patrick.net

Bap: I think if you can buy a $585K bubble house for $150K + repairs, there is a WSJ article somewhere in your future.

Hope this ominous "transformative" stuff I am reading about Oct 7 is bogus, and you all come out okay from whatever the hell it is.

StuckinBA

USD against a basket of currencies will IMHO go down, some more some less, Yen, Euro, Swiss Franc all have significant upside potential at this point, CAD and AUD will recover to their previous heights, I am very negative on GBP, that is the only component I am not sure that will appreciate against the USD.

sriramgopalan Says:
Peter Schiff (one of the few economists I respect) had this recommendation: People should stop paying their mortgage!

This "strategy of default" may be bigger than you or Peter Schiff are referring to. There is speculation in the tinfoil crowd that a false-flag operation will provide cover for wiping out the trillions in derivative obligations.

Normally, I would dismiss the tinfoil chatter, but with what we have seen already from the Neocons, anything is possible.

Stuck,

I was wondering the same thing, about the USD. Maybe they'll devalue it against gold. There has already been a precedent for doing that. It would mean going back on the gold standard, but we've gone off and then back onto it again, during and after the War of the Rebellion. Maybe they'll confiscate gold again like in 1934 and reopen the gold counter for foreign banks. Like, maybe they'll confiscate it at 1000 per ounce but then revalue at 2K per ounce, something like that. At the same time issue a new gold backed currency, expiring our old one with some kind of gimmickery to goose consumer spending.

I dunno. I don't think this will happen, but gold is the only money not backed by a political entity that will jump onto the debasement bus in a race to the bottom.

OO Says:
35 years old, ex-engineer-turned IBanker, very typical path. But the joker part is he was only a VP (not even ED, MD) at Goldman in its IT practice, and he has never lived through any recession, any major event, and now he is suddenly in charge of “financial stability” department for the world?

Either he is:
1. very bright and exceptional
2. in posession of compromising pictures of Paulson with a sheep
3. exceptionally pliant and can be counted upon to ensure that taxpayer money is used for the greatest benefit to the greatest number of banksters
4. being set up to be a patsy

My personal pick is 3, 4, 2, 1.

OO said:
I am just enjoying this big pile of SH*T landing right in the face of Fuhrer Bush. Bring it on, collapse more.

Think like a Neocon. Maybe they _want_ this crisis to hit before his term ends, so they can get what they want to "fix the problem" :-)

PermaRenter,

I have decided that I will vote against all incumbents and will vote independent this November.

To everyone who is on a tear about "voting against the incumbents", please stop and think about what that really means:

1. you will be voting for the Republicans to take over congress.
2. you will be voting against Obama for president if you vote "independent"

Just do the math. Since the democrats have a majority among the incumbents, you are in effect voting Republican. Is that really what you want to do?

One thing is to vote against the incumbents in a PRIMARY (nominational) election, but it is something different to vote against the incumbents in the GENERAL (real) election.

# justme Says:
What I do NOT get is the clamor for USD. I can understand the flight-to-safety argument to some extent, and perhaps the oil-price-is-dropping argument. But what is really going on here?

I just had this discussion after supper with an MIT alumna - she had had a couple of stiff Negronis, so I don't know whether that sharpened or dulled her reasoning... but her explanation for the strong dollar was that due to massive amounts of deleveraging, notional "dollars" were getting destroyed, which creates upward pressure on the actual dollars that are in the system. Made sense to me and the Harvey Wallbanger that I was having at the time.

Jimbo,

extra right on the cause of the financial crisis.

SP,

That sort-of-kind-of sounds like an explanation, of only I could wrap my head around what "de-leveraging" means in this context. Mind you, I'm not being sarcastic, I jut do not quite get it. Appreciate the attempt there.

Socialist regulation of capitalism is the only thing that can work.

Congrats! The congress just granted your wish.

Capitalism without failures is the worst form of Socialism.

Capitalism without losers makes everybody a loser.

To everyone who is on a tear about “voting against the incumbents”, please stop and think about what that really means:

1. you will be voting for the Republicans to take over congress.
2. you will be voting against Obama for president if you vote “independent”

Excellent!!!

@justme, I suspect you just want to see if I am too drunk to type "deleveraging" correctly again. :-)

What I mean is that banks are unwinding huge (tens of billions) of trades any way they can - writedowns, netting, etc. This takes a lot of dollar-denominated liquidity out of the market. If you look at the worldwide pool of dollars as money+debt, and the debt side is shrinking precipitously , it follows that the remaining money is worth more.

Taking oil futures as an example - an oil contract may have sold at 130 a month ago, but is liquidated today at say 90. You now have 40 fewer notional dollars against the same barrel of oil. Multiply the same thing across different assets that are deleveraging and it makes the dollar worth more. I am not sure if this is what is going on, but it sounds vaguely plausible to me when someone smarter than myself explains it. :-)

justme,

no I do not have data for this, and nobody has any data on this. But you can try to triangulate things yourself.

In July, when the dollar has already gotten strong and banks were already looking very shaky, we started having the biggest drop in foreign demand for US Treasury, US securities and US agency bonds. The July negative capital outflow number was $75B.

I don't yet have Aug number, but of course you can argue the situation changed a lot in August. But from what I heard on ground 0 in parts of Asia, my contacts in private wealth management are telling me otherwise, wealthy Asians are pulling money out of the US into Swiss Franc, PM and Euro bonds.

So someone else other than these fence-sitting foreigners must be filling the void. The only logical answer at this point are the holders of USD denominated speculative instruments which all went poof at the same time. Just JPM alone has an exposure to derivatives to the extent of $90T, go figure how big that black hole is.

After the dust settles in a couple more months, when we look back the report of Sept and Oct, I won't be surprised to find Japan and China to have significantly reduced their USD holdings to take advantage of this god-given opportunity.

Permarenter is is a typical one-issue voter, whoever that kicks out the H1Bs will be the on his ticket.

News for him - Fiorina is the biggest proponent of H1B, she has been crying for lack of H1B talents in this country for years.

I personally don't have a problem with McCain except his mental and physical deterioration, but you will have to point a gun at my face to vote Fiorina into any kind of position that will have even the slightest impact on my life.

Surfer-x, please tell me this ain't you:

http://www.cnn.com/2008/CRIME/10/06/california.murder.suicide/index.html

Seriously expect to see a lot more of this stuff. ".....when black Friday comes, ....catch the brave men when the dive ...." -Steely Dan

Bush's approval rating -->> 25%

Congress's approval rating -->> 10%

NADER/GONZALES '08

Jimbo Says:

> What caused the mortgage meltdown?
> Republican refusal to regulate the markets,
> plain and simple.

It is not that plain and simple…

There is very little difference between Republicans and Democrats these days and they will all (with a few exceptions) do what they need to do to get money and stay in office. Both parties were paid off by the banking and real estate lobby and did not regulate the markets.

P.S. I read something a while back about a super liberal that was big in to deficit spending and pouring tons of money in to programs to help recent immigrants, poor people and Africans with AIDS. The same article talked about a right winger that was a multi-millionaire who entertained rich business executives at her mansions in some of the most exclusive areas of the country while fighting to stop the workers at her restraint chain and vineyard from organizing. The article ended with the names of the liberal “George W. Bush” and the big business conservative “Nancy Pelosi”…

Or more accurately: Brazil, Argentina drop US dollar as intermediary in their bi-lateral trade.

If that gaming steps up: fake divorces, wllingly halting payments, asigning titles to family members, we will see a huge reposnse. For now, the FBI does not have the resources to pursue fraud. But $1.4t (the amount the Fed is dumping into this mess so far) can fund a lot of anti-fraud agents. And there are a TON of people who would just love to play tough love on their gamester neighbors.
I am recalling something Perma stated a while back. Since MOST peple refi homes as the price goes down, and since ALL refis are recourse (as opposed to nonrecourse) loans, a new fraud agency can start taking a lot of assets from a lot of people. So while Perma has never seen banks go after assets, yet, they will.
Play Peter Schiff's game at your peril.
The powers that be are rightly understanding the scope of fraud in the current debacle. If crushing fraud prevents this from getting worse, then crushing fraud we will have.

FAB,

I agree with Jimbo that it REALLY IS that plain and simple. Without the republicans having lawmaking and executive power for 20 of the last 28 years, this whole crisis would never have happened.

The whole argument that there is little difference between R and D these days, so you might as well vote R is just plain bogus.

I could agree that any republican might consider to vote against his own party because their own grand leader GWB ran up the biggest budget deficit in history. Now THAT is substantial, Some anecdote about a small local labor strife in San Franscisco non-withstanding.

Bao33,

"This dollar disaster was brought to you by, Super Liberal !!!, and his trusty sidekick, Greedy Bastard !!!”

Which one of these is George Bush? I have a hard time telling. Or maybe both of them are?

Bap33,

Why don't you instead worry about who some republican is sleeping with? For example Hanky Paulson? You sound like a bad repeater for Rush Limbaugh radio show.

Herb Moses was a director of something-or-other at FNM. He was not even a C-level executive. You are assigning way too much importance to him. Not that I am surprised. You have your blinders fastened on as usual.

But good luck with the lowball offer, I wish you well on that one.

"The whole argument that there is little difference between R and D these days, so you might as well vote R is just plain bogus."

Actually, I believe the argument is that there is no difference between R and D, so vote for Ron Paul :)

Duke,

I disagree with you on the fraud. Every step the banks have taken the last 9 years could pass as fraud in a court of law. I don't think they'll push it very hard in fear of a backfire.

Also, they are facing a PR crisis right now. There is palpable anger over the bailout, and in manifests in people's minds as the banker from Deal Or No Deal that fucked them over.

If they started pushing fraud on the people who are merely taking the routes legally available to them, they might start seeing angry mobs attacking their branches.

If the Fed and the Treasury really want banks to trade loans and credit with each other, is it not counterproductive to create ever new facilities for trading loans with government entities instead?

Just sayin'....

Fuzzy, a vote for Ron Paul is a vote for the Republicans, until they fix the election system.

I'm never going to buy into that bullshit argument, that by voting for my favorite candidate, I am in fact voting for someone else.

Especially when the 2 main candidates both believe the same thing. I could care less which one of them wins. I'm voting for who I want.

I applaud the Fed's decision to bail out CP with printing. This bailout effort probably helps out the J6Ps the most, because if the CP market is as locked up as it was, we ain't gonna get any payroll soon.

I know there are people arguing that only financial CP is locked up, but fear easily spreads. Unless you are rich and retired, a locked-up CP market is good for none. I would rather deal with inflation tax, which one can avert if properly positioned in investment, than seeing employment opportunities dry up.

My only complaint is Fed has been printing a bit too slow too late, they should just speed it up from now on and really get the helicopter going.

I was reading a number of economists views on alternate plans to the current TARP.
One struckme as particularly funny. An economist that teaches at Harvard stated that the best thing the governement could do would be to start making loans out of Fannie and Freddie at 5.25%. It would put a floor under housing, and bla blah blah.
I amost peed laughing.
I think this guy was formerly part of Carter or Clinton's panel on something or rather too.

Okay, Mr Harvard, here is a news flash. The days of how-mucha-month are over. Everyone now knows that buying today means you will lose your 20% down payment AND be stuck for a very long time since you will not be able to sell. Given the risk in the employment, taking on a house now is folly.
The only people who should be buying now are people with large reserves to weather pro-longed unemplyment and/or those that can handle the near-term loss and long-term malaise. And even then it should really only be done to get into those you-can-never-buy-here properties since waiting is still and obviousy the best buying policy.

Duke:
From that perspective, it's not the interest rate, it's the multiple of income, right? i.e. a median house should be 3.5 times the median income in the area, then 20% down, and terms as are appropriate to the economic climate (3% above inflation expectations)?

Although this now begs the questions of: 1) are median incomes going down or up over the next few year (inflation scenario says up, but slower than actual CPI, deflation says down, but how fast... yes?) and 2) How much are RE prices going to overshoot the bottom in any particular area?

And it is also a given that if you get it through the heads of the Hahvahd set that "it's the Price/Income ratio, Dummies!" then they'll want to wave a magic wand and raise everyone's income to support the current prices.

BTW, be aware that over in Cambridge and other Boston burbs, where Harvard Braniac Economists live and buy RE, the P/I ratio has been running 7 X to 10 X. At least. D'Oh!

MST (Boston)

Liberalism fails again.

Yep. Nazi Germany was ultra-liberal and it failed too. Liberalism and fascism share similar roots.

http://www.amazon.com/Liberal-Fascism-American-Mussolini-Politics/dp/0385511841

Fuzzy, a vote for Ron Paul is a vote for the Republicans, until they fix the election system.

Yes. Ron Paul _is_ a Republican. Bush is not a true conservative.

Just do the math. Since the democrats have a majority among the incumbents, you are in effect voting Republican

I agree with FAB and Fuzzy, there is little difference between D and R. Both supported giving W the power to take us to war, both supported the recent bailouts, Clinton was the one who got NAFTA and GANT passed, and Rebublicans raised the min wage time before last. Both trip over themselves showing support for Israel. Neither party will tackle the immigration issue.

If incumbents are kicked out, that will send an unmistakable message to those who get elected in thier place, regardless of party. Even better if third party wins some seats.

I do not know why you are so enamored with Democrats. They overwhelmingly supported the bailout.

I guess it is fashionable to be democrats. But then it was fashionable to buy homes in 2005 too.

Yep, it's cool to be Democrat/Leftish. Always has been.

We Conservative/Libertarians know that when you put a $2T honey pot on the Potomac, it will atract all manner of creepy-crawly things, and it will also corrupt nearly any incumbent, just by simple human nature. The longer they're there, the more likely they are to fall prey to "everybody does it" with a brief case full of "contributions", and "you're such a powerful man." (Usually said to Teddy, Bill, Larry, Barney, et al from a kneeling position.)

The very few who aren't corrupted are hard to spot. "No" on the bailout is only one possible indicator, and that could simply be cowardice in the face of constituent fury. At least they're manipulable, but that goes both ways.

Throw the bums out. Right, Left, Center. Presidents one term (with the threat of a second?), House "members" maybe three, Senators maybe two, then out with the scoundrels. Which they will be, by that time. I feel a Constitutional Amendment coming on.

Liberals seek to change human nature.

Conservatives put human nature to work.

Whose work is futile?

Fuzzy, It is a free country, you can vote for whoever you care to vote for.

Just know that when you vote for a 3d party, you are really voting for someone else, and that someone else is quite often not the one you would otherwise have as your 2nd choice.

Can we at least agree that the election structure in the US is flawed, and should be fixed so that more than 2 parties could get represented?

MST Says:

> The very few who aren’t corrupted are hard to spot.
> “No” on the bailout is only one possible indicator

Voting does not tell you anything. Once the “Replubocrats” had the votes they needed to pass the bailout of the rich bankers they let a large number of people in both parties (who had a large number of voters back home against the bill) vote against it. If the “powers that be” needed the votes they could get just about everyone to vote they way they want…