EconoMonitor

Nouriel Roubini's Global EconoMonitor

Political and Economic Risks for 2009: RGE/Eurasia Conference Call

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.

On 5 January, Eurasia Group released its Top Risks for 2009, in which the firm identified the key geopolitical areas to watch for global investors and market participants. The US Congress, which may enact legislative or regulatory changes that could have significant impacts on business prospects, was ranked as the #1 risk. (For more information on the Top Risks, please visit www.eurasiagroup.net.)

RGE Monitor is preparing to release its 2009 Global Outlook in mid-January, and this conversation will provide a preview of some of the key economic risks that investors need to watch.

Below are a few key points that will be addressed in the call:

  • Amid the most severe US and global recession of the postwar period, global growth is likely to be negligible in 2009. In the face of this severe global downturn and financial market stress, there will be unprecedented levels of political risk as governments increase their intervention in the economy in the hope of boosting growth.
  • In recent years, politically driven risks to markets have been most prominent in emerging markets. These countries continue to face these types of risk, but for the first time in many years, political and regulatory risk will have a dramatic impact in developed industrial democracies.
  • The United States is only halfway through a recession that started in December 2007 and will be the longest and most severe in the postwar period. President-elect Obama’s economic team is first rate, cohesive, and pro-globalization—but with Democratic majorities in Congress, the risks of overregulation are significant. While a large fiscal package to support growth is a priority, the US economy cannot avoid a severe contraction that has already started. The policy response will have only a limited and delayed effect that will be felt more in 2010 than 2009.
  • Europe and Japan will both contract 2.5% in 2009. With the industrial world already in outright recession and the emerging world navigating toward a hard landing, we expect global growth to be flat (around 0%) in 2009.

The conference call can be downloaded below. It is restricted for RGE clients.

Download audio file

159 Responses to “Political and Economic Risks for 2009: RGE/Eurasia Conference Call”

SeanJanuary 16th, 2009 at 1:48 pm

Miss America, care to elaborate that a little?By the way, what’s your take on the stock market going forward, given the “surprised” collapse of BAC and C, as well as another round of government hand-out. I am esp curious, would FED Reserver have to ask for bailout when all these Hundreds Billions BACK-STOP losses eat into their portfolio?ThanksSean

MAJanuary 16th, 2009 at 2:45 pm

Sean, well have to wait until May 1 to see how this plays out.Essentially, lending is how the whole system works. The credit crisis, so heavily based on the secondary market, grinds to a halt due to the transparency of the debt that’s being flip flopped as collateral. This in turn causes treasuries to become your new collateral. These T’s are viewed as liquid, thus, shops will option to intentionally fail to return these “liquid assets” because they want to hold their value. (sorta like hording T’s) …and by holding these, they then have valuable collateral for repos/cds/tds/etc…There is now going to be a stiff fine imposed for this.…which seems fine and good.…but now your custodians who do the lending for the underlying clients may not be as willing to lend T’s because if the client so chooses to sell, and the custodian can not get the securities back in time, it will force custodians into a scenario where they have to go on the open market, and buy the position for the client to avoid the fine. (or they could absorb the fine, or push the fine on to the client. – Those 2 options make the client and the bank less inclined to do that kind of business.)I’ve kinda oversimplified it, but that’s the roundabout implication I fear, as I see this action potentially damaging one of Banking/clients most lucrative forms of income generation.As for the market… Good luck.I still see the support levels being there. BAC needs money… They got it. C needs money they got it!…but the same goes for foreign banks too. So if their all doing it, then there’s no real net loss country to country on the global scale. I would always suspect increased money supply to inflate gold/oil… …but I think an odd reverse affect takes place as “proof of support” (pretty much guaranteed support) takes away from the hedge of those commodities inflation, thus driving them down.I still suspect that worldwide stimulus and Obama Power will sway markets to advance. This is my PRIMARY reasoning behind a moderate rally. (this could very easily implode as weight factors are pulling hard in the other direction).From a gut standpoint, I say the markets stay irrational, and fly in the face of conventional wisdom.Miss America

blindmanJanuary 16th, 2009 at 5:32 pm

ma,i think you might have said prudent lending is how the system works, while other types of lending may possibly destroy the system. not to put words in your mouth. thanks for your posts.

anton kleinschmidtJanuary 16th, 2009 at 9:51 am

There is much valuable input in this and all the other NR posts but I cannot help feeling that in all the complexity we are all ignoring some very basic realities. At a very simple level:BANKS are designed to intermediate between savers and borrowers and provide loans which will eventually be repaid.STOCK EXCHANGES are designed to provide business with access to capitalDating back to before the Great Depression we have allowed an assortment of predatory types and snake oil salesmen to subvert the fundamental activities of these two pillars of the capitalist model. These predators include politicians, imbedded economists, imbedded academics, bankers, investment bankers, derivative makers, short sellers, day traders, hedge fund operators, Ponzi operators, gung ho marketeers, etc.As a result of these predatory activities private citizens across the world have lost all confidence in the BANKS and STOCK EXCHANGES. Until such time as these regain confidence in these two institutions there is little hope of meaningful recovery.In other words step one is to deal with the predators and neutralize their profoundly negative effect on global economic wellbeing. Now and in the future!

kilgoresJanuary 17th, 2009 at 8:46 am

ptm:Sorry to be behind on current slang. Is ‘Word’ in this context intended as an expression of emphatic agreement?SWK

blindmanJanuary 17th, 2009 at 2:37 pm

k,you are correct unless it is being used facetiously or sarcastically in which case, obviously, it would indicate disagreement. i would suggest for the sake of clarity that in the second case a question mark be added. as in “word ?”.

GuestJanuary 16th, 2009 at 10:06 am

The cesspool must be cleaned out! It is instinctive for a con man to rape you if you let him. The con man will say that it is your fault. The taxpayers are sitting and allowing the facilitators of the largest banking pyramid scheme to draw taxpayer money at will, this is not a good idea. The con men will take the maximum they are allowed. We need some kind of change that employs Singapore methods. Everybody who has robbed the citizenry must be metaphorically caned! I personally favor the french haircut approach, but that is another story. Where are the indictments? Where is theimmunity testimony from the due diligence companies on the securitization robbery? Wheredid the money go?

GuestJanuary 16th, 2009 at 11:26 am

It’s possible that by bringing these crooks out into the light exposing their ways and means could bring down further the already distressed markets. Just a thought.

MarkJanuary 16th, 2009 at 1:04 pm

Great observation, but it is dependent upon the belief that the two systems themselves are/can be sustainable. I don’t believe that they can be: while appropriate use of capital is essential, concentration of capital IS the problem, for with it comes concentration of power; and it’s power that corrupts…Mark

GuestJanuary 16th, 2009 at 1:22 pm

Excellent, succinct, and profound!Now that the powers of the stock market and central bank money have eliminated the Savings and Loan system and a National Money system with no national debt and regulation by interest rate, the Money Powers of Perpetual Debt/Money at Interest/ Stock Exchange Finance are going for the juggler – all remaining competition, for total control and all profit from the money supply.Rothschild’s dictim: “Give me control of a nation’s money and I care not who makes the law” is working well for Wall Street in its profitable partnership with Congress. After all, “people can be bought with money.”America’s duty is to look for exemplars such as her Founders — representatives who can’t be “bought.”

MAJanuary 16th, 2009 at 10:13 am

@ Nouriel.I just went through the Eurasia group website…I found something ironic… I’ve been really starting to read up on Brazil. I’m really starting to analyze the “potential” there. It’s mostly a gut feeling but I can’t help but think they are primed for an industrial revolution. I think public works projects like paving the other 90% of their roads, creating their own machinery, increasing law enforcement, (thus providing greater political stability and breaking criminal ties/influence), are the type of “debt projects” that have the potential to boost this resource rich country in a time of worldwide despair.I noticed that they were completely omitted from the Eurasia study/work??? Of the BRIC, you/they talked about Russia, India and China. …and with south and central America, you/they talk about Venezuela and Mexico.…which is why I wonder…Do you leave Brazil out because you don’t see there being problems there??? -or- Do you leave them out because they will be less significant?Vitoria, I’d love to hear your take on this???All the best,Miss America

Octavio RichettaJanuary 16th, 2009 at 1:05 pm

On a relative basis, Brazil is one of the least, if not th least corrupt, country in SA. I used to have relatives-in-law there as I was married to a Brazilian lady for 10 years.I used to visit every year in the 90s and one of the things that surprised me the most is that it was at least one order of magnitude less corrupt than Venezuela, which was bad and has gotten worse by at least and order of magnitude under Chavez!IMO, Venezuela is now one of the most corrupt countries in the world, right in there with the likes of Nigeria. As far as I know, how bad corruption has gotten to be under Chavez in Venezuela is not common knowledge in the world community so here you have it in RGE from a former Venezuelan citizen (I am now a citizen of the US) who has first hand knowledge of the system.I don’t know how corruption in Brazil has evolved in the new century since I don’t visit since 2000. I can also tell you about Argentina which I started visiting for business on an annual basis since the early 90s and now live in part of the year. My sense is that corruption here is worse than what I experienced in Brazil but a lot better than Venezuela.

MAJanuary 16th, 2009 at 2:14 pm

That mirrors a lot of what I’ve read. I’ve also read that it’s around the borders, where corruption, drug traffic, etc… is most common.Thanks for the first hand stuff ORMA

economicminorJanuary 16th, 2009 at 3:51 pm

I’ve been there and have friends there. It is not primed for anything as it has the same problem that the US has currently. A concentration of wealth and power in the hands of the few. They care little for the population as a whole.There is a three tier cast system there. Those with the money. A small middle class of European decedents and the majority who are dirt poor. They ride 3 to a bicycle and still have horse drawn carts in the smaller towns and villages. The big cities are divided by favillas which are not unlike the ghettos of old Europe or old America.Brazil has a long way to go to be a modern country.

ex VRWCJanuary 16th, 2009 at 3:54 pm

Brazil is what we are destined for, a few wealthy surrounded by shanyytowns of the downtrodden and have-nots. Except the wealthy there secure themselves, an occurrence that will become even more common here in America as suburbia dies.

P&LJanuary 16th, 2009 at 9:40 pm

Letter from São Paulo, City of Fear by William LangewiescheVanity Fair, April 2007″Operating by cell phone, a highly organized prison gang launched an attack that shut down Brazil’s largest city last May, with the authorities powerless to stop it. For many in São Paulo, this vast, amorphous criminal network is the only government they have.”http://www.vanityfair.com/politics/features/2007/04/langewiesche200704Interesting article, grim outlook.

C.LakeJanuary 18th, 2009 at 9:35 am

It’s true that Brazil has a long way to go. But looking forward, and especially in terms of resilience to this crisis, Brazil will probably do better than any other G20 nation.This btw already shows in the data so far: in its latest report, the OECD has Brazil with the smallest downturn so far (CLI Nov08 y.o.y at -2.87% compared with OECD+BRIC total CLI Nov08 y.o.y at -8.40%).Source : http://www.oecd.org/dataoecd/32/43/41968271.pdf

GuestJanuary 16th, 2009 at 10:18 am

@ Guest (previous thread): “Besides why was Lehman Brothers singled out and allowed to fail. Suddenly Paulson realized that it could be something greater than the great depression, all of a sudden after Lehman’s collapse he woke up to that? Or was he simply wiping out Goldman’s competitor before he got going for the tarp? What did Paulson ahd to gain from Lehman’s collapse, its ridiculous for him to suggest that suddenly he realized the intensity of the crisis. He was obviously appeasing his buddies in Goldman, in fact Buffet, Paulson, many people with the US govt seem to have a lot for Goldman, the question is how much they might be swindling from the taxpayers money?”And look how much mileage the too-big-to-fail failures get out of Lehman: every day Bernanke et al. connect all the consequences of their imploding finance and need for more bailout to warnings of “what happened” after they let Lehman go down. Lehman is their bailout poster child — to generate billions in freebees. But, of course, they took financial care of Fuld: the only groupee that isn’t too big to fail in America is the pick-pocketed taxpayer.

GuestJanuary 16th, 2009 at 12:10 pm

With his “tote that bail'” policy for middle class taxpayers? Well, if I were a big “investment” banker I’d probably be jumping on the stock market for a ride, but as a “tote that bail” taxpayer I’ll probably be jumping off a cliff with the economy.I think the welfare-addicted investors are just hanging around for the next big fix to generate another high. But their addiction is fatal: they’re too-far-gone-to-save.

The AlarmistJanuary 19th, 2009 at 3:10 am

I think you mean, “tote that bale,” as in cotton. You will tote it, whether you like it or not, until such time as you qualify for victim status. Google a number of stress-related traumas to learn the symptoms you need to present, find a good shrink, and get yourself certified as a victim.

Pecos BankerJanuary 16th, 2009 at 10:49 am

Octavio,I was very interested in your latest post on SPX, SPY leaps. But I’m afraid I don’t have a good understanding of index Leaps. Normally, options on stocks are priced so that you are “controlling” 100 shares of stock for each option. Thus, your profit is 100 times the difference between the current stock price and the (lower) strike price, minus the cost of the option, assuming the option is in the money. How does this work for leaps on index options? From your calculation of 850/112.50*.01=75.6% of portfolio value when you are using 10% of your portfolio, I would assume that each leap controls 10 times the index. Would that be correct? Perhaps you can point me and others to information on leaps that can be understood by ordinary folks. I find the explanations by the COB overly detailed and opaque. Any help is appreciated! I’m sure there are many who would like to implement your strategies as well, but for a lack of understanding. Frankly, I’m getting desparate with the coming collapse of the $. I just learned that since I had elected TIAA-CREF annuities, I can only withdraw 10% per year max when I retire. Thus I need to find a way to protect the other 90% from the $ collapse. Same goes with Social Security!Thanks in advance!

GuestJanuary 16th, 2009 at 12:52 pm

PB,I’m not OR, but I too have part of my 401K with TIAA-CREF. My understanding is that you can move 10% per year at any time before/after retirement. So, if your not yet retired, you can begin to some out today. Also, my university offers several vendors besides TIAA-CREF. I split my contributions evenly across the vendors (in my case Prudential and Fidelity also) to reduce institutional risk. Just thought I’d thow that out.

Octavio RichettaJanuary 16th, 2009 at 2:10 pm

As I have said before, even though I have decent knowledge about the theory of option pricing, I have only recently started trading options so I am far from being an expert trader in options. Buying call and put options is a lot more risky in terms of the volatility of the capital you put in (which may disappear 100%) than trading in stocks. A lot of people have gone broke by abusing option trading.If you read my posts you will see that I talk about putting at most 10% into options which is A LOT of your capital given the risks. Just a few percentage points into options (e.g., at most 5%) would be a lot wiser. In other words, playing with 10% of your capital in options I consider very risky. Can you imagine what I think about playing options with 100% of your money?So buying options is risky but it is a lot less risky than naked option writing and collecting the proceeds from the sale i.e., selling naked calls or selling naked puts such as WB did (A bit more about covered call writing later in this post).You can get authorization to buy call and put options for a brokerage IRA account. That is what I did with Fidelity. If you have a brokerage IRA with TIAACREF you may be able to trade options there. You cannot trade options under the TIAACREF annuity accounts (I have an IRA brokerage account with TIAACREF but it sits inactive as, IMO, fidelity brokerage services are better).In terms of options on the SPX, the S&P 500 index, they are actually little different from options on SPY if you assume the quote you get for SPX is the quote you get for a stock with ticker SPX. For example a share of SPY is now trading at $84.37 and the quote for PSX yields 843.69 so they are pretty close but if PSX where a trading stock it would be about 10 times more expensive than SPY.One SPX contract controls “100 shares” of SPX or $84,369 worth of stock at current prices. The quote on PSX DEC 2010 850 strike price closed yesterday at $143. So one contract which controls one hundred shares of SPX bought at that price would cost you $14,300 plus whatever commission your broker charges. Trading on SPY options requires less capital. The quote on the SPY DEC 2010 85.00 option closed yesterday at 14.95. So one contract which controls one hundred shares of SPY bought at that price would cost you $1495 plus whatever commission your broker charges.Please note that options are a lot less liquid than stocks. The options I just used in the example have not traded today and the bid-ask spread is ridiculously high; so trading leap options ain’t cheap.Continuing with call option writing, naked call writing (i.e. selling call options when you don’t own the underlaying stock can be dreadful as there is no bound on the amount of money you may loose). However, selling covered calls on a stock you own and want to sell can be interpreted is a risk reduction strategy which of course lowers your expected return. Suppose you own IBM now trading at $84.50 and may want to sell it but you are not desperate to sell it now. Instead of selling it now, you may write a FEB 2009 85 call option on IBM which now trades at $4.10 and pocket the money (less commissions of course). Come Feb 21, the shares of IBM may be taken away from you if it is trading above 85 or you may get to hold them in either case you pocket the option premia. Writing the option on the stock may give you some additional income but takes away from you upside price appreciation on the stock beyond the option price.As a side note, you make some dreadful comments about the USD which I do not share but that is another subject. If you are so worried about the USD, put some money on the TIAACREF TIPS account. But I would not overdo it there either. I have about 5% there and, IMO, 10-15% is tops.

Octavio RichettaJanuary 16th, 2009 at 7:32 pm

BTW Pecos, there is a typo in your presentation of formula you write: 850/112.50*.01=75.6%The correct formula is 850/112.50*.10=75.6%I went back to my post and it is correct there.

Octavio RichettaJanuary 16th, 2009 at 7:42 pm

So Pecos, now I see I didn’t answer all your questions. You ask (I corected the formula in your question):”From your calculation of (850/112.50)*.10=75.6% of portfolio value when you are using 10% of your portfolio, I would assume that each leap controls 10 times the index. Would that be correct?”Answer: each Leap controls 850/112.50=7.56 times the index. so if you put 100% of your portfolio into the leaps you get 7.56x leverage on the index. So if you put just 10% of your portfolio into the leaps you control 7.56*0.10=0.756 which means your 10% investment is equivalent to having 75.6% of your portfolio in the index. But don’t forget this is not a free ride. For one thing you are investing the 10% which may go up into smoke if the option expires worthless.

GuestJanuary 18th, 2009 at 1:23 pm

Also, per new regs effective 1/1/09, you can shift ALL TIAA-CREF funds to another provider you have available or your enterprise can set another one up if you presently have only TIAA-CREF. We are going through the latter at present. Moving TIAA-CREF is like wading through deep mud but they are required by law to honor your preference for an alternative provider so keep pushing and you will get your funds out of TIAA. ((Clearly, TIAA-CREF wants to keep your funds so they will try to stonewall as long as they can but the law is the law so keep pushing))

GuestJanuary 16th, 2009 at 11:13 am

how far does the transparency have to extend? Sorry if this sounds like a ridiculous question – transparency should of course be transparency. But some of the bail-out $$$ have been funneled to places that the public knows nothing about.

GuestJanuary 16th, 2009 at 11:33 am

If the U.S. dollar ever loses its acceptance as a universal means of payment, the Fed loses its key to world power. And the great epoch of banker profiteering in Fed-managed “free trade” will be over.Then, and only then, can America and her industries re-engage past trade policies that guarded national self interests.Then, and only then, will we have an automobile industry.What killed America’s electronics industry is in part what killed her auto industry.It was in the 1960s and 70s that the predatory practice we now call global free trade began in earnest to destroy U.S’ manufacturing capacity. It was then that the international financiers and corporations began to undermine the nation’s industrial base.The feed began under the guise of “Lower Prices for Consumers,” first taking down TV manufacture. Collaborating with high-placed American officials indifferent to ethics, Sony of Japan targeted 62,000,000 U.S. households buying TVs with a globally accepted currency – dollars — deliberately setting prices lower than the cost to manufacture the identical item in the U.S.Although Sony corporation was charged with victimizing the U.S. by gaining unfair advantage for selling at prices lower than in Japan, the engineered “free-trade” assault on the US economy was underway.Japanese trade merchants engaged Robert Schwartz Strauss, a trade negotiator, who decided against raising a tariff to stop the undermining of U.S. manufacture—a decision favoring U.S. retailers but removing protection for U.S. manufacturers and workers. And the door opened — to China – with Citigroup and other big bankers rushing into that great continent to take more advantage of US wealth.Strauss, the man who doomed U.S. TV manufacturing with his trade decision, was the same man who negotiated the sale of crippled Motorola to Sony of Japan.And America and her people and her products became a gold mine for a succession of predators prospecting her wealth beyond dreams.

blindmanJanuary 16th, 2009 at 12:58 pm

g,again, absolute light.in comparison.. “President-elect Obama’s economic team is first rate, cohesive, and pro-globalization—but with Democratic majorities in Congress, the risks of overregulation are significant. ” ?? hmmm.

blindmanJanuary 16th, 2009 at 1:12 pm

and the fed is the instrument to direct/destroy not only the productive capacity but destroy the political foundation of peoples governments in the name of global systemic economic function or dysfunction, whichever becomes more easily managed.

MarkJanuary 16th, 2009 at 1:15 pm

And America and her people and her products became a gold mine for a succession of predators prospecting her wealth beyond dreams.You’ve just used a key word here- mine Per the on-line dictionary dictionary.com:to extract (ore, coal, etc.) from a mine.Wealth through exhaustion? Nowhere do I hear of people replenishing anything. That “mining” activity (excepting people’s minds) WILL cease. Predicating our future on non-sustainable practices/resources is suicide. All those cars, those (precious?) TVs, they won’t exist at some point in the future; there is no debate about this.One of the greatest obstruction in improving one’s ability to survive is to do repeat the same mistakes that put you in the situation that you find yourself in.Mark

GuestJanuary 16th, 2009 at 11:38 am

We now have a 350 billion + 840 billion committment tothe financial system. Will this generate a rally?Possibly! Will it last? No. We have a simple global aggregate demand problem. SUPPLY=DEMAND+DEBTWe have a long term downward harmonization of global wages that was masked by leveraging of debt to sustainan unsustainable oversupply of production. The fundamentals of the Global Aggregate Demand must beaddressed or we cannot get out of this Global PonziFinancial Trap. The Global Financial Architecture must be reconstructed to create real demand from real wages and real production with moderate debt and lower leverage. There is no other way out of this nightmare!

AnonymousJanuary 16th, 2009 at 12:01 pm

Your “commitment” estimate should include all liabilities recently assumed by the FED, Treasury. and FDIC. Your estimates are low by a factor somewhere between 10 and 100.Good luck.

GuestJanuary 16th, 2009 at 3:53 pm

I totally agree! I assumed we were all keeping score of the past committments. We are going to reach the 5 trillion mark soon. The important question! Where is the Global Aggregate Demandto sustain a Global Economy where people are paidslave wages? Can somebody reconcile the sustainability of our present economic system?Is the Global Financial Architecture sustainable?

HayesJanuary 16th, 2009 at 11:39 am

From OR’s post in the prior thread:”You will see that steps 1-6 above map extremely well into small rallies/dead cat bounces which sequentially show lower highs, lower lows, and apparently even shorter duration.”It would seem the duration can now be measured on a clock instead of a calendar – – It may be that the BAC bailout yesterday is a prelude to another “Sunday” – the banks here and in Europe are under serious pressure todayNOTE: if there is going to be a Sunday event the market will likely “sense” that later this afternoon – be on the lookout for a sharp reversal

Octavio RichettaJanuary 16th, 2009 at 2:13 pm

It looks like the crowd is getting ready for the weekend action. The indexes are heading up in the last hour. I am siting tight. I am not one of those fortunate ones who know what is going on behind the scenes.

GuestJanuary 16th, 2009 at 11:40 am

Bush Tours America To Survey Damage Caused By His Disastrous Presidencyhttp://www.theonion.com/content/video/bush_tours_america_to_survey

GuestJanuary 16th, 2009 at 11:46 am

Has the man no shame? For if the European bookies are right, Mr. Obama will still be calling it “change” when he looks out over the clueless sea of smiling faces in his inauguration speech.Two grafs from David Sirota’s column today set the record straight:“After President Bush this week asked Congress to release the bank bailout fund’s remaining $350 billion, Obama pledged to veto any bill rejecting the request, meaning he is beginning his presidency not by “turn[ing] the page on policies that have put the greed and irresponsibility of Wall Street before the hard work and sacrifice of folks on Main Street,” as he once pledged. Instead, he is promising a mushroom cloud unless lawmakers let taxpayer cash continue flowing to the biggest of Big Money interests.Amid paeans to “new politics,” we’re watching old-school paybacks from a politician who raised more Wall Street dough than any other, a president-to-be whose inauguration festivities are being underwritten by the very bankers who are benefiting from the bailout largesse. Safely distanced from electoral pressure, Obama has appointed conservative economists to top White House positions; floated a tax cut for banks; and is now trying to preserve corporate welfare that almost exclusively benefits the political donor class.“It’s money politics by a different name”http://www.denverpost.com/ci_11465499

MarkJanuary 16th, 2009 at 1:23 pm

Think about it. When in the history of the US has it had an incoming president able to so quickly pay off his contributors? Maybe once this is all done he can actually represent the people? Ha, yeah, fat chance!Mark

Andrew Bernhardt, St. LouisJanuary 16th, 2009 at 11:53 am

Quick… the banks, insurance houses, brokerages, and reinsurance houses— they need money! Quick! Billions, maybe trillions!!! Quick bail them out! Economic stimulus packages, rescue packages, TARP (troubled asset relief program), and socialism! Maybe communism next! How about some more sovereign defaults! There sure was “political risk” with George Bush over the past eight years! Total default here we come! Housing went to H*ll in a handbasket not by accident or for unknown reasons, as Bernanke tries to convince us— it went to hell becuase the Bush Administration, wrote 900 billion dollar deficits and crowded out investment, crowded out borrowing, and incited a credit crunch, housing market selloff, wrecked the dollar, the stock markets, realestate, tax revenue, incited two recessions, incited the greater depression, and destroyed the financial sector of the US and the globe, he drove up the federal gov debt outstanding to over 10.6 trillion. We can all blame him (George Bush), and the negligent congress too, for validating, ratifying, and approving of the red ink, deficit spending, budget for eight years! Total default here we come! No amount of money can fix stupid! They should try to balance the budget, and stop these huge bailouts paid for with borrowed funds, printed money, or our precious tax collections. Government spending needs to decrease!

GuestJanuary 16th, 2009 at 11:54 am

Billions here, billions there, before ya know it you’re actually talking about some money….Trillions here, trillions there, before ya know it, you’re actually talking about trash! Guess they got the “TR” part right, not trillions, nope nope, trash!

GuestJanuary 17th, 2009 at 1:41 am

Stop blaming George Bush. Look deeper… Those with the power, mainly the banks and the large banks have been getting rid of competition for many, many years. The quote above that in the 80’s the S&L disappeared was not by accident. Wait and see that it in a few years, financial concentration will be even more concentrated. It won’t be because of George Bush, it will be because a small group of bankers who for years have manipulated their way to get rid of competition through such agencies as Federal Reserve, which is not a government institution by rather a cabal of a small group of banks. Look farther than just the Republicans (GW) or Democrats, but many of them have helped participate in this group to concentrate money and power.

Andrew G. BernhardtJanuary 18th, 2009 at 1:11 pm

It’s just not possibly to not blame George Bush, and the entire congress… there is just no other root source for the problems being encountered in the USA or abroad. Who would you blame? You can’t blame the rich, they are not responsible for rule changes involving zero percent down, they’re not responsible for creating wars against mountains or iraq at a cost of 7 tillion dollar or more. There is just no one else to blame, except the government. Their government intervention, is the root cause, and is creating the conditions necessary to create what I describe as The Greater Depression. Yes, there is even political risk in the USA.~ Andrew G. Bernhardt, St. Louis, Mo.

Andrew G. BernhardtJanuary 16th, 2009 at 11:59 am

Why not devise some not billion dollar bailouts, and stimulus plans, not trillions either… how about some quadrillion dollar bailouts! Or how about some quintillion dollar stimulus plans! Why not even take it further to sextillion!!! or Septillion!? OR even octillion?! Nonillion?I mean why not?! (yeah, right, I’m being sarcastic!) Defaults, crowding out of investment, deficit spending, crowding out of borrowing, bailouts, stimulus plans, big government spending sprees! Why not! HA! When will the fools balance the budget again?!~ Andrew Bernhardt (see this link for more of Andrew: http://www.google.com/search?hl=en&safe=off&q=+site:www.rgemonitor.com+Andrew+Bernhardt,+RGE )

GuestJanuary 16th, 2009 at 12:02 pm

Rescue of Banks Hints at NationalizationBy EDMUND L. ANDREWSWASHINGTON — Last fall, as Federal Reserve and Treasury Department officials rode to the rescue of one financial institution after another, they took great pains to avoid doing anything that smacked of nationalizing banks.They may no longer have that luxury. With two of the nation’s largest banks buckling under yet another round of huge losses, the incoming administration of Barack Obama and the Federal Reserve are suddenly dealing with banks that are “too big to fail” and yet unable to function as the sinking economy erodes their capital.http://www.nytimes.com/2009/01/16/business/16banking.html?adxnnl=1&partner=rss&emc=rss&adxnnlx=1232128865-sKp2meg/oknY539CowUi%20Q&pagewanted=print

GuestJanuary 16th, 2009 at 12:27 pm

Just as teachers in our public schools must lower standards to teach to the lower third of the class, so follows wages and ultimately standard of living when economies are run by globalists.

GuestJanuary 16th, 2009 at 12:30 pm

Dow May Fall to 6,000 Should Low Break, Acampora SaysJan. 16 (Bloomberg) — A decline in U.S. stock indexes below the 2008 lows from November may trigger a rout that pushes benchmark averages to levels not seen since the mid-1990s, according to two leading technical analysts.“Hopefully we don’t make new lows, because if we do, all bets are off,” said Ralph Acampora, who retired from Knight Capital Group Inc. in October 2007 after four decades on Wall Street. Should the Dow Jones Industrial Average fall below the 7,552.29 it touched on Nov. 20, it might tumble to 6,000, Acampora said. That’s 27 percent below yesterday’s close of 8,212.49 and a level last reached in October 1996.The lows reached by the Dow average and the Standard & Poor’s 500 Index in November are “a very, very significant area” because they are roughly where the last bear market ended in 2003, said John Murphy, chief technical analyst at StockCharts.com and the author of three books on market analysis. “If that’s broken, it becomes very negative…”Acampora, whose career also included decade-long stints at Prudential Equity Group LLC, Smith Barney and Kidder Peabody & Co., said that while the past two weeks are “very disturbing,” he’s still “willing to give it the benefit of the doubt.” He cited the time that has passed since the lows were hit and positive breadth, in which rising stocks outnumber falling ones.Even if the 2008 lows are not revisited, the market is probably in a trading range comparable to the ones that followed the 1929 crash and the bull market of the 1960s, Acampora said. The Dow average is unlikely to exceed its October 2007 peak of 14,164.53 for at least four years, he said.After the 1929 crash, the Dow fluctuated between about 100 and 200 until 1950 when it began a sustained move higher. From 1966 to 1982, the average traded between about 600 and 1,000…Among Acampora’s past calls was a 1997 prediction that the Dow would reach 10,000. It rose to that level in March 1999.Murphy said the November lows are likely to be broken, in part because the dollar’s recent strength against the euro signals lower share prices globally, as foreign equity markets are correlated to local currencies.“There’s another down leg coming,” Murphy said. “Normally the market comes down in five legs. We’ve come down in two. I think we’re going to test those lows at the very least, and eventually probably take them out.”http://www.bloomberg.com/apps/news?pid=20601087&sid=a70_dt3j1Nk4&refer=home

GuestJanuary 16th, 2009 at 10:07 pm

but if it does not reach the grassroot (mid-class and below), how will it inflate anything?In US typically this sort of money will never reach the grassroot- level.And if Mall-Wart et al only see that they need to keep their prices low (or perhaps even lower them) to stay in business, then they will have to keep them low.

RanManJanuary 16th, 2009 at 1:07 pm

from what I can tell it has to do with the velocity of the money being created in addition to the the amount of “money” that is being destroyed thru asset deflation, etc. i.e. the banks are not loaning out the money the fed is so willing giving them. instead, since they know they are essentially insolvent, they are parking the funds with the FED who is paying them interest on “their” funds”….isn’t it crazy?…………I assume they are doing this to try and buy themselves as much time as possible to see if things improve (which they won’t), or maybe they can pull a rabbit out of their collective hats and somebody (probably the FED) will come up with something to save them (maybe this “bad” bank idea floating around now)……..Bottom line: The US gov’t is conspiring with the banks to loot the american taxpayer of as much money as they can. Remember, the FED is not part of the government. It’s a banking cartel owned by the big banks in the world. In 1913, we were sold down the river by CONgress and Woodrow Wilson with the federal reserve ACT of 1913. Since then, the value of the dollar has degraded thru inflation to be worth 4 cents compared to the 1913 dollar. The government does not has the knowledge or the balls to do what is right because they are part of the scam.Need I say more.????

blindmanJanuary 16th, 2009 at 1:33 pm

and it also deadly and murderous to millions of people attempting to live on the surface of the planet. see gaza, africa, m.e. etc.

economicminorJanuary 16th, 2009 at 3:37 pm

I agree. Debt collapsing in a highly leveraged system is reducing the money the FED has lent them daily. They are in survival mode.. velocity is waaaaay down.Although I will say this again. Money is still being lent. IF the lender can determine that the borrower is solvent and has the ability to repay. At least this is happening on residential real estate loans. There are even pretty much 0% down loans still happening.. What has happened is the number of buyers has diminished. Some because they have no ability to borrow, some because they can wait while houses go further down in price but mostly because the system used up all the buyers forward with their gimmick lending in the past. Autos same thing. Furniture same.We pushed purchases way forward due to cheap rates and fear of higher prices tomorrow’s sales into the recent past. Now that is all collapsing and the bankers are blaming it on liquidity and credit. Which is at a minimum, a half truth.

GuestJanuary 16th, 2009 at 1:01 pm

This market is just plain rigged! How do the great technicians of the past factor that in? Some more shorts got sucked in this afternoon, enough so that we can close at the high of the day today. No falling markets for Obamanomics! NONE! NEVER AGAIN!

bythewayJanuary 16th, 2009 at 1:07 pm

When you begin to think and talk about billions like you did it with millions some month before >>> this is inflation.million begin to be worthless. and so on.

HayesJanuary 16th, 2009 at 1:22 pm

The latest offering from KrugmanJanuary 16, 2009, 2:02 pmThe TIPS spread

Many of us have spent a lot of time over the past year and a half obsessing about the TED spread, the difference between LIBOR and the interest rate on T-bills. TED was a good indicator of fear in the banking system; the good news is that it’s way down.But there are new worries. These days I’m looking at the TIPS spread: the difference between nominal US bond rates and rates on Treasury Inflation-Protected Securities. This spread is an indicator of expected inflation. And what it shows isn’t good.Bear in mind that the Fed tries to keep inflation expectations “anchored.” Too low is as bad, or worse, than too high — because if expected inflation is low or negative, even a zero interest rate isn’t that good a deal, and the Fed may have a hard time booting us out of a recession. Normally the Fed wants expected inflation to be in the 2-2 1/2 percent range.Whoops.More and more, this looks like a Japan-type trap.

http://krugman.blogs.nytimes.com/2009/01/16/the-tips-spread/

Forensic economistJanuary 16th, 2009 at 2:01 pm

More reasons to short Wells FargoThe Commonwealth, the magazine of the Commonwealth Club of San Francisco, published a talk given by Kovacevich, outgoing CEO of Wells Fargo from last October. He opined at that time that financial innovation was a wonderful thing and that we were “probably in a recession”. If he is not deluded he clearly thinks that his listeners are.

GuestJanuary 16th, 2009 at 2:13 pm

As Bernanke passes out more candy to the insolvent banks, the bear market rally continues. I wonder what would happen if everyone withdrew their money from the big banks and stopped paying their mortgage: would the market still go up?

plongka10January 16th, 2009 at 2:44 pm

This is fundamentally what they are afraid of, and what all the assistance has been set in place to avoid. THe US public are like rabbits in the headlights…..

GuestJanuary 17th, 2009 at 1:48 am

I keep on thinking that why have I continued to pay my mortgage, pay my credit cards, etc. Don’t I deserve my bailout? Why should the government not pay my debts off? I am a citizen of these United States! Really, I think why should I not just stop paying my mortgage and get some relief!

C.LakeJanuary 16th, 2009 at 2:29 pm

The end of an era : the era of the institutional machine.I’d say for the last 25 years we’ve seen to a maximum level, colusion of various large institutions ; government, fed, major financial institutions, major corporations. This “institutional machine” created this fake prosperity based on debt. During this period, the GDP of the USA grew by 3% per annum on average, but this was mainly achieved by growing the total debt (public+private+unfunded liabilities) at a more than three times faster average rate of 10% per annum. This was achieved by decreasing the savings rate of all Americans from its long term historical average of 10% per annum until 1980 to -2% by 2006. From a nation of savers, the USA became a nation of people who spend more than they earn. All this was done in order to achieve artificially high rates of growth, because this was good for all members of the institutional machine, as it helped to grow profits at an even higher rate, therefore pushed the S&P500 at high P/Es, it also trickled down in the economy, people could buy more and more over-valued houses at credit, use them at ATMs via mortgage-equity-withdrawals, buy SUVs, expensive clothes, restaurants, etc… The institutional machine pushed for a deregulation of the financial system, for ever lower interest rates, for ever more obscure and risky financial instruments. This helped to create and fuel the largest asset bubble in history (housing, equities, debt). If a high level ranking member of the machine had not agreed with the general dogma, he would have been fired. If he was doing his job with perfection, he was thanked with great renumeration (executives of corporations) or great honours (eg president of the fed Alan Greenspan).Now, everybody with a brain or his own bank account can understand that if you grow your outstanding debt three times faster than your revenues for a long period of time, that means you are living above your means and you eventually run into deep difficulties. We’re there now. The shit has hit the fan.We are the generations that will have to pay for the exceses of the past. This is the harsh reality that nobody within the machine wants to admit. They don’t dare to admit it. Therefore they are trying, trying hard to hide it, just a little longer so that maybe they can reinflate the bubble for a few more years. Just a few more years.But it is already too late. We know that it will not work. It cannot work, for the money has either been spent during the bonanza years, or it’s lying on offshore accounts nice and safe. Reinflating the bubble a bit longer will just postpone the problem to a bit longer, and make it even a bit bigger (as if it’s not already too big). Do they think WE ARE STUPID OR WHAT ?All the kings horses and all the kings men, could not put Humpty Dumpty back together again.This is not a recession, this is not a depression, this is the end of an era. This is the end of the era of the insttutional machine. As long as it hasn’t given way to a resilient network of small local communities and entreprises, we will be in a mess, for the people will not accept the dictat of the machine much longer.If the elites try to hold to their institutional machine for too long, they will eventually see the people revolt. If they are intelligent enough, they will participate in the transformation of the machine into a resilient network. But in the end, in any case, what will have to happen will happen, the 21st century will not see the reign of the machine, for we, the people, already know, and we want a better world.

plongka10January 16th, 2009 at 2:48 pm

THen start by cleaning out your bank account. You know it makes sense to get it over with sooner than later.

GuestJanuary 16th, 2009 at 4:14 pm

If these bailouts keep coming and if they don’t work, I think you will start to see some serious taxpayer protests.

GuestJanuary 17th, 2009 at 1:52 am

You are absolutely correct! But watch – NOT EVERYONE WILL BE A LOSER – TAKE NOTICE AS TO WHO IS A WINNER. They will be the ones who manipulated all of this or may just have been lucky. For there will be winners or what we may call survivors; but some won’t be just survivors; they will have know and helped this all happen. These are not just small players but are the largest players around the world.

GuestJanuary 16th, 2009 at 2:33 pm

Economist George Reisman debunks the myth that deflation is falling prices in a series beginning today “to provide the intelligent layman with sufficient knowledge of sound economic theory to enable him to understand what must be done to overcome the present financial crisis and return to the path of economic progress and prosperity.Here is an excerpt from the first of these daily articles by Dr. Reisman, Pepperdine University Professor Emeritus of Economics and the author of “Capitalism: A Treatise on Economics.” (collector’s articles?)“Falling Prices Are the Antidote to Deflation” (excerpt)Contrary to The [NY] Times and so many others, deflation is not falling prices but a decrease in the quantity of money and/or volume of spending in the economic system. To say the same thing in different words, deflation is a general fall in demand. Falling prices are a consequence of deflation, not the phenomenon itself…While this must certainly come as a surprise to The Times, and to everyone else who does not understand the nature of deflation, falling prices are in fact so far removed from being deflation that they are the antidote to deflation. They are what enables an economic system that has experienced deflation to recover from it and thereafter to enjoy the fruits of economic progress.This conclusion can be demonstrated Socratically, by means of a simple question that could be used on an economics exam for sixth graders.Thus, imagine that prior to the present financial downturn, Bill used to go shopping once a week in his local supermarket. When he went there, he could afford to spend $10 for bottled water. At the prevailing price of $1 per bottle, he was able to buy 10 bottles. Now, in the midst of the downturn, when Bill visits the supermarket, he can afford to spend only $5 for bottled water.Here’s the question: At what price per bottle of water would Bill be able to buy for $5 the 10 bottles of water he used to buy for $10? Answer: 50¢.As this question and its answer make clear, a fall in prices enables reduced funds available for expenditure to buy as much as previously larger funds could buy.This point applies even when lower prices do not result in greater purchases of the particular item whose price has fallen. Thus, suppose that the price of a gallon of milk is $8 and now falls to $4. Yet Bill and his family do not need more than one gallon in any given week, and so won’t buy any larger quantity of milk at its now lower price. The fall in its price still helps economic recovery. It does so by freeing up $4 of Bill’s funds to make possible the purchase of other things, that he wants but otherwise couldn’t afford because of the lack of available funds.Another, similar example is that of a fall in the price of gasoline or heating oil, which helps to increase the ability of people to spend in buying products throughout the economic system.As indicated, in sharpest contrast to falling prices, deflation is a process of financial contraction. In our present crisis, it is a contraction of credit and of the spending that depends on credit. A fall in prices and, of course, in wage rates too, is the essential means of adapting to this deflation and overcoming it.Nevertheless, the prevailing bizarre confusion of falling prices with deflation, stands in the way of economic recovery. In regarding falling prices, which are the effect of deflation and at the same time the remedy for deflation, as somehow themselves being deflation, people are led to confuse the solution for the problem with the problem that needs to be solved…http://mises.org/story/3296

GuestJanuary 16th, 2009 at 2:39 pm

And this excerpt on Bailouts:BailoutsBefore closing, I must say a few words about the present efforts of the government to overcome the crisis by means of “bailouts” and their associated financing by budget deficits. Ultimately, these efforts are an attempt to overcome the effects of a rise in the demand for money for holding by means of a sufficiently large increase in the supply of money. In its campaign, the government appears to care for nothing but overcoming the crisis of the moment, without regard to the fuel it is providing for the next crisis.The government today has unlimited powers of money creation. And so it is highly likely, given its evident willingness to use those powers, and the overwhelming public support that exists for using them, that the increase in the supply of money it brings about will ultimately outweigh the present increase in the public’s demand for money for holding. When and to the extent that that happens, and business sales revenues and profits begin to rise and employment and wage rates begin to rise, the public’s demand for money for holding will once again begin to fall.At that point the massive increase in the quantity of money the government is currently bringing about will fuel sharply rising prices and give birth to a new crisis. This time, a crisis of inflation. Then, the government will either have to be content with a US economy that resembles the economic system of a Latin American country or it will have to rein in its inflation. If it chooses the latter quickly, we’ll be back to the situation that prevailed in the early 1980s and have to undergo a fresh economic contraction, though probably one of much greater size than then, because of the unfinished business left over from the present crisis.If the government delays too long in reining in its inflation, then when it finally does decide to do so, it may be confronted not only with prices rising as rapidly as they did in Latin America decades ago, but also with the massive unemployment rates that accompanied the efforts to rein in such major inflation. At that time, prices rising at a rate of 20, 30, or 50 percent or more were accompanied by comparably high unemployment rates…

GuestJanuary 16th, 2009 at 3:23 pm

Deflation > Inflation > HyperinflationI am a firm believer in having the courage to recognize Humpty-Dumpty thresholds. We are at such a shattered moment. However, if you have written a book The Audacity of Hope such a threshold does not apply.It is said that a nation elects what the average value of a nation wants. Get in line for your ice cream.It may take a few years to get to inflation but the monster always wins =’s the liquidity pumped into the system will never be withdrawn quickly enough.

kilgoresJanuary 17th, 2009 at 9:04 am

Gee, why don’t you write a book titled, “The Audacity of Cynicism?” Bound to be a best-seller. Saw a bumper sticker the other day with nothing but the date of the NEXT presidential inauguration on it: 01.20.12. Maybe you ought to get you one of those, too.I understand the term ‘courage’ to mean “mental or moral strength to venture, persevere, and withstand danger, fear, or difficulty” (Merrian-Webster’s Online Dictionary, http://www.merriam-webster.com/dictionary/courage). I don’t think this adjective aptly describes your self-proclaimed economic epiphany.SWK

GuestJanuary 16th, 2009 at 2:51 pm

Its very unfair that the govt didnt bail circuit city out, apparently 1-2 billion dollars of inflow only could have saved 30000 jobs. The taxes from these workers are running in trillions to save so many other institution including the car makers, the insolvent and the big banks, and almost everthing that Paulson touches his hand onto and it turns into gold, however for maybe only 1-2 billion dollars circuit city is being liquidated. So, these guys who work so much, govt is taking their money and giving it to wall street which caused the problems in the first place. This is very unfortunate and if Circuit City can fail, then so can the big bank. At least the govt ought to consider the viability of the company it is saving, if it ends up infusing more cash than the market value of the firm, then what is the logic behind it…..this is one of the saddest part of American history, taking money from a worker a circuit city and giving it to wall street…and we know all the congressman and presidents can argue that it is to save the worker ultimately but that is just rubbish….because the fact will remain after the crisis, that these banks are too big to fail and the people who are working for paltry amount of money subject of the banks too big to fail status…if the system had broken down and been recreated at least there would be some consoltation that never again would a few banks jeopardize the whole nation and the average working man….

GuestJanuary 16th, 2009 at 3:08 pm

The fed was created soley ot protect and serve banks-plain and simple. You and I don’t matter. You are wittnessing this first hand today.

GuestJanuary 16th, 2009 at 2:57 pm

Bites from: U.S. Stocks Advance as Valuations Overshadow Banking ConcernsJan. 16 (Bloomberg) — U.S. stocks gained for a second day as investors snapped up shares in the Standard & Poor’s 500 Index trading at its cheapest valuation since 1991, offsetting concern that bank losses are worsening.Intel Corp. climbed 2.1 percent to lead gains in the Dow Jones Industrial Average after saying profitability may improve after the first quarter. The S&P 500 recovered from a drop of 1.6 percent after its valuation slid to 14.8 times reported earnings. Bank of America Corp. tumbled for an eighth day even after getting a $138 billion federal lifeline, while Citigroup erased an advance of 17 percent spurred by its plan to split the company in two.“Nobody is really willing to step up for risk today; for the thinking investor, there’s a lot of opportunity because of that,” said Robert Lutts, president of Cabot Money Management, which oversees $400 million in Boston. “When the opportunities are there, it often doesn’t look pretty.”and…“Today’s action in the banks and the government’s actions to help them is making it clearly evident that what is good for their viability and bondholders will not square with the interests of equity holders at the bottom of the capital structure,” Peter Boockvar, equity strategist at Miller Tabak & Co., said in a note to clients….and…The cost of living fell in December, capping the smallest annual gain in a half century, as the recession deepened. Consumer prices fell 0.7 percent in December after dropping 1.7 percent the prior month. Excluding food and energy, costs were unchanged. Americans paid 0.1 percent more for goods and services in 2008, the least since 1954, the Labor Department said.Estee Lauder Cos. dropped 11 percent to $25.81, the steepest decline in the S&P 500 after Bank of America. The maker of Clinique and Bobbi Brown cosmetics cut its sales and profit forecast for fiscal 2009 ending June 30, citing “deteriorated global economic conditions.”http://www.bloomberg.com/apps/news?pid=20601087&sid=ag.fWL8_GMnk&refer=home

GuestJanuary 16th, 2009 at 3:17 pm

I saw this artwork that was posted on the previous thread after it closed: thought it interesting and likely ~ a check mark recession:There has been a lot of discussion about whether we are in a V-shaped, U-shaped, or L-shaped recession. Although we have not yet run out of letters, I’d like to suggest another possibility that looks more like a check mark:*_________________________*_________________________*_________________________*____________________*____*_____________*___________*______*__________________*__________________This is also a V rotated to the right, but a check mark is more concise. It is a compromise between a V and an L.Reply to this comment By David Levner on 2009-01-16 09:42:28

ex VRWCJanuary 16th, 2009 at 3:35 pm

Roll call of the employment victims for today: Layoffs list I got to sit down with the CEO of the high tech small business I work for yesterday. It was not encouraging. He reports that private equity and VC activity in Silicon Valley is completely dead now. Angel investors are almost universally turning down any private equity opportunities in favor of grabbing safe investments like Apartment REITs with their money. There is no appetite for risk or creation of new enterprise in Silicon Valley. Americas few remaining engines of innovation and technology creation are slowly grinding to a complete halt. Note all of the high tech layoffs in the list above.The storm is coming ashore. As Stephen Curtis Chapman wrote The wind is growing colder and the sky is growing dark. TPTB are doubling down with their strategy of ‘save the banks, save the financial system’. They have very little time left to react before this storm hits full force and they are wasting it shoring up the mansion that will surely collapse.

MarkJanuary 16th, 2009 at 4:02 pm

Does anyone have a link to a site that shows announced/filed layoffs? I used to have one, but I can no longer find it!Mark

GuestJanuary 16th, 2009 at 3:37 pm

SAN FRANCISCO (MarketWatch) Barclays PLC, responding to a plunge in its London-listed shares, said Friday that its profit for 2008 will likely exceed most analysts’ forecasts, adding that directors of the bank know no reason why its stock price tumbled.

PeterJBJanuary 16th, 2009 at 5:26 pm

If I am not mistaken, all of the resources (current and future) of the United States of American are now well on their way to be distributed to the Wall Street ghetto and all that hangs off it – Congress: a minority of what is self-termed as a “ruling elite”, or, that control group that (mis)manages the State.On schedule – this is an acceptable definition of institutional Communism. Hayek remains correct.Obviously, the American business model is unprofitable unless it is manipulated and supported directly by Government, its coffers and its “gunships”. Looking at retailer sales of recent date, I have noted prices slashed 70% and even more and wonder…?As the current model really took hold through Edward Bernays after WWII and that this model demands that the public become 1. avid consumers and 2. poor savers, obviously, the model is seriously flawed and must be seen, viewed, understood as indeed, a Ponzi schema; or, these requirements are not consistent with human nature.I question most seriously Professor, your description of the Obama economic team as being “first rate” as I hold the opinion that the whole of Obama’s team, is nothing but a third rate continuity of self destructive incompetence. Obviously the proof will be eventually determined as to who is correct, so we wait. Your adoration of the Washington mob does not serve you well, imo. But then, you don’t define what is first rate and where I assume that you mean responsible and competent governance on behalf of the citizenry and country, i.e. my assumption may be incorrect.I state my position again: This is a “leadership” crisis which can be heralded as a totally pervasive state of Hanlon’s Razor at the helm.Again: The movie “WaterWorld” appropriately depicts the current situation admirably – particularly in the scene from the bridge of the Exxon Valdez as the Captain played by Dennis Hopper the “Deacon” where the speech is given and free cigarettes are distributed and the recipients eagerly rush off to row to — anywhere.Interestingly, The tagline is ” beyond the horizon lies the secret to a new beginning”…Ho hum

blindmanJanuary 16th, 2009 at 6:54 pm

g,i maintain that by any standard the man is a gifted poet and an oracle of the true MIND channeling some rare frequency of light. ho hum ..oh..hmmmmmmmmmmmm.

C.LakeJanuary 17th, 2009 at 4:31 am

Obama’s economic team is only “first rate” at continuing the inepsies of the past 25 years, building fake prosperity on credit. Maybe they can prolong this regime for another 4 more years, giving us the illusion of a temporary betterment, and postponing an even bigger crisis to a next election cycle.But if they continue that way, there will come a time when we, the people, will have to explain to them that we are not innocent morons who can accept to be fooled by our leaders much longer. I sincerely hope that they realize their strategic error before that time comes, and participate in transforming this short-term-profit-bubble-creating-institutional-debt-machine into a resilient network of local communities and small entreprises. For this process to be succesful, it is not the old elite model of leadership that will be needed, but that of a new type of ego-less servants.

GuestJanuary 16th, 2009 at 7:24 pm

HERE WE GO!!!International investors lost their appetite for long-term US financial assets inNovember and the revised October numbers now also show a marginal outflow. Bothmonths were characterised by high uncertainty and depressed risk sentiment, as stockmarkets dropped and the financial markets came near to collapse.Net sales of long-term securities amounted to USD 21.7bn in November comparedwith a revised outflow of USD 0.4bn in October the largest outflow since August2007. However, including short-term assets there was an inflow of USD56.8bn, whichwas still a large reduction of the USD 260.6bn inflow the previous month.Worth noting in todays report is the collapse of foreign demand for US Treasuries.Foreign investors net sold USD 22.9bn worth of Treasuries the first net sale sinceAugust 2007. If foreign investors have continued to sell Treasuries in the monthsfollowing November it is somewhat disturbing (also for the dollar) given the largeamount of debt expected to be issued during 2009.Novembers net outflow was a result of increased foreign selling, as net selling offoreign financial assets by US investors was broadly unchanged at USD 34.3bn.http://danskeresearch.danskebank.com/link/TIC160109edited/$file/TIC_160109_edited.pdf

ptmJanuary 17th, 2009 at 9:13 am

Thanks for the PDF. This has to be the most significant trend in predicting inflation and it looks like the data are tipping the deflation-inflation-scale towards inflation.

Octavio RichettaJanuary 16th, 2009 at 7:53 pm

Just watched the 1995 film <,i>Four Rooms featuring Tarantino as one of the directors. Here is the script:http://www.script-o-rama.com/movie_scripts/f/four-rooms-transcript-quentin-tarantino.htmlWhy do I bring this up? There is a GREAT LINE in the movie that in a nutshell tells what our country is all about. The line shows the reason behind people being so mad at the unfair way in which Hanky, Benny, Tim, and now Obi are handling the credit crunch:It’s not right. It’s not right and it’s not f*ck*n’ fair!But why should that surprise anybody? When the hell has America ever been fair?We might be right every once in awhile, but we’re very rarely fair.

Octavio RichettaJanuary 16th, 2009 at 8:05 pm

A more complete version of the quote:Now me, personally,when I think of bellboy,I think of The Bellboywith Jerry Lewis.Did you ever see that film, Ted?Um… no, sir.Oh, you should. It’s oneof Jerry’s better movies.He doesn’t say a wordthrough the entire film.It’s a completelysilent performance.Now how many actorscan pull that off?I gotta tell you, that guy,he’s gotta go to France to get respect.That says it allabout America right there.Just that one little sentence saysit all about America right there.The minute Jerry Lewis dies, everynewspaper in this fuckin’ country…is gonna be writin’ articlescallin’ the man a genius.It’s not right. It’s not rightand it’s not fuckin’ fair!But why should that surprise anybody?When the hell has America ever been fair?We might be right every once in awhile,but we’re very rarely fair.The great jerry Lewis is still alive! The man has got more lives than a cat!http://en.wikipedia.org/wiki/Jerry_Lewis

Lewis has suffered years of back pain due to a failed slapstick stunt on an Andy Williams television special in 1966 that almost left him paralyzed. In April 2002, Lewis had a “Synergy” neurostimulator, developed by Medtronic, implanted in his back, which has helped reduce the discomfort. He is now one of Medtronic’s leading spokesmen.Lewis has battled prostate cancer, diabetes, pulmonary fibrosis, and has had two heart attacks. Medical treatment for the fibrosis using prednisone in the early 2000s caused the comedian to experience weight gain and bloating that noticeably changed his appearance and rendered him unable to perform, in September 2001, at what would have been a return to the London Palladium for the star, a charity event produced by comedian Steven Alan Green. (Green’s take on the event was turned into a one-person show, I Eat People Like You For Breakfast, which Green performed at the 2003 Edinburgh Festival.) Lewis some months thereafter began an arduous, months-long rehab, which weaned him off the prednisone steroids that had so altered his appearance and enabled him to get back to work.Lewis suffered a serious heart attack in December 1982, and second minor heart attack on June 11, 2006 at the end of a cross-country commercial airline flight en route home from New York City.[15] It was later found that he had pneumonia. Lewis had two stents inserted into an artery in his heart that was 90% blocked, and it restored full blood flow to his heart. This has allowed him to continue his rebound from the lung issues he suffered from 2001 to 2005 and his health has improved. While it meant canceling several major events for Lewis, he recuperated in a matter of weeks.In 1999, his Australian tour was cut short when he had to be hospitalized in Darwin with viral meningitis. He was ill for more than five months. It was reported in the Australian press that he had failed to pay his medical bills, however Lewis maintained that this was the fault of his health insurer. The resulting negative publicity caused him to sue his insurer for US$100 million.[16]

GSMJanuary 16th, 2009 at 8:04 pm

“President-elect Obama’s economic team is first rate, cohesive, and pro-globalization”- NRPraise like this attributed to Obama’s snakes in suites economic team on this blog churn my stomach. (Volcker is the lone exception.)Respectfully NR- what utter rubbish. Summers was a main proponent in the repeal of the Glass-Seagel act. A legislation borne of much suffering, hardships and widespread economic destruction, that was traitorously repealed in 1999 ushering in a greed fest for the Banksters at the expense of the average US citizen’s future. Clinton and his buddies set this trainwreck on it’s course. And it goes on still today as more and more public moneys are poured into the Wall St banks blackholes , feeding those same snakes in suites.Summers of course is a choirboy for Rubin and that parasitic outfit called Citi. These are the “star studded” economic heavies that the US will deploy to get them through this national catastrophe? Are Americans so DUMB and apathetic that they sit back and watch this soap opera unfold as they hand over their hard earned wealth and national treasure- their FUTURE- to these slimy scammers- who parade themselves as the cavalry, arriving in the nick of time to save the day?WAKE UP AMERICA! THESE ARE THE SAME GUYS WHO CREATED THIS DISASTER. YOU THINK THEY INTEND TO IDENTIFY AND THEN PUNISH THE CULPRITS???? DO YOU REALLY THINK THEY WILL RECTIFY THE WRONGS THAT LED TO THIS DISASTER?You are being royally screwed , good people of the US. And so are your children and grandchildren.An article putting the torch to Summers belly;http://www.telegraph.co.uk/finance/comment/liamhalligan/4213828/Harsh-economic-realities-await-the-Obama-team.html……..or is it putting the torch to Joe6pack’s belly?

GuestJanuary 16th, 2009 at 9:54 pm

WAKE UP AMERICA! THESE ARE THE SAME GUYS WHO CREATED THIS DISASTER. YOU THINK THEY INTEND TO IDENTIFY AND THEN PUNISH THE CULPRITS???? DO YOU REALLY THINK THEY WILL RECTIFY THE WRONGS THAT LED TO THIS DISASTER?You’re right. Individual liberty in the country is threatened because of the money monopoly. It has gotten to the point where private investment bankers have become the power behind not only monetary policy, but behind foreign policy and domestic issues as well, as they affect the financial titans.The outgoing treasury secretary and the current Fed leadership are representatives of the money monopoly, and the incoming treasury secretary and financial advisors are all well known representatives of the investment banks. Not only are they not new faces, they are the same faces. We‘re talking about the influence of Goldman Sachs and Rubin, of the Clinton White House, of Wall Street and the Fed. Ironically, the Left calls these people “conservatives.” They are neither liberals nor conservatives, they are money changers.Geithner, for example, is now going through confirmation hearings. He underpaid his income taxes for several years so he could keep the gross and finally only paid the remainder just in time to be appointed treasury secretary. The Treasury runs the IRS. So here’s the head of the IRS who’s a tax cheat.He’s going to be questioned and grilled over hot coals by Congress and then confirmed: there’s no way on this planet that they won’t confirm him. They work for him—the money monopoly.It comes to a point where you can’t have a country like this. It won’t last. Eventually, everybody’s going to be saying this. If you’re a non-financial person you already can see what this is doing to the country.It’s ludicrous to say that these people are different from anything we’ve had before and to think that Clinton or either of the Bushes and now Obama have any single thing to say about finance: anyone who thinks so just hasn’t been watching, because they don’t.Politicians, Congress and the White House and the people the White House selects don’t pick the Fed chairman or the treasury secretary—those people pick them.The American people are waking up, from the Left and the Right. It can be seen in print and in columns. It’s coming from the people – the columnists are getting their fire from the people and the details from the Internet – dates, places, quotations. The Internet is instant power.Fortunately, it’s not a true statement to say that people aren’t waking up. You’re waking them up, GSM — you and others like you, right here, some of the best voices on the web. The thing that’s different now is that everybody’s beginning to see their representation’s bought out. The politicians are fools to think we don’t see. There’ll be a time when people won’t want to be in the same room with a Congressman.

Octavio RichettaJanuary 16th, 2009 at 10:09 pm

Excellent point. I thought about this when I first saw the news cross Bloomberg.I don’t care if he walks on water. A guy of this supposed caliper who cheats/is so careless about his taxes should not be confirmed to run the treasury.

HayesJanuary 17th, 2009 at 8:50 am

I posted this on the previous thread – the columnist is right wing but his argument is sound. What I find astonishing is that this issue is getting no traction in the MSM.January 16, 2009Why Geithner and Rangel MatterBy C. Edmund Wright”…While working for the International Monetary Fund, Geithner failed to pay taxes even though the IMF “grossed up” his pay to actually give him the money with which to pay his taxes. They also attached a stub that showed exactly what his pay was including how much had been grossed up … Not only that, but Geithner himself prepared his own tax returns for several of the years where this underpayment was made. Bottom line: He either is not capable of handling a rather pedestrian income statement for tax purposes or he flat out cheated.”

kilgoresJanuary 17th, 2009 at 9:16 am

Dr. Roubini has great respect for Larry Summers, for who he worked for at the Treasury Department in the Clinton administration for several years. I have great respect fro Dr. Roubini, and since he knows Summers well and I don’t, I will defer to his judgment. Summers may have made some poor judgments, but frankly, I don’t know of a professional — whether in economics, medicine, law, teaching, or whatever — who is immune from that mortal debilitation. Everything’s obvious in hindsight to everyone.SWK

Octavio RichettaJanuary 17th, 2009 at 10:39 am

Professor Roubini has tenure but he is not 100% free to scream loud whatever he feel he should. He is part of the economics academic establishment and severing his ties with them while still active in the Profession is practically impossible unless he is nuts or has the type of cojones that Antonio Banderas shows in some of his films like Zorro, four rooms.

kilgoresJanuary 17th, 2009 at 7:03 pm

OR:Surely you don’t think Dr. Roubini is being disingenuous in making these positive remarks about Larry Summers simply out of concern for his own job security, do you? He certainly hasn’t been shy in the past about expressing opinions about the state of the economy that have subjected him to outright ridicule. I don’t imagine he would hold back if he really had reservations about someone; or, at least, he would probably remain diplomatically silent or neutral in his comments.SWK

Octavio RichettaJanuary 16th, 2009 at 8:23 pm

Bernie Madoff Offered Glorification of Smoothness: John DorfmanEmail | Print | A A ACommentary by John Dorfmanhttp://www.bloomberg.com/apps/news?pid=newsarchive&sid=alapGXx_ZxYII frequently wonder if my writing here may do some people more harm than good in terms of possibly enticing them to do something crazy in their investing.Well, after reading Mr. Dorfman’s article above I surely know I will sleep better.I cannot believe the blunt and, IMO, irresponsible disregard for risk Mr. Dorfman endorses and encourages in this article.After the almost complete wreckage so many people experienced in 2008, I am totally puzzled as to why Mr. Dorfman would encourage people to disregard risk as measured by the standard deviation of historical returns; which, of course, has limitations but is totally undeserving of being thrown out the window.

PeteCAJanuary 16th, 2009 at 9:43 pm

Makes good sense. Especially if he owned a launch or a yacht. I’ve been saying for quite a while that it would not be surprising to see some of these guys abscond with whatever money is left in the hedge fund account. Clients should call police is places like the Bahamas, Jamaica, and Grand Cayman Is.PeteCA

ptmJanuary 16th, 2009 at 8:49 pm

Buy a house, get citizenship?! Yes, it’s true

The US government has allocated 10 000 such visas nation-wide for potential investors in real esate, under a programme approved by the US Congress. Florida’s is the first such programme that has actively been given the green light to commence. Specialists in the field argue that this is the best time to invest and purchase property in America, as prices in some states have been slashed by as much as 25 per cent. Experts argue that within three years’ time, however, the market will stabilise and prices will rise.

http://michellemalkin.com/2009/01/16/buy-a-house-get-citizenship-yes-its-true/

Octavio RichettaJanuary 16th, 2009 at 9:01 pm

I don’t see any reliable evidence in your link That such crazy program exists.I believe there is a treaty investor visa (at least there us to be) which requires about a million USD invested to get it. It is not a US resident visa. it is a temporary visa such as the H1 working visa.

Octavio RichettaJanuary 16th, 2009 at 10:05 pm

If, IMO, I notice an article is misleading I am also free to let the readers know about my opinion. You are also free to clarify/amplify the information.

Octavio RichettaJanuary 16th, 2009 at 10:51 pm

ptm, OK, we may be talking the same language but your heading is quite misleading. it is not as easy as just buying a house on credit. And this is not a new law to bailout the housing market. It is precisely the law I was talking about. Yes, it is somehow unfair but there are much bigger injustices to worry about. There aren’t too many people out there able to fork out 1 million bucks of capital for a business. I know this doesn’t make the program right but it certainly diminishes the size of the problem. from your link:Bush can do his part by eliminating one of the greatest abuses of American citizenship: the immigrant investor visa program. It has spawned a niche market in skirting laws, scratching backs, and selling out.This fraud-ridden scheme was created under an obscure section of the 1990 Immigration Act, signed by Bush’s father. Known as the EB-5 law, it allows wealthy foreigners to purchase green cards by investing between $500,000 and $1 million into new commercial enterprises or troubled businesses. After two years, foreign investors, their spouses, and children all receive permanent resident status – which allows them to contribute to U.S. political campaigns and provides a speedy gateway to citizenship.No time to dig deeper into this but I assure you whoever wrote the stuff above is slanting it to make it sound easier than it is. The greencard stuff I assure you is a lie. What the heck, here it is. The real thing!http://travel.state.gov/visa/temp/types/types_1273.html

Requirements: Treaty InvestorThe investor, either a real or corporate person, must be a national of a treaty country;The investment must be substantial. It must be sufficient to ensure the successful operation of the enterprise. The percentage of investment for a low-cost business enterprise must be higher than the percentage of investment in a high-cost enterprise;The investment must be a real operating enterprise. Speculative or idle investment does not qualify. Uncommitted funds in a bank account or similar security are not considered an investment;The investment may not be marginal. It must generate significantly more income than just to provide a living to the investor and family, or it must have a significant economic impact in the United States;The investor must have control of the funds, and the investment must be at risk in the commercial sense. Loans secured with the assets of the investment enterprise are not allowed; andThe investor must be coming to the U.S. to develop and direct the enterprise. If the applicant is not the principal investor, he or she must be employed in a supervisory, executive, or highly specialized skill capacity. Ordinary skilled and unskilled workers do not qualify.

Octavio RichettaJanuary 16th, 2009 at 10:57 pm

These are all types of temporary visas that allow entry into the US (including the treaty investor visa):http://travel.state.gov/visa/temp/types/types_1286.htmlThe are all the visa types that allow a person to immigrate to the US (i.e., get a greencard)http://travel.state.gov/visa/immigrants/types/types_1326.htmlI have substantial experience with several of the visa types in each category. I have always done the work myself without any lawyers.I can assure you that even though the system is not perfect, the US has one of the best thought out visa programs in the world. It is not so easy to slip by.

P&LJanuary 17th, 2009 at 1:02 am

Last time I looked (when 43 was “elected” for the 2nd time) you needed around $3 million to invest your way to New Zealand citizenship. Maybe we need to raise the buy in?”New Zealand Active Investor Migrant Policy – an overviewThe Active Investor Migrant Policy opened on 26 November 2007. Its aim is to attract investor migrants with business experience, international connections and financial capital to New Zealand, to support our economic transformation and contribute to the development of innovative, productive, and globally competitive firms in New Zealand.The policy is divided into three categories:Global Investor Category – for migrants investing NZ$20 million in New Zealand, including at least NZ$5 million in active investment.Professional Investor Category – for migrants investing NZ$10 million in New Zealand, including at least NZ$2 million in active investment.General (Active) Investor Category – for migrants investing a minimum of NZ$2.5 million in New Zealand, who have an additional NZ$1 million for settlement funds.RequirementsSee the requirements that you will have to meet if you want to be granted residence in New Zealand under the Active Investor Migrant Policy.http://www.immigration.govt.nz/migrant/stream/invest/activeinvestor/requirements/

Octavio RichettaJanuary 17th, 2009 at 4:56 am

I’ll tell you where, IMO, is the weak link in US immigration. I don’t want to denigrate people with a low level of education, unskilled-type labor skills, but it is much easier to eventually gain permanent residency in the US if you are willing to stay here illegal doing low level work like dish washing, house cleaning, construction, etc. for years and then eventually get pardoned via some kind of an amnesty like they did in the mid-80s, and I believe early in the early 2000s, than if you are a high level professional and want to gain lawful admission to the US.Why is it that there are MILLIONS of low-level illegal workers in the US? We the country in the world with the greatest technology cannot keep our border in check/keep track of temporary visitors?IMO, what is going on is that we do want/need the slave labor that results from the condition of being illegal. Illegal workers perform low level jobs at rates that are very attractive to employers, and uncle Sam just looks the other way.There is this Albanian guy (there was he died a few years ago) Anthony who founded the famous Anthony’s Pier 4 restaurant in Boston Harbor; featuring pictures of himself with all kinds of cellebrities, from US presidents and movie starts to the Pope, etc. (Ted Kennedy is a regular visitor, I crossed him and other family members many times). Anthony always hired illegal Albanians and the INS, now DHS, guys knew about this and turned their head the other way. I heard from more than one persons that DHS inspector could always count with a free meal at Anthony’s.This is a much bigger problem than the handful of high net worth individuals who get a non-immigrant treaty investor visa and presumably comply with the stringent regulations in it. I know crocked lawyers can find their way around any law but that is a different item for discussion.

kilgoresJanuary 17th, 2009 at 9:28 am

OR:Thank you for that well-reasoned comment. I used to practice in the immigration law area, and I agree with you.The law in this respect is very logical and pragmatic. U.S. immigration rights are based on three main public policy considerations: foreign relations, keeping families intact, and supporting the American economy. The first consideration sets the stage for political asylum as a means of acquiring U.S. citizenship. The second consideration allows current naturalized citizens to petition on behalf of spouses, childern, and parents to enter the U.S. and become naturalized citizens, too. The third consideration is the basis for the H, E, and L programs, under which foreign nationals can come to the U.S. and in some cases become permanent residents and ultimately naturalized citizens, by bringing work skills or other special talents that are in short supply here (e.g., registered nurses), other highly sought=after credentials (e.g., Nobel Prize winners in Physics), or monies for business and other investment that can create jobs for Americans and otherwise contribute meaningfully to the welfare of the United States.SWK

Octavio RichettaJanuary 16th, 2009 at 9:11 pm

A good reminder about the power of the WLI:http://www.businesscycle.com/glossary/Leads – the WLI has an average lead of 10 months at business cycle peaks and three months at business cycle troughs, which amounts to a longer overall lead than the LEI. Given its prompt availability, the WLI has an even longer effective lead at business cycle turning points, and would have historically signaled a typical recession about three months ahead of the LEI. In fact, the WLI has a longer effective lead than the LEI at 83% of business cycle peaks and 60% of business cycle troughs..And the one for last week which came out this morning and I forgot to check:No sign yet of recession endhttp://www.businesscycle.com/news/press/1283/ReutersJanuary 16, 2009(Reuters) – NEW YORKA measure of future economic growth in the United States fell while its annualized growth rate inched up in the latest week, but both still signal that the way out of the recession is not in sight, a research group said on Friday.The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index fell in the week ending Jan 9 to 108.6 from 109.3 in the previous week, initially reported as 109.4.The index’s annualized growth rate ticked up to negative 25.5 percent from negative 26.9 percent, revised from minus 26.8 percent. It marked its highest reading since the week to October 24, 2008, when it was minus 22.8 percent.”Despite some recent stabilization the WLI remains in a clear cyclical downswing, indicating that an economic recovery is not on the horizon,” said Lakshman Achuthan, managing director at ECRI in an instant message interview.The weekly index fell due to higher interest rates and weaker housing, with the decline partly offset by higher stock prices, Achuthan said.No sign yet of recession end

Octavio RichettaJanuary 16th, 2009 at 10:32 pm

I must confess that when I started reading these guys in late 2006 I thought they were a bit outlandish in their views. However, as time passed, they proved to be A LOT closer to the truth than most.BTW, the home page for RGE always has some great reading under daily digest.Professor, we the little guys continue to be extremely thankful for the amazing amount of relevant information you provide to us for free. You make it possible for us to compete one-to-one with the bigger, but not necessarily smarter, guys.

GSMJanuary 16th, 2009 at 11:12 pm

I’ll second that OR. LOT’s of great and timely material on this blog. Although sometimes my opinion differs on an issue with NR’s, I ALWAYS respect and appreciate the Prof’s analyses. Because of their accuracy.

Octavio RichettaJanuary 17th, 2009 at 4:58 am

You’ve got to keep you eyes in the ball. The real immigration bigo problem the US has is the MILLIONS of illegal allies who are already here most of them performing slave work for us and mainly behaving very well so that they are kicked out of the country. This post from ptm’s discussion above is worth reposting:I’ll tell you where, IMO, is the weak link in US immigration. I don’t want to denigrate people with a low level of education, unskilled-type labor skills, but it is much easier to eventually gain permanent residency in the US if you are willing to stay here illegal doing low level work like dish washing, house cleaning, construction, etc. for years and then eventually get pardoned via some kind of an amnesty like they did in the mid-80s, and I believe early in the early 2000s, than if you are a high level professional and want to gain lawful admission to the US.Why is it that there are MILLIONS of low-level illegal workers in the US? We the country in the world with the greatest technology cannot keep our border in check/keep track of temporary visitors?IMO, what is going on is that we do want/need the slave labor that results from the condition of being illegal. Illegal workers perform low level jobs at rates that are very attractive to employers, and uncle Sam just looks the other way.There is this Albanian guy (there was he died a few years ago) Anthony who founded the famous Anthony’s Pier 4 restaurant in Boston Harbor; featuring pictures of himself with all kinds of cellebrities, from US presidents and movie starts to the Pope, etc. (Ted Kennedy is a regular visitor, I crossed him and other family members many times). Anthony always hired illegal Albanians and the INS, now DHS, guys knew about this and turned their head the other way. I heard from more than one persons that DHS inspector could always count with a free meal at Anthony’s.This is a much bigger problem than the handful of high net worth individuals who get a non-immigrant treaty investor visa and presumably comply with the stringent regulations in it. I know crocked lawyers can find their way around any law but that is a different item for discussion.

Wild BillJanuary 17th, 2009 at 6:03 am

Like many of you, I am confused. On one hand, we express gratitude to Professor Roubini for his accurate, prescient information. His predictions for the future do not include any consequences stemming from the enormity of the bailouts. He expresses confidence in the financial team assembled by Obama while we blame these same team members for much of the crisis we find ourselves in.I am grateful to the professor too, but I am incapable of the leap of faith required to have confidence in the “dream team” that the professor thinks so highly of. I would love to hear some details that would help me understand why pouring money into black banking holes is not as disastrous as I intuitively believe it to be, and how this wonderful group of economic whiz kids plans to avoid the consequences dictated by the laws of economic thermodynamics.I don’t mean to be overly skeptical. It certainly isn’t fair to judge them before they are actually well into their jobs. I am merely seeking information that will allay my fears, if such information actually exists. Right now, the only scenario I can imagine that will get us out of this mess without going to war, is some sort of extra-terrestrial intervention.

PeterJBJanuary 17th, 2009 at 6:44 am

And, pray tell, would any extra-terrestrial race – assuming an advanced convention of intelligence as they can/could/perhaps/maybe navigate inter and outer space/time where we cannot [barbaric] – decide that now would be a great and advantageous time to intervene in Earth politics?To save America aka USA? er, perhaps? (Why?)The real economy is empowered by the innate emotions [energies] of the core ‘differentiated’ lowest common denomination [mass] of the populace spread (demographics).SOooo… I think we should focus on your/our/real fears… (?) er, reality!However, this Earthling is just going to watch it all go down whilst awaiting opportunity – with a lot of company…This is called a Universal Principle.Ho hum

Wild BillJanuary 17th, 2009 at 9:48 am

Dear Peter JB,Why should extra-terrestrial save us? Because we are integral parts of the critical mass of life force necessary to perpetuate ever evolving life in our universe and because you and I are nice guys.

PeterJBJanuary 17th, 2009 at 3:45 pm

May I request Sir, that you speak only for yourself on such matters :] and may I add, that your position may be so, as you state but, such a position, above all, is merely opinion, albeit yours.Therefore I remind you that the life game (autopoiesis) plays by the rules of conservation where convention prioritizes redundancy and economic frugality/efficiency/effectiveness; and, a delightful game it is; apart from those times, such as now, when we need witness the results of those crasse acts of applied ignorance.This jail in which we are in, is of our own making and real freedom is for us to grant, er, to ourselves. We just rid ourselves of the feral which we call “leadership” and take up that role ourselves.However, this “suffering” is our lesson; our picking the cat up by the tail.All the important attributes of alien species are within you / us – we don’t need intervention; we need to try to understand (the Laws of Physics) and stop being so damned arrogantHo hum

Octavio RichettaJanuary 17th, 2009 at 8:44 am

There is nothing like a famous short such as Chanos starting to “promote” a stock as a “good short”, to have the stock reach new 52 week highs, APOL closed at 89.47, the 52 week high is 11 cents higher:-)http://online.barrons.com/quotes/main.html?symbol_or_name=apol&x=0&y=0&sym_name_switch=symbol

HayesJanuary 17th, 2009 at 9:15 am

From a post above on citizenship/green card for housing – a prominent developer (and Obama supporter) floated the idea back in the fall, Richard LeFrak, The LeFrak Organization link. I am trying to find the reference but it was also suggested by a Senator/Congressperson recently.

MM CAJanuary 17th, 2009 at 9:43 am

This was just today. By my count I have almost 1 million job losses indicated to be happening from Jan 1 to Feb 15. We will hit 1M a month by spring. BTW, I called the Circuit city failure 4 months ago and Nortel 2 months ago. GE and Dell sometime this year, probably later in the year. Many, many other retailers are toast too. GM and Chrysler will be in bankruptcy sometime this year. Chrysler for sure will go away. Also Tech companies are in deep trouble across the board. I suspect we will see 30-50% reduction in ALL IT spending this 2009-2010 period, products and services. private equity and VC activity in Silicon Valley is completely dead now. Angel investors are almost universally turning down any private equity opportunities in favor of grabbing safe investments like Apartment REITs and Treasury’s with their money. There is no appetite for risk or creation of new enterprise in Silicon Valley. Americas few remaining engines of innovation and technology creation are slowly grinding to a complete halt. Note all of the high tech layoffs in the list below. Green related technologies, including Solar are tanking because they have no faith in Obama beating down the Oil companies.It would’ve only taken a 2-3 billion loan to Circuit city to save their company and 35,000 jobs. But no, we gave BOA 140 Billion at 1 am this morning; Citi will be getting another 25-50 billion…. This is totally out of control, saving the banks and financial companies that should not be saved.Obama’s stimulus plan is a total joke. You heard it here, it WILL NOT WORK. In my opinion he will need 2.5-3 trillion (and he/we don’t have that much unless they print and risk further devaluing the US dollar) and he has to target it directly at small and medium size business, at least 60% of that number. He has to let some of badly managed companies bite the dust, mostly banks and finance companies.Do not pay attention to the stock market- it is totally irrevalent as an indicator of what is going on. Total value of all US stocks in existence is approx 8.5 Trillion (Dow, NasDaq, S&P, OTC) We have already spent that in the past 9 months fighting this problem. They could’ve bought the whole stock market already. Actually a lot of the bailout money that has gone to Banks and financial firms has been used to buy stocks (people have no idea that this happening) to keep the stupid market propped up. Goldman Sachs and any and everyone who ever worked for them, including most of the Govt officials on Obama’s team like Giethner, as well as Paulson and all the current ones working for Bush are all trying to save their friends. Google the term “plunge protection team” and read up on it. It will describe how the Gov’t by law and regulation is manipulating the market.I suspect No later than end of Feb/march we will see Obama on national TV at night telling us we are in deep crap. Rationing and wage/price controls will be coming. I hope I am wrong. It is possible they could limp along like they are for another year or so and not tell us how bad things are, but sooner or later Obama will have to come clean.Layoffs Picking Up Speed—Is Your Firm On the List?Topics:Employment | Economy (Global) | Economy (U.S.)Companies:Hertz Global Holdings, Inc | Wellpoint Inc | Halliburton Co | Schlumberger Ltd | ALCOA Inc | Cigna Corp | Boeing Co | Walgreen Co | Lexmark International Inc | Cummins Inc | Visteon Corp | Oracle Corporation | ING Group, N.V. | Barclays PLC | Pfizer Inc | Barnes & Noble, Inc. | Ecolab Inc | Seagate Technology Holdings | Google Inc | MeadWestvaco Corp | Motorola Inc | Marshall & Ilsley Corp | Autodesk IncBy: CNBC.com with Wires | 16 Jan 2009 | 03:44 PM ETText SizeThe pace of corporate layoffs has picked up sharply since the beginning of the year, reflecting the worsening US recession.APOn Friday alone, companies as diverse as General Electric, Pfizer, Advanced Micro Devices, Wellpoint and Hertz announced big cuts in staffing.Motorola announced earlier this week it will cut an additional 4,000 employees as it faced weaker-than-expected handset sales. And software company Autodesk said it is cutting 750 jobs, or about 10 percent of its employees, as it prepares to report a loss in the fourth quarter.The Labor Department reported Thursday that first-time requests for unemployment insurance jumped to a seasonally adjusted 524,000 in the week ending Jan. 10, from an upwardly revised figure of 470,000 the previous week. Analysts had expected 500,000 new claims.The jump in last week’s numbers, combined with a slew of layoffs announced this week, signal that jobless claims will continue to rise.Slideshows On the Job Front …· Highest Paying Jobs· Jobs Most at Risk· Hardest Jobs to Fill· What Jobs Can be Outsourced“The experience of previous deep recessions suggests claims are nowhere near their peak, and we doubt that peak will be reached before the fall of this year,” said Ian Shepherdson, chief U.S. economist for consulting firm High Frequency Economics.Shepherdson said in a research note that weekly jobless claims could reach 750,000 later this year.Here is a rundown of corporate job cuts announced so far this year.Pfizer [PFE 17.50 0.11 (+0.63%) ] plans to lay off as many as 2,400 sales staff this quarter in a continuing reorganization. The drugmaker has already cut about 15,000 jobs in the past two years, including 800 research jobs earlier this week, to downsize before the company’s $12 billion-a-year.General Electric’s [GE 13.96 0.19 (+1.37%) ] GE Capital unit will cut between 7,000 and 11,000 jobs. GE had said it would reduce costs at GE Capital by about $2 billion this year, according to the report.· Advanced Micro Devices [AMD 2.29 0.03 (+1.28%) ] plans to cut 1,100 jobs, 9 percent of its global staff, and slash the remaining employees’ pay as the chip maker hopes its third round of layoffs in a year can help it get through a brutal market for computer sales.Insurance company WellPoint [WLP 37.89 0.04 (+0.11%) ] said that it would eliminate about 1,500 positions, or about 3.5 percent of its workforce, to reduce administrative costs.Rental car company Hertz Global [HTZ 5.27 -0.12 (-2.23%) ] said Friday it will eliminate more than 4,000 jobs worldwide as it further cuts costs amid slowing demand.· Delta Air Lines [DAL 11.43 0.46 (+4.19%) ] , which took over rival Northwest Airlines last year, said it expects about 2,000 staff to opt for an early retirement program as it aims to trim capacity as much as 8 percent this year.Autodesk [ADSK 16.14 0.66 (+4.26%) ] is cutting 750 jobs, or about 10 percent of its work force to cut expenses and expects to report a loss rather than a profit for the fourth quarter.Marshall & Ilsley [MI 7.62 -0.31 (-3.91%) ] is cutting 830 jobs, or 8 percent of the total. It said 80 percent of the cuts had already been made. It also began a program to reduce costs by $100 million a year, and said no executive officers will receive bonuses for 2008.Hybrid electric and electric powertrain maker Azure Dynamics said it would reduce its workforce by about 25 percent as part of a cost-reduction plan.Motorola [MOT 4.54 0.11 (+2.48%) ] said it would cut another 4,000 jobs, as it forecast a fourth-quarter loss and weaker-than-expected handset sales. The company had previously announced a plan to cut 3,000 jobs in October 2008.MeadWestvaco [MWV 11.78 0.23 (+1.99%) ] , which makes paper and plastic products, said it will cut some 2,000 employees, or about 10 percent of its work force, as it accelerates cost savingsGoogle [GOOG 299.67 0.68 (+0.23%) ] said it was closing three engineering offices and cutting 100 recruiters as the recession dampens hiring. Computer equipment maker Seagate Technology also said it will eliminate 2,950 jobs, or 6 percent of its work force.Seagate Technology [STX 4.39 0.06 (+1.39%) ] is cutting thousands of jobs and slashing some employees’ salaries by as much as 25 percent, a surprise move coming just a few days after the company changed chief executives and announced it was cutting 800 U.S.-based workers.St. Paul-based sanitizer and detergent maker Ecolab [ECL 36.60 1.08 (+3.04%) ] laid off 1,000 workers in response to the economy that has dramatically affected the company’s restaurant and hotel customers.RELATED LINKSCurrent DateTime: 12:56:24 16 Jan 2009LinksList Documentid: 28696143· GE Capital to Slash Up to 11,000· Pfizer to Cut Up to 2,400 Jobs· AMD to Lay Off 1,000· WellPoint to Lay Off 1,500· Hertz to Cut More than 4,000 Jobs· Motorola to Slash 4,000 More Jobs· Google to Cut 100 Recruiter Positions· Seagate Cutting 6% of Workforce· Barnes & Noble Slashes 100 Jobs· Oracle Cuts Several Hundred Jobs· Boeing to Cut 4,500 Jobs· Cigna to Slash About 1,100 JobsThe nation’s largest book store chain Barnes & Noble [BKS 17.88 0.69 (+4.01%) ] said it would cut nearly 100 jobs at its corporate headquarters in New York, due mostly to reduced store openings and consolidated operations at its retail and online segments. The company said it would provide affected employees with an enhanced severance plan and healthcare benefits for the next 12 months, as well as job placement counseling and transition seminars.Barclays [BCS 7.25 -1.15 (-13.69%) ] was the latest major banking institution to announce big layoffs, revealing its plans to cut 2,100 jobs in its retail and commercial banking units, adding to redundancies of the same size in its investment banking arms announced earlier in the year.Dutch financial services group ING [ING 9.33 0.24 (+2.64%) ] said it will cut 750 U.S. jobs as part of a global program to cope with the economic slowdown.Software giant Oracle [ORCL 16.91 0.38 (+2.3%) ] announced it will cut around 500 positions in its North American sales and consulting business. However, this is not as much as some people had speculated.Visteon [VS 0.885 — UNCH (0) ] said it cut salaries for about 2,000 white-collar employees by 20 percent at its facilities in Michigan and adopted a four-day workweek there for the month of January. Visteon will also suspend matching payments for 401K employee retirement plans and reduce new hiring, it said.U.S. manufacturer Cummins [CMI 26.32 0.22 (+0.84%) ] it would cut its global white-collar workforce by at least 800 and reduce its top executives’ pay by 10 percent next year to save money during the deepening recession.Lexmark International [LXK 25.45 -0.36 (-1.39%) ] announced that its fourth-quarter sales came in worse than expected,prompting a decision to cut 250 jobs and transfer roughly 125 more to lower-cost countries in the coming months.Drugstore operator Walgreen [WAG 26.91 0.01 (+0.04%) ] said it will cut 1,000 jobs by mid-year, or about 9 percent of corporate management, through a combination of voluntary buyouts and layoffs.Boeing [BA 42.46 1.50 (+3.66%) ] , the world’s second-largest airplane maker, plans to cut about 3 percent, or about 4,500 positisons, of its work force as a weakening global economy lowers demand for jetliners. Many of the cuts will be in areas not directly associated with aircraft production. This will be the company’s second round of layoffs after cutting 800 workers in November 2008.Cigna [CI 15.27 0.55 (+3.74%) ] said it will cut about 1,100 jobs and consolidate some offices because of the flagging economy and won’t give pay raises to salaried employees this year.Alcoa [AA 9.43 0.06 (+0.64%) ] said it will eliminate 13,500 jobs, or 13 percent of its work force, in order to conserve cash and cut costs in the face of the global economic downturn.Schlumberger [SLB 39.90 -0.28 (-0.7%) ] , the world’s largest oilfield services provider, plans to shed 5 percent of its North American workforce, or 1,000 jobs, and is looking at cuts elsewhere, a spokesman said on Thursday.Oilfield service company Halliburton [HAL 17.74 0.32 (+1.84%) ] also confirmed it will begin laying off workers but hasn’t said how many or when.

HayesJanuary 17th, 2009 at 9:47 am

another excellent article by Michael Pettis Monetary conditions might exacerbate the Chinese adjustmentJanuary 15th, 2009 by Michael Pettisexcerpt”The US experience in the Great Depression suggests that among the things we should be most worried about in China is underlying monetary conditions. If hot money outflows accelerate and, as is likely to happen, the trade and FDI surpluses drop sharply, we could start to see some large monthly net outflows, and it shouldn’t come as a surprise if large outflows increase the perception of risk and so encourage further large outflows. Remember that outflows mean dollars sold by the PBoC in exchange for RMB, which represents a contraction in the base money supply. If China is forced to experience a sharp monetary contraction on top of its economic adjustment, things could easily get out of hand.”

The AlarmistJanuary 19th, 2009 at 3:23 am

You ever wonder what a Roman of 410 AD felt like as he sat starving in his walled city surrounded by the barbarians? He probably thought, gee, my house was worth 300,000 cisterces last year … it’s sure to come back after these pesky Goths go away … the Emperor assured us they would, in time, go away. All will be well if we just hold on to hope.Moral of the story … The goths didn’t go away. After nearly starving to death, the Senate received the demands of the visigoths: All the gold, silver, jewels and wealth of the city.The Senate dared to ask, “But what will that leave us?””Your lives,” was the reply of the Goths.Guess we should be glad to escape with that much.