European Tribune - Community, Politics & Progress.

US Treasury nationalises all trillion dollar companies on sight!

by Jerome a Paris
Wed Sep 17th, 2008 at 10:39:41 AM EST

After nationalising - sorry, putting in conservatorship - Fannie Mae and Freddie Mac, by granting them up to $200 billion (for companies worth less than $10 billion at the time), we now learn that the US Treasury has just agreed to pay up to $85 billion dollars for 80% of a company that the stockmarket valued, as of yesterday evening, at $13 billion.

What Freddie, Fannie and AIG had in common is a balance sheet in the trillion dollar range (Lehman was comparatively puny with only $600 billion). It seems that we have the definition of "too big to fail" - and we have a price: around 10 times the market value.

Meanwhile, as Magnifico underlined in a must-read diary, the NYT notes that:

In the end, the government succeeded in getting Wall Street to create its own insurance policy. But at the same time, the Fed, in agreeing to loosen terms under which it lends money to firms, is potentially putting more taxpayer money at risk.

The insurance policy is the $70 billion package that banks have agreed to put in place to provide liquidity to one another. This is something that events have more or less forced upon them and is hardly a big deal (like the central bank lending, it just helps with liquidity, not with credit risk).

But the other decision by the Fed is a lot more ominous. It is essentially allowing commercial banks to use its retail deposits, which are to a large extent insured by the taxpayer, to shore up their investment bank operations. This is the end game of the repeal of the Glass-Seagall act which separated commercial banking from investment banking. For ten years, with investment banks vibrant and markets on a bull run, the issue did not really come up, but now that suddenly, sick investment banks are taken over by commercial banks, and the investment bank units of big universal banks are in bas shape, the door is suddenly open for massive intra-bank transfers that can be done on the back of the taxpayers.

The mechanism will be simple: banks use the fact that the Fed is now willing to accept dubious assets as collateral for its loans to the banks: the worst assets will be pushed onto the Fed's balance sheet while tha banks get real cash from the Fed. And if these banks fail, their deposits will be covered by federal guarantees - which certainly will incite them to raid these funds for as long as they can to prop up their failing investment banking activities.

given that these activities are known to be failing right now, this is a reckless encouragement given to do these raids today - and one whose price will be paid for many years into the future. I suppose that this "in the future" is the relevant word here... (as in, after January 20).

So the under-trillion-dollar banks have the best of both worlds: no nationalization (yet...), and almost unlimited access to taxpayer-backed Fed cash. It's not certain that it will help their shareholders not to be wiped out, but it's certainly good for their creditors (other than depositors), ie by and large, the financial world.
Everybody is losing money right now - but this is about ensuring that those at the top of the pile lose a lot less than the rest of us. Sweet...

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US Treasury nationalises all trillion dollar companies on sight! | 84 comments (84 topical, 0 editorial, 0 hidden)

Crossposted from DailyKos (4.00 / 7)

http://www.dailykos.com/storyonly/2008/9/17/6473/70935/705/601353

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (jeromeguillet@yahoo.fr) on Wed Sep 17th, 2008 at 10:41:53 AM EST

Re: Crossposted from DailyKos (4.00 / 2)

YAHOOOOOOOOOOOOOOOOOOOOOOOO!

Where's your motherf*%&ing flag pin?

by Drew J Jones (blahblahblah@blahblahblah.com) on Wed Sep 17th, 2008 at 10:48:55 AM EST
[ Parent ]

Re: Crossposted from DailyKos (4.00 / 2)

Adding, that it doesn't really matter that everyone is losing money. As you point out, the rich are losing less relative to the rest of us - they've got the government, the legal system, the taxing authorities and now the central bankers on their side and we got diddly.

Money being the ultimately expression of power, and power being not an absolute, but rather, an attribute measure relative to others, I would venture that this situation suits Wealth, generally speaking, very well.

Because even if they are losing money on paper, as a clas, their control deepens further still, to our detreiment.

"C'est un scandale !"

by redstar on Wed Sep 17th, 2008 at 03:44:55 PM EST
[ Parent ]

Nothing that $700b well spent a year ... (none / 0)

... can't see us through, as long as we have the safety net of a job guarantee at a living wage.

dKos: Just like the Great Depression, Keynes can Fix This

Utsukushikereba sore de ii

by BruceMcF (agila61 at netscape dot net) on Wed Sep 17th, 2008 at 06:28:29 PM EST
[ Parent ]

US Treasury nationalises all trillion dollar cos (4.00 / 5)

So the under-trillion-dollar banks have the best of both worlds: no nationalization (yet...), and almost unlimited access to taxpayer-backed Fed cash. It's not certain that it will help their shareholders not to be wiped out, but it's certainly good for their creditors (other than depositors), ie by and large, the financial world.
Everybody is losing money right now - but this is about ensuring that those at the top of the pile lose a lot less than the rest of us. Sweet...

This looks like a classic IMF-US Treaury bailout of Western™ creditors (Wall Street) when a developing country crashes.

The US treasury is just applying the same recipe to the US economy.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Wed Sep 17th, 2008 at 10:52:47 AM EST

Re: US Treasury nationalises all (4.00 / 4)

Precisely.

It's the Shock Doctrine at work.

Mark Blythe talked about this in more academic words in his book Great Transformations.

Back in the 1920 Frank Knight distinguished uncertainty from risk. Uncertainty is not subject to the calculation of probabilities. Risk is calculable.

Economic ideology is the means by which uncertainty is converted into risk.

Ideologies are broken as received truths when they no longer allow individuals to convert uncertainty to risk. That's what's happening now in the United States. And it's not just Wall Street, its what's happening in Texas. Expectations have been breached, forcing individuals to question what they know.

Punctuations of this sort are the source of great shifts in economic policy, like the kind that could shift the Overton window to the left.

But we don't have a strong Left in America, we have a half ass liberal who's painted as the second coming of Christ by the folks who think that they are immune from the hardships that the peculiar institution of capitalism has brought to America.

What is needed is someone who will smash the old Friedmanite idols, and used this period of uncertainty to push American economics to the Left. But that won't happen, because the opportunity to do that has been passed up.

So the GOP will vanquish uncertainty, not through improving the lot of the working class, but through conning the public into the believe that there is shared sacrifice for the nation, when in fact in these hard times even the upper tier is needing a bit of help. They will resort to a virulent form of nationalism that gives life meaning through separation from the "other" rather than an improvement in one's own life.

Thank you Democratic party, we needed you to exercise leadership and you've managed to grasp defeat from the jaws of victory.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Wed Sep 17th, 2008 at 01:20:28 PM EST
[ Parent ]

Re: US Treasury nationalises all (none / 0)

I am reading Naomi Klein's "The Shock Doctrine" now, and... reading it is something else than hearing about it. It immediately gives unexpected insights to the ongoing financial "shock and awe" (of sorts) as well. I'll try to post a diary tomorrow.

I've read somewhere that many "emerging" investors (from India, China, etc) are turning to Japan for easy money to borrow. Japan has the largest pool of equity (with the nationalized Postal Bank, for example) now, they say... Yep, the last largest pools (of money, oil or whatever) are there to be looted.

If so many are indebted, who are those keeping or receiving the money or priveleges??

Last weekend I talked with a thoughtful relative, about world affairs as well. At some moment, he said that the US president is supposed to know everything what is really happening. I said that Bush is just a frontman... but for what group?.. "Wallstreet... bankers..." I made a guess. He looked up as under revelation, so I probably hit upon something.

by das monde on Thu Sep 18th, 2008 at 10:03:46 AM EST
[ Parent ]

Ahhh! (4.00 / 2)

The beauty of the free market!

Consequence free, that is.

by Trond Ove on Wed Sep 17th, 2008 at 11:04:12 AM EST

Different reading of the events (4.00 / 4)

The owners of bonds are very often foreigners. Bernanke tries to save foreigners investments in the US, to keep them funding the US economy, which badly needs money from abroad. If he wouldn't do that, interest rates in the US would shoot up dramatically or lending would stop completely.
Even if the worst case scenario wouldn't come true, a deflationary recession is something the US can't afford, with trillions of dollars in net debt. Lending must go on, 'flation' must keep 'in'.

The middle class and poor people in the US won't be looted much by this rescues. For the simple reason, you can't steel from a naked man. In the end the taxpayer must pay, e.g. the taxes must be raised - and that means those in the US, who potentially profit from the recues, will pay for it. Or there will be high inflation, but as the middle class in the US seems to save mostly via owning property, the rise in inflation will affect disproportionally the rich, too.

Lich King/Caribou Barbie 08
Pain brings Katharsis

by Martin (weiser.mensch(at)googlemail.com) on Wed Sep 17th, 2008 at 11:15:19 AM EST

Interesting comment (4.00 / 2)

I agree that there is a strong angle of protecting foreign creditors in the current decisions, but
inflation is the traditional indirect way for governments to default on their debt and, in the case of the US, which borrows in its own currency, the way to default on foreign creditors in the end;
I disagree that the rich will suffer the most: they have access to ways to hedge their assets (holding foreign currencies and assets, buying inflation-linked products), whereas the middle classes and poor depend on wages and pensions which, currently, are not following infaltion at all (and that will be the big political fight of the coming years, I suspect).

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (jeromeguillet@yahoo.fr) on Thu Sep 18th, 2008 at 01:26:01 AM EST
[ Parent ]

Re: Interesting comment (none / 0)

whereas the middle classes and poor depend on wages and pensions which, currently, are not following infaltion at all (and that will be the big political fight of the coming years, I suspect).

Usually I agree, but the American situation is different than the one here.

More people own a house than e.g. in Germany, which will keep its real value in inflationary times (in contrast to e.g. live insurance, bonds,...)
Many have no net financial wealth at all, but debt, which will lose value.
those that have financial wealth may have e.g. live insurance from ... AIG?
if people start to starve, the 'political fight' could get really ugly and
they have the foreign gov'ts as allies in so far, that foreigners are against massive US inflation

and
- Paul Krugman seems to see the bail outs rather positive, e.g. doesn't see them as the core of the problems, but as damage containment, who is not exactly a Wall Street worshipper.

I guess therefore maybe not in the very short term, but in 5 years from now, the US will massivly increase taxes. The only possibility to rescue libertarian capitalism in the US probably is voting for Ralph Nader..., as he would at least not spend $800 bn each year on military and related stuff.

Lich King/Caribou Barbie 08
Pain brings Katharsis

by Martin (weiser.mensch(at)googlemail.com) on Thu Sep 18th, 2008 at 11:40:37 PM EST
[ Parent ]

Re: I am a lazy, busy fuck so please (none / 0)

either show me the last five minutes of this boring movies or read me the last 3 pages of this bad novel.

I know. You can't predict the future. Then give me the three most likely scenarios (Cheney is a space alien with a book reading "How to Serve Man") and their probabilities.

Have pity on us poor dull scientists. I'm busy trying to find a way to domesticate truffles. Will the world BE there a year from now? Do I have to get out my little book from the '60s "Quotes from Chairman Mao"?

McCain/Palin ... total sacks of SHIT!

by THE Twank (paszeski__aaaaaaatttttt__yahoo.com) on Wed Sep 17th, 2008 at 11:24:48 AM EST

Of course, you're correct, but (4.00 / 3)

it seems to me that this is also one of them 'contradictions of capitalism' that "you hear so much about" (Texas expression - you have to imagine the accent). In squeezing the last drops of "Sweet" from this situation, they have publicly acknowledged the 'socialist' nature of the relationship of the largest corporations with the U.S. government - socialism for the rich.

Several of the stories describing these events use the word "nationalize" in their headlines. I think that - a la Chris Cook - it is time to redundantly point out the reality of their actions; and then make the connection that, given the financial relationship, the political imperative is to convert to socialism for the population at-large.

Speaking for myself - and in deference to the concerns of Colman, Chris, Jerome, Starvid, and others - this socialism should only be aimed at the non-productive services (e.g., insurance) and at the 'commodity' producers. By 'commodity' I mean products that are mass-scale, necessary, and essentially undifferentiated among producers. Entrepreneurial capitalism will, and should IMO, survive for all small-source and differentiated products and services (e.g., wine and almond croissants - and maple syrup).

Here's the deal - the Shock is here. We knew that it was coming, and we knew that it would be big. We've done our job of analysis, and we've brought the critique to the communications media - and, really, to the public. This is the time to discuss, sort out, and publicize solutions. In other words we need to be ready to apply solutions, as per the Shock Doctrine model.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Wed Sep 17th, 2008 at 11:27:53 AM EST

Re: Of course, you're correct, but (4.00 / 6)

In squeezing the last drops of "Sweet" from this situation, they have publicly acknowledged the 'socialist' nature of the relationship of the largest corporations with the U.S. government - socialism for the rich.

You know, I'm old enough to remember when that was called fascism.

Where's your motherf*%&ing flag pin?

by Drew J Jones (blahblahblah@blahblahblah.com) on Wed Sep 17th, 2008 at 11:34:06 AM EST
[ Parent ]

Too big to fail (4.00 / 13)

As the "capitalists" in the GOP proceed with the largest nationalization in US history, it seems a good time to talk about market dominance.

In the past six months a half dozen financial firms have been effectively nationalized. In order to disguise this a variety of means have been used, such as lending money to the acquiring public firm, or as yesterday with AIG taking an ownership position via warrants.

In the UK, which has a tradition of nationalizing (and then re-privatizing) a takeover is done straightforwardly. That's what happened with the Northern Rock Bank. But in the US we have to maintain the fiction that private enterprise does everything better than government and, therefore, subsidies and bailouts have to be called something else.

The reason given for these actions is that these firms are "too big to fail". I claim that any firm that is too big to fail is just too big, period.

Since Reagan there has not been any semblance of anti-trust legislation and firms have been allowed to merge and buy each other up, willy-nilly. For awhile firms used to justify their actions by claiming that this would lead to improved efficiency, but the stock market usually sells off the stock of the acquiring firm. Investors know that the results will lead to lower profits. So why do they do it? I claim that the CEO's do it as a way to keep score (as they do with their salaries). "I'm running a $XXX billion firm" is oneupmanship for the parasite class these days.

If a firm is too big to fail, then it is too big to exist.

There are two simple reforms (well, simple to state). First, firms cannot own other firms. The parents are just conglomerates and provide no added benefits. In fact top management can't even follow the details of all their subsidiaries.

Second, when a firm gets over a certain size it has to be split up. Look at the benefits from breaking up AT&T. It's true it was a monopoly, but once it was split new businesses emerged and we got everything from WiFi to cell phones. Now that the telecom business has been allowed to reconsolidate the US has fallen behind in this area.

Not only are big firms inefficient, they wield too much political power and they control too big a segment of the economic pie.

The nationalization of failing firms has just made explicit what has been the reality for several decades now. The US is not a capitalist economy, it is a corporatist-syndicalist one similar to what Mussolini tried to set up. The parallels with the rise of an internal secret police function should give us pause as well.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Wed Sep 17th, 2008 at 11:34:17 AM EST

Re: Let me restate my question: (none / 1)

I'm not interested in what MIGHT happen in a world where Democracy ruled, where even the little people had a voice.

What's going to happen in THIS world, where a VERY small group of ultrawealthy control everything significant including the armies, police, resources, etc.

How soon can I expect to a. starve b. be herded off to a processing plant to become Soylent Green crackers c. give me your guess.

McCain/Palin ... total sacks of SHIT!

by THE Twank (paszeski__aaaaaaatttttt__yahoo.com) on Wed Sep 17th, 2008 at 11:50:38 AM EST

Re: Let me restate my question: (none / 0)

How soon? Probably will be a while.

If there is something I have learnt while doom-watching it is that things generally take there sweet time. This crash has been predicted for some years now, and even when it has started there are apparently lots of motions that has to be gone through.

by A swedish kind of death on Fri Sep 19th, 2008 at 01:33:28 PM EST
[ Parent ]

Re: US Treasury nationalises all trillion dollar.. (none / 1)

Just a simple question from someone with no understanding of modern finance (and probably doesn't
want it)

Basically, in laymens terms, just how can the US
finance all these bail outs/buy outs?

All these companies that the Federal Reserve are
giving money too (squidillions of dollars), where is
that money coming from?

Isn't the US running a massive budget deficit already?

Are they paying in kind? Gold? Wheat? Football Cards?

All views expressed are my own but you knew that.

by Elras on Wed Sep 17th, 2008 at 12:09:48 PM EST

Re: US Treasury nationalises all trillion dollar.. (none / 0)

Thank You! I'm not alone.

McCain/Palin ... total sacks of SHIT!

by THE Twank (paszeski__aaaaaaatttttt__yahoo.com) on Wed Sep 17th, 2008 at 12:25:46 PM EST
[ Parent ]

Re: US Treasury nationalises all trillion dollar.. (4.00 / 4)

:) An opportunity to educate yourself is here, Fed funds monthly financial statement which is published by the treasury. I don't doubt that you possess the common sense and basic arithmatic skills to perform an analysis of The Data. For example as of 8/08 (col#1: ACTUAL PREVIOUS FY TO DATE ; col#2: BUDGET EST. NEXT FY. (i.e. a projection of line item cash flow needed to balance current plus growth of statutory and discretionary appropriations FY 2009 in billions of USD -- the first digit value placement is trillion)

TOTAL ON-BUDGET AND OFF-BUDGET RESULTS:

TOTAL RECEIPTS 2,282,318 2,651,363
ON-BUDGET RECEIPTS 1,701,251 1,968,990
OFF-BUDGET RECEIPTS 581,067 682,373
;CTOTAL OUTLAYS 2,556,711 3,133,202
ON-BUDGET OUTLAYS 2,129,083 2,631,725
OFF-BUDGET OUTLAYS 427,628 501,477
;CTOTAL SURPLUS (+) OR DEFICIT (-) -274,393 -481,839
ON-BUDGET SURPLUS (+) OR DEFICIT (-) -427,832 -662,735
OFF-BUDGET SURPLUS (+) OR DEFICIT (-) 153,439 180,896
;CTOTAL ON-BUDGET AND OFF-BUDGET FINANCING 274,393 481,839

MEANS OF FINANCING:

BORROWING FROM THE PUBLIC 252,889 537,707
REDUCTION OF OPERATING CASH, INCREASE (-) 42,682 ......
BY OTHER MEANS -21,178 -55,868

Directly below this classification, you'll find RECEIPTS/INDIVIDUAL INCOME TAX and RECEIPTS/CORPORATION INCOME TAX: heady stuff.

I'm uncertain why item "BORROWING FROM THE PUBLIC" is not enclosed by parenthesis (or prefixed by a minus sign), signifying GAAP liability or capital loss. Because that amount reduces the Treasury's general account (of cash and treasuries) held in reserve by the FRB. I suppose it merely reflects a reporting lag, as I understand it, this is the most recent published data. Fed funds cash flow tables published by the FRB are not nearly as detailed ("top line" totals) and are released for *.xcel or *.pdf. No wonder the US public relies on "analysts" to furnish accurate information through MSM channels.

For example: A few hours ago, FT reported,

The US Treasury on Wednesday announced it was creating a supplemental funding programme to ensure that the Federal Reserve has the cash it needs and its ability to provide emergency liquidity support for the markets is not constrained by the size of its own balance sheet.
The move was intended to deal with fears that the US central bank's balance sheet was overstretched following the AIG loan announced on Tuesday.

The rest of the article reiterates stock market (price) deflation in reaction to Treasury "regulation" ("bailout", "conservatorship", private M&A) of failing investment bank and insurance holding companies. What the article does not discuss is what or how "supplemental programme" entails. That is issue of additional public debt --borrowing from the public-- in the form of new Treasure bonds ...because the FRB is unwilling and/or unable to trade its own reserve of US treasuries. This is an historically significant event as is the daily TED spread (~3.0), the difference in interest rate demanded by lenders, 3 mo US treasuries versus global interbank (LIBOR) money supply. International investors are not "confident" the US federal government able to service, at least, public debt at any price.

Note: A portion of taxpayer contributions to Treasury's general fund ("RECEIPTS") held by FRB pay monthly interest on public debt as well as statutory and discretionary "OUTLAYS".

Diversity is the key to economic and political evolution.

by MarketTrustee (pbing@estudioinc.com) on Wed Sep 17th, 2008 at 02:20:43 PM EST
[ Parent ]

Re: US Treasury nationalises all trillion dollar.. (4.00 / 2)

LOL

Paulson Geithner LLC: Statement Regarding Supplementary Financing Program

The Federal Reserve has announced a series of lending and liquidity initiatives during the past several quarters intended to address heightened liquidity pressures in the financial market, including enhancing its liquidity facilities this week. To manage the balance sheet impact of these efforts, the Federal Reserve has taken a number of actions, including redeeming and selling securities from the System Open Market Account portfolio.
The Treasury Department announced today the initiation of a temporary Supplementary Financing Program at the request of the Federal Reserve. The program will consist of a series of Treasury bills, apart from Treasury's current borrowing program, which will provide cash for use in the Federal Reserve initiatives.
Announcements of and participation in auctions conducted under the Supplementary Financing Program will be governed by existing Treasury auction rules. Treasury will provide as much advance notification as possible regarding the timing, size, and maturity of any bills auctioned for Supplementary Financing Program purposes.

H/T MORE POWER, SCOTTY! I NEED MORE POWER!!

Diversity is the key to economic and political evolution.

by MarketTrustee (pbing@estudioinc.com) on Wed Sep 17th, 2008 at 02:47:30 PM EST
[ Parent ]

Re: US Treasury (none / 1)

You can finance any amount if you control the printing press and have enough ink and paper on hand.

Where's your motherf*%&ing flag pin?

by Drew J Jones (blahblahblah@blahblahblah.com) on Wed Sep 17th, 2008 at 02:31:45 PM EST
[ Parent ]

Re: US Treasury (4.00 / 2)

You don't need to create cash to create money - all you need to make is an annotation in the books of the central bank.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Wed Sep 17th, 2008 at 02:48:07 PM EST
[ Parent ]

Re: US Treasury (none / 1)

True, but I was going for the image.

Where's your motherf*%&ing flag pin?

by Drew J Jones (blahblahblah@blahblahblah.com) on Wed Sep 17th, 2008 at 02:56:32 PM EST
[ Parent ]

Re: US Treasury (4.00 / 2)

But the image is misleading - I think it would be good if it were dispelled.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Wed Sep 17th, 2008 at 03:10:28 PM EST
[ Parent ]

Re: US Treasury (none / 1)

It's misleading, but it gets the message across. A third of the country can't find Louisiana on a map, but they're going to understand monetary policy?

Where's your motherf*%&ing flag pin?

by Drew J Jones (blahblahblah@blahblahblah.com) on Wed Sep 17th, 2008 at 03:21:25 PM EST
[ Parent ]

Re: US Treasury (none / 1)

It is all misleading. It gives the impression, that debt doesn't matter, because, hey, when the gov't can't pay the interest, just let it print some money. When the taxes aren't high enough to finance something, just let's print money.

Printing money would be, if the fed buys directly treasuries in exchange for fresh money. This hasn't happened so far. If this would happen, I'm pretty sure, this would be seen as an act of default by the US federal gov't.

Lich King/Caribou Barbie 08
Pain brings Katharsis

by Martin (weiser.mensch(at)googlemail.com) on Wed Sep 17th, 2008 at 03:29:17 PM EST
[ Parent ]

Re: US Treasury (none / 1)

They know enough to associate printing money with inflation, and they get that it's going to Wall Street.

All of this horseshit about bailouts signals that debt doesn't matter, but it's not as though that's changing people's perceptions. It's only nerds like me who give a damn about debt. Most of the country is too lazy and/or stupid to be bothered. And why should they be when so many voters will be dead by the time the bill comes due? America's been borrowing outrageous amounts of money for thirty years -- in government, on Wall Street, on houses, on credit cards, and on and on and on.

And it'll get worse. We've got the Fed throwing money at AIG, Bear, etc. Why not throw a hundred billion more at Detroit so they can piss it all away while we're at it?

Nobody cares.

Where's your motherf*%&ing flag pin?

by Drew J Jones (blahblahblah@blahblahblah.com) on Wed Sep 17th, 2008 at 03:56:40 PM EST
[ Parent ]

Re: US Treasury (none / 0)

Buddy, can you spare the Fed?

How close to default is the US? What happens if the Treasury tries to sell bonds and no one wants them?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Sep 17th, 2008 at 06:56:26 PM EST
[ Parent ]

Re: US Treasury (none / 1)

Speaking of bonds: How does all of the turmoil affect the comfort level of the Japanese and the Chinese in holding US treasury securities? And does anyone know why the UK has more than quadrupled its holdings of US Treasury Securities over the last year?

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Wed Sep 17th, 2008 at 08:15:19 PM EST
[ Parent ]

No, (4.00 / 5)

It hasn't. Asian and Arabian countries buy treasuries via London. That means, in the first out data, UK has always huge treasury holdings. In later revised versions the UK holdings are adjusted downwards.

Lich King/Caribou Barbie 08
Pain brings Katharsis

by Martin (weiser.mensch(at)googlemail.com) on Wed Sep 17th, 2008 at 08:19:40 PM EST
[ Parent ]

Re: US Treasury (none / 1)

The Fed holds them instead. That is the rules of the game, after all.

That is, if a Treasury Check is presented for clearance, and the Treasury does not have a positive balance in its Federal Reserve account, the Treasury issues a bond to the Fed and the Fed creates a Fed account balance (obligation) corresponding to the bond (asset).

Whether that bond is handed directly over to the Fed with the Fed then either selling it or not during Open Market Operations or whether the Treasury sells the bond in auction to top up its Fed account and the Fed sweeps it up to maintain its interest rate targets is operational detail. Treasury checks are not allowed to bounce.

Utsukushikereba sore de ii

by BruceMcF (agila61 at netscape dot net) on Wed Sep 17th, 2008 at 10:30:01 PM EST
[ Parent ]

Re: US Treasury (none / 1)

weasel word of the week: deleveraging...

wtf?

Peace is not the absence of war -- peace is the absence of fear. Ursula Franklin

by melo (melometa4(at)gmail.com) on Thu Sep 18th, 2008 at 06:24:46 AM EST
[ Parent ]

Re: US Treasury (4.00 / 3)

That's like calling climbing down from a burning building "de-climbing-up".

Utsukushikereba sore de ii

by BruceMcF (agila61 at netscape dot net) on Thu Sep 18th, 2008 at 07:03:35 AM EST
[ Parent ]

Re: US Treasury (none / 0)

yup, or defenestration for leaping from a window!

Peace is not the absence of war -- peace is the absence of fear. Ursula Franklin

by melo (melometa4(at)gmail.com) on Thu Sep 18th, 2008 at 12:06:10 PM EST
[ Parent ]

Re: US Treasury (4.00 / 2)

I thought that Defenestration more implied being thrown through rather than going through as a result ofyour own efforts.

Life should consist in at least fifty percent pure waste of time, and the rest doing what you please.

by ceebs (bunchofwankers (at) gmail (dot) com) on Thu Sep 18th, 2008 at 12:10:11 PM EST
[ Parent ]

Re: US Treasury (none / 0)

oh, ok...

stretching the definition i guess!

Peace is not the absence of war -- peace is the absence of fear. Ursula Franklin

by melo (melometa4(at)gmail.com) on Thu Sep 18th, 2008 at 01:57:57 PM EST
[ Parent ]

Re: US Treasury (none / 1)

I think Defenestration would apply to leaping through a window provided you did not open the window first.

Utsukushikereba sore de ii

by BruceMcF (agila61 at netscape dot net) on Fri Sep 19th, 2008 at 01:37:43 AM EST
[ Parent ]

Re: US Treasury (none / 1)

i've seen that refered to as self-defenestration.

Life should consist in at least fifty percent pure waste of time, and the rest doing what you please.

by ceebs (bunchofwankers (at) gmail (dot) com) on Fri Sep 19th, 2008 at 03:21:03 AM EST
[ Parent ]

Right now (4.00 / 4)

What happens if the Treasury tries to sell bonds and no one wants them?

This does not seem to be a problem: investors are seeking safety, and US Treasuries are seen as the only place where you can park your cash and be sure to get it back in the near future - thus people are bidding absurdly low prices right now to hold Treasuries (in the last auction yesterday for 3-month Treasuries, 5% of the bids were at 0% interest rate: people did not care to earn anything, they just wanted a safe haven).

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (jeromeguillet@yahoo.fr) on Thu Sep 18th, 2008 at 01:29:12 AM EST
[ Parent ]

Re: Right now (none / 0)

How is the interest paid (or not paid) on these bills funded?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Sep 18th, 2008 at 05:47:58 AM EST
[ Parent ]

Re: Right now (none / 0)

The same way any government expenditure is funded ... the funds are disbursed and then its sorted out after whether that was tax revenues that funded it or whether it was accumulated as more debt.

This is, of course, part of the addiction to economic growth ... if an economy is growing more rapidly than the debt burden is growing, then the debt burden declines over time. That is, indeed, the primary way that the US has "paid down" the debt accumulated during Wars or Republican Administrations ... growing out from under the debt.

Utsukushikereba sore de ii

by BruceMcF (agila61 at netscape dot net) on Thu Sep 18th, 2008 at 07:06:55 AM EST
[ Parent ]

Re: US Treasury (none / 1)

why do i have the image of the ex-owner of a casino being politely told his credit can no longer be extended?
he's drunk, waving his arms, spluttering 'don't you know who i am? i'll kick your ass!'

....if i can only find it first.

Peace is not the absence of war -- peace is the absence of fear. Ursula Franklin

by melo (melometa4(at)gmail.com) on Thu Sep 18th, 2008 at 05:37:00 AM EST
[ Parent ]

Re: Printing Money would be..... (4.00 / 2)

Treasury to Sell Bills to Bolster Fed Balance Sheet
(Update2)
By Rebecca Christie and John Brinsley
Sept. 17 (Bloomberg) -- The Treasury will sell more debt to enable the Federal Reserve to expand its balance sheet, a sign of the strains created by the biggest extension of central-bank credit to financial companies since the Great Depression.
The program starts today with a $40 billion auction of 35- day bills, a day after the government agreed to take over American International Group Inc., the Treasury said in a statement in Washington.
The proceeds will ``provide cash for use'' by the Fed as it seeks to boost liquidity in credit markets struggling from $515 billion in writedowns and losses since the start of last year. The announcement illustrates the potential drain on the government's finances in taking over AIG, Fannie Mae and Freddie Mac, and taking on $29 billion in Bear Stearns Cos. assets.
``It is becoming imperative for the Fed to take actions to enlarge its balance sheet,'' said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co. in New York.
Arguing before Congress in July for unlimited authority to help mortgage companies Fannie Mae and Freddie Mac, Paulson said ``if you have a bazooka in your pocket and people know it, you probably won't have to use it.''

Y'all were sain'....

If sanity be culturally normative, then by the norms of this culture I claim insanity.

by ARGeezer (argeezer a in a circle yahoo dot com) on Wed Sep 17th, 2008 at 04:29:58 PM EST
[ Parent ]

Re: Printing Money would be..... (none / 1)

eggsactly. The "printing" is begun. And the FRB is not iself completely tapped out. So I reckon this move is a kinda "top off" -- friends&familie minutes, if you get my drift.

Diversity is the key to economic and political evolution.

by MarketTrustee (pbing@estudioinc.com) on Wed Sep 17th, 2008 at 07:08:10 PM EST
[ Parent ]

Re: Printing Money would be..... (none / 1)

The bills are still auctioned, the fed is not buying them directly.
Actually I'm pretty sure, that it was illegal to do that, without a vote of the congress, but law is currently of course only a second tier issue.

This was done to recapitalise the fed, not to cover gov't expenditures.

Lich King/Caribou Barbie 08
Pain brings Katharsis

by Martin (weiser.mensch(at)googlemail.com) on Wed Sep 17th, 2008 at 07:16:19 PM EST
[ Parent ]

Re: Printing Money would be..... (4.00 / 3)

The bills are always auctioned. One of the FRB functions as US central bank is agent of the US Treasury. The FRB maintains and services a (bank) account of existing currency and Treasury bonds. Periodically, the FRB auctions T-bills in this account. Sometimes the auction is Open Market. Sometimes it is closed to Primary Dealers. Those movements demonstrate "monetary policy" by manipulation of "prime rate" and "discount rate."

The fact that the FRB has NOT auctioned all US bonds in reserve (fed funds account) is significant. Because the strategy announced implies both FRB governors and Treasury officials anticipate expenditures that exceed their current capital stocks. The "programme" is consistent with FHFA director Lockhart's "conservatorship" plan to capitalize FRE, FNM on a quarterly review of their restructure plans.

I'm not saying these plans are morally or politically defensible. They are legally defensible.

Only the US Treasury is authorized however to create new debt, i.e. print currency, literally, to realize (GAAP terminology) money supply that is US debentures (unavailable currency) and marketed, or distributed, by FRB. I believe you understand this fundamental mechanics of money supply. Believe the statement; the "supplemental programme" is a euphemism for creation of new debt -- not a new type auction or "discount window" or "credit facility."

Review
The Structure of the Federal Reserve System
econlib/Money Supply

Authorities exercised as of 7 Sep 2008
Government Sponsored Entities Credit Facilities (GSECF) FAQ (pdf)
GSE MBS Purchase FAQ (pdf)

Diversity is the key to economic and political evolution.

by MarketTrustee (pbing@estudioinc.com) on Wed Sep 17th, 2008 at 07:57:07 PM EST
[ Parent ]

Re: Printing Money would be..... (none / 0)

Only the US Treasury is authorized however to create new debt

But isn't there a limit given by the congress in its budgetary legislation, how much new debt the Treasury is allowed to create?

Lich King/Caribou Barbie 08
Pain brings Katharsis

by Martin (weiser.mensch(at)googlemail.com) on Wed Sep 17th, 2008 at 08:24:44 PM EST
[ Parent ]

Re: Printing Money would be..... (none / 1)

The Treasury will sell more debt to enable the Federal Reserve to expand its balance sheet, a sign of the strains created by the biggest extension of central-bank credit to financial companies since the Great Depression. (My bold.)

That is why the Treasury is auctioning the bills.

If sanity be culturally normative, then by the norms of this culture I claim insanity.

by ARGeezer (argeezer a in a circle yahoo dot com) on Wed Sep 17th, 2008 at 08:33:06 PM EST
[ Parent ]

Re: Printing Money would be..... (none / 1)

Yes, technically. Before each FY fed on-budget bill vote (appropriations for agencies are voted throughout the year, generating "pork"), consolidating statutory and discretionary spending, congress adjusts its own credit limit with the FRB. Each year since Mr Bush's administration succeeded Clinton's, Congress has increased the credit limit without qualification to retire that debt. 1 October commences the new fiscal year (FY).

None of this overt, seasonal politicking has anything to do with agency overages (e.g. DoD, CIA, DHS war crimes) of agency budgets. In practice, contracts entered and paid by agency administrators obligate public receipts over budgeted funds to cumulative off-budget expenditure, public debt.

Diversity is the key to economic and political evolution.

by MarketTrustee (pbing@estudioinc.com) on Wed Sep 17th, 2008 at 08:43:59 PM EST
[ Parent ]

Re: Printing Money would be..... (none / 1)

The "printing" is begun. And the FRB is not iself completely tapped out.

So they're wasting their ammo... It will come back to bite ~~them~~us.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Wed Sep 17th, 2008 at 07:19:54 PM EST
[ Parent ]

Re: US Treasury nationalises all trillion dollar.. (4.00 / 3)

It's called fiat money. Money has value because on the say-so (fiat) of the Government. Normally money gets created when banks loan it. This includes the Federal Reserve loaning money to private banks or to the US Treasury.

Creating new dollars devalues the dollar in proportion to the amount of new money created. This will manifest itself as domestic inflation in the medium term, but foreign holders of US assets (including debt) simply see it as a markdown of the value of their holdings.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Wed Sep 17th, 2008 at 02:46:56 PM EST
[ Parent ]

Re: US Treasury nationalises all trillion dollar.. (4.00 / 5)

Except that inflation only happens when workers ask for more money.

So by definition this can't be real inflation. It's - something which looks like inflation, acts like inflation, smells like inflation, but is called having sound fundamentals.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Sep 17th, 2008 at 03:59:39 PM EST
[ Parent ]

Re: US Treasury nationalises all trillion dollar.. (4.00 / 2)

Embassy! Trrrrrrsts! They hate us for our freedom!

Where's your motherf*%&ing flag pin?

by Drew J Jones (blahblahblah@blahblahblah.com) on Wed Sep 17th, 2008 at 04:14:36 PM EST
[ Parent ]

Of course, in reality that is in effect just ... (4.00 / 5)

... an excuse to keep the economy slack enough so that there is no tightness in labor markets so that all productivity gains can be appropriated as profits.

Utsukushikereba sore de ii

by BruceMcF (agila61 at netscape dot net) on Wed Sep 17th, 2008 at 10:34:32 PM EST
[ Parent ]

A nice set of double standards (4.00 / 4)

Well it seems that privatizing banks is bad, according to Goldman Sachs:

"It's looking like a negative development. I don't see why the banking sector needs to be under the purview of the public sector," said Alberto Ramos, a senior economist with Goldman Sachs, "The private sector does a much more efficient job of running that type of business."

He was referring of course, to the privatization of Banco de Venezuela (not even the whole banking sector) by the Chavez government. As Fanny and Freddie were being bailed out the tone was different:

Analyst Alec Phillips at Goldman Sachs (NYSE: GS - news) said the prospect of a bailout is daunting since the GSEs own or guarantee some 5.3 trillion dollars in mortgage debt -- roughly the same amount as the entire government debt.
But he said Fannie and Freddie debt is "backed by high-quality assets ... which generate income," and that an intervention would be "small in the federal context."

I can only imagine the uproar had Chavez nationalized an insurance company...

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Wed Sep 17th, 2008 at 12:33:16 PM EST

Re: A nice set of double standards (4.00 / 3)

It's not nationalisation. It's a Christmas present gift voucher.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Sep 17th, 2008 at 01:30:41 PM EST
[ Parent ]

Re: A nice set of double standards (4.00 / 2)

the violins are way out of tune, the deck is at 45°, the conductor's on ambien, but damn it, the music is STILL PLAYING!

and a headless chicken doing the boogie woogie in the middle of the dance floor.

grab the money and RUN!

fellini on steroids

Peace is not the absence of war -- peace is the absence of fear. Ursula Franklin

by melo (melometa4(at)gmail.com) on Thu Sep 18th, 2008 at 05:47:05 AM EST
[ Parent ]

Re: A nice set of double standards (none / 1)

I'm sure the caPTAIN OF THE tITANIC DIDN'T MAKE HIS OWN ICEBERG THOUGH.

Life should consist in at least fifty percent pure waste of time, and the rest doing what you please.

by ceebs (bunchofwankers (at) gmail (dot) com) on Thu Sep 18th, 2008 at 12:11:40 PM EST
[ Parent ]

Re: A nice set of double standards (none / 1)

I do need to miss that caps lock more regularly, or check before I post.

Life should consist in at least fifty percent pure waste of time, and the rest doing what you please.

by ceebs (bunchofwankers (at) gmail (dot) com) on Thu Sep 18th, 2008 at 12:12:45 PM EST
[ Parent ]

Re: A nice set of double standards (none / 0)

Seems reasonable in the circumstances.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Sep 18th, 2008 at 05:34:28 PM EST
[ Parent ]

Re: An effecient job of running... (4.00 / 2)

"The private sector does a much more efficient job of running that type of business."

The man has a point if you include under the rubric of "running" the knack for "running it into the ground."

If sanity be culturally normative, then by the norms of this culture I claim insanity.

by ARGeezer (argeezer a in a circle yahoo dot com) on Wed Sep 17th, 2008 at 03:18:41 PM EST
[ Parent ]

Re: US Treasury nationalises all trillion dollar c (4.00 / 4)

An influential Wall Street financial columnist calls for consequences for Federal Regulators. The part beyond the skip is almost certainly behind the subscription wall.

UP AND DOWN WALL STREET
Stuff Happens
By ALAN ABELSON Barron's Barron's MONDAY, SEPTEMBER 15, 2008
What the Paulson plan for rescuing Fannie Mae and Freddie Mac forgot to include. Mother of all bailouts.
IF, AS VIRTUALLY ALL THE PUNDITS AGREE, the decision to have uncle Sam take over that pair of moribund siblings, Fannie Mae and Freddie Mac, is a no-brainer, we can all breathe a sigh of relief. For who, pray tell, is better equipped for a no-brainer than the crew in Washington tending the economy?
The rationale for the mother of all bailouts -- the companies taking on water fast have a combined $5.3 trillion in debt, which even in these extravagant times is not exactly small change -- is that they are "too big to fail" (try telling that to the dinosaurs). As someone recently noted, President Nixon, when informed that a corporate goliath in dire straits was too big to fail, chuckled wickedly and said: "Tell it to get smaller." A man after our own heart.
-Skip-
Equity holders, common and preferred both, are apt to wind up with sympathy, which doesn't buy you much even at Wal-Mart. By contrast, huge chunks of the bonds are owned by institutions that were sufficiently canny, shrewd or whatever to buy when it looked as if the hapless pair were going down the tubes and foreign investors (the latter, reckons FTN Financial, hold over 30% of Fannie and Freddie's senior debt and 15% of their residential mortgage-backed securities). And these powerful folks might have taken it very much amiss if they got stiffed.
Such a negative reaction by the foreign holders would have been especially consequential, as more than one observer has noted, for they also happen to be this spendthrift nation's largest creditors, and were they to get mad, who knows what mean things they might do? Like stop accumulating our IOUs or even start dumping their enormous troves of dollar assets, and that would really cause a proper mess. The Chinese alone have something approaching $350 billion of mortgage-backed securities and a trillion or so of dollar holdings in their vaults.
The alacrity with which Paulson acted and his stunning discovery that housing is the root of the economy's woes are not, we suspect, unrelated to the fact that Nov. 4 draws inexorably closer. Raising his consciousness as well, it seems reasonable to assume, is that Wall Street is a prime victim of the maelstrom and Wall Street is where he hails from and Wall Street made him very rich and moderately famous.
Conspicuously missing from both the secretary's profuse pronunciamentos on the blueprint for saving Fannie and Freddie from plunging into the abyss and most of the commentary pro and con is what and who caused it (apart from the now standard "a few bad apples"). Which seems more than passing strange for an administration that makes such a fetish of "accountability," at least when it suits its purposes.
The worst credit crunch and housing collapse since the Depression have sprung in no small measure from an unprecedented regulatory negligence encompassing a number of governmental and quasi-governmental satrapies, from the Federal Reserve on down. Yet there's not an iota of interest by Paulson and his fellow pooh-bahs in compiling a scroll of shame that might apportion the blame, clearly illuminate the sources of our present discomfort and, just possibly (and here we confess to being naïve) act as a deterrent to future delinquents.
Shrugging off responsibility with the philosophical "stuff happens" doesn't cut it. For somebody makes that stuff happen, and full disclosure is the first step in trying to assure that it doesn't happen again, at least in the same way and with the same awful effect.

I suppose calling out those who made, who enabled and who allowed this would be called "making this crisis into a divisive partisan issue" by those who wish to studiously avoid such inquiry. The "foreign investors" who hold "up to 30%" of F&F's "senior debt" and 15% of their residential MBS's certainly include the Chinese Government.

If sanity be culturally normative, then by the norms of this culture I claim insanity.

by ARGeezer (argeezer a in a circle yahoo dot com) on Wed Sep 17th, 2008 at 01:45:11 PM EST

But for all the bloggers in the US, (4.00 / 5)

like this one on kos...

Just because the government took ownership of corporate assets, this neither necessarily implies Socialism nor does this mean it is owned by "the people." For these conditions to obtain, the the government needs to be of the people, and that's just not the case in the US, the government is of the monied interests in that country, and this "nationalisation" is nothing short of socialising the costs of the failures of the neo-liberal orthodoxy those monied interests continue to espouse.

That they still believe their bullshit is evidenced by Bernanke's first reaction (beyond bailing out his rich buddies in the financial services industry): further deregulation - eliminating the wall between insured savings and investment banking...putting the us financial services right back into the situation that led to the 1930's. Of course, this makes sense in a way...the top continue to make out like ever richer bandits relative to the rest of Americans, because now, not only is political, legal, tax and fiscal policy in that country baldly warped to serve their interests, but now monetary policy has chucked aside any pretense that it was not, itself, just as well in their pockets.

I knew it was going to get bad, but had no idea it would get this bad....

"C'est un scandale !"

by redstar on Wed Sep 17th, 2008 at 03:40:36 PM EST

...especially not this quick! n/t (none / 1)

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Wed Sep 17th, 2008 at 03:45:54 PM EST
[ Parent ]

Re: But for all the bloggers in the US, (4.00 / 2)

further deregulation - eliminating the wall between insured savings and investment banking...putting the us financial services right back into the situation that led to the 1930's.

You know, I'm absolutely shocked they are allowing the investment banks to tap FDIC insured deposits. That should be enough to trigger a run on the banks if people understood what they read (as this was in the NYT among others).

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Wed Sep 17th, 2008 at 05:01:32 PM EST
[ Parent ]

Re: But for all the bloggers in the US, (4.00 / 2)

But, they don't.

As you know.

And even if they did, the question is, what to buy? Real estate? Nope. Stocks? Nope. Corporate bonds? Nope. Stocks? Nope. Hoard cash under your mattress like grandpa? Not if they're just going to inflate it. Gold? Always risky, but maybe. Foreign stock funds? Seen what's happening in foreign markets? Man, check out Shanghai.

But I certainly wouldn't be trusting in the FDIC regime much longer...bank savings? They should in short order be paying the same interest as uninsured deposits.

Assuming the average saver could figure it out. Which they can't.

Sorry for the elitism.

"C'est un scandale !"

by redstar on Wed Sep 17th, 2008 at 05:11:38 PM EST
[ Parent ]

Re: But for all the bloggers in the US, (4.00 / 3)

Wall St is a machine for taking money out of people's pockets. Bernanke's first loyalties are to Wall St. So the process won't end until there's no more money to pick.

And that's when you'll get rioting, as people discover that money they thought they had isn't there any more.

Does Obama really want to be president? Because there are only three options now - default, hyperinflation, or debt forgiveness.

The last one is the only one that will work - Wall St will get shafted for once - but it's also the least likely.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Sep 17th, 2008 at 05:37:44 PM EST
[ Parent ]

Re: But for all the bloggers in the US, (4.00 / 3)

Because there are only three options now - default, hyperinflation, or debt forgiveness. The last one is the only one that will work - Wall St will get shafted for once - but it's also the least likely.

Debt forgiveness may be the least likely.....but a not unrelated fourth option exists.

A "Debt/Equity swap" to a "Quasi REIT" could save their bacon in the short term while changing the game in the medium and long term.

by ChrisCook (cojockathotmaildotcom) on Wed Sep 17th, 2008 at 06:01:41 PM EST
[ Parent ]

Re: But for all the bloggers in the US, (4.00 / 3)

And that's when you'll get rioting.

Quick story. Summer 1974. My girlfriend and I are both working in the gardens of the local private college. A person comes along, we say Hi, and she tells us that there has been a run on sugar at the grocery stores. My girl friend and I look at each other like, "That must be a joke, right? This is America after all. We NEVER run out of shit." That evening, we're at the grocery story, come to the baking goods aisle, and the shelf with sugar IS EMPTY except for one 4-5 lb. ripped open paper container ... sugar strewn everywhere, not cleaned up.

Conclusion: America is a bunch of spoiled brats who will turn VERY UGLY at the least hint of a shortage.

LET'S WATCH!!!!

McCain/Palin ... total sacks of SHIT!

by THE Twank (paszeski__aaaaaaatttttt__yahoo.com) on Wed Sep 17th, 2008 at 06:27:02 PM EST
[ Parent ]

Re: But for all the bloggers in the US, (none / 0)

I was always extremely lazy in managing my petty savings, as a result most of my money is on 1-month interest savings account. The good thing about this is, when tomorrow I run to the bank (which I will do), I will only loose little for each month I have the money below the pillow.

I am pretty aware that that money might be worth next to nothing when the proverbial sh.t hits the fan (more than now), but I prefer to have it on my hand than seeing it disappear or being slashed inside the bank or taken away even if temporally.

Of all forms of caution, caution in love is perhaps the most fatal to true happiness - Bertrand Russell

by tiagoantao (put_my_login_here <> gmail com) on Wed Sep 17th, 2008 at 06:09:48 PM EST
[ Parent ]

Re: But for all the bloggers in the US, (none / 1)

Just buy Euros...

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Wed Sep 17th, 2008 at 06:29:22 PM EST
[ Parent ]

Re: But for all the bloggers in the US, (none / 0)

Considering that "the system" seems to be so tightly integrated (and in a non transparent way), what is there to assure that a massive blunder in Wall Street will not have massive ripples over here in a couple of days?

Of all forms of caution, caution in love is perhaps the most fatal to true happiness - Bertrand Russell

by tiagoantao (put_my_login_here <> gmail com) on Wed Sep 17th, 2008 at 06:36:45 PM EST
[ Parent ]

Re: But for all the bloggers in the US, (4.00 / 4)

I think the Eurozone financial sector has not as "innovative" as the Anglo-Saxon/Swiss ones.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Wed Sep 17th, 2008 at 07:09:10 PM EST
[ Parent ]

Massive ripples, sure, but if you live in a ... (none / 1)

... US$ economy, the relative security of the continental European bank-oriented financial system as compared to the boom and bust Anglo market-oriented system is a fairly reliable windfall gain.

Come to think of it, it might not be bad advice for UK bloggers either.

Utsukushikereba sore de ii

by BruceMcF (agila61 at netscape dot net) on Fri Sep 19th, 2008 at 01:43:32 AM EST
[ Parent ]

a run on the banks (none / 0)

Just what I thought. Made me cold and sweaty all over. If I had assets in a US bank, which I thankfully don't, I'd run and get them ASAP.

What I still don't get is why people buy US government bonds instead of, say, Exxon Mobil corporate bonds. The risk that the US gov will do something really crazy seems a lot higher than Exxon Mobil defaulting on their debt, in my humble opinion...

And of course, the yield is much better.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid (arvid.hallen at gmail.com) on Thu Sep 18th, 2008 at 05:19:41 PM EST
[ Parent ]

Re: a run on the banks (4.00 / 2)

Well, the US could do something crazy, e.g. nationalise all oil in its ground. US Treasuries are definitively better than bonds of any single company in the US.
As well a US gov't default would come in the form of money printing. Any dollar denominated bond would suffer the same losses as the Treasury bond.

Lich King/Caribou Barbie 08
Pain brings Katharsis

by Martin (weiser.mensch(at)googlemail.com) on Thu Sep 18th, 2008 at 09:49:49 PM EST
[ Parent ]

Re: a run on the banks (none / 0)

The republicans would never attack the oil industry.

And hey, why not buy Total corporate bonds then, or euro ECB bonds, or EdF bonds or.. The list goes on.

Why flee and head for the source of the problem, instead of away from it?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid (arvid.hallen at gmail.com) on Fri Sep 19th, 2008 at 07:57:02 AM EST
[ Parent ]

Re: a run on the banks (none / 1)

Oh I think there are several reasons

political: Peg your currency
possible currency mismatches on the balance sheets, if you invest all your money in e.g. Euro, but your debt is in Dollar. Banks will therefore be happy to invest
betting on deflation / rising dollar: This may be not totally absurd, as Japan for sure as well tried to get some inflation and didn't manage to

Lich King/Caribou Barbie 08
Pain brings Katharsis

by Martin (weiser.mensch(at)googlemail.com) on Fri Sep 19th, 2008 at 09:22:32 AM EST
[ Parent ]

Treasury bonds are the only assets ... (none / 1)

... allowed to be held by the monopoly issuer of dollars, so if you want to an asset that you are confident can be used to meet future dollar obligations, and are worried that a commercial bank account may not fill the bill, the T-bill is the most secure possible dollar-denominated asset.

It rules the roost not from being 100% secure, but from the fact that if its in the absolute back of the line of dollar denominated financial assets in terms of being completely fucked.

Utsukushikereba sore de ii

by BruceMcF (agila61 at netscape dot net) on Fri Sep 19th, 2008 at 01:47:19 AM EST
[ Parent ]

Re: Treasury bonds are the only assets ... (none / 1)

The FED can't hold anything but treasury bonds? I thought they had taken on all kinds of toxic crap recently. Or did I miss something here?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid (arvid.hallen at gmail.com) on Fri Sep 19th, 2008 at 07:58:58 AM EST
[ Parent ]

Nitpick (none / 0)

Do you mean on sight (nationalising all $1tn companies as soon as they see them) or in sight (nationalising the ones that they/we see)?

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Wed Sep 17th, 2008 at 04:54:34 PM EST

People thought me a loon (none / 0)

Others have called me a "street prophet".
But with the designed decline of America I did say.
It's all yours Europe.

by Lasthorseman (Lasthorseman@comcast.net) on Thu Sep 18th, 2008 at 08:52:27 PM EST

Anybody recall (none / 0)

My tin foil hat discussions about something called the North American Union, a European style merger of Canada,Mexico and the US? Hmmmm....anybody??

http://people.csail.mit.edu/rahimi/helmet/

by Lasthorseman (Lasthorseman@comcast.net) on Sun Sep 21st, 2008 at 09:51:46 PM EST

US Treasury nationalises all trillion dollar companies on sight! | 84 comments (84 topical, 0 editorial, 0 hidden)

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