America's Financial Mess

[Zip]

Things are

[Thomas M. Miovas Jr.]

Things are

That was funny as hell

But I guess it is too bad that most of the time the governmental market manipulators are not the ones to be taken out financially when things go bust. It would be cool though if they suffered greatly for doing that to the economy. Maybe being so evasive will lead to them getting brain cancer or something....

[gags]

It looks like the cycle is starting again:

http://www.businessweek.com/magazine/conte...+temp_top+story

Another government program to promote home ownership for people who can't afford it continues to create market distortions.......

[Thomas M. Miovas Jr.]

It looks like the cycle is starting again:

http://www.businessweek.com/magazine/conte...+temp_top+story

Another government program to promote home ownership for people who can't afford it continues to create market distortions.......

The problem is that articles like this come down on the businessmen who take advantage of the government agencies -- i.e. the FHA -- but say nothing about shutting down the government involvement into the economy. As long as the FHA is going to back those loans at taxpayer expense, why shouldn't these companies take advantage of it? I mean, it's pragmatism, but the government made this possible and no one is claiming the FHA ought to be shut down. The FHA and other such agencies ought to be shut down, but so long as altruism rules, no one is going to say that those people who can't afford it ought not to be given a taxpayer guarantee of their mortgages.

[gags]

Oh I agree Tom. When this FHA program goes bust, it will be the fault of "greedy businessmen".

[Zip]

Some shameless self promotion...

Two Prophetic Passages from PWNI

[KendallJ]

The bank bailout is a failure. Balance sheets have not been reset. Major bank stocks are off from their levels when they got infusions. We're seeing the forecast for high interest rates on the horizon even as the Fed is expected to continue lowering them.

China, which is where our manufacturing sector is today is seeing massive factory closings, and skyrocketing unemployment (those economists who point to our modest unemployment levels are missing the boat - the canary in the mineshaft is China)

Who wants to bet on massive inflation soon, as the Govt continues to try to spend our way to prosperity?

[Clawg]

Who wants to bet on massive inflation soon, as the Govt continues to try to spend our way to prosperity?

*Betting* for massive inflation to occur is a bad idea

[softwareNerd]

Who wants to bet on massive inflation soon, as the Govt continues to try to spend our way to prosperity?

It'll happen as governments around the world follow their tried and tested (and failed) methods. I don't know about "soon". This recession is going to be a God-send to the government, because most people in power still believe in neo-Keynesian ideas. So, quite apart from the politics of it, they will see new government spending as the right way to tackle the problem. I think there is a certain "post-70s" awareness of the dangers of inflation, but -- if anything -- that will push them to funding things like roads and bridges, where they can push money out for a couple of years, without a longer term commitment.

We will probably see a time when Congressmen will be berating Bernanke, telling him to be more concerned about growth than about inflation. The unemployment rate will probably hit 8%, and voters will be screaming for more government help for "main street". In terms of acting on it, I'd say one should wait for more "capitulation".

[adrock3215]

This market got taken to the woodshed today. I've never seen anything like it. Volume was huge and large selling pressure. The 2, 10, and 30 year bonds moved insanely. Oil sold like crazy, it's below $50 now. I see a big increase in fear today.

I think there is more downside to go, but not before another shoe drops. Maybe Citi is the next to drop. C below $5 today is bad news, mutual funds typically don't hold under $5 stocks. The selling was huge when it broke that number.

The Fed is getting very close to a liquidity trap. Bernanke is going to lower the interest rates to 0%, and markets won't get any better. The Fed is nearly powerless.

[IchorFigure]

I have a question for the economic-minded posters. I keep hearing contradicting statements about whether or not we're in a recession. It seems absurd that we could possibly not be in a recession to me. Are the politicians and media just scared stiff of admitting we're in a recession, or are we actually not in recession yet?

[KendallJ]

Raise interest rate. Develop rapid receiverships. Let banks fail where they are going to.

The longer they prolong the pain the worse it will be. I never ever thought I'd ever see such idiocy again.

[K-Mac]

...are we actually not in recession yet?

There are certain criteria that have to be met for us to formally be in a recession or depression. I don't know off hand, what those numbers/criteria are, but I'm sure you can google and find it.

[adrock3215]

I don't know off hand, what those numbers/criteria are, but I'm sure you can google and find it.

It's when the NBER decides we are. No...seriously, that's really the answer.

[K-Mac]

Jeez, you're right, adrock3215. And how f**king stupid that is!

http://www.nydailynews.com/money/2008/10/3...recession_.html

Edited November 20, 2008 by K-Mac

[Thomas M. Miovas Jr.]

Prices are falling (most notably because oil is down) and the government is worried about this and may do something to increase prices via Fed policy.

They are calling it deflation, but I disagree with this -- deflation occurs when the money supply contracts, and I don't see any clear evidence this is happening. And prices coming down is not a bad thing anyhow; in a well functioning economy, prices are mostly coming down due to increases in production.

But many consumers are apparently holding off, waiting for an even better deal.

Apply that dynamic to all sectors of the U.S. economy -- most notably, perhaps, the housing sector -- and there are all the makings of a deep recession.

Another downside of deflation, according to Faucher, is that it complicates the Fed’s job of setting interest-rate policy, which tends to target inflation rather than deflation.

Stop messing with the economy via the Fed and everything will work out for the best. They don't want you to save money on items and services bought -- it makes their record keeping too damned difficult. Morons!

[KendallJ]

Friend sent me this today. These banks are starting to feel like Monopoly Spaces. "I'll buy Park Place!"

[adrock3215]

They don't want you to save money on items and services bought -- it makes their record keeping too damned difficult.

That has nothing to do with why the government will fight deflation.

Deflation hurts debtors. Since the US Treasury is the largest debtor in the world, the US government will do everything it can to make sure deflation doesn't happen. Also, we will have sharply higher taxes in the near future. No doubt about either of these two facts.

[EC]

Does anyone else here wonder why all these politician--and even worse--business men want or even think that all these bailouts and government intrusion in business will even work? I mean I can see with just a quick glance that not only can none of this ever work, it actually can--and is--making the situation worse by the day. I just don't understand how all these people can come to a different conclusion when all evidence and history say's that it can NOT work. I just don't understand how these people are coming to such idiotic conclusions and then acting on them. It's like the whole world gone insane. Sorry that was my semi-random rant of the day.

[utabintarbo]

Does anyone else here wonder why all these politician--and even worse--business men want or even think that all these bailouts and government intrusion in business will even work? I mean I can see with just a quick glance that not only can none of this ever work, it actually can--and is--making the situation worse by the day. I just don't understand how all these people can come to a different conclusion when all evidence and history say's that it can NOT work. I just don't understand how these people are coming to such idiotic conclusions and then acting on them. It's like the whole world gone insane. Sorry that was my semi-random rant of the day.

Short-term thinking run amuck. Even in a business like the auto industry, which must have a long-term outlook (several model years, at lest), it seems the focus is on arbitrary targets in the next quarter, with little to no regard to consequences. This has been a long time coming.

[Maarten]

It's pretty interesting. My girlfriend's family (and she herself) are pretty liberal, but they're all squarely against any form of bailout on the grounds that it's wrong to take other people's money to support these things. They were also talking about how it just seems to be an exercise in evasion on a massive scale =)

[Thomas M. Miovas Jr.]

Now the Democrats are talking about coming up with their own $700 billion recovery plan that will include a massive 2.5 million jobs public works project, and that is on top of half of the previously passed Bush bail out, giving them over $1 trillion to do their project. Taking $1 trillion out of the general economy and putting it in government decision jobs and economic recovery is bound to lead to massive distortions and who knows where this will lead us. I think they are leaning towards a command economy, which won't be good as that is basically a wealth redistribution scheme by a different name.

[Thomas M. Miovas Jr.]

Deflation hurts debtors. Since the US Treasury is the largest debtor in the world, the US government will do everything it can to make sure deflation doesn't happen. Also, we will have sharply higher taxes in the near future. No doubt about either of these two facts.

It hurts debtors only in the sense that each dollar they pay back is worth more than each dollar they borrowed. Still the government ought not be manipulating the dollar. It should stay out of the economy, especially on the fundamental level of what is money, and then we can get back on the gold standard or gold as money standard and not have to worry about inflation or deflation, unless something drastic happens with the quantity of gold or unless a particular bank begins to inflate or deflate their own currency, which would be specific to that bank and others could avoid it.

It's just evil to worry about inflating the dollar (i.e. decreasing its value per dollar) because we are in debt. It is a way of making us all pay for government borrowing beyond them taking our taxes to do that via inflation.

Besides, I see no evidence we actually have deflation, as in less bills out there chasing goods and services within the US economy. The two year average for gold is pretty stable right now, and not deflationary -- i.e. gold prices have stabilized.

According the the chart at this location the 100 day average of gold has come down, but I wouldn't say it is dramatic enough to cry about deflation. The government officials are using the wrong standard to determine inflation or deflation, that is they are using prices of goods and services, rather than the price of gold, which tells the whole story. So oil comes down dramatically, and they cry deflation, and want to pump more cash into the money supply just when American's can take a breather from high prices brought about by nearly $5 per gallon gasoline.

[Maarten]

This is disgusting. Some CEO is predicting that all financial companies will be nationalized within the next year, and not only does he think that's a necessary thing to happen, but he says that he thinks shareholders shouldn't be compensated in any way when the government takes over the company. Awesome!

Disgusting manager person

[gags]

Taking $1 trillion out of the general economy and putting it in government decision jobs and economic recovery is bound to lead to massive distortions and who knows where this will lead us.

Oh, it's far worse than that Thomas: "The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago."

http://www.bloomberg.com/apps/news?pid=new...id=aDqw8_eMzrhU

The government is out of control and nobody has any idea how huge this thing has become. Unfortunately, the productive people in society are going to get stuck with the bill.