Last month, Rex Nutting had a surefire contrary indicator: He noted that the Bush administration DOES NOT expect the GSEs to fail, and that no rescue plan is imminent.
He wrote at the time that this made the government takeover a Phoney and Fraudy pretty much a sure thing.
Why?
"Is there any surer sign of an impending disaster than a reassurance from the White House that it doesn’t expect it to happen?"
That seems to be more or less an eventuality at this point. But it raises an interesting question:
Recession? Housing Slowdown? Credit Crunch? Been there, done that.
What other impending disasters are out there? What aren’t people expecting? What possible surprises are there — upside as well as down — that could shake things up even more?
What say ye?
Russia
Our Economy is Strong!
Our Infrasturcture is sound!
Our Military is fine!
My 401K Mutual Funds will rebound!
All is well, all is well.
A Russian-led boycott of U.S. bonds in retaliation for the Poland-US missile defense shield pact could cause yields to skyrocket, just at a time when tax revenues are falling and U.S. borrowing intesifying.
The competition for cash from the shortfall from the U.S. Treasury could drive the U.S. into a severe and prolonged L-shaped recession.
I’ve gotta think all this lightning-fast “sector rotation” between commodities and financials is going to cause the blow-up of some hedge funds, with a spectrum of possible consequences proportional to their size and leverage. There was much talk of this earlier in the year, but not so much lately.
Defaults migrate up the economic chain. The Fed cuts rates to zero. All possible damage ensues.
According to the Stern Review, “one percent of global gross domestic product (GDP) per annum is required to be invested in order to avoid the worst effects of climate change, and that failure to do so could risk global GDP being up to twenty percent lower than it otherwise might be.”
I’ll accept that the science of climate change remains imperfect, but this administration’s do nothing approach is putting the future wealth of all nations in peril.
http://en.wikipedia.org/wiki/Stern_Review
Anyone expecting Fan and Fred shareholders to be wiped out is going to be sorely disappointed. CDS counterparty risk means that bailouts will always be done leaving shareholders with something.
Did anyone notice the details within the initial claims release by DoL?
“States reported 1,284,252 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending Aug. 2, an increase of 570,284 from the prior week.”
I looked at prior initial claims news releases and could NOT find any reference to the “570k prior week” statistic.
Looks like the employment picture (or lack thereof) seems very ominous.
What say ye?
Foreign governments currently use the procedes of our trade deficit to purchase 600 billion dollars per year of our debt. As the recession deepens and we purchase less foreign goods and oil, these countries will have less funds with which to purchase our debt. This will mean skyrocketing treasury rates and trash the dollar.
Every morning when I drive to work, I pass by the FNMA headquarters in Washington DC. They have stopped watering the grass in front of the building, and it has withered and turned brown.
If that is a sign that collapse is imminent, I don’t know what is.
There is some (more) unexpected trouble in housing I don’t hear anyone talking about. Starting October 1 anyone taking out an FHA mortgage will actually have to come up with a down payment instead of the often used down payment gift assistance programs.
These gift assisted no down payment FHA loans make up more than 50% of the closings in my market. When they disappear…. so will a lot of the “qualified” buyers. I predict this will cause another 5-10% leg down in prices on top of the already existing problems.
I concur with gloomy. The rise in Treasury rates is the next shoe to drop. And this shoe is like a big ole army boot with spikes on the bottom. It is gonna hurt. The tight credit market will get even tighter; housing will come under greater pressure as affordability falls; more adjustable rate mortgages fall to foreclosure due to higher rates; and the dollar falls further.
Is this a call for black swans?
Maybe a Russian oil embargo, or an oil embargo from non-aligned state-run oil producers. That would be far worse than the 70’s since we produce much less.
A bond boycott from our trade partners would be interesting.
Does anyone know what the credit default swap implosion would do?
“CDS counterparty risk means that bailouts will always be done leaving shareholders with something.”
I am not too sure about that.
http://www.reuters.com/article/bondsNews/idUSL1142498520080111?pageNumber=2&virtualBrandChannel=0
Was it not one of the problems that got Fannie and Freddie in trouble in the first place, that the CDS folks were using a broken risk formula that was also based on inaccurate data? I suspect that the something that the shareholders will be left with will be pretty close to nothing.
Iran, if it looks like Obama will win. Israel may see the last days of the Bushies as the last chance to strike. Who knows, they may figure McCain isn’t as crazy as the Bushies and he won’t be any better than Obama for them.
BTW, just finished a very interesting book, The Shia Revival, by Ali Nasr. The kind of book that should have been read by those like Condi and W who didn’t know that the Sunni’s and Shia’ had issues before the invasion. It more or less confirmed my opinion that we should have made an alliance with Iran and told the Sunni’s, e.g. Saudi’s and Pakistani’s to go to hell. The Saudi’s and Pakistani’s were the ones supplying the terrorists. From reading the book, one gets the strong impression that the Iranians envision any nuclear weapons they eventually build as a counterbalance to the Sunni bomb that Pakistan has as much as it is a deterrent to us or the Israeli’s.
Another one: The Chinese bubble bursts and one of the biggest purchasers of our debt is out of the picture. According to Michael Pettis’ blog, there are the beginnings of a real estate slowdown, much like our mess started with 18 months ago. We’ve already seen a huge amount of their public’s wealth evaporate in the collapse of the Chinese stock markets.
If the scenerio posted by Kirk comes true than rental property is worth buying.
Commodity swaps and related derivatives that have no futures backup
GM, Ford bankruptcy. Citibank imploding.
“The Chinese bubble bursts…”
“This will mean skyrocketing treasury rates…”
What an awesome blog.
I think this doom and gloom game would be a lot more fun and informative if posters were to include a corresponding hedge.
I believe that a significant/deep GLOBAL recession is not being discussed widely enough. Global equity/credit markets are certainly not pricing in such a scenario, which seems to be increasing in probability by the day based on all that I analyze/know.
Russia and China each airlift 100,000 troops to the border of Iran and Iraq to match our quarter MM on the ground.
Anyone holding treasuries at the long end of the curve must be breaking into a cold sweat.
Gov’t entities start defaulting on bonds as tax revenues dry up. They also cut pension and medical benefits.
Any one would be enough:
Russia, Iran, Turkey, Pakistan, Taiwan
The commodity bubble completely implodes and takes its fair share of financial casualties with it. All of the swill and lies surrounding it are exposed. Oil drops to at least $35 a barrel in the greatest asset implosion since the Great Depression.
My longtime favorite: Fed nationalizes Fannie/Freddie, doubles national debt in the process, Dollar plummets.
I have been long commodities and short on the Dollar since I saw, “House passes housing bill; Bush lifts veto threat.”
Lotsa countercurrents in these scenarios — poor demand for Treasuries = higher rates, hard to know what the dollar (or gold) would do. It’s not impossible that both could rise, at least for a while.
Depends on whether there are weaker (or perceived weaker) currencies out there at the moment. If Russia were to conduct an oil/gas embargo, Europe would be hurt worse than us, and the euro would suffer accordingly.
Dunno how they could prevent a gen-u-ine panic amongst the sheeple.
I guess I would be more worried that Cowboy Dubya would try and call Putin’s bluff, and Putin won’t be bluffing. It won’t matter if the lawn at Fannie Mae isn’t watered if it glows in the dark.
Ratings agencies downgrade U.S. debt from AAA, and all of the attendant consequences from that.
On the positive side, the collapse in consumer spending will mean that Nintendo Wii products will have actual presence on the store shelves, and not disappear within minutes of coming off the truck.
And with the shrinkage in home-buying, it may be possible to buy some pretty nice houses at bargain prices — but the buyer will be required to pay cash.
Bicycle sales should skyrocket, expanding at rates only a little below bicycle thefts.
And seed companies should do well, along with home gardening suppliers.
I wrote something about that shortly after you did:
http://alephblog.com/2008/07/11/in-large-red-friendly-letters-it-reads-dont-panic-gse-edition/
Key quote: “Two notes on the politics here: the Bush Administration wins, and loses. Wins, because they end the dominance of the GSEs in a bigger way than they ever could have imagined. Loses, because they can’t use them to support the mortgage market any more. Can the FHLB pick up the slack without them? I doubt it, at least not fully. The FHA isn’t big enough either.”
There have been politics going on from the start here. The real question is whether the Democrats decide to do something to rescue these legacy institutions that have been their friends.
“scenerio posted by Kirk comes true”?
buy
those mini-storage gated communities; upgraded with communal shower and toilet facilities in a corner of the lot
Big, and I do mean big, drops in emerging markets. With the US, Japan, and Europe all pretty much in recession, decoupling becomes a joke.
Emerging markets have already been dropping faster and further than OECD markets. My guess is that they have quite a bit further to fall. And woe to EM countries that have large current account deficits.
People looking at EM as a refuge from the weakness in OECD countries will probably be surprised at how far and how fast they can drop.
My top 4 disasters to come:
1) Credit cards are the next subprime (not really unpredictable, just very likely to be next)
2) Ginnie Mae and Sallie Mae go the route of fannie and freddie
3) McCain replaced midway thru campaigning due to health reasons (which are really a convenient way of the repubs admitting they are overmatched to save face)
4) Numerous people go into debt by paying to watch IOUSA with their credit cards
You think the US military was broken after Vietnam stay tuned for post Iraq….
Bush/Cheney have put the great USA military machine in a precarious position if China or a resurgent Russia starts flexing its muscles like in a showdown with Iram
Unlike the 1970’s the USA is now the BIGGEST debtor nation by far i.e. foreign countries own something like $5-7 trillion of USA assets.
But Bush/Cheney don’t give a rats ass because W will be in a compound in Paraguay and Cheney in a undisclosed compound.
Blackhalo wrote:
“My longtime favorite: Fed nationalizes Fannie/Freddie, doubles national debt in the process, Dollar plummets.
I have been long commodities and short on the Dollar since I saw, “House passes housing bill; Bush lifts veto threat.””
You know, in that scenario I can almost guarantee the dollar would RALLY as a result of the half cocked mindless masses that would now shreak “Eureka”, hey, the Govt’s got our back. Every bank stock would surge… I kid you not. The fact that the risk and liability gets pushed down the road is a GOOD thing to these currency traders. Their time frame is 24 hours (at most).
I wonder what a resurfacing cold war would to to the major fiat currencies. I mean the exchange rates, since the US depends on Chinese imports and Europe on Russian oil…
From the widespread censorship in the Olympic Games I gather the Chinese are more worried about internal affairs than airlifting troops anywhere. The Party could at least allow a second or third alternative to the robotic chant they use.
NATO blockades all ports in the Black Sea and enforces a no fly zone over Georgia. The Russian Army runs out of vodka and once they sober up they realize where they are and begin to head back toward Moscow in search of more vodka. As the vodka rout intensifies the muslim factions band together and drive the Russians from the Caucasus’ entirely.
America supports “democratic” elections in the Caucasus region and radical Islamists rise to power creating a new muslim bloc.
David Rockefeller and Zbigniew Brzezinski rejoice (they love when a plan comes together).
Oil spikes. Vodka spikes. Times are hard everywhere.
The hypothesis that a Freddie & Fannie nationalization would hurt the US dollar fails to take into account that virtually every thinking person expects this — it is already priced into the USD.
Nobody who has given even a few minutes of looking into the situation expects Freddie & Fannie to survive their coming trip to the infirmary in their current form.
It would be a major plus if they were taken off the field, nationalized, with the announcement of a plan to replace them with new publicly-owned entities (more than just 2) that would compete against each other for business, and (more importantly) would have NO government backing or guarantee.
I believe that such an outcome, if the plan to replace them were announced on the day they were nationalized,with a future IPO date say, 5 years out (for lack of a better guess as to when things would be stable again) also committed to.
The banking system, and the sorry state of the finances of the USofA, are bigger problems that will take a Very Long Time to get past.
But we will — there is ample history of other countries having gone down this road and reinventing themselves after having effectively run their countries into bankruptcy. In the recent past, Brazil, Russia, Mexico, assorted Far Eastern and Latin American nations … this isn’t a new thing. The only thing we will be bringing to the historical record is the size of the splash we will make.
There are (and more are coming) plenty of foreign-owned businesses in this nation, and we still represent a substantial market for other country’s products. There will be plenty of interest in seeing Uncle Sam rehabilitated and back in the game.
But it will be under a lot of rules and restrictions about our ability to borrow money. Nobody is going to be lending that old reprobate USofA money on the same scale that was done in the past.
>1) Credit cards are the next subprime (not really unpredictable, just very likely to be next)
Nah, due to creative and punitive fee structures, cc debt has already been dispatched (on the bank’s books) long before the never-declining debt load (to the consumer) has driven them to bk. And it isn’t fully dischargeable anymore in bk. CC’s aren’t the next shoe, they are the milky teat currently keeping the banks from starving.
All of the above…
The powers that be will have us good Men fighting a useless war for no other reason than there is not enough good will on this earth.
Bring on the Locusts…..and the Horsemen…we f’ing deserve this.
For your reading pleasure, some lyrics from a visionary band…
The The – Armageddon days are here (again) Lyrics
Album: Mind Bomb
They’re 5 miles high as the crow flies
leavin’ vapour trails against a blood red sky
Movin’ in from the East toward the West
with Balaclava helmets over their heads, yes!
But if you think that Jesus Christ is coming
Honey you’ve got another thing coming
If he ever finds out who’s hi-jacked his name
He’ll cut out his heart and turn in his grave
Islam is rising
The Christians mobilising
The world is on its elbows and knees
It’s forgotten the message and worships the creeds
It’s war, she cried, It’s war, she cried, this is war
Drop your possessions, all you simple folk
You will fight them on the beaches in your underclothes
You will thank the good lord for raising the union jack
You’ll watch the ships out of harbour
and the bodies come floating back
If the real Jesus Christ were to stand up today
He’d be gunned down cold by the C.I.A.
Oh, the lights that now burn brightest behind stained glass
Will cast the darkest shadows upon the human heart
But God didn’t build himself that throne
God doesn’t live in Israel or Rome
God belong to the yankee dollar
God doesn’t plant the bombs for Hezbollah
God doesn’t even go to church
And God won’t send us down to Allah to burn
No, God will remind us what we already know
That the human race is about to reap what it’s sown
The world is on its elbows and knees
It’s forgotten the message and worships the creeds
Armageddon days are here again
The aliens take over.
Don’t know if it’s been mentioned yet, but State government budget crisis, leading to mass government layoffs and municipal bankrupcies will be the next fire. .02
i agree, the financial status of the country is very bad at the moment….
We’re going to run out of fresh, potable water. I could explain why, but I don’t have time, and it doesn’t make a difference.
Second constantnormal, but have to add that any private entities will only take up that ‘cross’ if they get complete bankruptcy protections a-la student loans.
That will give us a situation where those of us who went to school, got a job, and bought a[n inflated] house, are literal slaves or peasants for the next 30 years (or more, if you hit a rough patch and they ‘recapitalize’ you.) No escape. No safety valve. Hell, not even a modern analog to Australia or Georgia (North America, not Caucasus. . .)
Moral hazard indeed. . .
“What other impending disasters are out there?”
Who knows? We can’t seem to get straight answers from either our government or our companies’ CEOs on either the plight of this country or its businesses. They’ll get back to us once they’re done plundering both.
Yes, things look bad. They’re going to get worse before they get better, and that won’t be soon. Check. But there’s enough gloom and doom here for a Y2K survivalist conference. So, what could really f*** things up? China. Either plunging into internal strife and/or attacking Taiwan. I’d worry about that more than I’d worry about the Russians, who are right now apprehensive about their very survival as a nation. Israel nuking Iran or some such? Sounds scary, but in fact nobody else gives a bleep about Iran. They’d all talk about how awful it was and then do nothing.
The Ag bubble will implode. It is getting bigger and bigger and soon will blow.
I know this may seem like “small potatoes”, but screwing around with ones food supply can not be cool even in today’s advanced, what me worry world of US leadership.
On the other hand we don’t have any problems another good war won’t cure, when the main problem is getting another W/McSAME elected as our next great leader.
The Ag bubble will implode. It is getting bigger and bigger and soon will blow.
I know this may seem like “small potatoes”, but screwing around with ones food supply can not be cool even in today’s advanced, what me worry world of US leadership.
On the other hand we don’t have any problems another good war won’t cure, when the main problem is getting another W/McSAME elected as our next great leader.
hear hear. I completely agree. The world would be far safer is saddam was still in power and Russia could steam roll though Georgia and Poland without any messy US “interference”. It goes without saying that we be better off with higher taxes, greater government intervention and a stronger trial lawyers association. As the 200,000 screaming germans know, if it weren’t for Bushitler we would have stable financial industries, housing markets and growing economies like Europe. Too bad we have obama like policies in only a few states like michigan, NY, MA, penn, etc. The rest of the country could benefit from similar policies and experience similar economic and population growth.
I was thinking that Warren Buffett seemed to be eerily perfectly positioned (what with all his insurance businesses) to step in and replace Freddie & Fannie (by his rules, not Congresses) with non-GSE’s and a guaranteed HUGE business.
Then I saw this headline from Reuters “Fannie and Freddie debt gains as deep share dive abates” — and said WTF? Who is nuts enough to be buying them?
But of course, you know who it must be — the PPT, getting a head start on things and buying up all of GS Freddie & Fannie inventory at prices that are a good deal better than they will be soon.
Am I too cynical?
what are the chances of FRE/FNM stock being delisted with nationalization as the stock price weakens further and what are the consequences of such delisting?
“The hypothesis that a Freddie & Fannie nationalization would hurt the US dollar fails to take into account that virtually every thinking person expects this — it is already priced into the USD.”
I do not believe that the extent of the obligation of this action is priced in to the dollar though. My expectation it that housing prices will continue to decline to, at a minimum, 3X wages, and I do not see wages going up in the near term. I consider and over correction on housing VERY likely. There are trillions of dollars of foreclosures on the way of even prime fixed loans in many markets.
The U.S. is going to have to service this growing debt somehow, and that would mean higher Bond rates to attract investors in greater numbers. I do not see how the U.S. can continue to borrow from China at those rates and then turn around and loan that money out to prospective homeowners at a rate they can afford at current vauatons.
What I’m seriously worried about?
In a year or two, no matter who is prez, it’s going to look awfully attractive for the US govt to just default on all it’s debts. Russia’s doing pretty well now, isn’t it?
PKUT
clearly you like short shots and slogans as opposed to any analysis.
just two points…invading iraq didnt make america stronger.
as for obama economics and your trite comments about how he would harm the rest of the country like he did “new york, maine penn and michigan..”what huh why those states???)…obama economics will probably look a lot like clinton economics, and from where i stand those were the best years since Eisenhower.
Bush has driven this country into the ground by almost every measure i can think of…but i know you will never be convinced of that.
and as the depression takes hold in the coming years guys like you will blame what bad things happen next year on obama or whom ever…not realizing that economic crisis are often decades in the making.
try and keep this in mind, bush and Reagan administrations were big big deficit spenders way more than any dems you could think of and they accumulated more national debt than all other American presidents put together since `1776.
ps, it took all my self restraint not to call you names.
Jim Rodgers mentioned the possibility of exchange controls in a recent interview. But then he also said the national debt doubled over the past few weeks with the GSE bailouts, which seems like an exaggeration to me as there must some value in the GSE bonds.
Foreign central banks have been decreasing their holdings at the Fed of GSE securities the past two weeks, and although they keep buying Treasury debt to hold at the Fed, the recent TIC reports, which are dated, show that net flows of long-term securities have been trending down.
Lee Adler of the Wall Street Examiner and Radio Free Wall Street said yesterday that the U.S. is on the edge of a knife. He follows the Treasury auctions very closely, among other markets, and has been stunned at the way Treasury has issued much more than the Wall Street estimates, hitting the market with one emergency cash management bill after another. When these bills are announced, they are usually reported in the WSJ without alarm in a sentence or two. Nothing more is said for reasons that are well understood.
The mainstream press mostly focuses on the budget deficit and the dance between the administration’s estimates and those of Wall Street whereby the White House gives high numbers early so it can beat them later. By looking at the Treasury auctions, Lee is able to see that not only are the revenues down but the outlays are much higher than the White House and Wall Street have acknowledged in deficit estimates. I’ve seen with my own eyes how the media is beholden to the government regarding the cash management bills, but I would’ve thought the Wall Street analysts would call the bluff on this year’s deficit. From what I read, they’re playing along as usual.
The meltdown scenario that looks convincing to me is one floated by IIE last fall, if I remember the source correctly: a relatively small country such as Chile inadvertently starts a run on Treasury debt when someone in their central bank decides to redeem or sell, without taking into consideration the consequences. It wouldn’t have to come from a rival like Russia or China.
According to Al Martin, who claims to have seen the DoD protocols, the secretary of the treasury can declare force majeure without White House approval. Troops would be dispatched to protect the regional federal reserve banks and lots of other moves would be triggered. His article on this is posted here: http://www.housepricecrash.co.uk/forum/index.php?showtopic=68465
The memo that was circulating in Washington last spring and was leaked by people close to one of the GSEs had C and R in the title: C standing for the conflict that would arise from default and R from the revolution that might result from trying push the bill on taxpayers to make good on the debt.
In a true meltdown scenario, exchange controls might end up being one of the more mild measures. WSJ has reported on the existence of these scenarios, but Treasury will not reveal what they are.
The “next disaster” is anarchy, as anarchy progresses in 3 distinct phases;
Stage I) A select, visible minority – usually an elite – is excepted from enforcement of the law.
Stage II) A large, visible cohort is excepted from various laws – usually for politically convenient reasons. The criminal cohort remains visible, and unpunished.
Stage III) The remaining majority finally experiences revulsion, the government is discredited, and the laws become unenforcable. Your society of exceptions becomes a history lesson, and the reset experiment begins.
So which stage or we at? Well, between wall street, main street, and the fact that millions of homeowners self-qualified as felons by lying grandly on their mortgage applications…it looks like we’re in “stage II”. I know it seems tough, but without the law we don’t have a society. Is it too much to ask our current government to enforce the law!?!? That’s what we pay them for… of course unless some enterprising states start initiatives to stop paying for non-service. Sound familiar? Or sound like you heard it in the news recently? In the end, if we’re lucky, we’ll still have mayors and deputies. If you need anything else, you’re on your own. I wish I was making this up…
Wow…now that’s a black swan. Someone smart enough to understand and use sarcasm posting a defense of the presidency of George W. Bush. What a dispiriting comment on humanity. It makes me think we deserve some of the “impending disasters” prophesied here.
Paulson hoped that by publicizing the fact that the Treasury could buy equity in the GSEs and recapitalize them, it wouldn’t actually have to do anything. He wanted all of the benefits without any of the risks and actions. That pretty much sounds like the ethos of America’s financial economy in the early 21st century.
Until our leaders in government and business drop this ethos, things may tread water, but they won’t improve.
The Clinton economy went into recession 60 days into the bush administration. Somehow the greed driven stock market economy couldn’t maintain itself. I do think federal income taxes have become too progressive under bush. It’s not good for the country that almost 40% of filers pay no income tax. the economy has held up relatively well under bush, despite inheriting a recession, a horribly overvalued stock market, 911, katrina, a war against islamic fundamentalists, and unprecedented level of negative press (ex review the coverage of unemployment in 11/96 vs. 11/04). Obviously loose money and global credit issues have negatively impacted us, but hey at least gdp didn’t contract last quarter like the EU and Japan. It’s still a long way to November. Maybe I’ll see the light Mr. 57 states talks about and understand how increased taxes, increased government regulation, allowing trial lawyers free rein, pouring billions into magic, yet undiscovered “alternative” fuels, forgoing free trade, socializing medicine, and “windfall taxes” will improve the economy.
Unexpected? The Democrats will win after all, then begin a series of numbnuts.con false pogroms for carbon neutrality, free education and free healthcare, a colossal diversion of tax revenues from those money pots into growing Fed bureaucracy, until every citizen has a Fed handler who knows their taxable income to the penny. We will receive a 2nd “economic stimulus” pay-it- backward, with 200% origination fees and interest, then another, and another, until all our future tax revenues for the entire four-year term are already obligated to pay off their “economic stimulus” Ponzi, just another layer on the credit.con and WMD.con and dot.con and deregulation.con and starwars.con, (2008’s the first time Fed had to *rebate* our future harvests, that’s how tissue-thin this Ponzi runs), until a minority portion of America will drift out to Ch11 like Wilson in Castaway, and we’ll cry for 30 seconds or so, then say, well, they’re probably better off living in dumpsters and freeway jungles, as long as the majority still have their government paychecks off our future taxes, living on government pensions and untaxed capital gains from their lofty balconies on the ten houses they can even remember.
from the wayback machine:
Charlie Rose Show, 8/6/2007. Part I, Floyd Norris talks credit squeeze. Part III Taleb talks his book.
http://video.google.com/videoplay?docid=-1393776214264698170&ei=QFOuSLG2NIS64gKU-6XXAw&q=taleb
1. Fed raises rates
Combined effect of inflation and Phoney and Fraudy causes Fed to increase interest rates. Foreigners rush to the carry trade. Market rebounds. This brings us out of recession and helps the dollar. (we hope) Our economy recovers ahead of the rest of the world.
2. Fed lowers rates
All of Fed’s tools can’t stop the erosion of the dollar. Inflation skyrockets and there are riots in the streets. Congress invokes something like the Aldrich-Vreeland Act and NAFTA and brings out a new currency merging Canada and Mexico to compete with the European Union. Self-reliance websites get millions of hits but still have trouble finding advertisers. Tentmakers can’t keep up with the demand.
Moral of the story. The credit markets have been propping up all other markets for years. Without them this house of cards will fall.
Tokyo is devastated by a huge earthquake.
I can’t resist posting this link to another oh-so relevant The The song;
http://www.youtube.com/watch?v=y64S4hzcejk
“Moral of the story. The credit markets have been propping up all other markets for years. Without them this house of cards will fall.”
Posted by: Bryan B | Aug 22, 2008 2:29:19 AM
From the ‘Dollar’ forward, it’s all credit.
Borrowing one’s Currency into existence, at Interest, is no way to go on a “Long-Run”.
The Economic drag, built-in, of such a system, is akin to getting a free cup of Termites, along with the keys, at the closing of your new house.
which leads, over time, now 95 years, to:
We’re going to run out of fresh, potable water. I could explain why, but I don’t have time, and it doesn’t make a difference.
Posted by: Marcus Aurelius | Aug 21, 2008 11:18:24 PM
which with, I concur
We’ll continue to chug along until cash flow dries up and our supply chain breaks down.
The civilization will come to an abrupt end…not just here but worldwide.
People (working people) are still digging the hole deeper (borrowing to maintain their ‘lifestyle’) even though they can’t afford what they already owe.
This will have the same effect as a dog hitting the end of its leash at a full run.
Worse, it will be just as ‘sudden’.
One short ‘oof’ and the social clock will turn back a thousand years.
In a few short (and very bloody) weeks, so will the human population of the planet.
Perhaps the fact that few see it coming is its own blessing.
Taiwan won’t be the crisis. The current president in Taiwan is from the KMT, the Chinese Nationalist Party, if the worldwide situation gets worse, he will bend more towards China’s will. Rather than Taiwan to China negotiations he has already taken the giant step back to KMT to China negotiations. One of the top KMT officials, Lian Chen, former presidential candidate and big loser, has been selling his arse to China for the past four years. Don’t look for the crisis except to the Taiwanese there.
Speaking of a disaster –
http://www.reuters.com/article/marketsNews/idINN2237993020080822?rpc=44
“We’re going to run out of fresh, potable water. I could explain why, but I don’t have time, and it doesn’t make a difference.”
Thanks, Marcus. I’m not sure why, but that one gave me a good laugh.
“Drove my Chevy to the levy, but the levy was dry.”
Otherwise, the only contrary Bush administration indicator I’ve seen is that Rice and Maliki are working on a timetable for withdrawal of US troops from policing duties in Iraqi cities. This news is so encouraging I can only assume were months away from the draft.
Speaking of another disaster – Auto industry seeking gov’t $25 Billion Loan (bailout) .
http://www.reuters.com/article/marketsNews/idINN2237993020080822?rpc=44
constantnormal – “Fannie and Freddie debt gains as deep share dive abates…Who is nuts enough to be buying them”
me – I would reckon the folks who see the real books; the incoming monthly payments on those $2.5T; 1/2 of all mortgages; and who is making the payments
thanks for that post mock turtle – “Bush has driven this country into the ground”
Ed Freeman – “it’s going to look awfully attractive for the US govt to just default”
Bryan B – “brings out a new currency merging Canada and Mexico to compete with the European Union”
me – all this seems to be the 21st Century battle plan for the New America of this presidency. Turn over the USA to the WTO and squash country. Corporations are the new flags to pledge.
I would be in favor of a change such as this, IF I thought this would bring on world peace, BUT in capitalism we would still have industry against industry. Bread and butter local spending VS military industrial complex spending. Maybe in a thousand years needs will pass. NA.
The ultimate plan needs future worker upbringing, training, housing, subsistence and recreation BALANCED with world supplies of workers and commodities BALANCED with intellectual abilities and physical abilities BALANCED with human agression to GET ONE OVER ON MY NEIGHBOR.
You mean something like Harmony I think, Greg….
Our next civilisation will be artistic, or there will not be a civilisation any more.
Food for thoughts; with all the models and number crunching power available everywhere in the financial industry and your own den or office, why has nobody realized that the systems as a whole is inherently utterly unstable ? We are heading for Doom because of the lack of harmony and balance in the system, imho.
I think the power that be knows this. I have read Alan Greenspan’s “Age of turbulence”. Wiki defines turbulence as a fluid regime characterized by chaotic, stochastic property changes. This includes low momentum diffusion, high momentum convection, and rapid variation of pressure and velocity in space and time.
Like every other word Greenspan uses, this was very carefully chosen.
What other indicator do we need that this was foreseen? The question of our leaders inaction or inability to prevent it from happening is irrelevant. We need better, more ethical leadership anyway. I do direct the reader towards the Foundation series of books from Isaac Asimov for a very interesting, if not entertaining, work of (science)-fiction about this very subject.
This is a great post by the way, despite a certain lack of “artsy-fartsy” inputs like mine.
Nobody seems to have mentioned the disruption that would accompany a failure of the European monetary system as Spain, Ireland and Italy experience deflation and Germany tries to prevent inflation. This is a serious problem and would probably cause widespread currency disruption.
Most writers seem to have their minds on world affairs as to impending disasters, with which I agree. I think that any time big govt., big labor, big business, and big greenies get together, in any and all countries and internatl. organizations, the rest of us look to carry on our lives quietly, separately, and unnoticed- which is very difficult. Central planning by all the elites who know better than ordinary people what to do, leads to totalitarianism . I think the financial system reflects the state of the world since the 90’s- chaotic, tribal, nations being rethought and borders redrawn, runaway idealogies in global warming, globalism period (human nature is not global or utopian), Shiites in Iran who wish to hurry up the 12th imam, Hindus who believe that we are in the age of Kali, goddess of death, Christians and Jews who have plenty of scripture about the last days, and so on. I would say that we are in a mess because of our human nature, and – guess what, all of the critics of Pres. Bush over the past 8 years- Pres. Bush did not cause human nature- we did!
Human nature is a mess, if one reduces his/her perspective enough…..think of it, we carry a chemical power plant in our guts that has putrefaction as by-product. Yet it fuels our bodies and enables us to live.
What differentiates us from the rest of Nature, is our Soul, conscience or Spirit, or whatever one names it.
I do agree that man did not cause human nature, but it is man’s destiny to elevate oneself above this nature, or our race will perish.
Given that the few efficient engines of change in our societies are greed, shame and hate, this journey is a perilous one.
I am quite detached from politics in general, but I do hold the opinion that our current President has failed to elevate us above our nature tho.
That is a leader’s only true real job.
How this uneducated buffoon became the leader of the free world is indicative of either how not really free we are, either of how undeserving we are of this very freedom.
A Biblical quote particularly relevant to the present is from Amos 8, where among the people’s sins is to hurry from their religious observance into the marketplace, where they can engage in such profit-making activities as to make the bushel smaller and the shekel bigger, and to sell the refuse of the wheat as good wheat. The size of the bushel and the value of the shekel certainly point to the smaller cereal boxes and higher prices of today. I do not think that it is any president’s job to lead us to be better people- that is our job. The whole business of celebrity worship is a bit sick.
The only time Jesus got physical was when he took care of the merchants in the temple…….
Now that’s food for thought.
I will agree to the business of worship being a sick one.
If I may ask,if it is not our elected leader’s job to elevate us, how are we, as individuals, going to achieve elevation? What example should we follow ?