Collapse of the Economy in 24 hours. . .

[Chris Coles]

Re: Collapse of the Economy in 24 hours. . .

There is only one way through this mess, it is by tightening the belt, strapping down everything of any value, paying off the debts, even by as little as a few dollars a week if necessary and boldly creating a decisive plan to move forward as soon as one can find the capital base required to make any move financially sound. It takes time, and commitment. Those of us that will survive will have the world at our feet.

[don]

Re: Collapse of the Economy in 24 hours. . .

A smoother transition from the FIRE Economy to a New Economy could have been managed, but for one of the more dysfunctional aspects of what I call the Inexorable Logic of the US Political Economy: the political system and the financial system have an impedance mismatch; one turns slowly and the other very, very quickly.

Excellent sharing of your thoughts, EJ, with one caveat. There's nothing unique about the US time lag between economic change and political catchup. That lag could serve as a shorthand definition of revolution, an age-old phenomenon among mankind.

[goadam1]

Re: Collapse of the Economy in 24 hours. . .

The real anger is growing. That woman was pissed off enough to call c-span. Oh wait, no one like her is watching c-span. Do you imagine the call could have been manufactured. Is the dog being wagged?

[strittmatter]

Re: Collapse of the Economy in 24 hours. . .

EJ,

Could you elaborate on this point further?

Are you referring to inflation that will severely erode savings? Or other "sharing"?

Thanks . . . .

Or to put it this way, Titanic-ly speaking, are you saying it's now so beyond recall such that:

When the plight of the mighty unsinkable ship became eminent, all inhabitants, from captians to steerage table, would not escape the effect. Many passengers jumped overboard. Some of the jumpers were wearing tuxedo's, others were wearing dirty blue jeans, but once they all hit that icy cold water, EVERYONE had the same problem.

[BrianL]

Re: Collapse of the Economy in 24 hours. . .

Selling Hawaii to Japan? I'd say Alaska, but I'd wager it has more value strategic value. ;)

It seems like we're well into 'anything is on the table' at this point. If I'm reading this right, the challenge now is simply shifting through the dozens of pathes that would have been deemed crazy in the past.

[EJ]

Re: Collapse of the Economy in 24 hours. . .

Excellent sharing of your thoughts, EJ, with one caveat. There's nothing unique about the US time lag between economic change and political catchup. That lag could serve as a shorthand definition of revolution, an age-old phenomenon among mankind.

Yes and no. Market and economic processes that took a year in 1930 take a month or two today, mostly due to improvements in communications, while the speed of the legislative process then and now is nearly identical.

Political change, as it relates to the communication of economic conditions to the public and their political response to it, is also vastly accelerated today.

But increased speed works in both directions. The question remains, can we get out of this as quickly as we got in? I'm not 100% sure we can't at least halt the secondary effects of the collapse at some level above economic chaos. But it is going to have to be under a new system because the old system was crashed.

During the acute phase of the financial crisis, when I was communicating with various banking experts, all of whom told me the same thing independently of each other, as McCain took an ideological stand against the emergency bailout bill -- which, by the way, may not have worked anyway even if it had been applied in time, which it was not so we'll never know -- I was reminded of a scene from a movies where the protagonist and antagonist duke it out in the cockpit of an airplane that is spinning toward earth. In the movies, the good guy knocks the bad guy out just in time to grab the stick and pull the plane up so that it barely misses the mountains buy a few feet and all the passengers are saved.

In the real world the two fight until the plane crashes into the ground and everyone dies.

[Slimprofits]

Re: Collapse of the Economy in 24 hours. . .

The real anger is growing. That woman was pissed off enough to call c-span. Oh wait, no one like her is watching c-span. Do you imagine the call could have been manufactured. Is the dog being wagged?

I sometimes watch and listen (in the car) to c-span. Usually that call in show gets me to riled up after one or two callers though. Give it time.

[cobben]

Re: Collapse of the Economy in 24 hours. . .

This is more like feeding the poor starving sharks with nice fresh pork . . . who do I have to bribe to get in on this?

""This is exactly what the financial system needs," said Andrew Feldstein, chief executive of Blue Mountain Capital Management LLC, a multibillion hedge fund that is gearing up to participate in the Fed program. The program, he said, "is like sending an ambulance through a traffic jam.""

[don]

Re: Collapse of the Economy in 24 hours. . .

Yes and no. Market and economic processes that took a year in 1930 take a month or two today, mostly due to improvements in communications, while the speed of the legislative process then and now is nearly identical.

Political change, as it relates to the communication of economic conditions to the public and their political response to it, is also vastly accelerated today.

But increased speed works in both directions. The question remains, can we get out of this as quickly as we got in? I'm not 100% sure we can't at least halt the secondary effects of the collapse at some level above economic chaos. But it is going to have to be under a new system because the old system was crashed.

During the acute phase of the financial crisis, when I was communicating with various banking experts, all of whom told me the same thing independently of each other, as McCain took an ideological stand against the emergency bailout bill -- which, by the way, may not have worked anyway even if it had been applied in time, which it was not so we'll never know -- I was reminded of a scene from a movies where the protagonist and antagonist duke it out in the cockpit of an airplane that is spinning toward earth. In the movies, the good guy knocks the bad guy out just in time to grab the stick and pull the plane up so that it barely misses the mountains buy a few feet and all the passengers are saved.

In the real world the two fight until the plane crashes into the ground and everyone dies.

All well received with a single re-shoot in the editing room:

In the real world the two fight until...the passengers storm the cockpit and take control of the plane. History will tell if they can fly it or not ;)

[johnw106]

Re: Collapse of the Economy in 24 hours. . .

This is what I have been telling people all along. It was never an issue of credit.
It was never an issue of so called sub-prime mortgages. No one with a touch of common sense would ever beleive that a handfull of bad mortgages brought down the entire worlds banking system.

What we are facing is a problem with gambling. Plain and simple addiction to the gaming tables. The financials were placing bets on things like where the S+P would close on a certain day. Whether or not a certain stock would close up or down. Even on things like the release dates of video games. And as with any gambler addicted to the dice, when they lost they doubled down on the next bet to make up the loss. They managed to hide the gambling losses for a while in off book ledgers, but they couldnt keep it hidden forever. Then the atomic bomb. Lehman went down and the government didnt have enough cash to save it, and no buyer with the funds wanted to touch it.

When some of the wealthier people got wind of it they started taking their cash out of the banks and buying T-bills, and promptly started a panic. The banks and insurance companys are broke. The banks can not make loans because they have no money. They gambled it all away.

The system is not going to collapse. It already has.

[serge_oc]

Re: Collapse of the Economy in 24 hours. . .

Maybe history can provide some insight into what large scale events can do, and how fast.

A Teutoburg battle was a defining event in Rome's history. Most people don't know about it.

But it was 3 short days in which Roman military lost a quarter of its might.

http://www.amazon.com/Romes-Greatest.../dp/0750940158

It took nearly 400 years for Rome to vanish after that. But those three days (during the reign of Augustus) marked the beginning of the downfall of Rome.

It was the end of expansion of Rome and beginning of contraction.

So Rome didn't fall in a day.

On the other hand, to buy and sell goods across the Empire took months or years in Rome. It takes days now. Build up of public opinion took decades. So did change in monetary policy, which truly depended on movement of the military and the process of taxation. Not so much today.

Would be interesting to see the historical account of what happened last year, maybe some 100 years from now. And if it was truly as important as it may seem to many.

[EJ]

Re: Collapse of the Economy in 24 hours. . .

Or to put it this way, Titanic-ly speaking, are you saying it's now so beyond recall such that:

When the plight of the mighty unsinkable ship became eminent, all inhabitants, from captians to steerage table, would not escape the effect. Many passengers jumped overboard. Some of the jumpers were wearing tuxedo's, others were wearing dirty blue jeans, but once they all hit that icy cold water, EVERYONE had the same problem.

That is indeed what I have been saying. We are all going to wind up in the water. Those who have been paying attention will hit the water, metaphorically speaking, with a rubber raft, protective clothing, and rations, that is, no debt and well diversified savings, to tide them over until the new structure of the economy emerges. Most Americans, unfortunately, will hit the water not only in a t-shirt and skivvies -- no savings -- but carrying an anvil -- debt.

What is the obligation of the modestly prepared to the unprepared?

What of those who didn't see it coming but by virtue of succeeding at playing the system that led to this disaster are not only protected but are in a position to take advantage of the situation?

One of the tenets of Ka-Poom Theory is that the unprepared vote, and will tend to vote for relief in the form of inflationary, pro-debtor policies -- that remove the anvil, so to speak, by increasing nominal income. But before that happens, first a lot of passengers have to hit the water.

Considering the composition of Obama's team, and the team that Volcker has assembled, what kind of life preservers shall we expect to see thrown to the unprepared over the next few years and to what effect?

So far, the effort is modest -- "creating" jobs paid for out of future income (debt) and taxation. (Don't forget, the housing bubble was a Republican government jobs program that no one voted for.) When that fails, and it will, shall we expect this group to begin to develop debt forgiveness policies? That means, for starters, reverting bankruptcy laws back to pre-2005? A wave of bankruptcies will follow, and the demise of several major credit card companies after that. Wait, didn't the Fed recently turn American Express into a bank? Okay, so make all of the credit card companies into banks, too, before changing the bankruptcy laws, then bail them out afterward.

Net result? Debt moved from private account to public account, debtors saved, creditors saved, country one step closer to bankruptcy.

This is how our system works.

[we_are_toast]

Re: Collapse of the Economy in 24 hours. . .

EJ, Did someone kick your dog this morning?!

You sure are spooning out the castor oil today! I guess sometimes you just have to grab their nose and spoon it in. Thanks for being straight with us, I think it really helps to know how you really feel about the events unfolding.

[labasta]

Re: Collapse of the Economy in 24 hours. . .

Hang on a minute.

Did the man in the video say that 500 odd billion dollars was withdrawn from electronic accounts within 1 hour? That is the reason for the shenanigans in September?

Who on earth did that and why?

And, are they going to do it again to really piss us off?

Do I have to put my tinfoil hat on?

[raja]

Re: Collapse of the Economy in 24 hours. . .

Think back two years ago. Think of a single event that has occurred since the start of 2007 that would not, if forecast in 2006, be seen as the ravings of a doomer lunatic:

- Collapse of US investment banking industry between 2007 and 2008
- Nationalization of Fannie and Freddie in 2008
- Fed borrowing reaching $690 billion at the end of 2008
- Economic output in Japan collapsing by 30% in five months at the end of 2008
- US unemployment rising by 600,000 in Dec. 2008

I'll answer your question with a question. If the US government cannot borrow the money in the credit markets that it needs to stop the collapse of the US economy, where are is the government going to get it?

Perhaps you misunderstood the intent of my question . . . .

I have little doubt that your pessimism is warranted. What I was wondering was how to position against mandated "sharing".

When you say "I guarantee that before this is over you will be sharing them (the life preservers) with the survivors whether you like it or not", are you suggesting that there is no way to protect one's wealth from being doled out to others through government action. Won't investing in gold or inflation hedges work?