while we were otherwise occupied - Tilted Forum Project Discussion Community

roachboy · 11-13-2008, 08:17 PM

and that is not a criticism. i was otherwise occupied too. but this can't be good:

Quote:

Signs of turmoil grow as G20 looms

By FT reporters

Published: November 13 2008 21:05 | Last updated: November 13 2008 22:14

Evidence of global economic turmoil mounted on Thursday as leaders of the G-20 group of nations began to arrive in Washington for this weekend’s summit.

Germany plunged into recession after a steeper-than-expected 0.5 per cent fall in economic activity in the third quarter, new data showed. In the US, the government said the number of workers filing new claims for unemployment benefits rose last week to 516,000, its highest level since 2001. Meanwhile, China revealed that its industrial growth hit a seven-year low.

Against this backdrop, US President George W. Bush, host of the summit, delivered an impassioned defence of the free market system, serving warning that his administration would resist efforts to impose heavy-handed regulation on global financial markets.

The outgoing US president vowed to support efforts to bring greater stability and transparency to the troubled financial system but warned it would be a “terrible mistake” to allow “a few months of crisis” to undermine faith in free market capitalism.

While reforms in the financial sector are essential, the long-term solution to today’s problems is sustained economic growth,” he told an audience in New York. “And the surest path to that growth is free markets and free people.”

Lowering expectations for the summit, Mr Bush said the challenges facing the global economy were too great to be resolved in a single weekend and added the talks would be the first in a series of meetings.

Global economic conditions took a sharp turn for the worse after the financial crisis deepened in September, with countries around the world taking big hits to output and employment. The Organisation for Economic Cooperation and Development said on Thursday there was little chance of recovery until the second half of next year.

The Standard & Poor’s 500 index of US equities gyrated through the day, rising 5.5 per cent to 899.26 in late trading after falling earlier to its lowest level in more than five years - 818.69, which was down 3.9 per cent on the day.

Traders said the rebound came after the market held its ground above the 800 level and raised hopes that a near-term bottom was in place.

”It’s too early to say whether a bottom is in place, the volatility is ridiculous,” said Jim Paulsen, chief investment strategist at Wells Capital Management. ”A week ago we traded above 1,000 on the S&P and now we are back at the low of a wide range.”

Many of the world leaders heading to Washington seemed resigned to waiting until Barack Obama, the US president-elect, takes office in January for long-term solutions to be agreed.

Gordon Brown, the British prime minister, has championed reforms to global financial architecture, including a beefing-up of the International Monetary Fund, but he said this weekend’s talks will see only omg“initial” steps in that direction. Leaders of Britain, France, Germany, Italy and Spain want the summit to map out outline proposals that could bear fruit at another summit within the next 100 days.

Nicolas Sarkozy, French president, believes this is the moment for Europe to assert its expertise in multi-lateral solutions and to propose specific ideas for global solutions, with the European Union taking the lead.

Reporting by Andrew Ward and James Politi in Washington, George Parker in London, Ben Hall in Paris, Michael Mackenzie in New York, Victor Mallet in Madrid, Guy Dinmore in Rome and Tony Barber in Brussels

FT.com / World - Signs of turmoil grow as G20 looms

so he's still in power and things keep unfolding.
what do you make of this gambit from the bush administration?
i think it's a feint that only someone in a weak position in the context of a crisis would do. or you could say it means that everything is on the table now. or he could be saying what he said about "free market capitalism" in which case what exactly is the position he's adopting? no i think it's the first two which are really the same thing.

it's almost like people are thinking ahead in a kind of vague way and meanwhile things seem to have happened.

what do you think is going on at this point with the global economic system?
because it appears that all of it is involved, yes?
that can't be good.
-----Added 13/11/2008 at 11 : 20 : 24-----
or it's a change in the power arrangement in favor of the e.u.. so it'd be the end of the post world war 2 arrangement. that's interesting, isn't it?

genuinegirly · 11-13-2008, 08:29 PM

I tend to see it as a good thing when world leaders meet to discuss problems affecting all of their people. I do think little will be decided until Obama comes to office. I hope he's studying up, because he's going to have to jump in running with solutions to this financial crisis.

Baraka_Guru · 11-13-2008, 09:02 PM

I'm beginning to think this is a common global problem now finally compounding itself and collapsing under its own weight.

I'm not sure about many European countries, but in North America the problem has been known for a while:

High debt use + negative savings rate = spending beyond our means

When it gets out of hand, you see the debt machine stall. You can't get blood from a stone.

With globalization and people defaulting on loans and making late payments, the system begins to crack.

Our markets are so intertwined, virtually no one is spared.

I try not to think of these things so much. I try to think of my own situation, my own debt.

roachboy · 11-14-2008, 05:39 AM

Quote:

Economics
Bretton Woods II – five key points on the road to a new global financial deal

While the G20 summit is almost certain not to create a new "Bretton Woods" system overnight, countries led by Britain and France want an enhanced role for the International Monetary Fund, to improve surveillance of complex financial markets and help prevent such excesses building up in future. They also favour increased funding for the IMF.

Gordon Brown made well-publicised efforts to persuade Gulf states to make large contributions to its coffers, while there is also pressure on China, and Japan has pledged $100bn of reserves.

The additional money would enable the IMF to finance more bail-outs to countries suffering runs on their currencies and banks.

The US is less keen on this because new streams of funding would dilute its voting rights within the Washington-based institution.

Similarly, the keenness of oil-rich Gulf states to contribute will be tested now that oil prices have more than halved from their summer peaks.
Global regulation

There is a widespread recognition that regulation of financial markets has been far too weak in recent years. Authorities have been increasingly aware of the excesses building up in such markets, like those for mortgage-backed securities, but have failed to increase regulation.

There is also, though, a recognition that too hasty regulation in response to a crisis, like that of the Sarbanes-Oxley Act brought in by the US Congress in 2002 in response to the Enron scandal (and designed to improve corporate responsibility and combat corporate and accounting fraud), could be counter-productive.

So, there will be discussion of a new global regulator that can force banks and hedge funds to be more transparent about their borrowings and their investment positions.

Such an organisation would force banks to hold greater capital cushions or make them pay bonuses in shares that would have to be held in a company for, say, five years, to make sure it was the longer-term interests of the shareholders that was the focus rather than the bankers' own short-term interests.

There is also discussion of a temporary suspension of "mark to market" accounting rules under which banks are required to report the current value of their assets at times when pricing those assets - such as sub-prime mortgages – is virtually impossible.
Recapitalisation of banks

This is already happening around the world, with most countries following the British model. The US government announced changes to its $700bn bail-out for its banking system on Wednesday, under which it will buy fewer toxic mortgage-backed securities from banks and instead recapitalise banks by buying shares.

This weekend's G20 meeting will discuss a possible response to the problem of banks running out of capital - which probably would be based on a Spanish-style system whereby banks have to hold a bigger capital cushion in good times, which they can draw upon in bad times.

Building such a system will not happen overnight but G20 leaders will probably commit themselves to such action. There is also likely to be discussion of new rules to simplify derivatives products and improve the transparency of the markets in which they are traded.
Fiscal/monetary policy

One aim of the G20 summit is to coordinate global action on interest rates in an effort to pump some life back into the world economy and avoid deflation, or falling prices.

Most governments have already begun to cut and many are also either embarking on, or considering, tax cuts or spending increases to help reflate countries' economies - especially as the impact of interest rate cuts in many economies is being hampered now by the poor availability of credit.

Brown is trying to lead globally coordinated tax cuts. But public deficits in Britain have grown so large in recent years that the country is one of the worst-placed of the main economies to afford a big fiscal giveaway.
New world order

Recent decades have been dominated by western industrialised nations grouped together under the banner of the Group of Seven, but the summit, this weekend, billed as G20, marks a significant shift.

Large-scale economies such as China, India and Brazil now have a place at the table and are demanding a much greater say in global economic oversight because they consider the old "Anglo-Saxon" free-market dogma to be dead.

Reflecting this shift, Brown has indicated that it could be possible to get an agreement on the Doha round of trade talks, which collapsed in Geneva earlier this year amid bitter recriminations between the US and India.

The French president, Nicolas Sarkozy, for his part, will use the summit to suggest that the days of the dollar as the world's reserve currency are over.

Bretton Woods II - five key points on the road to a new global financial deal | Politics | The Guardian

so last night when i saw the financial times article that i bit above, i was a bit thrown by it, partly because i was surprised to find that something potentially this big a deal could have been unfolding while we were looking at our own collective image in the mirror of the election. obviously, goerge w. bush's statement, which last night i thought a bit nutty, is in fact posturing as the g20 meeting gets ready to convene with an agenda--maybe---of something like a new bretton woods.

this is a big deal. you'd think we'd be paying attention.
i wasn't really either, so just erase that wagging index finger from your mental image-roachboy.

the center of what the guardian takes to be the agenda is the alteration in the role and status of the imf,
it seems like the idea is to shift it back into the role that it occupied at its inception, during the first bretton woods regime, which was abandoned after the united states went off the currency peg model in 1970 or 71 (can't remember exactly and it's early).
since then, the imf has been a central agent of crisis formation, reproduction and intesification throughout the southern hemisphere.
now the idea is to recalibrate.

the other idea entails a loss of american hegemony within the imf. this could have consequences, but they're neither necessarily good nor bad--but this shift alone is a good index of the distance that's being travelled here and the speed at which it is being travelled.

do you think this agenda for a second bretton woods could accomplish it's various goals?
what do you make of the manoevering for position?
the stakes are high---it's an interesting dance to watch.

why do you think this isn't being covered most extensively in the american "free press"?---i don't mean to imply a conspiracy of silence with the quotation marks---i just think the category is not spelled correctly without them with reference to the united states.

cutting across this is the interregnum----the lame duck bush navigating a dance on this scale---obama in the wings---what do you think this means for any outcomes of the g20?

roachboy · 11-14-2008, 03:57 PM

on the other hand, this is happening too fast for obama at any level, so the idea is probably to play for time and that's maybe why bush opened with the move he did. it defused expectations. or something did. maybe there never were much in the way of expectations before sarkosy started talking about refounding capitalism.

Quote:

Europe tempers G20 ambitions

By FT reporters

Published: November 14 2008 19:38 | Last updated: November 14 2008 23:00

European leaders scaled back their ambition for this weekend’s Group of 20 summit on the world economy on Friday, even as official figures showed that the eurozone had fallen into recession for the first time.

Conceding that the US political transition made breakthroughs unlikely, representatives of G20 nations played down the likelihood of a big announcement of a co-ordinated global fiscal stimulus to support the world economy, although leaders were expected to back the use of fiscal policy where appropriate.

Nicolas Sarkozy, French president, had said the summit could “re-found capitalism”. However, French officials acknowledged that no such language would appear in any communiqué.

Support for the idea of global financial regulators also looked to have evaporated in favour of a UK idea of a “college of supervisors” from different nations, who would review global banks.

“We have always said that this is going to be a series of summits; nothing is going to be solved overnight,” White House spokeswoman Dana Perino said.

However, Hank Paulson, Treasury secretary, indicated that the US side was prepared for critcism from other countries.

“I don’t point my finger at any single country for anything because we have in many ways humiliated ourselves as a nation with some of the problems that have taken place here,” he said. “But I do believe the underlying cause when people look back and think about these things, has got to be huge imbalances – no nation’s fault.’’

The scale of the challenges confronting the G20 leaders was underlined by new data on Friday showing that the 15-country eurozone had fallen into its first recession even before the financial markets crisis worsened in October.

Gross domestic product in the region contracted by 0.2 per cent in the three months to September after a similar drop in the previous quarter. Italy joined Germany and Ireland in technical recession, defined as two quarters of declining GDP.

Underlining the scale of the turmoil, it emerged that the Adam Opel unit of General Motors was seeking loan guarantees from the German federal government and four states where it has plants in order to protect its business from its US parent’s worsening finances

FT.com / World - Europe tempers G20 ambitions

meanwhile...
what do you think should happen with gm and ford?

Frosstbyte · 11-14-2008, 04:14 PM

I have never been more terrified about economics in my life than when I took a class in international trade law and policy and figure out just how the US economy had been run for the past 30 or so years. It's such a classic catch-22 that we can't afford how much we spend, but if we don't spend it, the rest of the world doesn't have anyone to buy it, so they can't afford to not loan us the money to we can spend it.

Bush is right, for once, that this is not a problem that's going to be solved in one conference, and I sure hope that Obama is willing to make some hard choices and pick some really smart people who understand how international finance works. Some good reads there, rb, though I don't have any more specific thoughts at the moment.

Paq · 11-14-2008, 06:54 PM

useless trivia: the 5 hedge fund managers invited to this all have 1 thing in common(other than being hedge fund managers)..can you name it?

as for gm and ford...they reaped the benefits of cheap gas, etc, and did NOTHING to improve themselves. They built suvs bigger and bigger with the same mpg as forty years ago...Part of me says "sorry, byebye" but i know there are hundreds of thousands of people who would be out of a job if that were to happen..i still think they need to change on a fundamental level. I was kinda saddened to hear toyota turned down GM's plea for help. i mean, i know they are competitors, but that just seems like kicking someone when they were down.

that said, i know gm and F will be bailed out, probably to the tune of about 25 billion...

flstf · 11-14-2008, 07:33 PM

One of the pundits on one of the news shows said yesterday that economic collapse was inevitable and all the bailouts in Europe and the US is just an attempt to spread it out so the crash will not happen all at once. Perhaps things are pretty good now compared to what they will be. I hope not. A slow motion depression is still a depression.

Slims · 11-14-2008, 07:47 PM

It's certainly a global problem, not simply an American one.

I don't buy that we were otherwise occupied to notice...who didn't notice the stock market tanking or the economic slowdown? People were just too self absorbed to care about solutions.

Paq · 11-14-2008, 07:47 PM

in my stocktrading group, we call this "death by a thousand cuts'

ie, they aren't sending out ALL the news at once and they are propping stuff up until the previous news gets digested...

personally, i'd prefer a 1000000 pt crash in a day and recovery can start...

Derwood · 11-14-2008, 08:11 PM

i'm extremely naive in the ways of economics, so i don't understand how NOBODY has any money/capital/net worth. how can markets and employment, etc. be going down everywhere? who has all the money?

Slims · 11-14-2008, 08:38 PM

I think it's more like this: The people who really produce goods get caught up in the 'downcycle' and are unable to produce as much as they would normally, which has a real impact on the economy by reducing the amount of product to go around, which makes more people tighten their belts and the economy gets worse.

These days it seems like the ups and downs of our economy are at least 95% driven by human psychology rather than real necessity.

Paq · 11-14-2008, 08:45 PM

if youre talking about hte stock market, than the daily ups and downs are COMPLETE human psychology...your massive ups are caused by a combination of "Oh god, i have to cover my short positions" followed by "oh god, i'm missing the bottom buying opportunity" so you get days like yesterday's 800 pt swing low to high...

then you get today's 'Oh god, i was completely wrong, sell sell sell" followed by "woohoo, time to load my short positions again"

so hte market runs hard in either direction. now, what that has to do with the actual economy..not much...

roachboy · 11-15-2008, 08:01 AM

this is short and to the point.

Quote:

The G20: Who is there and how desperate are they?

* Ed Pilkington
* guardian.co.uk, Saturday November 15 2008 00.01 GMT
* The Guardian, Saturday November 15 2008
* larger | smaller
* Article history

Argentina - $150bn public debt

Attending: Cristina Fernandez de Kirchner, president
Argentina last month decided to nationalise its 10 largest private pension funds, taking $30bn of assets into public ownership. Shares then lost a fifth of their value in two days. Argentina defaulted on its debts in 2001 and investors fear it may do so again.
Desperation rating: Five stars
Australia - $141bn public debt

Kevin Rudd, prime minister
Australia has eliminated net public debt but runs a gross one of about 15% of GDP. Tough regulation meant its banks had little exposure to the US subprime mortgage market but the fall in commodity prices is hurting. Australia could face recession next year.
Desperation rating: Three stars
Brazil - $590bn public debt

Luiz Inacio Lula da Silva, president
Brazil's economy is growing at 5% this year but is expected to slow sharply next year. Central bank is making credit available to help firms boost sales and it has intervened in the market to meet demand for the US dollar.
Desperation rating: Three stars
Canada - $900bn public debt

Stephen Harper, prime minister
The Bank of Canada warned that growth would hit zero next year. Weaker oil prices and lower US demand are hurting Canada. Last month, it guaranteed bank lending in a move that could leave the taxpayer liable for up to US$175bn.
Desperation rating: Four stars
China - $580bn public debt

Hu Jintao, president
China is taking a big spending $586bn approach as industrial growth hits a seven-year low. As holder of the world's largest foreign exchange reserves ($1,900bn) China is under pressure to aid global finances but stands to be the biggest winner from the crisis.
Desperation rating: Three stars
France - $1.63tr public debt

Nicolas Sarkozy, president
The French economy grew by 0.1% between July and September but recession may only be temporarily avoided. Paris has made a €320bn guarantee for bank lending and a $40bn fund to recapitalise banks. Sarkozy has announced the creation of a fund to protect French companies from foreign "predators".
Desperation rating: Four stars
Germany - $2.07tr public debt

Angela Merkel, chancellor
Europe's largest economy officially entered recession this week after GDP shrank by 0.5%, the second quarter of decline. Germany has seen exports plunge. It is providing €400bn in guarantees for bank lending, plus a further €100bn to recapitalise its banks.
Desperation rating: Four stars
India - $637bn public debt

Manmohan Singh, prime minister
India is being tipped as a key player in helping bolster the global economy. Growth is expected to be 7.5% this year, down from 9% and disguising the slowdown in the industrial sector. Along with China, a big gainer.
Desperation rating: One star
Indonesia - $147bn public debt

Susilo Bambang Yudhoyono, president
Jakarta unveiled an emergency package last month in response to increasing pressure on its currency and stock market - including export tax cuts and ordering state-owned companies to repatriate foreign currency earnings.
Desperation rating: Two stars
Italy - $2.19tr public debt

Silvio Berlusconi, prime minister
The economy has contracted for a second quarter, by a worse than expected 0.5%. It is Italy's fourth recession in seven years. The government has set aside up to €40bn to recapitalise its banks and created a €650m fund to guarantee lending to companies.
Desperation rating: Five stars
Japan - $7.45tr public debt

Taro Aso, prime minister
The world's second biggest economy may be on the brink of recession. Despite this, Japan is prepared to take a leading role in helping get the global economy going, standing ready to offer $100bn in loans.
Desperation rating: Three stars
Mexico - $203bn public debt

Felipe de Jesus Calderon Hinojosa, president
The government is increasing spending by more than 13% to $231bn next year in a bid to boost the economy. The slump in the oil price hurt Mexico as oil revenues finance around 40% of its spending. The US slump has also cut the amount expatriate Mexicans send home.
Desperation rating: Four stars
Russia - $76bn public debt

Dmitry Medvedev, president
Russia has pledged a $200bn package for the economy and financial markets while the central bank has raised key interest rates to try to halt capital flight. Share prices have slumped while the rouble has been under heavy pressure. Russia has financial firepower but a fall in commodity prices hurts.
Desperation rating: Four stars
Saudi Arabia - $91bn public debt

King Abdullah
Its stock market is down 40% this year and the government has made $40bn available to its banks. However, the focus has been on Saudi pumping money into the IMF so that it can in turn bail out struggling countries.
Desperation rating: Three stars
South Africa - $88bn public debt

Petrus Kgalema Motlanthe, president
Its financial system is largely unscathed and could use its stronger bargaining position to press for more African voices in international forums such as the IMF. A potential gainer.
Desperation rating: Two stars
South Korea - $269bn public debt

Lee Myung-bak, president
No bank nationalisations but the government said yesterday it was ready to provide liquidity to the sector amid fears of mounting bad debts and slowing growth. Wobbling.
Desperation rating: Three stars
Turkey - $257bn public debt

Tayyip Recep Erdogan, prime minister
Turkey's debt was downgraded by credit rating agencies this week. It might need further IMF cash. Its currency lost a third of its value against the dollar last month alone.
Desperation rating: Four stars
UK - $1.2tr public debt

Gordon Brown, prime minister
Amid bank bail-outs and interest rate cuts the country sits on the brink of recession. The FTSE has lost around 40% since last summer. Desperation rating: Five stars
US - $8.4tr public debt

George Bush, president
The origin of the subprime crisis. Washington has drawn up a $700bn bail-out plan for the nation's banks, including a fund to buy toxic assets. Needs a solution fast.
Desperation rating: Five stars
EU

The eurozone is now officially in recession. The economy of the 15 countries using the euro shrank by 0.2% between July and September compared with the previous quarter.
Desperation rating: Four stars

The G20: Who is there and how desperate are they? | Business | The Guardian

and here's a general assessment of the lay of the land on this saturday morning.
Doubts raised over prospects of success for 'hasty summit' | Business | The Guardian

this will probably double post---there's something squirrely going on with my browser or computer can't tell which exactly....

in the left responses to the election thread, there was a piece by mike davis.
it's basic argument is that the financial crisis is also, and perhaps just as importantly, an ideological crisis. ideology in this sense refers to the framing assumptions that enable coherent assessments of a situation and which enables coherence of responses. davis argues, in different terms, that because of the latter, the former is not even being recognized for what it is, like the grand canyon was not recognized by the folk who first saw it.

this seems most characteristic of the bush administration at the moment.
the implications of this are huge, both in terms of political arrangement (the political arrangement that shapes trans-national economic activity) and in specific policy terms.
so if my read on the manoevering just prior to the meeting is correct, the bush administration is basically punting--they have little choice, being both lame ducks and trapped in a situation that pulverizes their own neoliberal worldview (and apparently lacking the flexibility to move outside that worldview, they simply perform the effects of the problem--they can't get in front of something they can't really process).
so they're playing for time, hoping to launch something co-ordinated and short-term, and there'll be another meeting.

this puts enormous pressure on obama. the situation is such that the american position in the trans-national system is at stake. the way to maintain something of that position--and it's important because despite the legion problems with the domestic economy in terms of system coherence, what enables it to function at all is tied to the american position in the other arrangement----is to have a systematic plan ready to be advanced--sarkosy for example is acting as if the french already have one--so the game is on.

depending on which stop-gap measures are implemented, there will be a bit of time before things unravel maybe---it looks like the gamble is to prop shit up until, say, february. that's not alot of time.

meanwhile, the auto industry is in terrible condition and will probably be bailed out somehow or another. even this is generating new and improved versions of the ideological crisis--for economic conservatives, this removes any consequence to bad management decisions---so opens the door for every industry group to fuck up and some to washington and say "bail me out."

but that's already happening--witness the chaos in the "troubled assets relief fund" which is now not being used to relieve troubled assets--it's more a huge pool of money surrounded by a soup kitchen that's pouring it into the proffered cups of corporate lobby groups.

it really is insane, what's happening in the states. and the g-20 meeting will be a punt. so we collectively, since we live in this situation regardless of what we think of it, have to hope that the stop-gap measures work, and that something about making them at the trans-national level will generate a degree of coherence that the present administration is self-evidently not able to produce itself.

tisonlyi · 11-16-2008, 06:49 AM

Nouriel Roubini is an economics professor at New York Uni if memory serves. He's been right about the path of the US economy with frightening accuracy over many years.

This is his statement on the US economy, and what Obama is going to have to deal with.

Quote:

From RGE Monitor:

One can count at least 20 separate or complementary causes that will sharply reduce consumption in the next several years:

· The US consumer is shopped-out having spent for the last few years well above its means.

· The US consumer is saving-less as the already low household savings rate at the beginning of this decade went to zero/negative by 2006 and has now to raise to more sustainable levels.

Yves here. I hate to be a pedant, but one and two are more or less the same reason.

· The US consumer is debt burdened with the debt to disposable income having increased from 70% in the early 1990s to 100% in 2000 and to 140% in 2008.

· Not only debt ratios are high and rising but debt servicing ratios are also high and rising having gone from 11% in 2000 to almost 15% now as the interest rate on mortgages and consumer debt is resetting at higher levels.

· The value of housing wealth is now sharply falling by over $6 trillion as home price depreciation will soon be 30% and reach a cumulative fall of over 40% by 2010. Recent estimates of this wealth effect suggest that the effect may be closer to 12-14% rather than the historical 5-7%....

· Mortgage equity withdrawal (MEW) is collapsing from $700 billion annualized in 2005 to less than $20 in Q2 of this year. Thus, with falling housing wealth and collapsing MEH US households cannot use their homes anymore as ATM machines borrowing against them.

· The value of the equity wealth of US households has fallen by almost 50%, another ugly wealth effect on consumption.

· The credit crunch is becoming more severe as the recent Q2 flow of funds data and the Fed Loan Officers’ Survey suggests: it is spreading from sub-prime to near prime to prime mortgages and home equity loans; and from mortgages to credit cards, auto loans and student loans. Both the price and the quantity of credit are sharply tightening.

· Consumer confidence is down to levels not seen since the 1973-75 and 1980-82 recessions.

· Real wage growth and real income growth has been stagnant in the last few years as income and wealth inequality has been rising. And now with GDP and real incomes falling real consumption will fall sharply.

· The Fed is reaching the zero-bound on interest rates as the economy gets close to deflation given the slack in goods, labor and commodity markets. Deflation means that consumers will postpone consumption as future prices are lower than current prices, as real rates are positive and rising and as debt deflation increases the real value of the households nominal debts

· Employment has been falling for 10 months in a row and the rate of job losses is now accelerating... In this cycle job losses have been so far “only” slightly over 1 million while labor market conditions are severely worsening based on all forward looking indicators...Massive job losses and concerns about job losses will further dampen current and expected income and further contract consumption.

· Tax rebates of over $100 billion failed to stimulate real consumption earlier in 2008. Only 25% of the tax rebate was spent as US consumers are worried about jobs and need to use funds to pay their credit card and mortgage....another general tax rebate would be as ineffective as the first one in boosting consumption.

· The 1990-91 and 2001 recessions were not global; this time around the IMF is forecasting a global recession for 2009.

· The recent rise in inflation – that is only now slowing down – reduced real incomes even further for lower income households who spend more than the average households on gas, transportation, energy and food. The recent sharp fall in gasoline and energy prices will increase real incomes by a modest amount (about $150 billion) but the losses of real disposable income and thus falling consumption from other sources (wealth, income, debt servicing ratios) are much larger and more significant.

· The trade weighted fall in the value of the U.S. dollar since 2002 has worsened the terms of trade of the US and reduced further real disposable income and the purchasing power of US consumers over foreign goods.

· With consumption being over 71% of GDP a sharp and persistent contraction of consumption all the way through at least Q4 of 2009 implies a more severe recession than otherwise. Consumption did not fall even a single quarter in the 2001 recession and one has to go back to 1990-91 to see a single quarter of negative consumption growth...

· Monetary easing will not stimulate durable consumption and demand for residential housing as demand for such capital goods becomes interest rate insensitive when there is a glut of capital goods; monetary policy becomes like pushing on a string. In the previous recession the Fed cut the Fed Funds rate from 6.5% to 1% and long rates fell by 200bps. In spite of that capex spending of the corporate sector fell by 4% of GDP between 2000 and 2004 as there was a glut of tech capital goods and it took years to work out such a glut. Today there is a glut of housing, consumer durables and autos/motor vehicles; so it will take years to work out this glut...

· While policy rates are sharply falling the nominal and real rates faced by households are rising rather than falling.... together with less availability of credit are severely dampening the ability of households to borrow and spend.

· To bring back the household savings rate to the level of a decade ago (about 6% of GDP) consumption will have to fall – relative to current GDP levels – by almost a trillion dollar. If all of this adjustment were to occur in 12 months GDP would contract directly by 7% and indirectly (including the further collapse of residential and corporate capex spending in a severe recession) by 10%, an exemplification of the Keynesian “paradox of thrift”. If such an adjustment were to occur over 24 months rather than 12 months you would still have negative GDP growth of 5% for two years in a row with a cumulative fall in GDP from its peak of 10% (note that in the worst US recession since WWII such cumulative fall in GDP was only 3.7% in 1957-58). One can thus only hope that this adjustment of consumption and savings rates occurs only slowly over time – four years rather than two. Even in that scenario the cumulative fall of GDP could be of the order of 4-5%, i.e. the worst US recession since WWII. Note that the cumulative fall in GDP in the 2001 recession was only 0.4% and in the 1990-9 recession was only 1.3%. So, the current recession may end up being three times as long and at least three times as deep (in terms of output contraction) than the last two and worse than any other post WWII recession.

RGE - Nouriel Roubini's Global EconoMonitor

These two blogs are excellent sources of information about the current crisis:

naked capitalism
Calculated Risk
-----Added 16/11/2008 at 09 : 56 : 02-----
Panic Alert:

I posted a while ago regarding Letters of credit being refused as the trigger to hoard.

*gulp*

London Banker: Systemic Risk, Contagion and Trade Finance - Back to the Bad Old Days

tisonlyi · 12-04-2008, 09:37 AM

This is lifted from comments on another site, London Banker, and i don't agree with all of it, but the endgame tallies with what most of the sources i'm reading point towards...

I think that 'fall' or 'collapse' in the dollar will happen much sooner.

Quote:

From the London Banker website (comment section):

HISTORY
1.Margin calls on hedge funds
2.Sudden contraction of global market liquidity
3.Huge sales to meet margin calls
4.Trillions of dollars of value wiped off balance sheets
5.High levels of hedgie redemptions
6.More sales of assets
7.Collapse in global prices for equities, debt and commodities.
8.Dollar stronger because lots of funds in London struggling to meet their margin calls in New York.
9.Fed doubles balance sheet
10.Taxpayer largesse doled out to Wall Street
11.Bailouts of autos, airlines, etc. wherever (and ONLY wherever) Wall Street is at risk from CDS liabilities
12.Huge expansion in the monetary base
13.Banks begin to accumulate massive reserves
14.Incoming margin cash (and a lot of other cash) parked in Treasuries
15.Treasury prices up; yields down.
16.25 November: Bloomberg reports US bailout totals 7.7 trillion

FUTURE
17.Margin calls end
18.Deleveraging stops
19.Reduced demand for dollars
20.Reduced need to park cash in US Treasuries
21.US domestic demand very low and imports greatly reduced
22.US trade deficit declines quickly
23.Exporters to US don’t need to need to buy so many US Treasuries
24.Bank reserves used to buy crashed assets, many outside the US
25.Banks start to sell US Treasuries to finance these purchases
26.Net sales of US Treasuries – prices falter then fall
27.US can’t sell enough Treasuries and starts to monetize debt
28.Dollar starts to fall
29.Global equity markets rise
30.Commodity prices rise
31.Supply-side shock in the US leads to shortages
32.US prices rise and US govt. can’t fudge inflation numbers enough
33.US citizens panic
34.Hyperinflation of prices of consumption goods in the USA
35.Dollar falls
36.IMF overwhelmed
37.Exports to USA reduced even further
38.Global economy shrinks again, worse than ever
39.Global depression

This is good in that there's some 'good' news on face value, like a dramatic fall in the balance of payments, that actually points to an underlying catastrophe in progress.

*gulp*
-----Added 4/12/2008 at 12 : 40 : 53-----
Oh, and the reason i was following up in here:

Bloomberg.com: Investment Tools

the baltic index is dropping again. From 12k to under 700 over the year.

Nothing is moving, which spells better balance of payments for the US, but also massively reduced demand for dollars directly - with the follwing implication being a massive reduction in the amount of asian dollars looking to be parked in US treasuries...

*gulp, gulp*

Paq · 12-04-2008, 10:30 AM

yea, tison, we were looking at the baltic dry shippers....freaking..crazy. from printing money to begging for money. Dryships (DRYS) is down from over 100 to 4 bucks..i'm selling puts so i can get it for 1.00-2.00 and i'll just tuck it away for a while.

At any rate, i think the london banker article has a great point. Consumer credit is going to be in danger very soon..

Tully Mars · 12-04-2008, 10:37 AM

For the life of me I can't figure out why the dollar isn't dropping like a rock. I mean the UST seems to be doing everything it can to get it to fall. They're printing money as fast as they can and throwing it at any and every problem (except maybe the auto workers.)

I honestly think that's part of the plan. We owe so many countries so many dollars that having the dollar worthless (note I said worthless, not worth less.) could be a real benefit. I mean if a billion dollars buys a couple bags of bread and we owe China et el several billion...

Paq · 12-04-2008, 10:43 AM

Tully, if you look at the euro/usd, you can see it basing rihgt now, which is a perfect beautiful setup for the dollar to drop like a rock and we'll redo the 1.60/1 eur/usd of he summer...

yea, im stocking up commodities, too, but small positions, like every other stock right now...

Tully Mars · 12-04-2008, 11:36 AM

Quote:

Originally Posted by Paq

Tully, if you look at the euro/usd, you can see it basing rihgt now, which is a perfect beautiful setup for the dollar to drop like a rock and we'll redo the 1.60/1 eur/usd of he summer...

yea, im stocking up commodities, too, but small positions, like every other stock right now...

I show it at 1.25-1.30 today, seems awfully low to me. I'm kind of tempted to buy 20-30K in euros. Of course if I did that the dollar would almost certainly get stronger against the euro and I'd loose my shirt.

I am in a couple funds that are euros based. Every since a friend of mine lost it all (500K+ to 3,700 over night) to Enron I've been about as spread out as one can get.

Speaking of exchange rates- as many know I'm in Mexico. The pesos been dropping pretty fast, people here are starting to freak. Freaking and blaming the problems on the US. A lot of countries seem to blame the US for the current financial climate, I'm noticing a trend. So far this as been good for me- my rent, elect, gas etc... is all in pesos. So my rent used to cost me $300 a month now it's closer to $260. I think this benefit could be short lived. Eventually prices will have to rise and I'm just hoping when they do it won't be more dramatically then the dollars increased value.

Paq · 12-04-2008, 01:15 PM

well, if you check the chart, there is a lot of 1.25 support on the eur/usd. I don't know your situation or risk aversion, but if you can hold out, then i could easily see it going back up. I understand how you feel, i sold naked 7.5 puts on BSC (i make money as long as bsc stays over 7.50/share) the friday before the weekend...woke up monday to ..let's just say a massive loss..the worst part is that i could have held for a week and gotten out with a profit when they renegotiated for 10/share. (i actually got out when it bounced to 5-6 range, but still, it suuuucked)

a friend of mine bought LEH the weekend before that debacle...200K went poof overnight

fre/fnm are others i know...

diversification..deeeefinitely the way to go. It's just such a hard market to buy and hold right now..

Tully Mars · 12-04-2008, 01:42 PM

Quote:

Originally Posted by Paq

diversification..deeeefinitely the way to go. It's just such a hard market to buy and hold right now..

I've always been in several sector at once, even when it's was measured in hundreds of dollars for me. After my friend, who BTW I told was bat shit crazy, put all he had into Enron (PG&E employee) I've been damn near OCD about it. Anymore it doesn't seem to matter what you're in it's likely going down. I did move a little into a fund that was heavily weighted in gaming (casinos et el) and some into a CD. So far that CD has out done everything and I'm sure you know it's isn't paying much... but it is paying.

Personally in this market buy and hold is the only move I'm comfortable with. I'm 45, have an income and I don't see needing my IRA or 401K for 15-20 years. While it's hard to see shit like 38% of those disappear over the course of a few weeks. I think bailing now would simply lock in those losses. I got time, it'll come back... or it won't and we're all screwed together. I made it through 87 (though in 87 I had slim and none in... much closer to none at the end) and the dot com BS, they came back this will too. This is just way more serious and will take more time.

I personally think it will bounce back, just going to take several years. Isn't that the way it always works? Weeks to loose it, years to make it back. But much like the Stones "Time is On My Side."

Paq · 12-04-2008, 02:23 PM

oh, it's definitely at the point of "If you haven't cashed out, then just wait' but i mean, right now, i'm not buying and holding anything except companies that i am 99% sure will be around in 20 yrs....just that for most of the last century, those were the banks...Now, it's oil/energy, which is still taking a beating, and long term companies with great balance sheets...and unfortunately, those are few and far between...it's so funny, though, bc i have people asking me all the time "I'm afraid to not be buying this bc it could all go back to the highs' and i have to drag out my 200 yr dow chart and ask them to point out anytime a recovery was made in a day, week or even a year. There are TONS of buying opps and they will be buying opps for quite a while. yea, you may miss the absolute bottom, but that is better than buying, losing 50% and having to wait again....

I just feel bad for a lot of my friends who were planning to retire within the next 5 yrs..my parents included...

and yea, i'd say this is much worse and longer term than the 87 or dotcom crash, but yea, i'm trying to figure out how to make money in the meantime from it

roachboy · 12-04-2008, 02:32 PM

it seems pretty obvious that as credit lines dry up that bulk shipping is going to take a hit, and that it is more visible and worrisome than parallel developments in container movements. letters of credit were the devices that made the Wheel turn back in the day when i worked in this sector....so this is an index that gives some indication of activity at the level of raw materials movement, and so is an indication of the consequences of the credit crisis on manufacturing. for anyone with a trace of residual marxist in em, watching this index tank is watching the wall move closer and closer.

freight movement also appears to be at the center of its own futures trade, yes? the bi tracks motion within this trade and not the actual movement of shipping, yes? what is the relation between these two exactly? i know that, for example, maersk is pulling some of its newer bigger bulk ships outta the water for a few months, so things are obviously tightening. and lloyd's has an article (which i could read all of because i'm too cheap to subscribe) that german insurers are starting to freak out about what they see coming in this sector.

the regular movement of materials and such is the blood stream of the present capitalist order. nothing good for it will come of a freeze in the movement of goods. i wonder if the system can afford to putz about between now and 22 january, when presumably things will Change once obama's crew of neoliberals is....wait....um.....

Tully Mars · 12-04-2008, 02:47 PM

Quote:

Originally Posted by Paq

and yea, i'd say this is much worse and longer term than the 87 or dotcom crash, but yea, i'm trying to figure out how to make money in the meantime from it

No kidding. I think given the right opportunity I could make money in real estate right now. Maybe not right now, but the idea of putting some into it tweaks my interest. I have a good deal of confidence I could buy a property and invest some time and money into it and make some cash in the long run. The property would have to be in the right market, be the right price (damn cheap) and need renovation. I have a back ground in home construction (built the last house I lived in) and remodeling. I could buy the property, move in and work on it over the next couple years. I'm almost certain money could be made, just not sure I'm that ambitious. There's also that pesky "almost sure." Would hate to put money, time and effort into what could become a money pit. But if you look at people who bought during the 30's those who could hold out for 10-15 years made money... good money, very good money.

I have a friend, actually a couple friends, who've bought foreclosures and they're sweating big time. One has a renter who's paying the paper on the property (but not taxes or ins.) Both of them are in a position to make the monthly payments. Funny thing is the friend with the renter is freaking out more then the one who's going completely out of pocket. I say if they can hold on they'll come out good. It's just a matter of time.

Yakk · 12-04-2008, 04:27 PM

So every time you borrow money, someone else owns the debt.

Every time you default on debt, you gain wealth and the owner of the debt loses wealth.

All of these things move money around.

Now, the trick is, if someone lends money to you, and you do not end up being able to pay it back, while they _think_ you are able to pay it back, for a period of time ... the books don't actually balance.

You have cash (from the loan), and think you own the things you bought with it.

They have your debt, and think that you will make good on it.

In reality, their debt isn't worth all that much -- because you will default.

And the things you bought with the cash from your debt ... well, you won't own them, because you are going to go under.

The things you wanted (that you bought with your cash from your debt) end up going to the people who wanted you to pay them back in cash (and they don't want it). This is bad for the 'sum worth' of both you and the person borrowing money from you.

In essence, that loan/debt agreement isn't making wealth -- it is simply moving liquidity from someone who wants future returns, to someone who wants immediate liquidity to buy something right now. This arrangement can make both of you better off (as you own something that both of you want). If it collapses (or the illusion that it works collapses), it causes real harm.

Now, if you are able to generate the future cash-stream to pay off the debt, and you don't walk away from the security, and you intended and where aware of that future cost and do think it is worth it -- you are both better off.

But that isn't always what happens.

In the case of America, the world (as a whole) is lending it massive amounts of money. Now, either America boosts its productivity, produces things that generate massive amounts of money, ships more goods out of itself than it is importing, and uses that to pay off these debts . . . or the people who think that owning American debt will give returns later on are wrong.

In short, there are at least two ways America can get itself out of this mess. It can ramp up its own productivity -- or it can engage in economic collapse.

Paq · 12-04-2008, 07:05 PM

tully, some well heeled friends of mine are buying up condos and real estate in sarasota florida and boca raton right now. Basically getting 1m homes with property (the 'good' part of real estate) for 250K or so...

it's crazy down there. Boca had riots at hte beginning of the year bc of how bad their housing market has tanked. I've heard places in cali are even worse...

So, it's a great time to be a buyer..if you have cash.

Tully Mars · 12-04-2008, 07:23 PM

Quote:

Originally Posted by Paq

tully, some well heeled friends of mine are buying up condos and real estate in sarasota florida and boca raton right now. Basically getting 1m homes with property (the 'good' part of real estate) for 250K or so...

it's crazy down there. Boca had riots at hte beginning of the year bc of how bad their housing market has tanked. I've heard places in cali are even worse...

So, it's a great time to be a buyer..if you have cash.

I've seen stories about that, I am tempted. But I'm a little leery about owning property from a distance. I already have a rental property, the house I built. Currently it's leased to the US Coast Guard. I feel comfortable with that in part because the US government deposits the rent each month and partly due to the fact that the person in charge of housing lives at the end of the road. He's an old friend and has to drive by my house everyday. Last November the Oregon coast was hit with an unusually strong storm. In December I didn't get a deposit. I called, he explained there was damage and as soon as they had it repaired they'd deposit the difference of the repairs. I was told part of the roof was gone and a panel on my shop (metal 24X40) was torn off. In January I got a regular deposit. So I called and asked what was going on. Was told the repairs were done and he wasn't sure about the total cost but he assured me the Feb. deposit would include the left over amount from Dec. Sure enough in Feb. the deposit hit. When I first looked on-line I thought "that's two full months," little quick math and I realized it was $87 short of two months. I called and he said "yes, the guy living in the house did the repairs himself and that's all it cost." He sent me pictures of the repair by e-mail. Looks fine to me.

Leaves me in a comfort zone.

tisonlyi · 12-04-2008, 07:36 PM

buying property now...

*slaps head*

Seriously, gents. I'm a layman... maybe that's a disadvantage, maybe not. I've no skin in the game, so to speak.

I realised the debt monster was out of control in the uk about 6 years ago... It wasn't through any in-depth looking at figures, it was looking at what surrounded me. zero down payment mortgages without almost no questions asked, the tv ONLY advertising consolidation loans, refinancing of mortgages, credit cards, fresh unsecured loans, insurances, etc... People earning little over minimum wage (somewhere between 7.50 and 11 $/hr) having new cars every year, buying houses left and right, credit cards everywhere... I couldn't believe it.

Then I looked around. Maybe I was wrong. Maybe there were sound principals for why this was happening... I found no such justification.

Look at the LONG TERM, like 20 year, TRENDS for house prices. that's where they're going down to unless there's full scale nationalisation of banks, plus full-scale regulation of prices for property. It happened in Sweden in the early nineties. The banks have since been sold back into the private sector, but the price controls remain (as far as people I know who live there tell me).

If house prices go back to 10-20% down, 3x double income prices, then most banks are screwed, even after this bailout. Commercial real estate loans are only just showing. Option ARM's, etc are starting to reset now and will continue through to 2011. If house prices go back down 10-20% down and a single income... woah...

There are NO solvent banks. The govt cannot save them, only delay the inevitable.

Mr Margin has called the hedge funds and they've repatriated their dollars, hence the upward trend of the dollar and collapse in stock markets. That's ending atm.

International trade is dying, and so demand for dollars.

The usual market for US debt is gone. China won't be trading so much with you, and thus not have so many dollars to recycle. added to that, they'll be spending dollars to buy materials to fund their programs of internal demand stimulus.

Who will buy US treasuries now? Japan? No. China? No way. Petros? Have you seen the drop in price? (plus the petros are looking to stimulate demand at home much like the chinese) I mean... The UK holds the 3rd largest foreign total of US treasuries. somewhere not far below $400bn... I don't think we'll be buying any of your fine dollars anytime soon, if we can get away with it...

How to finance the spending then? (it's up to around $8tn dollars atm...)

Monetizing debt.

End.

Seriously, gents... Unless you see some way out of this for the dollar, get the hell out of that currency. NOW, while it has some strength.

ngdawg · 12-04-2008, 07:58 PM

Maybe not so coincidently, we are doing yet another refi on our house and are in a terrific position right now.
Our credit rating is "excellent" because of all the past pay-offs and current balances we owe-$23k in debt with no late payments=CR of 702. Go figure.
Interest rates drop daily so we are, as of today, hovering at about 6%, maybe will hit 5.75%, down from the 7.525% ARm we are currently paying. And that ARM would have risen to 9.525% on Jan.1. My father had told me that, had we defaulted by not paying for 3 months straight, we could have negotiated a LOWER rate...we're being punished for being punctual!
Our one retirement account went UP in value because we've got some Revlon stock, which was at a high 10-15 years ago of over $50, dropped to penny stock and now is up to $7.33, while everyone else is dropping. Again, go figure...
Because our current HC provider, Aetna, raised its rates by 45%

, spouse's employer is changing carriers, so we'll see a drop, albeit a small one, in our coverage payout.
And gas here is down to $1.54.
That's the good news....

The bad news....
Spouse is in a skilled labor industry and contracts are not coming in very quickly. Where there were 10 under him there is now 1.
I am in a personal retail service industry-portrait photography. We don't compete with Walmart and can't. Where last Christmas season, we were swamped with appointments, this year we've got more empty pages in the datebook than full. Ironically, we are spending more money on mass mailings, etc., so that we can drum up more business. And those that are coming in that used to be our really big spenders are now getting bare minimum like our in-house holiday cards instead of the really nice stuff that costs 2-3 times more.

Houses are not selling, which is not good for a refi as that drops the appraised value. Two years ago our home, wreck that it is, was appraised at $360k; now I'd be thrilled at $300K. But, houses not selling is a good bargaining chip for anyone who finds themselves in a mortgage quagmire because whoever is holding the mortgage doesn't want the burden of taking the house. Banks are hurting according to the news and they'd have to take over the taxes as well. Anyone contemplating bankruptcy would do well to rethink it and make a few phone calls instead. It's a pretty sure bet they'd be able to keep their home and afford it.

A recession is a time-out. It makes everyone take notice of what's been happening and fires up the brains to try and resolve things. But, this country needs to get back to being one of productivity if it wants to be an economic powerhouse. For way too long, those that make business decisions made them in a "me first" mentality. Now they're reaping what they've sown, dried up the well [add more cliches here] and crying that they need help.
I firmly believe that other countries are hurting because we stopped being productive-we had nothing more to offer, nothing more to sell; a dollar is truly worthless if there's nothing behind it, no workers, no product, no incentive. Going off to China, et al for production and sitting back taking in the profits has come back to bite everyone in the collective ass.

Tully Mars · 12-04-2008, 09:03 PM

Quote:

Originally Posted by tisonlyi

buying property now...

*slaps head*

Seriously, gents. I'm a layman... maybe that's a disadvantage, maybe not. I've no skin in the game, so to speak.

I realised the debt monster was out of control in the uk about 6 years ago... It wasn't through any in-depth looking at figures, it was looking at what surrounded me. zero down payment mortgages without almost no questions asked, the tv ONLY advertising consolidation loans, refinancing of mortgages, credit cards, fresh unsecured loans, insurances, etc... People earning little over minimum wage (somewhere between 7.50 and 11 $/hr) having new cars every year, buying houses left and right, credit cards everywhere... I couldn't believe it.

Then I looked around. Maybe I was wrong. Maybe there were sound principals for why this was happening... I found no such justification.

Look at the LONG TERM, like 20 year, TRENDS for house prices. that's where they're going down to unless there's full scale nationalisation of banks, plus full-scale regulation of prices for property. It happened in Sweden in the early nineties. The banks have since been sold back into the private sector, but the price controls remain (as far as people I know who live there tell me).

If house prices go back to 10-20% down, 3x double income prices, then most banks are screwed, even after this bailout. Commercial real estate loans are only just showing. Option ARM's, etc are starting to reset now and will continue through to 2011. If house prices go back down 10-20% down and a single income... woah...

There are NO solvent banks. The govt cannot save them, only delay the inevitable.

Mr Margin has called the hedge funds and they've repatriated their dollars, hence the upward trend of the dollar and collapse in stock markets. That's ending atm.

International trade is dying, and so demand for dollars.

The usual market for US debt is gone. China won't be trading so much with you, and thus not have so many dollars to recycle. added to that, they'll be spending dollars to buy materials to fund their programs of internal demand stimulus.

Who will buy US treasuries now? Japan? No. China? No way. Petros? Have you seen the drop in price? (plus the petros are looking to stimulate demand at home much like the chinese) I mean... The UK holds the 3rd largest foreign total of US treasuries. somewhere not far below $400bn... I don't think we'll be buying any of your fine dollars anytime soon, if we can get away with it...

How to finance the spending then? (it's up to around $8tn dollars atm...)

Monetizing debt.

End.

Seriously, gents... Unless you see some way out of this for the dollar, get the hell out of that currency. NOW, while it has some strength.

Actually buying real property is one way "out of the dollar" IMHO. The dollar can do what ever it wants and any real property you own will, for the most part, rise and fall accordingly. People here in Mexico are cashing in their bank accounts and buying houses and property like crazy. Wasn't that long ago the peso dropped so much so quickly that one day the government issued the new peso... suddenly the pesos you had were worth 10% of their face value. Houses didn't drop like that. When I moved here the peso was right at 10:1 on the dollar today it closed at nearly 14:1. Many times over the history of modern man people have ended up using cash notes for things like wall paper. A House will never end up being worth wall paper. It's a real asset where as a piece of paper that has , dollar, yen or even euro printed can end up being a worthless piece of paper.

tisonlyi · 12-05-2008, 07:43 AM

There's an long, long way to go for an awful lot of property to fall yet for most of the states and the uk. (the mortgage brokers association in the states, for example, reports today that 10% of mortgages that are not in foreclosure at the moment are delinquent...)

Property has an awful, grinding way back down to it's trend.
-----Added 5/12/2008 at 10 : 45 : 05-----
Oh, and don't bank (sic) on those interest rates, when the market starts to slide for the dollar - and it will - they'll be heading north in fine style.

if you can get something fixed atm, do it.

Paq · 12-05-2008, 07:59 AM

hehe

speaking of margins being called, Hedge funds are expected to be cut by 50% in 09 vs 08..that's aftter hundreds have already gone out of business in 08....

dunno, i think this will turn around, just a matter of how and when, honestly. I think this is about like when oil was 150 and people were screaming "gas will be $8/gallon and oil will be over 250 by the end of the year'

Generally, when everyone gets on the same side (dollar weak, market is going to die, oil is going to be $1000/bbl) then it's time to start looking in the other direction.

i'm not saying i don't agree with a lot of what you're saying, just that i have a trader's mindset about it, so i'm looking at a much shorter term timeframe.

tisonlyi · 12-05-2008, 08:07 AM

I understand that trader mindset will go ultra-short term, depending on what it is you generally trade... but... this isn't a normal set of circumstances, it won't be a normal recession.

Basically, monetizing of debt has already started on some scale (as i understand it). The Fed is buying into short term treasuries in a big way, in hopes possibly of forcing the banks out of their short-term bolt-hole for cash and into what they should be doing... lending... but that doesn't excuse that the fed is out there buying its own govt's debt.

Maybe i'm misunderstanding that...

Monetization - Wikipedia, the free encyclopedia

Quote:

Debt monetization occurs when a nation's central bank (e.g. the Federal Reserve in the United States) buys government bonds. [1] If a government's expenses exceed its tax revenue, if nothing is done the government will draw resources (capital) out of the private market. Since there is a limited amount of capital available in the market, there will be less available to fund business growth if the government takes out a substantial portion. If the debt is monetized, the capital is thereby returned to the private market.

Debt monetization can be seen as a flat tax because the ultimate result is that the government acquires additional funds and the currency decreases in value. However, monetization helps the government temporarily to meet its short term commitments at the beginning. Debt monetization has the drawback of increasing the twin deficit. That is, when government financing is increased, along with interest rates and foreign capital, the trade deficit also goes up along with the budget deficit.

Tully Mars · 12-05-2008, 08:34 AM

Quote:

Originally Posted by tisonlyi

There's an long, long way to go for an awful lot of property to fall yet for most of the states and the uk. (the mortgage brokers association in the states, for example, reports today that 10% of mortgages that are not in foreclosure at the moment are delinquent...)

Property has an awful, grinding way back down to it's trend.
-----Added 5/12/2008 at 10 : 45 : 05-----
Oh, and don't bank (sic) on those interest rates, when the market starts to slide for the dollar - and it will - they'll be heading north in fine style.

if you can get something fixed atm, do it.

I'm not certain I know what a "fixed atm" is, could you enlighten me?

I would never get an adjustable rate mortgage. I want to know what my loans going to cost me, period.

Let's say you're right and the dollar drops like a rock (personally I think you are right. I think that's part of the plan. Make the dollar worth so little that paying off the people we owe money to is no big deal.) To me that's even more reason to invest in real property. Whether that's real estate or gold or ??? Having something that will never end up being a mere piece of paper in troubled times has almost always been the way to go in the long run.

Let's say you buy a condo or house for 300K that two years ago sold for 1m. (out of my price range but...) and the dollar drops to the point that milk is $50 a gallon. Now that 300K really isn't very much money. Let's see I could pay off my mortgage with how many gallons of milk?

Plus all these people that are losing their homes to foreclosure are going to need some place to live. It's going to be a renters market, not a rentees market. People with property to rent and or lease will have a large pool of rentees to choose from. Sure some people are going to be unable to rent, it's a sad fact but parks are likely to fill with full time campers. But there will be some people who couldn't afford their mortgage because they used their house like a credit card and now owe a shit load on it and the rate adjusted. They'll be able to afford rent but won't be able to qualify for another mortgage. Even if your rent doesn't cover the mortgage, if you can cover it and wait it out for 10 years I think the return on your money will be good. The housing market has crashed, it may crash further. But at some point it will go up. Look at any period in history and over time real estate goes up.

The key here is to look at the long term. You're not trying to make money in the next 6 or 12 months. Or even in the next few years. You're trying to ride out hard times and find someplace to put your cash that after all the cards and chips fall, after the dust settles, will be worth something. The US has a lot of natural resources. Right now things look bad (mainly because they are bad.) But it will turn around, it's just a matter of time. I think that amount of time is going to be significant. People are talking about the middle of Obama's first term. I'm thinking 2018 is more reasonable. I'd like to get to 2018 with as few scrapes and cuts as possible.

tisonlyi · 12-05-2008, 10:31 AM

The point where the dollar falls off a cliff is the point where predictions end, it's a kind of singularity.

Who knows what will happen when the US can't import 1/10 of what it currently imports? What happens when the imploding dollar throws all of the banks into immediate bankruptcy, not chapter 11 as there won't be the kinds of credit needed to facilitate that? what happens when at least the majority of the financial industry disappears? what happens happens when the large corporations can't operate any more due to financial apocalypse? what happens when the majority of service industries go to the wall? When the country can't import the oil it needs? Can't import the wheat it needs? Can't, in essence, sustain itself.

Dead dollar = dead banks and financial institutions.
Dead banks = dead financial system.
Dead financial system = dead economy in the US and major disruption to the world economy... and with that... the societal impacts are anyone's guess.

Property might be nice to have at some point, I'm just not sure what that point would be exactly? Where would you buy? why? Is there a possibility of ghost cities? If so which? Where will people run to?

Just a thought... The US used to maintain a strategic wheat reserve. The Bush administration (iirc) decided that interfered with the smooth running of the market and abolished it. The reserves ended this year. Dry shipping - how wheat is moved globally - has collapsed, effectively. What is that going to do?

NationMaster - Grains > Wheat imports (most recent) by country

Think the collapse of the Soviet Union to a couple of orders of magnitude and on a pretty global scale

This is a pretty apocalyptic view, but it's a pretty apocalyptic situation and I'm pondering my fears out loud.

I'll gladly look a fool in a couple of years if this doesn't play out.

('fixed atm' - i was trying to suggest that if you can refinance, get into a fixed interest rate if at all possible... and if any sort of apocalypse happens, it doesn't matter.)

BTW, it'll probably happen to the UK first. Family members are reporting spikes in the price of basics already... I don't know if any UKsians can back that up.

Tully Mars · 12-05-2008, 06:24 PM

Quote:

Originally Posted by tisonlyi

Property might be nice to have at some point, I'm just not sure what that point would be exactly? Where would you buy? why? Is there a possibility of ghost cities? If so which? Where will people run to?

Well, if I knew the answers to these questions I be on a plane ASAP.

Interesting info on the wheat. Bummer I don't like corn tortillas.

raeanna74 · 12-06-2008, 09:06 AM

I think our economy could get a huge boost if the average guy who HAS any money available were to start investing it instead of running scared. Our media has caused a panic, more or less, that is preventing people from spending any money.
The housing market being so slow has brough down housing prices tremendously. Some houses are actually being sold for half or less than half of the money it would cost to build the identical house now. Interest rates are extremely low. Anyone who has any half decent credit could get a home loan for next to nothing.

For example: I was renting 5 months ago. Rent was actually pretty cheap for my area. About $300/mo + utilities. I bought a home in August. It was a forcloser being sold for about 1/6th of it's last purchase price. I got a loan for a fixed 6% (reasonable - interest rates have dropped even further since then) and managed to buy this 3,000+ sq ft Turn of the Century Colonial for $18,000. My mortgage payments PLUS my utilities aren't more than my rent was previously. Granted I have home owners insurance and taxes (which are only $6-700/yr each) but the investment will pay itself back EVENTUALLY. In the meantime I reduced my living expenses and get to have my own, LARGE home.

Imagine what it could do for our economy if people in my position would start to buy homes. Housing sales would increase, media would (hopefully) report it, that news would encourage other investors to start using their money, ... who knows what else would be affected. Even if it's only a marginal improvement - I have a feeling it would be a more effective, long term solution than our government is considering.

Tully Mars · 12-06-2008, 09:26 AM

Quote:

Originally Posted by raeanna74

I think our economy could get a huge boost if the average guy who HAS any money available were to start investing it instead of running scared. Our media has caused a panic, more or less, that is preventing people from spending any money.
The housing market being so slow has brough down housing prices tremendously. Some houses are actually being sold for half or less than half of the money it would cost to build the identical house now. Interest rates are extremely low. Anyone who has any half decent credit could get a home loan for next to nothing.

For example: I was renting 5 months ago. Rent was actually pretty cheap for my area. About $300/mo + utilities. I bought a home in August. It was a forcloser being sold for about 1/6th of it's last purchase price. I got a loan for a fixed 6% (reasonable - interest rates have dropped even further since then) and managed to buy this 3,000+ sq ft Turn of the Century Colonial for $18,000. My mortgage payments PLUS my utilities aren't more than my rent was previously. Granted I have home owners insurance and taxes (which are only $6-700/yr each) but the investment will pay itself back EVENTUALLY. In the meantime I reduced my living expenses and get to have my own, LARGE home.

Imagine what it could do for our economy if people in my position would start to buy homes. Housing sales would increase, media would (hopefully) report it, that news would encourage other investors to start using their money, ... who knows what else would be affected. Even if it's only a marginal improvement - I have a feeling it would be a more effective, long term solution than our government is considering.

I think a lot of what you're saying makes sense. But the media reports shit that happens- like the jobs and retail sales numbers and the markets trends down, which they report making the markets trend down even further. Can't really fault the media for doing their job. It's not like the people on the floor at the markets aren't going to read these reports and cause the market to fall. I'd rather have the news tell me what going on them blame them for it.

Upper Michigan has some really low property values. I've seen some stuff that I just couldn't believe. But the job market up there would be a concern. In your situation sounds like you're employed, using the home as a residence and thus it makes a hell of a lot more sense to own then rent. As an investor buying property in the rust belt (or anywhere even near it) would be a pretty big gamble.

raeanna74 · 12-06-2008, 06:58 PM

Quote:

Originally Posted by Tully Mars

...Upper Michigan has some really low property values. I've seen some stuff that I just couldn't believe. But the job market up there would be a concern. In your situation sounds like you're employed, using the home as a residence and thus it makes a hell of a lot more sense to own then rent. As an investor buying property in the rust belt (or anywhere even near it) would be a pretty big gamble.

That's what I was getting at. I believe that people who are renting and unemployed could so easily find a way to make it up here.
I spent almost 2 years looking for work in the Wausau area only 3 hours south of here. Found so little and what I did find was part time, minimum wage, and very inconsistant. Helping others in the construction industry helped me but even that was slowing down.
Up here, within 2 months I had found 2 jobs and several other potential ones. And none were at minimum wage.

11-13-2008, 08:29 PM	#2 (permalink)
genuinegirly Eat your vegetables Super Moderator Location: Arabidopsis-ville	I tend to see it as a good thing when world leaders meet to discuss problems affecting all of their people. I do think little will be decided until Obama comes to office. I hope he's studying up, because he's going to have to jump in running with solutions to this financial crisis. __________________ "Sometimes I have to remember that things are brought to me for a reason, either for my own lessons or for the benefit of others." Cynthetiq "violence is no more or less real than non-violence." roachboy

11-13-2008, 09:02 PM	#3 (permalink)
Baraka_Guru warrior bodhisattva Super Moderator Location: East-central Canada	I'm beginning to think this is a common global problem now finally compounding itself and collapsing under its own weight. I'm not sure about many European countries, but in North America the problem has been known for a while: High debt use + negative savings rate = spending beyond our means When it gets out of hand, you see the debt machine stall. You can't get blood from a stone. With globalization and people defaulting on loans and making late payments, the system begins to crack. Our markets are so intertwined, virtually no one is spared. I try not to think of these things so much. I try to think of my own situation, my own debt. __________________ Knowing that death is certain and that the time of death is uncertain, what's the most important thing? —Bhikkhuni Pema Chödrön Humankind cannot bear very much reality. —From "Burnt Norton," Four Quartets (1936), T. S. Eliot

11-14-2008, 06:54 PM	#7 (permalink)
Paq Junkie Location: South Carolina	useless trivia: the 5 hedge fund managers invited to this all have 1 thing in common(other than being hedge fund managers)..can you name it? as for gm and ford...they reaped the benefits of cheap gas, etc, and did NOTHING to improve themselves. They built suvs bigger and bigger with the same mpg as forty years ago...Part of me says "sorry, byebye" but i know there are hundreds of thousands of people who would be out of a job if that were to happen..i still think they need to change on a fundamental level. I was kinda saddened to hear toyota turned down GM's plea for help. i mean, i know they are competitors, but that just seems like kicking someone when they were down. that said, i know gm and F will be bailed out, probably to the tune of about 25 billion... __________________ Live. Chris Last edited by Paq; 11-14-2008 at 07:02 PM..

11-14-2008, 07:47 PM	#9 (permalink)
Slims Eccentric insomniac Location: North Carolina	It's certainly a global problem, not simply an American one. I don't buy that we were otherwise occupied to notice...who didn't notice the stock market tanking or the economic slowdown? People were just too self absorbed to care about solutions. __________________ "Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery." - Winston Churchill "All men dream: but not equally. Those who dream by night in the dusty recesses of their minds wake in the day to find that it was vanity: but the dreamers of the day are dangerous men, for they may act out their dream with open eyes, to make it possible." Seven Pillars of Wisdom, T.E. Lawrence

11-14-2008, 07:47 PM	#10 (permalink)
Paq Junkie Location: South Carolina	in my stocktrading group, we call this "death by a thousand cuts' ie, they aren't sending out ALL the news at once and they are propping stuff up until the previous news gets digested... personally, i'd prefer a 1000000 pt crash in a day and recovery can start... __________________ Live. Chris

11-14-2008, 04:14 PM	#6 (permalink)
Frosstbyte Winter is Coming Location: The North	I have never been more terrified about economics in my life than when I took a class in international trade law and policy and figure out just how the US economy had been run for the past 30 or so years. It's such a classic catch-22 that we can't afford how much we spend, but if we don't spend it, the rest of the world doesn't have anyone to buy it, so they can't afford to not loan us the money to we can spend it. Bush is right, for once, that this is not a problem that's going to be solved in one conference, and I sure hope that Obama is willing to make some hard choices and pick some really smart people who understand how international finance works. Some good reads there, rb, though I don't have any more specific thoughts at the moment.

11-14-2008, 07:33 PM	#8 (permalink)
flstf Easy Rider Location: Moscow on the Ohio	One of the pundits on one of the news shows said yesterday that economic collapse was inevitable and all the bailouts in Europe and the US is just an attempt to spread it out so the crash will not happen all at once. Perhaps things are pretty good now compared to what they will be. I hope not. A slow motion depression is still a depression.

11-14-2008, 08:11 PM	#11 (permalink)
Derwood Who You Crappin? Location: Everywhere and Nowhere	i'm extremely naive in the ways of economics, so i don't understand how NOBODY has any money/capital/net worth. how can markets and employment, etc. be going down everywhere? who has all the money?

11-14-2008, 08:38 PM	#12 (permalink)
Slims Eccentric insomniac Location: North Carolina	I think it's more like this: The people who really produce goods get caught up in the 'downcycle' and are unable to produce as much as they would normally, which has a real impact on the economy by reducing the amount of product to go around, which makes more people tighten their belts and the economy gets worse. These days it seems like the ups and downs of our economy are at least 95% driven by human psychology rather than real necessity. __________________ "Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery." - Winston Churchill "All men dream: but not equally. Those who dream by night in the dusty recesses of their minds wake in the day to find that it was vanity: but the dreamers of the day are dangerous men, for they may act out their dream with open eyes, to make it possible." Seven Pillars of Wisdom, T.E. Lawrence

11-14-2008, 08:45 PM	#13 (permalink)
Paq Junkie Location: South Carolina	if youre talking about hte stock market, than the daily ups and downs are COMPLETE human psychology...your massive ups are caused by a combination of "Oh god, i have to cover my short positions" followed by "oh god, i'm missing the bottom buying opportunity" so you get days like yesterday's 800 pt swing low to high... then you get today's 'Oh god, i was completely wrong, sell sell sell" followed by "woohoo, time to load my short positions again" so hte market runs hard in either direction. now, what that has to do with the actual economy..not much... __________________ Live. Chris

12-04-2008, 10:30 AM	#17 (permalink)
Paq Junkie Location: South Carolina	yea, tison, we were looking at the baltic dry shippers....freaking..crazy. from printing money to begging for money. Dryships (DRYS) is down from over 100 to 4 bucks..i'm selling puts so i can get it for 1.00-2.00 and i'll just tuck it away for a while. At any rate, i think the london banker article has a great point. Consumer credit is going to be in danger very soon.. __________________ Live. Chris

12-04-2008, 10:37 AM	#18 (permalink)
Tully Mars Living in a Warmer Insanity Super Moderator Location: Yucatan, Mexico	For the life of me I can't figure out why the dollar isn't dropping like a rock. I mean the UST seems to be doing everything it can to get it to fall. They're printing money as fast as they can and throwing it at any and every problem (except maybe the auto workers.) I honestly think that's part of the plan. We owe so many countries so many dollars that having the dollar worthless (note I said worthless, not worth less.) could be a real benefit. I mean if a billion dollars buys a couple bags of bread and we owe China et el several billion... __________________ I used to drink to drown my sorrows, but the damned things have learned how to swim- Frida Kahlo Vice President Starkizzer Fan Club

12-04-2008, 10:43 AM	#19 (permalink)
Paq Junkie Location: South Carolina	Tully, if you look at the euro/usd, you can see it basing rihgt now, which is a perfect beautiful setup for the dollar to drop like a rock and we'll redo the 1.60/1 eur/usd of he summer... yea, im stocking up commodities, too, but small positions, like every other stock right now... __________________ Live. Chris

12-04-2008, 01:15 PM	#21 (permalink)
Paq Junkie Location: South Carolina	well, if you check the chart, there is a lot of 1.25 support on the eur/usd. I don't know your situation or risk aversion, but if you can hold out, then i could easily see it going back up. I understand how you feel, i sold naked 7.5 puts on BSC (i make money as long as bsc stays over 7.50/share) the friday before the weekend...woke up monday to ..let's just say a massive loss..the worst part is that i could have held for a week and gotten out with a profit when they renegotiated for 10/share. (i actually got out when it bounced to 5-6 range, but still, it suuuucked) a friend of mine bought LEH the weekend before that debacle...200K went poof overnight fre/fnm are others i know... diversification..deeeefinitely the way to go. It's just such a hard market to buy and hold right now.. __________________ Live. Chris

12-04-2008, 02:23 PM	#23 (permalink)
Paq Junkie Location: South Carolina	oh, it's definitely at the point of "If you haven't cashed out, then just wait' but i mean, right now, i'm not buying and holding anything except companies that i am 99% sure will be around in 20 yrs....just that for most of the last century, those were the banks...Now, it's oil/energy, which is still taking a beating, and long term companies with great balance sheets...and unfortunately, those are few and far between...it's so funny, though, bc i have people asking me all the time "I'm afraid to not be buying this bc it could all go back to the highs' and i have to drag out my 200 yr dow chart and ask them to point out anytime a recovery was made in a day, week or even a year. There are TONS of buying opps and they will be buying opps for quite a while. yea, you may miss the absolute bottom, but that is better than buying, losing 50% and having to wait again.... I just feel bad for a lot of my friends who were planning to retire within the next 5 yrs..my parents included... and yea, i'd say this is much worse and longer term than the 87 or dotcom crash, but yea, i'm trying to figure out how to make money in the meantime from it __________________ Live. Chris

12-04-2008, 02:32 PM	#24 (permalink)
roachboy Super Moderator Location: essex ma	it seems pretty obvious that as credit lines dry up that bulk shipping is going to take a hit, and that it is more visible and worrisome than parallel developments in container movements. letters of credit were the devices that made the Wheel turn back in the day when i worked in this sector....so this is an index that gives some indication of activity at the level of raw materials movement, and so is an indication of the consequences of the credit crisis on manufacturing. for anyone with a trace of residual marxist in em, watching this index tank is watching the wall move closer and closer. freight movement also appears to be at the center of its own futures trade, yes? the bi tracks motion within this trade and not the actual movement of shipping, yes? what is the relation between these two exactly? i know that, for example, maersk is pulling some of its newer bigger bulk ships outta the water for a few months, so things are obviously tightening. and lloyd's has an article (which i could read all of because i'm too cheap to subscribe) that german insurers are starting to freak out about what they see coming in this sector. the regular movement of materials and such is the blood stream of the present capitalist order. nothing good for it will come of a freeze in the movement of goods. i wonder if the system can afford to putz about between now and 22 january, when presumably things will Change once obama's crew of neoliberals is....wait....um..... __________________ a gramophone its corrugated trumpet silver handle spinning dog. such faithfulness it hear it make you sick. -kamau brathwaite

12-04-2008, 04:27 PM	#26 (permalink)
Yakk Wehret Den Anfängen! Location: Ontario, Canada	So every time you borrow money, someone else owns the debt. Every time you default on debt, you gain wealth and the owner of the debt loses wealth. All of these things move money around. Now, the trick is, if someone lends money to you, and you do not end up being able to pay it back, while they _think_ you are able to pay it back, for a period of time ... the books don't actually balance. You have cash (from the loan), and think you own the things you bought with it. They have your debt, and think that you will make good on it. In reality, their debt isn't worth all that much -- because you will default. And the things you bought with the cash from your debt ... well, you won't own them, because you are going to go under. The things you wanted (that you bought with your cash from your debt) end up going to the people who wanted you to pay them back in cash (and they don't want it). This is bad for the 'sum worth' of both you and the person borrowing money from you. In essence, that loan/debt agreement isn't making wealth -- it is simply moving liquidity from someone who wants future returns, to someone who wants immediate liquidity to buy something right now. This arrangement can make both of you better off (as you own something that both of you want). If it collapses (or the illusion that it works collapses), it causes real harm. Now, if you are able to generate the future cash-stream to pay off the debt, and you don't walk away from the security, and you intended and where aware of that future cost and do think it is worth it -- you are both better off. But that isn't always what happens. In the case of America, the world (as a whole) is lending it massive amounts of money. Now, either America boosts its productivity, produces things that generate massive amounts of money, ships more goods out of itself than it is importing, and uses that to pay off these debts . . . or the people who think that owning American debt will give returns later on are wrong. In short, there are at least two ways America can get itself out of this mess. It can ramp up its own productivity -- or it can engage in economic collapse. __________________ Last edited by JHVH : 10-29-4004 BC at 09:00 PM. Reason: Time for a rest.

12-04-2008, 07:05 PM	#27 (permalink)
Paq Junkie Location: South Carolina	tully, some well heeled friends of mine are buying up condos and real estate in sarasota florida and boca raton right now. Basically getting 1m homes with property (the 'good' part of real estate) for 250K or so... it's crazy down there. Boca had riots at hte beginning of the year bc of how bad their housing market has tanked. I've heard places in cali are even worse... So, it's a great time to be a buyer..if you have cash. __________________ Live. Chris

12-04-2008, 07:36 PM	#29 (permalink)
tisonlyi Nothing	buying property now... slaps head Seriously, gents. I'm a layman... maybe that's a disadvantage, maybe not. I've no skin in the game, so to speak. I realised the debt monster was out of control in the uk about 6 years ago... It wasn't through any in-depth looking at figures, it was looking at what surrounded me. zero down payment mortgages without almost no questions asked, the tv ONLY advertising consolidation loans, refinancing of mortgages, credit cards, fresh unsecured loans, insurances, etc... People earning little over minimum wage (somewhere between 7.50 and 11 $/hr) having new cars every year, buying houses left and right, credit cards everywhere... I couldn't believe it. Then I looked around. Maybe I was wrong. Maybe there were sound principals for why this was happening... I found no such justification. Look at the LONG TERM, like 20 year, TRENDS for house prices. that's where they're going down to unless there's full scale nationalisation of banks, plus full-scale regulation of prices for property. It happened in Sweden in the early nineties. The banks have since been sold back into the private sector, but the price controls remain (as far as people I know who live there tell me). If house prices go back to 10-20% down, 3x double income prices, then most banks are screwed, even after this bailout. Commercial real estate loans are only just showing. Option ARM's, etc are starting to reset now and will continue through to 2011. If house prices go back down 10-20% down and a single income... woah... There are NO solvent banks. The govt cannot save them, only delay the inevitable. Mr Margin has called the hedge funds and they've repatriated their dollars, hence the upward trend of the dollar and collapse in stock markets. That's ending atm. International trade is dying, and so demand for dollars. The usual market for US debt is gone. China won't be trading so much with you, and thus not have so many dollars to recycle. added to that, they'll be spending dollars to buy materials to fund their programs of internal demand stimulus. Who will buy US treasuries now? Japan? No. China? No way. Petros? Have you seen the drop in price? (plus the petros are looking to stimulate demand at home much like the chinese) I mean... The UK holds the 3rd largest foreign total of US treasuries. somewhere not far below $400bn... I don't think we'll be buying any of your fine dollars anytime soon, if we can get away with it... How to finance the spending then? (it's up to around $8tn dollars atm...) Monetizing debt. End. Seriously, gents... Unless you see some way out of this for the dollar, get the hell out of that currency. NOW, while it has some strength. __________________ "I do not agree that the dog in a manger has the final right to the manger even though he may have lain there for a very long time. I do not admit that right. I do not admit for instance, that a great wrong has been done to the Red Indians of America or the black people of Australia. I do not admit that a wrong has been done to these people by the fact that a stronger race, a higher-grade race, a more worldly wise race to put it that way, has come in and taken their place." - Winston Churchill, 1937 --{ORLY?}-- Last edited by tisonlyi; 12-04-2008 at 07:48 PM..

12-04-2008, 07:58 PM	#30 (permalink)
ngdawg peekaboo Location: on the back, bitch	Maybe not so coincidently, we are doing yet another refi on our house and are in a terrific position right now. Our credit rating is "excellent" because of all the past pay-offs and current balances we owe-$23k in debt with no late payments=CR of 702. Go figure. Interest rates drop daily so we are, as of today, hovering at about 6%, maybe will hit 5.75%, down from the 7.525% ARm we are currently paying. And that ARM would have risen to 9.525% on Jan.1. My father had told me that, had we defaulted by not paying for 3 months straight, we could have negotiated a LOWER rate...we're being punished for being punctual! Our one retirement account went UP in value because we've got some Revlon stock, which was at a high 10-15 years ago of over $50, dropped to penny stock and now is up to $7.33, while everyone else is dropping. Again, go figure... Because our current HC provider, Aetna, raised its rates by 45% , spouse's employer is changing carriers, so we'll see a drop, albeit a small one, in our coverage payout. And gas here is down to $1.54. That's the good news.... The bad news.... Spouse is in a skilled labor industry and contracts are not coming in very quickly. Where there were 10 under him there is now 1. I am in a personal retail service industry-portrait photography. We don't compete with Walmart and can't. Where last Christmas season, we were swamped with appointments, this year we've got more empty pages in the datebook than full. Ironically, we are spending more money on mass mailings, etc., so that we can drum up more business. And those that are coming in that used to be our really big spenders are now getting bare minimum like our in-house holiday cards instead of the really nice stuff that costs 2-3 times more. Houses are not selling, which is not good for a refi as that drops the appraised value. Two years ago our home, wreck that it is, was appraised at $360k; now I'd be thrilled at $300K. But, houses not selling is a good bargaining chip for anyone who finds themselves in a mortgage quagmire because whoever is holding the mortgage doesn't want the burden of taking the house. Banks are hurting according to the news and they'd have to take over the taxes as well. Anyone contemplating bankruptcy would do well to rethink it and make a few phone calls instead. It's a pretty sure bet they'd be able to keep their home and afford it. A recession is a time-out. It makes everyone take notice of what's been happening and fires up the brains to try and resolve things. But, this country needs to get back to being one of productivity if it wants to be an economic powerhouse. For way too long, those that make business decisions made them in a "me first" mentality. Now they're reaping what they've sown, dried up the well [add more cliches here] and crying that they need help. I firmly believe that other countries are hurting because we stopped being productive-we had nothing more to offer, nothing more to sell; a dollar is truly worthless if there's nothing behind it, no workers, no product, no incentive. Going off to China, et al for production and sitting back taking in the profits has come back to bite everyone in the collective ass. __________________ Don't blame me. I didn't vote for either of'em. Last edited by ngdawg; 12-04-2008 at 08:06 PM..

12-05-2008, 07:43 AM	#32 (permalink)
tisonlyi Nothing	There's an long, long way to go for an awful lot of property to fall yet for most of the states and the uk. (the mortgage brokers association in the states, for example, reports today that 10% of mortgages that are not in foreclosure at the moment are delinquent...) Property has an awful, grinding way back down to it's trend. -----Added 5/12/2008 at 10 : 45 : 05----- Oh, and don't bank (sic) on those interest rates, when the market starts to slide for the dollar - and it will - they'll be heading north in fine style. if you can get something fixed atm, do it. __________________ "I do not agree that the dog in a manger has the final right to the manger even though he may have lain there for a very long time. I do not admit that right. I do not admit for instance, that a great wrong has been done to the Red Indians of America or the black people of Australia. I do not admit that a wrong has been done to these people by the fact that a stronger race, a higher-grade race, a more worldly wise race to put it that way, has come in and taken their place." - Winston Churchill, 1937 --{ORLY?}-- Last edited by tisonlyi; 12-05-2008 at 07:45 AM.. Reason: Automerged Doublepost

12-05-2008, 07:59 AM	#33 (permalink)
Paq Junkie Location: South Carolina	hehe speaking of margins being called, Hedge funds are expected to be cut by 50% in 09 vs 08..that's aftter hundreds have already gone out of business in 08.... dunno, i think this will turn around, just a matter of how and when, honestly. I think this is about like when oil was 150 and people were screaming "gas will be $8/gallon and oil will be over 250 by the end of the year' Generally, when everyone gets on the same side (dollar weak, market is going to die, oil is going to be $1000/bbl) then it's time to start looking in the other direction. i'm not saying i don't agree with a lot of what you're saying, just that i have a trader's mindset about it, so i'm looking at a much shorter term timeframe. __________________ Live. Chris

12-05-2008, 10:31 AM	#36 (permalink)
tisonlyi Nothing	The point where the dollar falls off a cliff is the point where predictions end, it's a kind of singularity. Who knows what will happen when the US can't import 1/10 of what it currently imports? What happens when the imploding dollar throws all of the banks into immediate bankruptcy, not chapter 11 as there won't be the kinds of credit needed to facilitate that? what happens when at least the majority of the financial industry disappears? what happens happens when the large corporations can't operate any more due to financial apocalypse? what happens when the majority of service industries go to the wall? When the country can't import the oil it needs? Can't import the wheat it needs? Can't, in essence, sustain itself. Dead dollar = dead banks and financial institutions. Dead banks = dead financial system. Dead financial system = dead economy in the US and major disruption to the world economy... and with that... the societal impacts are anyone's guess. Property might be nice to have at some point, I'm just not sure what that point would be exactly? Where would you buy? why? Is there a possibility of ghost cities? If so which? Where will people run to? Just a thought... The US used to maintain a strategic wheat reserve. The Bush administration (iirc) decided that interfered with the smooth running of the market and abolished it. The reserves ended this year. Dry shipping - how wheat is moved globally - has collapsed, effectively. What is that going to do? NationMaster - Grains > Wheat imports (most recent) by country Think the collapse of the Soviet Union to a couple of orders of magnitude and on a pretty global scale This is a pretty apocalyptic view, but it's a pretty apocalyptic situation and I'm pondering my fears out loud. I'll gladly look a fool in a couple of years if this doesn't play out. ('fixed atm' - i was trying to suggest that if you can refinance, get into a fixed interest rate if at all possible... and if any sort of apocalypse happens, it doesn't matter.) BTW, it'll probably happen to the UK first. Family members are reporting spikes in the price of basics already... I don't know if any UKsians can back that up. __________________ "I do not agree that the dog in a manger has the final right to the manger even though he may have lain there for a very long time. I do not admit that right. I do not admit for instance, that a great wrong has been done to the Red Indians of America or the black people of Australia. I do not admit that a wrong has been done to these people by the fact that a stronger race, a higher-grade race, a more worldly wise race to put it that way, has come in and taken their place." - Winston Churchill, 1937 --{ORLY?}--

12-06-2008, 09:06 AM	#38 (permalink)
raeanna74 I'm not a blonde! I'm knot! I'm knot! I'm knot! Location: Upper Michigan	I think our economy could get a huge boost if the average guy who HAS any money available were to start investing it instead of running scared. Our media has caused a panic, more or less, that is preventing people from spending any money. The housing market being so slow has brough down housing prices tremendously. Some houses are actually being sold for half or less than half of the money it would cost to build the identical house now. Interest rates are extremely low. Anyone who has any half decent credit could get a home loan for next to nothing. For example: I was renting 5 months ago. Rent was actually pretty cheap for my area. About $300/mo + utilities. I bought a home in August. It was a forcloser being sold for about 1/6th of it's last purchase price. I got a loan for a fixed 6% (reasonable - interest rates have dropped even further since then) and managed to buy this 3,000+ sq ft Turn of the Century Colonial for $18,000. My mortgage payments PLUS my utilities aren't more than my rent was previously. Granted I have home owners insurance and taxes (which are only $6-700/yr each) but the investment will pay itself back EVENTUALLY. In the meantime I reduced my living expenses and get to have my own, LARGE home. Imagine what it could do for our economy if people in my position would start to buy homes. Housing sales would increase, media would (hopefully) report it, that news would encourage other investors to start using their money, ... who knows what else would be affected. Even if it's only a marginal improvement - I have a feeling it would be a more effective, long term solution than our government is considering. __________________ "Always learn the rules so that you can break them properly." Dalai Lama My Karma just ran over your Dogma.