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Freefall

By SusanUnPC on January 22, 2008 at 10:57 AM in Economy

UPDATE: Steve Clemons is hosting a forum with economic policy advisers to the various political campaigns tomorrow morning, 8:00-9:30 AM ET (more details below the fold — the digital recording will be up afterwards):
As the Economy Screams:
Perspectives and Proposals from the Presidential Campaigns

Image and headline via Mark Halperin, Time. Luckily, I watched BBCAmerica’s BBC World News America, or I would have scarcely known about the market crisis since CNN and MSNBC rarely, if ever, mentioned it yesterday. (BBC interviewed investors and others around the world; there is grave concern about the U.S. economy.) Here’s the latest from the NYT: “Responding to a worldwide stock sell-off and fears about a U.S. recession, the Federal Reserve slashed its benchmark interest rate before the opening of the U.S. markets.”

Here’s the front page of the UK’s Guardian newspaper:

::::::::::::

MORE ON THE UPDATE ANNOUNCEMENT from Steve Clemons:

The Fed just dropped the fed funds rate by 75 basis points — the largest such Fed move since 1984 and the market barely noticed.

No matter what the issues were yesterday, it is clear that the economy — domestic and global — is now the biggest political issue today and tomorrow. . .at least for a while.

So, tomorrow morning — from 8 am til 9:30 am — the New America Foundation/Economic Growth Program will host a forum with economic policy advisers to the various political campaigns.

Thus far, the campaigns included are Obama, McCain, Clinton, Huckabee and Edwards. The Romney campaign has been working very hard to send someone but after back and forth, the campaign was not able to produce someone for the meeting but hopes to work with us in the future. Senator Fred Thompson’s campaign and Rudy Giuliani’s team are also still trying to find someone at this point.

RSVP directly to me if you can make it at clemons@newamerica.net. If you have media questions, please call Erin Drankoski at 202-986-4901.

This event will be digitally recorded — and we’ll have the file on the web immediately after the event tomorrow – but also are happy to send the link direcly to anyone who requests it, particularly those outside of Washington or abroad.

As the Economy Screams:
Perspectives and Proposals from the Presidential Campaigns

Wednesday, January 23, 2008
8:00 a.m. – 9:30 a.m.

Brenda Stewart

I fear for our country. we are all in a world of hurt….except for the ceo’s and such. today on cnn they are saying that right now the dow is only down 80 to 90!!!! well since it was way down at the opening of 400+, I suppose this i s a bit of good news—not. the 3/4 fed cut is not going to help out now…..toooooo late, in my little known knowledge of this. on cspan this am… I was watching the committee for our financial situation. not good, by far. the tax cut stimulus that the prez wants to give us it like the other one early on in his rule. it is just a loan and we still have to pay taxed for this…I personally do not want it if I have to pay taxes on it..no matter how much it may be. this will just make matters worse. Oh I know some need the $$$ right now but come the next tax season, we will not be any better off.

The world is feeling this due to what this administration has done to all….just so the rich can get richer. that a bunch of BS this is.

Claimer: I do not have a degree in economic, just plain old common sense is all I have.
Bill Keyes

What recession? What fears?

Der leader has told us everything will be fine as soon as we get our huge stimulus package checks in the mail.

Why I wouldn’t doubt that by summer everything will be so good that we sheeple will be willing to change the constitution (like Hugo tried and failed) and Der Leader can run again.

What the hell let’s just make him President For Life.

Hail to the chief!!

Seig Heil!

TeakwoodKite

Hey Mister, Can I have my ~~ball~~ wheel barrel back?

Eclaire

Oh lordy, it’s a Grover Norquist wet-dream. The government has borrowed itself into a closet, mostly to foreign governments. Tax policies have created a hugely monied class, immured in gated compounds. The rest of us are unemployed or working at Starbucks, watching our 401-K’s, should we be so fortunate, spiral into black holes as the market plummets, and hoping our adjustable rate mortgages don’t adjust beyond our means to pay because we just realized that our health insurance lapsed last week.

The US government declares bankruptcy, renegs on its bond interest payments to an angry world market, closes our borders, stops all those entitlement payments that are depleting the Treasury, and focuses on the one service that goverments should provide: security. Blackwater and Triple Canopy are deployed to pacify the unruly population, first running off all thsoe government benefit-sucking illegals, and then dealing witht the rest of us.

Here’s hoping for a sit-com-like ending, where Grover wakes up, and discovers that the last 7.5 years have all been a dream and that Al Gore has actually been President, installing wind-farms all over the Great Plains and putting an electric car in every garage.
G Hazeltine

It is not a ‘market crisis.’ It is the potential melt down – perhaps the beginning of the actual melt down, of the world’s financial system, which has been the topic of informed and responsible commentary for quite a while – at The Agonist, at Calculated Risk, at Past Peak, and elsewhere.

Perhaps it should have been a topic of discussion here, though the Obama bashing would have to have let up a bit to make room.

CNN and MSNBC might not be adequate windows through which to view the world, really.

http://agonist.org/ian_welsh/20080120/essential_insanity

http://noquarterusa.net/ SusanUnPC

Leslie has been doing a great job covering the economy. It’s not my area of expertise. I hope Larry weighs in too.

“CNN and MSNBC might not be adequate windows through which to view the world, really.” Definitely. I tune in to track the political stories, although they leave me starving for substantive coverage there as well. Thank god I watch PBS Newshour and BBC World News America as well as BBC World News (both on BBCAmerica channel) every day, as well as listening to NPR or BBC radio when I can. Sadly, I can only listen to one show at a time when I’m reading, researching, and writing.

http://noquarterusa.net/blog/ Leslie

Thanks Susan! Hope Larry weighs in too.

Bet Fox is spinning this as nothing to worry about, “invest for the long-term,” “buy and hold” [suckers], nothing to see here, the economy is strong. Wasn’t Hannity saying that just the other day? And only two weeks ago, as someone points out above, Bush was saying the economy was strong.

And as Eclaire so rightly points out…this is a Grover Norquist/Bushie wet dream come true. Drown government in a bathtub, except for the selling off of defense to Blackwater, Halliburton et al. Who gives a damn if our cities drown, our bridges and infrastructure collapses, youth too poor to pay for their educations join the military and return from Iraq broken and homeless…I could go on.

Brenda Stewart

what a good commentary!

Donovan Fraser

I just wonder how the white house is going to spin this market free fall into “see how great the economy is”?

HELLO !!!!!!!! are there anymore of the 23% Bush Davidian’s out there who still believe anything this clown says?

I mean really, ONLY Bush can tout his tax cuts and their positive effects on our economy and in the SAME sentence, offer up 150 billion to save the tanking economy. talk about schizophrenic

he is a truly a historic fuck up as a prez…….

1 more year………Lord help us!
justsomeone

Susan, from time to time you may want to watch CNBC & checkout Bloomberg.com. Last night Obama (ever the master of nuance) referenced the “mismanagement” of Bill Clinton’s “Community Reinvestment Act”, which resulted in the sub prime crisis. Hillary caught his drift but doubt anyone else did. The wild & loose interpretation of that Act combined with the damage NAFTA brought & then followed by GWB’s war spending & borrowing have brought us to this tittering point. We are tittering. This morning was only a preview.

http://noquarterusa.net/blog/ Leslie

Community Reinvestment Act? Will have to look that up.

Everything I’ve read points to Bush’s tax cuts as one of the culprits behind the subprime mortgage crisis. Because following the dot.com bust, real estate was one of the few markets where the wealthy could invest their money and hope for a good return. Banks lowered mortgage requirements to create these real estate funds for the wealthy to invest in. Only the banks forgot or didn’t realize…argh, I’m not an expert in this…they didn’t realize that the properties with the subprime loans might default and become devalued. So banks couldn’t recover the loan amounts. All of this contributed to the real estate bubble, which is now bursting. [Hope I'm describing this accurately, please someone else weigh in....]

CK

You might want to investigate the removal of redlining as one of the foundation factors to the subprime crisis. In essence the banks were forced to make mortgages to people they knew were bad credit risks. So the banks tried to dump the risks by repackaging them. They succeeded; we lose.

G Hazeltine

It is not a ‘subprime crisis.’

From Calculated Risk:

Stop the Subprime Meme!
From remarks by David Einhorn in October (hat tip Cal and NakedShorts)

… the credit issues aren’t just about subprime. Subprime is what the media says. Subprime is what the financial establishment says. Subprime is about them – those people and the foolish people that made loans to them. The word subprime is pejorative. Subprime is not about us, for we are not subprime. How convenient to be able to pass the blame.
Anyone who thinks this a subprime problem, doesn’t understand what is happening.

Or, as Tanta wrote: We’re all subprime now.

‘We’re all subprime now’ can be found at:

http://calculatedrisk.blogspot.com/2007/11/were-all-subprime-now.html

See also:

‘This is not merely a subprime crisis’ by Wolfgang Münchau, from The Financial Times

http://www.ft.com/cms/s/0/50d659d2-c1f3-11dc-8fba-0000779fd2ac.html?nclick_check=1

Or Stirling Newberry’s commentaries at The Agonist.

The working poor did not cause this.

CK

Standard BS. The perps are from a protected class of victims so we must spread the blame and dilute the reality so much that no one is to blame, no one is guilty, certainly not the beneficent government goons. We are not all subprime now as individuals, but those individuals who avoided the siren songs sung by the government in league with the lenders and the credit card companies will be the ones whose pockets will be picked to pay for those subprimes and cdos and derivatives. Anyone with savings will be raped, anyone with a time preference beyond 6 months will be pillaged. We will have the village of deadbeats and bottom feeders that it takes to raise a sociopath.
It is no longer just a subprime crisis, those losers were the coal mine canaries telling us of the rest of the losers to come.

G Hazeltine

I’m not sure I understand your point. “Standard BS”, “perps are from a protected class of victims”, “village of deadbeats and bottom feeders that it takes to raise a sociopath”, “rest of the losers to come.”??

In any case, from the Financial Times article:

If this had been a mere subprime crisis, it would now be over. But it is not, and nor will it be over soon. The reason is that several other pockets of the credit market are also vulnerable. Credit cards are one such segment, similar in size to the subprime market. Another is credit default swaps, relatively modern financial instruments that allow bondholders to insure against default. Those who such sell such protection receive a quarterly premium, based on a percentage of the amount insured.

The CDS market is worth about $45,000bn (€30,500bn, £23,000bn). This is not an easy figure to imagine. It is more than three times the annual gross domestic product of the US. Economically, credit default swaps are insurance. But legally, they are not, which is why this market is largely unregulated.

Technically, they are swaps: two parties swap payments streams – one pays a regular premium for protection, the other pays up in case of default. At a time of low insolvency rates, many investors used to consider the selling of protection as a fairly risk-free way of generating a steady stream of income. But as insolvency rates go up, so will be the payment obligations under the CDS contracts. If insolvencies reach a certain level, one would expect some protection sellers to default on their obligations.

A 45 Trillion (trillion) dollar market. Largely unregulated. “If insolvencies reach a certain level, one would expect some protection sellers to default on their obligations.” Right.

Way, way beyond subprime.

http://noquarterusa.net/blog/ Leslie

Just visited Faux News’s website and guess what: the main story up right now is about Clinton and Obama getting set to fight.

A small item near the bottom of the “news” page, under U.S. News, reports on the economy: “Stock futures fluctuate after Fed cuts interest rates.” Under “business news” Fox has this: “Disaster averted? Stocks recover after Fed cut.”

Wish I could photograph that page, it’s priceless.
CK

It all starts with productive capacity. Factories and skilled labour. Most of America’s factories are decrepit if they have not already been shuttered and stripped. Much of America’s skilled labour force is baby boomers — you know those machinists and such like that are retiring with no replacements in site.
Get beyond weapons and Boeing and what does america export: cereal grains, hides, scrap metal, some coal, some entertainment. What does the USA import?
From http://www.counterpunch.org/roberts01222008.html
“…According to reports, 70% of the goods on Wal-Mart shelves are made in China. During 2006, Americans spent $1,861,380,000,000 on imported goods, that is, 23% of total personal consumption expenditures were spent on imports (including offshored goods). This means that between one-fifth and one-fourth of new consumption expenditures will stimulate foreign economies.

Americans worry about their dependency on imported energy, but the $145,368,000,000 paid to OPEC in 2006 is a small part of the total import bill. Americans imported $602,539,000,000 in industrial supplies and materials; $418,271,000,000 in capital goods; $256,660,000,000 in automotive vehicles, parts and engines; $423,973,000,000 in manufactured consumer goods; and $74,937,000,000 in foods, feeds and beverages…”.
One can think of trade as goods flowing in two directions during a year and then money flowing in one direction at the end of the year. The money flow balances any discrepancy between the material flow in and out. In a balanced world, some years the money flows one way some years the other; overtime the money flow is supposed to net to 0.
The USA has been being carried by those nations willing to sop up $ every year for decades on end.
Eventually they stop but having sopped up so many dollars they have to divest quietly or everyone will attempt to divest simultaneously.
In July of last year the USA and the G7 nations attempted to beggar the PRC while simultaneously encouraging Japan to continue its inflation exporting carry trade. China said no thanks. Over the last 7 months the trade flows and the currency flows have changed and China is the nation that is changing them. China has RAISED its discount rate, its reserve requirements and is placing price controls on internal trade. The Chinese are SAVING not only paper money in bank accounts but real assets ( read gold and silver and industrial metals etc etc ).
Learn Mandarin.
Learn Go not checkers not chess.

simon

But if the US economy fails, the Chinese will also be affected, correct?

Much of the Chinese economy is predicated on Western, say, American companies, wont their demise affect China?

Bill Keyes

Oil prices sink on fears of a recession
An economic slowdown would likely dampen demand for crude oil

Awwwww…

Those poor Saudi princes they will probably have to cut back on re-golding their bidets.
JerseyJeffersonian

CK, G Hazeltine (and all),

For some understanding of the box in which we find ourselves and the way in which we got there, see this article at TomDispatch from Chalmers Johnson:

http://www.tomdispatch.com/post/174884/chalmers_johnson_how_to_sink_america

Eisenhower’s unease at the rise of the Military-Industrial Complex was well founded.

When the nation’s economic diversity is hollowed out, when its industrial base is decimated through financial disincentives towards capital investment and the selfishness of the rich looks to outsourcing to increase their wealth and to put those unionists in their place, disaster for the majority of the citizens will inevitably follow. Couple this with the unimaginable sums spent on the military. And it’s a totally bi-partisan endeavor. Way to go.
TeakWoodKite

Sonoma County 4th quarter default rates compared to same quarter last year up 199%.
Smilin’ Jim

The Decider was really freaked, the media bite had to be short otherwise his panic sweat was going to trigger a pancake makeup mudslide.

On the other side of the Universe, Rep. Rangel was obscured by a dense cloud of smug on the Charlie Rose show Friday as he allowed that there seemed to be much better cooperation between Congress and the White House as of late.

Indeed, strange bedfellows are created at the junction of the cusp where oil, war and worldwide financial panic intersect: The gestation of the perfect storm.

All we need is another Tet…..

TeakWoodKite

Watching Pelosi and Reed leaving the WH made me wonder what horse trading went on…Sadly there is no amount of makeup that will cover up that Alcoholic Nose.

Smilin’ Jim

Bush could have left office with soaring corporate profits, busted unions, a fearful workforce and having tripled the underground assets of his home state.

Alas, interesting times have intervened and should the 10% chance of the worst case prevail, he may be hounded out of office just ahead of a Chamber of Commerce lynch mob.

C’est la geurre. Speaking of which, suppose the bearded followers of the Prophet (peace be upon him) liquidate their inventory of suicide bombers on the 20th anniversary of the Tet Offensive?

Can you imagine the feeding frenzy of the 24/7 media? Imagine Wolf Blitzer, stoned and hollow-eyed on NoDoze and in wrinkled Armani, orchestrating a slide show of lurid graphics and earnest experts in a firestorm of self-flagellation? FOX would incandesce. The blogsphere would fireball. And just eight months before the election.

Just 11 shopping days left until Tet……..

Smilin’ Jim

“20th anniversary of the Tet Offensive?”

Make that 40th.

Damn, has it really been that long?

Larry Johnson (Bio)
@noquarterusa

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