Nouriel Roubini's Global EconoMonitor

Nationalizing the Banks: Latest Roubini Interviews On ABC’s This Week and On Reuters

(2/22/2009): This Week With George Stephanopoulos – Roundtable: Nationalizing the Banks (click for video)


(2/22/2009): This Week With George Stephanopoulos – Green Room: Got Hope? (click for video)


(2/20/2009): Reuters –  Roubini says crisis end distant (click for video) 218nrreuters_250.jpg From Reuters: Nouriel Roubini, one of the few economists who foretold much of the current financial turmoil, on his view that the banking and credit crisis is still far from over.

182 Responses to “Nationalizing the Banks: Latest Roubini Interviews On ABC’s This Week and On Reuters”

2centsFebruary 23rd, 2009 at 10:36 am

Deutsche Bank is saying it is prudent to value GE Capital at zero at this point! It also believes that there will be a ‘material’ adjustment to the dividend in the second half of the year.

2centsFebruary 23rd, 2009 at 10:54 am

Holy Crap!I just saw this on the previous thread by our famous ‘Guest’ poster. I’ve cleaned it up a little and made the links live.


No wonder we’re collectively stuck doing nothing. The gamblers are first in line no matter what.Collectively I think we all thought we were fuk’d, but no we were wrong we are double fuk’d. No make that fuk’d^2.Thoughts?

MorbidFebruary 23rd, 2009 at 12:39 pm

The Loophole that Became a Wormhole…G,2 cents;Thanks – this really nails it. Finally I understand why all the dancing around and endless bail, bail, bail… We are so screwed, unless there is a world wide jubilee.

these (derivative)obligations are not like other obligations. They occupy a series of loopholes that make them unusually dangerous. Perhaps the greatest loophole of all came in the 2005 amendments to the Bankruptcy Code. Although designed ostensibly to “get tough” on profligate debtors, those amendments also made certain that CDS holders would get special treatment in bankruptcy…

The Loophole that Became a Wormhole…

2centsFebruary 23rd, 2009 at 1:09 pm

Yes, Morbid … kind of leaves ones flakes a little frosted doesn’t it.These guys were smart … buy some really stinky crap with a big return then get some AAA firm to insure that return via CDS and then rest assured that if old stinky goes belly up then old reliable AAA will be there to catch your fall. If worst comes to worst and stinky goes belly up AND old reliable croaks then you at least get first dibbs on the estate!

GuestFebruary 23rd, 2009 at 9:14 pm

OMG- If this is true it means no corporate bond or any other lesser creditor is safe. Wither GE? Pardon the pun but I guess we know why the stock is and whole market is crashing. Nevertheless, thanks for that.

GuestFebruary 24th, 2009 at 1:54 am

That means no money left to pay off the rest of the corporate structure after cds payments. Such a deal. No wonder Geithner doesn’t want to discuss it.

Michael LitleBigFebruary 23rd, 2009 at 10:58 am

I watched the round table discussion with yourself,George Will, Krugmam and George S. today.Many thousands of homeowners were harmed because of the lack of oversight by the Congress who were responsible for the regulators.The Office Of Thrift Supervision by refusing to regulate,supervise and enforce what few mortgage lending regulations wreaked havac on the mortgage borrowers that held loans with the federal thrift banks.Conversely as stated in the Associated Press investigation last year the Congress failed to forefill their responsibility of the Appraisal Sub Committee. These are two examples of where mortgage holders like myself lost their homes due to mailfeasance and misfeasance and we want accountablility. Until there is accountability this pain will continue for a lot of people. I was deeply disappointed to see the members of this discussion want to put this phase of the Banks and Congressional oversight behind them.There will no way that these charlatans will get away with this as in the last two recessions and repeat this horrific event again in the future. As you know Dr. Roubini its takes courage to stand upto the aberrant acts of the wealthy and the powerful. I for one would want to see your support and voice in demanding accountability.

Pecos BankerFebruary 23rd, 2009 at 4:28 pm

There was no accountability when Cheney held his energy task force meetings. GW and his admin lied to us to get us into Irak. We then proceeded to vote him and his cronies in again in 2004. From the two facts above, nobody has any right to be surprised by anything that has happened so far. The writing was on the wall from the very beginning. This is what we voted for: lack of transparency, lying, and all the consequences that follow.

GuestFebruary 23rd, 2009 at 11:06 am

As the Sovereign Society said in mid-decade, this is a 372-trillion dollar derivatives time bomb that would “vaporize” wealth. The bomb has exploded and the fall out is extreme, and as John Pugsley predicted in 2006, it is “the final unraveling of the U.S. economy…” Said Pugsley, “nearly one third of these derivatives are concentrated in the hands of just 3 banks: JP Morgan Chase, Citigroup and Bank of America — those 3 accounting in 2006 for a “mind-bending $372 trillion of the global derivatives market.”It is hard to salvage anything from a bomb explosion.Pugsley pointed out then that this “Phantom Economy” was “20 times the size of the U.S. economy” from which a small group of private investors had already “reaped gains of up to 1,794% and 797% by cashing in on these little-known investment techniques.He further noted in 2006: “Derivatives have been at the core of almost every major economic disaster since 1987. They were responsible for Black Monday. They were behind the Asian crisis, the LTCM hedge fund disaster, the fall of Barings Bank, the bankruptcy of Orange County, and the collapse of Enron and Argentina…“And they’ll soon be responsible for what could turn out to be the greatest economic disaster yet. For the popularity of these notorious financial instruments has erupted at an alarming rate. Their explosive growth has given birth to an underground economy—so powerful and so complex—that no one really understands it. Not Buffet—not even Greenspan or Bernanke. Yet one thing is clear to all: This “Phantom Economy’ carries threats that have the power to blow up the U.S. financial system.”And “blow up” it did

The AlarmistFebruary 24th, 2009 at 2:12 am

When I read this, I’m reminded of the line about Lawyers from Other Peoples’ Money, which seems to fit well …”They’re like nuclear weapons. Everybody’s got to have them, but once their used everything is F__d up.”

GuestFebruary 23rd, 2009 at 11:08 am

Here’s an excerpt from Ron Paul’s foreward to Thomas Woods’ new book, “ Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse,” a New York Times bestseller as of March 1.“These fixes are based on the false belief that the free-market economy has failed. But it is not the market that has failed. It is intervention into the market that has failed. The Federal Reserve and its manipulation of money and interest rates have failed. None of this can be blamed on the free market, but that isn’t stopping newspaper columnists from doing so anyway.“Keynesian so-called economists, led by Paul Krugman, are vainly reaching into their usual bag of tricks to try to solve the problems of intervention with more intervention, and nothing is working. But they are persistent. They’ll keep scrounging around in that bag all throughout the Obama administration. The slump will continue, since none of these tricks has the slightest thing to do with the underlying problems in the economy. All we’ll have to show for them is an empty Keynesian bag and lot more unpayable debt.“Meanwhile, who’s being ignored during this crisis? The free-market economists of the Austrian School of economic thought, the very people who predicted not only the Great Depression, but also the calamity we’re dealing with today. The good news is that Austrian School economists are gaining more acceptance every day, and have a greater chance of influencing our future than they’ve had for a long time. I’m told that Google searches for “Austrian economics” are off the charts…“Our years of living beyond our means, buying everything on credit and on money printed out of thin air, are over. Sure, our government will carry on with its nonsensical policy of curing indebtedness with more indebtedness, inflation with more inflation, but the game is up. It’s not going to work… [T]he sooner we understand what has happened, assess our economic situation honestly, and rebuild our economy on a sound foundation, the sooner our fortunes will be restored.”.

GuestFebruary 23rd, 2009 at 11:12 am

Feds and Citi at the table…”The federal government is in talks to beef up its ownership stake in Citigroup to as much as 40 percent of the company’s common stock, the Wall Street Journal reported Sunday—just days after the Obama administration said it didn’t want to nationalize America’s largest banks”This administration is, oh, I don’t know, retarded. This might be the worst 45 day start to any administration, ever. These guys can’t keep a story straight for 48 hours, and they’re ram-rodding anything and everything they can through they system. This is going to lead to unbelievable backlash – but of course, maybe that’s what they’re looking for.

Little SaverFebruary 23rd, 2009 at 12:21 pm

Can’t be worse than Paulson’s three page TARP poposal with relief from accountability included.Covering up the situation, creating dense fog and avoiding accountability seem to be high on any government agenda.Not so much change on that yet.

The Same GuestFebruary 23rd, 2009 at 1:00 pm

good point, but I wasn’t arguing that Paulson’s plan was good (it wasn’t), just that Obama’s plans are bad. Just because someone doesn’t like your guy doesn’t mean you have to point your finger at some other guy.

MichelleFebruary 23rd, 2009 at 8:30 pm

I have come to the conclusion that TPTB know that they can’t save the Titanic and are instead striving for an orderly, inevitable capsize. I’d call it a financial and economic meltdown in first gear climbing Pikes Peak, and the uncontrollable ride down the other side should be wild!

GuestFebruary 23rd, 2009 at 12:46 pm

Well if you cripple a system is easier to catch it and kill it. Once it is cold then you can resurrect the new and better system in Obama’s own image. What will it actually be?

GuestFebruary 23rd, 2009 at 1:20 pm

If it walks like Goldman Sachs, talks like Goldman Sachs, it is Goldman Sachs — dead or alive. Rubin and Summers = Goldman Sachs. Paulson and Geithner = Goldman Sachs. Friedman/Dudley and Zoellick = Goldman Sachs. Obama and Clinton = Goldman Sachs. Shareholder of the Federal Reserve System = Goldman Sachs.

REDFebruary 23rd, 2009 at 2:38 pm

The Government looks like chumps. Why are they taking equity and giving the bondholders a free ride, and no haircut?

GuestFebruary 23rd, 2009 at 11:12 am

I am taking the liberty of reposting Pete’s comment. It only got a minute or two of breathing time on the last thread — and it’s too important to pass by ~So, at this auspicious time in the history of the United States, we have reached the point where everyone knows our banking system is insolvent.Last week we crossed a number of important SELL indicators, or indicators that confirmed a long-term bear market (e.g. Dow Theory). As a result, even diehard investors are yanking their money at this stage. That explains the market movement this morning.The point is … the Treasury, Fed and Congress have been fighting tooth and nail to STOP the system from ever reaching this point. The whole mad panic by the Treasury – when they sold the TARP to Congress – was to avoid the critical situation that we are now in. Whoops, did I say TARP? Does anyone even remember TARP any more? Since that time we’ve moved through more bailout plans, and a $1 trillion spending package from Pres Obama. But nothing can stop the slide downwards.Wich of course – it shouldn’t. Home prices in the USA have to get back to an equilibrium level where people can actually AFFORD them. Not afford them as in … Oh sure you can take out a 50-year mortgage. Afford them as in … yes a young married couple can buy a new home, with the expectation of reasonable payments, BASED ON the lower wages that we Americans will all be earning in the future.Nobody can stop this slide down to a new home price equilibrium. Just like nobody can stop the fact that our living standard is reducing, or the incomes paid to Americans (measured in inflation-adjusted dollars) are declining. It has been pointless to fight this process, but unfortunately our whole system of leadership is living in denial.Expect more strong reassurance – and more scream of agony – from Washington DC. But very little of this stimulus money is being spent on a well-thought plan that takes into account where America WILL be in the world in the next 10 years.PeteCA

London BankerFebruary 23rd, 2009 at 6:27 pm

Great comments on the thread tonight! It’s the middle of the night where I am, but I felt like checking in on the thread to see if any of the regulars were posting. The comments here tonight make me really miss blogging – and the leisure to read everything every day.I’m settling in for the long haul on my project here. It won’t change the world over night, but it will be infrastructure that gives some parts of the world a better chance of profitable endeavour once they sort out the current mess.Looking at the Fed’s balance sheet, I just can’t see the world being dollar based beyond the medium term. What will be interesting is the redistribution of economic power implied in the determination of the new basis for international exchange.The US hasn’t exported much beyond debt, armaments and consultants for quite a while. Countries that produce resources, manufactures and food may think it time that their exports become the basis for international exchange valuations. That could be deflationary (wringing out the debt and consultants’ fees from the global economy valuations) or inflationary (forcing unproductive countries to pay more of their less valuable currencies for the same resources, manufactures and foods). Either way, it likely won’t be good for the US. Interesting times ahead.

Average JaneFebruary 23rd, 2009 at 6:36 pm

Great to see you here, LB, for a moment or two. Glad you’re keeping watch for us. Keep comin’ back.

economicminorFebruary 23rd, 2009 at 11:48 am

Krugman says there is a lot of money sloshing around and so there is a lot of money looking for something to invest in which will keep the borrowing costs down.I doubt that there would be all that much money sloshing around IF most of the toxic assets were actually marked to market. I just don’t buy the argument that these assets should be hidden and saved until they the markets recover so that they could be sold closer to the values that they are booked at.This argument is counter to free markets where everything is bought and sold in an open auction. Just like stocks, when there are few buyers, the price goes down, when there are lots of buyers, the stock price goes up. That is the free market. Yes if you have lots of capital and don’t want to sell and believe that the price will be better later, you can hold your stock and sell later. But the banks need capital and just like when you are on a margin account and the price of your stock goes down, the brokerage forces a sale to cover, this forced sale can affect the stock price for all the other owners. That is just the way it is. Why should the American public be forced to come up with the money to cover the shorts of the financial institutions? So that they can act like the assets they hold are worth way more than market. This makes them and their capital appear much larger than it really is. This is all foolishness and obfuscation. All in the belief that what? Houses will regain their bubble status or that their CRE portfolios will reinflate in the near term? Or the student loans or the credit card loans or auto loans? That we will be saved by a magnanimous god from our own bad behavior?Those in charge of our system are so far up denial’s rear end that they really can not see the light of day.

GuestFebruary 23rd, 2009 at 2:28 pm

Krugman does not impress me. You do not know what he stands for. His answer on the interview regarding accountablility is to put it behind us and move on. Did the Jews put the holocuast behind them? I want to know each and every one of this evil doers who screwed us.

HayesFebruary 23rd, 2009 at 11:56 am

from a couple of threads ago but worth repeatingFrom previous thread7286 was the closing low Oct 9, 2002 with an intraday low of 7181 on Oct 10, 2002. But other than that you have to go back all the way to 1997 to find lower levels.Separately 741 on the S&P (Nov 21 intraday low) will be key. (as of now we have just broken below the November 20 closing low on the S&P of 752.44 )

GuestFebruary 23rd, 2009 at 12:06 pm

Here’s another Obama appointment following the same old pattern of having the money monopoly pick the candidates. These appointees have no intention of serving the citizens, only the personal interests of the private bankers. It is another unchanged appointment.It follows the pattern that the power brokers can no longer trust anybody except insiders who have proven that they will follow the money ’s orders. There is no one in a key position in the Obama Administration who isn’t a foot soldier of the New York power center.____________________Leibowitz Said to Be Choice for Trade CommissionFeb. 23 (Bloomberg) — President Barack Obama will appoint U.S. Federal Trade Commission member Jon Leibowitz to be the next chairman of the regulatory agency that reviews mergers and enforces consumer protection laws, an administration official said.Leibowitz, 50, appointed a Democratic member of the commission in 2004, will succeed FTC Chairman William Kovacic, a Republican who has told colleagues he will remain on the five- member commission, which has one vacancy.The appointment could be announced as early as today, said people familiar with the matter. It doesn’t require Senate confirmation as Leibowitz is already a member of the commission.Before joining the FTC, Leibowitz was a lobbyist for the Motion Picture Association of America, the movie industry trade group formerly headed by the late Jack Valenti. He was also the Democratic counsel to the Senate Judiciary antitrust subcommittee during a 14-year stint as a Senate aide…

GuestFebruary 23rd, 2009 at 2:58 pm

Obama is no different– even worse– on economy. His typical solution is to throw money at problems and delay the inevitable, rather than have the strength to be forceful, to not necessarily meet the expectations of the market (as he has been doing time and again, as soon as the dow moves down Bernanke and Obama come on tv with another “plan” to throw money around), but to be able to shore up the system in the medium-term. Regardless of what the market wants, the best solution to save free markets is to nationalize the big banks, clean them up, cut them into pieces, and privatize them as much smaller– but stabler– entities. The banks that aren’t too big to fail should be allowed to fail. This is common sense, not high-tech, number-savvy economic theory.

PeteCAFebruary 23rd, 2009 at 12:18 pm

So, at this auspicious time in the history of the United States, we have reached the point where everyone knows our banking system is insolvent.Last week we crossed a number of important SELL indicators, or indicators that confirmed a long-term bear market (e.g. Dow Theory). As a result, even diehard investors are yanking their money at this stage. That explains the market movement this morning.The point is … the Treasury, Fed and Congress have been fighting tooth and nail to STOP the system from ever reaching this point. The whole mad panic by the Treasury – when they sold the TARP to Congress – was to avoid the critical situation that we are now in. Whoops, did I say TARP? Does anyone even remember TARP any more? Since that time we’ve moved through more bailout plans, and a $1 trillion spending package from Pres Obama. But nothing can stop the slide downwards.Wich of course – it shouldn’t. Home prices in the USA have to get back to an equilibrium level where people can actually AFFORD them. Not afford them as in … Oh sure you can take out a 50-year mortgage. Afford them as in … yes a young married couple can buy a new home, with the expectation of reasonable payments, BASED ON the lower wages that we Americans will all be earning in the future.Nobody can stop this slide down to a new home price equilibrium. Just like nobody can stop the fact that our living standard is reducing, or the incomes paid to Americans (measured in inflation-adjusted dollars) are declining. It has been pointless to fight this process, but unfortunately our whole system of leadership is living in denial.Expect more strong reassurances – and more screams of agony – from Washington DC. But very little of this stimulus money is being spent on a well-thought plan that takes into account where America WILL be in the world in the next 10 years.PeteCA

GSMFebruary 23rd, 2009 at 7:19 pm

There is no stimulous money in the US- it is new DEBT. The US stopped making debt free money decades ago- all that is spent is simply debt.FDR managed to finesse his way through a decade and more of the economic torture that befell his country with programs, promises and enlightened oratory. He held the country together- which was his objective. It took the asset destruction, labour confiscation and massive spending (all occurring simultaneously) of WW2 to bring and end to the GD. Will it be any different this time? No- expect several years, maybe a decade of these “programes”, unless something altogether much more awful to intervene.

GuestFebruary 23rd, 2009 at 9:37 pm

With this difference: Red China, the recipient of our industry, talent, patents, educational advances and markets, is patiently waiting in the wings.

The AlarmistFebruary 24th, 2009 at 2:18 am

Even the Chinese have a limit on their patience … at some point they, or their local proxies, will arrive in person to claim the assets that are backing their otherwise worthless paper.

irving fphelmphFebruary 23rd, 2009 at 11:37 pm

Well I think Obama has some damned good ideas and his programs are absolutely what we need.Energy independence and an infrastructure that is geared toward the new century. Health care for all of us. Decent public schools for our youth! So much belly aching about Obama. Jeez I can’t believe all the complaining I read on the web about a guy who has been in office for a month.We are not a nation of whiners and complainers, we are men and women who when pressed will get the job done! lets get to work renewing this country and our planet!

MichelleFebruary 23rd, 2009 at 8:39 pm

A person ought to know things are too expensive when they drag out the loan terms – in 2007, 9 year auto loans became available for the first time. Anybody get suckered into one of those? Auto manufactures need to get real with their pricing, too.

GuestFebruary 23rd, 2009 at 12:22 pm

Lines from “Bernanke Offers Jobless Recovery as Humphrey-Hawkins Hopes Fade” (Feb. 23 | BloombergEven with credit markets thawing, Fed officials see unemployment persisting at 8 percent or higher through the final three months of 2010.While some Fed officials expect economic growth to resume in the latter half of this year, unemployment may not get below 7 percent until 2011 or even later, according to the latest forecast.Jobless RecoveryThat means the U.S. may be in for its third jobless recovery since 1991.JPMorgan expects the Fed to keep the benchmark lending rate at zero to 0.25 percent for the next two years, not raising rates until at least 2011.President Barack Obama may also need to expand the $787 billion fiscal-stimulus package he signed into law Feb. 17.

Average JaneFebruary 23rd, 2009 at 6:41 pm

This is just astonishing, folks. “Third jobless recovery since 1991.”So just exactly what is a “recovery” if it’s “jobless”?Oh, yeah. It’s a MasterCard recovery. Priceless.

GuestFebruary 23rd, 2009 at 9:42 pm

It’s a banker recovery, resurrected to create the fourth American jobless recovery since 1991. By that time, just about everybody should be jobless.

PeteCAFebruary 23rd, 2009 at 12:25 pm

News this morning …LOS ANGELES (Reuters) – California’s main source of irrigation water is expected to go dry this year for most of its growers due to drought, idling at least 60,000 workers and up to 1 million acres of farmland, federal officials and experts said on Friday.The zero allocation for most of the farmers who buy water from the federally managed Central Valley Project was declared as California water officials repeated their plans to cut amounts supplied from a separate state-run water system to 15 percent of normal.The drought-forced cutbacks are a huge blow to thousands of farmers in the Central Valley, which produces over half of the fruit, vegetables and nuts grown in the United States. Higher prices are likely for a wide range of crops as a result.The Central Valley, a fertile but arid region stretching some 500 miles from Bakersfield to Redding, is the agricultural heartland of California, which ranks as the nation’s No. 1 farm state in terms of the value of crops produced — more than $36 billion a year.The principal source of water for farms and ranches in the valley is the federally built and managed CVP, a vast network of dams, pumping stations and canals that collects runoff from the Sierra Nevada mountain range and delivers it to irrigation districts throughout the region.A recent forecast by University of California economists projected losses of 60,000 to 80,000 jobs and over $2 billion in income from a scenario like the one announced on Friday.The state unemployment rate already tops 9 percent, well above the national average.’IT DOESN’T GET WORSE’Richard Howitt, a co-author of that study, said he expected that 850,000 acres of land would be left dry and fallow, and another 2 million acres would grow less food than normal. His analysis assumes farmers will make greater use of groundwater to help offset cutbacks from the state and federal government.Officials at the U.S. Bureau of Reclamation, which runs the CVP, estimated that 1 million acres, roughly a third of the land irrigated by the system, would be put out of production. Agency spokeswoman Lynnette Wirth called the situation “grim.””It doesn’t get any worse than zero,” California Farm Bureau Federation President Doug Mosebar said in a statement. “Our water reliability has hit rock bottom.”————————————————No doubt this will impact prices for vege’s and fruits going forward. But it’s a big step backward for the CA economy. Overall, I’m having a hard time seeing food prices going down in the long-term future – sure looks like the trend should be the opposite.PeteCA

CaponeFebruary 23rd, 2009 at 1:35 pm

just make sure you keep the water flowing to the nearby city in the middle of the desert that produces gaming and prostitution. gambling cities are more important than fruits and vegetables…

GuestFebruary 24th, 2009 at 2:19 am

If you put a piece of plastic over the aqueduct system in CA you save 500,000 acre feet of water a year. That piece of information came from a friend in AZ in 1967 who was the Congressional Liaison Delegate for the Central Arizona Project and the General Manager of Power for the Salt River Project. Nothing was ever done to save the water by the State of CA or the Feds. As for the comment about Las Vegas — Las Vegas gets its water from the Colorado River as part of the Nevada allocation of 400,000 acre feet a year.

ALAFebruary 23rd, 2009 at 1:05 pm

Think about this, The government could imbed seed packets into dollar bills, It would raise the value of the dollar and second if the dollar starts to slide in value you could then plant it and have something to eat , It’s like having Food stamps built into the dollar now that’s a new concept Obama will approve of.

GuestFebruary 23rd, 2009 at 1:10 pm

AmEx Pays Some Cardholders $300 to Close AccountsFeb. 23 (Bloomberg) — American Express Co., the largest U.S. credit-card company by purchases, is paying some cardholders $300 each to close accounts so the lender can reduce the risk of defaults as the recession deepens.People who got the offer to “simplify” their finances must pay off their entire credit-card balance by April 30, according to New York-based American Express. Enrolling in the program cancels a customer’s account and may lead to forfeiture of reward points or rebates, the company said on its Web site.Chief Executive Officer Kenneth Chenault is shedding customers as rivals reduce credit lines, raise interest rates and cut back on mail solicitations to brace for future losses. The industry’s defaults are set to break records and may reach as high as 11 percent by year-end in a stress scenario, reducing American Express’s annual profit by about 40 percent, according to Brian Foran, an analyst at Goldman Sachs Group Inc…Charge-offs, or loans that American Express deemed uncollectible, rose to 8.29 percent in January from 7 percent the month earlier, while payments at least 30 days overdue climbed to 5.28 percent from 4.86 percent, the company said last week in a filing for debt packaged into securities.American Express, which got $3.39 billion from the U.S. Treasury to boost capital, said last month that fourth-quarter profit from continuing operations fell 72 percent to $238 million as more consumers defaulted…

PeteCAFebruary 23rd, 2009 at 1:19 pm

Let me go back to a simple comment that I originally posted on this blog last year.It would be a good idea for American families to have a store of food and water out away, and a supply of emergency cash.That’s it. Get some basic emergency food and cash put in a safe place.This comment is really important for people – like me – who live in big cities. It may not be so important if you’re lucky enough to live in a rural area where your neighbors are helpful and friendly, and people will really pitch in if you’re hungry.Why am I saying this? Because our whole economic system runs on credit, and right now our banks are insolvent. As Americans, we are totally dependent on those plastic cards we keep in our wallets and our purses. But what if they stop working for a few days? Well … that’s a BIG problem. How do we buy gasoline and get to work? How do we buy bread, milk and eggs for our families? Thise little pieces of plastic tie us into the mammoth system of credit that’s running our whole country. And that mammoth system is being run out of banks that are insolvent.I am NOT trying to put people in a panic here. On a daily basis – I am amazed by how well our system of credit cards and charges keeps working, while our banking system is falling apart. Truthfully, the people at the top who are keeping this system of computers and credit running are doing a fantastic job!!! I man it. For everyday Americans at the street level, life appears to go on. Yet all the big economic signs are pointing to something more serious.Maybe in fact the President and the Powers-That-Be will work miracles and keep this vast system of computers and credit cards free from glitches. I hope they do. But as Americans it’s time for us to be sensible and make sure we have a backup option. Some emergency cash to get by … in case the whole credit system has a hiccup of some kind.Once again … do not panic.Just be prepared, and that way if any problems ever do develop – you can sit and watch them at home on your TV. It beats walking the streets, or standing in long lines at supermarkets and banks.PeteCA

MarkFebruary 23rd, 2009 at 1:36 pm

Better yet is to plant gardens. Work with neighbors, they’re more trustworthy than the existing system…Mark

economicminorFebruary 23rd, 2009 at 2:04 pm

Not better yet, but added to what Pete says. When your car gets one third empty, fill it up. Buy a 25# bag of beans and a 25# bag of rice at least. Use the water left over from cooking them to water your tomatoes or peas.Who knows what will happen. When Chaos takes charge, anything is possible. Best bet is be as prepared as you can for anything out of the ordinary.

economicminorFebruary 23rd, 2009 at 4:54 pm

This is why America is failing. When people should be preparing to take care of them selves by planting food, they decide to arm themselves so they can take it from someone else. People don’t want to work, just take, even by force. Sad commentary on life in the Great USA.What they should be buying are digging forks and hoes and drip irrigation systems. I am glad I live a long way from the large metro areas of this country.Good luck to all. It sounds like we are going to need it.

GuestFebruary 23rd, 2009 at 9:58 pm

The liberties of our country, the freedom of our civil constitution, are worth defending at all hazards; and it is our duty to defend them against all attacks. We have received them as a fair inheritance from our worthy ancestors: they purchased them for us with toil and danger and expense of treasure and blood, and transmitted them to us with care and diligence. It will bring an everlasting mark of infamy on the present generation, enlightened as it is, if we should suffer them to be wrested from us by violence without a struggle, or be cheated out of them by the artifices of false and designing men.[SAMUEL ADAMS: Article published in 1771]

MorbidFebruary 23rd, 2009 at 2:46 pm

Be A Part of the Solution – Not A Part of The ProblemYeah Pete, get yourself out of harms way and lessen the chaos if it should come.We live rural, but if there is a breakdown in the supply chain and supermarkets run empty shelves it is good to be ready.I had my wife stock up on six large jars of peanut butter, hundreds of oatmeal packets, six cases of canned soups… anything with a good shelf life that we can slowly work off and replace as it goes – but in the meantime keeping a month or so of food on hand at all times.

PeteCAFebruary 23rd, 2009 at 4:14 pm

I’m actually seriously debating whether I need to move my family to a different place in America. I am watching the economy closely, and that is one option in the back of my mind.PeteCA

PSFebruary 23rd, 2009 at 5:06 pm

I purchased bags of rice at Sam’s. In a sealed container rice will stay good for 5 years. I believe Jasmine rice is the best for nutrition.

r0tiNeKFebruary 23rd, 2009 at 10:30 pm

Look up Permaculture Communities PeteCA. This is where it’s all heading. We need to be more Independent & Self-Sufficient. And you will be much better placed in a Community with like-minded people. The Centralised Systems are going to disintegrate & ultimately collapse.Independent Self-Sufficiency is the new Paradigm.

MorbidFebruary 24th, 2009 at 5:54 am

r,Thanks for this information. I listened to an audio cassette by Bill Mollison about 10 years ago and was very impressed with this man. He has a tested working model for friendly, high yield agriculture for individuals. I guess his book Introduction to Permaculture is a good place to start.In Grave Danger of Failing Food

London BankerFebruary 23rd, 2009 at 6:42 pm

As some here with long memories will recall (remember Michael the Banker?), I also favoured stockpiling a reserve of food, cash and fuel – and had done so as of two years ago. One of the more interesting challenges before leaving the UK was distributing my secret stores to all my friends and family. Everyone I saw in the run up to departure got 10 kilos of rice and an assortment of canned goods.There’s still 40 litres of diesel in the garage, but that doesn’t go bad. (NB: never store gasoline/petrol as it is very dangerous, combustible and also degrades quickly. If you’re worried, buy a diesel engine car.)I haven’t recreated the stockpile here in my new home. Partly this is because I am too busy working, but also because space is more limited. I think about it though. I remain nervous. I’d like to know my family and I would have water, food and a way out if needed.

slfFebruary 23rd, 2009 at 6:55 pm

I’ve been stocking up a little extra at a time, as sales permit, and sometimes even when they don’t. Not sure if it will ever be enough to put my mind at ease, but it’s something. Also been storing water, learning about gardening & aquiring seeds, and have extra funds on hand. My brother & his wife look at us like we’re close to going off the deep end. The funny part is that I’m not sure we’re doing enough.. lol.

CahillFebruary 23rd, 2009 at 7:53 pm

Pete,Your advice is greatly appreciated. I read your comments last year and since my family and I have had a stock of several months of food and water, cash, silver and yes shotgun and ammo to protect ourselves if need be (God willing it is not required). It seems like the final break is just around the corner. As for leaving California, I’ve spent a lot of time in Texas and Oklahoma and I think you’d be a great addition to either state!

AnonymousFebruary 23rd, 2009 at 1:45 pm

Disregard: Looks like we had a simultaneous near-telepathic redundant posting above on the same subject.AM

BKFebruary 23rd, 2009 at 2:24 pm

Citi Bank offered me the same deal…accept a $500 statement credit to close the account. My account had a near zero balance. I called customer service to see if this still applied to me, because I would be pretty crazy not to accept a free $500, and the line tells me my balance, available balance and then hangs up. There is currently no customer service available at their 24 hour 1-800 number.I was pretty shocked.

GuestFebruary 23rd, 2009 at 1:36 pm

Conclusion of Bill Butler’s “401(k)’s and IRA’s: Modernity’s Peculium”Instinctively understanding that nature abhors a vacuum and knowing that 401(k) and IRA dollars sent to Wall Street were not subject to the government’s thirty percent charge, I anticipated [in the early 1990’s] that these newly-popular accounts would likely result in a significant flow of cash into the stock market. I was so convinced that this coercion would cause a market bubble that I began trying to parlay my new law degree and finance undergrad into an opportunity in the finance industry. I toddled around from investment firm to investment firm peddling my theory that the coercive transfers evidenced by 401(k)’s and IRA’s would necessarily inflate the market. Even before the repeal of Glass-Steagall, managing funds and selling 401(k) plans would be like shooting fish in barrel as long as the pipeline of pre-tax dollars continued. As long as the music continued to play – baby boomers remained employed, did not retire and did not withdraw their funds – the inflation would continue. The losers would be the ones who did not see this as a cause of the inflation and so would not be able to anticipate at least a timeframe of when the music might stop. The Ivy Leaguers with whom I shared this theory were uninterested in my simplistic analysis. From them and from financial pundits I heard instead that this was a “new era” in which P/E ratios and Capital Asset Pricing Models (CAPM) were no longer relevant. Oh well…I now realize there is more to the market bubble story, but not much. Although the Fed’s decade of artificially low interest rates and federal deficit spending have certainly contributed the bubble, the fact remains that the price of the market has been driven up by a powerful pipeline of coerced capital that is now drying up. It is no different than if one person, A, holds a gun to B’s head and tells B to pay C or A will take one-third of B’s property. B is now recognizing the scam and is refusing to play along. Much of this capital remains in the market unwillingly, it is held hostage by the coercive power of the government to tax it. It is, in short, not much different that the Roman slave’s peculium.[A slave could own no property, but from early times it was customary to give the slave a peculium, a fund that he could administer as if it belonged to him. Technically, this sum belonged to the master, but to some extent it was treated as a separate estate with which the master did not interfere except for good reason.]

GuestFebruary 23rd, 2009 at 1:58 pm

Democrats Target 401k and IRA Retirement Accounts. uh oh.Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts – including 401(k)s and IRAs – and convert them to accounts managed by the Social Security Administration. Triggered by the financial crisis the past two months, the hearings reportedly were meant to stem losses incurred by many workers and retirees whose 401(k) and IRA balances have been shrinking rapidly.The testimony of Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.

economicminorFebruary 23rd, 2009 at 2:11 pm

They better do this in an overnight raid because if they give me any warning, I will pull all mine and pay the taxes.

GuestFebruary 23rd, 2009 at 1:38 pm

NEED ADVICE: my 17 year old daughter is great in math but wants to go into business. She is planning on studying finance next year and keeps asking me for advice as she is concerned about the future job outlook. I don’t know what to tell her. Thanks in advance for all suggestions!

BKFebruary 23rd, 2009 at 2:45 pm

Bio engineering… Nano technology… something to that affect. Take it from a person with a Finance degree, it is the last thing you want right now.

rohelioFebruary 23rd, 2009 at 7:54 pm

World travel for a year. She may discover that there are infinite ways to live and create outside of the confines of academia. Acumen and discipline will survive. She can focus later and will have greater perspective…an instinct for what is important and what is mere wheel spinning

P&LFebruary 23rd, 2009 at 11:02 pm

I heard Robert Reich speak at URI a few years ago, and he gave what I thought was a great piece of advice. To paraphrase his comment…”Pick a profession that requires your physical presence, like nursing, car mechanics, plumbing. If it can be done on a computer, it can be done by anyone, anywhere.”

P1AQLFebruary 24th, 2009 at 4:28 am

I recommend Finance. Earning money is easy – learning not to lose it is harder. Learning Finance will allow you to avoid the charlatans and quacks.P1AQL

2centsFebruary 23rd, 2009 at 1:44 pm

Current reports are showing that this crisis was all in error and will be fixed by this weekend! It seems that back when the financial system was being ported from paper to computers there was a misunderstanding about how fractional numbers were internally represented. There was a miscommunication which led to the entered data being assumed to be an integer input that inherently had the last two digits forced to represent cents. This led to most if not all inputs being recorded as 100 times less than their true value.To make amends, all real financial instruments will undergo a conversion @ 12:01 AM on 2/28/09. However, due to legal difficulties all contract oriented instruments and debts will remain at their legally identified terms. The courts may undertake a future adjustment of these contract instruments at such time that it seems that those who were responsible participants of the system are fully repaid for their commensurate burden. Until such time just assume that your crap is still your crap.Some have become worried that this will be a hugely inflationary event. Rest assured that this is just a massive one-time programming change. Only the decimal point will be moved. All other notions of the value of money will remain well anchored. One might look at it as no more than negating the original mistake.On the positive side, we fully expect some people to be surprised the next time they view their balances after this event. Our only regret it that it took us nearly 3 decades to uncover this error.Our sincerest appologies. We’re just glad to finally bring an end to this nighmare.

GuestFebruary 23rd, 2009 at 2:20 pm

Michael Wolff wrote today in “Chimp Writes NY Post Editor’s Obit” that the career of Col Allan, the editor of the New York Post, will “likely be ended by the cartoon equating President Obama with a chimpanzee.”Why did Obama run for President if he can’t take the heat? Or is that why the Chicago Mob put him in the oval office — because he can’t be criticized? How much more will the common man take in this country? It’s just another cold blanket thrown over free speech by chilling political correctness! Just more hypocrisy!

GuestFebruary 24th, 2009 at 7:56 am

I’m as liberal as the day is long and when I first saw that cartoon I immediately thought it was portraying Geithner, I saw no racial inference in it until I read the accusations in the accompanying article. I think black people need to chill out.

2centsFebruary 23rd, 2009 at 2:27 pm

AIG Is In Talks With Government To Secure Additional Funds to Keep Operating, CNBC Has Learned. See CNBC for updates.Sources say that AIG will need at least $60 Billion more!I’m tired of hearing about these morons. Either cut the cord, or in past American fasion just give them an unlimited direct link to the Treasury. Since the end result is the same either way, at least what I don’t hear or see on a bi-monthly basis will keep me feeling rich.That’s all it is anyhow just a feeling!

GuestFebruary 23rd, 2009 at 2:39 pm

It is way past time for change. The American people are going to have to take back their government by refusing to pay taxes and by refusing to use Fed fiat paper as an exchange medium. Or else, they soon will have nothing, destitute and without a future.

MorbidFebruary 23rd, 2009 at 4:37 pm

If Banks Are Allowed To Go Bankrupt……and all the derivatives are only partially covered by the funds they collect from the proceeds – would that trigger a domino effect in the world economy?I’m thinking off all the balance sheets that have certain risks carrying a derivative offset that now suddenly becomes “worthless” – forcing a sudden negative input onto the books. Something like this replicated a few trillion times.

The AlarmistFebruary 24th, 2009 at 2:26 am

If banks are allowed to go bust and the CDS’s are allowed to go with them, will anyone really notice? No, the people with a real economic interest will still have the underlying bonds, which may or may not go bust (probably less likely to without the pressure of the CDS hanging over them).This whole charade has been one giant propping up of a market that itself claims has no real overhang once all the competing positions are netted.So, let the big 200 die.

PeterJBFebruary 23rd, 2009 at 2:44 pm

Talking about “nationalization”:” THE NEW “ALI BABAS”!by Lyndon H. LaRouche, Jr.February 23, 2009 (LPAC)–Like the famous Ali Baba crying “Open Sesame” before the cave, the association of the more than forty thieves of America are crying “Nationalize the Banks!” In other words, bring down the U.S. government of President Barack Obama.The test of both the sanity and morality of any specialist in finance today, is their willingness to support nothing other than a general placing of the remnants of what had once been, prior to the infamous Dodd-Frank swindles, the great chartered private banks of the nation under reorganization under conditions of Federal bankruptcy protection, as I had proposed in the HBPA legislation which the Rohatyn-Soros-managed Dodd-Frank, Forty Thieves of America Club have worked to sabotage.Under such Federal bankruptcy protection, the accounts, including mortgages, which qualify under the standard of Glass-Steagall chartered banks, are awarded immediate bankruptcy protection, and will be protected, thus, to return the essential business of daily life, and keep their true savings deposited there, to approximately normal operations conducted under Federal Bankruptcy protection. It is the gamblers who must eat the losses which they, and they alone, have earned.Under that arrangement, Federal banking and the U.S. Treasury will be freed from the currently operating, inherently larcenous grip of “bail out” of gamblers and thieves, and the Federal government’s support activities will be to promote the restoration and growth of what have been traditionally, maintenance of, and investment in productive employment and essential services.Any different policy would have the same effect as treason or worse than treason. The greedy maniacs who used persons such as Dodd and Frank and complicit tools in the Federally supported robbery of America, must be removed from the table and the equations of government, in order that the great general welfare principle of the Preamble of the Federal Constitution shall prevail, and the financial swindlers of all persuasions left to moan.Defend that principle as if your family’s life and future depend upon it. They do.” always come across to me as the last great American ‘Patriot’.I never realized until now that ‘insanity’ (the whole congressional / finance industry ‘ “leadership” show) could be so amusing and indeed, entertaining. ‘Insanity’ is derived from incest, yes?Encore!Ho hum

PeterJBFebruary 23rd, 2009 at 3:04 pm

Speaking about the disappearance of ancient (and modern) socio-economic societies that were advanced beyond immediate comparison:I must say that in physics, ‘structure’ is essentially the innate expression of ‘function’, a priori (note this) and hence, once ‘function’ (structure and its organizations) is ‘hijacked’ to feed the phantom fantasies of fools and ghouls, then the likelihood of a total systemic collapse increases in probability. The clue really is in the ‘soul’ of the seed that produced the structure(s) of modern day society (your mileage will vary) – integrity repeatedly violated, reacts violently and the soul returns to chaos.In the terms of physics then, it could be considered as highly probable that the Constitutional State of the United States of America, is on a course with hard fate and nothing I see as remedial events appear to be the ‘will’ du jour – sadly.Ho hum

blindmoleFebruary 23rd, 2009 at 9:39 pm

pjb,.@ “..soul returns to chaos.”? i don’t know.perhaps it returns to the trunk, the main stem, theroot or the stream. or dormancy. perhaps chaos is merely an outer branch manifestation that will fall off with that dead wood source of violations of integrity? is soul present in the violation of integrity or is it absent, if absent, where is itthen? is soul in a chaotic state when involved in violations of integrity. yes. (its) i think so.. we won’t miss the passing of this.soul. freedom., the right hand. the left hand.perfect conformity to the realities extant, but transcendentby virtue of that ” and just as noticeable ” soul..individual, unique and one of a kind.the snake does not morn for it’s old boyd kuhn. thank sssssssssss.for that link..remediation , to return to a prior state of presumed purity. first, to identify contaminants. we are working on that. or, some day we may getto that. we need more pressing , thenthe juice will flow and the essence will be revealed.hard fate. yes, i think so.but. as miles davis mused .. “so what?”fate is like that. it was bound to happen, eventually. has been happening, under the radar,yet in plain sight.i’m glad to be alive to see it, be partof it, as opposed to the alternative.peas.

GuestFebruary 23rd, 2009 at 10:21 pm

Harry S. Truman in “Memorandum” written for himself wrote: “In my opinion eight years as President is enough and sometimes too much for any man to serve in that capacity.”There is a lure in power. It can get into a man’s blood just as gambling and lust for money have been known to do.”All this to say, the bankers at the Federal Reserve have been in power 95 years — without conscience — until a few men now wield power over millions, reducing all to the subjection of a few.The laws of physics would say that the pendulum has swung its limit and is set to swing back with a vengeance. Let us not miss our opportunity.

GuestFebruary 23rd, 2009 at 3:06 pm

Stock-Market Pullback Isn’t Just ‘Financial’ Now February 23, 2009 (provided by the Walll Street Journal)While eyes have been locked on the steep descent of Citigroup and Bank of America, financial stocks are no longer the main culprits in pulling the stock market toward 11-year lows.Instead, manufacturers and even makers of basic consumer goods are now the biggest drags, a shift that has some investors worried. Although the current bear market began as a housing and banking crisis, the damage has spread. Financial stocks have shrunk so much in value that their continuing declines, while still large in percentage terms, are too small in dollar terms to move the indexes as much.A more diverse group is leading the declines today. A look at the Dow Jones Industrial Average this year shows declines in stocks like 3M and Procter & Gamble have had more of an impact than the drop in Citigroup or American Express.”What started as a subprime mortgage crisis became a U.S. credit crisis, then a U.S. recession, and now we are in a full-fledged, globally synchronous recession of historic proportions,” says Leo Grohowski, chief investment officer BNY Mellon Wealth Management in New York. “There are very few areas that have been insulated from the decline in earnings and in stock-price performance.” …’t-Just-‘Financial’-Now

Kent R. RieskeFebruary 23rd, 2009 at 3:57 pm

How to STOP housing mortgage defaults in 15 minutes.Since the housing mortgage defaults are mainly behind the banking crisis, we should place considerable efforts trying to stop the deflationary spiral in housing prices and mortgage defaults.I have sent the follow proposal to President Obama, but it is most likely destined to the email trash can by the White House staff.Therefore, I am hopeful this post will generate some interest that will draw the attention of Professor Roubini and his staff. Perhaps he could improve on this plan and draw International attention to solving the home mortgage problem in a similar manner. Certainly he could improve on this concept greatly.~~~~~~~~~~~~~~~~Dear President Obama,The current housing mortgage default crisis could be stopped in 15 minutes. I will layout a few simple concepts below. I am not writing more because I expect this mail to be simply diverted to the trash by the White House staff.1. President Obama, you should have a 15 minute TV address to the American people about the housing mortgage default crisis.2. Tell the people that those who have defaulted on their mortgages have made a grave mistake because in a few short years the return of inflation could easily make a $300,000 home increase in value to $600,000. They will never qualify for a home mortgage again in their lifetime, and they most likely could not afford the home at the future higher prices. This shocking truth will convenience many home owners that they should not walk away from their home as many of their neighbors have.3. Tell those people who are “under-water” on their home, where the mortgage is larger than the current value, to sit tight. They should be encouraged to do everything possible to continue paying the mortgage payments because that home could be selling for millions of dollars by the time the mortgage has been fulfilled.4. Immediately sign an “executive order” forbidding all mortgage lenders from “calling in” loans on homes where the home owner has positive equity. This nasty practice is an attack on the home owner to grab liquidity out of a home while the owner suffers the equity loss from the “fire sale” of the home. Interference between the free-market contract is required because of these extreme conditions.5. Immediately sign an “executive order” requiring mortgage lenders and those who cannot afford the monthly payment because the lost their job, or whatever, to agree to the following plan:5A. Mortgage lenders should allow all payments including interest, principal, insurance and taxes to be added to the mortgage loan balance. Therefore, the loan value would be increasing. As housing prices stabilized and rise again in the future the value of the home would become equal to the mortgage balance at some time. No one will have lost any money. The home should have an independent inspection at the start of this program, and the home owner is expected to care for the home. When the home is sold in future years another independent inspection would be done. Excess damages would be subtracted from the home owner’s part of the excess equity, if any. Some normal aging and wear would be exempt so as to prevent the lender from gouging the borrower.5B. Home owners could certainly pay toward the loan in any way they desires so as to increase their portion of the equity. The home owner could make partial payment as their ability to pay returned. The mortgage lender would not have to monitor or harass the home owner if a payment were missed. The deficient amount would simply be added to the mortgage loan balance.6. Benefits of this plan:6A. Nearly all home owners would STOP abandoning their homes. Why should they leave under this plan? There is no reason.6B. Nearly all of the mortgage lenders would STOP foreclosure proceeding on home owners who have delinquent payments. Why should they under this plan? In the past the value of homes have increased faster than the amount of the loan payment. Sitting tight on the loan will result in a full recovery of the loan plus the interest long before the term of the loan arrives.6C. The plunge in housing values would stop and the crisis would simply evaporate. The housing deflation spiral would be reversed.6D. The stock market would soar thereby returning the lost capital to investors at no cost to the US government. The effect would be worldwide, so this plan could also be employed in other countries who see the instant benefits.6E. This plan would not require any government spending whatsoever.6F. This plan would not punish responsible home owners who have equity in their homes.6G. This plan would not reward those irresponsible people who have already walked away from their homes. Rewarding irresponsible home buyers is harshly criticized by responsible buyers.6H. This plan would benefit everyone, lender and borrower. It would be fair to everyone no matter the status of their home ownership.Only 15 minutes of TV air time during prime time is required. The plan should be kept secret until delivery, but the speech should be hyped before hand in order to get everyone’s attention. The general topic would be revealed two days in advance without revealing details of the plan.Sincerely,Kent R. RieskeBoulder, CO 80301

GuestFebruary 23rd, 2009 at 4:02 pm

“that home could be selling for millions of dollars by the time the mortgage has been fulfilled” – yes likely to be true and millions of dollars will be able to buy you a few hundred cups of coffee per month at that time… housing in most of North America is finished due to the deflationary demographics but massive food and energy inflation likely coming

GuestFebruary 23rd, 2009 at 4:52 pm

So, what you are suggesting is that, when the average income isn’t supporting the average home value as it is now, the solution is inflation so that the disparity becomes increasingly greater. Then when the next bubble collapses, you will advise the the govt to sit inside the homes of people with a baton in the hand and not allow them to sell, until another bigger bubble is created thru inflation?

GuestFebruary 23rd, 2009 at 5:14 pm

good point – and what if we get a slow deflation in housing with accelerating inflation in food and energy and maybe even CPI?

economicminorFebruary 23rd, 2009 at 5:28 pm

This also assumes that the collapsing asset values can be overcome by an increase in the money supply.So far there is no indication that this is even close to happening. In fact it isn’t happening! The government is not only to late but putting the money in the wrong hands.Inflation may happen in some commodities but won’t happen in housing for a decade or more. It already happened and is collapsing because the debt that created the high prices can not be supported by income from any and all sources.They can not create the money fast enough to even slow this down, much less turn it around. Citi, BOA, now AIG have all had huge infusions of capital and that was just a black hole that ate it up.You think that inflation will return, you are drinking their kool aid or inhaling what Bill says he didn’t or what Phelps did.

GuestFebruary 24th, 2009 at 12:59 pm

With all due respect Mr. Reiske,home ownership as we know it is gone. It died in 2005.By the way,a fatal flaw in your program is that no one, including the Congress or The President tells the Banks what to do.The banks have no rules. That is what this crisis is all about.

Octavio RichettaFebruary 23rd, 2009 at 4:01 pm

I don’t recall where I read in the last few days that during the great depression, unscrupulous people went broke in 1929 the prudent ones went broke in 1932!A recent Maulding mailing reminded me of a great website I found a few years back: of food for thought!

Octavio RichettaFebruary 23rd, 2009 at 5:08 pm

So what is the post above all about?YTD I am down 6.8%, but I could not resist taking some more risk today*. I doubled up my SPX DEC 2010 call position but with a strike price of 750 (I paid $140/share). I also went short gold: GLL 1.5%.So my portfolio now looks like this:Cash, including CDs: 36.4%Bonds inv grade corp+Ts: 23.7%Total at low risk: 60.1%At risk:US stocks 14.5%US’10leaps(SPX, XLF, XLE)16.7%Int’l’10 leaps (EWJ, EEM) 3.6%Comm’10 leaps (DBA USO)** 5.1%Total at risk: 39.9%Total: 100%**Includes 1.73% in GLL (Gold double short ETF)* The purpose of the post above is to make sure you are aware of the fact I may be one of those prudent ones who continue to take risk – and loose – in a diving market (I do plan to stop long before I go broke. My next risk increasing point is SP500 @ 600, if we get there)

HayesFebruary 23rd, 2009 at 8:58 pm

We are due (unless there is an interim surprise) for a significant spike up (my guess is it will be violent and shortlived) before the great descent down -You appear to be well positioned to profit from such a move.

GuestFebruary 23rd, 2009 at 4:04 pm

Obama’s stupid Geithner is destroying global economy with all non-sense broadcast or pr broadcast without substance. and his boss Obama is doing pr dance more often than necessary. my god, Obama is running the global economy into toilet.

Real GuestFebruary 23rd, 2009 at 4:20 pm

Hi, Guest. Stop whining all the time. Barack Obama is your and our President. Learn to respect your President. Will ya? And, now, give yourself a name other than a “Guest.”

irving fphelmphFebruary 24th, 2009 at 12:05 am

i’m with you Real Guest. Let’s stand behind our president. I for one can’t believe all the bellyaching about a guy who’s been in office for a little over a month! His goals are clear and spot on. We need to rebuild! Isn’t that obvious to everyone? All this talk about getting guns is just a self fulfilling prophesy that is worrying to me. Let’s try and be positive and stand by the majority vote and come together as a country.

irving fphelmphFebruary 24th, 2009 at 5:32 pm

I’m not sure what lens you are looking through guest and guest but I’m glad I’m a sheipel when it comes to this. hurling name calling at our President is disrespectful and juvenile, especially since Obama has been in the Oval office for a month and 3 days. Perhaps going into a little more specifics might help me understand. Is it that he will be closing down Guantanomo? Or perhaps will end the Iraq involvement in 16 months? Maybe it’s that he wants to renew America? is that the grouse? Stem cell research ban that he will overturn?

GuestFebruary 23rd, 2009 at 5:03 pm

The financial sector has redefined democracy by claiming claims that the Federal Reserve must be “independent” from democratically elected representatives, in order to act as the bank lobbyist in Washington. This makes the financial sector exempt from the democratic political process, despite the fact that today’s economic planning is now centralized in the banking system. The result is a regime of insider dealings and oligarchy – rule by the wealthy few.The economic fallacy at work is that bank credit is a veritable factor of production, an almost Physiocratic source of fertility without which growth could not occur. The reality is that the monopoly right to create interest-bearing bank credit is a free transfer from society to a privileged elite. The moral is that when we see a “factor of production” that has no actual labor-cost of production, it is simply an institutional privilege.Excerpts from Michael Hudson’s new article

Marvin the MartianFebruary 23rd, 2009 at 5:38 pm

“The reality is that the monopoly right to create interest-bearing bank credit is a free transfer from society to a privileged elite. The moral is that when we see a “factor of production” that has no actual labor-cost of production, it is simply an institutional privilege.”Land ownership monopoly is the exact same free transfer from society to a priveleged elite.Somebody please inform the economists of earth that the dystem they supposedly explore is founded on 2 hoaxes.Maybe then you humans will be getting somewhere besides worse and worse off.Why billions of you continue to do without to provide the giga-wealthy their free breakfasts, lunches, dinners is a mystery to the rest of us in the cosmos. Some of us think you might still see the obvious for what it is before you blow your planet to smithereenies. Others scoff at the idea.Our betting pool grows.

GuestFebruary 23rd, 2009 at 6:00 pm

Marvin, I like the irony in your name. Your feet are very firm on the ground and you are very human. I have read all Michael Hudson has ever written and his approach is to systemically analyze the lack of economic historical memoryin the intellectuals that call themselves economists. We accept too much and never question. This counter enlightenment movement that has convinced us to work against our self interest is not based on the Progressive ideasthat made this such a great country. Regulationof Markets and Progressive Taxation of income are the economic changes that brought the ascendancy of the middle class in this country.Regressive Taxation and totally unfettered andunregulated markets brought the demise of the middle class. Until this administration discovers “the public interest” in banking policy, we will flounder. The Professor’s thirdplank of REDUCTION OF THE DEBT OVERHANG has tobe implemented. The banking interests have nointention to act in the public interest, andwe must have an Obama Metamorphosis or we aregoing to be in a hell of a lot of trouble.Please also check out the latest Bloomberg Video of Nassim Taleb. He tells it like it is!!!!

GuestFebruary 23rd, 2009 at 7:45 pm

It’s incredible that the New York central bankers have raised interest charges to usury on credit cards while the Fed supplies them interest-free capital, at the same time it is forcing CD and IRA and Treasury rates below inflation. And, Americans, who have no representation in their government, must sit and take it silently while suffering ruination.What have we gotten ourselves into?

FEDupFebruary 23rd, 2009 at 8:52 pm

thankyou for pointing that out. My CC interest charge has gone to 24.99% while they are getting interest free money from the Fed. Isn’t comforting to know that our leaders in Washington who write the laws have the best interests of the public at heart?! Totally outrageous! Forget about restoring credit, nobody will be able to afford it or want it anymore!

GuestFebruary 23rd, 2009 at 5:10 pm

I don’t believe all the economists predicting an unmeployment rate of 8.5 percent by the end of the year.In the last month, 500000 people or so got unemployed and the unemployment increased by .4 percent. This month (Feb) they are predicting somewhere around 700000 people getting unemployed so that would be in the vicinity of the .5 percent range. Even if a modest average of .3 percent per month is taken for the next five months, we could be looking in the vicinity of 7.5+1.5 = 9 percent range plus minus .2 percent by the end of July. I don’t see how 95 percent of the newly unemployed will be back to work within the next 4-5 months.Considering the fact that the job cuts that the larger companies have announced aren’t executed immediately, and done thruout the year gradually, the job cuts announced in Dec-Jan region would be in effect thru the year. Soon, the multiplier effect would kick in as the unemployed would drive bussinesses down in their areas leading to more job-cuts.I think by the end of the year 11 percent unemployment is not too far-fetched and, considering all the distortions in numbers that the govt may revert to, 20 percent should still be official.Just think about it, CPI suddenly jumped in January. The fed is scared of deflation and they have every incentive to distort numbers, and this quarter supposedly being the worst quarter (plus after december 1.5 percent unsold inventory), how could the CPI suddenly jump? Excess of inventory would decrease prices so would a contraction in consumption and GDP. The FED could have distorted the number such that a fitting 0 percent inflation for the year was achieved (rather than a negative number which have made deflation plain obvious). The FED is naturally trying to avoid revealing the true numbers since it trembles at the idea of deflation and the jump in the CPI in January (or was it december)– there is absolutely no explanation for that. In fact it somehow jumped enough to make inflation 0 for the whole period, so it shows how a negative number could have been “carefully” avoided.

GloomyFebruary 23rd, 2009 at 6:25 pm

No, they can’t stop it. Yes, we are on the edge of the abyss as the acceleration in “necessary bailouts” intensifies. Expect GE to waddle up to the trough in the next week or two. All hell is going to break loose.

slfFebruary 23rd, 2009 at 6:43 pm

Part of me wishes all hell does break loose.I am so tired of constantly waiting for the ‘other shoe’ to drop.And I mean the big one, not all these bitty billion & trillion dollar shoes.Never thought I’d refer to billion & trillion as bitty, but there it is.

GuestFebruary 23rd, 2009 at 8:44 pm

We may well get a bounce in the markets in the very near term, it will be short lived.The first sign will be the collapse of a major Euro finance enterprise such as UBS.This will be followed by a “breaking news” segment that will announce the end of mark to market.After a brief respite everything will happen quickly

GuestFebruary 23rd, 2009 at 10:22 pm

Key word is distortion, I would guess that most of us do not believe the we are witnessing is the real story. If distortion is being used and I think it is but not sure of the degree, then where are we in reality today. What lines do we read between and do those like the professor know more than they are willing to share?. Should we be listening close than we are. Should we run scenarios no matter how far fetched they may seem to open our field of view.

GuestFebruary 23rd, 2009 at 6:54 pm

U.S. Consumers Driven Away From Drink Spending: Chart of DayFeb. 23 (Bloomberg)… The CHART OF THE DAY shows…Take-out sales of alcoholic beverages tumbled 9.3 percent in the fourth quarter, the steepest drop since the U.S. Commerce Department started compiling data half a century ago. They sank four times as much as overall consumer spending, depicted by a green line in the chart.The plunge, which took place as the U.S. recession surpassed the one-year mark, shattered the previous record of 3.7 percent in the fourth quarter of 1991. That decline capped three quarters of falling sales as the U.S. came out of a recession.Beer sales fell the most, 14 percent, in last year’s fourth quarter. They accounted for 61 percent of the $111.9 billion in alcohol sold to drink at home. Wine sales retreated 1.6 percent and sales of liquor slid 0.9, a Web site best known for its statistical analysis of last year’s U.S. presidential election, featured the alcohol-sales data last week in a posting by founder Nate Silver.

GuestFebruary 23rd, 2009 at 8:36 pm

The only way to stop the downward spiral is to do something that holders of wealth will never agree to.Print money and give it to consumers (higher wages or debt reduction) to stimulate demandNeedless to say it also causes a decrease in the value of the US Dollar, but given the poor shape the rest of the world is in – everyone else should print and devalue along with us.For those worried about inflation – its nothing higher interest rates won’t solve and higher is where they should be anyway.

GuestFebruary 23rd, 2009 at 9:34 pm

there is nothing wrong with current deleveraging. that will teach people to live within their mean. what Geithner doing to bailout insolvent institutions like auto and financial companies is just prolong the pain into next few decade.

GuestFebruary 23rd, 2009 at 10:10 pm

Teaching people to live within their means is fine as long as you are also teaching lenders to ONLY LEND TO THOSE THAT CAN AFFORD TO PAY IT BACK. If borrowers are the only ones taking the pain then you have an unfair society which deserves to go down the tubes

GuestFebruary 23rd, 2009 at 9:36 pm

the deleveraging will teach financial banks to lend money to those who can and will repay the loan back. no more subprime lending practice. what Geithner is encourage more subprime lending practice. Geithner is giving money to insolvent institutions that will not or cant return the money back to tax-payer. and stupid Obama picked him to be Treasury.

GuestFebruary 23rd, 2009 at 8:39 pm

U.S. Pledges Capital for Banks as Stress Tests BeginFeb. 23 (Bloomberg) — U.S. financial regulators pledged to inject additional funds into the nation’s major banks to prevent their collapse and will this week begin examinations to determine whether they have enough capital.Banks that cannot privately raise the additional capital they need after the so-called stress tests will get taxpayer money, regulators said in a statement in Washington. Government funds would be in the form of “mandatory convertible preferred shares” that would be exchanged into common equity “only as needed over time.” Stakes the Treasury has already bought will be eligible to be changed to convertible preferred shares.While the new injections could leave the government with majority ownership of several lenders, Citigroup Inc., Bank of America Corp. and other banks rallied on speculation shareholders won’t be wiped out. Officials said that the move would be a temporary effort to ensure firms stay in business and keep providing credit to households and businesses…The Treasury already has bought more than $280 billion worth of stakes in U.S. financial companies since Congress approved a $700 billion financial-rescue fund in October. That’s failed to stem an exodus of investors from banks on concern credit losses will surge further this year.The new government funds are designed to provide a “temporary” buffer for firms against increased losses during the crisis, the Treasury, Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Office of Thrift Supervision said.The mandatory convertible preferred shares will be exchangeable to common equity on a one-to-one basis, a government official said on condition of anonymity.Officials are open to considering requests to exchange existing government stakes into common equity shares if the bank and its regulator believes it would help it survive, Treasury spokesman Isaac Baker said late yesterday.“The U.S. government stands firmly behind the banking system during this period of financial strain,” the Treasury and bank regulators said in today’s statement. “The government will ensure that banks have the capital and liquidity they need to provide the credit necessary to restore economic growth.”Supervisors will start the stress tests on Feb. 25 to assess whether banks have enough capital to withstand “a more challenging economic environment.” The statement didn’t specify the tests that bank examiners will run or say when the results will be known.FDIC officials will release a quarterly report Feb. 26 with an updated tally of the number of “problem banks,” put at 171 in the third quarter.“They don’t want to announce to the world that a third of the banks are undercapitalized and have to be nationalized,” said Sean Egan, managing director of Egan-Jones Ratings Co. in Haverford, Pennsylvania. “So they’re trying to finesse it.”U.S. business economists in a survey today projected that the country’s recession will be the worst in more than three decades as job losses mount and consumers and companies retrench.The world’s largest economy will shrink by 1.9 percent this year and a total of 2.8 percent in the current downturn, the most since the 1973-75 slump, according to the median estimate in a poll taken by the National Association for Business Economics.Another 3.2 million Americans will be cut from payrolls in 2009, pushing unemployment to 9 percent by year-end, NABE said.Nationalization IdeaSliding bank shares have given momentum to the idea of nationalizing banks in recent weeks. Nouriel Roubini, the economist and professor at New York University’s Stern School of Business, Republican Senator Lindsey Graham of South Carolina and former Federal Reserve Chairman Alan Greenspan have all suggested it as a solution to banks’ woes.Fed Chairman Ben S. Bernanke said last week “there’s a very strong commitment on the part of the administration to try to return banks or keep banks private or return them to private hands as quickly as possible.” …The government holds $52 billion of preferred shares in Citigroup, five times the bank’s market value as of Feb. 20. If the U.S. were to convert all of its holdings into common shares, it would own more than 80 percent of the company.Charlotte, North Carolina-based Bank of America, which has received $45 billion in TARP funds in exchange for preferred shares and warrants, would be 66 percent owned by the government if its entire stake were converted to common equity, according to data compiled by KBW Inc., a New York-based investment bank.The figure would be 69 percent at Regions Financial Corp. in Birmingham, Alabama, which has received $3.5 billion from the U.S. It would be 83 percent at Fifth Third Bancorp, the largest Ohio-based lender, which got $3.4 billion.KBW calculated the government stakes based on a conversion price of 80 percent of the stock’s value as of Feb. 5.Bank of America, Citigroup and Wells Fargo & Co. in San Francisco are among more than 400 financial institutions that have received cash in exchange for preferred shares under the program…Still, analysts and investors anticipate that writedowns will climb. President Barack Obama has also said that some lenders haven’t fully recognized likely losses. The International Monetary Fund estimates that writedowns and credit losses on U.S. mortgage-related assets will reach $2.2 trillion, after a total of about $1.1 trillion so far…Treasury Secretary Timothy Geithner outlined earlier this month a Public-Private Investment Fund designed to address the toxic assets. Officials have yet to specify how the program, which may reach $1 trillion, will work.

GuestFebruary 23rd, 2009 at 9:26 pm

Where’s the end of this? There’s a point when the government can’t give these billionaire gamblers any more public money. I think they’ve been giving them money under the table – they’ve stretched that $700 billion bill so much it looks like rubber band, all the while Bernanke doles out trillions. How could Americans possibly know where the end is when there’s no accounting on how much it is, where it goes, when it goes, why it goes — because we’re dealing with liers.The people who are making these secret trillion dollar decisions are the same people who are getting the money. It’s an incestuous circle — bankers giving the money and bankers getting the money. Geithner is a banker. Bernanke is a banker. Paulson is a banker. Billionaire financier Perelman is a banker. Rubin is a banker. $100 Million a Year Lloyd Blankfein is a banker.The point is, every one of these dollars has been paid for or will be paid for by some kind of labor or production. These dollars represent value, albeit declining value with the Fed inflating by the trillions. It is a transfer of money from people who made it to the people who have wasted it or who are putting in their pockets.These busted bankers are in a black hole with no bottom, and they’re trying to pull us in with them.How long have we heard, we’re fine, we just need this to fix it and we’ll be fine, and we only need that to fix it and we’ll be fine? And it’s all a tissue of continuous lies. These banks are in much worse shape than they’ve ever let on. They’re walking zombies and they’re out for our blood, even if it kills us.

PeteCAFebruary 23rd, 2009 at 8:45 pm

Jason B: “Are we at the edge of the abyss?”We’ll take a look at that issue tomorrow morning. It’s a key question at this time.In the mean time … the very steady selloff that we saw in the US markets today certainly indicates a serious flight to safety. In fact, it might be much better to characterize global investor sentiment now as “flight to safe havens”. You should see this in the market behavior as we move forwards.PeteCA

Jason BFebruary 23rd, 2009 at 9:11 pm

The stock market is not the economy. I know that economically we are in very serious trouble. Deadly serious. Separately from that, technically the market looks like it is set for a big crash in the near term. Maybe the next few days or weeks.What I am worried about are the interconnections. Once one piece crumbles, the whole thing could fall like a house of cards. I am hoping for the best, but have plan B in place. This site gave me the time to prepare. Thanks again to all of you.

GuestFebruary 23rd, 2009 at 9:26 pm and Democrats’ short sightness will destroy States across the country. States need to learn to balance their budget via spending cuts and not rely on federal stimulus aid. The states that learn to cope with this crisis will emerge as winner. The states that rely on Obama’s spending pacakage will face the same problem down the road, unless there is II, III, IV, V spending package down the road. Democrats will destroy USA.

GuestFebruary 23rd, 2009 at 10:35 pm is going to run the PPIF through the TALF and the FED will non-recourse it to the FED SPV. Geithnerand the gang are going to cover a long downside to bringhedge fund profits. The hedge funds will plan to hirethe same guys who took the upside of the disaster.

Dr. DanFebruary 23rd, 2009 at 10:36 pm

also favoured stockpiling a reserve of food, cash and fuel – LB NOW NOW…where are you guys stockpiling Cash ?I guess if at all anything happens..banks are the first ones to fall…and cash will be unavailable before food and oil.So lets talk CASH first.

GuestFebruary 23rd, 2009 at 11:30 pm

When all the trees have been cut down,when all the animals have been hunted,when all the waters are polluted,when all the air is unsafe to breathe,only then will you discover you cannot eat money.Cree Prophecy

AnonymousFebruary 24th, 2009 at 12:14 am

Everyone, anyone,I know Roubini was predicting the Dow would go as low as 7,000. Has he lowered his estimates or does that remain the same?Apart from Nouriel’s prediction, what do most of you think? Are we going significantly lower?

slfFebruary 24th, 2009 at 12:42 am

Take this with a grain of salt, because I know next to nothing about markets. That’s my spouse’s job, lol. But when I see women (who don’t trade for a living) on a hobby-related board still talking about making trades and picking up ‘deals’, talking about how stocks are ‘oversold’, it’s my personal opinion that the markets still have a significant way to go on the downside. How much further? Hard for anyone to say, isn’t it..

REDFebruary 24th, 2009 at 12:53 am

One thing for sure is that there is more downside – how far – well how long is a piece of string?How long will it take to restructure the US economy?Will the dollar survive as reserve currency?Will the US govt default on its debt?Will the Euro collapse?Will China go into a Great Depression?If you can answer these questions, I’ll tell you where the markets will bottom.This market is only for (very) long term investors. If you can’t take a loss – get out and buy back when things have stabilised in a couple of years. You may need all the cash you can get your hands on in the next 12m.

AfA, Tokyo, Stockholm, Reykjavík, HarareFebruary 24th, 2009 at 12:54 am

So the US has officially had its “Lost Decade”, what was a worse case scenario few months ago is already a reality.If the lost decade is confirmed in the next few days and if nationalization becomes reality, can I have my new Japanese and Swedish passports?Concerning Citi and BofA, the administration to be willing to take a majority stake in both firms. In that case, how could nationalization be possible without effectively bailing out shareholders (or past ones anyway) and incurring losses to taxpayers, since shares will be worthless?

GuestFebruary 24th, 2009 at 1:51 am

“A Coward Responds” by Becky Akers(Feb. 24) — So the leech whose salary as Attorney General of the United States we pay, who is, in effect, our employee – even our servant, if you swallow Leviathan’s claptrap about public service – reviled us as “a nation of cowards” last week. Try calling your boss a yellow belly and see what that does for the old working relationship. Yet Public Servant Eric Holder not only delivered this insult in his “Remarks” for the “Department of Justice [DOJ] African American History Month Program,” he expects our deferential agreement.And what makes us cowards? Have we defended the torture of helpless prisoners, as has Holder’s DOJ? Or the armed kidnapping of a terrified, 6-year-old refugee fleeing Castro’s hell? Have we preyed on folks who prefer reefer to rum, ginning up crises and calling for longer terms of imprisonment to curry favor with voters? Have we kicked the down and dying Second Amendment in the hopes of advancing our career with the Democratic Party? No. We’re jellyfish because we don’t share Holder’s obsession with skin-color.And yet the hypocrite alleging our racism lives in a glass house. “We still speak too much of ‘them’,” Holder confesses, “and not ‘us.’” Actually, regardless of how politicians like the AG “speak” about their fellowmen, the rest of us likely don’t much notice the Creator’s rainbow of hues… the rest of us are too busy working and paying taxes for such tawdriness.Holder’s “Remarks” are a vacuous yet horrifying blend of platitudes, pap, megalomania, and threats. Here’s a federal official lusting not only to know our thoughts and emotions but to compel their conformity with his: “Through its work and through its example this Department of Justice, as long as I am here, must – and will – lead the nation to the ‘new birth of freedom’ so long ago promised by our greatest President. [Yo, Barack: I smell disloyalty in the ranks.] This is our duty and our solemn obligation.” …Ironically, as Holder bloviated about the DOJ’s “duty and…solemn obligation” to force his fetish on the rest of us, one of New York City’s biggest buffoons seemed determined to spoof the whole topic. Al Sharpton pitched yet another fit, this time over a political cartoon in the New York Post: two cops stand over a “violent” chimpanzee they shot and killed in Connecticut after it mauled a woman; one cop tells the other, “They’ll have to find someone else to write the next stimulus bill.”Al spies a reference here to Barack Obama. Hmmm. Either Al’s illiterate or he has an unhealthy fixation with the charlatan in the White House. How else to account for reading the president into this caption since Congress writes legislation and the bill in question originated with the last Administration? (Come to think of it, the previous Thief-in-Chief did bear a striking simian resemblance…) …Nor could the governor of New York resist adding his two cents, even if they jangled incoherently. “They [sic – presumably the Post?] do feed a kind off a negative and stereotypical way that people think,” David Patterson babbled, “but I think if it’s enough that people are raising this issue, I hope they would clarify it. In a situation like this where an economic downturn has shown in the past that it does lead to a lot of unnecessary and stereotypical characterizations, an explanation is in order.” You betcha; in fact, maybe someone could explain Dave’s meaning. Then the governor revealed what’s driving him and no doubt many of the Post’s other enemies: “I’m trying to be fair to the New York Post, who [sic] has never been very fair to me.” …Meanwhile, if the cartoon offends anyone, it oughta be the chimps…

GuestFebruary 24th, 2009 at 2:32 am

wow…and I thought that US was doomed by peoples over-optimistic mortgages…Laid-Off Foreigners Flee as Dubai Spirals Down

DUBAI, United Arab Emirates — Sofia, a 34-year-old Frenchwoman, moved here a year ago to take a job in advertising, so confident about Dubai’s fast-growing economy that she bought an apartment for almost $300,000 with a 15-year mortgage.Now, like many of the foreign workers who make up 90 percent of the population here, she has been laid off and faces the prospect of being forced to leave this Persian Gulf city — or worse.“I’m really scared of what could happen, because I bought property here,” said Sofia, who asked that her last name be withheld because she is still hunting for a new job. “If I can’t pay it off, I was told I could end up in debtors’ prison.”With Dubai’s economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills). Some are said to have maxed-out credit cards inside and notes of apology taped to the windshield.The government says the real number is much lower. But the stories contain at least a grain of truth: jobless people here lose their work visas and then must leave the country within a month. That in turn reduces spending, creates housing vacancies and lowers real estate prices, in a downward spiral that has left parts of Dubai — once hailed as the economic superpower of the Middle East — looking like a ghost town.No one knows how bad things have become, though it is clear that tens of thousands have left, real estate prices have crashed and scores of Dubai’s major construction projects have been suspended or canceled. But with the government unwilling to provide data, rumors are bound to flourish, damaging confidence and further undermining the economy.Instead of moving toward greater transparency, the emirates seem to be moving in the other direction. A new draft media law would make it a crime to damage the country’s reputation or economy, punishable by fines of up to 1 million dirhams (about $272,000). Some say it is already having a chilling effect on reporting about the crisis….But Dubai, unlike Abu Dhabi or nearby Qatar and Saudi Arabia, does not have its own oil, and had built its reputation on real estate, finance and tourism. Now, many expatriates here talk about Dubai as though it were a con game all along. Lurid rumors spread quickly: the Palm Jumeira, an artificial island that is one of this city’s trademark developments, is said to be sinking, and when you turn the faucets in the hotels built atop it, only cockroaches come out.

(full story at:

PeterJBFebruary 24th, 2009 at 4:57 am

Talking about the total inadequacies of US Intelligence; mainstream and commercial insider connected:Stratfor Feb. 2009 analysis suggests a division in China’s Central Government Party Politics which I suggested here, prior to the Beijing Olympics in 2008. late than never, er, I guess…Now, looking at Witch Clinton’s recent ‘screw human rights for money is okay’ message to China recently, one could be forgiven for thinking that ‘Obama baby’ i.e. the Obama Administration, is (is subtle the right term here?) attempting to create a wider gap in the existing political divisions in China. How crasse! Divide and conquer indeed. Who is she kidding?Have American’s lost the mojo? must be asked – where the answer must be: indeed!Anybody can whack America these days; Iraq, Iran, Afghanistan, Vietnam so shall the list continue?Will Israel officially take over the reins of Government in the USA?Perhaps the only answer to this question is when? American has clearly lost its soul.Ho hum

PeterJBFebruary 24th, 2009 at 6:49 am

“”The greatest danger to liberty today comes from the men who are most needed and most powerful in modern government, namely, the efficient expert administrators exclusively concerned with what they regard as the public good.”– Fredrich August von Hayek(1899-1992), Nobel Laureate of Economic Sciences 1974Sorta conjures up visions of Benanke, Greenspan, Geithner, Paulsen, Summers, et al, er, eh?Oh dear: Ho hum

HayesFebruary 24th, 2009 at 7:03 am

Dr. Doom Roubini: Nationalizing Banks is ‘Market Friendly’,/b>Roubini on CNBC this morning (text and video)

irving fphelmphFebruary 24th, 2009 at 9:16 am

” American has clearly lost its soul.”anytime anyone uses the word ‘clearly’ I begin to question it. I think we’ve got lots of soul, I see it everyday in the way we treat each other. We’re, despite rumors to the contrary, a very hardworking lot. Our culture of music and film and the arts is alive and well. We strive to improve ourselves and our communities. Day after day one hears and sees ocean cleanups and community activities, food banks and the like, aimed at cleaning up our environment and helping each other out. People are taking mass transit and riding bikes. America is beginning to discover its soul for the challenges ahead. And we have a brand new leader, an African American! for the first time in it’s history. For the naysayers out there I can only say, he’s doing all he can to lead us in the right direction. We now have an African American Attorney General! There is much to celebrate today.

GuestFebruary 24th, 2009 at 10:57 am

I love the fact that they teach you in university that the board runs the company.and then this stuff comes along and all the boards are like “we cannot expect to know what is happening in the company from having a meeting once a quarter”and from the female presenter here.

David Wafula NerubuchaMarch 4th, 2009 at 3:47 pm

“The Capitalists will sell us the rope with which we will hang them.” The poignant words of this quotation were uttered by Vladimir Ilyich Lenin, the first leader of the Soviet Union early in the previous century. The verdict might have come to fruition with the $787 billion stimulus package voted for and approved by Congress, in addition to getting signed into law by President Barack Obama recently, marking the event as a milestone of sorts. Interestingly, it follows similar actions undertaken by Franklin D. Roosevelt to jump start the American economy during the time of the Great Depression. The trillion dollar question is: where did or will the funds to be used to finance the recovery of the US economy come from? It is only obvious that with China holding approximately 10 per cent of US reserves, including Treasury Bills — occasioned in part, by the huge trade imbalance — makes for perfect financial sense to borrow from them. So, the effort could well be equated to the band-aid option to quickly fix serious anomalies and/or shortcomings of the capitalist system, by strategically subsidizing consumer spending of utilizing “tradable loans” through the Federal funding programs. This ofcourse is done with the foresight of hoping against hope the wound will heal. And while the results of this course of action may be measurable and positive, it may not be necessarily sustainable, particularly in the long run. For instance, if tax cuts on the middle class are part of the equation, the effects on the taxpayer could turn out to be revolutionary, i.e., if it has not already happened. At any rate, the idea of nationalization of privately run commercial banks by the Federal government must not be condemned wholesale, but rather, necessitated by the Federal Reserve in order to stave off economic catastrophes, the kind the United States and the world by extension is going through. Ideally, the Democrats must take precedence – which they have, by default – through institutionalizing budgetary prescriptions into the friendlier and more humane market driven social capitalist system.Cheers 🙂 David W. Nerubucha

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