Lehman Deader Than The Dodo

[Admiral Valdemar]

Kernel, who said we were in depression? We've not even hit an officially recognised recession yet. The talk I've been hearing is we're setting up for going into one, because this is the worst financial crisis since the Great Depression, which will have long lasting impacts on the economy when added on top of multiple other factors helping to harm economic growth.

Like the original depression itself, nothing happened overnight and it was easy to play down fears of any upheaval in the economy for a long time before the big problems hit the majority of people.

Also, it is far, far too simplistic to look at this as only a problem with over-leveraging in large investment banks, just as it is not truthful to say this is only about sub-prime mortgages. The Fed and other central banks and even the media keep propagating a lot of myths as it is, such as this being a liquidity crisis when it's nothing of the sort, or that a turnaround is right around the corner now.

[Broomstick]

First of all, dumbshit, I didn't say we were IN a Depression at the moment.

Don't just take my word for it - in this thread is a quoted Wall Street Journal article talking about how this is the worst financial crisis since the Great Depression.

Oh REALLY? Let's have a look at some data shall we?

I am presuming that the Wall Street Journal can speak with some authority on the matter. Is that correct or not?

As I said - don't take my word for it, I linked to information from a publication that presents itself as a source of information about business. Why shouldn't I give weight to their reporting? Are you saying the Wall Street Journal is not a valid source for financial information?

So the GNP doesn't support your case. What about unemployment?

What about it? In the GD we didn't reach massive, 25% unemployment until 1933, four years after the triggering event, the crash of '29. IF - and it's a hypothetical - IF the current situation follows the same pattern then we won't reach 20 or 25% unemployment until 2012.

IF this is a trigger event a comparable year to compare would be 1929, where unemployment was under 10%, as it is now. That doesn't mean all was right in 1929, nor does it mean everything is OK right now.

Could I be wrong on it? Sure. Personally, I'd rather be. But it looks pretty damn grim to me which is why I'm stating that. Oddly enough, you seem to be the one getting your panties in a twist over it, like my opinion or viewpoint is somehow a direct, personal attack on you. Why don't you take your attitude and shove it up... oh, how about J's ass, as J is saying much more scary things than I am in another thread

Wow, unemployment doesn't work for you either does it?

No, it doesn't. "Not working" is sort of the definition of unemployment, which is why I found a part time job and I'm looking for better.

Next you might argue that the stock market might see the future trends of the actual state of the economy quicker than GNP and unemployment data.

Actually, no, I wouldn't say that because I know jackshit about the stock market which is why I haven't much said anything about it. Maybe you should pay attention to what I say instead of listening to the voices in your head. You're wasting your time rebutting a point I never made and never will make.

Know why consumer confidence is in the shitter? Because people are losing their jobs, or getting their hours cut, and prices are rising. Now they seen the Wall Street tycoons scrambling like a kicked-over anthill. You don't have to be a genius to see there is a Problem here.

Blah, blah, blah. Thanks for a series of totally subjective claims. Got anything useful to add?

Yeah - why don't you look at what people are saying and doing rather than statistics?

I actually have NOT said "Great Depression" for any of those other financial crises you mentioned, but I am for this one because, yes, I think it really is that bad. My parents, who grew up during the Great Depression, independently came to the same conclusion. Given that they have nearly 80 years of experience in the real world I assume they have some basis for comparison of financial crisis.

Wow, this is a crisis on the scale of the Great Depression because your parents say so! What a wonderful appeal to (false) authority!

Well, my parents have direct, personal experience with the Great Depression. Unlike you or me. They have lived through several economic crisis since then, and they have said that this is the worse they've seen since then. I don't know why you have a problem with that statement, unless you think my parents are lying for some unknown reason. Unless you're saying only an economist is permitted to have memories and draw upon personal life experience when making observations. They're not saying that because THEY'RE suffering - they're still doing quite well, in fact - but because of their observation of the world at large.

So, you pick and choose the prettier statistic, and ignore the people who have been forced from full time to part time work, or subjected to pay cuts, or both.

I picked the data point that the US Department of Labor uses when they report on unemployment. If you have a problem with that take it up with them.

Why does the BLS bother to generate those other figures month after month if they serve no purpose? You're telling me to only look at the date YOU present? That you know better than the BLS and their team of (presumably) professionals?

Part time workers aren't considered unemployed, so instead of firing half your workforce you force them all to part time, drop their health care benefits.... but it's OK because unemployment hasn't gone up at all! But you don't understand why worker morale is shit and everyone is worried.

That problem has always existed with labor statistics. It's not like it's any worse now.

PROVE IT - I would love to see the stats on people who work part time but who really want full time employment instead, but I can't find them. Do they exist? If so, where? You claim that it's no worse now, so presumably you know where to find this information. Where is it?

If you have some reason to think that the partial employment problem is worse now than during other economically down periods in US history go ahead and present your evidence.

As I said, I can't find the statistics - do YOU know where they are?

Frankly, I'm worried now. Perhaps you find statistics reassuring, but I'm looking around, not just locally but nationally, and there are very, very worrisome things going on.

Bitch, in case you didn't notice, this is SDNet. Maybe you are aware of the rules here about presenting claims without evidence?

Where does saying "I'm worried" constitute a "claim" to be backed up. It's an opinion. You do understand the difference between fact and opinion, yes?

YOU find the statistics reassuring. I am seeing a disconnect between stats that say "all is fine, it's a normal downswing" and what I'm seeing in the world around me, and the information I'm getting from various sources such as The Wall Street Journal which I presume have some grasp of what's going on. There are those alarming reports in all the media outlets about emergency session of Congress, meetings with the President, government take-over of businesses... that's not normal. I can't recall so many like-sized firms going under, and so many being Federalize all at once. My parents can - from when they were kids.

Again, what the stats you present say and what other sources say do not match. I find the mere fact they don't match to be disturbing. But that's an OPINION, which I am allowed to have whether you agree with it or not.

So, if 60% of the country is taking paycuts and forced to part time that's OK because, you know, they aren't unemployed or anything really serious? Or, hell, even a mere 25% of people forced to part time work would be terribly serious. But it's OK, because the Official Unemployment Rate is low! Nothing is wrong, folks, because this one stat has stayed low! Just ignore that you no longer have health insurance and can no longer pay your bills because, you know, you're not unemployed, you're "merely" earning only 50% of what you did last year!

1) Back up these numbers of yours. I'm assuming you are pulling them out of your ass.

"If" generally signals this thing called a hypothetical, not a reflection of reality. So, tell me, hypothetically, if 60% of workers have a forced reduction in pay, is that a sign of healthy economy? If 25% of the work force that wants full time work is only working part time is that a sign of a health economy. I did NOT say we have that now.

2) Assuming you can actually find decent data on this, show how it is any different than the squeeze that normally occurs during a tough economic period and you MIGHT have a point.

Because I am not familiar with the mathematical and statistical tools I am not basing my opinion on them so much as on other indicators. Such as a very free-market, deregulate, no government interfere administration has just nationalized Freddie and Fannie and taken over AIG, a private company. That's not normal at any time. Now, there have been times when the Feds have take drastic and/or unusual actions before, but I don't recall, in my lifetime, so many so close together. There was the RTC during the S&L crisis, but that was pretty much a one-shot deal. This time we've had multiple instances of it one after the other. Or do you deny the changes that have occurred in these companies the past few weeks? Hell, it's all over the news.

I don't know what you'd accept as proof we're up shit creek, talking to financial types is rather like talking to Fundies - you're so convinced you're right, and that only those within the exclusive club have access to enlightenment.

Proof would take the form of actual data to support your argument. Since you have none, I think you need to look in the mirror with that fundie comment.

Did or did not the Federal government take over Freddie and Fannie?

Did or did not the Federal government take over AIG?

Did or did not the Federal government have an emergency meeting about what to do about the economy recently?

Did or did not the Federal government change some of the trading rules recently, such as the ban on short selling for 799 companies?

Were there or were there not 12 bank failures this year - FAR more than is typical.

CNN is reporting that the rise in jobless claims was worse than expected.

House prices in most markets are still falling, while foreclosures are on the rise.

Or are all these occurrences a collective mass hallucination? The fact so much is going so wrong in so short a time is what's generating concern. You say there's nothing to worry about - OK, tell me why none of the above is relevant to the economy.

I remember every recession since the 1970's, and we didn't have mulitple Wall Street firms falling like dominoes in any of them until now. We didn't have dropping real estate values nationwide. I see a lot of financial types trying to tell each other it's OK and it's going to be alright but I don't believe them because every day brings more bad news.

What the fuck does Wall Street have to do with this? Jesus fucking Christ, I can't believe I'm talking to a person who doesn't know the difference between indicators that an investment banker might be interested in (hint: the stock market) and someone who is analyzing the actual state of the economy.

Are you saying the stock market isn't part of the economy? Are you saying the stock market is somehow irrelevant to the economy?

Wall Street's problems are, as far as I can see, another symptom of an underlying problem of some sort. As is the collapsing housing market/foreclosure problem, or is real estate disconnected from the economy, too?

The Second Great Depression need not look exactly like the first to be real. We may not see 25% unemployment, that doesn't mean everything is OK. If everyone ends up like me - earning only 1/3 of what they were the year prior - they might still be "employed" but that would still be a terrible, terrible economic circumstance. We do have safeguards we didn't then, but that doesn't mean it won't be horrifically painful to live through the next few years or even decade.

So far we haven't even seen a period of actual loss of GNP, explosive unemployment or any other indication of something on the scale of the Great Depression. As usual, you've brought nothing to the table to make your case.

No, we're just seeing a whole lot of other bad stuff we don't normally see, and we're seeing a lot of it together.

If I'm driving down the road and smoke starts pouring out from under the hood and the car won't shift out of first gear I don't have to be a mechanic or a design engineer to figure out that something is wrong here. Likewise, at present I don't have to be an economist or mathematical genius to notice there is something wrong with the economy. Well, the big-wigs in Washington say they've fixed that. I hope to God they have, but only time will tell.

[Broomstick]

I remember every recession since the 1970's, and we didn't have mulitple Wall Street firms falling like dominoes in any of them until now. We didn't have dropping real estate values nationwide. I see a lot of financial types trying to tell each other it's OK and it's going to be alright but I don't believe them because every day brings more bad news.

I misread this, so here's the actual response to this.

If you knew anything about history, you'd know that investment banks die like this all the time and it is always for a very specific reason.

Thank you for the civilized explanation, it was quite understandable in layman's terms.

I do realize that investment banks can and do go under, and have done so in the past. I don't recall so many failing in such a short time period (I'm including the ones sold off to other banks, as what's being reported indicates that if they hadn't be been they would have gone the way of Lehman). Can you name any other time when so many investment banks have fallen in so short a time period?

Or, let's take bank failures requiring use of the FDIC insurance - there have been TWELVE this year. There were three in 2007 - we knew there were rough spots in the economy in 2007, but no reason to panic. There were NONE in 2006. NONE in 2005. 2002 was alarming with 11 but that was for the entire year - we still have 1/4 to go. Those aren't investment banks. Granted 2002 had a lot and the world didn't come to an end, it's possible that 2008 is also a statistical anomaly. Seems to me you could say that about a lot of things these days, but we also seem to be having a lot of anomalies all at once. Which is sort of a meta-anomaly.

So no, I'm not basing my concerns on formal statistical analysis. I'm basing it on that I'm seeing some unusual occurrences - like a large number of bank closures, as just one example - and they're all happening at once. Yes, that may be a different data set than what you're looking at, which might be why we aren't seeing the same thing.

If it was JUST AIG, or JUST Lehman, or JUST Federalizing Fannie or Freddie, or JUST 12 bank failures - any ONE of those - I would not be as concerned because as we all know shit happens. I certainly didn't predict the apocalypse when Enron collapsed - it was just one company, the real estate market was still rising, etc. etc. When the dot.coms blew up - well, it was just one sector. Other areas of the economy were still doing well, and fuel was cheap, and while painful for those immediately involved those of us not directly in IT didn't really suffer much.

So, reassure me - point to a part of the economy that is actually doing WELL right now.

[The Kernel]

Kernel, who said we were in depression? We've not even hit an officially recognised recession yet. The talk I've been hearing is we're setting up for going into one, because this is the worst financial crisis since the Great Depression, which will have long lasting impacts on the economy when added on top of multiple other factors helping to harm economic growth.

If you read my previous post, you'll see that I'm perfectly well aware of the current GNP growth levels. I said "Recession" to be charitable to the case (or lack thereof) that Broomstick was making.

I am merely reporting on the current state of the economy, the future is obviously more nebulous. All of these bad CDOs are obviously a nightmare, but the fact that other sectors are still strong is a telling indication that this might not be as widespread as people believe. Of course this is all speculation until we start seeing earnings reports later in the year; Q4 should be very telling about how the overall economy is doing.

However, you need to accept that it is WAY too early to be calling this the next Great Depression without the data to back it up.

Like the original depression itself, nothing happened overnight and it was easy to play down fears of any upheaval in the economy for a long time before the big problems hit the majority of people.

Actually, it virtually DID happen overnight. The crash of 1929 saw an immediate erasure of ~50% of the value of the market, followed by the collapse of the banking system. Not the investment banking system either, but actual BANKS were shutting down by the truckload. The number of failed bank has actually been very reasonable so far, even compared to the S&L crisis.

Economic indicators might be bad, but the government is simply not going to allow the banking system to collapse. This bailout is going to hurt badly but we are going to see runs on the bank like we did during the Great Depression as the central bank has proven they will do whatever is necessary to prevent it.

Also, it is far, far too simplistic to look at this as only a problem with over-leveraging in large investment banks, just as it is not truthful to say this is only about sub-prime mortgages. The Fed and other central banks and even the media keep propagating a lot of myths as it is, such as this being a liquidity crisis when it's nothing of the sort, or that a turnaround is right around the corner now.

What this economic crisis is about is a lot of bad debt existing in the market, the vast majority of which is in mortgages (not just sub-prime ones either). There isn't much evidence to support a general meltdown of the rest of the economy however; if you have some you can present it, but I doubt you will succeed as it doesn't exist.

[The Kernel]

I am presuming that the Wall Street Journal can speak with some authority on the matter. Is that correct or not?

As I said - don't take my word for it, I linked to information from a publication that presents itself as a source of information about business. Why shouldn't I give weight to their reporting? Are you saying the Wall Street Journal is not a valid source for financial information?

Classic appeal to authority. If you have an argument to make, go ahead and make it with facts to back it up rather than saying a Depression is coming "because the Wall Street Journal said so".

What about it? In the GD we didn't reach massive, 25% unemployment until 1933, four years after the triggering event, the crash of '29. IF - and it's a hypothetical - IF the current situation follows the same pattern then we won't reach 20 or 25% unemployment until 2012.

You could make the same argument about any bear market in history. What exactly are the specific economic indicators you feel make this comparable to the Great Depression?

IF this is a trigger event a comparable year to compare would be 1929, where unemployment was under 10%, as it is now. That doesn't mean all was right in 1929, nor does it mean everything is OK right now.

Wrong you stupid bitch, unemployment is NOT at 10%. The figure used during the Great Depression to gauge unemployment is the figure I AM USING, not yours. Try again.

Could I be wrong on it? Sure. Personally, I'd rather be. But it looks pretty damn grim to me which is why I'm stating that. Oddly enough, you seem to be the one getting your panties in a twist over it, like my opinion or viewpoint is somehow a direct, personal attack on you. Why don't you take your attitude and shove it up... oh, how about J's ass, as J is saying much more scary things than I am in another thread

I take stupidity personally yes. You are making predictions based on nothing.

Actually, no, I wouldn't say that because I know jackshit about the stock market which is why I haven't much said anything about it. Maybe you should pay attention to what I say instead of listening to the voices in your head. You're wasting your time rebutting a point I never made and never will make.

Considering you are comparing this to the crash of 1929 (which saw the erasure of 50% of the market value virtually overnight) you SHOULD be looking at the stock market if you want any forward looking indicators.

Yeah - why don't you look at what people are saying and doing rather than statistics?

Where I'm sitting people are quite content with their economic status. Me and my entire circle of friends have seen our salaries increase at an average of 10% in the last year. Unlike you however, I'm not stupid enough to take this as evidence of the global state of the economy.

Well, my parents have direct, personal experience with the Great Depression. Unlike you or me. They have lived through several economic crisis since then, and they have said that this is the worse they've seen since then. I don't know why you have a problem with that statement, unless you think my parents are lying for some unknown reason. Unless you're saying only an economist is permitted to have memories and draw upon personal life experience when making observations. They're not saying that because THEY'RE suffering - they're still doing quite well, in fact - but because of their observation of the world at large.

Once again, appeal to subjective authority. We might as well be discussing the weather.

Why does the BLS bother to generate those other figures month after month if they serve no purpose? You're telling me to only look at the date YOU present? That you know better than the BLS and their team of (presumably) professionals?

1) The Bureau of Labor Statistics does not consider a person unemployed using your criteria. They REPORT those figures, but that's not what they consider to be an unemployed person. Have a look at their September 5th report:

The unemployment rate rose from 5.7 to 6.1 percent in August, and non-farm payroll employment continued to trend down (-84,000), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. In August, employment fell in manufacturing and employment services, while mining and health care continued to add jobs. Average hourly earnings rose by 7 cents, or 0.4 percent, over the month.

2) Even if I wanted to use your criteria to compare to the Great Depression it would be IMPOSSIBLE since the BLS has only been using it for the last few years. You can't mix-and-match statistics with different criteria unless you want to be a dishonest little weasel.

PROVE IT - I would love to see the stats on people who work part time but who really want full time employment instead, but I can't find them. Do they exist? If so, where? You claim that it's no worse now, so presumably you know where to find this information. Where is it?

You made the claim bitch, you back it up. You are asking me to disprove your assertion which isn't the way we do things around here.

As I said, I can't find the statistics - do YOU know where they are?

Do your own fucking research. Jesus tap dancing Christ, is it that difficult?

Where does saying "I'm worried" constitute a "claim" to be backed up. It's an opinion. You do understand the difference between fact and opinion, yes?

Concession accepted. You have no evidence to back up your claims about the economy beyond gut feelings.

YOU find the statistics reassuring. I am seeing a disconnect between stats that say "all is fine, it's a normal downswing" and what I'm seeing in the world around me, and the information I'm getting from various sources such as The Wall Street Journal which I presume have some grasp of what's going on. There are those alarming reports in all the media outlets about emergency session of Congress, meetings with the President, government take-over of businesses... that's not normal. I can't recall so many like-sized firms going under, and so many being Federalize all at once. My parents can - from when they were kids.

You obviously missed the S&L crisis where literally hundreds of US banks failed. We haven't seen anything NEAR that amount.

Again, what the stats you present say and what other sources say do not match. I find the mere fact they don't match to be disturbing. But that's an OPINION, which I am allowed to have whether you agree with it or not.

Once again you make references to nebulous claims of others. Can't you make your own arguments without resorting to appeals to authority?

"If" generally signals this thing called a hypothetical, not a reflection of reality. So, tell me, hypothetically, if 60% of workers have a forced reduction in pay, is that a sign of healthy economy? If 25% of the work force that wants full time work is only working part time is that a sign of a health economy. I did NOT say we have that now.

Fuck you, I'm not playing your stupid hypothetical games. If you have evidence to present then present it, otherwise take your fucking hypothetical bullshit and shove it up your ass.

Because I am not familiar with the mathematical and statistical tools I am not basing my opinion on them so much as on other indicators. Such as a very free-market, deregulate, no government interfere administration has just nationalized Freddie and Fannie and taken over AIG, a private company. That's not normal at any time. Now, there have been times when the Feds have take drastic and/or unusual actions before, but I don't recall, in my lifetime, so many so close together. There was the RTC during the S&L crisis, but that was pretty much a one-shot deal. This time we've had multiple instances of it one after the other. Or do you deny the changes that have occurred in these companies the past few weeks? Hell, it's all over the news.

You bring up the S&L bailout and say that this is an unprecedented event all in one paragraph? I must admit, you've got guts to be so self-contradictory.

And just because you think the are vastly different because you see the S&L bailout as a "one-shot deal" only belies your own ignorance.

Did or did not the Federal government take over Freddie and Fannie?

Yes, which tells us that the mortgage market has a ton of bad loans. This is not something I deny.

Did or did not the Federal government take over AIG?

See above.

Did or did not the Federal government have an emergency meeting about what to do about the economy recently?

You think that's unusual? Try reading a history book--emergency Fed and Treasury meetings are nothing new.

Did or did not the Federal government change some of the trading rules recently, such as the ban on short selling for 799 companies?

Yes, they banned short selling of financial stocks. What exactly do you think that means?

Were there or were there not 12 bank failures this year - FAR more than is typical.

HAHAHAHAHAHAHA! Good one! I suppose you thought 12 bank failures sounded impressive?

Let me let you in on a little secret: the S&L crisis saw 747[/i] financial institutions fail.

CNN is reporting that the rise in jobless claims was worse than expected.

So unemployment is going up. I already agreed with this.

House prices in most markets are still falling, while foreclosures are on the rise.

Duh, this is exactly what you'd expect when housing prices fall. It's called a real estate bubble, and I've shown in this thread and others that I'm perfectly well aware of it.

Or are all these occurrences a collective mass hallucination? The fact so much is going so wrong in so short a time is what's generating concern. You say there's nothing to worry about - OK, tell me why none of the above is relevant to the economy.

So you decided to stawman my argument. Well at least you decided to do something new after a long list of appeals to authority.

Get this straight: I agree that the economy has issues and that we are in a bear market. What you have to prove is that this is at the SAME OR SIMILAR LEVEL TO THE GREAT DEPRESSION. This is something that your whole bullshit list has utterly failed to do.

No, we're just seeing a whole lot of other bad stuff we don't normally see, and we're seeing a lot of it together.

I think the obviously failure for you here is that you don't understand the concept of DEGREES. Turns out that one economic crisis is not necessarily as bad as another. You claim that this economic crisis is worse that any of the dozen or so that have occurred since the Great Depression, yet you have consistently FAILED to show how this is the case.

If I'm driving down the road and smoke starts pouring out from under the hood and the car won't shift out of first gear I don't have to be a mechanic or a design engineer to figure out that something is wrong here. Likewise, at present I don't have to be an economist or mathematical genius to notice there is something wrong with the economy. Well, the big-wigs in Washington say they've fixed that. I hope to God they have, but only time will tell.

How appropriate that you ended this bullshit tirade with yet more subjective bullshit that attempts to strawman my position.

Let's recap this for those that don't want to read through pages of your bullshit rebuttals.

You: This situation is as bad as the Great Depression!

Me: Nothing we have seen indicates that.

You: But all these things are happening! It must be as bad as the depression!

Me: This is an economic crisis to be sure, but nothing we have seen suggests it will lead to another Great Depression.

You: You are saying that nothing is wrong at all with the economy! You think that John McCain is right!

[Admiral Valdemar]

If you read my previous post, you'll see that I'm perfectly well aware of the current GNP growth levels. I said "Recession" to be charitable to the case (or lack thereof) that Broomstick was making.

I am merely reporting on the current state of the economy, the future is obviously more nebulous. All of these bad CDOs are obviously a nightmare, but the fact that other sectors are still strong is a telling indication that this might not be as widespread as people believe. Of course this is all speculation until we start seeing earnings reports later in the year; Q4 should be very telling about how the overall economy is doing.

However, you need to accept that it is WAY too early to be calling this the next Great Depression without the data to back it up.

Financially we're nowhere near over with any of this, which is cause for concern in itself. When I talk about depression, I'm looking more at the next few years with respect to not just the correction in credit and housing, but how the geo-politics of our current "Wars on..." and net energy and food exports come into play. As I've said before, we need not have this financial clusterfuck to be seriously concerned with the economy as it is and the direction it's headed. It's just the bankers seem to have pre-empted a lot of actions I'd have expected a few years down the road (for better or worse).

Actually, it virtually DID happen overnight. The crash of 1929 saw an immediate erasure of ~50% of the value of the market, followed by the collapse of the banking system. Not the investment banking system either, but actual BANKS were shutting down by the truckload. The number of failed bank has actually been very reasonable so far, even compared to the S&L crisis.

Economic indicators might be bad, but the government is simply not going to allow the banking system to collapse. This bailout is going to hurt badly but we are going to see runs on the bank like we did during the Great Depression as the central bank has proven they will do whatever is necessary to prevent it.

I was referring to the impacts on the people on the street, as opposed to just the stock market and those heavily enough involved to suddenly consider that 20th storey window exit. After that crash (which we may yet have in some form), the markets still rallied long after and the full effects of what '29 had put into motion were not fully realised for some time. Now, the UK has had a bank run already, and there are jitters still in the public over that incident, even if Northern Rock is probably the safest bank around now. With the past fortnight showing even HBOS can be brought to its knees practically overnight, it doesn't bode well for confidence in lending which is remarkably constrained.

This does not mean the stock market needs to crash 80% or more and for every major bank to have its clients come and rush off with their cash to place under that mattress. But it does mean a great number of people are now up shit creek, with many, many more on the line. Mortgages are being defaulted on around the world with lasting impacts on the economy as people squeeze the pennies and so the domino effect moves onward.

The canary in the coal mine here is housing and bank loans. After that, retail and all associated start taking bigger hits. Remember, we've only just gotten into this new phase of the Credit Crunch which has been going on for a year now and was somewhat benign, if annoying, before this gearing up.

What this economic crisis is about is a lot of bad debt existing in the market, the vast majority of which is in mortgages (not just sub-prime ones either). There isn't much evidence to support a general meltdown of the rest of the economy however; if you have some you can present it, but I doubt you will succeed as it doesn't exist.

That one factor is all that is needed to roll out further problems, as stated above. The peaking of credit, deflationary pressures and the coming of baby boomers' retirement is all that is needed to exacerbate the current problems.

In any case, the cost of energy is the single biggest factor affecting the economy and that most certainly is harming the global economy now (there was a good historical graph showing other recessions and energy crises with GDP I'll try and find again). It hasn't stopped it, it hasn't contracted it, but it has slowed the growth and this after only a few months of heightened oil prices where supply was actually growing still. I don't think we want to see when it contracts.

[The Kernel]

Thank you for the civilized explanation, it was quite understandable in layman's terms.

I do realize that investment banks can and do go under, and have done so in the past. I don't recall so many failing in such a short time period (I'm including the ones sold off to other banks, as what's being reported indicates that if they hadn't be been they would have gone the way of Lehman). Can you name any other time when so many investment banks have fallen in so short a time period?

The S&L crisis saw 747 financial institutions fail. This is old news.

Or, let's take bank failures requiring use of the FDIC insurance - there have been TWELVE this year. There were three in 2007 - we knew there were rough spots in the economy in 2007, but no reason to panic. There were NONE in 2006. NONE in 2005. 2002 was alarming with 11 but that was for the entire year - we still have 1/4 to go. Those aren't investment banks. Granted 2002 had a lot and the world didn't come to an end, it's possible that 2008 is also a statistical anomaly. Seems to me you could say that about a lot of things these days, but we also seem to be having a lot of anomalies all at once. Which is sort of a meta-anomaly.

You really should have gone back further in time with that Google search. I would have loved to see the little lightbulb pop on over your head when you saw 1985-1991.

So no, I'm not basing my concerns on formal statistical analysis. I'm basing it on that I'm seeing some unusual occurrences - like a large number of bank closures, as just one example - and they're all happening at once. Yes, that may be a different data set than what you're looking at, which might be why we aren't seeing the same thing.

The fact that you don't understand why these collapses are occurring or what they mean to the broader economy shows that you really shouldn't be arguing anything now should you?

If it was JUST AIG, or JUST Lehman, or JUST Federalizing Fannie or Freddie, or JUST 12 bank failures - any ONE of those - I would not be as concerned because as we all know shit happens. I certainly didn't predict the apocalypse when Enron collapsed - it was just one company, the real estate market was still rising, etc. etc. When the dot.coms blew up - well, it was just one sector. Other areas of the economy were still doing well, and fuel was cheap, and while painful for those immediately involved those of us not directly in IT didn't really suffer much.

This may surprise you but the Enron and Worldcom collapse wasn't a portent of broader economic failure. It was caused by some very specific market conditions.

So, reassure me - point to a part of the economy that is actually doing WELL right now.

Plenty of sectors are still doing well. If I provide a sample list of S&P 500 companies that are seeing growth this year will you shut up?

[The Kernel]

Financially we're nowhere near over with any of this, which is cause for concern in itself. When I talk about depression, I'm looking more at the next few years with respect to not just the correction in credit and housing, but how the geo-politics of our current "Wars on..." and net energy and food exports come into play. As I've said before, we need not have this financial clusterfuck to be seriously concerned with the economy as it is and the direction it's headed. It's just the bankers seem to have pre-empted a lot of actions I'd have expected a few years down the road (for better or worse).

I am familiar with your doom-and-gloom scenarios regarding peak oil. That's a whole separate matter altogether though, and not one I'm really all that interested in hashing out with you.

I was referring to the impacts on the people on the street, as opposed to just the stock market and those heavily enough involved to suddenly consider that 20th storey window exit. After that crash (which we may yet have in some form), the markets still rallied long after and the full effects of what '29 had put into motion were not fully realised for some time. Now, the UK has had a bank run already, and there are jitters still in the public over that incident, even if Northern Rock is probably the safest bank around now. With the past fortnight showing even HBOS can be brought to its knees practically overnight, it doesn't bode well for confidence in lending which is remarkably constrained.

This does not mean the stock market needs to crash 80% or more and for every major bank to have its clients come and rush off with their cash to place under that mattress. But it does mean a great number of people are now up shit creek, with many, many more on the line. Mortgages are being defaulted on around the world with lasting impacts on the economy as people squeeze the pennies and so the domino effect moves onward.

The canary in the coal mine here is housing and bank loans. After that, retail and all associated start taking bigger hits. Remember, we've only just gotten into this new phase of the Credit Crunch which has been going on for a year now and was somewhat benign, if annoying, before this gearing up.

A slow, steady decline is possible. But there's nothing definitive to suggest that is going to happen at this point. It's POSSIBLE, but what you are talking about is far enough out at this point to be hazy and open to a great deal of argument.

What my entire thesis has been in this thread is that there are little to no short term indications of a collapse on the scale of the Great Depression. Might we see a long term slide of the world economy? Perhaps. But I'm not going to be the farm on it.

That one factor is all that is needed to roll out further problems, as stated above. The peaking of credit, deflationary pressures and the coming of baby boomers' retirement is all that is needed to exacerbate the current problems.

This has been argued about for years now. Just because these nightmare scenarios exist doesn't mean they are going to happen.

This is a bit like the argument surrounding climate change. We know it is happening, we have some doom-and-gloom scenarios as well as some fairly benign scenarios, and a ton of stuff in between. Right now it is simply way too soon to make a judgement call about it, although we can all agree that climate change is a bad thing.

In the case of the economy: yes these are unhealthy indications. Whether or not they will prove able to resist factors that apply upward pressure on the market remains to be seen. In any case, the events of the last few months haven't made any of the long-term results more clear.

In any case, the cost of energy is the single biggest factor affecting the economy and that most certainly is harming the global economy now (there was a good historical graph showing other recessions and energy crises with GDP I'll try and find again). It hasn't stopped it, it hasn't contracted it, but it has slowed the growth and this after only a few months of heightened oil prices where supply was actually growing still. I don't think we want to see when it contracts.

Energy prices are a big wildcard in the global economy right now. They are more worrying to me than this current credit crunch, but I'm not sure if the market will find ways to adapt to it or not as there are some incredibly complex issues at work here.

At the very least the amount of public perception behind the energy crisis seems to have given the issue a nice kick in the pants. Hopefully the market will respond and adapt as it has done during other transformations, but for now it is unclear what the net result of all of this is going to be.

[J]

The Fed Funds Rate blew out to well over 6% on Wednesday. A tripling of the rate from the target rate has never happened in history, it took an $80 billion injection of slosh to bring it back down.

There were no bids on Libor on Thursday, that's why the no shorting rule was introduced in Britain.

The TED spread has blown open to over 300 basis points.

Foreign holdings of Treasuries are starting to fall. That's the July data, I suspect the next months will be worse.



What this means is the credit tap is being squeezed, the bonds & foreign exchange markets are under a lot of stress.

Recall that the Great Depression was caused by a collapse in the bonds market which resulted from the government attempting to step in and prevent the correction in asset prices which was taking place as the bubble markets of the 20's deflated. The bonds market collapse caused an overnight ramp in borrowing costs which shut off the flow of capital at the precise time that market participants needed access. The stock market crashed, then the bonds market locked up solid which instantly shut down the flow of credit and set off the next series of stock market crashes and prevented any recovery for nearly a decade.

It doesn't matter what the earnings of various S&P 500 or whatever companies are, almost every last one of them depends on reliable access to the bonds market in order to fund their daily operations. If the bonds market suffers a dislocation and locks up, that source of funding is gone and those companies are going to find themselves insolvent as soon as their on hand cash reserves run out.

Right now the bonds market is telling us "no more! cut this crap out now!" We can choose to listen, or we can roll the dice and hope that history doesn't repeat. Every single crash and every severe recession or depression has been preceded or triggered by stress in the bonds market. Our actions with the continued bailouts and so forth risks a complete failure of the bonds market. The last time that happened we got a Great Depression out of it.

[Broomstick]

I am presuming that the Wall Street Journal can speak with some authority on the matter. Is that correct or not?

As I said - don't take my word for it, I linked to information from a publication that presents itself as a source of information about business. Why shouldn't I give weight to their reporting? Are you saying the Wall Street Journal is not a valid source for financial information?

Classic appeal to authority.

Well, since I haven't done independent research on my own I have to depend on SOMEBODY's information, don't I? For that matter, you quote other sources, too

And you didn't answer my question - Are you saying the Wall Street Journal is not a valid source for financial information?

If you have an argument to make, go ahead and make it with facts to back it up rather than saying a Depression is coming "because the Wall Street Journal said so".

Apparently, no facts fit your view of the universe.

And can we get one thing clear - no one said we were in a depression right now!

What about it? In the GD we didn't reach massive, 25% unemployment until 1933, four years after the triggering event, the crash of '29. IF - and it's a hypothetical - IF the current situation follows the same pattern then we won't reach 20 or 25% unemployment until 2012.

You could make the same argument about any bear market in history. What exactly are the specific economic indicators you feel make this comparable to the Great Depression?

Holy fuck, do you read my posts entirely or just the first sentence of each paragraph? I told you.

IF this is a trigger event a comparable year to compare would be 1929, where unemployment was under 10%, as it is now. That doesn't mean all was right in 1929, nor does it mean everything is OK right now.

Wrong you stupid bitch, unemployment is NOT at 10%. The figure used during the Great Depression to gauge unemployment is the figure I AM USING, not yours. Try again.

Learn to fucking READ asshat - I enlarged and bolded the pertinent phrase. I SAID UNDER 10%. Why the hell should I take your word on anything, or trust anything you trot out here, when you so splendidly fail at basic reading comprehension?

I take stupidity personally yes. You are making predictions based on nothing.

I make predictions all the time. Why is this a problem?

Actually, no, I wouldn't say that because I know jackshit about the stock market which is why I haven't much said anything about it. Maybe you should pay attention to what I say instead of listening to the voices in your head. You're wasting your time rebutting a point I never made and never will make.

Considering you are comparing this to the crash of 1929 (which saw the erasure of 50% of the market value virtually overnight) you SHOULD be looking at the stock market if you want any forward looking indicators.

No, I refer to the crash of '29 as a triggering event - there is no reason to believe a future depression will start with an equivalent stock crash. There are other mechanisms that can fuck over an economy, such as war, plague, natural disasters... Granted any of the above would have to be huge to bring the US to its knees. I'm not sure we'd call the result a "depression" but it sure would suck for awhile.

I don't need to know the exact drop for the crash of '29 to know it's impact and that it set a series of dominoes in motion. It was hardly the only factor at work - the Dust Bowl certainly played hell with the economy, too. Maybe if we hadn't had that at the same time the GD wouldn't have been so bad. Or maybe it would have. Personally, I'm not interested in that sort of "what if" debate.

Yeah - why don't you look at what people are saying and doing rather than statistics?

Where I'm sitting people are quite content with their economic status. Me and my entire circle of friends have seen our salaries increase at an average of 10% in the last year.

Bully for you - a year ago I enjoyed the same blissful state, however, unlike you, even when I was earning buckets of cash I was concerned when I heard about layoffs or other regions of the country having economic difficulties and very concerned about what would happen when housing bubble popped.

Last time I was unemployed for an extended period I wasn't concerned about the overall economy, though, because I could see that it was doing well. I am quite capable of distinguishing between my personal situation and larger picture.

Well, my parents have direct, personal experience with the Great Depression. Unlike you or me. They have lived through several economic crisis since then, and they have said that this is the worse they've seen since then. I don't know why you have a problem with that statement, unless you think my parents are lying for some unknown reason. Unless you're saying only an economist is permitted to have memories and draw upon personal life experience when making observations. They're not saying that because THEY'RE suffering - they're still doing quite well, in fact - but because of their observation of the world at large.

Once again, appeal to subjective authority. We might as well be discussing the weather.

So who IS qualified to talk about the GD? My parents should just shut the hell up because they aren't "qualified" somehow? The notion that someone who lived through the GD has nothing to say about it, that there can be no true facts in anything they say, is just retarded.

Ironically, the weather DID impact the GD. Would you like to discuss that?

Why does the BLS bother to generate those other figures month after month if they serve no purpose? You're telling me to only look at the date YOU present? That you know better than the BLS and their team of (presumably) professionals?

1) The Bureau of Labor Statistics does not consider a person unemployed using your criteria. They REPORT those figures, but that's not what they consider to be an unemployed person.

Yes, there is an official unemployment rate. Then there are other unemployment rates. Why do they call them unemployment rates if they aren't?

2) Even if I wanted to use your criteria to compare to the Great Depression it would be IMPOSSIBLE since the BLS has only been using it for the last few years. You can't mix-and-match statistics with different criteria unless you want to be a dishonest little weasel.

I am aware that you can't mix and match statistics, and it's impossible to go back at this point and extract that information. I still think it would be interesting, if it were possible.

As I said, I can't find the statistics - do YOU know where they are?

Do your own fucking research. Jesus tap dancing Christ, is it that difficult?

Yes, actually, I HAVE tried to look for it, and I can't find it. I've been trying to find it for several weeks now. I really, really can't find it. If you know where it is I would appreciate you telling me. If someone else knows where it is, I would appreciate them telling me.

In other words, in this case, yes, it really is that difficult. In fact, it may not even exist.

Where does saying "I'm worried" constitute a "claim" to be backed up. It's an opinion. You do understand the difference between fact and opinion, yes?

Concession accepted. You have no evidence to back up your claims about the economy beyond gut feelings.

Fuck you, no concession on my part. You aren't the only one allowed to have opinions, asshat.

You obviously missed the S&L crisis where literally hundreds of US banks failed. We haven't seen anything NEAR that amount.

Not yet.

The S&L crisis didn't happen overnight either.

Again, what the stats you present say and what other sources say do not match. I find the mere fact they don't match to be disturbing. But that's an OPINION, which I am allowed to have whether you agree with it or not.

Once again you make references to nebulous claims of others. Can't you make your own arguments without resorting to appeals to authority?

You asked me the source of my opinion. I gave it to you. Once again, no proof of any sort is acceptable to you. In fact, you are so convinced you are right that you read into my statement things that are not there, which is why in quotes I have to emphasize statements that clearly show that what I say and what you think I say are not the same thing.

"If" generally signals this thing called a hypothetical, not a reflection of reality. So, tell me, hypothetically, if 60% of workers have a forced reduction in pay, is that a sign of healthy economy? If 25% of the work force that wants full time work is only working part time is that a sign of a health economy. I did NOT say we have that now.

Fuck you, I'm not playing your stupid hypothetical games. If you have evidence to present then present it, otherwise take your fucking hypothetical bullshit and shove it up your ass.

In other words, you read into my statement what you thought/wanted me to say, and now that you're caught on it you'll take your marbles and go home.

I present a hypothetical situation and you ask for proof of its existence? That's crazy.

Because I am not familiar with the mathematical and statistical tools I am not basing my opinion on them so much as on other indicators. Such as a very free-market, deregulate, no government interfere administration has just nationalized Freddie and Fannie and taken over AIG, a private company. That's not normal at any time. Now, there have been times when the Feds have take drastic and/or unusual actions before, but I don't recall, in my lifetime, so many so close together. There was the RTC during the S&L crisis, but that was pretty much a one-shot deal. This time we've had multiple instances of it one after the other. Or do you deny the changes that have occurred in these companies the past few weeks? Hell, it's all over the news.

You bring up the S&L bailout and say that this is an unprecedented event all in one paragraph?

And you conveniently ignore everything else I have to say in that paragraph.

And just because you think the are vastly different because you see the S&L bailout as a "one-shot deal" only belies your own ignorance.

Have we had to do a massive S&L bail out since? No? Then it was a one-time event (so far).

Did or did not the Federal government take over Freddie and Fannie?

Yes, which tells us that the mortgage market has a ton of bad loans. This is not something I deny.

Finally, we agree on something.

Did or did not the Federal government have an emergency meeting about what to do about the economy recently?

You think that's unusual? Try reading a history book--emergency Fed and Treasury meetings are nothing new.

True - but I'm not saying it is unique to this situation, just that it's yet another troublesome event. It's not just ONE thing that prompts my concern, it's a combination of things.

Did or did not the Federal government change some of the trading rules recently, such as the ban on short selling for 799 companies?

Yes, they banned short selling of financial stocks. What exactly do you think that means?

It means that they felt a need to impose further regulation - which, from this administration which is largely anti-regulation, cause me concern. Once again, if it were JUST this one rule change I wouldn't care, but in this case it's yet another indication that something is wrong and needs to be fixed.

Were there or were there not 12 bank failures this year - FAR more than is typical.

HAHAHAHAHAHAHA! Good one! I suppose you thought 12 bank failures sounded impressive?

Not really - but we had two years with no failures whatsoever, then a year with three, and now twelve - possibly with more. If we go down to three or none next year, well, no big deal, but if the rising trend in bank failures continues I find that troubling.

Of course, bank failures these days is NOTHING like they were in the 1920's - the FDIC does a lot to prevent bank runs since, for most people, who have under $100,000 in an FDIC insured account, they know they still have their money. If we didn't have the FDIC we would see bank runs. That's just one example where a GD2 will probably be different than GD1.

Let me let you in on a little secret: the S&L crisis saw 747[/i] financial institutions fail.

Yes. It was a crisis. If we have 700+ banks fail next year that would be a problem, right?

CNN is reporting that the rise in jobless claims was worse than expected.

So unemployment is going up. I already agreed with this.

Well, the do attempt to predict the jobless rate. It's higher than predicted. That could be an error in prediction or an indication of trouble. We won't know which until more time goes by, but I am keeping an eye on it.

House prices in most markets are still falling, while foreclosures are on the rise.

Duh, this is exactly what you'd expect when housing prices fall. It's called a real estate bubble, and I've shown in this thread and others that I'm perfectly well aware of it.

So... we have deflating Real Estate, investment failures, the government stepping in.... sure, they've intervened before, but the fact they do indicates there is a problem here because not every downturn in the market leads to those actions.

Get this straight: I agree that the economy has issues and that we are in a bear market. What you have to prove is that this is at the SAME OR SIMILAR LEVEL TO THE GREAT DEPRESSION. This is something that your whole bullshit list has utterly failed to do.

I never said we were IN a depression - it's ludicrous to state that. You're looking for an opponent but what you want to argue and what I'm talking about aren't quite the same thing, apparently.

You claim that this economic crisis is worse that any of the dozen or so that have occurred since the Great Depression, yet you have consistently FAILED to show how this is the case.

If that is such a wrong-headed concept why is that fact - that this is the worst economic crisis since the GD - being repeated by media outlets every day?

From CNN:

Paulson, Federal Reserve Chairman Ben Bernanke and other officials have said in recent days that the lack of easy credit between banks and other financial institutions threatens to inflict serious damage on the economy if not addressed immediately.

So... CNN is saying Ben Bernanke (among others) says there is a serious problem that needs to be fixed - are you going to insist Mr. Bernanke knows nothing about the economy? Or dismiss this as an "appeal to authority"? I would hope the Fed Reserv Chair is a reliable and authoritative voice on the economy. Or do you know better than him?

Also from CNN:

NEW YORK (CNNMoney.com) -- Somber. Sobering. Warnings of an economic "meltdown."

That's how participants described an emergency meeting held Thursday night between leaders of Congress and Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke.

Are you saying that the participants in those meetings are not trustworthy, that they're pulling these concerns out of their collective asses?

When the Treasury Secretary and the Fed Reserve Chair say "economic meltdown" I sit up and take notice. Tell me how you are more qualified to just the economy than they are.

If I'm driving down the road and smoke starts pouring out from under the hood and the car won't shift out of first gear I don't have to be a mechanic or a design engineer to figure out that something is wrong here. Likewise, at present I don't have to be an economist or mathematical genius to notice there is something wrong with the economy. Well, the big-wigs in Washington say they've fixed that. I hope to God they have, but only time will tell.

How appropriate that you ended this bullshit tirade with yet more subjective bullshit that attempts to strawman my position.

Hey, you don't like it blame Mike - he was the first to make an analogy to a car. I just borrowed it.

[J]

Nouriel Roubini interview (video)

His predictions & analysis to date has been almost spot on. Ignore him at your own peril.

[irishmick79]

Nouriel Roubini interview (video)

His predictions & analysis to date has been almost spot on. Ignore him at your own peril.

Holy shit that interviewer is annoying. Let the man speak, for crying out loud!

[Admiral Valdemar]

CNBC tends to be the FOX News of finance channels, with Bloomberg a little better (least the UK version is). I don't have satellite like my parents, so can't watch the fun unfold, though Bloomberg has their channel streaming online.

And a lot of the talking heads in the American versions are just that bad. If they're not fellating themselves, then they're talking over anyone they invited because they want to voice their opinion. Why not just cut out the guests and have 24 hours of mutual masturbation? It'd be at least honest.

[Illuminatus Primus]

The Fed Funds Rate blew out to well over 6% on Wednesday. A tripling of the rate from the target rate has never happened in history, it took an $80 billion injection of slosh to bring it back down.

There were no bids on Libor on Thursday, that's why the no shorting rule was introduced in Britain.

The TED spread has blown open to over 300 basis points.

Foreign holdings of Treasuries are starting to fall. That's the July data, I suspect the next months will be worse.



What this means is the credit tap is being squeezed, the bonds & foreign exchange markets are under a lot of stress.

Recall that the Great Depression was caused by a collapse in the bonds market which resulted from the government attempting to step in and prevent the correction in asset prices which was taking place as the bubble markets of the 20's deflated. The bonds market collapse caused an overnight ramp in borrowing costs which shut off the flow of capital at the precise time that market participants needed access. The stock market crashed, then the bonds market locked up solid which instantly shut down the flow of credit and set off the next series of stock market crashes and prevented any recovery for nearly a decade.

It doesn't matter what the earnings of various S&P 500 or whatever companies are, almost every last one of them depends on reliable access to the bonds market in order to fund their daily operations. If the bonds market suffers a dislocation and locks up, that source of funding is gone and those companies are going to find themselves insolvent as soon as their on hand cash reserves run out.

Right now the bonds market is telling us "no more! cut this crap out now!" We can choose to listen, or we can roll the dice and hope that history doesn't repeat. Every single crash and every severe recession or depression has been preceded or triggered by stress in the bonds market. Our actions with the continued bailouts and so forth risks a complete failure of the bonds market. The last time that happened we got a Great Depression out of it.

So the lesson is, let them eat it right now?

[Admiral Valdemar]

The correction has to happen, one way or another. I'd rather get it over with now than pump more of our hard earned cash into rearranging the deckchairs on the Titanic.

[J]

So the lesson is, let them eat it right now?

Might as well, there is no way out of the current mess unless one can find a way of re-inflating housing prices back up to 2005 levels while deleveraging the entire system. That, as we all know is absolutely impossible and the time for engineering a soft landing is long past. Our choices now are simple; force all guilty parties to take there losses right now which results in an instant crash or keep throwing money into a black hole and end up with a crash anyway, which will of course be worse since the whole system will be further weakened and the debt laod will be greater as well.



On a sidenote. The S&L crisis cost around $150 billion in bailouts when all was said & done, the initial cost estimates were $20-30 billion. The cost of the current crisis to date is around $500 billion billed to the taxpayers via the Treasury and another $400 billion or so which was eaten by the Federal Reserve. Back in July we were told that a bailout of Freddie & Fannie would cost $25 billion. That number is now conservatively estimated at $220 billion, and rising at $20 billion a month. The Treasury & Fed estimate it'll take $700 billion to buy out all those bad mortgage products, and that bailout bill goes before Congress this week. Going by historical precedent, this means the bailout will end up costing oh...$3.5-7 trillion. Add it onto the balance sheet and you can wave goodbye to America's AAA debt rating. That will result in carnage.

[Uraniun235]

Our choices now are simple; force all guilty parties to take there losses right now which results in an instant crash or keep throwing money into a black hole and end up with a crash anyway, which will of course be worse since the whole system will be further weakened and the debt laod will be greater as well.

Are you saying that basically if we keep racking up debt, it'll take longer to recover from the crash because we'll have to work our way through that debt?

...What's the estimated time of recovery from that as compared to the time it would take to recover from the federal government just defaulting on all the debt and smashing the whole system in one swell foop?



(Shit, if Shep can fantasize about bombing nations out of existence, why can't I fantasize about nuking global finance?)

[Vympel]

Why is there absolutely no outrage about US taxpayers basically taking on all this worthless shit? Is there noone (apart from internet writers) pointing out what a massive fucking moral hazard this is? Privatize profits, socialize risk, wonderful!

Has the US lost its AAA rating yet?

[Uraniun235]

Why is there absolutely no outrage about US taxpayers basically taking on all this worthless shit? Is there noone (apart from internet writers) pointing out what a massive fucking moral hazard this is? Privatize profits, socialize risk, wonderful!

Has the US lost its AAA rating yet?

US taxpayers don't have a fucking clue what any of this means, at all. General apathy + fucking arcane financial gobbledegook + minimal mass media coverage = utter public ignorance.

Even if you did get on the air and say "hey wake up America, you're being swindled!"... why would anyone believe you?

And even if there was a public outrage, do you really think that's going to stop the government when the administration has successfully convinced Congressional leaders that this intervention is vitally necessary to averting a crash?

The time for public outrage was months ago. But then, back then people were still nattering on about "oh how do we prevent home values from dipping lower". Yeah, I guess you could try telling people "hey we need to get this over with and bite the bullet", but that wouldn't have played well at all next to "oh we can do this without much pain, we can just ride it out and it'll be all okay and we can spend more money!"

And frankly, the public doesn't has neither the intellect nor the education to really judge one argument better than the other.




What's the public reaction in the enlightened world? This has consequences potentially far more dire than anything that's happened in Iraq, and I seem to recall there being anti-war protests against the war outside the US; where are the anti-bailout protests?

[Edi]

From the AIG thread:

The scariest thing is that if shit hits the fan big time in the US and you scale the Finnish numbers up wholesale to the US economy, it looks like a fucking massacre. €40 billion bailout when the national budget per year is ~€30-35 million translates to a humongous number.

The US national budget is $3 trillion, so an equivalent bailout would cost $3.5-$4 trillion. That's near 30% of GDP.

So does the unemployment, 450k unemployed out of 5 million people would be somewhere around 30 million for the US, and as a statistic, these would be in the "unemployed and actively looking for work" column, to which you then add all the part time and other stuff. And once you count out the pensioners, children, stay-at-home parents and others who are not counted, that 30 million is going to be a pretty fucking scary looking percentage figure in the U1 column.

Another 30 million unemployed is 10% of the entire population, and just about 15% of the work force (which is about 2/3 of the population). On top of the current 6% unemployment rate -- an undercount of unemployment, since, as you note, it doesn't include part-time and other stuff -- that's over 20% unemployment.

And if J is right, that initial rough guesstimate turned out to be conservative when all is said and done.

[Broomstick]

Why is there absolutely no outrage about US taxpayers basically taking on all this worthless shit?

The American taxpayer comes in two types:

1) Scared to death of losing job, works 80-100 hours a week, too exhausted to focus on anything else

2) Has lost job, too focused on bare survival and getting another job to focus on anything else.

Also, a lot, probably most, Americans are in debt up to their eyebrows anyhow - they made the same mistakes the guys on Wall Street did. It's just that they won't get a bail out

[SirNitram]

Why is there absolutely no outrage about US taxpayers basically taking on all this worthless shit? Is there noone (apart from internet writers) pointing out what a massive fucking moral hazard this is? Privatize profits, socialize risk, wonderful!

Has the US lost its AAA rating yet?

Everyone who was paying attention and informed enough would've noticed the pricetag for Iraq is well over the estimates for the latest bailouts. And unlike Iraq, there's a miniscule chance of making some of this back.(The debt being sold will not have a 100% failure rate. It will just be so low none of the cash-strapped and beaten financial players will take it.)

[Broomstick]

How much was the government able to make back with RTC and the S&L debacle? If I recall, they did managed to sell off some assets, even if they didn't recoup all costs.

[SirNitram]

How much was the government able to make back with RTC and the S&L debacle? If I recall, they did managed to sell off some assets, even if they didn't recoup all costs.

The best numbers I can find have the combined taxpayer/thrift losses at 153 Billion, while the total assets taken by the RTC were pegged closer to 394 Billion. I doubt it's that good... After all, that was just one deregulation bill, not the culmination of many and the entire looney-tune idea of credit default insurance.

But ten percent returns seem passable. Most peg the failure rate of the subprime loans at 25%. However, I suspect Alt-A will be far, far worse. It's already quadrupled at least once, while subprime has largely stabilized.

(The reason is obvious: Subprime just means it's a loan from someone with crappy credit. Alt-A is someone with great credit, but all that bullshit about not bothering to check if they'll be able to keep up on the 'reset' rate. The worst of the worst? NINAs. No Income, No Assets, no one checked a single sheet of paper and still wrote the loan. Fraud, anyone..?)

[Admiral Valdemar]

According to the Telegraph, there's a very real threat of the US defaulting on its debt now. The money markets and stock markets have been critically hit and are on life support as it is, and this crisis is nowhere near over. Should this happen, you at least get rid of those trillions in debt, but on the other hand, the dollar becomes totally worthless and a new reserve currency is needed. So long as others buy T-bills and assets, they won't sell the US up shit creek. However, this assumes the powers that be will allow such an action. They seen adamant to prolong this and screw the taxpayer in the process.

The Chinese and Russians will be ready for any eventuality. I expect they'd love to trade those T-bills for actual pieces of the American dream. Course, even if the debt evaporates, which is better than having it hang round every American's neck like a chain, you still need to balance the books, which means the War of Terror ends there and then, the military stops getting pork and new toys and social programmes get cuts too.