...in this case, the banks are shearing x-billions of losses off the top of their blankets and re-attaching x-billions of new debt onto the bottom. This new debt, of course, goes to cover the old losses and only represents further losses-to-be-reported-later, since the banks are basically insolvent. Borrowing more money when you're broke doesn't make you less insolvent.
The banks can probably keep this gag running a little longer, but not without consequences. My guess is that it spins out of control in March sometime when some more hedge funds blow up and at least one big bank, perhaps Citi, rolls belly up like a harpooned whale. The game is really over, and all the playerz know it. The consequence of continuing to pretend the meta-fiasco of Ponzi endgame is fixable will be an even more shattering depression than the one we're already in for.
We are a much poorer nation than we thought we were and the reality is just too hard to face. Nobody from the most august banker (Treasury Secretary Hank Paulson) to the lowliest wanker (the WalMart inventory clerk who "bought" a house outside Phoenix with a no-money-down, payment-option, adjustable rate mortgage) can believe that this is happening. The candidates for president are pretty much assuming that vast financial resources will exist to be deployed against a range of problems. Everybody is going to be hugely disappointed.
When you introduce perversities into an economic system, they invariably end up expressing themselves as distortions. The economy that evolved the past two decades, driven by the perverse securitization of wishes and frauds, will now express itself in a stark cratering of American living standards. Incomes and jobs will vanish, massive quantities of stuff will collect dust on the WalMart shelves, the fragile infrastructures of daily life will go to shit, and there will be political hell to pay. Every attempt to avoid a straight-up workout of our massive losses, will represent another layer of perversity and more consequent destructive distortions.
I feel sorry for the next president. Even as he takes his oath of office, the nation will be flying apart like a seized-up engine. Since the fiasco in finance is happening in lock-step with Peak Oil (and very likely because of it at a fundamental level) we can expect one of the distortions to take the form of oil shortages. These shortages will come not just from demand bottlenecks in a stressed-out world oil allocation system, but because exporting nations will start demanding payment in Euros or something besides the depreciating currency that reflects our disintegration, and we'll have a problem coming up with payments that amount to at least fifty percent more than we're used to shelling out...
I do feel sorry for Hilbama. Both the Dems strike me as really wanting to change things, even though they're coming to realize exactly how compromised they are. On the other hand, McCain strikes me more and more like Nader: he runs on ego alone.
Once upon a time he seemed to know better than Bu$hCo, Keating notwithstanding.
No more.
Elsewhere, the stampede gathers speed.
...The credit markets came under renewed stress Thursday as investors sought absolute safety and even moved away from debt issued by Fannie Mae and Freddie Mac, the government-sponsored mortgage lending enterprises.
The intensifying credit crisis came as one regulator, Timothy F. Geithner, the president of the Federal Reserve Bank of New York, said that some banks had moved from being too willing to take on risks to being reluctant to take any chance of losing money, a move that was making the crisis worse.
“The rational actions taken by even the strongest financial institutions to reduce exposure to future losses have caused significant collateral damage to market functioning,” Mr. Geithner said in a speech to the Council on Foreign Relations. “This, in turn, has intensified the liquidity problems for a wide range of bank and nonbank financial institutions.”
Those liquidity problems intensified Thursday as a new increase in the number of mortgage foreclosures was reported and two financial companies that had relied on borrowed money said they were unable to raise the cash demanded by their lenders.
Both Carlyle Capital, a company sponsored by the Carlyle Group, a major private equity fund, and Thornburg Mortgage, the second-largest independent mortgage lender in the United States after Countrywide, said they had been unable to meet the demands and had defaulted on some obligations. Their stock prices plunged...
The Carlyle Group is defaulting on loans. You know shit is seriously starting to hit the fan. One wonders when the Saudi Royals begin their hostile takeover, and who will nuke whom in retaliation.
1 comment:
All the more reason for Bush/Cheney to get their Iran on before BushCo ends. War is their solution to all problems. What they would love is a new terrorist attack on American soil.
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