Collapse of the Economy in 24 hours. . .

[metalman]

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.

sunday must be 'listen-up' day.

aren't you all glad you listened?

glad i'm not in the cold water naked.

i'm not 100% down with the titanic analogy, tho. people in cold water are immobile... the financially 'unprepared' will be mobile... and looking for anyone who has something they need.

[tsetsefly]

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.

EJ, But it seems to me that the insiders are trying to revive the old system at all cost or even worse stay in position to take advantage of the new system!
so which one is it? , or am I wrong?

[Supercilious]

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

"[i]f you don't have a banking system, you don't have an economy."

It is important that we must pay attention and decipher the doublespeak my fellow iTulipers! What Rep. Kanjorski meant to say was: “Without a banking system, there is no way to fleece the masses!”

In other words, the banking system is nothing but an efficient system to extract wealth (labor) from the many to the benefit of the few.

If there was no banking system in place, wealth could not be concentrated in the apex of few individuals. Wealth would be diffused into many little pools of talented individuals.

Of course, I doubt that Rep. Kanjorski meant that without a banking system people would cease to trade.

I completely agree with you here. We are told over and over again, at nauseam, that without the banks we are all going to die ....

There was a time when a successful operation of cornering of the silver market created a bank panic (in 1907) and under the threat of bank collapse the people agreed to create the Third Central Bank of USA ( aka The Federal Reserve Bank), to give up their power to create money to a private banking monopoly, and all this only for having a stable dollar, to prevent bank failures and to produce economic stability ....

What can I say. The Fed has a stellar record of doing it's job, it is surpassed only by success of the SEC to fight major financial fraud like the Bernie Madoff Case ....

[metalman]

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

EJ, But it seems to me that the insiders are trying to revive the old system at all cost or even worse stay in position to take advantage of the new system!
so which one is it? , or am I wrong?

he insiders... that's what he's saying... that they should not have built the system, then they should not have allowed it to crash, then they should not try to revive it.

[Mega]

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

EJ, what are our choices now?

As i see it, two camps:-

Ron Paul/Schiff/Austrian Eco camp:- Do nothing, let the markets sort the problems (Eco-right, but political NO-CAN-DO)

Neo-Lib/Hands on camp:-Do EVERTHING, make it last longer, but not as painful(Eco-Wrong, but Politcal YES).

How about O-BEE-1 sits down & tells it like it is, tell American its in an Eco-Peal Harbour & it going to take years.

Mike

[vinoveri]

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

)
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.

I almost wish you hadn't said that. I was tenaciously hanging on ...still in the denial phase to these realities.. hoping that it cannot be so ... had thought I was being paranoid about the scope of the disconnect and chasm between what should be and what is -

Work, save, live frugally/modestly, neither a borrower nor a lender be, build wealth diligently to enable you and your children to have open opportunities and a chance at independence from wage slavery - how could I have learned all of this if the system is just the opposite??

What will be the result of the 10s of millions of folks who share the above common views (boy I sure hope I'm not deluding myself here) - who now see there efforts (for their children) undone, and the rewards of the irresponsible and profligate doled out.

Hey, let's see how the economy works, when the people that work and sacrifice decide to do the following:

1. buy for cash a nice homestead in a state like Fl or Tx where the entire value of your homestead is exempt from creditors in bankruptcy.
2. Keep as much assets as possible flowing into qualified retirement plans which are also exempt from creditors in bankruptcy
3. continue to amass as much credit as you can, and use it to play the roullete wheel, (e.g., the stock market), and buy groceries until either you win big or run out of credit in which case you go bankrupt.

Result: Best Case: you amass a fortune without really working
Worst case: you have fun for a few years without working, spending the money of others and at the end still have your mansion and retirement accounts

The fact that our system allows for such a scenario evidences its inherent tendency towards and inevitability of bankruptcy

[ecortes]

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

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


hyperinflation it is.

This could play out like 1930 Germany if they let the hedge funds try to find a solution; the market was up and the DMark went down.

The government is making it political to get the money into the economy.

[mmr]

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

At this point, it seems to me that the last major question in how this situation will play out is how quickly the exit from “risk-free” Treasuries will occur once it begins. The fundamentals for government debt are obviously horrible, although the ingrained flight to “quality” habit, especially in the absence of other financial alternatives, may hold things off for a while longer. Treasury and the Fed may also be able to delay the upcoming event somewhat by buying long bonds and concentrating new debt issuance in short maturity T-Bills to give the appearance of stability as they desperately try to maintain low yields on consumer and CRE debt. Unfortunately this will only make the exit event more concentrated and faster when the event happens and Treasury suddenly discovers that it can’t find enough investors to roll over its short-term debt. The constant expansion of the Treasury credit wrap programs will only accelerate the event. Germany already failed a government bond auction last month, and at some point, I would think that it will happen here too, after which short rates will go from zero to a very high level in the blink of an eye. I won’t venture a guess as to exactly how high they will go and what other tools Treasury might use as a last gasp measure to stop this, but I imagine that the outcome of a T-Bill crash will be basically the same as the near-miss last fall. Unfortunately most people will not see this coming, even with all that has happened. With the rapid dissolution of any remaining trust in the political and economic system and the level of rage and chaos, I dread to think what the US will look like afterwards.
I suppose that the details of how one invests one’s financial assets from now until the event are probably a moot point at this stage. The real value of equities, debt, bank deposits, etc. will probably be about the same at that time (i.e., close to 0, with any residual real value that one is somehow able to maintain subject to confiscation in one way or another.) It will be interesting to watch this play out, unfortunately probably in the same sense that it would be interesting to watch a 500-ft tsunami moving toward you… good luck to all, since other than trying to preserve some physical assets for what's coming, there isn't much left to be done.

[Scott4139]

Irrational (negative) exuberance

First, ITulip is responsible for saving my 401K by getting me out of the market, keeping my 2008 loss to only 8.5%, while maintaining a 5 year return of 6%. All things considering this is not so bad!!!

But can I really count on things getting this much worse? Seems to me some sectors will get crushed, but others will continue with little impact and others will thrive. As a member of the automotive industry I know I'm in a losing sector.

For OEM suppliers the norm seems to be 10-20% pay cut for the SGA part of the business. Production is close to zero, so direct labor's all laid off. Many suppliers are on 4 day weeks (20% pay cut).

Ok, so that leaves me 3 days a week to find an alternative. Seems like a good time to find a recession resistant business to buy and run on the side. Everythings on sale now.

I'm going shopping.

[BadJuju]

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

EJ sounds positively sanguine right now. Sounds like he's very depressed, too.

[goadam1]

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

Maybe this is the new normal. 24 hour news and digital money will make for a permanent crisis.

Meanwhile, you sometimes doom out the mother of all depressions and then a suggestion that the new up is coming with the US moving along to it's monetary collapse under the weight of it's debt. It is hard to not want to see doom moved to another day and hope that the future brings unexpected good fortune.

[xtronics]

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

EJ, Do EVERTHING, make it last longer, but not as painful(Eco-Wrong, but Politcal YES)

I keep hearing this - it isn't correct though. Doing Everything will make it longer and MUCH MORE painful in the long run.

A Depression might be bad, but survivable, Even moderate hyperinflation brings lasting destruction - the loss of reserve currency status will hurt more than any correction.

[Jay]

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

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.

EJ, thank you for the honesty and insight. You are a good man.

[occdude]

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

Well they're right. You cant have an economy without a banking system. And guess what? We don't have either.

The economy is in free fall because its dirty, REAL dirty. Its only reacting in magnitude to the absolute waste out there currently. I mean, can firefighters really expect to make 175000 a year and retire with 80 percent benes and medical after 20-30 years? Can everyone claim a disability for fibromylagia, or phantom back pain or neurosis, psychosis? Can polar bears have air conditioning to counter the devastating effects of global warming?

These are all examples of how silly a society can get in the midst of an enormous global credit bubble. We don't know whats valuable anymore. Therefore our "values" as a society are completely unworkable. Up is down and water runs uphill in such a place because there is a disconnect between cause and effect buffeted by plastic, delayed by credit.

Well the delay is OVER folks, these signals coming from the market aren't saying "gee wiz guys take it easy, regroup and come again" they're saying "tear this sh*t down and rebuid it, soup to nuts!!". That means steadily strip this rotten onion all the way down to the core and figure out where the "uncle pointl" is for consumers again. It means SUBSISTENCE level consumption, it means PAIN. Pain is what the signal is coming from the market, NOT death but definitely time for introspection.

Now I am not eager to hit this draconian new reality as much as anyone, I have a wife and small children. But, we have to FIX IT, if my children are ever going to have a decent life, if human progress is to continue. We made some serious mistakes, now its time to pay folks. Its time to focus on things like food, shelter, health,family, friends, community, nation things that MATTER in the real world, not derivatives,banks, bail outs and other politics. Nobody should starve, sick people should be provided for, shelter should be provided preferably by a free society good will and not government, but at this point if things get bad enough, then government can make up the shortfall TEMPORARILY and at SUBSISTENT levels.

Crisis can bring out the best in people and also the worst. But its important to find out now, staring into the abyss, what kind of people are we going to be. I am an optimist, I believe collectively, people want the best things and that with so many voting that way with their actions that the "forces of good" will dispatch the "forces of evil", that efficiency will win out over expediancy and that we will resume our forward march of progress with well earned battle scars and some interesting stories to tell our grandchildren. But if society chooses to tear itself apart first to rediscover these ancient values of thrift and economy then so be it. Better to have this fight now while theres a glimmer of light at the end of a long tunnel then to spend DECADES vascillating between extremes to arrive at the same conclusion. Better to take on these wrong notions of entitlement and irresponsibility that threaten to infect society as whole.

[due_indigence]

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

When I hear talk of pain endured to date or yet-to-come, I wonder if people fully understand the power of greed, that is, how much pain a small cadre of bankers are prepared to inflict on the world in order to consolidate power and maximize profit. We ain't seen nothing yet. The Fed was established in 1913 in one part to facilitate the onset of WWI for profit. The Bolshevik revolution similarly was about bankers' power. Hundreds of millions of people died all in the pursuit of greed by a few.

Those pushing for the bail-out are not about to concede the conceptual error of their ways and yield to the greater good. I really try to avoid all the Illuminati stuff, but there is an argument to be made that banking is the locus of human evil. I still think most Americans believe that we are somehow immune to the predations of third-world exploitation (the city on a hill crowd). Yes many of the financial elites call America home. But banking is a rootless global enterprise. Tomorrow's elite could just as easily headquarter in Beijing. Like locusts, when they are done with America they will move on. We will be shocked at the rapidity of their departure.