patrick.net

Headset, yeah a pun on a 1031-exchange.

snmr, yup, will be interesting to see how "the market" likes the the q4 somewhat uncertain guidance.

All these anti-foreclosure, anti-clog-up measures are extremely inflationary.

There was an interview earlier last week by the Aussie Central Banker Glenn Stevens which is very telling, this guy is the straightest shooter among all CB heads that I have heard. He said, (from memory, so there maybe slight variation of verbage), "we RBA has unlimited ability to provide AUD swaps, and the FED has unlimited ability to provide USD swaps, so it is a matter of time for the capital injection to work".

I think the $700B is just for show (primarily to our creditors), as if the printing is still restrained, not completely out of thin air. The Fed has already expanded its balance sheet by over $500B in the last 12 months, to be precise, the last 2 months, I don't see them seeking Congress approval for that. In about 12 months, we will have easily printed over a few trillion, easy.

On PBS Newshour with Jim Lehrer today: Discussion of bailout plan preferred stock purchases.

Dean Baker of the Center for Economic and Policy Research posed the question why the taxpayers get 5% interest rate while Buffett gets 12% on Morgan Stanley preferred. He also thinks the taxpayer should get voting rights, and that CEO pay should strictly defined, not just lip service.

To all who are against the bailout in the first place, should we not now concentrate on getting the taxpayers the highest possible return? In other words, write your US representative and complain!!

Side note: Richard Sylla of NYU piped in that the government (that is you, the taxpayer) should not be in the business of making a profit. Sure, privatize the profit, socialize the risk, yet again.

Here is a scary development that has largely gone under the mainstream radar: Money market funds are getting the go-ahead to pretend that their NAV is 1.00 based on estimated value of portfolio contents.

http://www.cranedata.us/news/#item-1898

In the grand scheme of things, the $700B doesn't matter.

In 24 months, when all is said and done, we will look back and laugh at how we actually cared so much about the $3000 per person, because that $3000 won't be able to buy much, at least the expectation will be as such.

What they are doing is using $700B as a distraction of attention so that they can print freely in the background. Watch Fed's balance sheet. Where did the Fed get its $500B in the last two months??? Anybody, anybody, Mueller?

The Fed cannot be seen as straight printing from the air, that will lead to instant collapse of the financial system because nobody will trust USD any more. So every once in a while, they put on these shows as if the money comes from the taxpayers, what taxpayers, this country won't have enough taxpayers.

I maintain, the $700B is just for show. The real printing going on in the background is completely unrestrained.

justme Says:
"To all who are against the bailout in the first place, should we not now concentrate on getting the taxpayers the highest possible return? "

Excellent point.

When bufffet can make good bargains, why can't US govt with so much more capital and bargaining power make such deals ?

something is definetely broken. Conflict of interest ? mr paulson ?

Correction, Buffet appears to be getting 10% not 12%. Still ....

Look at the terms that Mitsubishi got:

Under the revised deal, Mitsubishi UFJ receives $7.8 billion of
preferred shares that convert to stock at a price of $25.25, down from
the previous level of $31.25.

The remaining $1.2 billion is in non-convertible preferred stock. Both
classes pay a 10-percent dividend. The $900-million interest payment to
Mitsubishi UFJ is about 16 percent of Morgan Stanley’s adjusted net
income next year, based on the average of nine analysts’ estimates.

Buffett bought $5 billion of perpetual preferred stock in Goldman, the
Wall Street firm that has best navigated the credit market turmoil. As
part of the deal, Buffett secured the right to buy an additional $5
billion of common stock at any time in the next five years. His
preferred shares will also pay 10 percent interest.

I maintain, the $700B is just for show. The real printing going on in the background is completely unrestrained.

True, but compared to amount of $USD being destroyed via deflation its still a lesser amount.

It is not USD deflation, it is de-leveraging.

It is debt being destroyed faster than printing, so here is a little bit of glitch. But don't you see that the worldwide government can guarantee ALL deposits and different degrees of inter-bank lending over a weekend? Where does the guarantee money come from? Falling from the sky?

So as always, the government is half a step behind. They are a bit behind in printing, and they will be very behind in containing inflation when they eventually catch up with printing.

The nice thing is, after this crisis of the century which will go down in history book as the ultimate blowup of our financial system, the Fed will go along with it. The Fed is insolvent now. All it can do is to print until its FRN loses credibility entirely, and at that point, it will be gone.

Market Reflation Indicators:

http://www.financialsense.com/Market/wrapup.htm

But don’t you see that the worldwide government can guarantee ALL deposits and different degrees of inter-bank lending over a weekend? Where does the guarantee money come from? Falling from the sky?

You do not need money to guarantee anything, at least not if you are a government.

They are trying to prevent the invocation of those guarantees.

All it can do is to print until its FRN loses credibility entirely, and at that point, it will be gone.

Not if ECB is losing credibility faster.

Where does the guarantee money come from? Falling from the sky?

The same place all fiat currencies come from; thin air.

The trick is how much you print and where it goes.

Consider this scenario, for example. The central bank prints a $100 bill. Skipping the fractional reserve lending part; this is then ultimately lent out to a citizen.

If they turn around and invest it in equities or commodity futures; or use it for consumption (ultimately pushing up demand for equities and commodities), that would be inflation.

If they burn it in their furnace; its deflationary.

Now imagine the scenario that they lend it to their neighbor at some small interest rate and its the neighbor that burns it in the furnace; defaulting on the loan.

Again we have deflation. And this is what is happening on a global scale. People *all over the world* borrowed money during the credit boom they have no chance of ever paying back.

So the first party is pissed it didn't get paid back and doesn't want to lend out any more of its cash. So the central bank gives them a 'do over' by printing up a new $100 bill and handing it over to them. The net money supply never changes. This can never be inflationary.

This *can* work in the long term as long as all the parties get dinged in the process, including the central bank. Then they all learn their lesson and hopefully exercise better diligence in the future. Otherwise we end up in moral hazard territory and everyone just takes bigger risks next time.

In fact, people think our current predicament is a result of the many bailouts of past.

Actually you do need money to guarantee, because a lot of these banks are in fact insolvent. If it is not a bank run, it will be something else that can bring one of these down.

You cannot count on 100% of the people NOT cashing in on your guarantee, if 1% cashes in and find out your guarantee doesn't work, the whole system will fall apart.

You can't have a FDIC with $0 in the coffer to guarantee anything. People are not that stupid, they know it is printing.

I wonder, if and when the economy does get traction, will the Fed have to jack rates (Volker style) to contain the the massive inflationary scenario it has put in place.

On a global scale, the currency with the worst fundamental is moving up the fastest, which says to me, is a result of deleveraging, not deflation. It's because US-based financial companies and USD-denominated assets are getting the most margin calls.

Deflationists believe that governments are sane and rational and far-sighted. Stagflationists like myself believe that governments are comprised of insane power-grabbers who are so reckless that they don't care if the world goes down just so they can remain in power for one more day.

The economy will NOT get traction. It will just be the favored banks getting sprinkled money betting on the last bubble, commodity, because it has fundamentals to support such a bubble. After that will be complete collapse and deflation to no end. I am not extrapolating, this has happened in history repeatedly, must be human nature.

The economy can only get traction if the money is sprinkled evenly to everyone, so Americans can go on their patriotic shopping trip again. Right now only the chosen ones get the fresh supply of money, and the only thing they can bet on is basic human necessities that we have to consume no matter how expensive they are.

The biggest problem with printing has always been, you cannot direct precisely where your printed money go and there are always unintended consequences. 1970s was lucky for us because we actually had quite a bit of savings, and a strong manufacturing base. Now the Fed cannot raise interest for another 10 years, we are stuck in ZIRP until the entire world recovers. Or else if we raise interest rate alone, we will have no industry left in this country.

I am not extrapolating, this has happened in history repeatedly, must be human nature.

Gresham's Law is immutable. Bad debt will always crowd out good.

There is a dark side of me that really wants this situation to get worse and worse and blow up in mushroom cloud right in the face of the departing President. This is still not Mad Max enough, just want Bush to seal that reputation as the worst President ever, can't let Wilson get ahead.

This is still not Mad Max enough, just want Bush to seal that reputation as the worst President ever, can’t let Wilson get ahead.

He is still not FDR yet.

Are you kidding me, FDR is way better than Bush. if you think Bush is better than FDR, then you are the biggest idiot on earth and please don't even respond to my post, I have no bandwidth for you.

Don't read it if you don't like it.

Just don't get me wrong. The bailout has made Bush unredeemable in my eyes.

Think the financial crisis is bad? Wait until you see the entitlement crisis.

But I won't call you in idiot because you are entitled to your opinion as much as I am entitled to mine.

Pasadena woman facing eviction is found dead in burning home
"She was made aware of Monday's eviction," he said. "That may have been what precipitated the arson and death."

Police are still trying to determine the history of the house's ownership.

Neighbors said Dunn's grandparents owned the house before it was passed down to her parents and then to Dunn and her sister.

A few years ago, neighbors said, Dunn and her sister took out a loan on the house but couldn't repay it and had to sell.

The new owner, who let Dunn continue to live there and pay rent, lost the home to foreclosure in May, neighbors said. Washington Mutual bank was listed in property records as the current owner.

The spin that Paulson had to "force" the banks to take the $125B is utter baloney:

If you put gang-of-9 bank CEOs together in a room, it is very predictable what will happen.
They will all try to out-pretend each other that they "do not need it", and then "reluctantly" sign. They all just want plausible deniability before they sign.

The problem is that instead of lending the money out, they are all going to add it to their acquisition war chest and strut around trying to force the other guy into acquisition submission. What a farce.

The banks will still refuse to lend out money against shriveling assets as security. This is just like 2001. They will be looking for another bubble to inflate rather than spending the money on what it is supposed to be for. "Trickle down" voodoo economics does not work in banking, either.

Wake up you sleepy Kahl ee for nee onnz.

It wa a short rally. (As opposed to a short rally?) We're back down scraping the 9000 mark.

Today's spin? "Recession Fears."

The above is with reference to a NY Times article:

http://www.nytimes.com/2008/10/15/business/economy/15bailout.html?_r=1&hp&oref=slogin

MST,

Indeed.

Now here's one place the "Credit Crunch" actually bites.

http://benbittrolff.blogspot.com/2008/10/credit-crunch-baltic-dry.html

1) No letters of credit? No freight.
2) No Freight? No parts available for manufacturing.
3) No Manufacturing? No Money to service debt.
4) No debt service? Return to step one.

I think Reflation will be successful if they start sending checks to people directly. Fortunately ben can't do it directly. We need congress to come in and legislate.

Extend Unemployment benefits for longer periods.
Rebate Checks.
Tax Cuts to all kinds of people/business.

When they start doing these, I would start worrying about Reflation. Until then we would be in Deflation.

Is this the bottom?

How much lower can we go when we are throwing people in jail now for not being able to keep their lawns green!

http://search.live.com/news/results.aspx?q=Brown+lawn+jail+Joseph+Prudente&form=MSNHPM

Is this the bottom?

Well, throw in an Iranian/Chinese freighter dirty bomb aimed at wiping out Israel on Yom Kippur, which was only prevented by being seized by Somali pirates.

http://tinyurl.com/4zzxgt

Are we having fun yet?

This is starting to sound like a Tom Clancy novel.

Again.

The spin that Paulson had to “force” the banks to take the $125B is utter baloney:

Yeah, I can't imagine they were forced into it. They probably were more than happy to receive the much needed cash. They probably put up a poker face to media and as soon as they went into their office, started dancing all around.

MST, I think that link IS a Tom Clancy novel, and not reality. There is no way the MSM would not have reported something on this if it were true.

MST - thanks for the info about Alt-A's, a bit late,but I don't get the chance to check back frequently.

I can't see things getting sorted out until the resets for the next 2 years are past.

They need to come up with at least a 4 year economic plan to sooth the masses (that acknowledges that there will be more businesses failing or earning less profits and job losses and foreclosures), not instant fixes that turn out to be only temporary band-aids for the markets.

OK, I'm getting a little nervous that I'm not finding any articles saying that MST's story is a hoax, or nonsense. Will someone please provide a link dispelling the story so that I don't start building a fallout shelter in my back yard? I'm really not in the mood to start digging right now. I'm surprised Iran is still on the map if this is true.

I was curious how the story died out so quickly. I didn't even know it had ended, last thing I had heard was the pirates were on the ship and were negotiating because there were rumors of infighting among them.

JustYou:

There is no way the MSM would not have reported something on this if it were true.

uh, yeah, OK. We'll let that pass.

http://www.foxnews.com/story/0,2933,430681,00.html
http://www.thetimes.co.za/PrintEdition/Article.aspx?id=851953

As well as others.

No doubt, there is such an Iranian ship, hijacked on August 21. No doubt Somali Pirates did it. Very little doubt some became mysteriously sick and probably died after getting into the cargo => not iron ore, but something not good. Descriptions of the malady match Rad. Sickness.

The question then is about the "Russian report". I haven't found independent confirmation of that one. Still looking.

We'll see.

The whole thing is interesting. I'm of course skeptical but I'm not finding anyone saying that it is not true.