RSS Feed for This PostCurrent Article

From Recession to Depression

Europe now is the canary in the economic mine and the outlook is dire. Check out today’s headlines:

European debt crisis: Risks grow as borrowing rates for Italy, other nations rise

and

Banks Build Contingency for Breakup of the Euro

and

OECD figures suggest Britain’s economy will slip back into recession at the start of next year

The gritty, unyielding reality is that Europe aka the EURO will not extricate itself from this bog of despair. The breakup of the economic union in Europe will worsen an already wobbly global economy. Merry Christmas.

The borrowing rates for troubled — and even not-so-troubled — European governments soared again Friday, heightening the danger of an all-out collapse in Europe’s common currency. It comes as political leaders across the continent are pointing at each other as they call for action to avert a worse outcome.

The danger is most pressing in Italy, where the rate the nation must pay to borrow money for a decade rose Friday for the fifth straight day, to 7.23 percent from 6.64 percent a week ago. The increase came in an auction of new bonds for which demand was weak — pushing the rate the Italian government must pay to borrow money for two years up four-tenths of a percentage point, a remarkably big one-day jump, to 7.5 percent.

With debt totaling 120 percent of Italy’s economy, higher rates could create a dangerous, self-reinforcing spiral for the country — the higher its borrowing costs, the more onerous the interest payments. That in turn increases the likelihood of economy-cratering tax increases and spending cuts or a catastrophic default.

Over recent days, the sense of impending threat has even spread to nations that have generally sound finances. Standard & Poor’s cut its long-term credit rating for Belgium to AA on Friday from AA+, expressing concern that the nation may have to engage in costly bank bailouts that will strain its finances.

How’s that for a choice? Deflation or default? Neither a palatable option. But reality will intrude. It is not a matter of if, but when.

How do I know? The rise in the cost of borrowing is spreading with no end in sight. That’s why banks are preparing for the worst:

But some banks are no longer so sure, especially as the sovereign debt crisis threatened to ensnare Germany itself this week, when investors began to question the nation’s stature as Europe’s main pillar of stability.

On Friday, Standard & Poor’s downgraded Belgium’s credit standing to AA from AA+, saying it might not be able to cut its towering debt load any time soon. Ratings agencies this week cautioned that France could lose its AAA rating if the crisis grew. On Thursday, agencies lowered the ratings of Portugal and Hungary to junk.

While European leaders still say there is no need to draw up a Plan B, some of the world’s biggest banks, and their supervisors, are doing just that.

“We cannot be, and are not, complacent on this front,” Andrew Bailey, a regulator at Britain’s Financial Services Authority, said this week. “We must not ignore the prospect of a disorderly departure of some countries from the euro zone,” he said.

Banks including Merrill Lynch, Barclays Capital and Nomura issued a cascade of reports this week examining the likelihood of a breakup of the euro zone. “The euro zone financial crisis has entered a far more dangerous phase,” analysts at Nomura wrote on Friday. Unless the European Central Bank steps in to help where politicians have failed, “a euro breakup now appears probable rather than possible,” the bank said.

The impending death of the EURO, if realized, will be akin to a 500 lb bomb detonating in a mall. There will be enormous collateral damage and many innocents will be killed or maimed in the ensuring economic mayhem.

  • HELENK
  • Anonymous

    Lots of folks here assume the European crisis is caused by government debt. The countries that had early problems, like Iceland and Ireland, had balanced budgets. The problems was with the banking and real estate sectors, along with a lack of any meaningful regulation. In Iceland, the banks multiplied many times in size in a very short time by taking on loads of debt. They were soon many times larger than the GNP of Iceland itself. People who were fishing for cod a few years before were running big hedge funds and owning lots of assets abroad (mainly England) and inflating the price of local real estate. It all collapsed, the banks failed, and everyone just walked away from all their debts.

    In Ireland, there was a similar large inflation of the banking sector caused mainly by a huge expansion of real estate. It was all a big house of cards. Real estate crashed; the banks crashed; people started to leave the country; and the country failed.

    In both cases, the national government budgets were balanced and tax revenues had been a reasonable percentage of GNP. It was the private sector that ran amok and screwed everything up. Forget Republicans and Democrats. Put a few bucks in front of people and they’ll do something stupid every time.

  • Anonymous

    …looks like all that “tarp” (our tax dollars) money that went to European banks to shore up the EURO did not do anything but kick the can down the road. I wonder how many Americans understand that.

    125 percent of GDP….looks like a storm approaches…

    • Anonymous

      We staring at the other end of the Keynesian gun.

  • Anonymous

    Basically that is all bullshit!

    The democrats and republicans all payed this game. Both parties are responsible for the deregulation of the banking and mortgage industry and not going after the C-Suits just as the banking regulators did during the S&L Scandal under Reagan and its happening all over again. Its not just the democrats you twit…

    You quick with insults to support your diatribe but you sir, are off this planet.

  • no longer a democrat

    And right on que, George Soros set to make billions on the break up of the Euro. What a disgusting man, makes comments the Euro is going to break up to push the reality in that direction, all the while putting shorts in the amounts of billions against the Euro.

    http://www.dailymail.co.uk/news/article-1253791/Is-man-broke-Bank-England-George-Soros-centre-hedge-funds-betting-crisis-hit-euro.html

  • no longer a democrat

    Looks like the IMF, mainly funded by us in the US, will be “loaning” Italy and other 600 Billion.
    http://www.zerohedge.com/news/uncle-sam-rescue-after-all-latest-rumor-sees-%E2%82%AC600-billion-bailout-italy-us-pardon-imf

    This is not going to end well, and when it goes, it will make 2008′s economic blowup as a minor ripple.

    Cannot pay debts with more debts. This has been tried so many times, it never works.

  • HELENK
  • Wbboe

    One of the problems which I see here is that the collapse of the Euro–like the Wall Street collapse that preceded it will be seen as a failure of markets, as opposed to a failure to regulate market excesses and to learn from history. In that case, the wrong prescription will be delivered which will be to throw out the market and institute a command and control economy.  The drying up of liquidity alone will impel policy makers in that direction.  This comes at a heavy cost however, because first of all it is a formula for long term stagflation, and it has direct ramifications for personal liberty.

    The United States emerged from World War II with a command and control economy. Unions were themselves a party to that structure.  However, by 1960 this whole concept of management was challenged
    a Professor at MIT named Douglas MacGregor, in a seminal book called The Human Side of Enterprise. In it he moved beyond what he called theory X  which assumed employees must be commanded and controlled to a new model called theory Y which assumed that employees are self motivated and self directed.  The latter has been the thrust of management science ever since, and it corresponds with the decline of an assembly line driven economy.  

    At this point, the Democrat party seems to advocate a return to a command and control structure, wherein an elite class of Harvard trained people would effectively rule our lives in a Kafkaesque administrative state where economic liberty and personal freedom would be correspondingly diminished.  The putative justification for this transmorgification would be global threats be they financial, political, security or environmental.  In essence, what the Democrat party under Obama stands for is the notion that the American People should be controlled by their betters.  The situation we see today in Europe illustrates the downside of that devolution.

    • Anonymous

      The heart of the problem has been decades in building here and in Europe. It is not the excess of markets but the excess of governments.

      Our government as well as other western governments have believed in growing command and control (as you call it) of their individual economies.

      And their people have allowed them to have and use that power because these people have either lost faith or never understood free market capitalism and did not understand the fact that the more government controls the economy the less freedom and opportunity people have.

      Under Dimocrats or Republicans this country has never left federal command and control of our economy. There were times were that increase in dominance receded to a limited degree but the increase has continued since the implementation of The New Deal.

      The Tea Party is the first major effort by Americans to reverse that while the Occupy Whatever is an effort to dramatically increase that command and control and, in fact, to bring us to a point of outright socialism.

      In Europe, there are countries that are paying a price for that reckless dominance. The failure of the Euro and the Eurozone is a collateral part of that reckless dominance, although the Eurozone was a dumb idea from the start and it would not have taken much to break it.

  • Wbboe

    Larry, for some reason I did not see your last paragraph.  You answered my question too. 

  • Dave L.

    Is Obamadinijad and little Timmy advising the Euros on how to handle their financial mess ???  It sure looks like it !

    • Anonymous

      splains a lot if they are.    lol

  • elaine

    We’re already on the hook for it. What do you think the Fed forcing $25Trillion of BOA’s derivivatives & $29Trillion of JPM’s deriviatives ( to be warranted/backstopped/guaranteed) onto the depository arm of the FDIC means???

    Certainly everybody here knows the Fed is not purely a gov agency or even an exclusively American agency. Bernake has been bailing out EuroZone banks since 2008. He admitted it to Congress but refused to say which EuroZone banks.

  • DM

    CNBC: How European Banks Play Extend and Pretend Right Now 
    “The lamps of liquidity are going out all across Europe. Banks
    are no longer borrowing on the bond market, for the very good reason
    that bond investors aren’t willing to lend to banks at any sustainable
    yield. Money market funds are desperately extricating themselves from
    European exposure. In the wake of MF Global, US financial institutions
    are attempting to prove their health by selling any exposure to European
    sovereigns and financials that remains on their balance sheet. “more…http://www.cnbc.com/id/45435825

    • Wbboe

      A fire sale I would guess.  God knows what the end game will be here.  But at the bottom of all this comes one of my greatest prejudices derived from a sense of history and no less business dealings.  Never ever trust the Germans. They may not be the source of this problem, indeed they may be in some sense its victim, but at the end of the day they will come out of it owning a greater share of Europe.  I do not like how the cards here are falling and I have zero confidence that the Obama Administration will play the cards we are dealt with any consideration for the interests of the American People.  On the contrary, if you look at the full sweep of his career, one thing stands out above all others.  Time, and time, and time again, so much so that you can set your watch by it and make book on it and be sure of it beyond reasonable doubt to a moral certainty, Barack Hussein Obama protects his cronies over his constitutents always.  Never has that formula been seen to fail.  And for the United States he is our greatest problem–and the greatest threat to our financial, political and personal security. You can believe this because it is the truth and history confirms it.

  • Anonymous

    http://www.telegraph.co.uk/news/interactive-graphics/graphic-of-the-day/8868729/Graphic-European-debt-crisis-explained.html

    European debt crisis explained – graph…..

    Ok so I am looking up what the cause of the debt crisis is and I’m still not 100% sure what is the cause.  

     Is it too many people sponging off the governments over there?  Obviously its over spending as many of these articles talk about austerity.  Its many factors but what are the biggest factors in this?  

     

  • Anonymous

    “The impending death of the EURO, if realized, will be akin to a 500 lb bomb detonating in a mall.”
    -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -
    While the media is suddenly waking up to the problems with the Euro individual countries, banks, and companies have been developing contingency plans for an impending collapse or the need for the restructuring the European currency back to what it once was (glad I held onto the old francs and liras).

    The Eurozone was a bad idea from the outset but it is not the cause of its own demise. Too many European countries took on too much debt because they took on too much of the lives of their citizens. They forgot or gave up on capitalism along time ago.

    The debt problem is at the core and the possible death of the euro is part of the collateral damage from that.

  • DM

    I want to stress that we’re looking at the worst case scenario here.  It’s not for sure and the future is truly unknown.  Let’s not get depressed and react to what is not here and may never happen.  We must always hope for the best.  I know I said that we’re all doomed, and what I mean is that if the worst happens, we’re all in the same boat.

    • Wbboe

      I agree in part.  I agree that this is a worst case scenario, but the likely scenario may be the same to a lesser degree. Even if they can manage to steer a soft landing, that effort is likely to produce unintended consequences. The world engine still depends on consumption in the United States, and our ability to get a handle on our spiraling debt situation.  That alone makes the world financial system unstable.  I remember Soros mawkish comments that the American system is kaput and his attempt to get China to assume the role we have occupied since the end of World War II.  Those comments were tied in with his advocacy for a world reserve currency to replace the dollar. With a powerful man like him working consistently against the interests of the American People it is hard for me to see that this will end well.  The point where I disagree is in the notion that we are all in this together.  The elites have a big cushion, and history has shown that once they have used up the resources of one country they move on to the next.

      • Wbboe

        Of course big media will report that retailers had a wonderful Christmas season ergo the economy is recovering.  The along about January or February, the seasonal lay-offs will transpire, the credit cards will fall due, and the messiah will still be in office.  Also, we will have Iowa, New Hampshire and South Carolina.  

  • William L. Donlon

    Excellent Article Larry:

    I Know This Is Boring Shit To Most People But –

    It Is Where The Tire Hits The Road And As Americans We Have A Duty To Read And Understand It.

    Everything About The European Debt Is Following The Same Pattern   We Saw In The The Days Leading Up To The LehMan Brothers Collapse.

    Since M F Global Collapse On 10/31/11 —
    Everyone Is Trying To Cleanse Their Balance Sheets Of Toxic European Debt.

    Black Friday (11/25/11) —
     Will Be Followed By Black Tuesday (11/29/11)  —

    Italy Will Face A Second Round Of Debt Auction And Rising Interest Rates This Tuesday.

    The Knock Back Effect Blew By Germany Last Wednesday And Will Soon Overtake The United States.

    The U.S. $15 Trillion Debt Is At Record Low Interest Rates.

    Every 1% Increase Will add
    An Additional $150 Billion On To Our Interest Payment —

    ($15,000,000,000,000 X .01 = $150,000,000,000)

    That’s Just To Service The Debt —

    It Doesn’t Touch The $15,000,000,000,000 Principal.

    2012 Will Be The Most Turbulent Year In Our Recent History.

    The OWS Mobs Have Been “Play Mobs”

    The Mobs In July And August Will Be The Real Thing.

    We Jump Off This Double Dip Recession/Depression  With —

    22,000,000 People Unemployed Or Under – Employed

    One Third Of All U.S. Housing Is In Foreclosure Or Under Water.

    We Have Doubled Our National Debt Since 2008 To 70% Of GNP.

    This Disease Will By No Means Be Localised —

    The Toxic Germs Will Be Pumped To Every Organ In The Body.

    Millions Of Miles Of R.R, Public Transit And Airlines. Will Fall Into Bankruptcy,

     Factories Will Lock Their Gates, And Businesses That Don’t Go Under Will Be Forced To Restructure And Retract.

    The Disease Will Race On To The Capillaries And The Cells —

    Millions Of Family Business Will Fail Along With Family Farms.

    State, County and Town Employees Will Be Let Go As Tax Revenues Dry Up.

    The Richest Country In The History Of The World Will Stand By Idol As It’s Life Blood Is Turned To Water.

    What Is Coming Is Total Depression Not Seen Since The 1930s!!

    It Takes GUTS To Stand Up Like You Are Doing Larry, —

     And Telling It Like It Is.

    Thanks!

    • DM

      Being underwater will be more common as assets lose value from deflation.  We never believed the wisdom of the phrase:
      “Neither a borrower, nor a lender be.” – Shakespeare

      • Anonymous

        NEW YORK (CNNMoney) — With no end to the eurozone debt crisis in sight, there has also been no end to the stream of possible solutions. The latest involves using gold as collateral.
        With eurozone central banks holding some 64% of the world’s gold reserves, they’d have the heft to back that up.

    • Anonymous

      And meanwhile congress still intends to spend more. The more they spend the more votes they think they can buy.

      And when it all collapses under a debt too big to bail, we will pay the price as they posture and point their fingers at each other.

      With of course, if he’s still in office the Obama Finger Pointer/Blame Gamer-in-chief.

    • CentralMass

      No argument on your sentiments but your number seem a slightly off.

      Three years ago on this date the national debt was $10.565 trillion. We were bleeding around $3.85 billion dollars/day.  Gross debt as a share of GDP was at  74.7%.

      Today the debt is $15.055 trillion and gross debt as a share of GDP is 100%. We are bleeding around $3.97 billion dollars/day.

      The key mechanism employed to create jobs by the Bush administration, the so called Bush tax cuts, were extended, and are now the Obama tax cuts.  Revenue as a share of the GDP has dropped by around 6% to ~30% The ranks of the actual unemployed have increased by 84% with these policies in place.

      Over that 3 years:
      http://www.marketwatch.com/story/corporate-profits-share-of-pie-most-in-60-years-2011-07-29

      “As part of its regular revisions to the national income accounts, the
      Commerce Department told us Friday that corporate profits in 2008, 2009
      and 2010 were actually $343 billion higher than earlier estimated.

      And personal incomes of American families were $265 billion lower over those three years than previously estimated.”

      “Corporate profits now account for the largest share of gross domestic
      product since 1950 — 12.6%. Wages and salaries account for the smallest
      share of GDP since 1955 — 54.9%.

      With unemployment still in the stratosphere, wages and salaries are
      depressed. Fewer people are working, and the ones who are working aren’t
      getting raises. According to separate report released Friday by the
      Bureau of Labor Statistics, wages in the private sector have increased
      just 1.7% in the past year, only half as fast as prices have been
      rising.”

    • Jim ticehurst

      Spot On Larry and William…But Hey..Americans are still spending 46 BILLION $$$ a year on thier Pets..We can thank the republicans for the Gramm-Leach-Bliley Act in 1999  which was signed into Law by Bill Clinton himself..

       Also called the “Financial Services Moderniation Act”…it repealed the Glass-Stegall act of 1933..nd allowed Commercial Banks..Investment Banks..Security companys and iunsurance Companys to All Consolidate..and the Be Regulated by the Federal reserve..

      They went on a rampage of Greed during the G.W. Bush Years
      Causing Our economic Collapse..So..they are all to Blame..Republicans..democrats..congress and the Fed..

      I think its best for the United States if we would elect a Independent THIRD PARTY President who would appeal to the Blue Collar folks in Both partys..The would force the Polarized
      Congress to  Co-operate and come back to the Middle..

      Otherwise..We will have all the scenarios Larry and William Point Out…

  • DM

    The first stage will be a credit freeze, like the 2008 Lehman Bros debacle, but the demise of the euro will be worse because there’s no taxpayer money or an active central bank, like the Fed, to save the sinking banks in France, Italy and in the end, the whole European banking system.  That debacle will also trigger many bankruptcies here in the U.S. because institutions saw the euro as a stable currency, a good bet against the inflated dollar, and now find themselves hoping that Merkel and the E.C.B. will do something, print money, anything, to save their nominal euro investment at any price.  I suspect there are more MF Globals out there.
    In the meantime, the Obama administration does nothing when it should be working 24/7 to figure out how to respond to the debacle.  We’re really in trouble.

    • Wbboe

      Would you then expect a rush from the Euro to the dollar and a corresponding uptick here?  Or would our ties to the Euro through Obama and his buddies and the fed drag us down?  It is an imponderable I suppose.

      • DM

        You are right, and that’s what we’ve seen.  The euro has lost value against the dollar and other currencies.  But if the euro collapses, then institutions that have money in European banks will incur heavy losses.  How bad that will be it’s not known. Banks hold accounts, invest in bonds and other instruments, and make loans to European banks.  The reason credit freezes is that institutions lose confidence in the stability of other institutions, and stop lending.  The money stop flowing and payments can’t be made.  It happened in 2008.  U.S. institutions don’t hold much debt from the PIIGS, but that doesn’t mean the financial institutions here in the U.S. are not at risk.

        • Wbboe

          Thanks for the response DM.

      • Docelder

        I am expecting O’Dumbass to be right out front with the idea of a world currency… of course the Clinton’s and their one world bunch will be in… O’Dumbass being the public face and fall guy.

        • Wbboe

          Now you have really got me scared.  This is something Soros has been pushing, and this may well give him the opportunity.  That single act alone would subsatantially reduce the wealth of every American.  It is the same problem in a sense as if we abandoned our border and let ourselves be inundated by illegal immigration.  Good fences make good neighbors.  Without them what you are left with is the tragedy of the commons.

          • Anonymous

            the tragedy of the commons = OWS

        • Anonymous

          Obama a fall guy? LOL

          • Docelder

            Honestly… could he have been elected on his merits? Did he ever belong in this job? Did anything he ever accomplished make him ready to be POTUS? The answer is no. The Clinton’s and their kind placed this post turtle of a POTUS on his perch… he isn’t smart enough to plan any of this… I doubt he is smart enough to understand it. The guy believes he is the one… I think he really does. He is at best a tool… and yes he will be the fall guy… watch Bill run in to rescue us… we are already hearing talk of third terms… watch slick Willie carefully… watch both his hands. Pay no attention to Barack the smoke machine… don’t be deceived by the media which act as the mirrors… none of this “just happened”.

            • Anonymous

              (sorry …snark) It thought him more of a “spring” guy. LOL

  • Alice Wolf

    We need to turn our attention away from the doomed EU and start making amends with Russia and China.   We need the Grand Pacific Alliance.   These nations are surging forward into scientific development and are building massive infrastructure platforms that will benefit both of them.  Railroads, nuclear plants etc.  We need them and they need us.  We must make Congress do the right thing, reinstate Glass Steagall.  That will effectively shut down the empirical oligarchical monetary system that dates back to the days even before the Roman Empire.  It was anti social them, and it’s still anti social.
    By reinstating Glass Steagall we can offload the derivative debts and separate the bankster’s gambling den from our commercial banking operations.   We could revert to having a sovreign currency, yes we are a sovreign republic, meant to be, and it is high time we turned our backs on this failed dead system.   We need the FED like a hope in the head.   We need President Obama even less.   With goodness knows who’s dollars, there is a new attack on Pakistan, we have promised help to Turkey just today, Libyan rebels are arming Syrian rebels and giving them money, just where are they getting these weapons and cash?   Santa Claus?   President Obama has just ordered more warships to the Med. and shut down intelligence sharing with Russia.  That’s brilliant right?   Russia is sending their warships down the the Med. too.   Seems like someone’s havin’ a party.
    Are we really up to a thermonuclear war???????????????????
    We need to stop paying attention to the EU, once we get ourselves back on our feet we can help them out.  The Europeans used to like being sovreign nations, this jolly all of us together just won’t work.
    They have different languages, different cultures, and different levels of productivity, why would they want to be lumped togeher in a lovely austerity zone run from Brussels by unelected men.   The new leaders of Greece and Italy were not elected.  It’s a joke.

  • Alice Wolf

    We need to turn our attention away from the doomed EU and start making amends with Russia and China.   We need the Grand Pacific Alliance.   These nations are surging forward into scientific development and are building massive infrastructure platforms that will benefit both of them.  Railroads, nuclear plants etc.  We need them and they need us.  We must make Congress do the right thing, reinstate Glass Steagall.  That will effectively shut down the empirical oligarchical monetary system that dates back to the days even before the Roman Empire.  It was anti social them, and it’s still anti social.
    By reinstating Glass Steagall we can offload the derivative debts and separate the bankster’s gambling den from our commercial banking operations.   We could revert to having a sovreign currency, yes we are a sovreign republic, meant to be, and it is high time we turned our backs on this failed dead system.   We need the FED like a hope in the head.   We need President Obama even less.   With goodness knows who’s dollars, there is a new attack on Pakistan, we have promised help to Turkey just today, Libyan rebels are arming Syrian rebels and giving them money, just where are they getting these weapons and cash?   Santa Claus?   President Obama has just ordered more warships to the Med. and shut down intelligence sharing with Russia.  That’s brilliant right?   Russia is sending their warships down the the Med. too.   Seems like someone’s havin’ a party.
    Are we really up to a thermonuclear war???????????????????
    We need to stop paying attention to the EU, once we get ourselves back on our feet we can help them out.  The Europeans used to like being sovreign nations, this jolly all of us together just won’t work.
    They have different languages, different cultures, and different levels of productivity, why would they want to be lumped togeher in a lovely austerity zone run from Brussels by unelected men.   The new leaders of Greece and Italy were not elected.  It’s a joke.

    • DM

      Asia is not any better.  Without Europe, China is in trouble.  Have you not seen the ghost cities China has been building to keep its economy from sinking?  Watch the SBS TV Australia report:
      http://www.youtube.com/watch?v=pbDeS_mXMnMThe banks of China are on the edge of bankruptcy. The IMF just issued a warning that Chinese banks risk heavy losses.  WIthout China, the rest of Asia is also doomed.  We’re all doomed.

      • Wbboe

        I guess you answered my question above, here.

      • Wbboe

        Very interesting.  You comment suggests that many of us, me included, have been wrong in assuming that  the growth we have been seeing in China–in the 9-10% gdp range if I correctly recall was not the solid sustainable organic growth we took it for, but has a tulip bulb aspect to it too.  If you think about it for a moment, if the world economy is this interconnected then a bubble here will produce bubbles elsewhere and when one bursts a chain reaction can take place The culprits in this game, the real culprits, are the economists who failed to see this coming.  If it were my call, I would have Alan Greenspan in the docket.  As a matter of fact, Judge Posner wrote a book on the crash which I have quoted here before, and he put the lion’s share of the blame on them too.  But nobody seems to realize that.  Second place would go to Barney Frank and his left wing pols who forced banks to adopt unsound lending practices.  Third would go to the corrupt Ivy League Professors and Wall Street hacks who recommended and sold trillions in worthless investments.  All of the should be together in the pit.. 

        • Wbboe

          Oddly enough, Alan Grenspan did more harm to this country than Osama bin Laden.  The difference is Alan and his ilk were grossly negligent, whereas bin Laden acted with malice aforethought.

          • DM

            The Fed looked the other way as it opened the vaults for the banks to take as much money as the banks wanted.  It was all about phony profits to get huge bonuses.
            The Fed bears great responsibility. By keeping interest rates so low, the banks could make huge profits with low cost money.   On top of that, it’s the Fed’s responsibility to ensure that banks keep assets to certain levels to ensure their viability. It’s one of the  Feds main jobs.  On those two counts, the Fed is responsible for the collapse of the banking system, low cost money and no oversight.  There is no evidence that the repeal of the Glass-Steagall Act is responsible.  Bear-Stearns was a commercial bank. Once the house of cards started to fall, everything went down. That’s not to say that other agencies, like the SEC and FiINRA were not complicit too.  The idea that there were no laws to stop the fraud is theater, IMHO.
            Roubini was among several economists who warned of the impending disaster as early as 2006, but Greenspan and then Bernanke said there was no problem.

            • Wbboe

              Excellent analysis.

            • Anonymous
              • DM

                Roubini lays it out very well, but the problem is that Option 1, what he calls the best solution is not going to happen for the simple reason that Germany is not going to accept the debt from the EZ.  Unlike the Fed, that is willing to shove inflation into us so that the debt holders don’t have to take the loss, the E.C.B. is not going to use inflation to get the EZ out of the mess.  Germany sees that fiscal responsibility, despite the pain, is the only true exit from the debt.  I agree. 

        • Wbboe

          I am sure Barney would get real huffy about that sort of allegation.  But when you lay out all the facts, the conclusion becomes inescapable.

    • Wbboe

      Alice, you may be right, but the question I have never been able to get clear in my mind is what do we have that China and Russia want.  Obama and his jobs Czar Immelt have sold China our military secrets, and what those two have not given them, they have managed to steal.  Unless of course, we are talking about land–and for a guy like Obama massive Chinese immigration to restore real estate values is the subject of an executive order which has been sitting on his desk for two years waiting to be signed. If he gets a second term it will be executed–that is my sense.

      • Anonymous

        Prepare yourself because the annointed one is getting re-elected. Even Glenn Beck (whom I don’t care for too much) is saying obama will get re-elected. I do not see him losing, his peeps have something up their sleeve. Another canard

        • Docelder

          Obama will be re-elected because the people who selected him aren’t done with America yet. It isn’t our decision in 2012… it wasn’t our decision in 2008. It is a done deal… and yes there will be stagecraft… something like a staged attack from somebody who will be identified as a TEA party member… stir up the guilt… maybe find blogs from the perpetrator with racial overtones… maybe whoever it is can hate black people and immigrants equally… round up the whole herd and get them to vote against the evil white man Romney… who will look so much the same as Obama to people on the right that the right won’t even care once again. 

  • Anonymous

    I would like to think that we are somewhat resilient over most of the European Countries. But the way the Republicats are running things that 500lb bomb may look more like a 500MT bomb and of course I wonder how the European financial community has helped with the potential break up.I also have to wonder how the European financial community has been plundering the wealth?

    Let’s see… The S&L scandal was a lousy $150 billion and we sent some 1000 big guy to prison. The recent mortgage/bank scandal is estimated to be $11 trillion in household losses and we sent no one to jail even though there are more than 100,000 phony affidavits from some of these mortgage companies. Matter of fact Obama administration besides the bailouts is considering spanking these guys with just fines….No jail time…

    Think any of this added to our current plight? Let’s hope the Europeans don’t try and come running to us for help!

    • Wbboe

      Amen Popsmoke. Amen times ten.

      • Docelder

        No wonder why Obama was “The One”. No wonder why he was “selected” in 2008. Nobody else could golf and vacation through all of this with a clean conscience… Obama hasn’t got the first clue… poor dumb schmuck probably believes he is the one. Probably thinks he is doing a great job… This is why he was the one.

        • Anonymous

          Of course he thinks he’s doing a “great” job. And ego that size could accept nothing less.

        • Anonymous

          Of course he thinks he’s doing a “great” job. And ego that size could accept nothing less.

          • Wbboe

            He is doing a great job of doing what he was installed to do: to implement the neo lib agenda, through creative destruction.  Do you suppose he could fire a czar or two just to show that he cares.  No way.  They are his SS legions will gather with him in the fuerher bunker when the time comes.  In fact, they are the only ones who are indispensible to the Soros agenda–other than him of course.

            • Anonymous

              I see your point but I think you give him too much credit.

              I find him a rather mediocre liberal with delusions of grandeur. He read all the media swooning and hype and because of a massive ego, he believed it.

              He is the cardboard cutout that is front and center for those far more competent, ideological and corrupt that he is himself. Were it not for others propping him up he wouldn’t even be an Illinois State Senator.

              Either way he is in a position to do more damage than I even want to contemplate.

    • Anonymous

      “The recent mortgage/bank scandal”
       -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -  -
      It wasn’t “recent” and most of it was legal.

      It was your liberal dimocrat buddies who created this, fostered this. and protected this from the outset. It was a dimocrat policy and U.S. law that forced banks to give bad mortgages. That is where it started and not one dimocrat is going to jail for it.

      Europeans will deal with their debt crisis and have been. They can’t some here because we have no money and have our own debt crisis for the same reson they do.

      As far as your “But the way the Republicats are running things” this is just roo unintelligent to respond to. 

      • Anonymous

        “It wasn’t “recent” and most of it was legal.”

        Really? All legal?  So when the hell has Liars Loans been legal?  You stupid bastard two USAs and AGs of New York, Delaware, Arizona, Florida and a couple of other states are already pursuing criminal actions. Matter of fact Ziocon, in Florida they just sent a mortgage broker to prison for 50 months because all of this was so very legal. No where does it say in the Community Reinvestment Act that one must make bad loans.

        Secondly you stupid bastard, it was the republicans, along with the democrats who “DEREGULATED” the industry  and it was the BUSH ADMINISTRATION who told the regulators that the “industry” was their clients not just the American Public.

        Answer this you Ziocon moron. Why doesn’t the big bad ass republicans in the House hold hearings on why this Administration is not pursuing criminal actions against the mortgage and banking industry for the last most “recent” mortgage fraud scandal?

        This is both a democratic and republican problem.

        Both parties are tired to the financial industry.

        • Anonymous

          “All legal”
          I said most were legal moron (and they were) or is English a second language?
          -  -  -  -  -  -  -  -  -  -  -  -  -
           
          ” No where does it say in the Community Reinvestment Act that one must make bad loans.”
           
          Someone should explain to the unintelligent Nazi that the CRA resulted in lawsuits that forced banks to give loans to people previously not considered credit worthy for the loans they were seeking.
          -  -  -  -  -  -  -  -  -  -   -  -  -  –
          Deregulated what? When banks were being forced by the government to give risky mortgage loans exactly how was that deregulation?
          -  -  -  -  -  -  -  -  -  -  -  -  -  -  –
          “Why doesn’t the big bad ass republicans in the House hold hearings on why this Administration is not pursuing criminal actions against the mortgage and banking industry for the last most “recent” mortgage fraud scandal?”
           
          There were not recent mortgage scandals or didn’t you notice that the housng market collapsed?
           
          A far left Nazi like you clearly doesn’t have the intellectual capacity to understand history or the implications of one action leading to others.
           
          If anyone should be going to jail it should start with the Dimocrats who created this, fostered this, and protected this. How about you start with Barney Frank and Chris Dodd?
           
          This was a dimocrat created problem but the republicans did nothing to stop them.

          • Anonymous

            Basically that is all bullshit!

            The democrats and republicans all payed this game. Both parties are
            responsible for the deregulation of the banking and mortgage industry
            and not going after the C-Suits just as the banking regulators did
            during the S&L Scandal under Reagan and its happening all over
            again. Its not just the democrats you twit…

            Your history starts at Dodd/Franks? Try the deregulation starting with the killing of Garn-St. Germain…

            You quick with insults to support your diatribe but you sir, are off this planet.

            • Wbboe

              My sense is that the general problem is what you say it is, namely a tacit agreement by the political elites in both parties to abandon a tight regulatory framework and let the market world which has created a maldistribution because unregulated capitalism leads to monopoly. But in the more if you drill down on this problems, I do not think the honors are equal.  On the one hand, Bush did establish the principle of cheap money from China in exchange for free access to our markets. And Greenspan who had several hundred economists working for him never bothered to look seriously at the problem of a bubble. Nevertheless, I believe the “proximate cause” of the  the financial crisis which has spread to the world was the abandonment of underwriting standards by banks on real estate loans which the Republican Administration regulators generally opposed, but the Democrats who by then controlled congress demanded on the false premise that everyone should have a home owner whether they could afford it or not.  So I agree with Hokma in the sense that while you are right about both parties having their fingerprints on this, the more guilty party is the demorats.  I am an independent at this point, but the one thing I will say is the Republicans have a viable challenger in the grass roots of the party, whereas the Democrats do not.  They are strictly under the influence and control of the elites at this point. That issue was settled in the 2008 primary, and no one with any common sense believes those jamokes are the party of the people. That is like believing in the tooth fairy.

              • Wbboe

                It is amazing to me that for all the noise the left makes when a Republican is in office, they are as quiet as the church mice they undoubtedly are about similar abuses by democrats.  It is hard for any adult with an IQ above room temperature to take them seriously. Debbie Downer is the poster girl for what they are and that is a travesty.

              • DM

                Greenspan knew the problem, but did not act on it because real estate is the only part of the economy that was working.  To stop the flow of funds would have meant a huge recession, and Greenspan is a political animal.  Keeping his job was all that mattered.  The Fed is responsible for the mess, nobody else.  The Fed opened the spigot to easy money, and looked the other way while banks had their party and paid themselves billions of dollars in bonuses.

              • Anonymous

                Wbboe, we are basically on the same page. However even the Reagan administration even fought with the regulators over the S&L Scandal and that includes the Democratic Speaker of the House applying pressure not to refer criminal charges to DoJ at the time as well. But the regulators did their jobs unlike today. Only the small fish are being speared right now in the current situation.

                Greenspan was no friend to the American Public. He shoulders a ton of blame even for this current plight.

                However, where we really part is that there is no political party that is the lesser of the two evils here.

                I recommend you search for interviews with William Black one of the S&L Regulators. He fires upon both parties pretty evenly.

                Try these to start…
                http://www.netcastdaily.com/broadcast/fsn2011-0914-1.mp3

                http://www.youtube.com/watch?v=_LvH-ZCfr-k&feature=player_embedded

                We will see how many people believe in the tooth fairy next November…..

            • Anonymous

              Your dim-lib talkng points are a mish mash of historical inaccuracies.

              I did not see you mention even once Fannie and Freddie. These loans were already happening before the banking deregulation.

              This is nothng at all like the S&L problem and to equate simply shows your lack of depth of understanding.

              Go back to you pot smoking.

              • Anonymous

                Oh buddy you talk out your butt! Talking points nothing. I am not a Ziocon..

                But you are very correct. Frannie and Freddy are the worse. Their C-Suits need to go to jail! Matter of fact Fanny and Freddy and found the fraud back in 2003 or 2004 but did not refer for prosecution. There is enough crap of blame starting from Greenspan right up to to Holder…

                But lets face facts… Both Democrats and Republican are equally at fault here….

                • Anonymous

                  “I am not a Ziocon”
                   
                  It’s Jew (and proud of it) to you Nazi.
                  - – - – - – - – - –
                  “Matter of fact Fanny and Freddy and found the fraud back in 2003 or 2004″

                  Go back further when this was all being escalated up under HUD Secretary and current NYS Governor Andrew Cuomo. THIS was the vehicle that used the CRA as the legal basis to force through one bad mortgage after another.

                  The banks were left with no choice than find financial tools to deal with this impending balloon of bad debt.

                  These derivitives would have happened whether banks were de-regulated or not because politicians would have made sure that banks could deal with it so their policy failings would never surface.

                  As I said, the mortgage problem stemmed from the CRA and then step by step over decades how this evolved. And, yes, while it was not a GOP policy they did nothing to stop it even when they occupied the oval office.

                  • Scottymac54

                    You are a kapo.

                    Not a Jew.

                    Chillul Hashem. 

                  • Anonymous

                    As mark Simone calls you a  jew hating nut job. Go read a book.

            • Scottymac54

              Stop stating FACTS!

              We’re going to go off the rails here….

          • CentralMass

            See the Gramm–Leach–Bliley Act
            http://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act

            The Bill was written by three republicans and passed with a fully republican controlled congress with a veto proof majority in the final months of Clinton’s last term.

        • Anonymous

          guilty as charged.

        • Anonymous

           ”why this Administration is not pursuing criminal actions against the mortgage and banking industry for the last most “recent” mortgage fraud scandal?”

          So where is your LZ? You think any of the USAG’s of the last 3 decades have done anything about it?  

          • Anonymous

            Teak… That is a loaded question you ask. Oh yes back during the S&L Scandal they did a ton. But prosecutions are at an all time low and since 2001? Laughable! All small fish… No top suits. No top Mortgage Banks…. At my LZ we cut, cap and balance with a chainsaw…..

            Even the FBI has no more than 150 agents nationwide covering these types of while collar cases. How the hell do you prosecute such a complex fraud with limited investigative resources? You don’t… Obama and Bush both of them are responsible for this. Holder right now is seeking monetary fines with no criminal prosecutions.

            You try what the mortgage bankers pulled off and see what happens…

            • Anonymous

              So if I were to, as a FBI type attempting to follow the money it would be like chasing down an “X-file”….no? That Malboro Man would just gum up the works. The current AG makes the perjury of Gonzales look like a Dali painting.

            • Anonymous

              So if I were to, as a FBI type attempting to follow the money it would be like chasing down an “X-file”….no? That Malboro Man would just gum up the works. The current AG makes the perjury of Gonzales look like a Dali painting.

            • Anonymous

              Again, An overwhelming majority of mortgages were done legally and legitimately. There were some that were done illegally.

              I have two mortgages. One is perfectly fine. But on the second home I took a mortgage in 2006. Once he billing began coming in it was evident that there was something wrong and it was discovered that the mortgage company falsified documents. I brought a federal lawsuit against them and it is still in court. So I know firsthand just how corrupt some of these banks were.
              -  -  -  -  -  -  -  -  -  -  -  -
              The problem was the rule of law and how the effort to put everyone in a home forced banks to break their lending standards and finally led to very creative adjustable mortgages that fostered dangerous levels of real estate speculation (FL, NV, AZ) that the government did nothing to prevent or stop. All it took was one recession to burst that bubble.

              • Scottymac54

                TWO houses!

                Interesting.

                • Anonymous

                  It’s called working for a living and being to earn and afford a vacation home. Something the occupy grifters would not understand.

                  • Scottymac54

                    Ah! 

                    A vacation home.

                    I understand.

    • Anonymous

      Republicats as in both parties?

      Excuse my thickheadedness.

       My knee-jerk reaction was to have a hissy fit over the blaming of the just the GOP.

      Then my eyes caught up with my ire and I began to think, sometimes a little delay between see and think, aging arteries and all that, that you were assigning the blame to both of our dysfunctional and corrupt parties. I should add stupid too but that seems redundant when mentioning politicians.

    • Anonymous

      The Eurozone was a bad idea from the outset