How to Inspire More Panic in the Economic Crisis 20 comments
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In an extraordinarily candid and chilling economic assessment, the Governor of the Bank of Spain, Miguel Ordonez, warned that the global economy is on the brink of a “total” financial meltdown. Governor Ordonez, in an interview with the Spanish newspaper El Pais is quoted as follows:
“This is the worst financial crisis since the Great Depression”
“There is an almost total paralysis from which no-one is escaping.”
“The inter-bank (lending) market is not functioning and this is generating vicious cycles: consumers are not consuming, businessmen are not taking on workers, investors are not investing and the banks are not lending.”
“If, among other variables, we observe that inflation expectations go much below two percent, it’s logical that we will lower rates.”
“The lack of confidence is total.”
One thing for certain is that the Governor’s remarks will do nothing to restore confidence in the financial system. Typically, central banker statements are reserved and constructed to restore confidence in the financial system rather than to incite panic.
As the head of Spain’s Central Bank, one of the Governor’s primary functions is the promotion of the sound working and stability of the financial system. One may wonder exactly how seriously the Central Bank adhered to their duties when they allowed the Spanish property markets to soar to ridiculous markets values, fueled by easy Central Bank lending policies and lax oversight. Perhaps they were following Alan Greenspan’s advice that bubbles cannot be recognized and are best dealt with after the fact. It is statements such as this that prove the basic incompetency of Greenspan, the man most responsible for destroying the integrity of the world’s financial system.
The central banks responsible for the insane easy money and lending policies that brought us to the brink of ruin are now in charge of restoring confidence. Their prescription for recovery is more easy credit. (See $700 Billion Debated - $5 Trillion Ignored.) I think it is indeed time to panic.
Disclosure: None.
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This article has 20 comments:
www.elpais.com/articul...
I recommend he take a break and play a game of "catch the terrorist" with a Basque buddy.
"Thomas Jefferson, a wise man by most accounts, thought central banks were not a very good idea.
If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations that will grow up around them will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating.
We did not heed Mr. Jefferson’s prudent advice. The result for the American people has been persistent inflation that has destroyed the purchasing power of the US dollar. It takes $1.00 to buy what cost 5 cents in 1914, a 95% loss of purchasing power since the creation of the Federal Reserve. Most of this loss in purchasing power has occurred since 1971. “Tricky Dick” Nixon took the country off the gold standard in 1971 and uncorked the bottle and let the inflation genie out. The unchecked issuance of debt by our government, facilitated by Federal Reserve policies since 1971, has brought our great country to the brink of financial disaster. The organization that caused the problem, did not see this crisis looming, and has utterly failed in stemming the damage, is now taking actions completely outside of its mandate, while telling the public they have the answers. They have duped the American public for 85 years through the insidious use of inflation, and now they are trying to dupe the world into keeping their Ponzi scheme going for a while longer."
On Dec 25 09:09 AM TAS wrote:
> Leave it to a socialist government (and Spain has the real McCoy)
> to almost gleefully anticipate the fall of capitalism and the necessary
> rise of big government to resolve all of the problems to live life
> happily everafter.
>
> I recommend he take a break and play a game of "catch the terrorist"
> with a Basque buddy.
>
Pouring money into losers = panic.
Zero interest rates = panic
Force mortgage rates to 4.50% so why buy a home now = panic
Politicians bad mouthing the economy = panic
Media manipulating statistics to only show downtrends = panic
An investment community that has lied, cheated, and stolen while getting overpaid = panic
A Non-Term-Limited Congress that continues to steal the taxpayers money so they can pay off their political contributors = panic.
Why panic? Why invest? Why work? Why fight for your country?
Thank you "Baby Boomers" for squandering the legacy of the "Greatest Generation". Shame!
Why should anyone be optimistic, hire people, buy cars, expand business when the ignorant, lazy, over degreed and undereducated public and private leaders don't show any leadership because they aren't leaders they are rock stars.
On Dec 25 09:19 AM varmit wrote:
> Else where on this site James Quinn wrote:
> "Thomas Jefferson, a wise man by most accounts, thought central banks
> were not a very good idea.
>
> If the American people ever allow private banks to control the issue
> of their currency, first by inflation, then by deflation, the banks
> and the corporations that will grow up around them will deprive the
> people of all property until their children wake-up homeless on the
> continent their fathers conquered.... The issuing power should be
> taken from the banks and restored to the people, to whom it properly
> belongs. The modern theory of the perpetuation of debt has drenched
> the earth with blood, and crushed its inhabitants under burdens ever
> accumulating.
>
> We did not heed Mr. Jefferson’s prudent advice. The result for the
> American people has been persistent inflation that has destroyed
> the purchasing power of the US dollar. It takes $1.00 to buy what
> cost 5 cents in 1914, a 95% loss of purchasing power since the creation
> of the Federal Reserve. Most of this loss in purchasing power has
> occurred since 1971. “Tricky Dick” Nixon took the country off the
> gold standard in 1971 and uncorked the bottle and let the inflation
> genie out. The unchecked issuance of debt by our government, facilitated
> by Federal Reserve policies since 1971, has brought our great country
> to the brink of financial disaster. The organization that caused
> the problem, did not see this crisis looming, and has utterly failed
> in stemming the damage, is now taking actions completely outside
> of its mandate, while telling the public they have the answers. They
> have duped the American public for 85 years through the insidious
> use of inflation, and now they are trying to dupe the world into
> keeping their Ponzi scheme going for a while longer."
>
Public = idiots.
On Dec 25 09:09 AM TAS wrote:
> Leave it to a socialist government (and Spain has the real McCoy)
> to almost gleefully anticipate the fall of capitalism and the necessary
> rise of big government to resolve all of the problems to live life
> happily everafter.
>
> I recommend he take a break and play a game of "catch the terrorist"
> with a Basque buddy.
>
1. The Bush-Administration definetely ruined this country and I strognly believe the GOP is done for good.
2. Obama faces a huge challenge, but the good thing is, there is not much he can do wrong, all the mistakes are already made.
3. Here is what he should do:
Get our troops home and end both wars .
Spend that money in the economy.
Nationalize the whole financial system.
Install universal healthcare.
then when syria/iran drops the nuke on us, unemployment will go away along with half the population and reconstruction will keep us fifedoms busy.
wow - now that is called stupid as a rock
waynei
Paul
Also, the author points out Spain's and the United State's correlation to overblown real estate markets. Unfortunately, contraction of these markets take years just like the expansion of these markets. That's why they should be kept in some amount of check by the Fed. Unlike Greenspan's lazzie-faire policy of if the punch tastes good only worry once people start falling down dead.
Nice facts to point out in Europe. They too are choking on the same chicken bones we are. It's nice to note Greenspan wasn't the only dolt in the world. The UK is also in the same predicament.
As AAA mentions, "The first step to solving the problem is recognizing it." Have we really recognized the problem and started solving it? I think not. Where the Fed and Treasury think the problem is that banks just need more money to shove into people's hands that want it, the real problem is endemic oversupply of houses and the general instability caused by 1) erratic arbitrary Fed and Treasury actions 2) outright corrupt accounting by banks hiding losses under base 1 off balance sheet accounting rules 3)CDS and other toxic derivatives allowed by the deletion of Glass Stegal 4) criminal negligence or outright hooliganism by CDS writers and subsequent mortgage bond writers 5) Congress and the government which rather than demand better Fed oversight of the economy rewarded the Fed with new powers which it has used to offer interest on Fed deposits and a 0% interest policy that in essence encourages banks to park money at the fed and discourages lending and bank deposits leading to deflation and economic contraction.
So yes, things look grim. Until we face the facts, demand bank disclosure, bar off balance sheet games, reign in CDS with no collateral and unlimited leverage, install depositor protection barring banks from gambling for big bonuses, and stop funding bad management and zombie companies that will hemorrhage workers and money for years on end I can't think that things will be different than Ordonez's analysis.
I'm a Baby Boomer and I seriously doubt that I've squandered the legacy of the greatest generation. I've paid off my mortgage, been employed for 42 years, saved several hundred thousand dollars and have zero debt. How are you doing?
On Dec 25 09:33 AM PrudentMan, CFA wrote:
> Obama/Biden: "The economy will get worse" = panic.
>
> Pouring money into losers = panic.
>
> Zero interest rates = panic
>
> Force mortgage rates to 4.50% so why buy a home now = panic
>
> Politicians bad mouthing the economy = panic
>
> Media manipulating statistics to only show downtrends = panic
>
>
> An investment community that has lied, cheated, and stolen while
> getting overpaid = panic
>
> A Non-Term-Limited Congress that continues to steal the taxpayers
> money so they can pay off their political contributors = panic.
>
>
> Why panic? Why invest? Why work? Why fight for your country?
>
>
> Thank you "Baby Boomers" for squandering the legacy of the "Greatest
> Generation". Shame!
>
>
>
> Why should anyone be optimistic, hire people, buy cars, expand business
> when the ignorant, lazy, over degreed and undereducated public and
> private leaders don't show any leadership because they aren't leaders
> they are rock stars.
Ditto here. Just want to add that all these folks that blame the baby-boomers forget that for most of our lives our "leaders" (word used loosely) were from the previous generations. And our problems started during the reign of those "leaders".
So, who's to blame? I suspect that a very high percentage of the boomers match our profile, or the profile of fiscally conservative behavior, and great majority the credit-derived woes issue from later generations.
MHO
Sadly, we have a cascade type banking crisis on our hands. One need not be genius to see it.
First, the "mortgage crisis" resulted in the American consumer halting the mortgage equity withdrawals from their homes. This resulted in a sudden consumer spending drop.
A sudden backup in inventories caused an unemployment spike, spooking whatever consumers were left. Thus holidays sales, car sales and travel ceased.
Now we are going to see retailers closing, (empty malls, commercial real estate malls [CRE malls] going bankrupt) hotels closing and CRE hotels going bankrupt, light industrial/warehouse properties empty and CRE manufacturing bankruptcies, office space vacancies rising and CRE office bankruptcies.
Local banks, struggling with home mortgage problems are going to have distressed business loan on their books too- and the fed is already at a zero interest rate policy. (zirp) They have no more bullets in their gun! (zirp is designed to stampede money market investors into bank certificates of deposits [CD] to help capitalize small banks.)
With every loan category on the bank's balance sheet in distress, they need every dime available as a capital reserve just to remain solvent and avoid seizure. They will be unable to write new loans of any kind! This will be true for every lending facility in the country.
This is why all the infusion into the banking system has not and will not result in more liquidity.
Directing scarce resources into failing business ventures like auto manufacturing will only prolong and delay our recovery. Businesses need to turn to the bankruptcy court (The appropriate body to deal with it- not the legislative or executive branch. After all, politicians don't make economic decisions, they make political decisions with economic consequences!) and get all the losses distributed out of the system. From the bottom we will grow again from a sounder foundation.
On top of this will be local governments in distress. All tax revenues will be down sharply. They will have difficulty selling bonds and may be faced with defaulting on existing debt- yet another hazard for our suffering bank balance sheet!
A few comments.
1. The Bush-Administration definetely ruined this country and I strognly believe the GOP is done for good.
2. Obama faces a huge challenge, but the good thing is, there is not much he can do wrong, all the mistakes are already made.
3. Here is what he should do:
Get our troops home and end both wars .
Spend that money in the economy.
Nationalize the whole financial system.
Install universal healthcare.
Here's my response to her comments:
Dummkopf!!