[Roccland]

Well - people - I think Karl is a bag of wind most times...he will - in the end - be right, but for the wrong reasons. Probably one of the most important posts I have seen him write. Got preps?

Link

[seahorse2]

Rocc, I haven't been able to log onto the tickerforum lately. Have they limited it to registered users?

[Roccland]

Rocc, I haven't been able to log onto the tickerforum lately. Have they limited it to registered users?

Karl is playing games. The tickers are still available. The link should work for you.

[FoxV]

Karl is also a deflationist. He's really good with his technicals but that's were it ends. His Macro understanding is pretty poor and his Geopolitical is non-existent (Basically the USA is the world)

Listen to what he says technically, but throw away everything else. Credit yields may skyrocket and securities may collapse, but how many of those securities can be bought/transferred/renegotiated through Fannie and Freddie? Well it use to be 50% of the market, and was just raised to 75%. When the Alt-A SHTF it'll be 100%.

There won't be a credit collapse because now there is always:
a GSE to extend credit
With an infinite line of Credit with the US Gov
Which can Create infinite amount of Treasuries
Which can be bought with infinite fresh bills from Ben's printing press.

All roads now lead to Weimer

[Roccland]

There won't be a credit collapse because now there is always: a GSE to extend credit

Here Karl talks about Paulson and his inability to backstop the GSE...

[Polemic]

I've been a deflationist ever since I watched Money Masters 2 years ago.
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered." Thomas Jefferson, Letter 1802 to Secretary of the Treasury, Albert Gallatin

It makes sense if you're a banker: Expand the money supply with cheap money and loose loans. Get people in debt big-time. Then pull out the rug on the money supply. Voila! Everybody owes you (the banker) cash, and they'll have to liquidate to get it. Things become cheap. The bankers have all the cash, and they gobble up everything for pennies.

Meanwhile, competing banks (those who aren't in the loop) get caught off guard, and caught holding the hot potato. They go belly up. Now you have a monopoly on banking.

Another reason I think deflation is the next phase: Because everybody expects the opposite. Plus, maybe they have a deal with their Asian friends who are sitting on all that U.S. cash. ..."Don't dump dollars. We have a plan and we'll hook you up. Deflation is coming so those dollars will be worth more..."

There's more I can think of but I'm hungry.

[FoxV]

There won't be a credit collapse because now there is always: a GSE to extend credit

Here Karl talks about Paulson and his inability to backstop the GSE...

you left out an important piece of my post with that quote Roc

There won't be a credit collapse because now there is always a GSE to extend credit:
With an infinite line of Credit with the US Gov
Which can Create infinite amount of Treasuries
Which can be bought with infinite fresh bills from Ben's printing press.

Bond market is not part of the picture. Wouldn't that be inflationary? Damn Skippy it is. The Deflation argument is predicated by the US playing by the economic rules. Well the US has a long history of throwing out the rules when it doesn't suite them.

ultimately it just comes down to what will happen under each scenario
Inflation:
Insolvent homeowners can afford their homes
Reserve based banking system stays solvent
Government keeps its operations/wars funded
"Race to bottom" support by foreign CBs to keep their reserves healthy
Foreign influence over US Policy diminishes
Employment rises because of "Buy while you can" economics
Social unrest reduced by "gotta keep up" survival mode
$60,000,000,000,000 Social security net stays intact
$1,000,000,000,000,000 Derivative models stay intact

Deflation:
Massive amounts of homeless/squaters/disposesed
Reserve based banking system becomes insolvent
Government no longer able to fund wars/operations
Foreign CBs by up US assets on the cheap
US sovereignty greatly compromised (especially to Asia)
Employment falls because of "Wait to buy it cheaper" economics
Social unrest by idle and destitute population
Social security gone
Derivative models break

and I don't understand why you would say banks want deflation Polemic. Banks are not sitting on mountains of cash waiting to buy up hard assets. They're sitting on mountains of paper IOUs (bonds, equities, securities) both as assets and liabilities. In deflation all those things go down in value (price) and the cost to hold them goes up (yield).

There may be an argument to say that the banks can then loan out money at high yield, but to who. Nobody can afford their mortgage at 5% interest. Who's going to afford it at 20%?

And the banks wanting to own all the houses they have mortgages one has no precedent. Banks do not want to be landlords. That's why they're willing to take huge losses at auctions to get rid of properties. Especially if they are deflating in value. That just causes more losses.

Comparisons are often made between the 30's, 70's and now, but the US, and world, is a vastly different place. The entire world is fiat and the US is in its weakest position now than at any time in its history. The only asset it has left to maintain its supremacy is its Military. and guess what, WARS ARE INFLATIONARY.

As I said, all roads now lead to Weimer.

sorry for the rant, put people are calling deflation while we're in the middle of 10% price inflation and 15% monetary inflation. Come on, get real. Stop reading Tickerforum and start reading Itulip

[roccman]

you left out an important piece of my post with that quote Roc

There won't be a credit collapse because now there is always a GSE to extend credit:
With an infinite line of Credit with the US Gov
Which can Create infinite amount of Treasuries
Which can be bought with infinite fresh bills from Ben's printing press.

Bond market is not part of the picture. Wouldn't that be inflationary? Damn Skippy it is. The Deflation argument is predicated by the US playing by the economic rules. Well the US has a long history of throwing out the rules when it doesn't suite them. -snip- As I said, all roads now lead to Weimer. sorry for the rant, put people are calling deflation while we're in the middle of 10% price inflation and 15% monetary inflation. Come on, get real. Stop reading Tickerforum and start reading Itulip

Well said and agree on all points. Next bubble - the privatization of war.

[Twilight]

Good article. Thanks for posting.

The next spokesperson, analyst or journalist who points to a write-down of debt securities by a few percent and mentions a "kitchen sink" or leaving the bad news "behind" or "out of the way", just take one of those charts and if the slope is not zero, smack them over the head with it. I mean how hard can it be for them to figure out that if the trend is still higher yield / lower price, it is not the end of the story? Oh wait, they probably know and are lying.

Real estate AAA should never have been priced anything like Treasuries. Being so close was a deliberate mis-pricing of risk we all appreciate now. Spreads nearly doubling, well yes, they need to soar higher in order to reflect the true risk. Though what that does to the value of the paper if you bought it at par when it was issued - ha. Good point about leverage there. More write-downs here we come. Also more liquidation of the good stuff to plug the holes this is going to open up in people who lose more than what they put down. This sort of thing has to be driving a lot of volatility.

How is holding this stuff to maturity working out anyway? Maybe I have not been paying attention, but I have not heard much hair-pulling over outright defaults? Do they just drop it into a non-performing assets bin and quietly contemplate opening the Pandora's Box of insurance?

Good thing I am not in debt, on the other hand that will not be any consolation if someone is stupid enough to try to bail out this stuff.

[Zardoz]

He's genuinely scared. He's scared to death: Market Ticker (Posted late Thursday night)

Okay folks, this is serious stuff. This is now a national emergency. Seven trillion dollars of wealth has been vaporized in US Stocks in the last seven days alone, with five of it since the passage of that ill-designed and foolhardy "bailout" bill.

The selloff this afternoon is the "real deal." It was not caused by the stock market getting "mad", it was caused by the short-term credit market along with the Treasury market suddenly dislocating at a few minutes before the bond pit closed at 2:00 PM. Worse is also the fact that institutional lending has essentially disappeared - both between banks and now it is choking off commercial short-term credit across the board.

It doesn't get any more serious than this. To repeat: short-term commercial credit is threatening to completely disappear from the American scene. Every action our government has taken thus far, including repealing mark-to-market requirements have made the situation worse by further destroying confidence.

In the overnight market the futures are imploding once again; the Osaka exchange was closed in Japan after hitting its "lock limit" within minutes prior to the Nikkei opening; the Nikkei is now down ANOTHER 10%, for a total loss of nearly 20% in just two days, with Japanese banks trading "offer only" - that is, NO BID. There are rumors of government bond market fails in parts of Europe, and Iceland has essentially been cut off from the rest of the world Interbank marketplace.

Japanese banks are now firewalling themselves from European and US claims; the interbank market is about to explode. Iceland has effectively defaulted on sovereign debt and today there was a rumor that Hungary had a failed bond auction, effectively defaulting as well.

Key: Sovereign debt (that is, Treasuries from various nations) has become infected with trash - unfortunately including ours now that Fannie and Freddie were nationalized and TARP has been passed - and may fail in a cascade-style fashion across the world. If this occurs our ability to fund our government will be cut off as well, leading to a need to reduce government spending by $800 billion a year immediately. This means huge and immediate cuts to Social Security, Medicare and Military budgets - by as much as half.

Over a year ago I warned in my writings that this could happen if we did not take action. If we did not force accountability through Congress and onto our financial system. If we did not force the thieves, liars and thugs on Wall Street to take their medicine. Instead of taking action we have sat on our collective asses and allowed Congress to pass bailout after bailout - now our stock market is down close to 40% from the top with 20% of that loss coming in just over one week!

We are facing a global DEPRESSION and the cut-off of essential goods and services in this nation if we do not stop this lunacy immediately. Please understand - the TRUCKER who has a full load of food headed for your grocer REQUIRES commercial credit in order to fill his truck with diesel.

The local GAS STATION owner REQUIRES commercial credit to fill his underground storage tank. The local CAR DEALER REQUIRES commercial credit to have cars - and parts - in his dealership. No credit, no car - and no car repairs. IF THESE MARKETS DO NOT IMMEDIATELY UNFREEZE THE CONSEQUENCE WILL BE THAT FOOD AND FUEL MAY NOT FLOW TO YOUR GROCERY STORE AND GAS STATION.

Think about that very carefully and then consider whether YOU can afford to sit on your ass for one more second, or whether you have an absolute NEED to get on the phone, fax, and whatever else RIGHT NOW to your elected and appointed representatives and, if you do not get in response that they will IMMEDIATELY resolve this matter whether you will vow to band together with every one of your associates and friends, form a group consisting of everyone in your local city or town, and call a GENERAL STRIKE, refusing to both work and permit commerce to be conducted UNTIL THE LIARS ARE FORCED INTO THE OPEN, DEALT WITH, AND THE SYSTEM IS ABLE TO CLEAR.

We are quite literally out of time. This freeze in the markets WILL continue around the globe unless something is done NOW. Every "intervention" and "promise" made by our government thus far - all of them - have been LIES. Our government has done NOTHING to alleviate the problem and in fact every one of their "solutions" have made the situation worse - going back for more than a year. We have "pumped liquidity" and even bailed out firms with taxpayer money, and yet the markets have not unfrozen.

They remain frozen because the root cause of the problem is that banks and other financial firms have been lying for more than a year, each quarter claiming to have "kitchen sinked" their losses only to report more the next quarter, and in some cases have gone on national TV to proclaim they're "well-capitalized" only days or weeks before they collapse!

The first question anyone asks when someone wishes to borrow money is whether or not they will get paid back. If the lender does not believe they will be able to be paid back then that loan will not be made, no matter how much money someone has available to them. It really is that simple folks and yet this fundamental principle has been willfully and intentionally ignored for more than a year.

YOU MUST CHOOSE RIGHT NOW, TONIGHT, AS AN AMERICAN WHETHER YOU ARE GOING TO GO TO WORK TOMORROW AND PRETEND THAT NOTHING IS WRONG, OR WHETHER YOU ARE GOING TO ENGAGE IN PEACEFUL BUT FORCEFUL PROTEST IN DEMANDING THAT THIS CRISIS BE ADDRESSED NOT WITH "MORE OF THE SAME" BUT BY ARRESTING EACH AND EVERY ONE OF THE CROOKS, BY FORCING BALANCE SHEET TRANSPARENCY FOR EACH AND EVERY FIRM IN THE UNITED STATES, AND BY THEN FORCIBLY RECAPITALIZING VIA DEBT-TO-EQUITY "CRAMDOWNS" EACH AND EVERY INSOLVENT BANK AND OTHER FINANCIAL INSTITUTION, WITH TREASURY STEPPING IN WITH TAXPAYER MONEY ONLY AFTER THE TRUTH (OR FALSEHOOD) OF SOLVENCY IS ESTABLISHED IN PUBLIC WHERE WE CAN ALL SEE IT.
YOU LITERALLY MUST CHOOSE NOW, AS THE TIME TO DAWDLE AND THINK ABOUT IT HAS EXPIRED.

Looks like we're there. TS has HTF. Good luck to all of you.

[TheDude]

Yeah, right. Protest against what? Ignore that iceberg? Steer hard to starboard? Man lifeboats now? We're not even passengers in steerage on this ship, not even mice. More like cockroaches! J6P isn't going to have a light bulb moment reading Ticker Forum, fer Christsakes. J6P can barely read the instructions on a TV dinner, that's why he's J6P.

Which brings me to the IMF, and its warnings of a global recession this morning. Where the fcuk were you 6 months or even 2 years ago, when an entire chorus of people on the web, from Panzner to Schiff to Supkis to Shedlock, Noland to Bonner to Denninger to Stoneleigh, to, yes, me, were warning, each in our own style and fashion, about what we see before our eyes today? Dr. Doom, me? I don’t think so.

We've done our part warning about peak oil, here and elsewhere. What else is there to do? Calling for a general strike ain't gonna push people over the edge, whether for financial collapse or imminent fuel shortages. People don't form organized protests - that's insane. The government will take care of things once markets settle down. [/sarcasm, exasperation, cynicism]

Best you can do is get out of town, or try and make sure people in the one you're in know what's in store. Once again: people en masse (OK, Americans) will be proactive about the financial unwind once it's on their doorstep, no sooner, same as with peak oil.

[Roy]

asdf.

[TheDude]

John's busy complaining about how Hirsch left conservation out of his calculations. I've needled JD about the likely treatment gaijin will receive in coming years, to no response. Good luck with all that Mr Seamless Transition. He also had a post about how we've replaced energy doom with economic
doom, which I frankly found stunning.

Maybe we'll see some of his ideas put into practice, like the oil shale getting nuked. Desperate times desperate measures.

[Last_Laff]

Hello Oilrocks... hello?

[BigTex]

I'm looking forward to telling stories around the fire barrel at the refugee camp.

"I was alive back in 2008. It was as bad as they say. The fear was so thick you could cut it with a knife. Stock markets were falling 10% or more every day. Lending had dried up almost overnight. Everyone knew it was going to culminate in something ugly, but no one knew exactly what..."

When I'm done the children with squeal with fear and then yell in unison:

"BigTex, tell us about the SUVs again. PLEEEEEAAAASE!!!!!"

[wisconsin_cur]

I'm looking forward to telling stories around the fire barrel at the refugee camp.

"I was alive back in 2008. It was as bad as they say. The fear was so thick you could cut it with a knife. Stock markets were falling 10% or more every day. Lending had dried up almost overnight. Everyone knew it was going to culminate in something ugly, but no one knew exactly what..."

When I'm done the children with squeal with fear and then yell in unison:

"BigTex, tell us about the SUVs again. PLEEEEEAAAASE!!!!!"

Ah, the good old days. I miss them already.

wb hogan... missed in the middle of the North American night

[MD]

Ah, the good old days. I miss them already.

welcome back Hogan

[Roy]

I'm looking forward to telling stories around the fire barrel at the refugee camp.

"I was alive back in 2008. It was as bad as they say. The fear was so thick you could cut it with a knife. Stock markets were falling 10% or more every day. Lending had dried up almost overnight. Everyone knew it was going to culminate in something ugly, but no one knew exactly what..."

When I'm done the children with squeal with fear and then yell in unison:

"BigTex, tell us about the SUVs again. PLEEEEEAAAASE!!!!!"

That's some funny chit man!!!!

Don't forget to talk about drag racing, PWCs, ATVs, and private aviation while you're at it!!!



I needed a laugh today! Thank you.