Moon of Alabama Brecht quote
October 08, 2008

Financial Crisis: Act Forcefully

The major central banks have lowered the interest rates. That may stop the stocks to drop for a few hours. Then it will occur to someone that interest rates do not matter if no bank has the capacity to lend.

The great de-leveraging continues apace. Billions of imaginary wealth kept as assets in the books went 'poof'. Covering those losses ate away from the basic capital of the banks. To keep a reasonable debt to capital ratio they needed to sell stuff into declining markets and to recall loans they made. That is a downward spiral which is hard to stop. Until a bottom is found, the banks will have no capacity for new big loans.

Two trillion of retirement savings in 401ks and pension funds were lost in the last 15 month. There are some hard times coming for a lot of people. It will be even harder if this crash continues

The Fed and the Treasury as well as their international companions are still behind the curve. Instead of acting forcefully, each week they add a new trough for Wall Street to feed on.

The crisis is so out of control that monetary tools are losing their effect. There are some things only national states can do and now such things need to be done in a worldwide concert:

  • Close financial markets worldwide for a week, longer if needed.
  • Declare all outstanding financial derivatives (except covered puts and calls on simple stocks and covered commodities derivatives) and synthetic financial products null and void.
  • Reassess the balance sheets of all bigger financial entities under the new realities.
  • Triage those entities: Some are too broken to be saved. Close them down. Some will need capital. Nationalize them. Some will be fine.
  • Take over and destroy the excess housing supply that threatens to draw down U.S. housing values and the correlated assets deep below reasonable levels.
  • Initiate a huge infrastructure repair program to reignite the basic economy.

Those steps can be taken now, or in six month. Now they could help. Six month from now there will be so much damage done to the real economy, that a very deep and multi-year long recession will be needed to recover.

Posted by b on October 8, 2008 at 09:22 AM | Permalink

Comments

That may stop the stocks to drop for a few hours.
Apparently, "few" meant two hours.

I agree with your points, but I should add another, for fairness, justice and the human way. For any institution that isn't "fine", any that needs public money, needs to be nationalised, or is too deep to be saved, the entire leadership - CEOs, board members, and all the managers from the top levels - must be frogmarched to jail and should remain there until the trials are over (trials during which of course at least 90% of the fuckers must be convicted and sentenced to years of real jail, if not decades for the worst and biggest deciders).
The culprits have to pay for this catastrophe, and it's time to make an example. And considering the alternatives if this descent into the abyss goes to the bitter end, they'd probably be wise to accept such a mild punishment.

Posted by: CluelessJoe | Oct 8, 2008 9:35:50 AM | 1

If any of you have 60 minutes to spare, this talk given by Naomi Klein at the University of Chicago (ironically enough) is very much worth your while...

http://www.democracynow.org/2008/10/6/naomi_klein

She explains how Milton Friedman, the godfather of deregulation, is largely responsible for getting us into this financial mess. And his descendants will keep us in this mess until we can muster up the strength to kick them out of power and replace them with an army of Keynesian economists. Then they'll finally be free to inject massive doses of Keynesian medicine into our economy in hopes of getting it back on its feet.

And just doll up Naomi with a bouffant hairdo and the right shade of lipstick and suddenly she'll have the beauty-queen looks of Sarah Palin. But unlike Sarah, Naomi isn't dumb as dirt, nor does she have a voice that sounds like nails on a chalkboard!

Posted by: Cynthia | Oct 8, 2008 10:06:38 AM | 2

"Take over and destroy the excess housing supply that threatens to draw down U.S. housing values and the correlated assets deep below reasonable levels."

Why would this be a good idea? Do you not have homeless in the US? Do you not need social housing?

Housing's not worth as much as it was. Let it lower itself to a reasonable price and then start from there.

The others are a good idea, but actually knocking down houses is nuts.

Posted by: Rafar | Oct 8, 2008 10:39:37 AM | 3

Anyone else find it of note that, not one time have I heard anyone mention the working poor, (single mothers) or the below the poverty line citizen. All I hear is how these things will effect the middle class.

I'm reminded of the saying, "how we treat the least of these" etc...

Call me a hopeless romantic.

Posted by: Uncle $cam | Oct 8, 2008 10:49:37 AM | 4

Oh, that's right, "the poor will be with you always"... /dripping sarcasm

Posted by: Uncle $cam | Oct 8, 2008 10:52:09 AM | 5

In the news today one much respected economist here said something like this:
"There is bad scenario and worse scenario. Bad one is that crises will be something like 1990 and last twice long and worse scenario is that crises will be like 1929 , with 20% unemployment and will last up to a decade" ( God forbid)...

Posted by: vbo | Oct 8, 2008 10:59:09 AM | 6

@Rafar

Why would this be a good idea? Do you not have homeless in the US? Do you not need social housing?

Housing's not worth as much as it was. Let it lower itself to a reasonable price and then start from there.

The others are a good idea, but actually knocking down houses is nuts.

The problem is that the downtrend in housing threatens to 'overswing'. There is a reasonable price to rent and price to income ratio which determines the long term trend in house prices.

That ratio was much too high and is coming down. But there are 4-6 million houses in excess of total U.S. demand. That practically guarantees that house prices will sink a lot below the reasonable long term trend numbers.

With prices too low, more people will be under water, i.e. own more on their house than it is worth in the markets, and will walk away. There are already some 12 million households under water to day. If prices sink to the long term trend those may be 20 million. If prices sink below the trend those will be 30 million with more walking away and becoming homeless.

The way to stop prices from going below the trend is to remove excess supply now.

This supply is in outer suburbs, build too big and too cheap and too far away to commute. Someone homeless who may afford a cheap rent for such a too big place will still not have the money to keep it heated and will not have the money to commute from there.

To keep these houses empty for some years may well destroy them^anyway. To remove them in a planed way will allow counties to release whole suburbs and ex-urbs back to nature. A lot of costs (police, roadwork, sewer etc.) can be lowered a lot if whole suburbs get shot down.

Posted by: b | Oct 8, 2008 11:12:11 AM | 7

Uncle @4,

The only person recently who has used the words 'working class' has been Sarah Palin.

Not sure how to interpret that particular oracle.

Posted by: Tantalus | Oct 8, 2008 12:01:59 PM | 8

Are you really serious about destroying houses??

Instead of destroying the houses why not let them be priced to sell at least someone will get a place to live and besides you would have to destroy a lot of houses to keep the current housing prices. The delevereging is going to happen and deflation of housing prices is needed and no amount of money or intervention will stop it..

Oh and how about closing those 700 US military bases around the planet and bringing the people home? that might save a bit of money do'n cha think? and oh how about doing away with the drug war and closing prisons for non-violent drug offenders?

In fact how about reducing the government police and surveilence state could save a trillion just on that.

Nah .. who would wanna do that except for some Ron Paul types and besides more government intervention is the best way to go, after all they are the very smart of us all and have come to save us from ourselves. Let's give them more power to fix things and i'm sure they will come up with the bestest solutions

Posted by: Sam | Oct 8, 2008 12:20:35 PM | 9

Our present economic and financial predicament has no solution because reality never has solutions, reality is a constant transition and the present moment is one in which our conscience of transition is more acute and more disturbing. The time when profit was considered possible and screwing someone was thought to be inconsequential or when consequential there was always "choice" to delete it, is passing away. Now we are confronted with the relatedness of everything and everyone. We are working ourselves towards a system where some semblance of justice will appear. I do not hope that "mine and thine" will disappear but a rigid system of law enforcement, already available, will direct our conduct.
Now there are already few places where one feels free from intrusion, namely church and government offices. Everywhere else we are spied upon: traffic intersections, the grocery store, the malls, our internet mail, everywhere some part of the system intrudes upon our lives. Think of Great Britain covered by intrusive cameras.

Posted by: JLCG | Oct 8, 2008 12:31:43 PM | 10

And just doll up Naomi with a bouffant hairdo and the right shade of lipstick and suddenly she'll have the beauty-queen looks of Sarah Palin.

she's canadian. we'll have to find someone else for the VP slot.

Posted by: annie | Oct 8, 2008 12:39:01 PM | 11


@10 JLCG:

"Think of Great Britain covered by intrusive cameras."

I live in Britain and I know from first hand experience it is one of the most violent and hostile environments in the whole of Europe. We got CCTV coming out of our ears here because we got street crime coming out of our ears here. With CCTV we Brits have damn well got just what we deserve.

Posted by: Spyware | Oct 8, 2008 12:59:52 PM | 12

b

Here is where I first grasped at what was happening to Wall Street. PBS NewsHour just broadcast Risky Credit Default Swaps Linked to Financial Troubles; the first American media explanation of the basic underlying problem of the Panic of 2008.

The only fix is to wipe the 63 trillion dollar worthless debt off of the world's banks books. Great Britain is apparently going to follow Sweden's 1990s example and nationalize.

The American dilemma is that the GOP will control the federal government until
January 20, 2009. Their bedrock belief is to fight nationalization. The USA will end up with two big banks, JPMorgan Chase and Wells Fargo. Fees will jump through the roof. By 2016, the far outer suburbs will be pox marked with empty lots, like SE Washington DC now. Infrastructure will crumble. Stab in the back politics will flourish as troops are hastily pulled out of the Middle East. Inflated dollars will be spent only on food, shelter and energy.

Posted by: VietnamVet | Oct 8, 2008 1:07:55 PM | 13

http://forums.wow-europe.com/thread.html?topicId=6104961956&sid=2
Depends which houses. I'd have no problem with burning to the ground the whole suburban America, which deserves nothing more than to disappear. People should live in cities or in farms.

Posted by: CluelessJoe | Oct 8, 2008 1:23:18 PM | 14

What the heck was that? *note to self: keep kids away from PC and from copy-pasting stuff*
Ok, it was meant to be:
but actually knocking down houses is nuts.
Depends which houses. I'd have no problem with burning to the ground the whole suburban America, which deserves nothing more than to disappear. People should live in cities or in farms.

Posted by: CluelessJoe | Oct 8, 2008 1:26:46 PM | 15

Roubini's ideas what to do from his post this morning: Revisiting my February paper “The Risk of a Systemic Financial Meltdown: The 12 Steps to Financial Disaster”…And Some New Policy Recommendations to Avoid the Meltdown

Policy rate cuts will have limited effects as they don’t resolve the fundamental problem in markets that is keeping money market spreads relative to safe rates so high, i.e massive counterparty risk. To resolve that triage of insolvent banks and recapitalization of solvent banks, together with massive injections of liquidity in non banks and the corporate sector are necessary; yesterday plan to support the commercial paper market – something I recommended last week - is a step in the right direction.

Other more radical additional policy actions are also needed now; here are four suggestions for such additional policy action:
- To reduce the counterparty risk in the money markets a triage between insolvent banks that need to be shut down and a recapitalization of solvent banks is necessary together with massive injections of liquidity in non-banks and the corporate sector. ...
- a generalized temporary blanket guarantee of all deposits is now necessary both in the US and in Europe followed by a triage between insolvent banks to be closed rapidly and illiquid but solvent banks that deserve to be rescued to avoid the moral hazard of such blanket guarantee; ...
the flawed $700 bn TARP legislation will have to be modified in three ways to: a) allow for direct government injection of public capital in banks in the form of preferred shared matched by private capital contributions by current shareholders (via suspension of all dividend payments and matching Tier 1 capital provided by private shareholders); b) implement a clear plan to reduce the face value of mortgages for distressed home owners and avoid a tsunami of foreclosures; c) do a rapid and radical triage between solvent banks and insolvent banks that need to be rapidly closed.
- given the collapse of private aggregate demand ...: the federal government should have a plan to immediately spend in infrastructures and in new green technologies; also unemployment benefits should be sharply increased together with a targeted tax rebates only for lower income households at risk; and federal block grants should be given to state and local government to boost their infrastructure spending

Yep ...

Posted by: b | Oct 8, 2008 1:26:51 PM | 16

To echo Clueless Joe, for the extra bullet point. Some of what was done was outright fraud, and it will be possible to prove it. No jail - the main aim would be to get some money back. Probably not much, but even symbolic amounts (as compared to the multiples of trillions!) to be apportioned in some ‘fair’ way.

For ex. here the day after Lehman went phut an association sprang up, care of the intertubes. Lehman some-? product was sold here by Credit Suisse as ‘capital guaranteed’ to middle class investors. CS immediately announced it would reimburse (buy back) small investors, those who had less than half a million in savings and more than half of it in Lehman. Then a second association was formed, as the first lot were not aggressive enough according to those out for blood. Credit Suisse changed its position today - they will stump up for more. And so it will go on - CS would lose in the courts and they know it. This solves no problems I know and leads to cascade effects...still choosing some scape-goats and sending them to jail is no help at all. I favor re-education, off to the hospital to clean the floors!

@ rafar. Some large proportion of the houses will be knocked down anyway as those who own them (German bank? US Gvmt?) will not pay the rates, the upkeep, watering the lawns, etc. and won’t be able to sell.

Neighbors will agitate in that direction as abandoned houses attract druggies etc., are health hazards (mosquitoes in swimming pools, etc.) Lastly, many of these houses are being stripped of copper, electric wire, etc. and become just shells. Here in CH they would ultimately be repo by the local authorities who would then decide. There is maybe about -for now- 10+% excess housing in the US, according to US census data on average occupancy person/sq foot, etc., stats which are not appropriate during a depression, where ppl double up and no longer have a largish area for their owny-oh.

Yet, destroying property to revive the ‘value’ of the remaining property is totally nuts, both from a common sense and finance pov. So I disagree *partly* with b at 7, which I just read. If the US had a proper Gvmt....many solutions could arise...

Our crash and burn economy...here is an article about Mazda destroying cars:

http://www.neatorama.com/2008/05/07/mazda-destroyed-4703-brand-new-cars-after-cargo-ship-accident/>link

Posted by: Tangerine | Oct 8, 2008 1:47:00 PM | 17

Clueless,
when I saw the link I figured the World of Warcraft had initiated scheames were you could get a virtual house...

Regarding houses, I think destroying houses to avoid druggies from having roof over their head is needlessly cruel. Yes, I know the spiral of house decent, but that is just kicking the problems to the next county. I would say take over houses, and if nobody wants to rent for a break-even price, remove the houses in a controlled manner.

Posted by: a swedish kind of death | Oct 8, 2008 2:15:29 PM | 18

No one sentenced us
and we kept on
Unpoliced
we drew uncertain breath
the lost piled high unchecked
and the wreckage accumulated as evidence
as jury’s gathered anxious
no one jailed us
half hazard hearts took no sure stance
and unseen blood made no sudden movements
Our hands guided them selves.

and no voice was raised
and no song was sung
and no voice was raised
and no song was sung
no voice was raised
no song was sung

Posted by: Uncle $cam | Oct 8, 2008 2:19:36 PM | 19

And, I should add: get some treatment for the druggies so that they can get of.

Posted by: a swedish kind of death | Oct 8, 2008 2:25:07 PM | 20

Amazing. None of the points listed by b would do anything to fix the problem, and some of them would even exacerbate the crisis.

What would closing the financial markets do, exactly? How would that help? You're just removing liquidity from the system, which means there will be larger and longer swings. This is a net negative. If it worked, then why not close markets permanently?

Destroying houses destroys real wealth. In a recession, where capital is rapidly dwindling, the last thing you want to do is destroy more capital. Not only that, but you'll spend yet more capital to do it (buying up houses, and then spending more money to destroy them). Sure it'll increase the price of the remaining houses, but at a huge cost. This is a net negative. If it worked, then why not destroy most if not all houses?

Nationalizing firms doesn't magically create new capital. Money is not capital. If that worked, Zimbabwe would be an international powerhouse.

Declaring legal contracts as now being illegal (or void) is problematic in many aspects. What if money already traded hands to initiate the contract? Why are some derivative contracts legal and others not?

At least the infrastructure repair program would end up getting the taxpayer something, even if it's still wasteful of perfectly good capital.

Keynesism hasn't worked before. It's highly unlikely that it'll start working today.

Posted by: | Oct 8, 2008 3:10:02 PM | 21

Knocking down houses brings to mind the "Imperial Life" scene in Douglas Adams'Hitchhiker's Guide to the Galaxy"

"So in order to obviate this problem, and effectively revalue the leaf, we are about to embark on a massive defoliation campaign, and. ..er, burn down all the forests. I think you'll all agree that's a sensible move under the circumstances."

Posted by: Obelix | Oct 8, 2008 3:13:31 PM | 22

Re planned destruction of some subdivisions, I can tell you that some of this would be highly advisable. In the exurbs of Washington DC (like other US cities) vast areas of former farmland have been deforested and "developed" into very-large-lot subdivisions with one extravagantly large (and actually very lonely) McMansion built on each lot.

Some of these McMansions could be converted into multi-family condos... But for residents of all of them, transportation is a huge and expensive hassle. Local authorities and community banks need to work closely to figure out what rezoning makes sense: to cluster the remaining residences into densities that can efficiently be served by public transport; to aggressively develop multi-use zoning systems and working mass transit systems, etc.

We need communities to be developed much more holistically and humanistically. Reliance on private automobiles is incredibly socially isolating for anyone who can't easily drive (older people, people with epilepsy or other disabilities, people who can't afford to keep a car on the road, etc.) It is also earth-hostile and selfish.

Given the high social and planetary costs of those exurbs, there is a lot to be said for their widespread reversion to farmland or forests. We might need to build not inconsiderable compensatory housing (closer in, much denser, and much better connected to decent services.) But even then, it would still be worth doing.

Posted by: Helena Cobban | Oct 8, 2008 3:17:48 PM | 23

treatment for druggies? what sort of new age communistic world do you think amerikans live in ASKOD? Drug treatment programs only work if the addict pays for it themselves ask any multi-millionaire psychologist member member of amerika's drug treatment industry.
Fund it properly and then the ordinary workers at the coal face would want to be paid too, what would happen then? The scam of convincing them that all of their work is part of their own treatment would be blown and the drug rehabilitation industry would take a hit, cause next thing the twelve step counsellors would organise and profits would be slashed.

That could endanger the whole program. The whole purpose of having illegal drugs illegal would be lost. Making drugs illegal is the first step in demonising 'druggies' making their trip down the path to perdition easier. Then, when they are truly despairing these fools are persuaded to mortgage their lives to get out.

Smart amerikan capitalists make money out of druggies on the way in by selling them drugs, the neighbours security systems, police new hi tech weaponry and then providing prison cells. Charging an arm and a leg to the lucky few who manage to get out of the artificial construct of 'addiction' is fair enough. Think how much the corporations lose when that person stops being Economic Unit prisoner #748364950217 ?

Posted by: Debs is dead | Oct 8, 2008 3:22:16 PM | 24

this horrorshow will continue & nothing mr paulson of goldman sachs nor the flunkies of central banks willl change the essential dynamic - the death of the school of chicago - & its poisonous policies are soon to arrive at the abyss

there may be shifts for an hour or two, even a day or two

but it is all going down

Posted by: remembereringgiap | Oct 8, 2008 3:28:18 PM | 25

it is a matter of amusement for me that they have placed 3 trillion into the rotten corpse of capitalism in the heart of the empire itself & it is changing nothing

the fools who fumble with england are goint to invest 2 trillion into their banks & it will do nothing

the poor have to decide which side they are on & finish the beast before it takes their future to the abbatoirs

Posted by: remembereringgiap | Oct 8, 2008 3:37:22 PM | 26

@whoever @21 - Amazing. None of the points listed by b would do anything to fix the problem, and some of them would even exacerbate the crisis.

What would closing the financial markets do, exactly? How would that help? You're just removing liquidity from the system, which means there will be larger and longer swings. This is a net negative. If it worked, then why not close markets permanently?

I'd close the exchanges to have a few day to remove the derivative shit that is 'clogging the financial pipes'. It is hard to unclog those pipes while shit is added to them every second.

Declaring legal contracts as now being illegal (or void) is problematic in many aspects. What if money already traded hands to initiate the contract? Why are some derivative contracts legal and others not?

Declaring financial contracts illegal is possible and covered by Supreme Court rulings during the 1930s.

Some derivative contracts are covered by the means to deliver or to take delivery. A refinery may have a derivative contract with an oil producer. A hog farmer may have one with a slaughter house. Both make economical sense.

A derivative based on the ability to deliver and receive is ok in my view. A speculative derivative between a financial interest and another financial interest on a subject that both have no physical interest in is simply price manipulation. Pure uncovered financial derivatives are gambling with public assets.

I can't answer on your other points as you just spew ideology but offer neither solutions nor consistent recipes. Go back to worship Friedman and Rand. They got us here, think they will get us out?

Posted by: b | Oct 8, 2008 3:44:41 PM | 27

all paulson has to do is stutter his staments & the dow goes down. perhaps he should read king lear from the podium

Posted by: remembereringgiap | Oct 8, 2008 3:45:50 PM | 28

“The value of a credit depends not on the existence of any gold or silver or other property behind it, but solely on the "solvency" of the debtor, and that depends solely on whether, when the debt becomes due, he in his turn has sufficient credits on others to set off against his debts. If the debtor neither possesses nor can acquire credits which can be offset against his debts, then the possession of those debts is of no value to the creditors who own them.”

snippet, from M. Innes. Banking Law Journal, May, 1913.

http://www.ces.org.za/docs/what%20is%20money.htm>link

:) nothing new under the sun...

/and down it will all go/

Posted by: Tangerine | Oct 8, 2008 3:51:58 PM | 29

Again on the house destructing.

My plan would not be to prop up house beyond their long term value. The plan is to destruct enough excess supply to prevent a fall beyond long term reasonable value. The economic advantage of that is obvious. Any drop beyond reasonable values develops into a down spiral with huge economic and social consequences. To prevent that a decent investment to buy up houses in foreclosure and to destroy them makes sense.

If this is combined with structural changes like Helena envisions, destroy complete exurbs, resettle the people in semi dense areas, it is a social profitable one.

Posted by: b | Oct 8, 2008 3:53:00 PM | 30

B, I don't think that would be practical, at least in the US.

If the situation, say, in California resembles the rest of the nation, the land utilized to build those houses has been irretrievably damaged for any other use, save industrial. Topsoil has been carted off, the terrain has been denuded and leveled, concrete has been poured to form cellars and slabs. When I consider what it takes to raze a house or two in order to expand parkland, it is a very expensive undertaking.

Secondly, homeowners living adjacent to the government-owned structures would most likely file suit for destroying property values. Whole subdivisions would have to be purchased and razed; homes of those who still lived in them would need to be seized through eminent domain proceedings.

It's interesting that states with strict land-use policies have generally suffered the least from the "bubble". Oregon, in particular, has a rather elaborate set of laws that limit the extent to which a city can expand its boundaries and further designates land for timber or exclusive farm use. The laws are a constant source of bickering and I wish they were stronger, but they have served a positive purpose. But then, Oregon is strangely liberal state--it has no sales tax, disallows self-service at gas stations and has a legal requirement for a balanced budget.

Posted by: Obelix | Oct 8, 2008 4:50:57 PM | 31

yes, b

if anthing is certain - what was shat out of the chicago boys in the sixties - that bore its evil fruit under the fascist dictatorship of the murderer pinochet & washed all over the world - is finished. completely fucking finished

all the game theorists will have to go blow out their indicible brains in some public toilets in the middle of some tent city with their gold plated berretas

it is now the night of the macroeconomists

karl marx & his pal freddie engels had the answer to all this long ago

Posted by: remembereringgiap | Oct 8, 2008 5:03:24 PM | 32

Helena, your dream of re-woodsifying the suburbs, and b's endorsement of it just above, is nice and sensible but still nothing but a dream. As many of us watched the exurbanisation of DC for the past 40 or so years, we had the very same thoughts. True of other cities too of course but Washington is the best example, bulged unstoppably by massive expansion of revenue and payroll and contractors...

Here is the reason it won't work: money. My perspective is from a smaller city about 200 miles SW of DC, just outside as it happens, of the expansion ring limit. We have grown very slowly or not at all; real estate is still cheap. There are still nice big expanses of open space, woods and fields, inside the city limits. But of course the developers want that acreage, to follow the northern trend and pave it over for profit.

I suspect we have now missed the bullet; can't imagine anyone no matter how jaded could put up cash now for more building, however our esteemed local planners have so far cast a blind eye at any downside risk (and degradation)to the city, in favor of some promise of increased tax revenues. This is what happened in Fairfax, Manassas, Warrenton, many other towns within driving distance of DC, which saw that immense influx of house-hunters in their quaint little country towns. Now they are chock full of bigbox stores, stacked townhouses, pavement and cars.

The flow may be slowed, but it cannot be reversed because money is king; you will rarely/never find a city council or a planning commission which is immune from favoring the moneyed interests, which naturally use all the influence they can muster to set themselves up as beneficiaries of public policy.

And lastly, one of the core causes of all this expansion/congestion is too many people in one place. True of many large cities now. Can't be fixed by making new rules for habitation.

Posted by: rapt | Oct 8, 2008 5:06:05 PM | 33

what would be a 'compelling' story, what is within their "bailwick", what would be a "gamechanger" - would be at high noon in wall street & in the city of london - is to summarily execute profiteers & their shills - & to broadcast it on an enless loop for a day or two - in much the same way - that they murdered saddam hussein

that might unclog the system

Posted by: remembereringgiap | Oct 8, 2008 5:09:40 PM | 34

For the record Rgiap, it was one of Saddam's doubles who was hanged, while the big man himself was whisked off to Belarus I think it was.

Posted by: rapt | Oct 8, 2008 5:19:19 PM | 35

Lear: Who is it that can tell me who I am?
The Fool:Lear's shadow.

I was wondering where you were r'giap, so very glad you were able to check in my friend.

Posted by: Uncle $cam | Oct 8, 2008 5:25:36 PM | 36

b, you sound as manic-depressive as Cramer.

Heard on the bus: "Yeah, it's the first time in twenty years he's been out of a carpenter job. No, he doesn't want to commute. I'm sure something will come along, it usually does." And so it has!

Saw not one, but four painter vans from the same company racing toward an office development, and saw not one, but four tag-along gravel trucks, fully loaded, heading the same way. It must have been a commercial financing breakthrough!!

There's commercial funds available everywhere! The Fed isn't addressing any longer the loan and liquidity problems from the residential mortgage mess, they're bailing out the WS casino players who took a haircut betting on commodity plays and writing phony CDSs!

That round-tripping diversion of Fed funds from their original stated intent is, I believe, known as "defrauding taxpayers" or "grand larceny",
although, if you pre-emptively steal their money as an "economic crisis" instead of waiting for it to trickle in as taxes, guess it's not fraud.

What is word?... Bushiting? Hallibanery?

It's a fraud!! A totally engineered economic fraud, stealing upwards of $4T away from mortgage finance resolution towards covering $54T in CDSs.
It's a diversion!! A smoke screen! It's like pledging $10B to Afghanistan then diverting that money pot to KBR Hallibani's in Iraq, which they did, only now that they've perfected "rounding the corners of the square", and now that they've "repeated a lie often enough", everyone believes the End is Near, and is willing to throw any amount of public debt obligation against private loss, approaching the level of our soon *unfunded* SSTF.

It's as though Hitler figured out a better way to attack Poland was to scream over and over "!die Russen gekommen bestimmt!", until all the Poles fled to Germany, then the Nazis just waltz in and help themselves to the now unpopulated larder.

Cleverly Rovian in it's simplicity, this Sicherheitsleistung, and those are the best most convincing lies, the ones which contain an element of truth, and which require forceful, rapid decision or 'the sky will fall'.

It's just business! They won, we lost! Get over the theft of your SSTF! Life as perpetual wage-slaves in a perpetual war economy will now resume.

Posted by: Gerry Mander | Oct 8, 2008 5:39:11 PM | 37

It's very refreshing to hear an honest politician.

Posted by: Uncle $cam | Oct 8, 2008 5:52:38 PM | 38

Hey b, I don't know if this will make you feel any better, but I kinda like your idea of destroying vacant and abandoned homes as a way of slowing down the fall in home prices. But I think we first oughta cannibalize these homes for parts prior to destroying them. Then we can used these cannibalized parts to restore homes that are worth saving.

Posted by: Cynthia | Oct 8, 2008 6:33:52 PM | 39

down,down,">http://money.cnn.com/2008/10/08/news/companies/aig/index.htm?cnn=yes">down,down, down - bring out the tumbrils in manhattan

Posted by: remembereringgiap | Oct 8, 2008 6:40:21 PM | 40

Cynthia #39--

You say:

"But I think we first oughta cannibalize these homes for parts prior to destroying them."

This is already being done. In high-foreclosure areas, (illegal) salvage gangs go in after the residents have been evicted and strip wiring, plumbing and fixtures. The value of the house drops below zero while the town or city tries to find someone to stick with the task of tearing down the empty shell.

The effect on neighboring property values can be imagined, as can be the resulting cascade of foreclosures and jingle-mail (walking away from your property when your mortgage exceeds property value).

A typically American solution to the typically American problem of excess housing stock.


Posted by: Gaianne | Oct 9, 2008 3:44:14 AM | 41

Excerpt from Pasolini's Salò, or the 120 Days of Sodom

Posted by: Uncle $cam | Oct 9, 2008 3:57:33 AM | 42

Insurance Hearings:AIG spent $500K @ resort AFTER BAILOUT

See my above #42 for my comment on this...

Oh, and Have a happy 99 Cent Store Christmas, kiddies!

Posted by: Uncle $cam | Oct 9, 2008 4:46:28 AM | 43

I kinda like your idea of destroying vacant and abandoned homes as a way of slowing down the fall in home prices.

What a great idea! Destruction, that's the way! Gotta keep them asset values high somehow. Shit, if only we could manage a real war, we could get the shit bombed out of all that excess stock.

And while we're at it, why not dump a few boatloads of bananas in the ocean. That ought to do good for banana futures.

Posted by: DM | Oct 9, 2008 7:29:36 AM | 44

The American Housing Survey is conducted every 2 years by HUD. Density in housing has been going down steadily, from 2.61 persons per household in 1991 to 2.54 in 2005. If the 1991 density were maintained for the 2005 population, there would be an excess of 3 million houses; if we were to restock the 2005 houses to 1991 density, it could handle 8 million new people. I bet 2.54 p/h is low by other countries' standards.

An interesting recent piece on building deconstruction.

Posted by: Browning | Oct 9, 2008 12:49:14 PM | 45

@Browning: Do you have any data on area (i.e. square feet) per person in 1991 versus 2005? I'll bet that has risen dramatically also, if my casual observation of new construction is any measure.

My wife and I share a house with about 2100 sqare feet, which I was surprised to find is considered "modest" mowadays. There are neighbors' homes around me where two people share more than 7000 square feet, with all of the attendant inefficiency and energy consumption that implies.

I grew up with 4 siblings in a home with 1200 square feet of floor area. At no time do I recall feeling "cramped", although I never did get a bedroom to myself.

Posted by: Obelix | Oct 9, 2008 2:04:15 PM | 46

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