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This page contains a single entry from the blog posted on October 24, 2011 4:46 AM. The previous post in this blog was A great Dane that wasn't. The next post in this blog is Money to burn. Many more can be found on the main index page or by looking through the archives.

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Monday, October 24, 2011

End of tunnel not in sight

The bad economic news keeps jumping off our screen. This graph caught one reader's eye, and here's a grim assessment of where the country is heading.

Meanwhile, here's a fascinating graphic laying out the dire straits in which Europe finds itself.

Comments (12)

Feldstein suggests mortgage principal write downs as a possible way to recovery. The idea to provide a reduction in mortgages only for those completely underwater is perceived by many as unfair. A bail-out so to speak for some who may have may have been less repsonsible in their purchases.

One plan I have seen calls for a reduction in principal for anyone with a bank mortage. The reduction would be based on the drop in value of homes for a particular area. The write down includes provisions for the bank to recover money if the home is later sold for a profit so the money can be paid back.

In any case, more forclosures are certainly on the way if we stay on the current path.

Why not retire all debt and just print money? We could bring everyone home, close the borders and make the US a ghetto of sustainable equality.

This is all public information yet many of our elected officials prefer to ignore this news. It is fairly obvious for everyone to see the long term effects of public worker unions, unfunded pension plans, and spending on things like trains, green energy, etc.

But this is exactly what Sam and others continue to do. They hand out money to the unions, they waste money on silly public works projects, they hire PR people by the dozen, etc.

Why the big disconnect?? Almost everyone who isn't an elected official gets the fact that too much spending is killing economies around the world, but the politicians continue to waste money by the bushel basket.

"Why the big disconnect?? Almost everyone who isn't an elected official gets the fact that too much spending [backed by inadequate levels of taxation, leading to rising inequality] is killing economies around the world, but the politicians continue to waste money by the bushel basket."

fixed that for you

So the short version is the whole planet is like a family being destroyed by soaring debt it will never be able to pay.

Attempting to do so is sacrificing far more than the cost of bankruptcy.

Earth bankruptcy.

Human race, start over?

The numbers of homes being held in default and awaiting foreclosure is probably the worst sign of imminent deepening of our own economy.

That and the massive inability of our governments to pay their bills, obligations and liabilities.

Minus total mayhem, how can the economic scenery be any worse?

There's obviously many people well positioned to weather the re-living of any historical economical storm but if the world is as it seems that will not serve as any obstruction to the apparent inevitability of further collapse.

And won't collapse suck many of the currently secure into the abyss?

Help is here:

http://www.youtube.com/watch?v=emwwBm6yeRQ&feature=related

Rumors have it that many banks are refusing to let you get your money out.

Why?

The banks are broke and nobody is making them have to play in the real world, where you balance your books and take your losses.

This is all leading to total collapse and then the issuance of electronic credit.

We are being suckered into a wireless world controlled by the few.

Seldes, "..backed by inadequate levels of taxation...".

Let's examine just one small entity of taxation-Portland's. If we were to eliminate urban renewal that would be an additional 26 cents of each dollar going to the whatever you deem needs funding. But on top of that you can add just the debt service of Portland's 11 URA's amounting to over $132 Million per year, not counting paying down the principal.

Add it up and that's big money without your call for more taxation.

“Is the U.S. in a depression? In a word, “no,” … “I’m not quite sure what a depression is,” he said.”

I’m not sure what it is, but I know this is not it. Hmmmm...

IMO we are in a depression, obviously. Falling asset prices, high unemployment, ‘flight to safety’ at the drop of a news story, all levels of gov and big industry doing everything they can to ‘boost confidence’, it plays out like all other depressions.
Simply because it doesn’t look like 1933 doesn’t mean squat. The war in Vietnam looked nothing like the Peloponnesian War, but they were both wars. The current depression doesn’t look like the last – more safety net, different technologies – but it sure exhibits the same symptoms underneath.

Interesting factoid: During the “Great Depression” the country was NOT in recession most of the time. Yet we still call the entire time a depression.

This will eventually be called the Great something.

Perhaps the Great Depreciation

or the Great Desolation

I attended a talk given by Richard Heinberg on Friday - he's the author behind "Peak Oil" and has a new book out titled "The End of Growth." He's basically saying that GDP can no longer be expected to increase by significant amounts, and that increase is what has enabled everyone (governmennts included) to continue to increase debt loads, expecting to pay off the debt down the road with proceeds from the growth. Basically an economic Ponzi scheme. I don't see where 6.5 million jobs (especially living-wage jobs) will come from - and governments are starting to shed jobs at rates that offset the private market increases.

This will eventually be called the Great something....

The Great Deception!

Returning to the underlying problem of derivatives that was broached again last week in this forum in the matter of BAC:

"Bank of America is shifting derivatives in its Merrill investment banking unit to its depository arm, which has access to the Fed discount window and is protected by the FDIC.

This means that the investment bank's European derivatives exposure is now backstopped by U.S. taxpayers. Bank of America didn't get regulatory approval to do this, they just did it at the request of frightened counterparties. Now the Fed and the FDIC are fighting as to whether this was sound. The Fed wants to 'give relief' to the bank holding company, which is under heavy pressure.

This is a direct transfer of risk to the taxpayer done by the bank without approval by regulators and without public input. You will also read below that JP Morgan is apparently doing the same thing with $79 trillion of notional derivatives guaranteed by the FDIC and Federal Reserve.

What this means for you is that when Europe finally implodes and banks fail, U.S. taxpayers will hold the bag for trillions in CDS insurance contracts sold by Bank of America and JP Morgan. Even worse, the total exposure is unknown because Wall Street successfully lobbied during Dodd-Frank passage so that no central exchange would exist keeping track of net derivative exposure."
http://dailybail.com/home/holy-bailout-federal-reserve-now-backstopping-75-trillion-of.html

Credit unions, btw, are not insured by the FDIC; the NCUA backs deposits with "the full faith and credit of the US government."
http://www.ncua.gov/NCUAsafe.aspx

But how solid will the credit of the US government be if it has to make good potential derivatives losses for just BAC?


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