Trillion
Category: Economy
Ph’nglui mglw’nafh Krugman R’lyeh wagn’nagl fhtagn! Aaaaiiiiii!!!!
As, at best, a very junior member of the Occult and Hermetic Order of the Shrill, I would like to offer my congratulations to the most senior member of this sacred order, Paul Krugman, who has won the Nobel Prize for Economics.
When I heard it on my clock radio, I pumped my fist and shouted.
OPEC to Holding Emergency Meeting
It looks like they will be discussing a production cut in response to plummeting oil prices.
Well, Now We Know What the Sh%$ Pile is Worth
Lehman’s Credit Default Swaps (CDS) lost 91.375% off of face value, which is lower than even I expected, I was expecting about 15¢ on the dollar.
So now we have a market price on these assets.
Based on the size of the CDS market, this means that losses are well in excess of world GDP.
This is not a liquidity issue. This is an insolvency issue.
Economics Update
Let’s start with the fact that this has been a TEOTWAWKI week.
That being said, we are seeing a huge increase in borrowing from the Fed Discount window, as a part of the Fed’s sh^%pile for cash program.
OTOH, jobless claims did fall a bit, to 475,000 though they were at 7 year highs to begin with, and job creation is lagging.
Also, Oil fell to $82/bbl, the lowest in a year and gasoline is heading down too.
Also, the dollar continues to climb, as is the Yen.
In real estate, we are seeing mall vacancies skyrocket.
Alan Greenspan, How About a Nice Steaming Dish of STFU?
Because now the failed jazz musician is predicting a recovery for housing in the first half of 2009.
Seriously, did he get his PhD from the back of a cereal box?
Oh…I forgot….He DID get his degree from the back of a cereal box.
F%$#-you Greenspan, and your muse, Ayn Rand.
Iceland® a Wholly Owned Subsidiary of Russia
Well, it looks as if as bad as the US has been hit, tiny Iceland has been absolutely destroyed by the financial crisis.
Despite regulatory actions intended to shore up Icelandic banks, Icelandic banks have all failed, and they are in talks with the Russians about a €4 billion loan…..For a country with just over 300,000 people….That’s a bit under $20,000 per resident.
It also looks like there may be some action from the IMF, which raises an interesting question, how will Europeans feel when one of their own is told to gut labor protections, reduce union rights, end free health care, and make payments for primary education mandatory?
That is, after all what the IMF demands of dark skinned folks.
Of course, no crisis is complete without one complete pratt making things worse, and (not surprisingly) this role is assumed by British PM Gordon Brown, who is upset that the Icelandic guarantees only apply to domestic account holders, so he, “has used powers granted under anti-terrorism laws to freeze British assets of Landsbanki until the standoff is resolved.”
I think that once the Icelanders find out what the IMF is demanding, and if they are true to form, it will be the complete dismantling of their social safety net, they will run to Russia for their loan, which will come with its own strings, probably a naval base, and possibly an air base.
Amusing Use of Language
Though Paul Krugman considers this bon mot unfortunate:
Hopefully Mr. Paulson’s fiscal moves will provide enough fiscal laxative to unplug the banking sector and get money flowing again.
.Me, I’m always up for a poop metaphor.
Number 3 On the List of Things Unlikely to Work
George W. Bush is planning to give a speech tomorrow to reassure the nation….Yeah, like that’s going to work.
The Dow Fell Below….
I had this ready yesterday, but I never thought that I would have to use it today.
It’s an obscure Dragonball-Z reference, which has been remixed over 1000 times on Youtube, here’s one video:
BTW, I’m done with Yom Kippur for the next year, but I’m still plowing through my oft-delayed taxes, so posting will be light for a while.
GMAC Unable to Resell $2.7 Billion In Loans
This situation is not getting better:
GMAC yesterday failed to sell a $2.7bn portfolio of loans as conditions across the credit markets continued to deteriorate.
It put the loans, which are part of GMAC’s commercial finance business, on the block as part of previously announced plans to shed non-core assets, said a spokeswoman. It withdrew the sale due to “market conditions”.
GMAC is majority owned by investors led by private equity firm Cerberus Capital Management. General Motors holds a 49 per cent stake
The Economy Has Gotten So Bad,
Illegal immigrants are looking for work in Mexico.
:rimshot:
No, really, US economic problems are depressing illegal immigration.
Economics Update
Oh my God.
Economics Update
Well, we are seeing the 9th straight drop in monthly non-farm employment rolls (click on graphs for pretty pictures).
I find The U6 graph that I swiped from Paul Krugman to be particularly interesting.
Let’s just call it; we are in a recession.
I would also note that the credit flows have nearly shut down worldwide, which is why the Federal Reserve lending window is seeing record use from banks.
BTW, it ain’t just the Fed which is throwing money, particularly US Dollars, out the windows, it’s all of the central banks.
The obvious big news is the House passing the Wall Street bail-out, and I’m as yet unsure how the markets are reacting to this.
Oil is down down, which could either imply confidence in the US economy, or the belief that a recession is inevitable, and the dollar is mixed.
House Passes Bailout
I’m not sure that there was a realistic alternative at this time, thought I think that the package sucks.
$700 billion to the rich pigs on Wall Street….*sigh*
People are Hoarding Gold
For those folks who think that treasuries art not safe enough.
Economics Update
First the Institute for Supply Management’s manufacturing index just fell off a cliff, dropping to 43.5%, when the consensus was for 49.6%.
This is the lowest number since October, 2001, when manufacturers were freaking out over 911, and the biggest drop since 1984.
The fact that factory orders are down 4%, and that the
Baltic Dry Index Tanks, a survey of shipping costs are also in the tank, reinforce the idea that something is amiss, though I woul,d be remiss not to note that the Baltic Dry Index has a lot of noise in the data, and so is not particularly reliable.
Meanwhile, the marginally less noisy weekly jobless claims number have shown an increase too, up 1000, to 497K.
We also have evidence that the credit freeze up continues, with LIBOR spreads rising, and commercial paper basically going away.
In fact, the spread between two year debt swaps and treasuries hit a record, 167.25 basis points.
It doesn’t help that hedge funds are experiencing problems related to the Lehman collapse, with billions of dollars still tied up with mess, while facing a surge of withdrawals from their clients.
Furthermore, there are rumors of a major insurance company on the verge of collapse, and so borrowing costs for the major insurance companies have spiked.
Things aren’t looking great with college’s finances either, with Commonfund restricting withdrawals from its Intermediate Term Fund, which serves schools and other non-profits, because of liquidity concerns.
On the other side of the ocean, the ECB is openly talking about a rate cut, which has pushed the Euro below $1.40:€1.00.
This is all pushing commodities down in price, with Oil, Gold, and Corn falling on the expectation of a stronger dollar and a weaker global economy.
In banking and real estate, 30-year fixed-rate mortgage rates are up marginally, and Citi bought Wachovia for some magic beans (actually around $1/share), and the FDIC got preferred shares.
While not technically a bank failure, that is what it is in reality.
Oh My God Economics Update
I normally don’t note stock market swings, but 778 points after House ‘Phants kill the Paulson bailout bill?
Surprisingly, the dollar is up and oil is down.
Money with half a brain should be fleeing in the other direction, but it appears that European banks are in real trouble too, because their governments are bailing a bunch of them out.
Not that US banks are doing much better, with Citi getting the bits of Wachovia for magic beans.
So not both the US Federal Reserve and various foreign central banks are shoveling money out the door.
Meanwhile, Iceland did what Paulson should have, when it nationalized the Glitnir bank, as has the UK, which has nationalized mortgage lender Bradford & Bingley.
How to Understand the Economic Crisis
These guys are comedians, but they do a better job of explaining this than journalists and economists.
Economics Update
With upwards of 70% of the US Economy being consumer spending driven, it’s not good news that the final for consumer confidence missed expectations, 70.3, as opposed to the forecast 71.0, but it does reflect the fact that the final number for economic growth in the 2nd quarter was revised downward.
The fact that August new home sales are the lowest since 1982, which was not a great year for the economy either, points to the fact that the economy sucks in the real world too.
Of course, while all this is going on, Congress is still fighting over bailing out Wall Street, which has lead to a muddled picture for the dollar.
That beins said, it’s clear that the energy markets are banking on a recession with both oil and retail gasoline heading lower.
All this uncertainty is why 30 year mortgage rates exploded this week, going from 5.78% last week, to 6.09% this week.
31 basis points in a week….Ouch.
FWIW, the central banks are shoveling cash out the door, which will eventually start devaluing the currency (inflation).