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The Depression Thread
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Kuros

Joined: 27 Apr 2004

Posted: Tue Sep 15, 2009 6:31 am Post subject:

I think I could park this here, rather than make another thread:

S.E.C. settlement with the Bank of America over Merrill bonuses is rejected

Quote:

Judge Rakoff refused to approve a $33 million deal that would have settled a lawsuit filed by the Securities and Exchange Commission against the Bank of America. The lawsuit alleged that the bank failed to adequately disclose the bonuses that were paid by Merrill before the merger, which was completed in January at regulators� behest as Merrill foundered.

He accused the S.E.C. of failing in its role as Wall Street�s top cop by going too easy on one of the biggest banks it regulates. And he accused executives of the Bank of America of failing to take responsibility for actions that blindsided its shareholders and the taxpayers who bailed out the bank at the height of the crisis.

ontheway

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

Posted: Tue Sep 15, 2009 7:52 am Post subject:

Thank you Mises:

From Bloomberg:

Quote:

�Reluctant to Act

�It�s an outrage,� especially �in the U.S. where we poured so much money into the banks,� Stiglitz said. �The administration seems very reluctant to do what is necessary. Yes they�ll do something, the question is: Will they do as much as required?�

Stiglitz is too pessimistic and the banking system will probably continue to strengthen, said Jim O�Neill, chief economist at Goldman Sachs Group Inc. in London. �I�m not sure why he�s saying it,� O�Neill told Bloomberg Television today. �The banks were close to near death. We�ve been to hell and back, so to speak, and we�re on the road to recovery.�

Stiglitz, former chief economist at the World Bank and member of the White House Council of Economic Advisers, said the world economy is �far from being out of the woods� even if it has pulled back from the precipice it teetered on after the collapse of Lehman.

Economic Malaise�

�We�re going into an extended period of weak economy, of economic malaise,� Stiglitz said. The U.S. will �grow but not enough to offset the increase in the population,� he said, adding that �if workers do not have income, it�s very hard to see how the U.S. will generate the demand that the world economy needs.�

The Federal Reserve faces a �quandary� in ending its monetary stimulus programs because doing so may drive up the cost of borrowing for the U.S. government, he said.

�The question then is who is going to finance the U.S. government,� Stiglitz said.

There was never a financial crisis along the lines of what the Ds and Rs have told us and sold us. The Bush/Obama team along with the Ds and Rs are mostly owned by a handful of big banks that should have been allowed to fail.

First off, this Depression was caused by the Federal Reserve. The FED printed money, created a bubble, the bubble burst, et voila, the second Great Depression is upon us. It had nothing to do with the exotic investments of the big banks that have been blamed by the government. But the media and most of the public is too dumb to get it.

This did put a number of big, dinosaur banking and insurance institutions into jeopardy. They were victims of the FED, to be sure, but they should have known better. It is no secret what the FED was doing.

Furthermore, the economy was not saved by bailing out these big dinosaur insurance companies and banks. In fact, the economy would have been better off had they allowed the big banks and AIG to fail. AIG, Merril, BOA ... they are not to big to fail, they are too big to save.

The US economy, the world economy, the people of America and the world - we would all have been better off if the government had done nothing. We should have let these dinosaur firms collapse - the free market solution.

We need to have a massive default on this kind of socialist debt system. We need to have massive deflation - reversing the socialist inflation. We need to return to the gold standard - which is easy if we let the dinosaurs die - and then, the economy would have been able to rebound much faster.

But, the government lied. The Federal Reserve (the FED) lied. The insiders from the big banks and the Fed took the reins of the financial policy side of the US government. They fooled Bush, who is an idiot, and Obama is either part of the club of corruption, or with Bush, part of the numb-skull and bones club. Perhaps both.

So, the taxpayers were forced to pay to save the big dinosaur firms - another socialist bailout of a failed socialist paradigm.

Had we let the big banks collapse, and the economy deflate, (and maybe even taken the opportunity to go back on the gold standard), the medium and small banks would have been able to pick up the pieces that had value, and expand, helping the economy to grow again, with lower prices, real savings by the freshly chastened consumer, and without an additional $13 trillion additional burden from saving the dinosaurs, without the hyperinflation that we now face, and without the prospect of future bubbles.

mises

Joined: 05 Nov 2007
Location: retired

Posted: Tue Sep 15, 2009 8:01 am Post subject:

Quote:

Poorer but no wiser
Commentary: America falls behind in the global wealth wars

LONDON (MarketWatch) -- A year after the Lehman Bros. collapse and subsequent credit crisis comes new confirmation that America is falling behind.

A report by the Boston Consulting Group finds that the U.S. is no longer home to the greatest chunk of the world's wealth. That honor now belongs to Europe. See related story.

Of course, it's not like anybody is really getting ahead. Global wealth fell nearly 12% in the past year to $92.4 trillion. It's just that America's share is falling faster than Europe's, where total wealth declined a mere 5.8%.

And it could just be a case of America having a higher "beta" than the rest of the world. In which case, even though wealth gets destroyed faster in the U.S., it also is created more quickly there.

One had better hope so, given that the effect on the U.S. tax base over the past year has been pretty devastating, especially at a time when the country's need of big earners has never been greater.

http://www.marketwatch.com/story/us-wealth-shrinks-faster-than-europes-2009-09-15

http://www.efinancialnews.com/homepage/content/1055173256

Quote:

Europe overtakes the US as world�s wealthiest region

The economic and financial crisis of the last 18 months has transformed the global map of the world�s wealthiest people, with Europe nudging out North America as the richest region, according to a new report by The Boston Consulting Group.

BCG�s said that global wealth fell 11.7% to $92.4 trillion in 2008 � the first decline since 2001. BCG said it is unlikely to return to its pre-2007 levels for four years.

North America saw the biggest decline in wealth, falling by 21.8% last year. The big drop was partly put down to the large percentage of wealth held by Americans in equities. Latin America was the only region where wealth grew, by 3%.

Total wealth in Europe fell 5.8% to $32.7 trillion last year.

Offshore wealth fell by 8.2% to $6.7 trillion last year. Switzerland remained the largest offshore centre, accounting for 28% of the total.

The number of millionaire households worldwide fell by 17.8% to nine million last year. But the crisis also narrowed the gap between the wealthy and non-wealthy, with wealth owned by households with less than $100,000 in assets under management increasing by 2% last year, but declining in all other segments.

Those households with more than $5m saw their wealth falling by 21.5% last year.

��Wealth will begin a slow recovery in 2010 but may not reach its pre-crisis level until 2013,� said Peter Damisch, a BCG partner and a co-author of the report.

�We expect wealth to grow at an average annual rate of about 4 percent from year-end 2008 through 2013.�

The BCG study said regulatory pressure is changing the landscape of cross-border wealth management.

�Once their tax and legal advantages evaporate, so too will their appeal,� Damisch said.

�Being inconspicuous is a tenuous value proposition in an era of increasing oversight.�

BCG said the wealth management industry had weathered the storm better than most other financial-services sectors, but of the 124 institutions surveyed, the median pretax profit margin fell to 30% in 2008, down from 36.4% in 2007.

Clients shifting their investments to basic, low-margin investments hurt the industry, according to BCG.

�Dazzling product complexity is no longer seen as a positive attribute�if it ever really was,� said Bruce Holley, a BCG senior partner.

�It is unclear when�and to what extent�assets will migrate back to high-margin investments, but wealth managers cannot count on a strong resurgence of these products in the short term.�

I don't expect this to last. The EU has major problems they aren't working on (just like the US). Switzerland could (will? Eventually the swaps with the Fed must end) implode entirely due to UBS's American mortgage exposure. Ireland has popped. Germany and Sweden have major risk in the Baltics. But for now, it is fun to point out that as the bankers pay themselves huge bonuses, the United States as a whole is becoming less wealthy.

mises

Joined: 05 Nov 2007
Location: retired

Posted: Tue Sep 15, 2009 8:53 am Post subject:

Visitorq will love this:

http://www.nytimes.com/aponline/2009/09/15/business/AP-US-Obit-James-McDonald.html?_r=1

Quote:

BOSTON (AP) -- Massachusetts investigators say James S. McDonald, president and chief executive of investment management firm Rockefeller & Co., has died of an apparentlyself-inflicted gunshot wound.

A spokesman for the Bristol district attorney's office says the 56-year-old McDonald was found in his vehicle at about 3 p.m. Sunday behind a car dealership in Dartmouth.

The spokesman, Gregg Miliote (mill-ee-OH'-dee), says it appears McDonald shot himself but the death is still under investigation.

McDonald had been president and chief executive of the New York investment manager since 2001. The company was started in 1882 by John D. Rockefeller to manage the family's assets.

bucheon bum

Joined: 16 Jan 2003

Posted: Tue Sep 15, 2009 7:29 pm Post subject:

Some good news, for those employed

Quote:

Wage growth has picked up in the last several months, according to two different government surveys. You don�t hear or read nearly as many stories about pay cuts these days. Even though unemployment has reached its highest level in 26 years, most workers have received a raise over the last year.

Summary: if you have a job, you're in good shape. If you don't, yeah, you'll have to enjoy that unemployment for awhile.

visitorq

Joined: 11 Jan 2008

Posted: Wed Sep 16, 2009 1:48 am Post subject:

mises wrote:

Visitorq will love this:

http://www.nytimes.com/aponline/2009/09/15/business/AP-US-Obit-James-McDonald.html?_r=1

Quote:

This is what happens when you mess with the mob: you get taken out back and shot. My guess is he probably knew too much, and stepped out of line in some way. I highly doubt it was a suicide.

Anyway, 'Rockefeller and Co.' is just one of the countless tentacles of their empire. The overall family business (ie. shuffling their illicit wealth around to and from their many trusts to keep it well hidden and tax free) is taken care of behind closed doors at 'Rockefeller Family & Associates' (Room 5600 - 30 Rockefeller Plaza).

mises

Joined: 05 Nov 2007
Location: retired

Posted: Wed Sep 16, 2009 6:05 am Post subject:

http://www.ritholtz.com/blog/2009/09/bernanke-says-recession-over-should-you-care/

Quote:

Bernanke Says Recession Over; Should You Care?

Ben Bernanke has declared the recession over.

This leads to one simple question: Why should you care what his recession forecasts are?

Based on his track record as a forecaster and his acumen in identifying economic problems before they exploded, his views on starts and finishes of recessions are, to be blunt, irrelevant.

Recall it was Mr. Bernanke who described the sub-prime situation as �Contained;� it was he who believed Housing would not spill over to the broader economy; and it was he who somehow thought the Bear Stearns situation was a one-off.

I don�t wish to single out Mr. Bernanke; After all, he is an economist, and if you were paying attention, you will note that the entire profession missed the oncoming recession, credit crisis and market collapse. You may also find it helpful to ignore what the profession that cannot forecast yesterday thinks about tomorrow.

Even now, the Federal Reserve Chairman said the recession was �very likely over� as consumers showed some of the first tangible signs of spending again. Never mind that all this retail activity has been driven by government subsidies.

Now, as an investor, you do want to be mindful of the Fed Chief�s economic views, particularly how they pertain to his interest rate policies. The ed has made it clear rates are staying low for the foreseeable future, so this becomes a non-issue in this context.

But his economic forecasts? Don�t bother.

Note that I have not been a particularly harsh critic of the Fed Chair. While he may not be Paul Volcker, he is also (thankfully) not Alan Greenspan. And we could have done much worse than having a student of the Great Depression, who is also an out-of-the-box thinker as Fed Chief.

But as a prognosticator? He is no better than his predeccessor . . .

How can a downturn be over when unemployment is still increasing, trade is decreasing, cre collapsing, atl-a hitting. etc. Is the DJA our only measure of economic health in the United States? Ben is going to regret this forecast, but like his other wrong forecasts he'll not suffer any negative consequences aside from some internet based commentators calling him out.

I was listening to Financial Sense Newshour last night and the host Jim Pupluva (a very strong long term bear) mused that the Fed/Treasury might be able to keep the economy from the next leg down until 2011. I guess my biggest flaw in this situation is that I underestimated how far the state would go to push these major problems down the road. That was dumb of me. I reckon the banking sector is like a bandaid on a hairy leg. Do you want to pull it off fast or slow? Either way it will hurt, and either way it is coming off. I guess they're happy to drag the process of pulling it off over a decade or more.

Last edited by mises on Wed Sep 16, 2009 6:09 am; edited 1 time in total

bucheon bum

Joined: 16 Jan 2003

Posted: Wed Sep 16, 2009 6:08 am Post subject:

Housing Industry Looks to More Tax Credits

Quote:

The government�s efforts to directly reward home buyers began more than a year ago with a $7,500 tax credit that had to be repaid over 15 years. Last winter, amid fears of another Great Depression, the Senate came up with a much sweeter $15,000 package as part of the stimulus bill. That measure was ultimately reduced to the $8,000 credit.

Now the sponsor of the original Senate bill, Johnny Isakson, Republican of Georgia, is back with a new bill that would give a maximum $15,000 credit to any buyer who stays in a home for at least two years.

Yet another reason I cannot be a Republican supporter. Another example of their hypocrisy. Free market, small gov't? Please.

Quote:

On the other side of the issue is the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute. It labeled the original credit as one of the worst provisions of the stimulus package, on the grounds that the money is a bonus for people who would buy a house anyway. The center has an even dimmer view of extending the credit to all buyers.

Duh.

bacasper

Joined: 26 Mar 2007

Posted: Wed Sep 16, 2009 7:26 am Post subject:

mises wrote:

http://www.ritholtz.com/blog/2009/09/bernanke-says-recession-over-should-you-care/

Quote:

Bernanke Says Recession Over; Should You Care?

Ben Bernanke has declared the recession over.

Benny is right. The recession is over. Unfortunately, the depression is just getting started.

caniff

Joined: 03 Feb 2004
Location: All over the map

Posted: Thu Sep 17, 2009 3:50 pm Post subject:

http://www.slate.com/id/2228412

Quote:

Ben Bernanke declared Tuesday that the recession is "very likely over at this point." He called the recovery technical, though, and said that it won't feel like a real recovery. Instead, Bernanke talked about the risk that the economy will grow too slowly in the second half of 2009 to create many new jobs or replace the ones that were lost. In which case, "unemployment will be slow to come down," Bernanke said. "It will come down, but it will take some time."

Great. Let's all get back to "Dancing with the Has-beens" and stuff.

Pluto

Joined: 19 Dec 2006

Posted: Thu Sep 17, 2009 5:19 pm Post subject:

It's a jobless recovery Caniff, just remember that. Also, it's a recovery by where global trade continues to collapse.

Quote:

The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination - and is why your Christmas stocking may be on the light side this year

Daily Mail: Ghost Fleet Larger than UK and US Navies (COMBINED!) sits off the Coast of Singapore.

& of course:

http://www.zerohedge.com/article/thousands-rusting-ship-hulls-are-fitting-tribute-speculative-market-bubble

caniff

Joined: 03 Feb 2004
Location: All over the map

Posted: Thu Sep 17, 2009 6:59 pm Post subject:

I briefly considered posting only positive (read: B.S.) quotes and commentary just to stir up the folks, but I don't think I'd make a very good troll. Plus the situation just isn't funny.

mises

Joined: 05 Nov 2007
Location: retired

Posted: Thu Sep 17, 2009 7:31 pm Post subject:

caniff wrote:

I briefly considered posting only positive (read: B.S.) quotes and commentary just to stir up the folks, but I don't think I'd make a very good troll.

Plus the situation just isn't funny.

And it isn't all that interesting anymore either. The decisions have been made and now we wait to see how long this thing will last.

caniff

Joined: 03 Feb 2004
Location: All over the map

Posted: Thu Sep 17, 2009 7:52 pm Post subject:

mises wrote:

And it isn't all that interesting anymore either. The decisions have been made and now we wait to see how long this thing will last.

While I wouldn't want to have the last post (as I haven't contributed much in regards to this), that sentiment may be a fitting endcap on this thread.

mises

Joined: 05 Nov 2007
Location: retired

Posted: Thu Sep 17, 2009 8:12 pm Post subject:

Agreed. Fortunately for Mr. Mises, the depression isn't a personal experience and I no longer have the time to fuss about this topic. So, barring big news, I agree.

Some historical perspective:

http://www.scribd.com/doc/19729161/Havent-We-Been-to-This-Show-Before-Dan-AlpertWestwood

http://www.zerohedge.com/article/market-commentary

Quote:

Some more September (1930) news:

* Brokers, businessmen, and even the general public more optimistic; over 75% of brokerage houses now advise buying stocks.
* Offering of $334.2M in 2 3/8% one-year Treasury certificates is oversubscribed by almost 4:1.
* B. Anderson, Chase Natl. Bank economist, says Fed policy of easy money will not be sustainable when business revives; suggests moderate tightening now to avoid shock of a sudden severe tightening later.
* Florida Bondholder's Adjustment Committee calls on owners of defaulted local bonds to accept arbitration with principle that local govt. should �pay to the full extent of its ability to pay� when fairly determined, and no more. Says full payment in many cases impossible due to string of problems in past few years including collapse of real estate boom, bank failures, storms, and Med. fly scare; local feeling is that many bonds were voted in due to high-pressure tactics by outsiders.
* Roger W. Babson (economist, made perfectly timed bearish call in fall 1929) optimistic on immediate future, sees possible �stampede of orders� due to underproduction; says it's as evident now that business is bound to improve as it was clear a year ago that it must deteriorate.
* The great debate: Bears argue that past month's rally has already discounted the mild improvement in business, and that decline in steel production in past week indicates weakness. Bulls counter that steel decline was due to Labor Day, that August steel and car loading figures show more than seasonal improvement, and that recent retail figures and company outlooks have been improved. On the technical side, bulls believe the recent rally has �definitely broken� the downtrend since last Sept., indicating future support should come in well above the June bottom of 212.
* �While the recovery in business will undoubtedly be gradual, and characterized by confusing uncertainties, the fact remains that all indices that have pointed to revival in the past are now existent. As the stock market is usually some months ahead of trade, observers ... think there is a good chance that Wall Street will be the outstanding bright spot of the country during the winter months.�

Chariman Ben sure is a good Great Depression historian

http://newsfrom1930.blogspot.com/

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