Financial Armageddon
- Thread starter SGaynor
- Start date
$50B is optimistic. Just like the $85B for AIG. Just like the $300B for CitiGroup. Just like the $250B for Fannie/Freddie. Just like the $34B for the "big 3".......
Funny...
You put your money in a bank. You invest your money in the bank rather than put it in a safe. It's more convenient. Plus they pay you a fixed rate of interest. They are "insured". By the "government".
Nobody asks how they are able to pay you that rate of interest on your deposit.
One day you decide to withdraw all of your money from the bank.
So they give you somebody elses money. Or whatever money they keep on hand in any given day.
If everyone decides to withdraw all their money, we have what's called a "run on the bank". And then the government declares a bank holiday. Why? Because the truth is that the bank does not have enough money to give everyone their money back. They say it's because the money is "invested". The capital is put to work, as it were.
In reality they are operating under a fractional reserve lending system whereby your 1 dollar becomes $10 in loans. With the push of a button. Do the math. But, hey, it's insured by the "government". In actuality, the government doesn't have any money at all. The government only has tax receipts. So we learn that the government doesn't have any actual money, and the banks don't have any actual money.
And we call what Madoff was running a "ponzi scheme".
And then our government, against overwhelming opposition by their constituents, passes TARP. TARP, we are told, will be specifically for financial institutions. It will specifically deal with "systemic risk". It will also have oversight, and there will be strict limits on executive compensation.
And then it is spent on automobile manufacturers.
And then we change the channel.
Then we get up and go to work so we can finance this.
You put your money in a bank. You invest your money in the bank rather than put it in a safe. It's more convenient. Plus they pay you a fixed rate of interest. They are "insured". By the "government".
Nobody asks how they are able to pay you that rate of interest on your deposit.
One day you decide to withdraw all of your money from the bank.
So they give you somebody elses money. Or whatever money they keep on hand in any given day.
If everyone decides to withdraw all their money, we have what's called a "run on the bank". And then the government declares a bank holiday. Why? Because the truth is that the bank does not have enough money to give everyone their money back. They say it's because the money is "invested". The capital is put to work, as it were.
In reality they are operating under a fractional reserve lending system whereby your 1 dollar becomes $10 in loans. With the push of a button. Do the math. But, hey, it's insured by the "government". In actuality, the government doesn't have any money at all. The government only has tax receipts. So we learn that the government doesn't have any actual money, and the banks don't have any actual money.
And we call what Madoff was running a "ponzi scheme".
And then our government, against overwhelming opposition by their constituents, passes TARP. TARP, we are told, will be specifically for financial institutions. It will specifically deal with "systemic risk". It will also have oversight, and there will be strict limits on executive compensation.
And then it is spent on automobile manufacturers.
And then we change the channel.
Then we get up and go to work so we can finance this.
Speaking of ponzi schemes . . .
30 States Have Defrauded Their Unemployment Insurance Programs
Fox News Live | 12/16/08
30 States Have Defrauded Their Unemployment Insurance Programs
Fox News Live | 12/16/08
Per Fox News a minute ago... 30 states have emptied their unemployment insurance funds by spending it on liberal social programs.
Expect oil exploration and production to drop even further. In fact what happens to an oil well when you have to shut it down because there is no place to store the production?
Oil Storage at capacity - 50M barrels floating storage in tankers
FT ^ | December 15 2008 23:17 | Carola Hoyos in Oran and Javier Blas in London
Peak Oil? . . . . Maybe Peak Demand.
Oil Storage at capacity - 50M barrels floating storage in tankers
FT ^ | December 15 2008 23:17 | Carola Hoyos in Oran and Javier Blas in London
Peak Oil? . . . . Maybe Peak Demand.
More demand destruction as opposed to Peak Demand, though I'm guessing your comment is somewhat tongue-in-cheek?
And with the shit really hitting the fan in China now, expect even more.
So, Obama wants a $1T infrastructure bailout. Whatever that means. I love the way these guys throw around the word "Infrastructure".
How will it be paid for? Hmmmm, I'll go out on a limb here and predict Fed taxes on gasoline will dramatically increase next year.
And with the shit really hitting the fan in China now, expect even more.
So, Obama wants a $1T infrastructure bailout. Whatever that means. I love the way these guys throw around the word "Infrastructure".
How will it be paid for? Hmmmm, I'll go out on a limb here and predict Fed taxes on gasoline will dramatically increase next year.
What no comments on the Fed planning to buy up consumer debt (credit cards, auto/home loans) from banks by just printing money?
How dire is the situation when the Fed is willing to stoke all kinds of inflation to get the economy moving and fight deflation?
------------------------------------------------------------------------------
http://money.cnn.com/2008/12/15/news/economy/credit_market/index.htm
After rate cuts: The Fed's new ball game
With rate cuts doing little to help boost the economy, the Fed has begun to print money to finance its liquidity programs. But that could spell disaster down the road.
How dire is the situation when the Fed is willing to stoke all kinds of inflation to get the economy moving and fight deflation?
------------------------------------------------------------------------------
http://money.cnn.com/2008/12/15/news/economy/credit_market/index.htm
After rate cuts: The Fed's new ball game
With rate cuts doing little to help boost the economy, the Fed has begun to print money to finance its liquidity programs. But that could spell disaster down the road.
As California and the RINO Arnold head for a $50B deficit, propose raising taxes during a recession, and Obama wanting to spend another $1T+, we have others with real executive experience.
Palin proposes 7 percent cut in state spending
www.ktuu.com ^ | Monday, December 15, 2008 | Jason Moore
Palin proposes 7 percent cut in state spending
www.ktuu.com ^ | Monday, December 15, 2008 | Jason Moore
ANCHORAGE, Alaska -- Gov. Sarah Palin released her proposed budget for next year, and if the Legislature follows her lead, the state will be spending less money.
Palin's $4.9 billion budget proposes an overall 7 percent cut in state spending, although state agencies would see a slight increase in the operating budget.
The governor is proposing cuts in capital projects to achieve the decrease in spending. Palin, surrounded by her budget staff and state commissioners, made the announcement Monday morning in Juneau.
With oil revenues on the decline, she says the state is forced to adjust the way it spends money.
"We of course are going to be prudent," Palin said. "We're going to live within our means. We don't want any Alaskans to assume that government is the answer to all of the challenges and issues and problems that any individual faces." . . . .
Palin's $4.9 billion budget proposes an overall 7 percent cut in state spending, although state agencies would see a slight increase in the operating budget.
The governor is proposing cuts in capital projects to achieve the decrease in spending. Palin, surrounded by her budget staff and state commissioners, made the announcement Monday morning in Juneau.
With oil revenues on the decline, she says the state is forced to adjust the way it spends money.
"We of course are going to be prudent," Palin said. "We're going to live within our means. We don't want any Alaskans to assume that government is the answer to all of the challenges and issues and problems that any individual faces." . . . .
SGaynor said:
Banks won't lend because they don't know who the zombies are. Treasuries are still in demand at zero rate of return. Money market funds now are in negative yield territory.
Free Money! . . . . . or not.
There will be a price to pay. Has the dollar peaked? The ride down is going to be very painful.
Disco Jo said:
No, not just.
It's also Fraud, Incompetence, Negligence, Thievery and Treason, just to mention a few others.
We are supposed to be better than a Banana Republic.
:banghead:
SCSL said:
And getting worse.
AIG Has Another $30 to $200 Billion in Uncovered Losses to be Bailed Out
17 December 2008
Jesse's Caf? Am?ricain
Even if the credit markets were to stabilize, the valuations of structured securities are still far from where they should be, said Laurie Goodman, a former head of fixed- income research at UBS Securities LLC, who recently left to join Amherst Holdings LLC in Austin, Texas.
“The losses we’ve seen so far are a fraction of what we’ll be seeing,” she said
“The losses we’ve seen so far are a fraction of what we’ll be seeing,” she said
The Bloomberg article is instructive in terms of the complexity of valuation and of unwinding CDS:
http://www.bloomberg.com/apps/news?pid=20601109&sid=aNSpiZqzDc6A&refer=home
http://www.bloomberg.com/apps/news?pid=20601109&sid=aNSpiZqzDc6A&refer=home
OK, so I'm not a financial wizard from wall street.
All the sub-prime mortgages, and all the zero-down mortgages, and blah blah blah.
Did the requirement to pay PMI on mortgages with less than 20% down go away?
If it didn't, what the fuck?
I mean, if you're required to pay for PMI, "in case you default", why is there a problem? shouldn't the PMI insurance company pay up?
Or was AIG the only PMI insurance company in the world?
Sounds like the states REQUIRING you to have auto insurance to register your car, then requiring you to have UNINSURED MOTORIST INSURANCE.
Unless someone is full of shit, the PMI thing was just bullshit from the get-go.
Or I just don't get it.
All the sub-prime mortgages, and all the zero-down mortgages, and blah blah blah.
Did the requirement to pay PMI on mortgages with less than 20% down go away?
If it didn't, what the fuck?
I mean, if you're required to pay for PMI, "in case you default", why is there a problem? shouldn't the PMI insurance company pay up?
Or was AIG the only PMI insurance company in the world?
Sounds like the states REQUIRING you to have auto insurance to register your car, then requiring you to have UNINSURED MOTORIST INSURANCE.
Unless someone is full of shit, the PMI thing was just bullshit from the get-go.
Or I just don't get it.
Subprime mortgages were typically exempt from PMI. This is one of the features that made them attractive. Purchase loans of 105% loan-to-value with no PMI were not uncommon.jim-00-4.6 said:
Remember first that this crisis is not fundamentally about mortgages. Rather it is about fraudulently rated mortgage-backed securities and other derivatives (such as collateralized debt obligations and credit default swaps) There is an enormous difference. The underlying asset upon which a security is based is less important than an accurate representation and rating of that asset. If I sell you chicken shit disguised as chicken salad, your problem isn't with the chicken shit. Your problem is with me for representing it to you as chicken salad. The chicken shit is what it is.
Part of the problem is that insurance companies are severely over-leveraged, themselves heavily invested in derivatives. When the investments managed by insurance companies with your premium dollars are illiquid, they are unable to meet claims. This is true of mortgage insurance, bond insurance, auto insurance, etc.