Billmon: Things Become More Serious

September 23, 2008

Billmon:

We may not be there yet. Both the dollar and the commodity prices could stabilize, at least temporarily — particularly if the Cheney Administration (or should I say the Goldman Sachs Administration?) and the Dems in Congress can quickly reconcile their differences and ram the MOAB through the legislative colon (and up ours). Further disasters are not inevitable — or at least, they don’t have to happen all at once.

But if and when it comes, disaster (the kind that turns financial panics into searing generational memories) will unfold in a string of events that will look very much like what we saw in the markets today — only on steroids.
Things Become More Serious

Posted by b on September 23, 2008 at 15:02 UTC | Permalink

Comments

This may be a situation where no scenario–not even the most inventively pessimistic scenario–pertains to the situation. It may be a moment–or not even a moment–where clarity and fresh thoughts have nothing to offer, where no amount of thinking can produce helpful insights, no level of sophisticated modelling can describe or situate the elements in movement.
Less a universal darkness than a universal blindness, with life being mere survival, and survival being mere luck.
Surely this has happened before, but it hasn’t happened to me, and so I don’t know how to be afraid. Perhaps I’ll learn….

Posted by: alabama | Sep 23 2008 15:44 utc | 1

@1- Perhaps I’ll learn….
I think it’s prudent now to yell fire in the public theater. No one is telling people to run for the exits. Everyone is saying, ‘Sit tight, don’t panic, we’re working on a solution.’ 401k’s and other investment vehicles are evaporating. The average person doesn’t know what to do and is just sitting there smelling smoke.
That extra 1% they were getting from having their money in a money market fund rather than a savings account seems like more of a joke than ever. Speaking of which, after a bloody interval, maybe the simple standard of banks lending out real deposited money will become the norm again.

Posted by: biklett | Sep 23 2008 16:27 utc | 2

Coincidentally, just saw this story after I wrote the above…
Banks and customers show more interest in checking accounts

Posted by: biklett | Sep 23 2008 16:50 utc | 3

Billmon’s article was great, but I think even he has drunk the American exceptionalist kool-aid. “Unlike, say, Mexico or Argentina, there is absolutely no chance the US will be forced into default because it can’t service or roll over its debts.”
Absolutely NO chance? That’s quite a statement. There is ALWAYS at least some chance that something can happen. It may not be likely but it’s certainly there. Personally, I think it’s inevitable that the US will eventually default. If you run the numbers and follow the various possible scenarios to their logical end there doesn’t seem to be any alternative. In fact, I think we’re in the process of doing that right now. At this point, the US is no longer able to pay its debts without further borrowing, which technically means default. I’d go even further and suggest that there is a real possibility that the federal government could even collapse, the way the Soviets did.
An interesting question to discuss is whether the world would rather see the American economy recover or its military-industrial complex dismantled. I think Americans are very severely underestimating just how frightened people around the world are of the American military and what they would sacrifice to bring it down. I also think that Americans are severely overestimating just how important they are to the global economy at this point. The world can survive without America. Nothing lasts forever.

Posted by: mike | Sep 23 2008 16:56 utc | 4

it’d be interesting also to see the current figures on purchases of guns in the states – running out of time before the 3rd infantry division’s 1st BCT gets settled

Posted by: b real | Sep 23 2008 16:57 utc | 5

@#5
That used to be the job of the National Guard, before they started shipping ’em overseas.
from b real’s link: “We’ve been all over the world during this time of conflict, but now our mission is to take care of citizens at home … and depending on where an event occurred, you’re going home to take care of your home town, your loved ones.”

Posted by: catlady | Sep 23 2008 17:51 utc | 6

wrt the 1st BTC & our formalizing facism, chris floyd just put up a related post that includes a section on Bringing It All Back Home

Posted by: b real | Sep 23 2008 18:12 utc | 7

No one should lose sight of the fact that Hank Paulson represents crony capitalism at its worst. After all, he’s a Goldman Guy and Treasury Secretary all rolled into one!

Posted by: Cynthia | Sep 23 2008 19:11 utc | 8

in awe at the scale of the catastrophe
it is a wonder leaders do not piss on bush in turns at the general assembly – it would be one form of exorcism

Posted by: remembereringgiap | Sep 23 2008 20:00 utc | 9

@mike
two words: printing press

Posted by: ran | Sep 23 2008 23:15 utc | 10

“Personally, I think it’s inevitable that the US will eventually default. If you run the numbers and follow the various possible scenarios to their logical end there doesn’t seem to be any alternative.”
Yes, agreed.
The USA government itself reported that its obligations had gone from 20 Trillion in 2000 to 65 Trillion in 2006. It should be over 75 Trillion by now. There is no way to pay off that kind of debt unless you aggressively use inflation. I would prefer to see the USA just repudiate the debt and start over; as in the long run that would be the best for the citizens. Would anyone loan money to the killing empire after that? I would hope not.

Posted by: Buckaroo | Sep 24 2008 9:35 utc | 11

rgiap
i just spit tea onto my computer.thank you i needed that!

Posted by: onzaga | Sep 24 2008 12:41 utc | 12

Technically, using the printing press to pay the debt might not be a default. But the end result might be similar.

Posted by: a swedish kind of death | Sep 24 2008 23:44 utc | 13

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