Oil's energy contribution has declined by about 12% since 1999. The world's economies have also declined by about 12%. (Using conventional metrics, which are time delayed determinations, this will only be seen in hind sight). The massive destruction of asset values now occurring testifies to it happening.
Peak is well behind us, world economies have peaked and will continue to decline.
Joined: Mar 12, 2007 Posts: 1009 Location: As close as I can get to the beginning of the pipe.
Posted: Sun Aug 24, 2008 11:11 am Post subject: Re: Housing and Economic Collapse - In Progress #3
Prescient Rasputin thinking big about F&F bailouts, and how the Fed will prop the financial sector equities.
Quote:
"Now, here is how such a plan by Treasury could work:
If they were to offer my original $50 a share for the stock (and for simplicity's sake, I'm just lumping all the common and preferred together) the TOTAL exposure for Treasury--if each shareholder surrendered ALL their shares--would be:
$112 billion
..or roughly ONE-EIGTH of the $800 billion fiatscos that Hankzooka was awarded (for this fiscal year anyway, with more possibly on the way) by Congress to bail out the GSEs.
This leaves approximately $700 billion for mopping up bad MBS/bonds.
However, my sense is that just having Treasury "credibly threaten" to buy the shares at $50 would so comfort the lambs that they WOULDN'T all feel impelled to sell all the shares. Perhaps only 40% of the lambs offer up their stakes, so the total outlay by Treasury is:
$45 billion, approximately
Furthermore, such an offer by Hankzooka and company would also have the following knock-on effects:
1. Instantly sky the stock prices of Fannie and Freddie, shutting up the crybabies who have been destroyed financially by holding these dogs
2. Also instantly sky the stock prices of the entire financial sector--which has recently taken a beating that makes the Internet stock meltdown look tame by comparison
3. So crush and demoralize the short-selling-seditionists that they would be scarred for life and would never short a stock again
4. Finally, incite a 5000-point, six-month, rally on the Dow, proving raven totally correct."
And Willem Buiter tells the Fed (in 118 pages) what wankers they are.
Quote:
"In the case of the Fed, the nature of the arrangements for pricing illiquid collateral offered by primary dealers invites abuse. In the case of the BoE and the ECB, the secrecy surrounding their pricing methodology and models, and their unwillingness to provide information about the pricing of specific types and items of collateral make one suspect the worst. Because these distorted arrangements (in the case of the Fed) and lack of transparency as regards actual pricing (for all three central banks) continue, it is likely that all three central banks continue to create avoidable moral hazard. The reason the Fed did worst in this area also, is probably again due to the fact that, unlike the ECB and the BoE, the Fed is a financial regulator and supervisor for the banking sector. Cognitive regulatory capture of the Fed by Wall Street resulted in excess sensitivity of the Fed not just to asset prices (the ‘Greenspan-Bernanke put’) but also to the concerns and fears of Wall Street more generally. All three central banks have gone well beyond the provision of emergency liquidity to solvent but temporarily illiquid banks. All three have allowed themselves to be used as quasifiscal agents of the state, providing subsidies to banks and other highly leveraged institutions, and assisting in their recapitalisation, while keeping the resulting contingent exposure off the
budget and balance sheet of the fiscal authorities. Such subservience to the fiscal authorities undermines the independence of the central banks even in the area of monetary policy."
"Cognitive regulatory capture." Now that's a mouthful. Is that a kind name for cronyism?
And what's with the term synthetic money I'm seeing creeping into lexicon this week? The MSM is finally trying to come up with a grok-word for those derivatives hanging over the global economy. Synthetic money; I like it. _________________ "When fascism comes to America it will be wrapped in a flag and carrying a cross." --Sinclair Lewis
Posted: Sun Aug 24, 2008 11:12 am Post subject: Re: Housing and Economic Collapse - In Progress #3
shortonoil wrote:
The dollar is the world’s reserve currency, and there is no other good alternative out there. If it goes, the world’s CB are going to be in a deep pile of it, and that is why they are selling metal paper by the truck load, while at the same time buying the physical hands over fist.
Quote:
So what has been happening in the markets for physical gold and silver? Almost the exact opposite of the paper contract markets. Virtually no physical gold or silver is being liquidated by long-term investors. Instead, they are trying to purchase gold and silver like crazy."
Translation:
Owning gold/silver ETFs = wortheless
Holding physical = priceless
Is that about right...because this is what I have been hearing for years...some still seem to think paper is worth something...well some paper is worth something...
Joined: Oct 23, 2004 Posts: 5928 Location: New Jersey
Posted: Sun Aug 24, 2008 1:51 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
Iaato wrote:
Prescient Rasputin thinking big about F&F bailouts, and how the Fed will prop the financial sector equities.
.
Rasputin has gotten most of the facts wrong. $800 billion increase in the debt limit does include $50 billion for the F & F bailout, but the rest is for the expected federal budget deficit.
In the event of a F & F failure, the debt limit would likely have to be increased again - since debt issued for the purpose of saving F & F would have to increase the official amount of Treasury borrowing (if the total exceeded $50 billion, which it probably would).
They are still trying to push the failure of F & F past the elections, but it's getting harder and harder since it now has been confirmed by the Chinese and Russians that they are slowly liquidating their F & F debt holdings. They are however shifting from F & F debt to US government debt, as to not cause a dollar crash right now. _________________ It's already over, now it's just a matter of adjusting.
Joined: Mar 12, 2007 Posts: 1009 Location: As close as I can get to the beginning of the pipe.
Posted: Sun Aug 24, 2008 2:04 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
Dante, you're still talking about debt limits and $50 billion increments. With $600 trillion in derivatives hanging over our heads the Fed is going to have to get much more creative and change all the rules if they want to maintain the system even through the election. The wheels are coming off, and debt limits during exponential growth of the fiat is a dated concept. _________________ "When fascism comes to America it will be wrapped in a flag and carrying a cross." --Sinclair Lewis
Joined: Oct 23, 2004 Posts: 5928 Location: New Jersey
Posted: Sun Aug 24, 2008 2:44 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
Iaato wrote:
Dante, you're still talking about debt limits and $50 billion increments. With $600 trillion in derivatives hanging over our heads the Fed is going to have to get much more creative and change all the rules if they want to maintain the system even through the election. The wheels are coming off, and debt limits during exponential growth of the fiat is a dated concept.
Yes I am talking the official actual money budget figures. I believe we actually had an increase of $5 trillion in accrued liabilities for the fiscal year ending in 9/2007 from the CBO.
Yes I also do agree that managing the breakdown of a $600 trillion daisy chain of derivatives is much more of a problem to the Fed right now. I was just responding to Rasputin's comments. _________________ It's already over, now it's just a matter of adjusting.
Joined: Oct 23, 2004 Posts: 5928 Location: New Jersey
Posted: Sun Aug 24, 2008 5:39 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
Quote:
Libor Signals Credit Seizing Up as Banks Balk at Money Lending
By Liz Capo McCormick and Gavin Finch
Aug. 25 (Bloomberg) -- Most of the bond strategists and salesmen that Resolution Investment Management Ltd.'s Stuart Thomson talked to last August expected the credit crunch to be long over by now. Instead, money markets show there's no end in sight, and it may even worsen.
``It's like an ongoing nightmare and no one is sure when we're going to wake up,'' said Thomson, a money manager in Glasgow at Resolution, which oversees $46 billion in bonds. ``Things are going to get worse before they get better.''
Banks are charging each other a premium of 77 basis points over what traders predict the Federal Reserve's daily effective federal funds rate will average over the next three months to lend cash. The spread is up from about 24 basis points in January, and may widen to 85 basis points, or 0.85 percentage point, by mid-December, prices in the forwards market show.
Bloomberg _________________ It's already over, now it's just a matter of adjusting.
Joined: Oct 23, 2004 Posts: 5928 Location: New Jersey
Posted: Sun Aug 24, 2008 5:48 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
Quote:
Ills at Freddie, Fannie Leave Experts at Loss
By SUDEEP REDDY
August 25, 2008
JACKSON HOLE, Wyo. -- Some of the U.S.'s top economists figure the government's response to Fannie Mae and Freddie Mac has come to a critical turning point: They expect Treasury will be forced to inject funds into the two firms, but they're not sure whether pulling the trigger will be enough to bolster the sagging economy.
The woes of the two mortgage-lending giants were the talk of the Federal Reserve Bank of Kansas City's annual conference at this mountainside resort. When the central bankers, academics and Wall Street economists met a year ago, the housing-market problems had just begun to deepen global-credit problems.
Since then, government officials around the world have repeatedly intervened by injecting liquidity into markets. Their actions may have prevented a much deeper financial meltdown, but they haven't ended the crisis.
The fundamental problem: Home prices continue to decline sharply. That is leading to more homeowner defaults and foreclosures, which further knock down real-estate values. The price declines are hitting banks that hold mortgage-related securities, ultimately restraining credit and slowing the overall economy.
"It's simply not clear -- at least not clear to me -- what will stop this self-reinforcing process," Harvard economist Martin Feldstein told conference participants.
"The crisis has now spread to the real economy, and who knows what will happen as a result," said Bank of Israel Gov. Stanley Fischer, a former top official at the International Monetary Fund and Citigroup. "The crystal ball at this stage is unusually unclear."
WSJ _________________ It's already over, now it's just a matter of adjusting.
Posted: Sun Aug 24, 2008 8:11 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
[quote="DantesPeak"]
Quote:
...The fundamental problem: Home prices continue to decline sharply. That is leading to more homeowner defaults and foreclosures, which further knock down real-estate values. The price declines are hitting banks that hold mortgage-related securities, ultimately restraining credit and slowing the overall economy...
I am so tired of hearing that housing is the problem, sub-prime is the problem, etc. These are not the problem -- they are symptoms. The only reason the pseudo-valuations of housing went up is because of the manipulations of the bankers and their "innovative" financial instruments.
The problem is all the greedy bankers who hallucinated this wealth and all the paid-off politicians who let the crimes continue. When will it end? Not until we have a correction back to something resembling a production-based economy. With declining energy and natural resources that could be a while. _________________ Civilization is a personal choice.
Posted: Sun Aug 24, 2008 8:42 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
SchroedingersCat wrote:
The problem is all the greedy bankers who hallucinated this wealth and all the paid-off politicians who let the crimes continue. When will it end? Not until we have a correction back to something resembling a production-based economy. With declining energy and natural resources that could be a while.
It's not only bankers and politicians, it's pretty much anybody who has lived in the Western World in the last 30 years, we all, to some degree or another, have profited from that scheme.
I agree that there is a serious correction that needs to happen, and it will, the question though is if anything could be coming afterwards.
Reading people like Mish right now they still seem to think that the Government is at the root cause of all the problems and needs to be cut even more down to size, if that thinking prevails I think we'll be in for much much harder times than we'd like to imagine.
I wonder, who is willing (and capabal) of pressing CTRL-ALT-DEL on the Global Financial Markets? I doubt it'll be the bankers and I cannot see any politician willfully do it either.
Posted: Sun Aug 24, 2008 8:47 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
SchroedingersCat said:
Quote:
The only reason the pseudo-valuations of housing went up is because of the manipulations of the bankers and their "innovative" financial instruments.
The only reason that the "innovative" financial instruments” came into existence was because that was the only avenue where a bank could still make money. Remember the S&L crisis. That was the death toll for the 3,3,3 formula. Borrow at 3, loan for 3 more - be on the golf course by three.
The bankers knew the risk they were taking, banker and moron is not “always” an oxymoron. By the time of the Dot Comm bust, banking was finding its self crawling into a corner. The real culprit in the crime was when everyone found out that you could buy an island in the Caribbean if you became a hedge fund manager.
The way you got that island (plus the boat) was to sell derivatives. Hedge funds became so profitable that banks started to buy them. Then we were off to the races.
Now, even though I think that J.P. Morgan and GS are the epitome of creatures that would eat there own young, then brag about it, I don’t think we can heap all the responsibility on the IB. It was a rich, rich pie - quite a few had their hands in it!
Posted: Sun Aug 24, 2008 9:31 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
Just noted that one of the oldest and most respected of the gold bulls is warning of deflation now : Richard Russell
I used to subscribe to his publication. Russell has been investing since the 50s. He is a 'chartist', taking most of his queues from the market itself. He was, and I'm sure still is, a big fan of holding some gold. But he also sees what economic time it is, and those banking on inflation should take note -
"From what I see," Russell says, "the markets are telling us to prepare for hard times, and a global spate of the worst deflation to be seen in generations. This is why Gold has been sinking, this is why stocks have been falling big money, sophisticated money, is cashing out, raising cash, preparing for world deflation.
"This is probably why Lowry's Selling Pressure stays at its high," says Russell. "Smart money is selling into the stock market, day after day. They're raising cash in preparation for the hard times when deflation is in the saddle. Deflation is ushering in the new strong dollar. Big money sees deflation and the lower rates that go with deflation.
...
"What I see is a coming world deflation, and I believe that's the message the markets are sending. What's the best stance in a deflationary situation? Lots of cash, and safe, solid, investments. Two areas that fit that requirement US Dollars and US Treasury paper.
"What happens to stocks during deflationary times? They're sold to raise cash. What happens to business in deflationary times? It's crushed by ever-lower prices. What happens to the average citizen who's loaded with debt during deflationary times? They're battered unmercifully, as income buys less and less and as debt crushes them.
"What happens to assets during deflationary times? They're worth less and less and their sale brings in fewer and fewer dollars. Isn't the price of Gold and oil already telling us that?" _________________ Welcome to the Kondratieff Winter
"Sharp US money supply contraction points to Wall Street crunch ahead"
"Data compiled by Lombard Street Research shows that the M3 ''broad money" aggregates fell by almost $50bn (£26.8bn) in July, the biggest one-month fall since modern records began in 1959.
"Monthly data for July show that the broad money growth has almost collapsed," said Gabriel Stein, the group's leading monetary economist.
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On a three-month basis, the M3 growth rate has fallen from almost 19pc earlier this year to just 2.1pc (annualised) for the period from May to July. This is below the rate of inflation, implying a shrinkage in real terms.
The growth in bank loans has turned negative to a halt since March.
"It's obviously worrying. People either can't borrow, or don't want to borrow even if they can," said Mr Stein.
Monetarists say it is the sharpness of the drop that is most disturbing, rather than the absolute level. Moves of this speed are extremely rare." _________________ Welcome to the Kondratieff Winter
Joined: Apr 13, 2005 Posts: 3272 Location: St.Louis, Mo
Posted: Sun Aug 24, 2008 9:49 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
When people pay back their loans and banks don't lend it back into circulation, guess what happens ? This is how the central banking cartel causes panics. They use these panics to their advantage to manipulate whatever their agenda is. It has always been this way.
Posted: Sun Aug 24, 2008 11:47 pm Post subject: Re: Housing and Economic Collapse - In Progress #3
Armageddon wrote:
When people pay back their loans and banks don't lend it back into circulation, guess what happens ? This is how the central banking cartel causes panics. They use these panics to their advantage to manipulate whatever their agenda is. It has always been this way.
Again--If the economy contracts enough, there will be supply crunches of things you need, and a surplus of credit sensitive assets like houses flooding onto the market. In a difficult scenario, you might get pure deflation. In a monster clusterf**ck, of unprecedented proportion, you can't count on that.
Posted: Mon Aug 25, 2008 12:06 am Post subject: Re: Housing and Economic Collapse - In Progress #3
Armageddon wrote:
When people pay back their loans and banks don't lend it back into circulation, guess what happens ? This is how the central banking cartel causes panics. They use these panics to their advantage to manipulate whatever their agenda is. It has always been this way.
That one particular action has a deflationary effect.
However there are many variables to add up and that is only one of such.
It is the summation of ALL variables that determines the final result. --> and NOT a single variable
The summation of all inflationary actions taken by TPTB (such as budget deficits+trade deficits+current account deficits) far exceeds deflationary actions therefore the net result is still inflation.
//
As for Americans paying back their home loans.
*evil laughter*
There's still lots of people on interest only loans so I guess these home "owners" will NEVER pay back their loans. _________________ joeltrout Oct-2008: Dow 13,000 in three years
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