005.
... with a lot heavier federal debt burden, which still has to be paid back
so, if you loan me a dollar and I pay back a dime, would you be satisfied if the dime were known as a dollar?
so, if you loan me a dollar and I pay back a dime, would you be satisfied if the dime were known as a dollar?
If you were a bank and it meant Sheila's crew left me alone - then yes.
For 90% of Americans the answer would be yes as well.
that is the deal we are left with by the ones we call our leaders
heartless, souless spirits with no regard for any save their own
William Greider gives us some great food for thought on on the Federal Reserve....
During the past year, the Fed has flooded the streets with money--distributing trillions of dollars to banks, financial markets and commercial interests--in an attempt to revive the credit system and get the economy growing again. As a result, the awesome authority of this cloistered institution is visible to many ordinary Americans for the first time. People and politicians are shocked and confused, and also angered, by what they see. They are beginning to ask some hard questions for which Federal Reserve governors do not have satisfactory answers.
Where did the central bank get all the money it is handing out? Basically, the Fed printed it, out of thin air. That is what central banks do. Who told the Fed governors they could do this? Nobody, really--not Congress or the president. The Federal Reserve Board, alone among government agencies, does not submit its budgets to Congress for authorization and appropriation. It raises its own money, sets its own priorities. Among its functions, the Federal Reserve directly regulates the largest banks, but it also looks out for their well-being--providing regular liquidity loans for those caught short and bailing out endangered banks it deems "too big to fail." Critics look askance at these peculiar arrangements and see "conspiracy." But it's not really secret. This duck was created by an act of Congress. The Fed's favoritism toward bankers is embedded in its DNA.
This awkward reality explains the dilemma facing the Fed. It cannot stand too much visibility, nor can it easily explain or justify its peculiar status. The Federal Reserve is the black hole of our democracy--the crucial contradiction that keeps the people and their representatives from having any voice in these most important public policies. That's why the central bankers have always operated in secrecy, avoiding public controversy and inevitable accusations of special deal-making. The current crisis has blown the central bank's cover. Many in Congress are alarmed, demanding greater transparency. More than 270 House members are seeking an independent audit of Fed accounts. House Speaker Nancy Pelosi observed that the Fed seems to be poaching on Congressional functions--handing out public money without the bother of public decision-making.
No wonder Ben Bernanke has his underwear all in a bunch about anyone trying to encroach on 'the turf' of the semi-quasi private-political-government (Goldman Sachs Club) secret payoff organization.
Taking a look at consumer spending if the savings rate stays at 7% an increase from 0% in 2007 one could expect a permanent impact on GDP in the order of over 700 billion dollars each year. I see the argument for positive year over year growth in the Fall but I don't think that will happen either. Business always tails off in the fall and I wouldn't be surprised if it happened again.
i dont see how residential sales around half million and car sales of 10 million propel us out of this hole
mock turtle: yet, while you and I can agree, we will be told it is so
I took a day trip last week with the family to Mystic Ct. Very nice place if you are into boats and nautical history. Anyway a jackknifed tractor on i95 had traffic backed up so we pulled off at a Tanger Outlet in Westbrook, CT to kill some time on the way home.
Granted it was mid-week but it was a ghost town. Roughly 10% of the storefronts had a "A new Tanger store coming soon" sign in the window.
I see the argument for positive year over year growth in the Fall but I don't think that will happen either. Business always tails off in the fall and I wouldn't be surprised if it happened again.
I think folks are expecting increase in GDP is going to be due to G (govt spending) not any other term.
Government can make artificial demand is Cash for Clunkers but this will only hurt real demand down the road.
The reason why car makers are struggling is overcapacity. Even if auto sales bottom at 10 mill Plants will still have to be closed and automakers will still go BK as they cannot downsize quickly enough to meet the new reality.
km4, I know that conspiracy theories are very enjoyable. And various whipping boys are good at different moments. Early in the crisis, rating agencies were fun, then Cayne, then Fuld, then Paulson, now it's Goldman. Maybe Bernanke is up next. But there were many people involved, and a lot of cooperation amongst all the parties, including homeowners, voters, and Congress.
I do not see the Federal Reserve as operating against the direction from Congress and Treasury. If Bernanke were to start a major move in opposition to the wishes of Barney Frank, for example, or Chris Dodd, hearings would be scheduled within the month, and the media would be scraping up his body parts from the floor of the hearing room. the hearings we get to see now are theater, the result of consensus amongst the major players, so each can position themselves in public where they need to be.
"Business always tails off in the fall..."
which is why I think we will all receive some money direct from our leaders
of course, I could be wrong, after all--I sell advertising.
How is it a good thing when someone buys a repo at a screaming deal, and the guy who lost it moves in with the in-laws and loses everything. This is worse than a wash as the new guy is going to punch in the words "home appreciation" into wikipedia and find no definition for the word any longer.
Bloomberg survey puts Q2-2009 GDP growth at -1.5%, and that is before the stimulus kicked in (although it does include that one-time government transfers in April-May)
The world’s largest economy shrank at a 1.5 percent pace following a 5.5 percent drop in the first three months of 2009, according to the median forecast of 66 economists surveyed by Bloomberg News ahead of Commerce Department figures due July 31.
Liz or CR,
An OT question. On BFF my 89 yr.old CRE banker neighbor told me that banks aren't foreclosing on very many loans they actually own (it's all shadow inventory)... He says that he FCs are owned by Fannie, Freddie, hedgefunds, etc., but not banks, because too many banks would be under capitalized, be BK, and be closed by the FDIC if they had to write down any mortgages. Old Al has been right so far. Is he right again?
patientrenter
+1 There is no conspiracy just the normal order of gov't in plain sight before our eyes. No cloak and dagger are needed when you can turn on Cspan and see the fraud perpetuated in the open
traderwalt: think securitization
Conspiracy, conspirator or conspire may refer to:
Types of conspiracies
* Cabal, an association between religious, political, or tribal officials to further their own ends, usually by intrigue
* Conspiracy (civil), an agreement between persons to deceive, mislead, or defraud others of their legal rights, or to gain an unfair advantage
* Conspiracy (crime), an agreement between persons to break the law in the future, in some cases having committed an act to further that agreement
* Conspiracy (political), a plot to overthrow a government
That trailer has been there pretty much every weekend lately.
It's the only way they can get people to shop in the outlet stores.
"the hearings we get to see now are theater, the result of consensus amongst the major players, so each can position themselves in public where they need to be.", said patient renter
agreed
the entire political process and the 4th estate has become one big kabuki dance
the american people, for the most part get the mushroom treatment
kept in the dark
fed a steady diet of bull s#!^
@ patientrenter (profile) wrote on Sun, 7/26/2009 - 2:56 pm
Hmm ////well then tell Neil Barofsky who is part of the TARP watchdog.
A career prosecutor, Barofsky is a life-long Democrat who donated money to Obama's presidential campaign. But ever since he was appointed to head the oversight office created by Congress when it enacted TARP -- an office designed to ensure transparency and accountability at the Treasury Department and in the banking industry -- he has repeatedly clashed with Obama's Treasury officials over their lack of transparency in how the trillions of dollars in TARP-related funds are being sent to and used by the banking industry.
Barofsky details the war being waged by the Obama administration -- especially the Treasury Department -- on his independence, as well as their constant and multi-faceted campaign to impede his efforts to bring transparency to what is being done with these vast amounts of money (those obstructionist actions are consistent with the efforts of Senate leaders to block a vote on Ron Paul's bill to audit the Fed, a bill which now has truly bi-partisan and trans-ideological support among a majority of House members). As a hard-core Obama supporter, Barofsky is quite obviously dismayed at what he describes as the failure to adhere to transparency pledges in these areas. Barofsky is particularly worth listening to because his integrity, apolitical independence, and prosecutorial tenacity in imposing accountability are exactly what our political culture so woefully lacks.
Push is now coming to shove, and the 'Golden Triangle' of the Federal Reserve, the Treasury and the White House is about to implode. It is past time for reform, and it is past time to 'tear down that wall Mr. Obama' and let the sun shine in (S604 Bernie Sanders Sunshine Auditing the Federal Reserve Act).
The propaganda machine is in full swing: The recession is over, everyone dance in the streets, Goldman Sachs rules the world, bonuses for everyone on Wall Street and 'trust the Federal Reserve' because they did such a great great job pulling thr woll over the eyes of the American public!
The lies, the cover up, the bullshit of it all??????
mock - nice comment. What happens next pse?
C
volker, I am thinking that most mortgages have been securitized. Then maybe I should ask whether the smaller banks hold many mortgages that aren't securitized. Al apparently thinks they do.
al prolly knows that if they do then they know them
makes for a different calculus
"No cloak and dagger are needed when you can turn on Cspan and see the fraud perpetuated in the open" said Tim waiting for 2012
true and you can get good info here at CR and at yves smiths site (naked capitalism) etc or listen to an hour long interview with terry gross on npr
but most americans have the attention span of a gnat and
want infotainment
so in depth reporting and half hour interviews and C span hearings are seen by way too few
The GDP will probably rise ....
Based on FASBy malarkey ...
Let's just ignore all those losses ...
patientrenter (profile) wrote on Sun, 7/26/2009 - 2:10 pm
Rob Dawg, seems like California's budget is being cut at the state and local govt level, with the full bite scheduled over the next few months. My assumption is that, when the bite grows big enough for a penalty to be seen to have been applied, there will be a federal bailout for the balance, some time around October. Is that your prognosis?
I took some undeserved crap in a previous post for calling July 15th for the California crisis to come to a head even though that was exactly the day the State ran out of cash and the leadership went to round the clock bargaining so I'm hesitant. That said the Feds had better have a prepackaged bailout plan sooner than October. When the August disbursements to the municipalities don't go out it'll be lawsuits and layoffs everywhere. Call it Labor Day. The only thing that I'm not sure about is if Rahm will try to use the situation to introduce a VAT.
As I posted multiple times a few months ago, the slavish behavior of the executive branch in response to barked orders from their GS masters was a credible threat towards the current administrations popularity (and, perhaps more seriously, threatens the Democrats at their core).
Now, O's popularity is dipping under 50%. The problem is that the bright young people who voted for him are the exact same kinds of people to actually read and understand that Matt Taibbi piece.
Democracy occasionally - though rarely - functions. We'll see if O comes to his senses and stops answering "how shiny" with every request for a shoeshine from Lloyd and Jamie, though that possibility is seeming more and more remote every day.
Strawman Crap, Dawg.
Notice how no one is talking about Re-enacting Glass Steagall ?
The tax payer is and will remain the bag holder for the Banksters ...
Congress is far too turgid to actually assemble a VAT plan. Nothing gets done unless the lobbyists want it done - and who REALLY wants a VAT?
Yes savings, but mew too.
So a total of 1.3t not being spent.
And at least a trill or 2 of lost house value. Haven't seen the figures lately.
km4, it's not all sweetness and light in that consensus. Bernanke wants more power. So do Frank, Dodd, Summers, Geithner, Bair, Barofsky.... But the point is that the overall marching orders are understood by all the major players, and they are all making sure not to be the one that causes it to fail. They'll fight like cats and dogs to get the most for themselves and their own interests, but not enough to upset the apple-cart. It's pretty obvious that reinflation is the overall goal, and money will be poured in - as much as it takes, for as long as it takes - until that happens. No one is quite sure what to do after that, and the consensus breaks up some then, but until then they are all lined up, and will only fight over the smaller or future items.
CR
Being unemployed I certainly hope you are right about the end to the "recession". My own experience which of course is highly tainted by my own position but also by considerable insider knowledge of what's going on in corporate America tells me we are in Great Depression II. If I had any money, I'd even bet on it
VAT should slow the velocity of money and consumption right ?
How do you think the Feds are going to bail out California without making it appear the rest of the States are expected to pay and/or inducing another dozen to follow the lead?
I'm sure the temporary tax surcharge will be called anything except VAT but VAT it has to be. Everything else is insufficient to the task.
And patient, the inflation thing might work, if it were handed out via helicopter.
But it's going the money graveyard of dead banks, and just dies. The little
electrons dance more and more sloooowly.
How about a "Freedom Tax"?
by calling it a loan. a few other major states will also join the breadline.
and if there is whining, the flyover states can cram it up their ag-subsidy-eating pieholes.
Congress is far too turgid
I don't think that word means what you think it means.
Volker,
I called Al. He was talking CRE loans and said what CR has been saying.
cre is a whole different kettle of fish
while local bankers may well know these bag holders, they are subject to the whims and variegations of the marketplace
@patientrenter,
Without going conspiratorial, what do you make of the incredible level of cooperation between central banks around the world?
They meet, collaborate, plan, and execute hundred billion swap lines, intervene in currency markets on each others behalf, sign accords on gold sales, etc.
These are done in secret meetings mostly without oversight from their respective governments, though the true level of independence of each central bank varies.
they will do what they see as is in their best interests, business wise
personally--they will protect their holdings at all cost
As to non-foreclosures, it's hard to say.
Lots of Plaintiffs like Deutchebank, as trustee for xyz 1232 fund.
Lots of Plantiffs like plain old Everhome Bank. Which could hold an
assignment of mtg or closed the thing themselves, but have assigned
the income privately.
Lots of incompetence. Lots of doing nothing. Lots of starting and then
stopping. Lots of not enough employees to supervise.
It's really hard to tell.
CR is correct, but remember--CR is an optimist
Oh, cre. I don't know too much about cre foreclosures, but I have the feeling that there aren't
too many of them yet.
liz: that's where October comes in
Wave 2. coming. Sure autos and housing will moderate, but next comes wave 2.
So far net state and local government employment has stayed constant with last year (June to June). Given all the budget woes at the state and local level it is hard to imagine how employment will not contract here over the next few months.
Accommodation and food services (which now employs almost as many people as does manufacturing) has only seen a 2% drop in employment over the last year, although the accommodation part has declined 8%. Still that is less than the decline in occupancy rates for hotels and much less than the decline in RevPar.
LL: " The little
electrons dance more and more sloooowly."
I believe that can be overcome, Liz. For example, we have seen people more ready to buy stocks and MBS and othe risky assets in just the last few months. It took a few trillion dollars total being poured in, month after month since the middle of 2007, but it eventually shows up. And there really is no practical limit to how many more trillions there are from that source - the US govt.
On a micro level, consider the 3% down FHA loans, with the 8K tax credit. It's little or no money down, with no real penalty to the borrower for a failure to repay, and possibly huge upside. If that doesn't generate enough borrowing, then you can always extend the program. Any system that allows people to buy an asset using almost nothing but cheap borrowed money, with no real recourse, will generate borrowing. So it's always possible.
Rob Dawg, thanks for your update. I don't see a VAT in direct response to CA. But to justify a special bailout, I see them waiting until there are pictures on the nationwide news of CA people lining up for food. A month of that, and a special bailout (with a smaller amount of money for responsible states) will be easier to pass.
once the bankstas are done with this next round of free gobmnt money
then and only then comes the solution
7% inflation per year
debt cost are cut almost in half
pension liabilities and unfunded gov programs too
He says that he FCs are owned by Fannie, Freddie, hedgefunds, etc., but not banks, because too many banks would be under capitalized, be BK, and be closed by the FDIC if they had to write down any mortgages.
That's what i'm hearing about portfolio loans held by community banks in S. Carolina. Why would banks want any REO's in this market? Foreclosing would incur legal costs, as well as tax, insurance, and HOA liabilities for the bank. better off to cross your fingers, hope for a rebound.
of course, this is the type of doubling-down, regulatory forbearance that Congress had sought to avoid after the S+L crisis.
As far as being an "inveterate optimist" ... guilty as charged. I warned readers that I was in optimist in 2005 - while I was predicting a housing collapse, house prices falling 40% or more in some areas, consumer spending declining because of the end of MEW, etc. and housing leading the economy into recession. Everyone laughed in 2005 when I wrote I tended to be an optimist!
Even Roubini was saying there would be no global recession a while back, so he's an optimist in that way too.
As the old saying goes:
"The bears are always way too early and way too optimistic."
@ patientrenter (profile) wrote on Sun, 7/26/2009 - 3:16 pm
km4, it's not all sweetness and light in that consensus. Bernanke wants more power. So do Frank, Dodd, Summers, Geithner, Bair, Barofsky.... But the point is that the overall marching orders are understood by all the major players, and they are all making sure not to be the one that causes it to fail. They'll fight like cats and dogs to get the most for themselves and their own interests, but not enough to upset the apple-cart. It's pretty obvious that reinflation is the overall goal, and money will be poured in - as much as it takes, for as long as it takes - until that happens. No one is quite sure what to do after that, and the consensus breaks up some then, but until then they are all lined up, and will only fight over the smaller or future items.
Yes I generally agree....and it's just plain nefarious or perhaps just laughable being that the USA is essentially broke.
Who loses BIG ?
as mmckinl (profile) wrote on Sun, 7/26/2009 - 3:14 pm says
Notice how no one is talking about Re-enacting Glass Steagall ?
The tax payer is and will remain the bag holder for the Banksters ...
No green shoots?
They are having trouble getting fhas to appraise out. I had one scheduled for
warning. Is it that the banks don't quite think the guarantees will be
last week, where the fha appraiser had oked the amount but the bank demanded
a 2nd fha appraisal anyway. It's downright weird. Come to think of that is there something
moving under the surface, where banks don't want to make either Fha or SBA loans.
honored????
And patient does people ==GS?
Notice how no one is talking about Re-enacting Glass Steagall ?
And nobody's talking about splitting up Goldman Sachs either.
I'm sure somebody told Obama:
"If you mess with us we'll crash this economy so fast you won't even have time to think the word 'impeachment' before you're out on the street."
"mmm, October is when I think the S is really gonna hit the f."
Why October, Liz?
Comrade Coinz, what do I make of the cooperation amongst central banks? A conspiracy? Not really. To see what they are doing and planning, you just have to pay attention to the right columnists in the FT, WSJ, NYT, and reports from actual central banks and central bankers and their conferences. Or in the published reports of conversations amongst legislators and economists and the CBer's etc.
I would be shocked - I mean really shocked - if Barney Frank or Chris Dodd, or Larry Summers couldn't get almost any info they wanted about those discussions. I feel almost certain the major actions are taken only after consultations with key Congressmen and Treasury and WH people. But those folks don't want to be held accountable for all of the Fed's actions, so they all agree it's just consultations, not a required approval process. That's the way the world works.
You just did ac, you just did. I think you are the first.
The economy is in a state of churn in my opinion. GD2 is NOT off the table in my view. The hope is public sector spending will jump start private investment and consumer spending will return in a healthy way. The last 8 years of a credit bubble slash consumer glut driven economy will not return for a generation at least, if ever in our foreseeable future. The market will eventually get that. Of course, who cares what I think and i am not paid for my opinion. But as one person who has lived through a number of recessions and localised RE bubbles, that's my view.
On a micro level, consider the 3% down FHA loans, with the 8K tax credit. It's little or no money down, with no real penalty to the borrower for a failure to repay, and possibly huge upside. If that doesn't generate enough borrowing, then you can always extend the program.
I know about 5 people who decided to bite the bullet instead of renting. Next spring, they'll all receive fat refunds. I'm thinking that Cash-4-Clunkers should provide "housing credit" anticipation loans.
Somewhat OT, for the Californians.
Brilliant Woman Solves All of California's Problems - CollegeHumor video
The friend who sent this to me asked for confirmation if this is real. it looks real to me, but maybe Bob Dobbs or someone can say for sure.
few if any of the economist and soothsayer (are they different?)
are factoring in the economic effects of a pandemic
if h1n1` behaves at all like the 1918 influenza we will be in even more dire straights
and if not the swine flue then some other thing like
oh, maybe global warming is much worse than even the UN climate conference projections
or what ever...
point is we have not built in a margin of safety...the system is operating at loads above specification, the system and structure is not robust
we are fools
@ ac (profile) wrote on Sun, 7/26/2009 - 3:37 pm
Notice how no one is talking about Re-enacting Glass Steagall ?
And nobody's talking about splitting up Goldman Sachs either.
I'm sure somebody told Obama:
"If you mess with us we'll crash this economy so fast you won't even have time to think the word 'impeachment' before you're out on the street."
Yes the definition of faustian bargain on steroids so just more happy talk from MSM about green shooties as Joe and Jane Q. Middle Class Public sink further and further and further...
definitely RedLining the system right now, mock.
or is it Flat Lining?
I would be shocked - I mean really shocked - if Barney Frank or Chris Dodd, or Larry Summers couldn't get almost any info they wanted about those discussions.
From the Alan Grayson footage of him questioning Bernanke on the swap lines, it is clear that Alan Grayson doesn't have all the information he wants.
But he is not Frank or Dodd, so maybe he is not important enough.
Not that setting up the swap lines was the wrong thing to do.
"point is we have not built in a margin of safety."
When, for the most part, have people ever built in such a margin? When, except in a few fortunate places and times, have they ever had much of a margin to build with?
Because Pavel, a lot of people will have run out of unemployment by then,
and a lot of people will be getting, or have gotten their walking papers from
state and local government, and Cali's smoke and mirrors will have reached
the breaking point by them. Also, it's a year and a half after I fully expected that
I would have to close down my ofc and hunker down in Merritt Island, and
typically my clients take a year and a half to go under after they hit the skids,
after that is I thought they just couldn't go on any more.
It's a Liz rule of thumb.
A little something for the engineers in the crowd:
Moyer Made - Projects: 1/6th Scale Chevrolet V8
that's quite a thumb
According to the Great Wave guy, in
The high middle ages equilibrium.
The Renaissance equilibrium and
The Victorian equilibrium.
These times were characterized by lower crime, less inequality,
lots of creativity, a more stable family and lower rates of bastardy,
as well as steady prices. Well, not exactly steady, but oscillating around
a mean very nicely.
My gut says another wave down is coming as well. My 401k savings remains in money market earning nothing (since mid-July 2007) because of it. I sometimes worry that I've missed the next train leg up in equities (obviously, the march lows would have been a nice time to get in), bravo to CR for timing both the crash and the uptick - that guy is good. I want to start diversifying into the market at some point (I'm 34, so plenty of time), but the game feels so darn rigged right now, still. I think we'll have an October surprise as Liz says. The bad stuff always seem to happen in the Fall, for some reason. I really would like one more leg down out of the way, back to Dow 6000-7000, before I move my money back in. Then I'll be ready to gamble up.
CR, love the analaysis. it's spot on. however, the us is still f'd.
By f'd, i mean an end to her hegemony, declining standard of living for her people, increased threats both economic and miltaristic, and an inevitable currency collapse. i predict that the us will go down in history as the most feeble and short-lived global empire ever erected.
but, I'm an optimist!
I'm on some kind of email list for a local realty company. I get emails of local properties for sale, and then updates when they are sale pending or sold.
This morning there were another ton of sale pendings and solds. Properties seem to be flying off the shelves here.
Don't know if this is just a green shoot that will wilt in the heat of the sun, or whether it is a true indicator of change.
Gnome, yep
the red line leads to the flat line
ps thanks for the thread music
and the polls...great fun
The economy is in a state of churn in my opinion. GD2 is NOT off the table in my view.
Yep, that's one of the lessons from the Great Depression is that people really thought it was over in 1931. Even the "smart" people were talking about the "Depression of 1929-1931" as a historical event.
In this case however, there are many more signs of trouble ahead. Again, the real estate bubbles in places like Korea and China, the hot money flooding back into places like Latin America and Australia, the renewed carry trades in the dollar and the yen, a US stock market that once again is above fair value (where cyclical lows are typically 50% below fair value) all point to a future problems.
The simple fact is that we could be looking at another crash that this time occurs in an environment of double digit unemployment.
Such an event would economically and psychologically devastating and could result in a complete loss of faith in modern finance, business, and government.
It's important to remember that the Great Depression in America didn't result in the same sort of cultural calamity and human catastrophe that the hyperinflation in Germany did.
There are worse outcomes than the Great Depression.
What price range Outsider.
In south Fla, you can even get a bidding war at the very low end.
But nothing, and I mean nothing is moving in the say 325k-800k range.
"he has his own troubles with escort services "
honesty is such a lonely word
You're welcome.
Oh, com'on let Luci back.
The escort service comments are just beggin' for him!!
We don't have much of a 325-800k market. Edit: Well, we don't have much of a 500-800k market anyway.
But when I noticed this morning, properties were in the high 100's to almost 300 range. I'd say most properties are in the low to mid 200s.
We have not gone back to 2002 levels yet. A low priced house selling for $100k in 2002 went up to about $200 in peak and is now down to about $130-140.
Only a third off? I am jealous. I'm also hearing thunder and shutting the computer down.
"Is it that the banks don't quite think the guarantees will be
honored???? "
very few banks are actually in the business of banking at this point. most are trying to just capture a little yield between short fed discount money and longer t-notes while doing as little as possible and staying as far off the radar as possible.
What ac said...
Liz, don't knock it unless you've tried it.
barfly, thats just awesome
would be very cool to do a mini dyno test of engine output when valve covers and cooling system are complete
Where are we headed ?
A ten minute video you should watch ...
Renegade Economist US Special with Dr. Michael Hudson
Renegade Economist US Special with Dr. Michael Hudson « Dandelion Salad
mock T - I know. Too cool, huh? How 'bout the size of that crankshaft?
OMG, perusing the glossary for the first time. LOL hilarious.
ac... i agree entirely with your comments at 3:50 above
and
with hft and computers and the unification of world banking
the entire system could degrade much faster than many an "expert" suspects
Let's not mince words here folks -- the "Greater Depression" is not only still inevitable, it's happening in just the order history would suggest it should. The schedule is never as fast as we'd expect, but then again, history shows that, too. Declines never occur uninterrupted, nor are they ever without government interventions that lead to blatantly misleading economic indicators.
Even among the CNBC "green shoots" crowd there is not a single industry identified that is expected to drive future economic growth. Nobody knows where any new jobs are going to come from, and all government except DC is either firing or furloughing. Those that have lost jobs are starting to lose their UE benefits in huge numbers, and those that still have jobs are cutting back their spending.
Corporate America recognizes this. The only reason anyone's reporting "profits" is because they've been dramatically cutting costs, but that's not a formula for future growth.
Yes, we may see a tiny positive GDP number in Q3, but the next wave down later this year will be beyond brutal.
Hey! Think you got it rough?
YouTube - Brick Carrier in Bangladesh
"We are always the ones sending our money home, not the other way around."
Mendota: a town scraping bottom
barfly,
You really need to organize those poems and guest post'em over at "afterthecrash.net". Great stuff. The last one sounded perfect for nova's (recently relocated) American Apocalypse series.
"the entire system could degrade much faster than many an "expert" suspects"
see Mises treatise on "Crack Up Boom"
If someone wants to do that, have at it. These are the ephemera of the day, to me. My gift to you.
I agree that we'll likely see weakness in growth for several years. I don't see much chance of a plunge into a Depression. I do know that some folks here have invested in mental or even physical preparation for a total collapse in society, so they are anxious to see it play out. But, being realistic, our modern society is very productive, and the lower it runs below its full potential, the less it takes to make it rebound. if we had a disastrous dip to 50% of our current GDP, even a couple of monkeys could make it rebound. People don't want to become poor, or stay poor. They will work feverishly to make themselves more productive and more rewarded.
But I know a few here are economic survivalists, and are hoping the world changes to fit their vision, instead of having to do things the other way round!
From the Wiki on Fresno county:
"The per capita income for the county was $15,495. About 17.60% of families and 22.90% of the population were below the poverty line, including 31.70% of those under age 18 and 9.90% of those age 65 or over."
Heckuva job, AARP! And you KNOW those numbers have ballooned this year. I hope that not just every Californian, but every American is proud of the fact that almost half of the kids in a large county in the middle of our most populous state goes to bed hungry every night.
Now that the water is cut off, the central valley is exactly two kinds of people - jail guards and everyone else.
mmckinl (profile) wrote :" Where are we headed ?
...
A ten minute video you should watch ...
Renegade Economist US Special with Dr. Michael Hudson
Renegade Economist US Special with Dr. Michael Hudson « Dandelion Salad
Done.
Post industrial economy. Roger that.
Neo-feudalism. Roger that.
A real estate driven economy, not industrial - roger that.
Fed = bondage. Roger that. Loan other countries' central banks loans and force them to sell off public assets like railways and hwys to maintain the Fed debt service (are you listening Canada?) Roger that.
Thanks mmckinl!
patientrenter
It's not about GDP ...
It's about 50 trillion dollars worth of debt that has to be serviced ...
It's about how the Fed and UST are trying to underwrite the debt bubble ...
You can have a completely viable and profitable economy in shambles because of the financial sector ...
Which is where we are now because of politics ...
Ridgeback - you didn't happen to work at a large firm in Phoenix, did you?
"because of politics ... "
I think our addiction to cheap credit created the politics involved to a great degree.
didn't the credit card industry send out over 2 billion solicitations in the US in 2005?
I do know that some folks here have invested in mental or even physical preparation for a total collapse in society, so they are anxious to see it play out.
I don't see a total collapse in society, and I'm certainly not anxious to go there. There's nothing on the other side of that fence that could possibly appear greener.
OTOH, we have ample evidence that we're on the verge of an EPIC FAIL, and I'm not about to pretend that this is just another economic cycle where growth automatically follows contraction just because.
OVERHEAD SUPPLY
It is everywhere. Housing, stocks, bonds, cars, Motorcycles. Any return in prices or demand will quickly hit the supply ceiling. The supply must be worked out over time but in the case of housing and stocks the supply may never be fully worker out.
TJ (or mmckinl), indulge me and play out the most likely scenario you foresee.
Help me with a few common touchpoints, like GDP, S&P index....
There an interesting dissonance in the comments. Even reading several years worth of comments you'd incorrectly assume many here are bears. The vast majority are merely bearish. I'm only bearish despite being that way since October 6th, 2005. I'm really hoping this October can be the time to change my outlook to long term careful investor but the last 18 months have made me pessimistic as to the government responses being able to stay out of the way long enough to allow market mechanisms to find a sustainable level. The problem is that there's a blind spot for the PTB. They cannot get past the fact that not liking the answer is not the same as the answer being wrong.
KR
Renegade Economist US Special with Dr. Michael Hudson « Dandelion Salad...
Done.
Post industrial economy. Roger that.
Neo-feudalism. Roger that.
A real estate driven economy, not industrial - roger that.
Fed = bondage. Roger that. Loan other countries' central banks loans and force them to sell off public assets like railways and hwys to maintain the Fed debt service (are you listening Canada?) Roger that.
~~~~
Yep, you got it ...
The problem with their plan is that the wealth being produced is immediately intermediated with debt patronage
so that the entire financial system is sucking the life blood out of the economy ... The Fed's $13 trillion transfusion will only last so long
before the economy succumbs again ...
Another Powerful Sunday Night Article - thanks
Don't Get Massacred !
Gudovac1941: Methodology - thoughts and observations
What are you guys talking about I thought it was cool to disrespect Russia (I pretty much missed the cold war). Yea! Give it to em Biden! As for the response the only thing I heard was KGB. We need to speed up our missile defense program, nuclear missiles are about to start flying!
Do I have this right: jobless recovery, with increasing foreclosures/defaults, increasing unemployment and a few trucks and homes sold (to retards)?
I think you're only referring to 'long term outlook for equities' by that term (bear), Rob. It is a little more nuanced than that for most of the crew here. Or at least I hope it is - owning thousands of shares of SRS and thinking bad thoughts about The Man hasn't been a particularly sharp investment approach since March.
mmckinl, as for the large debt we have...
I agree that Americans at large have grown impatient with the notion of repaying each current $1 of debt to others by virtue of producing $1 more than they spend, and giving the extra production to the creditor. So the non-repayment will take the form of bankruptcies, loan restructurings, defaults, and, for govt and all other debt, a haircut from higher inflation. And some will be repaid. We're not total deadbeats!
You don't invest in a collapse you hedge. I anticipate the SP 500 at below 720 and GDP down more than 9%
Was Long the market from 2003-2007 but was always bearish long term and I believe that we peaked in real terms back in 2005. The rest was inflation driven growth IMO. Growth still is inflation driven and will be from now on.
Dawg,
Yeah, I'm personally a very optimistic person, and will always see bright things ahead for myself and my family regardless where the economy goes.
That said, my bearishness stemmed from 2003, when research confirmed by suspicions of a new housing bubble. Little did I know how vast & deep our problems were until then. The events since (in general terms) have not been a surprise, and have done nothing but reinforce my expectations for the future.
patientrenter
They change the rules everyday ... there is no time table for the next drop.
But one fact is for sure ... what can't go on forever ,won't ...
If I had to bet I would go with Liz ... this October ...
If and when the bottom starts to break TPTB will add theatrics ...
Like a war or pandemic ... to cover their complete and utter financial malfeasance ...
"my expectations for the future"
Which look like what?
you people are nutz
mmckinl, your scenario is hard for me to understand. Can you describe it more, or give an analogous historical sequence?
@albrt
Ridgeback - you didn't happen to work at a large firm in Phoenix, did you?
Yes, a regional outpost of a large firm HQ'd elsewhere. Preference would be to keep the company name under wraps ... although I'm a nobody.
"People don't want to become poor, or stay poor. They will work feverishly to make themselves more productive and more rewarded." said patient renter above
all that is true, but
what must be remembered is that the united states and its people became affluent because of a rare confluence of events, hard work, inventiveness , some good luck
dont kid yourself...there are many many people around the world who hate being poor and work very very hard every day...and remain poor
we have gutted our economic engine and are in serious serious trouble
patientrenter
You have the wrong end of the stick ...
It is the banksters that don't want to take their losses ...
They can't afford to ... they would be insolvent ...
Liz,
An acquaintance was a Deputy Director at the SBA until recently. He told me they've been gutting the SBA for a decade. I don't think they have any budget to do many loans these days. Neither party seems to make any association between job creation and small business and that's not changing any time soon.
we have ample evidence that we're on the verge of an EPIC FAIL
TJ - Care to elaborate what you mean by ample evidence? IMO the most likely scenario is a grinding downward trend for the next few quarters interrupted by a few quarters of positive growth as all that debts and overconsumption getting worked out of the system (a US version of lost decade of sorts).
However, I do not think the government will allow an epic fall and the government does have a lot of levers...
care to elaborate
what do you mean by that
can you give specifics such as GDP, s&P, etc
I believe
I am hedging
I am predicting
nutz--each and every one of you
mmckinl, yes, I know the banksters don't want to take their losses - I am inside the industry. What I am looking for is the source of your certainty about a near-collapse of economic wellbeing and activity. I am hoping that you will describe the trajectory that you see taking us there. I am hoping to engage you on the specifics. Then either I will learn something new, or you will, or we both will. A good outcome, no matter what.
Thnx, barfly............that mini-motor link is awesome.....
patientrenter
mmckinl, your scenario is hard for me to understand. Can you describe it more, or give an analogous historical sequence?
~~~~
Sure Germany under Hitler a la 1938 ... the Great German economic miracle was about to implode because of debt ...
Hitler needed the war for plunder to pay for his military buildup ... when he saw that the pillage of the Jews , Sudetenland and Austria would not be enough
he began pillage of the rest of Europe ...
I hate to be the bearer of bad news - well, not really - but I don't see a whole lot of good down the road. Locally (NE WI for those scoring at home), I'm hearing layoff notices are coming soon. 2,500 jobs at one place unless labor gives up being paid to work. Unemployment is running out for many people. While California has averted bankruptcy for the time being, at least a half dozen states are in as bad of shape or worse shape than California. Munis are being forced to layoff. Many of them are not in a position to bond projects. This is at a time when many of the water systems across the country will need major capex. Oh, and this rally is occuring with gas prices at a lull. Once we actually do have expansion, let's see how well the consumer and industry hold up against $3.50/gal gas and deisel, which between the Indians and the Chinese will become a more scare product.
Not really. My blog post of 2 days ago discussed at length the SFR rental market for a community in California. I'm thinking there will be a small window of low rates and low prices before the inflation pressures take over. I certainly don't want to be stuck with too many dollar equivalents either. I won't bet against the market; too many magnets under the wheel, too many zeros, too many hangers on to tip and bribe. Lots of people have joined me in those attitudes. The new economy is going to be glorious. We just need to let go of the old economy first. There are no safe steps.
Didn't realize that the losses were this bad:
As the economy has worsened, loans more than 60 days past due, in foreclosure or held for sale have increased to 35.6% as of May from 33.5% a year earlier for FHA and VA loans issued in 2006. For loans issued in 2007, such serious delinquencies have risen to 44.5% as of May from 41% a year earlier.
Moody's Downgrades $4.5 Billion Of Bonds With FHA, VA Mortgages
as to the government responses being able to stay out of the way long enough to allow market mechanisms to find a sustainable level.
My feeling is that no matter what the government does, the market will find that "sustainable level". It may take a little longer, but it'll get there.
"and the government does have a lot of levers... "
yes, they have the lever that shovels billions a day into aig/fre/fnm and arranges sweetheart marriages for the biggest banks with a similar pricetage... too bad they don't have a lever to give a small fraction of that money to the states
mmckinl, OK, now I see why you see a catastrophe looming. The US beginning WW3 in search of resources and peoples to plunder would definitely qualify. I guess I'd just comment that I don't see it as likely.
patientrenter - 4:37 pm
There is no certain scenario ... there are many cards left to play ...
Stay tuned ...
"The new economy is going to be glorious. We just need to let go of the old economy first. There are no safe steps. "
I know you're being more than a little snarky, but I actually think you're completely right. It will just take 20 years to get to that point. The main pressures are demographic, we need the 90s babies to hit peak earnings. The 80s babies are a decent demographic chunk, but the professionals in that generation which would lead the way are under too much debt and malinvestment to ever recover.
bull shit
mmckinl - The Versailles treaty was a big part of the German national psyche after WWI. It was among factors that led to the economic crash of the Weimar Republic in the 1920s, which left its own psychological scars. All of these factors are absent from the modern US situation. Where are the parallels?
Economic systems, when they lose updraft, do not grind downward floating like a leaf - they fail. In this case, were it an avalanche we are discussing, we have seen the first crumblings of small dusty snow sliding forward and down, signalling a teutonic shift about to give way.
Economic systems, when they lose updraft, do not grind downward floating like a leaf - they fail.
Japan?
"Where are the parallels?"
The parallels don't exist insofar as those war debts were dissolved by a crashed currency.
We don't have that option - we'll be paying our yield on time, with a real commitment to crushing our own consumers under deflation before failing to pay our foreign masters with a substantive currency.
"Didn't realize it was the losses were this bad:"
Me neither. 40% is amazing. But they've opened the FHA spigots anyway, which goes to prove that there was never any commitment to solid home loan underwriting in Washington DC.
Byz.........THAT link is a GREAT example of the youth of California.........I have a couple nieces like this.
patientrenter,
Going to pin me down, eh?
Want more?
MrM
i dont wnt to speak for TJ
but if i may say for myself, we have reached a point where the debt is not serviceable
interest alone on the national debt nearly exceeds military spending and almost equals spending on social security, medicare medcaid etc
and this is only the interest on the public debt of the federal governement
add to that state and local indebtedness and then private debt and the load is crushing
all at a time when we have largely exported the "productive" portions of our economy
we are seriously effed
I am very optimistic. I know what the average guy can do when they put their mind and back in to it. I just don't see that happening as long as the hand outs keep coming. No lesson learned from the passed has sunk in to many. Bottom 2012.
patientrenter
mmckinl, OK, now I see why you see a catastrophe looming. The US beginning WW3 in search of resources and peoples to plunder would definitely qualify. I guess I'd just comment that I don't see it as likely.
~~~~
That's just the analogy ... a War is just politics by other means ... we have already seen the pillage of the middle class ... it won't be enough ... stay tuned ...
BSR - especially to you. Nothing would please me more than that these were passed around in your bar.
What don't you peeps get about cannibalism? Everything is going to be torn apart in the new economic order!
we have reached a point where the debt is not servicable
That's why inflation is very likely in the medium and long term, no?
interest alone on the national debt nearly exceeds military spending and almost equals spending on social security, medicare medicaid etc
and this is only the interest on the public debt of the federal government
Really? I did not expect that since most of the Federal debt is short term which pays next to nothing these days.
Can you please share the source?
However, I do not think the government will allow an epic fall and the government does have a lot of levers...
Go back a few years and you'll hear people state that the government wouldn't let the DOW drop below 10K, wouldn't allow home prices to drop 30%, etc. I keep saying the same thing now that I said then (which you can look up) -- they really don't have a choice in the matter.
I thought, based on my limited knowledge, especially Irving and his writing on debt deflation, that once the monster awakens - it does not stop until it is satiated.
MrM : Japan?
and the Nikkei is what percent of 20 years ago? Yes, Japan is a good example, and they were savers. It has kept them alive, however, they are on the slope with all of us. At least they are Industrialised and will sell to emerging economies, who will inturn trade energy and commodities to China and India.
MrM
mmckinl - The Versailles treaty was a big part of the German national psyche after WWI. It was among factors that led to the economic crash of the Weimar Republic in the 1920s, which left its own psychological scars. All of these factors are absent from the modern US situation. Where are the parallels?
~~~~
The parallels are economic .... as in debt ... Hitler was of course financed by banks !
excellent point, low yields are a huge part of sustaining this charade.
don't current payment annualize to about a billion a day? DoD is around 550bil and SS is around 680bil, I think.
When I first saw the world trade towers burning I thought to myself, you know that might as well be a foreign country to me, I was mesmerized , too bad they didn't hit the New York stock exchange while they are at it, the subsequent invasion of Goldman sachs headquarters for profiteting off it would be a big plus in my book.
Dow below 10K is hardly an epic fall
I think the main question is not the government's ability to affect price levels of certain asset class, be it equities or home prices, but the government's ability to affect the aggregate level of economic activity in the country. In this regard the government, while not omnipotent, is still quite potent, especially in the medium term (fiscal and monetary policies have substantial lags).
Hitler was of course financed by banks !
OK, now that we've reached goodwin's point: I suddenly realize that I don't know how Germany went from hyperinflation to Hitler-led manufacturing society. ANyone know?
MrM
we have reached a point where the debt is not servicable
That's why inflation is very likely in the medium and long term, no?
~~~
There is no mechanism in place to use inflation productively ...
Inflation will only drive the middle class under quicker ...
Yes, with a ton of personal help from the father of potus 41.
MrM,
DOW below 10K definitely is not an epic fail, and was not intended to be an example of one. I was answering patientrenter's question on some future events.
Regarding the government's ability to affect the economy, it's strictly a "kick the can" maneuver, putting off today's problems for greater ones tomorrow.
"Dow below 10K is hardly an epic fall"
and non-farm payroll under 120mil? what would you call that?
BR-
Oh yeah, that's real...
A friend from SCruz sent me a less edited link a couple of days ago... if you think that's particularly over the top for public statement, you must be one of those east coasters that believes in slavery, because your vegetables don't grow on trees, and you don' t use machines so that you can not work. I thought she was actually quite politically balanced, embracing the free markets, small business, GWB, and all.
The spiteful, bad smelling (and I don't even mind patchouli), rambling lunatics are the real problem.
Not much worse than the sweater puppies who get paid to do financial analysis on CNBC.
I mean... she works for free :^)
Debt Deluge: Busiest Week in 24 Years
Debt Deluge: Busiest Week in 24 Years - WSJ.com
The government will flood the Treasury market with a record amount of new debt this week, topping $200 billion.
The improvement in risk appetite this year has left its mark on the Treasury market's performance: government debt has lost 4.76% through Thursday after a return of more than 10% last year, according to Barclays data
the Nikkei is what percent of 20 years ago?
We are talking about real economic activity measured (however imperfectly) by GDP. Nikkei is not relevant, IMO.
Yes, Japan is a good example, and they were savers.
Yes, this is a big one. As the US population frantically turns from overspenders to savers, it certainly drags down the US economy.
OTOH, I do not expect that foreign savers will go on strike and one fine day will decide they do not want US debt any more. Instead, I expect them to continue moving toward the short-term part of the yield curve, pushing long-term yields up. That's why I expect a prolonged downward grind, not an epic fall.
Just one guy's opinion, FWIW.
House Bill Extends Higher Loan Limits
The previous $417,000 limit was temporarily increased to $729,750 for mortgage buyers Fannie Mae (FNM: 0.57 0.00%) and Freddie Mac (FRE: 0.592 -1.33%) and mortgage insurer the Federal Housing Administration (FHA), as part of the nearly $800bn American Recovery and Reinvestment Act of 2009 that President Obama signed in February.
But that temporary increase is set to expire at the end of the year unless Congress extends it. The committee’s bill would provide that extension until September 2010, the end of the 2010 fiscal year.
The bill calls for the FHA to insure $400bn in single-family loans, as well as provides Ginnie Mae the authority to guarantee up to $500bn in mortgage-backed securities.
another Trillion in off-balance sheet liabilities.
"I did not expect that since most of the Federal debt is short term which pays next to nothing these days. "
~~~~
The vast bulk of debt is private not public ...
hyperinflation to Hitler-led manufacturing society. ANyone know?
I believe that Germany would have hit the wall, money wise, by 1942, without a war. They were also hurting for foreign curreny reserves.
Here's an interesting tidbit.
By my calculations the Federal interest payments on the debt is exactly enough to pay every mortgage in the US.
Regarding the government's ability to affect the economy, it's strictly a "kick the can" maneuver, putting off today's problems for greater ones tomorrow.
Yep, hoping that in the meantime the economy somehow will recover "because it always does"
payments on the debt is exactly enough to pay every mortgage in the US...
Next year it will cover that and a pony.
Thanks Ridgeback. We just lost a guy to the DOJ, and I was wondering if you were him, but we are a local firm.
The vast bulk of debt is private not public ...
the terms "public" and "private" are not what you think it means w/r/t to the national debt.
Debt to the Penny (Daily History Search Application)
"I do not expect that foreign savers will go on strike and one fine day will decide they do not want US debt any more"
And what if foreign CBs simply don't have a surplus to invest in our paper? Not really an asset class decision then...
signalling a teutonic shift about to give way.
nova
hyperinflation to Hitler-led manufacturing society. ANyone know?
I believe that Germany would have hit the wall, money wise, by 1942, without a war. They were also hurting for foreign curreny reserves.
~~~~~
And OIL !
Of which we will see less as the world economy tries to get to its feet and prices spike ...
In a year's time, our society has shifted from a state of panic to a state of hopelessness, which is where we will live for the next (lost) decade(s).
mock turtle (profile) wrote on Sun, 7/26/2009 - 6:34 pm
what must be remembered is that the united states and its people became affluent because of a rare confluence of events, hard work, inventiveness , some good luck
dont kid yourself...there are many many people around the world who hate being poor and work very very hard every day...and remain poor
we have gutted our economic engine and are in serious serious trouble
We have just reached a point where the financial (speculative) economy went from being an engine that grew manufacturing and technology into its own system for itself. The economic miracle works because it helps produce value from speculation sufficiently that the money "borrowed" from the future tends to get paid back and then some. We've gutted our manufacturing capacity - "green" might replace some of the work we've lost but will not be very profitable. Health care will bubble by simple demographics combined with our general poor health, but again is not a game-changing industry. The only way to get things onto a sustainable track is to create a new speculative flow out of genuine innovation, not trickery/theft/deception, or government mandate, and let the financial "parasite" hook on to it to open the flood of speculative capital in a way that benefits the real economy MORE than it benefits the financial economy.
and non-farm payroll under 120mil? what would you call that?
IMO, U3 below 15% and the EMRATIO above 55% is still a recession, not an epic fall
But don't quote me on the numbers - there is no hard and fast rule as to what is and isn't an epic fall, it is all a matter of historic proportion
This is how twisted we have become. Saving is considered bad for the economy.
Sockeye on the barbi...night!
Regarding "Epic Fail"...
You could've said that the US was simply suffering another GD -- an especially severe and protracted economic downturn -- and that we'd emerge on the other side relatively unscathed.
However, given that GD involved a very different country that we have now -- one with ample resources, few obligations, and much greater prospects -- we're in seriously bad shape. The FIRE economy was a last ditch effort to sustain the ponzi economy of the late 20th century, but now we've reached our Minsky Moment (otherwise known as "peak debt") and must face the consequences.
Too much of what we've had is (and always was) unsustainable. Our "Epic Fail" will be the collapse of the dollar, as it represents all that cannot and will not be sustained.
As others have stated above, there's a glorious new economy out there, but getting there's going to be a cast-iron bitch.
And what if foreign CBs simply don't have a surplus to invest in our paper? Not really an asset class decision then...
Countries with current account surplus like China, Japan, oil-exporting countries, Germany have to place it somewhere. Your question assumes their economies collapse. Well, yeah, that would be rather disastrous.
MrM,
I thought Germany and Japan were collapsing? Are they not on track for a -6 GDP drop?
"IMO, U3 below 15% and the EMRATIO above 55% is still a recession, not an epic fall ... """
~~~~~
It is at our debt levels ... 4 times the debt that started the first Great Depression ...
And back then we were the largest industrial producer and oil producer in the world ....
Real Wealth ! Not paper Wealth !
Nova-
Yes...war was a necessity with it's "policy" that we seem to be mirroring at present. IF they didn't then the populace would have needed trucks instead of wheel-barrows (for the money)
Remember late '02? Albeit ours was on a much smaller scale........I hope that's not where we are headed now.....again.
Ciao
MS
total cummulative debt (public corporate private) in the usa is estimated at around 700,000 us dollars per person
US total cumulative debt per person - Wikipedia, the free encyclopedia
thats a huge transfer of wealth
"......to create a new speculative flow out of genuine innovation" = The Game Changer
swam in the river.
picked peaches and blackberries.
the mrs canned 17 wide-mouth jams
peach cobler in the oven.
THIS IS THE BESTEST RECESSION EVER !!
Hu's ready for more fireworks?
I couldn't believe the local fish wrap actually had an article on U-6 employment......It's a start
Ciao
MS
For those debating the demand for Treasuries, I'd suggest revisiting that Sprott paper posted on ZH a week or so ago. Unless the rest of the world wants to jump from the frying pan totally into the fryer, there simply isn't anywhere near the demand to match the supply.
Black Star Ranch (profile) wrote on Sun, 7/26/2009 - 7:19 pm
"......to create a new speculative flow out of genuine innovation" = The Game Changer
Yep... and therein lies the whole problem. These superwealthy elites somehow "forgot" that return requires risk. Billionaires can well afford highly speculative gambling on new technologies that may or may not change the world, just as easily as they can gamble on whether J6P with $35k income can afford to mortage away his life making regular payments on his $150k domicile. Both are gambling, both can potentially deliver high returns and are risky, but one has just a bit more social value and it's not the political farce of an "Ownership Society" based on lifelong debtorship.
Mock t-- I ain't payin'.
TJ:
I would have agreed a year ago, but the market has soaked up well over 1 trillion over the past year with very low interest rates.
"Your question assumes their economies collapse. "
Nope. Just assumes that they would rather spend a surplus on domestic stimulation/welfare than stash it in our cash, if they have one at all. Not a wild or pessimistic conjecture in the slightest.
Nuke,
"Past performance is not necessarily indicative of future results."
Could be that's scraping the bottom of the piggy bank.
I thought Germany and Japan were collapsing? Are they not on track for a -6 GDP drop?
They sure did suffer significant drops in GDP given the export-driven nature of their economies and the fact that the US and other traditional importers are not buying as much as before. However, their current accounts are still in surplus. This is how their economies are built - they produce a lot more than consume, so to say.
"As others have stated above, there's a glorious new economy out there, but getting there's going to be a cast-iron bitch. "
~~~~~
two words ...
Peak Oil ...
Well, the coming week will be a good test of that. I do not expect auction fails, but we can well see the yields on 7-year paper to go higher.
"Where are the parallels?"
We don' need any stinkin' parallels.
No, seriously, history is always hopping off one rail and onto another. Who would have predicted 20 years ago that the major creditor nation would be China and expect to be believed? It's always happening that way.
Who would have believed in the mid-80s that by 1992 there would be no more Soviet Union?
Many examples might come to mind of improbables or unthinkables in history.
Headin' out for a while; catch up later!
total cummulative debt (public corporate private) in the usa is estimated at around 700,000 us dollars per person
700,000 us dollars per person * 304,059,724 (US population via google) = $213 Trillion
Do you believe that number?
...not an epic fall.
(edit) oops. I just noticed that was epic fall. Nevermind.
Many examples might come to mind of improbables or unthinkables in history.
Pet rocks?
Nope. Just assumes that they would rather spend a surplus on domestic stimulation/welfare than stash it in our cash, if they have one at all. Not a wild or pessimistic conjecture in the slightest.
They would need to change their economic models quite substantially, make them a lot less export oriented. Of course it can be done, but not in a span of 2-3 years.
TJ:
I think the world realizes that refusing to buy T bills means an end to US hegemony. And, believe it or not, much of the world wants the US to remain a hegemonic power. I have met many in Asia (S Korea, Japan, Malaysia) that bank on it. As far as global superpowers go, we are a relatively benign one, certainly better than the USSR or China. Lots of countries, from the EU states to the Gulf states, benefit from having the US around to intervene in places like Bosnia. That, in and of itself, probably accounts for a lot of support in the Treasury market.
Headin' out? Get back in that chair and blog! There's children in China who's jobs depend on it.
peak oil may be a blessing in disguise
obviously we will never "run out" of oil...there is just less and less of it and epecially less and less of the oil that is economically attractive to recover
this means the end of "cheap" oil and at some point transportation expenses start to chip away at the cheap labor advantages of 2nd world nations
resulting in a shif back to home industires
also peak oil should continue to accelerate the tech revolution in nuclear, wind, solar, tide, etc
Rob - this is +10! (! stands for the factorial)
"They would need to change their economic models quite substantially, make them a lot less export oriented. "
~~~~~
And a big fall in life style ...
Europe is pimping the third world just as we are ...
They just know how to look better doing it ...
barfly do it like this:
Metaobservations
Epic не успеят
" mock turtle
"peak oil may be a blessing in disguise"
~~~
As was the Black Death ... that killed so many it broke the feudal system ...
An economic "Game Changer" would have to subject itself to today's business models including profit ratios, etc. I don't see most modern day "entrepreneurs" designing, initiating production, producing, marketing, distributing and providing product according to old school margins and tolerances.
I'm still not sure if the "IT revolution" was truly an economic game-changer (and it was my area of grad study) but the primary advantages of IT were realized in process automation, electronic funds transfer and other very "boring" and well-defined areas of business. We're going to see that in health care, and the gains will be substantial, but it is Automation, which means gains from efficiency which don't usually generate new business or open new markets to the firm implementing them. It's a sad fact given all the hype surrounding Information Technology but history bears out that there are a few key players that emerge from thousands of unsuccessful ventures and they tend to lock in most of the firms. Non-IT firms are generally conservative with IT investments and tend to rely upon known knowns and industry-tested best practices. I don't see why health care is going to be any different.
I don't know either JP, ok, how did it happen?
Many examples might come to mind of improbables or unthinkables in history.
What would be a good example of an unthinkable in the current environment.
Dow below 5K or U3 above 12% in 2015 doesn't cut it.
Desintegration of the USA a la Orlov USSR-type scenario?
Fall similar to that of the Roman Empire?
We always tend to apply what has already happened in one countries to new ones, but coming up with new "unthinkable" scenarios is difficult
The black death was the gift that kept on giving. Kept the population down
for centuries. Indirectly caused the Renaissance and Reformation. Kept
laborers reasonably well paid.
Unfortunately there was that dying in hideous pain thing.
*****wipes sweat from brow*****
*****shovels another load of coke (and now heroin thanks to Afghanistan) into the stock market furnace*****
Black Star Ranch (profile) wrote on Sun, 7/26/2009 - 7:40 pm
An economic "Game Changer" would have to subject itself to today's business models including profit ratios, etc. I don't see most modern day "entrepreneurs" designing, initiating production, producing, marketing, distributing and providing product according to old school margins and tolerances.
Agreed. Nope, the philosophy still seems to be "build it and they will come" for the most part.
Speaking of H1N1:
A serious outbreak of the virus in the country’s overcrowded prison system would cause particularly severe problems. An Irish Prison Service (IPS) spokesman said: "At a corporate level, the IPS is acutely aware of the possible adverse impact of a swine flu outbreak at prison level and an IPS Contingency Planning Group is considering necessary steps which may have to be considered in the event that significant numbers of cases occur within the prison system, either involving staff or prisoners."
Prison staff face jail quarantine over flu | Irish Examiner
Better be working on your immune systems kids; the clock is ticking!!
THOUSANDS FACE DEATH IN SWINE FLU JABS DELAY
Daily Express | Posts | Breaking news, sport, showbiz, pictures and video from the Daily and Sunday Express newspapers - updated 24/7
The Government has warned that 65,000 could die, 350 a day, over the next few months. The eventual death toll could reach 750,000. Young children, pregnant women and people with underlying medical conditions are most at risk.
Official figures released last week show youngsters under 16 are almost twice as likely to die from swine flu than others.
I don't know either JP, ok, how did it happen?
I disbelieve the number. Annual GDP is what, $14B? Total borrowing = 15x GDP?!
Sounds bogus.
Edit: What is the interest on that alleged $213T? If it were all 3%, $6B of the GDP is purely interest payments.
(As if 3% is a realistic number. Avg should be much higher.)
So the wiki link is claiming that the majority of our economy is interest payments. Riiiiight.
TJ and mmckinl, I had to take a break for a little dinnertime snack - fresh tomatoes and basil, with olive oil. I am not trying to pin you down, TJ or mmckinl, just get a better idea of what you mean by a collapse, and then debate the likelihood of the trajectory.
I lived through the downturns of the early 1980's and late 1970's and 1974-5, and I really don't see what's happening now as being a lot worse. Is it possible that you were young back then, and not fully tuned into the worry and pain of adults at the time? There were gas lines, short time, really major physical dislocations. Now we have what looks to me to be nothing worse than what happened back then. And I suppose my point is that these were just normal recessions, and had normal recoveries. The 1974 downturn didn't really end until 1983-4. What's strange and unusual is the recessions of the last 20+ years. Vigorous govt action has softened their impact. We're now all accustomed to recessions that are just minor blips. That doesn't mean that a real recession inevitably leads to an "out of control" spiral. It just leads us back to what happened after virtually all other historical recessions - a recovery.
As for Japan, Japan's GDP is no less now than it was 20 years ago. People refer to it as a disaster, but in fact their economic activity did not drop off a cliff, nor did their wealth. Sure, stagnation doesn't feel as good as a boom, but it's also a lot better than a real long-term bust - when average incomes fall significantly and stay down.
That is a very nice star!
http://www.hoocoodanode.org/images/smileys/blackstar.png
disaster: John Kemp
Mon Jan 19, 2009 1:06pm EST
By John Kemp
LONDON (Reuters) - The United States and the United Kingdom stand on the brink of the largest debt crisis in history.
snip
To understand the scale of the problem, and why it leaves so few options for policymakers, take a look at Chart 1 (here), which shows the growth in the real economy (measured by nominal GDP) and the financial sector (measured by total credit market instruments outstanding) since 1952.
In 1952, the United States was emerging from the Second World War and the conflict in Korea with a strong economy, and fairly low debt, split between a relatively large government debt (amounting to 68 percent of GDP) and a relatively small private sector one (just 60 percent of GDP).
Over the next 23 years, the volume of debt increased, but the rise was broadly in line with growth in the rest of the economy, so the overall ratio of total debts to GDP changed little, from 128 percent in 1952 to 155 percent in 1975.
The only real change was in the composition. Private debts increased (7.8 times) more rapidly than public ones (1.5 times). As a result, there was a marked shift in the debt stock from public debt (just 37 percent of GDP in 1975) toward private sector obligations (117 percent). But this was not unusual. It should be seen as a return to more normal patterns of debt issuance after the wartime period in which the government commandeered resources for the war effort and rationed borrowing by the private sector.
From the 1970s onward, however, the economy has undergone two profound structural shifts. First, the economy as a whole has become much more indebted. Output rose eight times between 1975 and 2007. But the total volume of debt rose a staggering 20 times, more than twice as fast. The total debt-to-GDP ratio surged from 155 percent to 355 percent.
Second, almost all this extra debt has come from the private sector. Take a look at Chart 2 (here). Despite acres of newsprint devoted to the federal budget deficit over the last thirty years, public debt at all levels has risen only 11.5 times since 1975. This is slightly faster than the eight-fold increase in nominal GDP over the same period, but government debt has still only risen from 37 percent of GDP to 52 percent.
snip
THE DEBT MOUNTAIN
The data in Table 1 (here) makes clear the rise in private sector debt had become unsustainable. In the 1960s and 1970s, total debt was rising at roughly the same rate as nominal GDP. By 2000-2007, total debt was rising almost twice as fast as output, with the rapid issuance all coming from the private sector, as well as state and local governments.
This created a dangerous interdependence between GDP growth (which could only be sustained by massive borrowing and rapid increases in the volume of debt) and the debt stock (which could only be serviced if the economy continued its swift and uninterrupted expansion).
snip
U.S. & UK on brink of debt disaster: John Kemp
| Reuters..
I'm sorry I missed the game of blame assessment from earlier threads. Notice how it is shrinking down to blame your neighbor?
The comment about the interest being paid on the national debt has reached the point it could pay for the housing cost of our nation gives one pause to think. I chuckle when I read the comments regarding paying for the crap bought by the average person when the crap bought with our national debt falls firmly in the poor decision making category. I'm going to stick with blaming lenders for their poor lending standards, the government for never passing on overpaying for everything and the capture of our political system by special interest lobbying.
Collapse. Examine your personal budget. Look at the YoY increases in necessary costs(fixed costs). Look at your wage and how it has been impacted by the recession. Pay close attention to inflation in your fixed costs. The smart companies are there and they aren't dropping their rates regardless of their inputs. Food, energy, shelter, health have all seen higher then CPI cost increases for years. Now we face devaluation of the dollar, what happens to those fixed costs? If we see wage deflation continue unabated with a decrease in accepted value of the dollar and increased fixed costs won't more default be the end result. Maybe greed of mandated costs with an icing of debt servicing/higher taxes will bring a grand cry of "uncle!" from the masses.
The citizens of this country have been put up against the wall. Very unsettling looking at the creditors all demanding payment. What is Uncle Sam going to do when he's put against the wall? Look right and left and see the country standing shoulder to shoulder with him? Maybe then change will happen. Until then count on the "kitchen sink" approach to continue in solving the Pandora's Box of problems facing us. Of course hope was the final evil let out of the box:
"Hope was personified in Greek mythology as Elpis. When Pandora opened Pandora's Box, she let out all the evils except one: hope. Apparently, the Greeks considered hope to be as dangerous as all the world's evils. But without hope to accompany all their troubles, humanity was filled with despair. It was a great relief when Pandora revisited her box and let out hope as well."
I think hope is the first evil to be put back and then maybe the realities of the world can be dealt with...not betting on it.
Hope - Wikipedia, the free encyclopedia
CR,
Thanks for the new smileys, they offer greater communication potential!
Damn..........someone is selling my product!
(I designed and produced this product in 1993 (before youtube).........amazing.....
YouTube - TotStopper
The failure of our Complex economy ...
"Peak oil -> higher oil prices, but little additional production-> stagnant wages -> little discretionary income -> cutbacks in buying many discretionary items -> layoffs (restaurants, newspapers, many businesses)-> more loan defaults -> banks not in a position to lend as much because of losses on loans -> debt harder to obtain -> lower demand -> lower prices on other commodities, like food -> more defaults and layoffs -> banks in even worse shape -> etc.
These cycles are leading to a huge unwind of debt that has barely begun. There are also a large number of derivative contracts outstanding, and some of these may generate huge payments (as has already happened at AIG). These also have barely begun to unwind.
It is not too hard to envision a situation where the worldwide banking system collapses, and it is necessary to start over, perhaps almost from scratch, with new currencies and new international treaties. As the result of such changes, there is at least the possibility that the world's financial system may function at only a minimal level, and world oil production will take place at only a very low level."
The Oil Drum | Where Is Oil Production Headed?: An Adverse Scenario
Why thank you, Doc.........thnx go to kcoop
There are some I know (unnamed) who are making so far on part time work (unreported of course), child support and unemployment. with some help from mom (not me). Well the dad
is paying hardly anything now and the unemployment is coming to an end.
Multiply by thousands and thousands. They aren't gonna be buying new cars or
purses. No siree Bob.
As I have posted, I had my doom moment in Oct or Nov of 2007. The securitization
train had stopped. Mtg broker buddies with what they considered good deals couldn't
get them through. And I read Countrywide had a quarter trill in foreclosures. (I wonder
what the total is now.?)
After 10 seconds of deepish thought after hearing the Countrywide thing, I concluded that
we were up the creek, and the banks couldn't take the losses; this wasn't subtle or rocket
science it was brick falling on your head obvious.
Tried spreading the word, sold most stocks, and all I got was eye rolling.
I no longer believe what any guru says.
The weather people have much more of a handle on weather--that is, not much, but a little,
that all these gurus do.
The only think I don't understand is why anybody believes or thinks that confidence is a
good thing. I think extreme skepticism is a good thing. None of these people want to do
anything other than make money without contributing any value.
Default I say. Early and often.
Epic не успеят
Alright, with patientrenter back to continue the "epic fall" discussion, I can go watch what those vampires are up to
For those still interested in Treasury sales, here is the latest from Bloomberg
The U.S. more than doubled bond and note offerings to $963 billion in the first half of 2009 in an effort to end the recession and finance a budget deficit that the Congressional Budget Office projects will reach $1.85 trillion this year. It may sell another $1.1 trillion in the second half, according to London-based Barclays Plc, another primary dealer.
Including bills, the Treasury has raised $1.046 trillion in new cash this year, according to government data.
“There’ve been very valid concerns about whether the market would be able to take down that kind of supply consistently,” said Christopher Sullivan, who oversees $1.5 billion as chief investment officer at United Nations Federal Credit Union in New York. “Given the demand seen at many of the auctions, that fear has been a little bit misplaced.”
At the six sales of two-year notes this year, investors offered an average $2.81 of every $1 of debt sold, compared with $2.34 during the same period last year. For five-year notes, the so-called bid-to-cover ratio has risen to $2.22 in six sales, up from $2.07 last year.
...
Demand from international investors has increased along with the sales. The government relies on foreign buyers to finance the budget deficit and almost 50 percent of the $6.6 trillion in marketable Treasuries are held outside the country, up from 35 percent in 2000, U.S. figures show.
Indirect bidders, a class of investors that includes central banks, purchased 67.2 percent of the record $27 billion in seven-year notes sold on June 25, or double the amount of bids at the last sale in May, according to the Treasury.
The ratio was the highest since 2004 on the sale of $37 billion in five-year notes the day before, while the $40 billion in two-year notes auctioned on June 23 attracted the highest percentage of indirect bids for that maturity in at least six years.
JP wrote, quoting my quote from wiki
totall cummulative debt (public corporate private) in the usa is estimated at around 700,000 us dollars per person
and then JP calculated
700,000 us dollars per person * 304,059,724 (US population via google) = $213 Trillion
and asked
Do you believe that number?
JP im not sure what to believe, i think the number is very big but may include debt due to leverage and derivatives
still, some very conservative websites put usa total public and private debt at between 50 and 75 trillion, still a crushing number
Epic не успеят
It is not Russian either
I created this a few weeks ago
9.8T in bailouts
Bloomberg.com:
News
possilby 23T in bailouts
Bailouts could cost U.S. $23 trillion - Eamon Javers - POLITICO.com
13T in government debts
U.S. National Debt Clock
17T in corporate debts
OFF THE CHARTS; Who's Most Indebted? Banks, Not Consumers - NY Times
1T in credit card debts
Opposing Views: OPINION: Americans $1 Trillion in Credit Card Debt
11T in mortgages
Bloomberg.com:
News
52T in social security/medicare obligations
Medicare, Social Security Owe Up to $52 Trillion to Current Retirees a... ( Debts Up To Three and Half Times Grea...)
Like other government trust funds (highway, unemployment insurance and so forth), the Social Security and Medicare Trust Funds exist purely for accounting purposes: to keep track of surpluses and deficits in the inflow and outflow of money. The accumulated Social Security surplus actually consists of paper certificates (non-negotiable bonds) kept in a filing cabinet in a government office in West Virginia. These bonds cannot be sold on Wall Street or to foreign investors. They can only be returned to the Treasury. In essence, they are little more than IOUs the government writes to itself.
Social Security and Medicare Projections: 2008 - Brief Analysis #616
200T in derivatives in banks
OCC: OCC's Quarterly Report on Bank Derivatives Activities
Black Star Ranch (profile) wrote on Sun, 7/26/2009 - 7:52 pm
Damn..........someone is selling my product!
(I designed and produced this product in 1993 (before youtube).........amazing.....
YouTube - TotStopper
Looks like a smart, simple product; hope you're seeing some royalties!
Black Star:
That's my Mom: How did she get out of the joint? Re: TotStopper
sry for the obtusiness.
its bulgarian epic fail.
LOL......no royalties.........that's about the time I dropped out.....
lawyerliz (profile) wrote on Sun, 7/26/2009 - 7:55 pm
The only think I don't understand is why anybody believes or thinks that confidence is a
good thing. I think extreme skepticism is a good thing. None of these people want to do
anything other than make money without contributing any value.
+1
Money for nothin' and chicks for free; that ain't workin!
that's 320T we owe by my total. (of course I understand some of these debts cancels out each other)
Basel Too:
They don't need to wait, the can file a 2008 amended return (1040X) and get the credit in short order ( ~6 weeks).
BTW - re a grandchild being on the deed to get first-time HO credit; the home being purchased must be the claimant's principle residence for three years to qualify.
Will be interesting to see how IRS checks/responds to instances where this isn't the case.
Liz, if we all decided to default tomorrow on all our debts, then the economic system would collapse. As you well know, the legal system couldn't keep up with such a shock. So we could all default on all our debts if we wanted to. But we would be moving our society into a chaotic direction. Is that what we want? If we don't, then we need to exercise restraint and start believing again in old-fashioned truths, like "there's no free lunch", and "responsibility should be rewarded and irresponsibility punished". It's dull and boring, but letting the dam burst and going with unlimited moral hazard is not going to end well.
Lawyerdawg Liz,
default consultations 1-900-cold-sweat,
its $20 bucks if I get top-dollar Humility.
Brazenness costs 125 for the full hour.
patientrenter (profile) wrote on Sun, 7/26/2009 - 8:02 pm
If we don't, then we need to exercise restraint and start believing again in old-fashioned truths, like "there's no free lunch", and "responsibility should be rewarded and irresponsibility punished". It's dull and boring, but letting the dam burst and going with unlimited moral hazard is not going to end well.
Could not agree more. You can be the first to convince the power elite, celebrities and the financial oligarchs that they have to play by the spirit of the rules because it's in society's best interests. Then the people will easily follow suit.
Seeing similar in better areas of Oakland. (Yes, there are several.)
No I agree it's not. The hub and I owe hardly anything and intend to pay what
we owe. Some of what I said was snark. But. . .
But what I see is millions and millions tempted into debt slavery. Debt slavery is worse
than moral hazard in my book. People who can only pay cash for things will quickly
learn not to spend too much.
patientrenter
The economy is not in our hands .... the banksters , the Fed and the UST have control ...
And they are bailing out themselves at the public's expense ...
I calculate that the national debt is 1000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000. Why so big? Because we should count the obligations for our kids' education, and their retirement, and their kids, an so on. That could be infinite, but I wanted to be optimistic, so I assumed the world would end eventually:)
Joe6Pack will . . .Shrug.
Bruce Springsteen - The River