Tuesday, October 7, 2008

Congress: Thanks for nothing.

Note: Read the first comment. Very thought-provoking.

The market went down over 1000 points after the bill was passed before it finally began to recover. Funny how the people crying to the media about how the DJIA's nearly 800 point decline on Monday last week are virtually silent over this slide. The Market Ticker once again nails it concerning the Bacardi Bailout and Congress:
"That's a 10 percent crash in two days, courtesy of YOU, Congress.
Well this isn't a crash (yet) but its a hell of a sell-off, and you can thank Congress - directly - for it, because they are responsible. ........

Please do so - call your Congresscritters (both House and Senate) and thank them LOUDLY for the over $1.5 trillion in market wealth that they have destroyed, some of which undoubtedly is yours along with the $700 billion bailout that is going to go to the Chinese.
Make sure you keep thanking them for the 30% loss in your portfolio since last October. That, by the way is what one would expect as the full loss during a Bear Market and our government hasn't even admitted we're in a recession yet!............

Let me once again outline how we solve this problem:
Force disclosure of everything on everyone's balance sheet and their marking models. No exceptions. This can be done now, administratively, and must be done right here and now. Today.
Force all credit default swaps (CDS) and other OTC derivatives onto a public exchange. (This, surprisingly, is actually being discussed - but a forced implementation has not yet been announced.)
Force leverage down to no higher than 12:1; if this forces asset sales, so be it. Give participants six months to do it, 1/6th of the excess taken off per month until complete.
Once that is done we must then recapitalize the banking system, and the easiest way to do that is through forced "cramdown" debt-to-equity swaps.
The simple fact of the matter is that I have been yelling at Congress on this issue for over a year and we are now at a place where the market is threatening to blow up wholesale, with the real economy going off the cliff as consumer spending capacity simply evaporates.
All this nonsense about "short selling" being responsible for this mess is an abject lie. The proof is in the tape - you can't short, so why are the banks and other financial stocks collapsing?........"

http://market-ticker.denninger.net/archives/600-Thanks-For-the-Crash-CONGRESS!.html

1 comment:

Anonymous said...

Obviously, the Americans' borrowing from China and the Chinese supply of money to the US is indeed an intriguing geo-political game. Surely, this cannot be simple economics by any stretch of imagination.

Given this paradigm, till date experts opine that both are locked in a tight bear hug. According to Lawrence Summers, 'It is a new form of mutually assured destruction that has quietly emerged over the last few years. This implies that China needs the US (for its exports and to park its forex reserves) as much as the US needs China (for imports and borrowings).

So have the Americans played into the hands of Chinese?

Recent events in the US have turned this 'MAD paradigm' upside down. It is in this context that the recent bailout package needs to be viewed, which seeks to increase liquidity over a period of time by the US government taking over sub-prime assets from financial institutions. That, according to the American thinking, is expected to provide liquidity to the US economy.

But it is all these happenings within the US that makes this accumulation of forex reserves by China extremely interesting. It may be noted that the Chinese, unlike the others, have always questioned the global order with the US at the helm of affairs. And the Chinese accumulation of forex reserves is surely a strategy that perhaps has an ominous side to it.

All this is not pure economics as it is made out to be. Rather, it was and remains a well-planned economic, political and military strategy of the Chinese. And in a way it is the mirror image of the Star Wars programme that the then US President Reagan unleashed on the erstwhile USSR in the early eighties that eventually bankrupted the later within a few years as it engaged in competitive arms build-up with the former.

Statecraft is all about engaging other countries at one's own terms, pace, time and cost. This is what the US did to the USSR in the eighties and succeeded in dynamiting that country. And that is what China could do to a vulnerable US in the coming months. Crucially, if it doesn't, from the Chinese perspective it might well rue this moment forever.

The US till date was depending on the Chinese for imports and to finance them as well for such imports. Now they will have to be considerably dependent on the Chinese to protect their currency as well as to ensure liquidity in their money markets. And that completely alters the existing global order.


How China could wreck the US economy

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Jackson Jambalaya is the home of Trollfest '07. Catch this great event which promises to leave NE Jackson & Fondren in flames. Sonjay Poontang and his band headline the night with a special steel cage, no time limit "loser must leave town" bout between Alan Lange and "Big Cat"Donna Ladd following afterwards. Kamikaze will perform his new song F*** Bush, he's still a _____. Did I mention there was no referee? Dr. Heddy Matthias and Lori Gregory will face off in the undercard dueling with dangling participles and other um, devices. Robbie Bell will perform Her two latest songs: My Best Friends are in the Media and Mama's, Don't Let Your Babies Grow up to be George Bell. Sid Salter of The Clarion-Ledger will host "Pin the Tail on the Trial Lawyer", sponsored by State Farm.

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If you get tired come relax at the Fox News Tent. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both will entitle you to free drinks.Get your tickets now. Since this is an event for trolls, no ID is required, just bring the hate. Bring the family, Trollfest '07 is for EVERYONE!!!

This is definitely a Beaver production.

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