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Jimmy

There has to be a writedown for each and every OTC derivative contract doesn't there?

Surely, they can't all simply disappear, even if vast numbers of derivative market counter-parties agree or are forced by regulatory jurisdictions to some broad method of settlement.

Discounting ~$700 trillion must simply take too much time to be stabilizing by this point.

GK

Imagine Elaine and Malcolm cartooning together. Awesome power.

http://www.youtube.com/watch?v=676-wftOu94

"Newspaper Cartoonist Fired for Political Artwork

Former New Zealand Herald Political cartoonist Malcolm Evans was awarded the Qantas Media Awards 2003 Cartoonist of the Year.

His work caused controversy and resulted in him leaving the Herald."

gg battams

it all seems to me like a load of banksters spining bigger and bigger steaming piles of bullshit .this crash looking at this explanation of how they have been inventing different ways of produceing money out of just hot air is going to be tremendous .it will make 1929 look like a unpaid hotel bill. how these senators and bernanke paulson have the nerve to sit there is beyond me they remind me of a load of black vultures sitting on the sun bleached corpse of humanity waiting to fly somewhere else but being totally gorged they cannot take off.civil war is comeing to the whole world and the banksters will all be hanging from unlit lamposts as there wont be any electricity or any thing else

Q

When the interest rate swaps implode due to the repricing of risk, the whole house of cards will fall down. The solution of both the executive branch and the legislative branch will be to print more money via more bail outs via debt without any real cash, interest rate cuts with the delusion printing our way out, and tax cuts where nobody has to pay the piper. The consequences will be severe and fast, the total repudiation of the US dollar in international trade almost overnight. The US will get a quick taste of hyperinflation of the Weimer Republic meshed in with a touch of Zimbabwe before the brutal winter of deflation finally settles in.

The only solution out is to stop the bail outs, raise interest rates to attract savings, withdraw our overextended military from around the world (let the foreign SOBs fight their own wars), encourage living within our means, and start a massive public works program to rebuild our broken infrastructure, manufacturing base, schools, health care, military and energy independence.

Unfortunately the window of opportunity and bitter pill for the illness will not be taken.

Simon

Over the years I believe the US has a very evolved and resilient financial system that could weather any downturns ie Tech bubble.
However the recent events have clouded this view.
In the bailout plan the 700 billion does not seem that much since the US GDP is about 13 trillion which is ~20 times the bailout amount.
The question is how much of the 700 billion is real money vs imaginary money, and how much of the GDP are inflated by unproductive spending such as lawsuits.

Bear of Little Brain

Q:
Hey, easy on us foreign SOB's! Seems to me, either we're resisting the American Imperial Army, being dragooned and bullied into fighting with it, or criminally conspiring with it. I include my own (UK) government in the latter category; Blair belongs with Bush in a court in the Hague. There was never a majority in favour of going to war with Iraq here. BTW, you may have noticed our Prime Minister, "Crash Gordon", was over there on Friday, presumably to get fitted with a nice new collar and lead, and get his poodle-cut trimmed.
As for being over-extended, that was the choice of the US government after the USSR collapsed. I nearly started to waffle on about UK post-WWII imperial decline/withdrawal and the rise of US imperial influence after Suez, but I'll stop myself, except to mention TSR-2 being forcibly scrapped in favour of purchasing grossly inferior American F111's. It won't mean much to you, unless you're of a certain age, but that was when I first realised just who was pulling our strings.
Still, when it comes to foreign SOB's, check out GK's cartoon link, and watch out for the "Occupied Territories" one.
As Ken says; peace. And all the best.

Blunt Force Trauma

The (much quieter) bank panic

http://tinyurl.com/4uoboc

Elaine Meinel Supkis

Bush bribed Blair by telling him, in 2001, he offered Blair endless money as a member of Carlyle Group.

Q, that was a very coherent summary of what is going on. Yes, we have very little time to retract our empire. The DC overspending is increasing, not decreasing. True, Obama talked about taxing the rich but still wants tax cuts for the majority.

McCain wants tax cuts and more tax cuts. This is infantile talk in an emergency.

About these OTC derivatives: NOT ONE TRUST SURVIVED MORE THAN TWO YEARS AFTER THE CRASH IN 1929.

Not one. Every cent of 'value' in these things vanished. Value can vanish totally. For example, an office building in downtown Hiroshima had a fair amount of value at 9am that August morning the nuclear bomb fell on the city. 1 microsecond after the bomb fell, the building's value vanished.

This concept of sudden collapses in value is important to understand. Nothing on earth keeps value constantly. For example, farmland can see value vanish in just one decade if it turns to desert or an Ice Age begins to build glaciers on top of it.


A pharaoh's pyramid can go from very valuable to no value the minute thieves penetrate its secrets and steal things. Then regain value as a tourist attraction thousands of years later.

The famous Greek statues had tremendous value when new but when Christianity swept the Mediterranean, they became totally worthless. A thousand years later as the Europeans dug up all these discarded masterpieces, they became valuable again and are now nearly priceless.


But paper stuff: once paper instruments lose value totally, they never, ever, ever regain value. The hopes of the people in DC is, the OTC dies but the mortgage industry survives with the US government being the mortgage holder of 90% of all mortgages.

This way, the US government sucks up all the bad mortgages while the banks wait on the sidelines or merely become outlier offices that funnel new mortgages into the new Federal Mortgage Debt Holding Facility, aka, the chains of feudalism.

Ah, feudalism! A favorite topic for me! Owners of the indentured serfs did very well! These owners were the government. These owners were called 'royalty' and 'barons' etc. The masses were basically slaves while the barons and kings fought like fiends over possession of these serfs and ownership of vast tracts of land.

Sword in hand, on their war horses, they ran roughshod over everything.

Bear of Little Brain

WOW!
In my usual frivolous way, I was going to post a link to Talking Head's "Burning Down the House", when I stumbled across this:

http://www.youtube.com/watch?v=H5tZc8oH--o

It's actually posted by a McCain supporter. However, the first seven minutes is full of factual information and is a timeline on the current crisis; then it becomes a political ad. After watching this, you may begin to wonder about the pantomime going on in Washington. An interesting combination of unintended consequences and corruption, IMO. Oh, be prepared to use the "Pause" button a lot, in order to read the headlines and pick out the dates. Politically: a plague on both their houses.

The more I see of all this, the more it resembles a house that has served its usefulness and is now overrun with termites, cockroaches, and all manner of vermin. The question is, do you continue living there and pay for temporary pest control, or burn it down and rebuild? The former, I guess. Anyway, here's Talking Heads, if you like this kind of thing:
http://www.youtube.com/watch?v=Ozc70JPGRMQ


don

Elaine: Hide and Seek ? Let me get this
straight: The Derivative monster is out
their, Ted, Libor, IAS39, CDS, CDO's etc.
and we still couldn't predict this fallout
was going to happen? I know Cayman is a great place for vacation, and to hide funds,
did Wall Street Actually think that writing
off the bad debt with no regulation was
never going to be found? Hide and Seek?
Or is every politician and wall street
financial guru dirty?

geoff bedfordshire

bradford and bingley uk bank has just gone under either it will be broken into sections or nationalised

JT

I watched the hearings on cnbc.
Terrible to notice how uninformed the senators were.
For all you conspiracy theorists, it´s just as stupid as it seems, they tried to give a hundred billion or more directly to GS.

"An nescis, mi fili, quantilla prudentia mundus regatur?"
-sigh-

Blunt Force Trauma

Don asked,

"I know Cayman is a great place for vacation, and to hide funds, did Wall Street Actually think that writing off the bad debt with no regulation was never going to be found? Hide and Seek?"

- The best place to hide something of this nature is in plain view. It never got questioned. Until now.

"Or is every politician and wall street
financial guru dirty?"

- I'd say "yes".

Blunt Force Trauma

Hey Bear,

I just watched that vid about an hour ago. Not from your posting though. Great minds :)

Bear of Little Brain

Probably mixing up the story and the movie/film:
Dorothy falls in with the pigs and, in a delirium, is transported to Oz (short for 'ounces'). There she acquires silver slippers (ruby in the film) and starts her adventures on the Yellow Brick (gold?) Road. On the way, she accidentally melts the Wicked Witch of the West when she throws water over her. Later, she discovers that the Mighty Wizard is a really a balloonist from Omaha (!) hiding behind a curtain. Finally, she discovers that her silver slippers can transport her home to Aunt Em, where she wakes up in bed, but the slippers are gone.
Sound familiar?
What if all these notional values on notional cross-party contracts, denominated in notional (digital and fiat) currencies all go "Poof", all disappearing in smoke in one magical moment.
Will we wake up to realise that we fell in with pigs and became delirious; that our Oz was a fantasy; and that nothing real has changed much, other than a lot of witches melting when there's no liquidity for them in their fictitious world. We'll have lost our silver slippers, but we'll be back in Kansas, Toto.

Bear of Little Brain

BFT:
Your great mind; my little brain ;-)

Oops

Off topic but the results are in.....

WINNER...military contractors, nuclear power industry, big oil, wall street criminals.

LOSER...American people

Blunt Force Trauma

Sunday! Sunday! Sunday!

This is becoming one of the bigger news stories where nothing is happening. Not that I want it to happen. That is.

Candidates Debate Economy, As Bailout Agreement Could Come Sunday

"I believe that great progress is being made, as I've said before, we will not leave until a legislation has been passed that will be signed by the president and we will be working through the weekend to achieve that end," said Pelosi.

- 'Progress'? Forcing, er, passing a bill that the public doesn't want and economists see as dire will achieve an 'end' alright.

http://tinyurl.com/3wgn5q

AND....

Senate leader: Significant progress on bailout

'Sen. Harry Reid says congressional aides worked late into the night and he hopes for an agreement in principle by late Sunday. President Bush said in his radio address he hoped for a deal very soon and a key House negotiator, Rep. Barney Frank, has said he believes a deal can be in place by Sunday.'

- And after Monday more banks will close down, home foreclosures will surge, jobless numbers will increase as inflation rises uncontrollably. It's all good.

http://tinyurl.com/3kx3fx

Bear of Little Brain

JT:
"An nescis, mi fili, quantilla prudentia mundus regatur?"
Got me there… Can barely conjugate amare these days.

Latin lesson, courtesy of Monty Python
http://www.youtube.com/watch?v=vsawP_Ew0r4

Ear-pulling is an essential part of learning latin, as is blackboard-rubber(eraser)-ducking. RIP, Mr Petoello.

Blunt Force Trauma

JT said:

"For all you conspiracy theorists, it´s just as stupid as it seems, they tried to give a hundred billion or more directly to GS."

That's me. Tin Foil Hat Guy. You're kidding?! More money to Gollum? I gotta find that out!

Oh. I'll take Latin for 100.

"An nescis, mi fili, quantilla prudentia mundus regatur?"

Umm, "Do you not know, my son, with how little sense the world is run?".

Okay. So I Googled it. Sue me.

Bear of Little Brain

Bear, me. Sue, you?

Elaine Meinel Supkis

--quantilla prudentia mundus regatur---

I much prefer a more literal translation;

Quantity small [of] prudence earth's regulation

In other words, Libra is ignored and impudent humans screw up the planet.

Bear of Little Brain

regatur: third person passive subjunctive - a verb.
my guess:
the world may be ruled by/with/from very small wisdom/prudence
Spare me the 100 lines, Miss!
;-)

CK

1) Once upon a time, there were hundreds of investment bank/brokerage operations.
2) Then thanks to the wonders of consolidation there were 5 majors.
3) 1 major has been eaten by BofA, 2 have died the death and the remaining two have morphed into bank holding companies.
4) It took Gollum-Sucks and JPMorgan less than a week to do that morph, the fed and the comptroller of the currency could not process the paperwork any faster.
5) Three years ago the largest american retail corporation applied to become a retail bank holding company. Paperwork is still lost on that one. Thank Barney Frank for that one along with the usual host of stupids in DC. Wouldn't it be nice to have a prudent large bank.
6) Most banks in the USA are in absolutely NO financial difficulty, have no off the balance sheet issues, have been prudent/boring/stodgy old stick in the muc bankers. I have recommended this before and will do so again. If you have accounts with citi, BofA, Wachovia, etc. find yourself a nice local bank ... preferably one where the managers wear belt and suspenders and drive serviceable old cars. Deposit your monies there. If you are one of the lucky ones with more than $100K total, in accounts with a single bank; move them yesterday. I guarantee you that within driving distance of most of you are several small local prudent bankerly type banks. Start here: http://www.bauerfinancial.com/btc_ratings.asp

don

Blunt:
thank you..
thats what I thought..
maybe I should have reversed the
question, who isnt dirty?

Blunt Force Trauma

AP Top News at 12:34 p.m. EDT
13 minutes ago

WASHINGTON (AP) — Congress made significant progress on a financial bailout of Wall Street and the Senate's Democratic leader said Saturday he hoped to announce a deal by the end of the weekend. President Bush expressed confidence that lawmakers soon would pass a rescue plan before leaving Capitol Hill to campaign for re-election. He acknowledged that many Americans are frustrated by a situation that has led to a possible $700 billion bailout and angered that they may have to cover Wall Street firms' mistakes.


PAULSON'S BANK BAILOUT
The Biggest Swindle Ever Pulled!

http://tinyurl.com/447cht

Blunt Force Trauma

That's it, Pelosi! Get that baby rammed through so you can hit the road to campaign to keep your seat! Good luck with the "happy" voters! Also, you can keep all these peope happy as well:

Top Contributors
Congressman Nancy Pelosi 2007 - 2008

http://tinyurl.com/5xt4r8

Ed-M

$548T in credit deivatives in addition to $596T in OTC derivatives?

http://www.gold-eagle.com/editorials_08/demeritt061608.html

Michael

Elaine,

Andrew Butler has an article presented at MarketOracle - http://www.marketoracle.co.uk/Article6495.html - which gives a nice compact version of the "awakening" that is beginning to widely occur about how the CDS are the REAL problem and the REAL reason for the bailout.

Elaine Meinel Supkis

The real, REAL reason for the mess is the Floating Currency and this was launched because the US insists on running its government increasingly in the red.

JT

Blunt,
I don´t speak any latin either, allthough my junior high school finnish teacher was determined to teach us some latin too.
"O tempora! O mores!" she used to say to us backrow boys when we misbehaved.
I expected you to google it :), the joy of discovery.
Sorry no disrespect intended.

larry, dfh

If I understand things at all, there were some accounting/regulatory changes that resulted in:
1) OTC trades not being reported. This way, all sorts of shadow trades could be perpetrated without knowing who's actually doing the buying.
2) The amount of capitalization for futures purchases was vastly reduced.
3) phil gramm was involved in both of these.
Now, CitiGroup is the largest holder of home-heating oil in New England. If Hugo Chavez has another aid-to-the-poor program in New England, that could ruin alot of folks who speculated on oil when it was $140/bbl. I'm of the skeptical opinion that the profits and indeed balance sheets of the financial houses are all off the books. With the OTC trading being essentially invisible, it is very possible that the on-books accounting is miniscule compared to the total picture.

moncler jacket

Good stuff as per usual, thanks. I do hope this kind of thing gets more exposure.

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