Moon of Alabama Brecht quote
January 21, 2008

A Black Monday?

Current ticker numbers:

Nikkei   -3.86%
FTSE   -3.35%
DAX   -5.86%
CAC   -4.73%
DOW   -4.73%
S&P   -4.73%

As I wrote yesterday - You ain't seen nothing yet ...

Posted by b on January 21, 2008 at 08:07 AM | Permalink

Comments

Global food crisis looms; climate, fuel shortages bite

Soaring crop prices and demand for biofuels raise fears of political instability

Empty shelves in Caracas. Food riots in West Bengal and Mexico. Warnings of hunger in Jamaica, Nepal, the Philippines and sub-Saharan Africa. Soaring prices for basic foods are beginning to lead to political instability, with governments being forced to step in to artificially control the cost of bread, maize, rice and dairy products.

Record world prices for most staple foods have led to 18% food price inflation in China, 13% in Indonesia and Pakistan, and 10% or more in Latin America, Russia and India, according to the UN Food and Agricultural Organisation (FAO). Wheat has doubled in price, maize is nearly 50% higher than a year ago and rice is 20% more expensive, says the UN. Next week the FAO is expected to say that global food reserves are at their lowest in 25 years and that prices will remain high for years.

Food price inflation is here to stay, warns chief of PepsiCo

Across Asia, food is the new oil as prices surge Reuters

Posted by: Uncle $cam | Jan 21, 2008 8:25:46 AM | 1

HK stocks plummet 5.49 pct in worst single-day slump since 2001

HONG KONG, Jan. 21 (Xinhua) -- Hong Kong stocks nose-dived 1,383.01 points, or 5.49 percent, to close at 23,818.46 on Monday, the worst single-day slump since Sept. 11, 2001.

The market was shattered by the slump of the stock markets in Asia and on the Chinese mainland as the market remained skeptical of the economic stimulus package by the White House to avoid recession in the United States.

The blue-chip Hang Seng Index dropped as much as 3.1 percent in the early session, and was down 714.6 points or 2.84 percent, at 24,487.27 by midday and then it widened its losses below the psychological 24,000 level in the afternoon following the slumps of stock markets in Asia. The index plummeted as much as 1,431.74 points, or 5.68 percent, before close at 23,818.46.

Turnover fell to 117.51 billion HK dollars (15.06 billion U.S. dollars) from Friday's 127.36 billion HK dollars (16.34 billion U.S. dollars).

All the 43 components of the benchmark Hang Seng Index fell.

Posted by: Uncle $cam | Jan 21, 2008 9:18:37 AM | 2

Lucky for the U.S. its Martin Luther King Day and the markets are closed. Would have been bloody otherwise.

Posted by: Lysander | Jan 21, 2008 9:24:36 AM | 3

"its Martin Luther King Day and the markets are closed"
Tuesday will be when the fun really hits the fan.

At long last, it begins.

Posted by: CluelessJoe | Jan 21, 2008 9:46:06 AM | 4

Nikkei -3.86%
EUROSTOXX 50 -7.31
DAX -5.86% -7.16%
CAC -4.73% -6.83%
IBEX35 -7.54%

Posted by: curious | Jan 21, 2008 12:46:14 PM | 5

Interestingly, today's plunge was triggered by three distinct developments from three corners of the world.

The first was AMBAC's downgrading by Fitch that b's link above mentions, and Jerome a Paris expounds upon over at the EuroTrib.

The second came from France:

(snip)
"I'm reasonably confident that French banks will weather this turmoil without major trouble even though they are clearly, like all banks, in the world still in the process of marking down assets," said Christian Noyer, governor of the Bank of France and a member of the European Central Bank's governing council,

Noyer's comments about "marking down assets" were enough to hit banks like Societe Generale (FR:013080: news, chart, profile) , which saw drops of around 8% on Friday and lost another 7% on Monday.
(snip)

And the third 'thud' was heard from China:

Bank of China Ltd. appears increasingly likely to report a large write-down on its investments in U.S. mortgage securities, illustrating the broadening reach of the global financial downturn -- and how one of China's biggest lenders was less astute at avoiding the problem than it initially thought.

Analysts estimate that state-owned Bank of China, traditionally the most international of the country's big banks, may have to write off a fourth of the nearly $8 billion it holds in securities backed by U.S. subprime mortgages, those made to borrowers with weak credit. While that would still leave it profitable for last year, it would be far larger than the $322 million the lender said it had provisioned for such losses in its results announcement for the third quarter, when it last publicly addressed the issue.
(snip)

So Much for the Decoupling, as the Big Picture says.

Posted by: Alamet | Jan 21, 2008 1:02:23 PM | 6

ô i would love to be a fly on a wall in a wall street lavatory as the 'masters' of the universe throw everything they've eaten at their fancy restaraunts, up & over

as leadbelly sd - well, well, well

Posted by: remembereringgiap | Jan 21, 2008 2:50:00 PM | 7

"Revert to the mean" = DOW 9,000 at current earnings.

Earnings are going off a cliff. DOW 6,000? That would put it at #1 in the chart of worst performing years....

Posted by: Peter VE | Jan 21, 2008 3:42:12 PM | 8

ACA Customers Allow More Time to Unwind Default Swaps

The piece is about ACA, a "monoline" bond insurer, that is bancrupt but still needs a month to admitt it.

The bonds, often municipals, that need to be refinanced will have to go without insurences, i.e. bond issuers will have to pay a lot more of interest than they do now.

Therefore follows this nice line from the above piece.

``The monolines are dead, their business model is dead,'' said David Roche, head of investment consultancy Independent Strategy in London. ``The government is going to have to recapitalize this industry or there will be communities in the U.S. where they can't even flush their toilets'' because they can't afford the services.
The big bailout - the S&L crisis was kids-stuff compared to this ...

Posted by: b | Jan 21, 2008 3:55:16 PM | 9

I don't get what all this crap is about anyway. When America was healthy prosperous stable country, or should I just say vaguely functioning & stable w/some probs. that needed addressing, the DOW was in the 7-900's.(I'm thinking of mid to late 70's.) Doesn't it need to return to earth? Why the hell should it be over 1000, much less 5000...10,000...14,000 and so on...that sounds like a death spiral out into the ether...

Posted by: jj | Jan 21, 2008 4:13:08 PM | 10

I've been really distressed about arab & chinese govts. buying up chunks of major NY banks recently. But, it wasn't until this weekend that I realized the Major reason it's a disaster. We know why they're buying in - to avert bankruptcy. So, is that a good thing then. NO, it compounds the disaster. It destroys the essential feedback loops. Their radical right-wing nut Miltie Friedman Econ. Policies are destroying their proponents. So, instead of saying Holy Shit Sherlock, these policies are destroying us & must be changed immediately, they're simply destroying the feedback loops...while they'll go on the campaign trail saying anyone who disagrees w/these policies is a wild-eyed radical...This is Bloody Insane - whatever one's ideology...these madguys are destroying every goddamn institution in our country - for starters.

Posted by: jj | Jan 21, 2008 4:27:03 PM | 11

Actually, they're rubes, buying into the fire sale not realizing the fire (or rather coastal flooding) is coming, soon. Same as Dubai gov buying the worldwide ports contracts sold by the Oriental and Penninsular Steam Navigation Company in spring '04.

Posted by: plushtown | Jan 21, 2008 4:41:00 PM | 12

It would be safe to say that the rot has spread out to every corner of the globe. Nowhere possibly not even Zimbabwe who have been the victims of a financial industry boycott for years, are safe from this poisonous blood sucking destruction.

A couple of weeks ago right at the end of the 'silly season' the news leaked out that all of NZ's major banks were at risk too. Apparently the foreign (Australian banks) who bought all of NZ's large banks in the 1990's are ridiculously over exposed to the sub prime mortgage derivatives.
Since NZ has had 13 days straight of a falling market with no sign of relief.

The business media here is doing the usual playing it down, accusing outsiders (the same outsiders we are exhorted into being proud to have joined into business with us - ie bought up all the assets) and claiming it is worse elsewhere.

Reuters today are trying to ease the oncoming pain by telling us the Yellow Peril suffer too. Such an archetypal Murdoch cover-up. It's OK that amerikan hubris and avarice has wrecked our markets because they have hurt the Chinamen worse.

This is no accident, as former Wall St insider Pam Martens tells it over at Counterpunch Citigroup, Merrill Lynch and other industry big fish went out of their way in the early noughties to create a trading mechanism:

"Citigroup, along with 12 other big banks and securities firms were funding a private company to gobble up all the necessary components to keep this burgeoning cash cow to themselves in the opaque, unregulated, over-the-counter (OTC) market, despite the fact that they knew it was dysfunctional."

The trades were kept hidden and frequently unacknowledged between the traders (amazing in it's blind stupidity) in an effort to maximise profits by monopolizing the market.
But how to keep score? Somehow they had to keep track for themselves in an arms length sort of a way if only as a mechanism to support their boasts of record profits. An ideal mechanism would allow banks to fall back on that old favourite claim to good trades and hide the bad 'uns.

So in Marten's words again:

The private company that would become Wall Street's ticker tape for pricing exotic credit instruments (derivatives on sub-prime mortgages and credit default swaps) started out as Mark-it Partners in 2001, the brain child of Lance Uggla while he was working for a division of Toronto Dominion Bank, TD Securities. . .

Deutsche Bank, Goldman Sachs and JPMorgan were reportedly the first three firms to take an equity stake in Mark-it on or around August 29, 2003 when the three firms sold a proprietary database of credit derivative information to Mark-it. Since Mark-it is a private firm, financial terms have not been disclosed. . .

What would have been the incentive for three big Wall Street players to build a proprietary database and then, in a magnanimous gesture completely uncharacteristic of Wall Street greed, hand it over to be shared with their largest competitors?

One likely answer is that around this time regulators with a fetish for orderly paper trails (but myopic to the rapidly escalating financial hazard of this unregulated market) had stumbled upon the fact that there was a growing backlog of credit derivative trades that were never officially confirmed between the parties. . .

(Although regulators knew about this spiraling trading nightmare as earlier as 2003, the GAO report did not come out until we were deep into the credit crisis in June 2007.) It was during this time that regulators got an agreement from the major dealers that Mark-it Partners would begin collecting and aggregating the data on unconfirmed trades, keeping individual dealer data confidential from other dealers and preparing a monthly report of aggregated data for regulators.
Who were the banks and brokerage houses responsible for this unmitigated mess? With only a few exceptions, the exact same firms with a majority ownership in Mark-it Partners. . .

the credit derivatives market has grown from an estimated total notional amount of nearly $1 trillion outstanding at year-end 2001 to over $34 trillion at year-end 2006.

According to the U.S. Office of the Comptroller of the Currency (OCC), JPMorgan, Citigroup and Bank of America handled about 90 percent of this trading among U.S. commercial banks in the fourth quarter of 2006.

It any of this is news to you read the article because it has condensed the information itself further precis must leave out some vitals.

A couple of interesting points. Some trading exchanges either because they recognised the dangers of a hidden unsupervised market attempted to offer an alternative structured mechanism for trading credit derivatives. Martens mentions Eurex, the Chicago Mercantile Exchange (Merc), the Chicago Board of Exchange (CBOE) and the Chicago Board of Trade (CBOT) created instruments which were boycotted by banks anxious to maximise returns. The notion of safeguarding against loss appears to have been discounted as 'unrealistic' by these assholes who are still enjoying their commissions and bonuses while (to quote Martens once more) "401(k) plans, endowments, public pensions and Citigroup employees' deferred compensation plans, loaded up to their eyeballs in Citigroup's bizarrely large float of 5 billion shares, have watched the stock value decline by 53% over the past 12 months as toxic debt that was never hedged comes home from holiday in the Caymans to blow up on Citigroup's books."

This 'window of opportunity' was created after the repeal of the Commodity Exchange Act and it's replacement with the Commodity Futures Modernization Act back in 1998.

The then head of Commodities Futures Trading Commission begged Congress to reconsider this action because inter alia:"
The (Commodity Exchange) Act generally contemplates that, unless exempted, futures and commodity options are to be sold through Commission-regulated exchanges which provide the safeguards of open and competitive trading, a continuous market, price discovery and dissemination, and protection against counterparty risk."

Who spoke for the change? Three guesses . . .Oh you only needed one. That is correct Alan Greenspan. (applause sounds) Greenspan strikes his pose of receiving plaudits from the masses and collegiate back-slaps from those Masters of the Universe who fuck us every day.

Greenspan - the man who luxuriated in the praise from across the globe given him because the world's markets were trading smoother for longer than ever before. Some foolishly claimed that the age of boom bang bust markets was over under the Greenspan method. Of course what they didn't know was that Greenspan was trading today's prosperity for tomorrow's poverty.

Greenspan did know and did a Harold Wilson. That is when he could see that collapse was inevitable he took his government guaranteed exit package and superannuation and headed for the hills hoping to claim that none of it was due to his fuck-ups.
"Last week, Mr. Greenspan joined the payroll of the hedge fund, Paulson & Company, which last year made $15 billion in profits betting that poor people's homes would be foreclosed on while using the unregulated over-the-counter contracts that Mr. Greenspan assisted in making possible." (Martens again)

A brief comment on NZ where over a dozen finance companies (moneylenders, usurers) have gone broke in a little over a year owing investors billions. So called financial advisors (former life insurance salesmen in the main) grabbed fat commissions for selling these dogs to their now broke clients.

Apparently none of it was illegal, and the government appears to be dragging their heels on making most of these shonkies illegal. The police refuse to investigate just as they refuse to investigate the millions of dollars ripped off migrant families in a franchise scam.

Nowadays in NZ the only crimes are poor on poor crimes of violence which dominate our news. Maori and Pacific Islanders are criminalized when they fail to cope with the onslaught of predatory capitalism which laissez faire markets have unleashed upon them. As far as governments are concerned that is the 'crime problem'.

From reading amerikan, Oz, and english media I suspect that this technique of blaming the poor for the social chaos which has been unleashed and which is about to get much worse is S.O.P. in those countries too.

What will come next?

Even puff piece economic writers concede food is getting dearer. That is "because the Arabs got greedy" they lie to us.

In fact world food prices have risen around 25% in the last 12 months. It is important to remember that the last time the accepted economic orthodoxy fell apart at the seams was the era of stagflation in the early 70's. We were told the fact that inflation continued unabated during a decline in productivity was because the markets were insulated by regulation and greedy unions. Why else would wages continue to rise when people were being laid off? The fact that many people had still not broken out of the poverty trap keeping them on the bones of their ass was not considered.

Similarly this time the Commodity Futures Modernization Act will probably be scapegoated but no one will refer to the abolition of the Commodity Exchange Act being a cause.

So in all likelihood we will be told that over regulation is the problem; not under regulation. Whether we accept that or not will depend on what circuses are dragged out to conceal the shortage of bread.

Posted by: Debs is dead | Jan 21, 2008 5:02:17 PM | 13

The reason the DOW is so high is because of 401ks. The 401ks, Roth IRAs and other "so called" savings plans inflate the prices of stock. This allows companies with high stock prices to leverage monies to buy other companies thus consolidating and creating corporate bohemoths. This in turn returns larger profits and Wall Street demands ever higher returns on investment and higher returns on company balance sheets thus creating a cycle that has gotten ever more dangerous. Throw in stock options for CEOs and you start to require ever more inventive ways to create profit for the Wall Street masters. Wage arbitrage, SIVs, corporate consolidation, you name it.

People should have learned from 2000-2001. This exact same pattern of stock market volatility happened when the dotcom bubble burst. Only this time it affects families even more because it has to do with homes, not just investment savings. The warnings came last spring or even as far back as February, when the markets ups and downs became more frequent.

It is time to put money into local community banks and credit unions and revive the country. Don't touch the big boys at all. They are in deep, deep trouble. As far as China mentioned above, they've been suckered just like Japan was in the 1980s. Remember Rockefeller Center? American real estate is always a bad investment for foreign countries. The market cycles very ten to twenty years and some people get screwed. Remember re-cycling petro-dollars? The London and Wall Street masters always know how to inflate things and then let someone else take the fall. But this time, I think it may bite everyone in the ass.

I read a NY Times article about HRC and her economic policy. She says government will be more involved in the economy and she will re-regulate certain sectors of the economy. We'll see. I remember Bill was going to cut middle class taxes. I'm still waiting.

Posted by: jdp | Jan 21, 2008 5:03:57 PM | 14

i imagine now, that those united states might become a province of china before my heart gives out - or at least so in debt - it will have to follow the orders of the plenary meetings as ditifully as any peasant in northern china

Posted by: remembereringgiap | Jan 21, 2008 5:05:41 PM | 15

Sorry, Peninsular and Oriental Steam Navigation Company, sale handled by http://www.zawya.com/story.cfm/sidZAWYA20060227081231> Citigroup (Rockefeller dominated, earlier by Morgan) and NM Rothschild & Sons Limited, and not at a low price but at 20% above assessed value, according to MSM at time.

Posted by: plushtown | Jan 21, 2008 5:06:37 PM | 16

While my longer piece seeps thru the spam trap I feel obliged to point out that the Asian and Arab purchase of large chunks of amerika's major financial institutions was no bail out. It doesn't effect the short term liquidity of those institutions at all. That job has been left up to the amerikan taxpayer, whose support was guaranteed through subsidies and tax breaks before the Singapore govt super fund buy in. That money will go to those banks former shareholders, not to the bank itself, well mostly not.

I find it ironic that those who were happy to enjoy the wealth created by those institutions when they financed the exploitation of other sovereign nation's assets can't deal with the boot being on the other foot. That is when the economies of other nations benefit by exploiting amerikan assets.

It's not as if it really makes a blind bit of difference to Joe Shitkicker what the nationality of a bank's shareholders are. They all belong to the race of greedheads and will look to maximise profits regardless of anything else.

Although it could perhaps be argued in a sort of Darwinian logic that the new blood will bring new ideas. That the moribund amerikan management, too eager to live off their sinecures without actually achieving any advantage for their corporations are to be replaced with outsiders full of fresh ideas who will create long term benefit for the corporations.

Posted by: Debs is dead | Jan 21, 2008 5:24:38 PM | 17

jdp, do not be concerned, the adults have jumped the feedback loop and have bought the farm. Remember the Tommy Copper joke.

"Apparently, 1 in 5 people in the world are Chinese. And there are 5 people in my family, so it must be one of them. It's either my mum or my dad. Or my older brother Colin. Or my younger brother Ho-Cha-Chu. But I think it's Colin."

Posted by: Cloned Poster | Jan 21, 2008 5:37:25 PM | 18

there's not much purer pleasure than watching a broker broken

Posted by: remembereringgiap | Jan 21, 2008 5:46:04 PM | 19

giap,

now thats a little sado, but its funny.

Robert Rubin having his ass handed to him, may I have another?

Posted by: jdp | Jan 21, 2008 6:10:11 PM | 20

jdp

no, its just a little pleasure to watch these creeps & their commentators - who were the crown kings of certitudes - shit their pants on their beloved media & the dumbo straightmen spokespersons on this or that 'news' channel - it is what i would call a venereal form of vaudeville

Posted by: remembereringgiap | Jan 21, 2008 6:41:09 PM | 21

Perhaps the great unraveling has begun....

Posted by: mikefromtexas | Jan 21, 2008 7:29:35 PM | 22

The Nikkei is down 612 points this morning (Tues in Japan) .......

Posted by: Uncle $cam | Jan 21, 2008 7:56:58 PM | 23

The Fed may well have a historical Tuesday soon.

If there's any New Yorker barfly, may I suggest that they avoid South Manhattan in the next days. With all these bankers jumping from 40th floor, you never know what's gonna hit you when quietly wandering on the street.

Posted by: CluelessJoe | Jan 21, 2008 8:15:31 PM | 24

Black Monday, huh? Weird irony on MLK day. Around the net today so far, surprisingly little chatter on what this all means, at least compared to the pervasive campaign white noise.

Posted by: anna missed | Jan 21, 2008 8:17:32 PM | 25

[DISCLAIMER: I don't own any precious and won't buy in until the bubble breaks.]

Gold bugs are pouring out of the cupboards and massing behind the refrigerator:
AU price + 40% over production cost in 2005, + 35% adjusted for US$ devaluation
AU price + 80% over production cost in 2006, + 75% adjusted for US$ devaluation
AU price +150% over production cost in 2007, +145% adjusted for US$ devaluation

That is a **purely geometric classic-bubble** curve, y = 35*(x-2005)^2. Ergo,
gold might hit ~315% over production costs, predicted to reach $336, or $1059,
about a 21% YOY return, not counting the linear -5%/YR US$ devaluation, offset by
buy:sell point spread for retail gold, (although Perth Gold Shares avoids that).

So if you're feeling buggy, you might make 20% in 2008 on a gold play. **Might**.

The reason AU spiked is because in 2002 world miners uniformly began to hold onto
their inventory as a better investment than cash, as the US$ began to devaluate.
But the moment miners feel their inventory topped, AU's price will go flatline,
as it did for most of 2006, 0% YOY, (until the credit.con news got all spun up).
That looks like it's happening now: FOREX_XAUUSDO

But consider that some ADR stocks have already bounced +10% in after market trade.
Overnight. For a $9 commission. So you'd have to have balls of uranium to buy AU.
Oops, did I say uranium? Wow, bet U308-bugs are getting their ass handed to them.
How'd you like to have a cellar full of platinum ingots right now. Ha,ha,ha,ha.
No wonder Cheney's face is ashen, 1000-yard stare. All that PL in Bank of Dubai.

Posted by: Fealen Buggy | Jan 21, 2008 8:27:47 PM | 26

I have put Howard Zinn on hold after five chapters to read "Free Lunch" by David Cay Johnston. Wow. Are we ever getting screwed. I read his other book, "Perfectly Legal" but this book has better commentary and he seems to really take shots at the political establishment from local governments, to state, to federal.

The subsidies written into the tax codes and paid unknowingly paid by the masses is a real eye opener.

giap, I always laugh about those movies where the frat boys are bent over getting their ass spanked and saying thank you sir, may I have another. Thats what came to mind above.

We'll see how it shakes out tomorrow with the stock. If you are an investor, you best have that broker on speed dial. I see alot of people with 401ks getting their ass handed to them. I have already realized I'm working until they grow grass over me.

Posted by: jdp | Jan 21, 2008 8:54:02 PM | 27

Buried in pending H.R. 3977, a bill to amend the Harmonized Tariff Schedule of the
United States, to also provide earnings assistance and tax relief, which includes
the proposed Bush:Bernanke $154B rebate appropriation clause, are the minutea of
details involved in the rebate plan, sent to Committee on Finance for amendment.

Only uniformed military/police personnel, volunteer first-responders and certain
homeland defense covert security personnel will get a "tax credit" refund per se.
The average American will receive instead a purchase discount card, clearly marked
"no redeemable cash value". The card also may not be used for food or energy buys,
since the Food Stamp Program covers the food, and the cascade of surcharges and
fees on energy purchases would be adversely affected. The card's terms of use are
perhaps the most nefarious. Purchases may be made only on, "buy one, get one free
(on US)" basis. So you have to buy two of whatever you want a tax credit on one of.

Michael Chertoff, Director of Department of Homeland Soviet, is involved in the
choice of whether or not these rebate cards will require a RealID to use, or come
with a RFID chip which identifies the card holder, to co-enjoin a black market in
cash swaps at check cashing services. However, RealID won't be in place until July,
and RFID technology isn't approved as secure enough for biometric information use.
(DHS is concerned that certain terrorist groups may use the cards to buy weapons.)

Therefore, in all likelihood, your 2007 tax rebate card will sit unapproved on your
mantel until near next Christmas, when it's time to buy Uncle Ned a tie ... and get
Uncle Ernie the same thing. Oh, last part. No returns on the rebate card purchases.
The administrative expenses of the tax rebate card program are expected to exceed
the actual usage value of the cards themselves. That budget will accrue to FEMA.

Have a nice warm bowl of cabbage soup, comrade!

Posted by: Pearly Gates | Jan 21, 2008 9:36:26 PM | 28

Yup. Looks like MLK day will be a brief stay of execution. I wonder if the FED, ECB or BOJ will offer up some free money? (excuse me, "liquidity")

And if so, would it even make a dent in the markets at this point? Doesn't seem the Dow has been helped by Helicopter Ben's promises of a big drop.

Posted by: Lysander | Jan 21, 2008 9:56:02 PM | 29

Should be interesting tomorrow (Tues) when the market opens. Here's some DOW (DJIA) numbers to note:

Election Day, 2000 --- 10,900 (give or take a few points)
Bush Inauguration 2001 --- 10,587
Sept 10, 2001 (day before 9-11) --- 9,605

Do you think any of these are going to get passed on the way down tomorrow?

Posted by: Ensley | Jan 22, 2008 12:24:24 AM | 30

Cartoon.......Two cavemen talking. One says "One day the grid went down and never came back on."

Posted by: R.L. | Jan 22, 2008 12:43:01 AM | 31

re Pearly Gates post above: She/he discusses

Only uniformed military/police personnel, volunteer first-responders and certain
homeland defense covert security personnel will get a "tax credit" refund per se.

I'm not clear what this refers to. Does this mean that wage earners who have taxes deducted from their pay check & are due a refund @tax time, ie. most Americans, will no longer get their cash (check) refund from IRS?

Posted by: jj | Jan 22, 2008 12:53:03 AM | 32

MR...Bush. Tear down this Wall Street!

Posted by: pb | Jan 22, 2008 1:24:40 AM | 33

jj: Sorry, I was f'g with you'all. Nobody asked where BushCo's $189B "for other
undisclosed national security purposes" was to be spent, and nobody is asking
about this latest abortion $154B. Most of it will go to shore up US government.

Nobody is asking important questions. If your banker said he was going to take
$189,000 out of your account, wouldn't you run him over with your pickup truck?
Then if he relented after stealing you blind, and said he was going to give you
$154,000 back, do you think you might demand that he answer a few f'g questions?

http://www.youtube.com/watch?v=1sOgj6HuI_o

World Economic Forum opens tomorrow in Davos. Meanwhile world stock bourses
are down in some cases over -10% and trading has been frozen.

Listen to this pompous ass talk about "global collaboration"!

"Now...let me cut to za problem...society plus ecology ...und zo on ...
und zo on ...rrrhh ... in za financial economic wurldt."

Meanwhile, J6P is watching the new episode of Terminator on TV.

Zo who has za better handle on reality?

Posted by: b #347 | Jan 22, 2008 1:25:08 AM | 34

Debs comment @13 was caught in the spam trap and only now released - it's worth your time.

Posted by: b | Jan 22, 2008 1:27:17 AM | 35

Debs started off w/this gem

It would be safe to say that the rot has spread out to every corner of the globe.

which got me to thinking - was that PRECISELY THE POINT? Has anyone read recent issue of CFR journal (Foreign Affairs) wherein they supposedly discuss working toward one world currency. This would provide the opportunity &, of course, the opportunity for the World Bankers to officially take over running the world.

Posted by: jj | Jan 22, 2008 1:42:16 AM | 36

via Atrios and DKos, remarks of billionaire publisher Mort Zuckerman:

Zuckerman: I don't think it's an exaggeration. It's an understatement. You've heard me say here I think we are facing the worst financial crunch and crisis since the Great Depression. You have the entire banking system now that is virtually frozen and there are not just the sub-prime mortgage thing. There are other things called credit default swaps where they're going to lose as much money, 250 billion dollars on. The banks are frozen. They're not making loans because they have such huge debts that they have to take onto their balance sheets and nobody knows how to deal with that because you had a dramatic...you had two bubbles that have burst at the same time. The housing bubble which has collapsed in this country. The first time since the Great Depression that housing values have gone down for a year since the depression and it's going to go down even more next year. The credit crunch, you've just exploded the whole credit system in this country. We were way over leveraged. The banking system was over-leveraged. People didn't even know about it. The bankers didn't know about it. They didn't access the risk. Now that risk is piling in and every body's going to pay the price. Uh it's going to stimulate nothing other, I mean it's going to destimulate the economy. Nobody has money to lend. They're saving all their money to pay off their debts. They're borrowing money or looking at uh the rest of the world to enhance their capital and it's still not going to solve their problems.

Posted by: b | Jan 22, 2008 2:06:36 AM | 37

I am sure that a major cause of panic was GWB's offer to "help" the economy. Everbody knows what his idea of help means: to help his friends save their asses and assets at the expense of everybody else.

Posted by: ralphieboy | Jan 22, 2008 2:39:14 AM | 38

Wake me up when it drops a couple dozen σ. This is baby stuff - and I say that with all the schadenfreude I can hork up. You guys must have been in the womb in '87. Now THAT was fun.

Posted by: ...---... | Jan 22, 2008 3:14:41 AM | 39

http://jameshowardkunstler.typepad.com/clusterfuck_nation/>Jim Kunstler finally (and way early for his weekly post) weighs in with the proper metaphors for the economic meltdown. A sample:

FULLBLOWN PANIC

A whole closet full of "other shoes" is now waiting to be dropped. Surely the biggest clodhoppers in the closet belong to the hedge funds, representing trillions and trillions of dollar-denominated "positions" which, however hallucinatory, had previously yielded enough real "money" year-by-year to keep all the realtors and Humvee dealers in the Hamptons goose-stepping to Goldman Sachs's drumbeat. These "positions" can't help now from moving into counterparty crisis territory, especially as the bond insurers such as MBIA and Ambac go up in a vapor, and if that happens the damage could be so colossal globally that Stephen Hawking might have to be brought in to run the Federal Reserve.

This is going to be a rough week. Fastening your seat belts may not be enough for this ride. Better superglue yourselves to the floorboards and pray for God's mercy.

Posted by: anna missed | Jan 22, 2008 3:23:27 AM | 40

Hell, who knows maybe that growing community of flat tire beater Winnebagoes currently residing under the freeway I drive by will swell into a voting block by next November. The new Hooverville coming your way.

Posted by: anna missed | Jan 22, 2008 3:39:57 AM | 41

You guys must have been in the womb in '87.

nah were oldies around this joint. '87's tame compared to what comin' round the bend.

Posted by: annie | Jan 22, 2008 8:33:18 AM | 42

Fed slashes rates in shock move

The Fed's interest move came as a complete surprise, as it was taken outside its timetabled rate-setting Open Market Committee meetings.


It certainly indicates that the Federal Reserve wants to be seen as taken action over the concerns of an economic downturn
Jeremy Stretch of Rabobank

Rate cut fails to end markets slump
Q&A: Stock market falls

The last two such surprise cuts were on 17 September 2001, shortly after the attacks of 11 September, and on 3 January 2001, in the wake of the dotcom bust.

The last time the Fed cut rates as much as three-quarters of a percentage point was in August 1982, almost 26 years ago.

"This is huge," said the BBC's business editor Robert Peston.

"And it is a big risk. If this doesn't work, then people will say they have nothing left in their locker."

Posted by: annie | Jan 22, 2008 9:30:26 AM | 43

Dollar dives versus euro on emergency Fed cut

The dollar fell sharply against the euro on Tuesday after the Federal Reserve unexpectedly slashed its benchmark overnight lending rate by 75 basis points in a bid to allay market fears about a U.S. recession.

The Fed's emergency move, precipitated by a global equities market rout, has wiped out the dollar's yield advantage over the euro. The Fed funds rate target is now at 3.5 percent.

Posted by: annie | Jan 22, 2008 9:34:15 AM | 44

26 GIs killed in Iraq through the 19th of this month compared to 23 all last month. things heating right back up for our "brave freedom fighters".

weren't the insurgents all either our bought and paid for allies (Sunni) or honoring a ceasefire (Mehdi) or beaten (AQ)? That's what Dr. Pangloss, er sorry Petraeus told me.

new MRAP armored vehicle takes first casualty

Posted by: ran | Jan 22, 2008 10:29:59 AM | 45

oops, sorry B that shoulda gone into the OT thread.

Posted by: ran | Jan 22, 2008 10:49:12 AM | 46

Ha, I like what a commenter said from another blog:

what rational person doesn't have at least a couple of months' cash up their sleeve?

Hahaha...

I just hope this doesn't affect the Super Bowl cuz I got the last twenty dollars in my savings account riding on the Giants.


Barkeep, tab please...

Posted by: Uncle $cam | Jan 22, 2008 11:35:24 AM | 47

Barkeep, tab please...

If you are so broke, please prepay your drink :-)

Posted by: b | Jan 22, 2008 12:07:41 PM | 48

Why does this
coupled with this, this (search for "Thomas Frields" and this leave me with a sinking feeling about my financial future? To summarize: FBI agents (or Cia interns at the FBI) go to Booz Allen Hamilton when they "die", like tainted angels being assumed into an all-forgiving heaven. Once there, the bread of their "terrestial rewards" is leavened with even finer opportunities to "serve" the public
by gaming financial institutions in favor of their patrons while sipping the nectar of eternal secrecy, and collaborating (certainly not conspiring) to muffle the occasional cry of outraged citizens and honest but overmatched investigators.

Posted by: Hannah K. O'Luthon | Jan 22, 2008 12:14:24 PM | 49

@annie - 43 - as expected and foretold, the Fed will feed inflation and feed it more and again until the bad debt is inflated away. It takes from the poor and prudent and gives to the rich and the dumb.

Gold jumped some 3-4% with the announcement.

The Fed's main task is seen to keep the stock market up. If it inflates enough the nominal market value will probably increase. In real terms, ex. inflation, the market will tank.

Lowering the rates doesn't do shit for the current problems in the credit markets.

Posted by: b | Jan 22, 2008 12:16:16 PM | 50

Gold jumped some 3-4% with the announcement.

ok b, does that mean we all get a free round :)

drinks on the house!

Posted by: annie | Jan 22, 2008 3:35:02 PM | 51

I watched the CNBC and Vince Farrel, an investment guru was ontalking about what Milton Freidman would do. I thought, wow, you dumb asses really don't get it. Freidmans bullshit got us here. Its time to go back to Keynes. Freidmanomics is such dogma they just can't see their nose to spite their face. Freidman has got to be debunked and it has to be done forcefully. 30 years of Freidman is killing us.

Over at TPM, Jared Bernstein from the Progressive Policy Institute commented that its amazing that when things fall apart they want stimulus Keynes style to save the day.

Posted by: jdp | Jan 22, 2008 3:47:26 PM | 52

I think that Bernanke's agency should be renamed the Federal Lack of Reserve Board

Posted by: ralphieboy | Jan 22, 2008 3:50:05 PM | 53

@ B thanks for digging my piece outta the spam trap, just as an aside that was the first draft which came through not the final piece. It's a weird system at Typepad.

@jdp on Keynes Take a look at PC Roberts Counterpunch piece Farewell to Old Economic Nostrums

Roberts who was the first Reagan administrations supply side man argues that neither Friedmanism nor Keynsesian economics could be applied to the the current problems. he believes the modern amerikan economy is too different from the old Keynsian model, and that since many of the current probelms are a result of little or no regulation, that Friedman's derugalation method would only exacerbate the problem.

Roberts points out that most of the Keynsian prescription worked by stimulating demand which then increased production that benefited the domestic labour market because corporations increased their manufactured output and they hired more workers.

That would no longer work, because too high a proportion of goods are manufactured outside amerika.
Stimulating demand would benefit the economies of China, India, Taiwan and Korea, perhaps even Mexico, but it wouldn't cause a large enough increase in domestic production to stimulate the labour market sufficiently to pay for it's cost.

Posted by: Debs is dead | Jan 22, 2008 5:24:47 PM | 54

Huge new distraction comes in the nick of time

Leading all news broadcasts right now: actor Heath Ledger of Brokeback Mountain, and the soon to be released Batman flick The Dark Knight, was found dead in his Manhattan apartment today: RIP Heath Andrew Ledger April 4, 1979 – January 22, 2008

Just what the doctor ordered to deflect attention from the crashing economy.

Posted by: | Jan 22, 2008 5:40:01 PM | 55

Give em head, harry reid is on the floor NOW asking for an extension on the FISA bill.Because, that's what's important today. protecting the telecomms...

Posted by: Uncle $cam | Jan 22, 2008 6:05:30 PM | 56

Why is Bush going to the Congress for answers to the collapse of the economy? Shouldn't he be asking the Project For a New American Century or the American Enterprise Institute? I thought they were the guys who had all the answers.

Oh, wait,,,he wants to blame congress when the problem can't be fixed.

Posted by: pb | Jan 22, 2008 6:16:51 PM | 57

pb

guess richard perle & paul wolfowitz or paul bremer will work it all out from their chalets on the swiss border & tell us after the next invasion

so imagine a lot of 'guys' working for us 'folk' at the 'fed' will all start wearing their brooks borther suits with army boots & 'hollering' orders like in the old times

Posted by: remembereringgiap | Jan 22, 2008 7:01:27 PM | 58

Debs,

I read that earlier today and wrote Roberts a long e-mail. While he's right about the war and offshoring being the problems, He was a pusher of supply-side. He is one of the people that came in and said the Keynes dynamic wasn't working. The problem in the 1970s were multiple, but fomented by certain policies, especially by Nixon and his team. The first was continuation of the Vietnam War. You know, guns and butter etc. Loads of dollars slooshing around. Second, Nixon took the US off Britton Woods and let the dollar float creating a big devaluation because of the amount of dollars from inflating for war and the great society. Then, since the oil countries were being paid in cheaper dollars as today, they wanted more per barrel of oil. And because the US voter had very little information compared to know, it was all blamed on the middle east conflict. But it was US Fed and fiscal policy. This lead to even more inflation and set the ground work for the Freidmanonomics we have today. Because the US population was easily munipulated, alot of it was race politics, anti-environmetal and anti-womans rights politics, the Repubs were able to co-opt the Reagan dumocrats and win.

This in turn allowed Reagan and his Freidmanites to impliment so called supply side which is warmed over Gilded Age and 1920s economics.

Anyway, thats what I wrote to Roberts and told him we need some FDR type regulation again.

Many of the people that are involved today served in the 1970s, especially under Ford. Ford is a coverup artist, think JFK.

Posted by: jdp | Jan 22, 2008 8:59:53 PM | 59

bring it all on; let the boil be lanced

Posted by: theodor | Jan 22, 2008 11:07:31 PM | 60

@Debs @54 - Roberts points out that most of the Keynsian prescription worked by stimulating demand which then increased production that benefited the domestic labour market because corporations increased their manufactured output and they hired more workers.

Tha's why I earlier argued for "infrastructure investment". Any tax relief now will go into consumption and to a part feed China and Saudi Arabia.

Local infrastructure (re-)building will take the construction workers who lose their job after the housing boom and put them to work. The secondary effects from that would be bigger than any pure consumption scheme and the money would just drain away.

The problem with a pure Keynsian solution is that it is overdone and lost its ability.

How that you may ask?

Since 2002 the U.S. runs the biggest Keynsian program the world has ever seen - the war on Iraq. It pumps hundreds of billions into the U.S. economy each year. (Think building MRAPs and HUMVEE). It is unproductive "investment" that does have little pay-off. But the "program" has taken away the ability of a real Keynsian program now that it is needed.

The U.S. can no longer for a half a trillion in extra infrastructure investment ...

Posted by: b | Jan 23, 2008 2:35:34 AM | 61

Hehe - Stiglitz agrees with me: How to Stop the Downturn

The federal government should also provide some assistance to states and localities, which are already beginning to feel the pinch, as property values have fallen. Typically, they respond by cutting spending, and this acts as an automatic destabilizer. Federal assistance should come in the form of support for rebuilding crucial infrastructure.
...
Tax cuts in general perpetuate the excessive consumption that has marked the American economy. But middle- and lower-income Americans have been suffering for the last seven years — median family income is lower today than it was in 2000.
...
The day of reckoning has come. This time we need a stimulus that stimulates. The question is, will the president and Congress put aside politics to get the job done?
Answer: No!

Posted by: b | Jan 23, 2008 3:44:50 AM | 62

Joseph Stiglitz makes some interesting points in his NYTimes OpEd today.

The Bush administration has long taken the view that tax cuts (especially permanent tax cuts for the rich) are the solution to every problem. This is wrong. Tax cuts in general perpetuate the excessive consumption that has marked the American economy. But middle- and lower-income Americans have been suffering for the last seven years — median family income is lower today than it was in 2000. A tax rebate aimed at lower- and middle-income households makes sense, especially since it would be fast-acting.

I assume that Stiglitz chooses his words carefully, and can not resist underlining his remark that median family income has declined since 2000.
If the population changed from say 100 million to 110 million families and if the median income dropped from, say, $40K to $35K then
while in 2000 there were 50 million families with income under $40K,
in 2007 there were 55 million families with income under $35K.
The exact changes depend, of course, of the Dini distributions for
2000 and 2007, the true values of the medians and other factors, so the situation may be less (or more) drastic than it appears. This is, of course, merely the other side of the arithmetic coin whose obverse
is the increasing concentration of wealth in what are already the top
percentiles of the Dini distribution.

Posted by: Hannah K. O'Luthon | Jan 23, 2008 3:57:51 AM | 63

Adding to my comment in 61 Chalmers Johnson in Tomgarm on military Keynsianism

Our excessive military expenditures did not occur over just a few short years or simply because of the Bush administration's policies. They have been going on for a very long time in accordance with a superficially plausible ideology and have now become entrenched in our democratic political system where they are starting to wreak havoc. This ideology I call "military Keynesianism" -- the determination to maintain a permanent war economy and to treat military output as an ordinary economic product, even though it makes no contribution to either production or consumption.
...

Posted by: b | Jan 23, 2008 5:51:17 AM | 64

"America: Host or Parasite?"

Interview with economist, Dr. Michael Hudson. Dr. Hudson is President of The Institute for the Study of Long-Term Economic Trend, a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of "Super-Imperialism: The Economic Strategy of American Empire". We discuss the US balance of payments trade deficit which creates US credit to finance the US national debt and war abroad; Russian economic shock therapy as the final stage of the cold war; the real estate bubble; permanent war and the inevitable collapse of the current US dominated global economic system.

I don't recall if MOA has mentioned Dr. Hudson, if not, pour yourself a tall one, make it a double, and sit back. Prepare to be enthralled, enraged, enlightened. This was aired in 07, however, it is just as spot on today and the future as then.

Posted by: Uncle $cam | Jan 23, 2008 4:44:26 PM | 65

Addendum:

Of course, MOA has mentioned Professor Michael Hudson before,
here as well by several others, in the archives, I've just missed the boat on this one, none the less, it is worth relistening/rereading if like me, you have somehow missed it. Here's the cached carolyn baker article from b real's above link:
SUPER-IMPERIALISM: The Shameful Legacy Of Liberal Democrats

B real says, and I concur, this is imparative to understanding economically whats before us.

And here is a few snippets to taste:

Throughout the book, Hudson is perhaps kinder than he should be. Although he does not use the term, what he is superbly describing and documenting in his book is economic warfare far more brutal and merciless than the limited-hangout offered by John Perkins’ Confessions Of An Economic Hit Man on which Catherine Austin Fitts comments:

In the process of providing a colorful account of a 1970s whodunit (complete with low tech strategies devoid of the dazzling technology toolkit that is now an essential part of the economic hit man's weaponry of economic warfare), Perkins delivers to readers the "big lie": he reveals the secret that there is no greater conspiracy. This is simply globalization run amok, he would have us believe. Somehow, this particular conspiracy theory seems charmingly credible as part of a "confession." Perkins admits to what is known and then uses the credibility created by his "limited hangout" to further obscure the reality of who's who in the real governance of global investment and risk management. We are to presume that the investment networks in and around the Harvard Corporation, the City of London, the Vatican and investment managers and bankers for the proceeds of transnational organized crime are simply good-hearted fellows who let things get out of hand.

There is no Sunni or Shia, no Democrat or Republican—only the have’s and have-not’s.”

Posted by: Uncle $cam | Jan 23, 2008 5:57:27 PM | 66

Damn $cam, for a great weekend of reading you must head right on over to Michael-Hudson.com. Guns & Butter played another interview w/him today. It's from last yr. (America: Host or Parasite), but worth a listen nevertheless.

Be sure to read his first link under "Interviews" section. (Debtor Nation - The Hijacking of America's Econ. from Acres, Jan. '08) Awesome stuff, but it's a pdf file so I can't cut 'n' paste. He talks among other things about the genesis of Latin Am. drug money becoming an impt. underpinning keeping US econ. afloat. Happened during Vietnam. McNamara went to Chase (Emperor Rockefeller's bank) & other banks & told them they needed to attract more foreign funds to stabilize the war-induced balance of payments problem. Together they calculated that the most liquid industry in the world was the drug & crime industry. But all their money then was being funneled to Swiss Banks. So they set branches throughout the Caribbean of their own banks. This also helped their clients evade taxation. ...(p. 4)

...(p2-3)
Acres U.S.A. (Mag conducting interview) How did we make transition from creditor to debtor Nation?
M.H. -This happened in 1951 - to finance Korean War... {long discussion, including how European Nations facilitated it to maintain their age old class war against their own people. b- you should DEFINITELY read Hudson's discussion here. He discusses how German bankers/govt. hell bent on screwing its own people, et.

This should give you a flavor of the goodies w/in.

Posted by: jj | Jan 23, 2008 10:57:18 PM | 67

Don’t hold your breath!


Market Bloodbath Highlights Cracks in Capitalism: Mark Gilbert

Posted by: Rick | Jan 24, 2008 7:54:32 AM | 68

It offers no answers as yet, nor a change of paradigm, obviously. But this Business Week article asks the correct question:

How Real Was the Prosperity?

We're just beginning to figure out how much of the nation's recent growth was the result of a credit-induced frenzy. Here are some guideposts

I'd like to add to the above, How real were the GDPs these past few years? How real were per capita incomes? How real the financial sector's claimed share in economies overall?

The financial sector was sloshing around oceans of fictitious capital in return for which it not only cut itself very real fees and bonuses, but it also came to dominate over every other economic activity. Now that the matter of the emperor's new clothes is settled, maybe we could take a close look at his throne, his palace, and his divine prerogatives as well.

Posted by: Alamet | Jan 24, 2008 12:56:13 PM | 69

Alamet, it's Europe and USA who are fighting the cold war. The Russians et al will win the cold war, laughing at us as we cannot pay the heating bills, as we freeze to death.

Posted by: Cloned Poster | Jan 24, 2008 4:04:27 PM | 70

The news that a 33 year old junior shit kicker in France's Societe Generale Bank 'defrauded that institution for 5 billion euros' strikes as one of these stories which instantly splash around the world overwhelming every other piece of news, yet somehow too much of this tale doesn't add up.

How did he do it? Right towards the end of a rather obscure Reuters article we learn:
"Five billion euros of losses is enormous. It represents a position of several dozens of billions of euros, perhaps 30 or 40 billion. How can one person all by themselves do that?"

Indeed.

How can one "junior trader" "certainly not a star"?
This is being compared to the Englishman Nick Leeson's 'one point something billion Euro' fraud on Barings Bank that 'broke' that bank but in the case of Leeson, senior bank executives knew he was their biggest earner. He had kept the bank ahead of the game in a year or more of tough times. When Leeson's luck finally ran out, he had been betting on Japan stock futures and their run finally foundered, the Barings execs ran a million miles from Leeson and had him thrown into jail. Typical capitalist perfidy. But SocGen exec's claim to have known nothing about young Jerome Kerviel's antics has an even fishier smell to it than the Barings bastards.

To have lost as much as he did he would have had to take a position of tens of billions of Euros on one of the most basic derivatives in an extremely complex market, futures contracts on European equity indices. No one noticed for over a year?

As one amerikan derivatives trader said:
"Everyone is asking themselves .. how just one trader, all alone in the corner, could have beaten all those whiz kids who throng around in Societe Generale,"

Of course SocGen has the answer to that, well an excuse they want us to believe anyhow. That is that Kerviel had been working in the back office for several years before he won the front of house gig and during his time down in the engine room he had come to thoroughly understand all SocGen's security measures which he then bypassed. Simple as that. Heh! well isn't it a bit unusual to move someone with that knowledge out the front? I mean to say if that were de rigeur in the banking world to have traders who know the security well enough to subvert it, why bother to have controls at all?

Reuters say it nicer " A senior bank board member told Reuters that Kerviel "was not a star", but Bank of France Governor Christian Noyer told reporters that the rogue trader was a "genius of fraud".

Play that again, Sam.

Just by way of a coincidence at the same time that SocGen announced their $7Billion loss, as an afterthought they slipped in that they were down the tubes some 2.05 billion euros with a loss related to the credit crunch. IE that old sub-prime scam.

Now even though it doesn't normally have a lot of friends and allies in the bitchy world of international wheeler dealing and has been regarded as an ideal takeover target for some time, the banking world has really rallied around SocGen on this. Everyone is sticking together, praising CEO Daniel Bouton who made some sort of token offer to resign which was "of course" refused.

They are sticking to the script because the news of this came less than a day after everyone was making pretend that Bush's lame parish pump prime and Bernacke's interest rate cut had engineered a 'turnaround' on the market. "

The cry had been; "There is nothing to see here folks, its all over, y'all can go on home". Then during a pause in the chatter, SocGen dropped a big steaming log on the rug. As fast off as a bride's teddy, everyone went for the most unlikely finance yarn since the South Seas Bubble in their rush to clean the carpet.

The 'rally' story must be sold to the rubes. The new sceptics in Hong Kong, the poor buggers who have spent the last few days trying to explain the exigencies of a bear market to a mob of annoyed and anxious Chinamen, didn't buy the story and will have to be dragged into line.

Although a wise-ass in amerika did put the cat right into pigeon territory when he wondered whether the bank's maneuvers had contributed to Monday's market fall, and to the U.S. Federal Reserve's decision to cut interest rates.

CNBC came to the rescue on that one and reported a Fed source saying the central bank had not been aware of SocGen's problems ahead of the emergency 75 basis point cut.

But that is getting closer to what probably happened, after all according to Reuters again "One banking insider estimated that the losses were worth "just" one billion euros at the weekend, but these rapidly snowballed when SocGen moved to purge their books on Monday and Tuesday as European stock markets plunged."

Yeah right the bank finds itself long on European equities and just keeps on selling, right into the biggest fall in a couple of decades? I mean we don't know what the exact positions were but apart from the fact that some recovery from Monday's low would likely eventuate didn't it occur to the French Masters of the Universe that selling all those positions in one hit was going to push the market further down?

Disingenuous Bouton turned that around when he told a news conference "These losses could have been gains if the market had climbed on Monday, Tuesday and Wednesday" Hell maybe the market wouldn't have fallen so far if you hadn't unloaded tens of billions of dollars worth of long positions Dan.

So why? Well the answer is in the question really. Undoubtedly the fool Kerviel did take some shortcuts to try and force his luck on the dealing desk. In doing so he provided slugs like Daniel Bouton an excellent get out of jail free card if their over-confidence ever caught up with them. Maybe they only found out about Kerviel's stupidity recently, maybe they have been saving it up for a rainy day but one thing is for sure, virtually every other bank which has lost billions on the sub-prime stupidity has had their CEO fall on his sword. Bouton didn't need to because at the same time he announced a loss of a couple billion in the sub prime saga he let slip about Kerviel's $7 billion fuck up. A fuck up that was only $1 billion before SocGen liquidated their position on Monday.

Kerviel is out there somewhere, he won't be dragged before a magistrate until the media have the public screaming for his head. That should prevent any 'underdog' blow back that could happen if he were dragged in front of a beak right now and had a laywer 'straightening a few facts out' to the worlds' cameras.

Bouton is fine, the world is fine, apart from the poor fuckers whose pension fund and life insurance is in the SocGen, and of course France's taxpayers all of whom have to ante up another $5 billion euros. That is straight after being told there is no dividend this year.

Say what you like about centralized demand economies, but the Russians would have put a bullet to the brain pan of everyone involved; from Politburo member Bouton, on down.

Posted by: Debs is dead | Jan 24, 2008 4:35:35 PM | 71

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