Rolling US Economy Into The Shitbin Thread

pretty sure people will continue to get sick, so i'm feelin' fine

Yeh, it's time somebody invented a whole new genre of music for us to be bores about in 50 years, a la Jazz.

Nikkei promptly headed for the bottom immediately after opening, down 10% in the first 45 minutes.

I fear we have reached the horizon where rational action, in itself, will lead to further catastrophe, because in this environment rational action demands liquidation of assets and the hoarding of cash.

the hell with cash, I need to hoard tools, skills, land, and intoxicants.

also seeds and guns

oh look nikkei's down 10 percent again.

how many 10 percents do they have?

achilles vs tortoise

http://upload.wikimedia.org/math/9/b/e/9be700e893958b7691036065ac2d18dd.png

no whammies no whammies

up is down, down is up - buying is the new selling! and vice versa!

i meant to ask this earlier but o.nate what do you think about forcing investment banks to go back to being private partnerships? basic argument in favor is that it limits their ability to take risks and attract (excess) capital and that it allows firms to avoid runs on their stocks and become stuck in a confidence spiral

I think that one good thing about the private partnership structure is that management tends to own a bigger stake in the company- they have "more skin in the game" (not sure the etymology of that, but seems to be the popular phrase on CNBC and elsewhere) - and it's not quite so easy to cash out. And so they have more incentive to take the long view. I think these problems could probably be solved at public companies by more thoughtful compensation policies. As far as the increased ability to attract capital at a public firm, I think that would be a good thing - the main problem in this crisis wasn't that the banks had too much capital- it was that they had too little capital and too much leverage. It was that excessive risk-taking, motivated by distorted compensation policies, that led to these problems. The problem of having a run on your stock is possibly another argument for a private partnership, but that's only the most visible sign of a company's woes - not the underlying source of the problems - having publicly traded stock may contribute to some difficulties in a crisis, but it doesn't cause the crisis.

This tends to be the argument for partnership in any industry. John lewis, an employee owned retail chain over here, is renowned for both it's low staff turn-over, conservative business plans, and high profits.

I would like to see retail banks and insurers return to a co-op/mutual structure, for much the same reason; to align the interests of the bank with those of the users.

yah totally our current system encourages waaaay too much risk - one year you take ridiculous risks they pay off and you get a hundred million dollar bonus - the next year those risks sink yr company and you get a hundred million dollar golden parachute

meanwhile a hard working american - me to be specific - asks for a measly $1m of the total $700b bailout and no one even has the courtesy to return his calls

You forgot to promise to spend beyond your means, jho.

i do that already! just take a look at my balance sheet over here - my actions totally warrant a bailout

http://jeffreygoldberg.theatlantic.com/archives/2008/10/aigs_ceo_to_shareholders_later.php

http://www.earth.columbia.edu/worldeconomy/

Thanks for that I shall be watching via webcast.

More than half of China's toy exporters have gone bust so far this year.

http://news.bbc.co.uk/1/hi/business/7675552.stm

Dow is in the green so looks like we should just close this thread up; shitbin avoided

i wont trust it until republican politicians can again say the 'fundamentals of our economy are strong' and still be elected

More than half of China's toy exporters have gone bust so far this year.

Wait, WHOA, what, really? Holy fuck!

I am hoping that the OECD/G7 leaders have the cojones to roll out some good old fashioned keynesian deficit spending, preferably on the green infrastructure we need to survive. We've stopped the rot but the banks are not going to get the system going again, so let's kick things off by doing some good.

http://www.nytimes.com/2008/10/17/business/17bank.html?hp

otm

More than half of China's toy exporters have gone bust so far this year.

I'm surprised at this, but only to the extent that it's possible to go bust in China. Never been myself, but heard tell of entire streets filled with shops selling some useless item, e.g. western wedding dresses, and no customers nor any discernable demand - and yet lack of even the slightest shot at profitability matters not due to some weird alchemy or other (Niall Ferguson recently described the place as not so much capitalist as Stalinist, which chimes)

An interesting theory on why the Lehman bankruptcy was so damaging. He basically argues that the UK lacked some US Depression-era broker-dealer regulations that limited the damage in the US, causing UK hedge funds (and the European arms of US hedge funds) to get royally screwed:

http://brontecapital.blogspot.com/2008/10/why-lehman-mattered.html

Never been myself, but heard tell of entire streets filled with shops selling some useless item, e.g. western wedding dresses, and no customers nor any discernable demand

this happens anywhere in the world as long as overhead is low enough. Suburban/rural strip malls in America can be almost as ridiculous; I still remember Douglas Adams' encounter with a Gym Socks and Free Range Chicken kiosk somewhere in Africa

"We need money to pay for our housing and food. We have been waiting for a few days now. The government said they will solve this problem in three days. Today [ Friday ] is the third day and we have had no reply from them."

welcome aboard BEEYOTCH

http://i35.tinypic.com/2mxgy2d.jpg

lool

OPEC is cutting output. I would think that with economic pressures as they are, moves to inflate oil-prices will be self-defeating.

i lucked out big time, my company transitioned our 401ks the day before the market tanked; it took two/three weeks for them to show up over at fidelity and they lost only a fraction of what they would have lost had the funds stayed in stocks during the intervening time. not to say they won't plummet in value now, I guess, but still.

Good to hear. Really! Hope that things stay stable for you.

Ned that sounds so sarcastic!

Not in the least. AKM was very clear about his concerns re: work on this thread earlier.

Sorry I didn't catch that

So...2008 != 1929, but rather 1873, the "real" Great (orig. Long) Depression, says:

http://chronicle.com/temp/reprint.php?id=477k3d8mh2wmtpc4b6h07p4hy9z83x18

If true considering the Panic of 1873 didn't subside fully until the mid-1890s, this is no mo reassuring, methinks

Quotes:

The probl​ems had emerg​ed aroun​d 1870,​ start​ing in Europ​e.​ In the Austr​o-​Hunga​rian Empir​e,​ forme​d in 1867,​ in the state​s unifi​ed by Pruss​ia into the Germa​n empir​e,​ and in Franc​e,​ the emper​ors suppo​rted a flowe​ring of new lendi​ng insti​tutio​ns that issue​d mortg​ages for munic​ipal and resid​entia​l const​ructi​on,​ espec​ially​ in the capit​als of Vienn​a,​ Berli​n,​ and Paris​.​ Mortg​ages were easie​r to obtai​n than befor​e,​ and a build​ing boom comme​nced.​ Land value​s seeme​d to climb​ and climb​;​ borro​wers raven​ously​ assum​ed more and more credi​t,​ using​ unbui​lt or half-​built​ house​s as colla​teral​.​
---
But the econo​mic funda​menta​ls were shaky​.​ Wheat​ expor​ters from Russi​a and Centr​al Europ​e faced​ a new inter​natio​nal compe​titor​ who drast​icall​y under​sold them.​ The 19th-​centu​ry versi​on of conta​iners​ manuf​actur​ed in China​ and bound​ for Wal-​Mart consi​sted of produ​ce from farme​rs in the Ameri​can Midwe​st.​
---
The crash​ came in Centr​al Europ​e in May 1873,​ as it becam​e clear​ that the regio​n'​s assum​ption​s about​ conti​nual econo​mic growt​h were too optim​istic​.​ Europ​eans faced​ what they came to call the Ameri​can Comme​rcial​ Invas​ion.​ A new indus​trial​ super​power​ had arriv​ed,​ one whose​ low costs​ threa​tened​ Europ​ean trade​ and a Europ​ean way of life.​

As conti​nenta​l banks​ tumbl​ed,​ Briti​sh banks​ held back their​ capit​al,​ unsur​e of which​ insti​tutio​ns were most invol​ved in the mortg​age crisi​s.​..
---
As the panic​ deepe​ned,​ ordin​ary Ameri​cans suffe​red terri​bly.​ A cigar​ maker​ named​ Samue​l Gompe​rs who was young​ in 1873 later​ recal​led that with the panic​,​ "​econo​mic organ​izati​on crumb​led with some prime​val uphea​val.​"​ Betwe​en 1873 and 1877,​ as many small​er facto​ries and works​hops shutt​ered their​ doors​,​ tens of thous​ands of worke​rs — many forme​r Civil​ War soldi​ers — becam​e trans​ients​.​ The terms​ "​tramp​"​ and "​bum,​"​ both indir​ect refer​ences​ to forme​r soldi​ers,​ becam​e commo​nplac​e Ameri​can terms​.​
---
In the end, the Panic​ of 1873 demon​strat​ed that the cente​r of gravi​ty for the world​'​s credi​t had shift​ed west — from Centr​al Europ​e towar​d the Unite​d State​s.​ The curre​nt panic​ sugge​sts a furth​er shift​ — from the Unite​d State​s to China​ and India​.​ Beyon​d that I would​ not hazar​d a guess​...

I have no idea whether this crisis really resembles one past crisis or another, but the argument reminds me a bit too much of the one about whether Iraq is more like WW2 or Vietnam or Korea or the Spanish American War or whatever.

― Everything is Highlighted (Hurting 2), Thursday, October 9, 2008 10:50 PM (1 week ago) Bookmark

And even if it DOES look relatively more like the depression of 1873 than any other depression, that tells us very little of any use as to how long it will last, how bad it will be or how to get out of it.

That doesnt really engage with or counter or answer or refute or entertain any of those pts tho :(

x-post

Well historical antecedents can at least give us an idea, a reference points, a mental framework of either the underlying causes or the possible solutions that exist. Otherwise why study history? If nothing, all the talk of Bernanke being "ooh deep txtbook expert on Gr8 Depression" will be irrelevant

Also economic crises and wars are not a good analogy

thanks ned! I still face potentially losing my job but at least I didn't wipe out on my retirement account too.

sweet goodbye letter from a retiring hedge fund manager who made huge profits betting against mortgages

http://www.portfolio.com/views/blogs/daily-brief/2008/10/17/hedge-fund-manager-goodbye-and-f-you

A nice sensible letter.

made like $20m - now i get high - c u fools l8r

i like the hemp part best - dude left college as a sophomore, right?

how do you bet on the subprime collapse? will the answer involve several paragraphs that i wont understand anyway?

prob some type of shorting - tho im sure theres endless complexities

Max:

credit default swap:

basically you purchase "insurance" on a monetary device that you might not even own a part of. In exchange for the fees you pay for the "insurance," you get the full value of the monetary device if it defaults. "Insurance" is in quotation marks because it is un-regulated. The idea of "betting on the collapse" means that if you have no real stake in the instrument in the form of ownership, you're basically HOPING that the instrument defaults.

http://en.wikipedia.org/wiki/Credit_default_swap