patrick.net

Bunker fuel may yet be outlawed by treaty - it’s the dirtiest crap you can have that still burns.

Gas turbine combined-cycle marine systems are much cleaner, but they emit more CO2! What should we do? :roll:

The whole world is leaning so far left that the planet may just fall off its orbit.

I would argue that India will never be capable of organizing in a fashion that is in any respect comparable to China over the past 25 years. The disparate culture, poor infrastructure, and stifling bureaucracy would combine to make this impossible. I don't see India ever competing at scale as a global manufacturing exporter. Probably global market growth will not happen in time to allow this scenario to develop.

OO, good stuff on China. :-)

A successful nation puts economics in front of culture.

Deflation, if it happens, will be caused by the unwinding of credit - and the F’ed is powerless to stop that. As it is, they are unable to get banks to lend (as is clear from the o.p.)

My favorite theory is that they're not lending for two reasons:

1) They don't have much money free (reserves - TAF = negative number right now)
2) They "know" that some of them are already insolvent, but because of zero transparency, they don't know who. I wouldn't lend any non-FDIC money to them right now either. (Hello, Countrywide? WAMU? Citi?)

Default risk is rather high right now, isn't it? I think once the monolines are downgraded, the banks that survive will be happy to lend money to those with decent collateral :-)

Couple important and often overlooked facts about the US economy.

The US is currently the world's largest manufacturer. Larger than China, Japan, Germany, and everybody else. Nobody seems to talk about this anymore. Another is the US has lost far more jobs to information technology productivity gains than to offshore outsourcing and manufacturing. I think its important to keep this in perspective when endeavoring to understand macro inflationary and deflationary issues.

NVR, OO, Netdance:

Thanks for the comments and input on China. As I said, I think that I'm definitely at the end of the information food chain. Not too take this thread too far off topic, but with my EXTREMELY limited knowledge of China, I've always thought that the long periods of chaos and instability have had a tremendous influence on domestic Chinese policy.

To that end, I really wonder what will be the reaction of the CCP to any hints of turmoil? Will the CCP do almost anything to keep people employed and peaceful. So will the Chinese vendor financing scheme to the US continue no matter how much the dollar depreciates? IOW, if the alternative is substantial civil unrest, how will they react?

Deflation, if it happens, will be caused by the unwinding of credit - and the F’ed is powerless to stop that. As it is, they are unable to get banks to lend (as is clear from the o.p.)

I don't think the Fed is "powerless" --not all-powerful, either, but far from powerless. And Congress has shown great willingess to lend its own virtually unlimited powers to the "cause" (propping up lending bubbles and asset prices) whenever the banksters whine loudly enough.

If it if becomes necessary, they could simply conjure electronic money out of thin air and deposit it into member banks. An extreme solution to be sure, but don't think it can't/won't happen. For now, all I see modestly depreciating houses, while the cost of virtually everything else is spiralling upwards. Classic stagflation.

Deflationists: 0
Stagflationists: 1

waiting2buy has a good point- you had to buy in 2003 or earlier to 'get out alive'.

I look at all the sales in my local MLS (1 sale per day for an area with 800k population so it doesnt take long)

there are two types of sales
1. bought LONG time ago so can afford to slash price and not bring check to closing
2. short sale/REO sale - both must be bank approved.

the #2 are growin in share monthly its about 45% of sales now last I checked that is 45% of sellers who got WIPED OUT.

but the REAL trend is NO SALES.....I did some numbers checked 2 months ago and looked at a ton of listings from early 2007 and only 1 in 3 ended up being 'SOLD' the other 2 were expired or cancelled listings..... I then compared this to 2004 sample...9 out of 10 listings ended with SOLD status....

If you have MLS access you know what I mean, its a absolute epic disaster right now, a once in a lifetime shift change from biggest bubble evar to biggest crash evar. And STILL the dream price listings are dominating! hilarious waste of time for a realtor. So would take a listing when only 1 in 3 actually sell and the rest cost you money? not me..... but working with buyers is the same....they lowball and the seller wont take it - no sale.

Keep in mind the years 04/05/06 were all record years in terms of sales volume AND refi/cash out....so ALL these people have neg equity which is #1 default reason....50% off peak price is now a conservative estimate IMO. Even in your fort or whatever city that is in SF.

the mls data is a goldmine....in august 2007 the sales volume 'shut off' overnight....I called the mls to ask if they system had been down there were so few sales, no joke, it had no down time....8/07 was 'end of the world' when light switch flicked and music stopped.

Will the CCP do almost anything to keep people employed and peaceful.

Most definitely YES.

northernvirginiarenter:

You have a cite for that statistic? Google fails me here, and I'd love to see numbers.

All the numbers I've seen show us with the largest trade deficit - larger than all others combined.

So if we're making so much, where's it going?

Like I said, I'd love a cite.

Will the CCP do almost anything to keep people employed and peaceful.

Most definitely YES.

Given their base impulses, I'd instead say, they'll do anything to keep their population pacified. Big difference.

And besides ruthless repression, there's also the unifying notion of an external enemy - Japan, for instance. Or the U.S. (They've done both in the last decade - remember that slow moving observation aircraft that "delibrately struck" their superfast fighterjet?)

There's a few things they'll try after universal, unbroken growth doesn't work out. I don't like thinking about any of them.

in august 2007 the sales volume ’shut off’ overnight….I called the mls to ask if they system had been down there were so few sales, no joke, it had no down time….8/07 was ‘end of the world’ when light switch flicked and music stopped.

Sounds like what my VP said about the market in 2001 - before the attack that folks now blame for the recession. "It was like every customer just decided to stop buying." Exact quote.

For fun, go to redfin, and look at 3br SFR in the town of Santa Clara/Sunnyvale, $550k or lower. EVERY one is a short sale, and ALMOST all were bought in the last two years for about $700k. It's getting positively creepy out there.

For fun, go to redfin, and look at 3br SFR in the town of Santa Clara/Sunnyvale, $550k or lower. EVERY one is a short sale, and ALMOST all were bought in the last two years for about $700k. It’s getting positively creepy out there.

Oh, and for the mathematically challenged, that's a 20% haircut in two years.

Too bad the banks didn't require any of them to put 20% down, eh? Then we wouldn't be in this mess.

There’s a few things they’ll try after universal, unbroken growth doesn’t work out. I don’t like thinking about any of them.

As I have said many times, the human problem is intractable.

Ed S,

I don't think there is one single alternative other than CCP at the moment. When it comes to the choice of another government, Chinese are extremely conservative. This is not an era in which the government with absolute power and control over the military can be easily overthrown. CCP was built on the notion of 2 legs: ABSOLUTE control of military and media. Mao himself emphasized often, from gun and powder emerges a government.

The most likely scenario for China is not an upheaval or ousting of the current administration. I predict one of the following two will happen:
1) More progressive changes within CCP compelled by circumstances, or CCP splits internally.
2) CCP still maintains a grip on the country as it is today, but loses control gradually, which will be reflected by very high crime rate and frequent uprisings, but none of which will topple the government.

Will there be an inflection point? Sure, but not so soon, because CCP is very militant in its organization and it is still by far the most well organized group within China.

@Peter P

We need to get you a nice dose of Upton Sinclair to go with your Unagi and Hamachi.

Economics before culture?

Maybe I should join Hellokitty in France.

@Ed S

CCP domestic turmoil is coming, and for my money I'd guess nationalistic social programs on a scale the world has never seen. Hopefully their imperialistic hawks will not gain sway and decide to throw all those "extra" men to the meat grinder via some Taiwan conflagration or some crazy maneuver in Africa or even South America. Maybe they are not too terribly far from force projection capabilities

I doubt the European Union can survive in its current form.

I've actually begun writing a book in which the UK realizes its mistake and pulls out of the EU. It then joins the US as six states forming the "Great United States", followed shortly thereafter by Canada and Australia.

The present EU is a ponzi scheme in which France and Germany suck funds out of the other countries in order to prop up their otherwise unsupportable welfare states.

I'm beginning to wonder if we'll see some oil exporter sovereign funds come in and put together a PRish bailout via scale purchase of residential US real estate. Maybe some concessions from the US government, military sales or some other such non-sense, and some billions of USD foreign exchange comes in and buys up 1000's of distressed properties turning them into subsidized rentals.

I could see Chavez endeavoring such a thing. It would be entertaining.

Nah, they probably don't want all the sh*tboxes either.

I’ve actually begun writing a book in which the UK realizes its mistake and pulls out of the EU.

Very interesting!

UK is not very European anyway.

Dennis, do you think Turkey gets to join the ponzu scheme before EU dissolves?

I’m beginning to wonder if we’ll see some oil exporter sovereign funds come in and put together a PRish bailout via scale purchase of residential US real estate.

Unlikely. They will buy up assets that add to their political influence. Watch out for infrastructure companies and banks!

DennisN - I find that hard to believe. No. 1, the UK is part of something called "the commonwealth" along with australia, canada, and I think new zealand. There's no way they'd become six US states. And think of how it would mess up our flag. I don't see the US joining the Commonwealth either, that's just as impossible. But maybe some nice PC term can be come up with for a Union Of English Speaking Nations No We Don't Mean Those Little Bitty Nations Using English Though. I like "The Anglosphere" but it's probably too nerdy sounding.

PeeterPee -Mmmmm Ponzu Scheme.... sounds yummy.

You spend a lot of time at Sushi Maru, don't you?

You spend a lot of time at Sushi Maru, don’t you?

Haven't been there for a while.

Northernvirginiarenter - I actually see something where the Owners, the Landlord Class, in the US becomes a collection of Arabs and Asians. If you're a regular working Joe, you end up slaving your life away for them. Think we can't have prison camps, a'al'China? Think we can't have sharia law, leaning most heavily on the non-Arabs who do all the work? Think again. Who has the gold, makes the rules.

We're really heading into a Fremen vs. Sardaukar situation, for anyone who's read Dune.

How about...

Dominion of Englishland

LOL good one PeeterPee!

Am wondering what this means... this is from Bloomberg http://tinyurl.com/ywt6z5

Auction-Bond Failures Roil Munis, Pushing Rates Up
Rates on $100 million of bonds sold by the Port Authority of New York and New Jersey, with bidding run by Goldman, soared to 20 percent yesterday from 4.3 percent a week ago, according to data compiled by Bloomberg.

Am wondering what this means…

It means the highest bid was so low that it implied a yield of 20%.

This may indicate a several liquidity crunch in that market.

@Netdance

Google is failing me also, without a significant effort of time. I don't recall exactly where I read this stuff but I did "buy it" at the time.

Here's something I found quickly via google below from relevant and recent treasury secretary testimony, and I'm sorry this is not hard data and sound analysis. Also, trade deficit and manufacturing base are obviously two different things. We just happen to consume most of what we produce ourselves.

"Q In terms of long-term growth, a lot of people are saying because the manufacturing base is gone, where do you see, in the next two to three years, long-term growth? What sectors in this economy?

SECRETARY PAULSON: Well, let me start. I want to give you more detail than you want on the manufacturing base because I would say it's fascinating when you look at it. You may not know it, but who is the largest manufacturer in the world? The U.S., by a lot. It's fascinating. When I had looked at the data in 1950, we had about 30 million -- manufacturing jobs in the U.S. were about 30 percent of the country then, and there are about 15 million manufacturing jobs, okay?

Today, we've got the same 15 million manufacturing jobs; they're about 10 percent. But the output has gone up seven times over that period, and we -- you know, our manufacturing base is two-and-a-half times larger to China, it's bigger than Japan, it's bigger than Germany. This is a story about automation. And I would say to you, we have a broad-based, diverse economy in the U.S.

And when people think of services, they very often think, well, gee, those are low-quality jobs, et cetera. There are many high-quality, high-paying service jobs in many sectors. So our economy is more diverse, stronger, more -- you know, I've traveled all around the world and I will tell you, the more I'm outside of the country, the more I see that even though we've got our problems, I would put us up against any country in the world in terms of our economy and our ability to compete."

Bush signed sign the 730k limit bill (masked as the rebate check bill in the MSM) so I will now move to France where the government REALLY knows how to control things....because 90% of the country is a gov employee like soon to be US. (#1 employer in US is federal government).

HK,

can you please tell me how can we move to France too? I hear that they have socialized medicare :-)

@SP

Auction-Bond Failures Roil Munis, Pushing Rates Up

Wow, thats a find. If that does not smooth out thats a big systemic problem, even a call 911 emergency type problem. Fed will not standby and let stand, I wonder what they can and will do. I bet we will see some reaction as soon as tomorrow, big story with serious implications.

Bush signed the 730k limit bill

In a related story, the new median price of a house in CA is expected to be $729,999.99 by the end of March.

Peter P Says:
It means the highest bid was so low that it implied a yield of 20%.

Thanks, I got that part by reading the article. :-)

I meant that I am wondering what it means. Clearly, going from 4.3% yesterday to a failed 20% bid today isn't ordinary. In another story in my newsfeed, I saw something about more than two-thirds of today's auctions failed.

But hey, the top-story in my Reuters RSS says that Paulson declared "No recession ahead", so I guess nothing to worry now.

Clearly, going from 4.3% yesterday to a failed 20% bid today isn’t ordinary.

It is more like having the highest bidder of a house being a low-balling patrick-dot-netter.

I agree with that on service jobs - lots of service jobs are very high paying. High end hairdressers are one example. CPAs I believe are service workers and they're generally high paid.

Also, some of the stuff you'd never suspect, pay quite well. over at the NCN (national caricaturists network) site many have come into that field because it paid more with a lot less hassle than what they did before. These street performers of various types out on the streets around the BA were making more than they did as engineers, it's all in line with the warehouse guys making more than the skilled repair tech.

But most service jobs are low-paid, it's true.

Is debt servicing a highly-paid "job?" :)

I worked as an attorney: that's a service job. Same thing for doctors.

POTUS is also a service job, though not highly paid.

So little faith in muni bond insurers currently. Less faith in the quality of the rating guys.

Our local governments and public entities might all need revisited from ratings guys in light of the contagion of a declining real estate market. With declining economic activity and tax base erosion, ratings downgrades expected. Man we got us credit contagion.

Our local government can't borrow cheaply to pay for schools, roads, prisons, libraries, and all the other non-sense. Wow.

That's an economic death spiral if I've ever seen one. Faith and trust in our economic institutions cannot be rebuilt overnight, and maybe this gets at the core of this problem.