Economic News

[G-spotter]

There's really good rime ice climbing on the central crater of Ruapehu! You should hit it just right in early spring?

[prole]

 

Anybody here making large withdrawals today?

Link

Top Economist: Americans Should Worry About Bank Deposits if Congress Doesn't Act

Posted Sep 15, 2008 12:58pm EDT by Aaron Task in Investing,

 

Updated from 12:58 p.m. EDT

 

With the "financial storm of the century" hitting financial institutions, many Americans are worried about the safety of their bank deposits. While the FDIC insures individual accounts up to $100,000, the reaction to IndyMac's failure this summer -- lines outside retail branches -- shows Americans have limited faith in the Federal Deposit Insurance Corp., which guarantees individual accounts up to $100,000.

 

Update: "The banking system is safe and sound," Treasury Secretary Hank Paulson declared at a mid-afternoon press conference Monday, seeking to ameliorate such concerns.

 

"Nothing is more important than the stability and orderliness of our financial markets [and] regulators remain vigilant," Paulson continued. "We're working through a difficult period in our financial markets right now as we work of some of the past excesses, but the American people can remain confident in the soundness and resilience of our financial system."

 

But Americans are justified to be worried, says Nouriel Roubini, of NYU's Stern School and RGE Monitor, who notes there is already a "slow-motion run on retail banks" occurring nationwide.

 

That "run" could accelerate as people realize the FDIC fund has about $50 billion to "insure" about $1 trillion in assets at the nation's financial institutions, says Roubini. "They're going to run out of money" unless Congress acts soon to recapitalize the FDIC.

 

In addition, the recent spike in number of banks on the FDIC's "troubled list" is only through June, meaning even that inflated number understates the problem.

 

The intent here isn't to add to people's anxieties, but Roubini is one of the few market watchers to correctly predict the severity of this ongoing credit crisis. If nothing else, he says people with accounts exceeding $100,000 in value should spread their money - and the risk - among different firms.

[j_b]

This is a huge blow to market fundamentalism. The free-market rhetoric is religion that isn't supported by a shred of evidence. All administrations since 1978 are guilty of pushing the deregulation of economic activity that led to the current crisis as well as other bubbles of recent decades.

[billcoe]

No need, prepped for this years ago. Prepare for the worse, hope for the best.

[prole]

This is a huge blow to market fundamentalism. The free-market rhetoric is religion that isn't supported by a shred of evidence. All administrations since 1978 are guilty of pushing the deregulation of economic activity that led to the current crisis as well as other bubbles of recent decades.

 

Nah, not as long as the jesuit economists and their alcolytes in the business press can still filibuster us to death with ahistorical technojargon, right? During the next couple decades of re-regulation we can look forward to the remaining true-believers whine about the misapplication of "sound market principles" or failure to "go all the way" as the explanation for the current crisis (their IMF clergy members will have had plenty of practice from South America) on the one hand. On the other we can expect to hear how reregulation is doomed to failure and totalitarianism is right around the corner. Your dustbin awaits fellas, filed right next to "the end of history".

 

Unhappily, as a result of the failure of their misguided doctrines the next phase of global capitalism is likely to have a strong authoritarian flavor. Don't think the American technocrats watching the Chinese Olympics weren't wondering "what the hell's so great about democracy anyway?"

[j_b]

It is going to be difficult to avoid a hard landing for many, including because of peak oil so their "catapulting the propaganda" may not be as effective in the future. I guess this is where the Chinese model comes in. I see that you are a fan of Ms Naomi Klein.

[prole]

I haven't read much by her in a while, but yep this pretty much covers the idea:

From Olympics: Unveiling Police State 2.0

The games have been billed as China's "coming out party" to the world. They are far more significant than that. These Olympics are the coming out party for a disturbingly efficient way of organizing society, one that China has perfected over the past three decades, and is finally ready to show off. It is a potent hybrid of the most powerful political tools of authoritarianism communism -- central planning, merciless repression, constant surveillance -- harnessed to advance the goals of global capitalism. Some call it "authoritarian capitalism," others "market Stalinism," personally I prefer "McCommunism."...

...The goal of all this central planning and spying is not to celebrate the glories of Communism, regardless of what China's governing party calls itself. It is to create the ultimate consumer cocoon for Visa cards, Adidas sneakers, China Mobile cell phones, McDonald's happy meals, Tsingtao beer, and UPS delivery -- to name just a few of the official Olympic sponsors. But the hottest new market of all is the surveillance itself. Unlike the police states of Eastern Europe and the Soviet Union, China has built a Police State 2.0, an entirely for-profit affair that is the latest frontier for the global Disaster Capitalism Complex.

Edited September 15, 2008 by prole

[j_b]

here you go:

 

gXAACXUh7yI&

[JayB]

This is a huge blow to market fundamentalism. The free-market rhetoric is religion that isn't supported by a shred of evidence. All administrations since 1978 are guilty of pushing the deregulation of economic activity that led to the current crisis as well as other bubbles of recent decades.

 

Nah, not as long as the jesuit economists and their alcolytes in the business press can still filibuster us to death with ahistorical technojargon, right? During the next couple decades of re-regulation we can look forward to the remaining true-believers whine about the misapplication of "sound market principles" or failure to "go all the way" as the explanation for the current crisis (their IMF clergy members will have had plenty of practice from South America) on the one hand. On the other we can expect to hear how reregulation is doomed to failure and totalitarianism is right around the corner. Your dustbin awaits fellas, filed right next to "the end of history".

 

Unhappily, as a result of the failure of their misguided doctrines the next phase of global capitalism is likely to have a strong authoritarian flavor. Don't think the American technocrats watching the Chinese Olympics weren't wondering "what the hell's so great about democracy anyway?"

 

I suspect that we'll arrive at rather more prosaic remedies to the regulatory shortfalls that have given rise to the present crisis.

 

At the end of the day, imperfect as it may be, there's no mechanism other than prices that enables the coordination of supply and demand, and the allocation of capital in a way that responds to the prerogatives of reality than the price system. You can slap a new body on the engine and tweak the controls, but nothing else will work. Reality is too complicated, and the future too uncertain for a centralized bureaucratic mechanism to do anything but fail.

 

This should be obvious by now, even to people who take Naomi Klein seriously.

[olyclimber]

remember this?

 

I1eSlYtXiro

[TREETOAD]

is that guy a pro wrestler?

[prole]

This is a huge blow to market fundamentalism. The free-market rhetoric is religion that isn't supported by a shred of evidence. All administrations since 1978 are guilty of pushing the deregulation of economic activity that led to the current crisis as well as other bubbles of recent decades.

 

Nah, not as long as the jesuit economists and their alcolytes in the business press can still filibuster us to death with ahistorical technojargon, right? During the next couple decades of re-regulation we can look forward to the remaining true-believers whine about the misapplication of "sound market principles" or failure to "go all the way" as the explanation for the current crisis (their IMF clergy members will have had plenty of practice from South America) on the one hand. On the other we can expect to hear how reregulation is doomed to failure and totalitarianism is right around the corner. Your dustbin awaits fellas, filed right next to "the end of history".

 

Unhappily, as a result of the failure of their misguided doctrines the next phase of global capitalism is likely to have a strong authoritarian flavor. Don't think the American technocrats watching the Chinese Olympics weren't wondering "what the hell's so great about democracy anyway?"

 

I suspect that we'll arrive at rather more prosaic remedies to the regulatory shortfalls that have given rise to the present crisis.

 

At the end of the day, imperfect as it may be, there's no mechanism other than prices that enables the coordination of supply and demand, and the allocation of capital in a way that responds to the prerogatives of reality than the price system. You can slap a new body on the engine and tweak the controls, but nothing else will work. Reality is too complicated, and the future too uncertain for a centralized bureaucratic mechanism to do anything but fail.

 

This should be obvious by now, even to people who take Naomi Klein seriously.

 

Not exactly the fire and brimstone sermon we used to hear from your pulpit. But then again, I can imagine even the most ardent worshippers have been chastened by what people just like Naomi Klein have been warning about for years (The potential collapse of Fannie and Freddie were topics for discussion in my grad seminars more than 5 years ago). Anyway, if not Klein how about Stiglitz?

 

America's financial system failed in its two crucial responsibilities: managing risk and allocating capital. The industry as a whole has not been doing what it should be doing - for instance creating products that help Americans manage critical risks, such as staying in their homes when interest rates rise or house prices fall - and it must now face change in its regulatory structures. Regrettably, many of the worst elements of the US financial system - toxic mortgages and the practices that led to them - were exported to the rest of the world.

 

It was all done in the name of innovation, and any regulatory initiative was fought away with claims that it would suppress that innovation. They were innovating, all right, but not in ways that made the economy stronger. Some of America's best and brightest were devoting their talents to getting around standards and regulations designed to ensure the efficiency of the economy and the safety of the banking system. Unfortunately, they were far too successful, and we are all - homeowners, workers, investors, taxpayers - paying the price.---from Guardian 9/15/08

Edited September 16, 2008 by prole

[joblo7]

8 years of removing safeguards for profit will do that.

communications,

energy

banking

health care

why the fuck do you think the reps are selling that less gov crap.?

 

cause it works/pays for them .

[prole]

That's the only coherent thing you've said all week.

[Buckaroo]

Reality is too complicated, and the future too uncertain for a centralized bureaucratic mechanism to do anything but fail.

 

Is that why China has an $800Bil surplus and the US has a $7Tril Debt?

 

China is actually producing goods, over here we're just shuffling paper back and forth and hoping it reproduces.

[Mal_Con]

Now don't you all worry the fundamentals of the American economy are sound, and have you seen the pictures of the MILF I am running with

[Buckaroo]

At the end of the day, imperfect as it may be, there's no mechanism other than prices that enables the coordination of supply and demand,

 

BS, mediated meritocracy. Regulation is key. That's why Enron didn't last, they gamed the supply to artificially drive up rates, of course they had to do away with the rules or break them. They killed most of the rules and with no limits their greed overcame them.

 

The mortgage industry the same way, you don't think the dereg allowed an intentional bilking with the CEO's etc walking off with billions?

 

They did away with trust busting, so consolidation/monopoly and we're where we are now. Why would so many just go down all the sudden if regulations didn't allow it and it wasn't intentional?

[Hugh Conway]

over here we're just shuffling paper back and forth and hoping it reproduces.

 

Wall Street is our future! So is BioTech!

 

Oh, wait, those bubbles are bursting...

[Buckaroo]

The funniest thing about this is that when they claim that they *need* public money to finance their retooling, they are more or less conceding that the money that these investments generate won't be sufficient to repay the debts. If it was, they'd be able to get private financing.

 

Yes, without regulation the cretins of industry go for the short term profit. You can make more money on already tooled SUV's than you can on developing small hybrids for the future. And without the government of the people they just take the money and run.

 

When that short term ends they can re-arrange the chairs and petition for $billions from the greed pig politico's that they bought at one percent of that. And they'll hand over dollars borrowed from China in the taxpayers name. Of which you'll only be allowed to pay the interest.

[prole]

"In other news, Sarah Palin is fuckin' hawt!"

[John Frieh]

Things won't bottom out until the underlying assets - houses and condos - find prices at which the rent they can generate will cover the debt required to purchase them. We're still a ways away from reaching those price levels IMO.

 

More foreclosures followed by the rise of a new slumlord/real estate speculator class? Yay?

 

RMLS announced PDX real estate down 7.3%... biggest decline on record.

 

[j_b]

At the end of the day, imperfect as it may be, there's no mechanism other than prices that enables the coordination of supply and demand, and the allocation of capital in a way that responds to the prerogatives of reality than the price system. You can slap a new body on the engine and tweak the controls, but nothing else will work. Reality is too complicated, and the future too uncertain for a centralized bureaucratic mechanism to do anything but fail.

 

Regulation is necessary to prevent the crooks from cooking the books as shown by the on-going financial collapse and the countless frauds of the last 3 decades. Regulation is necessary to manage resources and ecosystems services that would otherwise be plundered by barbarians as shown by the sorry state of the planet. Regulation is necessary to account for all kind of externalites not considered in "supply and demand" and about which greedy bastards really don't care. Without regulation it is impossible to know what is the supply so prices surely won't take it into account.

 

Free-marketeers cannot be counted on not to kill the golden goose because they'd rather cash in now and move on to another plunder. Free-marketeers cannot be counted on to do the most basic algebra to balance a budget and make sure there is enough for tomorrow and future generations.

 

It really isn't rocket science. The immense majority of us were much better off when there were real jobs, pension plans, savings, etc .. which was BEFORE deregulation so I suggest that you bring a little evidence to the table before you keep reciting your gospel about "centralized bureaucracy" (I guess you had to think of something since you couldn't seriously invoke "big government" and "nanny state" without looking silly)

[Peter_Puget]

gee..and here I thought I had a real job, real retirement savings.

 

So the sky is falling..exactly how can I determine the extent of the mess.

 

let's see..

 

Unemployment doesn't seem out of whack.....

 

Has commercial credit dropped off the face of the earth? Are small businesses unable to get credit? Are lines of credit being revoked left and right?

 

 

 

Please tell us some signs and symptoms to look for....

 

Oh and J_B welcome back!

 

Weren't the Dems actively trying to increase F/F lending just a few months ago?

 

 

Edited September 16, 2008 by Peter_Puget

[Jim]

Agreed. With some modest oversight most, if not all of this "financial crisis" could have been avoided. Insisting on stricter guidelines on loan eligibility and increased capitalization requirments for firms would have done most of this. Instead what do we have? The typical short-term greed that fuels the financial sector.

 

If they were such Masters of the Universe couldn't these free capitial wizards have seen this coming? Check out the last year's payment for the CEO of WAMU or Solomon Brothers for instance. They earned this by driving their firms into the ground? And the fallout has much wider social implications.

 

To pretend that our financial system is run by the invisible hand is fallacy. From government backed mortgage securities to farm subsidies government props up business continually. I'm a bit tired of socialized business. They want free reign until it's time for a government bail out. Since they can't seem to operate with normal business standards, and because the implications of the failure of such large institutions are large, more oversight is needed.

[Hugh Conway]

Has commercial credit dropped off the face of the earth? Are small businesses unable to get credit? Are lines of credit being revoked left and right?

 

Yes, yes, and yes.

 

 

Now that the US is in the insurance business...