Moon of Alabama Brecht quote
October 03, 2008

The Rescue Money Flow

"Every economy rests on a credit system, which means it rests on the erroneous assumption, that the other will pay back the borrowed money. If he does not do so, a so called support operation is initiated, through which all, except the state, profit well. Such a bust can be recognized from the fact that the population is asked to have trust. By then it likely has nothing else left."

Kurt Tucholsky: Short Abstract on the National Economy (Kurzer Abriss der Nationalökonomie), 1931, (my translation)


The Paulson plan, aka TARP or the bailout, may well get through the House today. Paulson will then have loads of money to spend until January 20, 2009. We can only hope that the satirist Tucholsky is wrong and Paulson will work for the benefit of all and not only a few.

What has been little noticed is that the action the Paulson plan prescribes is already happening by abusing the Fed balance sheet.

A friend asked me to deliver a simple short talk today about the recent Fed action and the Paulson plan. I came up with a few simplified charts to explain what is going on. They concentrate on what changed within the system.

The usual monetary flow looks somewhat like this:


Banks buy treasuries (debt notes) from the U.S. Treasury. The banks give those treasuries to the Fed as reserves holding and in return for cash. They now have money to lend to the economy. In a fractional reserve banking system, the banks can lend out some 10 times their reserves. They do so against some collateral from the borrowers.

The Fed's balance sheet holds mostly treasuries, bills and notes, as assets and the dollars it handed out as liabilities. Such was still the case in January. $850 billion of sound stuff on each side.

Now some of Tucholsky's 'others' decided not to pay back the money they borrowed from the banks and it turns out that the collateral the banks received has less value than assumed. A bank in total may have lend out ten times as much as it has as reserves. A loss of ten percent of all loans it made would eat all of its reserves and it would have to shut down its business. It needs to get rid of the bad collateral and/or find fresh reserve capital to continue to lend.


When this happened earlier this year, the Fed stepped in and offered to take Mortgage Backed Securities and other dubious collateral for renewed cash lines. It did not print more money, which would have been inflationary, but exchanged half of its valuable treasuries for "bad" assets of dubious value. One can see this in its September balance sheets as 'term auction credit' and 'other Federal Reserve assets'.

It soon turned out that this was not enough and that the banks needed to get rid of much more dubious 'assets'. The banks stopped lending to the real economy. They simply had not enough untainted money left.


Here Paulson stepped in. He wrote additional federal debt notes and sold those to China. The Treasury then lend the money to the Fed which used it do buy "other assets" from the big banks and broker/dealers. Within a month the Feds balance sheet expanded by an unprecedented $650 billion dollar.

But such a balance sheet expansion can not go on indefinitely. As the Economist explains further expanding the Fed balance sheet may eventually push the fed fund rate to zero. It would essentially make the Fed impotent of setting and keeping inflation targets. A problem Japan fought for over an decade.

To not further damage the Fed, Paulson came up with the TARP plan. He wants the authority to continue directly what over the last weeks has been done through the balance sheet of the Federal Reserve.


Paulson will lend money form China and use this to buy whatever he likes to prices only he may determine from any financial institution he thinks deserves that gift. (The Fed, by law, is restricted in that and had to buy the "other assets" at somewhat realistic prices from well know folks.)

The not very hidden real Treasury intend is to buy "other assets" for too high prices and to thereby re-capitalize the banking system. The amount which Paulson will be able to spend is only limited by the current legal debt ceiling. That gives him some $1.5 trillion for now. What happens after that is gone down the drain is the problem of a different administration.

Eventually the Fed will have to get rid of the "other assets" too and will have to transfer them to Treasury to pay for the loan it got.

Will the TARP plan work? It will take some bad assets off the books of the banks. But it will also have some terrible unintended consequences, most of them inflationary. An outright nationalization of the banks, like Sweden did a while ago, would likely have been much more effective. Direct lending to Main Street could help a lot more. Maybe the next 'support operation', which certainly needs to and will come and be even bigger, will go into those directions.

Within the international view I see two issues. The lenders Paulson needs for his plan, China, the Gulf and others, will have political conditions for such a huge endeavor. China will ask for a free hand on Taiwan, but what will the Sheiks ask for?

The Fed has done the above in cooperation with other central banks and set up hundreds of  billions in swap lines with these. This has some interesting currency effects. The Euro dropped pretty hard. I have yet to understand by what chain of effects it did so. Any idea?

(Bret Setser's blog Follow The Money is the usual place to go to learn about the international money flows, but even as he calls this a 'currency crisis' he has not yet explained why.*)

* Update: See Bret's comment here

Posted by b on October 3, 2008 at 17:16 UTC | Permalink


The House just voted for the (continuing of) the bailout.

Dem: Yea - 172 - Nay - 63
Rep: Yea - 91 Nay - 108
Total: Yea - 263 Nay - 171

Posted by: b | Oct 3 2008 17:28 utc | 1

I left a crucial "Not" of my post; I meant to say that to date, the credit crisis has NOT turned into a currency crisis. My apologies.

Posted by: bsetser | Oct 3 2008 17:54 utc | 2

End of the Republic? - Its not a free market when you take out the risk? - END OF EMPIRE?

Posted by: gus | Oct 3 2008 18:02 utc | 3

@2 - Thanks Bret for clearing that up.

So this is not yet a currency crisis. I agree. At a point, I think, it will be a huge one with inflation tanking the US$ vs. commodity currencies and hard to defeat.

Posted by: b | Oct 3 2008 18:12 utc | 4

The Euro dropped pretty hard. I have yet to understand by what chain of effects it did so.Any idea?

Chuck Butler has an interesting theory for this:

One of the things we've learned this week is that the European banks are not getting to go Ollie, Ollie Oxen Free, on the holding of toxic waste debt... And since they are U.S. issued mortgage bonds, the trader that called tells me that they need to have capital reserved in U.S. dollars. Well, usually, these banks use LIBOR for this funding... But with the credit crunch going on all over, LIBOR rates have gone through the roof. So... Looking for alternative means of raising capital, the European banks have turned to the euro / dollar swap market... Selling their euro reserves and buying dollars.

Posted by: SimplyLurking | Oct 3 2008 18:17 utc | 5

it is absolutely not the end of the crisis

it is however the definitive end of the empire

what is not surprising though is the way the whores of the media follow each & every order from the republicans - the same sheep bleating their fear all this week - telling us the sky was going to fall in if the bailout was not voted are now parsing it in a manner the implies they have serious knowledge. look, they do not even have dumb knowledge - they wouldn't know a fact if it hit them directly in the face

they will direct the people of those united states to enter their most degraded decline with their depraved discourses

a people that permit their hearts to ne hollowed out by this stupidity must face the bill that is being laid on the table

it is nothing less than a badly made horror film

Posted by: remembereringgiap | Oct 3 2008 18:50 utc | 6

@SimplyLurking - possible, but I'd like to see some data.

Roubini: Financial and Corporate System is in Cardiac Arrest: The Risk of the Mother of All Bank Runs

This is indeed a cardiac arrest for the shadow and non-shadow banking system and for the system of financing of the corporate sector. The shutdown of financing for the corporate system is particularly scary: solvent but illiquid corporations that cannot roll over their maturing debt may now face massive defaults due to this illiquidity. And if the financing of the corporate sectors shuts down and remains shut down the risk of an economic collapse similar to the Great Depression becomes highly likely.

So what needs to be done? Even several hundreds of billion dollars in emergency liquidity support to the financial system by the Fed and other central banks in the last week alone have not been enough to stop the seizure of liquidity in interbank markets and the shut down of financing for the corporate sector as counterparty risk is now extreme (no one trusts any more in this crisis of confidence even the most reputable and trustworthy financial and corporate counterparties).

Thus, emergency times where we are at risk of a systemic meltdown require emergency measures. These include:

[lots of unorthodox, but necessary nasty stuff ... like the direct Fed lending to Main Street proposed above ...]
The suggested policy actions are extreme and radical but the times and conditions in financial markets and the corporate sector are also extreme. Thus, to avoid another Great Depression radical and unorthodox policy action needs to be taken now both in the US and in other advanced economies as the credit crisis and liquidity crisis is now becoming virulent even in Europe and other advanced economies. This credit crisis is both a crisis of confidence and illiquidity and a crisis of credit and solvency. But while the insolvent institutions should go bust we have now reached a point where many financial institutions and now non financial firms may become insolvent because of pure illiquidity; and this would lead to an extremely severe economic contraction similar to an economic depression rather than a mild recession. At this point the US, the advanced economies (and now likely even some emerging market economies) will experience an ugly recession and an ugly financial and banking crisis regardless of what we do from now on. What radical policy action can only do is preventing what will now be an ugly and nasty two-year recession and financial crisis from turning into a systemic meltdown and a decade long economic depression. The financial and economic conditions are extreme; thus extreme policy action is needed now to save the global economy from an ugly depression.

Roubini is right here to sound the alarm loudly.

Still I believe that the economic consequences, very, very nasty as the will be, will be dwarfed by the political consequences. Those will result in wars if the political actors do not get sanity into the whole process of global deleveraging and concede cooperation under different rules.

"The American way of life is not negotiable" folks (Cheney quote) will push for a big war. That will be a massive populist movement of people ripped off in this downturn.

There are other zones of danger. The Gulf with 90% foreigners in the population, many held as kind of slaves. Pakistan/India/Bangladesh with all the ecological/economic/ethnic problems they have. East Europe which has run on "free market" philosophy for the last 15 years and will crash very, very hard ...

Posted by: b | Oct 3 2008 18:51 utc | 7

B: And if you keep in mind that the Gulf states' slave labour actually is notably made up of people from Pakistan, India and Bangladesh (as well as from Indonesia and Philippines), you have the potential for a nice cross-over, with the S Asian behemoths being possibly involved in the Gulf mess.

Posted by: CluelessJoe | Oct 3 2008 19:10 utc | 8

Bank loans, to individuals and businesses and even for real estate have not ‘dried up’ *so far* (mid sept.)>forbes

Posted by: Tangerine | Oct 3 2008 19:11 utc | 9

@CluelessJoe - yep - though they have no Navy to go there and the land way is blocked by Iran. But the governments will make a stand and their folks in the Gulf may react.

The more I think through the political issues of a deep world wide recession, the worse the scenario gets - sigh ...

Posted by: b | Oct 3 2008 19:14 utc | 10

Then, of course, there's the Methane Time Bomb, as if matters aren't going to be bad enough.

The culling will commence, purposively, or not.

Posted by: Wasilla Meth Addict | Oct 3 2008 19:30 utc | 11

@Tangerine - mid Sept. is long gone: States, Roiled in Credit Crisis, Face Lower Revenue

U.S. states and municipalities from New York to California are facing deteriorating finances as investors shun their bonds in a credit market averse to all but the safest debt and a slowing economy erodes revenue.
Tax-exempt borrowers this week sold less than 15 percent of a typical week's sales, data compiled by Bloomberg show, and their costs to borrow long term soared to the highest in eight years.
Those short financed municipals have a big problem as well as the short financed commercials ...

The "cardic arrest" now seems real. Yesterday, I only thought it was likely. Two weeks ago, possible, four month ago unlikely. Maybe I am not pessimist enough ...

Posted by: b | Oct 3 2008 19:31 utc | 12

the sharks are now feeding upon themselves.

don't know whether to grab popcorn or Quaaludes

who knew it would end this way?

Posted by: dan of steele | Oct 3 2008 19:44 utc | 13


what a sordid subspecies they are

Posted by: remembereringgiap | Oct 3 2008 20:00 utc | 14

There's a new sheriff in town. The American Congress has appointed a dictator above all of us, above even the current and next President. Above our Constitution. Above all laws.

This is the Fourth Reich. We have entered into the Permanent Emergency, where power rests with one man, and one man only. The Emergency Without End described by Hitler's legal philosopher, Carl Schmidt. Rule by Exception. The only rule is that there are no rules, just the tall man with life or death power over every other soul, and over all ventures. The no holds barred, do the right thing rule of Marshall Matt Dillon of Gunsmoke fame. Professor Leo Strauss would be ecstatic were he still among the living.

The tall man with a badge, standing in the middle of Wall Street is our Fuehrer. Hank Paulson is in charge of the United States, personally and completely. You can dance to his tune, or down you go. He can neither be restrained nor driven, except by his own benevolent intentions. He keeps his own counsel. No one knows his plans, no one knows his mind. He works in mysterious ways. Everyone waits to see what the tall man will do.

This is the Fourth Reich. This is the State before any and all persons, before any and all freedoms. This is the end of America, of government by consent and representation. The American idea has been shelved.

The tall man will entrench a new economic order here in America, and around the world, entrench it so deeply that it will last a thousand years.

Or, it will last only a few years. Reichs are like that. Even our Fuehrer knows not what comes tomorrow.

Posted by: Antifa | Oct 3 2008 20:11 utc | 15


tommorrow he will go back to working for goldmann sachs - in fact he is working for them now in the same way that his evil twin cheney still works for halliburton

we know tho that it will not be a thousand year reich because they are so fucking stupid & there is an absolute myopia - an absence of vision

it may not even last a thousand days - the duration of the siege of leningrad - which americans will become more familiar than they ever wanted to be

& yes, those thousand days will be more full of the strauss's, the schmidts - the whole range of hate filled scum who imagined themselves kings of philosophy but whom history has revealed as being the slime that collects on the stagnant waters of late capitalism

Posted by: remembereringgiap | Oct 3 2008 20:28 utc | 16

It is a mistake to imagine that Paulson was rushed to his new position as Financial Dictator in order to stave off an emergency.

The three-page bill creating his private, Fourth Branch of Government was drafted at the White House months ago, probably by David Addington, and only brought out when it became clear to Karl Rove that McCain is not going to be the next President.

The intentional sinking of several flagship investment and commercial banks, while favoring Goldman Sachs, JP Morgan, BoA, and Citibank with Federal funds galore is part of a program of consolidation absolute financial control of America in the right hands.

Introducing Ausnahmezustand, or Rule by Exception, has been the motif of the Cheney Administration from the first day he held office. Laws don't apply to Dick Cheney and Friends, because the situations he deals with are Exceptions.

No one has challenged the Cheney Administration seriously on such claims, so there was no reason for him not to scuttle the incoming Democratic Presidency ahead of the election, when Congress was still amenable to scare tactics.

Now it is time for some big adjustments in America's economic structures, all dictated -- not discussed or decided or reviewed -- but dictated by Hank Paulson.

Congress no longer approves budgets. The Executive no longer prepares them. They both get their marching orders from the dictator atop a private banking cartel, Hank Paulson.

Cheney and Friends have never had any intention of giving up the power they have claimed.

No one has seriously challenged them on any power grab or crazy ass explanation or foreign adventure, ever.

Why would they suddenly glance at the calendar, say, "Oh, hey I guess our term is up soon!" and give it all back.

Nothing of the democracy we once knew, prior to January 20, 2001 is coming back to us. If the idea of America, if the idea of real self-government ever comes to be again, it will be anew, not a restoration of the old.

That is busted, all over the road.

Posted by: Antifa | Oct 3 2008 21:08 utc | 17

rgiap #6, why do think we confront an "american" empire rather than the famous international bankers?

Posted by: | Oct 3 2008 22:22 utc | 18

#18 is me.
To add to, re rgiap #16

we know tho that it will not be a thousand year reich because they are so fucking stupid & there is an absolute myopia - an absence of vision

How do the former owners of the Penninsular and Oriental Steam Navigation Company, who sold (transaction run by Rothschild Banks) worldwide ports contracts to Dubai gov show myopia? They know current coasts will go,>ports will move inland , new contracts, yay.Of course for a smaller population, but after all these myopics have told us for 40 years that 80-95% fewer "useless eaters" was desirable/necessary.

Coastal disappearance alone won't do 80-95% (if indeed desired, not just lied about), but revived 1918 flu, famines, out of town troops, FEMA (in US) camps, various disasters will be blamed on myopia by those allowed to live and toil.

1000 years? No, I don't think they expect that, further physical catastrophes await (axis shift after weight of former East Antarctic ice spreads worldwide via oceans perhaps?), but they'll have a lot of fun in the meantime.

Posted by: plushtown | Oct 3 2008 23:02 utc | 19

turn about is fair play -- bsetser is "Brad Setser" not "Bret Setser". One of my brothers is named Brett, but it is spelled with two tts and he doesn't blog about international finance.

Posted by: bsetser | Oct 3 2008 23:20 utc | 20

Very helpful and clear analysis b. Thank you.

Powerful stuff, Antifa.
But until the faces behind the curtain are known, what is to be done?

London Banker had a bloody good piece on this, speaking as a former central bank regulator.

London Banker


proscribe |prōˈskrīb|
verb [ trans. ]
forbid, esp. by law : strikes remained proscribed in the armed forces.
• denounce or condemn : certain practices which the Catholic Church proscribed, such as polygyny.
• historical outlaw (someone).

Is that what you meant?

Posted by: John Cleary | Oct 3 2008 23:29 utc | 21

to #19 add genetically focused diseases ("marching Chinese" fall in tracks, Japanese, Koreans and most Indians are already underwater), other bio/chemical/microwave warfare, HAARP fun, (whatever the hell HAARP's full functions are), many delights to follow from the non-myopic.

Posted by: plushtown | Oct 3 2008 23:33 utc | 22


to put it brutally, the american empire is the einsatzgruppen of international capital. if you'll forgive me - i've haf this out with slothrop since the inception of this site of b's - & there was nothing, absolutely nothing that slothrop could bring to the table that would convince me that international capital while existing was purely an exculpatory term to hide the crimes of empire

while international capital are or have been the benificiaries - the american empire is the principal beneficiary. u s imperialism is also the armed wing of capital

i was convinced that the imperialist project of invading iraq was the the beginning of the end of the us empire & sd so here - & nothing that has passed since then has changed what i think - in fact the defeat of the empire has in this last three year, underlined with this unbelievable concentrating of wealth they call a bailout - is obvious for even the blind to see

Posted by: remembereringgiap | Oct 3 2008 23:34 utc | 23

rgiap, #23, agree that US power is declining, just think that's a "bust-out" (mafia term), and that all current historical events are deliberate, not mistakes.

Like einsatzgruppen proper, all US killers are functionaries, not decision makers.

there was nothing, absolutely nothing that slothrop could bring to the table that would convince me that international capital while existing was[not]purely an exculpatory term to hide the crimes of empire

Why not? If money rules, why would thos who rule money not rule the criminal actors? I. e. Charles Manson is more guilty than his controlled feebs.

Posted by: plushtown | Oct 3 2008 23:52 utc | 24

why would thos who rule money not rule the criminal actors

why would criminal actors not want to rule the money?

Posted by: annie | Oct 4 2008 0:06 utc | 25

can't, owe money/position and are blackmailable.

Posted by: plushtown | Oct 4 2008 0:46 utc | 26

So for how long the economic catastrophe has been postponed by this bailout? Can anybody say?

Posted by: vbo | Oct 4 2008 2:27 utc | 27

The Euro dropped pretty hard. I have yet to understand by what chain of effects it did so. Any idea?

Now that you are taking snapshots of the dissolution of your fabled American "empire" tumbling over "the cliff," you notice you're tugged into the gyre. Oh my. What is a neo-Weimarist German exceptionalist, occasional putinphile like yourself gonna do?

It's time to read The Gay Science, I guess.

Posted by: slothrop | Oct 4 2008 2:54 utc | 28

@Brad - @20 - sorry, my sole fault.

@John - @21 - I meant prescribe, corrected above, thanks.

Posted by: b | Oct 4 2008 4:11 utc | 29

Now that you are taking snapshots of the dissolution of your fabled American "empire" tumbling over "the cliff," you notice you're tugged into the gyre. Oh my. What is a neo-Weimarist German exceptionalist, occasional putinphile like yourself gonna do?

Sloth - You seem to believe that I thing or thought Europe would decouple from the downturn. Please find me the comment or piece where I ever said so. The rest of your comment is nonsense and, again, ad-hominem. I will again delete all your comments if you keep up that style.

Posted by: b | Oct 4 2008 4:20 utc | 30

London Banker linked by John above:

America is now a centrally planned economy where the Treasury will determine which firms survive and prosper through allocation of scarce capital to an undercapitalised financial sector.

Clearly what is going on here has nothing to do with kick starting the credit markets or stabilising the equity markets or restoring depositor confidence in banks. (Treasury official: “No provision in the legislation that mandates re-lending.”) What is going on here is a blatant attempt to provide government funds to a select cadre of firms (not all banks) which are chosen to be the survivors feasting off the carcasses of their less fortunate and less well-connected brethren as the downturn intensifies in the years to come.

The crash in equities will still happen. The debt deflation of the economy leading to mass commercial and consumer credit defaults will still happen. The collapse of many national, regional and local financial institutions will still happen. The bankruptcy of many municipalities and shortfalls in state budgets will still happen.

This bill is about engineering survivor bias to friends of the Bush administration so that they profit disproportionately from the collapse of these markets using the funds provided by the taxpayer via the unreviewable and unconditional authority of the Secretary of the Treasury.

Posted by: b | Oct 4 2008 6:55 utc | 31

US to give Taiwan $6.8B in arms, and nuke deal with India.
That puts the kaboosh on so-called quid pro quo for loans
from China and Saudi, demanding anything other than markets,
so let's leave that tin-hat theory off the table in future.

Barney Frank seemed upbeat tonight credit pipeline is already
being freed up, with Fed bid prices setting a mark-to-fakeit
within the next two weeks, then somehow by magical thinking
4,000,000 pieces of toilet paper will be processed by Xmas,
so that the biggest retail season of the year doesn't bomb,
and the New Year hires don't turn out to be 60-day notices,
which of course is exactly what will happen unless they free
up another enchanted pixie dust "economic stimulus package".

As for the rest, this morning at the train stop there was a
guy rocking hard back and front like Hasidim at the W'Wall,
don't know if he was kosher or k-razy, then this evening at
the train stop there was a rad bomber break dancing on meth,
don't know if he was slap-happy, or insane for the weekend.

With everyone glued to their cellphones, hoping there won't
be a bank holiday and Pay Day Loans will stay open later,
they make this post and your last one seem kinda myopic.
Sometimes it's better to just give it a rest, and lay low.

Posted by: Chan Ticleer | Oct 4 2008 7:11 utc | 32

Woman, 90, Shoots Self Inside Foreclosed Home

Posted by: Uncle $cam | Oct 4 2008 9:05 utc | 33

Animated timeline map of the expansion of>Walmart franchises in the U.S. Dollars to donuts, given the current meltdown, the same map will soon reproduce in reverse as "Large Warehouse Space" now available. Silver lining #1.

Posted by: anna missed | Oct 4 2008 9:28 utc | 34

"US to give Taiwan $6.8B in arms. Firstly give is not the verb that should be used. Sell is the word you need to use in reference to amerika and weapons. Amerika doesn't 'give' anyone the heat offa it's shit much less a net creditor nation such as Taiwan.

This would have been part of the negotiations with Premier Wen Jiabao that shrub had last week. At no stage has it ever looked like the Taiwan question would be settled militarily so Wen will be interested in things peripheral to the arms deal. Although the PRC won't want a repeat of the Hongkong debacle where the brits drained the Honkers state coffers dry on un-needed infrastructure projects that ran over budget employing companies allied with the english conservative party, they also appreciate that the Kuomintang crooks who illegally invaded and stole Taiwan from it's indigenous people in 1948 are unlikely to leave too much money available when the time for re-integration comes. However if amerika can get Taiwan to take arms in lieu of some of the billions it owes Taiwan, China may agree if doing so enables amerika to settle some PRC debts.

Once Wen was advised of what weapons were being sold, that they weren't junk and could be integrated into the PRC military when the time comes he may have decided it is in China's interest to give it the big tick.

China's problem with arms sales to Taiwan has always been that it isn't consulted. That seems to have changed since last week.

Of course they will still publicly make a song and dance about this, otherwise peeps esp Taiwanese peeps may wise up. I'm sure that some of Taiwanese elite, many of whom have family in the PRC elite know what' is going down, but the shit-kickers can only guess.

So Wen may have no in principle objection to some of Taiwan's resources being wasted on arms as long as China is kept in the loop and the rip-offs are kept to a manageable level.

Peeps tend to overlook that China is becoming Taiwan's biggest trading partner. China Taiwan trade has been growing at over 16% a year since 2003 and Hongkong is used as a sort of staging post to enable joint Taiwan/PRC corporate entities to be established.

Chinese/PRC integration is a foregone conclusion, a few helicopters and missiles won't change that.

Posted by: Debs is dead | Oct 4 2008 11:12 utc | 35

Oops should read Taiwan/PRC integration is a foregone conclusion.

Posted by: Debs is dead | Oct 4 2008 11:13 utc | 36


Fannie Mae forgives loan for woman who shot herself

Posted by: gus | Oct 4 2008 13:02 utc | 37

sleepy coding - oopps

Posted by: gus | Oct 4 2008 13:04 utc | 38

gus, just drop the last / from your url when preparing the link. It will work even now if you do just that after getting the "page not found" using your hyperlink in #37.

Posted by: dan of steele | Oct 4 2008 14:02 utc | 39

Hate be the forever pessimist but, that of little consolation as we both know that the so called "forgiveness" is more due to good P.R. than any genuine concern for Ms. Polk. One that they can point to for years to come. Well worth the sad deed to a property they will get when she does die.

Posted by: Uncle $cam | Oct 4 2008 14:29 utc | 40

You're entire shtick is "watch americans suffer. hehe." You are delighted to read the news of the day if it includes some disaster which might harm "americans." "I will take snapshots as I watch America fall over the cliff." hehe. That's the finest homage to decoupling ever uttered by you. You have on several occasions mentioned that the world doesn't depend on american consumption.

You deny anything, everything, because you're basically a dishonorable man. And anyone who in good faith disagrees with you is a stain on your little vanity project here.>Here.. And elsewhere. I could find more, if I could search your site. Years ago you promised to produce access to the content. But, of course, you didn't follow through.

But, I love this blog!

Posted by: slothrop | Oct 4 2008 15:33 utc | 41

@sloth - in the piece you point I out I solely write about currencies and inflation and how the Euro prevents the export of inflation from the U.S. to Euro-countries. The "de-coupeling" in there comes in a quote from Merkel, who even said "partitially decoupeling".

Find me something where I said that Europe would decouple from the current recession. I don't think I ever wrote such.

You're entire shtick is "watch americans suffer. hehe."

The 'shtick' here, (hehe, Sloth using German words?), if this blog has one at all, is the suffering of the world caused by american exceptionalism. I am sure I have written more on Iraq her than on the U.S.

Posted by: b | Oct 4 2008 15:50 utc | 42

You deny anything, everything, because you're basically a dishonorable man....I love this blog!

lol, jeez sloth, nothing like a little cheer to start my day!

Posted by: annie | Oct 4 2008 15:54 utc | 43

yr a funny fellow - a brittle mixture of the renegade kautsky & peter lorre in passage to marseille. you are the pivot(as ms palin sd)of marxist anit-anti-imperialism. while i think you are a good man - i think your arguments resemble dich cheney's if it was farted out through the frankfurt school

good for a giggle comrade but you'll be at barricades as the whole shithouse goes up in flames

Posted by: remembereringgiap | Oct 4 2008 16:18 utc | 44

tucholsjy is as pertinent today as he was back then. he was through the wicknedness that defend capitism & imperialism. wittgenstein's relationship with him -he helped him out financially many times - was one of the reasons given for suggesting that wittgenstein might have been a recruiter for the kgb. i hope so

Posted by: remembereringgiap | Oct 4 2008 16:30 utc | 45

Well, whatever, b. If your decoupling thesis was really only limited to currency exchange, then you can cross that off your fantasy list as well.>Here's as good a summary of the carnage as you're likely to find.

The most intolerable fiction over the past ten years concocted by Euro-theorists of all varieties has been the model of fortress europe withstanding the inevitable collapse of global finance. And so, haughty>John Gray is braying about his imagined vindication that empire is over. If the magic american empire were truly "over" then that would surely mean we could find regions of stability performing beautifully reformed versions of capitalist exploitation. Yeah, yeah. It rather appears the empire thesis has fallen on its ass.

You know, it wasn't so long ago continental Europe offered just enough grand theory to knock down the easily-circulated reifications of capitalist civilization. Such theory made a useful mockery of the bourgeois dreamworld: business cycles are inevitable, the chaos of production is unavoidable, there is no such thing as class. Now, all we get is snickering schadenfreude.

You watch. Very soon they'll all be bitching about america's unwillingness to intervene.

Posted by: slothrop | Oct 4 2008 17:01 utc | 46

To boil it right down: you euros, now that you are a happy "community" invented by the Marshall Plan, have an Unhappy Consciousness. You blame everone but yourselves.

Posted by: slothrop | Oct 4 2008 17:28 utc | 47

now now sloth - the marshall plan was enslavement by any other name

Posted by: remembereringgiap | Oct 4 2008 17:34 utc | 48

Glad to see John Cleary @ 21 linked to London Banker's post. I'll add Russ Winter wrote more or less the same thing two weeks ago, in more forceful language:

Massive Bailout? Hardly, a Massive Tar Pit Instead

Incidentally, about bank reserves, from what I can gather, this Kos diarist's agitation was unwarranted, but the fact was not disputed: Zero Bank Reserves That, in short, the bail out bill includes a provision that now makes it possible for banks to reduce their reserves against transaction accounts to zero.

Posted by: Alamet | Oct 4 2008 17:37 utc | 49

@sloth - so you still haven't found an example where I wrote about recession decoupling like you have asserted several times?

Your first link is to Noland - thanks - read that yesterday - read all his columns he wrote during the last five years - in detail.

John Gray by the way is right.

You assert: If the magic american empire were truly "over" then that would surely mean we could find regions of stability performing beautifully reformed versions of capitalist exploitation.

That's a-historic. The end of an empire is always a chaotic event. A 'region of stability' would be a sign for a new empire, not for the demise of an old one as you assume.

The end of the U.S. empire (if it was one in the first place, it was in historic measurement the shortest one I know of) will take ten years or more and will be globally very chaotic as a re-balance of power structures needs to take place. Some kind of international policy anarchy.

Interesting times ...

Posted by: b | Oct 4 2008 18:05 utc | 50

rgiap wrote: it is however the definitive end of the empire

Pekin Games. TV rights: almost 1.8 (or so) billion dollars; 900 million from sponsoring contracts. And more!

92% is distributed to intl sport federations and national olympic committees. The CIO keeps the remaining 8%. The doling out scheme has been unchanged since 1984.

But now the whole world is contesting unfair sharing - too much goes to the U S O C (us olympic committee) - some 310 million dollars, more than all the other 204 olympic coms. together!

“It is no longer morally acceptable that the whole world pays for the training of US athletes” D. Oswald, head of summer Olympic games, wrote, in an official protest to the CIO.

(from an article in Le Temps, Switz. 3 oct 08)

These are details that matter. Sloth might say I am animated by shadenfreunde.

Posted by: Tangerine | Oct 4 2008 19:00 utc | 51

glad to see you back, alamet

Posted by: b real | Oct 4 2008 19:06 utc | 52

b @ 12, yes. municipalities etc. have debt to begin with and if i believe the gossip i hear and read are very badly run. i was reading on the Oil Drum about oil service cos. starting to suffer - the chain to the consumer is in for disruptions.

vbo @ 27 wrote: So for how long the economic catastrophe has been postponed by this bailout? Can anybody say?

Between 3 and 7 months.

I like prime numbers, but something like that.

Posted by: Tangerine | Oct 4 2008 19:08 utc | 53

Another'n>bites the dust.

Posted by: slothrop | Oct 5 2008 1:57 utc | 54

Thank you b real.

James Petras: Lessons from the Collapse of Wall Street

And, re # 54, Naked Capitalism has a compilation of links and quotes that imply failure of the Hypo rescue could trigger major trouble.

Posted by: Alamet | Oct 5 2008 17:40 utc | 55

I could find more, if I could search your site.

That is easy, and requires no special access. You can use google to search a specific site by adding "" and replace with the site you want to search. Then you can easily search for the word "decoupling" at

Posted by: a swedish kind of death | Oct 5 2008 20:29 utc | 56

askod, why wouldn't you just type 'decoupling' in the search box on MOA's home page?

Posted by: annie | Oct 5 2008 20:42 utc | 57

free enterprise, free enterprise
liberate the masses!
spin profits from debits
and lower taxes.

free enterprise some surmise
reduce social classes.
from many, now two -
riders and asses.



Posted by: whimsy mugwump | Oct 5 2008 21:42 utc | 58

free enterprise, free enterprise
liberate the masses!
spin profits from debits
and lower taxes.

free enterprise some surmise
reduce social classes.
from many, now two -
riders and asses.



Posted by: whimsy mugwump | Oct 5 2008 21:50 utc | 59

Ambrose Evans-Pritchard in full doom and gloom mode:

We face extreme danger. Unless there is immediate intervention on every front by all the major powers acting in concert, we risk a disintegration of global finance within days. Nobody will be spared, unless they own gold bars.

He should be relieved to know Hypo rescue is back on track.

Posted by: Alamet | Oct 5 2008 22:15 utc | 60

because I am to used to go directly to my firefox's little google-box to even check if sites has an own search-function. Ehm... well... at least it is the same search :)

Posted by: a swedish kind of death | Oct 5 2008 23:47 utc | 61


I want one multi-thousand page .doc with all the site's content.

Posted by: slothrop | Oct 6 2008 0:22 utc | 62

O,>bitch, bitch, bitch:

The credit crisis began in the United States, a fact that has led European politicians to claim superiority for their country’s financial systems, in contrast to what Silvio Berlusconi, Italy’s prime minister, called the “speculative capitalism” of the United States. On Saturday, Gordon Brown, the British prime minister, said the crisis “has come from America,” and Mr. Berlusconi bemoaned the lack of business ethics that had been exposed by the crisis.

Posted by: slothrop | Oct 6 2008 2:43 utc | 63


"Europe falls into the abyss"

This is serious folks. The ABYSS!!! A whole damn continent fell into it!!

Posted by: 94 | Oct 6 2008 3:22 utc | 64

slothrop - and anyone else wanting the "content" of this site:-

Point Adobe Acrobat at moonofalabama, select 'Entire Site', and click 'Go'. Two clicks - and you have a multi-thousand page PDF file (including all of b's photgraphs). If you need know how to make the document searchable, ask google.

Posted by: DM | Oct 6 2008 10:07 utc | 65

More money flow: Fed Boosts Cash Auctions to $900 Billion, May Do More (Update1)

The Federal Reserve will double its auctions of cash to banks to as much as $900 billion and is considering further steps to unfreeze short-term lending markets as the credit crunch deepens.
As part of today's steps, the Fed will increase its auctions under the 28-day and 84-day Term Auction Facility operations to $150 billion each. The two forward TAF auctions in November will be increased to $150 billion each, the Fed said.

The central bank will also begin paying interest on bank reserves.
In a separate statement, the U.S. Treasury said it is considering changes to its debt issuance, including a reintroduction of three-year notes. Any changes will be released at the department's quarterly refunding announcement Nov. 5.

The Treasury also said today that some cash-management bills may be ``longer-dated.'' The expansion in debt sales is needed to ``allow Treasury to adequately respond to the near-term increase in borrowing requirements,'' the department said in the statement released in Washington.

Posted by: b | Oct 6 2008 12:57 utc | 66

(This is the primary reason why) barter has less than 1% penetration in the business community worldwide while one in five businesses in Switzerland uses a barter system to increase commerce and profits.>appropriate economics

from google:

They equipped the new medium of exchange with a stimulus to spend it quickly, rather than holding on to it. Thus as a rule, not only was no interest paid on accounts, but on the contrary, a "storage fee", a kind of negative interest, was charged. This was to counteract people's tendency to hang onto their money for fear of the future.>mutualist blog

One way that businesses can continue to make profits in periods in which the supply of national currency is inadequate is to allow each other credit. As discussed in Chapter One, the credit-control measures that most firms use to protect themselves whenever trading becomes difficult actually make matters worse. While it would obviously be a mistake for firms to have no credit control at all, what businesses need when national currency becomes scarce is a properly regulated system of mutual credit so that they can use much less normal money when they trade amongst themselves. The Swiss Wirtschaftsring (Economic Circle) co-operative (WIR) is such a system..> blog, the ecology of money

see also:> US ATS system(?)

Posted by: Tangerine | Oct 6 2008 21:15 utc | 67

Is lending really frozen?

The Fed released there latest data on bank transaction and as of Sept 24th there are no signs that this lay person can see of frozen lending.

Posted by: ndahi | Oct 7 2008 16:44 utc | 68

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