It seems that everything is melting down. I do not believe for a moment that $700B is the true cost of the bailout. It will be much higher than that and will no doubt be in the trillions, not billions. Credit rating agencies are considering lowering the usa's stellar rating from aaa down to something lower. If that happens, treasury bonds will be harder to sell and must carry higher interest rates. Eventually no one will buy them and the govt will be officially insolvent.
I predict that social security payments will stop some day and most banks will go under. Unemployment will top 20% and may go much higher. Some countries will see unemployment of 70% or more. Inflation will hit like a semi going 90 plowing into people's savings. That nice little nest egg you were going to retire on will be just about enough to buy food and gas for a year or so.
Invest in gold, silver, oil and other commodities. Real estate is still dropping but that is going to turn around. You might be able to pick up some properties for a song when they hit bottom. Some day it will all get better but until then, it will get much worse.
If you listen closely, you might hear the sound of a giant derivative bubble popping. For years, many have predicted just this. The market is being exposed for the paper tiger it has become. When short term gains trump all else and the greedy oligarchs acquire sufficient political clout to craft deregulation like we've seen, its not only the markets that get exploited, but also WE the people.
Trickle down socialism is really fascism.
Greed causes a wealthy few to exploit the masses through free market manipulation.
Stupidity would be giving those same wealthy few a bail out of this financial crisis when it was their drive for short term profits coupled with a new found ability to bundle sub prime paper to non-traditional carriers of home loans that got us in this mess in the first place.
Why reward bad business practices by throwing more money their way? Its not going to stop the derivative bubble from bursting. Financially sound companies will step in and fill the credit need, reaping a profit on low risk, sound notes.
I have a feeling its going to get worse before it gets better, as this crisis has been building for over two decades, imo. (At least since the onset of Raygun's trickle down, voodoo economics.)
lw
When I read $700B all I thought of was how much longer it will take to dig out. We need to accept where we are at now and take what is coming to us. Start fixing now! Pumping $700B will not fix the problem, just cover it up for a few weeks. What do you guys think the overall cause of this epidemic is?
Greed coupled with bad economic policy (trickle down economics) caused this debacle.
LOL Nice tag line, btw.
lw
...also
The stock market is artificially inflated and has been for years. If you check the fundamentals of many companies doing well on the stock exchange, their real value should/would be considerably lower. High debt to equity with unrealistic forecasts based more on potential stock market growth than creating real value through a good or service. Short term gains have fueled the stock market and most growth has been on paper rather than due to real growth.
If the country decides to print 700 trillion new dollars to fund this bailout, the real value of a dollar will be diluted, causing inflation, affecting everyone.
Refusing to bail out the badly run companies may cause a credit crunch in the SHORT TERM but that's what is needed to really get this economy back on track, imo. We need to start focusing on real growth in the long term and stop worrying about this quarter.
lw
Quote from: "laughingwillow"If the country decides to print 700 trillion new dollars to fund this bailout, the real value of a dollar will be diluted, causing inflation, affecting everyone.
Refusing to bail out the badly run companies may cause a credit crunch in the SHORT TERM but that's what is needed to really get this economy back on track, imo. We need to start focusing on real growth in the long term and stop worrying about this quarter.
Prior to every economic crisis or potential recession, a plethora of opinions rise up and clash on whether it will be inflationary or deflationary. In worst case scenarios, see "hyperinflation" and "deflationary spiral" on Wiki. Here in the US, inflation nearly always wins out (just look at the 80's and the dot-com bubble). This is because banks favor inflation. It undermines the toxicity of their long term debt obligations and liabilities (Citizens hate it because it forces them to dig deeper into debt to meet the rising costs of living). Every once in a while however, we have a severe deflationary period and money becomes very VERY tight resulting in a deep recession (or "depression"). The sad thing is that such an experience is actually healthy for the long term economy because it washes out mismanaged leverage by squeezing the books till all the red ink rises to the surface. Over time companies consolidate and the weak ones die (as is intended in capitalism) then we recover with a stronger dollar and the standard of living gradually catches up.
The 700 trillion is not actual currency (or M1 money supply) and is injected into our economy as a long term debt obligation on the part of the treasury (which gets passed on to foreign investors, the financial sector, and the generous taxpayers), and as such its effect will be very very volatile.
The sad thing is, when this happened to Japan, they tried everything to ease lending and oil the gears but nothing worked and eventually they had to bite the bullet and buy up all the bad debt-backed securities from their banks and bail them out in a similar fashion (skyrocketing their national debt). Their deflationary period lasted over a decade and the unemployment was horrible.
The really really sad thing though is that what Japan did and what we are now attempting only work to perpetuate a cycle which will continue to rear its ugly head now and again with increasingly larger and more impressive numbers over the years.
Right on, caul.
Thanks for the clarifications.
lw
Quote from: "laughingwillow"The stock market is artificially inflated and has been for years. If you check the fundamentals of many companies doing well on the stock exchange, their real value should/would be considerably lower. High debt to equity with unrealistic forecasts based more on potential stock market growth than creating real value through a good or service.
Truer words were rarely uttered by any modern economist or analyst. We thought the lesson of the Dot-Com bubble was "only invest in actual earnings", but a P/E ratio is intangible and we have investors buying based on forward P/E numbers (which are just made up). Price to book (which is the true value of a company), these shares are selling at insane prices (even now). Any investment guide from before the Dot-Com will describe a P/E ratio above 9 as overvalued, overbought, or priced forward... But all through 2006-2007 and even into '08, analysts everywhere were saying that a P/E of 20-30 means the stock is oversold (regardless of the book value or the long term debt).
It is definitely a stock market crash
#1 September 29, 2008 10,365.45 -777.68 -6.98
What do all great depressions have in common?
debt, greed and stock market crashes.
Dow industrials fell on fears bailout package vote would fail, but later recovered to a loss of about 400.
If you're decades away from retirement, like I am, today's plunge (//http://consumerist.com/5056591/dont-panic-about-the-stock-market) is a buying opportunity!
...click the link...
I'm glad the bailout failed but it's just a matter of time before the thieves put something together anyway. The public be damned is their motto. Both Mc and Obama are in favor of a bailout so it will happen. We just have to wait until the right bribes hit the right hands and then it's a done deal.
I'd like to see the overpriced stocks take a beating and the overpaid managers get the sack. Let the banks fail and be taken over by other banks. When the dust settles, we would have a more realistic economy.
It looks like the line of big businesses waiting for a govt handout is longer than we thought. In addition to banks, investment firms, insurance companies, etc, we will also have to bail out the carmakers. Could the rest of the nation be far behind? Don't hold your breath waiting for your own bailout, it's only for rich people who made stupid mistakes and now want you to help them.
http://www.nysun.com/national/next-bail ... ers/85937/ (http://www.nysun.com/national/next-bailout-may-be-for-automakers/85937/)
Next Bailout May Be for Automakers
McCain, Obama Back Loan Guaranties
By RUSSELL BERMAN, Staff Reporter of the Sun | September 16, 2008
WASHINGTON â€" The beneficiary of the next government bailout may not be Wall Street but Motor City.
The nation's top car manufacturers are pushing Congress to act by the end of this month to guarantee $25 billion in loans to help them invest in the production of fuel-efficient vehicles. The idea is being greeted warmly by both the Democratic and Republican presidential candidates, who see it as a way to win votes in the swing state of Michigan while also moving America away from dependence on foreign oil.
Backers of the legislation, which include the Democratic leadership in Congress, say it would give a needed boost to a struggling industry and save American manufacturing jobs. But critics have panned it as a taxpayer-funded rescue plan for automakers who have lost out to foreign competitors in the race to build cleaner, more efficient cars.
"It boils down to a bailout of the Big Three," a senior fellow at the Heritage Foundation, James Gattuso, said, referring to the ailing American firms, General Motors, Ford, and Chrysler. "It is a direct subsidy to car makers."
Congress authorized the loan guarantee as part of a broader energy bill in December, but the money was never appropriated. Now, as lawmakers return to Capitol Hill for an abbreviated session, industry executives are lobbying intensely for Congress to dole out the funds before leaving town for the year at month's end.
Electoral politics and the recent willingness of the federal government to aid teetering financial firms have come into play, analysts and congressional sources said. "We know the auto industry feels somewhat emboldened to come to Washington and ask for subsidies," the associate director of the Cato Institute's Center for Trade Policy Studies, Daniel Ikenson, said.
It is only for the rich. What a sad, sad, sad world we live in. I say down with the bailout and let it fix itself, no matter how far down we have to go. Shits broke, pumping more money into something as broke as this is in no way gonna fix it.
BTW in my book, fixing itself could mean learning to live differently. We do not have to keep living as we have been in our society. Honestly, I don't see how this way, if somehow it does turn around, would even make our lives better in the future. Its broke.
"The Panic of 1893 (//http://en.wikipedia.org/wiki/Panic_of_1893) was the worst economic crisis to hit the nation in its history to that point. To put this event in context, the period of economic crises known as the Long Depression (1873-1896) was worse than the Great Depression of the 1930s"
We've been broke a long time. So much for progression. I say, let the government buy up everything and let them handle it all. We obviously cant handle it ourselves. What would be so wrong with a government run health care system or with a government run public transport system. Once the transport system is play we won't need umpteen million vehicles on the road, all with one passenger in them at any given time. This is just the start of what a properly elected government can handle. Mind you, I haven't mention government run social programs for the hungry and needy. There is no reason any of this should be for profit. If you want to provide a service, within reason and sanction of said government you shall be allowed on a large scale. If you just want to provide a service to put food on your families table, so be it.
The whole world is following the example of the usa and going down the drain. I don't quite see how it spreads like that. If other countries bought our toxic securities, then they would lose money but not go under. Iceland declared it's close to insolvency. The panic is spreading.
http://ap.google.com/article/ALeqM5gKRj ... AD93MDG7G0 (http://ap.google.com/article/ALeqM5gKRjNtb1ttrKSPTqOIlkHe6PPh6AD93MDG7G0)
IMF: World economy to slow sharply, led by US
By JEANNINE AVERSA â€" 4 hours ago
WASHINGTON (AP) â€" The world economy will slow sharply this year and next, with the United States likely sliding into recession reflecting mounting damage from the most dangerous financial jolt in more than a half-century.
The International Monetary Fund, in a World Economic Outlook released Wednesday, slashed growth projections for the global economy and predicted the United States â€" the epicenter of the financial meltdown â€" will continue to lose traction.
"The world economy is now entering a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s," the IMF said in its report.
The IMF now projects that the global economy, which grew by a hardy 5 percent last year, will lose considerable speed, slowing to 3.9 percent this year. It is forecast to weaken even more â€" to just 3 percent â€" next year, marking the worst showing since 2002. In the past, the IMF has called global growth of 3 percent or less the equivalent to a global recession.
Well, when you build a financial house out of straw, this is what you get. Its bigger than toxic securities, imo.
This does show how individual economies have evolved into one global financial system since the internets went online.
lw
btw, the stock market bubble has been growing for years with large gains on paper and little product advancement or infrastructure development to back the upward movement. Imo, this phenomena can be attributed to confidence and optimism in future market performance. Or some might say overconfidence and unwarranted optimism that has suddenly come to a crashing halt once the numbers start heading south.
lw
Iceland is asking for a few hundred million to avert disaster. That is like spare change among nations. Most self respecting third world countries won't ask for less than a few billion. It's like seeing the fine old gentleman down the block who is reduced to begging on the street corner.
Markets around the world are still tumbling. The rate cut by the fed was like a tiny balloon in a hurricane. It was hardly noticed and did little good as did the so called bailout. The next great depression has started and we are witnessing it. Hunker down because it's going to get a lot worse before it gets better. Sell off any stock you may own, down worry about taking a loss. Just get what you can.
Iceland's economy in midst of meltdown
From Chicago Tribune news services
October 9, 2008
Iceland plunged further into financial turmoil on Wednesday as the country's third-largest bank went into receivership and the government abandoned attempts to put a floor under its free-falling currency.
Prime Minister Geir Haarde acknowledged that it will take the nation of 320,000 people several years to recover from the crisis, which has been wrought by the exposure of the country's banking sector to the global credit squeeze.
The brief stock surge of Oct 13 was followed by more drops which wiped out the advances. The Dow which was up to 14,000 last year, is in the range of 8,000 now. The world is in a recession and depression is looming. When the media and the politicians admit we are in a recession, it will be depression time. Don't keep more than $100,000 in one account and sell all stock you own. The housing market is still headed down but the bottom may be seen by 2010 perhaps.
World stocks tumble as Tokyo markets plunge 11 pct
By JEREMIAH MARQUEZ â€" 9 hours ago
HONG KONG (AP) â€" World stocks tumbled Thursday, with Tokyo's market plunging more than 11 percent, after another dive on Wall Street as worse-than-expected data about the U.S. economy heightened fears of a global recession.
Japanese Prime Minister Taro Aso blamed the renewed drop in markets, which had rebounded earlier this week, on investor concerns that the U.S. government's $700 billion bank bailout was insufficient.
"Since it was insufficient, the market is again falling sharply," Aso told lawmakers. He did not elaborate.
Tokyo's Nikkei 225 stock average slid 1,089.02 points, or 11.41 percent, to 8,458.45, its biggest drop since the 1987 stock market crash.
In South Korea, the main index dropped 9.25 percent after Standard & Poor's said it may downgrade the credit ratings of some of the country's leading banks. The ratings agency warned the credit crisis could make it difficult for the companies to refinance maturing debt.
Hong Kong's key index trimmed losses, closing down 4.8 percent after falling more than 8 percent earlier.
Benchmarks in Britain, Germany and France opened about 3 percent lower. Russia's RTS also fell back.
Investors were unnerved by U.S. data showing the country's retail sales fell 1.2 percent in September, almost double the 0.7 percent decline analysts expected â€" clear evidence that consumer spending, which accounts for more than two-thirds of U.S. economic activity, was weakening.
That was followed by more bearish data from the U.S. Federal Reserve that showed the economy continued to slow in the early fall as financial and credit market problems took a turn for the worse.
All told, the readings provided some of the most ominous signs to date that the world's largest economy â€" a critical export market for Asia â€" was sliding into recession, if not already in one.