Friday, February 12, 2010

Dow Plummets 130 Points On Open, Get Ready To Break 10,000

From Jenna Orkin

Quote of the day:
“Germany [and France] face a Hobson’s Choice: if loan guarantees for Greece turn into a slippery slope towards implicit support for the whole of the ‘Club O’ Med’ (Portugal, Spain, Ireland, and Italy), EU creditors could be tainted by contingent liabilities worth trillions. Yet failure to reach a deal risks a sovereign version of the Lehman crisis.

No wonder then that Germany and France are diving into the water to rescue the drowning Greeks. But did you ever see how a drowning man treats a lifeguard? The lifeguard dives into the water and speeds toward the drowning man. Once the lifeguard arrives, however, the drowning man, in an effort to keep his own head above water, grabs hold of the lifeguard and plunges him under the water."

Credit Suisse: THIS Is the Real List Of Countries Verging On A Sovereign Crisis (And Yes The US Is On It)
Barclays: The Baby Boomer Tidal Wave Will Annihilate Government Bonds, Starting Now SocGen: How The World's Central Bankers Are About To Make The Next Huge Policy Blunder Dubai CDS spreads blow up

Will markets call EU bluff on Greek rescue?
Greece Will Survive Today, But The Real Story Is The PIIGS Collapse To Come
German halt, Italian reverse hit euro zone recovery
Economic Recovery in Europe Unexpectedly Wilts After Stagnation in Germany
Greece could bring euroland to its knees
Is "Moral Support" a Plan?
Greece Just Signed Its National Suicide Pact
Wow! The Greek Bailout Really Is Euro-TARP!
Interest rate warning
UK bond rates to double as aging population weighs on economy.
BT's £9bn pension deficit

Dow Plummets 130 Points On Open, Get Ready To Break 10,000
Corporate Bond Yields Offer Hint Party Is Over
Governor Christie Declares "New Jersey on Edge of Bankruptcy"
NJ governor declares fiscal emergency as deficit soars
Just six families helped by government Mortgage Rescue Scheme
End of Suburbia?
As the nation's home builders try to claw their way out of the biggest abyss in the sector's history, the future landscape is beginning to look a bit different than they once thought.
Can farming save Detroit? (from Rice Farmer)
Robin Hood tax vote 'rigged'
Goldman faces claims its computer was used to rig vote on bank tax.
Ex-Goldman programmer indicted over HFT code theft
Virginia delegates pass bill banning chip implants as ‘mark of the beast’ (from Rice Farmer)
Sealing Shift, Chávez Gives Contracts to Western Oil Companies

Begging Haiti for forgiveness
Naomi Klein: Haiti as a debtor? We in the west should pay arrears for years of violations
NYT: Missionaries’ aide eyed in trafficking ring
Cash for Haiti Could Undermine Rebuilding Effort
Law of unintended consequences or more propaganda to discourage aid? - JO

Beijing Seen Vacant for 50% of Commercial Space as Chanos Predicts a Crash
The 700 Military Bases of Afghanistan (from Vantage Point)

The Latest on the Ethanol Scam: US Ethanol Industry’s Grain Consumption in 2009 Was Enough to Feed 330 Million People (from Rice Farmer)
Pentagon quietly waging war on climate change
Mud Volcano Was Man-Made, New Evidence Confirms
Antibiotics Breed Superbugs Faster Than Expected
Dark matter 'seen for first time'

Secret Gold Policy

Rice Paddy Art
But how does it taste?


businessman said...

With what we've seen on the Blog recently, including video clips featuring interviews with stock market analyst Charles Biderman, does The Fed have the ability to forestall any major market crashes for still some time? It was mentioned in these interviews that The Fed appears to have spent $50-60 billion buying futures in recent months in after hours trading, which apparently compounds the effect of these purchases on the market 10X when compared with if they had just bought regular shares of stock.

$50-60 billion is relatively nothing for The Fed to be will the market still hold up for some time if The Fed spends another $200 billion or so on futures over the next year?

pstajk said...

I remember a few people recently calling out Mish for his disrespect toward unions ...

In New Jersey's and California's cases how are any of his points invalid in terms of balancing the budget? Pensions and benefits are crushing state spending.

gamedog said...

I feel a bit dodgy making predictions :) Part of me is expecting the markets to tank anytime, but another part of me thinks they can drag it out to July -Sept time (because TPTB don't look ready for it yet).

I expect to see a few more bailouts - for the PIIGS, a few US states too maybe, max out some more sovereign credit cards, bring a few more states/players right up to the brink, and then crash it globally, when all the ducks are lined up.

There has to be some big trigger to enable a replacement carbon based global currency. This from Miliband (Bilderberg)

Problem - Reaction - Solution

Global Financial Apocalypse - dark days - new global currency with central taxation element based on energy use.

That's me all predicted out LOL

PeakedOut said...

Poor budgeting and political greed is responsible for crushing state debts. Not unions. As an employee of California, we have made 30% less than the private sector for more than a decade. Yes, the retirement plan is overly generous, but this is the result of political considerations.
It has long been known that taking care of the Baby Boomer generation would bancrupt Medicare, Social Security, etc etc. It has the same effect with state budgets.
Without Unions, there would never have been a middle class.

State employees have been furloughed while private contracts continue to flow.

Mish is a financial specialist with a focus on the numbers, and the numbers show salaries and benefits breaking the budgets. It was similar agruments used by industrialists in the early 1900's to justify paying substandard wages. This ultimately lead to the creation of unions. NAFTA revisited the issue of pay, and the American worker has lost ground ever since. Poor business decisions and greed have contributed to our collapse. Unions are a symptom, not a cause.

PeakedOut said...

Several postings back, (it is REALLY hard to keep up with Jenna lately) the topic of snow plows for the rich came up. Essentially, arguements were put up, pro and con, for preferential treatment of wealthy communities. This hits on a realization I am seeing more and more.

As resources become more scarce, it is the poor being left out. This seems perfectly OK to those who are still not on the poor side of the equation, but the poverty line is rapidly climbing social ranks. At some point, a tippingpoint will be reached.

Try to remember where your opinions stood when you were on the high side and see how long you can continue to support them when that poverty line is over your own head.

Going back to that snow plough analogy, and rich versus poor, if the rich man holds on to his money by laying off workers, he is really only delaying his own demise. And how much logic is there in letting the boss get to work if his workers cannot?
A policy of protecting the wealthy only leads to a peasant uprising. Watching history repeat is painful and annoying. I wonder what types of self delusion I am operating under?

brell said...

unions were a symptom of enjoying glug glug glug cheap oil by the Developed Countries.

those days are over and are on life support.

yes middle class and unions are GREAT WHEN you have lots of cheap energy/resources.

we always overshoot.

but some say it's still better to have loved than not. ;) ;)

businessman said...

gamedog...thanks for the information. When I hear people talk about moving towards a carbon-based currency, does this mean that a move like that could potentially send the value of precious metals plummeting towards the ground?

Simon said...

re carbon economy and precious metals prices And would not the plummeting precious metals price suit those with wealth to safeguard? Wheels within wheels perhaps?

Simon said...

re carbon economy and precious metals prices And would not the plummeting precious metals price suit those with wealth to safeguard? Wheels within wheels perhaps?

Sebastian Ernst Ronin said...

Waiting for the middle class to be gutted...patiently.

Eddie Willers said...


Appreciate the insight, I wrote in 'favor' of the wealthy receiving snow plow service first...but my goal was more to promote privitization of snow plows as opposed to arguing in favor of the wealthy receiving services first.

When resources are scarce, they are allocated first to those who need (i.e. can afford) them most. Markets reflect this need by charging high prices for the good or service in demand. At the same time, the high price sends a signal to entrepreneurs: there's an opportunity to make money if you can provide this good or service. Greedy capitalist pigs subsequently flood the market in search of high profits, and the abundance of the good or service drives down prices. The market quickly reaches (near) equilibrium, and everyone who wants that good or service has it. Cell phones are a perfect example of this - 15 years ago only the very wealthy had cell phones. Today everyone who wants one has one. The market provides!

Conversely, because the government operates on a budget and not according to market forces (prices), unpredictable shortages and surpluses result. This is why people here waited almost a week for serviceable roads.

Re: peasant uprising. Your post had a hint of Marx in it ;) but I assume that is likely not the direction you were heading. While I agree the wealthy cannot wantonly lay off people and not expect recourse, I strongly disagree with the implication that an employer would lay someone off to protect his or her bottom line. There are a host of reasons personnel are let go and/or not hired in the first place, almost all of them having roots in government interference in the marketplace. Minimum wage laws and unions, for example, are largely responsible for high unemployment rates among teenagers and minorities because they unfairly price labor above the going market rate for teenagers and minorities. Labor, like any other commodity, carries a market price that should be free to fluctuate. As with other commodities, when prices are held above market rates, shortages result. By pushing for generous retirement packages and higher hourly rates, unions effectively 'price out' segments of otherwise employable people. The poor and inexperienced workers lose most.

Poor or wealthy I would support the free market because it is the only mechanism that truly cares for the poor.

(I should mention here that I am aware that my statement about unions above could be interpreted to back up your contention that employers drove down wages when there were no minimum wage laws, leaving everyone worse off. That conclusion overlooks some important ideas...but that will have to wait for a later date!)

gamedog said...

I don't think any "new" currency would send PM's plummeting, they have always been a traditional store of wealth even before oil. And before we see a "new" currency the old one must fail, which will send PM's much higher, only coming down with confidence in the "new". There will be volatility, the PTB are heavily involved in PM price manipulation, and we know the boom bust cycles are how the main PTB players cash in. If Gold/PM's get battered (for whatever "news" reason) they're only ever going to stay low if there is confidence in the financial system - since we're out of the growth paradigm and now on the downslope of P.O. I can't see that happening.

The pundits I have come to respect reckon we could see Gold go down to $700 - £800, some sort of shakeout to get people to sell so TPTB can mop it up cheap, before we see MCR's $2000 prices.

PM's are a good hedge against inflation, or rather an "easy" hedge for the average person with savings. The best hedges are the preps we all talk about, but that is far too much heavy thinking for the sheeple who don't "get it".

I don't own any Gold/PMs atm, we have already adapted to a minimal cost/spend lifestyle, savings are/will be invested in the homestead/preps. e.g. I'm currently looking at buying a £2500 (S/H) timberwolf pro tree chipper/shredder that will chip up to 9" wood. I don't "need" one, I can use my engine driven current shredder but it will take 50 times as long to produce the quantity I need. I need a lot of mulch for my forest garden project which we're planting in a couple of weeks. Point being, the £2500 is better invested in a useful bit of equipment than it is in the bank, or gold. I can hire it out, job it out, use it myself, and still sell it for at least what I paid.

If Gold does come down into the 7-800 range (looking at silver first) I might buy some coins to bury for a very longterm hedge, i.e. hold em for emergency funds only. If I do, it'll be 1/3 of my liquid cash. I have checked out a supplier as part of my preps, if I make a decision I can have coins in an afternoon.

That might sound a bit convoluted but it should show where I'm coming from ;-)

RanD said...

The last two sentences of Bill Bonner's - The Daily Reckoning - article titled Economic Instability a Result of Extreme Imbecility tell us:

"No nation has ever existed, except for present company…whose histories have yet to be completed…that didn’t default, renege, collapse, go bankrupt, disappear, disintegrate, capitulate, or otherwise fall over and die. The only questions are when and how."

More straight-to-the-point words have never been spoken.

Thankyou, Jenna.

businessman said...

gamedog...good analysis. I would hope that by the time we get to the point where a carbon currency would be proposed, that people would be very suspicious of it. But then again, as I've heard one top marketing expert say here in the USA, "Recognize that when you're marketing to people here in the USA you're marketing to Homer Simpson."

USAmoneytale said...

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movie is also first listing on Google: "USA Money Tale"
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* Understand graphically what "Billions" and "Trillions" of dollars really mean. Understand the human cost of Inflation, The Federal Reserve, and The Defense Department.
* You'll be amazed what the men on our currency have to say!
* Starring: Thomas Jefferson, Abraham Lincoln, Alexander Hamilton, George Washington, Benjamin Franklin, Ulysses S. Grant, Franklin Delano Roosevelt, John F. Kennedy, Woodrow Wilson and Andrew Jackson.
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Peter J. Nickitas said...

Jenna, MCR:


I paste this story from Cindy Sheehan to buttress an observation of mine, that benefits from lessons taught me by MCR and Howard Zinn -- that the stories of servicemembers and their families who see through the facades of war and imperialism merit honor and widespread communication, because the warriors often wind up on the winning side.

"I saw something interesting on the road to Havana today. A rebel was being arrested. Rather than go peacefully, he jumped into the van, detonated a bomb, and took a major with him."

"And what does that tell you?" asked Hyman Roth.

"That the rebels can win."

Godfather Part II.

I had a similar road to Damascus trip -- several times.

Peter J. of Minneapolis

Raymond said...

eddie - your simplistic explanation of how markets work to benefit those in most need "(ie the wealthy)" with the assumption of mobile phones or snow plows for all, neglects the very topic that this blog is discussing - abundant, accesible and cheap resources. not to mention and the fact that the drivers of mobile phone innovation (nokia, motorola and ericsson) all received massive government r&d incentives and tax breaks (150% of investment) to kick start their markets.

gamedog said...

LOL yeah, when the Springfield $$ goes Weimar and they tell Homer the only way to buy Duff Beer is with new "carbon" money - they'll be queueing round the block for it!

Eddie Willers said...


ALL resources are scarce. Scarcity drives value, and prices reflect the value placed on a particular commodity or resource. Markets are the most efficient method to allocate resources because prices quickly change to reflect the needs of consumers. If a resource were not scarce it wouldn't have a price (i.e. air).

Price also reflects the degree of resource scarcity. The fact that the price of a barrel of oil has not increased (in real terms) since the 1940's presents an interesting counter argument to this blog's message.

Will we run out of oil? I suppose so. Will running out of oil cause widespread doom? I doubt it, but our degree of success in overcoming shortages is directly related to how much of a market is maintained.

That said, I totally agree about the government handouts to cell phone companies for r&d. Government subsidies are unnecessary, but they are a reality. My hope in using the cell phone example was to illustrate market efficiency, a fact I feel another poster overlooked when he or she equated plowed roads for the wealthy with what sounded like some form of class warfare. While I enjoy reading the thoughts of the folks of this blog, I believe the community's biggest weakness is a basic understanding of economics.

Full disclosure: I'm not convinced Peak Oil is a reality. Even if Peak Oil were proven beyond a reasonable doubt to be true, I'd trust the market for solutions before I'd trust the government or, worse, the increased calls for localization.