Op-Ed Contributors - The End of the Financial World as We Know It - NYTimes.com

"OUR financial catastrophe, like Bernard Madoff’s pyramid scheme, required all sorts of important, plugged-in people to sacrifice our collective long-term interests for short-term gain. The pressure to do this in today’s financial markets is immense. Obviously the greater the market pressure to excel in the short term, the greater the need for pressure from outside the market to consider the longer term. But that’s the problem: there is no longer any serious pressure from outside the market. The tyranny of the short term has extended itself with frightening ease into the entities that were meant to, one way or another, discipline Wall Street, and force it to consider its enlightened self-interest." (Emphasis Mine.)

I've long used a mantra to keep entrepreneurs from making huge mistakes: Avoid short-term gain that leads to long-term loss. But to do that, you have to be willing to look at the long-term options and consequences, so that your short-term decision is based on enhancing the long-term, not sabotaging it.

Our financial system took away long-term oversight in favor of "improved" short-term analysis, something akin to blackening the windshield while fiddling with the speedometer. Are We doomed? Here's the answer...and it is not pessimistic. An example that is well within reach (now):

"THIS could be fixed. Congress might grant qualifying homeowners the ability to get new government loans based on the current appraised values without requiring their bank’s consent. When a corporation gets into trouble, its lenders often accept a partial payment in return for some share in any future recovery. Similarly, homeowners should be permitted to satisfy current first mortgages with a combination of the proceeds of the new government loan and a share in any future recovery from the future sale or refinancing of their homes. Lenders who issued second mortgages should be forced to release their claims on property. The important point is that homeowners, not lenders, be granted the right to obtain new government loans. To work, the program needs to be universal and should not require homeowners to file for bankruptcy." (Emphasis Mine.)

1000

Comparing the Great Depression With the Crisis of 2008 - InformedTrades

Comparing the Great Depression With the Crisis of 2008 - InformedTrades

No snip; just go read it. It'll take about 4 minutes and leave you wondering about what happened then and what will happen now.

The Economic News Isn't All Bleak - WSJ.com

"First, we haven't seen war, revolution, the collapse of states and governments or massive demonstrations sweeping the globe. Crowds have demonstrated in China, Greece and Thailand -- for reasons sometimes related to the economic crunch and sometimes not. Pakistan is teetering for multiple reasons -- of which economics is only one. But major economic crises in the 20th century almost always led to those types of major breaks, especially during the 1930s. While no one can say whether they will come in the months ahead, for the time being we should be remarking on how relatively stable things are in light of what has happened.

Second, consumers in many parts of the world are in relatively good shape. That statement might strike many as absurd, given the mantra of 'consumers have been living beyond their means.' But it's not just the third of American households that have no mortgage, or the 50% savings rate in China, or the still massive wealth accumulation in the Gulf region, Brazil and Russia. It's that the credit system, even at its most promiscuous, didn't allow consumers to take on the obscene leverage that financial institutions did. Millions of people who shouldn't have been lent money were, either in mortgages or through credit cards. But they couldn't be levered 40-to-1 as investment banks and funds were."

Press reports document criminality of US financial elite

IntelDaily.com:

"Among the executives remunerated in the millions, even as many of their companies began to report losses from the subprime mortgage collapse, were:

* John Thain, CEO of Merrill Lynch, who was awarded $83 million. His firm, now merged into Bank of America, received $10 billion in TARP money.

* Lloyd Blankfein of Goldman Sachs, who took home $54 million. Goldman Sachs spread around $242 million to its top five executives. It has received $10 billion in TARP funds.

* Richard D. Fairbank, the head of Capital One Financial Corp., who was paid $17 million. Capital One was given $3.56 billion in TARP money.

* Bank of New York Mellon CEO Robert P. Kelly, who was paid $8.6 million. His firm received $3 billion from TARP.

Another Associated Press article, published Monday, documents the refusal of the banks to reveal what they have done with the billions in taxpayer funds they have received. The AP put questionnaires to 21 banks that each received more than $1 billion in the government bailout, posing four questions: 'How much has been spent? What was it spent on? How much is being held in savings, and what's the plan for the rest?'

According to the AP, not a single bank provided specific answers." (Emphasis Mine.)

From this same article:

"In a fundamental sense, the entire economy has become a gigantic Ponzi scheme. Now the vast edifice of paper values is collapsing, posing either a revolutionary transformation of economic life on socialist foundations, or the ruination of the working class and broad sections of the middle class.

The ill-gotten gains of the financial aristocracy must be confiscated and used to provide for the needs of the people. No rational and humane solution to the deepening economic crisis is possible without the working class politically settling accounts with the present-day "Ancien Regime" of Wall Street swindlers and their political accomplices." (Emphasis Mine.)

FactCheck.org: Who Caused the Economic Crisis?

FactCheck.org: Who Caused the Economic Crisis?

"So who is to blame? There's plenty of blame to go around, and it doesn't fasten only on one party or even mainly on what Washington did or didn't do. As The Economist magazine noted recently, the problem is one of "layered irresponsibility ... with hard-working homeowners and billionaire villains each playing a role." Here's a partial list of those alleged to be at fault:

++The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap.

++Home buyers, who took advantage of easy credit to bid up the prices of homes excessively.

++Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses. 

++Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes. 

++The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families.

++Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates. 

++Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages.

++Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral.

++The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market.

++An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.

++Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up. 

The U.S. economy is enormously complicated. Screwing it up takes a great deal of cooperation."

US economy posts worst results for 27 years - Business News, Business - The Independent

"When the fourth-quarter GDP is calculated next month, it is expected to show the US economy contracted by about 1.5 per cent from the previous three-month period. Just a few weeks ago, the consensus was for a contraction of less than half that."

Oops.

Maybe We Should Try Stimulating Individuals Instead. THAT Would Stimulate the Economy. | Personal Finance Corner

AllBusiness.com

"What if it was given to individuals? What if the government took the rest of the $350 billion from the $700 billion bailout and gave it to the people? They could give $50,000 to $100,000 tax free to households making less than $250,000 and remain under that $300 billion mark. They're going to give that money to people who made bad decisions anyway, it might as well be regular folks who made bad decisions. Besides, if there was a massive stimulus package for individuals, many of us who made good decisions would be rewarded.

Congress could even stipulate that $10,000 of the money has to be spend on consumer goods. Now there's something that would stimulate the economy. And do it quickly. And just imagine how many people would go out and buy a new car. Auto industry gets help to! Plus, such a large chunk of money would help individual personal finances as well:

--Debt reduction.
--Increased investment (would help the stock market).

--Make substantial payments on mortgages (reduce foreclosures).

If our politicians are bound and determined (and they are!) to spend hundreds of billions of dollars, maybe they should abandon trickle down in favor of trickle up." (Emphasis Mine.)

Think about it: Your family and that of most everybody you know could have received something like $75,000 each, the government would have stopped its bleeding cash at just about $300 billion and what argument could there be against this as the easiest, cheapest and fastest way to jump-start the economy while also letting the current fat-cat idiots get their just desserts?

TARP This: Paulson's Bailout Plan Riddled With Deception | CommonDreams.org

"A New York Times report from London explained:

'Some analysts said the idea that recapitalizing banks would repair the lending market was flawed from the beginning because it was contradictory. On the one hand, the policy was meant to make banks reduce risk. On the other, it pressured them to lend more which meant taking more risks.'

So instead they diverted some of the money to satisfy their internal needs. An Associated Press investigation found: 'Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year.' Many other banks would not disclose what they did with the money. Many of them have tightened credit, rather than loosened it." (Emphasis Mine.)

The Liberty Papers--A Primer on Money

"The dangers of government control of the money supply:

There are two properties that make governments especially destructive:

1) Governments are able to seize resources by force and to compel people to do buainess with them allowing them to continue economically unprofitable activities for far longer than free market enterprises.

2) Governments, being controlled by people who have little incentive to take a long term view, and a great deal of incentive to use their offices for short-term personal gain

When governments seize control of the money supply, the result is usually disaster. They overproduce money, usually by debasing coinage. They force people to use the state approved currency to the exclusion of all else. In extreme cases they wreck the economy so badly that saving because impossible, and the economy reverts to a barter economy.

Today, the United States government has engaged in massive amounts of spending. They are not getting this money through taxation. Rather they are borrowing it, and a good porioin of what is being borrowed is money created by the Federal Reserve. The production costs of U.S. dollars being almost nonexistent, the Federal Reserve can continue to create money profitably through a Zimbabwe like hyperinflation. The Soviet Union and Nazi Germany were founded upon the ruins of nations whose economies had been strangled by government mismanagement of money. Will the United States similarly succumb to tyranny? Time will tell."

America Will Soon Owe More Than Its Citizens Are Worth

Peter G. Peterson Foundation

Well, that's a bitch...

As 2008 Fades Away by Michael S. Rozeff

LewRockwell.com

Some 21 thoughts on Our economy, 6 of which are highlighted here:

"12) The natural economy is what always keeps things going and produces the taxes that support the dollar and the government. It produces the goods and services we all want. The sick economy absorbs more resources than it gives back. It destroys value.

13) The natural economy gets stunted and suppressed when government directs resources to the sick economy through undue credit creation, to subsidies to sick companies, and to wealth transfers to people who gambled and lost.

14) The economy is very large. Neither the Fed nor the government can really control it. The attempt to do so weakens them and the economy both, which means it hurts us. Since this crash is so large and there is so much bad debt, at best the economy will limp along despite the massive government efforts.

15) The government and the Fed will be weaker than ever in terms of revenues and basic balance sheet health. But these institutions have power, with the blessing of the American people, and they are using it in large doses. They can paper over things for a while.

16) The extremely low yields on Treasuries are a negative sign. It shows that the economy is not producing real returns. It is stagnating. The same thing happened in the 1930s and in the Japanese economy from 1989 onwards.

17) The best way to have adjusted in 2008 was not chosen by our officials. That way was bankruptcy and re-organization in the economy. It would have been painful, but it would have led to a better-founded, more free, and healthier natural economy. The government–Fed way risks a breakdown of the economic and political system in a host of ways, leading to virtual dictatorship, economic controls, inflation, and slow growth." (Emphasis Mine.)

Okay, maybe there is a plot to take over the whole country, instead of just running off with the loot...

Nazi Economics by David Gordon

Lew Rockwell.com:

"...(A) key point that (economist Ludwig von) Mises often stressed: any intervention in the free market necessitates further interventions, because the initial measure will fail to achieve its goals. If the interventions continue, full state control of the market will rapidly ensue. The end result will be not capitalism, but socialism. As Mises put it: 'All varieties of interference with the market phenomena not only fail to achieve the ends aimed at by their authors and supporters, but bring about a state of affairs which – from the point of view of their authors’ and advocates’ valuations – is less desirable than the previous state of affairs which they were designed to alter. If one wants to correct their manifest unsuitableness and preposterousness by supplementing the first acts of intervention with more and more of such acts, one must go farther and farther until the market economy has been entirely destroyed and socialism has been substituted for it.' 

Exactly this process took place in Germany after 1933." (Emphasis Mine.)

I don't think the murderous moron is a 21st-century Hitler. There are limits, you know, and a minor one is that Adolf was demonstrably smarter than "Our guy."

I don't believe what We're seeing is a deliberate economic mess, for the consequences are too huge to control for the good of anyone. But I do think the trend is to secure as much money as possible for an oligarchy and rather than run the country with an iron fist, the simple goal is to walk--if not run--away with a double-fistful of loot.

Democrats Vow to Push a Science Agenda - TIME

"(The Democrat panel) also suggested the government's role in spurring scientific innovation should include improving infrastructure — from labs to computer networks — and making long-term funding commitments to researchers. 'Funding for science is so shaky, scientists themselves end up being risk-averse,' says Holt — a lack of certainty that he feels tends to stifle innovation."

One of the very few unimpeachable points concerning economics is that government investment in research and development has high returns, usually around 25-35% and at times as high as 120-140%.

Why? Risk reduction and infrastructure to promote more R&D. The Democrats are heading in the right direction here.

For a change.

Clusterfuck Nation by Jim Kunstler : Change You Won't Believe

"Just as global oil production peaked, our economy evolved into a morbid hypertrophy, and the chief manifestation of it was the suburban sprawl-building fiesta that has now climaxed in the real estate bust. By the early 21st century, when so much American manufacturing had been swapped out to Asia, there was no business left except sprawl-building -- a manifold tragedy which wrecked the banks that financed it, and left the ordinary people mortgaged to it with ruinous liabilities.

That economy is now in its death throes. The 'normality' it represents to so many Americans is gone and can't be brought back, no matter how wistfully we watch it recede. Even so, it was obviously not good for the country. The terrain of North America has been left scarred by unlovable objects and baleful futureless vistas that, from now on, will shed whatever pecuniary value they once had. It represents the physical counterpart to the financial mess that has been left to the young generations to clean up -- and the job will take a very long time."

Optimism still exists, but you have to dig past the cynicism and disdain to see where it might be...

Four really, really bad scenarios - Eamon Javers - Politico.com

The Bait Effect: A terrorist attack takes advantage of the economic crisis to have a "multiplier" effect.

The China Syndrome: China dumps its near trillion dollars in U.S. bonds and other obligations and pulls the rug under Our economy... and maybe theirs as well. But as they say in chess, it's not what you do, but what you can do that influences the game.

The Existential Crash: The U.S. of part of A. staggers, stumbles, pulls its focus inward to keep from reeling into a coma and the rest of the world slides into a higher level of chaos.

The Alternate-Dollar Nightmare: Simple: The moment a currency appears that has the power to attract investment away from the dollar, the dollar's toast. (It's worth that now.) 

But, as the article points out, who would you rather be, the U.S. or some other country? That's where the opportunity--and responsibility--lie.

Bailout Passes 200 Mark - ProPublica

"MidSouth, a Louisiana bank, will 'win' a $20 million investment on favorable terms. So far, 205 financial institutions have gotten a piece of TARP, the $700 billion bailout bill, according to ProPublica’s running tally. Money has been doled out across the country, from Hawaii to Maine to Puerto Rico. As always, you can see where the banks are on our map.

The biggest participant so far is Citigroup ($45 billion), the smallest Saigon National Bank, a regional bank in California ($1.2 million). The average investment is $1.2 billion, but the vast majority of banks have gotten much less – the median investment is $50 million. $246.95 billion total has been tagged for investment."

Go ahead, click and see Banco Popular of Puerto Rico getting its filthy hands on $0.935 billion. That's 935 million dollars. You wanna guess how much of that has been loaned to customers to help revitalize the local economy?

hahahahahazilch

The Next Round of Mortgage Shocks

NolanChart.com:

"What (CBS News' 60 Minutes) did acknowledge is that the next round of mortgage defaults is coming from two classes of mortgage lending that are slightly (but barely) more financially responsible than sub-primes. There were nearly $1 trillion in sub-prime mortages, but these new (to most Americans) forms of mortgages, the Alt-A and Option ARM mortgages, total roughly another $1.5 trillion. Given the fact that the banking industry has already sustained some devastating shocks, there is increasing doubt about the continued viability of many of the largest banks still left standing. Worse, it's going to take another 3-4 years for these loans to default, because that's how long it's going to take for the interest rates on these loans to reset to higher levels. Given the fact that a large segment of these loans are already defaulting even before the interest resets take place, the expert interviewed on the program claimed that he expects roughly 70% of these loans to default based on current, pre-reset default rates!"

I saw the segment and based on the facts presented, it seems inevitable that the housing-related implosion is just heading to Part II. What solution or solutions can stop this need to be implemented in the coming months.

Bush added loophole to Wall Street bailout provision | Business | Chron.com - Houston Chronicle

"Congress wanted to guarantee that the $700 billion financial bailout would limit the eye-popping pay of Wall Street executives, so lawmakers included a mechanism for reviewing executive compensation and penalizing firms that break the rules.

But at the last minute, the Bush administration insisted on a one-sentence change to the provision, congressional aides said. The change stipulated that the penalty would apply only to firms that received bailout funds by selling troubled assets to the government in an auction, which was the way the Treasury Department had said it planned to use the money.

Now, the small change looks more like a giant loophole, according to lawmakers and legal experts.

In a reversal, the Bush administration has not used auctions for any of the $335 billion committed so far from the rescue package, nor does it plan to use them in the future. Lawmakers and legal experts say the change has effectively repealed the only enforcement mechanism in the law dealing with lavish pay for top executives." (Emphasis Mine.)

Scott Adams Blog: Financial Markets Explained 12/15/2008

Dogbert The Financial Advisor: "You should invest all of your money in diseased livestock. It would be unwise to invest in just one sick cow. But if you aggregate a bunch of them together, the risk goes away. It's called math."

A 15-second (or in My case, 2) explanation of what led to the current economic debacle that beats everything else all hollow.

Fed Refuses to Disclose Recipients of $2 Trillion in Lending

Bloomberg.com: Worldwide

"Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system."

Let Me guess: that was before they got the bailout money. Right? And Congress didn't "demand" anything, they simply made a request along the lines of "If you can, you know." When Congress demands, it has the force of law. (Not that the law really means anything to these banksters.)