The Asian markets have had a few days to digest the news. Monday will be the first day of trading after the announcement for Middle East markets. The markets there are tiny but these are the people who are most affected by the possible default.
This is why the majors that got major $$$$$$$$$$$$$$ should have been nationalized at least temporarily. Then broken up and sold. Too big to fail is too big to exist. Harsh words have done nothing since the beginning of this big fat mess. But nooooo, couldn't do that. No strings attached and still getting 0% loans, earning interest on reserves on the feds balance sheet. Its preposterous to think that NOW more harsh words are going to produce anything but more of the same.
So if 70K out of 147K is dismal, what does 0 equal ? Surely that cannot be true...if it is then it shows the banks are giving the finger to the government. I suppose after fisting the gubment flicking them the bird is hardly a major event.
Yes, totally OT. Im glad yours are doing so well. Im at my parents place in NJ and they are still pulling amazing peppers, arugala, escarole. And it's almost December! I think the days are numbered though now, because the frost came here too last night. Crazy, but heck, Im not complaining.
I just moved to a new place in SF - not sure what my gardening capabilities are going to be for this year. Small shared backyard, but some space. Decent size deck, so I could do some potted plants there. Im already itchin to get started, but Ive got a long rainy winter in store. Which means I'll likely end up starting stuff inside under lights soon.
Zero is not correct. From a WSJ report earlier this month: Mortgage Program Gathers Steam After Slow Start - WSJ.com
"J.P. Morgan Chase & Co. said last week that more than 92,000 of its customers have made at least three trial payments under the program, but just 26% of them had submitted all the required documents for a permanent fix.
...
At Morgan Stanley's Saxon Mortgage Services, about 26,000 of the 39,000 borrowers in the program have made more than three trial payments. Roughly 500 have received completed modifications."
Not too sure why we're even trying mortrgage mods.. so many of them fail and we're still headed south on home values anyways. Lower home values will absolutely put pressure on local and state governments.. look out for a Muni Bond Collapse.. The Mean Old Investor: The Problem with Muni Bonds
We complain about extend and pretend a lot here. But you have to realize that the bubble was unsustainable before it lost some air. So we (as a society) were extending and pretending for years already. What's going on now is merely a continuation, a mutation, of what was going on before. We (the PTB) can keep doing this for a while yet, maybe years, maybe even a decade. After about a decade, I'd say they run out of bullets, and we get to nominal asset price deflation, or consumer price inflation.
Edit: Never mind, I don't want another debate about de/in -flation.
LOL!! Tens of thousands out of how many required and more coming? And those wonderful FHA loans F/F loans are in default again not even one year later. Like I said, deflation is interesting. What a mess.
I can't wait until we've got trial loan modifications on CRE defaults, now that's going to be interesting.
by the way, I would like to ask again, even though I did on a previous thread, if anyone can confirm that what is purported to have gone on at the Urban Land Institute's SF conference actually happened, and isnt some goofy fabrication. Because it makes for a pretty awful read on both the state of CRE affairs and public policy surrounding it. And it certainly is plausible.
........damn you..........and I AM the one living in the desert!.......btw, earlier, a comp 'tween Dubai and Vegas re. weather: 120-120 temp, but 100% - 10% humidity.
I agree. It's a waste of time, effort and capital to invest all that energy in hopeless affairs. This is no penalty do-over time. Take advantage of it!
Rajesh, the reason this time it really is different is Japan was just Japan, this time its global and this time debts of nations are so vast it can't merely be papered over in hopes of a sunshine and flowers given time.
Senator: Delay health care to focus on Afghan war - Yahoo! News
"said a sharp focus is needed for Obama's new strategy for the 8-year war and how much it will cost. "
"The war is terribly important," Lugar said. "Jobs and our economy are terribly important. So this may be an audacious suggestion, but I would suggest we put aside the health care debate until next year, the same way we put cap and trade and climate change, and talk now about the essentials: the war and money."
The new 8-year war. Nice too see than have them so well schedule now.
Well, youve got perhaps 25k at JPM if the paperwork checks out (which is a big if). And with MS, we've got 500 out of 26000...wonder what is slowing that conversion up??? Could it be the paperwork is as bad now as it was absent before? I mean, think of it this way - if you had no doc before, and you doc it now, it doesnt change the fact that you didnt have enough income when you HAD a job and sure dont have enough now that you DONT have a job.
So yeh, you might get 100k, but you might also get something closer to 50k, and either one of those results is basically crap.
According to Bloomberg, the November unemployment rate is expected to stay flat at 10.2% and the NF payroll is expected to drop by 100K.
Should we open a Hoocoodanode poll for these numbers?
Why is it bad if people who do not qualify for a loan.... do not qualify? There are plenty of qualified people, at the right price. Foreclosure is the first step to moving from people who cannot buy to people who can. This is all a polite game to avoid dealing with the real issue - price discovery. True price discovery will not be permitted.
Sitting on a park bench
eyeing little girls with bad intent.
Snot running down his nose
greasy fingers smearing shabby clothes.
Drying in the cold sun
Watching as the frilly panties run.
Feeling like a dead duck
spitting out pieces of his broken luck.
Well now, just imagine the UE rates should those soldiers come home and need work? ugh. Its amazing to me we can be so liberal with our assets overseas which put at risk more than just $$s, so liberal with biggie piggy banks but we just can't muster the courage to get the bankers that got literally trillions to take a little haircut on their yearly bonuses (GS on track for a record year among others) or get the quasi banker/broker/us taxpayer owned to do loan modifications on the bad products they sold.
"The state’s unemployment insurance fund ran out of money Oct. 13, and the state has already borrowed $80 million to make up for the shortfall. By the end of 2009, those loan amounts are expected to increase to $260 million. Through 2012, state officials predict the state may need to borrow up to $900 million."
Gee a couple hundred million here a couple hundred million there and pretty soon we're talking real money.
The new 8 year war? This is on top of the old 8 year war? Can we stop farting around and call it the Forever War? Destroy one country after another until we run out of countries.
Effectively, I already am. I'm not the one who sold them a bill of goods either and I'm not the one to didn't perform due diligence on loans. Besides my paltry savings evidently isn't needed by said biggy piggy banks, they don't need my stinking little dollars for their capital or balance sheets based on those returns for savings, CDs or anything other than something connected to the market.
Nanoo, you sound like you're going to be holding onto your "paltry savings". Well, others of us will also be trying to hold onto our paltry savings, and forgiving debt doesn't do that.
patientrenter, did I say one word about debt forgiveness? Nope. I said modifications on bad loan products and we all know what they are and we all know that we, the taxpayer, are responsible for backstopping the biggie piggy banks who made the bad loans to begin with and encouraged thorough "financial innovation" the double bubble speculation in RRE and CRE and thusly...the genesis of this big fat mess.
I am curious about the level of economic education on this blog.
Who here thinks that most of the dollar losses created by mass forgiveness or modification of debt falls primarily on bank executives and bank shareholders, versus savers (who invested directly or indirectly in bank debt) and taxpayers (who will be bailing out the banks for their extra losses)?
It's savers.
The money from "savers / investors" has to flow back to debtors if you want debtors to continue buying stuff.
If they were earning sufficiently, they... wouldn't be debtors.
The money from "savers / investors" has to flow back to debtors
Broward, John bought a home in Manhattan Beach for $300,000 in 1996. He's put in $100,000 to upgrade the kitchen and bathrooms since then. He sold it in 2006 for $1.5 million.
How is that $1 million or so gain going to get recycled to debtors?
If they were earning sufficiently, they... wouldn't be debtors.
It is not how much they are earning; it is how much they are spending relative to earning. There are a lot of high income debtors. Some Goldman Sachs partners lost big because they got a margin call on their GS stock when the market crashed and they didn't have enough ready cash to pay up. So the stock got sold at rock bottom prices; and then the stock price rebounded up.
His $1.2 million is sitting in the bank and they loaned it out.
And it's still his, thanks to the FDIC. So how is going to get recycled? If you go with your notion that recycling just involves passing the money along as debt, then the only loan mods we need to do are ones that pay all the existing loan obligations with new loans. I don;t think that's what you are suggesting, and it certainly is not what the PTB are pushing.
On Friday I received notice from SSA that my wife and I will each have to pay an additional $44.20/mo toward Medicare Part B this year due to Modified AGI exceeding $170,000 in 2008.
The irony is that the only reason that it came anywhere close to that was capital gains achieved by paying attention to this blog!
They'd better have brought enough cramdowns for the whole class
And what's the whole class? Does that include people who scrimped and saved and put down a lot of money, so they don't have a large loan? And people who looked at home prices and said WTF, it would be irresponsible of me to buy at that price, and are renting instead? How about younger folks who haven't bought yet, and whose tax bills will be paying off the cost of the loan mods (through govt bailouts of the banks and others)?
it is how much they are spending relative to earning.
It's a relative measurement but most people, particularly investors, can only think in one frame of reference.
The fact is, the products are being produced and consumed.
energyecon,
thanks for the link to the paper from that slashdot link
in return here is a link, Bing Cashback
to promote their new search engine, Microsoft is offering 8-25% cash back on purchases from a bunch of online stores. don't know if it's a good deal, but I can't keep up with your academic pdf paper links. I've got a big stack of pdfs in the to-read folder. besides, think of the economy
patientrenter, re: banks vs savers
that's just it, savings are not a flat distribution, the wealthiest will lose the most in absolute terms just from simple odds. percentage-wise, much of America has the 0% safety limit (see: The 2009 MetLife Study of the American Dream )
Did I ever tell you about the time I got into that fight... sure I had a fractured ocular socket and lost a tooth, but you should have seen the other guy -- he won't be messing with me any time soon.
that's what it's like
Who here thinks that most of the dollar losses created by mass forgiveness or modification of debt falls primarily on bank executives and bank shareholders, versus savers (who invested directly or indirectly in bank debt) and taxpayers (who will be bailing out the banks for their extra losses)?
First of all, we need to separate loans issued by Fannie/Freddie from loans issues by the private sector (dominated by Citi, JPMorgan, BofA, Wells Fargo).
Whatever losses are created by modification of loans issued by Fannie/Freddie will be borne by the taxpayers who own these companies.
Losses created by modification of private loans will first be borne by their shareholders (who in the case of Citi and BofA also include taxpayers). If that means more capital infusion into Citi, that would be a loss to taxpayers.
Nothing will happen to bank debt owners or bank executives so long as the Administration pursues the same set of financial policies.
Savers get screwed with or without loan mods due to zero interest they receive on their savings while they still have to pay interest to banks on the mortgage/credit card/auto loan balances.
According to Bloomberg, the November unemployment rate is expected to stay flat at 10.2% and the NF payroll is expected to drop by 100K.
Should we open a Hoocoodanode poll for these numbers?
His $1.2 million is sitting in the bank and they loaned it out.
Bank issue loans when they have enough capital and they like borrowers. The amount of deposits they carry is irrelevant to the loan decision. They always get as much liquidity form the Fed as they want/need.
then the only loan mods we need to do are ones that pay all the existing loan obligations with new loans
I'm tempted to agree with this but I'd have to think about.
There's no question that the Fed's answer is a roundabout method that adds a huge amount of overhead.
Look at the relative cost of C4C and the Housing incentive.
My instinctive guess is that we're working as inputs into the debt system, pushing into the sum of the problem so it requires something like 10x more nominal value than directly circumventing the problem.
savings are not a flat distribution, the wealthiest will lose the most in absolute terms just from simple odds.
Taxes are the right place to set redistribution policy. Setting up a giant RE lottery scrambling real net returns doesn't fix the problem of poor income and wealth distribution. It just adds one more layer that distributes wealth lousily and nearly randomly. To those who don't like the existing distribution method that favors the wealthy (because of low taxes on high incomes), this random scrambling of returns, driven by the RE lottery, is satisfying because it favors borrowers, who include poorer people. But it's just adding one nutty distribution system onto another.
But it's just adding one nutty distribution system onto another.
Yup.
That's a lot of what's happening.
Just like the web.
Legacy work-around on top of work-around.
You set the workweek to 32 hours to force balance of production to consumption at a macro level.
Put up tariffs to remove China & India's issues from being our issues.
Everything else can be driven by that.
You can get rid of a huge gov't bureaucracy & payments, eliminate a ton of make-work jobs but overall, a lot of people will be happier.
Loans create increasingly smaller deposits, it's a recursive function dependent on the original loan.
Ultimately it works out to a simple ratio, though, so I don't bother trying to track (or argue it) so granularly.
You set the workweek to 32 hours to force balance of production to consumption at a macro level.
I actually agree with this, broward. I work probably a 32 hour week myself, and could achieve all I want to achieve in much less, but I have to pretend that the 50-hour week is necessary. Ridiculous.
Loans create increasingly smaller deposits, it's a recursive function dependent on the original loan.
That assumes that in order to make a loan a bank needs to get a deposit in the first place. That's how it is described in macro textbooks, but that's not how it works in practice.
Please read winterspeak's posts I linked to above. He has written extensively on this topic.
I was surprised Colin Powell got invited to the WH shindig last week. This fcker along with the CIA guy, was instrumental in starting the Iraq invasion and there he was in the festivities. There is no fing accountability anywhere anymore. If there is a war crime tribunal somewhere someday, hope he gets his day in court.
Taxes are the right place to set redistribution policy.
this isn't a redistribution -- the money was never there, we are all losers
this isn't a policy -- this is letting people get exactly the investments they paid for
Thats why its too simplistic as the entire kit and hoocoodanode is the complexity of saving, loans, incomes and means of financing. In particular, the financing part which became the most complex allowing risk taking by bankers not formerly allowed under those horrible old fashioned methods of separating utilitarian banking needs including loans vs that of wall street/financial institutions. This included 'savings' as savers of hard cash money were unrewarded but by magic they could be ultimately rewarded by 'investing' it in all sorts of investment vehicles (in itty bitty small letters...there is always risk involved with any investment choices, be sure to consult a professional). Decreasing real wages/benefits, a declining dollar, didn't help and poor J6P decided those smart amoral scumbags surely could be trusted with his hard earned dollars so one day, he could put Suzie and Sam through college on that second mortgage.
Now price discovery is the problem in a deflationary RRE (and CRE) market which has too many federal fingers in it trying to reflate it again. Meanwhile by chance, bad luck, bad personal financial decision, hoards and hoards on on a slippery slope of complete ruin because all that risk that was to be so rewarding ended up being one big fat lie, be it in their homes or their stock market portfolios. And OH MY, in the interest of those next quarterly returns, their job got axed and now its BK time and a home under that bridge to no where. So now what and how did I do?
Please read winterspeak's posts I linked to above.
Yes, this is a good link. I think it went around here many months ago. But, people forget the cause and effect is reverse from the classic textbook description. Loan first, borrow what you need (from someplace) to make the ratios come out.
this isn't a policy -- this is letting people get exactly the investments they paid for
"This isn't a policy" . EHP, I know you're reasonably bright, but when Barney Frank says that making bad loans to keep home prices high is "policy" then it really is policy. He's closer to the center of policy-making than you or I are.
Probably meant 50.
There's a lot of push in IT to show hours, regardless of actual work.
I've got to go to lunch, I'll read the Winterspeak doc when I get back.
Nobody talks about but there's already a low-level revolution in motion.
4 police officers gunned down in WA today.
There's been several other one-off incidents in the past two years, including judges murdered and that tax collector guy in KY. Of course it has to be a suicide, can't afford it to be anything else.
I just made a huge steaming vat of homemade smoked turkey and barley soup (spicy of course). It is full of carrots, celery, onion, tomato, smoked turkey, chili peppers and barley. There is also two onions and probably a whole bulb of garlic in there....I made it from scratch, homemade broth and all...I'll have to save my dooming for another day...
We'll eat or give away half and freeze the other in batches in case anyone comes down with a cold or the flu (especially me because nobody else can cook it)...
just made a huge steaming vat of homemade smoked turkey and barley soup (spicy of course).
Yeah, great. It's 2pm here, I'm hungry, and now this pops up. And there's no technology to get me any via the internet. My stomach is growling even more now, thanks allot.
Sounds good, Kristina. Sometimes, when we tear apart the negative aspects of a 2% reduction in aggregate national income, we lose sight of the other 98% and all the ordinary pleasures life offers. With a positive attitude, and good cooking like yours, we could all feel better after a small national loss of GDP, even if it were permanent.
"Banks had to buy back $7.1 billion in defaulted single-family loans in the third quarter to reimburse mortgage investors, up from $1.9 billion in the previous quarter. Federal Deposit Insurance Corp. Call Report information shows that most of the buyback demands fell on JPMorgan Chase and Bank of America. Chase repurchased $2.7 billion in defaulted loans and BoA repurchased $2.3 billion to satisfy investor demands. Both are on the hook for troubled loans they took control of when they purchased ailing mega-thrifts — Countrywide in the case of BoA and Washington Mutual by Chase. The FDIC information also lists buybacks by Citibank ($898 million), National City Bank ($361.6 million), Wells Fargo Bank ($266 million) and SunTrust Bank ($232.3 million). Investors like Fannie Mae and Freddie Mac can require lenders to buy back defaulted loans that don’t comply with their underwriting requirements. Freddie Mac forced its seller/servicers to buy back $960 million in bad mortgages in third quarter. (Fannie does not disclose buyback information.) Ginnie Mae and Federal Housing Administration also require buybacks and indemnifications on bad loans." National Mortgage News - mortgage industry news | mortgage information | commercial real estate
Banks had to buy back $7.1 billion in defaulted single-family loans in the third quarter to reimburse mortgage investors, up from $1.9 billion in the previous quarter
Yes, I saw that, investor guy. I still cannot quite figure out why it's happening. It's just a shell game. The GSEs, whose losses are now paid for by the taxpayers, are pushing losses onto the big banks, whose losses are paid for the taxpayers. Different conduits, but they are drawing from the same pockets ultimately. Why bother moving it, and thus raising the visibility?
cough-cough Glass-Steagall again, I guess that was a long time ago but there were warnings hoisted when it was replaced by sober adults back then. Basel II needs to go into the circular file. I'm amazed at all the talk by G-20 members of cooperation during this time of crisis yet none of them are actually doing anything, zip, zero and NADA. Bozos can't admit they were wrong and even start to do anything constructive, smart, innovative, creative.
Decreasing real wages/benefits, a declining dollar, didn't help and poor J6P decided those smart amoral scumbags surely could be trusted with his hard earned dollars so one day, he could put Suzie and Sam through college on that second mortgage.
One of the things I admire about the people that pushed the survival-of-the-fittest culture on J6P was how simple it was to convince J6P that "investing" was easy. The "you don't need the govment telling you how ta invest your hard earned savings, you can make 10% on stocks/real-estate/tulip-bulbs EASY". If the past housing/stock/prosperity bubble has gone on (say) 10 more years, J6P would have happily handed over all "his" social-security "saving" to the banksters too. They almost got away with it in Bush's second term.
That's one of the fundamental things about dealing with peasants, regardless of the best intentions of the "progressives" (liberals, socialists, whatever) the teaming masses will ALWAYS manage the screw themselves by believing the capitalist myth-builders. You can't protect the peasants from themselves, no matter how hard you try.
patientrenter
I realized after the post that 'this' may end up in reference to some government program or action, and I apologize if I misled you. 'this' was just my own perspective on what is happening in a macro sense as it relates to banks vs savers as you proposed.
I don't think most of the commenters here agree with the federal government programs in general either by design or execution. So the confusion may have been when you asked the commenters here to respond to feelings they do not have or positions they do not support?
Personally I'm not in favor of pouring money into the banks, and then looking to take some back later. I would be less concerned about who profited while breaking no existing laws. Learn the lesson and move on, in the mean time offer bounties to people (lawyers, accountants, insiders) who could help alleviate the case load at the SEC and FBI to prosecute what was illegal. Would do a lot for public trust, knowing that powerful friends aren't protecting guys like the Tan Man or resources wasted on going after Mark Cuban at a time like this because he bankrolled some 9/11 conspiracy video that pissed off Bush.
My concern would be to right the ship, while having no illogical sympathy for the reputation of x hundred year old firms. If it's sustainable and endorse-able, carry on.
I would have created new banks, or bought existing bank infrastructure where sensible. Give them big deposits. Don't use them to buy crap above true value, let them lend at the low rates to the productive part economy on normal terms. but I like taking on a lot of work
That plan is clearly not going to happen, but maybe it sheds light on what I meant.
see above patientrenter: Glass-Steagall, youknowhwhat-can Basel II accord which loosened capital requirements of banks and opened up the entire can of worms to trade by nanoseconds globally in unregulated markets. Get the GD f'ing CFMA repealed. And for those homeowners with underwater mortgages and lost jobs...well I don't have an answer, its the conundrums of all conundrums.
barfly: I'm horribly flattered. I'm not sure I deserve any praise. I still don't understand volumes. Many people here are far, far more insightful. I'm here because I'm still trying to figure this puppy out.
She made the argument that what needs to be separated are the public utility and capital markets function of banks
I am happy to support any measures that reduce the biggest sources of future risk to the health of our financial system. But when I look at what happened, and what is continuing to happen, the big mistake that appears over and over again is encouraging too much lending against asset price bubble prices.
Would a reinstatement of GS break this habit? Well, the current source of the most poorly collateralized loans is the FHA and FNM and FRE. (During the peak, it was private lenders who were the worst offenders.) So, can we just prove that we are trying to deal with the biggest source of the problem by first removing all the nutty low-down 45% DTI home loan programs out there? Then let's re-impose GS and so on, knowing that we are acting out of economic imperatives, not political ones.
I would have created new banks, or bought existing bank infrastructure where sensible. Give them big deposits. Don't use them to buy crap above true value, let them lend at the low rates to the productive part economy on normal terms.
This really was the best solution. And we could have pulled it off, if it had been done sometime between October and March. I don't know if it can be done now, certainly not while Ben and Tim are reflating and making it clear that the Lehman lesson is "never again", instead of "about time".
patientrenter,
I agree that it is too late for it now, in terms of time, money, and expectations in place. They would have had to begun seriously working by Oct. 1 if they wanted to bring it in, but it would have been a miracle if they got all the necessary politicians to support it (although maybe that's what they got when TARP passed on the second vote)
Bernanke and Paulson (with Geithner around) committed to the Japan method of printing enough money to keep GDP flat / -flation non-negative, while hoping everything cures itself over time. New administration didn't deviate one iota for that plan, and I'm not expecting them to.
trade by nanoseconds globally in unregulated markets
As I said, Nanoo, the big problem was lending too much against asset bubble prices. The specific techniques that were used in the process of doing that had some impact, but the basic problem is what I just said. To this day, Bernanke and other key people have not acknowledged that this is the big problem. It's like people who eat too much complaining about the advertising of food on TV, or the availability of sweet foods, and so on. Sure, they are all part of the problem, but we're not going to solve that problem without fat people acknowledging that their basic problem is that they eat too much.
Nanoo, but what you do understand, you express very well, and I thank you.
"That's one of the fundamental things about dealing with peasants, regardless of the best intentions of the "progressives" (liberals, socialists, whatever) the teaming masses will ALWAYS manage the screw themselves by believing the capitalist myth-builders. You can't protect the peasants from themselves, no matter how hard you try. " - NaRm
NaRM, just because it's always been that way in the past, I like to believe it doesn't have to be that way in the future. Your own missives are helping people to wake up in that regard. I wish they could be more widespread.
the big mistake that appears over and over again is encouraging too much lending against asset price bubble prices.
Would a reinstatement of GS break this habit?
The idea implicit in her position is, given the separation of the depositary and capital markets functions, that CM would place only investor money at risk and would be allowed to fail.
I look at what actually happened, and you are absolutely right... everyone who had to be bailed out had >30x leverage.
We all saw perfectly well what happened with those SIVs - issue ABCP at 5% to buy CDOs at 5.5%, lever up by an average of 14x. Picking up dimes in front of a steamroller for 7%.
too many players involved for the 'global plan' to be what everyone wants. the truth is, and has been remarked on here by someone recently, when you have large groups what survives is what everyone does not, not want. I think what everyone didn't want was for these counterparty nightmares and international bankruptcies. that's fine, but you either have to produce the funds necessary to restore positive equity (because making the interest payments for a negative equity institution will mutate them into something very bad, only an idiot would do that...) or you can leave the adult's table. I mean, Bernanke really really wants the average house price in America to rise to $1mn and stay there on its own with no adverse consequences.... but Bernanke doesn't get everything he wants
POLL: When will we know that government is truly responding to the financial crisis?
This is a dumb question. Govt is already responding. Lets all relax and let do its job.
NEVER: "Muddle-thru" will go on and on: another (smaller) stimulus; extended UE benefits, "talk tough" on loan mods, financial reform and job creation, and devalue the dollar (slowly, hopefully)
When recreational drugs are legalized to reduce prison costs and tax the underground economy.
When there is a massive change in the US military budget cut (big reduction or increase in forces).
When depression-era "fireside chats" and work camps return.
Hu knows? To some degree, disaster is "baked in" because as things worse it becomes more difficult for nation states to coordinate a response. In the worse case, we may collectively follow the dinosaurs into oblivion as the dollar continues to fall; trade wars become more common; agreement on reducing greenhouse gas emissions never happens, wars break out.
Imagine how tempting real estate looked after wiping out in the tech bust.
Wow, a great investment opportunity. Real estate is proven to be solidly safe. Not like those tech shares. Gee golly. At least I still have a job. "Darling, let's look at a larger house. We'll be able to sell at retirement".
On Friday I received notice from SSA that my wife and I will each have to pay an additional $44.20/mo toward Medicare Part B this year due to Modified AGI exceeding $170,000 in 2008.
This is what I was saying. IRS and SSA now share your tax information. What you report to IRS gets filtered into your Medicare Part B premium calculation, with a two-year lag. You have to watch those MAGI thresholds (there are four of them). If you go just one dollar over a threshold (with a two-year lag), you will have to pay an extra $44.20 X 12 X 2 in Medicare B premiums in two years. Kinda a high marginal tax rate, no?
(Don't try explaining this to a CPA. It's too complicated.)
About separating capital market and depository functions:
The depository function is actually a very mature, low margin business. It has little value to the banks EXCEPT to fleece people (low cost $ and captured market) and make the Too-Big-To-Fail case (fleecing in a different way).
I, too, believe that the depository function should be nationalized, and there would/should be no bailouts of risky capital markets companies.
"Bernanke really really wants the average house price in America to rise to $1mn and stay there on its own with no adverse consequences.... "- EHP
that's maybe what it looks like, but I think his real objective is in keeping interest rates low, to increase discretionary spending, as Broward has mentioned previously. This POV holds a lot of water with me, for some obscure reason.
CM would place only investor money at risk and would be allowed to fail.
I support any measure that would make it possible to let insolvent financial institutions fail. But I think that campaigning for Glass-Steagall has become a way of avoiding that. By reinstating GS, we would feel like we'd solved the problem. Banks and lenders and borrowers and all of FIRE could get back to lending way too much against collateral that is still valued way too high. But removal of GS was the bete noire for the left wing of the Democratic party, so now it's become an emotional prize for them.
I would support reinstating GS, but only if we ensure we stop the main abuse first - too much lending against overpriced collateral. And that would mean removing the FHA and FNM and FRE programs....... Silence. Ain't gonna happen. People like what the bubble does for them personally, and they have no intention of pulling the plug, just pretending to.
EHP: I could have also asked it this way: since most believe that "extend and pretend" is faulty, and will lead to a poor outcome, when will we know that government has resolved to resolve the crisis?
Quit reading narrow blogs. Check the main news on TV and newspapers. Most people subscribe to the extend and everything will, hopefully, get back to nearly where it was before theory.
I should clarify again: most HERE believe that "extend and pretend" is faulty...
The question assumes that govt can be effective in resolving or alleviating affects of the downturn once conditions exist that result in the political will to do so with policy choices like legalizing drugs and bringing home troops.
his real objective is in keeping interest rates low, to increase discretionary spending,
And I think this POV is borne out empirically. Imagine if someone had told you in 2000 that $USD would be nearly cut in half, declining from 120 to low 70s, and, yes, commodities would rise as you'd expect, but almost the whole yield curve would be at generational lows.
And even at these tiny yields, there's strong demand for treasuries.
Imagine a world where 23% of mortgages are delinquent, yet mortgage rates have a 5-handle on them.
I am thinking the US consumer & the government are in a similar jam - jumped off a burning cruiseship in the middle of the ocean without a lifeboat and now treading water. Sooner or later there just isn't enough juice left to keep kicking, and then, it's davey jones' locker.
I know we all love wallowing in the schadenfreude and so on, but the US economy is not going to shrink by more than 20%, tops. And it's far more likely that it will merely see a reduced rate of growth. Let's not overstate the case.
I raised the question because earlier today someone posted the following link, a summary of the Urban Land Institute (ULI) conference that described someone from Treasury saying that "extend and pretend" is effectively (official!) govt policy for all bad loans.
The govt wants to support banks as they ride out the recession. But what if the recession is a long-lasting U or W?
to me, it shows strong faith in the USG and the American economy, worldwide.
On Dec. 14, $3.52 billion in Nakheel bonds come due. One of the largest Islamic group of bonds issued, the deal was snapped up by Western and regional investors. In a reflection of how sure investors were that Dubai would meet these payments, the bonds were trading at a 10 percent premium to face value earlier this week. They are now trading at around half of face value.
But what if the recession is a long-lasting U or W
Either the wall of money meets an equal wall of increased supply of goods and services, as the US economy starts growing rapidly again, or it doesn't and the large amount of money meets a smaller amount of goods and services. The rest is... history
I know we all love wallowing in the schadenfreude and so on, but the US economy is not going to shrink by more than 20%, tops. And it's far more likely that it will merely see a reduced rate of growth. Let's not overstate the case.
Yes, maybe, but what if we keep shrinking by 5 - 10% yearly for the next few years?
Is it so unlikely?
Government spending on welfare is not creating jobs, just feeding the unemployed. Consumption is still impaired.
An interesting statistic from Rich Toscano is that the Case-Shiller price for the high-price segment in San Diego FELL (albeit by less than 1%) in September.
If you believe that, then.... you are young, in economic education years.
I am indeed young, and quite used to being patronized.
However, the question still stands. We need something to create or invent. Something where the US workforce can create value, that grows the economy at a steady 4 or 6% a year, over and above what we have now.
Imagine the US government as the turkey and Treasury investors as the butcher...
CHARLIE ROSE: And what is the story of the turkey?
NASSIM NICHOLAS TALEB: In the book, I have the story of a turkey that
is fed for 1,000 days by a butcher, and every day confirms to the turkey
and the turkey’s economics department and the turkey’s risk management
department and the turkey’s analytical department that the butcher loves
turkeys, and every day brings more confidence to the statement. So it’s
fed for 1,000 days...
CHARLIE ROSE: Gets fatter and fatter and fatter.
NASSIM NICHOLAS TALEB: Fatter and fatter. On the day when its
comfort will be at its maximum, there is going to be a surprise. There
will be a surprise for the turkey.
we're pretty good at getting ourselves into jams, but we're also pretty good at getting ourselves out of them, too. Never underestimate the ingenuity of the masses, man.
In a large nation like ours, it is extremely unlikely that any large and successful long term shift in industries will come about as a result of prognostications by an elite group (of people patronizing others .
But it is clear that we cannot import more than we produce forever, and the rebalancing will likely involve a reduction in the forex value of the dollar. When that happens (and it's been happening some recently) on a large and long term scale, then millions of Americans will find many imports so expensive that enterprising Americans will see the opportunity to make the goods here for less, or even export to other countries for (gasp!) less than the competitors.
I can see fuel becoming more expensive, and that will lead to different commuting habits (including more working from home), and more local production. My personal hope is that somehow Americans will see the light and develop a food culture (in favor of flavor and freshness, not quantity and appearance and shelf life), but that's probably an empty dream.
The proper response is: It's probably not going to happen. Or: It could happen but the odds are greatly against it happening in the next five years.
No one can confirm that it definitely will not happen. Astronomers can work up a table of odds for Munich re, but even they can only generate estimates. We don't even know how many Earth-orbit crossing bodies exist in our system, or where all of them might be, or where their orbits may carry them, or from what direction they might approach the Earth.
However, if we did know these facts about them, we could probably speak with more confidence about their future positions than we could about what may happen to the global economy in the next five years. Astronomical bodies don't cheat, steal, lie, or even sneak. They aren't greedy, inattentive or incompetent. Neither the long run nor the short run make any difference to them. They don't bluff or make war.
Question: By pegging its currency to the dollar, isn't China defeating the dollar devaluation as a strategy for US industrial competitiveness? Dollar devaluation then becomes a tax on the world and a way of increasing asset values in the US (so the banks can become solvent), not a means of making our economy competitive (verses China, anyway). At some point, other countries will be forced to follow China's lead or face really cheap US and Chinese goods (or erect trade barriers).
Chinese to channel VC funds to innovative companies with high-growth potential while Obama ramps Afghanistan while trying to sell his health care plan. This cat is afraid to buck the MIC
By pegging its currency to the dollar, isn't China defeating the dollar devaluation as a strategy for US industrial competitiveness?
notso much defeating as working at cross purposes.
"Dollar devaluation then becomes a tax on the world and a way of increasing asset values in the US (so the banks can become solvent), not a means of making our economy competitive (verses China, anyway)."
I guess we shall see what we shall see on that front.
"At some point, other countries will be forced to follow China's lead or face really cheap US and Chinese goods (or erect trade barriers)."
Perhaps. Unless the economy comes derailed and then all bets are off.
But then, volker don't know shit. volker sell advertising
No sweat, reply the Keynesians. We can easily finance $1 trillion a year of new government debt. Just look at the way Japan's households and financial institutions funded the explosion of Japanese public debt (up to 200 percent of GDP) during the two "lost decades" of near-zero growth that began in 1990.
Unfortunately for this argument, the evidence to support it is lacking. American households were, in fact, net sellers of Treasuries in the second quarter of 2009, and on a massive scale. Purchases by mutual funds were modest ($142 billion), while purchases by pension funds and insurance companies were trivial ($12 billion and $10 billion, respectively). The key, therefore, becomes the banks. Currently, according to the Bridgewater hedge fund, U.S. banks' asset allocation to government bonds is about 13 percent, which is relatively low by historical standards. If they raised that proportion back to where it was in the early 1990s, it's conceivable they could absorb "about $250 billion a year of government bond purchases." But that's a big "if." Data for October showed commercial banks selling Treasuries.
That just leaves two potential buyers: the Federal Reserve, which bought the bulk of Treasuries issued in the second quarter; and foreigners, who bought $380 billion. Morgan Stanley's analysts have crunched the numbers and concluded that, in the year ending June 2010, there could be a shortfall in demand on the order of $598 billion—about a third of projected new issuance.
At some point, other countries will be forced to follow China's lead or face really cheap US and Chinese goods (or erect trade barriers)
Yes, it's not all going to a smooth plan. China needs to revalue its currency vis a vis the dollar, and increase its own internal consumer demand, but it hasn't. So the revaluation implied by the USD's devaluation has been borne by the Euro, mainly. Eventually, Europe could erect trade barriers to Chinese (and US) goods. But at that point China would probably see the light, and start moving. Messy, but that's the way these things happen in the real world. The underlying forces are fairly clear, but the individual steps and timing are unpredictable.
We need something to create or invent. Something where the US workforce can create value, that grows the economy at a steady 4 or 6% a year, over and above what we have now. Where does that come from?
Exactly. Where does that come from? Until some new technology is invented, probably some new energy technology, we have a long, painful slog ahead.
"By pegging its currency to the dollar, isn't China defeating the dollar devaluation as a strategy for US industrial competitiveness?"
by pegging to the dollar, China is absolutely in lockstep with us, leaving us with no comparative advantage. Basically, as I've said before, it's economic warfare, with China attached to our Achilles heel like a pit-bull.
So here's another scenario—which in many ways is worse than the inflation scenario. What happens is that we get a rise in the real interest rate, which is the actual interest rate minus inflation. According to a substantial amount of empirical research by economists, including Peter Orszag (now at the Office of Management and Budget), significant increases in the debt-to-GDP ratio tend to increase the real interest rate. One recent study concluded that "a 20 percentage point increase in the U.S. government-debt-to-GDP ratio should lead to a 20–120 basis points [0.2–1.2 percent] increase in real interest rates." This can happen in one of three ways: the nominal interest rate rises and inflation stays the same; the nominal rate stays the same and inflation falls; or—the nightmare case—the nominal interest rate rises and inflation falls.
Today's Keynesians deny that this can happen. But the historical evidence is against them. There are a number of past cases (e.g., France in the 1930s) when nominal rates have risen even at a time of deflation. What's more, it seems to be happening in Japan right now. Just last week Hirohisa Fujii, Japan's new finance minister, admitted that he was "highly concerned" about the recent rise in Japanese government bond yields. In the very same week, the government admitted that Japan was back in deflation after three years of modest price increases.
The proper response is: It's probably not going to happen.
Yes, you are right, Pavel. But you are older and wiser than me, and more polite.
I get frustrated when I see that people know as little about economics as they would about reading and writing if they had been raised by wolves. It's a sad reflection on our educational setup, and not usually their personal fault. But please, everyone out there should educate themselves about economics. If people knew as much about economics as they do about politics, we'd be making much better political and economic and financial decisions.
There are a number of past cases (e.g., France in the 1930s) when nominal rates have risen even at a time of deflation. What's more, it seems to be happening in Japan right now.
France in the 1930s is a dreadful example of how the morale of an entire country can disintegrate.
Focus Fusion is still twelve to eighteen months away.
Wind power is here and now.
Solar is here and now.
Decentralizing energy production to the end user is here and now.
All would (not "create") but employ millions of people with the requisite or approximate skills.
We're never going to pull ourselves out of the manufacturing mess by building eBay trinkets. And we're never going to achieve independence until we do so from the energy cartel. (Both foreign and domestic.)
printing presses have nothing to do with assets, whether the asset is worth 100 dollars or 10 dollars, it's all relative
The situation is such that China cannot bring to bear any real world enforcement measures, their military is ineffective and will be as long as we have our forlorn straddling the Khyber Pass.
I know the US economy is resilient. But I think this recession is different than any postwar recession.
We have an extraordinary set of challenges. On multiple levels. Tradition political economics in the "real world" is to deal with them when they become a problem. Special interests love that.
Just look at the auto industry. Talk about extend and pretend!
If we care about our grandchildren, we need to address competitiveness in a way that is holistic and forward looking.
Life is a blast when you know what you're doin
Best to know what you're doin 'fore your life get ruined
Life is a thrill when your skill is developed
If you ain't got a skill or trade, then shut the hell up
I think this recession is different than any postwar recession.
I agree that it is worse than any recession since 1983. But the recessions in the 1970's and early 1980's had some zing. I recall Presidential speeches that our way of life had to change, and so on. And that was after many years of malaise, not just 2 years.
Absolutely nothing wrong with Ferguson's analysis quoted above. There's definitely a limit to the amount of debt a government can issue. I think Japan is very close to that limit now.
MrM, I use to know the head of the bond dept. at a large southern bank. They prided themselves in always being large sellers in the FF overnight market and were conservative, almost nonlenders. Now I understand how they made their money. But their conservative ways allowed branch banking, out-of state-banks to blindside them. The name's still there, but somebody else owns 'em. Thanks for winterspeak. Got any more suggestions?
Announce a schedule of annually increasing taxes on most fuels, with small (3-6%) increases each year for 20 years.
That way, people can plan for the adaptations that need to be made.
State clearly the benefit for which the pain would be borne - a future where we don't have to send our money to people who don't like is very much (and who keep funding extremism all around the world that we send our armies to fight and die against).
Fund various alternative energy research programs, but let the winners be determined by the market (tilted ever more in favor of all the alternatives by the fuel tax).
In 1993, then President Bill Clinton proposed a BTU tax. It would have taxed all fuel sources based on their heat content except for wind, solar, and geothermal. It was never adopted.
The East Coasters first objected, stating that they shouldn't be penalized for heating their homes. Then the West Coasters objected, stating that gasoline is critical to people's livelihoods given the much greater distances involved. It all went nowhere, of course.
I prefer a conditional tax. In five years, if the price of gasoline is below three dollars the gas tax will go up 10 cents. This allows you to change behaviors without ever actually imposing the tax.
The right wing wackos will put even more pressure in Obama that South America ( except for bought and paid for Columbia courtesy of CIA ) is becoming another threat just like those Muslims in Middle East
We're not coming out of the mess because, sadly, the numbnuts and asswipes we elected, yes all of us elected, are focused on restoring the "Party Like It Was 2005". The problem is that during said party, we threw up all over the sofa, pissed in the potted plants (and killed them,) punched out the caterers, and knocked up the dog.
I haven't heard one single forward looking, forward thinking, forward planning word from the Bozos in Charge.
Throw so much money at the banksters, they don't collapse. What's next? Refund losses in Vegas? Cash4HopelessGamblers?
Now we're going to get the economy revved up by killing (still) more people?
And maybe it would go nowhere now. But since then 9/11 happened. And we have become bogged down in a war against an enemy sheltered in Pakistan, where it grows within madrassas and other organizations funded by wealthy zealots from Saudi Arabia. And the folks who think that the country will support more expensive fuel primarily in order to reduce carbon emissions are smoking something. That works in Berkeley and Cambridge and college communities across the country, but that's not broad enough. There is a chance the country could get behind cutting off our funding of the source of the extremism. That would appeal in Kentucky as well as Manhattan.
Pavel, somebody made some stupid rule (Godwin rule) that the Nazis were never to be referred to, or even mentioned, as somehow breaking Internet protocol. For the life of me, I don't know why, as it was perhaps their rise from economic circumstances that was perhaps the most important event in our recent history, and the analogies bear on so much.
It is precisely for people like yourself, with some knowledge of the facts, firsthand, to remind us of these things, as they arise in conversation, and I, for one, appreciate anything you might have to say on the subject, now or in the future.
Announce a schedule of annually increasing taxes on most fuels
A lot of our problems are political, not economic. Until we are faced with the possibility of terrible outcomes, making for public debate, special interests force changes that benefit them to the detriment of everyone else.
The attempt by the financial industry to have any TBTF resolution authority not be funded is a case in point.
While there are some benefits in efficiency, it seems that industry concentration is detrimental in the long run: oligarchs have too much influence with government, and their rent-seeking reduces innovation.
that's maybe what it looks like, but I think his real objective is in keeping interest rates low, to increase discretionary spending, as Broward has mentioned previously. This POV holds a lot of water with me, for some obscure reason.
they are connected. without restoring the apparent positive wealth of the household balance sheet, they will not spend like they did. ditto for bank lending. it's what I said at the outset, and surprise surprise bank reserves are the only thing going up in this world
Remember it? I sure do. Best thing I ran across in 1989. It's still alive. But these days, the first rule of usenet is that you don't talk about usenet.
We need to invent something that grows the economy and can't be outsourced to china or India. There fixed it for ya. Doubt it will happen for a decade or three. But I
am an optimist
The attempt by the financial industry to have any TBTF resolution authority not be funded is a case in point.
The funding is a red herring. Just like the FDIC. Banks today are being bailed out regardless of the FDIC finances. When TARP was being debated, no one said, "Oh, wait, we can't spend more than is in the FDIC fund". They'll bail and spend regardless of whether the fund is there, and regardless of how much is in it.
"The funding is a red herring. . . . They'll bail and spend regardless of whether the fund is there, and regardless of how much is in it."
We'll yes and no.
Yes, the government is going to do what it takes to protect the financial system, BUT I used it as an EXAMPLE of how industry has undue influence, and I'm not sure that your counterpoint reflects that and ...
The industry didn't want it funded because they know that it is MUCH more likely that the resolution authority will be used if it is funded. Resolution generally means a bank is put out of business BEFORE your problems are so immense that it threatens the financial system.
Having it funded benefits the taxpayer because it makes bailouts (using taxpayer $$$) less likely. Bank executives don't want it to be funded because they are much more likely to keep their jobs in a bailout vs. resolution. (as we have seen)
In a reflection of how sure investors were that Dubai would meet these payments, the bonds were trading at a 10 percent premium to face value earlier this week. They are now trading at around half of face value.
Another 50% drop and you'll have a chance at making a killing. Dubai as an international financial center didn't make much sense as even GE is getting into Islamic finance, as a travel destination they only have 5 months of decent weather, none of which are during when Euros holiday. Logistics and a waypoint for air travelers? Sure.
Rt Hon David Miliband MP
Secretary of State.
Department for Environment, Food and Rural Affairs (DEFRA),
Nobel House
17 Smith Square
London
SW1P 3JR
16 July 2009
Dear Secretary of State,
My friend, who is in farming at the moment, recently received a cheque for £3,000 from the Rural Payments Agency for not rearing pigs. I would now like to join the "not rearing pigs" business.
In your opinion, what is the best kind of farm not to rear pigs on, and which is the best breed of pigs not to rear? I want to be sure I approach this endeavour in keeping with all government policies, as dictated by the EU under the Common Agricultural Policy.
I would prefer not to rear bacon pigs, but if this is not the type you want not rearing, I will just as gladly not rear porkers. Are there any advantages in not rearing rare breeds such as Saddlebacks or Gloucester Old Spots, or are there too many people already not rearing these?
As I see it, the hardest part of this programme will be keeping an accurate record of how many pigs I haven't reared. Are there any Government or Local Authority courses on this?
My friend is very satisfied with this business. He has been rearing pigs for forty years or so, and the best he ever made on them was £1,422 in 1968. That is - until this year, when he received a cheque for not rearing any.
If I get £3,000 for not rearing 50 pigs, will I get £6,000 for not rearing 100? I plan to operate on a small scale at first, holding myself down to about 4,000 pigs not raised, which will mean about £240,000 for the first year. As I become more expert in not rearing pigs, I plan to be more ambitious, perhaps increasing to, say, 40,000 pigs not reared in my second year, for which I should expect about £2.4 million from your department. Incidentally, I wonder if I would be eligible to receive tradable carbon credits for all these pigs not producing harmful and polluting methane gases?
Another point: These pigs that I plan not to rear will not eat 2,000 tonnes of cereals. I understand that you also pay farmers for not growing crops. Will I qualify for payments for not growing cereals to not feed the pigs I don't rear?
I am also considering the "not milking cows" business, so please send any information you have on that too. Please could you also include the current Defra advice on set aside fields? Can this be done on an e-commerce basis with virtual fields (of which I seem to have several thousand hectares)?
In view of the above you will realise that I will be totally unemployed, and will therefore qualify for unemployment benefits. I shall of course be voting for your party at the next general election.
Yves was reporting zero permanent mods over on NC.
U.S. Treasury to Push Lenders to Finish More Home Modifications - Bloomberg.com
I am looking ahead for the real bottom!
And we're back to watching the Asian markets open on a Sunday night to see if they're buying the Abu Dhabi sorta-backstop story.
The Asian markets have had a few days to digest the news. Monday will be the first day of trading after the announcement for Middle East markets. The markets there are tiny but these are the people who are most affected by the possible default.
enter tumbleweed...stage right....
cricket...cricket...
OT.
GDD<
I can't believe my pepper plants are still going this year.
Two 37F nights and then 35F last night.
Still putting out peppers.
This is why the majors that got major $$$$$$$$$$$$$$ should have been nationalized at least temporarily. Then broken up and sold. Too big to fail is too big to exist. Harsh words have done nothing since the beginning of this big fat mess. But nooooo, couldn't do that. No strings attached and still getting 0% loans, earning interest on reserves on the feds balance sheet. Its preposterous to think that NOW more harsh words are going to produce anything but more of the same.
So if 70K out of 147K is dismal, what does 0 equal ? Surely that cannot be true...if it is then it shows the banks are giving the finger to the government. I suppose after fisting the gubment flicking them the bird is hardly a major event.
HomeGnome wrote:
NC, right?
Obama will need to blame the dubya shaped recession on dubya ?
Nanoo-Nanoo wrote:
But, don't forget: not JUST harsh, but embarrassing words too.
Yes, totally OT. Im glad yours are doing so well. Im at my parents place in NJ and they are still pulling amazing peppers, arugala, escarole. And it's almost December! I think the days are numbered though now, because the frost came here too last night. Crazy, but heck, Im not complaining.
I just moved to a new place in SF - not sure what my gardening capabilities are going to be for this year. Small shared backyard, but some space. Decent size deck, so I could do some potted plants there. Im already itchin to get started, but Ive got a long rainy winter in store. Which means I'll likely end up starting stuff inside under lights soon.
Just who has leverage over who is the question and yeah, its a rhetorical one.
bearly wrote:
Too late for that now. The six month peasant memory rule applies here.
South Carolina.
Still haven't had a frost yet.
Not that I'm complaining....
Chard and kale are loving the extra rain we've had.
Zero is not correct. From a WSJ report earlier this month:
Mortgage Program Gathers Steam After Slow Start - WSJ.com
"J.P. Morgan Chase & Co. said last week that more than 92,000 of its customers have made at least three trial payments under the program, but just 26% of them had submitted all the required documents for a permanent fix.
...
At Morgan Stanley's Saxon Mortgage Services, about 26,000 of the 39,000 borrowers in the program have made more than three trial payments. Roughly 500 have received completed modifications."
The number has to in the 10s of thousands.
best wishes
GDD9000 wrote:
Wonderful! You can join the Obama administration & spend your free time rearranging the deck chairs.
Not too sure why we're even trying mortrgage mods.. so many of them fail and we're still headed south on home values anyways. Lower home values will absolutely put pressure on local and state governments.. look out for a Muni Bond Collapse.. The Mean Old Investor: The Problem with Muni Bonds
We complain about extend and pretend a lot here. But you have to realize that the bubble was unsustainable before it lost some air. So we (as a society) were extending and pretending for years already. What's going on now is merely a continuation, a mutation, of what was going on before. We (the PTB) can keep doing this for a while yet, maybe years, maybe even a decade. After about a decade, I'd say they run out of bullets, and we get to nominal asset price deflation, or consumer price inflation.
Edit: Never mind, I don't want another debate about de/in -flation.
No time, Im building an ark, since the place didnt come with enough lifeboats.
Maybe it's just rounding error. I mean, it's pretty close to zero. Hahaha.
GDD9000 wrote:
Don't make it so obvious...
CalculatedRisk wrote:
LOL!! Tens of thousands out of how many required and more coming? And those wonderful FHA loans F/F loans are in default again not even one year later. Like I said, deflation is interesting. What a mess.
I can't wait until we've got trial loan modifications on CRE defaults, now that's going to be interesting.
patientrenter wrote:
How do you propose they hold back the tide of foreclosures? No bullet will stop a tidal wave.
patientrenter wrote:
Japan has been extend and pretending for twenty years, though in the last few months the people are having second thoughts.
by the way, I would like to ask again, even though I did on a previous thread, if anyone can confirm that what is purported to have gone on at the Urban Land Institute's SF conference actually happened, and isnt some goofy fabrication. Because it makes for a pretty awful read on both the state of CRE affairs and public policy surrounding it. And it certainly is plausible.
Interesting E-mail between National Real Estate Market Financiers/Investors (Gloomy)
patientrenter wrote:
Or two decades even, just like Japan. It's the waiting I can't stand. Those tumbleweeds and crickets are driving me nuts.
........damn you..........and I AM the one living in the desert!.......btw, earlier, a comp 'tween Dubai and Vegas re. weather: 120-120 temp, but 100% - 10% humidity.
Mr.Kowalski wrote:
I agree. It's a waste of time, effort and capital to invest all that energy in hopeless affairs. This is no penalty do-over time. Take advantage of it!
Rajesh, the reason this time it really is different is Japan was just Japan, this time its global and this time debts of nations are so vast it can't merely be papered over in hopes of a sunshine and flowers given time.
Senator: Delay health care to focus on Afghan war - Yahoo! News
What a fucking assclown!
Bush spent $1 trillion spent in Iraq was really the money that was available to health care
Let's see if Obama has backbone to buck the MIC because he cannot have it both ways
Nanoo-Nanoo, I think the number will be dismal, but the reports of zero are too low!
Anything less than 100,000 has to be considered a failure - at least so far.
best wishes
you forgot SAND, lots of SAND and lots of speculative double-bubble. Who knew it be all about sand
?
GDD9000 wrote:
Interesting read.
km4 wrote:
"said a sharp focus is needed for Obama's new strategy for the 8-year war and how much it will cost. "
"The war is terribly important," Lugar said. "Jobs and our economy are terribly important. So this may be an audacious suggestion, but I would suggest we put aside the health care debate until next year, the same way we put cap and trade and climate change, and talk now about the essentials: the war and money."
The new 8-year war. Nice too see than have them so well schedule now.
Well, youve got perhaps 25k at JPM if the paperwork checks out (which is a big if). And with MS, we've got 500 out of 26000...wonder what is slowing that conversion up??? Could it be the paperwork is as bad now as it was absent before? I mean, think of it this way - if you had no doc before, and you doc it now, it doesnt change the fact that you didnt have enough income when you HAD a job and sure dont have enough now that you DONT have a job.
So yeh, you might get 100k, but you might also get something closer to 50k, and either one of those results is basically crap.
According to Bloomberg, the November unemployment rate is expected to stay flat at 10.2% and the NF payroll is expected to drop by 100K.
Should we open a Hoocoodanode poll for these numbers?
Why is it bad if people who do not qualify for a loan.... do not qualify? There are plenty of qualified people, at the right price. Foreclosure is the first step to moving from people who cannot buy to people who can. This is all a polite game to avoid dealing with the real issue - price discovery. True price discovery will not be permitted.
Sitting on a park bench
eyeing little girls with bad intent.
Snot running down his nose
greasy fingers smearing shabby clothes.
Drying in the cold sun
Watching as the frilly panties run.
Feeling like a dead duck
spitting out pieces of his broken luck.
Well now, just imagine the UE rates should those soldiers come home and need work? ugh. Its amazing to me we can be so liberal with our assets overseas which put at risk more than just $$s, so liberal with biggie piggy banks but we just can't muster the courage to get the bankers that got literally trillions to take a little haircut on their yearly bonuses (GS on track for a record year among others) or get the quasi banker/broker/us taxpayer owned to do loan modifications on the bad products they sold.
State’s Unemployment Fund Goes Broke | Hartford Business
"The state’s unemployment insurance fund ran out of money Oct. 13, and the state has already borrowed $80 million to make up for the shortfall. By the end of 2009, those loan amounts are expected to increase to $260 million. Through 2012, state officials predict the state may need to borrow up to $900 million."
Gee a couple hundred million here a couple hundred million there and pretty soon we're talking real money.
Why not? I'd vote.
Tim waiting for 2012 wrote:
Don't worry, they'll pay it back. Just a temporary thing.
Nanoo-Nanoo wrote:
Nanoo, there is nothing stopping you from finding an underwater homeowner and giving your savings to them, to allow them to keep their home.
The new 8 year war? This is on top of the old 8 year war? Can we stop farting around and call it the Forever War? Destroy one country after another until we run out of countries.
edit: Or they run out of us.
Effectively, I already am. I'm not the one who sold them a bill of goods either and I'm not the one to didn't perform due diligence on loans. Besides my paltry savings evidently isn't needed by said biggy piggy banks, they don't need my stinking little dollars for their capital or balance sheets based on those returns for savings, CDs or anything other than something connected to the
market.
Nanoo-Nanoo-
Just to help me prepare for our upcoming discussion, what aspect of my original post struck a nerve?
Nanoo, you sound like you're going to be holding onto your "paltry savings". Well, others of us will also be trying to hold onto our paltry savings, and forgiving debt doesn't do that.
Inefficiencies providing jobs in health care.
Timelapse map of unemployment
multimediafinal
patientrenter, did I say one word about debt forgiveness? Nope. I said modifications on bad loan products and we all know what they are and we all know that we, the taxpayer, are responsible for backstopping the biggie piggy banks who made the bad loans to begin with and encouraged thorough "financial innovation" the double bubble speculation in RRE and CRE and thusly...the genesis of this big fat mess.
I am curious about the level of economic education on this blog.
Who here thinks that most of the dollar losses created by mass forgiveness or modification of debt falls primarily on bank executives and bank shareholders, versus savers (who invested directly or indirectly in bank debt) and taxpayers (who will be bailing out the banks for their extra losses)?
Hoopajoops that graphic is terrifying. Thanks for posting it.
Also, there's a good graphic - don't know that it's been posted - in the NYTimes yesterday:
- NY Times
patientrenter wrote:
It's savers.
The money from "savers / investors" has to flow back to debtors if you want debtors to continue buying stuff.
If they were earning sufficiently, they... wouldn't be debtors.
broward wrote:
Broward, John bought a home in Manhattan Beach for $300,000 in 1996. He's put in $100,000 to upgrade the kitchen and bathrooms since then. He sold it in 2006 for $1.5 million.
How is that $1 million or so gain going to get recycled to debtors?
patientrenter wrote:
His $1.2 million is sitting in the bank and they loaned it out.
broward wrote:
It is not how much they are earning; it is how much they are spending relative to earning. There are a lot of high income debtors. Some Goldman Sachs partners lost big because they got a margin call on their GS stock when the market crashed and they didn't have enough ready cash to pay up. So the stock got sold at rock bottom prices; and then the stock price rebounded up.
So sad.
broward wrote:
And it's still his, thanks to the FDIC. So how is going to get recycled? If you go with your notion that recycling just involves passing the money along as debt, then the only loan mods we need to do are ones that pay all the existing loan obligations with new loans. I don;t think that's what you are suggesting, and it certainly is not what the PTB are pushing.
It's hard for me to see how this will work societally. They'd better have brought enough cramdowns for the whole class.
Not sure what to make of this...
On Friday I received notice from SSA that my wife and I will each have to pay an additional $44.20/mo toward Medicare Part B this year due to Modified AGI exceeding $170,000 in 2008.
The irony is that the only reason that it came anywhere close to that was capital gains achieved by paying attention to this blog!
Thank you, CR. I think.
Maury the Credit Responsibility Panda wrote:
And what's the whole class? Does that include people who scrimped and saved and put down a lot of money, so they don't have a large loan? And people who looked at home prices and said WTF, it would be irresponsible of me to buy at that price, and are renting instead? How about younger folks who haven't bought yet, and whose tax bills will be paying off the cost of the loan mods (through govt bailouts of the banks and others)?
Rajesh wrote:
It's a relative measurement but most people, particularly investors, can only think in one frame of reference.
The fact is, the products are being produced and consumed.
energyecon,
thanks for the link to the paper from that slashdot link
in return here is a link, Bing Cashback
to promote their new search engine, Microsoft is offering 8-25% cash back on purchases from a bunch of online stores. don't know if it's a good deal, but I can't keep up with your academic pdf paper links. I've got a big stack of pdfs in the to-read folder. besides, think of the economy
patientrenter, re: banks vs savers
that's just it, savings are not a flat distribution, the wealthiest will lose the most in absolute terms just from simple odds. percentage-wise, much of America has the 0% safety limit (see: The 2009 MetLife Study of the American Dream )
Did I ever tell you about the time I got into that fight... sure I had a fractured ocular socket and lost a tooth, but you should have seen the other guy -- he won't be messing with me any time soon.
that's what it's like
patientrenter wrote:
First of all, we need to separate loans issued by Fannie/Freddie from loans issues by the private sector (dominated by Citi, JPMorgan, BofA, Wells Fargo).
Whatever losses are created by modification of loans issued by Fannie/Freddie will be borne by the taxpayers who own these companies.
Losses created by modification of private loans will first be borne by their shareholders (who in the case of Citi and BofA also include taxpayers). If that means more capital infusion into Citi, that would be a loss to taxpayers.
Nothing will happen to bank debt owners or bank executives so long as the Administration pursues the same set of financial policies.
Savers get screwed with or without loan mods due to zero interest they receive on their savings while they still have to pay interest to banks on the mortgage/credit card/auto loan balances.
Banks executives are not affected
MrM wrote:
Only if you add EMRATIO to the mix...
Has anyone pointed out that it's not the banker's money?
Banks manage Other People's Money.
broward wrote:
Bank issue loans when they have enough capital and they like borrowers. The amount of deposits they carry is irrelevant to the loan decision. They always get as much liquidity form the Fed as they want/need.
patientrenter wrote:
I'm tempted to agree with this but I'd have to think about.
There's no question that the Fed's answer is a roundabout method that adds a huge amount of overhead.
Look at the relative cost of C4C and the Housing incentive.
My instinctive guess is that we're working as inputs into the debt system, pushing into the sum of the problem so it requires something like 10x more nominal value than directly circumventing the problem.
patientrenter wrote:
In politics, it's the "whole class" that "matters the most". I would suspect that younger folks, renters, and savers don't matter as they never have.
MrM wrote:
You're kidding, right?
EvilHenryPaulson wrote:
Taxes are the right place to set redistribution policy. Setting up a giant RE lottery scrambling real net returns doesn't fix the problem of poor income and wealth distribution. It just adds one more layer that distributes wealth lousily and nearly randomly. To those who don't like the existing distribution method that favors the wealthy (because of low taxes on high incomes), this random scrambling of returns, driven by the RE lottery, is satisfying because it favors borrowers, who include poorer people. But it's just adding one nutty distribution system onto another.
MrM wrote:
Since when?
rajesh
really? such a shame so does this mean that they are not all knowing? such a suprise
patientrenter wrote:
Not to mention creating rich opportunities to commit fraud. Look at what the RE lottery managed to accomplish from 2000-2007.
broward wrote:
No. With fiat currency and fractional banking, loans create deposits. See, for example, winterspeak.com: Loans Create Deposits -- how banks actually work or winterspeak.com: The Public Purpose of Banking
patientrenter wrote:
Yup.
That's a lot of what's happening.
Just like the web.
Legacy work-around on top of work-around.
You set the workweek to 32 hours to force balance of production to consumption at a macro level.
Put up tariffs to remove China & India's issues from being our issues.
Everything else can be driven by that.
You can get rid of a huge gov't bureaucracy & payments, eliminate a ton of make-work jobs but overall, a lot of people will be happier.
MrM wrote:
Loans create increasingly smaller deposits, it's a recursive function dependent on the original loan.
Ultimately it works out to a simple ratio, though, so I don't bother trying to track (or argue it) so granularly.
broward wrote:
I actually agree with this, broward. I work probably a 32 hour week myself, and could achieve all I want to achieve in much less, but I have to pretend that the 50-hour week is necessary. Ridiculous.
broward wrote:
That assumes that in order to make a loan a bank needs to get a deposit in the first place. That's how it is described in macro textbooks, but that's not how it works in practice.
Please read winterspeak's posts I linked to above. He has written extensively on this topic.
patientrenter wrote:
Yes, I agree. Most people I know work much less than 40 hours.
btw, did you mean 50-hour week? Or 40?
OT
I was surprised Colin Powell got invited to the WH shindig last week. This fcker along with the CIA guy, was instrumental in starting the Iraq invasion and there he was in the festivities. There is no fing accountability anywhere anymore. If there is a war crime tribunal somewhere someday, hope he gets his day in court.
patientrenter wrote:
this isn't a redistribution -- the money was never there, we are all losers
this isn't a policy -- this is letting people get exactly the investments they paid for
Thats why its too simplistic as the entire kit and hoocoodanode is the complexity of saving, loans, incomes and means of financing. In particular, the financing part which became the most complex allowing risk taking by bankers not formerly allowed under those horrible old fashioned methods of separating utilitarian banking needs including loans vs that of wall street/financial institutions. This included 'savings' as savers of hard cash money were unrewarded but by magic they could be ultimately rewarded by 'investing' it in all sorts of investment vehicles (in itty bitty small letters...there is always risk involved with any investment choices, be sure to consult a professional). Decreasing real wages/benefits, a declining dollar, didn't help and poor J6P decided those smart amoral scumbags surely could be trusted with his hard earned dollars so one day, he could put Suzie and Sam through college on that second mortgage.
Now price discovery is the problem in a deflationary RRE (and CRE) market which has too many federal fingers in it trying to reflate it again. Meanwhile by chance, bad luck, bad personal financial decision, hoards and hoards on on a slippery slope of complete ruin because all that risk that was to be so rewarding ended up being one big fat lie, be it in their homes or their stock market portfolios. And OH MY, in the interest of those next quarterly returns, their job got axed and now its BK time and a home under that bridge to no where. So now what and how did I do?
MrM wrote:
Yes, this is a good link. I think it went around here many months ago. But, people forget the cause and effect is reverse from the classic textbook description. Loan first, borrow what you need (from someplace) to make the ratios come out.
EvilHenryPaulson wrote:
"This isn't a policy" . EHP, I know you're reasonably bright, but when Barney Frank says that making bad loans to keep home prices high is "policy" then it really is policy. He's closer to the center of policy-making than you or I are.
LBD, I just left you a comment on the previous thread.
NOTaREALmerican wrote:
Probably meant 50.
There's a lot of push in IT to show hours, regardless of actual work.
I've got to go to lunch, I'll read the Winterspeak doc when I get back.
Nobody talks about but there's already a low-level revolution in motion.
4 police officers gunned down in WA today.
There's been several other one-off incidents in the past two years, including judges murdered and that tax collector guy in KY. Of course it has to be a suicide, can't afford it to be anything else.
I just made a huge steaming vat of homemade smoked turkey and barley soup (spicy of course). It is full of carrots, celery, onion, tomato, smoked turkey, chili peppers and barley. There is also two onions and probably a whole bulb of garlic in there....I made it from scratch, homemade broth and all...I'll have to save my dooming for another day...
We'll eat or give away half and freeze the other in batches in case anyone comes down with a cold or the flu (especially me because nobody else can cook it)...
DANG, that sound good Kristina, now I'm hungry.
Comrade Kristina wrote:
Yeah, great. It's 2pm here, I'm hungry, and now this pops up. And there's no technology to get me any via the internet. My stomach is growling even more now, thanks allot.
Comrade Kristina wrote:
I'll send you my mailing address
Sounds good, Kristina. Sometimes, when we tear apart the negative aspects of a 2% reduction in aggregate national income, we lose sight of the other 98% and all the ordinary pleasures life offers. With a positive attitude, and good cooking like yours, we could all feel better after a small national loss of GDP, even if it were permanent.
Here's an interesting bit of news.
"Banks had to buy back $7.1 billion in defaulted single-family loans in the third quarter to reimburse mortgage investors, up from $1.9 billion in the previous quarter. Federal Deposit Insurance Corp. Call Report information shows that most of the buyback demands fell on JPMorgan Chase and Bank of America. Chase repurchased $2.7 billion in defaulted loans and BoA repurchased $2.3 billion to satisfy investor demands. Both are on the hook for troubled loans they took control of when they purchased ailing mega-thrifts — Countrywide in the case of BoA and Washington Mutual by Chase. The FDIC information also lists buybacks by Citibank ($898 million), National City Bank ($361.6 million), Wells Fargo Bank ($266 million) and SunTrust Bank ($232.3 million). Investors like Fannie Mae and Freddie Mac can require lenders to buy back defaulted loans that don’t comply with their underwriting requirements. Freddie Mac forced its seller/servicers to buy back $960 million in bad mortgages in third quarter. (Fannie does not disclose buyback information.) Ginnie Mae and Federal Housing Administration also require buybacks and indemnifications on bad loans." National Mortgage News - mortgage industry news | mortgage information | commercial real estate
good news or what?
UAE Offers More Funds to Banks
some investor guy wrote:
Yes, I saw that, investor guy. I still cannot quite figure out why it's happening. It's just a shell game. The GSEs, whose losses are now paid for by the taxpayers, are pushing losses onto the big banks, whose losses are paid for the taxpayers. Different conduits, but they are drawing from the same pockets ultimately. Why bother moving it, and thus raising the visibility?
"So now what and how did I do? "
perfectly, Nanoo. I really appreciate your down-to-earth take on things. Making sense of this mess isn't always easy, and you help.
cough-cough Glass-Steagall again, I guess that was a long time ago but there were warnings hoisted when it was replaced by sober adults back then. Basel II needs to go into the circular file. I'm amazed at all the talk by G-20 members of cooperation during this time of crisis yet none of them are actually doing anything, zip, zero and NADA. Bozos can't admit they were wrong and even start to do anything constructive, smart, innovative, creative.
Nanoo-Nanoo wrote:
What do you suggest? New loans with built-in options to not repay? Oh, wait, we're already there. What else?
Nanoo-Nanoo wrote:
One of the things I admire about the people that pushed the survival-of-the-fittest culture on J6P was how simple it was to convince J6P that "investing" was easy. The "you don't need the govment telling you how ta invest your hard earned savings, you can make 10% on stocks/real-estate/tulip-bulbs EASY". If the past housing/stock/prosperity bubble has gone on (say) 10 more years, J6P would have happily handed over all "his" social-security "saving" to the banksters too. They almost got away with it in Bush's second term.
That's one of the fundamental things about dealing with peasants, regardless of the best intentions of the "progressives" (liberals, socialists, whatever) the teaming masses will ALWAYS manage the screw themselves by believing the capitalist myth-builders. You can't protect the peasants from themselves, no matter how hard you try.
Nanoo-Nanoo wrote:
Yves makes the point that reinstating G-S is a 1930s solution for a 2010 problem.
She made the argument that what needs to be separated are the depositary and capital markets function of banks.
nar
not this peasant.
patientrenter
I realized after the post that 'this' may end up in reference to some government program or action, and I apologize if I misled you. 'this' was just my own perspective on what is happening in a macro sense as it relates to banks vs savers as you proposed.
I don't think most of the commenters here agree with the federal government programs in general either by design or execution. So the confusion may have been when you asked the commenters here to respond to feelings they do not have or positions they do not support?
Personally I'm not in favor of pouring money into the banks, and then looking to take some back later. I would be less concerned about who profited while breaking no existing laws. Learn the lesson and move on, in the mean time offer bounties to people (lawyers, accountants, insiders) who could help alleviate the case load at the SEC and FBI to prosecute what was illegal. Would do a lot for public trust, knowing that powerful friends aren't protecting guys like the Tan Man or resources wasted on going after Mark Cuban at a time like this because he bankrolled some 9/11 conspiracy video that pissed off Bush.
My concern would be to right the ship, while having no illogical sympathy for the reputation of x hundred year old firms. If it's sustainable and endorse-able, carry on.
I would have created new banks, or bought existing bank infrastructure where sensible. Give them big deposits. Don't use them to buy crap above true value, let them lend at the low rates to the productive part economy on normal terms. but I like taking on a lot of work
That plan is clearly not going to happen, but maybe it sheds light on what I meant.
see above patientrenter: Glass-Steagall, youknowhwhat-can Basel II accord which loosened capital requirements of banks and opened up the entire can of worms to trade by nanoseconds globally in unregulated markets. Get the GD f'ing CFMA repealed. And for those homeowners with underwater mortgages and lost jobs...well I don't have an answer, its the conundrums of all conundrums.
barfly: I'm horribly flattered. I'm not sure I deserve any praise. I still don't understand volumes. Many people here are far, far more insightful. I'm here because I'm still trying to figure this puppy out.
Maury the Credit Responsibility Panda wrote:
I am happy to support any measures that reduce the biggest sources of future risk to the health of our financial system. But when I look at what happened, and what is continuing to happen, the big mistake that appears over and over again is encouraging too much lending against asset price bubble prices.
Would a reinstatement of GS break this habit? Well, the current source of the most poorly collateralized loans is the FHA and FNM and FRE. (During the peak, it was private lenders who were the worst offenders.) So, can we just prove that we are trying to deal with the biggest source of the problem by first removing all the nutty low-down 45% DTI home loan programs out there? Then let's re-impose GS and so on, knowing that we are acting out of economic imperatives, not political ones.
Nanoo-Nanoo wrote:
first, get the puppy to use the paper for doing its business
EvilHenryPaulson wrote:
This really was the best solution. And we could have pulled it off, if it had been done sometime between October and March. I don't know if it can be done now, certainly not while Ben and Tim are reflating and making it clear that the Lehman lesson is "never again", instead of "about time".
ha..she does pretty well, mostly, except on days when sovereign's default.
Tradewalt,
Last reply on the other thread. Thanks
patientrenter,
I agree that it is too late for it now, in terms of time, money, and expectations in place. They would have had to begun seriously working by Oct. 1 if they wanted to bring it in, but it would have been a miracle if they got all the necessary politicians to support it (although maybe that's what they got when TARP passed on the second vote)
Bernanke and Paulson (with Geithner around) committed to the Japan method of printing enough money to keep GDP flat / -flation non-negative, while hoping everything cures itself over time. New administration didn't deviate one iota for that plan, and I'm not expecting them to.
Nanoo-Nanoo wrote:
As I said, Nanoo, the big problem was lending too much against asset bubble prices. The specific techniques that were used in the process of doing that had some impact, but the basic problem is what I just said. To this day, Bernanke and other key people have not acknowledged that this is the big problem. It's like people who eat too much complaining about the advertising of food on TV, or the availability of sweet foods, and so on. Sure, they are all part of the problem, but we're not going to solve that problem without fat people acknowledging that their basic problem is that they eat too much.
Nanoo, but what you do understand, you express very well, and I thank you.
"That's one of the fundamental things about dealing with peasants, regardless of the best intentions of the "progressives" (liberals, socialists, whatever) the teaming masses will ALWAYS manage the screw themselves by believing the capitalist myth-builders. You can't protect the peasants from themselves, no matter how hard you try. " - NaRm
NaRM, just because it's always been that way in the past, I like to believe it doesn't have to be that way in the future. Your own missives are helping people to wake up in that regard. I wish they could be more widespread.
Smash the capitalist myths!
I meant the banks
EvilHenryPaulson wrote:
because it's a global plan
Well, the really hot bodacious French maid didn't show up, so I'm going to have to clean the floors myself.
Happy dooming...
Oh
My cute doggie is calling me, so its time I bid adieu. Stimulating conversation tonight everyone, thanks.
Maury the Credit Responsibility Panda wrote:
She made the argument that what needs to be separated are the depositary and capital markets function of banks.
And yet, Glass-Steagall would have prevented exactly that.
patientrenter wrote:
The idea implicit in her position is, given the separation of the depositary and capital markets functions, that CM would place only investor money at risk and would be allowed to fail.
I look at what actually happened, and you are absolutely right... everyone who had to be bailed out had >30x leverage.
We all saw perfectly well what happened with those SIVs - issue ABCP at 5% to buy CDOs at 5.5%, lever up by an average of 14x. Picking up dimes in front of a steamroller for 7%.
volker the viking wrote:
too many players involved for the 'global plan' to be what everyone wants. the truth is, and has been remarked on here by someone recently, when you have large groups what survives is what everyone does not, not want. I think what everyone didn't want was for these counterparty nightmares and international bankruptcies. that's fine, but you either have to produce the funds necessary to restore positive equity (because making the interest payments for a negative equity institution will mutate them into something very bad, only an idiot would do that...) or you can leave the adult's table. I mean, Bernanke really really wants the average house price in America to rise to $1mn and stay there on its own with no adverse consequences.... but Bernanke doesn't get everything he wants
POLL: When will we know that government is truly responding to the financial crisis?
Imagine how tempting real estate looked after wiping out in the tech bust.
Wow, a great investment opportunity. Real estate is proven to be solidly safe. Not like those tech shares. Gee golly. At least I still have a job. "Darling, let's look at a larger house. We'll be able to sell at retirement".
And with that ... here we are.
Jackrabbit wrote:
they are responding to it, look at all the acronyms. did you mean to write resolving instead?
EvilHenryPaulson wrote:
maybe so, volker not smart enough to know for sure
But it's Japan CB, US Fed, England and ECB (others?) that are leaning forward in the foxhole together
This is what I was saying. IRS and SSA now share your tax information. What you report to IRS gets filtered into your Medicare Part B premium calculation, with a two-year lag. You have to watch those MAGI thresholds (there are four of them). If you go just one dollar over a threshold (with a two-year lag), you will have to pay an extra $44.20 X 12 X 2 in Medicare B premiums in two years. Kinda a high marginal tax rate, no?
(Don't try explaining this to a CPA. It's too complicated.)
About separating capital market and depository functions:
The depository function is actually a very mature, low margin business. It has little value to the banks EXCEPT to fleece people (low cost $ and captured market) and make the Too-Big-To-Fail case (fleecing in a different way).
I, too, believe that the depository function should be nationalized, and there would/should be no bailouts of risky capital markets companies.
"Bernanke really really wants the average house price in America to rise to $1mn and stay there on its own with no adverse consequences.... "- EHP
that's maybe what it looks like, but I think his real objective is in keeping interest rates low, to increase discretionary spending, as Broward has mentioned previously. This POV holds a lot of water with me, for some obscure reason.
EHP: Yes, thanks. Resolving to resolve.
Maury the Credit Responsibility Panda wrote:
I support any measure that would make it possible to let insolvent financial institutions fail. But I think that campaigning for Glass-Steagall has become a way of avoiding that. By reinstating GS, we would feel like we'd solved the problem. Banks and lenders and borrowers and all of FIRE could get back to lending way too much against collateral that is still valued way too high. But removal of GS was the bete noire for the left wing of the Democratic party, so now it's become an emotional prize for them.
I would support reinstating GS, but only if we ensure we stop the main abuse first - too much lending against overpriced collateral. And that would mean removing the FHA and FNM and FRE programs....... Silence. Ain't gonna happen. People like what the bubble does for them personally, and they have no intention of pulling the plug, just pretending to.
EHP: I could have also asked it this way: since most believe that "extend and pretend" is faulty, and will lead to a poor outcome, when will we know that government has resolved to resolve the crisis?
Jackrabbit wrote:
Quit reading narrow blogs. Check the main news on TV and newspapers. Most people subscribe to the extend and everything will, hopefully, get back to nearly where it was before theory.
Jackrabbit wrote:
I would posit they already have
I should clarify again: most HERE believe that "extend and pretend" is faulty...
The question assumes that govt can be effective in resolving or alleviating affects of the downturn once conditions exist that result in the political will to do so with policy choices like legalizing drugs and bringing home troops.
EMRATIO - what does this stand for?
barfly wrote:
And I think this POV is borne out empirically. Imagine if someone had told you in 2000 that $USD would be nearly cut in half, declining from 120 to low 70s, and, yes, commodities would rise as you'd expect, but almost the whole yield curve would be at generational lows.
And even at these tiny yields, there's strong demand for treasuries.
Imagine a world where 23% of mortgages are delinquent, yet mortgage rates have a 5-handle on them.
lubecpat wrote:
Everybody's Money Really Aches To Increase Otherwise
I am thinking the US consumer & the government are in a similar jam - jumped off a burning cruiseship in the middle of the ocean without a lifeboat and now treading water. Sooner or later there just isn't enough juice left to keep kicking, and then, it's davey jones' locker.
"And even at these tiny yields, there's strong demand for treasuries. "
to me, it shows strong faith in the USG and the American economy, worldwide.
bearly wrote:
I know we all love wallowing in the schadenfreude and so on, but the US economy is not going to shrink by more than 20%, tops. And it's far more likely that it will merely see a reduced rate of growth. Let's not overstate the case.
I raised the question because earlier today someone posted the following link, a summary of the Urban Land Institute (ULI) conference that described someone from Treasury saying that "extend and pretend" is effectively (official!) govt policy for all bad loans.
The govt wants to support banks as they ride out the recession. But what if the recession is a long-lasting U or W?
Maury the Credit Responsibility Panda wrote:
Mortgage rates have a 4 handle on them, in the latest report. We may see a 3 handle in the next few years.
barfly wrote:
On Dec. 14, $3.52 billion in Nakheel bonds come due. One of the largest Islamic group of bonds issued, the deal was snapped up by Western and regional investors. In a reflection of how sure investors were that Dubai would meet these payments, the bonds were trading at a 10 percent premium to face value earlier this week. They are now trading at around half of face value.
Dubai Debt Woes Suggest Wider Crisis - NY Times
Jackrabbit wrote:
Either the wall of money meets an equal wall of increased supply of goods and services, as the US economy starts growing rapidly again, or it doesn't and the large amount of money meets a smaller amount of goods and services. The rest is... history
patient wrote:
Yes, maybe, but what if we keep shrinking by 5 - 10% yearly for the next few years?
Is it so unlikely?
Government spending on welfare is not creating jobs, just feeding the unemployed. Consumption is still impaired.
Jonathan wrote:
If you believe that, then.... you are young, in economic education years.
*I know we all love wallowing in the schadenfreude and so on, but the US economy is not going to shrink by more than 20%, tops. *
Maybe, but how do you know?
An interesting statistic from Rich Toscano is that the Case-Shiller price for the high-price segment in San Diego FELL (albeit by less than 1%) in September.
patient wrote:
I am indeed young, and quite used to being patronized.
However, the question still stands. We need something to create or invent. Something where the US workforce can create value, that grows the economy at a steady 4 or 6% a year, over and above what we have now.
Where does that come from?
And if you don't think so then you're
Peppers are a tropical perennial, so I've had them go quite
a while if I babied them. Then I get bored and they die.
And I buy my chocolate from the health food store mostly.
Turkey soup yummy. I made too much though.
pavel.chichikov wrote:
"A meteorite will strike the earth within the next 5 years, wiping out the human species"
"It's not gonna happen"
"Maybe, but how do you know"
Live Market Quotes
here we go again
Imagine the US government as the turkey and Treasury investors as the butcher...
CHARLIE ROSE: And what is the story of the turkey?
NASSIM NICHOLAS TALEB: In the book, I have the story of a turkey that
is fed for 1,000 days by a butcher, and every day confirms to the turkey
and the turkey’s economics department and the turkey’s risk management
department and the turkey’s analytical department that the butcher loves
turkeys, and every day brings more confidence to the statement. So it’s
fed for 1,000 days...
CHARLIE ROSE: Gets fatter and fatter and fatter.
NASSIM NICHOLAS TALEB: Fatter and fatter. On the day when its
comfort will be at its maximum, there is going to be a surprise. There
will be a surprise for the turkey.
CHARLIE ROSE: Yes.
Streetwise Professor » Wallison: Timmy!’s Nose is Growing
"subprime is contained"
yea, but how do you know?
because I am Bernake, an old hat at this economics biz
Jonathan wrote:
important for maintaining the status quo
patientrenter wrote:
Pretending you can see the future and then calling someone dumb, +1
we're pretty good at getting ourselves into jams, but we're also pretty good at getting ourselves out of them, too. Never underestimate the ingenuity of the masses, man.
Jonathan wrote:
In a large nation like ours, it is extremely unlikely that any large and successful long term shift in industries will come about as a result of prognostications by an elite group (of people patronizing others
.
But it is clear that we cannot import more than we produce forever, and the rebalancing will likely involve a reduction in the forex value of the dollar. When that happens (and it's been happening some recently) on a large and long term scale, then millions of Americans will find many imports so expensive that enterprising Americans will see the opportunity to make the goods here for less, or even export to other countries for (gasp!) less than the competitors.
I can see fuel becoming more expensive, and that will lead to different commuting habits (including more working from home), and more local production. My personal hope is that somehow Americans will see the light and develop a food culture (in favor of flavor and freshness, not quantity and appearance and shelf life), but that's probably an empty dream.
RATM wrote:
Sorry, RATM. Yes, it is likely that the US economy will shrink annually by 5-10% for years. Carry on.
fuchas GREEN! get in NOW before it's toooo late!
"It's not gonna happen"
The proper response is: It's probably not going to happen. Or: It could happen but the odds are greatly against it happening in the next five years.
No one can confirm that it definitely will not happen. Astronomers can work up a table of odds for Munich re, but even they can only generate estimates. We don't even know how many Earth-orbit crossing bodies exist in our system, or where all of them might be, or where their orbits may carry them, or from what direction they might approach the Earth.
However, if we did know these facts about them, we could probably speak with more confidence about their future positions than we could about what may happen to the global economy in the next five years. Astronomical bodies don't cheat, steal, lie, or even sneak. They aren't greedy, inattentive or incompetent. Neither the long run nor the short run make any difference to them. They don't bluff or make war.
Are there markets in Boron?
barfly wrote:
Agreed!
The devil is in the detail.
Question: By pegging its currency to the dollar, isn't China defeating the dollar devaluation as a strategy for US industrial competitiveness? Dollar devaluation then becomes a tax on the world and a way of increasing asset values in the US (so the banks can become solvent), not a means of making our economy competitive (verses China, anyway). At some point, other countries will be forced to follow China's lead or face really cheap US and Chinese goods (or erect trade barriers).
Chinese to channel VC funds to innovative companies with high-growth potential while Obama ramps Afghanistan while trying to sell his health care plan. This cat is afraid to buck the MIC
This cat is afraid to buck ANYBODY
Fixed it for ya, km4
Jackrabbit wrote:
notso much defeating as working at cross purposes.
"Dollar devaluation then becomes a tax on the world and a way of increasing asset values in the US (so the banks can become solvent), not a means of making our economy competitive (verses China, anyway)."
I guess we shall see what we shall see on that front.
"At some point, other countries will be forced to follow China's lead or face really cheap US and Chinese goods (or erect trade barriers)."
Perhaps. Unless the economy comes derailed and then all bets are off.
But then, volker don't know shit. volker sell advertising
Ferguson: How Economic Weakness Endangers the U.S. | Newsweek National News | Newsweek.com
No sweat, reply the Keynesians. We can easily finance $1 trillion a year of new government debt. Just look at the way Japan's households and financial institutions funded the explosion of Japanese public debt (up to 200 percent of GDP) during the two "lost decades" of near-zero growth that began in 1990.
Unfortunately for this argument, the evidence to support it is lacking. American households were, in fact, net sellers of Treasuries in the second quarter of 2009, and on a massive scale. Purchases by mutual funds were modest ($142 billion), while purchases by pension funds and insurance companies were trivial ($12 billion and $10 billion, respectively). The key, therefore, becomes the banks. Currently, according to the Bridgewater hedge fund, U.S. banks' asset allocation to government bonds is about 13 percent, which is relatively low by historical standards. If they raised that proportion back to where it was in the early 1990s, it's conceivable they could absorb "about $250 billion a year of government bond purchases." But that's a big "if." Data for October showed commercial banks selling Treasuries.
That just leaves two potential buyers: the Federal Reserve, which bought the bulk of Treasuries issued in the second quarter; and foreigners, who bought $380 billion. Morgan Stanley's analysts have crunched the numbers and concluded that, in the year ending June 2010, there could be a shortfall in demand on the order of $598 billion—about a third of projected new issuance.
Jackrabbit wrote:
Yes, it's not all going to a smooth plan. China needs to revalue its currency vis a vis the dollar, and increase its own internal consumer demand, but it hasn't. So the revaluation implied by the USD's devaluation has been borne by the Euro, mainly. Eventually, Europe could erect trade barriers to Chinese (and US) goods. But at that point China would probably see the light, and start moving. Messy, but that's the way these things happen in the real world. The underlying forces are fairly clear, but the individual steps and timing are unpredictable.
Jonathan wrote:
Exactly. Where does that come from? Until some new technology is invented, probably some new energy technology, we have a long, painful slog ahead.
patientrenter wrote:
to a hard money currency in concert with Russia, et alia?
Well not everyBODY but am not going to go there
Mr Slippery wrote:
that is the more likely residence of the black swan
"By pegging its currency to the dollar, isn't China defeating the dollar devaluation as a strategy for US industrial competitiveness?"
by pegging to the dollar, China is absolutely in lockstep with us, leaving us with no comparative advantage. Basically, as I've said before, it's economic warfare, with China attached to our Achilles heel like a pit-bull.
barfly wrote:
it's an economic poker game, table stakes
there IFIFY
Mr Slippery wrote:
Focus Fusion is still twelve to eighteen months away.
More from Ferguson:
Ferguson: How Economic Weakness Endangers the U.S. | Newsweek National News | Newsweek.com
So here's another scenario—which in many ways is worse than the inflation scenario. What happens is that we get a rise in the real interest rate, which is the actual interest rate minus inflation. According to a substantial amount of empirical research by economists, including Peter Orszag (now at the Office of Management and Budget), significant increases in the debt-to-GDP ratio tend to increase the real interest rate. One recent study concluded that "a 20 percentage point increase in the U.S. government-debt-to-GDP ratio should lead to a 20–120 basis points [0.2–1.2 percent] increase in real interest rates." This can happen in one of three ways: the nominal interest rate rises and inflation stays the same; the nominal rate stays the same and inflation falls; or—the nightmare case—the nominal interest rate rises and inflation falls.
Today's Keynesians deny that this can happen. But the historical evidence is against them. There are a number of past cases (e.g., France in the 1930s) when nominal rates have risen even at a time of deflation. What's more, it seems to be happening in Japan right now. Just last week Hirohisa Fujii, Japan's new finance minister, admitted that he was "highly concerned" about the recent rise in Japanese government bond yields. In the very same week, the government admitted that Japan was back in deflation after three years of modest price increases.
lubecpat wrote:
Civilian employment over total population, the least gameable measure of unemployment that exists:
http://research.stlouisfed.org/fred2/series/EMRATIO/
A black swan that can be described is not a true black swan.
And what the heck is IFIFY. I googled it and got nothing.
pavel.chichikov wrote:
Yes, you are right, Pavel. But you are older and wiser than me, and more polite.
I get frustrated when I see that people know as little about economics as they would about reading and writing if they had been raised by wolves. It's a sad reflection on our educational setup, and not usually their personal fault. But please, everyone out there should educate themselves about economics. If people knew as much about economics as they do about politics, we'd be making much better political and economic and financial decisions.
lawyerliz wrote:
I Fixed It For You.
Oh.
volker the viking wrote:
It's definitely NOT table stakes when people bring printing presses to the game.
the little light, it came on
specifically, over total non-institutional (no funny farm, not disabled, not in military) population above age 16
patientrenter wrote:
Entertaining to see folks writing about the energy industry that way as well...
My shopping anecdote.
went to the bookstore and bought some books.
It's wasn't empty, but it sure as heck wasn't full either.
Barnes & Noble.
There are a number of past cases (e.g., France in the 1930s) when nominal rates have risen even at a time of deflation. What's more, it seems to be happening in Japan right now.
France in the 1930s is a dreadful example of how the morale of an entire country can disintegrate.
Focus Fusion is still twelve to eighteen months away.
Wind power is here and now.
Solar is here and now.
Decentralizing energy production to the end user is here and now.
All would (not "create") but employ millions of people with the requisite or approximate skills.
We're never going to pull ourselves out of the manufacturing mess by building eBay trinkets. And we're never going to achieve independence until we do so from the energy cartel. (Both foreign and domestic.)
And again I humbly request a smiley with a lightbulb overhead.
But you are older and wiser than me
Probably older.
pavel.chichikov wrote:
I heard it was fun
printing presses have nothing to do with assets, whether the asset is worth 100 dollars or 10 dollars, it's all relative
The situation is such that China cannot bring to bear any real world enforcement measures, their military is ineffective and will be as long as we have our forlorn straddling the Khyber Pass.
I know the US economy is resilient. But I think this recession is different than any postwar recession.
We have an extraordinary set of challenges. On multiple levels. Tradition political economics in the "real world" is to deal with them when they become a problem. Special interests love that.
Just look at the auto industry. Talk about extend and pretend!
If we care about our grandchildren, we need to address competitiveness in a way that is holistic and forward looking.
thread tunes:
Hieroglyphics - At the Helm
The Cansecos - Raised by Wolves
National Retail Federation - Black Friday Verdict: As Expected, Number of Shoppers Up, Average Spending Down
EDIT: OOPS! Missed CR's prior post. Sorry!
My peppers are still coming on strong here in N. FL as well. I have about ten bells and 30 habaneros still on the bush.
I always make too much but if freezes well.
Jackrabbit wrote:
Give them man a prize. He's smarter than most
Jackrabbit wrote:
I agree that it is worse than any recession since 1983. But the recessions in the 1970's and early 1980's had some zing. I recall Presidential speeches that our way of life had to change, and so on. And that was after many years of malaise, not just 2 years.
Anonymous Bosch
+100!
Energy Independence Now!
Absolutely nothing wrong with Ferguson's analysis quoted above. There's definitely a limit to the amount of debt a government can issue. I think Japan is very close to that limit now.
I heard it was fun
So was the German occupation - for collaborators.
The structure changed with the 1990 recession.
Uh-oh--Pavel Godwined.
Never forget, Liz
patientrenter wrote:
I think you are thinking about France in 1920's (the go-go period), during the GD, things were not so fun.
MrM, I use to know the head of the bond dept. at a large southern bank. They prided themselves in always being large sellers in the FF overnight market and were conservative, almost nonlenders. Now I understand how they made their money. But their conservative ways allowed branch banking, out-of state-banks to blindside them. The name's still there, but somebody else owns 'em. Thanks for winterspeak. Got any more suggestions?
Best way by far to achieve energy independence:
That way, people can plan for the adaptations that need to be made.
Rajesh wrote:
I'll pick Paris 1935 over Kansas, 1935, thank you.
Uh-oh--Pavel Godwined.
?
Overseas markets seem comfortably numb.
Rajesh, please send me a link on focus fusion. I found something several years ago, but nothing recent. Thanks.
patientrenter wrote:
Carbon tax - Wikipedia, the free encyclopedia
In 1993, then President Bill Clinton proposed a BTU tax. It would have taxed all fuel sources based on their heat content except for wind, solar, and geothermal. It was never adopted.
The East Coasters first objected, stating that they shouldn't be penalized for heating their homes. Then the West Coasters objected, stating that gasoline is critical to people's livelihoods given the much greater distances involved. It all went nowhere, of course.
That's when a focus and a fusion have a car accident and, erp,
that's not up to my usual standards.
The 4 buck gas started to have that effect.
You could galvanize the masses by calling it war.
patientrenter wrote:
I prefer a conditional tax. In five years, if the price of gasoline is below three dollars the gas tax will go up 10 cents. This allows you to change behaviors without ever actually imposing the tax.
Paris, 1932.
Cole Porter and Amelia Earhart.
Oil and water.
Purdue e-Archives : Cole Porter, Amelia Earhart, and Prince Fredel Hohenlohe
lawyerliz wrote:
I thought it was a Ford Focus equipped with Mr. Fusion:
http://zedomax.com/blog/wp-content/uploads/2007/09/mr_fusion.jpg
I have reached the point where I would actually prefer the govt
to get the money than the dark pools.
Ex-guerrilla easily wins Uruguay presidency - Yahoo! News
MONTEVIDEO, Uruguay – A plain-talking former leader of leftist guerrillas who once sought power through kidnappings and bombings is now the president-elect of Uruguay.
The right wing wackos will put even more pressure in Obama that South America ( except for bought and paid for Columbia courtesy of CIA ) is becoming another threat just like those Muslims in Middle East
We're not coming out of the mess because, sadly, the numbnuts and asswipes we elected, yes all of us elected, are focused on restoring the "Party Like It Was 2005". The problem is that during said party, we threw up all over the sofa, pissed in the potted plants (and killed them,) punched out the caterers, and knocked up the dog.
I haven't heard one single forward looking, forward thinking, forward planning word from the Bozos in Charge.
Throw so much money at the banksters, they don't collapse. What's next? Refund losses in Vegas? Cash4HopelessGamblers?
Now we're going to get the economy revved up by killing (still) more people?
TJ and The Bear wrote:
And maybe it would go nowhere now. But since then 9/11 happened. And we have become bogged down in a war against an enemy sheltered in Pakistan, where it grows within madrassas and other organizations funded by wealthy zealots from Saudi Arabia. And the folks who think that the country will support more expensive fuel primarily in order to reduce carbon emissions are smoking something. That works in Berkeley and Cambridge and college communities across the country, but that's not broad enough. There is a chance the country could get behind cutting off our funding of the source of the extremism. That would appeal in Kentucky as well as Manhattan.
Uh-oh--Pavel Godwined.
http://en.wikipedia.org/wiki/Godwin%27s_law
Sadly few remember USENET. I do. It's where I first ran into Robert Cote .....
Pavel, somebody made some stupid rule (Godwin rule) that the Nazis were never to be referred to, or even mentioned, as somehow breaking Internet protocol. For the life of me, I don't know why, as it was perhaps their rise from economic circumstances that was perhaps the most important event in our recent history, and the analogies bear on so much.
It is precisely for people like yourself, with some knowledge of the facts, firsthand, to remind us of these things, as they arise in conversation, and I, for one, appreciate anything you might have to say on the subject, now or in the future.
Ahhhh USENET
alt.peeves
Anonymous Bosch wrote:
What a great idea. Don't forget to send it to the House Financial Services Committee and the Treasury, and copy Ben.
barfly wrote:
Which is why we can't bring you anywhere, barfly
patientrenter wrote:
Announce a schedule of annually increasing taxes on most fuels
A lot of our problems are political, not economic. Until we are faced with the possibility of terrible outcomes, making for public debate, special interests force changes that benefit them to the detriment of everyone else.
The attempt by the financial industry to have any TBTF resolution authority not be funded is a case in point.
While there are some benefits in efficiency, it seems that industry concentration is detrimental in the long run: oligarchs have too much influence with government, and their rent-seeking reduces innovation.
barfly wrote:
they are connected. without restoring the apparent positive wealth of the household balance sheet, they will not spend like they did. ditto for bank lending. it's what I said at the outset, and surprise surprise bank reserves are the only thing going up in this world
One thing we know about you, patientrenter.
You're not Jewish.
patientrenter -
HA! So that's why.
volker the viking wrote:
Spatch wrote:
Remember it? I sure do. Best thing I ran across in 1989. It's still alive. But these days, the first rule of usenet is that you don't talk about usenet.
We need to invent something that grows the economy and can't be outsourced to china or India. There fixed it for ya. Doubt it will happen for a decade or three. But I
am an optimist
Jackrabbit wrote:
The funding is a red herring. Just like the FDIC. Banks today are being bailed out regardless of the FDIC finances. When TARP was being debated, no one said, "Oh, wait, we can't spend more than is in the FDIC fund". They'll bail and spend regardless of whether the fund is there, and regardless of how much is in it.
rich wrote:
I'm sure you mean that in a good way, rich.
Jackrabbit wrote:
With tarrifs.
Patientrenter:
"The funding is a red herring. . . . They'll bail and spend regardless of whether the fund is there, and regardless of how much is in it."
We'll yes and no.
Yes, the government is going to do what it takes to protect the financial system, BUT I used it as an EXAMPLE of how industry has undue influence, and I'm not sure that your counterpoint reflects that and ...
The industry didn't want it funded because they know that it is MUCH more likely that the resolution authority will be used if it is funded. Resolution generally means a bank is put out of business BEFORE your problems are so immense that it threatens the financial system.
Having it funded benefits the taxpayer because it makes bailouts (using taxpayer $$$) less likely. Bank executives don't want it to be funded because they are much more likely to keep their jobs in a bailout vs. resolution. (as we have seen)
TJ and The Bear wrote:
Another 50% drop and you'll have a chance at making a killing. Dubai as an international financial center didn't make much sense as even GE is getting into Islamic finance, as a travel destination they only have 5 months of decent weather, none of which are during when Euros holiday. Logistics and a waypoint for air travelers? Sure.
i saw this and thought of your title..this is the shape of the future, this a real letter, no money yet!
NIGEL JOHNSON-HILL,
PARKFARM, MILLAND, LIPHOOK GU30 7JT
Rt Hon David Miliband MP
Secretary of State.
Department for Environment, Food and Rural Affairs (DEFRA),
Nobel House
17 Smith Square
London
SW1P 3JR
16 July 2009
Dear Secretary of State,
My friend, who is in farming at the moment, recently received a cheque for £3,000 from the Rural Payments Agency for not rearing pigs. I would now like to join the "not rearing pigs" business.
In your opinion, what is the best kind of farm not to rear pigs on, and which is the best breed of pigs not to rear? I want to be sure I approach this endeavour in keeping with all government policies, as dictated by the EU under the Common Agricultural Policy.
I would prefer not to rear bacon pigs, but if this is not the type you want not rearing, I will just as gladly not rear porkers. Are there any advantages in not rearing rare breeds such as Saddlebacks or Gloucester Old Spots, or are there too many people already not rearing these?
As I see it, the hardest part of this programme will be keeping an accurate record of how many pigs I haven't reared. Are there any Government or Local Authority courses on this?
My friend is very satisfied with this business. He has been rearing pigs for forty years or so, and the best he ever made on them was £1,422 in 1968. That is - until this year, when he received a cheque for not rearing any.
If I get £3,000 for not rearing 50 pigs, will I get £6,000 for not rearing 100? I plan to operate on a small scale at first, holding myself down to about 4,000 pigs not raised, which will mean about £240,000 for the first year. As I become more expert in not rearing pigs, I plan to be more ambitious, perhaps increasing to, say, 40,000 pigs not reared in my second year, for which I should expect about £2.4 million from your department. Incidentally, I wonder if I would be eligible to receive tradable carbon credits for all these pigs not producing harmful and polluting methane gases?
Another point: These pigs that I plan not to rear will not eat 2,000 tonnes of cereals. I understand that you also pay farmers for not growing crops. Will I qualify for payments for not growing cereals to not feed the pigs I don't rear?
I am also considering the "not milking cows" business, so please send any information you have on that too. Please could you also include the current Defra advice on set aside fields? Can this be done on an e-commerce basis with virtual fields (of which I seem to have several thousand hectares)?
In view of the above you will realise that I will be totally unemployed, and will therefore qualify for unemployment benefits. I shall of course be voting for your party at the next general election.
Yours faithfully,
Nigel Johnson-Hill