Monday, October 27, 2008

"Where's Ours?"

The grabfest starts to get frenzied:

The bailout is now the hottest lobbying game in town.

Insurers, automakers and American subsidiaries of foreign banks all want the Treasury Department to cut them a piece of the largest government rescue in U.S. history.

Read the rest here. The bailout ethos has already become an indelible part of the national character. I've been saying it for a long time, and it's getting clearer: personal savings are not safe in the domestic, dollar-denominated system. Again, I mean that less in terms of stock market returns or nominal access to one's money than future confiscatory inflation and the potential for capital controls.

To the extent the consequences for the past eight years will continue long after this administration is gone, it will be increasingly important to keep in mind how and when it all started. Since that involves the public's memory, I'm not optimistic.


Anonymous KAIMU said...


So far the US FED tag team with the US TREASURY has not antied up enough fiat to stop the deflationary forces. I am waiting for the $10tril mouse clicks to kick in!! Like some drug crazed hippy from the 1960s thinking if one hit of acid makes you feel good imagine what ten hits will do? GROOVY-Y-Y !!!

With LSD names like Orange Sunshine and Window Pane maybe WALL STREET should start naming their more exotic derivatives like Constant Proportion Debt Obligations-CPDO to CRIMSON FUZZ!!! "Hey man, gimme some of that crimson fuzz!" When the derivatives whiz kids on WALL STREET are researching 18th century gambling strategies like the "martingale system"(based on doubling down on losing coin tosses) then its time to cash in America's chips and get into some heavy duty isolationism and gold fondling and just leave the casino to the casino! The house can play against the house! Goldman Sachs can play against Morgan Stanley. Who deals? We'll flip for it ... heads I win tails you lose! Just don't let Bugs Bunny divvy up the chips! ONE FOR YOU ... ONE FOR ME! TWO FOR YOU ... ONE, TWO FOR ME ... THREE FOR YOU ... ONE, TWO, THREE FOR ME ... OKAY WABBIT!!!

A deflationary monetary crisis will hopefully also deflate the US military like it did to Russia in the 1980s. Policing the World is for arrogant fools! Even Osama Bin Laden knows that ... If so, then some put options on LMT might be a good bet!

This Washington DC Nov 15th Summit should be fun. All our biggest creditors are coming and they are going to finally hand us the BILL! Only this time they will demand a pound of flesh ... instead of those paper IOUs That's one thing Americans have plenty of is "pounds of flesh"! We've been training for this event all our lives ... Carry on bravely!!!


10/27/2008 5:45 AM  
Anonymous Anonymous said...

60 Minutes did another very good segment last night, explaining what happened on Wall Street to the average viewer.

I'm working at a company that uses GE Capital to manage its fleet and on Friday, everyone was buzzing because GE had no money and wasn't making any car loans.

The CFO is beside himself at the thought of driving a three-year old BMW for another few weeks.

10/27/2008 7:39 AM  
Anonymous Ed said...

The problem for people pessimistic about the economy is deflation or inflation. If its deflation, cash is king, the dollar will hold, and investing in oil and gold will kill you. If its deflation, you want to move out of cash as rapidly as possible and into other currencies, gold, and oil.

The markets are obviously expecting deflation, but given the degree to which the US government is expanding the money supply I think the markets are wrong. But I don't know how long they will be wrong. It seems best to have no savings or money to invest at all.

10/27/2008 8:35 AM  
Blogger J. said...

Why is it that everyone has 20-20 hindsight, but not the foresight to have averted this disaster? It's not like a lot of people (include Nobel laureate Paul Krugman) didn't see or predict this coming (like everyone in New Orleans didn't know there was going to be a hurricane).

The banks need to start LENDING (not hoarding our government $$$ for acquisitions and salary increases), the government and banks and probably the courts need to put a halt to/stall foreclosures and figure out a way to let folks stay in the their homes while they slowly pay back what's owed at an affordable rate, and someone needs to regulate Wall Street again, as well as the regulators and insurers. Probably too late to bring back Glass-Steagall, but I think the markets have shown that they can't take care of themselves.

10/27/2008 8:57 AM  
Anonymous John B. said...

ed says:

It seems best to have no savings or money to invest at all.

There is a piece of advice I think just made my head explode.

10/27/2008 9:53 AM  
Anonymous Anonymous said...

It seems best to have no savings or money to invest at all.

That's an interesting thought - that's also occurred to me. If the money is ultimately worthless, then I might as well make sure my home is secure (and paid for), my car is paid for, and blow the rest either on fun or tangibles (like canned food and propane).

For the first time in my life (and I am CR's age) I have no idea what the right thing to do is with the money I have.

10/27/2008 1:38 PM  
Anonymous goldhorder said...

Still a fan of gold and silver myself. Comparing the rise of gold since leaving the gold standard in 1972 to the rise of the Dow is clear that buying and holding gold is the best long term savings strategy. think I'm joking? Since leaving the gold standard in 1972 the politicians and bankers can steal from you at will. Even with the growth of the last 30 years it is apparant that Wall Street has enriched itself at the expense of everyone else. How can buying a rare metal be better than buying stock over the last 30 years? Has economic activity slowed in the last 30 years? It was about an even bet before the gold is the clear winner. Do the research...from 1972 to present. We were still on the gold standard before that so it is pointless looking back before 1972. The beauty of owning gold is that you are protected from lawsuits, divorce lawyers, child care payments, taxes, government confiscation, etc. As long as you buy and sell under 10K it isn't reported. Gold is freedom. Just make sure it is hidden well. I suppose if you are dishonest you can make a pretty good living off of other people's money working in the financial sector...but why bother. Just work an honest job and buy gold. I haven't suffered at all. But of course I'm not addicted to debt either.
Krugman is an idiot by the way. The Austrians are the only ones who diagnosed this disease. As far as just getting the banks lending? Well you can increase the money supply by printing paper...or you can increase the money supply by changing the rules for investment banks and allowing them to leverage their assets 33 to 1 instead of 10 to 1. Their new mathematical equations "proved" this wouldn't be a problem. Well guess what...too much of those leveraged assets went into bad thing you know banks need money to keep themselves affloat. So much for surefire mathematical models. That is why banks are hoarding cash. They are leveraged to the hilt and need the money to stay solvent. I believe inflation is just beyond the horizon...the more and more the government buys into the banks...the more power they will have in the banking sector. They will get the debt factorys moving again soon enough. They are trying to print money as fast as they can but this deleveraging process is still deflationary...they can't print money fast enough!!! It is easier to expand the money supply through debt and fractional reserve banking than it is to print money. HAHAHAHA...we are sooooo doomed. Pay attention children...everybody in America, except us few lonesome "crazies", is hoping for a return to easy money and credit...everybody wants to get out of this deflation slump...don't you worry. You are going to get just what you asked for. LMAO

10/27/2008 2:01 PM  
Blogger Snazel said...

You wrote:

it will be increasingly important to keep in mind how and when it all started. Since that involves the public's memory, I'm not optimistic.

Since I am full-fledged member of the public myself, and because I am guilty of being distracted, misled and befuddled by my country's media, I am confident my memory will fail me, as you rightly predict.

Thankfully, there will be blogs such as this, that will help remind me.

Thank you for staying vigilant for the rest of us.

10/27/2008 11:24 PM  
Anonymous Thomas Daulton said...

@ Kaimu --


Pass me a hit of that Bob Dobbs Blue dot derivative !! I like the way it goes down with my $8-per-gallon methanol cocktail. I'm seeing trails, dude!

10/28/2008 1:30 PM  

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