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The Depression Thread
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mises



Joined: 05 Nov 2007
Location: retired

PostPosted: Wed Mar 11, 2009 7:15 am    Post subject: Reply with quote

http://www.iht.com/articles/reuters/2009/03/10/business/OUKBS-UK-BLACKSTONE.php
Quote:
Private equity company Blackstone Group LP CEO Stephen Schwarzman said on Tuesday that up to 45 percent of the world's wealth has been destroyed by the global credit crisis.


45%!

http://www.businessinsider.com/pelosi-already-talking-about-second-stimulus-2009-3
Quote:
Pelosi Already Talking About Second Stimulus


http://dailybail.com/home/2009/3/11/bailout-news-cnbc-video-nouriel-roubini-says-recession-will.html

http://dailybail.com/home/2009/3/11/bailout-news-video-pbs-the-charlie-rose-show-complete-interv.html

http://www.salon.com/opinion/feature/2009/03/07/a_word/index.html

Quote:
March 7, 2009 | MEXICO CITY -- Any serious scribe will tell you that writing is, at its heart, the maddening struggle to find exactly the right words. Should the overcast sky be called "gray," or "beige"? Is Rush Limbaugh best described as "an enraged Jabba the Hut," or "a deranged Stay Puft Marshmallow Man"? Are we living through a "recession" or a "depression"?

Recently, I've been groping for the precise word to characterize the zeitgeist of this (unfortunately) historic moment. I know it's not merely "demoralized." It's something far more dread-laden -- a word I finally found during a visit last week to central Mexico.

Sitting atop the famed Pyramid of the Sun, I took in Teotihuacan -- the ancient metropolis outside Mexico City. Its weathered bricks and mortar look like many great archaeological wonders, except its annals include a harrowing asterisk: When the Aztecs discovered the site, it was abandoned, and nobody knows what happened to its inhabitants. The ruins thus feel like monuments to an apocalypse.

That's the term that popped into my mind as I baked in the Mexican sun -- "apocalypse": a phenomenon whose signs are everywhere these days.

Iraq bleeds from unending strife, while Israelis and Palestinians appear intent on annihilating each other. Pakistan just released A.Q. Khan, the scientist who delivered nuclear secrets to North Korea -- the country that's again threatening long-range missile tests. Colombia’s civil war rages, and the "great news" in Mexico is President Felipe Calderon's announcement that drug cartels haven't totally taken over the country.

In America, our apocalyptic symbols are usually subtler -- the birth of octuplets or a restaurant chain's Chicago Seven pizza, which consumerizes a renowned court case into a fast-food dish. But Wall Street and Washington exhibit a more overt Sodom and Gomorrah quality of late, to the point where even business magazines like Portfolio are invoking the A-word.

It's not just the economic turbulence or the corruption that evokes this new darkness -- both have been around for a while. It's the “I feel fine” obliviousness of R.E.M.’s cataclysmic ballad -- the aggressively defiant, adamantly proud ignorance that marks history’s end times.

As wages stagnate in a nation whose median household income is $50,000 a year, one financial executive tells reporters that bankers "can't live on $150,000 to $180,000." Another bemoans efforts to restrict CEO pay by saying that "$500,000 is not a lot of money" -- and the New York Times chimes in by insisting that it’s true: "Half a million a year can go very fast."

Similarly, as lawmakers hand banks trillions of taxpayer dollars, Sen. Kent Conrad, D-N.D., complains that Congress has gotten "very little done to help the financial sector," and Rep. Michele Bachmann, R-Minn., says America should be most worried that "we're running out of rich people." Meanwhile, reporter Rick Santelli is billed as a populist hero for standing amid wealthy commodities traders and telling CNBC’s viewers that the people being thrown out of their homes are "losers."

Hollywood, our cultural mirror, reflects this back as a simultaneous mix of hedonism and fatalism, an MTV beach party at the end of the world. During this economic crisis, we're given "Confessions of a Shopaholic," a comedy film that glorifies overborrowing and overspending. We'll soon be fed the final season of "Lost," a television show whose Benetton models stumble onto a mystery that might destroy the planet. And then it's on to a film version of "The Road," Cormac McCarthy's fable about cannibalism at the end of humanity.

Apocalypse ... it seems so biblical, but suddenly feels so now. And if we don't quickly wake up and turn things around, we will be left to mutter Col. Kurtz's despondent whisper: "The horror ... the horror."
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ontheway



Joined: 24 Aug 2005
Location: Somewhere under the rainbow...

PostPosted: Wed Mar 11, 2009 9:49 am    Post subject: Reply with quote

The money hole. Too true to be funny:

"Should The Government Stop Dumping Money Into A Giant Hole?"


http://www.youtube.com/watch?v=JnX-D4kkPOQ&feature=channel_page




And, the serious solution:

http://www.youtube.com/watch?v=FFSe8nYHOjk
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Kuros



Joined: 27 Apr 2004

PostPosted: Wed Mar 11, 2009 11:47 am    Post subject: Reply with quote

Quote:

* The current decline is worse than the 1929-1932 rout.


By what measures?

Here's a political article with some data relevant to this thread.

Quote:

The "2009 = 1933" thesis raises two questions, however. First, how do our circumstances stack up against the situation FDR faced when he took office? Let's consider some key indicators. In the fourth quarter of 2008, GDP fell at an annualized rate of about six percent; by 1933, GDP had fallen more than 40 percent from four years earlier. Unemployment is now 8.1 percent, up from 4.9 percent a year ago; by early 1933, unemployment was 25 percent, including 37 percent outside the agricultural sector. Today our banking system is in deep trouble, but at the start of the New Deal, it was much worse. As FDR took office on March 4, 1933, all twelve Federal Reserve Banks were closed, and banks in 37 states had either limited withdrawals or shut their doors.
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mises



Joined: 05 Nov 2007
Location: retired

PostPosted: Wed Mar 11, 2009 12:05 pm    Post subject: Reply with quote

http://www.businessinsider.com/henry-blodget-great-crash-of-2008-now-worse-than-great-crash-of-1929-2009-3

Quote:
It has been 513 calendar days since the stock market peaked on Oct. 9, 2007. Since then, the S.&P. 500 is down 56 percent and the Dow is off 53 percent.

On Jan. 29, 1931 — the identical number of days after the 1929 market peak — the S.&P. 500 was down 49 percent and the Dow was down 56 percent. The 1929 crash got off to a much faster start, but we have now more or less caught up.


The quote is not about the general economy.
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mises



Joined: 05 Nov 2007
Location: retired

PostPosted: Wed Mar 11, 2009 12:12 pm    Post subject: Reply with quote

http://globaleconomicanalysis.blogspot.com/2009/03/boomers-future-went-down-drain.html
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mises



Joined: 05 Nov 2007
Location: retired

PostPosted: Thu Mar 12, 2009 1:05 pm    Post subject: Reply with quote

http://www.businessinsider.com/the-economy-as-ponzi-meme-gets-hot-2009-3
Quote:

Some unnamed reporter lobbed a softball question to Nouriel Roubini, asking him whether the Madoff story was somehow an allegory for the entire economy. And of course Roubini said yes, explaining how the entire economy for the last decade or so was just a big Ponzi scheme built on cheap money.

You know, a lot of people thought they were making money by trading ever-inflating assets until, boom, too many redemptions came in and it turned out that our houses and mortgage-backed securities weren't worth what they thought they were.

Paul Krugman said the same thing, using pretty much the same language. He called it our "Decade at Bernie's".

Lots of other folks have said the exact same thing before Roubini or Krugman. Peter Schiff had been warning about this since back in the days when Roubini still thought the trade deficit would be our undoing. Remember that? At some point we began to guage our economic process by looking at our asset values, rather than what we created. It's not that growing asset values aren't good. If you buy a house in a slummy area a few years before it gets gentrified, your increasing home value will reward you for having some foresight.

The problem though is that ultimately, the economic value of these assets don't correspond into any standard of living increases -- which is what a healthy economy is supposed to achieve, and so the two had to come back in line.

That being said, it's all well and good to say that cheap money inflated a big bubble, but the more interesting question is, why did the cheap money go towards building and buying houses. Why didn't the cheap money go to building factories, or to building up usable infrastructure.

That part isn't Alan Greenspan's fault. Banks are good at housing loans and securitization made that easier. We also, obviously, have a policy bias that makes manufacturing difficult -- whether it's our labor laws, environmental regulations, zoning or whatnot. Manufacturing houses one at a time with cheap (often illegal) labor is easy. Using those same factors of production to build something else isn't easily done.

That's what needs addressing. If we just clamp down on the asset-growing aspects of the economy, but don't facilitate our ability to produce anything of value, our economy is guaranteed to be a total basket case for years to come.

To some extent, this is what Obama is talking about with their desire to see "green jobs" -- you know, hard hats in Ohio building turbines and solar panels.

But all the people who were previously employed in the housing sector aren't going to find jobs in this sector. Not even close. At some point, real, non-subsidized industries need to spring up that can take advantage of all this cheap, unskilled labor that previously went into homes. Otherwise, forget about it.


And the 'bezzle continues:

http://www.nakedcapitalism.com/2009/03/belated-comment-on-citis-lehman-esque.html
http://www.bloomberg.com/apps/news?pid=20601087&sid=ab3VmhTulLyc&refer=home
Quote:
March 12 (Bloomberg) -- Four Citigroup Inc. executives who bought the bank’s stock last week generated a $2.2 million paper profit within nine days, regulatory filings show.


Citi releases an "internal" memo (promptly leaked) about how they turned a profit (totally impossible, unless you forget the loss side of a balance sheet). A few days prior, execs bought a ton of stock. The market "rallies" and the execs earn 2.2 million. Manipulation, seems to me (and many others).

Quote:
Citibank executives seem to have been doing a bit of trading ahead of Pandit's claimed "leaked" memo. There's nothing wrong with buying the stock of the company you work for. There is something very wrong (and illegal) with buying it if you're in possession of material inside information (like, for example, the profit numbers for the first two months of this quarter) while the rest of the marketplace is unaware of them, if your purchase was made due to the fact that this information would be "material" to the marketplace.

The price action of the last few days makes quite clear that the information was 'material.' My obvious question is whether or not these executives had possession of it before their "buy" orders were placed.

http://market-ticker.denninger.net/archives/863-Madoff,-Banking,-Morgan-And-More.html

I'd like to know how long they will hold (or held) that stock.
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mises



Joined: 05 Nov 2007
Location: retired

PostPosted: Thu Mar 12, 2009 1:08 pm    Post subject: Reply with quote

http://www.istockanalyst.com/article/viewarticle/articleid/2432853
Quote:
The Bank of International Settlements, which seems to be the only institution that tracks the derivatives market, has recently reported that global outstanding derivatives have reached 1.14 quadrillion dollars: $548 Trillion in listed credit derivatives plus $596 trillion in notional/OTC derivatives.

Yes, that is Quadrillion. One and 12 zeroes!


Quote:
Derivatives, as you may know, are essentially unregulated, high-risk credit bets. Unlike the earnest farmer who might employ a futures contract to hedge the price of the beans he’s worked so hard to grow, many of today’s institutions use futures, forwards, options, swaps, swaptions, caps, collars and floors—any kind of leverage device they can cook up—to bet the hell out of virtually anything.

What drives derivatives, at their very roots (if you can somehow get back that far), are base assets that get leveraged to a demented degree. Martin Mayer writing for the Brookings Institute, said, “the receiver of the payments on these loans or securities has bought the securities for the duration of the swap on 95% margin, even though the law says nobody can buy securities without putting up half the price.”


That's quite a lot of money.
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mises



Joined: 05 Nov 2007
Location: retired

PostPosted: Fri Mar 13, 2009 7:55 am    Post subject: Reply with quote

http://www.bloomberg.com/avp/avp.htm?N=video&T=Obama%20on%20Economy%20&clipSRC=mms://media2.bloomberg.com/cache/v3R.cwmVvIS0.asf

Sometimes Obama says things that make me think he really, truly understands what is happening.
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ontheway



Joined: 24 Aug 2005
Location: Somewhere under the rainbow...

PostPosted: Fri Mar 13, 2009 8:19 am    Post subject: Reply with quote

mises wrote:
http://www.bloomberg.com/avp/avp.htm?N=video&T=Obama%20on%20Economy%20&clipSRC=mms://media2.bloomberg.com/cache/v3R.cwmVvIS0.asf

Sometimes Obama says things that make me think he really, truly understands what is happening.




What this speech shows is that Obama knows how to mislead people. He's a great con man.

He praises the free market, correctly, which gets his audience on his side.

Then he praises government programs that are at the very core of how we got into the mess we are in, and promises to create or expand similar programs - which will ultimately make problems worse today and create massive additional dislocations in the future.

He wants to spend more money.
He wants to expand the size and scope of government.
He wants to mollify the executives in the audience so they won't oppose him.

Nice speech.
Nice job.

A good con to sell the next Ponzi scheme to the American people.

Reagan was a great communicator.
Obama's a great con man.


http://www.youtube.com/watch?v=L1mfCtjiw_o
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ontheway



Joined: 24 Aug 2005
Location: Somewhere under the rainbow...

PostPosted: Fri Mar 13, 2009 9:38 am    Post subject: Reply with quote

http://www.youtube.com/watch?v=Vtvf8Uqil28


Schiff really gets it.

From the depression, WWII, the 60s, Reagan/Volker, Bush/Greenspan, Obama/Bernake and what's to come.
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mises



Joined: 05 Nov 2007
Location: retired

PostPosted: Fri Mar 13, 2009 1:41 pm    Post subject: Reply with quote

I disagree.
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Ya-ta Boy



Joined: 16 Jan 2003
Location: Established in 1994

PostPosted: Fri Mar 13, 2009 5:25 pm    Post subject: Reply with quote

The Daily Beast has this headline:

Is the Worst Over?

The link goes to this article from the NYT:
As Week Ends, Shares Manage to Stay on Upside

The gains on Friday came as investors responded to Chinese concerns about its holdings of government debt and a rosy assessment of the economy from Lawrence H. Summers, a top economic adviser to President Obama.

In a talk before the Brookings Institution, Mr. Summers pointed to some signs showing an easing in the pace of economic contraction, but he said that the economy’s problems would not be solved overnight...

After enduring months of increasingly bleak headlines about bank solvency and corporate losses, investors seized on a few strands of less-than-awful economic news and alchemized them into hope, breathing life back into depressed financial shares and other niches of the market...

“You will see rallies like this from time to time as we bounce along the bottom of the market,” said Joseph V. Battipaglia of Stifel Nicolaus, discussing Thursday’s gains. “Recent history has had a lot of hopes dashed on big rallies. The question is, what about this time around?”

http://www.nytimes.com/2009/03/14/business/14markets.html?_r=1&hp

It's good to have a ray of sunshine, even if it isn't the real bottom of the pit. Who knows, maybe this is the beginning of the recovery.

Besides being good for the world and all that, it will be so much fun to be able to stick out my tongue, put my thumbs in my ears and waggle my fingers at all the doom & gloomers out there. I'm really looking forward to that time when it comes. The conspiracy nuts will naturally claim there was no crisis in the first place or the crisis was deliberately caused...but it's really hard to argue with success.
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mises



Joined: 05 Nov 2007
Location: retired

PostPosted: Fri Mar 13, 2009 5:39 pm    Post subject: Reply with quote

Ya-ta, this isn't even close to the end. In fact, this rally now is a sign of how damned corrupt and absurd the system is. Here is how it went:

Hedge fund managers and institutional investors talked up a looming rally, which created the expectation of a rally.

Citi execs bought huge numbers of Citi stock, and then released a laughable report that Citi made money. They made 2.2 million on the deal. Market manipulation.

The hedge funds and institutional investors (95% of the market, give or take) will use this rally to sell, further depressing prices.

This will cause increased "forced liquidation" as private/public pension funds are, in a word, fucked. They need cash now as dividends, interest and annuities aren't covering their expenses.

The market will continue to tank as the snowball of forced selling, deflation and a deteriorating macro environment become more pronounced.


This is the sad thing.. The market is manipulated for the benefit of those who control the information. The whole system is a mess.


And here is the economist par excellence David Rosenberg's prediction for March: 1 million jobs lost.

We aren't out of the water yet even with sub-prime housing. We will see another massive round of sub-prime losses in the next 4 months. Commercial real estate and credit cards are just starting to blow up now. Look to end 2010 early 2011 for recovery, and don't expect equities to recover inside of 15-20 years (meaning return to 2006 prices).
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mises



Joined: 05 Nov 2007
Location: retired

PostPosted: Sun Mar 15, 2009 7:24 pm    Post subject: Reply with quote

http://www.rgemonitor.com/roubini-monitor/255995/reflections_on_the_latest_dead_cat_bounce_or_bear_market_suckers_rally
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Pluto



Joined: 19 Dec 2006

PostPosted: Mon Mar 16, 2009 8:40 pm    Post subject: Reply with quote

mises wrote:
http://www.rgemonitor.com/roubini-monitor/255995/reflections_on_the_latest_dead_cat_bounce_or_bear_market_suckers_rally


Seems your guy was right. The market shot up close to 25% and may now continue its downward trend. My guess for tomorrow is that there will be morning hop upwards and then the major indices will continue there downward decline -- just a guess, don't hold me to it. I try and be optimistic but I can't see anything better than a Dow5000 S&P500..
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