September 30, 2008

I hope you can recite this in your sleep by now.

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


keith said...

And be careful where you have that cash

Banks all over the world will now fail.

This is not a drill.

Anonymous said...

Crisis creates opportunity, there will be fortunes made on those that pick up the right assets over the next few years, time to start thinking about 2009 and 2010 now so you can start doing your homework

keith said...

Agree. Crisis creates opportunity. But timing is everything.

Bought that Miami condo that was a steal at 30% off? Well, guess what. You're bankrupt now.

And I expect this week around the globe to be not just 1929 brutal, but there-is-no-comparison brutal.

Forget the popcorn. Get a gun.

Only hope to stop the death spiral? Bernanke and Paulson cut to 0%, flood the market with $1 trillion or more, raise FDIC to $2 million, and whatever else they announce Tuesday

Oh, small question. What happened to "trading limits are in effect"?

Anonymous said...

But... but nothing is happening to real estate yet. It's about time the bubble in the NYC metro area finally crashed.

bitterrenter said...

If things progress as we pessimists think it will, money won't be worth shit.

Then we can set about punishing those who brought us here.

World anarchists, unite!

Anonymous said...

HARARE, Zimbabwe (AP) -- Tens of thousands of Zimbabweans lined up at banks Monday, desperate to take out their money after the government raised the limit on daily withdrawals.
Every day in Harare, Zimbabweans line up at banks. After withdrawal limits were raised, the lines blocked traffic.

Every day in Harare, Zimbabweans line up at banks. After withdrawal limits were raised, the lines blocked traffic.

New rules went into affect Monday allowing withdrawals of up to 20,000 Zimbabwe dollars. about $35 or 25 euros. The old 1,000 Zimbabwean-dollar limit was barely enough to buy a newspaper.

The limit and the fact that Zimbabwe has the highest inflation rate in the world -- officially at about 11.2 million percent, unofficially much higher -- has meant long lines at banks most days.

But Monday was extraordinary, with lines resembling crowds at a soccer match.

Mothers with babies strapped to their backs arrived at bank doors at dawn. Police vainly tried to stop the crowds from blocking traffic -- but there appeared to be more police and uniformed soldiers in the lines than on duty.

President Robert Mugabe meanwhile, returned from a 10-day trip to the United Nations, greeted by a large crowd of singing, dancing well-wishers at the airport.

Anonymous said...

Short-term, feeling it at home:

What will this do to the real estate markets in already hard-hit bubble states?

Will values accelerate further in tanking???

Or does everyone "batten down the hatches" and try to ride this out, without budging any further on their asking prices?

If credit freezes up, doesn't everything (including prices!) also possibly "freeze" ?

Anonymous said...


Anonymous said...

Maybe the real Paulson Plan is to allow further consolidation of the banking sector before announcing: New and Improved Accounting Standards.

We are about to enter a financial services Twilight Zone.

wings said...

K A G U N G A ! ! !

Anonymous said...

It takes 1200 point drop now for curbs to kick in

Conrad said...

Just to join in the fun, wikipedia's featured article for today is Tulip mania...

Anonymous said...

sorry, keith. This time cash (fiat money) will not be a king. Bailouts followed by hyperinflation do the work. Be afraid of riots, be afraid of totalitarism after that.
This is way too long but still worth of listening:

Anonymous said...

"Some small business need credit to cover even payroll expense...."

I say WHAT??? If you need credit to pay your employees, YOU Should be OUT OF BUSINESS!!!

Matt C said...

Bitter Renter sez:
"World anarchists, unite!"

Uhh... if we unite, will we still be anarchists?

hp fan said...

For the inflationist tards and newbies. The Fed is not Zimbabwe...

"If the American people ever allow private banks to
control the issue of their money, first by inflation
and then by deflation, the banks and corporations
that will grow up around them (around the banks),
will deprive the people of their property until their
children will wake up homeless on the continent
their fathers conquered.
Thomas Jefferson"

Anonymous said...

"It hath been foretold" ....

Chris said...

Keith check out this qoute from Thomas Paine talking about PANIC's in his book "The American Crisis.
Its Quote of the month material

Tis surprising to see how rapidly a panic will sometimes run through a country. All nations and ages have been subject to them.... Yet panics, in some cases, have their uses; they produce as much good as hurt. Their duration is always short; the mind soon grows through them, and acquires a firmer habit than before. But their peculiar advantage is, that they are the touchstones of sincerity and hypocrisy, and bring things and men to light, which might otherwise have lain forever undiscovered. In fact, they have the same effect on secret traitors, which an imaginary apparition would have upon a private murderer. They sift out the hidden thoughts of man, and hold them up in public to the world.

Anonymous said...

Why does Wall Street need a $700 bailout plan if the FED can pump $630 Billion Into Financial System.

If the bad assets are such a good deal for the tax payers then why doesn't Wall Street just borrow some of those Fed newly minted $630 Billion and buy up the bad assets.

According to Barron's , Mr. Gross "estimates that the average price of distressed mortgage debt that will pass from troubled financial institutions to Treasury will be about 65 cents on the dollar, representing about a one third loss for the seller from face amount. Financed at 3% to 4% by the sale of Treasury debt, Treasury will be in a position to earn a positive carry, or yield spread, of at least 7% to 8% on the purchases, even after taking into account severe assumptions of default rates and foreclosure recoveries."

Could it be that Wall Street really know that the bad assets are worth less then 25 cents on the dollar

The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.

Anonymous said...

What happens to families like the Rothschilds who own internation banks?

Anonymous said...

A few family members have their own business....They have never used credit for their payroll this is news to me what the media is reporting...Can you explain that one to me?

Anonymous said...

Notice that oil and unleaded gas way down after bailout failure. Many commodities way down (wheat, soybeans) this is deflation. Meredith Whitney on CNBC this morning ancedotally notes a friend with a high credit score needs a jumbo mortgage and goes to Citi its offered at 11%. Money is dear it costs more there's less of it. This is deflation."cash becomes King" is deflation. Hyperinflation would lead to holding anything but cash. The solution is raise fdic limits to that $ 2 million raise the funds rate to a rate where banks have to pay 5 to 6% to attract depositors, a huge amount of liquidity would flow to banks

Anonymous said...

I really think that Paulson caused this panic . They knew they had the ability to put liquidity into the market until they could nicely ask for options from the Politicians .

The Paulson Plan was so offensive that it reeked of "hidden agenda ".
The stock market would of crashed anyway ,but it would of just done it a little more slowly .The stock market was down 450 points before the market crashed more so people were selling out ,to go to cash
most likely anyway ,bill or no bill .
Never yell fire in a movie house .

Anonymous said...

"According to Barron's , Mr. Gross "estimates that ... Treasury will be in a position to earn a positive carry, or yield spread, of at least 7% to 8% on the purchases, even after taking into account severe assumptions of default rates and foreclosure recoveries."


I'm quite tired of the media allowing Bill Gross to spew his manipulations like he's an objective and disinterested analyst. If these bonds are a bargain at 65 cents on the dollar, they'd certainly be a steal at 50 cents.

Anyone think PIMCO would have any trouble finding sellers at that price? Do I hear 40 cents, 30 cents? ...

Miss Goldbug said...

the RE market is on the edge of of the cliff.

Stock market crash = housing panic.

Anonymous said...

Conrade said:"Just to join in the fun, wikipedia's featured article for today is Tulip mania..."

Exactly. And has there ever been ANOTHER TULIP BULB mania?

Will we ever see house prices ever come back to 2005-2007 levels?

Anonymous said...

This just in (and without Vaseline, just like Barney Frank likes it):

A. Sarkozy called an emergency meeting with bankers and governments.

B. The Irish government just announced that will guarantee deposits on all its banks.


Anonymous said...


Way too many doomsday-ers here. There's no way things go down like they did in 1929 for the simple reason that we are no longer on the gold standard. The government can create money at will. Tomorrow they could say that they'll give out 10 trillion in short term loans to banks to be the lender of last resort and that would stop the fear in the banking sector in its tracks.

Now obviously that would be pretty drastic and I don't expect that to happen. Instead you are seeing a more limited intervention because no one likes to see the government step in.

Also keep in mind that the easiest way out of this is hyperinflation. He didn't get the nickname "helicopter Ben" for nothing. Got a mortgage backed security to offload on the government for 70 cents on the dollar? 3 years at 10% inflation makes the government whole again. Hyperinflation would devalue the dollar and reduce out purchasing power but it also makes our debt easier to pay back.

Honestly what I think you are seeing is a restructuring of the distribution of the wealth around the world. Just so happens that the housing bubble burst at the same time. By the time this is said and done the purchasing power of the US won't be much different than many other mediocre 1st world countries except it will be a bit lower cause we'll have higher interest rates and higher taxes to pay off our national debt.

Its the only way out of the hole we've dug ourselves into. The other options is the insolvency of the USA and there are too many vested interests inside and outside the USA to let that happen.

Lost Cause said...

Keith -- you always think that the end is near -- but we are nowhere near the end.

I was taught that there are only inflation and it's opposite, recession. You can call it deflation if you want. Inflation -- it is good to be in debt. Recession, cash is king.

none of the above said...

We will not have deflation.

We will have biflation.

For things that are requiring credit to buy (houses, cars, buildings, etc.) those prices will drop like rocks.

For things that require cash to buy, those will go up in price. Gas, food, medical services, etc.

We may see Zimbabwe style hyperinflation, which will be the only way for you to have your house to go up in value.

patrat said...

I agree there will be a dichotomy. Not only that, even now there is a dichotomy in that the lower class is in recession and the upper is not. So... things could get worse for the lower, and better for the upper, IMHO.