Rolling US Economy Into The Shitbin Thread

rolling Iceland into the shitbin now:

Fears that Iceland could be the first country to fall victim of the global financial turmoil grew yesterday when its central bank abruptly increased interest rates 1.25 percentage points to 15 per cent in an attempt to restore confidence in its struggling currency and stave off a full- blown economic crisis.

ATA files for bankruptcy; 2200 people unemployed overnight; Google acquires Doubleclick at too-high price, lays off 300

If you haven't already enjoyed about as much of this as you can stand, today's Fresh Air was one of the best explanations I've heard of the current financial crisis:

http://www.npr.org/templates/story/story.php?storyId=89338743&ft=1&f=13

http://www.economagic.com/em-cgi/data.exe/fedstl/exszus+2

destruction of the US dollar since 1971

1971: $1 bought you 4.3 swiss francs
1981: $1 bought you 2.1 swiss francs
1991: $1 bought you 1.5 swiss francs
2001: $1 bought you 1.7 swiss francs

this time last year it bought you 1.2 swiss francs

now it buys you a swiss franc

I'm not convinced the CHF is by any means immune from everything right now (esp with UBS stuff going on) but it will be interesting to see how the $ fares against it over the next couple of years

http://farm3.static.flickr.com/2399/2388931511_bb89b35e6d_o.gif

its more dramatic over the last 40 but here it is since dotcom crash

The Swiss franc is kind of an odd currency. Deprecation of the USD against the franc is probably just because Swiss inflation has historically been really low.

Agreed, but isn't what makes it a good benchmark to measure against?

better to measure against countries we do more trade with, I would think?

The price of oil has actually fallen considerably against Picassos.

that chart is worthless

I don't have any data, but I would kind of assume that the GBP, Euro/Euro precursor currencies have all fallen against the Swiss franc post-Bretton Woods.

Oh, yes, from that perspective agreed. I meant as a measure of depreciation of a currency (maybe this is why people wanted swiss bank accounts!) - though you are right, comparable currencies over the long term have probably weakend at similar rate to dollar

Agree with Circles there

What didn't you like about the chart Don? (just thought it would make a change from charts of dollar vs gold is all!)

well it a way all that chart does is show that the swiss franc behaves a lot like a commodity

True - which is why i figure it could be in an interesting measure of the path of the dollar/gbp over the next couple of years (cf inflationary vs deflationary bust). gold fulfills this function pretty well but can be emotive, volatile and speculative (the "is gold in a bubble?" arguments - whereas it harder, at least i think its harder, to argue that CHF is in a bubble

Which side of the inflation/deflation fence do you sit on Tombot? or to ask another question, "Is Cash King Now?"

I believe that real currency stability should be the goal of a well-managed economy and that nominal growth - god forbid nominal plateaus - at the expense of real value is a short-sighted, equity-favoring, egg-sucking pack of communistic lies designed to keep the rich fat and let everyone else die while they continue to believe that the universal franchise is just compensation for struggling through nigh-unescapable chumphood

cash doesn't have to be king, but cash should never be a horrendously STUPID way to hold your worth, which is what it's become. If you ain't making money for the money changers you're just a little piddling peon and deserve your eventual destitude. Fuck the lot. Burn it down.

Oh, it's late, isn't it.

but anyway I've been considering that my near-future purchase of a primary residence might be worth scaling back so that I can put a bit more into the markets - my timing has been off for the past couple of years, but I know that jim cramer is a day-trader imbecile, and I know that whatever I decide I want to live in is unlikely to appreciate by any reasonable amount over the next five years or longer.

commodities are already too high. they'll go higher, but knowing when to sell in that market is rife with peril at this point.

I agree totally, thats kind of what i was trying to get at with my figures vs CHF, that holding savings over the last 40 years has been the fed laughing at you, punished for having savings. i save, despite the fact i also save in a currency that is debased and is headed nowhere good any time soon:/

interesting about whether commodities are too high, i cant work it out. (ie 'gold is in a bubble' talk, is why i posted CHF figures. is CHF in a bubble?)

are people holding lots of swiss paper to dump on the market when they retire? is there a mass retreat into swiss currency from scary things like stocks or american bonds? That's what I mean by commodities being high. The "so-called-smart" (lol smarter than any of us) crowd is already in up to their elbows in chicago now. I always try to think three steps ahead (lol not rich yet).

I know what you are getting at, but is there a mass retreat into commodities? I'm not saying there isn't, I'm saying I don't know - basically because I don't know how 'mass' mass is? At this stage of the game I'm happy enough just to be debt-free and with savings that could last a couple years in event of job loss. Can't see every being 'rich', more about a buffer ( but then how many people have any kinds of savings cushion? even rich people! who mightnt be so rich if can't liquidate assets in falling knife selloff!)

Whats chicago?

chicago is the US commodities trading floor. it's where hardcore gamblers test their black box shit before trying it out on the "easy money" on wall street. smaller fortunes die far more horrible deaths in chicago on the daily, while the chubby ivy kids wring their hands in NYC over the perfumes of such unproven ideas as GOOG or APPL.

Anecdotally, a coworker told me that when he went to have his taxes prepared this weekend, his Girl April related to him that people are coming in crying, lost their job, their house, and please please jesus I just need a few dollars more, please don't make me owe the government too.

If people out in the boondocks are having that kind of a year already, I don't know whether that means bottom by june or if we're in for a double dip.

hmm im kinda seeing commodities (ok well gold) as long term hedge. volatility of thats tuff (and silver!!) wouldn't dare trade or try shorting it. i figure somewhere between 10-25% in gold as hedge for next 4 years or so. If it doesn't do well, silver lining means its maybe not as tin hat out there as it looks

I see a big fat wad of stupid people selling off gold in quantity over the next decade until it's down to half of what is is now. I'll be wrong as usual, of course, I thought houses couldn't possibly go for half a million dollars out in the middle of goddamned nowhere, with no seaside and a horrific commute. On the other hand, I'm still right about that last part, after a terribly cruel and horrific fashion that's done nobody any good.

Tin Hat Time: When do you think the banks realised what was going to happen? How much of it do you think was actually planned rather than incompetency (I'm not saying it was planned - and at face value the banks are major losers in this - but after the dust clears?) I mean, we've been here many times before? (though perhaps not in this scale, and it does look like unwinding of a post ww2 bubble as much as a post 01 bubble in many respects)

I've been wondering about that too, but in my naive eyes it seems more like an inadvertent conspiracy of self-interest than a deliberate conspiracy, i.e. everyone who stood to make any kind of fee or commission on anything didn't give a fuck about the results of their actions.

At the same time it's hard to understand how major financial institutions could design and insurance companies could insure instruments based on an assumption that real estate would rise forever.

Bubbles are shared illusions, a lot of people make a lot of money out of the shared illusions. Whether the institutions realised it or not they were building a game of timebomb pass the parcel. I think a lot of institutions did know what was going on because they were selling their dross off the books as soon as they could.

I lean more that way too....generally (The UK banks knew in 2001 I think - maybe didn't expect to go on as long as it did).

Yes to "everyone who stood to make any kind of fee or commission on anything didn't ive a fuck about the results of their actions" as in 'I'll be long gone when shit hits fan', but this doesn't explain higher up the chain - at what point did they know

(Semi?)-engineered downturns in the past (1907, 1913) seem to have been a lot...quicker? I'm just curious as to who is going to come out of this a winner (at face value the writedowns look bad for the banks, but on the other hand haven't JP Morgan basically just been 'given' Bear Stearns - after getting the means to do it...kind of from themselves - dunno if misreading that but it seems that way)

Market manipulation has become the standard way for the rich to make money.

For example, some brilliant child in a hedge fund seems to have discovered that the world market for rice is huge, but prices have traditionally been set in the U.S. on the Chicago Merc trading floor.

Because rice is far from a staple in the USA, that market was fairly small. Small == easy to manipulate. Lately, the number of rice contracts traded has tripled. Not coincidentally, the world price of rice has shot up. And somebody has been making a killing. This whole thing is about as real as the Enron-induced electricity "shortage" in California in 2002.

Food riots in third world nations are apparently a small price to pay for mega-profits for some hedge fund and a big bonus for some smart kid... amirite?

inadvertent conspiracy of self-interest
qft

this doesn't explain higher up the chain
I think it's the that people who really knew were one step from the top and could pass the blame upward to the very top, and those guys were off playing bridge and not giving a fuck

yeah I mean my impression of the big ibanks and insurers and audit firms is consistently that b-school grads bust their balls "work hard party hard" trying to get up to that rarefied echelon and then once they're there actually showing up to the office more than once a week is below their station

I know a lot of dudes at big ibanks (and hedge funds, for that matter) that fucking work all the time. Most of them are in their 40s and are pricks.

Can anyone recommend good articles on speculation as a factor in current commodity price spikes?

The US government has denied speculation is behind the spikes; quite odd they would even take any position in it in the first place.

prevents them from having to take the ibanks to task next week after half the world goes to shit. see dystopian screenplay thread update on food riots already going down. "we told you last week, speculation had nothing to do with it."

My cousin's son was an ibanker in wall street and died recently of a "mysterious heartattack" at age 26. Yeah..."work hard party hard" sometimes die hard 2 (i'm awful, i know)

But if you're doing cocaine 11 times a day just to make it through your 70 hour workweek for a job you don't even like I don't know how much unlimited sympathy you deserve

Well he wasn't exactly doing all that coke to help the poor or because it was the only way he could feed his family.

As I recall, Dick Cheney publically and scornfully dismissed the idea that the California energy price hike was due to market manipulation back in 2002, too. That inconvenient fact was tossed down the memory hole after the Justice Department took Fastow and Lay to court.

well and even in 2002 dick cheney lying through his ugly teeth wasn't really newsworthy

Yeah it was more of a "this is how what all the other bros at work are doing too" thing. Or whatever.

smartest guys in the room is an excellent documentary btw

yeh, When Genius Failed (about LTCM) is a good kinda-complementary read

Man, if genius keeps failing on us like this, we might have to stop acting surprised!

I don't think anybody on this thread was surprised! mainly because we're not geniuses I guess