Posted on 09/27/2008 4:03:55 PM PDT by Tempest
"It's more hype than real risk," said James K. Galbraith, a University of Texas economist and son of the late economic historian John Kenneth Galbraith. "A nasty recession is possible, but the bailout will not cure that. So it's mainly relevant to the financial industry."
Another doubter of the Great Depression theme is Kenneth Rogoff, a Harvard University economics professor, who thinks the intervention may prevent or delay the necessary failure of weak financial institutions.
"It is time to take stock of the crisis and recognize that the financial industry is undergoing fundamental shifts, and is not simply the victim of speculative panic against housing loans," he wrote in a syndicated column. "Certainly better regulation is part of the answer over the longer run, but it is no panacea. Today's financial firm equity and bond holders must bear the main cost, or there is little hope they will behave more responsibly in the future."
(Excerpt) Read more at miamiherald.com ...
“AAA”, “AA”, or “A” paper is all considered investment grade. If “AA” paper is subject to 78% losses or even worse, what should be expected from “BB” paper? 98.3% losses?
How are the Credit Default Swaps/receipts impacted by a Republican House Insurance plan? This is all very confusing, but my thinking is that the government should not sign on to be responsible for any of those derivative instruments—especially since they don’t seem to have any real assets backing them. Bad investment idea, so banks, hedge funds, etc. that had em lose!!
Sorry, that’s why it’s called an investment right? Don’t worry the gamblers will be back at the tables soon. They’re just holding out hoping that the house is going to start passing out some comps.
Its frustrating. We’re in a raft on the river shouting, “there is a waterfall coming 5 miles ahead!”
No response from the masses...
“There is a waterfall coming 4 miles ahead!”
Same thing, 3 miles, then 2 miles, then one mile.
When the entire raft full of people hears the mighty roar of cascading water, then all scream, “oh crap! a waterfall is just ahead! Where is the Coast Guard to save us?”
Meanwhile, I’ve put on my life preserver and jumped paddling hard to shore, but I’m still tethered to the raft. The idiots who haven’t paid any heed to the warning when it was first raised are pulling me over with them.
VERY FRUSTRATING.
You need to seriously educate yourself on this crisis. This is the worst financial crisis the USA has experienced since the Great Depression.
Please don’t let that reference lose you. My point is, the crisis is extremely serious and urgent. If people lose confidence in the market, activity stops and there is no jump starting it.
Major institutions have lost confidence in the markets and are hoarding cash rather than lending it out. Money to the economy is like blood in the body. When the heart stops pumping blood, the body dies. When the markets stop pumping money, the economy dies. As it is much easier to keep a man alive than to restart his heart with a defibrilator, it is much easier to keep the economy alive than restart the process of getting people to lend, borrow, buy and invest.
When people lose confidence in the market, they cause bank runs, drain money from the banks, causing bankruptcies.
The logjam in lending is occuring among the huge lending institutions, so you are not yet seeing it in your daily life. If that happens, if you see stark evidence of this in your daily life, it is because the markets are already dead and the money stoppage is trickling down. By that time it is too late to do anything, so you really don’t want to see 1st hand evidence of this in your life.
Credit is very hard to come by. Here are 3 articles describing how hard it has become for companies and people with good credit to get loans:
http://www.cnbc.com/id/26904496
http://money.cnn.com/2008/09/25/news/companies/banks_lending/index.htm?postversion=2008092515
http://money.cnn.com/2008/09/25/news/companies/banks_lending/index.htm?postversion=2008092515
You may scoff at the urgency to get institutions to lend again, but it is a very real problem. In the meantime, businesses that need operating capital to pay creditors and can’t get that capital are having to declare bankruptcy.
This urgency goes way beyond your ability to get a new credit card.
This crisis is for real. Please read more about it.
If a company as bad as McClatchy could get refinanced how severe could this credit crisis really be?
http://www.mcclatchy.com/pressreleases/story/2188.html
I think I’ll re-read your post 5 or 6 times. Things are starting to sink in.
The flip answer is just look at history. A lot of rafts and and a lot of waterfalls. But as churchill said, Americans always do the right thing — after they’ve exhausted all other possibilities. (that’s a paraphrase)
On the positive side, the system is working. a lot of hoopla and then a brawl to reach a solution. It’s the American way.
The actual quote:
“You can always count on Americans to do the right thing - after they’ve tried everything else.”
It seems like the House GOP is among the 70% majority. The problem is that the other guys get lots of campaign contributions from the folks who have been ripping us off, and now want to be bailed out of their malfeasance.
I’m going to reserve judgment whether the system is working until after I see we did not fall into a depression. I like to see managed systems that mitigate severe widespread risk.
In other words, that we have great prenatal care and such a low rate of child mortality, I would say, “the system if working.” If we did nothing and let the weak children would die, someone could make the claim “the strong survive to procreate while the weak die. See, the system is working”. I would call that system “not working” since there is so much we can do to insure the survival of most young children.
Maybe I misunderstand you when you say “the system is working”. I really like the way debt is just being rapidly destroyed. Japan refused to do that and spent 20 years trying to grow their economy. If we fall into a depression then I would not label that “the system is working”, but that “the system already failed years ago by allowing massive credit bubbles, and now we are just paying the logical prices of those long ago failures.”
Here is a “one pager” that’s designed to be more cogent than my blatherings.
http://www.tickerforum.org/cgi-ticker/akcs-www?getimagenr=10237
And here’s Karl’s video for today about this:
I am not sure if this is behind a “membership” barrier, I’d suspect not since it’s meant for dissemination.
~~10 min video:
http://www.tickerforum.org/cgi-ticker/akcs-www?post=63583
I’m not a cultmember, but Karl Denninger states it much more cogently than I can. He’s got more videos at www.fedupusa.com
Scary.
Not trying to overload you, but http://www.financialsense.com/ the interview with Doug 09/27 Noland is just superb.
The only people promoting bank runs are the idiots promoting a state of fear.
I.E....
You idiots do realize that it was easy credit that caused this mess don’t you?
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