How low can we go...

Here's a clip from a Krugman article in the Times. He's half right and half idiot.

GURK ZIRP
That’s Zero Interest Rate Policy — which is now, in the wake of this morning’s terrible employment report, inevitable. Yes, we’re Japan.
Add to this the news of a retail sales collapse, and we’re looking grim, grim, grim.
Monetary policy obviously isn’t enough. It’s time to raise Keynes: we need big fiscal stimulus, now now now.
Any way we can get current management at Treasury to take early retirement, and get the new guys in right away?
Add: The unemployment rate has now risen more than 2 percentage points from its pre-recession low. In 1990-1992 the unemployment rate rose 2.6 percentage points. Given what’s happening to retail sales, manufacturing, and so on, it’s now a certainty that unemployment has a lot further to rise. So the “worst recession in 25 years” thing is now baked in. The only question is whether we hit “worst slump since the Great Depression” territory.

So, he's right on ZIRP (world going there also), correct about Japan similarities, correct about how fing bad this is going to be, but he along with the majority of our leaders are COMPLETELY RETARDED when they talk about Keynes and Keynsian policy as the answer to this mess. Throwing fiscal stimulus in the form of BORROWED MONEY TO PAY OFF MORE DEBT AND INTEREST is a TRAP. It will crush our economy just as I've been predicting for over a year would happen and then would be implemented. Even my hero David Walker is promoting some of this Keynsian non-sense. I still love him to death (he was on Squawk Box this morning...more on that in a moment), but fiscal stimulus WILL NOT AND CANNOT WORK in an over-leveraged debt driven economy. Has anybody learned from our past experiences and experiments with these methods? Does anyone really understand the mechanisms behind debt bubbles and debt collapses, consumer driven recessions, etc... They are different animals and beasts completely from a lack of liquidity in the system. They are INSOLVENCY and DEBT problems. You must eliminate, reduce or default on the debt to recover...PERIOD. It is SO FUCKING SIMPLE yet not one sound bite in the media has made any sense other than a few marginalized "doomsdayers". We are heading straight into the perfect storm and our leaders are insisting on pushing down the throttle and driving through it. That mindset will seal the collapse of our economy.

Back from the dead...hopefully

Sorry about my absence...been slammed on time. Some posts are coming...

Third world america

Third World America
http://krugman.blogs.nytimes.com/2008/10/07/third-world-america-2/

Paul Krugman's latest article touches on a subject of mine 6 months ago.

Subprime Nation
http://economicrantsoflunatic.blogspot.com/2008/05/subprime-nation.html

Mark to market witch hunt

If mark to market is to blame for banks woes as many of the shills have said, then answer me this. If these assets are really worth more than what the market is bearing, then why isn't the market (which has plenty of capital...Buffet, PIMCO) buying these assets left and right. If something that should be worth 80 is being marked to 40 and you know it is worth 80, then there would be a rush to buy these assets at a discount. The reality is, the smart people (market forces) know the value of this garbage. Price discovery will not happen until the government clearly removes itself from the game. Otherwise, there is no incentive for private equity to step in and no incentive for banks to sell at the low (true) value. Don't fall for the bullshit being spewed by banks, investors and the government. They want the tax payers to prop these assets up for all the wrong reasons.

China and Economic Warfare

The evidence is mounting that China has pointed the economic equivalent of a nuclear weapon at the US. China (and possibly some other countries) are in a position to cut-off the flow of money into treasuries that the US NEEDS to pay federal expenses month to month. We are a debtor society. We require foreign funding to sustain our current spending. Without it, the government would be forced to print worthless dollars. Checkmate (hyperinflation). China swallowed a shitload of toxic MBS and agency debt. They are pissed. It's becoming pretty clear that they have backchannelled a demand to our leaders that funding will be cut-off if the toxic debt is not purged from their markets. That is what this bill is really about when it comes down to it. It does nothing to recapitalize banks, but it does restore the foreign money pump required for us to fund our economy. We are no longer controlling our destiny or government. It's a sad predicament.

Not unlike a gambler begging the loan shark for an extra week to try and kite the debt.

State and local finances crumbling

As predicted, states and local governments are starting to feel the pinch of decreased revenues. As I've said before, they are completely underestimating the severity of these shortages and they will get massacred over the next few years. The news is starting to pick-up on this oncoming tsunami. It's getting overshadowed, however, by the larger financial crisis in the credit markets. This will only exacerbate the problem at local levels, as spineless politicians will refuse to cut costs far enough and will refuse to raise taxes high enough. This will leave borrowing as the only remedy for shortfalls and borrowing won't be cheap. All of this was predictable, yet the weak remain in power and the weak will continue to destroy the foundations of this country.


Alabama County Misses Bond Payment- Bloomberg
State, Local Tax Revenue Stagnates- Wall Street Journal
Under Strain, Cities Are Cutting Back Projects - New York Times

So much news and so little time

So much is going on right now and I have so little time. I hope to get back into the swing of things shortly. Underneath the surface crisis, there are a number of ominous signs of depressionary times ahead.