Daily Digest

Daily Digest - August 10

Monday, August 10, 2009, 9:44 AM
  • Julian Week #32 Bank Closures 70, 71 and 72
  • Drop the Leverage and Trouble Follows!
  • The Real 'Bull' Market
  • Consumer Credit Contracting - It's a Big Deal
  • The End of the Peak Credit Era
  • US Debt Clock dot org (Seen on Financial Sense)
  • Financial Sense News Hour Augst 8, 2009
  • The Sacrificial Lamb?
  • Looking at Hank Paulson’s Ethics
  • Real Homes of Genius: $770,000 in Mortgages on a 900 Square Foot Culver City Home

Economy

Julian Week #32 Bank Closures 70, 71 and 72

Drop the Leverage and Trouble Follows!

The Real 'Bull' Market

Grossfederaldebt

Consumer Credit Contracting - It's a Big Deal

In my mind there is no doubt that the shadow banking system and the securitization of debt process led to the largest credit bubble in history. That bubble grew out of control, mostly unregulated and untracked. We are now paying the price and will be paying the price for generations as that mechanism was so successful at pulling future incomes into “today” that there is now simply no way that people’s earnings can pay back all the debt (Death by Numbers). This is just the beginning of the debt flush, it, quite unfortunately, will take years and years to get under control.

The shadow banking system and securitization of debt - it’s the central banker’s “secret garden” that all of the politicians so desperately want…

The End of the Peak Credit Era

We still have 26,000,000 unemployed and underemployed Americans in the country. Many have been relying on the plastic support of credit cards to ease the pain of the deep recession. Yet many are finding out that they are unable to have access to the once abundant lines of credit. It may be the case that we have witnessed peak consumer debt.

Even though some 8 million credit cards were yanked earlier in the year, many consumers are simply embracing a more frugal lifestyle. The contraction is occurring from both sides in that consumers are being more watchful on what they spend while lenders are actually vetting more carefully who they give credit to. The latest consumer credit report from the Federal Reserve shows that the trend in less consumption is still going strong:

US Debt Clock dot org (Seen on Financial Sense)

Financial Sense News Hour Augst 8, 2009

Laying stone on house, 2 stories up on scaffold, couldn't make notes of minutes, here is my best recall:

  • Part 3A at or about 15 minutes how economics changed to Keynesian
  • Part 3B Health care, good or bad the US is insolvent
  • Part 3B Would take 35 years to pay existing debt
  • Part 3B Chris Puplava on the Dollar and the Fed (About the 30 minute point)
  • Part 1 I'd be sure to catch the interview with John Williams of Shadow Statistics .com

The Sacrificial Lamb?

Who wouldn’t want free money thrown their way? Jon Stewart had House Speaker Nancy Pelosi on his show a few months ago and even he was asking her how he could get his hand on all the money flowing out of Washington, with his question to Nancy Pelosi below:

The Daily Show with Jon Stewart (04/08/09) [Link to video on page]

“Let me ask you a question. How do I, Jon Stewart, get in on some of this delicious TARP money? How badly in my own life do I have to screw up before you could give me say, not a billion, 500 million?”

Looking at Hank Paulson’s Ethics

Forget Rolling Stone’s broadside: Today’s must read column is Gretchen Morgenson’s New York Times piece on Paulson:

“Mr. Paulson was closely involved in decisions to rescue A.I.G., according to two senior government officials who requested anonymity because the negotiations were supposed to be confidential.

And government ethics specialists say that the timing of Mr. Paulson’s waivers, and the circumstances surrounding it, are troubling.

“I think that when you have a person in a high government position who has been with one of the major financial institutions, things like this have to happen more publicly and they have to happen more in the normal course of business rather than privately, quietly and on the fly,” said Peter Bienstock, the former executive director of the New York State Commission on Government Integrity and a partner at the law firm of Cohen Hennessey Bienstock & Rabin.”

Its worth reading the whole thing . . .

Real Homes of Genius: $770,000 in Mortgages on a 900 Square Foot Culver City Home

They all of sudden dismiss the Alt-A and option ARM catastrophe heading down the tracks and suddenly feel that they will miss housing bubble 2.0. Many think that if they don’t buy now, they will miss the next manic phase of the market where a 500 square foot shack will cost $1 million. A little bit of housing bubble perfume is back in the mix in Southern California.

23 Comments

gregroberts's picture
gregroberts
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Re: Daily Digest - August 10

Why is National Guard recruiting for 'internment' cops?

Ad campaign seeks workers at 'civilian resettlement facility'

http://www.wnd.com/index.php?fa=PAGE.view&pageId=106304

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idoctor
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Re: Daily Digest - August 10

Hedge Fund Heavyweights

http://www.cnbc.com/id/15840232?video=1210153499&play=1

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Re: Daily Digest - August 10

Hey Greg research FEMA camps on you tube and other sites and you might understand a bit more.

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Re: Daily Digest - August 10 - Health Care Plan info source

Here's a good source for health care info from the White House that deals with some of the wild rumors we've been discussing

http://www.whitehouse.gov/realitycheck/?e=10&ref=text

Jim

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Re: Daily Digest - August 10 - Health Care Plan info source

Jim
Thanks for the link, the videos look interesting. Apparently this is a more fluid process than it seemed at first. I hope the Whitehouse can also have info for elderly who are not internet enabled or twitter/facebook savvy. I am glad they are addressing the content of the bill more directly. The cost will come out of taxes on the wealthier citizens and the rest of us. It may look much different from its current version by then.
Regards
Denise

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Re: Daily Digest - August 10

Opinion

I have another question I hope I can get some opinions on.  I am a 31 year old small business owner in New Jersey.  I have a house with 25 years remaining on my mortgage, I have never been late of missed a payment.  What would happen if the banking system, all forms of government, and the dollar fail.  Would and could they take my house with no means to pay and a full blow collapse of this country?  Would people just inherit their houses?  Any ideas of what would happen to homeowners in good standings with their lender in a full blown collapse.

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Ken C
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Re: Daily Digest - August 10
vinnya wrote:

Opinion

I have another question I hope I can get some opinions on.  I am a 31 year old small business owner in New Jersey.  I have a house with 25 years remaining on my mortgage, I have never been late of missed a payment.  What would happen if the banking system, all forms of government, and the dollar fail.  Would and could they take my house with no means to pay and a full blow collapse of this country?  Would people just inherit their houses?  Any ideas of what would happen to homeowners in good standings with their lender in a full blown collapse.

 

As long as you remain in good standing and can make the payments to whoever holds the note you should not have any difficulty.

But now making the payments includes being able to pay the taxes which will probably go UUUUUPPPPP.

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vinnya
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Re: Daily Digest - August 10

But what happens if the dollar hyperinflates and disappears?  What happens if the governments collapse and my bank goes away. 

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Re: Daily Digest - August 10

 What would happen if the banking system, all forms of government, and the dollar fail.  Would and could they take my house with no means to pay and a full blow collapse of this country?  Would people just inherit their houses?

 

Your home will be the very least of your worries in a failure of the banking system, the gov't or the dollar. I would be much more concerned where your next meals come from, than what happens to your home. A failure of the US dollar would bring an abrupt end to oil imports resulting in insufficient fuel to transport food to the supermarkets. The US consumes about 20 Million barrels of oil per day and domestic production has fallen to less than 5 Mbpd.

I can't imagine the chaos and lawless environment New Jersey would become in your scenerio. Even if you stock up with plenty of food, virtually everyone else doesn't keep a stockpile of food. Starvation is a very powerful motivation to turn even the most civil people into violent criminals bent on taking what they need to ensure their survival.

I believe it was Curtis Lemay who once stated that America is only six meals away from anarchy. Meaning, that if food distrubution was shutdown for more then three days, all hell would break loose.

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What to do after the Collapse?

Vinnya go and read 'The Road' by Cormac McCarthy, it will give you one possible view of what may happen. PS, its not a very cheery read. You've been warned. And hyperinflation is fast enough, pay off your mortgage with your wheelbarrow full of money, that you would otherwise buy a can of soup with. Inflation can be a good thing if you owe money eg: US Gov't.

 

Ivan

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Re: What to do after the Collapse?

 I think we have a great example what would happen nation wide all at once... Katrina.  God help those that live in the urban centers.  Get ready for escape from New York.  The good thing is that choas never lasts forever.  Order always comes around after a spell.  Think of all the times the world has been in choas.  You just have to make it through that short period of time until the cleanup begins.

 

 

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Headless
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Re: Daily Digest - August 10

Here's one for you Davos: http://la-gun.com/email/manning/ 

"The south will rise again..."

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Montana Native
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Re: Daily Digest - August 10

The LA Gun guy sounded mainly like a big mouth, people that think they have "IT" all figured out rarely do. Any man who speaks in the style of a "preacher" should be taken with a grain of salt, or the whole shaker, or well..... an entire salt mine.

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Re: Daily Digest - August 10 - Health Care Plan info source
jpitre wrote:

Here's a good source for health care info from the White House that deals with some of the wild rumors we've been discussing

http://www.whitehouse.gov/realitycheck/?e=10&ref=text

Jim

 

Thanks for that unbiased source Jim.  The whitehouse would never try to pull a fast one on its own citizens.  ;)  LOL. 

I don't want to get political because that is counterproductive to the purpose of this site.  The fact is regardless of whether government run healthcare is a good idea --- we can't afford it.  The US is bankrupt.  Our standard of living is going to be vastly different than the one we have been accustomed to for the last 20 years.  We should be looking at ways to tame government spending and control, not increasing it.  We should be "easing" into the new paradigm instead of running pedal to the metal with the old system until we hit the brick wall.

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Re: Daily Digest - August 10

Davos, first your work on this sight is priceless.

Next I would like to do a commentary of my own (tongue and cheak?). For all it would probably be more prudent to just walk away from their homes and then rent. Your home will never realize its supposed worth (of a year ago) ever again.  Bankrupt all your debt (if you can). It's not likely that your good credit rating means a hill of beans anyways. Besides if you can't pay cash you don't need it.  Buy an old volkswagen that still gets 40 miles per gallon. Frankly I think it would be wise to buy used everything because we have already spent the energy, mined the pits, and burnt the coal to make these products. What better way to conserve on prescious resourses. Then when these items can no longer go any further recycle them and buy another used item. To finish, my point is lets use what we have already produced until it wears away to its natural elements. That would be true conservation, and natural recycling. I dream of better days ahead, simple, clean air and neighbors knowing neighbors. A communal paradise...26,000,000 people unemployed is a sad state of affairs. Sinful frankly....

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Re: Daily Digest - August 10

Second Stimulus Needed to Avoid Lost Decade: Krugman

http://www.cnbc.com/id/32354922

Goldman Must Release Info in Trade-Secret Case

http://www.cnbc.com/id/32364620

Davos's picture
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Re: Daily Digest - August 10

I don't think the announcer is this video had a chance to read Chris's fine work.

00:34 Dealers end up holding 10 year notes? Uh, until next week then the Fed buys them back...

End of video, recovery in housing market? Uh, hmmm, millions of homes sold to folks using sub prime, alt a, option arm, no income no job no docs, primes folks foreclosed on as the result of the fallout, and just who are the buyers going to be? 19 million vacant, 4-5 on the market and heavens knows how many in shadow inventory or how many sitting with NODs.

Ending QE??? I must have missed this I suppose the managed to get revenues up to spending. QE is not an option, we are insolvent, our liabilities exceed our assets and where we used to be able to borrow to service the debt we can no longer borrow enough. It is QE/Counterfeit or die.

FT is usaully ok...

 

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Re: Daily Digest - August 10

The Financial Sense Newshour was rather confusing.  Swenlin at Decision Point says everything is over and we are headed toward 12,000 and a new bull market.  Williams at Shadow Stats say we have a long way to go....down!  One of these guys is going to be very disappointed.  Maybe we need to send Swenlin a CM DVD.

vinnya's picture
vinnya
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Re: Daily Digest - August 10

I have moved out of the city and live in the most rural part of NJ on a small farm with a couple years food stored up and have been preparing for the past 5 years for this.  I have animals fruit and nut trees and everything I need to be self sufficient for the basic necessities.  I would hate to have to move.

Davos's picture
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Re: Daily Digest - August 10

Hello Dante:

Jim lets them talk, and then lets us pick. I prefer that to the shout matches on CNBC. I think Swenlin's view, and I didn't listen closely, is unlikely but possible. I think we could have and are having a bear market rally. How we are going to have an economy without jobs seems impossible to me. I guess until the next shoe falls as long as they can fudge the numbers anything is possible in the market. But I'd be lieing if I said I knew. I don't.

Headless's picture
Headless
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Re: Daily Digest - August 10

Dante said:

"The Financial Newshour was rather confusing."

Davos said:

"Jim lets them talk, and then lets us pick."

Is it possible that Puplava has no preference for the direction of the market?

PFS Group manages over $250 million for more than 900 clients (as of December 31, 2008).  

Is it possible that Puplava's advise is going to allow you and your grandparents to frontrun Goldman Sachs?

Puplava mantra--paraphrased; just slightly: "Buy buy buy gold!" And now he's suddenly saying...?

"Guard ye from the man of silver [gold] tongue, for though he sootheth thy soul, he stealeth thy wife."

 

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cannotaffordit
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Re: Questions about the Collapse ?

 I have what might sound like a couple of dumb questions. (and I'm a pretty well read guy)

(1)  What exactly is going to cause "the collapse?"  Will it be when enough funny money has been put into circulation that the U.S.$  will be completely worthless, and bread will be $15,000 a loaf or more ?

(2)  With the national debt growing exponentially, (and nothing I read tells how it will ever be paid off, but it'll just keep growing and growing)........who will (who can) "call the note?"  

(3)  And, if they do call the note, what can they do if they don't get paid?  Really?

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strabes
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Re: Daily Digest - August 10

Ben, 

1) My bet is eastern Europe collapse will be seen as the trigger for the next phase of the collapse...but it will cause an intense flight to $, not the $ collapse people are expecting.  It will actually have less to do with E Europe fundamentals than it will simply be the next phase of the global credit collapse...the next pendulum swing back to global risk-aversion.

2) For those in the matrix, the simplistic answer is Asia.  But of course reality is that it's the international bankers playing the central bank game at BOC, BOJ, and the asian primary dealers (not to be confused with actual Asian citizens, Asian countries, etc).  Or another group that could effectively call the note would be the people actually obligated to pay it--americans.

3) If the former, i.e. bankers, answering this question leads into what this site calls conspiracy theory so I can't really answer it.  If the latter, i.e. americans say "nope," well that's the beginning of the american renaissance as we return to a republic, fire the DC / Wall St empire government, and put an end to banker rule. 

 

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