A new plan needed as the cycle grows vicious (banks' hole keep outgrowing bailout)

FT ^ | 03/29/09 | Wolfgang Münchau

[TigerLikesRooster]

A new plan needed as the cycle grows vicious

By Wolfgang Münchau

Published: March 29 2009 22:37 | Last updated: March 29 2009 22:37

So you think you can see the green shoots of recovery? You draw comfort from the recent stabilisation of forward-looking indicators such as new home sales in the US? Or you think the stock market rally marks the end of the crisis? Of course, economic growth rates are bound to improve soon for technical reasons. Otherwise, not much would be left of the global economy by the end of the year.

Even if a recovery were to start early in 2010, as some optimistic forecasters believe, most of the pain of the recession is still ahead of us: unemployment and default rates will rise sharply everywhere. Most of the pain in the financial sector is also still ahead of us. This will feel like a depression long after it has ceased to be one.

I am more worried now than I was a month ago. The main problem is that the feedback loops between the real economy and the banking sector are truly scary. Remember that all the public and private sector forecasters are still busy adjusting their 2009 economic projections downwards. The latest downward revision for Germany came from Commerzbank last week, which now projects 2009 growth at a negative 6-7 per cent for this year.

[TigerLikesRooster]

Ping!

[pointsal]

now projects 2009 growth at a negative 6-7 per cent for this year

"growth" always rings as positive and upward...."shrinking" by 6-7 percent might ring a few more bells.

[A. Morgan]

“Ma, grab the youngins, that’s no house cat.”

[RC one]

Given the realities of the economic/financial/political system: too much debt; too many obligations coming up; decreasing manufacturing; decreasing retail sales; plummetting GDP; increasing unemployment; the dollar under attack from our principle lender; the inherant weakness of fiat currency and fractional reserve banking; etc, I think it’s just as likely that we’re in the beginning of the crisis as the end. I’m looking ten years down the road and I’m thinking we haven’t heard the last of things as far as this economic crisis is concerned.

[alloysteel]

We are sinking into a financial black hole - as we grow closer and closer to the singularity, we are torn apart by the increasing gravitational forces.

There is a cure for this madness, but it is both very painful in and of itself, and it shall not be applied so long as the now failing nascent obama regime remains in power.

There are several way to nullify this power. Civil disobedience comes to mind, and even overt guerrilla warfare against the symbols and icons of this troubled regime. There is always the temptation to revert to the actual wording of both the Declaration of Independence, and the Constitution as it has evolved since 1789, but this would be an open revolt against the current Administration and and the Democrat-majority Congress, both of whom have simply abandoned any pretense they are governed by those words of distilled wisdom.

Secession is still a legal option, that is, individual states may choose to LEAVE the union that is the United States of America, just as they could petition to join in the first place. This has been done before in our history, but that was crushed by force of arms, and the application of superior technology by the dominant and successful side in that conflict.

If the Confederacy had managed to form a viable country in its own right, and controlled the outcome of the conflict, we might have two (or more) countries occupying the land mass that is the United States today. It may yet come to that, as the governmental control coming from Washington, DC, is found to be less and less acceptable in a wide swath of the “red” states.

Purely as a matter of economics, it may be necessary to cut loose from the currently constituted Federal form of government.

The Soviet Union spun apart, didn’t it? Of course, with few if any practitioners of free market economics available to help rebuild the financial and trading capabilities, all those separate parts limped along badly for several years.

[GeronL]

giant sucking sound....

subsidies failure and get more of it

[April Lexington]

ping

[April Lexington]

You are wise, alloysteel! Very wise.

[Jack Black]

Given the realities of the economic/financial/political system: too much debt; too many obligations coming up; decreasing manufacturing; decreasing retail sales; plummetting GDP; increasing unemployment; the dollar under attack from our principle lender; the inherant weakness of fiat currency and fractional reserve banking; etc, I think it’s just as likely that we’re in the beginning of the crisis as the end. I’m looking ten years down the road and I’m thinking we haven’t heard the last of things as far as this economic crisis is concerned.

5 posted on Tuesday, March 31, 2009 7:17:32 AM by RC one --------------------------------------------------------------------------------

To: pointsal
We are sinking into a financial black hole - as we grow closer and closer to the singularity, we are torn apart by the increasing gravitational forces.

There is a cure for this madness, but it is both very painful in and of itself, and it shall not be applied so long as the now failing nascent obama regime remains in power.

There are several way to nullify this power. Civil disobedience comes to mind, and even overt guerrilla warfare against the symbols and icons of this troubled regime. There is always the temptation to revert to the actual wording of both the Declaration of Independence, and the Constitution as it has evolved since 1789, but this would be an open revolt against the current Administration and and the Democrat-majority Congress, both of whom have simply abandoned any pretense they are governed by those words of distilled wisdom.

Secession is still a legal option, that is, individual states may choose to LEAVE the union that is the United States of America, just as they could petition to join in the first place. This has been done before in our history, but that was crushed by force of arms, and the application of superior technology by the dominant and successful side in that conflict.

If the Confederacy had managed to form a viable country in its own right, and controlled the outcome of the conflict, we might have two (or more) countries occupying the land mass that is the United States today. It may yet come to that, as the governmental control coming from Washington, DC, is found to be less and less acceptable in a wide swath of the “red” states.

Purely as a matter of economics, it may be necessary to cut loose from the currently constituted Federal form of government.

The Soviet Union spun apart, didn’t it? Of course, with few if any practitioners of free market economics available to help rebuild the financial and trading capabilities, all those separate parts limped along badly for several years.

Alloysteel, nice summary of current events and some of the potential outcomes. Well deserving a Civil War II ping.

[hiredhand]

I had a conversation with a close family member of mine (NOT from my house!) who illustrated a problem without even realizing she had done this. She illustrated that leftists and a good many of others are operating solely based on emotion. They're making important decisions based on this. What she said was simple enough. We had been talking about the state of the economy and just badness in general. She's pretty much been wiped out in the stock market and we were lamenting this fact.

She said, "I think in the spring people will have more hope." Me and one of my young adults exchanged nervous glances and I asked this family member of mine WHY she thought that things would be better in the spring. She said that this was because it would warm up and that the change in weather would simply cause people to be hopeful. Once again, me and my daughter exchanged glances. I told her that while I agreed generally with her prediction of attitudes and the weather that I wondered about AFTER the spring...particularly the following winter. She looked a little perplexed. I explained that while most of us look forward to spring, the indicators don't tell us that anything is going to get better soon. So what about the following winter? I said that while it's nice that people will be hopeful in the spring, I asked what will they do the following winter as the situations has digressed during the spring and summer, even though they felt good about it, and were hopeful? She gave me the Trout Look. Do you know this look? Go stand in the mirror, and then lose all facial expression. Then open your eyes just a little wider and drop your bottom jaw. See the resemblence to a Trout? THAT is the look she gave us. It's not a look of confusion or even stupidity, but rather a look of complete INCOMPREHENSION. She did NOT comprehend what we we were trying to explain.

She looked at me and my daughter and uncomfortably searched for a suitable answer. But there was none. So she simply stammered out that she thought people would be more hopeful in the spring. We left it at that because there was no way we were going to convince her and to try would have done nothing but cause her stress.

In the winter, we'll look back and ponder this recount I'm sure. But people should understand something. Hope is nothing more than wishing optimistically. It's the sort of thing you do when you buy a lottery ticket. Never mind the statistical odds against you. It's also a completely passive action and useless all by itself. Now granted, if you're housebound, then perhaps all you can do is hope. But I don't think this is the case with most people who look to the government for a solution.

Faith, on the other hand, is built on a reasonable expectation based on a previous hard truth, or evidence. It's not a passive thing either. Those who have it believe it so strongly that they're willing to ACT in order to bring results to bear. I think the difference between hope and faith is one of the largest differences between those crying for the government to save them, and those screaming for the government to leave them ALONE.

But to all those who hope that things will get better when spring is fully here, let me encourage them. Things will get better! For starters, people won't have a heating bill! But I think there's a good chance that this spring will not be much unlike the eye of a really bad hurricane passing over, and when cold weather comes again, the full force of what preceded it from the spring and summer months will return full force.

[Oatka]

Given the realities of the economic/financial/political system: too much debt; too many obligations coming up; decreasing manufacturing; decreasing retail sales; plummetting GDP; increasing unemployment; the dollar under attack from our principle lender; the inherant weakness of fiat currency and fractional reserve banking; etc, . . .

This is why I am banking (no pun intended) on a Depression of Biblical proportions rather than inflation - hyper or otherwise. Not that the govt won't try, but the outstanding debt is, IMO, SO great, running the presses til they smoke, or fleeing to SDRs will do nothing.

I'm ready to turn on a dime (silver) if I see signs that I'm wrong, and believe me, I am checking the pulse every day. We are in "parlous times" indeed and need to be nimble.

[TenthAmendmentChampion]

And the first four years of the crisis, we are being led down the road to socialism by an arrogant hardheaded Marxist.

[Gilbo_3]

'trout look' bump...

excellent commentary as usual Sir...my 18 yr old has opened his eyes and trusts his own analysis of the 'news' and the decay thats rampant all around...

my 44 yr old stoner cousin on the other hand, remarked that hussein was doin some good things...my trout look wasnt visible over the phone but I think he got the hint when my only reply was 'yep communism is certainly being instituted straight outta the owners manual'...

Faith...get it while theres yet time, and introduce your kids to it as well and maybe someday we will have a chance...although itll really be a short time before we are overwhelmed completely...then 'choice' #2 will be at our feet...

[patriot preacher]

There’s no doubt the US is spinning out of control. There’s no doubt that the current government are actually hastening the approach of the crash. There’s no doubt they are positioning us to become “one with the world,” rather than a sovereign nation, strong and standing on its own.

When we begin to talk about scenario’s, the best we can hope for is that there is a great uprising of “Tea Party” AMericans who demand of the government — thru peaceful protest, political pressure and perhaps civil disobedience — to force the politicians to halt their extra (and UN-) Constitutional practices, perhaps bringing a seachange in the 2010 midterm elections.

I think this is unlikely, for 2 reasons: (1) The “powers that be” in Washington, DC have contempt for the people, and they have gamed the system so that no matter how the election turns out, they will have a “majority,” OR they will have enough “Judges” in Federal Courts, OR they will have the HUGE Executive and Congressional Beauracracies that will resist the mandate of the people and even the “elected government.” If THEY think the people are resisting their vision of what the nation ought to be, there is NOTHING to stop them from simply forcing it on the people, “for their own good.” They really don’t believe the people would fight back, to any great extent. I admit, I share that doubt. I see mostly sheep, not lions.

(2) GOD FORBID this next one happens — either another terrorist attack on the US, perhaps using WMD, or else a political assasination within our nation — and the WHOLE ballgame changes. Either would almost certainly degenerate into violent protests — or even civil conflict. Then, all bets are off, the economy collapses, and it’s every man/state for themselves, at least initially. Washington DC just would NOT have either the moral or logistical authority nor ability to maintain a stable control over the nation.

I think we are heading toward one of these 2 ends — I prefer the first, I fear the second. And I pray for MERCY.

[unique]

Think - COMMERCIAL REAL ESTATE, including shopping centers.

It’s the next HUGE wave of losses for the banking world - much bigger then residential housing.

[WarEagle]

Think - COMMERCIAL REAL ESTATE, including shopping centers.

Saw last night on Fox Biz where AIG was cutting back expenditures at shopping centers and apartment complexes they own. Methinks you're right.

[unique]

Well, I’ve been in the banking world all my life - it’s a iceberg coming at the ship America.

Banks have Huge loan portfolios centered on Commerical Real Estate - it’s a real money maker, even for small banks. It’s going to be a nightmare+.

[curiosity]

Too many financial institutions are fundamentally insolvent. The only workable solution is a massive, system-wide forced conversion of financial institution debt into equity.

Unfortunately, too many politicians are afraid to impose losses on bondholders. For the life of me I cannot figure out why.

[TigerLikesRooster]

Liberalism, to many people, is to fill an emotional void. Despite their pretense that they are more rational people.

The possibility that there is something outside their comfortable, albeit imaginary, liberal bubble, and you are about to be pushed out to it is simply unacceptable. It will shake them to the core. It is to deny 'the absolute.'

So it make people go to the ridiculous extreme. Failure to comprehend the situation or shall we say, unconscious but desperate refusal to confront the reality. To accept reality at hand is to renounce 'the absolute.' It is no better than death itself.