Ilargi: As you may have gathered by now, I read a lot. A whole lot. Today is no exception, as you can see from the amount of material below. I like to see what everyone is saying, especially when opinions differ a lot. Still, I knew beforehand what I thought, and what I would write about. I’ve known this one since I first started writing about finance a few years ago.
The credit - or financial- crisis we are drowning in today was caused by one thing: bankers and other financial institutions treated their deposits and other solid assets as items that could be put on casino tables as collateral for bets. Anything they could claim ownership of was laid out right there in front of the dealer, and the dealer accepted it. This was possible because regulators, and governments in general, loosened definitions of ownership (is that really yours, sir? ), and allowed their fat fingered bankers to bet 10-20-100 more than they actually showed the dealer, who in turn assumed the government would be good for it.
This part of the casino has now been closed; the tables are empty, the chips are missing, and Mr. Luciano is out looking for kneecaps.
Read on...
Ilargi's post follows Peacenik's rant about the banks yesterday. The banks gambled away the world's wealth and now the bankrupt system is beyond salvation. Chrsyler just announced it is shutting down all its operations for a month. Does anyone really believe that Chrysler is going to re-open. Just for old time's sake Peacenik will visit a few car dealerships and take some pictures. Peacenik is documenting history, ancient history. Motorola just announced it is freezing salaries and pensions. The dominos begin to fall. The consumer society is dead. Peacenik's sad advice is to save your cash and buy food and water only. And beer. Peacenik got Peacenik's first Google Alert about groceries this morning. Stay tuned, the early warning system is operational.
Showing posts with label depression. Show all posts
Showing posts with label depression. Show all posts
12/12/08
Prominent Trader Accused of Defrauding Clients
By DIANA B. HENRIQUES and ZACHERY KOUWEPublished: December 11, 2008
But on Thursday morning, this consummate trader, Bernard L. Madoff, was arrested at his Manhattan home by federal agents who accused him of running a multibillion-dollar fraud scheme — perhaps the largest in Wall Street’s history.
Regulators have not yet verified the scale of the fraud. But the criminal complaint filed against Mr. Madoff on Thursday in federal court in Manhattan reports that he estimated the losses at $50 billion. “We are alleging a massive fraud — both in terms of scope and duration,” said Linda Chatman Thomsen, director of the enforcement division at the Securities and Exchange Commission. “We are moving quickly and decisively to stop the fraud and protect remaining assets for investors.”
Peacenik woke up this morning and Conjure Bag was officially calling a depression. The Dow futures were way down. The goofballs on CNBC were freaking. Peacenik is on a day off and is now watching CNBC. Equador just defaulted on its foreign debt. GM just announced that it will shutdown for Jan. and part of Feb. Yes the news is all bad. The GOP had no problem giving $700 billion to the banks with no strings attached but $14 billion for the auto industry was too much unless the unions were destroyed. Oh, and by the way, this post has one of Wall Street's most respected persons admitting that his business was a Ponzi Scheme and $50 billion has gone poof. Why would anyone have money in the stock market? Lucky this is Friday. Peacenik is going to have a beer. Have a good weekend.
On Wall Street, his name is legendary. With money he had made as a lifeguard on the beaches of Long Island, he built a trading powerhouse that had prospered for more than four decades. At age 70, he had become an influential spokesman for the traders who are the hidden gears of the marketplace.
But on Thursday morning, this consummate trader, Bernard L. Madoff, was arrested at his Manhattan home by federal agents who accused him of running a multibillion-dollar fraud scheme — perhaps the largest in Wall Street’s history.
Regulators have not yet verified the scale of the fraud. But the criminal complaint filed against Mr. Madoff on Thursday in federal court in Manhattan reports that he estimated the losses at $50 billion. “We are alleging a massive fraud — both in terms of scope and duration,” said Linda Chatman Thomsen, director of the enforcement division at the Securities and Exchange Commission. “We are moving quickly and decisively to stop the fraud and protect remaining assets for investors.”
Peacenik woke up this morning and Conjure Bag was officially calling a depression. The Dow futures were way down. The goofballs on CNBC were freaking. Peacenik is on a day off and is now watching CNBC. Equador just defaulted on its foreign debt. GM just announced that it will shutdown for Jan. and part of Feb. Yes the news is all bad. The GOP had no problem giving $700 billion to the banks with no strings attached but $14 billion for the auto industry was too much unless the unions were destroyed. Oh, and by the way, this post has one of Wall Street's most respected persons admitting that his business was a Ponzi Scheme and $50 billion has gone poof. Why would anyone have money in the stock market? Lucky this is Friday. Peacenik is going to have a beer. Have a good weekend.
11/19/08
Debt Rattle, November 19 2008: He'll have to go
Stoneleigh:
A 1930s style depression is not impossible by any means. If governments could avoid a depression merely by printing money, then one would never have happened. Unfortunately, depressions do happen, because ‘money printing’ (monetizing debt) doesn’t cause inflation (ie an increase in the effective money supply) during a hurricane of credit destruction. Traditional money supply measures don’t capture the full picture.
Credit functions as a money equivalent during the expansion phase, but loses the quality of ‘moneyness’ once expansion morphs into contraction. As the vast majority of the effective money supply is currently credit, the collapse of credit will crash the money supply. As is already happening, ‘printing’ merely send money into a giant black hole of credit destruction, thanks to the hoarding mentality that has taken hold amongst banks due to the collapse of trust. Banks know what toxic waste they hold in their own vaults, and certainly aren’t going to trust their colleagues who almost certainly hold the same.
Peacenik thought Ilargi was frequently downbeat but his blogging partner Stoneleigh may top Ilargi's sense of doom in this piece. You have to scroll down a bit to get to Stoneleigh's article. Peacenik wonders what comes after fear.
A 1930s style depression is not impossible by any means. If governments could avoid a depression merely by printing money, then one would never have happened. Unfortunately, depressions do happen, because ‘money printing’ (monetizing debt) doesn’t cause inflation (ie an increase in the effective money supply) during a hurricane of credit destruction. Traditional money supply measures don’t capture the full picture.
Credit functions as a money equivalent during the expansion phase, but loses the quality of ‘moneyness’ once expansion morphs into contraction. As the vast majority of the effective money supply is currently credit, the collapse of credit will crash the money supply. As is already happening, ‘printing’ merely send money into a giant black hole of credit destruction, thanks to the hoarding mentality that has taken hold amongst banks due to the collapse of trust. Banks know what toxic waste they hold in their own vaults, and certainly aren’t going to trust their colleagues who almost certainly hold the same.
Peacenik thought Ilargi was frequently downbeat but his blogging partner Stoneleigh may top Ilargi's sense of doom in this piece. You have to scroll down a bit to get to Stoneleigh's article. Peacenik wonders what comes after fear.
11/17/08
Debt Rattle, November 16 2008: Everybody Now!
Ilargi: Now the G20 meeting is finished, we see confirmed once more what I've said all along: the whole circus was an emtpy charade from the start, and nothing was achieved. Except perhaps for one notion that stands out: the vast majority of so-called leaders (isn't that a title you need work to deserve?) understand that it's everybody for himself.
The best illustration of this is provided by the fact that all participants agreed that a lot of studying and talking is left to do, before they meet again. Which is supposed to be in April 2009 (?!). That’s half a year away. Until then, the world will supposedly stand still. May I suggest you look back 6 months, to April of this year? Try some of the media headlines in those days. It'll give you a good indication of how much change can occur in such a relatively short period, and how useless therefore an agreement like this is.
Peacenik watched the Sunday morning talking heads, went to the mall, did some shopping, and everything seemed "normal". The talking heads were more interested in Obama's new dog than they were in the G20 meeting. Lots of bonhomie. The mall was busy. The liquor store was busy. People enjoyed the Santa Claus parade. Meanwhile the economy continues to evaporate. While the ideologues argue about whether or not to save GM, GM is vaporizing. Peacenik thinks all this is very weird. It should be an interesting week.
11/14/08
Krugman: Return of Depression Economics
From Professor Krugman: Depression Economics Returns. A few excerpts:
I don’t expect another Great Depression ... [but] We are ... well into the realm of what I call depression economics. By that I mean a state of affairs like that of the 1930s in which the usual tools of economic policy — above all, the Federal Reserve’s ability to pump up the economy by cutting interest rates — have lost all traction. When depression economics prevails, the usual rules of economic policy no longer apply: virtue becomes vice, caution is risky and prudence is folly.
Peacenik thinks this is an optimistic post for a Friday. Krugman, recent winner of a Nobel Prize for economics, doesn't think there is going to be a depression. Yippee!! Have a good weekend.
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