Saturday, October 04, 2008

Open Discussion

As usual, last forum filled up quickly. Please feel free to use this new one for comments, links, discussion, etc.

Additionally, feel free to comment on the picture below (hat tip FoFoa)


Justin_n_IL said...

My comment on the pic below.


Justin_n_IL said...

What has since emerged are details of a meeting at the New York Federal Reserve bank chaired by Paulson, to discuss the risk of letting AIG fail. There was only one active Wall Street banker present at the meeting—Lloyd Blankfein, chairman of Paulson’s old firm, Goldman Sachs.

Blankfein later claimed he was present at the fateful meeting not to protect his firm’s interests but to ‘safeguard the entire financial system.’ His claim was put in doubt when it later emerged that Blankfein’s Goldman Sachs was AIG’s largest trading partner and stood to lose $20 billion in a bankruptcy of AIG. Were Goldman Sachs to go down with AIG, Secretary Paulson would have reportedly lost $700 million in Goldman Sachs stock options he had, an interesting fact.

That is a tiny glimpse into the man who crafted the largest bailout in US or world financial history some days ago, the failed TARP—Troubled Asset Relief Program—a proposed $700 billion financial stabilization scheme which, in Paulson’s original version would have allowed him or his Treasury successor to use $700 billion, with no oversight or accountability, to buy bad or worthless assets from financial institutions he deems worthy of help.

FOFOA said...

Yup, with retirement mere months away, he is desperate to protect his own retirement fund at taxpayer expense.

Now look again at that picture. It all makes sense now, huh?

Matt said...

Wow - do you all want to see something funny? Apparently the cartoon DuckTales did an episode about inflation. I'ts pretty good - here's a Youtube link. Somebody turned it into a pretty good clip!

FOFOA said...

New Jim Willie piece.

Sample: "Here are two stories, one about a city and another about the bank holiday coming.

This from a friend in Seattle: "I was talking to my neighbor last night. He is in finance in the county government, King County (Seattle). He said there are some very secretive budget talks being held, very hush, hush. Apparently, the county has lost around $200 million of taxpayer money in toxic paper investments, with huge implications on the budget. He says he is not privy to the details, but he is taking a 10-day vacation starting today, because he has nothing to do since everything is in flux."

This from a friend in Atlanta with strong banking connections: "Reliable word that Bank of America branch managers just received a letter or memo from the USFed instructing them to perhaps be ready for a one-week universal shut-down of the banking system, including access to checking accounts, savings accounts and credit cards. Reliable word has it that BofA bank branches received a shipment of signs last week, reading "WE'RE SORRY, BUT DUE TO CIRCUMSTANCES BEYOND OUR CONTROL, WE CANNOT BE OPEN AT THIS TIME.

FOFOA said...

Are China and the Middle East blackmailing the USA? That seems to be what Karl Denninger is saying in this 2 minute video.

Justin_n_IL said...

Those who don't have cash on hand would be wise to get some 4 sure. Imagine all the people who will be calling into work because they can't access gas. Or companies not being to able to work their employees. If this occurs there will finally be some far and wide screaming.

Some time ago I was thinking about the Great Depression. Back in those days many people were more than willing to help their fellow man. But the society we live in today is in stark contrast to the society back then. Not telling yall anything you haven't already thought about. Just felt like yapping.

jerry said...

Fofoa--if what has been predicted, a 7 day meltdown of everything financial, there is only one outcome and that is marshall law. If this prediction is more than just a wild and crazy mind running haywire, then what we will see is a panic that would only compared to something like when the Nazis invaded a place and rounded up the people. Pandemonium would be the only description.

I cannot believe this. I am a moderate level conspiracy believer, but this is too far flung for me to even get a taste of it as it brushes by my teeth. This would be the death knell for the Republican Party and a severe blow to the Democratic Party. I cannot believe that any uber-rich kleptocrat would risk everything they own and accumulated on such a panic.

We would see the nation shut down, no one leaving their homes for a week? And then, once those few investment banks reopened, a workers riot would be unleashed. I cannot believe anyone in the government would do such a thing. An invasion of Iran would be more believable. Dried up cars and trucks littering the roads would just be enough to burn down the house!

Why would Jim Willie think that most banks outside of those few suffering from toxic meltdown have anything to worry about? People are working and getting paid. His friend is going on a ten day vacation. If local and regional governments are seeing a $200 million shortfall in their budgets, then significant cuts and layoffs would occur, or a tax increase would be legislated by their state representatives under an emergency session.

Yes consumer inflation is around the corner, and a dollar problem is looming somewhere out there. If such a scenario happens here, then such scenarios happen in the outsourced lands. Riots will occur. People with bombs and wired up burkas hang out over there more than they hang out over here. A riot is a great place to do damage. Do you all recall the recent video of so-called Tibetans acting up in China over something of a lesser proportion? Or how about those Watts Riots way back when? We would see that worldwide, folks.

China and the Middle East, as far as my small mind can tell, don't need to blackmail the Bush Crime Family. They now will have access to the Fed's Drive -Thru Window. They will get their bag lunches full of cash.

China is already drinking more of the oil milkshakes and getting all they want. Russia is the country talking about lessening the world's dependency on the dollar.

So, Jim Willie needs to get his crystal ball out and head over to Wall Street, those traders are ready for anything, set up a table and cup and rake in a few bucks telling people, by whispering in their ears, exactly what date to board up their windows with duck tape and plastic.

pg in plano said...

I've been reading this blog for a couple of months now. I'm a little ignorant on anything more than the basics of economics, but have been concerned for years over the American lifestyle. I wish I had a crystal ball, but I don't. I do however think things are going to get much worse, and have taken heart to your advice. I keep my gas tank and cupboards full, and today I pulled cash just in case. Thanks for the info.

Justin_n_IL said...


You make a good case for dismissing it. It would truly be chaotic for a while. However at this point nothing would surprise me. Greed has created a monster with a mind of it's own. But that won't stop the powers that be from trying to divert it from it's path. Maybe it will be decided it's better to have a week of chaos and attempt to patch things up (in vain) in order to buy some time. Time will tell.

Anonymous said...

Anything new about BOA credit cards?

FOFOA said...


It is hard to envision some of the more dire predictions. What you must understand is that nothing is set in stone. No one knows the future for certain. There are various scenarios which could play out and each of those scenarios carries a certain probability. For my own positions, I try to guess at those probabilities.

I don't believe most of our Congressmen have evil intentions. I believe they are simply making huge mistakes. It is good to speak your mind and be heard, but to stay sane in an insane world it is best to say, "okay, this is how things are. It is neither good nor bad, it simply is. Now what can I do to protect myself?"

I have protected myself more than most, but not as much as some. I try to help where I can by spreading the word of what I believe to be the best moves, but in order to retain a small amount of credibility, I must not say out loud my wildest speculations and worst case scenarios.

Just today I was out making further preparations, including buying ammo and a generator. It is interesting that in two days the generators at Costco were 5 and are now only 1. I will say that I have thought the probability of some of the things you mention to be quite low, until the past couple days.


Justin_n_IL said...


Just had a chance to watch the short video. No surprise there. Buy this garbage back or we shut off the gravy.

Sheds some light on how dire the entire situation is. Extreme pain no matter the path.

jerry said...

I so appreciate reading all of the ideas, theories and predictions that pass through this blogspot. What I love most about this site is that real honest thought is discussed here. I have read sites hosted by very thoughtful writers where thoughtless, name-calling commenters clog up the discussion. Even though there are times I cannot always get my mind around what is written here, I do look forward to reading the debate. And, of course, I appreciate being a part of it, too. It does open my mind up.

Just as I have a hard time accepting Jim Willie's prediction, Fofoa makes a good point that should not be forgotten, and that is we just cannot predict what might actually happen! We should be prepared for the worst case scenario. And, Jim Willie offers that perspective to us. Like it or not.

When John McCain goes public by saying he feels that President Bush should veto the very bill that, he -John McCain voted for, because "this bill can damage the country". Quite a weird statement from a guy running for the most powerful position our nation offers a person. Just those words alone have to make a person think that danger lurks around the next corner.

Also, it is odd that the foreign and our domestic markets are not positively responding to this bribe-out bailout. I guess, no one is fooled that this reverse socialistic, trickle-down, one-time crap table pay off to the richest investment financial bankstas, who will take their winnings and find saver asset havens somewhere in the world, have been the recipients of the new Bush Crime Family Faith-based Initiative Plan in the waning weeks of their reign of terror. "Have faith in the markets. The essentials are good."

FOFOA said...


I see it kinda like this. America has 20 credit cards all maxed out. No available limit left. Each year we apply for a new credit card and max it out just to pay the minimum payment on the previous 20. We are only paying the interest, not the principle. And then the next year we must get a newer and bigger credit card to pay the interest on the previous 21.

Well who is issuing us those new cards each year? It is the foreign central banks that buy our debt, like China and Saudi Arabia. They are giving us a fresh credit line JUST to pay the interest on the previous debt we already owe them.

So now they are threatening to not give us a new card this year (fiscal year starts Oct. 1st). And we have no way to pay the trillion dollar interest payment on our other 21 credit cards. So without this new credit card, we will go into default on those 21 bills sitting on our desk.

What does that do to our credit rating? Are we now bankrupt? And who's to say that even if we buy back $700 billion of bad investments from them that they will honor the deal and give us one more year?

This is a pathetic situation we are in. If I ran my house this way, they would lock me up.


Randy said...


My primary computer just had a MAJOR Crash! Using a backup ATT. Would like to get in on the discussion - that Jim Willie issue brings up some scary thoughts - but trying to fix my primary before bed.

Excellent discussion folks!


45north said...

Maria Bartiromo interviewed Tom Donohue, US Chamber of Commerce today. Tom said Ben Bernanke, Hank Paulson and his team are doing a super job and we should stop listening to talk radio and do what is right for this country.

Are doing a super job! No they are not, they were asleep at the switch, watched this thing happen, probably planned for it and then they say they need $700 billion.

Mish has suggested that if private investors such as Tom Donohue put up 20% of the money to buy up securities then the government should put up the other 80%. The deal being the private investors are junior whereas the government are senior. How about it Tom? If these are good securities what about a good faith down payment? For that matter what about Hank Paulson himself? He has got to be good for $100 million, then on that basis the government could buy a total of $500 million of MBS (mortgage backed securities)! How about it Hank?

I have a message for Tom and Hank: go big or go home.

45north said...

government is senior

Justin_n_IL said...

Nice analogy Fofoa. By the way, what is the origin of "Fofoa"? Maybe it's obvious and flying over my head.

FOFOA said...

I'll email it to you. Might be a little too "pornographic" for Randy's site. ;)

Justin_n_IL said...

Has anybody noticed how fast the debt counter is climbing. Randy pointed out last night that it rolled to ten trill. I noticed tonight that it was already at 10.125 trill. At that rate 11 trill will be here in a matter of days. Especially after they pass the bailout.

Anonymous said...

The Mogambo Guru discusses our total National debt - and the creation of $1T in new fed credit last week.

"My voice trembles as I read aloud that now, for the first time ever, the Fed has created over a trillion dollars' worth of new credit, $1,134,942,000,000.00 to be exact, in the banks, which comes to $3,783 for every man, woman and child in America."

The national debt, more correctly known as Treasury Gross Public Debt, shot up $141 billion last week! Yikes! Don't multiply $141 billion by 52 weeks because you will plotz at the answer, and we are so freaking doomed that I cannot chug raw tequila fast enough to dull the rising feeling of doom or the rising taste of vomit tinged with blood.

Sure enough, the monetary base exploded to 911.350 from 843.825 in one week! Gaaahhh!

And as bad as this was, nothing could have prepared me for the news that Total Fed Credit jumped by an unbelievable $203.6 billion last week! In one week! $203 billion! In one lousy week!

This unbelievable, unprecedented, staggering $203.6 billion increase in credit is in the Federal Reserve account that, in the old days, used to run $10 billion a month, which was considered excessive, all the way during the huge 11-year inflationary run of money and credit that began in earnest in 1997, which produced all of the bubbles that are now bursting and causing this economic mess.

Now, instead of a white-hot $10 billion a month, now it's 20 times as much, $203 billion! And in one week! Gaaahhh! We're freaking doomed!

My voice trembles as I read aloud that now, for the first time ever, the Fed has created over a trillion dollars' worth of new credit, $1,134,942,000,000.00 to be exact, in the banks, which comes to $3,783 for every man, woman and child in America.

Hell, the one-week increase in Total Fed Credit alone is $2,030 for that selfsame every man, woman and child in America, assuming that there were no new Americans added to the census since the last paragraph!

And this stupefying rate of expansion is literally off the charts, as in the entire history of TFC, it had grown to only $931.34 billion, reached last week, and now, this week, it has increased $203.6 billion - a 22% increase! In One Freaking Week (OFW)!

We are So Freaking Doomed (SFD) that I reflexively run and hide under the stairs until I can reconnoiter the path to the Mogambo Bunker Of Last Refuge (MBOLR), and if the coast is clear, dash to its musty safety and lock, lock, lock myself in, perhaps then firing off a few rounds to let the neighbors and miscellaneous passersby know that I am scared and I mean business. Maybe then I can relax!

After awhile, as my jaw muscles unclench from the fear, I would be able to explain that this TFC is the source of the fabled "money from thin air" of story and song, which I had hoped would be best remembered by my Mournful Mogambo Ballad (MMB) titled "Fiat Money from Thin Air".

Alas, the tune proved to be less popular than I had hoped ("I actually feel soiled having just listened to it." - Chicago Sun), but which contained the immortal lyrics, "Fiat money from thin air will create real debts from thin air, which will accumulate and get bigger and bigger in a huge inflationary boom caused by all of this new money and credit until it reaches its maximum size, depending on various permutations of tax rates, regulatory zeal and social custom, all of which get looser and looser and weirder and weirder as time goes on, whereupon one day 'something happens' and the whole economy collapses, including the currency, which will cause those flying monkeys from The Wizard of Oz to appear from thin air, and some of them will swoop down and bite chunks out of the heads off of you, your parents and your children, and you will all die screaming unless you own gold, and if you don't own gold in the face of such rampant inflationary corruption and actual carnivorous flying monkeys, then you are stupid, stupid, stupid and you deserve to die! Hahahaha!!"

I ruefully admit that my tune became somewhat less than a folk anthem, which I credit to the fact that it is not actually "fiat money from thin air", as per the lyrics, but is actually "credit-appearing-in-the-banks-from-thin-air", which is, unfortunately, not as catchy a phrase, and so obviously the discerning music-lovers did not buy my albums, like it's MY fault or something that the truth is not catchy. The picky little snots!

Well, to be truthful, "credit-appearing-in-the-banks-from-thin-air" is much more descriptive of just the beginnings of the actual process, which is that this "credit-appearing-in-the-banks-from-thin-air" then literally becomes money when someone agrees to go into debt to borrow it.

So, it is, now that I think about it, kind of a "money from thin air" kind of thing after all! But would anybody buy my music now? No! Bastards!

But the fact is that my music being a flop is probably a good thing, as I wouldn't be able to promote the music, go on tour or appear with Regis and Kelly anyway, because every part of me is scared, and at my age, the unpredictability of various frightened glands and sphincters creates certain, ummm, problems, which I thought Thomas Donlan in his Editorial Commentary column in Barron's was alluding to when he wrote, "The danger is that they are igniting a great inflation to stave off a great depression", to which I nervously say, "Danger? Hahaha! Danger? Did he say 'danger'?"

Seeing that everyone has been stopped in their tracks and are looking at me, I gladly continue, "The use of the term 'danger" suggests that there is actually some hope, at least some slim, tiny chance that you will not die a horrible death, but in fact, there is No Freaking Way In Hell (NFWIH) that they are NOT "igniting a great inflation", because a great inflation in the money supply ALWAYS begets a great inflation in consumer prices, which means that the currency buys less and less, and so as each purchase of anything always takes more and more pieces of money, people begin consuming fewer and fewer things, causing their standard of living to fall, until one day they can only afford to buy food, and then one day they can't even afford that, and people get homicidal when they are starving, that is the thing that destroys economies and countries.

All of which could have been prevented with a gold-standard money.

Happily, since the government did what it did, then those who bought gold as a result will make out very well as gold soars in terms of a depreciating currency, which is depreciating because of over-issuance! Whee! This investing stuff is easy!

Matt said...

Sorry for the launguage everyone, but McCain is absolutely full of shit. In this clip he says the bill he just voted for should be vetoed and that it's a perfect example of what is wrong with government. But he voted for it. Infuriating!! said...

Great picture Randy!

Justin_n_IL said...

Here is a good read.

Black Star Ranch said...

After reading Jim Willie's piece "Breakdown Approaches Climax" from yesterday (10/2), and the immense libraries available as to the insolvancy of the US, it stands to reason that we have but a SHORT period of time left. The US can't pay the Treasury Bonds coming due NOW. That's what the "Meltdown" alluded to by politicians really means. With the high % of foreign ownership of these notes and the current trend of offloading more than they quarterly buy, we are experiencing a major "cash flow" problem. If you don't pay off the maturing Bonds, you'll have a RUN. Add to that the implied threats of runs in that market if additional major printing of REQUIRED currency is initiated, our government has NO choice but to pass this bailout bill to cover the $630+ billion worldwide in bond retirement. The banks holding the toxic real estate loans won't get a dime of this bundle. More monies will be requested in the immediate future for them, many will close down due to current hemorrhaging of local deposits, and the initial $700-billion will be gone. FDIC will be broke, they will look the other way as many banks will be shutting their doors themselves. No one will explain where the original $700b REALLY went as more banks and electronically operated firms will continue to fail. Within the quarter The FedGov will need another larger monetary fix. During this time the CDS market also will unravel, other unplanned financial landmines will explode and martial law will be instituted nationwide.

Our Country is broke. Our politicians will continue to throw more money at it making the matter worse, milking the "cow" dry. Regional business will be non-existent after the banks close. If it's not available to be purchased locally with cash, you won't have it. In the big cities store shelves will empty, be it by criminals or local authorities. IMHO, I think this will commence before the election, martial law will be declared, and the length of time will be considerable.

Now for the good news: Most of the Washington & New York criminals will have left the Country by then with their off-shore accounts filled, and the rest of us that have prepared for this eventuality will be able to get on with REAL life for a change.

I'm glad we had this talk - I'm feeling MUCH better now.

Justin_n_IL said...

Roubini article.

Anonymous said...

Something to think about....I just realized I placed an online order. Hope the system continues to work.

FOFOA said...


That Roubini article is very interesting. Sounds to me like a whole lot of printing gonna be happening soon.

FOFOA said...

"Thanks Jackoffs"

jerry said...

After reading the Roubini article, I am beginning to believe Jim WIllie might be right. A week shut down of all commercial banks and investment banks could be our October Surprise. This may be the nationalization of our large commercial investment banking system.

It sounds like credit is in a major freeze up. The rich bankstas have now left the bank building with their booty. They have no reason to stay in the market. A drop of 400 plus points on the DOW from its opening bell high, just may be an indication of what is to come.

It is time to store up cash and more. This may be the real Y2K.

FOFOA said...

Believe it or not I am far from being a conspiracy theorist. But reading this at a time like now gives me pause. Logic would dictate that it is possible. The way our leaders seem to be panicking makes you wonder if there are any bounds on their desire to control the thoughts of the masses.

FOFOA said...

Jim Sinclair's "Thought for the weekend:

The entire financial world hangs by the LIBOR rate. It better drop Monday morning and stay down or it has all hit the fan."

Justin_n_IL said...

Da Dum Da Dum

Justin_n_IL said...

FOFOA said...

This is an excellent summary of all of the "root causes" of our current woes. And this is my personal opinion of the solution.

Justin_n_IL said...

What's happened to dollar collapse dot com?

404 Not Found
The requested URL /default.asp does not exist.

FOFOA said...

Maybe Paulson didn't like the name of the site.

Anonymous said...

When all this money is put into the economy by the Feds -- who gets it? Who is getting rich while all this happens? I can see who it getting poor, going bankrupt, belly-up or whatever. Now tell me who the winner is!