Print Story The Great Depression of 2008
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By wiredog (Tue Jul 15, 2008 at 06:24:22 AM EST) (all tags)
Need we emphasize that you never, ever want to read the words "since the 1930s" when the topic is frantic government efforts to shore up an imploding economy?

From The Post:

Banking stocks suffered some of their worst losses in a generation yesterday as investors' confidence in the U.S. financial system continued to erode...


I wouldn't be surprised, come September, to see the Dow below 10k, Nasdaq below 2k, and the S&P 500 below 1000.

More good news:

New reports, meanwhile, showed weaker-than-expected retail sales in June, even as inflation pushed up wholesale prices at a faster than expected rate. ...the dollar fell to a record low of $1.60 against the Euro

The low dollar is a good thing. If you're a USian exporter. If you are from a place that exports to the US, not so good. Likewise ungood for oil users (all of us) in the US...

Via How The world Works (an econoblog everyone should read)

you simply cannot dismiss the threat posed by a possible Fannie Mae/Freddie Mac bankruptcy. The total gross domestic product of the world is about $50 trillion. Together Fannie Mae and Freddie Mac are responsible for about $5 trillion worth of U.S. home mortgage debt.

...This ain't just a U.S. problem, it's the whole world's problem.

...one of the most astounding legacies of the George W. Bush presidency, which becomes more profound and historic with the passing of every single day, is how absurd and laughable has become the idea that unregulated markets are a sensible way to run an economy. ... as a public relations exercise for free market fundamentalism, the Bush years have been an unmitigated disaster.

From the Federal Reserve Bank, some lending rules. Including a Rule that will
Prohibit a lender from making a loan without regard to borrowers' ability to repay the loan from income and assets other than the home's value.
As HTWW says:
Ponder that sentence for a moment.

The Federal Reserve has decided it must order lenders not to make loans that they should not make.

Make no mistake: The government is stepping in to prevent a bank failure (several, really), to keep the housing market from locking up, and thus to prevent, it hopes, a complete economic meltdown.


GM to Cut Salaried Workers, Production, Dividend
Struggling auto giant General Motors announced a number of sweeping measures this morning designed to raise cash and trim expenses. ...

They include:

-- Reducing the number of trucks manufactured, cutting marketing and sales budgets and freezing engineering budgets.

-- Continued workforce reduction, killing raises for this year and next and suspending executive bonuses this year. Wagoner would not specify how many workers could lose their jobs through attrition, voluntary buyouts or layoffs, but said, "We suspect the vast majority of reductions will be from initiatives that do not require involuntary actions." GM also did not specify which manufacturing plants would be affected.

-- The sale of unspecified vehicle lines, likely starting with Hummer.

-- Cutting heath-care benefits to retirees 65 and older, when they are eligible for Medicare, and increasing pension payments to partially cover the increased expenses.

-- Delaying development of its next-generation truck and SUV lines.


Rising inflation. Major bank failures (Bear Sterns, IndyMac, and the 2FMs (effectively, banks). Large companies struggling mightily.

As Lileks said:

I’m worried most about a recession, inflation AND a jolly round of trade wars, coupled with fragile banks, overcapacity, diminished consumer confidence and aggressive messianic collectivism. Something about that smells familiar. I love studying the thirties and forties, but not first hand.

Meanwhile, lm is in town. Time to call him up and figure out what we're doing for lunch. Update [2008-7-15 13:4:6 by wiredog]:
Met with lm and, umm, Mrs. lm for lunch at Oriental East, a nice Chinese place here in Silver Spring. Spent an hour or so just eating and talking about whatever. Really pleasant people to hang out and eat lunch with.
< I Have A Dare For You All | She was born in a crossfire hurricane >
The Great Depression of 2008 | 25 comments (25 topical, 0 hidden) | Trackback
Oh come on.... by ObviousTroll (4.00 / 1) #1 Tue Jul 15, 2008 at 06:32:10 AM EST
People use the phrase "since the 1930s" so often it's practically a variant of Godwin's law.

That said, there *is* a real problem and you summed it up in your first quote: our entire economy depends on confidence and few 401k owners and few individual investors actually remember bear markets - which means they are increasingly likely to completely freak out.

I think the only reason they haven't is that they don't have any options. There are no "safe harbors" for investors right now, so we're left grimly hoping that the Feds really will keep Freddie and Fannie from doing the dead cat bounce.

Speaking of which - you should head over to Reddit: the socialists are basically running the place with their insistence that the Fed should just let these failing banks and funds fail. Their willful ignorance of the consequences of that is terrifying in its own right.


--
Has anybody seen my clue? I know I had it when I came in here.

401k owners by wiredog (2.00 / 0) #3 Tue Jul 15, 2008 at 08:00:44 AM EST
Last night I sat down and figured out where my 401k would be if I hadn't cashed it in for survival money during bouts of unemployment, assuming I was putting into it at the same amount while working.

By cashing it in, and paying the various penalties, I reduced my losses. Paying down the credit card is probably the best investment I can make right now.

Earth First!
(We can strip mine the rest later.)

[ Parent ]
Testify by georgeha (2.00 / 0) #4 Tue Jul 15, 2008 at 08:02:16 AM EST
btw, I think I gmailed you from home.


[ Parent ]
Amen by wiredog (2.00 / 0) #6 Tue Jul 15, 2008 at 08:05:10 AM EST
I replied, via gmail, from work.

Earth First!
(We can strip mine the rest later.)

[ Parent ]
Oh, and by wiredog (4.00 / 1) #7 Tue Jul 15, 2008 at 08:05:52 AM EST
Bush Expresses Confidence in Economy

We're screwed.

Earth First!
(We can strip mine the rest later.)

[ Parent ]
The socialists want them to fail too? by marvin (2.00 / 0) #9 Tue Jul 15, 2008 at 08:50:46 AM EST
But from reading Merekat's diary, I thought it was the teenage libertarians that were the problem, wanting Freddie and Fannie to die.

And now the socialists want it too. Colour me confused.

[ Parent ]
Them too, but for different reasons by ObviousTroll (2.00 / 0) #10 Tue Jul 15, 2008 at 09:31:57 AM EST
the libertarians want them to fail because that's how capitalism is supposed to work. The socialists want them to fail so that evil fat-cat investors will finally be forced to pay for their misdeeds.


--
Has anybody seen my clue? I know I had it when I came in here.
[ Parent ]
Fannie and Freddie are the worst of both worlds by lm (4.00 / 1) #11 Tue Jul 15, 2008 at 03:56:40 PM EST
Fannie and Freddie represent privatization of profits (shareholders get the dividends) with socialized risks (the feds warrant the mortgages).


There is no more degenerate kind of state than that in which the richest are supposed to be the best.
Cicero, The Republic
[ Parent ]
I thought that was the entire banking industry by Herring (2.00 / 0) #20 Thu Jul 17, 2008 at 02:02:54 AM EST
See also LTCM.

Herring - Official HuSi diarist of the 2016 European Korfball Championship (October 22nd, Dordrecht, Netherlands)
[ Parent ]
The feds didn't bail out LTCM by lm (2.00 / 0) #21 Thu Jul 17, 2008 at 04:47:06 AM EST
They organized a private bailout from a collection of private banks. That's a different animal entirely over directly guaranteeing loans.

There is no more degenerate kind of state than that in which the richest are supposed to be the best.
Cicero, The Republic
[ Parent ]
Yay, we export a lot by georgeha (4.00 / 2) #2 Tue Jul 15, 2008 at 06:55:49 AM EST
I just need to work up to biking 30 miles a day, in all sorts of weather, stock up on bike tubes, rip up the lawn and plant potatoes, and learn some squirrel recipes and we'll get through this fine.


squirrel is not good. by garlic (2.00 / 0) #13 Wed Jul 16, 2008 at 11:17:35 AM EST


[ Parent ]
The high in cholestorel thing is a myth by georgeha (2.00 / 0) #15 Wed Jul 16, 2008 at 11:19:26 AM EST



[ Parent ]
I don't know about that. by garlic (2.00 / 0) #17 Wed Jul 16, 2008 at 12:36:30 PM EST
I know that eating squirrel growing up, I didn't like it.


[ Parent ]
I blame the cook by lm (4.00 / 1) #22 Thu Jul 17, 2008 at 05:23:49 AM EST
I grew up eating squirrel and it was yummy.

There is no more degenerate kind of state than that in which the richest are supposed to be the best.
Cicero, The Republic
[ Parent ]
could be. by garlic (2.00 / 0) #23 Thu Jul 17, 2008 at 06:05:34 AM EST
probably it was overcooked


[ Parent ]
Tastes like by wiredog (2.00 / 0) #24 Thu Jul 17, 2008 at 07:20:13 AM EST
chicken rabbit.

Earth First!
(We can strip mine the rest later.)

[ Parent ]
I had frog legs for the first time by lm (4.00 / 1) #25 Thu Jul 17, 2008 at 06:27:07 PM EST
It's the first time I've ever tried something that reputedly tastes like chicken that tasted like chicken.

There is no more degenerate kind of state than that in which the richest are supposed to be the best.
Cicero, The Republic
[ Parent ]
I'm making good $ with SKF by MillMan (2.00 / 0) #5 Tue Jul 15, 2008 at 08:04:53 AM EST
of course as it goes up, the likelihood of my bank dying in the process goes up as well...

When I'm imprisoned as an enemy combatant, will you blog about it?

WIPO by lb008d (4.00 / 2) #8 Tue Jul 15, 2008 at 08:44:54 AM EST
Buy guns.

Write in vote: by duxup (4.00 / 1) #12 Tue Jul 15, 2008 at 05:27:39 PM EST
Buy while the market is low.
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the only way I'm gonna make it by garlic (4.00 / 1) #14 Wed Jul 16, 2008 at 11:18:48 AM EST
Lucky me, what a great buying opportunity. All the rest of you need to stop freaking out, and freaking me out though.


[ Parent ]
yar by duxup (2.00 / 0) #16 Wed Jul 16, 2008 at 12:04:33 PM EST
We bought our house this last December.  We figured... when else are we going to have this opportunity?
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[ Parent ]
heh. by garlic (4.00 / 1) #18 Wed Jul 16, 2008 at 01:16:01 PM EST
My brother bought his house in Madison while he was stationed there for 2 years. He just sold it for a 10k loss. He's getting out of the Navy and is getting his first professional job in Milwaukee. Oh, and buying another house.

Houses are only worth what people are willing to pay, and if we can't get mortgages any more, I don't think they'll be worth as much.


[ Parent ]
Time by duxup (4.00 / 1) #19 Wed Jul 16, 2008 at 09:46:06 PM EST
Well buying a house isn't or at least shouldn't be a short term investment.
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[ Parent ]
The Great Depression of 2008 | 25 comments (25 topical, 0 hidden) | Trackback