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Daily Digest - March 11

Wednesday, March 11, 2009, 11:40 AM
  • March 9, 2009: In Cramer We Trust (Funny! H/T Zombie210)
  • Up Day on Wall St.
  • US Recession Could Last Up to 36 Months: Roubini
  • IMF chief warns world entering 'Great Recession' (H/T Zombie210)
  • 53% Say It's Likely the U.S. Will Enter a Depression Similar to 1930's
  • Bank of America, GE Sell $16.5 Billion of FDIC Debt 
  • Citi and Federal Government in New Non-Rescue Rescue Talks
  • Bernanke Says Banks Will Remain Capitalized, but "Too Big to Fail" Needs to End
  • Famous Last Words
  • Grand Illusion - The Federal Reserve
  • Highway robbery? Texas police seize black motorists' cash, cars (H/T Zombie210)
  • Romer Paper, "Lessons from the Great Depression for Economic Recovery in 2009"
  • More Money: Understanding Recent Changes in the Monetary Base
  • Financials: Here We Go Again Edition
  • On Optimism
  • Meredith Whitney
  • Alcohol, Drugs & Groceries
  • Got Cash?
  • Madoff to plead guilty to 11 counts: lawyer (H/T Zombie210)
  • The Inflection Is Near? (H/T Doug)
  • Uncle Jay Explains the News 

Economy 

March 9, 2009: In Cramer We Trust (Funny! H/T Zombie210)

Up day on Wall St.

US Recession Could Last Up to 36 Months: Roubini

IMF chief warns world entering 'Great Recession' (H/T Zombie210) 

By The Associated Press
ADVERTISEMENT

PARIS - The global economy will shrink this year as the world enters "a Great Recession," the head of the International Monetary Fund said Tuesday. 

Speaking in a taped interview with French television channel France 24, Dominique Strauss-Kahn said economic data has worsened since January, when the IMF forecast global growth in gross domestic product of 0.5 per cent this year.

"Since then the news hasn't been good," Strauss-Kahn said. "I think that we can now say that we've entered a Great Recession."

Strauss-Kahn didn't make a precise forecast for global economic decline this year.

"This recession can last a long time," Strauss-Kahn added, "unless the policies we're expecting are put in place, in which case 2010 can be a year of return to growth."

The World Bank said Sunday that the global economy will shrink this year for the first time since the Second World War and that the global financial crisis will make it tougher for poor and developing countries to access needed financing.

53% Say It's Likely the U.S. Will Enter a Depression Similar to 1930's 

Tuesday, March 10, 

Most Americans (53%) now think the United States is at least somewhat likely to enter a 1930's-like depression within the next few years.

The latest Rasmussen Reports national telephone survey found that 39% think this outcome is unlikely.
Nineteen percent (19%) say a Depression is Very Likely while 7% say it is not at all likely.

The latest results are more pessimistic than those found in early January, when 44% said a 1930's-like depression was likely in the next few years, and 46% disagreed.

In March 2008, only 38% of adults said the country is likely to slip into a depression, while most (55%) disagreed.

The most recent survey also found that half of all adults (49%) say today's children will not be better off than their parents. Only 26% hold the more optimistic view, while another 25% are not sure. Those results have changed little from January, when only 27% said children will be better off and 47% disagreed.

Twenty-six percent (26%) were undecided at that time.

Adults in their 30's are the most worried, with 62% who say it is likely the nation will slip into a deep depression. Less than half (47%) of those Americans over 65 think the country will slip into a 1930's-like depression.

Fifty-four percent (54%) of investors and 53% of non-investors say it is likely the country will slip into a serious depression. Forty-one percent (41%) of investors disagree, along with 38% of non-investors.
A third (32%) of adults with children living at home with them say today's children will be better off than their parents, while only 22% of adults with no children at home agree.

Related Rasmussen polling found that only 45% believe anyone who wants to work can find a job, but most say it is possible for just about anyone to work their way out of poverty in America.

As the economy continues to flounder, consumer and investor confidence continue to hit record lows.
Please sign up for the Rasmussen Reports daily e-mail update (it's free)... let us keep you up to date with the latest public opinion news.

Bank of America, GE Sell $16.5 Billion of FDIC Debt

March 9 (Bloomberg) -- Bank of America Corp., the largest U.S. bank by assets, and General Electric Capital Corp. raised a combined $16.5 billion today selling bonds backed by the U.S. government as they seek to hold down borrowing costs.

Bank of America, based in Charlotte, North Carolina, sold $8.5 billion of notes in its second-largest offering under the Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee program. The finance arm of General Electric Co. sold $8 billion of notes, also its second-biggest under the program.

Citi and Federal Government in New Non-Rescue Rescue Talks

The double-speak in this Wall Street Journal piece, "U.S. Weighs Further Steps for Citi," is so thick that parsing it is like wading through mud.

And I do mean to stress the attempts to obfuscate what is going on. Recall that the last retrade of Citi's arrangement with the officialdom was initiated by the big bank, which seemed a bit annoyed that the government did not jump when it demanded attention (the result was not a new cash injection, but Citi did just fine anyhow. As Bruce Krasting explained:

Last Friday Treasury agreed to convert $25 Billion of the TARP Pref for 36% of the common of Citi. The problem is that as of the close of business on Friday 36% of Citi is only worth $3 billion. This convert looks like a $22 billion loss.

If your broker had slipped a few of these Preferreds into your account last fall and you joined the Feebs on Friday in the convert to Common your account would be down 90% in fewer than four months. Fleeced.

This time, it appears the powers that be initiated the talks with Citi. And no, of course they are not worried, they are doing mere contingency planning.

If you believe that, I have a bridge I'd like to sell you. If this really were contingency planning, the Fed and Treasury should have been on that case the day after the Bear deal was finally wrapped up. And if it was really mere contingency planning, don't you think the Treasury would be doing the same for some of the other big banks?

The ratio of weasel wording to real content is unusually high:

Barely a week after the third rescue of Citigroup Inc., U.S. officials are examining what fresh steps they might need to take to stabilize the bank if its problems mount, according to people familiar with the matter.

Federal officials describe the discussions, which are wide-ranging and preliminary, as "contingency planning." Regulators are trying to ensure that they are prepared if Citigroup takes a sudden turn for the worse, which they aren't expecting, these people say.

Yves here. Even if you merely read this literally, it isn't credible. Has anyone ever prepared for an event they don't expect? Back to the article:

Citi executives said they haven't detected signs of corporate clients or trading partners withdrawing their business, even though the New York company's shares are hovering near $1 apiece -- closing Monday at $1.05 on the New York Stock Exchange. Citigroup says it has a strong liquidity position and that its capital levels are among the highest in the banking industry.

Yves again. Boy, is this not reassuring. We heard the same formula from Bear and Lehman. And did you notice the failure to mention the real elephant in the room, the biggest source of vulnerability......foreign depositors? Citi has over $500 billion (relative to a balance sheet of a tad under $2 trillion) of foreign deposits. A meaningful run would swamp its capital and available liquidity. Back to the story:

Banking regulators and Treasury officials called Citigroup executives over the weekend amid rumors about the discussions, according to people familiar with the matter. They said the talks were geared toward future planning and that no new rescue was imminent.

Citigroup CEO Vikram Pandit issued a memo to employees Monday as the company's shares hovered above $1, arguing the current price does not reflect the company's capital position and earnings power. Read the memo.

The discussions include the Treasury Department, Office of the Comptroller of the Currency, Federal Reserve and Federal Deposit Insurance Corp. The FDIC backs many of Citigroup's deposits in the U.S., as well as a large amount of new debt issued by the firm.

Regulators say the planning should be seen as a normal function of government during a financial crisis. One possible future step could involve creating a "bad bank" to take distressed assets off the balance sheet of Citigroup or other troubled financial institutions. Differing approaches are still being considered. Treasury officials already are developing a public-private partnership to tackle that problem more broadly, and the two concepts could either run parallel or be merged...

Yves here. Again, the disaster planning has started when the horse has left the barn and is now in the next county. And the bad bank talk for Citi has been on since Paulson's failed MLEC concept, circa late 2007, and is nowhere close to being operational. And even then, it was clear that the main beneficiary was to have been Citi, who had far and away the biggest structured investment vehicle exposure of any bank. To the Journal:

Also complicating matters, U.S. officials don't have a template for winding down a company of Citigroup's size and complexity, which Federal Reserve Chairman Ben Bernanke made clear at a Senate hearing last week.

"I'd like to challenge the Congress to give us a framework, where we can resolve a multinational complicated financial conglomerate like Citigroup, like AIG, or others, if that became necessary," Mr. Bernanke told the Senate budget committee.

Yves again. As we (and increasingly others) have said, a special bankruptcy regime for securities firms should have been the first order of business after the Bear failure. And I missed Bernanke's cheap shot at Congress. It's the Fed that has assigned itself the job of financial stability regulator, so the retort that Congress couldn't do better is childish.

Hopefully we are wrong about stress at Citi, but there are reports of growing strain in the credit markets, and Citi may be vulnerable. Perhaps the authorities are finally, belatedly, addressing issues they should have tackled months ago.

Bernanke Says Banks Will Remain Capitalized, but "Too Big to Fail" Needs to End

Federal Reserve Chairman Ben Bernanke stressed the need to overhaul operating rules for "too big to fail" institutions on Tuesday.

Speaking to the Council on Foreign Relations in Washington, D.C., Bernanke said the U.S. government currently remains committed to ensuring major banks have the capital necessary to weather the recession and to meet their commitments.

"Government assistance to avoid the failures of major financial institutions has been necessary to avoid a further serious destabilization of the financial system, and our commitment to avoiding such a failure remains firm," he said.

In a question and answer session following his speech, Bernanke said he thinks bank capital has been very well used and has reduced the deleveraging process.

But going forward, Bernanke said the U.S. government needs to consider creating an authority whose main responsibility is to oversee and prevent systemic risks in the financial structure, and called on Congress to create such a regulatory body. 

The idea that some firms are "too big to fail" and will be bailed out by government reduces market discipline, he said, and creates an unlevel playing field for smaller companies.
It has also been proven to be very costly for taxpayers, he said.

Bernanke said current bankruptcy law and framework in the United States is not effective enough when it comes to large non-bank financial firms, and that the range of financial crisis situations that necessitate government intervention should be narrowed.

He said accounting methods need to be adjusted so that they "do not overly magnify the ups and downs in the financial system and the economy."

However, Bernanke said he does not support suspending mark-to-market accounting. He said while it can aggravate market swings, it is a transparent accounting method.

He also said money market mutual funds - as a key source of funding for some businesses - need tighter restrictions, "to increase the resiliency of those funds that are susceptible to runs."

Bernanke said the Fed is a good candidate for his proposed grand systemic risk overseer. "A good case can be made for granting the Federal Reserve explicit oversight authority for systemically important payment and settlement systems," he said. Still, he recognized this responsibility could overburden the central bank.

Overall, the downside of capitalism is that it is prone to booms and busts, Bernanke said, but noted the model helps improve living standards. The central banker also disagreed with the statement that capitalism is "self destructive."

Famous Last Words

Grand Illusion - The Federal Reserve

The whole world is in a state of complete confusion. Americans are coming to the realization that their lives have been a grand illusion. You thought your neighbor had it made. They were driving a Mercedes, spent $40,000 on a new kitchen with granite countertops and stainless steel appliances, sent their kids to private school, had a second home at the shore, and took exotic vacations all over the world. Now their house is in foreclosure and you are paying to bail them out. The anger and outrage in the country is at the highest level since the Vietnam War. The American public is being misled by government officials, politicians, and the Federal Reserve regarding the causes of this crisis and the solutions needed to solve our economic tribulations.

The average American does not know much about the Federal Reserve. The government and the Federal Reserve prefer to operate in the shadows. If the American public understood what their policies have done to their lives, they would be rioting in the streets. Henry Ford had a similar opinion:

"It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

Most Americans believe that the Federal Reserve is part of the government. They are wrong. It is a privately held corporation owned by stockholders. The Federal Reserve System is owned by the largest banks in the United States. There are Class A, B, and C shareholders. The owner banks and their shares in the Federal Reserve are a secret. Why is this a secret? It is likely that the biggest banks in the country are the major shareholders. Does this explain why Citicorp, Bank of America and JP Morgan, despite being insolvent, are being propped up by Ben Bernanke and Timothy Geithner?

Highway robbery? Texas police seize black motorists' cash, cars (H/T Zombie210)

More than 140 people reluctantly accepted that deal from June 2006 to June 2008, according to court records. Among them were a black grandmother from Akron, who surrendered $4,000 in cash after Tenaha police pulled her over, and an interracial couple from Houston, who gave up more than $6,000 after police threatened to seize their children and put them into foster care, the court documents show. Neither the grandmother nor the couple were charged with any crime.

Officials in Tenaha, situated along a heavily traveled highway connecting Houston with popular gambling destinations in Louisiana, say they are engaged in a battle against drug trafficking and call the search-and-seizure practice a legitimate use of the state's asset-forfeiture law. That law permits local police agencies to keep drug money and other property used in the commission of a crime and add the proceeds to their budgets.

"We try to enforce the law here," said George Bowers, mayor of the town of 1,046 residents, where boarded-up businesses outnumber open ones and City Hall sports a broken window. "We're not doing this to raise money. That's all I'm going to say at this point."

Romer Paper, "Lessons from the Great Depression for Economic Recovery in 2009

In the last few months, I have found myself uttering the words "worst since the Great Depression" far too often: the worst twelve month job loss since the Great Depression; the worst financial crisis since the Great Depression; the worst rise in home foreclosures since the Great Depression. In my previous life, as an economic historian at Berkeley, one of the things I studied was the Great Depression. I thought it would be useful to reflect on that episode and what lessons it holds for policymakers today. In particular, what can we learn from the 1930s that will help us to end the worst recession since the Great Depression?

More Money: Understanding Recent Changes in the Monetary Base

If inflation resumes but the economy does not recover, policymakers will face a difficult choice.

Financials: Here We Go Again Edition

In a way, the recent deterioration in corporate credit spreads and other lending indicators shows that the Federal Reserve can only do so much. The Fed has had success with its introduction of various programs to stabilize credit markets - but the generalized anxiety investors feel about the economic landscape has not been altered, and of late, it has worsened.

Credit spreads, on the whole, have worsened of late, widening against government-issued bonds, and credit-default swap spread levels have also widened, particularly for financial issues. But it's important to note that this recent deterioration reflects worries about the economy rather than a fear-driven flight from risky assets due to liquidity concerns, as it did in the fall.

On Optimism

Yves Smith in commenting on her reading of Nassim Taleb's "The Black Swan":

But second, and perhaps as important, people do not want to see the world as subject to chance to the degree that Taleb says it is. This is hugely unsettling if you really do come to terms with the implications of his argument. We like to believe we have some measure of control over our lives. And research has shown that people do pretty consistently overestimate their degree of control and influence (for instance, most people will exaggerate their contribution to the success of a project, not as a matter of PR, although that may be true too, but their private assessment). Most people (ironically those deemed psychologically healthy) have an optimistic bias and generally assign too high odds of things working out well (the mildly depressed make more accurate assessments. I have often wondered which way the causality runs: do they make better assessments BECAUSE their unhappy state strips away the rose-colored filter, or are they mildly depressed because they keep giving more realistic assessments, which makes them a drag to be around, and they are depressed because they encounter social rejection?). So if you embrace Taleb, you'd have to accept the disorienting fact that the world really is a pretty untractable place, that success had more to do with luck than application (although Taleb stresses the importance of working at being lucky, that is, accepting the opportunity to meet new people and make the most of chance encounters).

Smith's observation is absolutely true -- an update on the science surrounding optimism ran in last week's economist -- though the causality is subtly different.

It has been known for a long time that optimists see the world selectively, mentally processing positive things while ignoring negative ones, and that this outlook helps determine their health and well-being. In recent years, it has also become clear that carriers of a particular version of a particular gene are at higher risk than others of depression and attempted suicide when they face traumatic events. The gene in question lies in a region of the genome that promotes the activity of a second gene, which encodes a protein called the serotonin transporter. ...

It has looked increasingly likely, therefore, that genes - particularly those connected with serotonin - have a role to play in shaping a person's outlook. So Elaine Fox and her colleagues at the University of Essex, in Britain, wondered whether genes play a part in the selective attention to positive or negative material, with consequent effects on outlook.

In a paper just published in the Proceedings of the Royal Society B they report that, sure enough, gene-related variation caused a bias in attention towards positive and negative material. Some people had two "long" versions of the promoter gene (one inherited from each parent), a combination that reduces the amount of serotonin in the junctions between nerve cells. These individuals were biased towards positive images and away from negative ones. By contrast, those who had either a long and a short version of the gene, or two short versions (and thus, presumably, more serotonin in the junctions), did not have such protective biases. In other words, the optimists really did see the world differently.

Rose-tinted spectacles may be good for one's health, as these results fit in with wider ideas about how a tendency to look on the bright side of life is part of being resilient to stress. Those with short variants of this gene are expected to have an increased susceptibility to mood disorders following such stress. It is not all good news, though, for optimists. Because these results suggest that a person's attitude to life is inherited, they serve as a stark warning to all buoyant optimists that trying to cheer the rest of the world up with nothing more than a smile and an effortlessly sunny disposition is doomed to failure.

That is, genetic makeup endows a disposition to selectively distort reality in order to present a falsely optimistic picture which, though fostering emotional resiliency under duress, is indeed distorted and false.

Meredith Whitney

Alcohol, Drugs & Groceries 

Got Cash?

Madoff to plead guilty to 11 counts: lawyer (H/T Zombie210)

Prosecutors said they would seek a 150-year prison term for the ex-Wall Street baron, saying they intended to throw the book at him, and would show no leniency.

"There is no plea agreement" for a reduced sentence for Madoff, one prosecutor in the case said in the court.

The Inflection Is Near? (H/T Doug - Repost)

Let's today step out of the normal boundaries of analysis of our economic crisis and ask a radical question: What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it's telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall - when Mother Nature and the market both said: "No more."

Uncle Jay Explains the News

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37 Comments

Davos's picture
Davos
Status: Diamond Member (Offline)
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Posts: 3620
Re: Daily Digest - March 11

bernankes_brew.jpg

Zombie210: That Cramer video rocked! If I was in that pot above, boiling, and I was blind I wouldn't take directions on how to get out from that momo!

The rest of the news has me scratching my head in disbelief.

We have another professor who studied the Great Depression who is now advising the president. A president who said he was going to be opened minded but won't read financial blogs.

Okay?!?!

She says that all economic indicators are the worst since the Great Depression. Okay, help me understand this, every indicator she is looking at is cooked. Unemployment 8% is really 18%, GDP is cooked by about 40% and yet she bases how bad things are on these really, really, really bogus numbers. Am I to believe that she doesn't know what the birth death adjustment is? Or what imputations are?

Hello? We have shanty towns & tent cities out there, home foreclosures out the proverbial and six figure layoffs each month. Gee, yah don't think we just might be in a depression Romer?

Your paper gets an F. Maybe Cramer isn't the only loser out there advising people.

I find it interesting to see the masses went from 38% to 53% think we will end up in a depression. Of which 54% are investors. I suppose as sales figures slip, layoffs mount and the market tanks some more these numbers will change strengthening the self reinforcing feedback loop.

And that is my rant for the dayWink momos 2, uninformed investors and the most powerul leader of the world 0.

Take care 

anndreuw's picture
anndreuw
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Re: Daily Digest - March 11

Yeah I love John Stewart, his Cramer (CNBC) battle have been going on for a while and I think the worst of it has yet to come. Maybe its a small scale representation of this economic crisis. haha

nickbert's picture
nickbert
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Re: Daily Digest - March 11

"Gen Xers get hit with a double whammy"

http://www.msnbc.msn.com/id/29497408

- Nickbert

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nickbert
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Re: Daily Digest - March 11

Regarding the above article I posted..... being at the tail (younger) end of the "Gen-X generation" I've always disliked being labelled and lumped in this group or any group for that matter, but I guess I do identify with that article.  I'm vested in a pension with my company, but I don't expect to ever see any of that money.  Ever since I started working in my teens I figured Social Security to be a joke and never expected to see a dime of it.  And I've never had the expectation of job (or any other) security, or that government will take care of me or even manage to do anything right for that matter.  Neither the tech bubble or this credit bubble really caught me off-guard or completely unprepared and I've always put myself in positions to be flexible and adaptable career-wise.  So perhaps there occasionally is a little bit of truth to the generalizations the popular media likes to stamp us with, and I guess as far as labels go 'resilient' is something I can live with.  And perhaps having my "armor of cynicism" regarding most aspects of government, media, or popular culture will be an even greater advantage in the years ahead.  It might soon be considered a survival trait Wink

- Nickbert

A. M.'s picture
A. M.
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Re: Daily Digest - March 11

Nickbert,

+1 to everything you just said.

Cheers!

FireJack's picture
FireJack
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Re: Daily Digest - March 11

Okay so far the subprime disaster has destroyed the banks, the US government has spent trillions and trillions to, well accomplish nothing really. European countries are on the brink of collapse and the pension problem is going to add trillions more to the debt. This derivative problem is a big unknown, 700 trillions dollars and its like a big nuclear bomb sitting there. Is it going to go off? How big is it going to be? Who knows.

 

Then I think it was last week Davos pointed to this video from 60 minutes:

Mortgage meltdown   -If anyone can embed the video into the post I would be most grateful as don't know how to do that.

 

Okay so these Alt-A Option arm mortgages are going to cause a larger more devastating wave. 60 minutes treats the problem like oh the markets will go down for a bit longer so just don't buy for a bit. Uh won't this mean that the US government will no longer be able to pay for basic services like water or school? Won't a large number of European countries go bankrupt? Am I just touching the surface of the devastation that will happen.  

 

Amusing watching Harper strut around talking about how the canadian economy is so great because of him bla bla. I'm hoping the Ignatieff is aware of what is about to hit us and decided not to topple the harper government because he knows what going to hit us harper is going to be standing there at the helm talking about what a great capt he is while the ship goes down. 

gregroberts's picture
gregroberts
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Re: Daily Digest - March 11
FireJack
Type [video: first then paste the url, if you paste the url first sometimes it will turn red and then it won't work, give it a try. Oops, it would not let me post the format so just add another bracket to the end of the url. Right above where you post comment is the format.
Greg
Davos's picture
Davos
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Re: Daily Digest - March 11

Hello FireJack, You can do a video:put http link here, don't snag the embed code on youTube just the Url copy and put it inside of [ brackets ]

Take care,

PS I think from todays Geithner video on Charlie Rose A conversation with Timothy Geithner, U.S. Treasury Secretary  that they are going to make the banks sell the toxic off balance derivatives and we the people are going to ensure any losses that they incur in the market.

I haven't done the math, but common sense would dictate that if to insure them with our tax dollars that they have to sell them really, really, really cheap - and I doubt that this is going to happen as the banks pay our elected officials cash and we just send them annoying emails. So, I think we are going to be on the hook for boucoup dollars when the derrivative SHTF round one. And, I don't know how to figure out what this means for, say, all the many, many, many pension plans that were totally stupid and invested money in this toxic waste.

While doing this is probably smart I also don't see how the flip it is going to encourage consumers to borrow. And, without consumers spending what they have saved or have borrowed I see no flipping reason for the economy to improve.

Then, like you said here comes wave 2.

IMHO these people couldn't come up with a plan to exit a burning building if the exit door was at their fingertips and sadly they are in our way.

That is my optomisitc take on it  

Doug's picture
Doug
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Re: Daily Digest - March 11

I've been seeing this $700 trillion number thrown around a bit.  Where does that come from? 

Davos's picture
Davos
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Re: Daily Digest - March 11

3

The entire artilce is here  http://www.financialsense.com/fsu/editorials/2009/0213b.html

What these things are really worth who the heck knows... But even if they sold them at .50 cents on the dollar that would be $87,920,500,000,000.oo to be liable for and if we had to ensure even 1/4 of that it would cost out at 21 trillion. Personally, I think Geithner's plan, and I haven't even heard it yet - is lamo.

Insure the depositers, let the banks go, redenominate the dollar and lets move on. This is retarted.

pjvalvo's picture
pjvalvo
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Re: Daily Digest - March 11

U.S. Army soldiers caught patroling the streets of Samson, Alabama.

This is a direct violation of the Insurrection Act. They are being utilized in a police fashion after a mass family murder-suicide.

 

http://www.vancouversun.com/news/dead+Alabama+shooting+spree+Police/1375074/story.html

 -look in the picture section.

Is this how they start getting us used to the idea of seeing soldiers as police officers?

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Damnthematrix
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Re: Daily Digest - March 11

"In the last few months, I have found myself uttering the words "worst
since the Great Depression" far too often: the worst twelve month job
loss since the Great Depression; the worst financial crisis since the
Great Depression; the worst rise in home foreclosures since the Great
Depression. In my previous life, as an economic historian at Berkeley,
one of the things I studied was the Great Depression. I thought it
would be useful to reflect on that episode and what lessons it holds
for policymakers today. In particular, what can we learn from the 1930s
that will help us to end the worst recession since the Great Depression?"

What will it take for people (even Roubini..?) to realise this depression is nothing like the 1930s... 

In the 1930s, America was awash in oil.  In the 1930s, the five largest oil fields in the world were yet to be discovered.  In the 1930s the world population was 1/3 what it is today.  The 1930s might as well have been on another planet!

Looking for solutions to this crisis in the past will only make things worse, as we flounder, oblivious toi the real issues facing us this time.

Mike 

ernie's picture
ernie
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Re: Daily Digest - March 11

The link to the Financialsence article didn't work.

(http://www.financialsense.com/fsu/editorials/2009/0213b.html)

 

They got hacked a week ago and haven't managed to get their site back to the way it was. I guess no backups.

 

Here is a link to the mention of the $700trillion

http://www.europac.net/externalframeset.asp?from=home&id=15674 

 

- Ernie.

 

FireJack's picture
FireJack
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Posts: 156
Re: Daily Digest - March 11

 

Okay here is the scenerio I'm seeing. This year, say sept, the derivative bubble pops and the US gov has to come up with 400 trillion dollars. It either defaults or prints it (which would be worse)? Let's say it prints, US dollar becomes worthless and Asia finds itself holding now worthless debts. China descends into cival war as large parts of europe go bankrupt. Mexico, south america, africa, austrlia, I dont know.Mexico will collapse but beyond that don't know enouph.

 

Financial collapse, it's happened before people got through it. What im concerned about are things that were not part of previous financial collapses.

a. Will basic things like road, bridge, and piping for water and sewage still be maintained, Where will the money come from to pay for this? What about other things like hospitals and schools? Can stuff like this still go on if its going to be as bad as it looks? There is an article today on the oil drum called "The economic crises impacts on public health."

 

b.  Will farmers still plants crops for food. My understanding is that farmers need capital to buy the seeds etc for the crops, especially where it is owned by large comglomerates. Will this go on as usual? My picture of how all this works is very vague. With the large droughts and the possibility that China does not have the 60 mill tons of grain they claim they have this could be a big problem. 

 

c.  The collapse of oil production due to lose of capital. The oil drum article had it dropping down to 20 mill a day by 2011 (a 1% chance) but already problems are cropping up.

 

A lot of big problems coming in all together and already all the money has been spent. A lot of people seem to think that we can just hunker down and weather the storm and I'm not sure how seriously to take these problems im seeing. 

 

 

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Re: Daily Digest - March 11

It's interesting that Mr. Tilson (from the 60 minutes piece) said that his firm is bullish on the stock market.  I'd love to know what sectors they think are primed to profit, and why.

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Re: Daily Digest - March 11

Greg

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Re: Daily Digest - March 11
Davos wrote:

Is it me, or does the middle fellow look suspiciously like Sir Francis Bacon?  Given the role Sir Bacon played in laying the foundations for the NWO, could this cartoonist be winking at his buddies?

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Re: Daily Digest - March 11

Is it just me or is Celente all over the place in that interview? He goes from very apocalyptic pronouncements to sounding as though he expects colleges, universities and restaurants to survive, and you just need to choose wisely in your degree program or the small business you plan to start up... I wish I had a clearer picture of what sort of chaos and collapse some of these prognosticators are imagining...

eta: I'm laughing at two "is it me?"s in a row. I swear I didn't see the previous post before I posted!

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Re: Daily Digest - March 11

I agree, Sue. I'm what I guess you might call a fan of Celente's and that's probably the worst (most random and rambling) interview I've heard him probably ever give. I noticed the same thing when I listened to it a few days back. He was on Alex Jones today, and I'm looking forward to hearing that one later. BTW, the last time he was on Alex Jones was one of his best.

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Re: Daily Digest - March 11

good to know. I'll hunt up the alex jones interview and give it a listen. I've heard a lot about him, and I'm quite interested in hearing what he has to say, but he must have been giving too many interviews lately. this economic crisis will make anyone punchy, i suppose...

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Re: Daily Digest - March 11

Ocean "Dead Zones" Spreading Rapidly as Humans Pollute the Planet

http://www.naturalnews.com/z025795.html

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Re: Daily Digest - March 11

What do cars and cows have in common? No, not horns

http://www.timesonline.co.uk/tol/news/environment/article5877416.ece

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Re: Daily Digest - March 11 Grand Illusion - The Fed Reserve

This article takes some liberty with the truth, perpetuating some often repeated errors.

For example, there are not three classes of shareholders, but there are three classes of directors for each of the 12 Fed district banks.  Three are Class C, appointed by the Board of Governors of the Federal Reserve System from outside the financial community to represent industry, labor, agriculture, etc. The remaining 6 directors are elected by the member banks of the particular fed district. Three Class A directors from the banking community and Three Class B directors from outside the banking and financial community.

Banks apply for membership in a district bank and pay 3% of their capital reserve ( I think), so big banks pay more, but each bank gets only one vote, independent of size. The application is publicly available at federalreserve.gov as a downloadable pdf. Member banks are paid a 6% dividend for their shares.

The Board of Governors is an agency of the US govt, whose members are appointed by the president for 14 years and approved by Congress. None may have any financial interest in any banks. They are the big kahunas in this structure.

There are explanations and links to various sites on:

Web Skeptic: Researching outrageous claims on the internet

Two in particular,

http://webskeptic.wikidot.com/federal-reserve-ownership

http://webskeptic.wikidot.com/federal-reserve-system

- Caasi

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Re: Daily Digest - March 11

jomanc

While I don't disagree that dead zones are a growing problem and one that needs some level of attention, I am sometimes distressed by the use of numbers without perspective.  The article states that 95,000 square miles of ocean are now dead zones.  That is a big number and one that most people would become very alarmed about.  It is 0.07% of the ocean surface.  If we were talking about the relative area of the average human's skin we would be talking about less than 2 square inched of your whole body.  A nasty burn or scape of that area would hurt but is still not much to be overtly concerned about.

As for the cow problem, well I guess we are going to have to give up the refried beans to do our part and be at least as responsible as the cows.  BTW as I understand it, methane is a far more potent greenhouse gas than is CO2 so you can't really equate tons of CH4 emmissions to tons of CO2 emmissions.

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Re: Daily Digest - March 11
cwixom wrote:

While I don't disagree that dead zones are a growing problem and one that needs some level of attention, I am sometimes distressed by the use of numbers without perspective.  The article states that 95,000 square miles of ocean are now dead zones.  That is a big number and one that most people would become very alarmed about.  It is 0.07% of the ocean surface.  If we were talking about the relative area of the average human's skin we would be talking about less than 2 square inched of your whole body.  A nasty burn or scape of that area would hurt but is still not much to be overtly concerned about.

And if it was skin cancer?

Burns and scrapes generally heal only if you stop the burning and scraping.

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Re: Daily Digest - March 11

Wondering if any site members have seen this PDF and what do you make of it:

http://sites.google.com/site/arthurianeconomics/off-line/NAE.pdf?attredirects=0

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Re: Daily Digest - March 11

InsideARM: Fitch: Spiraling U.S. Credit Card Delinquencies Point to Record Defaults


Quote:

NEW YORK -- U.S. consumers are falling further behind on their credit card bills as the economy continues to unravel, setting the stage for record default rates going forward, according to Fitch Ratings.

For the second consecutive month, credit card delinquencies breached all-time highs according to the latest Fitch Credit Card Index results. At January month end, the 60 plus day delinquency rate was 4.04%. The results come amid an unending parade of troubling economic data from surging unemployment to steeper declines home and equity market values.

... 

 

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Re: Daily Digest - March 11

http://snipurl.com/dlqxi

Chuck Norris claims thousands of right wing cell groups exist and will rebel
against U.S. government

The call by some right wing leaders for rebellion and for the military to refuse
the commander in chief’s orders is joined by Chuck Norris who claims that
thousands of right wing cell groups have organized and are ready for a second
American Revolution. During an appearance on the Glen Beck radio show he
promised that if things get any worse from his point of view he may “run for
president of Texas.” The martial artist/actor/activist claims that Texas was
never formally a part of the United States in the first place and that if
rebellion is to come through secession Texas would lead the way.

Today in his syndicated column on WorldNetDaily Norris reiterates the point:
“That need may be a reality sooner than we think. If not me, someone someday may
again be running for president of the Lone Star state, if the state of the union
continues to turn into the enemy of the state.”

He continues; calling on a second American Revolution; “…we've bastardized the
First Amendment, reinterpreted America's religious history and secularized our
society until we ooze skepticism and circumvent religion on every level of
public and private life.

How much more will Americans take? When will enough be enough? And, when that
time comes, will our leaders finally listen or will history need to record a
second American Revolution? We the people have the authority according to
America's Declaration of Independence, which states: That whenever any Form of
Government becomes destructive of these ends, it is the Right of the People to
alter or to abolish it, and to institute new Government…”

Norris claims that; “Thousands of cell groups will be united around the country
in solidarity over the concerns for our nation.” The right wing cells will meet
during a live telecast, "We Surround Them," on Friday March 13 at 5 p.m.

He closes with the words of Sam Houston followed by a plug for his next martial
arts event.

“We view ourselves on the eve of battle."

(Note: Speaking of showdowns, Chuck is also inviting anyone near the Houston
area this weekend to see a good example of the raw Texas fighting spirit by
joining him and others for the national martial arts event, "Showdown in
H-Town.")“

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Re: FDIC collected few premiums 1996-2006

Per Boston Globe: http://www.boston.com/news/nation/washington/articles/2009/03/11/now_nee...

The ABA spokesperson said: there was no reason to collect these premiums because "the interest income was enough to cover all the bank failures." He had no idea that any "economic collapse" could continue.  Must have been using the same data set the guys at Long-Term Capital Management were using.Tongue out

 

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Re: Daily Digest - March 11
cwixom wrote:

That is a big number and one that most people would become very alarmed about.  It is 0.07% of the ocean surface.

Living in Oregon, this is a big deal.  Our dead zone ALONG THE COAST is getting bigger.  That is where lots of fish, crabs, oysters, etc. are caught.

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Re: Daily Digest - March 11
Damnthematrix wrote:

http://snipurl.com/dlqxi

Chuck Norris claims thousands of right wing cell groups exist and will rebel
against U.S. government

Is it me (another is it me ;) or is Chuck Norris neither hinged or intelligent?

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Re: Daily Digest - March 11

Chuck forgot Sinclair Lewis' observation that "when fascism comes to America, it will be dressed in the flag and carrying a bible."

He should stick to kicking dummies.

 

SG

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Re: Daily Digest - March 11

Once again someone fails to catch the point.  What part of

Quote:

dead zones are a growing problem and one that needs some level of attention

was too complicated to understand or that impugned that I was not interested treating this problem.  Of course I could take the "and what if it was skin cancer" and ASS U ME what was meant that it is the equivient of  metastasized melanoma and that therefore the oceans are doomed no matter what we do so why even try, but then I would be off point too and making rediculous assumptions about that remark. 

What we should be talking about is what is the appropriate level of response to the problem and the most effective way of resolving it without killing all humans, causing them significant economic harm, or starving them to death.  I would be more interested in your well thought out proposals for a solution than the typical "the sky is falling, do something, anything, quick!" reaction we see so commonly in our congress.  I would also like to hear what you are doing in your personal life to address the problem as much as you as an individual can.  Maybe there would be some ideas I could incorporate into my personal actions to help.

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dickey45
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Re: Daily Digest - March 11
cwixom wrote:

I would also like to hear what you are doing in your personal life to
address the problem as much as you as an individual can.  Maybe there
would be some ideas I could incorporate into my personal actions to
help.

I'm using less chemicals at home and no longer fertilizing.  I'm also trying to get away from using our rivers (that dump into the ocean) as our extended sewer system.  Hmmmm, composting toilets.  Well, maybe not yet ;)

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Re: Chuck Norris

As a Texan and as a lifelong martial artist, I'm embarrassed by the opinions of Chuck Norris. I know the typical stereotype of Texans is of gun-toting, tobacco spitting, idiot cowboys. Norris's comments reinforce this invalid stereotype. I have lived in Houston my entire life, and I want people to know that these "cowboys"  make up a very small percentage of the local population.

Jeff 

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Re: Daily Digest - March 11
Quote:

Is it me (another is it me ;) or is Chuck Norris neither hinged or intelligent?

according to Chuck, he didn't say anything about right-wing cells.  gotta be careful being suckered by how the elite media portrays people.  he's clearly not the brightest guy in the world, but that doesn't mean he's a bad man.  in fact he sounds like a down home guy who knows how to have a loving life whereas ivy league and wall st elitists who run our show might sound good on TV but are generally sick.

from what I've heard him say, he wants to go back to a federal republic where individual citizens have the power rather than being an international empire of dumbed-down subjects controlled by professionals.  I couldn't agree more. 

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Doug
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Re: Daily Digest - March 11

I kinda doubt that anyone who does infomercials with Christy Brinkley is all that "down home." 

BTW, my son has a T-shirt entitled The Many Moods of Chuck Norris.  It then has 9 pictures of him with specific emotions written under each.  All the pictures are identical, showing the same stone face we are accustomed to. Smile

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