Gaze With Me Into The Credit Crystal Ball

[drew3918]

...others not involved were allowed to rise to power. An example of this noninvolvement last time was Germany and Japan. It's time for everyone to brush up on their history lessons.

 

Germany and Japan were quite involved ... Kuhn, Loeb had been financing Japan's rise to power for decades (all the way back to the Russo-Japanese War that was used to precipitate the fall of the Tsar).

 

To the extent Japan had been noninvolved, their noninvolvement was the result of economic sanctions by the west to curtail their access to petroleum and scrap metal. They sought what had been denied them via aggressive imperial expansion.

 

Germany had experienced the hyperinflation that crushed the Weimar Republic because their debt to the WWI victors was so great.

 

Germany had cut itself off from the world economic system and tried to self-finance a comeback from within, along with an attempt to coalesce along ethnic lines, which created predictable tensions with Jewry inside the country whose legitimate business interests were in many cases being outright stolen and in other cases simply destroyed because of the belief they had prospered even in the face of severe economic headwinds because the transnational cooperative economic community they maintained with Jewy elsewhere was somehow illegitimate. This is a pattern that has repeated itself clear back to when historical records become mere fragments and it is not restricted to Jewry, rather any discrete and insular group perceived as doing better than their neighbors has invited wrath, particularly if they can be viewed as somehow prospering at others' expense. It is immaleable human nature--no society ever becomes more tolerant, they merely switch targets once in a while. Note that the Amish live unmolested in a discrete and insular manner only because they eschew virtually every trapping of material success.

 

We need a new term for the study of the big money's influence over the behaviors of the collections of nation-states over which they hold sway ... I nominate "Plutohistory" ... as in "The Plutohistorical Origins of Japanese Expansionism at the Dawn of the 20th Century".

 

The world remains divided among the economic interests of essentially nine to fourteen bloodlines, depending on how you count. What you read in the papers is a daily chronicle of their footprints, along with the occasional glimpse of a shoe or a pant leg ... you never get to see the real face.

 

Just have to look for the true deep Blue bloods

[Jen23514]

They're now saying that foreign-owned banks will get bailout help too. On the surface it seems dumb and perhaps unnecessarily altruistic. But my own wanderings in court dockets have indicated that Deutsche Bank seems to have had to do a lot of foreclosing ... it may be that the anguished phone calls that got this done were coming from Berlin.

 

Even if our banking system were not directly affected by DB's troubles, the real estate held by them could be dumped on the market in such a way as to cost existing homeowners billions in equity and perhaps trigger another wave of defaults ... so it makes sense to help them too.

 

who do you think owns most of the mortgages in the US?

[drew3918]

They're now saying that foreign-owned banks will get bailout help too. On the surface it seems dumb and perhaps unnecessarily altruistic. But my own wanderings in court dockets have indicated that Deutsche Bank seems to have had to do a lot of foreclosing ... it may be that the anguished phone calls that got this done were coming from Berlin.

 

Even if our banking system were not directly affected by DB's troubles, the real estate held by them could be dumped on the market in such a way as to cost existing homeowners billions in equity and perhaps trigger another wave of defaults ... so it makes sense to help them too.

 

who do you think owns most of the mortgages in the US?

 

OPEC

[flacorps]

Goldman Sachs and JPMorgan now have the authority to become commercial banks that take in deposits and so all they need to do is buy a commercial bank or dozen in order to have a network of retail locations.

 

So we have come full circle from the need to have the retail banks protected from the instabilities of Wall Street that resulted in the Glass-Steagall Act to the post-Gramm/Leach/Bliley era where the wall that was breached by GLB's repeal of G-S now results in Wall Street buying commercial banks in order to shore up Wall Street's ailing fortunes.

 

Paulson has said that without a bailout there will be a Depression. This is an election year, so Congress becomes a wild card in that both Republicans and Democrats want to have handouts and hides to show the voters ... regardless of Wall Street's legitimate needs, Congress could easily give 'em too much, too little, to lenient or too strict. Or in the end Congress could simply be paralyzed owing to a failure of genuine leadership.

 

Relating all that to your (and my) pocketbook, uncertainty is the mother's milk of meltdown, and we have that in spades. Congress is unlikely to get something, anything passed in time to rescue the markets. That just isn't how the system works.

 

From a credit standpoint, pay down what you can, make sure that you have multiple issuers for your credit cards if you are in a position to take a preapproval or two that keeps showing up in your mailbox.

 

From a personal standpoint, keep plenty of food on hand, keep the vehicles above 1/2 tank and make sure that you and your neighbors have a good neighborhood watch program going and that at least a couple of you have a gun or two.

Edited September 23, 2008 by flacorps

[athensgaguy]

Goldman Sachs and JPMorgan now have the authority to become commercial banks that take in deposits and so all they need to do is buy a commercial bank or dozen in order to have a network of retail locations.

 

So we have come full circle from the need to have the retail banks protected from the instabilities of Wall Street that resulted in the Glass-Steagall Act to the post-Gramm/Leach/Bliley era where the wall that was breached by GLB's repeal of G-S now results in Wall Street buying commercial banks in order to shore up Wall Street's ailing fortunes.

 

Paulson has said that without a bailout there will be a Depression. This is an election year, so Congress becomes a wild card in that both Republicans and Democrats want to have handouts and hides to show the voters ... regardless of Wall Street's legitimate needs, Congress could easily give 'em too much, too little, to lenient or too strict. Or in the end Congress could simply be paralyzed owing to a failure of genuine leadership.

 

Relating all that to your (and my) pocketbook, uncertainty is the mother's milk of meltdown, and we have that in spades. Congress is unlikely to get something, anything passed in time to rescue the markets. That just isn't how the system works.

 

From a credit standpoint, pay down what you can, make sure that you have multiple issuers for your credit cards if you are in a position to take a preapproval or two that keeps showing up in your mailbox.

 

From a personal standpoint, keep plenty of fuel on hand, keep the vehicles above 1/2 tank and make sure that you and your neighbors have a good neighborhood watch program going and that at least a couple of you have a gun or two.

 

I like this post. It pretty much states my POV and gives good advice.

[flacorps]

From a personal standpoint, keep plenty of fuel on hand, keep the vehicles above 1/2 tank and make sure that you and your neighbors have a good neighborhood watch program going and that at least a couple of you have a gun or two.

 

I like this post. It pretty much states my POV and gives good advice.

 

I meant "food" where I wrote "fuel". I was already on to the next sentence in my mind and so my fingers jumped ahead too.

[flacorps]

No deal by close of NYSE today. As expected. Markets trending sharply down.

 

The reason for the warnings of depression is not that the fundamentals will vanish for prudent, worthwhile loans.

 

It is that the Fed, that collection of private banks, has shareholders who hate to lose money. And without the bailout, Morgan Stanley and Goldman Sachs fail, and the Fed loses money.

 

Since the Fed can create money, they need only replace that money with freshly issued money. Nobody can stop them from doing it ... and no one can make them do it. They won't do it.

 

What they will do is allow this country to endure a depression by making any money that is out on loan as much more expensive as possible ... and as unavailable as possible, unless and until Congress relents.

 

And if Congress doesn't relent, they will allow and encourage the cracks in our society to yawn wider until we have loss of political stability, unrest, and potentially even civil war.

 

And if somehow the country weathers the depression and the societal upheaval (as some societies have managed to do), the final punishment they can deliver is to demonize us to the rest of the world until we are either isolated (and there are some countries where isolation hasn't worked either) or until they can round up some adventuresome countries to invade.

 

It has happened before here and elsewhere, it is happening now here and elsewhere, it will happen again.

 

The situation has moved beyond the realm of politics and economics into the realm of how international bankers behave, which is a subject that transcends both subjects. It is a subject that is much more akin to the behavior of fictional mafioso.

Edited September 23, 2008 by flacorps

[romadant]

There's not much anyone, myself included, can do to stop or control this so I'm sticking to my strategy... For now I'm going to get up, go to work, come home, pay my bills, eat, and drink a beer or two Who knows if things will really get as bad as the post above indicates. If it does all the planning and worrying in the world won't matter much. If the country falls in to a complete mess as outlined above I'll adjust my strategy... I'll get up, clean my guns, kill a bird or two, eat, drink whatever alchohol I've stockpiled w/ my ammo, and wait for someone to bother me...

 

Not much for me to control here. Bullets would become the currency of choice.

[flacorps]

McCain has called for bipartisanship on the bailout issue and Bush has basically staked whatever tattered remnants of prestige he still possesses (and I'm speaking of his current status, not how history will judge him--which may be quite different) on the bailout going through.

 

Much as the bailout is a bitter pill, I think they're doing the right things ... but not for the reasons they can state in public.

[flacorps]

Latest press reports that GE's credit card unit is being aggressively pruned and that they are shoring up their reserves against expected losses. This basically confirms the very first post in this thread, since GE is among the biggest card issuers around (although not with their own label, rather they back cards for many different retailers).

[flacorps]

A lot has happened in a month. And it ain't over yet, although I think we are witnessing at least the beginning of the end.

 

Stocks cannot go to zero. Losing about half its value is pretty much the limit for our (I say nothing of other countries) stock exchange.

 

Countries and banks will try to reinflate up to the line in order to counter the effects of deleveraging.

 

It's hard to say at this juncture whether it will work.

 

I have some suggestions for everybody here: http://www.fromjumpstreet.com/?page_id=32

[flacorps]

This is from "The Market Oracle" blog:

 

In October 2008 another market has fallen into the tentacles of the Credit Crisis: the market for credit card loans. Credit card companies usually do not retain most of their credit card debt on their balance sheet; instead, they securitize it and sell it. The latest data from Dealogic indicates that the consumer-based securitization market has shrunk in October to $500 million from $50 billion previously. This means that the ability to securitize and sell consumer-based loans has fallen almost 100 times in one year. The implication is clear – credit card companies will be forced to cut consumers from credit card debt. This will bring the American consumer to his knees and means the end of the Consumer Economy. No wonder that in the last three months the media frequency of the word “Depression†has increased hundred-fold.

 

Obviously this is why Amex is becoming a bank, and why limits and rates are turning against us.

[CrapOneSux]

The IMF is going to audit the U.S. financial system. This has never happened to the U.S. It is really big news that the U.S. press is ignoring.

 

http://www.google.com/search?q=IMF+Audit+U...mp;sourceid=ie7

 

President Bush has stipulated that the audit may only take place if the results are delayed until after he leaves office.

 

Forget the price of oil, forget the declining dollar, forget the mortgage crisis.

 

This audit overarches all of them. Whatever bodies are in the crawlspace, whatever skeletons are in the closet, whatever crazy aunt is in the attic ... it's all gonna come out.

 

And I guarantee that one way or another, it will cost you money if you don't correctly anticipate its effects.

 

Thanks for posting this. The first article I clicked on showed an ad for a gold conference DVD set. I hope it comes soon Now to catch up on the rest of this post...

[flacorps]

Stocks cannot go to zero. Losing about half its value is pretty much the limit for our (I say nothing of other countries) stock exchange.

 

I'm not saying I was wrong in the quoted portion. But I did a little back-of-the envelope comparison of '29-'32 and where we've come since the October '07 stock market peak (14k). And if we decline 89% like they did at the rate we're already declining now, we'll bottom out around 1,400 and we'll get there in October of '09.

Edited November 17, 2008 by flacorps

[EastRidge]

Updating an old posting from August ...

More from The Bank for International Settlements

(bis dot org) on tear-ups of contracts totalling in

the trillions. Read it at:

 

"Voluntary terminations of credit default swap contracts"

http://www.bis.org/publ/qtrpdf/r_qt0812z.htm

 

Besides the half-page summary, there's a link to

the whole article in PDF form. By the way, those

"Multilateral Termination Services" sound sinister

but actually seem to take a little bit of pressure

off the cooker.

 

ER

 

The implication: over a decade of worldwide production is pledged

against some huge pile of bad paper. Could be true, but sane traders

won't go there. No power on earth could collect it.

 

Think carefully about what you've said: "sane traders won't go there."

 

But what we've had are bond salesman making the rounds of pension funds and other entities, saying "this stuff is as good as gold ... safe as T-bills" or what have you, and the rubes in the sticks have been buying it. Because it was the highest return you could get. So while the stuff was still salable, it had a lot of value, which made the next batch of it out of the chute equally as valuable even though the quality was a little less. And so on, and so on.

 

Meanwhile, the monoline insurers upped their reserves a little as they made piles of money, but there was no way it could be enough, particularly in the face of systemic catastrophe.

You know, I really did not believe this. So I looked it up.

 

My bad. (OMG, it could be TRUE!)

 

The Bank for International Settlements (bis dot org) reported

for December 2007, "596,004" "Notional amounts outstanding"

total contracts in billions of US dollars ... that's 596 trillion $US

(or 0.6 quadrillion $US) so already over 10x the gross world

product.

 

The reported figure doubled in two years. Other "off-the-books"

private contracts may exist. So, one quadrilliion is not far off of

the mark.

 

ER

[flacorps]

Bolivia just defaulted on their foreign debt. $10 billion.

 

That is down to Hugo Chavez's influence. Unless it's handled, it will spread. And that can't be good.

 

Simultaneous defaulting and solidarity among the defaulters would strain the CIA's ability to destabilize uncooperative regimes to the breaking point.

[EastRidge]

Bolivia just defaulted on their foreign debt. $10 billion.

 

That is down to Hugo Chavez's influence. Unless it's handled, it will spread. And that can't be good.

 

Simultaneous defaulting and solidarity among the defaulters would strain the CIA's ability to destabilize uncooperative regimes to the breaking point.

Um, do you mean Ecuador? (News yesterday 12-12.)

 

As far as I know, Bolivia has created a "debt audit

commission" but has not announced their intentions.

Same for Venezuela and Paraguay.

 

ER

[flacorps]

Um, do you mean Ecuador? (News yesterday 12-12.)

 

I didn't mean Ecuador, I meant Bolivia.

 

I should have meant Ecuador, because Ecuador was correct.

 

Couldn't keep my countries straight.

 

Someone claims to have seen the Amero currency:

 

http://www.effedieffe.com/content/view/5493/183/

 

Looks hoaxish/photoshoppish and where's the hologram one could expect to see on a new,

high-tech currency?

 

I don't doubt there are folks (some in high positions) who would like to unify the monetary systems of Canada, Mexico and the U.S.

 

I jus tdon't think the fingers are poised on the trigger for it.

[Tate74]

Bump

 

Such a great thread!

[flacorps]

The Treasury initiative that was described on the news this morning sounds like an expansion of the FDIC's "JDC Program"--Judgments, Deficiencies and Chargeoffs ... typically the Junk Debt Buyers pay 1% (far lower than usual) for a half-interest in the burned-out asset, and whatever they recover is split 50/50 with the government. What will be unusual in this instance is that it will be done in cases where banks haven't failed. The JDBs are chosen on a "beauty contest" basis ... which will leave a lot of room for lobbying, politicking ... and, well things go downhill from there.

 

No telling what will be done with the empty homes. That's going to be a lingering problem unless they actually create something like the old RTC program (of which what evolved into the JDC program was a small, residual component). Also, the JDBs and the government will need to contend with a myriad of state laws that were enacted in the Depression era to protect homeowners. Some of those laws don't permit deficiency judgments on purchase-money first mortgages (California), or leave the granting of a deficiency judgment in a residential foreclosure to the "sound discretion of the court" (Florida), meaning that there is no absolute contractual right to collect a deficiency.

 

Put the Redenbacher bag in the microwave ... this is going to be fun to watch.

[flacorps]

Reggie Middleton's boom bust blog suggests that Advanta's woes bespeak a greater distress among the nation's small businesses, who are also its key employers.

 

If that is indeed the case, we have a few more years in the recession/depression penalty box ahead of us.

[flacorps]

As predicted, the big life insurers are getting $22 billion in TARP money: Hartford Financial, Prudential Financial, Principal Financial, Lincoln National and Allstate.

 

Why? Are more people dying and causing the insurance companies to have to pay out? No. Life insurers are heavily invested in commercial real estate like shopping centers and office buildings. Those asset classes follow a deer-population-on-an-island boom and bust cycle. And it just busted bigger than it's ever busted. The insurers are sitting there with all the properties they can't lease out and can't sell, and they're having to mark 'em to market. Both their income and their reserves have been clobbered.

[GEORGE]

As predicted, the big life insurers are getting $22 billion in TARP money: Hartford Financial, Prudential Financial, Principal Financial, Lincoln National and Allstate.

 

Why? Are more people dying and causing the insurance companies to have to pay out? No. Life insurers are heavily invested in commercial real estate like shopping centers and office buildings. Those asset classes follow a deer-population-on-an-island boom and bust cycle. And it just busted bigger than it's ever busted. The insurers are sitting there with all the properties they can't lease out and can't sell, and they're having to mark 'em to market. Both their income and their reserves have been clobbered.

At one time INSURANCE COMPANIES had many $100,000,000,000's in cash reserves

 

Now they need a TAXPAYER BAILOUT

 

Hummmm

Edited May 16, 2009 by GEORGE

[EastRidge]

As predicted, the big life insurers are getting $22 billion in TARP money: Hartford Financial, Prudential Financial, Principal Financial, Lincoln National and Allstate.

 

Why? Are more people dying and causing the insurance companies to have to pay out? No. Life insurers are heavily invested in commercial real estate like shopping centers and office buildings. Those asset classes follow a deer-population-on-an-island boom and bust cycle. And it just busted bigger than it's ever busted. The insurers are sitting there with all the properties they can't lease out and can't sell, and they're having to mark 'em to market. Both their income and their reserves have been clobbered.

Quite true here. There's a Best Buy in the town

where I shop, opened last year in a brand-new

complex. The two anchors (BB and a sports store)

are the only two tenants. Twelve smaller store

fronts are still vacant -- after a year. And in a

nearby town, the new K-Mart replaced the old

one: Both vacant now, and the mall would be

out of business if not for the movie complex. Nor

is downtown (which died when the mall got going)

showing any sign of a comeback.

 

Whoever did invest here (banks, insurors, REITs,

whoever) is in a world of hurt. We are supposed

to be among the least-damaged counties in the

USA. (Grew fast, now just flat.)

 

ER

[Revike]

A customer and I had a discussion last year about where the next big sinkhole would be and commercial real estate was it. Kinda surprised it took this long for the spotlight to start finding it ...