Nouriel Roubini's Global EconoMonitor

2009 RGE Monitor World Economic Outlook – Executive Summary

With the industrial world already in outright recession and the emerging world navigating towards a hard landing (growth well below potential) we expect global growth to be flat (around -0.5%) in 2009. This will be the worst global recession in decades as the fallout of the most severe financial crisis since the Great Depression took a toll first on the U.S. and then – via a variety of channels of recoupling – on the rest of the global economy.

We forecast that the United States economy is only half way through a recession that started in December 2007 and will be the longest and most severe in the post war period. U.S. GDP will continue to contract throughout all of 2009 for a cumulative output loss of 5%.

One last look at 2008 will reveal a very weak fourth quarter with GDP growth contracting about -6%, in the wake of a sharp fall in personal consumption and private domestic investment. We see the real GDP growth contraction playing out through the year as follows: Q1 2009 -5%; Q2 2009 -4%; Q3 2009. -2.5%; Q4 2009 -1%, adding up to a yearly real GDP growth of -3.4% for the U.S. in 2009; our forecast is much worse than the current consensus forecast seeing a growth recovery in the second half of 2009; we also predict significantly weak growth recovery – well below potential – in 2010. Canada entered recession at the end of 2008, and the outlook for 2009 is likely to be worse, with the economy contracting by an estimated 1.5-2% for the year.

In 2009, Latin American countries will face a significant slowdown in economic growth. A combination of negative external shocks will slow down regional GDP growth to 0.8% in 2009. Under our scenario, all countries in the region will experience significant deceleration of economic activity in 2009. We expect Argentina and Mexico to shift into negative growth territory on a year-over-year basis. For the region as a whole, recovery will likely begin between the first and second quarters of 2010.

The latest cyclical upswing in the Eurozone was largely driven by a temporary but powerful boost to domestic investment from disappearing risk premia in the aftermath of the adoption of the single currency, and by external demand from a buoyant world economy. Both demand sources fizzled out by the second half of 2008, leaving the Eurozone as a whole and its largest members exposed to diverging deleveraging patterns in the face of suboptimal EMU-wide automatic fiscal stabilizer mechanisms. The latest record low readings of leading and sentiment indicators point to a severe recession ahead in 2009 that shapes up to be worse than the 1992/93 crisis. For the Eurozone we expect a below consensus y/y contraction in real GDP of around –2.5%, with negative growth in each of the four quarters of the year.

The United Kingdom economy is poised to shrink in 2009. Our forecast of a -2.3% growth in real GDP is below consensus as we do not expect a recovery in the second half of the year. Despite the relative resilience of consumer spending, investment should continue to collapse and the housing sector is yet to reach a bottom.

The Nordics, whose growth has outpaced other developed economies in recent years, are poised for much slower growth in 2009 and most likely an outright recession in most of the countries in this region. After growing faster than the world for the past decade as convergence occurs, Eastern Europe is set to slow abruptly in 2009. Countries with the largest current-account deficits—notably Estonia, Latvia, Lithuania, Romania, Bulgaria — are the most exposed to sharp corrections. Estonia and Latvia are already in the midst of sharp recessions, and Latvia turned to the IMF for help in December to avert crisis. The risk of an outright financial crisis is high in a number of countries in this region.

The combination of global credit headwinds and lower oil prices have dampened growth prospects in the Commonwealth of Independent States (CIS) (ex-Russia) with growth expected to slow to about 2% in 2009, with Ukraine and Kazakhstan being hardest hit by the crisis. With oil prices remaining well below half of the 2008 level, we expect Russian output to contract by 2.5-3% in 2009 as manufacturing contracts and Russia’s inflow-fueled consumption slows sharply.

The remainder of the Executive Summary and the rest of the report can be downloaded here and is available for premium subscribers.

235 Responses to “2009 RGE Monitor World Economic Outlook – Executive Summary”

Octavio RichettaJanuary 19th, 2009 at 4:24 pm

Short and sweet it is basically a couple of pages with what we have read on the press plus over 20 pages of IMF stuff clearly showing that even a moron should have known what to do with his IMF taxes.Mr. Geithner is an (apparently) very intelligent, highly trained individual, a graduate from Dartmouth (BA) and J. Hopkins (MA in International Economics). The type of guy who “eats” financial statements and tax-related issues for breakfast lunch and dinner.If you read about Mr. Geithner’s academic and career accomplishments, his memberships in the Bank for International Settlements (chairman) – Committee on payment and settlement systems, Center for Global Development (Board of Directors), Council on Foreign Relations, Economic Club of New York (trustee), Group of Thirty; it is virtually impossible to believe that his oversight was an innocent naive mistake.This is a guy who knows the IRS audit system inside-out, the odds of getting caught, and the fact that the penalty for getting caught is low.He has ample experience in filing tax returns in a variety of situations which included self employment work (schedule C) which is very similar to the situation at the IMF (the IMF is simpler).Mr Geithner, you could have played “smart ass” and gotten away with it if you were a common citizen. I am not endorsing your behavior for a common citizen but such behavior for a common citizen would have no criminal consequences even though I assure you the IRS would harass a little guy who commits your “small indescritions” A LOT MORE than they have harrassed you, particularly from now on since you will probably be the boss there.Amerikan senators, come on, shock me once again as you did with TARP when being chicken about your reelection won over principle.I am wondering how you are gonna sell the Amerikan public on this one? T. Geithner is to important to the system to fail?

Henry in SeattleJanuary 20th, 2009 at 11:12 pm

Crooks and hypocrites brought to you by the most ethical congress ever according to annoited Nancy Pelosi.

Mr. AnonymousJanuary 19th, 2009 at 4:16 pm

Why doesn’t everyone get outraged by massiave stupid 800 billion to 1 trillion dollar government bailouts, stimulus packages, backstops, capital injections,T.A.R.P., etc…. why doesn’t everyone just say Laissez-Faire?! Since when is government intervention good? Do we really want a gov run financial sector? Are we all asking for communism, socialism, or fascism? Lame! Laissez-Faire!!! The governemnt is bring out the conditions necessary to foster another major US (and global) depression! They should just let things run their course. Lets look on the bright side, eventually the entirely stupid american public, they will eventually pretend their houses and commercial property is rising! At that point things will beging to stop worsening. Until then, negative style behavioral economics will reign.

economicminorJanuary 20th, 2009 at 9:10 am

Hope! That a the President will be a Wizard and wave a magic wand and everything will be alright.Insanity, in that doing the same things that got us into this mess will get us out.Denial of the real underlying problems.

GuestJanuary 20th, 2009 at 7:57 pm

GentsDon’t you believe in change?Thats what we will get for the next 4 years!Yes we can have a Pres who will wave the magic wand, with Oprah’s assistance.Remember what she said: “America, he is the one”Just like Keanu Reeves in The Matrix

Mr. AnonymousJanuary 20th, 2009 at 2:29 pm

Global financial catastrophe here we come! Total default here we come! It’s the US Gov to blame, they crowded out investment, crowded out borrowing, and incited a credit crunch. They changed the mortgage rules, allowed zero percent down, they changed the valuation and reporting of level III assets, and now the world (and the USA) will suffer. Financial markets, the economies of the world too, they will be essentially flushed down the toilet. When will the united states dollar be perceived to be trash, litter, worthless? The Bush Administration, George W. Bush, and the entire congress, is to blame! Deficit spending is bad!

GuestJanuary 20th, 2009 at 5:13 pm

I worry a total loss of confidence in the banks will ensue soon… bank failures, bank runs, and total chaos will potentially materialize. How sad. Maybe the economic and financial markets catastrophe will materialize after this spring, when everyone realizes that things are not getting any better, if at all, and then this summer— This summer will be when perhaps a total default will happen!

Mr. AnonymousJanuary 20th, 2009 at 4:41 pm

At this point, shouldn’t there be some type of rebellion, revolution, or civil war in the United States?? The people versus the government scoundrels?! The people should capture all the official copies of the constitution and shoot them, and/or burn them up, maybe along with flag, the senators, representatives, and current and previous executives. The Government has fostered the conditions necessary, and has taken action to exacerbate the world’s economy into chaos, and they have ruined the economic landscape of the USA. I can’t believe how anyone can be excited about the government, or think that they are good. They are the exact opposite. The government is bad, it is ridiculous (not exciting), and something should happen to them.

ex VRWCJanuary 19th, 2009 at 3:58 pm

From the Times Online: Discontent Threatens China Lost in all the discussions about Chinese Treasury purchases and capital outflows and reaction to US inflation is the discussion on the social situation within China, in the face of the reduced growth Roubini’s summary cites. The view in this article view is obviously the view of a dissident, however there is much truth in his assessment, especially as it regards the wealth gap in China and the self-serving bureaucracy.

Andrew G. BernhardtJanuary 19th, 2009 at 4:08 pm

Oh, so when does everyone think all (or I mean the vast majority of them) the banks, brokerages, insurance, and reinsurance corporations will fail?? I’m expecting some bank runs, bank failures, etc. soon! And when I say “banks,” I mean the entire financial sector.~ Andrew Bernhardt

Andrew G. BernhardtJanuary 19th, 2009 at 4:11 pm

Here’s why we’re on the brink of a total financial catastrophe and economic collapse of the United States of America (and other countries), and what I describe as a global Greater Depression…A) The Executive Branch, George Bush, he wrote 750 billion dollar deficits per year (taking the federal gov. debt outstanding from 4.8 trillion to 10.6 trillion; which still excludes state, county, municipal, metropolitan, city, and local debt, corporate, agency, and private sector debt too). This crowded out investment, crowded out borrowing, and incited a credit crunch, and diverted money away from the real estate markets, both residentially and commercially. Oh, and if you include 5.4 trillion dollars of debt the US Gov. has assumed of the failed GSEs then the total debt is now 16 trillion, up 11.2 trillion over the Bush Administration (from 4.8 trillion to 16 trillion)!!! If you calculate it this way, including the GSE failure (government sponsored enterprise failure), then 1.4 trillion was borrowed annually during the 8 years of the Bush Administration. Doesn’t this crowd out investment and borrowing?!?!?!B) The totally financial negligent Congress, (all 435 imbeciles, senators, and representatives) they validated, ratified, and approved of Bush’s massive deficit spending spree— for a war against a terrorist, Osama Bin Laden, hiding in a cave of the mountains of afghanistan, and also the sovereign state of iraq.C) Eventually, with the severe crowding out of borrowing, this diverted enough money away from the securities markets, CDSs, CMOs, the US dollar, stock markets, and especially real estate. And on a global basis!D) The negligent Congress also created a new rule change, and allowed the banks to lend zero percent down style. Lame. Anyone that could take their thumb out of you-know-where, and if they could point at a house, they could have it, zero percent down! Why didn’t anyone decide (but only of course if they had, no income, no job, and no assets) to purchase zero percent down style, 5th Avenue, 6th Avenue, and 7th avenue for example, in downtown lower Manhattan??E) With real estate depreciating rapidly now, banks were smashed across the board, because they collateralized the mortgage risk, and traded it, from themselves to each other, and with their losses materializing rapidly, their income statements, balance sheets, and cash flow statements turned sour rather rapidly. Investors, panicking that the vast majority of all banks globally would fail (after seeing the materialization of their disgusting income statements, and balance sheets after Q1 of 2008), panicked and liquidated their stock holdings, dragging down the stock indices globally, at rates not seen in a very very long time! Volatility also increased rather rapidly to highs never before seen. The losses have been, are, and will be enormous!F) The Congress now pretends that borrowing more money in Economic Stimulus Packages, T.A.R.P. (troubled asset recovery program) funs, bailouts, capital infusions, capital injections, etc. will somehow be good, and also will amount to more than $1 dollar of GDP growth for each $1 of Gov spending! Stupid! Each dollar costs money, its borrowed funds, if borrowed at 4%, on 0.96 per year of GDP is really there at best! The gov. spending is spent and taxed also, taking it from 1.00 to maybe 0.70, where or how do they claim that each dollar is 1.57 e.g. of GDP growth!?!?!? Regardless these rather hasty government reckless spending sprees, they merely crowd out investment, and crowd out borrowing even more, exacerbating the problem further.The Government is to blame— no one else is! There is on one else to blame literally. George Bush, his budgets, and the entire Congress, and their inability to discourage the President from writing huge deficits (over the past eight years) was the entire source of the economic mayhem we’re currently experiencing globally. Duh, deficits matter folks! It’s (always) the economy stupid! Deficits matter, inflation matters, real gdp, and nominal gdp growth matters, interest rates matter too, and numerous labor force figures matter also.I would even claim that the fertility rate, birth rate, and age of first marriage matters— and no one else really cares. Weird to me. The family unit has deteriorated over the past 30 years, with the popularity of intra-uterine-devices and birth controls widespread usage among the younger age stratum. Another thing I have noticed is that apparently the department of education has failed again. Just look at how idiotic, imbecile like, and moronic the entire Congress (judicial branch and executive branch too) is— with their advanced degrees from, ha, ha, the world’s most prestigious educational institutions! Also, the cost of an education is enormous… if people only didn’t go to college, if they saved it, lets say 80k of tuition and living expenses (rent and food, and tuition over just four years!), and if they were plumbers or historians or laid the concrete for the federal highway, at a salary of $56,000 of earned income, then think of the savings they’d have!!! They’d sure be better off!! They’d be much more well off than their college graduate counterparts. Apparently, the benefits of a so called education are seemingly so costly, I wonder a lot how much time it takes the average individual to catch-up and actually reap the benefit of getting their degrees. If they attend graduate school, law school, or graduate school for an MBA, or PhD, or for medical school, the opportunity cost of such a decision is even more enormous!!! The cost is further complicated, more complex, and more costly if e.g. recessions strike and investment results are negative (as they have intensely been as of late). Sure makes the case for Treasuries— and I like TIPS best, treasury inflation protected securities; with principal that’s adjusted to the CPI-U, and the real yield is then applied to the adjusted principal, making for increased principal over time and even increasing coupons over time, assuming inflation over the long run, which historically since 1929 to the present has been approximately +3.26%, or historically from 1950 to the present has been approximately +3.88%.Total Default here we come, a default not only of the US Dollar, but also of the US Debt (the USA’s government bills, notes, and bonds), and soon! All the banks, brokerages, insurance, and reinsurance companies will fail miserably— bringing about the failure of everything else, as economic activity grinds rapidly to a total and complete halt! We’re in for a doozy of a recession, bartering, maybe some riots, a dramatic increase in the crime rates, a civil war, maybe a revolution, and a global financial catastrophe— bringing about a global depression, famine, starvation, and dehydration. Eventually, maybe we’ll be invaded by the Mexicans, the Canadians and peacefully, to keep the peace, deliver food and water, in a huge humanitarian effort for all 300 million poor Americans.Americans were in the past among some of the highest per capita GDP in the world, but not because they know how to make money, no no, no no, they are only good at borrowing money (from Japan, UK, Cayman Islands, Luxembourg, and China) and schlooshing it around, from themselves to each other!I guess we (the entire world’s people we) can literally just thank George Bush, for basically, borrowing too much money (from foreigners- Japan, the UK, Cayman Islands, Luxemburg, and China) for bad causes— and for creating this economic and financial and market chaos. Bush was basically, up to no good! Seems as though George Bush, republicans, and maybe even MBAs (since George W. Bush has an MBA), maybe they all want to practice socialism, and to socialize everything, and make it state run and/or government run, rather than free market capitalism. How lame! I much prefer free market capitalism. Perhaps, Republicans have always just stood for war, regress, and recession, and reckless spending sprees, and for doing the wrong thing? Perhaps, the Republicans want to ruin everything possible that’s important and then coincidentally the government feels as though it has to “take it over” rather than let it fail— also a mistake. I say let it (risk takers, banks, other ailed corporations) fail!!! Merging a bunch of failing corporations is not good either, it is bad, it does not bring about competition, and competition is good, mergers brings about monopolies, which I think are bad sometimes. I like spin-offs, divestitures, not mergers and acquisitions. Otherwise, we should all get Government Bailouts! Just kidding, I have a major laissez-faire approach! This government taking over everything in a bail-out mindset is practically communism, and totally financially negligent to me! The government with its bailouts, is fostering the conditions which have created the next Great Depression, what I call the Greater Depression.What will become of the fallout of the Bush administration?! Will there be malicious maniac heads of state abroad, in foreign countries, that rise to power, in the near future, in tough economic times, going through this economic depression (I call it “the Greater Depression”)? Will World War III begin? I fear for out future.~ Andrew G. Bernhardt, St. Louis, MO… See this for more of my comments:

Andrew BernhardtJanuary 19th, 2009 at 4:35 pm

What’s also interesting is that PE ratios in the USA are at nearly historical norms, of 11 to 14— despite the horrid economic data and worsening recession we’re going to go deeper into, and potentially into a global depression. With PE ratios at historical normal averages of 11 to 14, it’s easy to say that the stock indices have much lower to go. And some “experts” are writing that fundamentals are being thrown out the window— I think not!!! With earnings deteriorating sharply, the e, the denominator (of p/e) declines, and then at the margin, the p being still, the pe ratio rises sharply after a nasty earnings announcement (where e drops)… so then the market corrects itself, and drops further as all its entities drop with bad and worsening eps to report. Nasty global recession or global depression here we come! There is literally no end in sight to the financial and economic fallout of the Bush Administrations.

Glen TernesJanuary 19th, 2009 at 9:08 pm

Quit blaming BUSH! On man cannot do the kind of damage you are talking about (it takes a Village). Maybe we should have waived the white flag and just gave the US to Osama!

AnonymousJanuary 19th, 2009 at 9:49 pm

Oh please, ObL was in a US military hospital receiving treatment not long before 9/11/01. You believed all Bush’s blather for all 8 years?

CahillJanuary 20th, 2009 at 5:29 pm

Amen. You have to be complete MORON to believe one man has done all this. WE THE PEOPLE are all guilty. There may be a few exceptions but I guarantee the majority of even those of us who blog and post here are guilty too. Overspending, Overleveraging, Over induldence. We fed the beast!

GuestJanuary 20th, 2009 at 7:02 pm

Who is only blaming Bush, I would blame him and the entire g-d congress. Clearly, it takes more than one fool to ruin the economy of the world, it takes one fool in the white house, and 435 more fools in the congress. They are damn fools.

Octavio RichettaJanuary 19th, 2009 at 4:44 pm

This one will dry you mad but it is a good one. It is good to see not everyone is “asleep at the Whee” on this one!

* REVIEW & OUTLOOK* JANUARY 15, 2009A Geithner Tax AmnestyThe ‘tax gap’ in profile.Washington is abuzz over Treasury Secretary-designate Timothy Geithner’s $34,000 self-employment tax “mistake.” The brouhaha has prompted a second delay for Mr. Geithner’s confirmation hearing, which was originally scheduled for Friday but will now be put off until after the inauguration.When he does appear, Senators will want to know how a reputed financial wizard could have overlooked his Self-Employment Tax liability for four years. All the more so because he had signed a document from his employer at the time, the International Monetary Fund, certifying “that I will pay the taxes for which I have received tax allowance payments.” Democrats are saying this is no big deal, but if that’s true then perhaps they should consider applying their tax absolution a little more broadly.Some of our readers may recall something called “the tax gap,” which is the estimated difference between taxes due under the law and the taxes that the Internal Revenue Service actually collects. In 2007, the IRS estimated that the gap stood at $290 billion a year. And since Democrats took control of Congress, Senators like Max Baucus and Kent Conrad have made a fetish out of closing the gap. Mr. Baucus has browbeaten the IRS over the gap, demanding plans to close it and putting out newsletters decrying it.In response, the IRS issues regular “fact sheets” to inform taxpayers about such questions as whether your small business is actually a “hobby,” and how you can “help yourself by filing past due returns.” The IRS also audits taxpayers to check that their deductions are legitimate and that they’ve included all their 1099 income and so on. The IRS estimates that more than 90% of the gap is the result of honest mistakes or misunderstandings, but it also includes people who didn’t report their snow-shoveling income, their eBay sales or even their babysitting money.But now Mr. Geithner has come along seeking the job of overseeing the IRS, among other duties. And lo, Mr. Geithner is a living embodiment of The Gap.He’s no different from those people — you know who you are — who overestimated their charitable contributions or “forgot” about that $500 cash payment they received when it came time to do their taxes. Even after the IRS audited him in 2006, Mr. Geithner paid back taxes only for the two years — 2003 and 2004 — for which he had been audited. He did not bother to amend his 2001 and 2002 returns until late last year, when the tax issue came up during the Obama vetting process.But Mr. Baucus, who once called the tax gap “an affront to all the rest of us who pay our taxes,” is not affronted. “This is an honest mistake and it’s clear there was no intention not to pay,” said the Finance Committee Chairman.For our part, we are delighted that Mr. Baucus and Democrats are suddenly in such a forgiving tax mood. In addition to being a teaching moment for liberals, perhaps Mr. Geithner’s tax snafu can do all of America some good. We’d suggest that Mr. Geithner and Mr. Baucus together set a new standard for the IRS in dealing with people who, like Mr. Geithner, make a boo-boo on their tax returns.Let’s have an amnesty — with penalties waived, as they were for Mr. Geithner — for all those Americans who somehow “forgot” to pay their taxes but are now willing to fess up or are audited. If forgiveness is to be the order of the day for the man who may soon be responsible for the IRS, American taxpayers deserve a similar reprieve.Please add your comments to the Opinion Journal forum.

HayesJanuary 19th, 2009 at 5:15 pm

BAUCUS COMMENT REGARDING GEITHNER NOMINATIONWashington, DC— Senate Finance Committee Chairman Max Baucus (D‐Mont.) issued a furtherstatement today regarding the nomination of Timothy Geithner to serve as Treasury Secretary. Baucus’s statement followed the release by the Finance Committee of several documents related to issues uncovered in the panel’s vetting of the nominee.“I am disappointed in the errors found in Tim Geithner’s tax returns and other information, but I am satisfied that Mr. Geithner has taken the steps necessary to fix these problems. That’s why I intend to move forward as soon as possible with a hearing on his nomination,” said Baucus. “The President‐Elect needs a Treasury Secretary on day one. We have to roll up our sleeves and get this economy moving again for the American people, and Tim Geithner has the right combination of experience and skill for these difficult economic times.>/u> For these reasons, I continue to support his nomination to bethe next Secretary of the Treasury.”link

GuestJanuary 19th, 2009 at 5:48 pm

“The Pedagogy of Tax Evasion: Its Extent and Its Determinants”(Some) Relevant excerpts:Dentist jailed for tax fraud: From a US Business Journal, Hawaii — A 63-year-old Hawaii dentist has been sentenced to 21 months in prison for his role in cheating the state and federal government out of more than $200,000 in taxes. Victor H. Zuercher Jr. will also be under supervised released for 36 months after he completes the prison sentence, which he will begin serving June 29, said U.S. Attorney Edward H. Kubo Jr. Zuercher pleaded guilty to one count of income tax evasionInternational Advances in Economic Research; November 1, 2000 ; CEBULA, RICHARD PAUL, CHRIS; …the extent of aggregate income tax evasion can be estimated…Atlantic Economic Journal; June 1, 2004 ; Connelly, Richard T.; … Income tax evasion determinants have been investigated…The results indicate that aggregate income tax evasion is inversely related to the IRS audit…income tax rate, the greater the income tax evasion…AP Worldstream; August 22, 2002 ; MARTIN FACKLER, Associated Press Writer; …Chinese celebrity arrested for income tax evasion. Experts and officials say…CCNMatthews Newswire; May 17, 2005 ; …after being found guilty on eight counts of tax evasion in Ontario Court of Justice on May 16, 2005…declare $465,274 on his 1997 and 1998 individual income tax returns. The fine represents 50% of the federal income tax that he tried to evade…AP Online; May 4, 2005; …pleaded guilty to one count of income tax evasion, a prosecutor said. Roy Wilfred…November 2001 on four counts of income tax evasion for the years 1995-98, U.S…saying he was exempt from income tax. The grand jury indictment…US Fed News Service, Including US State News; February 28, 2006; Small pleaded guilty today to income tax evasion and making and subscribing…charged with two counts of income tax evasion in violation of 26 U.S.C. Sect…pleaded guilty to one count of income tax evasion with respect to his 1998 individual…CCNMatthews Newswire; August 31, 2006; …found guilty on one count of income tax evasion in the Ontario Court of…his 2000 to 2002 personal income tax returns. By not reporting…Guigui made to his clients. “Tax evasion takes money away from the…the minimum fine under the Income Tax Act. The courtCCNMatthews Newswire; January 11, 2005 ; …guilty to five counts of income tax evasion. The fine represents approximately…200% of the total federal income tax evaded.Man gets 18 months for tax evasion: St. Joseph News-Press; October 1, 2001; …three felony counts of federal income tax evasion. He pleaded guilty to one of the…he filed no federal individual income tax return for that year. He also…responsibility to file delinquent income tax returns for the years 1993 through…US Fed News Service, Including US State News; April 26, 2006; …age 41, of Pittston, Pennsylvania, yesterday of income tax evasion for the years 1998 through 2001 and failure to pay…to Lombardo in the tax evasion charges. The four income tax evasion charges each carry a penalty of up to five years…

GuestJanuary 19th, 2009 at 5:50 pm

I think I’m going to forget to pay my taxes for the next 3 years and claim “the Geithner double standard exemption”!

GuestJanuary 19th, 2009 at 5:00 pm

Pretty good analysis by Karl Denninger on the UK banking crisis, and what is about to hit us on this side of the Atlantic.Any premise that the “global bank bailout” scam could possibly work was dashed to pieces this morning.The entirety of the European banking system was routed, with share price losses ranging from 50 to 75 percent – in one day. HSBC, Barclays and RBS were all decimated as the truth has started to leak out and is no longer able to be ignored.This came following BAC, Citibank, Wells Fargo and others in the US being similarly destroyed on Friday, and now State Street (STT) has said they may have another $9 billion in “hidden” (unrealized and un-admitted) losses.It is time to quit screwing around. If the politicians will not do it, we must force them by any means possible – and necessary.The simple reality is that Bernanke and Paulson have between them guaranteed or “bought down” some seven trillion in debt thus far, and its not enough. Proof of this is found in the fact that the banks keep coming back to the well time after time.I said close to two years ago right here on The Ticker that we were likely facing $2-3 trillion in residential real estate losses – real losses.It appears I was too conservative and the actual losses in residential real estate alone will be at least double that amount.We couldn’t afford the original $2-3 trillion.Why not?Because it doesn’t end with residential real estate.The carnage also extends to commercial real estate, car loans, student loans, credit cards and more. In short, it is found in every area of debt, without exception. None of it is safe, and the money is simply not there, nor can it be conjured, to “put things right” with some sort of “tarp it over” scheme.This must be stopped, and stopped now. To the extent we are able, we must recall the money that has been committed. We must eject from policy roles all who had a hand in this so-called “rescue attempt”, and for those who threaten to continue it, they must face indictment for fraud – which is exactly what their policies, at this point, are.We now know these approaches will not and cannot work. The math said they couldn’t work at the outset, but now we can add proof that comes with time and experience – the actual experience now matches the projections, and it all sucks.It is time for President Obama (as of tomorrow) to take the stand and say in a loud, clear voice – NO MORE.If you’re broke, you’re broke. Its unfortunate but true. The bankruptcy provisions must be rolled back so that consumers, as well as businesses, can avail themselves of liquidation. It is what this nation – and indeed all nations – need.As for the markets, Obama’s “pretty candy from the rear end” rally may not come – and certainly, it may not last. If this is yet another attempt by the banks to twist his arm by manufacturing an “imminent crisis” that demands that he throw money at the problem, one can only hope that either he, or China, will simply say “uh uh” and halt the charade.The fact of the matter is that we have been systematically looted so that a handful of people can steal their last bonus check to the tune of $70 billion, another $200 billion has been blown into a black hole of fraudulent accounting under the pretense that these securities “will come back” and all of it is gone. We have “promised” that which we cannot deliver, and the check is on the table.Mellon had it right, and it is time for people to rally to this cry – “Liquidate, liquidate, liquidate. Liquidate it all.”There is a bottom folks. In the stock market, in real estate, in commercial space. It’s just a hell of a lot further down than people want to admit, but until we do admit it, we will do further damage and dig the hole deeper.The time to stop was in the spring of 2007 when I first called “BS” on WaMu’s earnings report; the cops should have descended on them and other similarly-situated banks and shut ’em down. They refused, and we refused to force the issue.Now we have proof through time that the approach taken was wrong – and I, along with the few other voices in the wilderness demanding that open, honest accounting along with bankruptcy were the only and proper course – were right.When in a hole the first rule is to STOP DIGGING.

GuestJanuary 19th, 2009 at 5:00 pm

Out with the old, in with the “new?”:“The Humiliation of America” by Paul Craig Roberts ~ exerptOn January 13, the London Times reported that Israelis have gathered on a hillside overlooking Gaza to enjoy the slaughter of Palestinians in what the Times calls “the ultimate spectator sport,,,.”[I]n his farewell press conference on January 12, Bush said that the world respects America for its compassion.· The compassion of bombing a UN school for girls?· The compassion of herding 100 Palestinians into one house and then shelling it?· The compassion of bombing hospitals and mosques?· The compassion of depriving 1.5 million Palestinians of food, medicine, and energy?· The compassion of violently overthrowing the democratically elected Hamas government?· The compassion of blowing up the infrastructure of one of the poorest and most deprived people on earth?· The compassion of abstaining from a Security Council vote condemning these actions?And this is a repeat of what the Israelis and Americans did to Lebanon in 2006, what the Americans did to Iraqis for six years and are continuing to do to Afghans after seven years. And still hope to do to the Iranians and Syrians.In 2002 I designated George W. Bush “the White House Moron.” If there ever was any doubt about this designation, Bush’s final press conference dispelled it.Bush talked about connecting the dots, but Bush has failed to connect any dots for eight solid years. “Our” president was a puppet for a cabal led by Dick Cheney and a handful of Jewish neoconservatives, who took control of the Pentagon, the State Department, the National Security Council, the CIA, and “Homeland Security.” From these power positions, the neocon cabal used lies and deception to invade Afghanistan and Iraq, pointless wars that have cost Americans $3 trillion, while millions of Americans lose their jobs, their pensions, and their access to health care.”These obviously very difficult economic times,” Bush said in his press conference, “started before my presidency.”Bush has plenty of liberal company in failing to connect a $3 trillion dollar war with hard times. The Center on Budget and Policy Priorities blames Bush’s tax cut, not the wars, for “the fiscal deterioration.”Bush told the White House Press Corps, a useless collection of non-journalists, that the two mistakes of his invasion of Iraq were: (1) Putting up the “mission accomplished” banner on the aircraft carrier, which, he said, “sent the wrong message,” and (2) the absence of the alleged weapons of mass destruction that he used to justify the invasion…The deaths of 1.25 million Iraqis, the displacement of 4 million Iraqis, and the destruction of a country’s infrastructure and economy are merely the collateral damage associated with “bringing freedom and democracy” to the Middle East…

Octavio RichettaJanuary 19th, 2009 at 5:08 pm

Don’t worry, Obi will start by making sure Timmy gets appointed; once thatt gets done, then he will start changing things for the better, including ME policy:-)

GuestJanuary 20th, 2009 at 8:05 pm

Obi 1 – oh I like that!Fools beget fools. The whole damn election was about electing a black man to the WHITE house.Now that reality is here, nothing can stop the devastation that is about to be unleashed upon us.

GuestJanuary 19th, 2009 at 7:04 pm

truly an abomination in every respect but our soul less rulers continue to convince us that “wrong is right and right is wrong” justifying all and any actions including torture, invasion of foreign countries, removal and execution of their leaders, demonization of all who disagree with our policies and in short, justification of any legal or illegal activities by the blind and immoral argument that: THE ENDS ALWAYS JUSTIFY THE MEANS!!!

GuestJanuary 19th, 2009 at 10:22 pm

Our leaders don’t convince me. They don’t convince many. But they have the guns and so they don’t have to convince us, they just do whatever they decide to do. We are unable to stop them.

ex VRWCJanuary 19th, 2009 at 5:09 pm

All of these points against Bush and even Obama and the team are well taken, but our memory needs to be longer to look for the roots of this crisis. The roots are found by also looking within ourselves, at a culture of materialism and consumerism and over-borrowing.Lets get off the bandwagon of wringing our hands about our leaders. Instead, the time has come to start to figure out what we, individually and collectively among ourselves, must start to do. This blog ands others like them are the equivalent of the salons of Paris in the 1780s. The opinions formulated here can have a huge bearing on the direction of thought we take as a people.We get that the bankers and the politicians are beholden to their own interests.We get that they will take all measures to preserve the status quo.We get that the undeserving and the insolvent will get bailed out.We get that there will be nationalism, geopolitical unrest, and even wars.We get that the investment and banking system is broken, and that most people feel locked into a system that is not being used in their interests.Now, what advantages accrue from this poor situation, and what opportunities:As the financial industry winds down, the best and the brightest may turn to other pursuits, which can include things that work more for the betterment of everyone.Someone being unemployed is an opportunity, if we choose to view it as such. It meant their time is no longer being taken in pursuit of things that served no purpose but to increase overcapacity and unsustainable bubbles. Maybe now, retroactively, we address the education gap in America by figuring out how we retrain people in areas of more benefit to society.Now is the time to figure out how to move beyond the typical investment ‘choices’ of equities, bonds, and government backed ‘cash equivalents’. I am talking about localized, community-based investment vehicles, like pools of funds managed in a self-directed IRA, for instance. Base investment on reasonable growth. Invest in your neighbors business. Loan him the money to buy his house. These things are possible.The psyche change now occurring has the potential to wipe out decades of growth in materialistic attitudes that strike at the core of who we are as a people. Lets start again, this time realizing the things that excess greed and consumerism cause. Lets recapture tradition, respect for each other, equality, working for the common good instead of for a buck.We must not lose the only thing we have left – American technical leadership, knowhow, and the audacity to tackle challenges too daunting for others to dare. We must figure out how to keep the technical, entrepreneurial edge that has always driven this country, in a way that is not distorted by excess greed of venture capitalists and ‘high growth’ investors.These things can be done. We are being handed a great challenge and a great opportunity in our time. What we make of it begins with us, individually and collectively. Our leaders may help or hinder us, but they cannot stop a determined movement with a clear goal and purpose in mind. Its time to look seek the light at the end of this tunnel and move towards it. Peering at the carnage and lamenting how dark the tunnel is will not get us there any quicker.

GuestJanuary 19th, 2009 at 6:18 pm

Well Stated. Everywhere around the net there are pockets of people doing things that are similar (what ever happened to OuterBeltway’s braintrust?) one thing when our elites fail us. We know this will happen – they have admitted that they neither care particularly for us or about us. But now, it seems that they are failing themselves as well and scrambling around madly to try to salvage whatever they can. Defeat has been almost admitted:, for one, am not so eager to admit defeat and prepare to learn mandarin so I may kowtow to my far eastern masters (with great reverence and respect for Asian culture, mind you) as an unfortunate American. In that respect, I almost wish we could bring back the (miserably failed) spirit of the PNAC – what could we have accomplished if we had rejected the Stiglitizian ‘great lie’ and embraced true conservative core values instead of this embarrasing failure of neo-conservatism. But I digress on political issues, and this is an economics blog.I wish our new president and administration well, and hope they are far more enlightened than I. But only time will tell, and History (with a capital H) has a nasty habit of popping up at inopportune times and changing the gameplan, despite the best of plans of our elite.The internet may yet save us all – probably not the way we all expected, however.

ex VRWCJanuary 19th, 2009 at 7:11 pm

OuterBeltway’s Brain Trust is alive and well, and is taking a new, more potent form even as we speak. Many of the ideas I speak of are embodied in the vision. Email him at if you want more details.

g AntonJanuary 19th, 2009 at 6:02 pm

I’m not a professional economist, but I wonder about some issue.I think that the essence of inflationary/deflationary economy is supply vs demand. If the populous in general does not have, say, enough money or confidence to buy a new car, demand falls, and correspondingly car prices fall. (Of course, car manufactures have fixed expenses regardless of sales, so if they don’t sell a certain number of cars at reasonable price, they are forced out of business.)In general,the inflationary index is a very good measure of supply/demand IF THE ECONOMY IS NOT MANIPULATED (and that’s a big IF). In my amateur readings of several professional economist is correct, I detect a confusion between the measure of supply/demand (the inflationary index) with supply/demand itself. They say, if deflation is the problem (which it is not), we’ll just “print” a lot more money, and put the economy in an inflationary mode.So what happens if the government in its wisdom prints “a lot more money”? Say you have a $100 in your wallet when you go to bed at night, and the government overnight decides to double the money supply (this is a bizarre example for didactic purposes, but with Economic Master Bernanke at the helm, who knows?). When you wake up in the morning, your $100 dollar bill is now worth $50–in other words, you payed a tax of 50% on all your monetary holdings and savings while you were sleeping. If you’ve been saving to buy a new car, this is a major setback for you. According to our next president Obama, taxes should be lowered as a stimulus and not raised during an economic crisis. Also, it’s much easier to raise prices than salaries. so that in the near term, people will have even less resources to spend on more expensive cars. If there is a long period of economic stability, the original disperity between supply and demand will, of coures, be restored.Another professional economist position that I find difficult to understand is that the dollar will not crash because “it has nothing to crash against”. In other words, if all the world currencies are in trouble, the dollar will be okay. The latin american economies have provided numerous examples of currencies that have become worthless all by themselves. Personally, I really don’t care how many uros I can by with my dollar, but I am concerned with how many pinto beans and tortillas I can buy with it.

GuestJanuary 19th, 2009 at 9:14 pm

In my amateur readings of several professional economist is correct, I detect a confusion between the measure of supply/demand (the inflationary index) with supply/demand itself. They say, if deflation is the problem (which it is not), we’ll just “print” a lot more money, and put the economy in an inflationary mode.

My take on this is that the confusion stems from the whole idea of what inflation is and what causes it. Some economists seem to think that the loss of value is a result of some sort of a magical “action at a distance” ( This sort of belief just confuses the economist himself and will not enable him to explain to others the causes of inflation.Here’s an example:You have a rare lithograph created by a famous contemporary artist. You have decided that you want to sell it and take it to an art gallery to be appraised. The appraiser there tells you that they would be willing to pay you 8,000 USD for it. You tell the appraiser that you want to think about be offer and that you will be back tomorrow. After you go to sleep that evening, the artist has a flash of inspiration and decides to create 2 additional copies of the lithograph he had sold you. He works all night and eventually prints 2 lithographs that looks just like the one you have. The artist then decides to keep them with himself for some years, and locks them into a closet for safekeeping. You wake up in the morning and drive to the art gallery, still willing to sell the art work. You ask the appraiser whether they are still willing to pay 8,000 USD for the art work.Note: At this point neither you nor the appraises knows that the artist has printed additional copies of the art work.QUESTIONS:A. will the appraiser say “no, it is not worth that much anymore”?B. if your answer to A is “yes”, why would the appraiser say so?C. could the artist’s action cause the value of the art work go down even when nobody knows about it and the art work is not available on the market?D. if the answer to C is “no”, then what action by the artist could cause the value of your art work to go down?What I mean with above is that merely printing money does not automatically cause inflation. The additional money would have to be available among the public. This is likely a reason why the government wants banks to lend more, as the government is unwilling to help people to earn better wages.If people earned better wages they would have more money to spend, but instead of pushing for this, the government wants to banks to lend more and people to buy on debt. The government could print money, funnel it to the corporations and ask them to give their workers a higher salary. Now they are instead funneling it to the banks, hoping that these are willing to lend with as weak lending standards as possible.

GuestJanuary 20th, 2009 at 10:18 am

Unless the concentration of wealth at the top is reduced and wages and salaries of consumers are increased, this severe imbalance will continue to keep demand for goods and services much lower than the supply thereof. There simply aren’t enough consumers in the world who make enough money to buy much more than food, clothing, shelter, education, health care, and transportation.

GuestJanuary 20th, 2009 at 3:22 pm

@ “Unless the concentration of wealth is reduced…..”Income inequality is at the core of this crisis just as it was in 1929. All these other explanations are just “econobabble.”Public “intellectuals” little more than political opportunists willing to pimp for those who rule.

GuestJanuary 19th, 2009 at 6:18 pm

an APPEAL!With all the trials and tribulations of the poor soul (sole) below, I felt it my compassionate duty to repost his dialogue as, through no fault of his own except that both life and the IRS have cheated him out of his just due, he missed the boat again in the land of the “free,” by minutes, simply because the previous Thread cheated him out of a fair hearing and shut down! Many helpful replies already have been received. ~ GUESTI am a self employed businessman. I suffer from debilitating depression that prevents me from running my business competently. In order to restore my ability to function, I employed a sexual surrogate and charged the expense to my business. The surrogate does not function well unless I provide her with expensive jewelry, which I also charged as a business expense. She has a mother and a sister who lived in Russia and wanted to come to the U.S. I payed their way here and charged that also.Every month, I receive a box of frozen filet mignons in the mail. I keep some for myself and send some to my best clients. I forgot to subtract the amount I ate myself. It was an honest mistake! Well, you know what happened next. That’s right. I got audited last year. The IRS said I owed $17,000 for unallowed deductions. I promptly paid them. Then they said I knowingly hired the sexual surrogate without determining her immigration status. I assumed she was legal since all her other qualifications were exceptional.Now they are going back to prior returns. They’re telling me I can’t deduct my cocaine expenses even though all my associates deduct their single malt scotch. Next they tell me I can’t deduct the new wine cellar I installed in my basement. And they call this the land of the free!Hide replies Reply to this comment By Wild Bill on 2009-01-19 15:47:27If you swap me the sister for a couple of boxes of the finest Bordeaux wines on which I have already paid VAT in Europe, will either of us still owe some taxes on this transaction before, during or after consumption?Hide reply Reply to this comment By tutterfrut on 2009-01-19 16:04:27Only the 2003’s, however. Right or Left bank – it has a bearing on the answer!Reply to this comment By ex VRWC on 2009-01-19 16:09:35Can we trade lives? Yours sounds more interesting!Hide reply Reply to this comment By ex

GuestJanuary 20th, 2009 at 9:59 am

Dear Self Employed in the Land of Free,It is a sorry state of affairs in a free country when an honest businessman such as yourself is pursued by the coppers at the Internal Revenue. I do no believe you do all the things for which the revenuers say you do, because revenue coppers always blame everything on prominent guys such as yourself.But I am thinking maybe it is not such a good idea for you to be documenting the evidence on the worldwide, like the Clinton guy who put the classifieds down the seat of his pants, as you are in a tough spot and hotter than a forty-five. Liquor and dolls, especially dolls, is apt to cause trouble especially on your income tax deductions.Personally I cannot understand the citizens who are naturally prejudiced against honest businessmen such as yourself who makes an honest wage living high on depression and income tax deductions.But this is not a fair world as we all know. So Brains Axelrod and the boys have made touch with Obama Chicago whom as you know is as of this day to be president of the United States and yours is a very desperate case. There is but one way to go if your desire is to be kept out of the tombs, where the accommodations are no means first class, and that is to claim “honest mistake” – even if you are innocent as we all know. Asking you to forgive my nose in your legit affairs, honesty pays. For Tim the Treasury it pays 40 to 1.No Regrets Frankie

JPJanuary 20th, 2009 at 7:35 pm

Just add the dolls as employees. Give them a draw agaist future earnings (currently deductable) and pay on a commission basis (also deductable). Any expenses they submit (gifts of single malt, gratuity at the casio, first class airline tickets) are deductable. Since they are reimbursed employee expenses – you are off the hook since your employee didn’t follow company policy. When you get auditited or when they don’t meet quota (what doll would?) then fire with casue and sue them to recover the draw you paid and recover any inappropriate expenses paid to them. You’ll win the case but never be able to collect. Since it takes 2 years to litigate, you’ll be in a new tax year to claim the draw and expenses owed as “bad debt” and deduct it a second time.

blindmanJanuary 20th, 2009 at 9:54 pm

w and g,exactly which part of your tribulation excludes you and your obviously systemically significant operation from access to tarp or related relief? please be specific. no detail should be overlooked as these could provide the foundation for the case, the explanation of which, would reveal your demonstrable innocence. over reaching interference in these matters needs to be checked and halted, i say start right here.!with this case lest some fools make a mockery of justice! we will not have it. so what is your ex employee’s/ nanny/ au pere/ cousin/ to be determined’s name? special interests? current address?.WARREN ZEVON lyrics – Dirty Life And TimesSome days I feel like my shadow’s casting meSome days the sun don’t shineSometimes I wonder what tomorrow’s gonna bringWhen I think about my dirty life and timesOne day I came to a fork in the roadFolks, I just couldn’t go where I was toldNow they’ll hunt me down and hang me for my crimesIf I tell about my dirty life and timesI had someone ’til she went out for a strollShould have run after herIt’s hard to find a girl with a heart of goldWhen you’re living in a four-letter worldAnd if she won’t love me then her sister willShe’s from Say-one-thing-and-mean-another’s-villeAnd she can’t seem to make up her mindWhen she hears about my dirty life and timesSome days I feel like my shadow’s casting meSome days the sun don’t shineSometimes I wonder why I’m still running freeAll up and down the lineGets a little lonely, folks, you know what I meanI’m looking for a woman with low self-esteemTo lay me out and ease my worried mindWhile I’m winding down my dirty life and timesWho’ll lay me out and ease my worried mindWhile I’m winding down my dirty life and times

Octavio RichettaJanuary 19th, 2009 at 7:21 pm

I looked at my posts in the last 24 hours and I see I threw a lot of energy of the Geithner affair. I don’t regret having done so, at least I got it out of my system. But in a way it was a waste of time as it is clear he will get appointed (see Hayes post above).Perhaps too early, but I think Obama won’t shape up to be the guy many are hoping for. He may turn out to be an OK president but not the walk on water type many believe he would be. I base my assertion mainly on the Geithner affair which many would say is a small thing.My response: I don’t think a great presidency starts with these kind of tricky plays. The Obama administration was covering this up until it came out in the WSJ last week.

GuestJanuary 19th, 2009 at 8:52 pm

That last thread was an exhilarating experience: like being on the ground floor of history in the making. I hated to see it go. Your posts were a major part of it.The people of the United States either change the way Washington is doing business or the government falls. The American Dream was rooted in justice and in a country of laws. We can’t have people saying everything is okay when it isn’t, that this is a land of freedom, that our leaders are statesmen and trying to do their best, that there’s honesty, that the money power serves the people and not itself… that all we have to do is to put our shoulders to the wheel, and everything will be okay.No! We can’t have that, there must be real change or it’s just be a matter of time before the people rebel. Politicians will have to ride in armored cars – they’ll be open targets. In the old monarchies, the people had pitchforks: but these people will have shotguns and bombs.Obama has two ways out: he can solve the government’s and bankers’ insolvency by substantially raising taxes all the way down to the lowest man in the street—not just on the middle class—or he can institute Argentina-like hyperinflation. But if he does either, he’ll have a Republican Congress in two years.I contend the American people will accept neither higher taxes nor hyperinflation without a major upheaval. I contend Obama is facing a situation similar to that now playing out in South Korea. I contend by his performance Obama only knows if he looks good in the suit he’s wearing — his people already are stealing as fast as they can and the gravy train’s up to its wheels, about to stop.The United States treasury is going to be a basket case. There’s no way out of this mess but to cut spending.

Octavio RichettaJanuary 19th, 2009 at 9:03 pm

Thanks for the kind words. Diz is going to be an exciting week.Perhaps, we will see the low probability event materialize: The Obama administration realizes this is not the way to kickoff a presidency that promised change and get a more qualified individual to replace Geithner.By this time in life (i.e., middle age time), we all have had the chance to have made a mistake for which we have had to pay dearly. We have learned from it and learned to live with it.IMO, Tim Geithner’s “learn from your mistakes time” has arrived. A tax cheat cannot head the US treasury.

HayesJanuary 19th, 2009 at 8:38 pm

Identifying and Understanding the Narcissistic Personality

Narcissists have been much maligned, but according to clinicians who study personality, there are many productive narcissists who succeed spectacularly well in life because they can articulate a vision and make others follow. Elsa Ronningstam, who has been studying and treating narcissists for 20 years, presents a balanced, comprehensive, and up-to-date review of our understanding of narcissistic personality disorder, explaining the range from personality trait, which can be productive, to full-blown disorder, which can be highly destructive. Through fascinating case histories, Ronningstam shows us the inner life of narcissists, the tug of war that exists within them between self-confidence and arrogance on the one hand and painful shame and insecurity on the other. It is the first integrated clinical and empirical guide to assist clinicians in their work with narcissistic patients.

To learn more about the various aspects of “normal” narcissism and Narcissistic Personality Disorder, click on the link below. Narcissistic Personality Disorder (interactive)

ptmJanuary 19th, 2009 at 8:53 pm

A year ago I bet my neighbor $20 that Al Gore would run for president. Lost that bet, so I doubled down and bet him the DJIA would go below $9,800. Won that bet.The neighbor was fired from a managing a paper mill plant and found another job in a neighboring state managing a railroad tank car plant. He is now the proud owner of two homes in two states and the covenants do not allow renting the house next to mine. Anyway he is coming back to check on the house and I feel it’s time to double down again and I’m trying to think of a good sucker bet. Which bet do you like?1. 25% inflation by the end of 2009?2. Failure of Chrysler and GM and GE by the end of the year?3. Nationalization of JP Morgan and Citi Group?They are all good, but I think I can hook him with the first one.

GuestJanuary 19th, 2009 at 9:37 pm

I wouldn’t go for the first one (even if I believed the ‘typical explanation’ given as to what causes inflation). The problem with it is that if inflation was 25%, the US government could well distort the official numbers so that you could not see it in those. So even with a 25% inflation, the official inflation story could still be that inflation is, say, 15%.#2 is possible, esp. IMO the failure of Chrysler as it is foreign-owned.#3 is possible, although you can end up with, not a total nationalization, but a X percent government stake in the institutions.

GuestJanuary 19th, 2009 at 9:47 pm

I go for No. 1 — using the John Williams pre-Clinton stats method you provide, we were only shy of 25% a tad less than 8% in ’08, weren’t we? But you’ll have to rope him in on Williams’.I think GE’s management is too cozy with the power center for an allowed failure there.I’d only take No. 3 if it included giving Dimon the presidency of the United States; I don’t think he’d settle for less. And who’s calling the shots here, anyway? And then Jamie could privatize the nation, under the name of JP Morgan. Makes it official.

Average JaneJanuary 19th, 2009 at 9:28 pm

This is for economicminor from the previous thread.I am an Average Jane. And I AM mad. And I know I’m in the minority.I truly do not know what it’s going to take to wake up the American People. The tyranny of the dumbed-down majority is upon us. It seems to me as though TPTB are carefully trying to avoid whatever trigger point there is that will incite the masses. Apparently our tolerance for pain is unprecedented. We’re distracted by living paycheck to paycheck, a financial morass created by ourselves, for ourselves, because we were too uneducated to see that we were becoming indentured servants to debt. We are all terrified that we’re going back to the Great Depression; or worse, if anyone’s read about the Bolshevik Revolution, headed straight for hyperinflation, massive unemployment, bread lines and all those terrible stories our parents and grandparents told us. We are afraid to go back there and since we know not how to extricate ourselves we remain in the quicksand. Or worse yet, we live in denial that we’re actually in the quicksand.The envelope just keeps getting pushed. More and more losses of our civil liberties, our privacy–we are now guilty until proven innocent of being a potential terrorist in all of our comings and goings. Financial freedom is a joke except for the very elite. We’ve tolerated our leaders starting wars not only against a country that did not attack us, but who started a war against our beloved Constitution and against our People.So we do need to check our premises, don’t we? We do need to question the meaning of the word “success,” don’t we? We do need to Pay Attention to what’s happened to our representative democracy, don’t we?I’m under no illusions that our illustrious leadership will bring us back from the abyss. So some of us, those who are awake, must be strong, somehow. Gather to ourselves those who think like we do, and protect those we love as best we can. Out of great misery can come great compassion–witness the generosity of people helping out victims of hurricanes or floods.We surely need a fresh start. We just don’t know how to make it happen.I am ashamed, economicminor, of the part I’ve played in this grand tragedy. I can only hope that my awakening has not come too late.

GuestJanuary 19th, 2009 at 11:16 pm

Beautifully said, Average Jane.And it’s not too late. It’s a new beginning. From the old ashes of our collapse will come a cleansing, a bright new edifice on our old foundation. For America’s foundation is still there, in her Constitution. We know how much we have lost, but we will rebuild. But we can’t rebuild until the old corruption that has abused our liberty comes down. I’m glad, Jane. For it’s tottering, it’s tottering! The corruption is in the open, the people are beginning to understand the situation, because of the internet. This is our hope. Arbitrary power can only be broken if it is understood. We can, we will take back America. For true prosperity is possible only through freedom.John Adams in 1819 defined liberty to be “a power to do as we would be done by.”Ruth Wilder Lane said in “Give Me Liberty”: It was the Americans who lived and kept their fighting spirit through the hard and bitter times that followed every surge of prosperity, it was men and women who cared enough for their own personal freedom to take the risks of self-reliance and starve if they could not feed themselves, who created our country, the free country, the richest and the happiest country in the world…”You’re not too late, Jane. You’re just in time.

economicminorJanuary 20th, 2009 at 10:25 am

Thank you for being angry. I also am angry but also a little numb. As I watch the Inauguration on TV and listen to those interviewed, there is a huge feeling of hope for our country. That hope is that our new President will actually change the direction of the country. I hope that too.I have been watching the unfolding financial crisis for more than a decade. I am surprised and amazed at how long it takes for cause and effect in this country. The ability of TPTB to pull just one more rabbit out of their wizard’s hat has been the why and how things got this bad. The American people expect TPTB to always be able to pull another rabbit or do one more financial trick from up their sleeves.This is why Americans are not angry yet. They believe and in their belief, is the power of those who pull the levers and push the buttons. So far the crowds have not been to disappointed in the gamesmanship of those who run the show.There is nothing to be ashamed of. Everyone needs faith. Those of us with little faith have only ourselves and that is a lonely place. Humans are tribal. It is easier to go with the crowd than it is to go it alone. In fact it is not only difficult to go it alone, it is really impossible. Society does not like individuals or independent thinkers.None of this stops change. None of this stops cycles. None of this prevents anything. In fact it is the cause of change.TPTB may be able to put in one more fix. I don’t see how. The numbers just don’t work out in my mind but I have been wrong before about timing. I do see that many of the systems we are relying on have major differences between the image of what they are and what they actually do. I think that all the built up forces of change are all coming together, joining forces so to say, into a rogue wave or a K wave.I see all this brought on by finance but all our systems are inter connected and inter laced with financial aspects. The timing is over due for a major change. I think it is happening. If I am correct, this will be the kind of change that will go down in history as a major event. The Bush/Clinton years will pale in comparison.If I am right and intervention in our financial system is ineffective or worse pushes the system over the proverbial cliff, we will see anger show up generally through out the country by the end of the year. I don’t know who it will be directed at but I can see the hope in the crowds in Washington DC and in my local community. When hope doesn’t fix the pension funds or the economy and things don’t get better, people will want someone to blame.Can Obama direct this anger in a positive way? I hope so. IMO he is making errors in his reliance on stimulus. I do not like some of his cabinet and other picks. His speeches on the economy have put a lot of emphasis on the stimulus which even the CBO has not come up with numbers to support. I think this is a mistake. But we as a country need someone to rally around and he is the one for the moment. Let’s pray for the country and our new President.

JPJanuary 20th, 2009 at 7:44 pm

Angry is a good word – disappointed is another…Let’s push our Federal Governement to publish Annual Financial Statements that meet GAAP. I can’t tell how bad things are becasue I don’t have good data.

Octavio RichettaJanuary 19th, 2009 at 10:01 pm

Things don’t look so good out there. Nikkei trowing another tantrum, trading 3% down to under 8k; and the asx 200 down almost 4% as of this posting. don’t show a very nice welcome for Obama. you think Asians don’t read the press? The Obama ship has been torpedoed (actually it hit an iceberg as they did it to themselves) and is now leaking water big time. Geithner is fatally wounded and is now moribund. He’ll soon become shark food.A blunt, repeat offender tax cheat cannot run the US treasury.

GuestJanuary 19th, 2009 at 10:19 pm

Octavio, is there any additional comment to add to this excerpt from Denninger today, posted above? What’s your take on the European banking rout, if any? Sounds like the train’s hit the wall.Any premise that the “global bank bailout” scam could possibly work was dashed to pieces this morning.The entirety of the European banking system was routed, with share price losses ranging from 50 to 75 percent – in one day. HSBC, Barclays and RBS were all decimated as the truth has started to leak out and is no longer able to be ignored…It is time to quit screwing around. If the politicians will not do it, we must force them by any means possible – and necessary.[I]t doesn’t end with residential real estate.The carnage also extends to commercial real estate, car loans, student loans, credit cards and more. In short, it is found in every area of debt, without exception. None of it is safe, and the money is simply not there, nor can it be conjured, to “put things right” with some sort of “tarp it over” scheme.This must be stopped, and stopped now. To the extent we are able, we must recall the money that has been committed. We must eject from policy roles all who had a hand in this so-called “rescue attempt”, and for those who threaten to continue it, they must face indictment for fraud – which is exactly what their policies, at this point, are…If you’re broke, you’re broke. Its unfortunate but true. The bankruptcy provisions must be rolled back so that consumers, as well as businesses, can avail themselves of liquidation. It is what this nation – and indeed all nations – need…The fact of the matter is that we have been systematically looted so that a handful of people can steal…

Octavio RichettaJanuary 19th, 2009 at 10:46 pm

From all the stuff I read, European banks may be in worse shape than their US counterparts. I ask: how is that possible?I first posted about the recession in Europe possibly being worse than here sometime around the time of the BS bailout last March (not an original I read it somewhere. One of those private banking reports from either UBS BNP Paribas.Gee it may be the time to take a flyer on gold at whatever price. It is time to run for cover.But don’t worry Obi’s speech tomorrow will turn the tide in no time.

JLarkinJanuary 20th, 2009 at 8:31 am

Octavio,I agree there seems to be noplace to hide. Taking a flyer at gold, oil, any commodities might make sense. Peter Schiff has been recommending that for months and months, but of course the asset deflation lately would be hard to swallow if you were overweight commodities back then. Maybe now is a good time. Schiff also recommends foreign blue chips, but as you point out, EU’s problems could be as bad or worse than ours.

jimmieJanuary 19th, 2009 at 10:31 pm

There have been many reasons offered for America’s economic crisis, but a very important one has not: the reaction of foreign investors to America electing a candidate proposing real and dramatic change.Nothing frightens investors, especially foreign investors, more than unexpected change. If a little detective work is done, or if you know the right people, you will find out foreign capital started to be withdrawn when it became apparent that Barak Obama was to be the Democratic party’s nominee. That is what sunk Bear Stearns.Panic was stemmed by very private messages that of course senator Obama was not going to be elected and that it would be business as usual with senator McCain as president. The outflow of capital slowed, but several months later foreign capital seeking rapid returns headed into commodities. The skyrocketing of the price of oil was one result.The Republican party held their convention from September 1 thru 4 and Sarah Palin was choosen as senator McCain’s running mate. There was a brief pause as no one knew anything about her. But within a few days as it became clear that she was completely unqualified, foreign investors realized that the Republicans were throwing the election. The investors then began to quickly pull their money out of all american investments that weren’t completely backed by the american government, i.e. hedge funds vs treasury notes.Every hedge fund and the companies offering them became bankrupt necessitating the need for the bailout. This is what Americans are not being told.

K in TXJanuary 19th, 2009 at 10:44 pm

Downshifting…Re:government stimulus/investment this little PBS documentary might be nudge in the right direction. caught it on my local PBS. Has some very simple concrete action items that would reduce energy usage, or at least slow increase in usage, and save the government money over time as a bonus.Of particular interest to me was the city of Austin, which decided that, rather than build a additional power plant, they would instead invest in improving efficiency throughout the city so that a new plant wouldn’t be needed. Mostly low tech stuff was employed here…roof coatings, sealing air ducts. The city produced the same net effect of a new plant at half the cost.LEDs were another big thing. Saving money from local budgets by replacing old traffic lights reduced the cost for electricity and maintenance. At one point the film posits that changing all the EXIT signs from old technology to LED signs would cut U.S. energy consumption equivalent to that produced by 5 nuclear plants.This was all existing technology with a big emphasis on efficiency/conservation. As make work projects go, how many EXIT signs could you change for what it costs to build and run 5 nuclear plants?I was surprised how far efficiency has come in large appliances just in the past 5 years. New washers use 1/3 the electricity of old ones and refrigerators may use 1/2 as much as the one you have now. How many plants could we NOT build if we had a cash incentive to “trade in” large appliances over 5 years old?Grist for the mill…

Average JaneJanuary 20th, 2009 at 2:07 pm

K in TX, this is wonderful news.But.Where I live apparently there’s been enough of a decrease in energy usage so that the local utility company is asking to raise its rates.They get us one way or the other.

K in TXJanuary 19th, 2009 at 11:04 pm

Retail Liquidations…FWIW, I caught a couple of posts last thread re:crummy deals at Circuit City. Having participated in this process as a retail manager years ago this was my experience.The liquidation company rolls in and everything is marked up to the highest price ever recorded in the computer system. Staff is kept on by offer of a “bonus” (read:severance) if they stay on to the bitter end.Markdowns proceed on a schedule determined by how sales numbers are running. Sales numbers must be reported to the liquidators daily. If initial markdowns (read:markups) are moving then it might be some time before an additional markdown is made. Many consumers (enough) simply seem to believe they are getting a good deal if there is a “Going Out Of Business” sign in the window.When sales slow sufficiently a new markdown is done. Process continues with the best balance of price/selection in the 40% – 60% off range, though even these markdowns may not be a bargain on very inflated items. Eventually the markdown hits 70% – 80% at which time fixtures will be sold as well. Once fixtures are for sale the end is near.In my experience nothing went lower than that, as remaining stock was boxed up and sold in bulk to an off-site liquidation company. Said company most likely marked the items up again and gave it another whack, perhaps online.With some exceptions I believe one is most likely to find the best deals at end of season clearance sales, or on discontinued items because of this final step.So far I haven’t encountered a retailer that dealt with off-site bulk liquidators in the regular course of business. There are some chains that operate “outlets”, but many of these outlets carry merchandise made for the outlet rather than merchandise unsold by the regular stores.Happy bargain hunting…

GuestJanuary 19th, 2009 at 11:44 pm

Good insider stuff. When the markdown hits 70%-80% at which time the fixtures are sold and nothing goes lower, I’m assuming most of these markdowns are valid, i.e., off the original price. Am I right?

K in TXJanuary 20th, 2009 at 8:32 am

They are valid discounts off of the highest retail price, which may be a good deal, but may not be a great deal.As an example let’s take a flat panel television. The television when it first came in the store may have been $1500. That is the price the liquidators will work from. However, that item might have come into the store 12 – 18 months ago and was most likely reduced in the interim.So if the television was selling at a price of $1200 when the liquidators took over that would be marked back up to $1500. Then when the liquidators mark it as “20% off the original price” it would go back to $1200. It’s very unlikely that this particular item would make it to 70% off, but I think this gives you the idea.

GuestJanuary 20th, 2009 at 11:27 am

This is priceless information: I always fall for bargains — never aware I should do a little price checking. You know, if an item was $100 and it’s marked down to $75, I automatically think I just made $25 and have cash in the bank. The retailers “know” me.

g AntonJanuary 20th, 2009 at 12:06 am

Perhaps before we get too wrapped up in pre-judging Obama, we should look back over the last eight years with George Walker Bush as our leader.One of my favorite books is Stephen Mitchel’s translation of the “Tao Te Ching”–a really beautiful book. In it, Lao Tzu gives us four simple catagories for judging the leader of a country. I leave it to the reader to select the catagory that best fits George Walker Bush:When the Master governs, the peopleare hardly aware that he exists.Next best is a leader who is loved.Next, one who is feared.The worst is one who is despised.If you don’t trust the people,you make them untrustworthy.The Master doesn’t talk, he acts.When his work is done,the people say, “Amazing,we did it, all by ourselves!”

HayesJanuary 20th, 2009 at 7:36 am

actually this Kotok article from Ritholtz is worth placing here IMO:Geithner and the NY Fed Code of ConductJanuary 18, 2009 David Kotok, Chairman Cumberland Advisors

We will start with two quotes.“It is indispensable to the proper functioning of, and the maintenance of public confidence in, the Federal Reserve Bank of New York (“Bank”) and the Federal Reserve System (“System”) that every employee perform his or her duties with honesty, integrity and impartiality, and without improper preferential treatment of any person. Each employee has a responsibility to the Bank and to the System to avoid conduct which places private gain above his or her duties to the Bank, which gives rise to an actual or apparent conflict of interest, or which might result in a question being raised regarding the independence of the employee’s judgment or the employee’s ability to perform the duties of his or her position satisfactorily. Each employee should conduct his or her financial affairs with integrity and honesty. To ensure the foregoing, each employee, including all Bank officers, shall respect and comply with the principles and standards of conduct contained in this Code. An employee who needs assistance in interpreting the provisions of the Code or who desires additional information should contact the Bank’s Ethics Officer.”Source: Code of Conduct, Federal Reserve Bank of New York.“There will be false starts and setbacks, frustrations and disappointments. I will make some mistakes, and we will be called to show patience even as we act with fierce urgency.”President-elect Obama, in Philadelphia, before he commenced his historic rail trip to Washington.We thank our readers for the many emails regarding the nomination of Tim Geithner for Treasury Secretary. His hearing is scheduled for January 21, one day after our newly elected President Obama officially takes office. Remember that this is the new US Senate at work, too. Many eyes around the world are watching to see how they handle this hearing, now that the facts around the Geithner tax scofflaw behavior have been disclosed.Our email and conversations have revealed several things. The email critical of Geithner and suggesting that his name should be withdrawn is consistent and in high volume. He has no defenders. Only two emailers responded that this is not a “big deal” and “what difference does it make,” since all the politicians are like that.Most emailers did not extend the error to Obama. They noted that Obama’s staff people and vetting process were at fault for letting the nomination proceed, but they were not ready to extend Geithner’s apparent judgment error to the new President. Obama enjoys the “honeymoon” status that most observers affirm.One member of Congress I spoke with noted how appalling this Geithner revelation is and that “it is no wonder” the public holds “such a low opinion of politicians.” Several political staffers said the same. All of this was “off the record.” After all, no one in Washington wants to publicly alienate the future Treasury Secretary in case Geithner gets confirmed.A former IMF employee noted how they were advised about these taxes repeatedly and in writing and that the IMF was very proactive in getting tax compliance from its staff. They saw Geithner’s excuse as lame and they found his claim of innocence “inconceivable.” The IMF has confirmed the story about the written documentation that they gave out.Federal Reserve officials are silent on this matter, as they must be. And the board of the New York Fed is silent as well, even as they conduct a search for Geithner’s replacement. There are six names in play for the NY Fed presidency; they include prominent NY Fed senior officers. The Fed’s Washington-based Board of Governors has its input into this replacement choice and is also publicly silent.The Geithner affair has become an embarrassment to the Federal Reserve. We can expect the vetting process for new Fed presidents and governors to become more intense as a result. In a way this is a good thing. Obama will be appointing several more Fed governors and has the option to replace Bernanke as chairman within a year. We will not see any more tax scofflaws holding Fed positions.Several readers commented on the double standard that would prevail if Geithner is confirmed. They recalled the facts around the “pulled” judicial appointments of Kimba Wood and Zoe Baird for the judicial vacancies at that time. In the case of Wood, she paid her taxes legally and on time and she violated no law. She did employ a “nanny” who was an undocumented person (illegal alien status). Perception alone was enough to end her consideration for the nation’s highest court.The Geithner affair is now in the hands of the US Senate. They have heard from the press (lots of critical editorials and letters to editors). They are aware of the facts. And they know that the world is seeking a new and trustworthy level of integrity and transparency in the post-Lehman, post-Madoff environment. Senators know that the qualities of good character and sound judgment are needed by the Treasury Secretary. Senators also know from the behaviors within their own ranks that the tests of character and judgment are most profound when they are determined by behavior that occurs when no one is watching.The only open item is whether the Senate has heard from you. Email is nice and easy but a phone call with a message to a Senator’s office carries a lot more weight. Politicians know that emails are easily sent. They have greater respect for constituents who pick up the phone. The US Capitol switchboard number is (202) 224-3121. If you do not know the name of your Senator, ask the operators; they will help you. The same is true for your Congressman. They can connect you to an office so that you may leave a message.We close by remembering an interpretation of an ancient text.God was talking with Adam in the Garden of Eden. He was describing all the trees that would be in the world since they were all there for Adam to see in that special garden. The trees were the metaphor for all the decisions that men and women would be making in the future. Adam asked God what he was going to do with the trees. God replied, “I am going to give them to you. What you do with them will be your decision.”On January 21 a piece of a tree will gavel a Senate hearing to order. Tim Geithner’s confirmation or rejection will be determined. And then newly inaugurated President Obama will see if his Philadelphia quote was prescient.Readers who wish may find the full 15 page Code of Conduct of the NY Fed on the New York Fed website by searching under the words “code of conduct.”

David R. Kotok co-founded Cumberland Advisors in 1973 and has been its Chief Investment Officer since inception. He holds a B.S. in Economics from The Wharton School of the University of Pennsylvania, an M.S. in Organizational Dynamics from The School of Arts and Sciences at the University of Pennsylvania, and a Masters in Philosophy from the University of Pennsylvania. Mr. Kotok’s articles and financial market commentary have appeared in The New York Times, The Wall Street Journal, Barron’s, and other publications. He is a frequent contributor to CNBC programs. Mr. Kotok is also a member of the National Business Economics Issues Council (NBEIC), the National Association for Business Economics (NABE), the Philadelphia Council for Business Economics (PCBE), and the Philadelphia Financial Economists Group (PFEG).

Octavio RichettaJanuary 20th, 2009 at 10:04 am

Hayes, U da’ man! My post below were before I read this. The tax cheat will not make it to the treasury!

GuestJanuary 20th, 2009 at 11:22 am

No way he won’t make it, IMO. There’s an unwritten law with these confirmations. Unless there is some extremely obvious evidence, they give the President whom he wants. Also, Congressmen don’t like to have a fight unless there’s a chance to win. After the cabinet’s in, then they can attack. If…if they so want.

GuestJanuary 20th, 2009 at 8:30 am

I have been seeing more and more references to a massive sovereign debt write down by the US by Soros, Fergusson, etc. Is the gameplan to provide huge Fiscal Stimulus and then have a Haircut for the Sovereign Debt Investors to prevent massive Interest Rate hikes in the future? Does anybody have any insight?

Octavio RichettaJanuary 20th, 2009 at 9:20 am

*^@*!^# I just lost my post! I will try again!With XLF down almost 10% and a fresh 52 week low, IMO, due to the “Geithner effect”, I decided to place a bet on US banks not going the Cuban/Venezuelan way.My move was bold. I placed 3% of my capital into XLF Jan 2011 call options with a $10 strike price. If I am wrong and hold to maturity I loose 3% of my capital but if that is the way things turn out to be I assure you the flow of people would reverse from Mexico to the US now to the other way around.

Octavio RichettaJanuary 20th, 2009 at 9:25 am

Fear is building up again. But we are not there with the S&P500 just yet. Can any hacker out there fish out the post from 1.5-2 weeks ago where I say something to the effect of the market rally not making it to inauguration day?

GuestJanuary 20th, 2009 at 2:54 pm

“Owners of capital will stimulate working class to buy more and moreof expensive goods, houses and technology, pushing them to take moreand more expensive credits, until their debt becomes unbearable.The unpaid debt will lead to bankruptcy of banks, which will have to benationalized, and State will have to take the road which willeventually lead to communism.”Karl Marx, 1867

Octavio RichettaJanuary 20th, 2009 at 9:39 am

It looks that way but it may not hold. PPPt has got a broken back. But let’s see what Obi brings out of the genie bottle. He may come up with something that works with the WS crowd. However, what will really work before the week is over is him kicking Timmy in the but and getting himself a new treasurer out of the many smart and qualified people we still have in the great USA.

MM CAJanuary 20th, 2009 at 9:38 am

From Roubini this morning: also the way i see it 3.5 Trillion is low- it’s closer to 15 trillion of toxic assests/losses coming- the old CDS issue will nto go go awayGiethner will fix it though- lol – If Obama does not remove him this week, he effectively is making his biggest mistake and one that will haunt him for 4 years… financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis.“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.”Losses and writedowns at financial companies worldwide have risen to more than $1 trillion since the U.S. subprime mortgage market collapsed in 2007, according to data compiled by Bloomberg.President Barack Obama will have to use as much as $1 trillion of public funds to shore up the capitalization of the banking sector, following the $350 billion injection by the Bush administration, Roubini told Bloomberg News. Congress last year approved a $700 billion rescue fund, of which half remains to be disbursed.Bank of America Corp., the largest U.S. bank by assets, posted a quarterly loss of $1.79 billion last week, its first since 1991, and received $138 billion in emergency government funds. Citigroup Inc. posted an $8.29 billion fourth-quarter loss, completing its worst year, and plans to split in two under Chief Executive Officer Vikram Pandit’s plan to rebuild a capital base eroded by the credit crisis.‘Bankrupt’ System“The problems of Citi, Bank of America and others suggest the system is bankrupt,” Roubini said. “In Europe, it’s the same thing.”Stocks in Europe, Canada and Brazil dropped yesterday on speculation government efforts to shore up the financial industry will fail to stem the deepening global recession. The U.K.’s Royal Bank of Scotland Group Plc said it expects to post a loss of as much as 28 billion pounds ($41 billion) for 2008 and the government got ready to raise its stake in the lender.Oil prices will trade between $30 and $40 a barrel all year, Roubini predicted.“I see commodities falling overall another 15-20 percent,” Roubini said. “This outlook for commodity prices is beneficial for oil importers, it’s going to imply that economic recovery might occur faster, but from the point of view of oil exporters, this will be very negative.”Oil has tumbled 77 percent from its July high of $147.27 as the global economy sinks into recession, straining the budgets of crude exporters. Saudi Arabia, Oman and Dubai, the second- largest sheikdom in the United Arab Emirates, have said they will post budget deficits this year.Crude oil for February delivery fell to $32.70, down 10.4 percent from last week’s close and the lowest since Dec. 19, on the New York Mercantile Exchange today. The contract traded at $33.37 a barrel at 10:45 a.m. London time.

Octavio RichettaJanuary 20th, 2009 at 9:42 am

Of course the banks being broke is part of the problem, we all knew that, even Benny. But, IMHO, What the market is really telling/asking from Obama is that he has to get rid of Tim Geithner ASAP.

Brian ShriverJanuary 20th, 2009 at 10:08 am

Two points:1) Why describe emerging markets’ growth below “potential” (whatever that is) as a hard landing? It looks like you’re suggesting the EM will face a slowdown but not an outright recession. Or maybe a slight recession. But to call this a “hard landing” is a bit of a misuse of language.2) The term “stag-deflation” is also silly. Stagflation, already a stretch, is simply a contraction in aggregate supply. Stag-deflation (ugh – it hurts to type it) is simply a contraction in aggregate demand. Why try to coin ugly new terms when existing terms work well?JMHO FWIW

Octavio RichettaJanuary 20th, 2009 at 10:13 am

Sorry Brian,You may turn out to be right but based on the info we have now you are a bit behind the curve on EM current thinking.

GuestJanuary 20th, 2009 at 10:22 am

An ode to Timmy “gotta go” GeithnerThere was a man who was so smartThat Obama wanted from the startAnd when they found he had not paid his taxThe public tried to give him the axBut in the end he is confirmedShowing once again the people do not learnThat the one calling the shotsAre those who devise these diabolical plots.

GuestJanuary 20th, 2009 at 10:37 am

Loans threaten Minnesota community banksCHRIS SERRES, Star TribuneFor much of the past two years, Minnesota’s community banks have seemed to escape the credit crisis engulfing the nation’s largest banks.Until now.Dozens of Minnesota banks have entered the new year on shaky footing, hobbled with millions of dollars of commercial real estate loans going sour at an alarming pace. Several analysts predict that some community banks could fail in the state this year, as the slump that began in the housing market spreads to business loans backed by land and buildings.”Any bank that has a sizable book of commercial real estate loans could have serious problems in 2009,” predicted Jamie Peters, a bank analyst at Morningstar in Chicago.Across the state, banks are beginning to feel the impact of loans they made to borrowers during the real estate boom, when property values went nowhere but up. The delinquency rate on commercial mortgages and construction loans made by Minnesota banks jumped 84 percent from the third quarter of 2007 to the same period in 2008, according to Foresight Analytics, a real estate research firm in Oakland, Calif. As of the third quarter of last year, 5.7 percent of commercial real estate loans in Minnesota were more than 30 days past due, up from 3.1 percent a year ago, according to Foresight Analytics.Officials with the Minnesota Department of Commerce, which regulates 429 state-chartered banks and credit unions in Minnesota, acknowledged the problem and said they are concerned. The department’s watch list of banks it considers in “less than satisfactory” condition has nearly doubled over the past 18 months to 50, from 26 in June 2007. A handful of those banks are at risk of possible failure, say Commerce Department officials, though they declined to identify them.In contrast with past economic downturns, many of the problem loans are showing up at Twin Cities metropolitan-area banks, as opposed to banks in small towns and rural areas, said Kevin Murphy, deputy director for financial institutions for the Commerce Department. “We’ve had a booming, consumer-oriented economy for many years here in the metro area,” he said. “And the merry-go-round has stopped. Not everyone is finding a seat when the music stops.”The fallout could ripple through the state’s entire economy, analysts said. As the economic slump deepens, and more commercial real estate loans go into default, banks will be under increased pressure to dump bad real estate loans and to curtail new lending as a way to preserve capital, analysts said. Many Minnesota banks dipped into their cash earnings in 2008 to shore up their reserves against loan losses.Already, local real estate developers say they have noticed banks tightening credit standards on land and development loans. They’re asking for additional collateral and demanding quicker repayment.”A bank will never tell you that they’re not doing loans,” said Richard Lewandowski, head of Edina Development Corp., a real estate development firm that has struggled recently to raise financing for projects. But developers “know that every one of them is reducing their exposure to real estate.”Amid the financial turmoil last year, it was widely assumed that many community banks had steered clear of the excesses that got bigger banks and thrifts into trouble and led to a $700 billion bailout program.But it was community banks that spearheaded much of the real estate overbuilding, say analysts, and the bad loans are now starting to turn sour as the economic decline accelerates.Last week, in an apparent recognition that the financial crisis was spreading beyond the giants on Wall Street, President-elect Barack Obama said he will ask his Treasury Department to direct more money to community banks.”The community banks were taking risks that other banks weren’t willing to take,” said Tony Plath, a finance professor at the University of North Carolina at Charlotte.OverextendedAs of last year’s third quarter, nearly 30 percent of all banks in Minnesota — or 133 banks — had commercial mortgages and construction loans exceeding four times their core capital, a level regulators consider excessive, according to Foresight Analytics. Core capital includes a bank’s common stock and retained earnings, and is considered a key indicator of a bank’s ability to absorb losses. While such a ratio doesn’t mean a bank is in danger of failing, it is cause for concern, analysts say.Even more jarring, 86 banks in Minnesota had commercial real estate loan delinquency rates of more than 10 percent as of the third quarter, according to Foresight Analytics. And 28 of those banks had delinquency rates in excess of 20 percent. By comparison, the national delinquency rate on commercial real estate loans is just 4.9 percent. Analysts consider a delinquency rate of more than 5 percent on a book of loans to be troubling.”With real estate exposure like that, the probability is high that a number of Minnesota banks will not survive the year,” said Plath. “The young banks that haven’t been through a recession will be in particular trouble.”Nationwide, the financial industry is experiencing its largest number of bank failures since the third quarter of 1993. In the third quarter of last year, 73 financial institutions were absorbed in mergers and nine failed, according to the Federal Deposit Insurance Corp. (FDIC) Among the failures was Washington Mutual Bank, a savings and loan with $307 billion in assets and the largest insured institution to fail in FDIC history.’Murphy, deputy director at the state Commerce Department, added that much of the weakness in community bank portfolios in the state is confined to construction and development loans, not business loans secured by commercial real estate. He cautioned against drawing hasty conclusions about a bank’s health by focusing on one indicator, noting that many banks with a sizable exposure to real estate as a percentage of their capital are “excellent banks,” he said.”If they’re all good loans, then who cares? It’s not a problem,” he said. “But if a bank has four or five big loans … and they all go bad, that could have catastrophic results.”Collateral ‘just isn’t there’Still, delinquency rates on commercial real estate loans have surpassed levels of 1994, at the end of the last recession and on the heels of the savings-and-loan debacle. And evidence is building that businesses, and not just developers, had overpaid for properties based on future income assumptions that have not materialized.”If you think losses were bad in 2008, just wait,” said Jennifer Thompson, an analyst at Portales Partners in New York. “The problem is that land is arguably worth almost nothing. There’s no demand for it. … So when a business runs into trouble, the collateral just isn’t there.”At Brickwell Community Bank in Woodbury, commercial real estate loans outstanding totaled more than eight times its core capital as of the third quarter of last year, according to Foresight Analytics.And delinquencies within the bank’s commercial loan portfolio rose to 10.1 percent, more than twice the national average. The bank posted a $2 million loss in the third quarter of last year, largely because it had to increase its reserves against future losses.Brickwell has stayed away from construction and development loans to home builders, but it’s still affected because some borrowers were businesses that sold supplies to builders or contractors, said Ivar Peterson, president and part owner of Brickwell, which focuses on Dakota, Ramsey and Washington counties.”In this environment, there are a lot of things that keep bankers up at night,” Peterson said. “But my biggest worry is the inability of my borrowers to repay their debts caused from the downturn of the economy. … We’re not in the business of owning any real estate.”Chris Serres • 612-673-4308

PeteCAJanuary 20th, 2009 at 10:38 am

The Great EscapeAs Hank Paulson & Co. pack their bags and leave office, I can’t help feeling we’re seeing the departure of one of the great masters of financial deception. Rumors and doubt swirled around the large banks on Wall Street. At issue was not simply the value of trillions of dollars of assets. What was really at stake was potential criminal charges … mortgage fraud, securities fraud, illegal derivatives transactions. The great TARP Bailout became not just an enormous symbol of financial fraud. It was also brilliant because all the assets and evidence were discarded and piled up in the coffers of the Fed – where they would become completely untraceable. Not a single major banker responsible for this mess was ever convicted of a crime. It may be the most brilliant example of the Great Escape ever engineered in American history.PeteCA

MorbidJanuary 20th, 2009 at 12:23 pm

PeteCA,Someone suggested in another thread that this mess should have been resolved the way the Savings & Loan mess was done. Use the bankruptcy process. Nothing is too big to fail. Use whatever infrastructure remains and/or create 10 new banks with Fed funds @ $25 Billion each – when leveraged 10/1 each can buy up on the cheap foreclosed properties up to 1/4 Trillion each.Let all those who overreached – tank.

CMJanuary 20th, 2009 at 10:39 am

Hayes, LOOK AT THE PPT GO!!! THEY ARE VERY AFRAID OF $21.58, it is the “crash” mark for the markets on SSO. We breach that with no PPT save and it is off to new lows for the markets. The $BKX is already down 12% today. The market smells bank nationalization and the shareholders are running for the exits before they are wiped out!!

ex VRWCJanuary 20th, 2009 at 11:33 am

Not to look like an idiot, but could you illuminate me on what you are watching when you watch ‘SSO’ ans what it means? Thanks in advance.

CMJanuary 20th, 2009 at 11:51 am

The SSO is 2X’s levered ETF pegged against the SP&P500. The unique thing about it is even though it is supposed to double the change in the S&P, it seems to move opposite the market at key points, giving you a clue as to trend changes.

GuestJanuary 20th, 2009 at 10:59 am

We now have more poeple employed in government than manufacturing

JimmyTheBankerJanuary 20th, 2009 at 12:02 pm

You mean proud to be an American debt slave…right? And you kids, and your grandkids…yup, that should make you really proud.

crgordonJanuary 20th, 2009 at 1:38 pm

No, I mean I am proud to be an American. I am not a debt slave. Neither are my children, nor my grandchildren. I am proud of the peaceful transfer of power. Proud of the hope that was felt by the 2 million people in DC witnessing the newly-elected President taking the oath of office – swearing to uphold the constitution. I am confident that my president, our president, doesn’t share his predecessor’s view of the constitution – ‘It’s just a goddamned piece of paper’. Proud that in electing a black-skinned person that the US continues to move away from the hatred of the past. No JB, I am very proud to be an American on this day. You either feel it or you don’t. I do.

GuestJanuary 20th, 2009 at 4:08 pm

Another clueless American taken in by the hype and slick packaging.We are deceived over and over and never seem to learn.

crgordonJanuary 20th, 2009 at 5:02 pm

It is true that I am an American. It is untrue that I am clueless. Indeed, I am very “clued”. Hence my comments.

GuestJanuary 20th, 2009 at 4:27 pm

You may be proud of the peaceful transfer of power but it makes me sick to see the peaceful transfer of despotism.

GuestJanuary 20th, 2009 at 11:02 am

@ Mr. Anonymous: Why doesn’t everyone get outraged by massiave stupid 800 billion to 1 trillion dollar government bailouts, stimulus packages, backstops, capital injections,T.A.R.P., etc…. why doesn’t everyone just say Laissez-Faire?! Since when is government intervention good?…”Gargantuan government has brought us to the edge of the cliff. And increasing the dominance and intervention of government at this moment will surely push us over.As the American economy falls into the abyss, the economists and the bankers harp for more, more, more transfer of wealth to the same banking cartel that put us here, unfortunately supported by our Professor. They want to keep the economy wired to the investment bankers, using the money we earned, taken from the futures of our children, so the investment bankers can continue to take our money. It is a deadly cycle – killing off prosperity for the American people.Is American free enterprise to be the scapegoat for this mess, as government force uses trillion dollar bailouts and taxation and self-serving regulations benefiting the monopolies and free lunch payola for the voting majority to choke the last life out of this American miracle?Is this the final step that will take American prosperity to the death stage as it did to Greece and Rome and England?If the people and banks and government bureaucracy refuse to give up their illusion of a free lunch, screaming for more government intervention, they will lose it, and everything else. The golden goose will be dead.

GuestJanuary 20th, 2009 at 11:10 am

The taxpayers can end this madness and begin to level the playing field by filing for bankruptcy. The debt must be written down anyway before any true recovery can begin, so let the public lead the way and emancipate itself from debt slavery. By the end of 2009, the FICO scoring system will be meaningless in its present form, IMO.

GuestJanuary 20th, 2009 at 11:38 am

Bloomberg Video Pick: Rogers Says U.K. “Finished”; Recommends Selling Pound

HayesJanuary 20th, 2009 at 11:56 am

Earlier today a pro Geithner commentator floated a new talking point — that his failure to pay taxes could not have been about the money as he has a spirit of public service citing that he could have made millions if he had gone to Wall Street – (didn’t Winona Ryder use a similar defense when she was charged with shop-lifting?)__________The International Economy Magazine – Nov-Dec, 2001

One of the favorite pastimes among International Monetary Fund officials recently is a discussion of the various explanations offered by former Treasury Undersecretary Timothy Geithner for his decision to accept the post of Director of the Policy Development and Review Department at the Fund, after failing to secure the No. 2 position of First Deputy Managing Director…Some IMF officials cite Geithner’s explanation that he would “never, ever” accept a private sector position in the financial markets. Yet others, when comparing notes, say that Geithner had actually expressed a desire for private sector employment. Some of the more mean-spirited long-time IMF hands suggest the former Clinton official was aggressively interviewing on Wall Street before disappointingly coming to the IMF …Read more

GuestJanuary 20th, 2009 at 12:08 pm

Frankly, I think he did get a job with Wall Street: isn’t Goldman Sachs and the NYFed Wall Street — and, incidentally, the IMF? And it’s paying very well, with a high-level performance promotion by the boys to the U.S.Treasury, at no risk or oversight from the economy or the Congress.

BearerofbearishnessJanuary 20th, 2009 at 12:08 pm

Were you all aware that the symmetrical triangle the S&P now resides in measures 300 points wide, meaning that should we break 820, teh pattern would resovle itself around the 520 level…

economicminorJanuary 20th, 2009 at 12:28 pm

Here is a snippet from a recent piece by Andrew Tanzer, Senior Associate Editor of the Kipplenger Letter

Why I’m So BearishI’m not counting on economic expansion in the back half of the year, and when the economy starts to mend, my fear is we will be in for a prolonged period of anemic growth. I’ve seen this before.What will change my outlook? It will be hard. One of the main reasons for my pessimism is the staggering national and, especially, consumer debt. The economic growth and rising profit margins of the past decade were largely fueled by an enormous run-up in debt. To put it to numbers, the ratio of debt to gross domestic product surged over the past decade from 250% to a scary 350%. The indebtedness must and will decline. But the last time this ratio fell dramatically coincided with the Great Depression.Household savings rates in the U.S. have collapsed from a historical range of 8% to 10% to virtually zero. Consumers evidently thought rising home equity (not to mention stock portfolios) was like a piggy bank, so they borrowed furiously and extracted trillions of dollars from their homes at the top of the residential market. This Ponzi scheme has now collapsed.The truth is that American consumers have spent a few trillion dollars more than they could afford over the past decade. They are now cutting consumption dramatically and boosting savings at a fairly rapid clip. Milton Ezrati, an economist at Lord Abbett, thinks it could take at least five more years for U.S. households to restore their balance sheets to equilibrium. As a result, I’d estimate that the share of GDP represented by consumer spending will tumble from 72% to 65% over the next few years. That is the equivalent of subtracting $1 trillion of demand per year.Collapses of heavily leveraged asset bubbles are never pretty. When you add the effect of years of excess consumption, undersaving and illusory economic expansion, you have a pretty toxic brew. We didn’t get here overnight, and we won’t emerge overnight. I see a prolonged period of subdued economic activity in which 2% growth, one-third less than in recent decades, is the norm.

As you have read my thoughts before, you know why I posted this piece.Obama’s speech was short with language to empower us all in changing America in a positive way. The program short and inspriring. There were millions on the mall. The future is being written starting today. Let us pray that our ordeals are short and our future bright and that all our enemies decide it is futile to bother with us.

CMJanuary 20th, 2009 at 12:45 pm

THIS IS IT! Either we form a “W” bottom here @ $21.58 SSO (S&P 820 ish) and rally hard to the upside or we tank!

economicminorJanuary 20th, 2009 at 12:38 pm

Why the banks need more bail out money… They have this and CRE plus credit cards, studuent loans, auto loans and business loans all in an acceleration of defaults.Anone that thinks this financial mess will be over this year must have optomism that the speed of collapse will also accelerate and be over sooner than I do.

Nightmare Mortgages Now the signs of excess are crystal clear. Up to 80% of all option ARM borrowers make only the minimum payment each month, according to Fitch Ratings. The rest of the money gets added to the balance of the mortgage, a situation known as negative amortization. And once balances grow to a certain amount, the loans automatically reset at far higher payments. Most of these borrowers aren’t paying down their loans; they’re underpaying them up.The option adjustable rate mortgage (ARM) might be the riskiest and most complicated home loan product ever created. With its temptingly low minimum payments, the option ARM brought a whole new group of buyers into the housing market, extending the boom longer than it could have otherwise lasted, especially in the hottest markets. Suddenly, almost anyone could afford a home — or so they thought. The option ARM’s low payments are only temporary. And the less a borrower chooses to pay now, the more is tacked onto the balance.The bill is coming due. Many of the option ARMs taken out in 2004 and 2005 are resetting at much higher payment schedules — often to the astonishment of people who thought the low installments were fixed for at least five years. And because home prices have leveled off, borrowers can’t count on rising equity to bail them out. What’s more, steep penalties prevent them from refinancing. The most diligent home buyers asked enough questions to know that option ARMs can be fraught with risk. But others, caught up in real estate mania, ignored or failed to appreciate the risk.The option ARM is “like the neutron bomb,” says George McCarthy, a housing economist at New York’s Ford Foundation. “It’s going to kill all the people but leave the houses standing.”Because banks don’t have to report how many option ARMs they underwrite, few choose to do so. But the best available estimates show that option ARMs have soared in popularity. They accounted for as little as 0.5% of all mortgages written in 2003, but that shot up to at least 12.3% through the first five months of this year, according to FirstAmerican LoanPerformance, an industry tracker. And while they made up at least 40% of mortgages in Salinas, Calif., and 26% in Naples, Fla., they’re not just found in overheated coastal markets: Through Mar. 31 of this year, at least 51% of mortgages in West Virginia and 26% in Wyoming were option ARMs. Stock and bond analysts estimate that as many as 1.3 million borrowers took out as much as $389 billion in option ARMs in 2004 and 2005. And it’s not letting up. Despite the housing slump, option ARMs totaling $77.2 billion were written in the second quarter of this year, according to investment bank Keefe, Bruyette & Woods Inc.The First WaveAfter prolonging the boom, these exotic mortgages could worsen the bust. They also betray such a lack of due diligence on the part of lenders and borrowers that it raises questions of what other problems may be lurking. And most of the pain will be borne by ordinary people, not the lenders, brokers, or financiers who created the problem.Gordon Burger is among the first wave of option ARM casualties. The 42-year-old police officer from a suburb of Sacramento, Calif., is stuck in a new mortgage that’s making him poorer by the month. Burger, a solid earner with clean credit, has bought and sold several houses in the past. In February he got a flyer from a broker advertising an interest rate of 2.2%. It was an unbeatable opportunity, he thought. If he refinanced the mortgage on his $500,000 home into an option ARM, he could save $14,000 in interest payments over three years. Burger quickly pulled the trigger, switching out of his 5.1% fixed-rate loan. “The payment schedule looked like what we talked about, so I just started signing away,” says Burger. He didn’t read the fine print.After two months Burger noticed that the minimum payment of $1,697 was actually adding $1,000 to his balance every month. “I’m not making any ground on this house; it’s a loss every month,” he says. He says he was told by his lender, Minneapolis-based Homecoming Financial, a unit of Residential Capital, the nation’s fifth-largest mortgage shop, that he’d have to pay more than $10,000 in prepayment penalties to refinance out of the loan. If he’s unhappy, he should take it up with his broker, the bank said. “They know they’re selling crap, and they’re doing it in a way that’s very deceiving,” he says. “Unfortunately, I got sucked into it.” In a written statement, Residential said it couldn’t comment on Burger’s loan but that “each mortgage is designed to meet the specific financial needs of a consumer.”

economicminorJanuary 20th, 2009 at 12:46 pm

I don’t know how many of you get John Mauldin’s weekly emails. He is pretty conservative and is on the side of Muddle Through rather than major upheaval but he does send out a weekly “Outside the Box” addition to his own opinions and this week is especially good. Last week was also but here is this weeks The Great Experiment by Hoisington Investment Management Company.They do include my favorite graph…. Debt to GDP but is much more.

economicminorJanuary 20th, 2009 at 12:51 pm

I gotta say that I love market stops.No matter how I think the market is going, I keep my stops in and when it goes the other way, I’m busted out with minimal losses.I am surprised we haven’t had / aren’t having a decent *hope* rally.I guess there is lots of hope but also lots of fear. Hope that things will change for the better but fear that the past events will continue to unravel and the losses will continue to grow.

CMJanuary 20th, 2009 at 1:18 pm

Be careful…they may be setting up the shorts fo rthe 2:00 ferries!!!! The may break $21.58 to suck in monster short positions and then BAMM!! teh witching hour forces a HUGE covering rally…BE CAREFUL

cmJanuary 20th, 2009 at 1:43 pm

UNBELIEVABLE! anyone watching the blatant futures jam job going on! You can’t tell me they don’t exist!!!!!

GuestJanuary 20th, 2009 at 1:41 pm

What about the financial scam miscreants working for the Government like Mike Hamersley who like Geithner is a tax fraudster in a high level government tax administration position. So let me get this straight, California is bankrupt, illegally issuing its own currency and confiscating income from citizens. This should come as no surprise since the FTB has working for them one of the biggest tax fraudsters of all, Mike Hamersley, helping to confiscate more income from taxpayers who have honestly filed their own tax returns unlike the thief, Hamersley. On May 24, 2000 at 3:33pmpst one of your high level tax shelter lawyers, Mike Hamersley sent an email to Vera Ellich of kPMG, advising her that their KPMG client had substantial authority to take a sham paper loss if the client sold stock of a subsidiary to the client’s lawyer for one dollar. This was outright tax fraud. Further, on June 12, 2000 at 10:18ampst, Vera Ellich sent an email to Mike Hamersly containing copies of the documents effecting Hamersley’s fraudulent plan back to 1999 for his review, a classic case of backdating a fraudulent transaction. Also, February 9, 2003, at 1:18 pm Richard Smith of KPMG sent Steve Gremminger of KPMG an email stating that Mike Hamersley had disseminated confidential information to his wife, who worked at Latham and Watkins in clearviolation of Section 7216, a criminal statute. In the recent KPMG case, it was also confirmed that Hamersley violated Sections 7216 and 7212 by illegally disclosing confidential information to various parties. Ask Hamersley for all his emails which he illegally late at night obtained in violation of KPMG protocol and stole many for his any personal gain when he sued KPMG (or ask KPMG for the emails, they all still exist). As an aside, Hamersley’s fraudulent activities did not stop there, when he obtained his KPMG settlement based on all his lies and theft, Hamersley failed to report the settlement as income under a twisted analysis of Section 104 (or at a minimum conspired to do so as he discussed doing so with several witnesses). How can the FTB employ Hamersley in their tax shelter division when he did not even bother with legal tax shelters but rather engaged in outright fraud and likely continues this sham life of being a crusader? Much more evidence against Hamersley exists related to his fraudulent activities and will likely be disseminated over time.

GuestJanuary 20th, 2009 at 1:47 pm

This “world has changed” BS is making me wanna vomit! NOTHING HAS CHANGED! The same politicians who ruined this country are still in charge.

Henry in SeattleJanuary 20th, 2009 at 11:26 pm

Crooks as usual running the show.Lie, cheat and nice words.No wonder politicians have no respect.

HayesJanuary 20th, 2009 at 1:47 pm

if Geithner goes down, logic would say Summers – except he has some baggage too – and selecting Volker might seem like desperation – any other obvious names?

tutterfrutJanuary 20th, 2009 at 1:56 pm

MadoffHis boom cycles are longer and the busts quite the same. At least he knows how to run a pyramid scheme over a generation. Gives us plenty of time to work out something else.

economicminorJanuary 20th, 2009 at 2:50 pm

does it really matter?whoever is TS will not be able to fix any of thisthe banks either need capital or nationalized and capitalizedif you wanted change, you wouldn’t want any of those listed. You would want someone like Calculated Risk or Karl Denninger or even Andrew Tanzer or the guys who run Houisington or OB or MA or me. BUT if you wanted change, you don’t want an insider who knows why the system has to stay the same.

GuestJanuary 20th, 2009 at 1:56 pm

Inauguration Day, 2009:A Day of MourningFor the victims of future wars, and for our old republic | Justin RaimondoWhen Thomas Jefferson was inaugurated, he sought to dismantle the evolving Federalist tradition of pomp and circumstance. In a ceremonial sense, royalism seemed to have been restored, or so it appeared to him. As this blogger put it, “Dressed in simple attire, Jefferson walked over to the Capitol with a phalanx of riflemen, friends, and fellow citizens from his home state of Virginia.”In these last days of the American Empire, such austere republicanism would be considered impossibly quaint. Having long ago morphed into Jefferson’s worst nightmare, the closer we get to the end, the more glamorous our inaugurals become. The poorer we are, the more millions we’ll throw at a ceremony that is really the crowning of a monarch – and not just any old king, but an emperor bestriding the globe.Appearances must be kept up. Like a bankrupt living on a palatial estate – one step away from foreclosure – we bask in imperial splendor even as the repo man comes knocking at the door…America is a bankrupt empire engaged in two overseas wars, with troops on every continent and bases ringing the globe. It’s unsustainable, and our ruling elites know it.The crisis of American state capitalism will consume Obama’s presidency until his credibility is reduced to a cinder. The only solution is for the administration to create a new social compact, one in which the government takes not only a major role but the leading role in directing the economic life of the nation. In order to do this, however, a broad coalition is necessary, one that spans – and in a sense transcends – the traditional categories of “Left” and “Right.” And this has been a source of Obama’s broad appeal: the belief that he is above it all…This claim to be non-ideological, and therefore “practical,” is a smokescreen for what is clearly an ideology of a very definite sort: it is garden-variety statism, i.e., a belief in the radical extension of governmental power… The nationalization of the banks, the auto industry, and even, it’s rumored, the newspaper industry, augur ill for the cause of individual autonomy and for the social base of the Jeffersonian remnant: small business, the middle classes, broadly defined, and the shrinking proportion of the population not entirely dependent on Washington’s largess.In the U.S., the private sector…have charted the course of the American river, but now the state is directing the flow.Obama’s economic program can be summed up in one word: reflation. Massive government spending, preceded by an orgy of bailouts…In the age of Obama, what the late, great libertarian theorist Murray Rothbard dubbed the welfare-warfare state will take on gargantuan proportions, just as it did under LBJ, both at home and abroad. This is bad news on every front. An inaugural celebration? Not for me, thank you. I’m going into inaugural mourning: all black to mourn the victims of Obama’s wars, and the death of our old republic.~ Justin Raimondo

JimmyTheBankerJanuary 20th, 2009 at 1:56 pm

2:00 “Ferries” in hard here-little early. If we close off at these kinda levels today, with no more “SUnday” tricks up their sleeves, this could be Obama’s first problem to fix…a stock market crash! Just wait till all those folks who attended the swearing in today get home and see their 101K’s down a nother 4% just today!

GuestJanuary 20th, 2009 at 2:15 pm

A note about the current earnings environment from Bloomberg:“The financial services are getting whacked, and I mean that in the `Sopranos’ sense of the word,” van Dijk said, referring to the U.S. television drama about an organized crime family in New Jersey. “It’s just a massacre across the board.”

GuestJanuary 20th, 2009 at 2:24 pm

Let’s see now: a day before the inauguration a truce is called in GAZA, BAC is given 20+118 billion as needed, Obama sworn in and gives a speech of hope and making America #1 again and the market tanks-makes perfect sense if you remember that the PPT was at the inauguration parties getting drunk!

GuestJanuary 20th, 2009 at 2:24 pm

Now Byrd is down too! Terrorists get at the food?Breaking News >> Kennedy, Byrd Taken by Medical Personnel From Inaugural Luncheon With Obama

GloomyJanuary 20th, 2009 at 2:36 pm

GE down 7% today to $13. When the pinnacle of American industrial might gets bailed out, it will be a watershed moment as it becomes clear to the general public that the emperor has no clothes.

MM CAJanuary 20th, 2009 at 2:56 pm

GE will fall to 7.00 after next weeks earnings and will be downgraged to negative…. they will hsseriuolsy consider bankruptcy within 3 months

GuestJanuary 20th, 2009 at 2:50 pm

maybe o bama should announce zero percent credit card rates for all who buy stock! wait, 0% is for the banks, the people GET 10, 15, 20, 25, 30 and higher on their cards…by the people, for the Banks…guess who?

GuestJanuary 20th, 2009 at 2:52 pm

REPORT: SATYAM USED FAKE DOCUMENTS FROM BANKS TO CLAIM CASH India-based Satyam Computer Services used fake documents from four major banks to claim a cash balance of more than $1 billion.

GuestJanuary 20th, 2009 at 2:53 pm

GOVERNMENT EVALUATING ADDITIONAL BANK RESCUE PROGRAM According to the publication, officials at the U.S. Treasury, Federal Reserve and FDIC are in talks with the incoming Obama administration over a plan that would establish a government bank to purchase the bad assets from U.S. banks.1/17/2009 9:29 AM ET

ex VRWCJanuary 20th, 2009 at 3:02 pm

Translation:Lets drag out the same old dead horse we did before when the market crashed. Maybe this time we will fool the people that it is alive and we can ride it out of here.

tutterfrutJanuary 20th, 2009 at 3:19 pm

Same idea for the battered Belgian banks here. Similar ideas in UK. I smell a globally coordinated take over off all bad debt by governments. They’ll finally get a good picture of total toxic paper. Then they’ll all print the debt away in somewhat similar proportions.There you will finally have Miss America’s ‘evaporflation’. No taxpayers’ money, no currency collapses.Those countries without toxic debt(if they exist) will have to decide if they can cope with that, and if not, what tools they have to fight it.

HayesJanuary 20th, 2009 at 3:16 pm

Citi and IBM higher in after hours — IBM exceeds estimates and Citi cutting dividend (suggesting more bailout money coming their way)

GuestJanuary 20th, 2009 at 3:48 pm

Bloomberg and its coterie of bankers just minutes ago crowned Obama “Banker-in-Chief,” the same way Napoleon self-crowned himself emperor. Now America has a self-appointed banker monarch reminiscent of Napoleon who, not satisfied with being Consul, forced Pope Pius VII to crown him emperor and then seized the crown out of the old Pope’s trembling, lifted hand and placed it upon his own head. So the bankers have seized the presidency away from the people and out of the hands of a trembling Congress and crowned themselves king!Hail to the new chief, this new Banker-in-Chief – not merely in command of all the military, but taking command of the entire economy.Now for the Napoleonic appointments — the Perfects to rule the Departments — the controlled press, the propaganda spread, and the reestablishment of the divine right of the bankers to rule. The moneychangers have a kingcraft, a monopoly, a demagogy, a crown – the Great Obama, the Banker King! Hail to the Banker-in-Chief!Obama Becomes Banker-in-Chief in Credit Market Freeze:

Octavio RichettaJanuary 20th, 2009 at 3:54 pm

So the movie is evolving according to script. ALL asset prices continue to nosedive! Today, stocks, treasuries, commodities, municipals, all went down. Bloomberg indicates investment grade corporate bonds went slightly up but not my holding of them via LQD went down 1.48%.Me, I loaded up the truck on options:1. The XLF leaps trade described above. 3% of portfolio value2. I also reopened by leap call option on XLE JAN 2011 but a lower striking price of 45: 1.5% of portfolio value3. I bought a stock TIE: 1.5% of portfolio value4. And perhaps too soon, but with SPX hovering around 800, I got into the SPX DEC 2010 850 strike price call leaps with 8.5% of my portfolio.So I went from a 0% to a 14.5% equity position which is ultra turbo charged since, except for TIE, the position was build around call leap options close to the price at which the underlying securities were trading.We gotta see the response now. Whether this was overdone from a fundamental point of view. Or the herd actually overshot a bit on the way down.I will go an a limb with an opinion and blame Timmy for a good chunk of the nastiness we have seen lately.My bet he WILL NOT get confirmed into the position and the markets will rallie. After all, how a guy who basically watched with his arms cross while banks did all kind of crazy things be so difficult to replace?Last time I did this I was early too. I started on 11/19 and finished the buying on 11/21. So I may add to my positions a bit if the market keeps sliding.It looks like ZIRP is pushing me out the window to take some risk. Hopefully I won’t fall on concrete:-)

DrstephJanuary 20th, 2009 at 6:05 pm

OR -Gutsy play, and I do agree that it makes sense to buy OTM calls “just in case” although rising VIX and i.v. makes more expensive (less so for the leaps you prefer).I bought OTM SPY Puts which I suspect I will trade out of by the end of the week. Odd price action this afternoon- seemed like a generalized sell off. 2:30 came and went. Closed out TWM today but still long SDS as a hedge against long equity positions – reduced exposure to toxic assets, particularly preferreds as I am fearful of dividend reduction/freeze in payments as part of the TARP.Concur that things hinge on Geitner. Very difficult situation to be in, particulary since confusion regarding a treasury sec. could make the market VERY nervous. By the way, did you see goldman movement today? Downside risk IMO exceeds upside – will play it for a bounce after a more pronounced sell off with shorter term options or long instruments to capture better risk/return parameters vs LEAPS. You might wish to review delta changes on the LEAPS vs underlying if you are purchasing high theta options. Just my opinion, though, and I am certainly no expert. For entertainment purposes only, of course. DYODD.Full disclosure: Long SPY OTM puts, SDS, no position in Goldman

Octavio RichettaJanuary 20th, 2009 at 8:38 pm

Thanks for the note. I closed TWM too early back in early October. GS is the only one trading above the November lows. I bought if at 58 and change, sold it then at around 74 on 12/5.I am not an options expert either. The sensitivity of leaps is lower to movements in the underlying stock. The guy selling me the leap is not a dummy. I am using my knowledge of fundamentals as a competitive advantage more than just trading options on a model to try and get an edge. For example, XLE: I paid 11.40 for the JAN 2011 45 leaps. Even though my intention is to hold I already made good money by selling the XLE 50 2011 leaps at 13.80 (bought them at 10)and now buying the 45s at 11.40.One must not neglect the breathing room that the longer time to expiration in leaps gives you.I am buying the leaps instead of the underlying security because I think there is quite a bit of upside potential* here but want to limit my downside. It boils down to being a greedy chicken:-)*Markets, even within bigger bears, usually bounce back quite hard from extreme lows.

BobJanuary 20th, 2009 at 4:00 pm

Nouriel Roubini has finally come to the conclusion that the banking system is dead!>>U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis.“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis…“The problems of Citi, Bank of America and others suggest the system is bankrupt,” Roubini said. “In Europe, it’s the same thing.”He must therefore know that this is no ‘U’ shaped recession. Depression here we come!

ASAJanuary 20th, 2009 at 4:23 pm

If our banking system is indeed insolvent and bankrupt (which we know it to be), then what does that make of our nation, which depends so much on credit??…and the saga continues!p.s. Can anyone give just one reason why we won’t see an “L” shaped recession?

BobJanuary 20th, 2009 at 4:47 pm

If we have to Nationalize our banking system why would you assume it would just be a recession? How much worse do you think it would need to get over that?

CaponeJanuary 20th, 2009 at 4:57 pm

L shaped U shaped “re”cession Please. Depression. “DE”pression.if it is a recession, then it is a Bermuda Triangle Recession – one which the economy as we knew it will never be seen again.or how about a Black Hole Recession

ASAJanuary 20th, 2009 at 5:30 pm

Let me restate this question.In attempting to understand the argument for a “U” shaped recession vs an “L” shaped recession/depression (seems more likely), can someone give just one reason why we won’t see an “L” shaped recession/depression?

BobJanuary 20th, 2009 at 5:45 pm

I’m in agreement with an L shaped recovery. However during this time of ‘L’ there will have to be a DEPRESSION! NR knows it but for some reason won’t state it! You can’t have our financial system FAIL and not have a DEPRESSION!

ASAJanuary 20th, 2009 at 7:20 pm

In April 2008, Professor Roubini compared our situation to that of Japan in the 1990’s, but stated that an L-shaped period of protracted economic stagnation was unlikely. isn’t our situation worst than that of Japan’s in the 90’s?Didn’t Japan have a positive savings rate, compared to ours (negative)?Doesn’t our total debt to GDP ratio (about 350%) indicate a much greater burden than that which hung over the heads of the Japanese?If the answer to any of the above is yes, than why is a period of protracted economic stagnation unlikely?Just curious to know the reason for the good professor’s statement, because at this point a depression is looking like the most probable outcome.

AnonymousJanuary 20th, 2009 at 7:49 pm

ASA, no one wants to be the bearer of bad newsAnyway, about US 44th Presidentthe west considers 13 to be jinx, guess what,4 translated in Mandarin is death!!so 44 = double death..they dont like that number..

GuestJanuary 20th, 2009 at 7:51 pm

ok ok ok, it is |________________________| shape. happy now? we will not see the recovery in our life time?

AnonymousJanuary 20th, 2009 at 8:43 pm

Since you’re talking alphabet-shaped depressions/recessions, I thought I would throw in one that’s been on my mind since last summer. It was featured on page one of the HSL International Newsletter.Harry Schultz in his Big Picture column on July 6, 2008 predicted a “V” shape chart as a very rough possible road map for our economic-monetary-banking future—BUT a really BIG “V,” a 20-YEAR “V” beginning in 2008, dipping to its bottom point in 2018, and not reaching back to the top of the right stroke until 2028.Said Harry then (at the time the DJIA was 11,289), “It is not a stock market chart, though that’s part of it. So are bonds. It also includes your BP (buying power)—which is partly the flipside of inflation. BP matters most of all. Eg, if the stock market goes up 10% but real inflation is up 15%, you have less BP/wealth/assets. If wages lag GNP or the CPI, you get poorer and must seek investments that net you more than you lose via the economics. If not, try to manage assets to shrink (per HSL re shrink-is-the-future) less than everyone else.”Continued Harry in his “Letter for Millionaires – current & prospective (& former),” “This chart may be as valuable as a Monet painting. It is a SOUP of all the things that will affect us. The chart formula is proprietary & hazy :). Note the chart seems like 10 years downhill, but it has up periods of 1-2 years when things improve sharply, & the press/politicians will tell us all is well–& so it will be, briefly, & can be used like any bull or bear market rally, in many different markets. But prudent people will be quick to take profits or apply tight stoploss orders. I explain below “why” all this will take 10-20 years…”In Big Picture Part II –2008-09 back in July, Harry began: “The financial stocks/banks continue to melt down at an astonishing pace. Write-downs are on-going & will be for a long time. Every few days a big bank launches a stock or bond issue to build up their eroding capital base. They need that in order to be able to make loans, without which they can’t make profits. They also sell big stock chunks to one of the Sovereign funds. Usually such announcements see their stocks go up on the day (before going down next day) as investors feel building the base is necessary & was successful. But each offering is an admission of bad management & weakness of the company—which in turn…”Well, that was then. To find out what Harry’s saying today in his newsletter for “THINKING humanoids ~ (worldwide” costs around $350 a year and I am not currently a subscriber. But it is a great newsletter, and it looks as if Harry, as usual, has been spot on.Anyway, a Big SQUIGGLY UP&DOWN 20-Year “V” SOUP ECONOMY is something to think about…

ex VRWCJanuary 20th, 2009 at 6:16 pm

I agree he will be toast in the end. There is no way for them to get around it. Time to look to plan B.

HayesJanuary 20th, 2009 at 6:40 pm

Obi has a golden opportunity if he dumps Timmy before the hearings begin. If he lets the Senate do the deed, he’s lost an opportunity and if the Senate does in fact reject Timmy — then Obi loses big time, IMHO.

Octavio RichettaJanuary 20th, 2009 at 8:10 pm

I agree 1000%! Obi is a smart guy he will make him withdraw the nomination by the open of business tomorrow. As I said, we all make mistakes and most pay the price which sometimes is very high. e.g.,Gingrich himself. Remember that one?

g AntonJanuary 20th, 2009 at 6:07 pm

So Obama’s initial day is darkened by a plunge on the DOW. I wonder if this is not an effect of the demise of the Bush’s Treasury Department’s “plunge team”. Good ridence of bad rubbish! If there is a plunge and you want to stop it, the honorable way of doing so is to shut down the market for a day or two. Otherwise, the hiding of bad news by market manipulation becomes a bad habit.The transistion from liar mode to truth mode may be a little painfull in the short term, but it’s certainly worth the price. Honesty is the best policy. I am sure that our ex-president George Walker Bush is an honest and honorable man, but his administration has be riddled by deceit and simulation. I would like to give you a point by point history of the Bush administration’s history of lies and deceptions over the past eight years, but it’s just too painful for me to do so.

GuestJanuary 20th, 2009 at 10:12 pm

So Obama’s initial day is darkened by a plunge on the DOW. I wonder if this is not an effect of the demise of the Bush’s Treasury Department’s “plunge team”.

Interesting point! They were leaving the office and could thus not keep the DOW up. May sound a bit crazy but would in some ways not surprise.

GuestJanuary 21st, 2009 at 6:38 am

Are you sure, because I am expecting a lot more Madoffs but I think the SEC on purpose is not trying to catch such people because they are afraid the markets might go down. Likewise, an evaser of tax is the treasury sec now

JPJanuary 20th, 2009 at 7:45 pm

Let’s push our Federal Governement to publish Annual Financial Statements that meet GAAP. I can’t tell how bad things are becasue I don’t have good data.

GuestJanuary 20th, 2009 at 8:07 pm

Ode to Timmy “tax dodger” GeithnerThere once was a man named TimmyWho made a mistake he called miniAnd the people yelled out: “don’t you dare”But Democrats answered: “we don’t care”So now our new President must decideDoes he want to give Timmy a free rideAnd the moral of the story is thisIf he’s confirmed, we’ll all be pissed!

Octavio RichettaJanuary 20th, 2009 at 8:14 pm

I wonder if people have voiced their opinion to their senator and Obi’s office itself. I mean these guys are smart if they miss on this one; then watch out! He will be worse than GWB!

Jason BJanuary 20th, 2009 at 8:17 pm

Day trading, options and leaps aside, from a macroeconomic point of view we are f*cked. Our banking system is insolvent, our private, public sector and citizenry are deeply in debt, our ability to manufacture products and sell them to other nations is nearly destroyed. Our old economic model of a ‘service economy’, based primarily on cooking up bogus financial products and selling them around the world, or importing cheap consumer products and selling them to eachother, is gone and we have no plan b. We have a large cohort of soon-to-be retirees who have promised themselves a life of luxury and decadence that cannot be delivered. Their life savings and the fortunes they amassed will fetch pennies on the dollar when sold to the much smaller and impoverished cohort behind them. The system through which we obtain the necessities to sustain ourselves is based on just in time transport from thousands of miles away, and on terms of credit among multiple intermediaries.In principle, the next few years don’t look so good.

Octavio RichettaJanuary 20th, 2009 at 8:21 pm

Tax Experts: Geithner Should WithdrawThursday, January 15, 2009 7:15 PMBy: Kenneth R. Timmerman Article Font SizePresident-elect Obama should withdraw the nomination of his Treasury secretary-designate, former Republican presidential candidate Gary Bauer tells Newsmax.The nomination of a man who has cheated on his taxes to become Treasury secretary “doesn’t pass the straight-face test,” Bauer said. “If this were a Republican Cabinet nominee, he would be in deep trouble, even in a Republican-controlled Senate.”…

Forensic economistJanuary 20th, 2009 at 8:22 pm

For what it’s worth, I have covered my shorts. I am not calling the bottom of the market, much less the end of the recession. I’ve got good profits, I’m taking them and keeping it in cash. Very few traders can play short term swings in the market, and I am not going to try. I will leave the last 10 – 20% to someone else and will sleep easier. Best of luck to you all, may God give Obama wisdom.Forecast: having read Koo’s book on the Japanese experience, he would say the recession lasts until debt is paid down or liquidated; until household savings return to pre-bubble levels. That could take a while. He also would say that the extreme liquidity pumped out is not inflationary, since no business or consumer one is spending cash, but is using to pay down debt and to rebuild savings.

Octavio RichettaJanuary 20th, 2009 at 8:48 pm

Sponsored Link: The Government’s Secret BailoutMonday, January 19th, 2009Could Tax Problems Trip up the Confirmation of the Best Candidate for Treasury Secretary?By William Patalon IIIExecutive EditorMoney Morning/Money Map Report is now 9:50 PM EST; what is TG waiting for to announce he is steeping aside? He will do more harm to himself and country if he forces the senate to drag him through the mud. What a bozo!

artichokeJanuary 20th, 2009 at 10:33 pm

I have a theory about what happened today.Congress is holding Hillary’s nomination hostage with one petty complaint after another, and there will be more if necessary, until Geithner is gone. They tell Obama “you won’t get Hillary until you give up Geithner.”This is looking like a credible threat, backed by a surge of public outrage over “tax cheat” Geithner, and looks like it might finally do the trick to make Geithner step aside.But the banks like Geithner. He was going to be their protector and, as much as possible, sugar daddy. He “understands” them. He is one of them. The banks are afraid of non-Geithner.Even the UK banks are afraid of non-Geithner. Hence, the cratering today.

HayesJanuary 20th, 2009 at 8:51 pm

check out this Bloomberg articleWorst Dow Drop Since Election Meant Rally in ’33 the graph

jugglingcdosJanuary 20th, 2009 at 9:10 pm

Hayes,this is getting pretty lame… i meant trying to find a silver lining in anything/everything that’s badIronically, if this is parallel to the 1930’s then WW3 is jusssstt around the corner

Jason BJanuary 20th, 2009 at 8:53 pm

He is either too stupid to figure out his taxes, or cheated on them. Neither makes him a good Treasury secretary

HayesJanuary 20th, 2009 at 9:27 pm

remember what SARS did – the pandemicflu thing should not be placed into the conspiracy file quite yet… is the “Dr. Doom” website for the Pandemicflu crowd IMHO – worth a periodic visit as the good Dr. Niman is credible /leading edge.yet not beholden to the mainstream.China warns of “grim” fight against deadly bird fluBEIJING, Jan 21 (Reuters) – China faces a “grim” situation in preventing and controlling human cases of bird flu, the health minister said, after announcing four human infections in the last two weeks and three deaths.Health Minister Chen Zhu called for hospitals to spare more resources in diagnosing and treating bird flu and more cooperation between agriculture authorities and his ministry, Xinhua news agency said….Read More

GSMJanuary 20th, 2009 at 9:52 pm

“The tyranny of the dumbed-down majority is upon us. It seems to me as though TPTB are carefully trying to avoid whatever trigger point there is that will incite the masses. Apparently our tolerance for pain is unprecedented. We’re distracted by living paycheck to paycheck, a financial morass created by ourselves, for ourselves, because we were too uneducated to see that we were becoming indentured servants to debt.”- by Average Jane@AJ,You are arriving at the core of the great battle for the US public’s minds , that is underway right now. The biggest battle there is.The “trigger point” you refer to is a run on US and other countries banks.It is certain that most US banks right now could not possibly sustain a run (and I note NR in his comments today basically confirms this). The public display of that catastrophic failure would shatter any hopes (Obama’s included) of resurrecting the US economy for a decade-possibly more. It would put the Republic in jeopardy.The deep fears and utter cluelessness of USGovt and the Fed is manifested in the ludicrous proposal to buy up all the toxic paper by the Bad Paper bank. The scary thing to me is that such an absurd proposition is receiving serious attention in the US. Yet more evidence that there is no will at all by the US elite to solve these exceedingly complex and most pressing problems, save to whitewash them and HOPE everyone else is foolish enough to buy it.The people of the US do not have the attention of their elected leaders save for the votes they cast. Their attention is reserved for Obama and the influential lobby groups manipulating legislation and Govt in favour of vested interests such as the big banks. The ascension of Geithner to SecTreas will ensure that the powerful bank apparatus and the rich they represent will remain protected throughout Obama’s presidency. They will only capitulate their power and influence once the US itself ceases to function as a state

Average JaneJanuary 20th, 2009 at 10:39 pm

Yes, GSM, the bankers and financial Wizards of Manipulating-Your-Money-Straight-Into-My-Account-in-Dubai are indeed terrified of a bank run. Witness the sheer panic as the Great American Consumer shut its collective pocketbook this past holiday shopping season.I received a statement in today’s mail from the financial company that manages what’s left of my pathetic retirement fund. In bold letters at the bottom: “NOW IS THE TIME!! As the markets continue to fluctuate [editorial: BWAHhahahaha], your first instinct is probably to stop contributing to your retirement plan. Don’t make that mistake!”Be afraid. Be very afraid.

economicminorJanuary 20th, 2009 at 10:36 pm

I posted these above and will post them here again.David Walker resigned last year. His message of unfunded liabilities is understated with the calamity of our financial institutional failure.You should watch these and learn what you don’t want to know.Watch this 60 Minute pieceDavid Walker, the US Comptroller General of the Government Accountability Office (GAO)Here is another David Walker speech. More detailed with questions and answers.David Walker talking to the Portland City Or Club about the 4 deficitsDenial is rampant. This was way before the crash!I think David Walker should be enlisted as Treasury Secretary instead of Geithner or Summers or Rubin.

PeterJBJanuary 20th, 2009 at 10:43 pm

“Jim Rogers, of the Singapore-based Rogers Holdings and co-founder of the Quantum fund with George Soros, told Bloomberg Television: “I would urge you to sell any sterling you might have. It’s finished. I hate to say it, but I would not put any money in the UK.” the rest to follow in time; no country will be spared and one by one they shall be attracted to the exposures of their own leadership incompetence.Ho hum

Octavio RichettaJanuary 21st, 2009 at 5:43 am

More on Geithner. A very “categorical” and “authoritative” piece in the WSJ, from a seemingly “know it all” reporter indicates Geithner will be confirmed. I have also read several other pieces (e.g., NYT) indicating same. Sorry, no time to post the links as I need a bike ride desperately!So bottom line, we, strike that, I may be upset over circumstances overriding principle but it looks like this is the way it will be. I sincerely hope I am the one who is wrong and that the “tax cheating thing” is really a “minor” indiscretion.

HayesJanuary 21st, 2009 at 7:06 am

Tax Issue Won’t Derail GeithnerSenators Are More Concerned With How Treasury Nominee Will Help Fix Economy* JANUARY 21, 2009 hearings for Timmy the Tax Evader will begin at 10:30am today – the media now refers to this as him being “late” in paying his taxes)If he is confirmed it will be a pyrrhic victory for Obama.

HayesJanuary 21st, 2009 at 7:32 am

Breaking NewsGeithner is going to be introduced by Paul Volker at the hearingHe is going to urge Congress to pass a big stimulus and urge reform of the TARP –