Rolling US Economy Into The Shitbin Thread

Cunning Realist has a little project going.

We haven't even got a good name for that pass play in the last Super Bowl yet. Dude needs to chill.

Hahah

http://bigpicture.typepad.com/comments/2008/03/foreclosure-pro.html

"the owners, have ceased paying their mortgages in some cases for nearly 2 years and have continued to occupy these homes. Now, these are homes in excess of $2,000,000 in the very best neighborhoods in South Florida"

this true? those jinglemail dudes must be regretting handing the keys back so easy now

http://themot.org/gallery/d/45773-2/gas_prices.jpg

yeah i was gonna start a rolling shitty gas prices thread yesterday.

$3.25 down the street, though i'm sure i've got it easy compared to some of you guys.

gas prices are further evidence that I am way too pessimistic to make money with puts and shorts or whatever, because I was calling for $4/gallon (DC area) back in 2006

I think I was just too young and unaware of how much oil companies will manipulate their own pricing at american pumps in order to maximize profit

like, maximize maximize warehouse full of actuarial scientists and microeconomics phd's all evaluating demand curves and models of agents with bounded rationality 80 hours a week maximize

will fed cut again in response to todays payroll data?

I'd say yes. One quarter percent cut looks about right to me.

They are in a tough spot. Politically speaking, they need to look busy. However, in real terms a cut now will do at least as much harm as it does good. It's only for show, to keep the panic on a lower simmer instead of coming to a boil.

it's good to know that we're using our fiscal policy primarily to sooth a bunch of panicky cocaine-addicts.

haha I know

http://bigpicture.typepad.com/comments/2008/03/whose-the-socia.html

Further, the ECB doesn't seem to care where their equity markets are.

http://bigpicture.typepad.com/photos/uncategorized/2008/03/06/2008europeangraphic.jpg

whoa the market was around 11500 in Jan '00. It's now at 11900.

where's my coke

NEW YORK (AP) -- Stocks tumbled for a second consecutive session Friday after the government's much-anticipated February jobs report revealed employers slashed payrolls last month, touching off concern that a cornerstone of the economy's growth in recent years is showing signs of strain. The Dow Jones industrials fell more than 200 points, bringing their two-day slide to more than 400.

The decline came despite the Federal Reserve's announcement that it would take steps to aid the credit markets.

The Labor Department's report that employers cut jobs by 63,000 last month -- the most since March 2003 -- unnerved investors worried about the health of the economy and who had been expecting a 25,000 gain in jobs. While the unemployment rate fell to 4.8 percent, the decline reflects people leaving the labor force.

The payroll numbers arrived minutes after the Federal Reserve announced it would take fresh steps to ease credit troubles, including boosting the amount of money it will auction to banks.

IT LIVES:

http://www.latimes.com/media/alternatethumbnails/photo/2008-03/36502038-07122031.jpg

Whoa Nellie.

So can someone help me understand what the fed did? They basically offered to trade government securities to financial institutions for risky mortgage-backed securities? Does anyone have any opinion on that?

Well, not exactly a trade- a 28-day loan of a Treasury with a AAA-rated mortgage-backed security as collateral.

ah ok. So does that basically add liquidity by temporarily letting banks hold more safer securities? I really don't understand this stuff that well.

Yes, it's supposed to be a liquidity injection - since the banks can easily convert the Treasuries to cash. There are some things that are not yet clear, such as will the Feds automatically roll these loans over every 28 days as long as the MBS hasn't been downgraded? What haircut will be applied to the MBS collateral?

So is there any big risk here? Like what if the MBS turn out to be even worse than we thought?

I guess there is some risk of the bank defaulting on the loan, but if that happens, I think we can assume the bank is hosed anyway since I don't think the government is going to let them just walk away from the loan unless they are in fact bankrupt.

The Fed's discount window is always portrayed as the 'lender of last resort' for banks in liquidity trouble. Hiowever, if a bank takes advantage of this, there is generally a presumption that the bank is in deep, deep shit. Their stock takes a big hit, other banks view them with increased suspicion, etc.

What this gambit seems to be doing is offering roughly the same opportunity, but without (they all hope) as much adverse baggage. It looks to me like an attempt to buy time for the banks while the latest interest rate cuts work their way into the system. It probably can't make anything worse in the big picture, but if things still look as bad in three months, then it won't accomplish jack shit.

rearranging chairs on titanic

yes. middle class now actually sitting in the ocean itself.

or I should say anybody who actually has to worry about expenses, as opposed to worrying about returns.

Approvals for new loans are dropping through floor in UK but mortgages and loans are how money is introduced to the economy, right? Money supply has been increasing at around 10-14% in the UK over last 3-5 years (similar figures in US?) - which all backs up a continuing inflationary scenario (which has been happening for years but had been hidden as it went into real estate). Is this now a pushing on a string situation? ie, for the inflationary scenario to continue won't loans need to continue?

obviously money has been going into commodities and gold but isn't this 'existing' money?

intuitively a continuing inflationary scenario seems to make more sense, if only because ben has read a lot of books on the depression and they'll do anything to avoid a repeat, and interest rates will presumably be cut aggressively further...but how is it going to get out there without loans and mortgages (I guess in UK mortgages and consumer loans take up a larger proportion of total debt since all UK industry got closed down)

guess it comes back to that old inflation vs deflation argument. or whether oil/wheat/gold are going to 'correct'. still have trouble conceiving of gold as anything but an 'inverse dollar' sometimes though

talking of which....close to 990 again

Unless a commodity is in a genuine shortage (i.e. orange juice after a massive freeze in Florida) then commodities are not really a value-added, growth-oriented kind of investment, but rather a hedge against capital losses, at times when financial instruments appear to be bad risks (i.e. bond ratings are being cut or inflation is accelerating).

Right now, traders (it's more neutral than calling them speculators, but let's stop calling them 'investors', ok?) have given up looking for returns and are looking to preserve capital from loss. That's why commodities are surging. There's a disctinct chance that the low interest rates are just going to fuel commodity speculation and push inflation up at a dizzy pace.

The Fed's goose is really cooked right now. They are nudging the dollar towards the cliff. As I said several months ago, if it comes down to saving the banks or saving the dollar, the Fed will jettison the dollar like a jet pilot hitting the big red EJECT button.

If I were the fed I would be quietly tapping up the good folks in the gulf, china and singapore and pleading with them to start buying up banks (moreso than the stakes they have already bought).

Funny, but sobering.

laughing and crying

a toxic blend. just in time for spring break.

Anyone want to buy a slightly used Bear Stearns

Although probably good to see JP Morgan Chase involved in the bailout rather than just the Fed. Wasn't it JP Morgan who locked the US banking community in his ballroom until they agreed to bail out a collapsing bank?

It was his library

took this at a local bagel shop a few days ago:

http://img.photobucket.com/albums/v335/gypsyfrocksbedlam/IMG_0479.jpg

Indeed, although you'd have to be blind not to have noticed the price of staples going up.

they should print some of these

http://bankjegy.szabadsagharcos.org/xxcentury/p136_b.jpg

http://upload.wikimedia.org/wikipedia/en/9/97/500000000000_dinars.jpg

Who is next after Bear Stearns? Lehmann?

how long before one of those, buys one of these:

http://thelongestlistofthelongeststuffatthelongestdomainnameatlonglast.com/images3/currency5.jpg

xpost

http://www.underconsideration.com/speakup/archives/idiocracy_money.jpg

Ouch. Bear Stearns sold to JPMorgan at $2 a share. Tomorrow should be a fun day for the markets.

http://online.wsj.com/article/SB120569598608739825.html?mod=hpp_us_inside_today

tell me, a total ignoramus, what the difference is between a recession and a depression---

Also, how did normal people with no savings make it through the depression?

"a recession is when your neighbor loses his job; a depression is when you lose yours" (i've seen that quote attributed to truman and reagan, among others).

i think that an economic depression is an economic downturn that lasts more than one year and an at least 10% decrease in a nation's economy during that period.

Bear Stearns was on the brink of financial collapse Friday when JPMorgan (JPM, Fortune 500) and the Federal Reserve Bank of New York said they would provide the brokerage a short-term loan. Bear was dealing with a classic run-on-the-bank: The firm's short-term creditors refused to lend the firm any more money and simultaneously demanded repayment of outstanding debt.

O_O

In the nineteenth century, these were called "panics". Then some bright early version of a PR-type person substituted the more soothing euphemism "business depression".

Consequently, President Hoover spent a vast amount of time in 1930 and 1931 making soothing speeches about how the "depression" was a temporary matter and "prosperity was just around the corner." By the time he was done the great public had connected the term "depression" with a soul-scathing cash famine.

Thus, the new euphemism "recession" was born. Now the public (especially those who weathered 1981-84) has learned to connect "recession" with a soul-searing cash drought. No new term has been substituted as of yet, although the term "banana" was attempted by one Fed chairman with an odd sense of humor.