EconoMonitor

Nouriel Roubini's Global EconoMonitor

RGE Monitor – 2009 U.S. Economic Outlook

It is clear that 2008 was a dismal year for the economy and financial markets and it is now official that the current U.S. recession started already in December 2007. So, how far are we into this recession that has already lasted longer than the previous two (the 1990-91 and 2001 recessions lasted 8 months each)? We forecast that the U.S. economy is only half way through a recession that will be the longest and most severe in the post war period. U.S. GDP will continue to contract throughout all of 2009 for a cumulative output loss of 5% and a recession that will thus last about two years. Our forecast is much worse than the current consensus forecast expecting a growth recovery in the second half of 2009; we also predict significantly weak growth recovery – well below potential – in 2010.

One final look at 2008 will reveal a very weak fourth quarter with GDP growth contracting -6%, in the wake of a sharp fall in personal consumption and private domestic investments. We see the real GDP growth contraction playing out through the year as follows: Q1 2009 -5%; Q2 2009 -4%; Q3 2009. -2.5%; Q4 2009 -1%, adding up to a yearly real GDP growth of -3.4% for the U.S. in 2009.

Personal Consumption

A shopped-out, saving-less and debt-burdened U.S. consumer lost its resilience and started to give up in the third quarter of 2008, when for the first time in almost two decades, personal consumption contracted. With personal consumption making up over two-thirds of aggregate demand, the outlook for the U.S. consumer is at the center of the dynamics that will play out in the real economy in 2009.

In our view, personal consumption will continue to contract quite sharply throughout 2009 as a result of negative wealth effects from housing and equity market losses, the disappearance of home equity withdrawal from the second half of 2008 on, mounting job losses, tighter credit conditions and high debt servicing ratios (the debt to income ratio went from 70% in the 90s, to 100% in 2000 to 140% now). This retrenchment of the U.S. consumer will result in a painful rebalancing in the economy that will eventually restore the household saving rate of a decade ago to increase the now sharply depleted net worth of the household sector.

The wealth losses for households related to the fall in home prices are roughly $4 trillion so far, and are clearly bound to increase further as home prices continue to fall –eventually reaching the $6-8 trillion range (compatible with a 30-40% fall in home prices peak to trough). With a negative wealth effect of 6 cents on the dollar, the reduction in personal consumption could amount to a whopping $500bn. And negative wealth effect from fall in equity prices – on the wake of a bleak 2009 for corporate profits – will also contribute to the contraction in personal consumption by an estimated $100bn (compatible with a 20% contraction in the stock markets from the level at the beginning of 2009.)

This adjustment is consistent with a rebalancing of the economy that will over time bring the saving rate to a positive level of roughly 5-6% where it was a decade ago, for this to happen consumption has to contract by an amount close to $800bn.

Housing Sector

The 4th year of housing recession – and the worst housing recession since the Great Depression – is well on course.

Total housing starts have plunged from the 2.3 million seasonally adjusted annual rate (SAAR) peak of January 2006 all the way to the 625 thousand SAAR of November 2008 (the last data point available), an all time low for the time series that started in January 1959. Single-family starts built for sale are down 75% from their Q4 2005 peak (seasonally adjusted data are not available, we performed our own seasonal adjustment).

On the demand side, new single-family home sales are down 70% from their July 2005 peak. Both demand and supply of homes are therefore still falling very sharply which does not bode well for inventories. Inventories are the mortal enemy of prices for any goods-producing sector, including housing.

Starts need to fall substantially below sales so that the excess supply in the housing market is reabsorbed. Inventories persist at record highs and the gap between one-family starts (for sale) and one-family sales (-92K annual rate in Q3 2008 according to our estimates) is at levels that cannot promote a fast work–off of inventories. To put these numbers in perspective, compare this with a measure of vacant homes for-sale-only. Vacant homes for-sale-only were at 2.2 million in Q3 2008, an all time high. In the decade between 1985 and 1995 it oscillated around 1 million units on average and 1.3 million units between 2001 and 2005. This implies that we have to deal with an excess supply that ranges between 0.9 and 1.2 million units, of which roughly 85% are single-family structures.

The sharp and unprecedented fall of starts might not have reached a bottom yet. In this economy-wide recession, weakness on the demand side of housing is bound to persist and we believe that supply will have to fall further, given also the great wave of foreclosures that is adding to the excess of supply in the market. We see starts falling another 20% from current levels.

We believe that home prices will not bottom out until the middle of 2010. Our target is a 38% peak to trough (so far prices have fallen 25% from the peak) but given the worsening conditions on the real side of the economy, we see a meaningful chance for over-correction that would bring prices down 44% from the peak reached in the first half of 2006 (Case-Shiller is the reference index for these predictions.)

Labor Markets

With continued credit crunch and significant cut down in consumer and business spending, the monthly job losses will continue in the 400-600k range during the first two quarters of 2009, pushing the unemployment rate to over 8% by mid-2009. The severe contraction in private demand through 2009 will keep lay-offs high so that the unemployment rate will reach 9% by the end of 2009.

Economy wide job cuts are expected, with big corporations and small and medium enterprises, residential and commercial construction, financial services and manufacturing continuing to shed jobs at a strong pace. Moreover, with structural shifts in the economy since the last recession, job losses this time will be more severe in the service sector, including retail, business and professional services, and leisure and hospitality. Unless the fiscal stimulus addresses the deficit problem for state and local governments, job losses at the government level will also gain pace. In turn, income and job losses will further push up the default and delinquency rates on mortgages, consumer loans and credit cards. Moreover, the loss of high paying corporate and financial sector jobs will be a big negative for tax revenues over the next two years.

As cost-cutting gains pace with the beginning of the (sluggish) recovery period in early 2010, lay-offs are bound to continue. Even as consumer demand might show some signs of recovery at some point in 2010, firms will most likely begin by hiring only part-time and temporary workers initially. The unemployment rate might get close to 10%, peaking in the middle of 2010 over two years after the recession began. However, the hiring freeze across industries that began in late 2007 will continue at least until 2010 causing discouraged workers to leave the work force and containing the extent of spike in the unemployment rate. Further, the decline in labor utilization will add to the deflationary pressure in the economy. An aging labor force, lower capital spending and potential growth over the next few years might also result in lower productivity growth and an increase in the natural rate of unemployment (NAIRU).

Capital Expenditure

Firms have been drawing down inventories beginning in Q4 2008 given the build-up of inventories of unsold good; this process will continue in 2009 dragging down production. As the slump in domestic and foreign demand and difficulty in accessing short-term credit persist over the next four quarters, business investment is bound to contract in the high double-digits throughout 2009. Industrial production, spending on equipment and durable goods will also remain in red through 2009. Moreover with a sluggish recovery in private demand even during 2010, firms will start building inventories and increase capex plans only at a slower pace.

Trade

Exports contraction that began in late 2008 will gain pace in 2009 as more and more emerging economies slip into slowdown following the G-7 countries. On the other hand, easing oil prices and secular downward trend in consumer spending and business investment will help imports to shrink. In fact, this might cause the trade deficit to contract in 1H 2009 since the contraction in imports might well exceed the decline in exports, thus containing any negative contribution of trade to GDP growth.

Dollar Outlook

The fate of the U.S. dollar in 2009 rests on the global growth outlook relative to the U.S. downturn. After profit-taking on long USD positions ends and trading volumes pick up as investors return from their holidays, the dollar may temporarily recover its relative safe haven status in part of H1 2009. Since markets have yet to fully appreciate the impact of the commodity slump and financial crisis on the rest of the world, risk appetite may collapse again on signs of a deeper- or longer-than-expected recession outside the U.S. Further de-leveraging of USD-denominated liabilities could provide an additional boost to the dollar as a funding currency. The bond yield outlook could be a further source of strength: while the Fed is already at ZIRP, other central banks will cut rates further to stimulate growth, putting downward pressure on currencies like the Euro. Alternating with these upside risks to the dollar may be downside risks from 1) a supply crunch in commodities that lifts commodity prices and producers’ economies, 2) inability of the market to absorb increased Treasury supply at low yields; 3) massive quantitative easing by the Fed; 4) large twin fiscal and current account deficits; 5) a worse than expected recession in the U.S.

Downside risks to the dollar seem more likely to outweigh upside risks in the latter half of 2009 and in 2010. Yet at the same time, similar downside risks exist for other currencies – growing fiscal deficits will weaken a range of currencies. With emerging markets continuing to have trouble attracting capital and Asian economies, hammered by export contractions, will be reluctant to allow their currencies to appreciate against or with the dollar – China allowed some depreciation of the RMB at the recent euro-dollar peak.

Once crucial support from deleveraging wanes, however, the dollar may be left with only foreign central bank reserve accumulation – which has already waned on the reversal of capital flows – to finance the large U.S. current account deficit. Yet, continued repatriation of assets and higher enforced domestic savings rates will at least reduce pressure on the dollar in the short-term.

Inflation/Deflation

Annual U.S. inflation, as measured by official producer and consumer price indices, is likely to slow in 2009 and even fall into technical deflation despite increases in the monetary base and fiscal measures to boost spending power. Slumping commodity prices may drag down the average annual headline CPI inflation rate to around -2% – a technical deflation which may morph into genuine deflation if falling prices generate expectations that they will continue to fall. Meanwhile, the growing slack in product and labor markets will keep core consumer inflation subdued at an average year-over-year rate of 1-2%. Steep discounts to get rid of unsold retail inventory, rising job losses and lower wage growth will reinforce the trend of stagnant or falling prices. Rising slack in labor markets and weak demand for commodities and goods/services will keep producer prices at bay. Upside risks to the inflation outlook include 1) a commodity supply crunch or geopolitical shock that leads to a sustained rise in oil/energy and commodity prices and 2) an earlier than expected global economic recovery.

Credit Losses Still Ahead

Back in February 2008, Nouriel Roubini warned that that the credit losses of this financial crisis would amount to at least $1 trillion and most likely closer to $2 trillion. As of mid-November 2008, the threshold of $1 trillion in global financial writedowns was finally reached. Given that national house prices expected to drop another 20%, we expect credit losses of $1.6 trillion on unsecuritized loans alone, much larger if we include mark-to-market losses on securitized instruments.

An in-depth analysis of current and expected loan losses per asset class and separately of mark-to-market writedowns per securities class based on current prices indeed confirms RGE’s initial loss range estimates (outstanding loan and securities amounts as in IMF Global Financial Stability Report, Table 1.1) For our calculations we assume a further 20% fall in house prices, and an unemployment rate of 9%. With respect to credit losses on unsecuritized loans, recent research by the Federal Reserve Board using comparable assumptions (but assuming high oil prices) concludes that over half of 2006-2007 subprime mortgage originations are going to default (i.e. $150bn out of $300bn). The loss trajectories for Alt-A loans are similar resulting in a 25% default rate ($144bn out of $600bn). Even prime mortgage delinquencies display a very high correlation with subprime loan delinquencies, implying an approximate 7% default rate when the potential for ‘jingle mail’ is taken into account ($105bn out of $3,800bn).

The cycle has also turned in the commercial real estate (CRE) arena with the traditional lag of around 2 years. Current serious delinquency plus default rates of 5.9% of CRE loans (net recovery, via Fed data) are projected to increase to up to 17% by Fitch assuming a 25% fall in prices ($142bn out of $2.4 trillion.) In the consumer loan area, we estimate credit card charge-off rate could increase to 13% in the worst case scenario. Adding a typical 5% delinquency rate during recessions, the total loan losses on unsecuritized consumer loans are projected to increase to $252bn out of $1.4 trillion (see The U.S. Credit Card Industry in 2009, by RGE’s Mathias Kruettli.)

The IMF warned that commercial and industrial loans (C&I) charge-off and delinquency rates are likely to climb to historical peaks and potentially beyond in this cycle. Compared to past C&I loan loss rates, we project charge-off and serious delinquencies to reach 10% or $370bn out of $3.7 trillion of unsecuritized C&I loans. With regard to leveraged loans, the latest research by Boston Consulting/IESE Business School based on the 100 largest PE firms engaged in LBOs calculates an expected book loss from default of about 30%. This translates into $51bn out of $170bn unsecuritized leverage loans.

Based on these calculations, RGE expects total loan losses to reach about $1.6 trillion out of $12.4 trillion of unsecuritized loans alone, implying an aggregate default rate of over 13%. The IMF assumes that the U.S. banking system carries about 60-70% of unsecuritized loan losses (and about 30% of mark-to-market losses on securitizations). Even assuming that future loan losses are fully discounted at current market prices, deploying all the remaining TARP funds – and much more – towards recapitalizing the banking system would be warranted as the expected credit losses imply that the U.S. banking system (commercial banks and broker dealers) is effectively insolvent as a whole.

The Disconnect Between Bond and Equity Markets

U.S. government bonds were on a tear in 2008, while equities plummeted in the worst bear market since the Great Depression. Bond yields at the long end hit all-time record lows, while the short end even dipped into negative territory. Only TIPS suffered as deflation risks rose. Stocks, on the other hand, had their worst year since the Great Depressions: DJIA lost 34%, S&P 500 -38.5%. At its 2008 low on November 20, the S&P 500 was down 49% for the year and 52% from its October 2007 peak. Stocks rallied in December though, resulting in an apparent disagreement between the stock and bond markets over the outlook for the U.S. economy. Bond markets seemed to be discounting a recession in 2009 while stock markets have gained since late November. This disconnect may vanish in 2009 though if the stock market rally was really just a bear market rally due to portfolio re-balancing and thin year-end trade volumes.

However, there have been intimations that the bond market is a bubble about to burst in 2009. Indeed, with ultra low bond yields, investors may be tempted to switch into higher-yielding equities – which are now considered by many to be undervalued. Valuation, however, is not the be-all and end-all of asset performance. The credit freeze needs to end before equities can see the end of the bear market. However, considering the likely economic stagnation and deflationary forces ahead, bonds should be a better bet than equities for some time. We see meaningful downside risks to stock prices as bad macro news – worse than expected – continues to dominate in 2009. Using the S&P 500 as benchmark, earnings per share will stay in the $50-60 range – and earnings have further to fall. If, as is not unusual during recessions, P/E ratio falls in the 12-14 range, we could see another 20% slide in stock prices from the level at beginning of 2009.

Fiscal and Monetary Policy Fiscal Policy

A lot of hope is being placed on the expected fiscal stimulus package of around $775 bn spread over 2009-10 including 40% of the stimulus in tax cuts for households and firms. Around half of the stimulus is expected to kick-in starting Q2 2009 and through 2010. But this will fall short of the pull-back in private demand of close to $1 trillion during this period.

Infrastructure spending, in spite of being highly effective, might not be timely, stimulating the economy only in late-2009 and 2010 when it has well passed the severe recession phase only to exacerbate the ballooning fiscal deficit. Nonetheless, around $100bn of infrastructure investment might be able to kick-in during 2009. Moreover, job creation in infrastructure might be overestimated given limitations in moving laid-off workers from other sectors to the infrastructure projects. As such, any job creation via government spending and tax incentives for firms will significantly fall short of the ongoing lay-offs.

Given the drawback of the ‘spending’ component of the stimulus, the government may be enticed to implement more tax cuts. While tax incentives for households like payroll and child tax credit might be well-targeted at the group with high propensity to spend, tax cuts in general will be less effective in stimulating demand given a secular rise in the saving rate expected over the next few years. Likewise, tax breaks for firms hiring new workers or investing in new equipment will be rather ineffective since businesses see little viability in doing so during a slump in domestic and export demand. At most, tax stimulus in spite of being timely and well-targeted will cause only a temporary rebound in the economy for a month or a quarter merely shifting the spending decision period just like tax rebates did in 2Q 2008.

Expansion of unemployment benefits, food stamps and other incentives will have a high bang-for-buck effect in 2009 and will only assuage the impact of the recession. The stimulus will also include up to $100 bn for state and local governments to meet their severe budget shortfalls including grants, Medicaid and unemployment insurance funds, preventing cutbacks in public services, investment and jobs in several recession-hit states. But again, fiscal aid for states often suffers from time lags.

Fiscal stimulus, TARP spending, GSEs-related expenditure along with further slowdown in corporate and individual income tax revenues will push the fiscal deficit to around $1.3 trillion in FY2009.

Taming the Foreclosure Problem

There have been growing calls in the Congress recently to use some of the remaining TARP funds to refinance mortgages for homeowners facing foreclosure or default due to negative home equity and unaffordable monthly interest payments.

Given the excess supply of homes in the market, home prices will fall at least 15% (from current levels) by 2010, pushing the number of homeowners with negative home equity from over 12 million currently to over 14-19 million. While price correction can help stimulate home demand and pave the way for market clearing, the ongoing credit crunch and consumer wealth erosion will continue to constrain home demand in the short-term. Households are facing tighter credit conditions, higher lending standards and mortgage terms (such as higher credit scores requirements, income requirements and down payments) due to the credit crisis. All these factors along with mounting job losses, falling wage income, negative wealth effect from the stock market and rising saving rate will keep home demand subdued and will indeed increase mortgage default and foreclosures in the coming months. Foreclosures will continue to increase the stock of home supply leading home prices to overcorrect and preventing market clearing. This might push over 25 million homeowners into negative home equity creating a vicious circle of foreclosures and downward spiral in home prices, bank losses and consumer-led recession.

As stated above, we believe home prices are still overvalued based on the price/rent and price/income ratios. But we are concerned that the possible overcorrection in home prices and increase in the excess home supply will prolong the recession and the contraction in consumer spending. This calls for greater government intervention on the supply side of the market to close the excess supply gap. The government recently announced plans to buy MBSs to help reduce the interest rate on the 30-year mortgages and stimulate home demand. However, demand-side measures will be largely ineffective and insufficient to deal with the increasing foreclosures. Reducing mortgage rates and offering tax credits are a smaller factor in determining home demand relative to credit conditions and lending standards. Moreover, many potential buyers are reluctant to step into this market while expecting further prices correction.

Since 2007, the government has introduced several programs to modify loans: The Hope Now Program (Oct 2007), the Housing Retention Bill (Oct 2008), IndyMac loan modification by FDIC (2008), FDIC and Federal Housing Finance Agency (FHFA) program (Nov 2008). However, these programs have rather suffered from slow implementation and have ended up modifying a lesser number of mortgages than initially estimated and also relative to the total ‘at-risk’ mortgages. This is because the voluntary nature of most programs has restricted lender and borrower participation. Moreover, a large share of the modifications was carried out via interest rate reduction or maturity extension, rather than via principal reduction – therefore not solving the inherent problem of high debt/income ratio and insolvency of households. These factors, added to the increasing financial headwinds faced by households, have led to a default rate of up to 40-50% on the refinanced mortgages. Also, around 80% of the troubled loans have more than one lender or rather a pool of lenders with varying degrees of flexibility in loan modification – with any modification requiring consent by at least 60% of the lenders. Problems of securitization of mortgages and disagreements between first and second-liens, where a homeowner has two mortgages, have tended to restrict lender participation.

Recently, many banks including JPMorgan, Bank of America and Citigroup have begun to modify loans as they realize that the costs from foreclosure runs much higher than losses from loan modification, and also that inaction will only lengthen the housing crisis and bank losses. As a result, they have been targeting the “at-risk” groups: homeowners with high debt-income ratio in states most affected by the housing crisis and rising unemployment. However, loans modifications are still mostly being done via lowering of interest rates, replacement of ARMs with fixed-rate loans or by extending the maturity period – rather than by reducing the principal.

To make government intervention more effective, several proposals have been made recently. These include: Congressional intervention to allow bankruptcy judges to change mortgage terms and reduce the mortgage principal. The government should refinance the mortgage into a longer term mortgage at a low and fixed interest rate. The reduction of the mortgage principal can be based on the extent of decline in home prices in a given region. The new interest rate can be based on the 1.6% spread between the 30-year fixed rate mortgage and the 10-year Treasury bonds. Monthly payments can be “interest-only” payments for the first few years. This would help establish positive equity for the homeowner and fix the problem of insolvency thereby making the monthly payments more affordable and reducing the risk of default on refinanced mortgage.

To increase participation, the program would be mandatory for lenders. Government can also condition capital injection into banks and purchase MBSs on banks’ willingness to modify mortgages. Also to attract lenders, the government should share the cost of modifying the loan with the lender by matching the cut in principal or interest rate by a proportionate or less than proportionate amount. As an incentive, the lender will be entitled to a share in profit from home appreciation if the homeowner sells the house in the future. The refinanced mortgages will be a ‘full-recourse’ loan. Or the government can share any losses due to default by homeowners on the modified mortgage.

Estimates suggest that a program to help those with negative home equity currently will cost over $600 bn. However, as prices overcorrect, more homes fall into negative equity and defaults on the refinanced mortgages continue, the cost would exceed a trillion. But in order to reduce the fiscal costs, the government should be the senior debt holder of the modified mortgage. With an equity position, it can benefit from the future home appreciation.

The eligibility criteria to qualify for the government program will be stringent: The homeowner should have a high debt/income ratio, the current mortgage should have a high interest rate or a high outstanding principal relative to the current home value; or the homeowner should be facing legal action for mortgage default or foreclosure. The program should target first-time homeowners in regions/states that are witnessing the largest home price correction and foreclosure rate. Those unable to meet monthly payments due to interest rate re-sets or facing higher monthly payments due to the recession (credit constraint, unemployment, falling wage and asset incomes) can also be targeted.

However, homeowners who won’t be capable of servicing the monthly payments even after modifying the loans can be converted into tenants for the same house for a given period of time under an agreement with the lender. The lender would release the homeowner from the mortgage obligations and will require the homeowner to just pay the rent during the given time period. At the end of the period as the homeowner’s income position and financing options improve, he will have the option to re-acquire the house from the lender at the then market value of the house, or even take a new mortgage to finance the house based his ability to pay. Hence, rather than forcing foreclosure on homeowners who fail to qualify for the government program, this alternative will prevent further foreclosures and excess home supply in the market. Moreover, it offers at least some cash flow for the lenders and avoids any fiscal risk for the government.

Monetary Policy

The Fed has enacted a wide and unprecedented range of measures to mitigate the credit crisis and stimulate the economy. It has already cut its target range for the Fed funds rate to 0-0.25% (essentially ZIRP) but, more importantly, it has created swap lines and an alphabet soup of programs to provide liquidity to the financial system and clean out toxic financial assets. The Fed experimented with different forms of financing itself in order to enable a sharp expansion of its balance sheet to accommodate these liquidity facilities. In addition to rate cuts and quantitative easing, the Fed has directly aided failing financial institutions. Now, the Fed is considering issuing its own debt and/or purchasing long-dated Treasuries and Agency debt. Will the monetary easing work? So far, the increase in money supply has not been accompanied by an increase in the velocity of money. In other words, credit growth remains stagnant as banks are reluctant to lend back out the money provided by the Fed and, at the same time, borrower demand has fallen. Since the problems of the private sector – households, financial institutions and corporate firms – are most of insolvency (excessive debt) monetary policy and liquidity support – even of a non-traditional form cannot resolve fundamental credit issues that require debt restructuring and reduction.

250 Responses to “RGE Monitor – 2009 U.S. Economic Outlook”

ChristianJanuary 8th, 2009 at 3:00 pm

“we could see another 25% slide in stock prices” – 25% from current levels. Apologies if it was unclear. Thanks for the comment.

GheorghiusJanuary 8th, 2009 at 11:12 pm

There is much talking about a Gov Bonds bubble in the US. How spreads (for ex. on 10 year fixed income Gov. bonds) are faring with EU and JP bonds? [Where could I find these yield spreads an a regular basis?]. Is the sovereign bonds “bubble” worldwide? Any view on high yielders (Italy, etc.)? How Northern EU (Danish, etc.) are doing in perspective? Thks

Bob GonzalesJanuary 10th, 2009 at 4:39 am

S&P EPS of $50-60 with a 12-14x multiple ?Isn’t is ealier to look at trenline “reported earnings” – mkt greared more now by FEAR to MISS a rally than, FEAR of more LOSS ( what other business do you have to re-start from =0= in a new year ?S&P reported earnings have just been reduced below $50.- EPS 2009 ($42.) Isn’t this a more conservative approach – 10x trendline earnings gets you to around 600-700 on the S&P…

C.LakeJanuary 13th, 2009 at 9:27 am

Why 10x ?Why not 6-7x like in the 50s or in the 70s ?Where’s the growth going to come from ? More leverage ? How long is it going to take to deleverage from where we are today ?Just asking.

C.LakeJanuary 13th, 2009 at 9:53 am

Also, seems to me trendline is no good. There’s been a clear discontinuity, a reset. If you want to forecast future cash flows you need to take it from here, how are corporations going to operate in this new lower risk / lower leverage environment.If people continue to think we’re going to be able to go back to the bonanza years of 15% returns per anum any time soon, they are fooling themselves. There’s going to be a wealth of reforms, regulations, limitations because of resource constrainsts and environmental reasons.

GuestJanuary 13th, 2009 at 10:48 pm

I think you made a mistake, I believe you added the next 2 years earnings together.2009 EPS + 2010 EPS = $60How about 2009 EPS $42 X 7 PE= S&P 294…OUCH

KeineahnungJanuary 12th, 2009 at 7:35 am

A level-headed summary and very sensible projection re the economy. However, rather fuzzy exposition on the disconnect between bonds and equities. Author jumps from governments to equities and ignores what’s in between, i.e. corporate bonds and preferreds with a very wide range of quality. It may also be expository, as author doesn’t distinguish clearly between governments and corporates, with result that in one sentence he/she suggests bonds are in a bubble and in another that they will be a better investment than equities. The distinction is actually critical. Yield on governments are at an all time low (very much bubble territory for their prices), while high quality corporates have exceptionally high yields and have traded at junk levels. The spread to the ten year has recently been so wide that something has to give. Either governments down or corporates up, or a bit of both. That is where the action is likely to be in the coming year and those active there will likely consider the equity markets still too unresolved, too vulnerable to negative surprises.

GuestJanuary 13th, 2009 at 9:37 am

Would you rather jump from a plain without a parachute or jump from a plain with a broken parachute both are bad choices but you have to choose one or choose neither one. It’s your choice.

MM CAJanuary 13th, 2009 at 8:48 am

Please join Eurasia Group President Ian Bremmer and RGE Monitor Chairman Nouriel Roubini as they discuss the political and economic risks in the year ahead. As the world enters 2009 facing the first global recession, Bremmer and Roubini aim to identify a comprehensive view of the challenges ahead – bringing together their expertise on global politics and economics. There will be an opportunity to ask questions after the discussion.Date and Time: 13 January 2009 10:00 (New York)13 January 2009 15:00 (London)Speaker(s): Ian Bremmer, President, Eurasia GroupNouriel Roubini, Chairman, RGE MonitorTopics: The top political and economic risks for 2009Who are the winners and losers from the first truly global recession?What are the political and economic forecasts for the world, and what impact do they have on each other?How will the Obama administration fare in its first year?What are the likely crisis points for the developed and developing world?Call-in: +1 866.847.7860 (US, Canada, Puerto Rico)+1 703.639.1427 (International)Passcode: 1323113Replay: +1 888.266.2081 (US, Canada, Puerto Rico)+1 703.925.2533 (International)Passcode: 1323113(the replay will be available two hours after call through 20 January)If you have any questions or need further information, please contact RGE Monitor at +1 212.645.0010 or info@rgemonitor.com

Once upon a timeJanuary 13th, 2009 at 9:25 am

I don’t see how we can make a recovery in 2010 with these predictions which are based on such good evidence. The last thing the feds want is for consumers to have any savings and you can know with some confidence that penalties and restrictions will be placed on those that do. The consumer needs to spend everything they make and finance more to bring us back to the levels of growth that were present before the downturn. The term growth really means debt and America needs to have lots of it to appear healthy. It looks like the world needs a debtor nation the size of the USA for the global system to work properly. As Americans detox from its debt drugs and the recovery process begins the willingness of Americans to start shooting up again will be diminished greatly. This recession depression is different than any other, this generation is different than any other and the outcome will be different than any other, I believe this disaster will be long in duration and very painful for a very long time to come.

aerial viewJanuary 13th, 2009 at 11:45 am

Agree! The fatal flaws in the current system have been exposed and are unrepairable until serious changes are made. With nearly unlimited production capabilities due to the rise of China, Japan and other economies, there is simply not enough consumption to sustain growth. Add to that the astronomical debt, hidden leverage time bombs of financial instruments and it is no longer a matter of IF but rather WHEN the system comes crashing down and changes the standard of living Americans have been used to. There response to this crisis is worst than that of Hurricane Katrina: our leaders just don’t get it!

GuestJanuary 14th, 2009 at 6:15 am

Protectionism Is NextI have been following the development of hybrid/all electric BYD (Build Your Dream) vehicles being developed and sold in China – an excellent article on this is in the Mon. 12 Jan. 2009 issue of WSJ. I like the b6 all electric design – 180 mile range with a battery life of 160,000 miles – shipping to the world starting in 2010. Price will be around $22,000. The hybrid will be $22,000 – shipping to the world in 2010 and already sold in China. Compare that with the Volt at over $40,000. More likely nearer $50,000 from what I have read in the past.Now for the bad news. ObamaNation plans to put heavy tariffs on such competing products with The Big 3! I almost fell off my chair when my wife told me this was on the news recently. We are so screwed.

MarkJanuary 14th, 2009 at 11:04 am

Who in the heck is going to be able to afford $22k anyway?Sorry, but nothing that the Obama administration does or does not do is going to save this sucker. It’s the SYSTEM; it’s expiring… it’s closing in on reset time…Mark

GuestJanuary 13th, 2009 at 9:39 am

1. 1500 banks go away- in progress- Citi in trouble2. 200,000 store closings – in progress3. Dow at 5000 possibly 4000 -stays propped up by continued Govt purchases of shares and preferred shares- do not use as gauge of how economy is doing4. S&P at 500 possibly 4005. Mortgage rates for new homes go to 3% and resale’s/refi’s at 3.75% – pushed by Obama6. Tax credit of at least 25k for home buyers7. Chrysler is gone by March.8. GM goes under by Sept.9. GE files bankruptcy – http://clusterstock.alleyinsider.com/2009/1/gm-gm-we-still-cant-rule-out-bankruptcy10. Calf state budget deficit hits 50 Billion- presently 41B11. All states and local gov’ts approach 300 billion deficits combined12. Massive state and local gov’t layoffs nationwide13. official unemployment hits 13%, unofficial unemployment hits 25% – current: http://clusterstock.alleyinsider.com/2009/1/jobs-numbers-much-worse-than-you-think14. Gas prices hover around 1.50 gallon unless there is major Mideast/Pakistani/Indian crisis then it goes to 5.00 quickly15. GDP shrinks at 6-8% for 200916. Deflation takes strong hold until sept 2009, at which point hyperinflation is roaring by dec 2009. – http://clusterstock.alleyinsider.com/2009/1/full-text-of-bernankes-speech17. US Dollar continues slow decline against Yen, Euro, Pound and Yuan – losses 50% by Dec 200918. 2009 Federal deficit hits 2 Trillion19. total Bailout and govt assistance programs approach 15 trillion from when it started in summer of 2008- currently at 8 trillion – http://www.bloomberg.com/apps/news?pid=20601087&sid=at6cYfv8wFJw&refer=home20. Total US liability approaches 60 Trillion by 200921. bond market collapses22. US treasuries become almost worthless23. China pulls the trigger and demands we pay back what we owe or they stop shipping goods to us or cut prices dramtically24. Housing values decline another 15-25% from Nov 2008 levels- Calif, Fla, AZ, Nevada see even steeper declines25. States and local govts raise taxes on everything, unless Federal govt gives them help… this is going to be ugly26. Obama starts giving states and companies relief on Medical insurance premiums and costs.. possible full nationalization of Health care system gets underway in 200927. Fed possibly nationalizes entire banking system28. More Madoffs and ponzi scams totaling 1 trillion may happen, unless they hide the losses29. approx 2 Trillion in more bad Res mortgages/losses to be absorbed by banks and govt – http://www.bloomberg.com/apps/news?pid=20601213&sid=aTtVEJqx_S2w&refer=home30. 1 in 3or4 mortgages fail. Prime and Alt A pool problem is actually worse and larger than sub prime problem31. commercial real estate and rents fall off a cliff, 50% drop in values and 1.5 Trillion in losses.32. Obama polls on effectiveness of handling job fall to Bush levels by end of 2009 – not his fault.33. US possibly gets involved in much larger ground war somewhere to stimulate economy and jobs and deal with crisis in mid east/India/Pakistan/Russia/Korea34. Credit card Debt approaches 2 trillion in losses for banks and lenders35. the Yankees with their new 3 players they paid 1/2 billion dollars to, win the world Series, but Yankee Revenue and profit implodes and Team gets in finaiancial trouble.36. 5-10 or more major sports teams go bankrupt in 200937. something happens in later part of year to unite the country… could be good or bad..38. Govt deals with civil unrest in parts of the country…..39. people will think things are better for 1-2 months at times during the year, only to be hit over the head with more bad economic news and problems40. these problems will last until at least 2012 as Americas struggle with all the resetting going on in the economy, from wages, to housing, to buying, to energy, to living simpler… – http://clusterstock.alleyinsider.com/2009/1/depression-odds-above-5041. Entire Govt and private Corp pension system is underwater by at least 2 trillion dollars and will be huge issue for Govt to deal with in 2009 – http://www.bloomberg.com/apps/news?pid=20601087&sid=aw9HrY21Ynno&refer=home

GuestJanuary 13th, 2009 at 11:52 am

Sounds more accurate than those who say everything will be OK by mid 2009 as a recovery begins, that is not going to be possible.

George HarterJanuary 16th, 2009 at 2:00 am

RIGHT-O Too much will have been destroyed in this mess. We have little industry left, our financial system is operated by lawless sleaze.Robert Rubin, Obama’s choice for economic adviser??? Geitner(sp??) a man who can’t do his taxers even with a preparer’s help, maybe Paulson is not the WORST we could have. Superwoman at the SEC???? Bernanke whining about the necessity of saving his banking friends, a trillion here, and there, we can ALWAYS print more!!(A Chicago guy????)Will we need a private banking system by 2012, or a NYSE?? Let them fall. There is enough cash to start up again rather than fight lost battles.

GuestJanuary 13th, 2009 at 5:42 pm

Point 9 says “GE” files bankruptcy. Let’s hope not or we are all more than cooked. The reference should be to GM.

KiersJanuary 14th, 2009 at 8:35 pm

so what’s for dinner?????don’t forget to add: California is acquired by China, Texas by Mexico, New England by Eurozone, and the Dakotas by Canada.One thing we can all agree. The Yankees WILL declare chapter 7 or 11!

George HarterJanuary 16th, 2009 at 1:50 am

Mr. A. Guest,Did you steal pages from my projecte3d economic nightmare. It would be hard to disagree with any point you have made, yet I am even more pessimistic fir the following reasons.Chinese industrial capacity will be DESTROYED by this depression. Factories will take years to regain their skilled employees, the rural economy is shattered (no internal purchasing power) their is NO ENVIRONMENT LEFT in China-or else saving it will break the bank. The country is at the edge of political chaos, violent chaos.The $2 trillion reserve may be chicken feed in a trade war(See Indonesia vs. China imports) INDIA?? US?? Without Chinese production where will all the consumer buying come from ? Russia?????Eh, Masive numbers of retail outlets will be- GONE! I DO NOT believe the medical issue will be quickly settled. The war may be LOST for 4 or 5 more years. Personal Income?? Food is inflating, no problem if you are rich, I know. Power costs for NY consumers have roughly doubled.The lack of cheap goods will cause spending constraints(go to Payless for $50 pairs of shoes).Autos, Cuba went for 50 years on a supply of 1957 Chevrolets!!! Is 8million cars per annum a fantasy? I think not. Where is the growth from a production of 8 million cpy?The damage from this bust will not be repaired in 2 years. Not in the US, certainly not in China, maybe not Japan! Russia? God, that’s all fantasy, we are locked in a mutual death spiral of interdependence.Our group of sciQuants and snotty intellectual Radicals believe that Rubinism will be in power at least one more year, then frightening political bumbling will happen for 2 more, then the fourth year, snarling defeat, massive finger pointing and no useful activity, probably more counterproductive insanity.Obama dies in a careless shaving accident (really a suicide from drinking his own kool-aid) the VP poor Joe, strokes out and we have NANCY PELOSI. I have already begun practicing my moves for a graceful seppuku.George Harter

MarkJanuary 13th, 2009 at 9:54 am

I’ve claimed for some time that a lack of negative feedback (as Daniel Quinn’s writings woke me up to) is our real underlying problem. I guess this goes to reason when the US refers to its culture as “The American ‘Dream’.” Barbara Ehrenreich nails this point:How Positive Thinking Wrecked the EconomyMark

HolyCowpuncherJanuary 13th, 2009 at 10:01 am

We had a case of 3 kids in a porcelain shop…Two of them were acting irresponsibly and eventually broke an expensive vase. Not being able to afford to pay for it they tried to fix it instead. They then started coercing the third one to help in fixing it. In this story, the 2 irresponsible kids are US Fed and UK BoE; “paying for the vase” means allowing the recession run its course, and “trying to fix it” means desperately lowering the rates and feeding money to the economy.The responsible kid is the ECB. Yet instead of critisizing the two irresponsible kids and digging out the truth behind the crisis, the anglocentric media spends time critisizing ECB or Germany.

economicminorJanuary 13th, 2009 at 10:01 am

Thanks for the concise analysis.One question, is the corporate debt, borrowed for CEO pay, stock buy backs, mergers and acquisitions, expansions, etc. included in the C/I loan numbers? I doesn’t seem to be. Seems like total corporate debt should be much larger. Especially when the US is talking nearly a 2 trillion dollar deficit next year?Just having a hard time getting my head around these numbers. Sorry.Well two questions; If the US is unable to keep interest rates low, doesn’t that have an outlier extremely negative effect on all the above predictions. How will the bankruptcy of some corporations and maybe a few municipalities effect the bond market as to price/interest rates?Then here is an interesting piece from Ron PaulShort and worth considering IMORon Paul’s Texas Straight TalkTexas Straight Talk

A weekly column by Ron PaulStimulating Our Way to Rock BottomWith attention turning to the next big economic stimulus package, questions are still swirling about our economic troubles. How did we get here? How do we get out? As usual, Washington has all the wrong answers. According to many politicians, we got here by not spending enough, not consuming enough, and not regulating enough. Now government, like some mythical white knight, is going to ride in to save the day by blanketing the economy with dollars, hiring an army of new bureaucrats, creating make-work jobs, and sending everyone some form of a bailout check. The debate seems to focus on whether this will cost enough to save the economy, or if this is just a “down payment” with much more government spending to come. Talk like that would be comical, if the results weren’t going to be so tragic.The results will be worsening economic woes until we learn our lesson. But instead Congress is behaving like drug addicts who must hit rock bottom before they are ready to face reality. They are playing foolish games with the economy now because they are thinking only of political expedience. This talk of job creation is a perfect example.Contrary to the belief of many, the goal of the economy is not job creation. Jobs can be a sign of a healthy economy, as a high energy level can be a sign of a healthy body. But just as unhealthy substances can artificially give the addict that burst of energy that has nothing to do with health, artificially created jobs just exacerbate our problems. The goal of a healthy economy is productivity. Jobs are a positive outcome of that. A “job” could be to dig a hole one day, and fill it back up the next, or perhaps the equivalent at a desk. This does no one any good. But the value in that paycheck ultimately has to come from taxing someone productive. Some think this round-robin type of economic model is supposed to get us somewhere.Politicians and bureaucrats have already done their fair share to ensure that jobs in the private sector are prohibitively complicated and expensive to create. They are now shocked that the economy is shedding jobs, and want to simply create hundreds of thousands of jobs to make up for the job losses, through another so-called economic stimulus package. The private sector must be permitted to do that, but instead they are massively burdened with taxes and webs of red tape and regulation. Washington’s bandaids will only prolong this agony. The Austrian school of economics teaches that only a free market economy, unencumbered by onerous government controls, creates long-term prosperity. Politicians, however, tend to be notoriously short-sighted.I am left with these questions – who is going to be left standing to tax in the private sector to pay for all these public sector make-work jobs? Is Washington really to be considered some sort of savior for creating unproductive jobs in place of the productive jobs they eliminated?We are at an economic dead-end and those in power are in denial. The truth is our economic problems are due to loose monetary policy, central economic planning, and the parasitic expenses of government. Unless we assess these problems honestly, we unfortunately have a long way to go until, like the junkie, we hit rock bottom.

Republican’s idea of economic health: Inflation and tax breaks for the uber wealthyDemocrat’s idea of economic health: Inflation and tax breaks for everyone.Yet someone has to pay…. And it is done by inflating the dollar. Which means the producers pay in both cases… Inflation transfers wealth from the producers to the money changers and politically connected. And when the productive workers can’t receive enough compensation to support their families they go into default… Gee, what’s been happening in the last few years? Or in the cases where unions demand that the pay go up with the devaluation of the dollar, those in power fix up the system so those industries crash or the corporations are allowed to move the jobs off shore…Can a country exist that way? Well we have for 30 years BUT can it continue?I guess we’ll see as that is the direction being taken.What is the end game to all this?

ex VRWCJanuary 13th, 2009 at 11:56 am

e, Well put. Everyone repeat after me -Inflation makes the wage/trade imbalance worse.Inflation makes the basics of life less affordable.Inflation creates bubbles by encouraging risky behavior.Inflation is a drug that will possess its users and won’t let go.Inflation is unsustainable as an economic system.Inflation has just hit the wall in the US.Deflation and Inflation are now in a struggle to the death. How that struggle is resolved and whether the power that be realize what is at stake will determine whether the US will be a place worth living in for our children and grandchildren.

eparisiJanuary 13th, 2009 at 12:22 pm

corporate debt in terms of outstanding bonds figures in the securities section of the IMF’s table 1.1. (high-grade corporate debt outstanding: 3800bn; high-yield corporate debt oustanding: 600bn) In our text here we’re only looking at unsecuritized loans outstanding.

economicminorJanuary 13th, 2009 at 1:49 pm

thanks but that doesn’t make the picture any prettiersecularized, unsecuritized … in a deflationary cycle, will it make any real difference. Did it make any difference that there was supposed security behind all the MBS or will it matter with the CRE loans or CMBS?When debts are collapsing and values are deflating it does matter to some degree as to secured or unsecured but not as much as indicated on the books I would think.

ex VRWCJanuary 13th, 2009 at 10:14 am

Here’s the part I have a little trouble with, regarding mortgage modification:

The government should refinance the mortgage into a longer term mortgage at a low and fixed interest rate. The reduction of the mortgage principal can be based on the extent of decline in home prices in a given region. The new interest rate can be based on the 1.6% spread between the 30-year fixed rate mortgage and the 10-year Treasury bonds. Monthly payments can be “interest-only” payments for the first few years. This would help establish positive equity for the homeowner and fix the problem of insolvency thereby making the monthly payments more affordable and reducing the risk of default on refinanced mortgage….snip…As an incentive, the lender will be entitled to a share in profit from home appreciation if the homeowner sells the house in the future.

Who takes the writedown for the reduction in principal? There are 2 choices, the bank or the government. Most proposals suggest a combination, trying to balance the hit to the bank’s balance sheet with the government’s liability. But most proposals also have a stipulation that the some portion of the written off principal will be payable to either the lien holders or the Treasury when the house is sold, as you suggest. Then you suggest several years of interest only payments.So where is the homeowners positive equity supposed to come from? Appreciation in a weakly recovering market, as you point out we are in for above?There would be no positive equity for the homeowner unless the housing bubble resumes. Therefore, the goal of the program, to restore the value/wealth proposition of home ownership, is compromised.This is my problem with mortgage modification suggestions. They are based on a wrong set of assumptions. They should be designed for what the economy will be, not for what it was in the distorted asset bubbles of the past few years.

economicminorJanuary 13th, 2009 at 10:41 am

The goal appears to be keeping people in homes they can’t afford for the benefit of the lien holders. Economic slaves, spending all their productive hours earning money for the host… At the expense of health, child raising, education and certainly no time for vacations or recreation…. Oh! Then who will support those industries…. More bail outs? Or assimilation? So goes personal liberty and freedom and free markets!Maybe the government has been secretly taken over by the Matrix or the Borgs?

ex VRWCJanuary 13th, 2009 at 10:49 am

e,It is a Trojan Horse that the Democrats will fall for, too, as even the RGE analysts have. Wrapped in the guise of ‘a bailout for Main Street’ the legislation will pass with much fanfare and self congratulation and media hype.But the army of bankers and lenders will crawl out of the belly. In the end it will be, as you say, a perpetuation of a situation that is unsustainable, and that is designed to keep affordable housing a distant dream and to protect the banks and the status quo as much as possible.

ex VRWCJanuary 13th, 2009 at 11:38 am

Brilliant line of thought over at CNBC: Loan ModificationThe NCRC (seems like a liberal community advocacy group) suggests having the government use eminent domain (?) to buy mortgages at 30-50% of their value so they can write them down, refinance them, and resell them to the private market. In essence, they advocate having the government cram all of the losses onto the banks balance sheets, rewrite the mortgages, and let the homeowners continue in their now affordable mortgage, all done at a massive scale.So, the governments plan will have been to give the first half of the TARP to the banks to stabilize them. Then, use the second half to destroy them and prop up an unsustainable housing bubble, then somehow resell the mortgages back to the banking sector they just destroyed (after saving it). And give all the houses away.What kind of economy do we expect to have at the end of this, if this is the kind of thinking out there?

economicminorJanuary 13th, 2009 at 1:51 pm

Wait, first I need to go get a maxi mortgage on my house so they can buy it out at 30-50%. Then I can buy the note back and make a bundle!Then I can go consume as they want me to.

GMeliJanuary 13th, 2009 at 10:27 am

There should be no lending in the USA.A home should be valued on supply and demand.A car should be valued on supply and demand.An education should be valued on supply and demand.Why do banks need to add 50-70% to the price of a home with financing?Financing should only be used for those who need it most (corporations for R&D, ie. green cars, etc..)

JimmyTheBankerJanuary 13th, 2009 at 10:33 am

11:31 a.m.Citi confirms talks with Morgan Stanley on brokerage combinationNew name for the brokerage: “Citi-Morg”. LOLOL

GuestJanuary 13th, 2009 at 10:49 am

MorgFrom Wikipedia, the free encyclopediaMorg is a fictional supervillain published by Marvel Comics universe, appearing as a herald of Galactus. Created by Ron Lim and Ron Marz, he first appeared in Silver Surfer vol. 3, #70 (August 1992).

economicminorJanuary 13th, 2009 at 10:56 am

And What about this?This is just the beginning of this IMO as the pension funds were one of the targets of the financial industry’s financial engineered garbage. There was lots of money with already poor balance sheets looking for a way to fund ever expanding retiree numbers. They needed AAA rated garbage with good returns to suck up hundreds of billions out of pensioners pockets.State Pensions’ $865 Billion Loss

By Adam L. CataldoJan. 13 (Bloomberg) — State governments from Rhode Island to California have run up estimated pension-fund losses of $865.1 billion, forcing some to cut benefits for new hires.Assets for 109 state funds declined 37 percent to $1.46 trillion over the 14 months ended Dec. 16, according to the Center for Retirement Research at Boston College. The Standard & Poor’s 500 Index of stocks fell 41 percent in the period.“Not a whole lot of people get too excited about pension funds,” Philadelphia Mayor Michael Nutter said in an interview. “But if you have to pay those costs, they do grab your attention.”After Philadelphia’s fund lost $650 million in the first nine months of last year, Nutter joined the mayors of Atlanta and Phoenix in writing a letter to Treasury Secretary Henry Paulson seeking financial help for U.S. cities. Their November letter cited investment deficits and rising pension costs.The $865 billion in losses, which exceed the $700 billion Troubled Asset Relief Program that Congress approved in October, comes as states face budget deficits totaling $42 billion.The Boston College center analyzed holdings reported on financial statements from 2006, when the 109 funds had about 20.4 million members. It didn’t specify which of the 218 U.S. state funds it studied.To return to 2007 actuarial funding levels by 2010, the 109 funds would need annual returns of 52 percent on assets, the analysis found. Annual returns of 18 percent would achieve the goal by 2013, the center said. The projections are based on a 5.7 percent annual increase in liabilities and a $50 billion increase in assets from contributions above annual payouts.‘Accelerating Complications’State funds have enough money on hand to pay benefits for the foreseeable future, said Alicia Munnell, the center’s director. “Even if markets recover, this will be a one-time loss that will have to be made up in the future by taxpayers,” she said.“We can’t make enough on investments to drive out of this hole if all you do is depend on investments,” said Mike Burnside, executive director of the Kentucky Retirement Systems in Frankfort.As of June 30, Kentucky’s largest fund for state workers held about 52 percent of the assets needed to pay current and future benefits to its 117,000 members. The plan had an unfunded liability of $4.8 billion at that time, while the entire system’s liabilities totaled about $16 billion.“When we are experiencing a negative cash flow and we are having to eat capital to make payroll, we are accelerating the complications,” Burnside said.Increasing taxes to fill the pension gap has little support, said Frank Karpinski, executive director of the Employees’ Retirement System of Rhode Island in Providence.No Easy Sell“I don’t think anybody wants to do that, likes to do that or would say it would be an easy sell anywhere, especially given the current economic situation,” he said.State and local governments contributed $64.5 billion to pension plans in fiscal 2005-06, according to data from the U.S. Census Bureau. That’s about 57 percent of the $113.2 billion spent on police and fire services.Attempts to reduce benefits also face opposition.“I believe that our members will oppose such initiatives in collective bargaining or in state legislatures,” said John Adler, a director with the Capital Stewardship Program in New York for the Service Employees International Union, which represents public workers. The union’s 850,000 members were in retirement plans with more than $1.5 trillion in assets as of Jan. 1, 2008, Adler said.Two-Tiered PlansTo cut pension costs, some states are creating two-tiered systems offering less to new hires.Kentucky lawmakers this year set the state’s first minimum retirement age, 57, for employees hired after Sept. 1, and required 30 years of service, up from 27, to receive full benefits. They capped cost-of-living adjustments, which had been tied to the Consumer Price Index, at 1.5 percent. The system had an unfunded liability of about $16 billion as of June 30, executive director Burnside said.New York Governor David Paterson, trying to close a $15.4 billion budget gap over 15 months, wants to reduce new workers’ benefits and raise the retirement age to 62 from 55. New York’s pension system was over funded, with assets of $153.9 billion, as of March 30.Of the 109 state funds, 43 were funded at 79 percent or less of estimated current and future costs. Those below 80 percent “constitute the weakest cases,” said Ted Hampton, an analyst with Moody’s Investors Service Inc. in New York. The average level is 85 percent, according to an analysis prepared for a Moody’s report published in July 2008, Hampton said.Public Costs HigherCompany pension funds have also lost assets in the stock- market decline. The value of so-called defined benefit plans fell to $1.1 trillion in October from $1.3 trillion at September’s end, according to Mercer LLC, a New York-based pension consulting unit of Marsh & McLennan Cos.Last month, after Pfizer Inc., International Business Machines Corp., United Parcel Service Inc. and dozens of other companies said losses could force them to make unexpectedly large contributions, Congress voted to delay provisions of the Pension Protection Act of 2006. The law would have penalized employers that didn’t cover at least 94 percent of their liabilities this year.For state plans, which weren’t covered by that mandate, the funding issue is complicated by 12 percent growth in membership since 2002, with 23.1 million now participating, according to census data.Excluding Social Security, public employers’ pension costs are three times the retirement costs of their private counterparts, according to a June 2008 report by the Washington- based Employee Benefit Research Institute.Missouri’s WagerSome state retirement systems have seen losses in derivatives as well as stocks. Public pension funds bought more than $500 million in so-called equity tranches of collateralized debt obligations, according to public records compiled by Bloomberg in 2007. CDOs are packages of securities that are backed by bonds, mortgages and other loans. Their equity tranches are considered their riskiest portions.The Missouri State Employees’ Retirement System invested $25 million in half the equity portion of the BlackRock Senior Income Series 2006 collateralized loan obligation, managed by New York-based BlackRock Inc. Moody’s last month cut ratings on parts of the debt, saying a drop in value of the underlying collateral may cause “an event of default.”Finding FundsChris Rackers, the manager of investment policy and communication for the Missouri fund, didn’t return calls seeking comment.In Rhode Island, state and local governments were scheduled to make contributions equaling 25 percent of their payroll expenses to retirement plans in 2010, said Karpinski, the executive director. Barring a recovery, the contributions may increase to as much as 30 percent in 2011, he said.“That is kind of the elephant in the room,” he said. “Where are the funds going to come from to make these kinds of required contributions?”To contact the reporter on this story: Adam L. Cataldo in New York at acataldo@bloomberg.net.

Will there be no consequences for those who did this?

ex VRWCJanuary 13th, 2009 at 11:14 am

This is all part of the dynamic of baby-boomer retirement. Keep in mind that all kinds of ‘guaranteed’ assets face similar situations, such as annuities, guaranteed return funds, insurance, etc. I get incensed when I hear people on the radio, even those I respect, touting guaranteed investments like these. Their faith in the collective governments to make good the nightmare losses is misplaced in my view. It is an impossibility.We are on the edge is a cliff, being dragged over it. As we are pulled over the edge, we are able to glimpse the size of the weight pulling us down. The more we go over, the more of the weight we see.

GuestJanuary 13th, 2009 at 11:44 am

Under almost all state pension funds, the payout to each retiree is fixed, does not float with inflation. This is also true with most private company pensions.The (intended) solution to babyboomer pension underfunding is huge inflation allowing companies to contribute devalued dollars to meet their obligations, effectively reducing the real-dollar payouts to the retired. Harm, but no foul.

economicminorJanuary 13th, 2009 at 12:09 pm

From what I have read about the pension system, there will be no choice but to first cut outlays (monthly payments to even existing retirees) and eventually they will either be closed down or taken over by the federal government. But this will be unfair to everyone and the distrust and anger will explode.Seems like many of the problems have similar outcomes. Banks can’t make money, the government will fund them. Pensions can’t pay, the government will fund them. They states can’t fund their expenses, the federal government will loan them money too. The auto companies, the home owners and who will be next? The candlestick maker? Oh the poor ethanol maker who can’t compete with the low prices of gasoline? Or the farmer who went out during the commodities rush and bought all kinds of new equipment based on corn selling for last years price?

economicminorJanuary 13th, 2009 at 11:09 am

Especially as the bail out will have consequences of rising prices (inflation) in oil, energy and other commodities thus adding more injury to the impaired balance sheets of those that they pretended to save. Plus at some point, higher interest rates or a collapsing of the dollar because they chose to monetize instead of borrow.Still another underlying problem with all this is that many of the loans, residential and commercial, were sliced and diced and sold off in many pieces to different investors and what they pretend will be easy, will not be.And after another year of spending money trying to prevent the inevitable deflation, all that money will be absorbed into the system, with a lot siphoned off by those who controlled it, but the debt from borrowing it will still be with us. So we will be weaker in the end with no benefit from all their manipulations.

aerial viewJanuary 13th, 2009 at 12:03 pm

Beranke and Paulson have just seen the tip of the “deleveraging iceberg” and will not be able to turn our “Titanic economic system” before it sinks even further. And I think they are beginning to realize this and are throwing into the water as many “fiscal and quantitative lifeboats” as they can find!

economicminorJanuary 13th, 2009 at 11:48 am

On the last thread By Anonymous on 2009-01-12 19:18:09 referred to fiduciary law as the law that will be able to punish the corrupted in the end.I have been in real estate for over 20 years and have studied and understand the basics of fiduciary law and its implications. It is a civil law. Goes back to the Magna Carta.Fiduciary is best know as how and why attorney’s act. They keep your secrets, they act in your best interests, even when you are wrong. But fiduciary law is really about any one who deals in contracts whether they are actual or implied.The idea is that if you represent someone in a transaction of any kind, you are bound to fair, honest open dealings with full disclosure to that person or those persons whom you represent. You are to put that person’s interests above your own. You can not put your interests first. You have special knowledge of the other person’s position and you can not use that against them.This representation does not have to be in writing. Although it is best if it is. All that has to be present is the appearance of representation. You act like you are representing the client and the client believes you are representing their interests and you have entered into a fiduciary relationship.In the 20+ years I have been in the real estate business, I have seen and heard many instances where there was obvious misrepresentation but in my world, I have not seen nor heard of one case locally where the client sued and actually won on fiduciary representation alone. Oh I have been to seminars where we have been told cases where this has happened but I have never heard nor seen one locally. That doesn’t mean one or two haven’t occurred but the basis of lawsuits are usually more involved than just fiduciary.One of the problems is proving it. Another is the cost of litigation and how extremely slow the system has become with the defunding (lack of funding) of the civil courts in our region. With the anti tax attitude of the country in the last 30 years, I imagine that most areas are like this. Oh money for petty criminal prosecutions and prisons has been available but civil courts? Naw!I’m sure there is a possibility to prosecute on fiduciary but the reality is different. Besides, do the new owners of Country Wide or IndyMac have any legal responsibility? Does the person who put you into the loan have any money? And who is big enough, with enough resources to go after the big guys living on the Rivera or in the Cayman Islands?Yes it is a law and yes it is possible but I will believe it when I see it.

economicminorJanuary 13th, 2009 at 2:04 pm

Besides, being civil and not criminal, all you can get is money and they have none.No jail time for civil.

GuestJanuary 13th, 2009 at 11:52 am

“Bernanke also restated that the U.S. central bank could buy longer-term Treasurys to keep loan rates low.”Please forgive my ignorance, but would someone please explain to me where does the FED get its money to buy everything and anything that comes by?Can they simply print money? Do they have an authority to do so?Thanks

ex VRWCJanuary 13th, 2009 at 12:01 pm

Ben the Sneaky. He says they want to buy Treasuries to keep loan rates low.But, as you point out, where do they get the money to buy them. They print it, of course. They call this all kinds of clever names like Quantitive Easing and Zero Interest Rate Policy (ZIRP). But it is printing. Ben is trying to disguise his motives.They have authority to do so. But they run an enormous risk of causing runaway inflation in the medium and long term if they do so.

GuestJanuary 13th, 2009 at 9:27 pm

sh~~, dont tell the whole world quantitive easing and zirp => printing. foreigner will find out. quiet in the hall.

phalangesJanuary 13th, 2009 at 2:03 pm

Yes and Yes.The Fed nominally needs a note from the Treasury to issue the money, which is issued with interest due back to the Treasury. Based on that note, then can recreate more “money” at whatever fractional rate they are using, with the original note as collateral.

KerkJanuary 13th, 2009 at 5:57 pm

One more “eureka” moment, and never a moment too soon. With another million of those, there will be meaningful change towards liberty and justice for all.

economicminorJanuary 13th, 2009 at 12:51 pm

Bernanke: More bank bailouts needed

Fed chairman endorses economic stimulus, but also says more help for banks is needed to fix the economy.By Chris Isidore, CNNMoney.com senior writerLast Updated: January 13, 2009: 10:52 AM ETNEW YORK (CNNMoney.com) — Federal Reserve Chairman Ben Bernanke said Tuesday that President-elect Barack Obama’s proposed fiscal stimulus package could help the economy, but he added that additional bailouts of financial institutions may also be needed to bring about a sustained economic recovery.Bernanke, speaking in London, said in his prepared remarks that the nearly $800 billion plan being discussed by the incoming Obama administration and the newly elected Congress “could provide a significant boost to economic activity.” He did not comment on or endorse any specifics of the nearly $800 billion.But Bernanke cautioned that the plan is “unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system.”Bernanke suggested that more banks and financial firms are likely to need additional capital injections from the government, and that further guarantees of their debt could be necessary, in return for the federal government receiving further equity in the firms.The Fed chairman also said that “removing troubled assets from institutions’ balance sheets, as was initially proposed for the U.S. financial rescue plan,” might also be needed to supplement any further investments in banks.One critic of the bank bailout agreed that more help might be needed for financial firms and that Bernanke was correct to suggest that the government look at all options for helping banks.”Everything he’s saying is right; we have a lot of tools and we have to use them wisely,” said Barry Ritholtz, CEO and director of equity research for research firm Fusion IQ. But Ritholtz added that the bailout has already been mismanaged by the Treasury Department.”The problem is that the time for that kind of thinking was five months ago,” Ritholtz added.

Where does it all end?Never enough money to bail out the inept and corrupted.If Ben is right, then the federal deficit could be ? $2.5 trillion or will it now be $3 trillion.At what point do interest rates go up or inflation rage thru the ramaining healthy parts of the economy destroying them too?How is it possible to save insolvency with more debt? Transferred from the healthy parts of the economy to the sick ones until there are no healthy ones?

HubbsJanuary 13th, 2009 at 1:29 pm

It ends when the Fed can no longer print money with impunity…i.e. as long as no inflation emerges.All the money being printed is disappearing into the black hole of banks reserves, so inflation can never emerge. Even though many may think the Fed is printing like mad, in reality, they are printing just enough to keep the economy alive. Forget all that crap about stimulus needed to “grow” the economy. The only goal is to stimulate the economy enough to keep it from collapsing. Against this background, this situation could persist for over a decade.

economicminorJanuary 13th, 2009 at 2:10 pm

you are correct about where all the current money is going.What is going to stop the banks from gaming with these reserves too, and running the price of oil and food back up to make profit for bonuses and bennies?Glass-Steagall worked for 67 years to keep this kind of corruption from the financial system. I say we repeal the Graham whatever bill and go back to what was working.

CMJanuary 13th, 2009 at 1:07 pm

SAVED!!! Lets see if “they” are serious about preserving this level. If not, that is your clue the news is about to get alot worse and “they” will find another level to support, like the November lows…

GuestJanuary 13th, 2009 at 1:05 pm

Bloomberg-“A disappointing quarterly performance may prompt Moody’s Investors Service to switch its outlook on GE’s AAA credit rating, the highest available, to negative from stable, mirroring a similar move from Standard & Poor’s Corp”When GE is effectively nationalized (later this year) the psychological impact will be enormous.

JimmyTheBankerJanuary 13th, 2009 at 1:08 pm

Man, I wish I could run my house finances this way!!!!!!This oughta save the dow LOLOL2:00 p.m.U.S. Dec. federal outlays $321.4 billion, up 41%2:00 p.m.U.S. Dec. federal receipts $237.8 billion, down 14%

HayesJanuary 13th, 2009 at 1:31 pm

here’s a wrinkle — Geithner doesn’t make the cut – according to CNBC there are some issues e.g. housekeeper without proper documentation, not paying into social security –

HayesJanuary 13th, 2009 at 1:57 pm

Obi’s spin machine is in full operation on this — the bought and paid for MSM is already dismissing it.

AnonymousJanuary 13th, 2009 at 7:43 pm

A Treasury Sec. that doesn’t pay his taxes to the Treasury!? Zoe Baird got un-nominated for far less than this (as Clinton’s nominee for Atty General.)Really, we need a big protest here! The people have a chance to derail Paulson’s twin Geithner!Really to me he seems like a total a**hole. If he’s confirmed, there’s no moral need to pay taxes until you’re caught. Obama is really going to lose a lot of his moral authority right off the bat if he doesn’t pull this nominee.

GuestJanuary 13th, 2009 at 8:40 pm

This guy couldn’t even be trusted to pay his taxes, and Congress would approve giving him $350B of money from other people who did pay their taxes?Please tell me this isn’t happening. We have to stop this!!

JimmyTheBankerJanuary 13th, 2009 at 1:58 pm

They oughta just change the name of the NYSE to the CASINO.”Calling All Suckers, I Need Opulance”

CMJanuary 13th, 2009 at 2:00 pm

Man, this is gonna be a nail bighter, it is do or die. We are wedged up to a 14 period MA on an hourly chart which separets the current sell-off from a new uptrend. The withcing houe is 2 minutes ways…do or die!

C.LakeJanuary 13th, 2009 at 2:06 pm

QUESTION TO RGE LEAD ANALYSTSI guess I would like to ask a similar question as many people here :You forecast a cummulative output loss of GDP of 5% over a duration of 2 years. Why are you so optimistic ? Why so little ?In their seminal paper on the Aftermath of Financial Crises (Dec 19, 2008), C.Reinhart and K.Rogoff have shown that on average, the cummulative output loss of passed financial crises has been 9.3% for a duration of 1.9 years.If we take 1929 as worse case, it was a cummulative output loss of 28% over 4 years !Now, if we look at the principal causes of all these crisis : asset bubbles that burst (housing, equity, debt, etc…) are the % of writedowns that we can expect from the bursting of these bubbles any smaller for our crisis than what we saw in 1929 ?Peak to trough price % decline :1929/33 Housing : – 18% 2006/2010? Housing : -40 % ? : ours is worse1929/33 Equities : -68% 2007/2010? Equities : ?? -60%+ : ours could be as bad !What about the debt/GDP of the USA in 1929 vs today ? which one is better ? Hint : not today.Now, in terms of its globality, is this crisis any less global than the 1929 ?Is there any major economy on the planet not affected ?Conclusion : isn’t this crisis worse than the 1929 from a macro-economic perspective ? Add to this, the problems of energy & resource constraints, CO2 emmissions, that we’re far more on this planet than in 1929, can someone please find one good reason to feel optimistic ? Or is it because we’ve learned a lot from the past and from our mistakes and we are much wiser now ? Or we’ve got better and more resilient food and goods production than in 1929 ? Everybody still has a little garden in his backyard to grow food and chickens ? We have many factories everywhere ?So, any reasons for optimism ? Anyone ? Anyone ?So, may I ask, apart from the $800 billion Obama plan, which is spending 5% of GDP that we don’t have and obviously only postponing the problem a little longer, is there a single reason why the cummulative output loss of GDP for this crisis will only be 5%, whereas it was 28% for the 1929 crisis ?Whose magic wand do we use this time ?

economicminorJanuary 13th, 2009 at 2:21 pm

you forgot to add the depletion of the oceans as a food source.Unresolved environmental issues like nuclear waste and newly noted problem with coal ash and many others.depleting energy supplies/sources. Almost all existing oil and gas fields are in decline.If I was asked where to spend $3-4 trillion dollars over the next few years, it wouldn’t be to prop up the bankers who did not hold up their fiduciary responsibilities to their clients or to our country.

C.LakeJanuary 13th, 2009 at 3:02 pm

Wanted to add :”is there a single good reason why the cummulative output loss of GDP for this crisis will only be 5%, whereas it was 28% for the 1929 crisis ?Hint for all potential snake-oil-salesmen, under good>/b> reasons, are not included ; crossing fingers, magic wands, wishful thinking, artificial smoothners.

GuestJanuary 13th, 2009 at 7:47 pm

Since everyone does NOT have a garden any more, they can be forced into the labor pool which will allow enterprising businessmen to start up much faster.We’ll learn what it’s like to earn Chinese style wages though.

George HarterJanuary 16th, 2009 at 2:27 am

I wish I couldn’t agree with everything you said. More, China will be wrecked as a cheap, low cost consumer goods producer. We may be afraid of them, but their government is deathly afraid of the 10’s of millions of newly unemployed Chinese workers, WHO HAVE NO SAFETY NET!!! Massive violent outbreaks and trade disaster, anyone????Water problems in the US SW??Reno relocates pop.in 2019. Millions flee southern Calif. water shortages-WHERE WILL THEY GO??? I don’t want ’em.Obama isn’t in yet and he’s done. Rubin, Geithner, Ms. SEC et al they are the FINAL SOLUTION! Bernanke, “SAVE THE BANKS AT ALL COSTS!” for What? for Who? A dysfunctioning economy doesn’t need GIANT banking institutions anymore!We are in trouble now, but give it 4 more years of monstrous, gargantuan bumbling with trillions of dollars, we might be toasted economically. Bangla Desh anyone??George Harter

GuestJanuary 13th, 2009 at 2:27 pm

You gotta love teh toying with the shorts here. They are trying to scare them out forever, then there will be limited downside to stocks FOREVER MWAHAHAAHAHAHAHAHAH!

GuestJanuary 13th, 2009 at 2:28 pm

Report: SOUTH KOREA INJECTS A FURTHER $3 BILLION INTO BANKS UNDER FED FACILITY South Korea’s central bank invested another $3 billion into local banks through 84-day dollar loans under its credit line with the U.S. Federal Reserve.1/13/2009 6:35 AM ET

Begining to believe CMJanuary 13th, 2009 at 2:30 pm

LOLOL VIX tells you teh true direction of the markets into the close-even with stocks down, it is falling! Manipulating futures to acheive an end, ya gotta love it.

CMJanuary 13th, 2009 at 2:40 pm

This is it! There is now wiggle room left, either we break up and start anew, or we break down and work towards teh Novy lows-no wiggle room left!

GuestJanuary 13th, 2009 at 2:56 pm

Of course he did. If I said that to the tax man, they would take everything I own and drop my ass in jail!!! I hate these politicians who are above the law! When are the US citizens going to kick some ass????3:54 p.m.Geithner made ‘honest mistakes’ on taxes: Obama spokesman

HayesJanuary 13th, 2009 at 4:12 pm

Consistent with the coverage of the election, a full court press by the media is on to protect Obi’s choice. The Geithner tax and immigration “mis-step” will get a footnote mention on network news and two of the three cable networks will frame it as a couple of disgruntled republicans threatening the stability of the economy by trying to politicize a minor issue.

HayesJanuary 13th, 2009 at 5:41 pm

bingo — nbc with Brian Williams — Top story – the weather with a focus on the inauguration — runner up — Hillary’s confirmation and some of Billy’s old acquaintances — third runner up – Geithner with the caption “Honest Mistakes”

GuestJanuary 13th, 2009 at 8:13 pm

Minimal or no enforcement of the laws for the elite and maximum enforcement for the rest of us!Is this what America continues to stand for?

AnonymousJanuary 13th, 2009 at 9:27 pm

Restorative “justice” for the rich, punitive “justice” for the poor.Nah, there ain’t no class war going on…

GuestJanuary 13th, 2009 at 3:03 pm

And another “honest mistake”:From Willem Buiter FTSpineless in Washington: Obama and Guantánamo BayJanuary 13, 2009The moral turpitude and ethical spinelessness of the Bush administration over the Guantánamo Bay detention camp have also infected president-elect Barack Obama. The offshore detention and torture camp still holds 248 detainees. During his election campaign, Obama promised to close it. His proposed time table does not impress, however. While Obama is now expected to issue an executive order during his first week in office closing down Guantanamo Bay, the measure will not be implemented, that is, the camp won’t actually be closed, during the first hundred days of his administration.Barack Obama’s lack of moral fibre on this issue is manifest from his own words.“It is more difficult than I think a lot of people realise”. Indeed, doing the right thing is often difficult and can be personally or politically costly. Difficult decisions should not come as a surprise to the president-elect. It’s what you expect to get on your plate when you run for president of the United States of America, rather than for dog catcher.“Part of the challenge is that you have a bunch of folks that have been detained, many of whom may be very dangerous, who have not been put on trial”. Indeed. The US government created an offshore detention centre where prisoners suspected of terrorist activities could be held, abused, mistreated, tortured, tried in kangaroo military courts or simply detained indefinitely without being charged let alone tried. In doing so, the Bush Jr. administration cocked a snook at the US Constitution, at habeas corpus (the right to have your day in court, to know what you are being charged with and to face your accuser), at the right to a fair trial generally, at due process, the rule of law, and at international conventions, signed by the US, on human rights and civil liberties.It is certainly possible, indeed likely, that many or most of those still detained in GTMO are very dangerous. That is no reason for detaining them if there is no proof that would stand up in a normal US court of law. If you don’t have the evidence to charge a person with a crime – evidence that would stand up in a normal US court of law – you have to set them free. That’s the law. That’s the rule of law.“And some of the evidence against them may be tainted even if it’s true”. Again, a good point. Some of the evidence against them may be inadmissible, even in the kangaroo courts established at Guantanamo Bay, let alone in a normal US court of law, because it was obtained through torture or through ‘torture lite’, the water boarding, and other forms of physical and mental abuse of prisoners that remain part of US military interrogation practice.Obama also appears to have adopted the Bush argument that Britain and other European countries should take some of the remaining GTMO inmates (other than their own nationals). In his final White House press conference, Bush said: “I understand that Gitmo has created controversies. But when it cam time for those countries that were criticising America to take some of those detainees they weren’t willing to help out”. No they won’t and why should they? Bush obviously hasn’t been in a china shop recently, and appears unfamiliar with the expression: “You break it, you own it”. I can understand the desire of Bushama and Obushma to externalise this internality, but this is a US problem that requires a US solution.The right course of action is simple. Just after midnight, on Tuesday January 20, 2009, when Barack Obama officially becomes the 44th president of the United States of America, all remaining Guantánamo detainees are put on a plane and are flown to the USA, where they are put under the jurisdiction and control of the US court system. I would favour the normal, ‘civilian’ Federal court system, because terrorism is a crime and terrorist should be treated as ordinary criminals. The alternative – following the unhelpful ‘war on terror’ model – would be to treat the prisoners as prisoners of war and try them in normal US military courts.Those that can be charged under US law will be charged and, if convicted, will pay with their lives or their freedom for their crimes. Those that are acquitted, and those that cannot be charged with a crime under normal US legal procedures, are released. If they are not US citizens, they should be sent back to their countries of citizenship or origin, as long as this does not put them at risk of being tortured or killed there. Extraordinary renditions have no place in the game plan of a civilised nation. If they cannot be sent back to their own countries without endangering their safety, they should be allowed to stay in the USA, as free individuals.It may well be true, as some have argued, that if a Guantánamo detainee, released because there is no evidence to hold him that would stand up in a normal court of law, were to commit a terrorist act (or any kind of criminal act) against the US, its residents or its citizens, the American public would never forgive the president that approved and arranged his release. What of it? The point of being president is not to be forgiven by the American people for doing the right thing. It is doing the right thing – and damn the torpedoes.The murderers and suicide cultists of Al Qaeda and other extremist Islamist groups threaten life and limb. But although evil and violent, they pose no material threat to the American way of life and to our freedom. Only the government’s phobic and over-the-top reaction to the threat posed by violent, extremist Islamism undermines our freedom and the Bill of Rights.The contempt for the rule of law – for the fundamental concept that government too is established under the law and operates under the law – expressed through the creation of the Guantánamo Bay detention camp by the Bush Jr. administration, represents one of the darkest events in the post-World War II history of the USA. It has done more to lower the international prestige and moral authority of the USA than any other policy decision in my lifetime. It makes one ashamed of the political system that produces such leaders. And now we witness this dark act being tolerated and continued because of the moral cowardice of the incoming Obama administration. This opportunistic, spineless behaviour is a huge blow to all those who hoped that the new president, unlike his predecessor, would be able to spell the word ‘decency’. It is also a major missed opportunity to restore America’s standing in the world.http://blogs.ft.com/maverecon/2009/01/spineless-in-washington-obama-and-guantanamo-bay/#comment-8431Change, my ass.

AnonymousJanuary 13th, 2009 at 4:28 pm

Circumstantial evidence may not be ‘proof’ enough in this context for some of you but IMO when it comes right down to it, if a person looks like a terrorist, acts like a terrorist, and even if you don’t catch him terrorizing with a lit molotov cocktail in his hands, by gum, I say let’s err and just flat out imprison the s.o.b. until we can 100% sure he ain’t gonna become a terrorist.OM

Lord SidcupJanuary 13th, 2009 at 5:47 pm

this policy was tried in in Northern Ireland and was called internment. During the early-mid 1970’s the UK security forces imprisoned thousands of (mostly) young catholic males who ‘looked’ and ‘acted’ like terrorists (a wonderfully loose definition).Aside from the moral issues (which seem beyond you), the policy was a total strategic and political disaster.The logical extension of your argument is to imprison/excfor many years for example pretty much

AnonymousJanuary 13th, 2009 at 8:39 pm

I’m cryin a friggin river just thinking about those poor terrorists being imprisoned. Ohhhhhhhh the humanity.OM

AnonymousJanuary 13th, 2009 at 8:41 pm

If someone looks like a tax cheat and acts like a tax cheat, he is a tax cheat.Geithner is a tax cheat.Don’t confirm him for Treasury! If he’s Sec Treas, nobody should pay their taxes either!

GuestJanuary 13th, 2009 at 5:47 pm

Guest,Your a complete idiot, if it were up to me, I’d put one in the back of each of their heads and be 100% sure they never commited another act of terrorism. You sir are the coward for not having the balls to do what is necessary to protect the people of this country.I’ll be the guy protecting your ass when the shit hits the fan if you want to talk.

MarkJanuary 13th, 2009 at 8:54 pm

What, only one or two Gitmo “detainees” have been charged in how many years? Many, MANY, have already been released! If there are new captives perhaps they haven’t been processed yet and you want to shoot them?I don’t need YOU to protect my ass thank you! Your reasoning skills suck, in which case I wouldn’t want to be near you and any sort of weapon.And before you go puffing out your chest note that I don’t get intimidated.

GuestJanuary 13th, 2009 at 9:39 pm

I wouldn’t try to intimidate you by any means even if you were sitting right next to me. I’d speak my mind and be even more convinced you’re an idiot after your last post, but I wouldn’t intimidate anyone, that’s not my style.Please excuse my exaggeration, what I am saying is that to protect my family, friends and neighbors (you included) I would absolutely do what was necessary including discriminating against anyone suspected of terrorism from overseas, they are not entitled to our laws. A domestic terrorist would be entitled to all of our due processes. I promise you the people we are fighting would not hesitate to discriminate against you. And yes you probably do need someone protecting you at sometime or another, I know plenty of people like you that do.

MarkJanuary 14th, 2009 at 11:09 am

You seem awfully fond of the word “idiot.”I would absolutely do what was necessary including discriminating against anyone suspected of terrorism from overseasYou’re reacting based on what OTHERS, with an agenda (propaganda), are saying: WMD! Not until things are exposed to the light of day can you (or I or anyone else) possibly pass judgment. You program rather well… a great tool for the manipulators…Mark

NathanJanuary 14th, 2009 at 4:55 pm

Mark,I may judge anyone I chose to. And no I am not reacting based on what others are saying. I don’t care what others think or say I use my own reasoning and judgement. I can’t personally interview those men, so to some degree I do have to trust in what others have found. Then again if we follow your logic you don’t believe anyone is guilty of anything unless you have personally examined the evidence? Personally I don’t care to carry on this conversation with you anymore, you are solidly entrenched in your ways and won’t change, that’s fine, we probably both feel that the other is a complete fool, i don’t need your approval and you don’t need mine. And yes I like the word idiot, it really is very encompassing.

ChignosJanuary 13th, 2009 at 11:09 pm

I hope you get exactly what you want, because if these terrorists get set free in the US, you and ll the Obamaniacs will get exactly what you deserve.

AnonymousJanuary 14th, 2009 at 7:17 am

MODERATORS, PLEASE – THIS IS A SICK, DERANGED, HIGHLY OFFENSIVE COMMENT BY CHIGNOS AND IT SHOULD BE REMOVED.

KiersJanuary 14th, 2009 at 8:42 pm

IF Obama does one more “I think we are getting a cockerspanieldoodle” BS job about kids I will SCREAM!What a DIFFERENT character he has turned out to be…as campaigner, speeech making was ONE thing and as President he’s just a kissy establishmentarian!Hillary will run foreign policy (in deed most of his cabinet are clinton acolytes) and Obama will run Economy.Here comes the new boss….same as the old boss…get on my knees n pray…we don’t get fooled again!!!

KiersJanuary 14th, 2009 at 8:45 pm

Another tainted oHBAMA appointment:DONT forget Dennis Blair is a borderline war criminal wanted in E. Timor and lied to Congress.

george harterJanuary 16th, 2009 at 2:37 am

How about 4 more years of Bernake/Rubin Economics! Sleazeballs in at SEC and “Honest Mistake” Geithner. Hilary would likely have had fewer Clinton retreads.I hated Hilary, but I voted wrong because of that. This clown has struck out before getting up to the plate.2 years, congress goes ballistic, even Barney “Good Buddy” Frank. But they’re Demo’s, incompetant, ineffective and incoherent. At least they are not the vicious Anti-Americans the Republicns have been.George

CMJanuary 13th, 2009 at 3:10 pm

More tape painting, watch the volume at 2:30, if it is higher than the day before, we close up (S&P), if it was lower, we close down. If you watch the VIX and volume, you can’t go wrong…a mouse always leaves a trail of turds.

GuestJanuary 13th, 2009 at 3:12 pm

WASHINGTON (MarketWatch) Tim Geithner, President-elect Barack Obama’s nominee to head the Treasury Department, made “honest mistakes” on taxes and is the right person for the job, an Obama spokesman said Tuesday. “He made a common mistake on his taxes, and was unaware that his part-time housekeeper’s work authorization expired for the last three months of her employment,” incoming White House press secretary Robert Gibbs said in a statement. Earlier Tuesday, Sen. Charles Grassley, R-Iowa, raised questions about the housekeeper and multiple years when Geithner didn’t pay Social Security and Medicare taxes for himself.

2centsJanuary 13th, 2009 at 10:45 pm

Tim Geithner needed to be something akin to Harry Houdini, Superman, Albert Einstein and Mr. Rogers all wrapped into one. Unfortunately, Mr. Geither has clearly shown that he is not even close to the qualities of any of these individuals.* He couldn’t even make his income taxes disappear. How is he going to make this financial fiasco disappear.* He has not once spoken up about eradication the villains in the financial sector, how on earth are we going to muddle through this being afraid of being attacked again?* In his current position, he clearly has not proposed and new theories or insights on how to approach this dilemma. His though process is something akin to we are here not because the system is unstable, but rather the people in charge have not been deft enough to navigate its waters. ( Hint: Tim gravity applies to physical and fiscal entities.)* Even if these other attributes were not up to par, we at least, or most importantly, need to have someone at the Treasury that we could trust and implicitly know that he had our best interests at heart.Wow, talk about falling off the horse!Obama needs to show that his administration is trustworthy and this is a serious blow! If he continues to blithely stand behind Geither, I’m afraid that Obama will find that he will have thrown a great deal of his capital/ goodwill to the wind before he even begins his journey.

GuestJanuary 13th, 2009 at 3:14 pm

WASHINGTON (AP) The federal government already has run up a record deficit of $485.2 billion in just the first three months of the current budget year, the Treasury Department said Tuesday.The deficit is on track to surpass $1 trillion for all of fiscal 2009 and some economists believe it could go much higher.The deficit for December totaled $83.6 billion, a sharp deterioration from a year ago when the government managed a surplus of $48.3 billion. Wall Street economists surveyed by Thomson Reuters expected a slightly lower deficit of $83 billion.All the red ink is occurring because of the massive spending on the $700 billion financial rescue program and a prolonged recession which has depressed tax revenues.The imbalance from October through December is the highest on record for a first quarter and surpasses the mark for a full budget year of $454.8 billion set last year.The Congressional Budget Office last week projected that the deficit for this fiscal year will hit $1.2 trillion. But that projection does not include any of the costs from the economic stimulus program that President-elect Barack Obama is hoping Congress will pass in the next few weeks in an effort to keep the current recession from deepening.The cost of Obama’s two-year program is expected to be around $800 billion.

Begining to believe CMJanuary 13th, 2009 at 3:16 pm

We had 5 saves today in the last 90 minutes of trading on the Dow at 8400-you can’t tell me that is fund managers and hedges lining up at the exact same spot during the same time of day to buy that level.

GuestJanuary 13th, 2009 at 4:40 pm

Help me understand what you & CM are referring to. Are you suggesting that someone is gaming the stock market? What is the indication, and towards what end?

HayesJanuary 13th, 2009 at 4:58 pm

equity prices are a component in for example the ECRI weekly leading index (WLI) -In addition there is a widely held folklore that the Fed/Treasury participate in the equity markets, though more covertly than their participation in the fixed income markets. The acronym PPT (plunge protection team) is how they are frequently identified.

GuestJanuary 13th, 2009 at 5:10 pm

If I understand you correctly, the PPT is buying up stocks at key points thoughout the day in an effort to prevent a steep decline in the market with two outcomes in mind 1) preventing panic and 2) boosting the numbers of important indicators of US economic health.

HayesJanuary 13th, 2009 at 6:28 pm

it’s a theory that periodically makes it into the financial news media and is rampant in the blogs and accepted by some market professionals – many view it as an explanation for unexpected support at key technical levels –

GuestJanuary 14th, 2009 at 5:39 pm

Gee, how could you tell? I’ve been lurking since early summer and what is obvious to many here is opaque to me.

GuestJanuary 13th, 2009 at 10:17 pm

Every time the Dow begins to start its 1929 impressions, the bulls need a little boost from Executive Order 12631, established March 18, 1988. This presidential order established the “Working Group on Financial Markets,” colloquially called the Plunge Protection Team (PPT). For all its provisions, the bulls like the portions best that give four men the authority to use the federal treasury for “enhancing the integrity, efficiency, orderliness, and competitiveness of [United States] financial markets and maintaining investor confidence.” Translation: these men, or their “designees” can buy as many equities secretly whenever they want, using every last penny in the Federal treasury.The four are treasury secretary Paulson, Fed chairman Ben Bernanke, SEC chairman Cox, and Commodity Futures Trading Commission chairman Bart Chilton.Pick any number you like on the roulette wheel but be advised, the “plunge protection team” is holding a magnet under the table

JaimeJanuary 13th, 2009 at 5:18 pm

Buyers are actively seeking bargains with good companies now. With investors with time frames of five years and more this is a good time to purchase quality at low prices.

economicminorJanuary 14th, 2009 at 11:08 am

James,Not if this follows the patterns of previous crashes. In the 1929-32 crash, the market fell for a year then had a 50% bounce before it sank again to the next big much lower low.In 1991 when the Nikkei crashed, it followed the same pattern and still hasn’t revovered.In the 2000 NASDAQ crash, same pattern.So don’t bet the house on this being a good time to buy. It might be a good time for a swing trader but could be a huge trap for anyone who has a buy and hold outlook.

GuestJanuary 19th, 2009 at 10:18 am

Reason? Program trading! Some funds actually believe we’re at a bottom. Every time the DJIA hits a certain level — it triggers program buying. These same buyers will sell in hordes if there’s a strong move to the downside. They’ll probably “protect” the 7,000 support level as well. But I think it’s less of a conspiracy and more fund managers trying to call a bottom. Besides… the market isn’t going to plunge all the way to 5,000 (or lower) in one day. The absolute low following the 1929 crash didn’t occur until July of 1932, and there were quite a few bear market rallies along the way.

GuestJanuary 13th, 2009 at 3:18 pm

IMO US housing market will also drop 80%”HOUSING MARKET: IRELAND WILL see more demolition than construction of houses over the next decade, as the economy struggles to recover from the collapse of the housing market and the emergence of “zombie” banks, UCD economist Morgan Kelly told the conference.In a presentation that drew several collective intakes of breath, Mr Kelly predicted that house prices would fall by 80 per cent from peak to trough in real terms.”http://www.irishtimes.com/newspaper/finance/2009/0113/1231738220759.html

GuestJanuary 13th, 2009 at 3:23 pm

4:20 p.m.Facing more losses, Alcoa’s cost cuts may deepen4:20 p.m.Nvidia lowers sales outlook on chip-industry woes

GuestJanuary 13th, 2009 at 4:39 pm

1913 Federal Reserve ActDespite the warnings, Woodrow Wilson signed the 1913 Federal Reserve Act. A few years later he wrote: I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.

kilgoresJanuary 13th, 2009 at 6:43 pm

He must have written this after his stroke.Seriously, though, this attribution to Wilson, which has made the rounds on gobs of libertarian/anti-Fed websites, is likely fake. From Wiki:”This quote seems to have spread widely on the internet, but is almost certainly a bogus concoction which misleadingly combines some genuine statements (which are already in the sourced section for “The New Freedom”) with a lead-in (in bold) which is almost certainly a total fabrication. For further commentary see discussions at Talk:Woodrow Wilson, Talk:Woodrow Wilson (Wikipedia) and Talk:Federal Reserve Act. It has been said by some supporters of its supposed authenticity to appear in “Senate Documents Co. 3, No. 23, 76th Congress, 1st session, 1939” but even were it in these records it would certainly be someone quoting it into the record, and not a quote of Wilson directly, as he had already been dead a number of years. Many such misquotations thus appear in Senate and Congressional records. If such a record actually exists a citation of a more definite source might conceivably exist there.”http://en.wikiquote.org/wiki/Woodrow_WilsonNice attempt at an appeal to authority argument, though….SWK

blindmanJanuary 13th, 2009 at 8:55 pm

k,speaking of perceived or real conspiracies, not that any of that changes real consequences or results, have you seen these norman dodd interview segments?the man can obviously speak for himself.

kilgoresJanuary 13th, 2009 at 9:07 pm

I don’t believe I have seen the interview segments to which you refer. What’s the gist of the conversation?SWK

blindmanJanuary 13th, 2009 at 10:49 pm

k,oh, just watch it, all 5 segments, it will only take 45 min., i said the man can speak for himself and i could never do him other than injustice. you really don’t want to miss this. how do i say, he is a gem from a time gone by. you know there are rare convergences in life. where a technology brings about a change by how people interact with the technology, the people are changed forever. but before that change in people takes place the technology captures the truth of the unchanged, unadulterated sample. this , to me is like that.a better example of this idea is found in a film called “desperate man blues”. concerning early vinyl record from different regions in the american south. real regional music before it became homogenized, 1920-1934. but that is a different story somewhat.norman was a naive young banker in a morgan bankand was given a life changing assignment. he describes some of his experiences and tells how one of his coworkers on the reece committee investigation “lost her mind” as a result of what she learned..http://www.garynorth.com/products/item9.cfm.sorry, i forgot to include the links..http://www.youtube.com/watch?v=C8cC21jB9EE

AnonymousJanuary 13th, 2009 at 9:08 pm

The quote as posted above is indeed in error.(Thomas) Woodrow Wilson 1856-1924from 1911; quoted by Justice Brandeis, Other People’s Money:The great monopoly in this country is the money monopoly. So long as it exists, our old variety of freedom and individual energy of development are out of the question.and:A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men, who, even if their actions be honest and intended for the public interest, are necessarily concentrated upon the great undertaking in which their own money is involved and who, necessarily, by every reason of their own limitations, chill and check and destroy genuine economic freedom.

GuestJanuary 13th, 2009 at 9:47 pm

Yes, THOMAS WOODROW WILSON, American 28th president of U.S., writer and statesman (1856 – 1924) is quoted exactly as you have it in my copy of “The Great Quotations” compiled by George Seldes and with the same attribution, p. 670 (5th printing 1970).This particular book of quotations doesn’t have your second Wilson quote, but it does have this one from “Economic Tribulation” by Vincent C. Vickers, who in 1910 was made a govenor of the Bank of England and resigned this appointment in 1919:In the progress of time, and through our own base carelessness and ignorance, we have permitted the money-industry, by the virtue of its business, to gradually attain a political and economic influence so powerful that it has actually undermined the authority of the State and usurped the power of Democratic government.

kilgoresJanuary 15th, 2009 at 7:53 am

>”In the progress of time, and through our own base carelessness and ignorance, we have permitted the money-industry, by the virtue of its business, to gradually attain a political and economic influence so powerful that it has actually undermined the authority of the State and usurped the power of Democratic government.”Regardless of whether this quote may be attributed accurately to President Wilson, it certainly seems to ring true today. Of course, I suppose it has always been true, as long as man has been establishing governments of any kind, that private riches ultimately influence, if not dictate, the course of political power. Not sure that’s ever going to change.SWK

GuestJanuary 13th, 2009 at 10:01 pm

Guest, I also have this quote in an old paper regarding the “Functioning of the Gold Standard” written in 1944. It says Wilson gave this condensed summation of the situation in the U.S.A. in 1916. (The only difference from yours being that it has three dots after “of a few men”…)

AnonymousJanuary 13th, 2009 at 5:13 pm

Working Towards Less Pain on the RackIf there could be one all-encompassing book title to this government’s interventionist torture device, it would be that one.AM

HayesJanuary 13th, 2009 at 5:15 pm

the honeymoon hasn’t even started and it appears to be over – at least there were no shoes involvedIranian protesters back Gaza and burn Obama pictureTEHRAN (Reuters) – Dozens of Iranians burnt posters of U.S. President-elect Barack Obama in Tehran on Tuesday and waved Palestinian flags in support of Gaza, according to a witness and photographs.Iranian demonstrators have often burnt effigies or pictures of U.S. presidents in protests. This appeared to be the first time Obama’s picture had been defaced so publicly, a week before his inauguration as president. Read More

jugglingcdosJanuary 13th, 2009 at 6:52 pm

Destabilization of the region,Current events in Gaza will sow seeds of hatred for the next 10 yearsManufacturing a war?? This formula have been repeatedly used, again and again..

GuestJanuary 13th, 2009 at 6:40 pm

Looks like Obama has been briefed on the *real* state of the economy?Obama Says Recession Requires Scaling Back Promises

Jan. 11 (Bloomberg) — President-elect Barack Obama said reviving the U.S. economy will require scaling back on his campaign promises and personal sacrifice from all Americans.”I want to be realistic here, not everything that we talked about during the campaign are we going to be able to do on the pace we had hoped,” Obama said in an interview on ABC’s “This Week” program broadcast this morning.

(source: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a3YMkstD3JzA)

GuestJanuary 13th, 2009 at 6:51 pm

isn’t it weird that the Federal government can run a multi-trillion-dollar deficit while the individual states are forced to do things like this:Poor take a big hit in state’s raid of ‘trust funds’

TALLAHASSEE – With Florida near the top nationally in lost construction jobs and home foreclosures, state lawmakers are taking a $190 million bite out of a pot of money intended to build low-rent apartments and moderately priced homes.More than half of the $2.6 billion in budget savings legislators scraped together for a final vote Wednesday comes from borrowing and sweeping up money that’s sitting in “trust funds,” accounts dedicated to a variety of state projects and policies.Some $70 million will be taken from a fund intended to fight insurance fraud and support the state fire marshal; state conservation land buys will be frozen until at least July 1; $6 million will be diverted from radios for law enforcement.Florida’s affordable-housing trust fund — created in 1992 to generate annual money for low-income housing and named for the late legislator William Sadowski — stands to take the biggest whack: $190 million.

jugglingcdosJanuary 13th, 2009 at 7:06 pm

things that makes you go hhhmmmm…http://www.telegraph.co.uk/news/worldnews/europe/germany/4226247/Nazi-era-newspapers-being-sold-on-Berlin-streets.htmlNazi-era newspapers being sold on Berlin streetsThousands of copies of the original 1930s papers are being bought for €3.90 (£3.50) each by German readers.The currently available edition of Der Angriff (The Attack), originally published in 1933, has the front page headline “Hitler Chancellor of the Reich” and features a commentary from Joseph Goebells.The editor of the project, Sandra Paweronschitz, a historian, told The Times: “From today you will have a unique opportunity to read what information was available to your grandparents and your parents.”The publisher, Peter McGee, told the newspaper: “It should be read by people who would never read a contemporary history textbook but still value quality analysis of the information.”

GuestJanuary 13th, 2009 at 7:50 pm

Perhaps we should pay a little more attention now to the Holocaust in Palestine. We can still do something about that, if we care enough.

GuestJanuary 14th, 2009 at 10:01 am

yes in fact it does not matter which group of civilians is being killed, we should view them all through the same lens and not give e.g. jews some sort of special treatment. Or to put it in another way: everyone should be treated as special. At least the world would be a better place than it is now.

GuestJanuary 13th, 2009 at 7:45 pm

“The Internal Revenue Service (IRS) is ready to help Americans pay their taxes, whether they want to or not. A bureau in the Department of the Treasury, the IRS is responsible for tax collection and tax law enforcement in its numerous forms. The agency collects 95% of the revenues that fund the US federal government.It has an annual budget of some $11 billion…” Answer.comAnd, we now make our taxes payable to the U.S. Treasury instead of to the IRS, as we did until recently. Soon we will probably make them directly payable to Timmy Geithner, the Fed’s man in the Treasury. Why mess around?

GuestJanuary 13th, 2009 at 7:28 pm

Speaking of PENSIONS:San Jose pension costs soar with added benefits | Mercury NewsJanuary 13, 2009 — As San Jose police battle for enhanced retirement benefits they say are crucial to recruitment and retention, a series of earlier sweeteners has helped push the city’s pension costs for officers and firefighters up 167 percent since 2000… (the Bay Area CPI has risen just 23 percent during that time.The maximum police and firefighter pension, which in 1996 was 80 percent of salary, rose twice this decade to 90 percent.A 2007 arbitration award boosted pensions for firefighters who retired before logging the 30 years needed for the maximum pension. Police now are seeking a similar benefit…[S]an Jose’s pension funds…have lost more than $1 billion — about a quarter of their value — in the recent stock market crash…City contribution rates for police have increased from 15.7 percent of payroll to 25.8 percent since 2000; for firefighters, the rate is now 28.3 percent. The rates the officers and firefighters themselves put in are less than half of that…The council also hiked medical benefits for retired officers and firefighters in 2000 and 2001.All told, while police and firefighter staffing increased just 3.4 percent in the past decade, the city’s costs for their pensions have risen 167 percent, to $62.7 million this year.The city’s civilian workforce saw far fewer pension enhancements during that time. The 75-percent-of-salary maximum pension for those workers — whose contracts are not subject to binding arbitration — has been unchanged since 1975. Their only retirement enhancements this decade were the automatic 3-percent cost-of-living adjustment and a change in calculating the salary level that determines their pensions…”Getting the best people we can get,” said Bobby Lopez, presidsent of the San Jose Police Officers Association, “costs money.”http://curevents.org/showthread.php?t=7828

GuestJanuary 13th, 2009 at 8:35 pm

The future of equities seems pretty bleak now, even for the very long term. According to Dr. NR, it is likely we are going to have 4 possible different scenarios:1. A severe and protracted recession together with Fisher’s debt deflation and keynesian liquidity trap2. Borrow a lot of money, raising the long term interest rates causing further long term weakness in the economy3. Print a lot of money, causing severe inflation in the long run4. Somehow the governments and fed manage to balance things right and economy recovers slowlyOnly 1 out of the 4 scenarios are good for equity, which is pretty bad for stocks for the long run. Seems like the Oracle of Omaha has made his buy call way too early. Does anyone else have a better investment strategy or asset class to navigate the next decade?

KiersJanuary 14th, 2009 at 8:51 pm

so the assets covered by TARP include CDOs, stochastic calculus, CDS, MBS, CHrysler Vans and Chevy’s, AIG, Universal Studios, CEO bonuses, but I can’t get a jobe.The country that gave us the McCarthy witch hunts became the Number one ally, within a decade of McCarthy, of China…a democratic nation. One thing for the people another for the boss.

GuestJanuary 13th, 2009 at 9:15 pm

AMERICAN MANDARINS by Karen KwiatkowskiJanuary 12, 2009 — Robert Scheer asks an important question: “Why Do So Few Speak Up for Gaza?” His focus is the lack of Western public outrage against Israeli military actions against Gaza –outrage that should have been apparent in newspapers and television long before the most recent spasm of bloodshed and destruction. When the wrong party won democratic elections in Gaza, democracy supporters in Tel Aviv and Washington responded with an economic embargo, supported by the US-subsidized socialist-dictatorship of Egypt.That particular act of war was extremely successful in starving and angering the already frustrated Palestinians who live in Gaza on $2 a day, with an unemployment rate of 70%. The lawless yet far less deadly Hamas rocket attacks on Israeli targets in December are claimed to have “started” the latest phase of the Israeli military and political campaign against Gaza. However, one needs only to look at the death toll (one-sided), the difference in military capacities between Israel and Gaza (shocking) and the kind of arsenals employed by both sides to determine what is happening. We’ve seen it on the elementary school playground, but this version is played out with incredible destructive force, no supervision, no brave friends, and no justice.The history of the policy in Gaza is important, even though average Americans are not experts on this history, and should not have to be. Those we do expect to understand this history apparently do not. Most mainstream pundits are either unfamiliar with the history, deny the facts, or choose to tell only the “winning” side, as AIPAC and the Israeli government would have it told. Thus Robert Scheer’s question.There are several answers to his question, beyond the obvious import of “The Lobby.”First, it is not in the least hypocritical for a country like the US to support what Israel is doing in Gaza. Washington talks the talk of freedom, but rarely walks the walk, especially when poor people in poorer countries stand in the way of the federal state’s desires…Secondly, many intellectuals tend to be less talented than they imagine, and they tend to make less money than they think they deserve. Mises points this out in The Anti-Capitalist Mentality, as does Hans-Hermann Hoppe. Hoppe’s concise essay on this topic explains that intellectuals need external economic support, and that this support comes from natural elites, those with wealth, a.k.a. the entrepreneurial, the innovative, the skilled producers, the risk-takers. Hoppe explains the shift in this natural elite in the United States:“Rich men exist today, but more frequently than not they owe their fortunes directly or indirectly to the state. Hence, they are often more dependent on the state’s continued favors than many people of far-lesser wealth. They are typically no longer the heads of long-established leading families, but “nouveaux riches.” Their conduct is not characterized by virtue, wisdom, dignity, or taste, but is a reflection of the same proletarian mass-culture of present-orientation, opportunism, and hedonism that the rich and famous now share with everyone else. Consequently – and thank goodness – their opinions carry no more weight in public opinion than most other people’s.”The twentieth century emergence of the predatory state as a new “natural” elite matters, even if the intellectual elite it subsidizes does not. Should we care about which wealth sector supports the intellectual class? Surely, intellectuals tell the truth, enlighten honestly, let chips fall where they may, regardless of monetary enticements? Isn’t that what it means to be an intellectual? No, Virginia, that’s what it means to be a moral intellectual. What we see in the mainstream today, and in all past episodes of statism throughout history, is the other kind. Many of these articulate and well-read advocates of “truth” are just plain sell-outs. Others are self-promoting, submissive, boot-licking sellouts. Words like mandarin apply, and thanks to Red Pill Radio and Bill Meyers for reminding me of the term…Thirdly, there is no outrage over Gaza because there is simply too much money being made. John Perkins has explained in his best selling books on US economic practices around the world how the US is no different from other corrupt states in using diplomacy, espionage, and economic manipulation to enrich itself in the short term.Wars, particularly your own or those of your closest ally, when your country is the biggest arms exporter of them all, is likewise a good deal. When the most recent assault on Gaza has temporarily depleted Israel’s stockpiled arms and ammunition, much of it manufactured in the US or by heavily US-invested companies, it’s time to celebrate in the weapons supply sector, which goes beyond the well known military-industrial complex to include agricultural chemical companies like Dow Chemical headquartered in Midland, Michigan and United Phosphorus, Inc in Trenton, New Jersey. Immediate and urgent opportunities abound, like this one, to ship 3,000 tons of US ammunition to Israel from a port in Greece.Few speak up for Gaza because it is small – 1.5 million people on 140 square miles. It has no oil, no water, and very little land, no ability to operate freely and trade with anyone. Gaza isn’t buying high quality weaponry by the shipload, profiting a long supply chain than ends not in a US boardroom, but in the US Congress itself.Gaza meets the Michael Ledeen definition of a “crappy little country” that must sacrifice itself to a more powerful country, and her ideological allies…Meanwhile, Gaza smolders and dreams of justice, and revenge.LRC columnist Karen Kwiatkowski, Ph.D. is a retired USAF lieutenant colonel.http://www.lewrockwell.com/kwiatkowski/kwiatkowski221.html

GuestJanuary 14th, 2009 at 12:29 am

g,some body said it, “correction alert, death isn’t a certainty, it’s a fashion statement.”???you can thank the corporate media for that. etc..

AnonymousJanuary 14th, 2009 at 7:31 am

lew rockwell and kwiatkowski can kiss my rosy red cheeks because of their hidden agenda, but do you mean Gazans provoked the mess by responding when Israel broke the fragile truce back in November?

MarkJanuary 14th, 2009 at 11:17 am

It’s been all part of the PLAN…Gaza Is the FutureFacts are facts no matter what someone’s “agenda” is… If you’re referring to their desire for the US to quit meddling in the affairs of other nations (libertarian stance), then yes, but there’s nothing hidden about this at all. And no, I’m not a libertarian: just someone who sidesteps party crap and looks seeks facts.Mark

MarkJanuary 14th, 2009 at 11:55 am

From a recent Norman Finklestein article The Facts About Hamas and the War on Gaza:The record is fairly clear. You can find it on the Israeli website, the Ministry of Foreign Affairs website. Israel broke the ceasefire by going into the Gaza and killing six or seven Palestinian militants. At that point—and now I’m quoting the official Israeli website—Hamas retaliated or, in retaliation for the Israeli attack, then launched the missiles.Now, as to the reason why, the record is fairly clear as well. According to Ha’aretz, Defense Minister Barak began plans for this invasion before the ceasefire even began. In fact, according to yesterday’s Ha’aretz, the plans for the invasion began in March. And the main reasons for the invasion, I think, are twofold. Number one; to enhance what Israel calls its deterrence capacity, which in layman’s language basically means Israel’s capacity to terrorize the region into submission. After their defeat in July 2006 in Lebanon, they felt it important to transmit the message that Israel is still a fighting force, still capable of terrorizing those who dare defy its word.And the second main reason for the attack is because Hamas was signaling that it wanted a diplomatic settlement of the conflict along the June 1967 border. That is to say, Hamas was signaling they had joined the international consensus, they had joined most of the international community, overwhelmingly the international community, in seeking a diplomatic settlement. And at that point, Israel was faced with what Israelis call a Palestinian peace offensive. And in order to defeat the peace offensive, they sought to dismantle Hamas.Mark

aerial viewJanuary 14th, 2009 at 8:11 am

This is a more realistic balanced assessment of the situation that the MSM refuses to portray.What most Americans don’t realize is that when you stand by and allow the immoral killing of innocent children and woman, their blood is on all of our hands and those same powers that condone this behavior are free to inflict injustice on anyone, including you and me! If you have any doubts, look at the effects of the financial crises on innocent Americans and our govt’s response to help them and bring those responsible to justice!

Chris BuongiornoJanuary 13th, 2009 at 9:23 pm

What about the people out there who are prospective first-time home buyers? Why not have a tax incentive for them that would encourage home purchasing? Most of the suggestions offered for resolving the housing problem attack the problem from behind the curve instead of in front of it. A demand-initiated incentive is the proper solution to reducing inventory and stabilizing housing prices.

2centsJanuary 13th, 2009 at 10:12 pm

Uhmmm! …Chris I think that too much goosing on the front end is how we got here in the first place? That would make it behind the curve that’s behind the curve, or full circle!

AnonymousJanuary 14th, 2009 at 10:24 pm

2cents, credit worthy buyers sitting on the sidelines instead of sitting in homes is wasted demand. No buyers to buy the homes that will languish and continue to depreciate causing more banks to hoard money due to the mortgages they hold losing more and more value…now that is a full circle!!!

2centsJanuary 14th, 2009 at 10:52 pm

I have no problem having prospective buyers weigh the realities and make their own decision. On the other hand providing incentives as Chris suggested is not helping the situation. If incentives are driving the deal then it wasn’t a good fit to start with and the likelihood of failure increases greatly. I think we have ample evidence to support this!

AnonymousJanuary 14th, 2009 at 11:52 pm

But what you are missing is the element psychology plays in the minds of prospective purchasers. Shiller addresses this subject very well in his second edition of Irrational Exuberance. Give it a read and maybe your staunch position based on arm’s length may change.

2centsJanuary 13th, 2009 at 10:56 pm

Ben S. Bernanke in a nutshell!

The Fed chairman said the favorable treatment that financial institutions are receiving from the government is “unavoidable” because the economy needs credit to grow. Still, aid should be accompanied by stronger supervision and regulation, he said. Full Bloomberg text

Folks there’s your confirmation that credit is the salvation of the financial universe! I suspect an inordinate amount of one way tickets being purchased over the coming years. (Origin U.S. — Destination ?)

2centsJanuary 13th, 2009 at 11:17 pm

I think we can sum up the way forward in basic FED alphabet jargon. Stabilize The Usual People In Debt and Convince Our Responsible and Reliable Underlings to Pay Taxes.Otherwise now known as the STUPID/CORRUPT theory for financial recovery.

GuestJanuary 14th, 2009 at 1:18 am

Of all the contrivances for cheating the laboring classes of mankind, none has been more effectual than that which deludes them with paper money. Daniel Webster, Quoted in Congressional Record, March 4, 1946.

aerial viewJanuary 14th, 2009 at 8:17 am

Agree! Those in power willl do everything and anything to preserve the status quo. Is it any wonder that wealth has continually become more concentrated in this country and the gap between the rich and the rest of Americans keeps growing larger? Maybe people will open their eyes when they see what the next 10 years look like.

George HarterJanuary 16th, 2009 at 2:55 am

Ticket to nowhere. We have to stand and fight here. Bush tried to destroy the constitution and then let loose the gates of corruption and large scale criminality(hiphiphooray,NOT)(Bill got us juiced with Rubinomics by the way)Now, we have elected a new boy for the job of President. I think we needed an actual man, not a boy.George

blindmanJanuary 14th, 2009 at 12:01 am

2c,the fed, by design, bleeds the world in the name of progress. that is just what they do. debt is your friend,credit is there friend and where these two meet lies the path to freedom and harmonious business, there is no limit, oh, now they found the limit, maybe? maybe, just a little bit more will do the trick.this social experiment we are in is selecting for the irrational, antisocial and insane. people are being driven to desperation and as it plays out those willing to gamble on tremendous inflation, again, will borrow money at high interest, to survive, and again speculate irrationally. the only game the fed knows. imo. our fed. their fed. THE fed. the end.

GuestJanuary 14th, 2009 at 12:57 am

Satyam Officials Sold Most Stock in India Before Fall (Update1).http://www.bloomberg.com/apps/news?pid=20601087&sid=a0DHOY9S6UN4&refer=home.“The impunity with which promoters sold shares is really shocking,” said R.K. Gupta, who manages the equivalent of about $100 million of stocks at Taurus Mutual Fund in New Delhi. “It also raises questions about how effective our regulatory system is that it could not detect the wrongdoing from the share sales.”.shocked and dismayed. …

GuestJanuary 14th, 2009 at 1:10 am

In times like these, when the economy’s sure to crack if there’s no course correction, it is good to be aboard with Nouriel Roubini – flying straight and level. Roubini is the best in the field when it comes to forecasting and analysis. IMO, no one can call it like the Professor and his team. They are 100% on “where we are and where we’re headed.”Personally, I believe if the current course taken by the government isn’t stopped soon, we’ll lose the country. Many groups who are left out of the reporting are in deep trouble and facing worse times ahead, not better. The two crises confronting the country — the banking system collapse and the recession — are two different things. It’s the recession that’s hammering the people to the breaking point.For example, if the government continues to take the public’s money and their jobs and their futures and their kids’ futures, and gives them back inflation and pollution and congestion and taxes, slapping them all the while with unworkable socialism, the people will break. And the system will break with them – into a political explosion, a blow-up. And once the air clears, America can begin to rebuild again.In the meantime, the thieves are taking the country’s money, the country’s gold, the country’s resources. It can’t continue.There are several things at play that brought us to this point and will keep us here beyond 2010.First, a lot more people are retiring, every day. The question is, what’s ahead of them? Most have Social Security, they might have a pension, but chances are that the vast majority won’t have enough money to live anywhere close to where they were. At the same time, they will have to deal with inflated prices on earnings and savings they made pre-inflation.Second, young married couples that were encouraged by government to buy houses, cars, furnishings, and lots of other things, are now in a blind alley. I’m talking about the average couple that’s facing really tough times, that’s facing inflation like the rest of us but facing it with heavy debt, and with young children who need shoes, doctors, education, day care… IMO, they are facing the worst two or three years of their lives ahead.Third, my common sense tells me that many people with money, who’ve been traveling to Europe, buying luxury cars and designer clothing and diamonds and eating in the best restaurants, are facing more difficult times. Many of those who bought McMansions, second homes, vacation homes, recreation vehicles and the good life on credit…have encountered unexpected money problems. They, too, are facing downsizing, debt, life-style shock, divorce…Fourth, the poor — the people making the beds, sweeping the floors, washing the dishes, slinging the hash, doing the laundry – may benefit from extended service contracts but a lot will lose their jobs. Lots of companies are going to cut back on maintenance services, on full-time employees; a lot of restaurants are going to close; a lot of oldsters will have to let their domestic and caregiver help go; a lot of small businesses are going belly-up… A lot of the poor are going with them.Fifth, the middle class, made to bear the brunt, is set to implode.That’s the way I see the economy, from the bottom rung up. I know that business columnists are going to lie about us, we’ve been watching them lie for years, and block us out with silence. I know, just as they give out no information on the plight of savers, there will be no information on the dire plights of these groups. I know there will be no information on how the handicapped, the injured and the blind, who were barely getting along before, are now faring in the jaws of inflation…in need of a new wheel chair that’s going to cost twice as much as before.I know we won’t hear about all these people, but they are there. And they are the economy.

economicminorJanuary 14th, 2009 at 8:23 am

I know that business columnists are going to lie about us, we’ve been watching them lie for years, and block us out with silence. I know, just as they give out no information on the plight of savers, there will be no information on the dire plights of these groups. I know there will be no information on how the handicapped, the injured and the blind, who were barely getting along before, are now faring in the jaws of inflation…in need of a new wheel chair that’s going to cost twice as much as before.

Sort of like the lack of coverage of the dead and wounded coming home from the wars.No coffins were allowed to be shown.Nice to have a free press!

MarkJanuary 14th, 2009 at 11:20 am

Well, there was ONE picture of a flag-draped coffin aboard a cargo plane; and I know the person who took it (bless her).Mark

george harterJanuary 16th, 2009 at 3:05 am

The problem for the upper classes is that there are 295 million nobodies, really (that includes high priced doctors too)/.What will happen to this RICH PERSON’S Disneyland if even 5% of the above decide they are done with it, tired of being robbed, tired of following legislation written for and by the wealthy for their advantage (15% income taxes for hedge fund traders?????? I am a schmuck and I lose 33% of my 41,000 dollar salary. And I am supposedly middle class(no medical anymore tho)Maybe the plebes should pay as much attention to the laws as Bernie Madoff??

Little SaverJanuary 14th, 2009 at 3:04 am

As financial results will be important in this stage:HSBC needs up to $30 billion in capital, Morgan Stanley saysBy Steve Goldstein LONDON (MarketWatch) 4:03pm 01/13/2009HSBC needs another $20 billion to $30 billion in capital, and the banking giant should halve its dividend, Morgan Stanley said in a research note. “We now expect earnings to fall more sharply in 2009, with no recovery until 2011 at the earliest. Structurally, profits will be hit by falling and flattening yield curves, combined with the cyclical impacts of a global recession and FX, and this should impair HSBC’s dollar cash flow,” the broker said. It reiterated an underweight call and slashed its price target to HK$52 from HK$75.

Little SaverJanuary 14th, 2009 at 4:28 am

More results:Deutsche Bank Has EU4.8 Billion Fourth-Quarter Loss on TradingBy Hellmuth Tromm and Jann BettingaJan. 14 (Bloomberg) — Deutsche Bank AG, Germany’s biggest bank, reported a loss of about 4.8 billion euros ($6.3 billion) in the fourth quarter after debt and equity trading suffered amid the worst financial crisis since the Great Depression.The bank said the loss also reflects increased provisions for debt backed by bond insurers and “other exceptional gains and charges,”

Jason BJanuary 14th, 2009 at 5:50 am

According to Mish, when reviewing the trendline charts on commodities there “..are breaks practically everywhere you look: oil, natural gas, sugar, the CRB itself, and now a technical failure in copper”. Combine this with the fundamental indicators – BDI, unemployment, sentiment, ECRI, industrial metals, anywhere you look in fact, things have never been so bad. We are really going to see an unprecidented and terrible situation by Q3 09, if the fundamentals still apply.

HayesJanuary 14th, 2009 at 7:55 am

Nortel Files for Bankruptcy Amid Credit Squeezehttp://www.bloomberg.com/apps/news?pid=20601087&sid=aEb2v0z000d4&refer=home

GuestJanuary 14th, 2009 at 8:11 am

It is amazing how the taxpayer through TARP, is now on the hook for broker retention bonuses at these new mega brokerages. These advisers were the street dealers of this toxic waste, and now they’re getting bonuses? Unbelievable. One of the problems we face is allowing the creation of “too big to fail” entities, yet we are allowing the creation of mega brokerages with 20,000-plus “advisers”, if you can call them that. The billions in fee-revenue charged (confiscated)by advisers working or insolvent brokerages to clients who lost trillions needs to be disgorged.

GuestJanuary 14th, 2009 at 11:04 am

The kings of finance in their Fed-bought palaces have grabbed the government away from the people, have used the law to steal the people’s purse and their liberties. Americans are fighting the interests of the biggest bankers and financiers in the world: they are bucking the nationally powerful politicians who have a personal stake in the game.Sweet and gentle Ben — greedy, hard, cold, arrogant — is but the latest Fed slipper who manipulates the country’s economy into the money-industry’s grasping hands.America, pull yourself together for shame’s sake. Unite and fight back through this period of growing darkness…or never see the light of freedom again.

Little SaverJanuary 14th, 2009 at 8:15 am

And another estimate of bank losses:http://www.247wallst.com/2009/01/banks-losing-10.htmlBanks: Losing $100 Billion In One Quarter (C)(JPM)(WFC)(BAC)(GS)(MS)(UBS)(CS)(DB)The conventional wisdom was that 2008 would be the worst year for bank losses in years, but that it would be the bottom. The damage of mortgage-backed securities has moved into the past. What else could be left?The figures for the last quarter of 2008, being reported now, show that 2009 could be astonishingly bad for big banks. The dozen largest banks in the world could easily lose a combined $100 billion. The problems causing that will certainly cascade into this year.Deutsche Bank (DB), the largest bank in Germany, said it would post a loss of $6.4 billion. Analysts believe the red ink at Citigroup (C) could be more than $10 billion. Bank of America is expected to turn in a $3.6 billion loss. Those figures do not include JP Morgan (JPM), Wells Fargo (WFC) , Morgan Stanley (MS), Goldman Sachs (GS) and a number of deeply troubled overseas companies including UBS (UBS), Credit Suisse (CS), and Barclays (BCS).Ben Bernanke recently said that banks would need another large infusion of capital. Even he may not know how large.The wave swamping bank earnings has moved away from being caused solely by derivatives. LBO loans, commercial real estate, consumer credit cards, and corporate bankruptcies are building and will not peak until the momentum in joblessness and falling GDP stops accelerating. That could take well over a year.

economicminorJanuary 14th, 2009 at 8:29 am

Oil Slump Forces Rich Arab Countries to Run Deficits So who’s going to fund the huge new deficits?U.S. Retail Sales Decline for a Record Sixth Month Both of these go to this issue.Deficits in the oil rich countries suggests selling US Treasuries and when retail sales go down, this leaves China with two problems, idle workers and less income.Japan is having similar probblems as everyone else as will Tiwain and Indonesia and Europe is having its problems…Again > Who is going to fund these deficits? OH Iceland you say!

GuestJanuary 14th, 2009 at 9:05 am

These countries can use their accumulated reserves to fund deficits unlike the USA which has no reserves.

redJanuary 14th, 2009 at 9:24 am

When they all start spending their USD reserves the dollar will crash, leaving them holding not much anything at all

GuestJanuary 14th, 2009 at 10:08 am

hopefully they have enough reserves in their own currency (large countries do not invest all in ‘one basket’ anyway)

GuestJanuary 14th, 2009 at 9:45 am

2+ million homeless people in usa alongside 2+ million vacant houses indicates a distribution problem, not an oversupply problem. There are not more houses in the usa or in the world than are needed by people with human needs. Obviously, extreme inequality of income and wealth is the only problem, so why do you not speak to that, Dr. Roubini?

economicminorJanuary 14th, 2009 at 11:27 am

Homeless people usually have little or no income. So who is going to pay the heating/cooling, water/sewer, property taxes, maintenance, etc.?I’m just asking, not suggesting that you don’t have a good point.What we really need in the country are jobs that pay enough to support our lifestyles… Seeing as we don’t, then the only option is for that accumulative lifestyle to recede to the point of sustainability.Unfortunately, I think this is a long way down from where we were in 2007.These are the consequences of borrowing for yesterday’s consumption against tomorrow’s income because when tomorrow comes, you have to pay 3 times. Once for yesterday, once for today and then interest on the debt for yesterday’s already gone consumption.Unfortunately yesterday came and went and we found ourselves insolvent and impoverished… Yet Denial rules and we still think we can live like yesterday is still in the future.

GuestJanuary 14th, 2009 at 10:14 am

JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS – FLASH UPDATE – January 14, 2009 – Retail Sales Plummet Worse Than Headline Number – Continued Downward Revisions of Headline Economic NumbersThe Census Bureau reported, on a year-to-year basis, retail sales collapsed by 9.81% and “core” retail sales fell by 7.88%.The 12-month rolling deficit through December rose to $833.2 billion, and the 2009 official budget deficit is highly likely to top $2 trillion, with commensurate funding required by the U.S. Treasury.Seasonally-adjusted monthly trade deficit for November narrowed sharply to $40.4 billion. Physical oil imports also dropped 1.8 million barrels per day in November, from 10.5 million in October to 8.7 million in November.

MAJanuary 14th, 2009 at 10:21 am

FYI – (from the other day)“Sorry I can’t give you much more on the “flow”, but the fact is there’s nothing to report. If the DOW does drop to 8,000 with Gold at 850+, I would likely advise a flip flop on assets. – By MA on 2009-01-08 14:24:16”All the best, Miss Americap.s. There are new rules on US-T fails that have come into play. This will severely handcuff lenders. (as to not impair secondary market liquidity) My initial reaction is to expect demand to go through the roof!To read more: http://www.newyorkfed.org/tmpg/pr090105c.pdf

hazletonJanuary 14th, 2009 at 10:49 am

@MAFor someone who is not in the financial world, can you interpret what you just said? What do you mean a flip flop on assets? What demand do you expect to go through the roof?I have a trivial amount in short term treasuries through Vanguard. Could they be at risk? Thanks.

MAJanuary 14th, 2009 at 11:25 am

@ HFlip gold for equities. (not that equities are worth more… it’s just that both assets are clearly manipulated. Buy the low, sell the high. Play by their rules. This downswing will bring plenty of new propping money into the exchange. This money was already factored into Gold’s inflation. Now it will be put to use in propping.)Treasury Yields would likely go down. The value of owned T’s with higher rates become more attractive. (no risk) good to own.MA

GuestJanuary 14th, 2009 at 10:30 am

11:21 a.m.J.P. Morgan raises Q4 U.S. economy outlook to -5.5% from -6%11:21 a.m.J.P. Morgan cuts Q1 U.S. economy forecast to -5% from -3%11:19 a.m.Walgreens to cut about 1,000 positions in 2009

GuestJanuary 14th, 2009 at 11:16 am

These are the people who set up this mess and these are the people who are receiving the bailout fix, and yet we are to take their word on the books of the economy? How can you trust the fox to tell you how many chickens are left in the hen house, especially when it looks like the chickens are all gone and the fox is asking for more chickens.

GuestJanuary 14th, 2009 at 10:34 am

Man-who is stepping into equities here? I should think at a minimum we test the lows and with how horrid the data has been, set new ones. I guess that is why it’s called a market.

JimmyTheBankerJanuary 14th, 2009 at 11:00 am

Shipping rates hit zero as trade sinksFreight rates for containers shipped from Asia to Europe have fallen to zero for the first time since records began, underscoring the dramatic collapse in trade since the world economy buckled in October.By Ambrose Evans-Pritchard, International Business EditorLast Updated: 3:39PM GMT 14 Jan 2009

JimmyTheBankerJanuary 14th, 2009 at 11:01 am

“They have already hit zero,” said Charles de Trenck, a broker at Transport Trackers in Hong Kong. “We have seen trade activity fall off a cliff. Asia-Europe is an unmit­igated disaster.”Shipping journal Lloyd’s List said brokers in Singapore are now waiving fees for containers travelling from South China, charging only for the minimal “bunker” costs. Container fees from North Asia have dropped $200, taking them below operating cost.Industry sources said they have never seen rates fall so low. “This is a whole new ball game,” said one trader.

GuestJanuary 14th, 2009 at 11:51 am

From a teacher in the Nashville area:We are worried about “the cow” when it is all about the “Ice Cream.”The most eye-opening civics lesson I ever had was while teaching thirdgradethis year. The presidential election was heating up and some of thechildren showed an interest. I decided we would have an election for aclass president.We would choose our nominees. They would make a campaign speech and theclass would vote.To simplify the process, candidates were nominated by other class members.We discussed what kinds of characteristics these students should have. Wegot many nominations and from those, Jamie and Olivia were picked to runforthe top spot.The class had done a great job in their selections. Both candidates weregood kids. I thought Jamie might have an advantage because he got lots ofparental support. I had never seen Olivia’s mother.The day arrived when they were to make their speeches Jamie went first. Hehad specific ideas about how to make our class a better place. He ended bypromising to do his very best. Every one applauded. He sat down andOliviacame to the podium.Her speech was concise. She said, “If you will vote for me, I will giveyouice cream.” She sat down. The class went wild. “Yes! Yes! We want icecream.”She surely would say more. She did not have to. A discussion followed.How did she plan to pay for the ice cream? She wasn’t sure. Would herparents buy it or would the class pay for it. She didn’t know. The classreally didn’t care. All they were thinking about was ice cream.Jamie was forgotten. Olivia won by a land slide.Every time Barack Obama opens his mouth he offers ice cream and sixtypercent of the people react like nine year olds. They want ice cream. Theother forty percent know they’re going to have to feed the cow and clean upthe mess.

MarkJanuary 14th, 2009 at 12:04 pm

And when Bush ran it was about free money- tax cuts for the rich. The rich didn’t care where the money came from, no, they didn’t care about the war (I believe that it was the first time taxes were cut during time of war), they only cared about free money. And now we see where this all got us…Everyone (with the exception of a handful) at the federal are nothing but a bunch of sales people, telling the people whatever it is that they want so that they can get into office and pay off their favors to their group of elites.Mark

GuestJanuary 15th, 2009 at 6:43 am

It’s Like The SILVER SURFER Said To EarthAll that you know has come to an endFasten your seat belts folks!

Andrew Gaston Bernhardt, Saint Louis, Mo.January 15th, 2009 at 12:33 pm

Why doesn’t the Bush Administration just admit it and give up?! They crowded out investment, crowded out borrowing (and on a global basis), and incited a credit crunch. They spent more money, borrowed US Dollars at that, on a War against the mountains of afghanastan & iraq, and spent so much taking the US Total Gov Debt Outstanding well past TEN TRILLION DOLLARS! They (republicans) are so profoundly, compellingly, eff-ing retarded that the republican party, and MBAs (since George Bush has an MBA) should be both thrown in the trash can! The republican party should cease to exist, and the MBA program should be STOPPED! We do not need any more fools that think or process information in any way like any MBA (or George Bush) ever again! We also do not need any republicans anymore! We also don’t need any more idiotic congressman who will validate, ratify, and approve of any stupid as hell gigantic deficit spending spree of government spending— the federal budget deficits are what ruined everything! It was not Wall St. it was not LaSalle St either— it was the idiot legislative branch and the executive branch that forced the treasury to borrow too much money! Borrowing too much is bad! When will the fools (the legislature) just default on the US Dollar? When will the fools (the legislature) just default on the debt (all bonds, notes, and bills)?? When will people in the USA just stop acting like Political risk is only for foreign third world countries?? Sure had political risk over the past eight years?? I wonder if anyone, Obama included, will be able to fix the fallout of the (profoundly, compellingly, eff-ing retarded) Bush Administration???Andrew G. Bernhardt , St. Louis, MO

Andrew G. BernhardtJanuary 15th, 2009 at 1:03 pm

How many sovereign defaults will there be? Iceland defaulted! When will the United States of America? $10,600,000,000,000 of debt! This also excludes state, county, municipal, metropolitan, city, and local debt, agency debt, corporate debt, and private sector debt. Lame as hell. The Americans are apparently only good at one thing, borrowing money (from everyone, and foreigners) and schlooshnig it around from themselves to eachother! After the Bush Administration will capitalism reign in the future? Will the USA and other nations cease to exist? Sovereign Defaults? New nations, new political boundaries? Socialism? Communism? Bartering? Will MBAs and Republicans be targeted like Jews were in the Great World Wars? What kinds of other political fallout of the Bush administration bring globally?? Idiots like Hitler, Stalin, and Hirohito and others seemingly gain power in tough economic climates and major depressions!! Wonder what will come of this economic fallout of George Bush?!?! Dow Jones Industrial Average 4,000 here we come! Looking back at it, the DJIA was around 11,500 or so when Bush took office! It’s now around 8,000, which is only a depreciation of approximately 30% over the Bush administration, and there’s been about 30% inflation over the same interval, and the dollar has lost 50% versus some major foreign currencies too! Gee, look what republicans (with MBAs) can do! The moral to the Bush Administration is no more republicans, and no more MBAs!

QuidditasJanuary 15th, 2009 at 2:07 pm

EX AFRICA ALIQUID SEMPER NOVIAn African Nation, well known for its very well documented corruption, has a Minister of Finance and a Central Banker that have more savy than apparently all their counterparts in the supposedly civilised Northern Hemisphere. Tito Mboweni raised rates whilst Ben Bernanke lowered the US’s to no avail. South Africa implemented its New Credit Act that regulates borrowings that financial providers can make to lenders. Strong regulation has kept the South African banking industry remarkably strong in comparison to the Northern Hemisphere. Barack Obama may wish to borrow them – their strong medicine of “short term pain for long term gain” has kept a fragile economy with a core unemployment of some 40% chugging along nicely. And we deride our politicians – I cannot believe that there are no Americans of similar caliber to Tito and Trevor; even Thabo Mbeki seems better then Barack and Jacob Zuma would definitely never have invaded Iraq, he would simply have struck a deal with Saddam for a few million to be deposited into his Swiss Bank account and he would have saved the USA billions in war costs. Until the USA changes its corrupt, nepotical, special interests political system we South Africans will hold a higher moral ground (with our tongues in cheek). Really, you could learn a lot from us.

billJanuary 18th, 2009 at 9:45 am

Full recourse mortgages on homes?I think that’s a bad way to try and solve the problem, especially when prices are still falling.How about in exchange for a $10,000 principal reduction, new 4.5% interest rate and 40 year amort schedule, the homeowner enter into some sort of deed-in-lieu consent so that 10 days after it misses a mortgage payment, the lender has complete title? This way we eliminate the dead weight losses to society of going through foreclosure.