This is a fantastic article linking the CDS implosion to the same behavior that caused the 1907 financial panic.
FT.com / Comment / Opinion – We modernised ourselves into this ice age.
Denninger sums it up quite well: We need a miracle and fast, or this economic crisis will make the GD look like a day at the beach.
There’s really nothing to say here, except wow! We’ve committed $10 Trillion to fixing our economy–mostly financial services catastrophes mind you–and we are not any closer to getting out of this mess. That’s almost a year’s GDP. Wake up people. The situation is dire.
By now we’re all inured to the fact that the financial system is a mess–thanks to vegas-style betting on CDOs, CDSs, RMBS, CMBS, Black-Scholes theorems, and Gaussian Copula formulae, unemployment is creeping up on 10%, we’re in month 17 of an official NBER recession, we’ve seen a massive evaporation of private wealth, the auto industry is teetering on the edge of bankruptcy, the housing market bubble has popped, the Fed has printed ungodly sums of money, and our federal government has created a bailout nation policy. So, you ask: What else could possibly go wrong? Are there any shoes left to drop?
Unfortunately, yes.
Here’s what’s likely to happen in the next 12-18 months:
1. Commercial Real Estate will crater. There are so many forces at play here, there’s no way we can escape a massive price collapse and upsurge in commercial vacancies and real estate defaults.
2. Flight from greenbacks. There is a growing chorus of concern among the BRICS, Western Europe, OPEC nations, and LATAM, to find other global reserve currencies as the U.S. financial crises worsens. This will create a death spiral for the value of our dollars.
3. Consumer credit defaults. Americans are overextended and card issuers’ delinquency rates are going through the roof. This is a recipe for disaster. As unemployment rises, the dollar devalues, and banks close lines of credit, expect a major crisis.
4. Double-digit unemployment. It’s going to happen. February 2009 saw 7 states with >10% U3 unemployment. The future does not offer many reasons why this number will not double and triple, as the rate goes further north.
5. Pension fund meltdown triggers corporate earnings destruction. This is a ticking time bomb. I’m not going to address all the reasons why–there are too many–just read pensionpulse.blogspot.com.
6. TARP ($700B) , PPIP ($1T), TALF, Auto Bailout, and ARRA (That’s the $800B stimulus) will prove to be a $3.77 trillion black hole. I’ve just picked the big ones. For the full USG commitment since Nov 2007 see http://money.cnn.com/news/specials/storysupplement/bailout_scorecard/index.html it’s $10 TRILLION!!!
So there you have it. Six more shoes to drop before this cluster**** of an economy hits bottom.
I’m searching for a silver lining.
This plan is a disaster for the US economy. Of course there will be loopholes, and of course the “masters of the universe” will drive truckloads of cash through them as they invent ways of gaming the system. I dont mean to sound cynical, but come on people, how can intelligent people not look at this plan and be scare shitless that abuse and fraud will not rear their ugly heads? Are people that ignorant of history? This is assinine. Put the fking instutions with toxic assets into damn receivership already, clean house of the management, start training MBAs at the b-schools who produced this shite to do something of value and high moral purpose for their country and stop perpetuating the cycle of greed and privilege that have become zeitgeist. Then we can unclog the financial system, purge it of the rapacious fraudsters that have infected our whole society, and we can turn our attention to the other looming issues facing our nation: healthcare, environment, energy, and education. Those arent going away while we deal with this financial disaster. Come on all you economists, what are the opportunity costs associated with our distraction from those issues?
Does anybody have any good news?
You just can’t make this stuff up. Wow, when is the Treasury going to fire every single person in a senior management position at this pig of a company?
A.I.G. Sues Government for Return of $306 Million in Tax Payments – NYTimes.com.
What if the Treasury held an auction and nobody came? The implications are catastrophic, but Yves does a great job illustrating the latest Fed move to buy lots and lots of treasuries.
More insanity coming from our Treasury Dept. Why have no charges been brought against AIG?
naked capitalism: Wiliam Black Savages Treasurys Conduct on AIG.