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mises
Joined: 05 Nov 2007
Location: retired
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 Posted: Mon Sep 15, 2008 6:45 am Post subject: |
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| blaseblasphemener wrote: |
A year ago, if someone would have predicted that in the next 12 months:
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While he didn't offer specific details of who/what/when, Peter Schiff (who was/is Ron Paul's economic adviser) did accurately describe much of what is unfolding. Nouriel Roubini got it right too, as did Jim Rogers.
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I don't think anyone would be talking about a recession if these things were predicted to come to pass. I think people would be saying America was in the throws of another a financial tsunami, a great, great depression.
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This is now possible. I don't know if it is likely (yet) but yes, a depression is very possible now. See the Krugman article I posted. A recession is 2 quarters of neg growth and there no real agreed criteria for how many quarters are needed for depression. Roubini figures the recession started in November, meaning we are soon in 4 quarters of neg growth. 5 or 6 is absolutely depression. But the stats are so political now, like everything else, that the patriots insist that we haven't even hit neg growth yet.
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| Greenspan said it is a once in a century event. |
Good. Glad to get this over at my young age. I'll buy a nice house cheap from some douchebag 30k millie flipper with Ed Hardy shirts and a Navigator.
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| What will America look like by Christmas? |
This is the big question.. The financial system is clearly parasitic on the real economy at this point. We are seeing the final days of the American financial empire, but the American economic empire could very well continue. Wall Street is actually quite useless for the rest of the country. Much of what they do does not benefit anybody and smaller, regional banks can provide needed lending. M&A's, leveraged buy outs, leveraged trading etc these things don't benefit anybody but those involved. Let Wall Street die.
One of the only good points of news in the last 24 hours is that Lehman employees may have to pay back their bonuses. The firm paid 5.7 billion in bonuses. A MD in banking would have gotten at least 200-300k base plus 200% bonus. VP's even more. They cooked the books with level 3 assets (bonus makers, as they are) to raise their own profit.
http://www.creditslips.org/creditslips/2008/09/lehman-2007-bon.html |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Mon Sep 15, 2008 8:27 am Post subject: |
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Here is what McCain had to about the financial crises:
http://www.youtube.com/watch?v=igAmVs0cvY8&eurl
"You know that there's been tremendous turmoil in our financial markets and Wall St. And it is -- people are frightened by these events. Our economy, I think still -- the fundamentals of our economy are strong. But these are very, very difficult times."
Krugman expands:
http://krugman.blogs.nytimes.com/
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This is trivial, sort of. But today, John McCain declared that �the fundamentals of our economy are strong� � and also explained that we�re �the most innovative, the most productive, the greatest exporter, the greatest importer.�
Exactly why we�re boasting about being the biggest importer isn�t clear � not to get all mercantilist, but buying a bunch of stuff isn�t a great achievement. And last I looked, we weren�t the greatest exporter; that distinction went either to the European Union, or, if you restrict yourself to countries, Germany.
I guess the reason I flag this is that it�s part of that tendency of Americans to assume that we�re by definition the best � the kind of attitude which lets people get away with warning �warning! � Americans that the likes of Hillary would give us French health care. (If only.) |
Contrast that with Obama:
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| I certainly don�t fault Senator McCain for these problems. But I do fault the economic philosophy he subscribes to. It�s the same philosophy we�ve had for the last eight years � one that says we should give more and more to those with the most and hope that prosperity trickles down to everyone else. It�s a philosophy that says even common-sense regulations are unnecessary and unwise; one that says we should just stick our heads in the sand and ignore economic problems until they spiral into crises. |
http://www.reason.com/blog/show/128794.html
Who is more in touch? |
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OneWayTraffic
Joined: 14 Mar 2005
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| Posted: Tue Sep 16, 2008 2:51 am Post subject: |
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| Bill Fleckinstein on msn.com has been calling this for several years. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Wed Sep 17, 2008 11:34 am Post subject: |
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The National Post compiles some interesting editorials:
http://network.nationalpost.com/np/blogs/fullcomment/archive/2008/09/17/fc-abroad-if-bankers-were-generals-they-d-be-swinging-from-lampposts.aspx
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FC Abroad: If bankers were generals, they'd be swinging from lampposts
Posted: September 17, 2008, 2:30 PM by Kelly McParland
Full Comment, Araminta Wordsworth, FC Abroad
Full Comment brings you a daily compendium of international punditry on the issues of the moment. Today: there is nothing like a roiling economic crisis to concentrate the minds of the world�s commentators, and the latest financial meltdown is no exception.
Wall Street as we know it is kaput, writes Robert J. Samuelson in The Washington Post in an article that lays the blame on the usual suspects, leveraging and greed.
�[T]hese components created a manic machine for gambling. Traders and money managers had huge incentives to do whatever would increase short-term profits. Dubious mortgages were packaged into bonds, sold and traded. Investment houses had huge incentives to increase leverage. While the boom continued, government remained aloof. Congress resisted tougher regulation for Fannie and Freddie and permitted them to run leverage ratios that, by plausible calculations, exceeded 60 to 1.
It wasn�t that Wall Street�s leaders deceived customers or lenders into taking risks that were known to be hazardous. Instead, they concluded that risks were low or nonexistent. They fooled themselves, because the short-term rewards blinded them to the long-term dangers. Inevitably, these surfaced. Mortgages went bad. The powerful logic of high leverage went into reverse. Losses eroded firms� tiny capital bases, raising doubts about their survival. This year, Lehman lost nearly $8-billion in �principal transactions�. Otherwise, it was profitable.�
Editorial writers at The Los Angeles Times want Washington to sit pat, then regulate:
�The fall of two investment banking titans this weekend and the travails of a giant commercial insurance firm so rattled policymakers that even Republican candidates were calling for more regulation to protect investors. Yet, in the short term, the most important thing that Washington can do for firms and investors alike is exactly what the Treasury Department and the Federal Reserve did for Lehman Bros. Holdings Inc. [and] Merrill Lynch & Co.: nothing �
�[Later,] the feds should reconsider how they oversee a financial services industry that has changed radically over the last decade, creating increasingly complex financial instruments that are hard to understand and value. The housing bubble was a regulatory failure on the micro level, with unsound and predatory practices largely overlooked until subprime lenders started imploding. But the more enduring aspect is the absence of any mechanism to guard the financial system as a whole against future bubbles, or the creation of firms that truly are too big and intertwined to fail.�
From the other side of the Atlantic, Max Hastings in The Guardian also advocated more regulation:
"When the dust settles, there will be a rebalancing of relative power between financial communities and regulators on both sides of the Atlantic. The kings of the market have been proved wrong. Unless the U.S. and Britain want to go through this nightmare again in a few years� time, it will be made more difficult for banks to expose themselves to risk so recklessly.
Yet it would be naive to suggest that it will be easy to get a new dispensation right. Market capitalism has delivered amazing prosperity to the West. Curbing its excesses without destroying the conditions for future wealth-generation will be tough. The bankers, market makers and hedge fund overlords have been insufferably arrogant in their decades of triumph, and nemesis is their just reward. But it will be flagellatory if, in our desire to punish the architects of systemic failure, governments introduce measures that stifle growth."
The headline though was pure Guardian: �Many of these bankers are horrible people.�
But as an investment banker�s wife told The Daily Telegraph last week, it�s hard to expect sympathy for our plight.
In a similar vein, Simon Jenkins lamented the teflon protection enjoyed by financiers, before calling for that traditional British (and Canadian) �fix,� a commission of inquiry:
�If the mistakes that have collapsed the world�s financial markets had been made by statesmen and had led to war, there would be corpses swinging from lampposts. If they had been made by generals, they would be falling on their swords. If they had been made by judges or surgeons or scholars, some framework of professional retribution would be rolling into action. But those responsible for our finances can apparently vanish into the forest like Cheshire cats, leaving only gold-plated grins. Not for them a Hague tribunal or a Hutton inquiry. They are not just good at shedding risk -- they shed blame �
I would happily arrest and try all those whose stupidity and greed are about to cause untold hardship to millions -- if I could find a law they had broken. Dr Johnson was quite wrong to say a man is �never more innocently employed than in getting money�. But when a building collapses, you do not kill the architect. You try to get him to build it again.
Underpinning financial credit is an absolute function of government and one that has not changed since the birth of capital. It clearly needs constant redefinition. When this saga is through there should be a tribunal of inquiry. Then we can be told what needs mending, and whom to take out and shoot.� |
This is such a gong show. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Wed Sep 17, 2008 11:43 am Post subject: |
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Looks like we're heading for a 10,000 DOW pronto. Gold soared today, which is a sign of panic setting in. This is getting really nasty.
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Gold prices post biggest 1-day gain ever
NEW YORK (AP) - Gold prices exploded Wednesday�posting the biggest one-day gain ever in dollar terms�as fears of more credit market turmoil unnerved investors and triggered a flood of safe-haven buying.
Gold for December delivery rose as much as $90.40, or 11.6 percent, to $870.90 an ounce in after-hours trading on the New York Mercantile Exchange after jumping $70 to settle at $850.50 in the regular session. That was the biggest one-day price jump ever; gold's previous single-day record was a $64 gain on Jan. 29, 1980. |
http://www.breitbart.com/article.php?id=D938L2E83&show_article=1 |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Wed Sep 17, 2008 11:46 am Post subject: |
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A good round up of links:
http://globaleconomicanalysis.blogspot.com/2008/09/global-financial-seizures-continue-gold.html
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Gold bulls have something to smile about today as it is soaring by more than $50 in the wake of renewed financial seizures. The markets have greeted the news Nationalization of AIG: Treasury to get 80% stake in return for $85 billion with a bang.
Treasury Secretary Paulson has been on the phone all day assuring multiple countries Don't Worry, The Banking System Is Sound.
With that backdrop let's consider some of today's seizures starting with Russia.
Russian Markets Halted
Bloomberg is reporting Russian Markets Halted as Emergency Funding Fails to Halt Rout.
Russian markets stopped trading for a second day after emergency funding measures by the government failed to halt the biggest stock rout since the country's debt default and currency devaluation a decade ago.
The ruble-denominated Micex Stock Exchange suspended trading indefinitely at 12:10 p.m. after its index erased a 7.6 percent gain and plunged as much as 10 percent within an hour. The benchmark fell 17 percent yesterday, the biggest drop since Bloomberg started tracking the gauge in May 2001. The dollar- denominated RTS halted trading after similar declines.
The government yesterday injected $20 billion into the interbank lending market via central bank and Finance Ministry auctions in a bid to contain soaring borrowing rates as credit dried up in the wake of the Lehman Brothers Holdings Inc. bankruptcy. The one-day MosPrime overnight rate, a gauge for monitoring liquidity demand, leapt 25 basis points to a record 11.08 percent today.
"The bond market remains effectively closed and banks are reluctant to lend to one another," said Julian Rimmer, head of sales trading at UralSib Financial Corp. in London. "The problems experienced by KIT Finance have heightened counterparty risk and reduced liquidity further."
Genius Fails Again
It is fitting that Russia is back in the news because it was the demise of Long Term Capital Management that kicked off a string of moral hazard interventions by the Fed that continues to this day. Please see Genius Fails Again for a recap of LTCM and the 1997 Russian Bond market collapse that then threatened the financial system. The derivatives mess today is thousands of times greater.
Hedge Funds Frozen
One has to wonder what today's derivatives geniuses were thinking (or rather not thinking) as they watched the collapse of Bear Stearns while munching on popcorn headed into last weekend's poker party with Merrill Lynch (MER), J.P. Morgan Chase (JPM), Goldman Sachs (GS), Citigroup (C), Bank of America (BAC), Barclays, sitting at the table with Lehman (LEH) as the pot. See Fed Sponsored Poker Party Morphs Into "Old Maid"
No bets made revealing what we all knew, Lehman was worthless. That forced Lehman into bankruptcy at midnight Sunday.
Hedge Funds Frozen
Today Hedge Funds Are Frozen In Wake of Collapse of Lehman.
The collapse of Lehman Brothers Holdings Inc. is creating a quandary for hedge funds: Who to do business with in a tumultuous prime-brokerage industry.
Late last week, many hedge funds scrambled to shift that business away from Lehman and to other so-called prime brokers, which provide trading and lending services to the funds. But some were caught up in the bank's move to file for bankruptcy protection on Monday, say lawyers and other industry specialists. As a result, they have found their holdings effectively frozen, with no indication of when they might be able to access them.
Legal experts cautioned that it could be weeks or months before the mess is sorted out, leaving hedge funds unable to unwind positions at a time when many assets are falling sharply in value.
Money Markets Frozen
Reserve Primary Fund (RFIXX), the oldest US money-market fund, became the first in 14 years to break the buck after writing off $785 million of debt issued by bankrupt Lehman Brothers Holdings Inc.
Shareholders pulled more than 60 percent of the fund's $64.8 billion in assets in the two days since Lehman folded. Reserve Primary Fund reacted by placing a seven-day freeze on redemptions. Please see Money Market Fund Breaks $1, Suspends Withdrawals for more details.
Massive Flight To Safety
Bloomberg is reporting Treasury 3-Month Bill Rates Drop to Lowest Since at Least 1954.
U.S. Treasury three-month bill rates dropped to the lowest since at least 1954 on concern that credit market losses will widen after the bankruptcy of Lehman Brothers Holdings Inc. and the federal takeover of American International Group Inc.
Investors pushed the rate as low as 0.233 percent as the loss of confidence in credit markets deepened. Reserve Primary Fund, the oldest U.S. money-market fund, became the first in 14 years to expose investors to losses after writing off $785 million of debt issued by Lehman.
"People are extremely cautious with respect to who they're lending money to at the moment," said Richard Bryant, a Treasury trader at Citigroup Global Markets Inc., one of the primary dealers that trade government securities with the Federal Reserve. "They're willing to buy very short-dated Treasury instruments and forgo returns and in some cases pay for the privilege of knowing their money is safe."
Central banks around the world pumped more than $280 billion into the financial system this week as they sought to ease a credit-market seizure. The Fed offered the loan to AIG, the biggest U.S. insurer by assets, in exchange for control.
The AIG rescue "smacks of sweeping the problem under the carpet rather than solving it in a structural sense," said Padhraic Garvey, head of investment-grade debt strategy at ING Bank NV in Amsterdam, in a note to clients.
Global money market rates hit 9-yr high
Business Standard is reporting Global money market rates hit 9-yr high.
The cost of borrowing in dollars for three months has jumped the most since 1999, with banks hoarding cash amid concern that more financial institutions will fail.
The London Inter-Bank Offered Rate, or Libor, rose 19 basis points to 3.06 per cent, the British Bankers� Association (BBA) said today. The increase was the biggest since September 29, 1999. The overnight dollar rate fell 1.41 percentage points to 5.03 per cent today. It soared 3.33 percentage points yesterday, the largest increase in its history. It was at 2.14 per cent a week ago.
�Everybody is worrying about which bank is going to go bankrupt next," said Ronald Tharun, a money-market trader in Stuttgart at Landesbank Baden-Wuerttemberg, Germany�s biggest state-owned bank. "There�s almost nothing being traded in the money markets. Nobody trusts anyone else."
Credit markets seized up as the collapse of Lehman Brothers Holdings and the US government�s rescue of the American International Group (AIG) spurred concern that more financial companies may collapse. HBOS, the UK�s biggest mortgage lender, slid as much as 52 per cent today on speculation that it may not have access to funding. The shares rebounded after two people familiar with the situation said the Lloyds TSB Group is in talks to buy the bank.
The cost of borrowing in the euro for three months rose half a basis point to 4.97 per cent today, the European Banking Federation said. That�s the highest level since December 5, 2000.
Global Systemic Distrust
"There�s almost nothing being traded in the money markets. Nobody trusts anyone else."
Welcome to the wonderful world of derivatives and 30 times leverage Mr. Bernanke. Not many can claim to threaten the world's financial system. It took years of hard effort, but you, Greenspan and the Fed, in conjunction with fractional reserve lending, managed to pull it off. You and the Fed should be proud. Stand up and take a bow. |
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