Posted: Tue Apr 01, 2008 9:58 pm Post subject: Re: Housing & Economic Collapse - In Progress
Great little blog entry from NYT talking about what we already know: the Fed has shown itself to have one single mission over the past six months--keep the stock market from crashing. Every recent Fed action and announcement has been designed and timed to soothe a nervous Dow Jones when it threatened to tank.
Say this for the Fed. It pays attention to what Wall Street wants.
When Wall Street wanted the Fed to ignore all the wild gambling in the derivatives markets, the Fed did so. Alan Greenspan fought to keep regulation away from that market, and argued that it was assuring the safety of financial institutions by allowing risk to be transferred to others. It turns out the exact opposite was true.
Now that the crisis is upon us, and Wall Street is in trouble, the Fed seems to announce new actions whenever investors get worried enough.
I count six separate days in the first quarter, which ended today, when the Fed announced actions. They are:
Jan. 22, when it cut the discount rate.
Jan. 30, when it cut the discount and Fed funds rates.
March 7, when it announced plans to inject money into financial markets
March 11, when the Fed and other central banks announced plans to inject more credit into markets.
March 16, when it financed the rescue of Bear Stearns and cut the discount rate
March 18, when it cut the Fed funds and discount rates.
On a net basis, all the damage for the quarter was done in the days leading up to each Fed action. In the three trading days before each Fed move — a total of 15 days since there was some overlapping — the S.&P. 500 fell almost 145 points and the Dow Jones industrial average lost 1,003 points.
Joined: Mar 12, 2007 Posts: 890 Location: As close as I can get to the beginning of the pipe.
Posted: Tue Apr 01, 2008 10:05 pm Post subject: Re: Housing & Economic Collapse - In Progress
These are good words, Dr. The Fed will keep the stock market from crashing, if today is any demonstration of their power. If they pump enough money in, we could get quite the bump.
Quote:
"Zimbabwe: Best Performing Stock Market in 2007? (April 2007 article)
The Zimbabwe Stock Exchange (the ZSE) is the best performing stock exchange in the world, the key Zimbabwe Industrials Index up some 595% since the beginning of the year and 12,000% over twelve months. This jump in share prices is far in excess of increases in consumer prices. While the country is crumbling, the Zimbabwean share speculator is keeping up much better than the typical Zimbabwean on the street.
CNBC logic fails to explain the coincidence of a rising ZSE and collapsing GDP because it entirely ignores the monetary side of the economy. At this point Austrian economics makes its contribution to our story. According to Austrian Business Cycle Theory (ABCT), the peak-trough-peak pattern that economies demonstrate is not their natural state, but one created by excess growth in money supply and credit. New money is not simply parachuted to everyone equally and at the same time — it is sluiced into the economy at certain initial "entry points." From these entry points, a number of initial goods are bought by recipients of new money causing a rise in price for these initial goods relative to other good"
http://www.mises.org/story/2532 _________________ "For my part, whatever anguish of spirit it may cost, I am willing to know the whole truth; to know the worst and provide for it." --Patrick Henry
Posted: Wed Apr 02, 2008 12:46 am Post subject: Re: Housing & Economic Collapse - In Progress
Quote:
"Zimbabwe: Best Performing Stock Market in 2007? (April 2007 article)
The Zimbabwe Stock Exchange (the ZSE) is the best performing stock exchange in the world, the key Zimbabwe Industrials Index up some 595% since the beginning of the year and 12,000% over twelve months. This jump in share prices is far in excess of increases in consumer prices.
I've heard that Zibabwean inflation is more like 150,000% from a native Zibabwean. She said the government has fixed the price of certain goods and then no store will sell those goods because it would be at a loss. So the stores sell goods that are not on the price fix list. But most of the trading was on the black market which is at a much higher price. Even if inflation's at a fraction of 150,000%, the 12,000% stock increase is actually a pretty bad loss.
Posted: Wed Apr 02, 2008 3:38 am Post subject: Re: Housing & Economic Collapse - In Progress
manu wrote:
The Head Lemming said, it will be a soft landing lemmings, there are no rocks below the cliff.
It will only be a hard landing for the first lot over the cliff...the rest will fall on other lemmings so they will have a 'soft landing'. The moral of this is that most of us will face a soft landing and so no need to worry _________________ We should teach our children the 4-Rs: Reduce, Reuse, Recycle and Rejoice.
Posted: Wed Apr 02, 2008 3:44 am Post subject: Re: Housing & Economic Collapse - In Progress
The UK Housing Bubble Blogspot has an interesting graph in the entry for 31st March which shows the spread of the interbank lending rate over the UK government paper. There as signs of a third spike in the rates so Alice wrote:
Quote:
It looks like we are heading for round three of the credit crunch. UK interbank interest rate spreads are again rising. As of March 28, banks needed to pay 98 basis points more to borrow 3 month money relative to a 3 month repo using UK government paper.
Back in good old days when banks trusted each other, the spread ranged from between 9-12 basis points.
_________________ We should teach our children the 4-Rs: Reduce, Reuse, Recycle and Rejoice.
Joined: Mar 12, 2007 Posts: 890 Location: As close as I can get to the beginning of the pipe.
Posted: Wed Apr 02, 2008 9:53 am Post subject: Re: Housing & Economic Collapse - In Progress
Nice point, FloridaGirl. And that ZSE article was from a year ago, so I'm sure the numbers for the stock market are a lot worse.
Did y'all see this post from Cid Yama about the G7 plans for bailouts?
http://www.peakoil.com/fortopic38239.html _________________ "For my part, whatever anguish of spirit it may cost, I am willing to know the whole truth; to know the worst and provide for it." --Patrick Henry
Debt-hit Colonial, Spain's second biggest property group, had its shares briefly suspended in trading in Madrid, amid reports it was meeting creditors.
A property boom has driven the country's economy for more than a decade, but builder SEOP and developer Cosmani declared insolvency last month.
...
In January, Colonial lost 40% of its value in two days and more than half of its board members resigned, first raising the spectre of a property meltdown in Spain.
...
Spanish property firms have been hit by rising interest rates and the global credit crunch.
That has made it hard to sell property in a market that some believe may be over-supplied. In January, home sales in Spain fell 27% on the previous year, while the number of new home building permits dropped by 50.2%
. _________________ We should teach our children the 4-Rs: Reduce, Reuse, Recycle and Rejoice.
Joined: Mar 12, 2007 Posts: 890 Location: As close as I can get to the beginning of the pipe.
Posted: Wed Apr 02, 2008 1:16 pm Post subject: Re: Housing & Economic Collapse - In Progress
Eli, I typically scan Denninger's rants, and while I admire his heart and activism, I am always amazed at the illogical juxtaposition of his libertarian? investment philosophy and his current desire for more bigger government. Weren't the Republicans running for the last 8 years on a ticket that suggested we should shrink government until you could drown it in a bathtub? It seems to me like he is asking to have his cake and eat it too. Of course my opinions may be biased due to my disgust at the racism on his board.
Quote:
"I have been a registered REPUBLICAN for more than 20 years. I voted for Ronald Reagan, George Bush, voted against Bill Clinton (twice) and voted for George W. Bush (twice.) I have a Gingrich Speaker's Gavel on my Credenza.
Today I am compelled to switch my voter registration to Democrat, because although I disagree with many Democrat policies, they have never attempted to rip up The Constitution wholesale, while The Republicans just did EXACTLY THAT."
Posted: Wed Apr 02, 2008 1:41 pm Post subject: Re: Housing & Economic Collapse - In Progress
I can understand that the Fed wants to stop a chain reaction of bank runs, but do they honestly believe that they can entice consumers into buying houses by keeping their prices high? I can tell you that this consumer will only buy on prices that are much lower. I am not interested in the speed at which my house value appreciates, or hoping to retire on my house appreciation. I would much rather spend less on my basic living expenses, so that the money I save can be used for retirement. I'm only in my 20s, but I feel like an old man compared to my peers. _________________ "If humans don't control their numbers, nature will." -Pimentel
"There is not enough trash to go around for everyone," said Banrel, one of the participants in the cattle massacre.
"George W. Bush loves poor people. He keeps making more of them." -unkn
Seriously, go read his previous articles. They include greats like "Buffett and Soros know jack about markets", "Peak oil can be solved by wishing for oil that doesn't exist, 'cause we want it" and "When everyone predicts a market crash, go and invest your life's savings in gold and silver".
To say this guy is a Pollyanna is to grossly understate how separated from reality he is. I figure he doesn't go into the Bear Stearns story because it flies in the face of his contrarian bullshit.
There's playing Devil's advocate, and then there's self-delusion. _________________ "Nothing survives. Not your parents. Not your children. Not even stars."
-Pinbacker, Sunshine
Joined: Mar 19, 2005 Posts: 797 Location: Bridge City
Posted: Wed Apr 02, 2008 1:57 pm Post subject: Re: Housing & Economic Collapse - In Progress
Falconoffury wrote:
I can understand that the Fed wants to stop a chain reaction of bank runs, but do they honestly believe that they can entice consumers into buying houses by keeping their prices high? I can tell you that this consumer will only buy on prices that are much lower. I am not interested in the speed at which my house value appreciates, or hoping to retire on my house appreciation. I would much rather spend less on my basic living expenses, so that the money I save can be used for retirement. I'm only in my 20s, but I feel like an old man compared to my peers.
retirement? hahaha that ain't happening for our generation. _________________ "if god doesn't exist, it is necessary that we invent him" - Voltaire
Posted: Wed Apr 02, 2008 2:46 pm Post subject: Re: Housing & Economic Collapse - In Progress
Sorry, I should have said Mad Max retirement. _________________ "If humans don't control their numbers, nature will." -Pimentel
"There is not enough trash to go around for everyone," said Banrel, one of the participants in the cattle massacre.
"George W. Bush loves poor people. He keeps making more of them." -unkn
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