patrick.net

We need a list of all the reps who voted for the bill. We pick one or two of the most vulnerable and create a web site attacking them for this choice and demanding the voters votes them out this election. It would make headlines and put fear into most of them. I am serious about this. Who else wants to be part of this?

They knew 99% of the public is against the theft, and they did it anyway. The bankers will support them with the stolen money, and the Reps will push the god, guns, and gays buttons, polished by expensive ad agencies, and the Reps will get re-elected by idiot America.

We had one shining moment of democracy this week, but that was the exception.

I think mortgage strike or tax strike would be more effective than anything we could do to Congress. Though if someone has a list of the Reps who betrayed America this time, I'm happy to post it again.

Someone please post the list!

@SP or OO
Time to implement the SP plan.

How safe are EverBank foreign currency CD's?

Yeah it is pretty sickening to have made the right predictions AND have endured the sacrifices necessary to get in good position just to have them change the rules.

Fuzzymath:
I am happy to hear you do not think inflation is going to be roaring anytime soon. That is my major concern: that hyperinflation happens and housing prices shoot through the roof and I am stuck renting forever...

I am wondering if mortgage rates stay this low in the next few months if it is a good time to go ahead and buy. I assume interest rates will be heading upwards (though with bad economic outlook & possible rate cut who knows?)...so it might be a good time to lock in a low rate even if the asset price is falling. If we eventually hit big time inflation then the house should stop losing value and my mortgage will be low comparitively speaking.

The sweet spot would be to get the lowest price on the house possible AND the lowest interest rate (unless they fall so far I can just pay cash - unlikely here in Southern California).

It is difficult to figure out what to do in this environment. I am not even confident my US$ shouldn't be swapped out for another currency...and yet as I say that the dollar is strengthening....

http://www.cnn.com/2008/POLITICS/10/03/california.loan/index.html

This is the future of America. We will go broke suddenly and we will all look at eachother and wonder where all the money went.

Stretch,

one of the main reasons inflation is bad is that it takes too long to get to the average person. If you had pure instantaneous inflation around the economy, there would be no change. The shit you buy would cost more, but you'd make more at your job too. It would all even out.

The problem is the money is created by the Fed and loaned to the government. From there, the government spends it on what they want (not what we want). The people they give that money to are the big winners, because they get the fresh money. Everything is still the same price, but they just got a bunch of money that didn't exist before.

By the time it gets to us as a wage increase, it's already too late. We've taken the hit, because we were paying higher prices for goods while not making more salary.

In this case, the money will go to the banks, who really aren't going to do one single productive thing with it. They've been insolvent for months, and this money is only going to get them back to break even. Essentially, it is replacing money that had already been destroyed in the bank/lending leverage transaction through all of the credit defaults going on.

However, the way the bill is termed, we can assume that the government will not stop at $700 billion. They will keep pumping money into the banks to replace the money that is being destroyed. This is in an attempt to stave off a deflationary spiral, and it's no surprise a student of the depression (Bernake) is at the center of this ploy.

Now look at what happened... there is real deflation going on... we're all losing money. However, the fed is now creating some and giving it to the banks. The way it works out, it's akin to a direct transfer of wealth from the people to the banks. We will continue to go broke, they will stay even keel.

At the same time, our government will go into more and more debt, until their credit rating goes down the shitter. At that point, foreign investment in the dollar will disappear, and THEN the dollar will officially be destroyed. Welcome to hyper-inflation.

This is obviously all conjecture on my part.

Thanks for the explanation of your views FUZZY - I really appreciate it.

Sounds to me that I need to watch what Japan & China do with their US$ reserves. If they start to sell off I need to buy something quick! From what I have read around the net they do not seem eager to unload so we should be okay...

Anyone else weigh in on this?

It's Friday afternoon at 3:24. Do you know where your United States Secretary of the Treasuy is?

Yes, the Suisse franc (CHF) is fiat currency - but of all the paper currency around, it has historically been the least debased of all major currencies.

By the way, I am not saying keep everything you have in CHF - but if it is money that is just going to _sit_, IMHO you are better off letting it sit in CHF than anything else. You probably also want to keep a decent chunk of it in precious metals, including physical. I think we are in a situation that portends a major dislocation - no idea where the USD, JPY, EUR or GBP are going to land at the end of this bust.

The downside is that this makes it more difficult to "play with stocks" and stuff like that, but if you are a "buy some BRK-A and wait" type of guy, moving it into a swiss account and buying equities from there works out. Even better if you aren't stuck with a US citizenship, because the Suisse report all your trades back here to prevent insider trading by schmucks like us (real insiders do just fine anyway).

You guys are not going to believe what the media is talking about. More Fiscal Stimulus.

Stretch002 Says:
Not to beat a dead horse here: is it FINALLY time to buy a house? If our currency is as doomed as some say, why not buy something with the currency while we can?

Probably one of the few asset classes that will do just as badly as USD will be US-RE. So, good luck with _all_ that.

This bailout does nothing for home prices, foreclosures or any of that crap - by tomorrow, the money will be already on its way to China.

Baltimore Says:
We need a list of all the reps who voted for the bill. We pick one or two of the most vulnerable and create a web site attacking them for this choice and demanding the voters votes them out this election. It would make headlines and put fear into most of them. I am serious about this. Who else wants to be part of this?

Where do I sign up?

Seriously.

You guys are not going to believe what the media is talking about. More Fiscal Stimulus.

Sounds about right to me, being that the DOW took a dump. That's what they all care about - the DOW.

The Original Bankster Says:
Baltimore, many people currently believe that the bailout was good and necessary measure.

You can thank the Main Stream Media propaganda machine for this. I am already volunteering some time and intellectual-property for an organization that is trying to break the oligopoly that controls public opinion.

Do everything you can to get the sheeple off the media and into credible blogs.

it might be a good time to lock in a low rate even if the asset price is falling

It makes mathematically more sense to wait for asset prices to fall first and buy when interest rates are higher. This assumes that you are what you say you are - a responsible saver with a decent down-payment, and not a howmuchamonth realtor.

Since someone asked - here is the vote roll call:

http://clerk.house.gov/evs/2008/roll681.xml

And for the record, I'm all on board with any future campaign to toss out all of the Yay voters.

Stretch002 Says:
Sounds to me that I need to watch what Japan & China do with their US$ reserves. If they start to sell off I need to buy something quick!

Seriously, are you a realtor?

When you say "buy something", I sure hope you are not suggesting taking all your liquid cash and exchanging it for an illiquid, non-income-producing "asset". If you believe hyper-inflation is coming, you are infinitely better off moving to the sidelines and parking everything you have in some other denomination (gold or even some less f*cked currency). The _last_ thing you want to be stuck with is an immovable pile of bricks that represents all your life's worth.

From what I have read around the net they do not seem eager to unload so we should be okay…

Don't be so sure. Part of the quid pro quo could have been that they will refrain from unloading their reserves as long as Paulson promises to get them a bailout at taxpayer's expense.

New Zealand has the Southern Alps.

slantedview Says:
That’s what they all care about - the DOW.

That's all the idiots you can see care about. Bonds are where the smartest traders are - the equity market is for the short-bus gang.

I am most definitely NOT a realtor. Search my name in google and read my other posts on Itulip, calculated risk, and Ben's blog and here on Patrick's site.

I am a guy who sold his house in 2006 and have been renting and saving. I am have a large amount of money in CD's and have been watching happily as prices moved in my favor. The last few weeks of economic news and blog posters screaming about "economy doomed" "USD is toast" and other stuff has me worried.

I am NOT a sophisticated investor and know nothing about putting money into foreign currencies or foreign banks. I am reluctant to buy PM's becuase of their surge and also do not wish to store them in my home. Given the governments willingness to change the rules as we go perhaps gold will not even be legal at some point.

So that said, it sounds like housing will continue to decline. It sounds as if the US$ will also continue to decline. Given that the housing decline is outpacing the $ decline then I should be okay...

Here's some food for thought:

John McCain's stump speech (as seen in Colorado today) includes a segment about energy independence, and he talks about how we send 700B out of the country every year to pay for foreign oil.

Stop and think about that for a moment. 700B for oil, versus 700B for Wall St bailout.

I say, when we bought oil, at least we got something for the 700B. And I'm not even a fan of
oil consumption.

I suppose I just want to be sure I am not left holding a bunch of worthless dollars when the smoke clears. Alternatively holding a bunch of metal that has lost its value, or holding some other countries worthless currency is also unappealing. Holding an illiquid chunk of stucco at least provides my family with some shelter...

When the music stops, I want to be sure I get a chair to sit in. I am ultimately wanting that "chair" to be a house. I want that house as cheaply as I can get it. So far sitting in the US$ chair has worked for me. I have begun to wonder if it will continue to work. If not, suggestions are MUCH appreciated.

“We hold these truths to be self-evident, that all men are created . . .endowed by their Creator with certain unalienable rights . . .--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed . . . But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, IT IS THEIR RIGHT, IT IS THIER DUTY, to throw off such Government, and to provide new Guards for their future security.”

If we can throw off this government through votes, so be it. If not, the document that justifies the very existence of our government, lays on every loyal citizen the duty to use every other necessary means. And if our only choice is between a McCain and an Obama, both of whom support our sale into slavery, then our vote option has been effectively taken away.

I guess I can say I want blood (figurative?), since every communist/totalitiarian country in the last few centuries claimed rivers of innocent blood. I'm not ego centric or a racist, therefore I believe that if we adopt the same philosphy and practice of communists and marxists (e.g. OBAMA) , we will experience the same results: poverty, abuse, and death of the innocent on an absolutely terrible scale.

May every tyrant and traitor to the United States and American liberty be tried, convicted, and put to death.

Stretch,

if you want to end up with a "chair to sit in", you might want to check out the banking industry.

@Administrator - I think OO is the NZ expert - my impression is that it is a fine place to be if you have something to do there, or if you are semi-retired. Not the best place if you are midway through your career - you need someplace with more opportunity.

@CB - please don't call it the "SP plan" - I am not ready for that kind of responsibility :-) I don't know much about Everbank FX CD's. All I can say is, if you are looking for long-term stability, don't compromise for the sake of convenience.

Back to Baltimore's proposal...

I volunteer a limited amount of design/coding time to the website.

@Stretch, sorry if I insulted you by wondering if you were a used-house-salesman. If you keep saying you think it is a good time to buy, that sort of thing is bound to happen. :-)

I hear you about the dilemma of holding a worthless stack of paper. Anybody who bought toilet-paper at Costco knows the feeling.

Yes, it is a pain to go looking for foreign currency to park in. But if it is your life's savings, you have to judge whether it is worth the effort. It is not that difficult - you can buy forex from your neighborhood bank for a small cut on the exchange rate - you order it online and instruct them to deliver to your branch. The only worry then is that if they change the rules next month and make it illegal to hold it, you are screwed again. If you have a large enough stash of cash, it may be worth expatriating it someplace safe for the time being, until Paulson and his financial-janjaweed are done raiding your village. YMMV.

Everbank is NOT safe, particularly in a FX control situation. Forced conversion of your foreign currency into local currency (in the case USD) has happened in almost every single severe financial crisis of troubled countries. As far as I can see, the US is quite 3rd world in a lot of ways and I do not trust the government one bit not to act the 3rd world way.

If you want to park money in FX, do it properly, park the FX in a foreign bank, sitting outside of US jurisidiction. I have some AUD sitting in Australia, and some CAD sitting in Canada. Managing accounts overseas is really much easier than lots of people think, everything is electronic and transaction across the border is done through email or faxes.

The most likely country to impose capital control to stem capital flight is the US. I am almost sure that this will happen at some time.

OO Says:
The most likely country to impose capital control to stem capital flight is the US. I am almost sure that this will happen at some time.

Any guesses how long we have before this? The last time I was stuck in this situation in another country, there was no warning at all. i.e. not a gradual escalation from one stage to the next - a few insignificant rumbles, and then just straight to currency controls.

For those who may not be informed, please remember there is a very important doc stuffed into this bill, and I am not going to spill the beans here because the implication is just too huge, google
"Emergency Economic Stabilization Act of 2008" yourself. If you are not shocked, I don't know what else to say.

Therefore my belief based on this piece of document is, we will end up in hyperinflation. Maybe you have never lived through or heard about stories of countries going through hyperinflation, but I would not want to buy a house or commit the future of my life to any country that will go through that.

The $700B bill is very benign compared to this new Act, which almost ensures that we get hyperinflation. Fed and the TPTB is more ruthless and desperate than I think.

I am talking about half a million dollars in cash.

Sounds like parking some of it in Swiss Francs in a Swiss bank would be relatively safer than keeping it in US$. Perhaps the age old "diversify" theme is in order. Some in Francs, some in Dollars, some in PM's, and some in ammo...

CD's mature in 3 months. Might pay the fee to get them out...

SP,

I think we bought some time today with $700B, ironically. If we didn't get the $700B, we are looking at days and weeks, but for now I believe that we still have a few months left that should be relatively calm.

Early 2009 is the start of ARM reset, which will set off many other unpleasant events, not in terms of CDO or CDS valuation because the derivatives market is already dead, but cause great damage to commercial banking's cash flow because they are now holding these stinking ARM loans.

Stretch002,

you certainly should NOT park half a mil in the US, move it elsewhere, but beware of the tax consequence in Switzerland, it is actually not quite tax free for a lot of instruments. You can always repatriate it when the dust settles.

Another way of buying PM the more convenient but non-bullshit way is to buy CEF, and ask for stock certificate registered in YOUR name to be stored at home. When we buy stocks, 99% of the time these stocks are registered under the brokerage name (street name), not in your name, for convenience of trading. So if trading is suspended for an extended period of time, or your brokerage goes down, it will be very hairy to claim the securities that actually belong to you.

I ordered a bunch of certificates for securities that I plan to hold through the turmoil.

Thanks again for the suggestions. I'll be doing some serious research this weekend! I wish I could rely on an Investment consultant but those guys are worthless! You folks on the blog have been better informed than anyone I have talked to on the commercial side...

Any specifics about how to put money into a Swiss Bank account without flying there?

DV,

if your goal is to park CHF, you don't need to go all the way to Switzerland, because CHF is paying almost no interest, so opening an account in Canada to host your CHF will be fine from the tax point of view. Non-resident aliens in Canada are taxed 20% on interest.

There are services offering opening a Swiss Bank account online for you for a thousand dollars or so but I do not trust them at all. I would rather drive across the border, go to a CIBC or HSBC branch in Oh Canada and buy CHF right there. If you insist, get a ticket and fly there just for once.

In a world that the reserve currency (USD) is getting debased, the commodity rich countries are going to do very well. Countries and people will have no choice but to park their $$$ in commodities that are useful.

Patrick,

forget NZ, they have an even larger trouble than us, too small of an economy and the housing price to pay ratio is more out of whack.

NZ is a beautiful country on a postcard, but the weather is just horrible, especially if you are from California. Worst of all, their pay scale is about half of the Californian counterpart but their cost of living is exactly at par (much worse in electronics), except for Kiwi fruit and lamb. I always wonder how NZlanders get by.

NZlanders are the biggest source of immigration to Australia. Every year more than 60K NZlanders move to Australia permanently, that says a lot about the country, which only has several million population! Most immigrants to NZ are using it as a backdoor into Australia because it is much harder to get into the latter while the NZ immigration policy is much more lenient. But once they obtain their NZ passport, off to Australia they go.

I just checked their website and realized their version of the FDIC is the CDIC. Depositis covered up to 100k. I wonder how much exposure eith of thise two banks has to the RE market. I hear the Canadian market has been as out of hand as the US market but about a year or so behind...

Wow does global crisis ring a bell? This sucks! LOL

OO says :
"In a world that the reserve currency (USD) is getting debased, the commodity rich countries are going to do very well"

I second that.

If there is worldwide depression, nobody would want to buy a plasma TV or try to get remote personal assistant. Basic needs and real demands will surface back again. Countries which rely on non-basic goods and services will be screwed ( germany, japan, china, india..etc)
countries which have abuntant natural resources will be able to weather the storm well(like S.America). US should not be that bad either if you compare to places like japan. China is already struggling to provide basic goods to its citizens although its making money selling crap to US. Imagine what would happen when US stops buying that crap during depression.

I hear the Canadian market has been as out of hand as the US market but about a year or so behind…

I am actually a Canadian citizen, so opening a bank accounts shouldn't be a problem. The Canadian RE market went up but nothing like the US, it's already cooling. The banks don't have as much exposure because they didn't have ARM's, I think the worst mortgage was a 40 year mortgage but it has since been discontinued. My friends used to envy me because US has 30 or 15 year fixed rate mortgages which you can't get in Canada, but most of us don't even take advantage of it.