Storm
Hold onto your hats.
September 18, 2007
U.S. Banks Brace for Storm Surge as Dollar and Credit System ReelBy MIKE WHITNEY
By now, you’ve probably seen the photos of the angry customers queued up outside of Northern Rock Bank waiting to withdraw their money. This is the first big run on a British bank in over a century. It’s lost an eighth of its deposits in three days. The pictures are headline news in the U.K. but have been stuck on the back pages of U.S. newspapers. The reason for this is obvious. The same Force 5 economic-hurricane that just touched ground in Great Britain is headed for America and gaining strength on the way.
On Monday night, desperately trying to stave off a wider panic, the British government issued an emergency pledge to Northern Rock savers that their money
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Either way, it could be an unkind cut
By Henry C K LiuStrong employment had been a key benefit of the liquidity boom in the United States even though wages had not been rising enough to keep up with asset prices. But news on slow growth of employment for July was an ominous sign that the liquidity boom was ending.
Economists know that employment data are a lagging indictor, showing only the effects of previous periods. Yet official
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Economy at `Scariest’ Since Depression, Says Penner (Update1)
By David M. Levitt and Bryan Keogh
Sept. 18 (Bloomberg) — The world economy “is probably at its scariest point since the Depression” as fallout from the U.S. subprime mortgage crisis crimps access to credit, said Ethan Penner, a pioneer of the $600 billion commercial mortgage-backed securities market in the early 1990s.
“We’re probably at the closest point to a big meltdown, a depression-type meltdown than we have been in our lives,” said Penner, 46, now a principal at real estate fund management firm Lubert-Adler Partners LP in Philadelphia, during a speech at a Real Estate Media Inc. conference in New York.
The U.S. housing market is an “unmitigated disaster”
Legume Sam:
today’s Los Angeles Times (paper copy) front page headline:
Fed slashes key rate to stir lenders
Here we go…
19 September 2007, 9:31 amLisa:
Another article by Mike Whitney:
Greenspan on 60 Minutes: It was all Bush’s fault
http://www.informationclearinghouse.info/article18411.htm
Some interesting posts on the Gang of 8:
http://finance.groups.yahoo.com/group/gang8/message/12169
http://finance.groups.yahoo.com/group/gang8/message/12160
http://finance.groups.yahoo.com/group/gang8/message/12129
http://finance.groups.yahoo.com/group/gang8/message/12120
19 September 2007, 3:32 pmLisa:
US rate cuts: Like a blow to the head
http://atimes.com/atimes/Global_Economy/II20Dj01.html
Now He Tells Us! Alan Greenspan Writes a Typical Beltway Memoir
19 September 2007, 4:26 pmhttp://www.electricpolitics.com/2007/09/now_he_tells_us.html
Steve:
Treasury Secretary Henry Paulson told Congress on Wednesday the government will hit the current debt ceiling on Oct. 1. He sought quick action to increase the limit, saying it was essential to protect the “full faith and credit” of the country, especially at a time of financial market turmoil.
The limit is $8.965 trillion. Unless Congress votes to raise it, the country would be unable to borrow more money to keep the government operating and to pay debt obligations coming due.
Yes! In order for Bush’s friends to retire in absolute splendor we must raise the ceiling to 100-shit-trillion-bazillion-mega-fuck-the-future-gazillion. (or you hate America and the troops and the little chil’ren and Terri Schiavo and are probably a fag who doesn’t go to church because you smoke weed and drive a commie Prius)
19 September 2007, 7:28 pmCraig:
This piece does a pretty good job of explaining in concrete terms what Henry Liu refers to when he talks about wages falling behind the asset bubble. The rate cut may help the liquidity crisis in commercial paper and help a number of companies roll over their debt, but it’s no solution to the housing bubble because there is no solution. A large amount of mortgage-backed paper is still junk, and these bad debts remain on the books of banks, hedge funds, and pension funds.
Also, when thinking about the rate cut, it’s important to remember that nothing happened, as in buildings didn’t go up and crops didn’t get harvested. In effect, it’s a zero sum game, with winners and losers. The winners are borrowers, because they will now pay a lesser rate. The losers are the people who will now pay more for gas and imported goods because of the weakening dollar.
19 September 2007, 9:54 pmpeggy:
NB from Mike Whitney: “It’s better to let cash-strapped borrowers default than slash interest rates and trigger a global run on the dollar.”
20 September 2007, 12:33 amLisa:
Excellent interview:
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vjUSJ.lwS8e0.asf
20 September 2007, 10:35 amRK:
Thanks Steve! I know I shouldn’t be so low-brow to condone such language here; but I laughed good, loud and hard at that last paragraph. Sounds like myself when I walk into my living room and my wife is listening to some yap crap on the Candyland News Network. I know this is a useless post but thanks for making me stir up some much needed endorphins and feel much better!!
20 September 2007, 10:54 amSteve:
Your welcome RK
My wife watches Candyland News also. Believing she is being informed. I find myself in a position now to where I have to resist the urge to pick up the TV and toss it through the window (or through the wall) after about the first 10 sec of a typical lacquer heads canned spiel.
Take a deep breath, exhale, calm, relaxing, going deeper, relaxing now . . . . . .
21 September 2007, 9:19 pmSam:
Important 2006 article by Paul Craig Roberts on the class war in America. By no means outdated.
http://www.counterpunch.com/roberts09302006.html
25 September 2007, 2:27 pmTimothy R. Anderson:
This is NOT the end of the credit crunch meltdown thingy ( whatever it shall
be called ! )
Northern Rock could and did go to the Bank of England to
cover their butts .
How much can the Bank of England cover , exactly ; what happens when
Northern Rock ‘ s peers try to do the same thing ?
People who aren’t customers of Northern Rock are worried , worried,
worried , and with good reason.
Northern Rock is not an isolated , freak-of-nature deal .
It is the smallest fragment of a snowball that is still at the
top of the hill .
Prime Minister Brown ‘s decision to have the election in November 2007
is not an accident , y’all .
The Tories know, and Labour knows , that this is the Titanic .
I hope that things don’t get to the point where the Queen of Britain needs to pawn the jewels. Not that she would.
Tim
4 October 2007, 1:23 pmChristina:
Credit meltdown: think of a levee, or a dam. It’s started to spring leaks, everywhere. All over the world, bankers are holding their collective breaths. They know there’s really not much they can do about it. The central banks can intervene, but that’s a highly limited & temporary fix that they have available. Certainly not fix bank portfolios which have no value. It’s just a matter of time before the whole system falls apart.
7 October 2007, 10:36 pmThere are some amazing numbers out there, which show that we really haven’t seen the biggest numbers of foreclosures yet in the U.S. The numbers of subprime mortgages will be resetting, in bigger & bigger numbers over the next few months. In March of ’08, I believe something like $110 billion dollars worth of mortgages will be reset. This is when whole neighborhoods will be standing empty.
Europe is in the same situation. Most vulnerable countries: Sweden, Denmark, The U.K. and Spain. France is vulnerable, but not as much as the previous 4.
When it’s all done, I expect houses will be worth about 1/2 of what they are now. If we’re lucky. But most probably, they will probably be about 20 cents on the dollar. I have friends who think this is the “perfect” time to go buy some houses. I’ve been warning them it’s too early. Wait about 2 years.
In the meantime, we will see massive bank failures, a lot of lost money both in real estate & the stock market.
Interesting thought, isn’t it? That the renters would be pushed to the front of the line.
audrey:
The county treasurer here is required by law to take out a classified ad listing tax foreclosure notices. So the treasurer for Wayne County (where Detroit is) did that today in the Detroit Free Press. The ad filled 121 pages with listing after listing. It’s fairly overwhelming.
26 November 2007, 12:10 am