patrick.net

Loved this article:

http://www.bloomberg.com/apps/news?pid=20601088&sid=a8mdg7z0u7Dw

...but can anyone spot the error in this paragraph?

"By the time the crash ends, Talbott predicts, homeowners will have lost as much as $10 trillion, with investors and banks worldwide losing almost $2 trillion. And just as the U.S. starts getting over a prolonged recession, the first big wave of baby boomers will retire, depriving the economy of their productivity (and high consumption), he says."

Amazon.com CEO Jeff Bezos announced a new version of the Kindle e-book reader Monday. Is the Kindle 2 just the beginning of Amazon’s plans to be a player in consumer electronics?

The Kindle was designed by an Amazon subsidiary called Lab126, located in Cupertino, Calif., just a few blocks away from Apple. Lab126 has more than a dozen job openings listed on its Web site, leading some analysts to speculate the ecommerce company has visions of launching its own music player or other device.

http://www.lab126.com/careers.html

Smartpen maker Livescribe Inc. said it raised more than $10 million in new funding.

The Oakland company -- which was named the Mobile Technology winner in the Silicon Valley/San Jose Business Journal's Emerging Tech awards in December -- makes a combination pen, digital audio recorder and handheld computer.

The 1.3-ounce gadget has been turning traditional note-taking into what the pen’s inventor, Jim Marggraff, likes to call “paper-based computing.”

The round was led by U.K.-based Lionhart Investments and Vantage Point Partners, which has an office in San Bruno.

The company has now raised more than $40 million.

The deeper we get into this recession, the more I'm convinced that we will experience something similar to Japan's lost decade rather than a GD 2.0.

Is there anyone here who has some first hand experience with 90s Japan who would like to share?

Geithner proved today that he is a mole for Henry Paulson and W. Bush.

I guess I've become a bit of a SV cynic, but one problem I see with all these consumer widgets is the potential user base is widely exaggerated for a product that doesn't go anywhere new. The pitch was made, and they got their seed money...but I wonder if they will ever break even?

Kindle is yet another hand-held electronic device promising a new digital medium to consumers. But unless you're a tech junkie, I see little tangible benefit over a printed book that is already portable/less complicated to use. There is potential for digital books, but not in a Palm retread. Think more like as a hybrid of Youtube/Flickr/blogging rolled into a book. Here the core problem is with publishing and their traditional view of media, who view the digital medium as subordinate to their core product (print). The answer should be a new product, not an old one repackaged as "innovation". Just my take here from working in publishing for years.

Smartpen seems nice -- except it is sort of still based on paper. Maybe if one could use it on a simple erasable tablet.

I was in Japan in 1990, 1992 and travel there quite frequently in the thick of their depression I tell you this is NO Japan.

Japanese had savings, load of them in their stock market crash. Japanese were not very much into stock market, most of their savings were in CASH. Not sophisticated in any sense, so very few having a situation of 401K getting halved into 201K. But a large of their savings were also in the form of corporate pension. Their favorite personal investment product was time deposit. That was why online traders like Schwab had to close their Japanese operation after a major attempt, because Japanese individuals were far less attached to the stock market than we are.

The Japanese had a serious debt problem, but only on the corporate level. Personal lending is less institutionalized, lots of intra-lending among the family members.

I stayed in Japan for 3 months in 1992 on an internship, honestly I didn't feel consumption was going off the cliff. Price came down for sure, but the streets were still very busy with lots of customers. Not the same thing that you feel in today's America, completely different. We cannot afford a lost decade, a lost decade needs savings to last, we will have a crash landing for sure.

OO,

How did the japan stock market index (Nikkei 225) climb to ~38k (and now fall to ~8k) without serious domestic demand for stock? Was it all driven by foreign investment?

Lots of foreign money (particularly the US), and domestic corporate funds. Individuals were not very much into stock market gambling, they have a better vehicle - pachinko, something like a slot machine that are ubiquitous all over Japan.

So Japan was bankrupt on a corporate level back then, not bankrupt on a personal level. We are bankrupt on a personal level, but not necessarily on a corporate level. There are lots of American corporates with a strong cash balance.

Japan in the lost decade was very much like GD1 America, positive foreign trade balance, manufacturing powerhouse of the world, and lots of excess manufacturing capacity at home.

Today, the excess manufacturing capacity of the US lies in China, we are retreating from an unsustainable excess demand.

Interesting to see who is on the board of the NY Fed:

http://seekingalpha.com/article/119744-geithner-channels-his-inner-paulson-unfortunately?source=headline1

Not that any of this is a secret, but it is not so widely publicized either.

Names: Jamie Dimon, Jeff Immelt, etc

http://www.newyorkfed.org/aboutthefed/org_nydirectors.html

Interesting to see that only 3 of 9 seats are supposed to represent the public, and those seats are elected by the board of governors. Very semi-circular and non-democratic election arrangement, to say the least.

No wonder Geithner is doing Wall Street's bidding.

I don't have to pay extra to borrow books from the library. Yes, in California hours will be reduced, but then lotsa folks will also have MORE TIME to use the libraries.

And I can buy used books at about 25cents per inch at the used bookstores, and about a dollar per inch plus shipping from web sellers.

Betcha theres a whole lot more folks like me than there are folks who will pay for a kindle.

justme,

be thankful. Before Geithner's appointment, the front running candidate was Jamie Dimon.

So Japan was bankrupt on a corporate level

I believe we too are bankrupt at the corporate level. The banks were most problematic for Japan and appear to be for us now. I believe you're correct regarding Japanese consumers back then.

But who took out all those loans in Japan that couldn't be paid back and caused the real estate market to plummet and their banks to become insolvent? Was it mostly just corporate loans? Many consumers must have been in trouble too.

frank,

most of the real estate gambles were made by the japanese corporates and businesses. To be exact, they were NOT really speculating on the real estate (aka, not flipping). Flipping on a residential and commercial level never reached the height of what we saw in the last 5 years. Liar loans, IO, Ninja never existed in Japan and was unheard of.

What in particular happened was, companies in Japan expanded their businesses very aggressively at the height of the realty bubble by mortgaging their own real estate holdings for funding needs. That was how the Japanese banks got screwed: corporate collateral decreased in value dramatically. Unlike the US banking system, the Japanese banks were more rigid in lending, and their public market size was way smaller. The most frequently used collateral for corporates and businesses in Japan was their real estate holdings, the idea of goodwill, IP and other creative financial assets as collateral was not adopted.

The consumers got into trouble because of the corporate debt, which caused many businesses to scale down drastically. The biggest blow in the late 90s to Japanese consumers was the collapse of corporate pension funds, because that was where a substantial share of individual retirement savings sat. There were 100-yr residential mortgage loans at the height of the Tokyo residential bubble, but that was not the norm. Japanese consumers were very cautious and savings-oriented.

But in terms of damage to consumers, we are way ahead. The collapse of our consumer spending caused our corporates to get into trouble, not the other way around. Aside from the banks, there are plenty of corporates with very strong balance sheets and cash flow stream like MSFT, AAPL or GOOG, which are very viable entities themselves.

We cannot afford a lost decade, a lost decade needs savings to last, we will have a crash landing for sure.

The Japanese had a big problem we do not.

They honor their debts. Its a cultural thing.

Americans have no problem walking away from ten trillion dollars worth of debt obligations if its in their best interests.

In a way; I think this will be our salvation.

OO,

It is very heartening to know that USA may have a real crash and econmic and social engineering will not be able to fix it. I think similar argument was made at mises.org as well.

I am really rooting for business cycle after watching Alan Greenspan's econoterrorism for a decade.

Lets hope that deflation runs it's due course ... god bless free market!

If there was such a thing as Groundhog Month, and if there was a movie by the same name (as discussed in this item last week), a bailout plan and plunging stock prices would probably be a recurring event for Phil Conners - they seem to happen about once a month. Since restoring the banking industry's health seems to be such a problem, maybe they should start thinking about euthanasia.

When historians look back at the financial crisis and ensuing economic upheaval of the last half of the first decade of the 21st century, what will be the storyline?

I submit it will be that, while the public was focused on the tax rebate program, then on the $700 billion TARP, and finally on the $100 trillion economic stimulus package, a much larger drama was unfolding below the surface.

While the public was distracted and focused on these high profile activities and events, other programs and activities some five times larger than those debated and discussed in open forums were being enacted by a select few unelected federal regulators who were making commitments of trillions of dollars backed by tax payer guarantees and loans

The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages.
...
Only the stimulus bill to be approved this week, the $700 billion Troubled Asset Relief Program passed four months ago and $168 billion in tax cuts and rebates enacted in 2008 have been voted on by lawmakers. The remaining $8 trillion is in lending programs and guarantees, almost all under the Fed and FDIC. Recipients’ names have not been disclosed.

“We’ve seen money go out the back door of this government unlike any time in the history of our country,” Senator Byron Dorgan, a North Dakota Democrat, said on the Senate floor Feb. 3. “Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose. How much from the FDIC? How much from TARP? When? Why?”

California may have to cut prison population by 40 percentStory Highlights
Overcrowding has created unconstitutional conditions, judges conclude

Gov. Arnold Schwarzenegger immediately promised to appeal the case

Those who would be released would be very low risk, says head of Prison Law Office

@ sybrib,

The public library is the most under used / under appreciated asset in our society!

http://en.wikipedia.org/wiki/Public_library

I don't use it as much as I should but my wife sure makes good use! It is so funny that most of her book club members go buy the books new and she checks them out and returns (on time) no charge.

In Japan during the previous bubble (1980s) you could borrow more than the value of a home or office building. So you could in essence use a negative down payment, and actually get cash back on the purchase. The more you real estate you bought, the more cash in hand. I am sure that the lenders put some limits and restrictions on this practice. But what a bubble stimulator that was. Lending based on expected future appreciated value!

Now that I've retired I spend a lot more time at the library. The public library here in Boise is limited - makes sense since their charter is not just to have a reference library of non-fiction books but rather to have lots of kids' books and fiction. The Boise State U library gives out cards to members of the community and they do have a much more extensive collection of serious books. Also the state law library is in town to support the Idaho Supreme Court. You can't check books out but the reference librarians are bored and eager to help. Plus they have free Westlaw terminals there. Do you have any idea how expensive a Westlaw account can be if you have to pay for it?

I'd say that Geithner is doing what anyone is supposed to do in his seat at this moment in history. This is the undisputed route, only available route for anybody in the seat of power. Printing their way out, getting into more debt, until, the final collapse. They know the ending, but it is like a drowning swimmer caught in muscle cramp in fast moving stream, he knows very well that the best response is to relax his body muscles and do nothing until his cramp is over, but he panics nevertheless and cramps up even more, struggling with hopeless strokes and disrupted breathing, which eventually send him into coma and death.

# justme Says:
February 10th, 2009 at 10:21 am

Geithner proved today that he is a mole for Henry Paulson and W. Bush.

Did you *mean* to call the new President an idiot or did it just come out that way?

"Today, the excess manufacturing capacity of the US lies in China, we are retreating from an unsustainable excess demand."

Perhaps that's actually a bit of good news for the US, since our factories weren't recently tooled for what may soon be non-existent demand of retail goods? But of course, there are those US auto factories...

Regarding the US, I wonder how much "excess capacity" is represented by the retail sector, specifically in retail development projects? In particular, the once-lauded "Euro" retail concept, ie townhouses piggy-backed on retail strike me as double-whammy during the downturn.

On a local note, this the downturn does not seem to faze Sunnyvale govt., which has diverted public funds into a retail/residential development that's still under construction. Rumor has it they're not finding enough merchants. Taking this fiasco further, Sunnyvale also plans to convert the Onizuka AFB into an auto mall. Brilliance!

BAI. Obama is in a tight spot. He could have made someone like senator Bernie Sanders or Paul Krugman the new SOT (sec of treasury), but van you imagine the blowback? Or is it Ron Paul you would like ;-).

Breaking News - $15,000 joke of a tax credit in the now agreed upon stimulus bill has been eliminated. HORRAAAAYYYYY!!!! I bet the NAR is super pissed off today.

Or is it Ron Paul you would like ;-).

Ron Paul will actually fix the system.

Breaking News - $15,000 joke of a tax credit in the now agreed upon stimulus bill has been eliminated.

tannenbaum: do you have a link for that?

@justme

I like how you're already making excuses for him. Still hoping he's different I guess, so you have to.

I'm not a Ron Paul fan.

How about Taleb or Roubini? That would make waves, not Krugman!

Sure, bring on Roubini. Or George Soros.

A good explanation of the purpose of currency swaps:

http://seekingalpha.com/article/120039-bond-expert-the-emperor-has-no-clothes?source=headline1

Quote from the comments section:

FED prints dollars. ECB prints euros. FED and ECB swap currencies and now the FED owns the euros and the ECB own the dollars.
Next step: ECB buys Treasuries with their dollar, FED buys Schatz with their euros (or whatever).
Financial media in US proclaims: high demand for US Treasuries!!

What a joke.

Patrick: Here you go:

http://news.yahoo.com/s/ap/congress_stimulus

It's near the bottom, 7th pragraph from the end.

Here's another more relevant article about the tax credit elimiantion for home buying:

http://www.mlive.com/business/ann-arbor/index.ssf/2009/02/tax_break_for_home_buyers_out.html

What a great day. Honestly, every person in real estate I know was salivating over this. Their collective balloon just got popped.

Basically, rather than the Fed buying Treasury directly in return for printed dollars, they print dollars, swap against EUR/GPB/whathaveyou, and then buy european bonds, while the europeans do the same for us.

In other words, it is a scheme to disguise the printing by involving the co-operation of a third party, and in a way that ensures a balance between the currencies.

This is nothing short of brilliant. Finally I understand it.

This is nothing short of brilliant. Finally I understand it.

Nothing brilliant. We are just dumb. :(

Change!

Why is Obama delaying the shut-off of analog TV signal?