REAL WORLD EVENT DISCUSSIONS

Economic nightmare scenario

POSTED BY: SIGNYM
UPDATED: Thursday, December 7, 2023 12:54
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Wednesday, February 6, 2008 10:45 AM

SIGNYM

I believe in solving problems, not sharing them.


I hope I don't get in trouble with the internet police. I found this on the RGE Monitor which is an economic review website with a macro bent. I'm going to edit this for brevity, so if you want to see the rest you'll have to register on the wesbite

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The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster

Nouriel Roubini | Feb 05, 2008

Why did the Fed ease the Fed Funds rate by a whopping 125bps in eight days this past January? It is true that most macro indicators are heading south and suggesting a deep and severe recession that has already started. But the flow of bad macro news in mid-January did not justify, by itself, such a radical inter-meeting emergency Fed action followed by another cut at the formal FOMC meeting.

To understand the Fed actions one has to realize that there is now a rising probability of a “catastrophic” financial and economic outcome, i.e. a vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe. ... That is the reason the Fed had thrown all caution to the wind – after a year in which it was behind the curve and underplaying the economic and financial risks – and has taken a very aggressive approach to risk management.

To understand the risks that the financial system is facing today I present the “nightmare” or “catastrophic” scenario that the Fed and financial officials around the world are now worried about. Such a scenario – however extreme – has a rising and significant probability of occurring. Thus, it does not describe a very low probability event but rather an outcome that is quite possible.

Start first with the recession that is now enveloping the US economy. Let us assume – as likely - that this recession – that already started in December 2007 - will be worse than the mild ones – that lasted 8 months – that occurred in 1990-91 and 2001. The recession of 2008 will be more severe for several reasons:

First, we have the biggest housing bust in US history with home prices likely to eventually fall 20 to 30%;

Second, because of a credit bubble that went beyond mortgages and because of reckless financial innovation and securitization the ongoing credit bust will lead to a severe credit crunch;

Third, US households – whose consumption is over 70% of GDP - have spent well beyond their means for years now piling up a massive amount of debt, both mortgage and otherwise; now that home prices are falling and a severe credit crunch is emerging the retrenchment of private consumption will be serious and protracted. So let us suppose that the recession of 2008 will last at least four quarters and, possibly, up to six quarters. What will be the consequences of it?

Here are the twelve steps or stages of a scenario of systemic financial meltdown associated with this severe economic recession…

First, this is the worst housing recession in US history and there is no sign it will bottom out any time soon. At this point it is clear that US home prices will fall between 20% and 30% from their bubbly peak; that would wipe out between $4 trillion and $6 trillion of household wealth. While the subprime meltdown is likely to cause about 2.2 million foreclosures, a 30% fall in home values would imply that over 10 million households would have negative equity in their homes and would have a big incentive to use “jingle mail” (i.e. default, put the home keys in an envelope and send it to their mortgage bank). Moreover, soon enough a few very large home builders will go bankrupt and join the dozens of other small ones that have already gone bankrupt thus leading to another free fall in home builders’ stock prices that have irrationally rallied in the last few weeks in spite of a worsening housing recession.

Second, losses for the financial system from the subprime disaster are now estimated to be as high as $250 to $300 billion. But the financial losses will not be only in subprime mortgages and the related RMBS and CDOs. They are now spreading to near prime and prime mortgages as the same reckless lending practices in subprime (no down-payment, no verification of income, jobs and assets (i.e. NINJA or LIAR loans), interest rate only, negative amortization, teaser rates, etc.) were occurring across the entire spectrum of mortgages; about 60% of all mortgage origination since 2005 through 2007 had these reckless and toxic features. So this is a generalized mortgage crisis and meltdown, not just a subprime one. ... Also, the RMBS and CDO markets for securitization of mortgages – already dead for subprime and frozen for other mortgages - remain in a severe credit crunch, thus reducing further the ability of banks to originate mortgages. The mortgage credit crunch will become even more severe.

Also add to the woes and losses of the financial institutions the meltdown of hundreds of billions of off balance SIVs and conduits; this meltdown and the roll-off of the ABCP market has forced banks to bring back on balance sheet these toxic off balance sheet vehicles adding to the capital and liquidity crunch of the financial institutions and adding to their on balance sheet losses. And because of securitization the securitized toxic waste has been spread from banks to capital markets and their investors in the US and abroad, thus increasing – rather than reducing systemic risk – and making the credit crunch global.

Third, the recession will lead – as it is already doing – to a sharp increase in defaults on other forms of unsecured consumer debt: credit cards, auto loans, student loans. ... As the Fed loan officers survey suggest the credit crunch is spreading throughout the mortgage market and from mortgages to consumer credit, and from large banks to smaller banks.

Fourth, while there is serious uncertainty about the losses that monolines {bond insurers} will undertake on their insurance of RMBS, CDO and other toxic ABS products, it is now clear that such losses are much higher than the $10-15 billion rescue package that regulators are trying to patch up. Some monolines are actually borderline insolvent

Next, the downgrade of the monolines will lead to another $B150 of writedowns on ABS portfolios for financial institutions that have already massive losses. It will also lead to additional losses on their portfolio of muni bonds. The downgrade of the monolines will also lead to large losses – and potential runs – on the money market funds that invested in some of these toxic products....

Fifth, the commercial real estate loan market will soon enter into a meltdown similar to the subprime one....

Sixth, it is possible that some large regional or even national bank that is very exposed to mortgages, residential and commercial, will go bankrupt. Thus some big banks may join the 200 plus subprime lenders that have gone bankrupt....

Seventh, the banks losses on their portfolio of leveraged loans are already large and growing... And hundreds of billions of dollars of leveraged loans are now stuck on the balance sheet of financial institutions at values well below par ... And add to this problem the fact that some actual large LBOs will end up into bankruptcy as some of these corporations taken private are effectively bankrupt....

Eighth a massive wave of corporate defaults will take place....

Ninth, the “shadow banking system” ... will soon get into serious trouble.... This system includes: SIVs, conduits, money market funds, monolines, investment banks, hedge funds and other non-bank financial institutions.... Unlike banks these non-bank financial institutions don’t have direct or indirect access to the central bank’s lender of last resort support as they are not depository institutions...

Tenth, stock markets in the US and abroad will start pricing a severe US recession – rather than a mild recession – and a sharp global economic slowdown.... Long covering and margin calls will lead to a cascading fall in equity markets in the US and a transmission to global equity markets.

Eleventh, the worsening credit crunch that is affecting most credit markets and credit derivative markets will lead to a dry-up of liquidity in a variety of financial markets, including otherwise very liquid derivatives markets. Another round of credit crunch in interbank markets will ensue triggered by counterparty risk, lack of trust, liquidity premia and credit risk.

Twelfth, a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices will ensue leading to a cascading and mounting cycle of losses and further credit contraction.... Capital losses will lead to margin calls and further reduction of risk taking by a variety of financial institutions that are now forced to mark to market their positions. Such a forced fire sale of assets in illiquid markets will lead to further losses that will further contract credit and trigger further margin calls and disintermediation of credit. The triggering event for the next round of this cascade is the downgrade of the monolines and the ensuing sharp drop in equity markets; both will trigger margin calls and further credit disintermediation.

Based on estimates by Goldman Sachs $200 billion of losses in the financial system lead to a contraction of credit of $2 trillion given that institutions hold about $10 of assets per dollar of capital. The recapitalization of banks sovereign wealth funds – about $80 billion so far – will be unable to stop this credit disintermediation... A contagious and cascading spiral of credit disintermediation, credit contraction, sharp fall in asset prices and sharp widening in credit spreads will then be transmitted to most parts of the financial system. This massive credit crunch will make the economic contraction more severe and lead to further financial losses.

A near global economic recession will ensue as the financial and credit losses and the credit crunch spread around the world.... Monetary and fiscal easing will not be able to prevent a systemic financial meltdown as credit and insolvency problems trump illiquidity problems. The lack of trust in counterparties – driven by the opacity and lack of transparency in financial markets, and uncertainty about the size of the losses and who is holding the toxic waste securities – will add to the impotence of monetary policy and lead to massive hoarding of liquidity that will exacerbates the liquidity and credit crunch.
********************************

---------------------------------
Always look upstream.

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Wednesday, February 6, 2008 10:53 AM

SIGNYM

I believe in solving problems, not sharing them.


ABS, MBS, CMBS, CMO, CDO, CBO, and CLO are subset of what are generally characterized as structured products. Below is what the acronyms stand for.

MBS = Mortgage-Backed Securities, and the universe of MBS is vast, it is however reserved by market participants to denote the pass-through mortgage bonds (agency pass-through and nonagency pass-through).

CMBS = Commercial Mortgage-Backed Securities, which are trust certificates (bonds) backed by a pool of commercial mortgage loans. The certificates are tranched on the basis of prepayment and credit.

CMO = Collateralized Mortgage-backed Obligations, which are pool of pass-through mortgage bonds tranched to reflect the degree of sensitivity to prepayment (particularly, agency CMO).

ABS = Asset Backed Securities, for example home equity loans (HEL), credit cards, etc. These are securities backed by receivables [payments] that are either secured (HEL) or unsecured (credit card), tranched on the basis of prepayment and default risks.

CDO = Collateralized Debt Obligation, for example, ABS CDO which consist of a portfolio of different ABS bonds, and the payments to the holders of these trust certificates are derived from the cash flows of the ABS bonds.

CBO = Collateralized Bond Obligation, for example high yield [emerging market] CBO which consist of a portfolio of different high yield [emerging market] bonds.

CLO = Collateralized [leveraged] Loan Obligation which consist of a portfolio of different leveraged loans

---------------------------------
Always look upstream.

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Wednesday, February 6, 2008 10:59 AM

CHRISISALL


Signy, if it happens as written, it won't be literally overnight, so expect the conservative element here to spend a lot of time poo-pooing it- until they lose their jobs or homes, that is.

The sky needs supports Chrisisall

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Wednesday, February 6, 2008 11:16 AM

FLETCH2


And then there is the wonderfull world of financial derivatives. To quote Warren Buffet.

Quote:



I view derivatives as time bombs, both for the parties that deal in them and the economic system.

Basically these instruments call for money to change hands at some future date, with the amount to be
determined by one or more reference items, such as interest rates, stock prices, or currency values. For
example, if you are either long or short an S&P 500 futures contract, you are a party to a very simple
derivatives transaction, with your gain or loss derived from movements in the index. Derivatives contracts
are of varying duration, running sometimes to 20 or more years, and their value is often tied to several
variables.

Unless derivatives contracts are collateralized or guaranteed, their ultimate value also depends on the
creditworthiness of the counter-parties to them. But before a contract is settled, the counter-parties record
profits and losses – often huge in amount – in their current earnings statements without so much as a
penny changing hands. Reported earnings on derivatives are often wildly overstated. That’s because
today’s earnings are in a significant way based on estimates whose inaccuracy may not be exposed for
many years.

The errors usually reflect the human tendency to take an optimistic view of one’s commitments. But the
parties to derivatives also have enormous incentives to cheat in accounting for them. Those who trade
derivatives are usually paid, in whole or part, on “earnings” calculated by mark-to-market accounting. But
often there is no real market, and “mark-to-model” is utilized. This substitution can bring on large-scale
mischief. As a general rule, contracts involving multiple reference items and distant settlement dates
increase the opportunities for counter-parties to use fanciful assumptions. The two parties to the contract
might well use differing models allowing both to show substantial profits for many years. In extreme
cases, mark-to-model degenerates into what I would call mark-to-myth.

I can assure you that the marking errors in the derivatives business have not been symmetrical. Almost
invariably, they have favored either the trader who was eyeing a multi-million dollar bonus or the CEO
who wanted to report impressive “earnings” (or both). The bonuses were paid, and the CEO profited from
his options. Only much later did shareholders learn that the reported earnings were a sham.

Another problem about derivatives is that they can exacerbate trouble that a corporation has run into for
completely unrelated reasons. This pile-on effect occurs because many derivatives contracts require that
a company suffering a credit downgrade immediately supply collateral to counter-parties. Imagine then
that a company is downgraded because of general adversity and that its derivatives instantly kick in with
their requirement, imposing an unexpected and enormous demand for cash collateral on the company.

The need to meet this demand can then throw the company into a liquidity crisis that may, in some cases,
trigger still more downgrades. It all becomes a spiral that can lead to a corporate meltdown.
Derivatives also create a daisy-chain risk that is akin to the risk run by insurers or reinsurers that lay off
much of their business with others. In both cases, huge receivables from many counter-parties tend to
build up over time. A participant may see himself as prudent, believing his large credit exposures to be
diversified and therefore not dangerous. However under certain circumstances, an exogenous event that
causes the receivable from Company A to go bad will also affect those from Companies B through Z.


In banking, the recognition of a “linkage” problem was one of the reasons for the formation of the Federal
Reserve System. Before the Fed was established, the failure of weak banks would sometimes put sudden
and unanticipated liquidity demands on previously-strong banks, causing them to fail in turn. The Fed now
insulates the strong from the troubles of the weak. But there is no central bank assigned to the job of
preventing the dominoes toppling in insurance or derivatives. In these industries, firms that are
fundamentally solid can become troubled simply because of the travails of other firms further down the
chain.

Many people argue that derivatives reduce systemic problems, in that participants who can’t bear certain
risks are able to transfer them to stronger hands. These people believe that derivatives act to stabilize the
economy, facilitate trade, and eliminate bumps for individual participants.
On a micro level, what they say is often true. I believe, however, that the macro picture is dangerous and
getting more so. Large amounts of risk, particularly credit risk, have become concentrated in the hands of
relatively few derivatives dealers, who in addition trade extensively with one other. The troubles of one
could quickly infect the others.
On top of that, these dealers are owed huge amounts by non-dealer counter-parties. Some of these
counter-parties, are linked in ways that could cause them to run into a problem because of a single event,
such as the implosion of the telecom industry. Linkage, when it suddenly surfaces, can trigger serious
systemic problems.

Indeed, in 1998, the leveraged and derivatives-heavy activities of a single hedge fund, Long-Term Capital
Management, caused the Federal Reserve anxieties so severe that it hastily orchestrated a rescue effort.
In later Congressional testimony, Fed officials acknowledged that, had they not intervened, the
outstanding trades of LTCM – a firm unknown to the general public and employing only a few hundred
people – could well have posed a serious threat to the stability of American markets. In other words, the
Fed acted because its leaders were fearful of what might have happened to other financial institutions
had the LTCM domino toppled. And this affair, though it paralyzed many parts of the fixed-income market
for weeks, was far from a worst-case scenario.
One of the derivatives instruments that LTCM used was total-return swaps, contracts that facilitate 100%
leverage in various markets, including stocks. For example, Party A to a contract, usually a bank, puts up
all of the money for the purchase of a stock while Party B, without putting up any capital, agrees that at a
future date it will receive any gain or pay any loss that the bank realizes.

Total-return swaps of this type make a joke of margin requirements. Beyond that, other types of
derivatives severely curtail the ability of regulators to curb leverage and generally get their arms around
the risk profiles of banks, insurers and other financial institutions. Similarly, even experienced investors
and analysts encounter major problems in analyzing the financial condition of firms that are heavily
involved with derivatives contracts.
The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in
variety and number until some event makes their toxicity clear. Central banks and governments have so
far found no effective way to control, or even monitor, the risks posed by these contracts. In my view,
derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are
potentially lethal.




The interesting point here is that the bond rating agencies that rate bonds given by the morgage bond insurers will probably have to restate their ratings in a number of industries should significant numbers of the mortgage insurers fail. If they do, then companies in entirely unrelated sectors may find their bond status and therefore their credit marked down. See Warren's notes above.

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Wednesday, February 6, 2008 11:18 AM

SIGNYM

I believe in solving problems, not sharing them.


Well, it is a nightmare scenario after all, but one within the realm of possibility. It seems to me (for those who don't want to even THINK of losing their shirts) the answer is to put your money someplace that's uncontaminated by the US housing bubble. Given that the mortgages have been packaged and sold, and repackaged and re-sold to financial institutions around the world (United Bank of Switzerland- UBS- took a HUGE hit on our mortgage crisis and went looking to the Bank of Signapore for more $$$. Now, you may view that as shoring up UBS... or weakening the Bank of Singapore!) you'll have to look pretty far afield for investments, banks and currencies that are disconnected from the flood of funny-money.

So... does anyone know of such a beast?
---------------------------------
Always look upstream.

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Wednesday, February 6, 2008 11:24 AM

CHRISISALL


Chrisisall Marketing And Research. It's a great company to invest in, and definitely WILL NOT pack up & move to New Zealand when the CEO gets enough cash in his hot little hands.

He has a plan!isall

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Wednesday, February 6, 2008 11:28 AM

SIGNYM

I believe in solving problems, not sharing them.


Ummmm... okay, I'll send you what I think that investment is worth.

Where should I send my $0.02?






---------------------------------
Just putting in my $0.02 worthtisall.

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Wednesday, February 6, 2008 11:35 AM

CHRISISALL


Quote:

Originally posted by SignyM:


Where should I send my $0.02?


To Finn.

Chrisisall

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Wednesday, February 6, 2008 11:38 AM

RUE

I have a vote and I'm not afraid to use it!


"New Zealand"

New Zealand, eh ? Everyone I know is thinking of those exact same travel plans. Maybe you'll want to go someplace a little more incognito - and uh, not Costa Rica or Sweden either.

***************************************************************
LOTR - best NZ ad ever !

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Wednesday, February 6, 2008 11:51 AM

SIGNYM

I believe in solving problems, not sharing them.


New Zealand is VERY hard to get into! (I checked. Honestly.) Costa Rica... not my cuppa tea. Too many indigent Niacaraguans fleeing from our imposed capitalist structure. (I checked there too. I have a friend who emigrated there about six months ago, but he went for the birds and the surf 'cause he's a big birder and surfer. Not my hobbies.)

Now Sweden OTOH...

---------------------------------
Always look upstream.

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Wednesday, February 6, 2008 11:51 AM

CHRISISALL


Quote:

Originally posted by rue:

LOTR - best NZ ad ever !

I thought that was Xena....*

LALALALALALAisall

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Wednesday, February 6, 2008 12:07 PM

FLETCH2


Sweden takes more than it's fair share of persecuted minorities, you may not have much luck there (you're not needy enough.)

I recommend Holland, the Dutch were so grateful to US troops for liberating their country they used to give Americans living there a Tax deduction. You should see if you can still get it.

Bit flat though....

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Wednesday, February 6, 2008 12:07 PM

FLETCH2


Sweden takes more than it's fair share of persecuted minorities, you may not have much luck there (you're not needy enough.)

I recommend Holland, the Dutch were so grateful to US troops for liberating their country they used to give Americans living there a Tax deduction. You should see if you can still get it.

Bit flat though....

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Wednesday, February 6, 2008 12:24 PM

SIGNYM

I believe in solving problems, not sharing them.


Can't be any flatter, wetter, or more cloudy than Buffalo!

OTOH, there is global warming to consider...

Eh. Scratch Holland off the list!
---------------------------------
Always look upstream.

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Wednesday, February 6, 2008 2:05 PM

KIRKULES


Quote:

Originally posted by SignyM:
ABS, MBS, CMBS, CMO, CDO, CBO, and CLO are subset of what are generally characterized as structured products. Below is what the acronyms stand for.

MBS = Mortgage-Backed Securities, and the universe of MBS is vast, it is however reserved by market participants to denote the pass-through mortgage bonds (agency pass-through and nonagency pass-through).

CMBS = Commercial Mortgage-Backed Securities, which are trust certificates (bonds) backed by a pool of commercial mortgage loans. The certificates are tranched on the basis of prepayment and credit.

CMO = Collateralized Mortgage-backed Obligations, which are pool of pass-through mortgage bonds tranched to reflect the degree of sensitivity to prepayment (particularly, agency CMO).

ABS = Asset Backed Securities, for example home equity loans (HEL), credit cards, etc. These are securities backed by receivables [payments] that are either secured (HEL) or unsecured (credit card), tranched on the basis of prepayment and default risks.

CDO = Collateralized Debt Obligation, for example, ABS CDO which consist of a portfolio of different ABS bonds, and the payments to the holders of these trust certificates are derived from the cash flows of the ABS bonds.

CBO = Collateralized Bond Obligation, for example high yield [emerging market] CBO which consist of a portfolio of different high yield [emerging market] bonds.

CLO = Collateralized [leveraged] Loan Obligation which consist of a portfolio of different leveraged loans



The only real problem with these investment products is figuring out what they are worth on a daily basis when the assets backing them lose value rapidly. This makes them illiquid because nobody is willing to buy them when the price reflects the conditions of a month ago.

On the other hand there is a positive effect of having so many different investment vehicles. The losses of any one financial institution is limited because these securities are so widely held. These securities are held by Banks, Mutual Funds, Brokerages, Foreign Governments, etc. and some were even in Money Market type funds because the fund managers didn't understand what they were buying. The chances of an major bank or financial institution going under is somewhat reduced because they were able to spread their risk to others.

Most of the financial institutions holding these securities have already reported what they believe to be their worst case scenarios, so much of the down side risk is already baked into the cake.

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Wednesday, February 6, 2008 2:25 PM

KIRKULES


Quote:

Originally posted by chrisisall:
Signy, if it happens as written, it won't be literally overnight, so expect the conservative element here to spend a lot of time poo-pooing it- until they lose their jobs or homes, that is.

The sky needs supports Chrisisall



Conservatives do tend to be more optimistic about the future. We know that the economy is partially driven by psychological factors and it might be possible for liberals to push us into a shallow recession with their constant doom and gloom messages. Recent recessions do seem to correspond with election years when uncertainty is at its greatest.

All we can do is hope for the best and prepare for the worst.

Kirkules, poo-pooing

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Wednesday, February 6, 2008 3:01 PM

FREDGIBLET


Quote:

Originally posted by Kirkules:
All we can do is hope for the best and prepare for the worst.



Indeed, the problem that I see is that all too often the conservatives seem to think that we should prepare for the best and ignore the worst, even if it happens.

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Thursday, February 7, 2008 4:07 AM

CHRISISALL


Quote:

Originally posted by fredgiblet:


Indeed, the problem that I see is that all too often the conservatives seem to think that we should prepare for the best and ignore the worst, even if it happens.

Real Conservatives don't think like that, only those rat-bastid NeoCon carpetbaggin' radical Skull&Bones dry-drunk creeps do. Unfortunately, they've been in power for the better part of a decade now, so damage has been done....

Not radical Chrisisall

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Thursday, February 7, 2008 4:59 AM

HERO


Quote:

Originally posted by chrisisall:
Signy, if it happens as written, it won't be literally overnight, so expect the conservative element here to spend a lot of time poo-pooing it- until they lose their jobs or homes, that is.


Good point. If you believe there is going to be a crash...go to amazon.com, type in 'Crash' and you'll see a bunch of books telling you how to survive or profit from the coming global crash. Sure, most were about the crashes that never happened...but just buying the book will make you feel better.

Only a disaster that is external to the market and global in scope will cause the crash you refer to. So go ahead and play Chicken Little all you want...I've got work to do, money to make, things to buy, and life to live.

H

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Thursday, February 7, 2008 5:25 AM

CHRISISALL


Quote:

Originally posted by Hero:
and life to live.


And idiots like me to reply to.

You'll see mister. Ten years from now when you feel the strain, and have to fix something on your car as opposed to just replacing it....and you get an aftermarket part 'cause they don't MAKE your car anymore....and gas is $8 a gallon...

Don't come crying to Chrisisall

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Thursday, February 7, 2008 6:34 AM

HERO


Quote:

Originally posted by chrisisall:
You'll see mister. Ten years from now when you feel the strain, and have to fix something on your car as opposed to just replacing it....and you get an aftermarket part 'cause they don't MAKE your car anymore....and gas is $8 a gallon...


1. I work for the government.
2. I live a mile from the office.
3. Ten years from now I'll be on my fourth new car...and it'll be under warranty...the good Japanese warranty.


H

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Thursday, February 7, 2008 6:38 AM

CHRISISALL


Quote:

Originally posted by Hero:

3. Ten years from now I'll be on my fourth new car...and it'll be under warranty...the good Japanese warranty.



Why do you hate America, Hero?

isall

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Thursday, February 7, 2008 8:41 PM

FLETCH2


Quote:

Originally posted by Hero:
Quote:

Originally posted by chrisisall:
Signy, if it happens as written, it won't be literally overnight, so expect the conservative element here to spend a lot of time poo-pooing it- until they lose their jobs or homes, that is.


Good point. If you believe there is going to be a crash...go to amazon.com, type in 'Crash' and you'll see a bunch of books telling you how to survive or profit from the coming global crash. Sure, most were about the crashes that never happened...but just buying the book will make you feel better.

Only a disaster that is external to the market and global in scope will cause the crash you refer to. So go ahead and play Chicken Little all you want...I've got work to do, money to make, things to buy, and life to live.

H




It's actually not that far fetched it's a basic cascade failure, where one part failing puts more stress on another neighboring part which itself fails. I can't tell you if there is a legal equivalent but it's a well established engineering principle and we've already seen it in effect in the mortgage crisis. The only real question is is it catastrophic or containable, and that will depend in large part on the strength of other parts of the economy and any feedback mechanism that are put in place -- that injection of capital by the Fed, that's an example of feedback, something you do counter to the prevailing trend, we'll have to see what else gets done and when.

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Thursday, February 7, 2008 10:20 PM

6IXSTRINGJACK


Can anybody else just see the smug look on Hero's face when he talks about how great he is?

"A government is a body of people, usually notably ungoverned." http://www.myspace.com/6ixstringjack

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Friday, February 8, 2008 1:50 AM

FREMDFIRMA


Not really, every time I get a visual image of him, it's just the back of his head bobbing up and down as he does his lewinsky impression for the boss.

-F

Yes, I went there, deal with it.

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Saturday, March 1, 2008 3:20 PM

JAYNEZTOWN


watch this video


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Saturday, March 1, 2008 6:57 PM

CANTTAKESKY


Thanks for the article, Sig. Now if I could only understand it! All I got was:

Blah, blah, blah, Americans owe money, blah, blah, they can't pay it back, blah, blah, they can't go shopping, blah, blah, businesses will suffer and owe more money, blah, blah, everyone will be out of a job.

Sorry. I can read science. Economics is like a foreign language that I have to translate into "Money for Dummies."

So if my translation is off, please correct me. Thanks.

--------------------------
I have been through some terrible things in my life, some of which actually happened.
--Mark Twain

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Saturday, March 1, 2008 9:11 PM

FREMDFIRMA


Heh, that's better than I did on translation.

All I got was, damn, that smells like Usury, and "Bills of Credit" and "any Thing but gold and silver coin"... and the distinct reek of why those things were forbidden in the first place.

To be blunt, to someone like me it looks like a house of cards built on a table of tissuepaper fiction, and someone just opened a window.

I'd say it's not my problem, but other people and their cursed Government seem hell bent on making it so, especially when I feel the bite of their extortionate taxes chewing on my wallet all damn day long.

-Frem

It cannot be said enough, those who do not learn from history, are doomed to endlessly repeat it

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Monday, March 3, 2008 9:58 PM

SIGNYM

I believe in solving problems, not sharing them.


CTS- You got it right. See, you CAN read economics!



---------------------------------
Let's party like it's 1929.

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Tuesday, March 4, 2008 7:00 PM

CANTTAKESKY


Quote:

Originally posted by Fremdfirma:
To be blunt, to someone like me it looks like a house of cards built on a table of tissuepaper fiction, and someone just opened a window.

I think you're right. That's why it goes from "Businesses will suffer and owe more money" to "Everyone will be out of a job." Because each business is one of the cards in that house of cards.

I dread the horrid times ahead. The question is, will it give us a fresh, clean start to fix our mistakes, or will we just get uglier?

--------------------------
Buy land, they're not making it anymore.
--Mark Twain

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Tuesday, March 4, 2008 7:00 PM

CANTTAKESKY


Thanks, Sig. I feel so proud!

--------------------------
We have the best government that money can buy.
--Mark Twain

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Saturday, September 30, 2023 7:31 AM

JAYNEZTOWN


Gibs...Flee Commiefornia?
people move out of Shit-Cago
Escape from NewYork

BLM has a strange definition of reparations.

https://twitter.com/CatchUpFeed/status/1707617481341415655

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Thursday, December 7, 2023 10:34 AM

JAYNEZTOWN


Biden’s clean energy agenda suffers a big blow when a first-of-its-kind nuclear project is cancelled

https://fortune.com/2023/11/09/modular-nuclear-reactor-nuscale-power-p
roject-utah-killed-biden-clean-energy-agenda
/

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Thursday, December 7, 2023 10:53 AM

6IXSTRINGJACK


That's just bad news all around.

Wind and Solar are bullshit hobbyist projects. If we want to ever go green the only viable solution we have right now is nuclear. Somebody needs to intervene and make sure that plant gets built, or we're going to have a bunch of $60,000 paperweight coal burning cars taking up space in people's garages and a lot of old people dying when the A/C gets shut off on the really hot days.

--------------------------------------------------

Political correctness is just tyranny, with a smiley face.

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Thursday, December 7, 2023 11:06 AM

THG


Poor signym. For decades she has predicted the fall of America in one form or another. So far always wrong signym has a perfect record. She is always wrong.

Just too funny...

T


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Thursday, December 7, 2023 11:24 AM

SECOND

The Joss Whedon script for Serenity, where Wash lives, is Serenity-190pages.pdf at https://www.mediafire.com/folder/1uwh75oa407q8/Firefly


Quote:

Originally posted by 6ixStringJack:
That's just bad news all around.

Wind and Solar are bullshit hobbyist projects. If we want to ever go green the only viable solution we have right now is nuclear. Somebody needs to intervene and make sure that plant gets built, or we're going to have a bunch of $60,000 paperweight coal burning cars taking up space in people's garages and a lot of old people dying when the A/C gets shut off on the really hot days.

Cost killed that project.

From the article about the cancelled nuclear power plant:

"Costs have increased more than 50% in the last two years to $89 per megawatt hour"

The Utah power system (that would buy the nuclear power) said it will focus on non-nuclear resources in the near term, and will need additional renewables, primarily solar and wind, as well as new natural gas.

https://fortune.com/2023/11/09/modular-nuclear-reactor-nuscale-power-p
roject-utah-killed-biden-clean-energy-agenda
/

What about the cheaper alternatives?

Solar, standalone — $32.78 per MWh.
Geothermal — $36.40 per MWh.
Wind, onshore — $36.93 per MWh.
Combined Cycle — $37.11 per MWh. Natural gas is converted into electricity

https://solarpower.guide/solar-energy-insights/energy-ranked-by-cost

While no other small modular reactor or advanced design has been submitted to the U.S. Nuclear Regulatory Commission for certification, the agency said Thursday that other companies are close to applying and there’s a great deal of activity within the industry.

The Joss Whedon script for Serenity, where Wash lives, is Serenity-190pages.pdf at
https://www.mediafire.com/folder/1uwh75oa407q8/Firefly

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Thursday, December 7, 2023 12:54 PM

SIGNYM

I believe in solving problems, not sharing them.


Quote:

Originally posted by THUGR:
Poor signym. For decades she has predicted the fall of America in one form or another. So far always wrong signym has a perfect record. She is always wrong.

Just too funny...



Dood. Everything that Nouriel Roubini predicted in the 2008 post CAME TRUE: Real estate dropped 20-30%. Investment banks (Shearson Lehman), commercial banks (ID hidden by The Fed but widely rumored to be BofA. Also our bank at the time- WAMU- shuttered) insolvent. Monoline insurers (AIG) insolvent. Shadow banks (Angelo Mozillo and his mortgage machine, Countrywide) busted. Stock prices down. Consumer spending sharply down. Businesses large (GM bailout) and small (Were you living in America at the time? All you have to do is recall the number of empty shops, car dealerships etc. looking just as bad as the height of Covid) failed. Commercial real estate busted.
Deep recession lasting two year. Worldwide impact.

Angelo Mozilo and his doomed mortgage machine
https://money.cnn.com/2018/06/06/news/companies/angelo-mozilo-countryw
ide-2008/index.html


The Great Recession of 2008: A Timeline and Its Effects
Matt Egan June 6, 2018: 6:34 AM ET
https://www.thebalancemoney.com/the-great-recession-of-2008-explanatio
n-with-dates-4056832


All the Key Events of the 2008 Recession
Updated on April 24, 2022
https://www.thebalancemoney.com/the-great-recession-of-2008-explanatio
n-with-dates-4056832


These articles, with the hindsight of history, explain in simple terms HOW IT ALL WENT BUST.
Nouriel Roubini's reputation got a huge boost from SO ACCURATELY PREDICTING how events would unfold.

One thing he did NOT predict was the end of America.
He was accurate about that, too.

The Fed (despite its name, NOT a government agency, a consortium of large private banks as insurer of last resort) turned on the printing machine to the tune of an estimated $17 TRILLION in bank relief, dropped interest rates, and shored up the financial system.
The whole episode, however, did and continues to have international negative effects on the USA, which I won't detail.

All YOU have a reputation for is being in deep, deep denial about things that make you afraid.
C'mon, sport. Put on your big boy pants. It costs nothing to "think the unthinkable".

You won't lose money, home, or job. You won't lose anything by THINKING. All you might lose is a little sleep and a sense of security.





-----------
"It may be dangerous to be America's enemy, but to be America's friend is fatal." - Henry Kissinger

Loving America is like loving an addicted spouse - SIGNYM



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