Update: Russia Exchanges Closed (and other horror stories)

Both the MICEX and RTS exchanges have been closed - lock limit down.

The markets have rendered their decision on the G7, Geithner and Obama's administration thus far, as expressed by Rick Santelli on CNBC this morning. As a picture is worth 1000 words, here 'ya go:

CNBC was running Terminator II theme music as their bumper this morning; that's pretty accurate. There is no chart support left between here and (unfortunately) the 500s in the SPX, and there's an argument to be made that the next real support is down around that dreadful 210 target that I laid out a couple of weeks ago.

Obama's administration must stop dicking around with asset prices. The "credit freeze" is manufactured as a consequence of idiotic actions of government; by at the same time threatening to support asset prices and destroy their value they have blown bid/offer spreads out to the point that trades cannot take place.

This stupidity must stop and it must stop NOW. Whatever policy is going to be on these assets it must be set and then the government has to sit down and shut up. If government is going to attempt to overpay for these assets then it must secure 10 and 30 year funding necessary to take the entire lot - not this garbage 13-week rollover nonsense where we can destroy our government if we have a failed roll - and accept the damage that much higher interest rates will cause from issuing roughly $2 trillion in 10s and 30s. This will mean severely constrained federal budgets and much higher borrowing costs for homeowners, companies and others - in short, it will be an engineered depression for the purpose of bailing out the banks.

That's the price folks - but it is the only safe way we can actually do what we've threatened, which is to overpay for these assets.

If we're not going to overpay for these assets then we must say so in a loud, clear voice, and if that results in the banks being declared insolvent, then so be it. Do it and get it over with. It will suck but then it will also be over. There is severe economic damage that will result from this path of action as well, mostly from having to backstop the FDIC. Yes, I know this detonates pensions and the like. The fact of the matter is that they're already dead and we must stop lying to everyone, first and foremost ourselves.

We also must consider "ring-fencing" the United States, pulling all swap lines and protecting ourselves. We cannot backstop the world; we don't have the money and can't raise it. We are tying an anvil to our ankles and jumping into the water, and if this doesn't stop - now - we are headed for the abyss.

We got here as a consequence of government idiocy. If government does not stop behaving like Moe, Larry and Curly we will watch Europe implode, we will try to backstop the EU and Asia via our swap lines and we will go down with them. Swaps have blown out this morning which indicates that despite all the "attempts" to inject stability we have failed.

Time has run out for the bullcrap games of the last eighteen months. Bernanke must be directed to protect our government and Treasury first and withdraw all external support until and unless Congress has authorized the full expenditure that could result from extending any US-backed program to a foreign entity.

If Obama lacks a sack between his legs and is incapable of taking the necessary actions to protect our nation then he must resign here and now. Playing hostage to the banksters never was cute but if this is not stopped right now - today - it may well prove fatal to our Republic.

KD is on a tear today!

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

-~~Ludwig Von Mises

“Several brokerage houses tumbled; blue-sky investment companies formed during the happy bull market days went to smash, disclosing miserable tales of rascality; over a thousand banks caved in during 1930, as a result of marking down both of real estate and of securities; and in December occurred the largest bank failure in American financial history, the fall of the ill-named Bank of the United States in New York.”

~~"Only Yesterday: An Informal History of the 1920’s" by Fredrick Lewis Allen

I have what is probably a VERY naive question/proposal:

Wouldn’t it be a good idea for the government, if they’re going to spend all this money, to fund private entities to start “GOOD” banks? These banks would have no toxic assets. They could selectively buy assets from existing banks after a thorough audit of each loan. That’s what the market seems to be crying for: a bank that is free of toxic debt.

The new banks would be exempt from CRA[p], FDIC, the Federal Reserve, state banking laws, and other requirements so they can build value and provide loan stability in a market environment.

I don’t know about everyone else but I am tired of the government using banks as political pawns. No industry is as regulated and scrutinized as banks, and their industry is in the worst trouble. We need good, solid banks that operate on free market principles. I would guess we haven’t had one of those for close to 100 years.

There’s no quick fix to this problem. The toxic loans have to be audited one by one. It’s a ton of work, but there’s no way around it.

It is time for the States to start quietly passing contingency resolutions to convene a constitutional convention for when and if the federal government no longer remains viable.

34 States are needed to convene a constitutional convention, and that move cannot legally be blocked by the federal government.

Because a constitutional convention is wide open to any constitutional changes the convention sees fit to include, the State resolutions should be very clear.

1) Each State will submit two delegates to the constitutional convention. As agreed by the 34 convening States, two and only two delegates will be seated from each State, appointed by their governor in consultation with each State legislature.

2) Both delegates from all States will be bound to submit only those constitutional changes approved by their State legislature, and to forward those changes submitted by other States to their home legislature for debate and approval or disapproval.

3) The federal government of the United States will be prohibited from interfering in or even monitoring the constitutional convention of the individual States, and delegates to the convention will have immunity from arrest or detention for the duration of the convention.

4) At the conclusion of the constitutional convention, the President of the United States, the Congress of the United States, and the Supreme Court of the United States will be obliged to carry out those changes to the constitution in accordance with the convention, which will remain in session for up to one year to insure that their directives have been fully carried out. Failure to carry out these directives may result in the removal from office of the President, any member Congress, or any Supreme Court justice who refuses to comply, with a two-thirds vote of the convention delegates.

'You ain't seen nothing yet --' Quoth the Bard.

Eastern European Currencies Crumble As Fears of Debt Crisis Grow

Excerpt:

Currencies have crumbled across Eastern Europe on mounting fears of a debt crisis as foreign creditors withdraw from the region.
Hungary’s forint fell to an all-time low on Monday, and Poland’s zloty slumped to the lowest in five years on plunging industrial output. Half of all loans to the private sector in Poland are in foreign currencies so borrowers face a severe debt shock after the 40pc fall of the zloty against the euro since August. * * *
The mushrooming crisis has already started to spill over into Germany's debt markets, lifting credit default swaps on German five-year bonds to a record 70 basis points. The gap between French and German CDS spreads has narrowed abruptly for the first time since the credit crisis began.
“Investors are beginning to ask whether Germany is going to have to pay for the rescue of Eastern and Central Europe,” [one expert] said. * * *

The end of 2010 might be a good time to consider moving to Poland and paying cash for a house. Or to the Czech Republic or Hungary. Pay cash for a house on a fine house on the Danube River in Budapest. Lookie Here Travel will be dirt cheap in 2010.

LOL, LOL !

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