patrick.net

This Neel Kashkari guy that Paulson appointed from the Goldman gene pool is a joke.

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?

Does he come from a very esteemed Indian upper caste family so that he can pull some strings there to have the Indians chip in? I can hardly believe that Paulson made such an appointment, at least get someone with decent qualifications please.

But that doesn't make sense, because the biggest bagholders of USD are Japan and China, they should have appointed a more connected Chinese or Japanese to the post.

I just think Paulson is treating these posts as his personal reward to those who have been loyal to him just like our Fuhrer Bush.

They need a marionette.

Wow. Nikkei's not lookin' too good.

Richmond. Exactly. They need a marionette. Neel Kashkari is to the bailout as General Petreus is to the Iraq surge.

Come to think of it, the bailout ought to be known as the "wall street surge".

I would be surprised if that guy has any Indian ties at all. He is probably Indian in name only.

And ruling class in India is not always upper caste. It is way more complicated than that.

And USD is not going to collapse against other currencies (except Yen). Why do you people think other currencies and other economies are going to be better than us ? Dollar collapsing against oil/gold - I get that. But dollar collapsing against Indian Rupee ? Please. I have a few INR that I can sell to you for a good price.

Indian software companies are going to have a ton of problems. With or without exchange rate risks. Cost cutting will affect out-sourcing. No country is going to be immune from this massive deflation.

I am also perplexed by Paulson's choice. But Hanky the American Hero has not done anything that's good for people - except maybe for the members of the country club he visits.

The problem of USD is too much debt. We are the most indebted currency in the world, and the other countries (not the developing ones) are actually better set up than us to weather the storm, if their size is large enough.

But the USD debate aside, I am happy about the perfect storm hitting right in the face of Bush, fast and furious. I was worried that it would hit AFTER he is gone so that he can point his finger at someone else. Oh yeah, try to blame Clinton, that cigar smoker hasn't been in office for the last 8 years.

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

Well I think everything is going to be great, especially if Jimmy Carter jr. gets elected.

This negativity, wow, amazing, I thought everyone was rich. rich rich.

Better grab an ugly chick and head for the door because the lights are getting turned on.

An economy that can weather the storm must produce enough stuff, you know, the stuff you actually consume, not just the digital bits like porn videos (hey, some actors and actresses still need to get the "stuff" going).

We are not producing enough stuff, especially stuff desired by the world at a price they wish to pay. In 2005 a moron on Businessweek wrote a cover story about how Americans are much richer than people believe, he argued that the world desires our Wall Street financing products and we are the world's financial broker. Yeah, I can see how that part of the GDP is going down the drain.

The strong USD we are seeing right now is not because we are doing better, but precisely because we are doing worse - a much bigger debt hole to fill as CDS/CDO/MBS whatever alphabet debt and derivative instruments are getting destroyed en masse. But this is not a way for a currency to get sustainably strong. Who doesn't want to have a strong currency so the whole country can enjoy cheap imports? If the system is rewarding failure, then the entire world should just go create lots of debt and induce a debt destruction to make their currency strong, problem solved, no starvation ever.

This artificial strength is temporary, because TPTB are not printing fast enough as the progress of debt destruction. But they will catch up, don't worry. When they are desperate, they will resort to overt printing straight from the thin air, unlike the $500B piecemeal deals here and there. We will get to trillion dollar printing.

Regarding USD and exchange rates in general:

I see why YEN is going up, because people who borrowed yen at low interest rates (a.k.a carry trade) now are paying off their yen loans and hence are buying yen to do it. They can now get cheap loans at home and do not need yen anymore.

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?

No, it is definitely NOT flight to safety.

It is all the hedge funds, IBs that have wild bets on the derivative instruments getting a margin call AT the same time. It will pass, don't worry. If USD stays artificially strong, it will kill US economy even more. Either way USD is a dead man walking.

For Chinese, we have this phenomenon called backlight shining, which typically refers to a short lapse of normalcy for a dying person, it could be actually explain in medical science, because this is induced by the last-ditch effort of his hormones to get his organs function properly. I have witnessed this myself on a couple of old dying relatives. For a brief hour or two, they looked completely normal and even healthy, but right after that was a quick descent to death.

USD is exactly trapped in this phase. When it starts its descent again, there will be no looking back, and it is going to be a straight line down.

No, this phenomenon is not confined to Chinese alone, but I don't know what it is called in other cultures.

OO,

I get it, and so do some other people. It was predicted to happen this way, a deflation scare ahead of the main event.

Marc Faber, a Swiss pro with an amazingly consistent record over last 30 years, also predicted this brief strength of USD which could last 6-18 months.

He successfully predicted the Asian Financial Crisis, and also has also forseen the upcoming depression since 2003 or so. He was usually not quite on the mark with short term prediction (I followed him for years), but he was doing very well with timing this time, perhaps he has eventually fine-tuned his skill much better.

He predicted back in the beginning of 08 that USD would enjoy a brief strength for a duration for up to 1.5 years, and USD Treasury would be the place to be in the meantime, while commodity would have a major crash. After that, he predicted a continued descent of the USD, but a mixed bag on commodity, certain categories may never recover.

OO,

If USD is to be devalued - then against WHAT ? Without coming up with viable answer to that, the claim that USD will get devalued is not even a complete sentence.

Euro ? GBP ? Fat chance. Which currency then ? It has to be a major currency. Oil is also influenced by many other factors and demand destruction is real.

What I do concede is USD will not enjoy the reserve currency status it has. We already have seen countries breaking away from that and it's a trend that will continue.

The only long term alternative I see is gold. This is going to be a very slow trend, as central banks around the world may start a return to gold standard - either officially or unofficially.

Treasuries on the other hand may eventually see a sharp sell-off.

I understand currency markets even less than stock markets - so take this comment with appropriate amount of salt.

I got this invite in LinkedIn:

The Central Intelligence Agency would like you to consider a career with the National Clandestine Service.

The CIA’s National Clandestine Service seeks qualified applicants to serve our country’s mission abroad. Our careers offer rewarding, fast-paced, and high impact challenges in intelligence collection on issues of critical importance to US national security. Applicants should possess a high degree of personal integrity, strong interpersonal skills, and good written and oral communication skills.

We welcome applicants from various academic and professional backgrounds. Do you want to make a difference for your country? Are you ready for a challenge?

All applicants for National Clandestine Service positions must successfully undergo several personal interviews, medical and psychological exams, aptitude testing, a polygraph interview, and a background investigation. Following entry on duty, candidates will undergo extensive training.

US citizenship required. An equal opportunity employer and a drug-free work force.

Central Intelligence Agency

You can make a world of difference.

The Work of a Nation. The Center of Intelligence.

OO, what margin calls in what derivative FOREX instruments are we talking about here?

Do you have a reference or some background material to link to?

I got this mail:

I hope Monday has been kind to you so far. I was reading through my news feeds today, and I saw some unfortunate news that Ebay is reducing work force. Being an eBay alum, I wanted to drop you a message - If any of your colleagues have been affected by this recent turn of events, pls. feel free to share my contact information with them should they approach you - Our agency is working on 225+ searches right now from Marketing to Engineering, individual contributor to the VP level and I can help them identify job leads that fit their requirements. The majority of my open searches are perfect for candidates with consumer focused web experience and range from social networking to interactive broadcast, early stage startups to established media plays. Regardless, I hope your week stays manageable, and I appreciate your time & any forwards you feel are appropriate. Kind Regards, Christian Cervero
Executive & Technical Recruiter
Cross Creek Systems
(650) 261-0411 Office
Christian@Xcreek.com
www.Xcreek.comhttp://www.linkedin.com/in/cervero

No, Obama never worked as a laywer for ACORN. The Republicans know that they can't run on their record, since Bush is now officially the most unpopular President ever, so they hope they can run on a bunch of lies about Obama. Not working this time, sorry.

What caused the mortgage meltdown? Republican refusal to regulate the markets, plain and simple. Why didn't they reign in Fannie Mae during the six years they enjoyed control of Congress and The Presidency from 2000-2006? They were simply on the take.

http://www.nytimes.com/2008/09/28/opinion/28sun1.html?_r=1&hp&oref=slogin

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

I laugh at the desperate republicans who try to set the clock of blame back to 1999. And also to put the blame on acorn and Obama. It is almost as funny as calling the dems liberal elites. They are very good at one thing, and everyone can see though it -- blaming others for the very thing that is wrong with them. I even heard Palin talking about "the Big Lie." What a riot. Absolutely no oringinal thought whatsoever.

PS -- Wasn't Meg Whitman of E-Bay just whooping it up at the republican convention in St Paul just a few weeks ago?

Capitalism is the only thing that can work.

Um, maybe capitalism is the one thing that can't work.

Capitalist Equilibrium?

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