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It will take a significant change in leadership of economic policy and very radical, coordinated policy actions among all advanced and emerging market economies to avoid this economic and financial disaster.

That has been clear for a while. As long as the diagnostic doesn't identify global financial capitalism, unrestricted capital flows and market fundamentalism as the root causes, the actions taken will be too little, too late and, at best, address the symptoms.

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 Fri Oct 10th, 2008 at 03:31:45 AM EST
I'll believe we're back on the path to sanity when the wittering about Buffet being Treas Sec is replaced by rumours about someone like Roubini getting the job.

The idea that someone should be Treas Sec because they have a good investment record and have made a few throw-away populist comments doesn't exactly inspire me, given what's happening at the moment.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Oct 10th, 2008 at 04:27:50 AM EST
[ Parent ]
Care to cross-post this comment on the Buffet thread?

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 Fri Oct 10th, 2008 at 04:30:11 AM EST
[ Parent ]
Buffett would never want it anyway.  Roubini would be a great one.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Fri Oct 10th, 2008 at 07:38:50 AM EST
[ Parent ]
You want to be greedy when others are fearful and you want to be fearful when others are greedy. In my adult lifetime I don't think I've ever seen people as fearful, economically, as they are right now.

- Warren Buffet, ten days ago, after he invested in Goldman Sachs and General Electric.

The central principle of investment is to go contrary to the general opinion, on the grounds that if everyone agreed about its merit, the investment is inevitably too dear and therefore unattractive.

- John Maynard Keynes, a long time ago.



Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sat Oct 11th, 2008 at 09:24:25 AM EST
[ Parent ]
The problem is a massive and systemic shortage of Capital to underpin the pyramid of credit created, since the opaque pool of investor capital to whom the banks "outsourced" most of the credit risk - the "shadow banking system" - is finished.

The financial claims which have been manufactured and imposed upon US businesses and individuals (particularly through mortgage loans) exceeded the capability of the US's productive capacity to meet them in or around August last year - the point of "Peak Credit".

While the Fed can provide infinite liquidity, the US cannot recapitalise their banking system without outside assistance ie a Bretton Woods II.

These financial claims constitute debt repayments and interest payments on the debt.

It seems to me that there are two choices for the creditors of the US.

(a) Conventional - reduce the number of claims, by writing off a large part of the debt and converting some of the rest to conventional equity in existing and new US credit institutions;

(b) Unconventional - convert the debt by a networked process of "Unitisation" into a new generation of "Public equity" within a partnership and trust based (rather than Company) legal framework.

If I were a creditor of the US, I would opt for the latter, if I were aware of the possibility.

It is my hope that Iran - if they understand, accept and assimilate my analysis and proposals this week - may promote these ideas in the region because:

(a) their fellow regional OPEC members have more to lose from the conventional approach than anyone else;

(b) the proposals are islamically sound at a fundamental level.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Oct 10th, 2008 at 08:08:38 AM EST
[ Parent ]

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