Financial topics

[John]

Dear Higgie,

It's very kind of you to say that, and I appreciate it. Thank you.

You turned me on to a lot of the detailed stuff, especially what
happened in the 1850s, which is very relevant to what's been
happening in this decade.

But I remember when I started digging into the CDOs, and later the
auction rate securities. I just couldn't believe that such
hare-brained nonsense was now a fundamental part of our financial
system. Up to that point, I thought the housing bubble was just that
-- an ordinary bubble. But anyone with half a brain who looks at CDOs
and ARSs quickly understands that there's massive fraud going on, and
that was apparent years ago.

That's when I really started to get both sick and furious. I still
get sick when I see some of these people. Yesterday I saw Stiglitz
on tv, who is one of the slimiest people around and an architect of
the financial crisis, and watched him as long as I could stand him.
And Krugman is one of the stupidest people on the scene. I'm furious
at these people -- not only because I hold them responsible as the
architects of the current disaster, but because their lives are
now devoted to gaining as much money and publicity from blaming
others for their own crimes. You have Robert Rubin from the Clinton
administration, Henry Paulson from the Bush administration, and Larry
Summers from the Obama administration -- all of them made many
millions of dollars as perpetrators of this massive fraud, and
they're still running things. They don't give a damn about anything
but saving their own asses.

Now that I've gotten started on this rant, we have to remember that
the financial crisis was executed by the people still in charge today
at Citibank, Bank of America, Goldman Sachs, etc. On the one hand,
these people are fucking over their own customers by reducing credit
and charging 25-30% interest rates. On the other hand, they're
paying themselves million dollar bonuses.

And why are they paying themselves million dollar bonuses? This is a
point that you never hear mentioned in the mainstream media. Why are
they so afraid of losing these employees? The more I think about
this, the more I keep coming back to the same reason. The employees
they're afraid of losing are the criminals who perpetrated the fraud,
and if one of those employees left, he might cooperate with
authorities in bringing criminal charges against the firm he left. In
other words, the ones who are receiving million dollar bonuses are
self-identifying as the ones should go to jail.

Here's something that's good for a laugh:

> Goldman Sachs CEO Lloyd Blankfein is telling employees of the
> powerful bank to avoid displays of conspicuous consumption, the
> New York Post reports.

> Goldman has faced a spate of bad press of late, including a
> Rolling Stone article casting it as "a great vampire squid wrapped
> around the face of humanity, relentlessly jamming its blood funnel
> into anything that smells like money" and a New York magazine
> piece asking if the company is "evil." (See "The Shine Comes Off
> Of Goldman Sachs" for more.)

> Blankfein appears to be trying to stem the tide by convincing
> employees to keep a low profile – and maybe put off buying that
> fancy new mansion until the economy has improved.

> http://www.cbsnews.com/blogs/2009/08/04 ... ?tag=stack

So you have criminals at Goldman Sachs, Citibank, BoA, etc., who made
millions selling CDOs and ARSs, still making millions in bonuses,
still thinking up new financial scams (like "cap and trade" and
"universal health care"), still fucking their own customers, and
worrying about PR efforts to stem "conspicuous consumption," so that
people won't hate them. This is such debauched, perverted behavior
that it's hard to even describe.

I've mentioned in the past that all the anti-bank rhetoric that we're
hearing today is very familiar to me, because I used to hear it from
my parents and my teachers in the 1950s, and now we can really see
why. If Blankfein thinks that a PR effort is going to change
people's attitudes towards Goldman Sachs, then he can take his PR
effort and shove it up his ass.

Whew! That's quite a "stream of consciousness" road I just traveled
-- from a simple discussion of Mike Alexander to expletives about
Goldman Sachs. Hmmmm. How much do I have to tone this down when I
post it on the web log?

John

[Higgenbotham]

The way I look at the current situation is a lot different than almost everyone else is viewing it.

First, here is a summary of how I think others are viewing the stock market. Most believe that the recent stock market loss of about 60% is a typical bear market. They believe that, even if we're still in a bear market, stocks are going sideways and may regain the entire loss before heading lower again but even if that doesn't happen stocks will probably regain 38-50%.

Here's what I think is actually happening. This more recent fraud has created the temporary illusion that things are getting better. In fact, things are getting worse and the illusion is about ready to come to an end. Stocks will not regain 50% or even 38%. A large percentage of the companies in the S&P 500 are actually worthless because they have no inherent ability to generate profits. Speculating on these stocks is akin to speculating on tulip bulbs or South Sea Company shares. So while this thing I am calling a stock market bubble does not appear to be one, that is what it is. The difference this time around is that stocks deflated off their highs because of the unwinding of the mortgage mess. The actual stock market collapse is still coming.

[burt]

But I remember when I started digging into the CDOs, and later the auction rate securities. I just couldn't believe that such hare-brained nonsense was now a fundamental part of our financial system.
...
That's when I really started to get both sick and furious. I still get sick when I see some of these people. Yesterday I saw Stiglitz on tv, who is one of the slimiest people around and an architect of the financial crisis, and watched him as long as I could stand him.

I feel exactly the same, BUT may I suggest that you analyse yourself with the GD theory.
There may be NO architect for this rotten situation, the trouble is that it was build by a full generation,...
So I'm using exactly the same idea that you use when you say that this is a mistake to think that Bush was the only responsible of the war with Irak, and I think it is coherent, worse than finding responsabilities, but sound coherent to me.

The way I look at the current situation is a lot different than almost everyone else is viewing it.
Here's what I think is actually happening. This more recent fraud has created the temporary illusion that things are getting better. In fact, things are getting worse and the illusion is about ready to come to an end. Stocks will not regain 50% or even 38%. A large percentage of the companies in the S&P 500 are actually worthless because they have no inherent ability to generate profits. Speculating on these stocks is akin to speculating on tulip bulbs or South Sea Company shares. So while this thing I am calling a stock market bubble does not appear to be one, that is what it is. The difference this time around is that stocks deflated off their highs because of the unwinding of the mortgage mess. The actual stock market collapse is still coming.

I have exactly the same opinion that Higgenbotham, but I'd be happy to read John on the GD theory about what means
-a- this level of corruption
-b-that NO ONE reacts to it
-c-The power given to the bank and to the money (I'm thinking about the derivatives)
-d-Higgenbotham, John and I are NOT the only ones who think that we are manipulated (generation or paranoïa ?? I'd be interested to know)

I know banks and with the crony system built, the corrupted financial system could perfectly hold for years....

Another question is "Who buy the stocks? Banks?" It would be a very efficient way to show good results.
Thank you to anyone participating here, I still have information from aedens to digest

[aedens]

http://market-ticker.org/archives/1304- ... vered.html

Mises’s notable contributions is his claim that socialism must fail economically. In a 1920 article, Mises argued that a socialist government could not make the economic calculations required to organize a complex economy efficiently.
http://generationaldynamics.com/forum/v ... 1750#p3882
Although socialist economists Oskar Lange and Abba Lerner disagreed with him, modern economists agree that Mises’s argument, combined with Hayek’s elaboration of it, is correct. I do not need to enumerate the differences since one wall fell and our storm backwall is near.

It's not that government has lacked information needed to fix the problem. It is institutionally incapable of bringing about the desired result, since the principles of profit and loss, private property and contract, enterprise and entrepreneurship, do not exist in government. Any Government operates with an eye to its own short-term survival, and those of its connected interest groups, and nothing else.
http://generationaldynamics.com/forum/v ... 1740#p3864
Basil Moore 1983, “Unpacking the post Keynesian black box: bank lending and the money supply”, Journal of Post Keynesian Economics 1983, Vol. 4 pp. 537-556; here Moore was quoting a Federal Reserve economist from a 1969 conference in which the endogeneity of the money supply was being debated.
“In the real world, banks extend credit, creating deposits in the process, and look for reserves later”.
We see who paid for that.
Their empirical conclusion was just the opposite: rather than fiat money being created first and credit money following with a lag, the sequence was reversed: credit money was created first, and fiat money was then created about a year later:
Having failed to understand the mechanism of money creation in a credit money world, and failed to understand how that mechanism goes into reverse during a financial crisis, neoclassical economics may end up doing what by accident what Marx failed to achieve by deliberate action, and bring capitalism to its knees.
Academic economics responded to these empirical challenges to its accepted theory in the time-honoured way: it ignored them.

http://generationaldynamics.com/forum/v ... 1740#p3862

They can see the weather but not sign of the times. Truly the days we live in try one resolve. The gate keepers have lost there way. The shepards have been stricken. Are we not held to a longer standard they dismiss. The gate keeper need to give acount to the dead letter. Negotiate, a standard they dismiss only leads back to the root they deny.

"These are nothing more than destructive efforts to interrupt a debate that we should have, and are having," Reid said Thursday. "They are doing this because they don't have any better ideas. They have no interest in letting the negotiators, even though few in number, negotiate. It's really simple: they're taking their cues from talk show hosts, Internet rumor-mongerers ... and insurance rackets."

Non payment for carbon credits.
Meanwhile: http://hosted.ap.org/dynamic/stories/N/ ... TE=DEFAULT
http://generationaldynamics.com/forum/v ... 1760#p3891

[aedens]

Similar patterns do exist still given demographic in contraction and currency.
aedens » Thu Jul 23, 2009 10:52 pm "I feel many forward looking Corps have already settled that"
What I mean is contraction and debt Implosions in true context to regional play foreign and domestic. I was amazed at the amount myself seeing the data today. Only one person conveyed the implication's when the wall fell I read and the complication's I remembered other than being reminded by below.

mannfm11 » Thu Jul 23, 2009 9:57 pm "In that vein, he is somewhat right in that a bubble don't need an economy, only speculators who think they are getting rich out of the money they are putting into something. Bubbles always break. In accordance with John, W.D. Gann wrote in his book, making money out of commodities that every generation had its bull markets, but evidently only the generations John mentions and their cousins have bubbles because it takes a type of manipulation to have one. Values are never what prices say they are.
MarshAviator » Wed Aug 05, 2009 9:37 am complex system failures Thanks guys....

Creative destruction most ignore or remember since are in a new business cycle albiet mixed to say the least.....
mannfm11 Earnings in the market are a non issue right now. They aren't because of the nature of a bursted bubble. The prices of the past relate to a financial bubble that allowed them to earn anything. Even though there might be a temporary leveling or pop in earnings, the next move is to lower and lower level until there are no earnings. Then debt will begin to consume corporate USA and Europe as it has consumed housing.

comp_gross_ext_debt_800.jpg (116.33 KiB) Viewed 7167 times

Latvia has suffered the most from the financial crisis. In terms of macroeconomic indicators, Estonia is not much different than Latvia. Estonia's gross external debt, most of which is privately held, is 116 percent of GDP, compared to Latvia's 124.6 percent. Furthermore, Estonia and Latvia both have a very high percentage of foreign currency-denominated loans in their loan portfolios 86 percent and 90 percent, est.

Dollars in green shoots from the new Black Box Crew.

Basil Moore 1983, “Unpacking the post Keynesian black box: bank lending and the money supply”, Journal of Post Keynesian Economics 1983, Vol. 4 pp. 537-556; here Moore was quoting a Federal Reserve economist from a 1969 conference in which the endogeneity of the money supply was being debated.
“In the real world, banks extend credit, creating deposits in the process, and look for reserves later”.
We see who paid for that.
Their empirical conclusion was just the opposite: rather than fiat money being created first and credit money following with a lag, the sequence was reversed: credit money was created first, and fiat money was then created about a year later:
Having failed to understand the mechanism of money creation in a credit money world, and failed to understand how that mechanism goes into reverse during a financial crisis, neoclassical economics may end up doing what by accident what Marx failed to achieve by deliberate action, and bring capitalism to its knees.
Academic economics responded to these empirical challenges to its accepted theory in the time-honoured way: it ignored them.
Trust at home hinges to abroad...http://www.americanthinker.com/2009/08/ ... _pill.html Pushing Up Daisy's

Why are we angry was asked?
Graph from InvestorsInsight is intended solely for informational purposes.

[John]

A report by Comstock Funds says the following:

• The current deleveraging process will weigh on the economy for 20
  years.
• The stock market is in a new "mini-bubble," reactive to
  quantitative easing by countries around the world.
• "We, however, don't believe that the U.S. massive stimulus
  programs and money printing can solve a problem of excess debt
  generation that resulted from greed and living way beyond our means.
  If this were the answer Argentina would be one of the most prosperous
  countries in the world. This excess debt actually resulted from the
  same money printing and easy money that we are now using to alleviate
  the pain."
• There's no danger of inflation because the velocity of money is
  stagnant.
• In last decade, total US debt doubled from $26 trillion to $52
  trillion - $14 trillion government debt, $38 trillion private debt.
• Since individuals are paying down debt, the amount of private
  debt is decreasing, and expected to continue decreasing.
• However, government debt is exploding.
• The $52 trillion in debt is now 375% of GDP, which is $14
  trillion. This is substantially worse than the Great
  Depression.

http://www.comstockfunds.com/%28X%281%2 ... trow/1.htm

At times like this, I like to quote

Stein's Law: If something cannot go on forever, then it won't.

Back in the 2004 time frame, people used to say the following to me:
"John, you can never be proved wrong, because if there's no crisis,
you'll always say that it just hasn't happened yet. When will you
admit you're wrong?"

My response was that public debt was growing exponentially, and if it
ever started to fall in a credible manner, then I would be proven
wrong.

Needless to say, nothing like that has happened. Public debt has
continued to grow exponentially, and nobody watching what's going on
in Washington can possibly believe that that's going to change until
some financial catastrophe forces a change.

People who wonder why we have to have a "generational panic and crash"
should think about the exponential growth of public debt. The Obama
administration is following a bizarre pseudo-Keynesian formula that
says that the way to reduce public debt is to go exponentially deeper
into debt. I don't see any way to break this spiral except through a
discontinuity - a massive financial crisis.

John

[burt]

People who wonder why we have to have a "generational panic and crash" should think about the exponential growth of public debt.

I'll open a new discussion, some days, on the type of crisis that we have, it is a combination of several types of crisis... I'll come back on that, this will be VERY complicated to solve, I'm happy not being at the government...

We have a worldwide problem, Public debt is the forth bubble, and every bubble blows at some day (first one was the Asian Bubble, the second the TechBubble, the third one the housing bubble, and the forth one IS AT ITS BEGINNING, it will be the public debt bubble, not now, the problem is still manageable, sorry about the different graphs.
It is NOT as bad as that, AS LONG as the debt is BELOW the wealth of the countries, and as long as my information are correct, the wealth of the US is around 50'000 Billions (so debt IS manageable), and a large part of the US debt is INTERNAL to the US, NOT a debt to external actors, I mean by that, it is POLITICALLY solvable)
But the DEBT Bubble will be built within the next years (not months)

The trouble is that we had a 3 steps move for the debt:
-During the Japan crisis it moves from companies to private (today large companies are CREDITORS, banks of the world, no more DEBITORS as they should be in a capitalist system,
-Now after the house bubble, it is moving from private and banks to Central banks
-and then ??? will the debt moves to God... We are going to face (within the next 20 years, NOT months) the redefinition of "What is money".
it will be VERY, VERY, VERY painful.

Please read Joseph Shumpeter, Capitalism WILL die, but it takes time, I'd say 50years from now, we are in the world it described one century ago, but it goes slowly, as usual when you speak about the end of a civilization, don't be in a hurry, anything dies... and IT IS PAINFUL.

Now this doesn't mean a "generational panic and crash" (please John explain this term, that I do not understand on a psychological basis).

We will have a CRASH, yes, a PANIC yes, probably a 3rd world war (not so sure, yet, but I think this is probable, IF my elliot wave count is correct, we will see....) yes...
But a generational panic is NOT a term I understand yet, please explain without fear

[aedens]

People who wonder why we have to have a "generational panic and crash" should think about the exponential growth of public debt.

I'll open a new discussion, some days, on the type of crisis that we have, it is a combination of several types of crisis... I'll come back on that, this will be VERY complicated to solve, I'm happy not being at the government...

We have a worldwide problem, Public debt is the forth bubble, and every bubble blows at some day (first one was the Asian Bubble, the second the TechBubble, the third one the housing bubble, and the forth one IS AT ITS BEGINNING, it will be the public debt bubble, not now, the problem is still manageable, sorry about the different graphs.
It is NOT as bad as that, AS LONG as the debt is BELOW the wealth of the countries, and as long as my information are correct, the wealth of the US is around 50'000 Billions (so debt IS manageable), and a large part of the US debt is INTERNAL to the US, NOT a debt to external actors, I mean by that, it is POLITICALLY solvable)
But the DEBT Bubble will be built within the next years (not months)

The trouble is that we had a 3 steps move for the debt:
-During the Japan crisis it moves from companies to private (today large companies are CREDITORS, banks of the world, no more DEBITORS as they should be in a capitalist system,
-Now after the house bubble, it is moving from private and banks to Central banks
-and then ??? will the debt moves to God... We are going to face (within the next 20 years, NOT months) the redefinition of "What is money".
it will be VERY, VERY, VERY painful.

Please read Joseph Shumpeter, Capitalism WILL die, but it takes time, I'd say 50years from now, we are in the world it described one century ago, but it goes slowly, as usual when you speak about the end of a civilization, don't be in a hurry, anything dies... and IT IS PAINFUL.

Now this doesn't mean a "generational panic and crash" (please John explain this term, that I do not understand on a psychological basis).

We will have a CRASH, yes, a PANIC yes, probably a 3rd world war (not so sure, yet, but I think this is probable, IF my elliot wave count is correct, we will see....) yes...
But a generational panic is NOT a term I understand yet, please explain without fear

In this vein Burt:
The experiment of relying on a world body as the guarantor of peace had now gone through three iterations: the League of Nations, the UN during the Cold War, and the UN after the Cold War. Each had proved a failure. By the end of Clinton’s first term, Kofi Annan, who served first as the head of UN peacekeeping and then as secretary general, was complaining aloud that enforcing the peace anywhere was beyond the capacity of the UN. And President Clinton and Madeleine Albright began to speak of the U.S. as the “indispensable nation”—a phrase that sounded offensively boastful to others but only reflected their surprise at this discovery. That pissed me off since my sons and brothers are not your body bags so fuck you united nations grow up you feed bag fed pricks.
Also: Writing at the end of 1989, Jeane Kirkpatrick said: “We will need to learn to be a power, not a superpower. We should prepare psychologically and economically for reversion to the status of a normal nation.”
Econ for econ sake: Austrian School offers us both an explanation and a prescription for our current ills. It is a prescription that is just as radical as, and perhaps even more politically unpalatable. Really the root is interpetation and intent to freedom. The fathers intended that we could do much if we could avoid entanglements as Jeane also understood but currently many see the last few decades somewhat as the movements of the Locust's. We have lived through a barren intellectual time, with each era more barren than the last “America’s locust years.” The point is Clinton made the UN step up so we could step back to fiscal sanity, guess what it worked. The bottom line is that the Fed is in a very difficult position. Its room to maneuver is either small or nonexistent, and the markets understand this. That is why there is a sharp divergence between those worried about price inflation and those fearing a lengthy depression. Lemming effect to debt curves. In essence if you see what hayek, misses where saying it is peace and management of scarce resources. Acton sums it nicely. Innovation and liberty to be free from the state of affairs. The point of the dead letter is defence as gatekeepers only. Now I have to pay for auto's, abortion and endless bullshit to waste given stupidity to manipulate more left and right. Much has changed to liberty and freedom since the wall fell?
Our back wall is coming now and to many slam there foot on the gas to get there to mantain the curve and road to serfdom we see. How many of the men and women we dismissed are going to make it back? Decades they shipped out what? Even if I know since where in a politcal mixed economy now they do not really care since yes we had to tools to avert this. Top to bottom the standard is there so why be surprised now. Lesson learned and forgotten. Now pain and despair. Really some need help and some do not. Short and to the point since either side will not get to it. Action follows thought. Keep your mind open and let go of the anger.

http://suddendebt.blogspot.com/
http://www.zerohedge.com/article/score- ... capturecom

[sadhic]

A report by Comstock Funds says the following:

• The current deleveraging process will weigh on the economy for 20
  years.
• The stock market is in a new "mini-bubble," reactive to
  quantitative easing by countries around the world.
• "We, however, don't believe that the U.S. massive stimulus
  programs and money printing can solve a problem of excess debt
  generation that resulted from greed and living way beyond our means.
  If this were the answer Argentina would be one of the most prosperous
  countries in the world. This excess debt actually resulted from the
  same money printing and easy money that we are now using to alleviate
  the pain."
• There's no danger of inflation because the velocity of money is
  stagnant.
• In last decade, total US debt doubled from $26 trillion to $52
  trillion - $14 trillion government debt, $38 trillion private debt.
• Since individuals are paying down debt, the amount of private
  debt is decreasing, and expected to continue decreasing.
• However, government debt is exploding.
• The $52 trillion in debt is now 375% of GDP, which is $14
  trillion. This is substantially worse than the Great
  Depression.

http://www.comstockfunds.com/%28X%281%2 ... trow/1.htm

At times like this, I like to quote

Stein's Law: If something cannot go on forever, then it won't.

Back in the 2004 time frame, people used to say the following to me:
"John, you can never be proved wrong, because if there's no crisis,
you'll always say that it just hasn't happened yet. When will you
admit you're wrong?"

My response was that public debt was growing exponentially, and if it
ever started to fall in a credible manner, then I would be proven
wrong.

Needless to say, nothing like that has happened. Public debt has
continued to grow exponentially, and nobody watching what's going on
in Washington can possibly believe that that's going to change until
some financial catastrophe forces a change.

People who wonder why we have to have a "generational panic and crash"
should think about the exponential growth of public debt. The Obama
administration is following a bizarre pseudo-Keynesian formula that
says that the way to reduce public debt is to go exponentially deeper
into debt. I don't see any way to break this spiral except through a
discontinuity - a massive financial crisis.

John

Jhon ,

Thanks for the graph. And we all have many other graphs like this measuring different parameter with a reference to 1930 crash .Now, what we may require is a third factor to pin point the forthcoming crash . Means at 1930 with those availability and human maturity , technology advances etc ~ 265% was the peak when the crash occurs. Now world develops in all aspect than 1930. To decide at which percentage the forth coming crash shall occur we need a third paramater to compare 1930 and 2009 . third parameter shall be technical in nature like population count etc . would you able to draw a line here ?

[burt]

The experiment of relying on a world body as the guarantor of peace had now gone through three iterations: the League of Nations, the UN during the Cold War, and the UN after the Cold War. Each had proved a failure.

I DO NOT agree with the actual failure, NEVER in the west we had such a long period of peace.
Now I'd be happy to learn from John on the generational process for trying to keep peace, you cite 3 iterations, there were other tries before, so the world is moving, very slowly, but keep moving.

President Clinton and Madeleine Albright began to speak of the U.S. as the “indispensable nation”

I'm not getting to politics, just trying to THINK, so just a remark: this go back to the DEFINITION and CONSEQUENCES of WHAT IS MONEY.
The DOLLAR value IS the value of it's ARMY, as long as the U.S. is seen as a powerful and military country, as long the dollar will be the reference (this doesn't take into account its value: it could STILL be the international reference with a value of half an Euro.
This would be much more painful, on my point of view, for the US to loose its reference value than to loose its value compared to other moneys.
So, this is a FACT (for me) that U.S. IS THE indipensable nation, BUT this has a cost, and WHO WILL PAY??

Really the root is interpetation and intent to freedom.

a) TODAY no one care about freedom, people are looking for SECURITY and this means NO SECURITY AND NO FREEDOM
This is a generational process (really) and I'd be happy to learn from John

b) Never forget that US IS and always WAS (from the beginning) an EMPIRE, the US government did NEVER care about the freedom of the others.
(this is politic, but I think well documented)

c) Never mix the people and the government
Most people I know in the US don't believe in the federal government and this is a hope for the future. Americans believe (more or less, less today than 30 years ago) in freedom, NEVER did the government (in electoral words, yes, in the real world NEVER, just a little bit, may be (and just may be) Lincoln and Eisenhoover, NONE of the others)

Keep your mind open and let go of the anger.

I've seen NO revolt today against what does the government with their crony banks, a little bit in the US, none in Europe...
Hello John, why so few anger?? we are in the middle of a rotten process that Reagan and Thatcher began int he 80's (I can document with fiscal argumentation)