September 27, 2008

The final phase is a self-feeding panic, where the bubble bursts. People .. scramble to unload whatever they have bought at greater and greater losses


1 : ready money
2 : money or its equivalent (as a check) paid for goods or services at the time of purchase or delivery

As I walk by the Porsches and Lamborghinis and BMWs and Mercedes and the (formerly) multi-million dollar homes over here, I wonder, how bad do those owners, many now unemployed, wish they could just have the CASH right now, not the assets.

They've lost their jobs. They've lost their income streams. They've lost their credit lines. And it's not just them. They funded the companies. They paid the salaries. They supported the restaurants and the car dealers and the realtors and the clothing stores and the dry cleaners and the travel agents and the private schools and oh, so much more.

And now, cash (not dollars!) HP'ers, is king. As it's been for over a year. As it will be for quite some time. It hath been foretold. By a great man with a great book, the HP bible - Manias, Panics and Crashes.

Too bad more people didn't read it. Everything you needed to know was right there.


Conspicuous Amero-Consumer said...

Is it too late to return the Hummer I bought last year??

Andrew from Russia said...

It could be an interesting outcome if, after the $700 billion bailout (printout?), cash dollars would still largely retain their purchasing power. Much depends IMO on whether these dollars will actually be circulated vs. proclaimed to exist at the disposal of institutions being rescued (which may face a hard time lending them out).
Speaking about cash, is anyone impressed by the performance of our super-strong rouble since July? Euro? GBP? I feel better off with USDs. In fact the dollar rally was a bit too much so that I'm pausing my "greening up" effort to seek some diversification, PMs included.
And if anyone wants a recipe for a disaster, here's one from certain "renowned analysts" in the Russian MSM: put your savings into the same currency you earn your income in. They probably believe that the only savings you are supposed to keep are toward mortgage downpayment. "Money exists to be spent."

Anonymous said...

"Cash may be king" but US Dollars wont be the currency to claim that title.
As Peter Schiff said "Get yourself out of US denominated assets. Get yourself out of dollars because they're going to print money like there's no tomorrow, devaluing the currency to the point of hyperinflation."
Dollars will be akin to the German mark in the Weimar republic: watered down and impotent.
The dollar may become king but it will be the king of "CRAP!"

Cash is Clay said...

I am the greatest!

Cant wait to buy a porsche for 25 bucks! CASH IS KING!!! But the next question, Whose Currency will win? US? EURO? PESO??? Zimbabwe's?

Mammoth said...

So...dollars are crap, rubles are crap...Where does one put cash then?

Anonymous said...

>> Is it too late to return the Hummer I bought last year??

Well, you can always eat it! There's a guy in the Guiness Book of World Records who ate a bicycle, piece by piece. Why don't you try it with your Dumber, er, Hummer? I would imagine that the hardest part will be the transmission. Just tell yourself it tastes like chicken.

hp fan said...

Follow the Herd...

Illlegals moving back to Mexico = Increased demand for Peso.

It's like the Japanese betting on the Kiwi. Even if there is no underlying value, there will be speculation that can be taken advantage of.

Anonymous said...

conspicuous amero-consumer said;
"is it too late to return the Hummer i bought last year?"

put it this the way - the "kings of the road" and the bigger the better mentality, are now history.

Anonymous said...

.10 on the dollar for equity

.5 on the dollar for value

Liabilities, no current value.

Current bounty prices apply.

America is Dead

i've had it said...


i did read Kindelberger's book Mania's Panic's and Crashes in december of 2007at your suggestion, so thanks for the tip. While I knew something about this sort of thing already, the book brought it all home and documented the process beautifully with historical examples.

Everyone should read it, though it's probably too late for most.

WTF1920 said...

Manias, Panics and Crashes was updated on Feb 22nd 1999! People had plenty of time to listen.

Anonymous said...

Keep posting Keith. It will sink in very soon!

Anonymous said...

The Feds/Treasury were stupid to put this in the context of a emergency .
Paulson and his sidekick could of continued with their cash injections
to the banks ,change the mark to market rule (which would of allowed banks to draw out their losses ). This plan would of delayed the money log jam by 3 years . In the mean time they could of tried to figure out how to get the real economy going . 50 billion a month in cheap short term loans to banks would of been a loan of sorts by the government . If the banks than defaulted on their short term loans in the final analysis ,the government could call on the assets of the banks . Sure there would of been losses ,but the government would of been a creditor of the banks ,instead of a partner ,or a direct granter of money for nothing .Further this would of allowed a buying of time for the worst banks to be taken over by the stronger banks ,no doubt at a loss to stockholder and equity holders and creditors when they failed . There would of been less banks with time,but other new banks or smaller banks would fill in the gap . We also won't need as many banks for a long time because we have a contracting financial sector . So the government is interfering with the natural process of correction . This process I describe would of costs the government 1/2 the cost of the current Paulson Plan at least .

What the banks want is a direct grant from the taxpayers to take bad debt off their hands so they can be in the money again and able to be free to loan and make money again .The problem is the model is broken for easy money because the Americans are already over extended in debt . So, just the fact that lenders have loan money will not make them lend to people who will not pay them back. So the banks will not be making big money for at least 10 years .
Oh well, Paulson and the gang are going to mess things up now by instead of offering assistance in the de-leveraging of Bad Banks ,they are being rewarded .

I also think that Paulson is a bias party ,and it is absurd that Congress and the Senate want a plan that will please him and his unsupported statements. I think bad loans that the firm he made his fortune with will be on taxpayers books ,and I believe thatit will come out that Paulson had a stake in this outcome .

It reminds me of when Mozillo was pushing for government intervention on CountryWide losses ,after he pumped and dumped his stock. You know Mozillo ,the guy who gives bribes to Dodds without him knowing it. You know Dodds ,one of the big ringleaders of the 700 billion dollar bail out bill

I contend that a trillion dollars has already been spent and committed for a loss ,so the 700 billion will make it close to 2 trillion in the real grants to banks from the taxpayers .

Doesn't anyone wonder how JP Morgan bought only the good assets of WAMU ? Who do you guys think is filling in the difference ,it isn't FDIC I can tell you that .

2 trillion committed ,how much more after that .
Also ,does a Treasury Sec just get to say anything without proving it to these BOZOS in the government ,or does the Treasury Sec. get to hide information like unregulated banks did ?