Read along with me, won't you?

"The way the TARP is designed -- and I didn't design this -- but the way it's designed is every dollar that comes back goes into the general fund but that does still create additional head room under the $700 billion authority for us to make capital investments," Geithner said. "So we have the ability to still use the $700 billion if we think there's a strong case for doing that, but the way the program works is a dollar comes in and goes to the general fund but still creates additional room for us to make a new..." "So your understanding of what we did is that the Treasury now has $700 billion that it can use permanently," DeMint said, "rotating in and out of the capital markets as you see fit?" "Well, I'm not quite sure permanent, but you're right," Geithner said.

Some of the folks who read this blog might recall me mentioning, oh, way back a few months ago, an interesting choice of wording in the original bailout deal.  To wit, Congress did not authorize the Sec. of the Treasury to use $700b; rather, it authorized to have in use up to $700b at any time.  In fact, I used this as an example repeatedly in my Critical Thinking class to demonstrate loaded language.  Welllll.... the chickens have come home to roost, have they not?  All that money that the banksters (headed by Paulson, now Geithner) were supposed to pay back to us taxpayers?  Ah well.  Turns out the banks now get their very own revolving fund, and the taxpayers get--what else?--the debt.

You didn't really want public schools and ambulances, did you?

http://www.nytimes.com/2009/03/08/opinion/08friedman.html?_r=3

Yes, Thomas Friedman is now arguing against growth economics.  Yes, that Thomas Friedman.  The one who wrote that delightful screed "The World is Flat", the holy book of everyone who doesn't really give a shit who gets it up the ass as long as you make money off of it (because that will eventually fix all problems, presumably including anal reconstruction for those on the initial losing end).

Told ya so.

Oh, and just for the record, did you see that the FDIC is near the end of its financial rope?  At least until We the Taxpayers get to bankroll it even more money. 

I'm gonna go stuff some more money in our mattress now.  =-p

http://www.nytimes.com/2009/02/13/business/economy/13yen.html?_r=1&ref=business  (yoinked from theautomaticearth.blogspot.com)

The short version:  what's happening in the American markets happened already--almost verse and line--to Japan in the early 90's.  They, too, ignored and/or resisted doing what was actually needed in order to stop the cascading mess, and they endured a full lost decade, including housing prices which fell for 15 years.  What did they finally do, which they should've done years prior?  Forced a complete audit of all bank books, nationalized and restructured the ones which could be saved and then resold them to the private sphere, and let the market raze the rest to the ground.  Can't help but notice how similar this sounds to... um... what I've been saying for about 6 months now (probably because it's also what people like Roubini have been saying--I'm not particularly smart about these things).  *sigh*  But no, we'll follow the example laid out by Japan and explore just how bad we can make things.

We wanted a free market?  Well, this is how one works--why are we using government funds to prop up zombie banks?  It's pointless, and will just waste more money that we can possibly imagine before failing.

It's just like battle fatigue, except that no one is shooting at me.  Yet.

I hit it today.  Just about an hour ago, actually.  This could have something to do with the fact that I'm quite sick and heading to bed soon, but more likely it has to do with seeing the current tally for our bailout efforts:  $7.7 trillion.

$7.7 trillion. 

$7.7 trillion.

That number is almost entirely meaningless to me.  All I can see is faces of children who won't get an education because we spent that money on bankers.  Families that went bankrupt because we couldn't afford basic health care for everyone thanks to the banks.  Streets with no power because the grid is so fragile due to lack of upkeep, and we spent that money on the banks.  A world getting warmer and warmer, agriculture struggling, people starving, desertification increasing.... and no money left to make "green" changes to our infrastructure, because the banks needed it more.  I can't even begin to list all the things we could have done, so well, so worthwhile-ly, and we instead chose to donate all the money to bankers.  I look at those numbers and I just see poor, hungry, dirty, sad faces swimming before my eyes.  As someone in the financial world put it (paraphrased):  I walk the streets and see people passing me who are already dead, they just don't know it yet.

It was enough to make me cry.

Then it was so bad that all I could do was laugh.

Now its too far, and all I can do is sigh.

My gods, what have we done?

So have you seen the latest revelation by Paulson, et al.?  Yeah, turns out they've decided that the original plan to use the bailout to buy off toxic mortgage-backed paper off of banks won't work after all, and they're just going to go ahead and buy stocks in lots of banks, automakers, etc, to prop up their bottom line.  Now, let's just set aside for a moment that he's completely derailing the original intent of the program with no authorization (cause apparently he doesn't need any), and also set aside the fact that $1.2 trillion has already dissappeared out the discount window of the Fed, and Bloomberg News is now suing under the Freedom of Information Act to find out where the hell all that money went to, exactly??  Let us deal instead with the fact that, based on Paulson's recent actions, there are only two viable explanations for his behaviour:

(1)  He actually has no idea what he's doing, or what to do, and is just fumbling around in the dark much like if my 6-year-old were he put in charge of things (I'd say my 3-year-old, but given that whole today/tomorrow discussion we've been having, I think I'll give him more credit that that).  This option is scary.  Or,
(2)  Paulson knows exactly what he's doing.  I mean, you can only screw up monstrously so many times before one must conclude that either you're very bad at what you do, or very, very good at what you do (tip of the hat to Illargi for that one).  This option is scarier.  

Everyone keeps saying that what we need is to restore confidence in the markets.  Well, yeah, probably that would help--capitalism cannot work in secrecy, that's foundational.  But let's take a step back and look at the situation.  How, someone please oh please explain to me how, is it supposed to help things to just shovel money to the asshats who made this mess?  Is that restoring transparency?  Confidence?  Here, let me give you a thought experiment.  Let's take, say, 20 mob bosses and put them in a room together.  Everyone knows that at least half of these bosses is currently bankrupt, they've just been hiding it, but no one knows which ones are which.  Now, let's say I come in and give each of them $100k in cash, and say that this should cover the losses that any one of them has taken.  The Question:  Are they all going to suddenly trust each other and lend money back & forth to each other?  Um... lessee, let me think about this.... ah.... HELL NO THEY WON'T!  Why not?  Because they all know that at the end of the day each and every one of them is a lying, cheating, stealing, no-good, shit-for-brains GANGSTER!  

We have gangsters in charge of our banks, and now everyone knows it.  Why would they trust each other under any circumstances?  I cannot imagine.

And what is all this nonsense about "banks better start lending again to consumers"?  What consumers?  Didn't anyone get the memo that we're all fricking broke?  I don't want to borrow any more money, and I don't know many people who do.  We want to make enough money to live within our means, and not need to borrow money to make ends meet.  We're sick of this treadmill.  Most of us are already in debt-servitude for the large remainder of our lives, we don't want more.  What, the car sales problem is that people just haven't been getting the financing?  Check again, Einstein.  The problem is that no one can afford to buy a car right now, even with financing.  

Here's a fun anecdotal story I got off of Chris Martenson's blog:  a guy down in San Antonio, TX, works in the repair shop of an auto dealer down there.  During a normal month, they sell around 200 new cars, and maybe 400 used cars.  During the month of October, they sold five cars.  Five.  FIVE (5).  And Paulson wants us to believe that the problem is financing?  Be serious.

I had my iPod cranking through my kitchen stereo today, and this song came on.  It's transparently not about the current financial situation, but I just couldn't help being reminded of Paulson & Bernanke while listening to it.  It's a dark cabaret ditty from a band called ThouShaltNot.  The original title is "True Love" but I really think it should be retitled "Ode to Paulson".  There aren't any good audio versions of it on the web, so the lyrics are behind the jump.  Enjoyez-vous.
( Lyrics )

This post my husband made in the comments of an earlier post is getting upgraded to headline news:

"And for today's financial news

Exactly 1 year ago today was the all time high for the Dow (at 14164.53), and the S&P500 (at 1565.15). The NASDAQ has never recovered from its 2000 high, but last Halloween was the highest it has been in 6 years.

As of the end of trading today the Dow is worth 60.5% what it was exactly 1 year ago, and the S&P500 is worth 57.5% (and the Nasdaq is worth 58% of last Halloween).

It was a bad day for stocks, and a bad week for stocks, but there literally hasn't been a year for stocks close this bad since 1932 (when stocks bottomed).

In more bad news, Nouriel Roubini says that all 12 steps of his Feb 2, 2008 12 step prediction have now been fulfilled. Yes we are now officially off even Nouriel Roubini's map (the most pessimistic economist anywhere near the mainstream, who accurately predicted, in order basically everything that has happened this year).

BTW - both Morgan Stanley, and GM autos are now on the edge of bankrupcy watch with the vultures circling. GM lost 31% of its share value today, after already being bailed out once by congress this year, and all indications making it look like it won't be enough. Morgan Stanley is being aggressively shorted again, (which became legal again today).

-Brian M"

Or heck, for those who still have any money at all...  Today, The Rules changed, and it ain't pretty.

Yes, the Dow lost over 500 points today, and it will likely get worse before it gets better.  But that's not the big scary from today.  The Big Scary isn't being widely reported on, and I can see why. 

Let's talk about collateral.  Collateral is the assets one puts up to secure a loan.  If that person defaults on a loan, the collateral gets yanked by the loaning agent.  Clear?  Sure, that's easy--everyone knows what collateral is. 

A few months ago, the Fed opened something called a "discount window" to primary dealer banks (i.e., there's about 15--no wait, after today make that 13--of them).  Primary dealer banks could go to this window, put up some collateral, and get a loan.  These loans would help banks maintain liquidity, staving off things like collapses & bankruptcies.  But I guess the banks didn't have enough good collateral.  So today the Fed broadened the collateral rules. 

Pay attention, cause here's where you should become truly scared shitless:  the Fed will now accept stock assets and bank deposits as collateral.  This was apparently one of the ground conditions for Bank of America buying Merril Lynch today.  As far as we can tell, this is literally tantamount to borrowing your friend's pickup, using it as collateral for a loan while you've got it, then returning it to your friend.  Or, to put it another way, institutionalized theft.  What exactly happens if the bank defaults on it's loan?  Does the Fed get to come sieze your deposit?  I mean, I guess it must have to, cause that's exactly what collateral is for, after all.  (Nevermind that, technically, your deposit isn't there at all.  Banks don't have some gigantic vault in the basement where your money is kept.  It's just on loan to them, and they've been playing with it.  So who the hell knows WHAT the Fed will be siezing if your bank capsizes.)

And don't even get started on stocks.  Can you imagine using stocks as collateral?  How's that supposed to work?  Stocks go up & down in value constantly--that's their entire fricking point!  So how they can become a set value to collateralize a debt... *break*  I have no idea how that's supposed to work at all.

Still have your money in banks?  The usual argument is "It's people panicking and pulling their money out that will hurt the banks and then hurt us all."  Well, it's looking more and more like we're all going to get hurt no matter what we do.  So I might suggest a different perspective on the situation, "He who panics first, panics best."

BTW, this has not yet begun to play out.  The banks have billions (probably trillions) of $$s on their books marked to scurillously high amounts--functionally inflating their ledgers, and they're still taking record losses.  When the liquidation of Lehman's gets going in earnest, the true price of that paper will be revealed, and all hell will break loose.

Have fun!

No, you're not. Really, I think that as a population, we have not yet begun to get angry.



This is one of the lone sane voices out there--Karl Denninger.  This 10-minute video certainly isn't long enough to explain in detail the complete and total clusterfuck that is currently occurring in our financial markets, but it's a decent abbreviation. 

The bad part?  It's probably already too late.  Fannie and Freddie sold us down the river.  Do we still have any options?  I really don't know.  What I do know is that the vultures are circling several other large banks--namely Lehman's and Washington Mutual--and WaMu all by itself has more FDIC-insured money in it's vaults than the FDIC can afford to pay out.  Guess where those tabs are going when the vulture's land?  The U.S. Treasury, just like Fannie & Freddie.  Any guesses where the Treasury gets its money?  Yeah, from us.  Would any other highly fraudulent, ultra-rich banking motherfuckers who've already cashed out millions like to stick their hands any further into my pocket?  Or how about my children's?  Alex has around $35; he's been saving up for a Thomas the Tank Engine Train-washing set, but I'm sure you need it more.

Fucking assholes.

And the just brilliant part of this whole mess?  The part that makes it all almost funny?  After the Bear Stearns bailout, the market got about a short-week bounce from renewed investor confidence.  What did the doubtlessly-into-the-trillions bailout of the FMs give us?  Not even 36 hours.  Not even 36 motherfucking hours of bounce.  If it's not now transparently obvious that we're spinning the drain here, I don't know how it could get clearer.  It is over, over, over, and we're bailing out the assholes who caused the mess.

Today the market, which according to CNN was "Set to open higher" has already lost over 100 points in the DJ.  How low can we go?  I just can't wait to find out.

Anyone got some popcorn? 

EDIT:  Dow closed down 280 points (2.4%).  AHAHAHAAAAA-headesk-headesk-headesk.

Did you know that last Friday the National Bank of Australia wrote down 90% of its US-Mortgage-backed debts?  Know what that means?  It means that, of all the money currently owed to it by various U.S.-based institutions through mortgages, it has assumed that it will never see payment on 90% of it.  Yup.  90%.  "Writedown" means that they've taken that amount off of their books, as they can no longer assume that this is revenue they can count on, or revenue which should be included in their own calculations for financial dealings.

How's that for confidence?  I wonder who's next....

Padre's Modern Mexican Bar in Phoenix, AZ:  Recession special--free drink with foreclosure notice!

http://money.cnn.com/galleries/2008/fsb/0807/gallery.recession_concessions.fsb/4.html

It's so painful it's funny...

I'm a fan of the "ready-made" post, so here's something I wrote for a food storage email list I'm on.  A new person on the list posed the question of why we are pursuing such extreme versions of food stockpiling, rather than the more traditional "emergency stores" version of food storage (you know, have enough food for a 3 days and water for a week version?).  Well, here's my response.  Now, if you'll excuse me, I promised myself I was going to go sit on the couch and read a magazine.

Here's a fun one I learned, thanks to theautomaticearth.com (a fiiiiirm favorite of mine).  One of the basic indexes used to gauge how well our economy is doing tracks the sales of consumer goods.  It tanked pretty badly last month--almost inexplicably, too (well, except for the possible explanation that we're all out of frickin money and credit).  But that makes for bad press.  Fortunately, indexes are nothing if not malleable, and so they retooled it slightly.  They removed one teensy-weensie sector from the tracking index, in order to get what they're calling their "core" consumer index.  What did they remove, you ask?  Cars.  Yeah, cars.  They just removed the automotive retail business from their model, and guess what?  The consumer index went back up!  Isn't that swell?! 

*headesk*

On The Automatic Earth, this was likened to how, in order to derive the "core" inflation rate, they stopped including the inflation rates for fuel and food, or, as they put it:  "It's a bit like core inflation that excludes food and fuel, also known as inflation without the inflation..."

I'm thinking about Easter Island.  I'm thinking about collapse.  Maybe because I'm reading the book Collapse by Jared Diamond, on the chapter about Easter Island.  Ya think?

It's a fun party question (well, for us anyway) to ask how anyone can tell when a collapse is happening.  Can you see it as it happens?  Is it happening now?  Getting ready to happen?  Already too late?  A million miles off?  When I start thinking about collapse, either ours or other's (e.g., Russia, North Korea, etc.) I typically begin thinking about agricultural systems.  I start wondering about governmental policy, or environmental contaminants.  I try to disentangle issues of geopolitical tensions from slow (or rapid) loss of natural resources, or immigrant hostilities, or charismatic dictocrats.  I think, and talk, about the Big Issues.  The Messy Issues. 

But now, I think about Easter Island.  And I think about a throwaway question from Jared Diamond in the introduction to Collapse, "What was going through the mind of the person as he cut down the last tree on Easter Island?"  In a way, that question is entirely academic.  Diamond apparently goes to heroic efforts later in the book attempting to answer it, and I look forward to reading his thoughts.  But I'm not there yet, and regardless, the question must be unanswerable.  Who knows what was going through his head?  Did he lament the position he was in?  Did he think that, surely, there must be more trees elsewhere, or that they must of course grow back soon?  Was he only concerned with finishing his job so that he could get home?

But there is one thing we do know.  We know that someone did in fact cut down the last tree.  We know that this happened.  And that should be a sobering thought to anyone.  Someone--once upon a time, on a small, isolated island in the Pacific, with no trade or interaction with other islands to speak of, no other source of wood or similar goods--someone felled the last tree standing.