It just never ceases to amaze me how swiftly the people at the top of the US pyramid are about turning over our entire nation’s remaining industrial base to foreign entities.  Actually, we started this with our entire shipping industry many years ago.  The means of not only transporting imports into our nation was entirely turned over to foreign powers, we turned over all our exporting shipping to foreign powers.  At first, our WWII allies did this.  Then our WWII foes joined in.  


Today, Europe does the majority of shipping to East Coast ports and Asia, to West Coast ports. Except for cars.  All car cargos are carried on nationalist ships.  For example, German ships carry German cars. Japanese ships carry Japanese cars.  Now, as our domestic ownership of our own auto industry is rapidly coming to an ignoble close, our media assures us that will will still have cars and even some pitiful jobs making cars thanks to our dire trade rivals being ‘merciful’ to us.  Isn’t that cute?  As I keep saying, the real ball that is bouncing here is trade, not finance.  Finance is a SYMPTOM, not a cause.


ALFRED: ALFRED Graph: balance of payments for goods and services

US trade deficit


This graph shows how our balance is increasingly unbalanced.  The only time imports go down for more than a few weeks, is during major, global recessions.  Note, too, how this graph shows the recovery of growth in imports took less than 2 years.  The present climb from 2002-2008 is nearly triple the rise from 1994-2000.  This unsupportable trade is being forced downwards despite heroic efforts of global media and global banks as well as all the leaders of the G20 nations.  


They all dearly wish to continue as was in the past.  The death of the US auto industry is all over the news today.  And our leadership keeps talking about replacing well-paying, unionized jobs with mysterious ‘other jobs’ of unknown quality and quantity.  The other day, a reader kindly sent me a book to read.  DHL delivered the book to my mountain.  I asked the driver about the looming withdrawal from US markets and his impending job loss.


‘I don’t mind,’ the cheerful young man said.  ‘I will go to school and become a computer programmer.’


I said, ‘I hate to tell you this, but one of the jobs suffering the most outsourcing to foreign countries is exactly computer programming.  I know a number of guys who can’t get work after graduating.’  The poor kid looked at me in disbelief.  He couldn’t comprehend that his plans he was hatching were doomed from the very start.  He thought it was still 1999 when computer programming jobs were all the rage.  Within my own family, members had to shift gears and change majors due to the insidious loss of these sorts of jobs to overseas employment centers, mostly in China and India.


If Detroit Falls, Foreign Makers Could Be Buffer –

But many industry experts say the big foreign makers are established enough to take control of the industry and its vast supplier network more quickly than is widely understood. 

“You would have an auto industry in the United States more like that of Mexico and Canada: foreign-owned,” said Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Mich….The transition to that new equilibrium would surely be painful. The big American companies employ about 240,000 workers, and their suppliers an additional 2.3 million, amounting to nearly 2 percent of the nation’s work force.

The outright failure of General Motors would eliminate the biggest auto employer and more than 100,000 manufacturing jobs. That is roughly the number of jobs already lost this year at the nation’s automakers and their suppliers.

If you click on the graph at the New York Times, you will see how ALL US employment has been underwater since January, 2008. And the US autoworker graph is sobering. decline-in-us-auto-employment

My own graph is much more dramatic.  US auto employment is plunging to 0% of the US workforce.  Foreign employment is rising but far, far slower than the losses.  When I go to the deep sea port in New Jersey, I see acres and acres of parking lots waiting for unmarked foreign ships to dock and disgorge millions of cars made overseas for foreign-owned corporations.  South Korea, Japan and Germany being by far, the major shippers.


All of this happened after the Plaza Accord, signed on September 22, 1985 : 

7. The current sustained expansion is occurring within a framework of declining inflation, a phenomenon that is unprecedented in the past three decades. Inflation rates are at their lowest in nearly 20 years, and they show no signs of reviving.

8. There has been a significant fall in interest rates in recent years. Apart from welcome domestic effects this has been particularly helpful in easing the burden of debt repayments for developing countries.

9. This successful performance is the direct result of the importance given to macroeconomic policies which have reduced inflation and inflationary expectations to continued vigilance over government spending, to greater emphasis on market forces and competition, and to prudent monetary policies.

10. These positive economic developments notwithstanding, there are large imbalances in external positions which pose potential problems, and which reflect a wide range of factors. Among these are: the deterioration in its external position which the U.S.experienced from its period of very rapid relative growth: the particularly large impact on the U.S. current account of the economic difficulties and the adjustment efforts of some major developing countries; the difficulty of trade access in some markets; and the appreciation of the U.S. dollar. The interaction of these factors– relative growth rates, the debt problems of developing countries, and exchange rate development– has contributed to large, potentially destabilizing external imbalances among major industrial countries. In particular, the United States has a large and growing current account deficit, and Japan, and to a lesser extent Germany, large and growing current account surpluses.

11. The U.S. current account deficit, together with other factors is now contributing to protectionist pressures which, if not resisted, could lead to mutually destructive retaliation with serious damage to the world economy: world trade would shrink, real growth rates could even turn negative, unemployment would rise still higher, and debt-burdened developing countries would be unable to secure the export earnings they vitally need.

12. The Finance Ministers and Governors affirmed that each of their countries remains firmly committed to its international responsibilities and obligations as leading industrial nations. They also share special responsibilities to ensure the mutual of their individual policies. The Ministers agreed that establishing more widely strong, non inflationary domestic growth and open markets will be a key factor in ensuring that the current expansion continues in a more balanced fashion, and they committed themselves to policies toward that end. In countries where the budget deficit is too high, further measures to reduce the deficit substantially are urgently required.

13. Ministers and Governors agreed that it was essential that protectionist pressures be resisted.

This treaty is infuriating, isn’t it? Very swiftly, the major parties here in the Trade Burmuda Triangle began a furtive and vicious struggle for power. The game was to somehow restrict trade while flooding the US with goods. The Germans did this by heavy social service taxes and the Japanese, by crushing the ability of Japanese consumers to get a hold of cheap credit.  


Japan’s Auto Exports To Reach 7 Million: June, 2008

The contribution of the Japanese auto industry to the country’s economy is large. Not only does the industry accounts for 10% of employment, but also contributes over 10% to the output of the manufacturing sector.


In the US, our auto employment was over 5% once upon a time, namely, before the broken promises of the Plaza Accords.  Japan relies very heavily on their auto export business for domestic employment.  Note here that except for the 1999 Asian Currency Crisis period, starting in 2002 when Greenspan made credit ridiculously cheap and lenders made borrowing ludicrously easy, Japanese auto exports shot upwards.  This, and the rising incomes in OPEC nations and China, boosted exports hugely.


If anyone imagines Japan letting foreigners flood their markets with cheap cars from, say, China, are nuts.  The Japanese worry about the free trade bugaboo.  They desperately need ‘free trade’ but emphatically not within Fortress Japan.


*UTLink: Plaza Accord, September 22, 1985

The Government of Japan noting that the Japanese economy is in an autonomous expansion phase mainly supported by domestic private demand increase will continue to institute policies intended to ensure sustainable non inflationary growth: provide full access to domestic markets for foreign goods; and the Yen and liberalize domestic capital markets.

In particular, the Government of Japan will implement policies with the following explicit intentions.

1. Resistance of protectionism and steady implementation of the Action Program announced on July 30 for the further opening up of Japan’s domestic market to foreign goods and services.
2. Full utilization of private sector vitality through the implementation of vigorous deregulation measures.

3. Flexible management of monetary policy with due attention to the yen rate.

4. Intensified implementation of financial market liberalization and of the yen, so that the yen fully reflects the underlying strength of the Japanese economy.

5. Fiscal policy will continue co focus on the twin goals of reducing the central government deficit and providing a pro-growth environment for the private sector. Within that framework. local governments may be favorably allowed to make additional investments in this FY 1985, taking into account the individual circumstances of the region.

6. Efforts to stimulate domestic demand will focus on increasing private consumption and investment through measures to enlarge consumer and mortgage credit markets.

None of these things remained in force after a decade. Japan had to search and scratch around a bit to find ways of circumventing these Plaza Accords they signed. Finally, they discovered a wonderful tool: they would soak up excess US trade dollars in the Bank of Japan’s FOREX reserves and then dare the US to stop them. For this was one of the main tools for killing ‘inflation’. That, and the nifty tool of moving jobs to cheaper labor venues while not putting tariffs on the return trade and of course, the other tool used by Germany, that is, high taxes cutting into discretionary income spending.

The US exported more cars to Japan in 1985 than today.   MIT SMR Article, “Are U.S. Auto Exports the Growth Industry of the 1990s?” – Fall 1993 Michael Smitka.

Japan has no more rabbits to pull out of the hat — its automotive production system has matured, and the industry is in decline. So argues the author, who shows how exchange rates, demographics, and the increasing sophistication of U.S. management are causing a shift in relative competitiveness. Furthermore, these changes affect most Japanese industries, and U.S. managers should be prepared to take advantage of them.

*This article from 1993 is so sad.  Japan fixed that hole through which the US automakers hoped to drive by simply letting lending collapse inside Japan.  The Japanese kept this depression going for they need to prevent domestic consumption from rising and thus, killing a great trade business.  Japanese people accept this situation since they know that if they open up Fortress Japan, China, not the US, will flood them instantly with cheaper goods.  This is why all G20 meetings end in a farce.  


Everyone feels safe, calling on the US to increase our debts and consumption rates.  Not a soul is demanding Japan do likewise.  Now, let’s look at the Plaza Accord’s promises signed by the US:


UTLink: Plaza Accord, September 22, 1985

The United States Government is firmly committed to policies designed to: ensure steady non inflationary growth; maximize the role of markets and private sector participation in the economy; reduce the size and role of the government sector; and maintain open markets.

In order to achieve these objectives, the United States Government will:

1. Continue efforts to reduce government expenditures as a share of GNP in order to reduce the fiscal deficit and to free up resources for the private sector.

2. Implement fully the deficit reduction package for fiscal year 1986. This package passed by Congress and approved by the President will not only reduce by over 1 percent of GNP the budget for FY 1986, but lay the basis for further significant reductions in the deficit in subsequent years.

3. Implement revenue-neutral tax reform which will encourage savings, create new work incentives, and increase the efficiency of the economy, thereby fostering non inflationary growth.

4. Conduct monetary policy to provide a financial environment conducive to sustainable growth and continued progress toward price stability.

5. Resist protectionist measures.

Just like Saturday’s G20 Kabuki Theater, the US promised to not protect ourselves from excessive imports pouring into our nation’s ports. This demand is cheerfully signed by all our Presidents since Reagan decided to work for the Japanese. We must not forget that they paid him over $2.5 million to give an addled, short speech due to his brain damage. They mostly didn’t understand what he was saying. But him being there to collect his bribes was the most important message. One that all of Asia understood quite clearly.

Here is an old news broadcast about the Plaza Accords:


And here is the latest unemployment map from the St. Louis Federal Reserve:


GeoFRED: Geographic Federal Reserve Economic Data


Michigan and Mississippi both have unemployment rates above 7%.  Ohio, Kentucky, South Carolina and California are all above 6.3%.  Nearly the entire eastern half of the United States is over 5% unemployment.  Ditto, the entire West Coast.  Imagine if 10% of Americans were employed in making our own cars!  Wouldn’t that change this map a tad?  Now, back to the Mad Hatter world of US media.  The New York Times loves to write about the economy, yet, mysteriously, it is 100% pro-free trade!


If Detroit Falls, Foreign Makers Could Be Buffer –

Given Chrysler’s weakness, the new kings of the auto industry would presumably be Toyota, Honda, Nissan, Volkswagen, Ford, Mercedes-Benz, BMW and Hyundai-Kia. (Volkswagen has not yet opened a plant in the United States, and BMW and Hyundai each have one plant.)

Like the Big Three, they would together dominate manufacturing in the United States, becoming big customers for steel, aluminum, plastics, glass, machine tools, computer chips and rubber.

Even in this year of plunging car sales, the automakers and their vast supplier network still account for 2.3 percent of the nation’s economic output, down from 3.1 percent in 2006 and as much as 5 percent in the 1990s, according to government data. More significant, economists say, 20 percent of the shrinking manufacturing sector is still tied to the automobile industry.


We cannot have a growing economy if our biggest industry is in sharp decline.  This isn’t a simple matter of our banks giving us more loans to buy more cars.  This is a national crisis that will turn us all into serfs if we don’t stop consuming foreign goods. The ravaging of our industrial base is malicious and deliberate.  We can see from the Plaza Accords that even President Reagan didn’t want to make the US auto industry die totally!


Yet here we are,  a few years later, doing exactly that.  When Japan began buying our national debt as well as squirreling away nearly a trillion dollars in their FOREX reserves, the US auto industry was running at 5% of our national output.  Even last year, it was still 3%.  But now, the contraction is killing it totally.  It can’t fall much further without vanishing.


Half of this is our own fault: we wanted tax cuts and much, much greater military spending.  So we merrily trotted off to sell our birthright to nations we nuked in the past.  As if the Japanese have forgotten that small detail!

If Detroit Falls, Foreign Makers Could Be Buffer –

The American automakers, of course, have bought more and more parts from overseas. But 85 percent of their products are made in North America, compared with 60 percent for the foreign-owned automakers, said Dan Luria, research director at the Michigan Manufacturing Technology Center….Vehicles built entirely abroad drive down the percentage at the foreign-owned automakers. The popular Toyota Prius, for example, is not yet manufactured in the United States. That will come soon, Toyota says. But given worldwide demand for the car, Toyota achieves economies of scale by centering production in Japan rather than using multiple sites.

 Such an inclination on the part of foreign companies to keep their production out of the United States helps to explain the push by the Democrats in Congress to provide aid to keep the American automakers alive. The federal help would probably go first to G.M., which says it will run out of cash by early next year and be forced out of business without federal help….But if the current downturn is prolonged, it might be too late. In an industry capable of making 17 million cars a year, sales have dropped to an annual rate of only 10 million vehicles made here.

“None of the Big Three — and perhaps not the transplants — can make money at 10 million,” Mr. Luria said. “The transplants are O.K. at 12 million and the Big Three at 15 million or so.”


Why on earth would all our trade rivals want more than token plants here?  They are not stupid. We are certainly stupid.  Of course, the New York Times reporter should suggest that all this would vanish in a flash if the US were to impose significant trade barriers.  Or we can do the other very smart thing: imitate our trade rivals.  Both Germany and Japan restrict the purchase of foreign goods the simple way: they tax gasoline very heavily, much higher than the US.  And they have significant Value Added Taxes.  And higher income taxes.  And harsher lending rules.  


This restricts buying!  In Japan, car ownership is dropping, not rising.  Hard to penetrate a market that is declining!  The US cannot merrily have the exact opposite rules of trade rivals.  Either we totally imitate them or we have huge barriers that are external.  The present system is stupid.


I notice a number of romantic thinkers online who imagine the cure is to have no social services and no controls at all.  This is how the Third World runs.  And we will be third world in no time flat if we do this.  None of the  nations eating into our gingerbread economic house are third world manufacturing nations.  They are either socialist or communist.  India is eating our jobs but not exporting high-value-added manufacturing goods.  Yet.  There is a strong move to socialize India, they even have a very active communist party there, unlike the US.

Net Exports’ Recent (and Surprising?) Contribution
to GDP Growth
What explains the surprising strength of net exports? Net exports depend positively on foreign demand, but negatively on domestic demand. In the past few months, the U.S. economy has experienced sluggish growth compared with the major trading partners.

Thus, the U.S. demand for foreign-produced goods and services stalled, while the
demand for U.S.-produced goods and services remained strong. An additional boost to net exports likely came from the depreciation of the dollar against the currencies of major
U.S. trading partners in the first half of the year. The net effect has been a significant unexpected export boom during which the trade balance has behaved as a countercyclical variable, in a fashion similar to episodes of sluggish growth.

Answering the second question involves a look at history. So, can we expect this contribution to last? The forecasts of lower world GDP growth as a result of recent financial turmoil and U.S. dollar appreciation over the past few weeks might further curb net exports growth.

History also suggests that large contributions of net exports are rare events in the United
States.  However, if the demand for U.S. products from abroad weathers the current financial turbulence, the net export component of GDP might continue to be significant.



The growth of exports is growing.  But note that IMPORTS are now growing faster than the rising growth of exports.  The export growth rate is still barely higher but momentum is on the side of the nations selling to us, not the reverse.  Nd government expenditures are growing, rapidly.  This means much of our vaunted GNP growth is fake.  Just like our entire banking system is fake.


GM and Ford Face EU Suppliers’ “Run on the Bank” | The Truth About Cars

The Financial Times reports the run on the bank scenario mooted by TTAC– bankruptcy-wary suppliers demanding cash-on-the-nail for goods and services– may be going down across the pond. “Troubled US carmakers General Motors and Ford Motor have been given a potentially devastating vote of no confidence by three big European credit insurers [Euler Hermes, Atradius and Coface], which have removed cover from their suppliers. The withdrawal of credit insurance – which covered suppliers against the risk of the car companies’ failing – has previously hastened the demise of a string of European companies, with suppliers to retailers and construction companies finding cover increasingly hard to come by.” The FT reports that the move leaves only three possibilities, all them swirling around a bathtub full of Not Good: “GM and Ford can start paying upfront for goods; they can hope their suppliers will trade uninsured; or they could be unable to buy the parts they need for car production.” [Thanks to Uncommon Sense for the link]


The US auto industry is being shorted and hounded.  And will go bankrupt.  Trade is very much a part of this collapse.  For our major industries need insurance and lending so they can run their business overseas.  Imagine the Bank of Japan leaving its own exporters to flounder and die!  IMPOSSIBLE.  I can’t even begin to conceive of this happening there.   Any  more than China letting their growing industrial base shrink at the wrong points.


China wanted to ditch the ‘Dollar Store’ manufacturing sector that has flooded American homes with odd bits of brick brack and toys.  They certainly want a powerful automobile market, controlled by themselves.  To gain the ability to do this, to learn the modern, Japanese systems, they let Japan in.  Japan is very nervous about this.  They know the Chinese will not let them run China’s auto industries by 2020.  So the Japanese try to keep the bulk of the most modern parts out of China.  Just like they will not let any Prius cars be assembled in America.


Bank of America Will Almost Double China Construction Bank Stake to 19.1%

Bank of America Corp., the company that’s buying Merrill Lynch & Co., plans to almost double its stake in China Construction Bank Corp. to about 19.1 percent.

Bank of America will exercise its option to buy shares in China Construction from China SAFE Investments Limited, the Charlotte, North Carolina-based company said today in a statement. The U.S. bank said it expects the transaction to be completed by the end of this month.

And our banks, after being capitalized by the US taxpayers, are taking the loot and running off to Asia to expand Asia’s infrastructure and manufacturing base. When will we ever learn?




Filed under .money matters

79 responses to “AUTOMATIC MISERY

  1. Jeremy/Nashville

    Not that long ago, the Nissan plant moved from California to Nashville….well, its in the metro area, in Franklin/Brentwood. I know everyone was so excited about it……everyone cheered “oh, it will bring new jobs to Nashville.” Now I wonder what the future will hold for all these new jobs. Perhaps America will indeed become slaves to foreign companies.

  2. RobG

    The Fed is now trying to fly and avoid ‘mid-air collisons’; hahaha, this is nuts: ABCPMMMFLF Spells Fed Relief for JPMorgan, Citi Shadow Banking

    A Fed program to buy as much as $1.8 trillion of short-term debt from U.S. companies means they don’t have to tap backup credit lines provided by banks, which would have forced JPMorgan Chase & Co., Citigroup Inc. and other financial institutions to record the loans on their balance sheets and raise more capital. Another Fed program, with the acronym ABCPMMMFLF, aims to shore up the $1 trillion market for asset-backed commercial paper issued by off-the-books financing vehicles guaranteed by banks.

    “The Fed’s commercial paper programs avoided a mid-air collision,” said Josh Rosner, managing director of New York- based research firm Graham Fisher & Co.

  3. Blunt Force Trauma

    Why Bankruptcy Is the Best Option for GM (WSJ)

    “General Motors is a once-great company caught in a web of relationships designed for another era. It should not be fed while still caught, because that will leave it trapped until we get tired of feeding it. Then it will die. The only possibility of saving it is to take the risk of cutting it free. In other words, GM should be allowed to go bankrupt.”

    Full article:

  4. Blunt Force Trauma

    America Taking The 2 Steps Which Lead to Bankruptcy (Geo. Wash. blog)

    “Companies go bankrupt when they:

    (1) Borrow more than they should; and

    (2) Have to pay their creditors more and more interest to loan them money.

    Everyone knows that the U.S. has borrowed too much. As of a year ago, the financial obligations of the U.S. were some $56 trillion dollars. That number has gone way up since then.”

    Full article:

  5. Blunt Force Trauma

    Obama-Pelosi Stimulus May Fail to Reignite Economy (Bloomberg)


    Short-term memory-itis seeme to be a plague. Does anyone not remember the $700B Banking bailout (now $5 trillion +) that these two pushed and forced to the point of Pelosi threatening martial law on the floor of Congress if TARP didn’t pass? And what was it used for? Not mortgages. That’s for bloody sure. It went to pay-outs and bonuses.

    Quoting Bloomberg…

    “President-elect Barack Obama and House Speaker Nancy Pelosi may throw as much as half a trillion dollars worth of stimulus at the economy — and have little or no growth to show for it.”

    Full article:

  6. Bubba

    The solutions are Americans must organize to resist.

    Every American should own many guns and ammo and reloading equipment, and learn how to operate them properly.

    Millions of Americans should organize and stop paying all taxes, and pull all their funds out of the banks.

  7. Bubba

    Starve the beast is what I call the above.

  8. Blunt Force Trauma

    U.S. in recession, jobless to peak at 7.5 percent: survey (reuters)

    My arse. There will be no peak. A peak denotes a bottom. There will be no bottom in the immediate future. And that 7.5% crap. Stuff that. Try on 20% for size.

    Full article:

  9. Blunt Force Trauma

    Bailout Watch 203: Delphi Rallies the Troops for Bailout Billions (TTAC)

    It’s a memo to Delphi employees to press and act as lobbyists for corporate welfare.

    Meanwhile, Delphi itself is a loser, having filed for bankruptcy in 2005 and got a hand-out from GM to the tune of 10.6 billion!

    Stepping on gas: GM to give $10.6 bn to bail out Delphi
    (Economic Times – Sept. 14/08)

    GM To Sell Suzuki Stake, Pay A Week Worth Of Bills

    “GM is expected to burn $4 billion to $5 billion in (the fourth-quarter) or roughly $1.5 billion per month. Hence, the cash proceeds from the sale of its equity stake will not even cover one week of expected cash burn,”

    Full article:

  10. drkrbyluv

    The big US automakers have been poorly run companies for many years. They used most their cash flow to grow their financial fortunes instead of re-investing in their core business. The decision was made to reduce research and development in order to milk more from their cash cow.

    Now, they have dated product lines and unsustainable debt. And worse, the management is fat and lazy.

    Such is the way of life in corporate America where short term financial opportunities are more important than a long term commitment to the core business that creates the wealth. Companies may neglect their core business for a time to increase short term profits and returns but invariably, over time, this is an untenable practice.

    The automakers should try to reorganize under bankruptcy in order to shed some of their bad business arrangements and oppressive debt and financial commitments. If they don’t make it, then at least they will not become parasites to other productive companies and tax payers.

  11. Blunt Force Trauma

    Barack Obama is warned to beware of a ‘huge threat’ from al-Qaeda (Times Online – Nov. 16/08)

    Just who is planning this anyway (please don’t start with the boogeyman, er, Al-CIAduh and Bin Laden analogies – its bad enough its in the headline) that they are leaking this or planting these stories, worldwide, as some of pre-cursor or acceptance of this “event”. I guess its to make you more compliant when they impose complete and total tyranny upon you after their “spectacular event” unfolds.

    This just reeks of Black Ops and false flag. With all the crap that is going on across the planet these days, and after the last “terrorist” attack, anything that is to be experienced now would just not be believed to be done other than by governments.

    Full article:

    ..and for the nine millionth time…

    Osama bin Laden is Dead (321 Gold – Nov. 13/08)

    “I’m pleased to see Barak Obama hit the ground running after his election on the 4th. The US needs change.

    I’d like to see him announce the death of Osama bin Laden as one of his first official duties. Bin Laden often better known as bin Forgotten died in December of 2001. There is nothing I am saying that is news to anyone who has actually spent any time thinking.”

    Full article:

    Makes me wonder WHO did get that $2 trillion!

    $2 Trillion Handed out by Paulson and Bernanke, But Who Got It, Nobody Knows (Alternet)

    “To repeat, we do not know who got this money or what collateral was put up in return for the loans or what conditions were attached to them.”

    Full article:

  12. Blunt Force Trauma

    White House rejects auto bailout (Al Jazeera)

    “Funds from the $700bn US government bailout package for the financial system should not be used to aid America’s troubled auto industry, the White House says.”

    Full article:

  13. Blunt Force Trauma

    Clement says no to short-term auto industry bailout (CTV)

    “Industry Minister Tony Clement says the Canadian government won’t be offering a short-term bailout to Canadian auto makers, but would help the industry transform itself so it makes “cars that people actually want to buy.”

    Hah! Canada gets it!

    Full article:

  14. Blunt Force Trauma

    Reid: Auto aid will get two shots in Senate (Detroit Free Press)

    “Senate Majority Leader Harry Reid said today the Senate would get two chances to approve aid for U.S. automakers, but did not release any details about the scale or scope of his plan.”

    Why not, you’ve (ok, the Democrats) been in control of the money for the past two years and have approved every one of Bush’s budgets for ‘surges’ in Iraq; why should this be any different?

    Full article:

  15. Blunt Force Trauma

    Adam Kokesh’s speech (Revolution March)

    9:51 video

  16. Paul S

    Much of the “credit” for our current mess should be set at the feet of American (in name only) management. A bitter hatred of unions is what motivates many in US corporate management. Their poster boy is Jack Welch. GE stock has been flat as a pancake for years, but Welch is still considered a genius. Go figure. And WHY can’t this country ever get rid of James Baker III? He’s a Bush crony who managed a couple of failed campaigns. Or Donald Rumsfeld of Dick Cheney, OR the Bush crime family? Amazing how the cast of characters in American politics stays the same year after year. I also liked Dennis Kucinich’s comment to Neel Kashlari when Kashkari was testifying to Congress. Kucinich said, “I have no doubt you are working hard, Mr. Kashkari. The real question is who are you working for?”

    reordered the power on Wall Street.
    What a Swell Party
    A pictorial timeline of some Wall Street highs and lows from 1985 to 2007.
    Worst of Times
    Most economists predict a recovery late next year. Don’t bet on it.Then came Meredith Whitney with news. Whitney was an obscure analyst of financial firms for Oppenheimer Securities who, on October 31, 2007, ceased to be obscure. On that day, she predicted that Citigroup had so mismanaged its affairs that it would need to slash its dividend or go bust. It’s never entirely clear on any given day what causes what in the stock market, but it was pretty obvious that on October 31, Meredith Whitney caused the market in financial stocks to crash. By the end of the trading day, a woman whom basically no one had ever heard of had shaved $369 billion off the value of financial firms in the market. Four days later, Citigroup’s C.E.O., Chuck Prince, resigned. In January, Citigroup slashed its dividend.

    From that moment, Whitney became E.F. Hutton: When she spoke, people listened. Her message was clear. If you want to know what these Wall Street firms are really worth, take a hard look at the crappy assets they bought with huge sums of ­borrowed money, and imagine what they’d fetch in a fire sale. The vast assemblages of highly paid people inside the firms were essentially worth nothing. For better than a year now, Whitney has responded to the claims by bankers and brokers that they had put their problems behind them with this write-down or that capital raise with a claim of her own: You’re wrong. You’re still not facing up to how badly you have mismanaged your business.

    Rivals accused Whitney of being overrated; bloggers accused her of being lucky. What she was, mainly, was right. But it’s true that she was, in part, guessing. There was no way she could have known what was going to happen to these Wall Street firms. The C.E.O.’s themselves didn’t know.

    Now, obviously, Meredith Whitney didn’t sink Wall Street. She just expressed most clearly and loudly a view that was, in retrospect, far more seditious to the financial order than, say, Eliot Spitzer’s campaign against Wall Street corruption. If mere scandal could have destroyed the big Wall Street investment banks, they’d have vanished long ago. This woman wasn’t saying that Wall Street bankers were corrupt. She was saying they were stupid. These people whose job it was to allocate capital apparently didn’t even know how to manage their own.

    At some point, I could no longer contain myself: I called Whitney. This was back in March, when Wall Street’s fate still hung in the balance. I thought, If she’s right, then this really could be the end of Wall Street as we’ve known it. I was curious to see if she made sense but also to know where this young woman who was crashing the stock market with her every utterance had come from.

    It turned out that she made a great deal of sense and that she’d arrived on Wall Street in 1993, from the Brown University history department. “I got to New York, and I didn’t even know research existed,” she says. She’d wound up at Oppenheimer and had the most incredible piece of luck: to be trained by a man who helped her establish not merely a career but a worldview. His name, she says, was Steve Eisman.

    Eisman had moved on, but they kept in touch. “After I made the Citi call,” she says, “one of the best things that happened was when Steve called and told me how proud he was of me.”

    Having never heard of Eisman, I didn’t think anything of this. But a few months later, I called Whitney again and asked her, as I was asking others, whom she knew who had anticipated the cataclysm and set themselves up to make a fortune from it. There’s a long list of people who now say they saw it coming all along but a far shorter one of people who actually did. Of those, even fewer had the nerve to bet on their vision. It’s not easy to stand apart from mass hysteria—to believe that most of what’s in the financial news is wrong or distorted, to believe that most important financial people are either lying or deluded—without actually being insane. A handful of people had been inside the black box, understood how it worked, and bet on it blowing up. Whitney rattled off a list with a half-dozen names on it. At the top was Steve Eisman.

    Steve Eisman entered finance about the time I exited it. He’d grown up in New York City and gone to a Jewish day school, the University of Pennsylvania, and Harvard Law School. In 1991, he was a 30-year-old corporate lawyer. “I hated it,” he says. “I hated being a lawyer. My parents worked as brokers at Oppenheimer. They managed to finagle me a job. It’s not pretty, but that’s what happened.”

    He was hired as a junior equity analyst, a helpmate who didn’t actually offer his opinions. That changed in December 1991, less than a year into his new job, when a subprime mortgage lender called Ames Financial went public and no one at Oppenheimer particularly cared to express an opinion about it. One of Oppenheimer’s investment bankers stomped around the research department looking for anyone who knew anything about the mortgage business. Recalls Eisman: “I’m a junior analyst and just trying to figure out which end is up, but I told him that as a lawyer I’d worked on a deal for the Money Store.” He was promptly appointed the lead analyst for Ames Financial. “What I didn’t tell him was that my job had been to proofread the ­documents and that I hadn’t understood a word of the fucking things.”

    Ames Financial belonged to a category of firms known as nonbank financial institutions. The category didn’t include J.P. Morgan, but it did encompass many little-known companies that one way or another were involved in the early-1990s boom in subprime mortgage lending—the lower class of American finance.

    The second company for which Eisman was given sole responsibility was Lomas Financial, which had just emerged from bankruptcy. “I put a sell rating on the thing because it was a piece of shit,” Eisman says. “I didn’t know that you weren’t supposed to put a sell rating on companies. I thought there were three boxes—buy, hold, sell—and you could pick the one you thought you should.” He was pressured generally to be a bit more upbeat, but upbeat wasn’t Steve Eisman’s style. Upbeat and Eisman didn’t occupy the same planet. A hedge fund manager who counts Eisman as a friend set out to explain him to me but quit a minute into it. After describing how Eisman exposed various important people as either liars or idiots, the hedge fund manager started to laugh. “He’s sort of a prick in a way, but he’s smart and honest and fearless.”

    “A lot of people don’t get Steve,” Whitney says. “But the people who get him love him.” Eisman stuck to his sell rating on Lomas Financial, even after the company announced that investors needn’t worry about its financial condition, as it had hedged its market risk. “The single greatest line I ever wrote as an analyst,” says Eisman, “was after Lomas said they were hedged.” He recited the line from memory: “ ‘The Lomas Financial Corp. is a perfectly hedged financial institution: It loses money in every conceivable interest-rate environment.’ I enjoyed writing that sentence more than any sentence I ever wrote.” A few months after he’d delivered that line in his report, Lomas Financial returned to bankruptcy.

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    Most economists predict a recovery late next year. Don’t bet on it.Eisman wasn’t, in short, an analyst with a sunny disposition who expected the best of his fellow financial man and the companies he created. “You have to understand,” Eisman says in his defense, “I did subprime first. I lived with the worst first. These guys lied to infinity. What I learned from that experience was that Wall Street didn’t give a shit what it sold.”

    Harboring suspicions about ­people’s morals and telling investors that companies don’t deserve their capital wasn’t, in the 1990s or at any other time, the fast track to success on Wall Street. Eisman quit Oppenheimer in 2001 to work as an analyst at a hedge fund, but what he really wanted to do was run money. FrontPoint Partners, another hedge fund, hired him in 2004 to invest in financial stocks. Eisman’s brief was to evaluate Wall Street banks, homebuilders, mortgage originators, and any company (General Electric or General Motors, for instance) with a big financial-services division—anyone who touched American finance. An insurance company backed him with $50 million, a paltry sum. “Basically, we tried to raise money and didn’t really do it,” Eisman says.

    Instead of money, he attracted people whose worldviews were as shaded as his own—Vincent Daniel, for instance, who became a partner and an analyst in charge of the mortgage sector. Now 36, Daniel grew up a lower-middle-class kid in Queens. One of his first jobs, as a junior accountant at Arthur Andersen, was to audit Salomon Brothers’ books. “It was shocking,” he says. “No one could explain to me what they were doing.” He left accounting in the middle of the internet boom to become a research analyst, looking at companies that made subprime loans. “I was the only guy I knew covering companies that were all going to go bust,” he says. “I saw how the sausage was made in the economy, and it was really freaky.”

    Danny Moses, who became Eisman’s head trader, was another who shared his perspective. Raised in Georgia, Moses, the son of a finance professor, was a bit less fatalistic than Daniel or Eisman, but he nevertheless shared a general sense that bad things can and do happen. When a Wall Street firm helped him get into a trade that seemed perfect in every way, he said to the salesman, “I appreciate this, but I just want to know one thing: How are you going to screw me?”

    Heh heh heh, c’mon. We’d never do that, the trader started to say, but Moses was politely insistent: We both know that unadulterated good things like this trade don’t just happen between little hedge funds and big Wall Street firms. I’ll do it, but only after you explain to me how you are going to screw me. And the salesman explained how he was going to screw him. And Moses did the trade.

    Both Daniel and Moses enjoyed, immensely, working with Steve Eisman. He put a fine point on the absurdity they saw everywhere around them. “Steve’s fun to take to any Wall Street meeting,” Daniel says. “Because he’ll say ‘Explain that to me’ 30 different times. Or ‘Could you explain that more, in English?’ Because once you do that, there’s a few things you learn. For a start, you figure out if they even know what they’re talking about. And a lot of times, they don’t!”

    At the end of 2004, Eisman, Moses, and Daniel shared a sense that unhealthy things were going on in the U.S. housing market: Lots of firms were lending money to people who shouldn’t have been borrowing it. They thought Alan Greenspan’s decision after the internet bust to lower interest rates to 1 percent was a travesty that would lead to some terrible day of reckoning. Neither of these insights was entirely original. Ivy Zelman, at the time the housing-market analyst at Credit Suisse, had seen the bubble forming very early on. There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators.” Zelman alienated clients with her pessimism, but she couldn’t pretend everything was good. “It wasn’t that hard in hindsight to see it,” she says. “It was very hard to know when it would stop.” Zelman spoke occasionally with Eisman and always left these conversations feeling better about her views and worse about the world. “You needed the occasional assurance that you weren’t nuts,” she says. She wasn’t nuts. The world was.

    By the spring of 2005, FrontPoint was fairly convinced that something was very screwed up not merely in a handful of companies but in the financial underpinnings of the entire U.S. mortgage market. In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion of that repackaged as mortgage bonds. But in 2005, there was $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds. Eisman couldn’t understand who was making all these loans or why. He had a from-the-ground-up understanding of both the U.S. housing market and Wall Street. But he’d spent his life in the stock market, and it was clear that the stock market was, in this story, largely irrelevant. “What most people don’t realize is that the fixed-income world dwarfs the equity world,” he says. “The equity world is like a fucking zit compared with the bond market.” He shorted companies that originated subprime loans, like New Century and Indy Mac, and companies that built the houses bought with the loans, such as Toll Brothers. Smart as these trades proved to be, they weren’t entirely satisfying. These companies paid high dividends, and their shares were often expensive to borrow; selling them short was a costly proposition.

    Enter Greg Lippman, a mortgage-bond trader at Deutsche Bank. He arrived at FrontPoint bearing a 66-page presentation that described a better way for the fund to put its view of both Wall Street and the U.S. housing market into action. The smart trade, Lippman argued, was to sell short not New Century’s stock but its bonds that were backed by the subprime loans it had made. Eisman hadn’t known this was even possible—because until recently, it hadn’t been. But Lippman, along with traders at other Wall Street investment banks, had created a way to short the subprime bond market with precision.

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    Most economists predict a recovery late next year. Don’t bet on it.Here’s where financial technology became suddenly, urgently relevant. The typical mortgage bond was still structured in much the same way it had been when I worked at Salomon Brothers. The loans went into a trust that was designed to pay off its investors not all at once but according to their rankings. The investors in the top tranche, rated AAA, received the first payment from the trust and, because their investment was the least risky, received the lowest interest rate on their money. The investors who held the trusts’ BBB tranche got the last payments—and bore the brunt of the first defaults. Because they were taking the most risk, they received the highest return. Eisman wanted to bet that some subprime borrowers would default, causing the trust to suffer losses. The way to express this view was to short the BBB tranche. The trouble was that the BBB tranche was only a tiny slice of the deal.

    But the scarcity of truly crappy subprime-mortgage bonds no longer mattered. The big Wall Street firms had just made it possible to short even the tiniest and most obscure subprime-mortgage-backed bond by creating, in effect, a market of side bets. Instead of shorting the actual BBB bond, you could now enter into an agreement for a credit-default swap with Deutsche Bank or Goldman Sachs. It cost money to make this side bet, but nothing like what it cost to short the stocks, and the upside was far greater.

    The arrangement bore the same relation to actual finance as fantasy football bears to the N.F.L. Eisman was perplexed in particular about why Wall Street firms would be coming to him and asking him to sell short. “What Lippman did, to his credit, was he came around several times to me and said, ‘Short this market,’ ” Eisman says. “In my entire life, I never saw a sell-side guy come in and say, ‘Short my market.’ ”

    And short Eisman did—then he tried to get his mind around what he’d just done so he could do it better. He’d call over to a big firm and ask for a list of mortgage bonds from all over the country. The juiciest shorts—the bonds ultimately backed by the mortgages most likely to default—had several characteristics. They’d be in what Wall Street people were now calling the sand states: Arizona, California, Florida, Nevada. The loans would have been made by one of the more dubious mortgage lenders; Long Beach Financial, wholly owned by Washington Mutual, was a great example. Long Beach Financial was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking home­owners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.

    More generally, the subprime market tapped a tranche of the American public that did not typically have anything to do with Wall Street. Lenders were making loans to people who, based on their credit ratings, were less creditworthy than 71 percent of the population. Eisman knew some of these people. One day, his housekeeper, a South American woman, told him that she was planning to buy a townhouse in Queens. “The price was absurd, and they were giving her a low-down-payment option-ARM,” says Eisman, who talked her into taking out a conventional fixed-rate mortgage. Next, the baby nurse he’d hired back in 1997 to take care of his newborn twin daughters phoned him. “She was this lovely woman from Jamaica,” he says. “One day she calls me and says she and her sister own five townhouses in Queens. I said, ‘How did that happen?’ ” It happened because after they bought the first one and its value rose, the lenders came and suggested they refinance and take out $250,000, which they used to buy another one. Then the price of that one rose too, and they repeated the experiment. “By the time they were done,” Eisman says, “they owned five of them, the market was falling, and they couldn’t make any of the payments.”

    In retrospect, pretty much all of the riskiest subprime-backed bonds were worth betting against; they would all one day be worth zero. But at the time Eisman began to do it, in the fall of 2006, that wasn’t clear. He and his team set out to find the smelliest pile of loans they could so that they could make side bets against them with Goldman Sachs or Deutsche Bank. What they were doing, oddly enough, was the analysis of subprime lending that should have been done before the loans were made: Which poor Americans were likely to jump which way with their finances? How much did home prices need to fall for these loans to blow up? (It turned out they didn’t have to fall; they merely needed to stay flat.) The default rate in Georgia was five times higher than that in Florida even though the two states had the same unemployment rate. Why? Indiana had a 25 percent default rate; California’s was only 5 percent. Why?

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    Most economists predict a recovery late next year. Don’t bet on it.Moses actually flew down to Miami and wandered around neighborhoods built with subprime loans to see how bad things were. “He’d call me and say, ‘Oh my God, this is a calamity here,’ ” recalls Eisman. All that was required for the BBB bonds to go to zero was for the default rate on the underlying loans to reach 14 percent. Eisman thought that, in certain sections of the country, it would go far, far higher.

    The funny thing, looking back on it, is how long it took for even someone who predicted the disaster to grasp its root causes. They were learning about this on the fly, shorting the bonds and then trying to figure out what they had done. Eisman knew subprime lenders could be scumbags. What he underestimated was the total unabashed complicity of the upper class of American capitalism. For instance, he knew that the big Wall Street investment banks took huge piles of loans that in and of themselves might be rated BBB, threw them into a trust, carved the trust into tranches, and wound up with 60 percent of the new total being rated AAA.

    But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds. “I didn’t understand how they were turning all this garbage into gold,” he says. He brought some of the bond people from Goldman Sachs, Lehman Brothers, and UBS over for a visit. “We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says.

    As an investor, Eisman was allowed on the quarterly conference calls held by Moody’s but not allowed to ask questions. The people at Moody’s were polite about their brush-off, however. The C.E.O. even invited Eisman and his team to his office for a visit in June 2007. By then, Eisman was so certain that the world had been turned upside down that he just assumed this guy must know it too. “But we’re sitting there,” Daniel recalls, “and he says to us, like he actually means it, ‘I truly believe that our rating will prove accurate.’ And Steve shoots up in his chair and asks, ‘What did you just say?’ as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him.”

    “With all due respect, sir,” Daniel told the C.E.O. deferentially as they left the meeting, “you’re delusional.”
    This wasn’t Fitch or even S&P. This was Moody’s, the aristocrats of the rating business, 20 percent owned by Warren Buffett. And the company’s C.E.O. was being told he was either a fool or a crook by one Vincent Daniel, from Queens.

    A full nine months earlier, Daniel and ­Moses had flown to Orlando for an industry conference. It had a grand title—the American Securitization Forum—but it was essentially a trade show for the ­subprime-mortgage business: the people who originated subprime mortgages, the Wall Street firms that packaged and sold subprime mortgages, the fund managers who invested in nothing but subprime-mortgage-backed bonds, the agencies that rated subprime-­mortgage bonds, the lawyers who did whatever the lawyers did. Daniel and Moses thought they were paying a courtesy call on a cottage industry, but the cottage had become a castle. “There were like 6,000 people there,” Daniel says. “There were so many people being fed by this industry. The entire fixed-income department of each brokerage firm is built on this. Everyone there was the long side of the trade. The wrong side of the trade. And then there was us. That’s when the picture really started to become clearer, and we started to get more cynical, if that was possible. We went back home and said to Steve, ‘You gotta see this.’ ”

    Eisman, Daniel, and Moses then flew out to Las Vegas for an even bigger subprime conference. By now, Eisman knew everything he needed to know about the quality of the loans being made. He still didn’t fully understand how the apparatus worked, but he knew that Wall Street had built a doomsday machine. He was at once opportunistic and outraged.

    Their first stop was a speech given by the C.E.O. of Option One, the mortgage originator owned by H&R Block. When the guy got to the part of his speech about Option One’s subprime-loan portfolio, he claimed to be expecting a modest default rate of 5 percent. Eisman raised his hand. Moses and Daniel sank into their chairs. “It wasn’t a Q&A,” says Moses. “The guy was giving a speech. He sees Steve’s hand and says, ‘Yes?’”

    “Would you say that 5 percent is a probability or a possibility?” Eisman asked.

    A probability, said the C.E.O., and he continued his speech.

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    Most economists predict a recovery late next year. Don’t bet on it.Eisman had his hand up in the air again, waving it around. Oh, no, Moses thought. “The one thing Steve always says,” Daniel explains, “is you must assume they are lying to you. They will always lie to you.” Moses and Daniel both knew what Eisman thought of these subprime lenders but didn’t see the need for him to express it here in this manner. For Eisman wasn’t raising his hand to ask a question. He had his thumb and index finger in a big circle. He was using his fingers to speak on his behalf. Zero! they said.

    “Yes?” the C.E.O. said, obviously irritated. “Is that another question?”

    “No,” said Eisman. “It’s a zero. There is zero probability that your default rate will be 5 percent.” The losses on subprime loans would be much, much greater. Before the guy could reply, Eisman’s cell phone rang. Instead of shutting it off, Eisman reached into his pocket and answered it. “Excuse me,” he said, standing up. “But I need to take this call.” And with that, he walked out.

    Eisman’s willingness to be abrasive in order to get to the heart of the matter was obvious to all; what was harder to see was his credulity: He actually wanted to believe in the system. As quick as he was to cry bullshit when he saw it, he was still shocked by bad behavior. That night in Vegas, he was seated at dinner beside a really nice guy who invested in mortgage C.D.O.’s—collateralized debt obligations. By then, Eisman thought he knew what he needed to know about C.D.O.’s. He didn’t, it turned out.

    Later, when I sit down with Eisman, the very first thing he wants to explain is the importance of the mezzanine C.D.O. What you notice first about Eisman is his lips. He holds them pursed, waiting to speak. The second thing you notice is his short, light hair, cropped in a manner that suggests he cut it himself while thinking about something else. “You have to understand this,” he says. “This was the engine of doom.” Then he draws a picture of several towers of debt. The first tower is made of the original subprime loans that had been piled together. At the top of this tower is the AAA tranche, just below it the AA tranche, and so on down to the riskiest, the BBB tranche—the bonds Eisman had shorted. But Wall Street had used these BBB tranches—the worst of the worst—to build yet another tower of bonds: a “particularly egregious” C.D.O. The reason they did this was that the rating agencies, presented with the pile of bonds backed by dubious loans, would pronounce most of them AAA. These bonds could then be sold to investors—pension funds, insurance companies—who were allowed to invest only in highly rated securities. “I cannot fucking believe this is allowed—I must have said that a thousand times in the past two years,” Eisman says.

    His dinner companion in Las Vegas ran a fund of about $15 billion and managed C.D.O.’s backed by the BBB tranche of a mortgage bond, or as Eisman puts it, “the equivalent of three levels of dog shit lower than the original bonds.”

    FrontPoint had spent a lot of time digging around in the dog shit and knew that the default rates were already sufficient to wipe out this guy’s entire portfolio. “God, you must be having a hard time,” Eisman told his dinner companion.

    “No,” the guy said, “I’ve sold everything out.”

    After taking a fee, he passed them on to other investors. His job was to be the C.D.O. “expert,” but he actually didn’t spend any time at all thinking about what was in the C.D.O.’s. “He managed the C.D.O.’s,” says Eisman, “but managed what? I was just appalled. People would pay up to have someone manage their C.D.O.’s—as if this moron was helping you. I thought, You prick, you don’t give a fuck about the investors in this thing.”

    Whatever rising anger Eisman felt was offset by the man’s genial disposition. Not only did he not mind that Eisman took a dim view of his C.D.O.’s; he saw it as a basis for friendship. “Then he said something that blew my mind,” Eisman tells me. “He says, ‘I love guys like you who short my market. Without you, I don’t have anything to buy.’ ”

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    Most economists predict a recovery late next year. Don’t bet on it.That’s when Eisman finally got it. Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. “They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” Eisman says. “They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans. But that’s when I realized they needed us to keep the machine running. I was like, This is allowed?”

    This particular dinner was hosted by Deutsche Bank, whose head trader, Greg Lippman, was the fellow who had introduced Eisman to the subprime bond market. Eisman went and found Lippman, pointed back to his own dinner companion, and said, “I want to short him.” Lippman thought he was joking; he wasn’t. “Greg, I want to short his paper,” Eisman repeated. “Sight unseen.”

    Eisman started out running a $60 million equity fund but was now short around $600 million of various ­subprime-related securities. In the spring of 2007, the market strengthened. But, says Eisman, “credit quality always gets better in March and April. And the reason it always gets better in March and April is that people get their tax refunds. You would think people in the securitization world would know this. We just thought that was moronic.”

    He was already short the stocks of mortgage originators and the homebuilders. Now he took short positions in the rating agencies—“they were making 10 times more rating C.D.O.’s than they were rating G.M. bonds, and it was all going to end”—and, finally, the biggest Wall Street firms because of their exposure to C.D.O.’s. He wasn’t allowed to short Morgan Stanley because it owned a stake in his fund. But he shorted UBS, Lehman Brothers, and a few others. Not long after that, FrontPoint had a visit from Sanford C. Bernstein’s Brad Hintz, a prominent analyst who covered Wall Street firms. Hintz wanted to know what Eisman was up to. “We just shorted Merrill Lynch,” Eisman told him.

    “Why?” asked Hintz.

    “We have a simple thesis,” Eisman explained. “There is going to be a calamity, and whenever there is a calamity, Merrill is there.” When it came time to bankrupt Orange County with bad advice, Merrill was there. When the internet went bust, Merrill was there. Way back in the 1980s, when the first bond trader was let off his leash and lost hundreds of millions of dollars, Merrill was there to take the hit. That was Eisman’s logic—the logic of Wall Street’s pecking order. Goldman Sachs was the big kid who ran the games in this neighborhood. Merrill Lynch was the little fat kid assigned the least pleasant roles, just happy to be a part of things. The game, as Eisman saw it, was Crack the Whip. He assumed Merrill Lynch had taken its assigned place at the end of the chain.

    There was only one thing that bothered Eisman, and it continued to trouble him as late as May 2007. “The thing we couldn’t figure out is: It’s so obvious. Why hasn’t everyone else figured out that the machine is done?” Eisman had long subscribed to Grant’s Interest Rate Observer, a newsletter famous in Wall Street circles and obscure outside them. Jim Grant, its editor, had been prophesying doom ever since the great debt cycle began, in the mid-1980s. In late 2006, he decided to investigate these things called C.D.O.’s. Or rather, he had asked his young assistant, Dan Gertner, a chemical engineer with an M.B.A., to see if he could understand them. Gertner went off with the documents that purported to explain C.D.O.’s to potential investors and for several days sweated and groaned and heaved and suffered. “Then he came back,” says Grant, “and said, ‘I can’t figure this thing out.’ And I said, ‘I think we have our story.’ ”

    Eisman read Grant’s piece as independent confirmation of what he knew in his bones about the C.D.O.’s he had shorted. “When I read it, I thought, Oh my God. This is like owning a gold mine. When I read that, I was the only guy in the equity world who almost had an orgasm.”

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    Most economists predict a recovery late next year. Don’t bet on it.On July 19, 2007, the same day that Federal Reserve Chairman Ben Bernanke told the U.S. Senate that he anticipated as much as $100 billion in losses in the subprime-mortgage market, FrontPoint did something unusual: It hosted its own conference call. It had had calls with its tiny population of investors, but this time FrontPoint opened it up. Steve Eisman had become a poorly kept secret. Five hundred people called in to hear what he had to say, and another 500 logged on afterward to listen to a recording of it. He explained the strange alchemy of the C.D.O. and said that he expected losses of up to $300 billion from this sliver of the market alone. To evaluate the situation, he urged his audience to “just throw your model in the garbage can. The models are all backward-looking.

    The models don’t have any idea of what this world has become…. For the first time in their lives, people in the asset-backed-securitization world are actually having to think.” He explained that the rating agencies were morally bankrupt and living in fear of becoming actually bankrupt. “The rating agencies are scared to death,” he said. “They’re scared to death about doing nothing because they’ll look like fools if they do nothing.”

    On September 18, 2008, Danny Moses came to work as usual at 6:30 a.m. Earlier that week, Lehman Brothers had filed for bankruptcy. The day before, the Dow had fallen 449 points to its lowest level in four years. Overnight, European governments announced a ban on short-selling, but that served as faint warning for what happened next.

    At the market opening in the U.S., everything—every financial asset—went into free fall. “All hell was breaking loose in a way I had never seen in my career,” Moses says. FrontPoint was net short the market, so this total collapse should have given Moses pleasure. He might have been forgiven if he stood up and cheered. After all, he’d been betting for two years that this sort of thing could happen, and now it was, more dramatically than he had ever imagined. Instead, he felt this terrifying shudder run through him. He had maybe 100 trades on, and he worked hard to keep a handle on them all. “I spent my morning trying to control all this energy and all this information,” he says, “and I lost control. I looked at the screens. I was staring into the abyss. The end. I felt this shooting pain in my head. I don’t get headaches. At first, I thought I was having an aneurysm.”

    Moses stood up, wobbled, then turned to Daniel and said, “I gotta leave. Get out of here. Now.” Daniel thought about calling an ambulance but instead took Moses out for a walk.

    Outside it was gorgeous, the blue sky reaching down through the tall buildings and warming the soul. Eisman was at a Goldman Sachs conference for hedge fund managers, raising capital. Moses and Daniel got him on the phone, and he left the conference and met them on the steps of St. Patrick’s Cathedral. “We just sat there,” Moses says. “Watching the people pass.”

    This was what they had been waiting for: total collapse. “The investment-banking industry is fucked,” Eisman had told me a few weeks earlier. “These guys are only beginning to understand how fucked they are. It’s like being a Scholastic, prior to Newton. Newton comes along, and one morning you wake up: ‘Holy shit, I’m wrong!’ ” Now Lehman Brothers had vanished, Merrill had surrendered, and Goldman Sachs and Morgan Stanley were just a week away from ceasing to be investment banks. The investment banks were not just fucked; they were extinct.

    Not so for hedge fund managers who had seen it coming. “As we sat there, we were weirdly calm,” Moses says. “We felt insulated from the whole market reality. It was an out-of-body experience. We just sat and watched the people pass and talked about what might happen next. How many of these people were going to lose their jobs. Who was going to rent these buildings after all the Wall Street firms collapsed.” Eisman was appalled. “Look,” he said. “I’m short. I don’t want the country to go into a depression. I just want it to fucking deleverage.” He had tried a thousand times in a thousand ways to explain how screwed up the business was, and no one wanted to hear it. “That Wall Street has gone down because of this is justice,” he says. “They fucked people. They built a castle to rip people off. Not once in all these years have I come across a person inside a big Wall Street firm who was having a crisis of conscience.”

    Truth to tell, there wasn’t a whole lot of hand-wringing inside FrontPoint either. The only one among them who wrestled a bit with his conscience was Daniel. “Vinny, being from Queens, needs to see the dark side of everything,” Eisman says. To which Daniel replies, “The way we thought about it was, ‘By shorting this market we’re creating the liquidity to keep the market going.’ ”

    “It was like feeding the monster,” Eisman says of the market for subprime bonds. “We fed the monster until it blew up.”

    About the time they were sitting on the steps of the midtown cathedral, I sat in a booth in a restaurant on the East Side, waiting for John Gutfreund to arrive for lunch, and wondered, among other things, why any restaurant would seat side by side two men without the slightest interest in touching each other.

    There was an umbilical cord running from the belly of the exploded beast back to the financial 1980s. A friend of mine created the first mortgage derivative in 1986, a year after we left the Salomon Brothers trading program. (“The problem isn’t the tools,” he likes to say. “It’s who is using the tools. Derivatives are like guns.”)

    When I published my book, the 1980s were supposed to be ending. I received a lot of undeserved credit for my timing. The social disruption caused by the collapse of the savings-and-loan industry and the rise of hostile takeovers and leveraged buyouts had given way to a brief period of recriminations. Just as most students at Ohio State read Liar’s Poker as a manual, most TV and radio interviewers regarded me as a whistleblower. (The big exception was Geraldo Rivera. He put me on a show called “People Who Succeed Too Early in Life” along with some child actors who’d gone on to become drug addicts.) Anti-Wall Street feeling ran high—high enough for Rudy Giuliani to float a political career on it—but the result felt more like a witch hunt than an honest reappraisal of the financial order. The public lynchings of Gutfreund and junk-bond king Michael Milken were excuses not to deal with the disturbing forces underpinning their rise. Ditto the cleaning up of Wall Street’s trading culture. The surface rippled, but down below, in the depths, the bonus pool remained undisturbed. Wall Street firms would soon be frowning upon profanity, firing traders for so much as glancing at a stripper, and forcing male employees to treat women almost as equals. Lehman Brothers circa 2008 more closely resembled a normal corporation with solid American values than did any Wall Street firm circa 1985.

    The changes were camouflage. They helped distract outsiders from the truly profane event: the growing misalignment of interests between the people who trafficked in financial risk and the wider culture.

    More From
    The New Order
    The crash did more than wipe out money. It also reordered the power on Wall Street.
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    A pictorial timeline of some Wall Street highs and lows from 1985 to 2007.
    Worst of Times
    Most economists predict a recovery late next year. Don’t bet on it.I’d not seen Gutfreund since I quit Wall Street. I’d met him, nervously, a couple of times on the trading floor. A few months before I left, my bosses asked me to explain to Gutfreund what at the time seemed like exotic trades in derivatives I’d done with a European hedge fund. I tried. He claimed not to be smart enough to understand any of it, and I assumed that was how a Wall Street C.E.O. showed he was the boss, by rising above the details. There was no reason for him to remember any of these encounters, and he didn’t: When my book came out and became a public-relations nuisance to him, he told reporters we’d never met.

    Over the years, I’d heard bits and pieces about Gutfreund. I knew that after he’d been forced to resign from Salomon Brothers he’d fallen on harder times. I heard later that a few years ago he’d sat on a panel about Wall Street at Columbia Business School. When his turn came to speak, he advised students to find something more meaningful to do with their lives. As he began to describe his career, he broke down and wept.

    When I emailed him to invite him to lunch, he could not have been more polite or more gracious. That attitude persisted as he was escorted to the table, made chitchat with the owner, and ordered his food. He’d lost a half-step and was more deliberate in his movements, but otherwise he was completely recognizable. The same veneer of denatured courtliness masked the same animal need to see the world as it was, rather than as it should be.

    We spent 20 minutes or so determining that our presence at the same lunch table was not going to cause the earth to explode. We discovered we had a mutual acquaintance in New Orleans. We agreed that the Wall Street C.E.O. had no real ability to keep track of the frantic innovation occurring inside his firm. (“I didn’t understand all the product lines, and they don’t either,” he said.) We agreed, further, that the chief of the Wall Street investment bank had little control over his subordinates. (“They’re buttering you up and then doing whatever the fuck they want to do.”) He thought the cause of the financial crisis was “simple. Greed on both sides—greed of investors and the greed of the bankers.” I thought it was more complicated. Greed on Wall Street was a given—almost an obligation. The problem was the system of incentives that channeled the greed.

    But I didn’t argue with him. For just as you revert to being about nine years old when you visit your parents, you revert to total subordination when you are in the presence of your former C.E.O. John Gutfreund was still the King of Wall Street, and I was still a geek. He spoke in declarative statements; I spoke in questions.

    But as he spoke, my eyes kept drifting to his hands. His alarmingly thick and meaty hands. They weren’t the hands of a soft Wall Street banker but of a boxer. I looked up. The boxer was smiling—though it was less a smile than a placeholder expression. And he was saying, very deliberately, “Your…fucking…book.”

    I smiled back, though it wasn’t quite a smile.

    “Your fucking book destroyed my career, and it made yours,” he said.

    I didn’t think of it that way and said so, sort of.

    “Why did you ask me to lunch?” he asked, though pleasantly. He was genuinely curious.

    You can’t really tell someone that you asked him to lunch to let him know that you don’t think of him as evil. Nor can you tell him that you asked him to lunch because you thought that you could trace the biggest financial crisis in the history of the world back to a decision he had made. John Gutfreund did violence to the Wall Street social order—and got himself dubbed the King of Wall Street—when he turned Salomon Brothers from a private partnership into Wall Street’s first public corporation. He ignored the outrage of Salomon’s retired partners. (“I was disgusted by his materialism,” William Salomon, the son of the firm’s founder, who had made Gutfreund C.E.O. only after he’d promised never to sell the firm, had told me.) He lifted a giant middle finger at the moral disapproval of his fellow Wall Street C.E.O.’s. And he seized the day. He and the other partners not only made a quick killing; they transferred the ultimate financial risk from themselves to their shareholders. It didn’t, in the end, make a great deal of sense for the shareholders. (A share of Salomon Brothers purchased when I arrived on the trading floor, in 1986, at a then market price of $42, would be worth 2.26 shares of Citigroup today—market value: $27.) But it made fantastic sense for the investment bankers.

    From that moment, though, the Wall Street firm became a black box. The shareholders who financed the risks had no real understanding of what the risk takers were doing, and as the risk-taking grew ever more complex, their understanding diminished. The moment Salomon Brothers demonstrated the potential gains to be had by the investment bank as public corporation, the psychological foundations of Wall Street shifted from trust to blind faith.

    No investment bank owned by its employees would have levered itself 35 to 1 or bought and held $50 billion in mezzanine C.D.O.’s. I doubt any partnership would have sought to game the rating agencies or leap into bed with loan sharks or even allow mezzanine C.D.O.’s to be sold to its customers. The hoped-for short-term gain would not have justified the long-term hit.

    No partnership, for that matter, would have hired me or anyone remotely like me. Was there ever any correlation between the ability to get in and out of Princeton and a talent for taking financial risk?

    Now I asked Gutfreund about his biggest decision. “Yes,” he said. “They—the heads of the other Wall Street firms—all said what an awful thing it was to go public and how could you do such a thing. But when the temptation arose, they all gave in to it.” He agreed that the main effect of turning a partnership into a corporation was to transfer the financial risk to the shareholders. “When things go wrong, it’s their problem,” he said—and obviously not theirs alone. When a Wall Street investment bank screwed up badly enough, its risks became the problem of the U.S. government. “It’s laissez-faire until you get in deep shit,” he said, with a half chuckle. He was out of the game.

    It was now all someone else’s fault.

    He watched me curiously as I scribbled down his words. “What’s this for?” he asked.

    I told him I thought it might be worth revisiting the world I’d described in Liar’s Poker, now that it was finally dying. Maybe bring out a 20th-anniversary edition.

    “That’s nauseating,” he said.

    Hard as it was for him to enjoy my company, it was harder for me not to enjoy his. He was still tough, as straight and blunt as a butcher. He’d helped create a monster, but he still had in him a lot of the old Wall Street, where people said things like “A man’s word is his bond.” On that Wall Street, people didn’t walk out of their firms and cause trouble for their former bosses by writing books about them. “No,” he said, “I think we can agree about this: Your fucking book destroyed my career, and it made yours.” With that, the former king of a former Wall Street lifted the plate that held his appetizer and asked sweetly, “Would you like a deviled egg?”

    Until that moment, I hadn’t paid much attention to what he’d been eating. Now I saw he’d ordered the best thing in the house, this gorgeous frothy confection of an earlier age. Who ever dreamed up the deviled egg? Who knew that a simple egg could be made so complicated and yet so appealing? I reached over and took one. Something for nothing. It never loses its charm. © 2008 Condé Nast Inc. All rights reserved. Use of this site constitutes acceptance of our User Agreement and Privacy Policy.

  17. drkrbyluv

    END the FED

    There are a thousand problems in the western world right now; at times it looks overwhelming to even consider any real change that favors the people.

    However, there is one institution that stands at the center of the tyranny we are witnessing as our freedom and prosperity is being stolen – the Federal Reserve Banks.

    The Fed and it’s central banking partners, provide the very sinews of tyranny. Strike at it and you strike at the heart of the beast – abolish the Fed.

    This coming Saturday we have a unique opportunity to bring the Fed into the consciousness of America. The Fed must be exposed and challenged and if we don’t attempt this, it won’t get done by the MSM or our politicians.

    No; one day of peaceful protest will not get the job done. But one day of national protest is the first big step to an ongoing process of education and activism. We need to show up in mass to reassert the commitment of a nation that is run by the people and for the people.

    The fine people who visit this blog understand more than most others just what is at stake. I have read and have been moved by many insightful and heartfelt comments. I think we, more than others, have an obligation to share what we know and to stand united in opposition to the tyranny that is the Fed.

    We owe this to our ancestors who stood strong on our behalf and we owe this to our children, grandchildren and great grandchildren – we need to become activists to help wake up the nation.

    Activism can be very rewarding, therapeutic and fun. For example, New York city can be a lot fun. The NYC protest (Wall Street) is taking place just south of Greenwich Village. There are lots of hotels and restaurants in this area and lots of nightlife to enjoy.

    If you have never witnessed it, let me share that there is a special camaraderie among activists. Most of us are philosophically isolated in our daily lives and the opportunity to socialize with other like minded people creates a lot of fun and relief.

    If anyone else is interested, I would be glad to find a good base for us to gather before and after the NYC event. I can try to get us discounted rates.

    Or, I would be more than happy to make some arrangements for us in Washington DC if that is preferred. I lived In Washington and am certain I can locate our base in a convenient and fun area.

    Let me know if you are interested!!!!!!!!

    END the FED

  18. Blunt Force Trauma

    Traders to Collect Big on Slick Bet (Cryptogon)

    “Investors who placed summer bets that oil prices would fall below $100 a barrel are set to make huge profits on Monday, with some speculators reaping a return of more than 2,000 per cent in less than six months.”

    Interesting. Oil is down 2 bucks to $55.86

    Full article:

  19. Blunt Force Trauma

    Paul S.


  20. Blunt Force Trauma

    Essential reading for Obama (Online Journal)

    “In the weeks until his inauguration on January 20, 2009, Barack Obama will be focusing on the most immediate tasks of assembling a new administration and familiarizing himself with the depth of domestic and foreign crises confronting the Unites States. Once in the White House, President Obama will have to grapple with the economy, the wars in Iraq and Afghanistan and their manifestations in the area of human rights and law. But the catalogue of failures of the outgoing administration of George W Bush is long. If President Obama is to succeed in delivering on the promises raised by his victory, he may find it useful to read some of the pages from the catalogue of failures of his predecessor. They shed light on the blunders that made America’s crises.”

    Full article:

  21. Blunt Force Trauma

    Ha, ha, ha. Just for kicks and giggles I Googled ‘worst cars 2008’ and then I clicked on Consumer Reports’s website:

    It lists 11 vehicles as the worst: 2 were Toyotas, 1 was a Suzuki and the other 8 were made by the ‘Walking Dead Three’

    (March, 2008)

  22. Blunt Force Trauma

    Apart and To Pieces (Automatic Earth)

    “Let’s start by agreeing that none of the Mother Mary only knows how many trillions in global bail-outs so far has solved any problem at all. It has all merely gone to serve the delay of what went up and must come down. None of it has made any bank or insurer any more solvent, and what there’s been in added liquidity has been frozen in place in the absolute zero of outer space, without ever reaching the public it was allegedly handed out to aid in the first place.”

    – snip –

    “The US automotive industry is capable of producing 17 million vehicles annually, while sales have dropped to an annual rate of only 10 million vehicles. They can magically hope that the holy spirit will descend from heaven to sell their cars for them, but the reality is that chances of that happening are somewhat slim, and certainly not robust enough to throw hundreds of billions of dollars into. Car sales won’t go up from the 10 million annual number we see today for a very long time, if ever; they will instead go down, and a lot too.”

    Full article:

  23. N. Ron Shrubbard

    The thing about no auto industry that is so bad is much more than manufacturing the vehicles themselves, it is all the support industries. I know somebody who was in part manufacture. It was a small business, literally mom and pop, yet involved sophisticated machine tooling work. A lot of that existed, until about 2002 to 2003, when it all fell apart, and layoffs cascaded, often 5 to 10 layoffs at a time, though in an incredible number of businesses, such that it added up to significant job loss. These were very good jobs, though mostly in small business, so the media had no trouble ignoring this. Only the back-page fine print of sources like Goonberg even mentioned it.

    I originally started out in the sciences, and was about half way through the Ph.D. level, when one day I abruptly quit. I know why, already by 1990, Americans avoid science and tech like the plague. The system does not run on curiosity about nature and free investigation. It is in reality hierarchical and feudal to an extreme, actually worse than many corporations! The whole thing is funded by a federal grant system, primarily from 2 sources. At the top are the board members who pick the grants. Next, the “field lieutenants” are the “star” professors/researchers, who once make their reputations “go on the circuit,” which is nothing more than endlessly traveling around and giving talks. That’s all they do, and this is the destination sought by all in this racket, and once achieved, indicates “you have arrived!” Below that, are the new profs and assistants scrambling for tenure. Below that, are the candidates and new Ph.D.s, who are essentially serfs, or slaves. Asians were (are?) more willing to tolerate this, and plus, their day-to-day lives within it at a USSA institution of “higher learning” may be better than what they left.

    Any creativity or insight or new and brilliant research direction generally comes from the profs struggling for tenure, or those with tenure who have ambition of “making the circuit.” In fact, it is expected of those at this level. It must come from somewhere. Unfortunately, when I say “brilliance,” the reader of his post should not think Newton, Helmholtz, Einstein, Heisenberg, etc. No, the one and only real-world definition of “brilliance” is the new development of something useful to the plutocracy. This is the obvious result of the huge money requirements to keep these research institutions going, and the fact the money is doled out by the federal governments. The plutocrats own the federal government, and thus the plutocrats dictate the reward system for getting the grants.

    Like all such systems, it encourages fraud, and the cold fusion scam out of University of Utah is a good (somewhat) known example. However, unlike most of the falsed-up (mainstream image and reality diametrically opposed) social systems imposted by the plutocracy, this one directly facilitates the manipulation of physical reality, and thus an ultimate incentive exists to keep its product in some sense real. Therefore, its degradation has been by a much slower process than in some other social systems. Still, enough time has passed, over decades, that the degradation is now palpable. I expect this hollowing out of substance, over enough time, to get worse, and eventually become complete, as it is with “markets,” the “news,” “elections,” etc.

    Speaking of universities, if you have not been to one, I was at one a couple days ago. I was in a biz admin and law library, and a little more than 50% of the students appeared Asian. This is a shift from 10 years ago. Is this because actual Asian individuals will be required to properly, and loyally, administer Duhmerica’s glorious future? Is it simply because potential Duhmerican students are now too dumbed down to cut it? Is it some other reason? I don’t know; I haven’t been in and personally experienced this sphere for years now.

  24. RobG

    My deck chair on the Titanic

    It’s a white paper by Martin Weiss, Ph.D., and Michael Larson, the Federal Deposit Insurance Corporation (FDIC) now claims to be covering 117 institutions with $78 billion in assets. The problem (part of it is), according to broader analysis by Messrs. Weiss and Larson is that there are 1,479 member banks and 158 thrifts with assets of $3.6 trillion, 36 times the FDIC number of institutions at risk of failure. So we’re going to run a bit short in bailout funds, worse comes to worse.

    Then, read the part from Weiss’s white paper about the $14.8 trillion in residential and commercial mortgages being only half the problem. There’s another $20.4 trillion in consumer and corporate debt in the US. And then there are the bankrupt local governments, with $2.7 trillion in securities outstanding with bond insurance on the brink of collapse. I mean this $700 billion bailout is a drop in the bucket.

  25. drkrbyluv

    Blunt Force Trauma –

    Excellent links as usual. You put a nice thread of links together that underscores what Elaine said yesterday – we simply can’t afford all the overhead that is the industrial-military complex. How can our economy be expected to prosper under the huge debt of perpetual war and militarism?

    The expenditures and corruption are not questioned because we are on a war footing – if we stop even to think, the Bin Laden (deceased CIA operative) will sneak into the country to blow things up.

    Back on September 10, 2001, Donald Rumsfeld made a startling admission – $2.3 trillion dollars was missing from the Pentagon.

    (CBS) On Sept. 10, Secretary of Defense Donald Rumsfeld declared war. Not on foreign terrorists, “the adversary’s closer to home. It’s the Pentagon bureaucracy,” he said.

    The 911 tragedy that took place the following day swept this huge story off the front page and into obscurity.

    When you add up the trillions of dollars missing or wasted you have to wonder how we didn’t sink years ago.

    It is amazing that both the democrats and republicans got away with the idiocy of not linking our huge debt, most of it in the military industrial complex, to the financial breakdown before us.

    And equally as heinous, why is no one in our government pointing out that our perpetual trade deficit will kill our economy while jeopardizing our sovereignty.

  26. Bear of Little Brain

    Paul S:
    Didn’t our resident news service (Blunt 😉 ) post the link earlier/yesterday?
    I read it over the weekend (or was it last week) via Jesse (I think). I know it’s a good article, but no need to post it.
    Just the link, with a recommendation? Pretty please. I have to scroll on my little laptop. Have mercy.
    PS: you’ll also like “Liar’s Poker”. if you haven’t read it 🙂

  27. Bear of Little Brain

    Just had someone on Bloomberg pointing out that if the motor industry bailout is restricted to the Big Three, it breaks WTO rules. All manufacturers, foreign and domestic, with American plants have to be included. Duh. 🙄

  28. nah

    and like mothers’ cookies went bankrupt too guess people dont got the money to buy cookies for what it really costs anymore sux more to make cars maybe

    vote your paycheck

  29. emsnews

    Yes, the WTO is set up so that it can assist us in becoming a Third World Nation! Isn’t that wonderful. 😦

  30. RobG

    Here is a good analysis (Just kidding; it’s Friedman at NYT):

    “If you are going to fight a global financial panic like this, you have to go at it with overwhelming force — an overwhelming stimulus that gets people shopping again”

  31. RobG

    Sorry about the broken link to Friedman: Gonna need a bigger boat

  32. GK

    This website does an amazing job of documenting the criminal transfer of our nation’s wealth to foreign control for a few pieces of silver.

    I believe the people who installed the Debt-Thermite into our economy are the same people who install the Real-Thermite into the WTC.


    Dustin Ensinger | Published 11/17/08

    If a hostile nation were trying to infiltrate America and destroy it from the inside out, well, they would be hard-pressed to do a better job than our current and former leaders have done. America and its policymakers have been asleep at the wheel for over two decades now. If they are not awoken very soon, America may find itself permanently stuck in a ditch.

    One of the first actions a hostile nation might take to destroy our country would be to drive up the debt, making the nation subservient and vulnerable to the actions of others. Unfortunately, this is already the case, all through our own doing.

  33. Ravi Batra, on Hartmann’s show a few days ago, expressed a bafflingly simple plan to bail out the car companies.

    GM, etc, seem to be asking for $25 billion now, some billions later.

    How about, he said, the US Govt take about $1.5 billion and buy up 60% of the outstanding stock in those companies (maybe he was thinking just GM, I forget) and then give this to the workers.

    For a fraction of the bailout price, GM would become a worker-run company, with new CEO, new board of directors, new direction from below. And even perhaps a chance to remake itself into a real going concern.

    Something to think about. Also, considering who holds the levers of power, something highly unlikely.

  34. GK

    A fictional conversation with Volcker arguing FOR a cleansing Depression, clearing of all criminal debt, and restoration of our economy.

    AGAINST a hyper-inflationary money printing bailout-fest (that we are currently embarking upon.)

    A Fictional Scenario of the Future: The Final Bailout

    “Treasury Secretary: Then what do you propose?

    Volcker: Before I build up to a proposal, I want to lay down the foundation with a basic principle. Ultimately, the fork in the road ahead is between (a) deflation and depression or (b) hyperinflation and destruction of our currency. But there can be no debate whatsoever as to which is the lesser of the evils.

    The deflation road is extremely arduous, but ultimately leads to recovery. The hyperinflation road can provide a temporary palliative, but it ultimately leads to the destruction of our society and culture.

    Treasury Secretary: Was it not the deflation of the 1930s that led to World War II?

    Volcker: No. The true roots of World War II lie in the hyperinflation of Germany in the 1920s. But let’s not debate history. Let’s look at our choices here and now …

    Choice number one: A strong currency — the nation’s social and political anchor. It gives workers a reason to work and be team players; families a reason to save and come together; entrepreneurs a motive for innovating.

    Choice number two: A failed currency — a nation’s albatross. It gives speculators, market manipulators, scam artists and the worst criminal elements the upper hand — not just on the sidelines of power, but in the upper echelons of government and enterprise.”

  35. Bear of Little Brain

    They would never take the risk of a workers’ cooperative succeeding. Not in America. 😕

    Dmitry Orlov suggested just letting it all go, cannibalising parts and making do and mending. He figures that the vehicles should wear out about the same time as the oil runs out. He’s a bundle of laughs, and the non-founder of the Collapse Party, the only party to see its manifesto being implemented without ever having to put up a candidate, he says:

  36. Grok1

    Elaine…..Re: your 11/14 post about Friedman. From The Wild Wild Left blog.

    Over the weekend, there appeared a post which is utterly awash in the delectable sweetness in delight at the discomfiture of the detestable. Shorter ATR: The mega-mall holding corporation on whch the fortune of Tom Friedman’s multi-billionaire in-laws depends has lost 98% of its worth (on paper) in the last TWO MONTHS.

    This state of affairs apparently led Friedman to discourse in an atypically honest column late last week at in NY TIMES. Quoth ATR:

    Suck. On. This.
    Schadenfreude has never been so, so sweet:
    It would be easy to dismiss today’s rant (however spot-on it might be) by New York Times columnist Thomas Friedman as yet another ideological tirade against the U.S. automobile industry. But based on the bad news coming out of shopping-mall owner General Growth Properties (GGP), it is no wonder Friedman is feeling crankier than usual. That’s because the author’s wife, Ann (née Bucksbaum), is an heir to the General Growth fortune. In the past year, the couple-who live in an 11,400-square-foot mansion in Bethesda, Maryland-have watched helplessly as General Growth stock has fallen 99 percent, from a high of $51 to a recent 35 cents a share. The assorted Bucksbaum family trusts, once worth a combined $3.6 billion, are now worth less than $25 million.

    If you click through to this chart, you’ll see the drop has actually been even more precipitous than described above. GPP was trading at $27.55 the week of September 8th. It’s now at $0.44. Thus, it’s lost 98% of its value in the past two months.
    SO, THIS is how a “Free Market” works? Schweet, schweet, schweeeeeet! Down from $3.6 BILLION, to “less than $25MILLION”? WhaddaRIDE!
    My own (substantial, to me, though amounting only to some 10s of THOUSANDS of dollars) losses (retirement accounts down 30-35% in two months) somehow don’t seem so terrible.


    This makes my day a wee bit brighter.

  37. emsnews

    What? I thought the Four Horsemen were running on that ticket. With Palin filling in for the Whore of Babylon at the top.

  38. Grok1

    Another Good Michael Hudson post in CounterPunch today.

    This man would have been a key member of a Kucinich cabinet if not Treasury Secretary (I love to fantasize).

  39. DeVaul

    “I mean this $700 billion bailout is a drop in the bucket.”

    It sure is.

    An article over on the Silver Bear Cafe by Ted Butler might explain the real reason for this curious number. It appears that Bear Stearns was dabbling in commodity bets (in this case, silver) and lost big time on their paper bets.

    According to some evidence dug up by Mr. Butler, it appears that JP Morgan took over Bear Stearns at the request of the Treasury in order to cover-up the silver manipulation and prevent a default that would cause the entire commodities exchange to implode.

    The sad part is that many will lose their jobs because a few scumbags at the top wanted to cover their asses and jump out with a golden parachute, leaving everyone else to clean up their paper gambling mess.

    This is why I am against the whole concept of “markets”. They were never “free”, and as soon as one was set up anywhere in the world, it immediately became a gambling den.

    As for GM, we need to think more about how we will grow our own food in the very near future rather than if we can out-compete Japan or China in auto manufacturing on the downward slope of Peak Oil.

    Let Japan and China figure out what will fuel their new super-duper cars, and which group of peasants will be able to buy them and maintain them. We need to make sure that we have access to food and clean water.

    And soon.

  40. Blunt Force Trauma

    Just thinking of the numbers after the markets close today….

    The DOW closed down 223 points to 8,273.

    That makes today the 5th triple-digit loss day in 11 business days since the (s)election of Owe-bama.

  41. Dutch

    Hahaha good postings! The Auto bailout is a given, whether they (big 3) go bankrupt or not. These corps will be used as “tax shelters” for the new green economy comrade! Sounds like music to me! As far as destroying america from within reminds me of a quote of Abe Lincolns a president Owe-bama wanted to be associated with. Beam me up!

  42. Dutch

    Interesting article, I have found it interesting that a “twenty dollar” gold piece was worth twenty “silver dollars”. Interesting in the fact that a “dollar is a weight” and a dollar “bill” is just that! A “bill”!

  43. emsnews

    Um, blaming Obama who still has no power to act, for stock market falls that were cooking over a year ago…is insanity.

    I have a vast memory. When Bush took over via the Supreme Court in 2000, the right wing continued to blame EVERYTHING and I do mean, EVERYTHING that went wrong, on Clinton! This includes 9/11 and Hurricane Katrina!

    It took them over 4 years to finally say that things were happening because of Bush. So of course, the right wing will blame Obama for things that started due to the GOP policies from Reagan on down…before the man has even walked into his office. Talk about jumping the gun here, guys!

    Geeze. You realize, this makes you look kind of sour.

  44. emsnews

    Dutch, I have written extensively about the relative value of gold versus silver. IT FLUCTUATES TREMENDOUSLY. There is seldom any point of stability here, not only between various kingdoms and governments and eras but vis a vis different economies in the same timeframe.

    Nothing has stable value EXCEPT when a global empire has sufficient fire power and economic strength to impose some sort of stability. The British Empire did this for 50 years and then the US attempted this for another 50 years.

    Now we are in an extended period of total chaos that will get worse. The relative value of gold, silver and bread will continue to go crazy and make little sense.

  45. GK

    Your tax dollars at work ‘bailing out’ the banks to help Americans.


    Nov. 18 (Bloomberg) — Bank of America Corp. will pay about $7 billion to almost double its three-year-old stake in China Construction Bank Corp., three weeks after being awarded $15 billion from the U.S. government to thaw frozen credit markets.

  46. Blunt Force Trauma

    Speaking of the yellow metal that is so precious…….

    I had posted something similar to this yesterday. Can’t say I can give it much merit, but it is interesting to visit the possiblility. I can also say that I don’t know enough this subject yet.

    Upcoming Gold Default (Gold Seek – Oct. 30/08)

    “The COMEX gold & silver markets are each hurtling down a dangerous path toward default. The artificial paper price has created enormous physical demand, and hampered supply production, if not delivery. The gap between the JPMorgan-led corrupted phony paper price and the legitimate physical price in actual trading markets has grown sharply, enough to force a breakdown like in any distorted market. When December contracts in gold & silver are demanded to be satisfied via delivery of the metal, it will be clear that the COMEX is running a scam. A default is highly likely. Of course, they can continue to deny contract holders the right to benefit from delivery, as they have been doing for months to ‘Non-Economic Customers’ but soon the ‘Commercial Customers’ will be defrauded. Arrests are warranted. We will see how this corruption unfolds.”

    Full article:

  47. Dutch

    Of course I blame Owebama Elaine! Hell, I could write a bill in fifteen minutes that would end all of this nonsense myself! Like my “Pa” used to say , “you can stack bullshit only so high before it starts sliding off”. So far with the noise on TV about his cabinet appointments it looks like more faeries playing grab ass at the whitehouse, something I would remind you that we have had for eight years and longer.

  48. Dutch

    Of course I blame Owebama Elaine! Hell, I could write a bill in fifteen minutes that would end all of this nonsense myself! Like my “Pa” used to say , “you can stack bullshit only so high before it starts sliding off”. So far with the noise on TV about his cabinet appointments it looks like more faeries playing grab ass at the whitehouse, something I would remind you that we have had for eight years and longer. I just hope this guys crowning achievement is not gay rights and a nuclear katrina.

  49. Blunt Force Trauma

    Elaine said:

    “Um, blaming Obama who still has no power to act, for stock market falls that were cooking over a year ago…is insanity. I have a vast memory.”

    He has power of influence despite his lack of power to “act”. You’ll remember that Obama (as well as McInsane) did push for the banking bailout bill which the majority of the public did not want. Which includes yourself. His “team mate”, Pelosi, even threatened martial law on the floor if that sam bill was not passed.


    Both Obama and McCain Make Push for Bailout (NYT – Sept. 30/08)

    Obama To Congress: Get This Done (Sky News – Sept.30/08)

  50. Dutch ( good)

    Of course I blame Owebama Elaine! Hell, I could write a bill in fifteen minutes that would end all of this nonsense myself! Like my “Pa” used to say , “you can stack bullshit only so high before it starts sliding off”. So far with the noise on TV about his cabinet appointments it looks like more faeries playing grab ass at the whitehouse, something I would remind you that we have had, for eight years, and longer. I just hope this guys crowning achievement is not gay rights and a nuclear katrina. If that makes me sour then so be it.

  51. Blunt Force Trauma

    Dutch said:

    “Dutch (rum…is good)”

    Apparently. You have posted the same thing three times 🙂

    I did enjoy “…. playing grab ass at the whitehouse…”, and, ““you can stack bullshit only so high before it starts sliding off”. Now, that is some wet poo.

    Ah, but I ddid notice you added the line; “If that makes me sour then so be it”; in the third posting. So the rum hasn’t taken hold yet.

  52. Blunt Force Trauma

    Oh, and Blooomberg isn’t all that impressed with Owe-Bama either:

    RPT, in case you missed it: Obama-Pelosi Stimulus May Fail to Reignite Economy (Bloomberg)

    “President-elect Barack Obama and House Speaker Nancy Pelosi may throw as much as half a trillion dollars worth of stimulus at the economy — and have little or no growth to show for it.”

    Full article:

  53. Dutch ( good)

    LOL I am so sorry cant help it I just fucked up is all. Once again my apoligies.

  54. Blunt Force Trauma

    …and while we’re at it….

    Owe-bama thinks that he’ll find the “boogeyman”.

    Good luck with that, Barack.

    Osama bin Laden is Dead (321 Gold)

    “I’m pleased to see Barak Obama hit the ground running after his election on the 4th. The US needs change. I’d like to see him announce the death of Osama bin Laden as one of his first official duties. Bin Laden often better known as bin Forgotten died in December of 2001. There is nothing I am saying that is news to anyone who has actually spent any time thinking.”

    Full article:

  55. N. Ron Shrubbard


    The fatal flaw with Ravi Batra’s plan is that it makes sense and would be good for people generally. Worse, it might facilitate ends that are the exact, 180 degree opposite of what the plutocrats have been working at so hard and for so long. Therefore, the plutocracy will never ever allow it!

    Worse, such a plan might stir syndicalist ghosts into activity, possibly into a full blow haunting (of plutocrats!). I feel fairly certain this is not something that even a single plutocrat wants to do. The reason for the risk is the size of an automobile industry, and the large portion of any society the whole thing comprises. Even here in the USSA, big as it is, you add in all the peripheral industry, and it has potential to be (formerly was) about 10% of the entire economy. This is probably why Japan, Germany, and some others restrict export of autos to national shipping, while they allow other stuff to be exported on any old ship, in any old container.

    If union-owned, union-managed auto companies got a foot hold, this could spread throughout the peripheral industries. Many of the newly defunct peripheral support industries could re-emerge overnight (there’s no way the experience, skills, and tools are all lost yet). The thing is, they would re-emerge as brand new entities, and they might do so, by way of a syndicalist “business model,” from the ground up. From there it could spread from the auto industry to other industries, and then ……………

    It is interesting to note that New York state, (and a few other states, still have statutory laws that make labor syndicates and anarchist/syndicalist political organizations and propaganda criminal acts. These laws have been on the books for about 100 years, though no attempt has been made to enforce them in a very long time. There has been no need. It does show that, when the rubber meets the road, the US constitution has been “nothing but a God Damned piece of paper” for a very long time. Forget a about inane and petty “First Amendment” disputes about works of “art” such as “Piss Christ,” and the rights of spoiled children to produce them, the anti-syndicalist laws make simply holding and expressing a certain political position/opinion a criminal act. One would hope that if New York actually attempted to prosecute somebody for this crap, the statutes would be immediately held unconstitutional. Sadly, the way things are going, I would not now at all count on it.

    In my state (California), the IWW has made a small comeback, as an actual labor organization, albeit very small. The IWW (Wobblies) never completely disappeared. However, for years and years, it really existed only as a social club for college campus radical types, plus a few history buffs. Recently, some independent truck drivers have joined it. A local advertising-for-yuppies rag did do a piece on this, and a few truckers stated not only are the Teamsters useless, the Teamsters wanted nothing to do with them.

    While I don’t know how significant this is, I do find it interesting. I also don’t think bringing back labor syndicates from the dead is necessarily the best idea; What I do feel, and strongly so, is that something like it, and the way of thinking it arose from, is in the right ball park. So far, these truckers are only a small number of independents, who do short hauls from the farms to the shipping facilities in Stockton and Lodi, for the export of the best stuff to Japan. For all I know, the good stuff is now going to China as well. The disgusting, square, pinkish-white tomatoes stay here for us. Any more, you have to go to a few roadside stands and the farmers’ markets to get any of the good stuff, though I guess it’s like that everywhere.

  56. Blunt Force Trauma

    Just found this as well…….

    Afghan article says US Bin-Ladin hunt phoney (Juan Cole)

    “The USG Open Source Center translates an article from the Persian Afghan press alleging that French troops were at one point close to capturing Usamah Bin Ladin in Afghanistan, but that American forces stopped them from doing so. It says that a forthcoming French documentary containing interviews with the French soldiers provides proof for the allegation. The argument is that the Bush administration needed Bin Ladin to be at large in order to justify its military expansionism.”

    Full article:

  57. Dutch

    Blunt sometimes I wonder If bin laden is with whitman, price and hadad.(you remember them… last years winners!) ………………….from the running man.

  58. N. Ron Shrubbard

    The fact that people are commenting upon Slobomba based upon and in response to the Dow is sadly a free testimonial to the plutocracy about how stunningly artful and skilled their propaganda and psychological manipulation prowess really is. It isn’t that Slobomba is not in office yet that is so hilarious, it’s that the Dow is the light that invokes the zero-thought moth-to-light knee-jerk response. Come on.

    If the plutocrats decree that the Dow is to close above 15,000, it will. Tomorrow. If the plutocrats decree that the Dow is to close below 1,000, it will. Tomorrow. No doubt, to do something so drastic they would have to fully coordinate all G7 central banks, with the PPT as the control center, and they would probably have to plan, coordinate, and pull certain set-up maneuvers overnight. Still. They could get ‘er done. I have faith in “our” Glorious Plutocracy!!

    If you’re wondering about Slobomba, simply look at the most recent knaves he follows. He’ll be like them, except most likely even worse. I say worse, simply because I follow the maxim that the trend is your friend. Don’t bet on a trend change until you actually see it, with confirmation. Like Slobomba’s predecessors, he is a loyal and diligent servant of plutocracy. It shows in many splendid ways, already pointed out here, as well as at other places. His “radical” wife’s CFR membership is a good example. So is his Chicago Machine entrenchment and his appointments-to-date.

  59. flash

    I saw a rant a few days ago on the moneywatch site where someone said “I hate the policies of the Obama administration.” WTF? Did I sleep until January? Get real, people, this debacle is bigger than Democrats and Republicans. It will take a total change in mindset to overcome, and I wouldn’t expect solutions to emerge from DC.

  60. Paul S

    Bear of little Brain: apologize for the long posting; that was an error on my part, not intentional. What i liked about the old website is it had a ‘preview’ option. I would have caught–and deleted the article and left the link as you said. Sorry.

  61. N. Ron Shrubbard

    Bear of Little Brain,

    I see you had the same thoughts as I did re the auto manufacturers. A workers’ cooperative model, of any type, for an industry as potentially large as automobiles? Nooooooo frigggggin’ way, dude!

    In fact, the club at the very very top so intensely hates the remaining 99.9% of us having anything at all, that they probably like the thought of the USSA auto industry collapse. In fact, they are probably eagerly awaiting it, and making plans for the celebration right now. Perhaps an extra super duper sensual goat sex ritual at Bohemian Grove? That ought to suit the occasion to a tee!

    In any event, we can be absolutely certain, beyond any doubt at all, that the plutocracy would rather go back to the New Deal balance between mainstream labor unions and owning plutocrats, and guarantee its continued existence for a thousand years, before it would ever restructure any major industry into any kind of workers’ cooperative, or anything like it. A bunch of ex-hippies hawking granola is one thing, and can be tolerated. Something like an automobile manufacturing entity? Forget it.

  62. krzcat

    Elaine, you probably saw this :

    Nov. 14 (Bloomberg) — More senior citizens are picking pockets and shoplifting in Japan to cope with cuts in government welfare spending and rising health-care costs in a fast-ageing society.

    When I read this story I wondered if some of these “criminals” are opting for prison, where at least they won’t be alone.

    As it turns out, IHT on this same story adds: “Rising elderly crime has also affected Japanese prisons, forcing them to renovate their facilities, modify forced labor and provide nursing care.”

    The Tehran Times reported: “In August, a 79-year-old Japanese woman went on a slashing spree in Tokyo’s bustling district of Shibuya, wounding two female passers-by before being arrested by police.

    The attacker reportedly said she was homeless, had no money and thought if she committed a crime, the police would care for her. ”

    Japanese author Tomomi Fujiwara, has written a book on this elderly crime wave, called “Bousou Rojin” (“The Elderly Out of Control”).

  63. krzcat

    Elaine, you probably saw this :

    Nov. 14 (Bloomberg) — More senior citizens are picking pockets and shoplifting in Japan to cope with cuts in government welfare spending and rising health-care costs in a fast-ageing society.

    When I read this story I wondered if some of these “criminals” are opting for prison, where at least they won’t be alone.

    As it turns out, IHT on this same story adds: “Rising elderly crime has also affected Japanese prisons, forcing them to renovate their facilities, modify forced labor and provide nursing care.”

    The Tehran Times reported: “In August, a 79-year-old Japanese woman went on a slashing spree in Tokyo’s bustling district of Shibuya, wounding two female passers-by before being arrested by police.

    The attacker reportedly said she was homeless, had no money and thought if she committed a crime, the police would care for her. ”

    Japanese author Tomomi Fujiwara, has written a book on this elderly crime wave, called “Bousou Rojin” (“The Elderly Out of Control”).

  64. Bear of Little Brain

    Paul S:
    “Bear of little Brain: apologize for the long posting; that was an error on my part, not intentional. What i liked about the old website is it had a ‘preview’ option. I would have caught–and deleted the article and left the link as you said. Sorry.”

    Oh, God. Now I feel guilty for mentioning it. Sorry.
    Now I’m in “having the last word” mode. Sorry, sorry.
    Now I’m in “sorry” mode. S…

    “The relative value of gold, silver and bread will continue to go crazy and make little sense.”
    Got gold 🙂 Got silver 😦 Bought a bread-making machine last month 😀 All bases covered (until the power cuts, anyway). No prizes for guessing where it was made.

  65. Bear of Little Brain

    Re: the Elderly. Them, not me. Yet:
    A few years ago, I seem to recall, Swedish homes for the elderly had to replace all their rather high beds, which were intended to make getting into and out of same as convenient as possible for their not-so-agile residents. They replaced them with beds much lower to the floor. The reason, apparently, was the high number of broken arms and fractured hips suffered by the male residents falling out during night-time visits to their lady friends.
    Will endeavour to remain on topic for rest of week.

  66. Blunt Force Trauma

    Here comes the sixth day of triple-digit losses sine the (s)election. Pre-market DOW is down 109 to 8150. Looks as though to be heading into 7000 territory. Markets open in an hour and ten minutes.

  67. Grok1

    Being a glass is half empty kind of guy I’d give Obama about a 1 in 10 chance of moving in the right direction. And admittedly his early appointments and expressed ideas seem like more of the same. But I am willing to give hime a couple of years to get it right. However, events might dictate that he show his intention much sooner. It’s basically a corporation versus American people scenario. He will have to decide which side he is on. During economic crashes the left-center-right political spectrum changes from a nice bell curve to something more resembling a needle. Stay tuned.

  68. Blunt Force Trauma

    Mulally, U.S. Auto Chiefs Renew Aid Push With Passage in Doubt (Bloomberg)

    “The automakers are selling investments to get funds. Ford today said it had agreed to sell 20 percent of Japanese affiliate Mazda Motor Corp., raising about $540 million. GM also today completed the 22.4 billion yen ($233 million) sale of its 3 percent stake in Suzuki Motor Corp.”

    Looking at the 1/33 stake in Suzuki that GM just sold off and the numbers are interesting. In another article I sent recently they showed GM’s operating budget. If correct, it means that GM ‘s stake (that 3 percent of Suzuki) is reportedly equal to 5 days operating budget for GM.

    Therefore: 5 days x 33 = 165 days. In only 165 days GM’s operating expenses cost as much as the entire value of Suzuki.

    No wonder they’re not competitive. They hemhorrage money.

    Full article:

  69. RobG

    Volker has some public comments on his views (link). It’s not clear how much he was able to express when him and the inner circle discussed the economy with with Obama (that inner circle was populated by lawyers and inexperienced economists):

    He advised Mr Obama to tread a fine line, embarking on bold action with a “compelling economic logic” rather than scattering fiscal stimulus or resorting to a wholesale bail-out of Detroit. “He can’t just throw money at the auto industry.” ***snipThere has been leveraging in the economy beyond imagination, and nobody was saying we need to do something,” he said. “There are cycles in human nature and it is up to regulators to moderate these excesses. Alan was not a big regulator.”Even so, he said the arch-culprit was the bonus system that allowed bankers to draw forward “tremendous rewards” before the disastrous consequences of their actions became clear, as well as the new means of credit alchemy that let them slice and dice mortgage debt into packages that disguised risk.

  70. CK

    So we spent last weekend ( 4 days ) doing business at a show in NYC. Some points on the micro level. There was no significant tunnel traffic going through the Lincoln each of the four nights going out and each of the four mornings coming in. The show we did always has a huge gate and concommittant sales. This time they still had the gate. ( Relatively cheap admission prices again this year ) but the crowd had all had both their arms amputated right above the wallet. We escaped without significant financial damage but no signigicant financial improvements either. Antigues dealing is always a tough trade, and NYC is a tough town.
    Interesting side notes: Marinas are seeing a huge uptick in abandoned pleasure boats. Truck traffic on the highways is down again. The amount of containers stacked along the road into NYC is impressive in a very sad way.
    While it is supposedly not proper to enjoy the pain of others, seeing the Moustache of All Wisdom flailing about as his dowery decrepitates is … pleasant.
    While I suppose it gives a nice fuzzy feeling to have elected a half black to the presidency, his only officially announced appointments so far are not impressive unless you are AIPAC or Israel. I admire the wonderfully Machiavellian way in which the repubs have managed to get out of the way of the onslaught. For the next many years they will be the voices in the wilderness.
    Where are the Vietnamese terrorists?
    ( As Machiavelli wrote: “a man will more easily forgive the murder of his father than the theft of his wallet.” Men will avenge themselves of small slights but do nothing in the face of larger harms. Tomorrow is another business day, more buying and selling more bartering and trading. The stuff of real life.
    Oh and an aside to this aside, the old cast iron bandsaw I thought I would be buying had a few major flaws upon inspection. Passed it and found for $20 an old sears bandsaw that was unloved but undamaged. LIG ( Life Is Good )

  71. Blunt Force Trauma

    Worse Than the Great Depression? (Steve Lendman Blog)

    “It’s a minority but growing view, including from 86-year old former Goldman Sachs chairman, John Whitehead, at the November 12 Reuters Global Finance Summit in New York. As disturbing evidence mounts, he said: “I think it would be worse than the depression. We’re talking about reducing the credit of the United States of America, which is the backbone of the economic system. I see nothing but large increases in the deficit, all of which are serving to decrease the credit standing of America.”

    Full article:

  72. emsnews


    I suggest people read the biography of FDR.

    When he went into the White House, he was much more conservative in his language and choices for staff than he was later. He had to first GET INTO THE DAMN OFFICE. Then, he quickly decided who to listen to as time passed!


    This is how thing work in the real world. If he goes in with total naive new people, they will be destroyed. So what happens is simple: new people who are really newer than before begin to filter in from below. As failures mount, the President changes hires at the top. Very quickly, I am betting, in this future case.

    Pre-judging the new President is dangerous. Bush Jr was easy to judge: he was obviously incompetent. Obama is far smarter.

    We need someone smart. Even if we disagree with this person. At least, they should have brains of some sort! When Obama takes over, we will go after him, step by step.

    Not not insanely. That is no good. We are in an ideological struggle. At least, I am. I am against free trade and against the floating currency. I focus on both. I am NOT against social spending, for example.

    I am for the US studying our trade rivals and countering or imitating the ones who successfully destroyed our markets! It is pretty simple.

    But raising gasoline taxes to match those of Europe and Japan: nearly impossible, politically. So instead, we are stuck with the low-tax, no tariff model. This is killing us. NOT OBAMA. NOT SOCIAL SECURITY. NOT EVEN WALL STREET.

  73. emsnews

    Also, now that Obama is poised to finally replace Bush, the right wing media is bellowing about depression. They are most anxious for the Democrats to fail. They were in total denial when we could easily see the coming collapse.

    Now that they lost power, they want to stand on the sidelines and scream about how we are in a total collapse. And the irritable talk about how Obama should turn this utter wreck around before going into office is part of this propaganda push on the right.

    If a person reads mostly right wing literature, the mindset is insidious. They don’t like it when people remember things, for example. So I suggest anyone here getting upset with our new Democratic president should take some time to google information from the past. Or read me more carefully.

    I will note here that readers sometimes are too eager to bring in news stories without first looking more carefully here to see if I already have linked to these stories.

    I like it when people correct my own mistakes. We all make them! But don’t make an IDEOLOGICAL mistake. People are hoping Obama will change things. They do NOT want real change, they want to do to the past in one way or another. Except for people like gays who still are denied basic civil rights. They want real change.

    And antiwar people want a real change, too. And are praying we get it.

    Then there are the people wanting economic change. I am one of these. And I suppose I will now have to write a long article about this whole matter. Heh.

  74. emsnews

    CK, thanks for the information about the selling convention not doing well. I am not surprised. And yes, there are lots of idle containers abandoned when the bulk of the lower end trade suddenly collapsed due to lack of transit funds.

    During previous contractions in trade, these containers were used by the homeless across the planet, as housing.

  75. Paul S

    Elaine: great comment on the right wing media. The jaw dropping lies these guys tell never ceases to amaze me. And isn’t it interesting how ALL of them use the same talking points? Almost word for word. They blame the liberals for the banking crisis: govt regulation of mortgages, in particular those at Fannie Mae and Freddie Mac. They blame the stock market crash on the election of Obama. These guys are shameless. Facts mean absolutely NOTHING to them. They are sleazy corpoate welfare whores. Fair and balanced my a##.

  76. JSmith

    ” US auto employment is plunging to 0% of the US workforce.”

    Elaine… You write a great deal on the US auto industry but you don’t appear to spend much time discussing its general incompetence. From management to the assembly lines, the US automakers have been on life support since the first oil crisis in the late 70s.

    And it’s not like they didn’t have any role models – the US automakers have been buying Japanese, German, etc. cars for years and taking them apart to see how they’re made. They could have designed some similar vehicales of their own… but no. They went with SUVs – which exploit a standards loophole so they’re treated as trucks rather than as the passenger vehicles they really are.

    I read the above-mentioned WSJ article on letting GM go bankrupt, and while it made some good points about allowing GM to shed some of its more onerous obligations, I doubt GM’s management would learn anything from the experience: they would just keep on doing business as usual.

  77. Souza Chicken is a largest suppliers and Exporters of chicken, Broiler chicken, fresh chicken, chicken products and hatching eggs in Mangalore India.

  78. Pingback: US And Japan Spiraling Down Same Depression Drain | Culture of Life News

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