svkoho

The Bubble of Uncertainty Is About to Burst

Useless meaningless pap

As GM Goes, So Goes the Nation (Part 2)

James: superb and exhaustive well researched article with good examples , graphs and solidly scary conclusions. What's an article like this doing in SA when it should be getting greater scrutiny in Der Spiegel, NY Times, Atlantic, Harpers, Time or any number of publications? If we keep getting posts like this SA is on the way up! Thank you .

Misunderstanding the Great Recession

Steve Hansen has written a comprehensive analysis of the causes of the current downturn. His graph of debt to GDP is particularly stunning as is his castigation of bean counters and economists who understand nothing because they see the world using binoculars that are turned around backwards. I draw the conclusion that if possible we need to return to a world where we in this country make things of value on site. We cannot grow our way out of this morass because as Steve points out the bulk of the "growth" has really been debt assumption for more consumption. If consumer consumption is 70% of our 13.8 trillion GDP what will GDP be very soon? .3 X 13.8 ??? Vast trillions of net worth are gone and we are borrowed out and the foolish assumptions of the Bush and Obama administration is that the solution is more cheap capital to the banks without a concurrent voting stake so that they can lend it out to people who don't want it is nothing short of insanity repeating the same failed policies that caused this disaster. We need to nationalize the banks and force mark to market rules, fire the bean counters and start from scratch. There are likely many good bankers to take the place of the imbeciles. There should be no rescues of bond or equity holders either here or abroad and they will squeal like pigs. The big banks are almost surely insolvent and pretending otherwise just delays the ultimate reckoning. There will be many nations in default in the next year or so and printing monopoly money and flooding the world with it risks a total collapse of the currency. Look at who is buying treasury securities and agency debt: the Federal Reserve and the day may soon be at hand when they are the only buyers. I fully expect the big overseas holders of our debt will begin unloading this debt and if and when that snowball starts rolling, katie bar the door.

The Law of Unintended Consequences: 20th Century and Beyond

Highly provocative article with plenty of strong opinions and some amazingly good comments which add to the value of the read. So many people complain "What would you do to solve the problem(s)? There are certainly things that we as a nation can do and should do to try to ameliorate and perhaps mitigate this disaster but keep in mind that this is indeed a disaster a long time coming and there probably is no solution. Gertrude Stein said" There ain't no answer. There ain't gonna be any answer. There never has been an answer.That's the answer."Meanwhile the problem is getting worse and until TPTB stop using the same methods of problem solving, we will continue to circle the drain. The government is owned by Wall street excecutives and corporations, advised by same and the Tarps and bailouts are by and for them. That includes the Fed which is appearing increasingly impotent and irrelevant as they have become the buyer, the banker and the decider of last resort. They have now jumped off the cliff buying up TBills,toxic mortgages, agency debt, junk corporate debt, junk corporations...you name it. This is ludicrous behavior and will likely result in a hyperinflationary collapse within the next decade. The level of debt and government obligations to Medicare,Medicaid,SS, Pension guaranty, FDIC savers etc is horrendous and totally undoable. We are looking at a default on government obligations unless the obligations are repaid with a worthless currency. And you want the author to suggest SOLUTIONS? There are things we as a people can do to help ourselves and our countrymen. We will stop borrowing. We will learn to do jobs that actually make things and benefit people directly. We must grow our food locally. We must stop mindless consumption and buy only what we need and what will last and what is repairable. WE can recycle everything that is recyclable especially critical metals and building materials. We must try to educate our countrymen that the way of doing things the past 50 or 75 years is over and it wont come back. If you want to call profligate sprawl and happy motoring the American dream, be my guest. But it is done. We must demand an end to the destruction of our currency because we need to start saving to build our capital investment base and if the Fed destroys the currency, what is the point of saving? There are things we can do to help ourselves. We must demand an end to all government bailouts of banks and corporations. We will need food and water and transportation and commerce and a modicum of health care and responsible national defense. IF we don't stop the perpetrators from raiding our national purse, we wont have the resources to deliver even these basic services.

The Current Economic Crisis: Hell, Meet Handbasket

Doug: concise and complete and I think accurate summary of how we got here. The commenters are unhappy with you because you offered no solution. It has not occurred to them that some problems may have no solution. What is the solution to your own immanent death?What was the solution to Hiroshima if you lived downtown? If there is such a thing as a solution to this horrid mess, it's that we must somehow return to productive economic activity and not trading abstract tranches, paper, and leveraged digital bets. We will probably not go back to where we were investing and trading abstract garbage. Despite the fact it is not "productive economic activity" as paulson says, we must let the scoundrels be known, let them be hated, and let them be hunted for the rest of their miserable lives.

John Hussman: Depression Fear Mongering 'Ridiculous'

John, talk of a depression is not ridiculous. Before last weeks plunge the S&P had a PE of 25. If we accept a historical norm of say 12 to 15, what is the fair market value? Yup 8 hundred perhaps, at best. During the last depression it was 5 or 6 if memory serves. The national debt is soaring over $4 trillion since bush darkened the scene, debt to GDP numbers are HIGHER than the great depression, the dollar has been tanking for a decade and the government has no way to meet its obligations with the debt which it has incurred without massive tax increases. The debt will never be repaid, John and the world has lost faith in the US financial system. If they don't buy our debt and our treasury securities, how exactly are we to restore our economy? The US economic boom of the past 30 to 50 years was made possible by almost free energy costs which were almost entirely domestically produced until 1970 and are now over 70% imported and which provide a trade deficit in petroleum alone of between 400 and 500 billion dollars a year. Our manufacturing base has been decimated, job loss is accelerating, domestic consumption is plunging and we have no domestic savings whatever.Tax revenues to local,state and federal coffers will soon be dropping, $3 trillion or more has been drained from housing...... Am I missing something or are you missing something. The banking industry with the collusion and encouragement of primarily but not exclusively the republican party establishment has allowed a debt and credit hurricane to form which is threatening to engulf the US and perhaps even the world economy. I would say that there is a plausible risk of a depression given this convergence of negative factors.

Our Coming Depression

The debt to GDP figures you posted were what led me to reach the same conclusions on my economic blog but your efforts to lay out scenarios and give historical perspective was far superior to my meager efforts and I thank you. There have been warnings going back several years by Jim Grant and Bill Fleckenstein using money supply and debt to GDP numbers as well. Nouriel Roubini has also been leading the charge on his somewhat apocalyptic rgemonitor.com site as well as John Hussman. Did I forget Jim Rogers? I think this downturn(ie Depression) will be deflationary which is the cruelest type of recession/depression and I would appreciate some comment on that. There was little in the way of helpful suggestions on what a poor and getting poorer investor should do to deal with this debacle but interested readers should have no trouble searching the blogosphere for ideas if they lack them on their own. The negative attacks on this excellent summary by the clueless who are circling the drain will diminish as they are flushed into the ABS pipe of what will be left of this economy. Calling you a socialist and democrat....that was really choice and it is a shame such people were allowed to grow up without learning a modicum of civility and manners. The only response they know is ad hominem repartee. The good news is they will be flushed. The bad news is they will be sharing the sewers with the clueless
uneducated consuming innocents who contributed in their own way to this fiasco but never saw it coming. These are indeed interesting times here at the end of empire.

What If What Economists Taught Us Is Wrong?

What an important post by Tim. This is precisely my rant for years. The times points out just one aspect of the failure of neoclassical economics. They also have ignored the role of energy usage in our industrial capitalist model. The next post should perhaps a shorter article on where they are right. To paraphrase WM Shakespeare, "First, kill all the economists!"

Days of Cheap Energy-Fueled Innovation Coming to an End

This an important article which posits ideas that are not dogma in the mainstream economic community. It is worth a reread and a clip and save. If he is correct the conclusions are sobering.

Requiem for a Departing Economic System

clue me in:is there any way that you can't? As for bush, the old slugger Ted Williams had it right as did eric severeid; Ted"If you don't think too good, then don't think too much." Eric said:"Our problems are caused by our solutions" or something to that effect.

It's Getting Harder to Keep on Truckin'

I used to be a trucker and I have sympathy for anyone losing their job and I do not believe the government or market forces can solve a problem which has no solution. Trucking is massively subsidized(who pays for the highways? Highway damage is proportional to the 5th power of the axle weight and truckers pay taxes that are a tiny fraction of the damage they cause to roads. Long distant trucking should end to be replaced by rail or barge which is far more efficient from a transportation energy expenditure perspective.DUH. Trucks will always have a purpose which should be the last mile or 5. If trucks had to pay their fair share of damage to the infrastructure, they would have been gone decades ago. I say expand rail traffic and phase out long haul trucking immediately.