Saturday, August 15, 2009

August 15 2009: Kash für Klunkers


Carl Mydans Summertime August 1936
Scenes at the auto trailer camp. Dennis Port, Mass.


Ilargi: For a long time this spring, we witnessed a seemingly neverending barrage of seemingly smart people proclaiming that European countries, in particular Germany, were damning themselves into a bottomless Teutonic hell pit by not following the American and British example of seemingly bottomless Keynesian stimulus packages. Two voices stood out more in the choir than others, though there were many. The first one, Paul Krugman, has simply never seen a stimulus he didn't like. The second, Ambrose Evans-Pritchard at the Telegraph, used his long and winding tirades to create the picture that continental Europe was much worse off then Britain.

So when the news came out this week that Germany and France had posted positive GDP numbers, you would have thought it was crow-eating time for both "expert" analysts. I haven't seen Krugman address the issue at all, which is a bit odd all by itself, and Ambrose, well, let's just say he doesn’t give up easily. Under the title "Keynes rescues France and Germany", he now manages to make himself believe that the two countries are doing relatively well because they DID enact the very crass Keynesian stimulus programs that not so long ago he accused them of refusing to deliver.

Anyone who's followed what German Chancellor Merkel and Finance Minister Steinbrück have said on the subject knows that they haven’t changed their views in the meantime. Nor have they announced any such program. Not to be outsmarted by such details, Ambrose cites a "researcher" who implies that the Germans (and French) have introduced sly, secret and hidden stimulus measures: "Germany has relied on more crass Keynesianism than it lets on". Not that there's any proof of this, at least not in Ambrose's article, but hey, if you claim they do it in secret, who needs proof?

Yes, Germany was way ahead of the US in a Kash für Klunkers deal. But that has a total value of only $7 billion, and not all has even yet been spent. Yes, Germany takes much better care of people who lose their jobs than the US does, as does France. Not only when it comes to handing them money, but also in retraining and other job-finding assistance programs. But these are examples of policies that have been in place for decades, so they certainly don’t come under the moniker “Crass Keynesianism".

In short, Ambrose is full of it when it comes to this particular topic, and it would look good on him if he would simply admit he's been way out of line for quite a while, and there comes a time to stop digging. The same goes for Paul Krugman.

What I wrote at the time Ambrose and Krugman were fomenting on and on about the deep abyss Merkel was throwing her country into, was that there is simply not one single example in history that proves that such stimulus packages are effective. It's all based on theory, particularly on trying to figure out what the opposite is of Federal Reserve policies in the 1930's. Since those policies are perceived as failures, doing everything the Fed did not back then, must work, or so goes the mantra.

Still, to use all the big words these people have used in order to justify measures that are 100% unproven always struck me as at the very least lacking in a healthy dose of humility. They were, so to speak, sentencing Merkel and Sarkozy before they had had their day in court. There was no proof available beforehand whether the Anglo crass measures or the continental European more hands-off approach would work out best. This week's numbers seem to indicate that the non-Keynesian ideas may have been just as good as the crass ones, if not downright better.

Which is not to say the Europe is out of its hole, not at all. Germany and France's neighbors like Holland and Spain issued gruesome figures this week, and in my view they all have a long way down ahead of them. Germany's manufacturing base, which far outshines that of the US today, will still depend on export markets to survive, and with credit rapidly disappearing worldwide, those markets are set to keep on shrinking for the foreseeable future.

One thing has become obvious, though, by now. Blind reliance on unproven models such as those advocated by Keynes and his modern-day disciples is not by definiton the best or only way to go. It may still turn out to be a preferable approach, it's just that there still is no proof of that. On the contrary, there are clear signs it may very well not be the best.

Apart from that, I could make a pretty solid case that all the trillions of dollars in US and UK crass stimulus have bought is a summer of feeling good. It takes just a fleeting glance at housing and job markets in both countries to move into the fall with very serious questions and concerns. Their real economies haven't improved, they've just kept right on sinking. The stock markets are up and many banks are still alive. But stocks can be sold off in a matter of days, and banks can't continue forever issuing profit numbers that don't include the losses festering on their books.









Keynes rescues France and Germany; Club Med lost
New geographical divide on the cards as twin motors of Euroland crawl out of recession but southern states remain in the wreckage.

Crass Keynesianism has done its job. A blast of fiscal stimulus and "cash-for-clunker" schemes have lifted France and Germany from the depths of recession. The twin motors of Europe each eked out 0.3pc growth in the second quarter, much to the consternation of their own governments and the International Monetary Fund. The eurozone as a whole shrank 0.1pc.

Christine Lagarde, the French finance minister, interrupted her holiday to announce that "France was finally coming out of the red". Her country has been cushioned by its big state sector and well-regulated banks. Growth may have been lifted by a bumper crop of Airbus jets, meeting old orders, so caution is in order. Airbus will trim its A320 lines in October. "It is too early to declare victory," said Marc Touati, from Global Equities. The Teutonic comeback is true to character. Germany is highly geared to the global cycle. It plunged harder than any other rich country bar Japan as the crisis hit, largely because demand for the "big ticket" machinery that drives its export industry imploded. It is now rebounding with similar vigour. Germany's superb companies are the first to benefit as China and the Middle East return to life.

The question is whether this adds up to much more than a restocking rally for a couple of quarters after the waterfall collapse over the winter – as occurred in Japan's Lost Decade, or in the 1930s. Within a few months the "sugar rush" of fiscal stimulus in Europe, the US, China, and Japan will be wearing off. Charles Dumas from Lombard Street Research said Germany has relied on more crass Keynesianism than it lets on. "They have had a budget stimulus, car subsidies, and they're paying people without jobs [Kurzarbeit]. This is all to the good, but it doesn't in any way create the foundations for a new growth story."

The DIW Institute in Berlin expects unemployment to rise by another million to 4.5m next year as job subsidies expire and companies are forced to slash labour – as they must, since over-capacity is at a post-war high. Mass lay-offs will deliver a fresh hammer blow to retail demand. While any sign of recovery is welcome, there is a sting in the tail of yesterday's data. The eurozone's "Club Med" remains mired in slump and likely to slip further behind if recovery gathers steam. Italy shrank 0.5pc, and has now suffered seven quarters of contraction. Spain shrank by 0.9pc.

David Marsh, author of The Euro: The Politics of the New Global Currency, said this North-South chasm will test the European Central Bank's ability to manage a one-size-fits-all policy for Euroland. "The moment of truth will come when German recovery leads to a rise in interest rates, and that may come sooner than people think," he said. "Germany will emerge from this crisis more competitive. It has used recession to make its companies fitter, while the South has been losing competitiveness steadily. I would be particularly worried about the situation in Italy, where lack of leadership is frightening." Italy is moving disturbingly close to a debt compound trap as tax revenues slide. The Italian treasury has revised the country's expected debt in 2010 from 101pc of GDP to 120pc since the crisis began.

Julian Callow, from Barclays Capital, said unit labour costs have risen 28pc in Italy and 27pc in Spain compared to Germany since the launch of the euro. It will be a Sisyphean task for the Club Med states to claw back parity unless Germany is willing to ease the adjustment by tolerating some degree of inflation. There are no signs of that. German prices have fallen 0.7pc over the last year. "Italy and Spain are really in a trap here," he said. Spain's crisis is more immediate. Unemployment has reached 18.1pc. Deflation is setting in after a 1.4pc fall in prices over the last year, raising the risk of debt suffocation.

For the eurozone as a whole, it is far from clear whether the banking crisis has been resolved. Credit to households and businesses has contracted since February: the M3 "broad" money supply has been flat. M3 stagnation can be an early warning of trouble to come a few months later, though in this case the ECB thinks the data had been distorted by emergency policies. Not all experts agree. Professor Tim Congdon, from International Monetary Research, described the money figures as "horrifying". The Federal Association of German Banks says there is a "real danger" of a fresh credit crunch over the next 18 months as default rates creep up and corporate downgrades force lenders to set aside greater reserves.

US and UK banks took much of their punishment early because they were heavily exposed to debt securities that collapsed almost instantly when the storm hit. European banks are likely to suffer later in the cycle. Their style of lending usually means that losses are not crystallised until defaults occur. The ECB says eurozone lenders may have to write down a further €203bn (£175bn) in bad debts by late 2010. Berlin has refused to conduct an open stress test on its banks, raising suspicions that it is brushing problems under the carpet until the elections in September. We will find out soon enough if that is true.




Will Germany Beat the U.S. to Recovery?
The race to economic health pits export-driven economies with strong social-assistance programs against those that count on consumer spending

It has been a rhetorical battle of Anglo-Saxon vs. Continental capitalism. Since the onset of the economic crisis, German leaders have scored political points by railing against the flaws of the U.S. and British economic systems, even as counterparts such as U.S. President Barack Obama and U.K. Prime Minister Gordon Brown pressed for bigger economic stimulus packages. Just this month, German Economics Minister Peer Steinbrück warned that the "casino capitalism" practiced in overseas financial centers will resume without stronger regulation.

On Aug. 13 the Continental gang got a bit more to crow about. Data released that day showed that France and Germany both posted surprising 0.3% economic growth in the second quarter, even as U.S. gross domestic product slipped 1% and Britain's sagged 3.2% over the same period. It was a vote of confidence in the Continental model, suggesting that the more traditional, consensual, and export-driven German economy—Europe's largest—could be better positioned for economic recovery.

Of course, one quarter's growth rate doesn't provide a complete picture—and it's too early to tell how each economy will fare once recovery has set in. But the unexpectedly faster European turnaround only deepens the debate over the merits of different economic models. Could export-driven economies with considerable social-assistance programs be in a better position to bounce back than those, such as America's, that rely heavily on services and consumer spending?

Not surprisingly, economists don't share a consensus on the answers. But many point to several factors that helped Germany return to growth in the second quarter. One is the success of the government's €2,500 ($3,540) cash-for-clunkers subsidy (Abwrackprämie) for trading in old cars for new, more fuel-efficient ones. The program stimulated considerable demand in new car sales. Another is the oft-cited "automatic stabilizers" in the German economy, including more generous support for the jobless and government subsidies for workers whose hours have been cut. Analysts say this "Kurzarbeit" program has prevented hundreds of thousands of job losses this year.

A recovery in China and the developing world also stands to benefit Germany, whose economy relies heavily on exports. German second-quarter growth was already helped by exports to non-Japan Asia, especially China, says Thomas Mayer, chief European economist for Deutsche Bank in London. That bodes well for the country's economic model, he says: "Germany's export model has been sustained for the last few decades and will probably remain in place for the future."

Indeed, amid an overall revival in global trade, "European economies are in a better position to recover," says Martin Lueck, an economist at UBS. "In the U.S., everything hinges on the consumer. As long as the savings rate keeps rising, house prices falling, and employment weakening, there is very little leeway for the consumer [sector] to recover." However, Lueck sees the most critical split occurring not between countries or economic regions but rather between economic classes. "If you draw a line dividing the winners and losers [of the past 20 years], it is not between U.S. or U.K. economic systems and Europe's, but rather the owners of capital vs. the owners of work. The losers are the owners of work in all parts of the world, particularly Western countries. The winners have been the owners of capital."

That's why, in spite of the good news about the second quarter, doubts persist about sustaining the recovery in Germany and the rest of Europe next year. Stimulus measures, including Germany's cash-for-clunkers program, will expire in 2010, when new car sales could fall again. Some analysts say Germany's temporary assistance to workers, which allows them to stay employed, may have merely delayed layoffs and that unemployment will rise again by the end of the year. And European banks still aren't lending at previous levels as they work to rebuild capital.

So while Germany will likely hold on to its export-powered economic model, analysts say the global slowdown won't allow it to regain the strength it once had. "An export-led economy is of course reliant on growth elsewhere, and if major export partners suffer, Germany will suffer, too," says Natascha Gewaltig, director of European economics at consultancy Action Economics. "The road of the German economy to pre-crisis levels remains long and winding," wrote UniCredit economists Alexander Koch and Andreas Rees in a research note. Dirk Schumacher, senior European economist for Goldman Sachs, suggests that Germans will have to start consuming more so their economy doesn't rely too heavily on exports. "A global imbalance means it's not just one country's problem," says Schumacher. "Every country needs to take a deep look and see what needs to change."




Enjoy eurozone's fragile stabilisation while it lasts
The eurozone economy is stabilising. While the first estimate of the region's GDP in the second quarter showed a tiny 0.1pc decline, there were increases of 0.3pc in both Germany and France. But cheers should be muted. Sure, positive surprises are welcome after many months of deterioration. The consensus expectation of eurozone GDP change for 2009 moved from 0.5pc growth last October to a 4.2pc decline in June, before improving to a 4pc decline in July, according to research boutique Consensus Forecasts. Expectations are likely to become less negative once again.

If this recession were to follow the recent historical pattern, the forecasts would soon be moving up dramatically. In the four downturns since 1974, eurozone GDP declined an average of 1.1pc, followed by an average 4.7pc cumulative growth in the two years following the trough, according to BNP Paribas. The shrinkage this time has been 5pc, suggesting near double-digit percentage growth rates during the recovery. Some economists are already talking about such a v-shaped recovery in the eurozone and around the world. But this time could well be different - and more difficult.

To start, the recession has hit so much of the world that few countries can rely on sustained export growth to pull them out of trouble. That is especially true of eurozone members, since their currency is expensive and demand for capital goods - the region's strong point - won't return in strength until a global recovery is well established. The main challenge to growth, though, is financial. A still crippled global credit system will keep consumers and businesses cautious. The end of preternaturally low policy interest rates and frighteningly high government deficits isn't yet in sight, but the transition to normality could easily go wrong.

The relevant precedents are both discouraging. Japan, which resembles the eurozone in its savings culture and ageing population, has never fully recovered from the excesses of the 1980s. And the US central bank's attempt to keep a non-inflationary recovery on track with a tightening in 1936 caused a recessionary relapse. Enjoy the good news while it lasts. There are reasons to suppose it may not last that long.




Amazing German Machines May Lead Europe Out of Recession
Germany's heavy reliance on exports caused serious problems for the country when the global economic crisis dried up orders. However, its obsession with manufacturing could soon help drive growth. By merging electronics and mechanics, German factories could drive the Continent's revival. Metal banging never really went out of style in Germany -- and that may be a good thing. The nation clung stubbornly to manufacturing in recent years as the US focused on faster-growth industries such as software and e-commerce. Workshops and factories still account for a quarter of Germany's gross domestic product and 30 percent of jobs, vs. 21 percent of employment in the US.

Now that capability could help drive a European economic revival. As China, India, Brazil, and other developing countries recover more quickly than developed countries, they'll need the specialized manufacturing systems that come mainly from Germany and a few other countries such as Denmark, the leader in wind power, or Italy, famous for its textile machinery. Much of the momentum for growth lies in a key shift in German factories, where companies have increasingly integrated information technology with old-fashioned mechanical engineering. They haven't had a choice, either -- high labor costs and high taxes mean European companies couldn't compete otherwise.

"German companies have to be very innovative to survive," says Peter-Michael Synek, whose job at the German Engineering Federation is to promote "mechatronics," the science of integrating electronic and mechanical components. As a result, Europe is producing machines packed with computing power. Siemens recently unveiled a driver-less forklift that uses lasers to find its way around factories. Kuka, a German manufacturer of industrial robots for the car industry, has moved into the entertainment business with so-called RoboCoasters. Customers at Legoland in Denmark and other amusement parks now sit in seats attached to giant robot arms that hurl them in unpredictable directions. And the Lely Group of the Netherlands has invented a machine that milks cows without human intervention.

Lely has already sold some 7,000 of its robot milkers worldwide. Cows learn to sidle up to the $300,000 (€210,187)-plus devices on their own when their udders feel full, letting themselves in and out of a special stall to do so. For the first time since man domesticated animals, farmers don't have to rise before dawn to milk the herd. Jutta Schemmerling, who owns a farm with 90 cows in the town of Ober-Mörlen north of Frankfurt, says she has more time to spend with her seven-year-old son since installing two Lely robot milkers last year. "It makes a difference in the quality of life," she says.

German expertise in high-tech machinery has allowed some sectors to defy the global downturn. Even as oversupply and plunging prices have cast a shadow over the solar power industry worldwide, German makers of machines used to produce solar power components reported a 60 percent sales increase in the first quarter of 2009 compared with a year earlier.

The explanation for this gravity-defying performance was simple. Companies such as China's Asia Silicon, which makes refined silicon for solar cells, are aiming to cut production costs. So they're ordering advanced machines or even entire production lines from companies such as Centrotherm Photovoltaics, based in the German town of Blaubeuren. Centrotherm, which builds machines that reduce the raw material needed to make a solar cell, nearly doubled sales in the first quarter, to $185 million, thanks in part to a big order from Asia Silicon.

Germany's reliance on factory machinery and other capital goods for export is not always an advantage. Manufacturers slashed purchases of these items because of the financial crisis, with orders for all categories of German machinery sinking 65 percent in the second quarter of 2009 compared with a year earlier. And while the country's manufacturers are famous for identifying a niche -- and then dominating it -- that focus also makes them vulnerable. "The specialization level of German manufacturing is one of the main reasons why contraction in output is so significant," says Silvio Peruzzo, euro area economist at the Royal Bank of Scotland.

Also, Germany's excessive bureaucracy and the low rate of startups may chip away at its competitive edge, says Dietmar Harhoff, a professor at the Institute for Innovation Research, Technology Management & Entrepreneurship at Ludwig-Maximilians University in Munich. But for now, he says, "there is a good prospect that Germany's strengths will pull the [European] economy out of the mess we're in."




Deflation, not inflation, is the economy's swine flu; QE is its Tamiflu
Fundamentalist view: our series in which a leading fund manager or expert at making money grow explains why savers and investors should see things their way. In the traditional Irish ballad Finnegan's Wake, a corpse is brought back to life after being splashed with whiskey. Of late, the Bank of England has been doing a lot of splashing too, not with whiskey but with cash. Having cut interest rates to their lowest level in 300 years, it is now pouring £150bn into financial markets, a sum that is more than 12pc of GDP.

Many fear this printing of money will prove highly inflationary and point to the green shoots of recovery as supporting evidence. In their view, not only is Tim Finnegan's corpse awake, it will soon be jigging. And, therefore, an inflationary shock lies around the corner. Could they be right? Or do the green shoots spring from arid soil? Despite the worst recession in generations, inflation has remained stubbornly high. In the City, the yield on 10-year government bonds has risen steadily since the Budget, in anticipation of massive borrowing and higher inflationary pressures.

Meanwhile, the broad-based recovery in the price of oil, industrial metals and other commodities could be indicative of economic recovery and of inflationary pressures. Such behaviour would be entirely normal if the prospects were for a typical "V-shaped" economic recovery. In which case, stock markets ought to be rallying. And indeed they have. In spite of the general economic gloom at the beginning of March, we saw one of the most substantial equity market rallies in recent years. Indeed, it looked more like a relief rally. Relief that a collapse of the global financial sector was no longer a threat. Relief that the economy was contracting less sharply than before. Relief that the Chinese economy had picked up.

To this we would say that, in their early stages, all recoveries look "V-shaped" and markets discount near-term expectations. It is what happens later that is important. Credit is the oxygen that an economy requires for healthy growth. Yet the global banking crisis has left many banks strapped for cash. Indeed, many banks appear unwilling or unable to lend to even the safest businesses. How, then, will they cope with the likely demand for credit in a typical upturn? The answer is that they won't. That's one reason why a "V-shaped" recovery is unlikely.

Here is another. If the price of a barrel of oil has to rise to $100 or higher in order to complete new cities in Saudi Arabia and the Gulf states, then the West could be in for another oil shock. High oil prices, if sustained, choke off growth. The credit-crisis-induced rise in bad debts means banks must now shrink their balance sheets. This reduces their ability to lend. Although such action may be sensible for each individual bank, in aggregate it risks pushing the economy into a deflationary spiral. Thus, the quantitative easing policies of British and US central banks are designed not so much to stimulate the economy for its own sake as to step into the breach.

The truth is that inflation, as driven by quantitative easing, is only a threat because deflation is an even bigger threat. Deflation, not inflation, is the swine flu that risks infecting the economy; quantitative easing is its Tamiflu. Because, for central banks, the risks are not symmetrical. Inflation at 5pc is much easier to deal with than deflation of 5pc. Because many companies need to use much of their lower disposable income to service debts, dividends are suffering. Marks & Spencer reduced its dividend by 33pc, BT by 59pc. Indeed, the pressure on British companies to lower or cut dividends, especially those with large debts, is at its most severe since the end of the First World War.

So why invest in dividend-paying companies when it is the low-yielding, highly indebted companies that are driving the stock market higher? Part of the answer is access to capital, which has become much harder to obtain. Companies that have supercharged their earnings with debt must eventually renew that debt. The problem is that banks are not lending. Although businesses with strong balance sheets have been able to raise fresh loans in the market, weaker companies have had to ask shareholders for capital. This has hit their share prices. In a deflationary environment, a strong balance sheet, with little debt, is an advantage.

The next deflationary scare might already be on its way. If Latvia's euro-linked currency peg breaks, the collateral damage may cause widespread problems for European banks. We believe this is not yet an environment for an inflationary surge but may be a time to consider lowly valued shares in world-class companies with good prospects that pay attractive, sustainable dividends.




Europe and US still at risk from deflation trap
The developed world has not shaken off the risk of sliding into a deflation trap, experts warned after new figures showed that prices in both the eurozone and the US are falling. Consumer prices in America slipped by 2.1pc in the year to July, according to official data released yesterday. It coincided with Eurostat figures showing that the eurozone's consumer price index dropped by 0.7pc in the past year, compared with deflation of 0.1pc in June.

The figures underline concerns that despite the sharp rebound in a variety of economic indicators, and despite news that France and Germany have both now pulled out of recession, the threat posed by deflation has not yet been extinguished. Indeed, the fall in consumer prices over the past year in the US represents the biggest such drop since January 1950, and means that the country has now been in deflation for eight months. Gabriel Stein, of Lombard Street Research, said: "Ultimately, US consumer prices will not rise on a sustained basis until the negative output gap has closed and a positive output gap opened instead. At some stage, this will happen. But not for some time."

The price figures, which showed that despite the annual fall prices were flat on the month, coincided with data showing that US consumers' confidence has slid yet further amid worries about the state of the jobs market and wages. The University of Michigan consumer sentiment barometer dropped from 66 points to 63.2 this month – the lowest since March, from 66 in July. The measure reached a three-decade low of 55.3 in November. The Labor Department said its consumer price index was unchanged from June as forecast, and dropped by 2.1pc – the most in six decades – from July 2008. Economists had expected the index to rise to around 69.

Chris Rupkey, of Bank of Tokyo-Mitsubishi UFJ, said: "If consumers are lacking confidence, then they will not be able to help us spend our way out of this long, dark recession. Households are still concerned about the jobs outlook, and certainly, Fed policy is also gearing off of the labour markets as no Fed has lifted interest rates while the unemployment rate is rising." However, there was brighter news from the manufacturing sector, as separate figures showed that industrial production rose for the first time in nine months. Output rose by 0.5pc last month, following a 0.4pc fall in June. The White House's so-called "cash-for-clunkers" incentive scheme to encourage homeowners to replace their old cars with new models is also thought to have helped




Worrying About Deflation
German Consumer Prices Fall For First Time in 22 Years

Latest figures confirm the first annual decline in Germany's consumer price index in decades. For some, the deflationary figures raise the specter of the Great Depression. Others say the decline will only be short term. This week German statisticians confirmed the first annual decline in consumer prices in the country for more than 22 years. The country's Federal Statistics Office released figures showing that consumer prices had dropped 0.5 percent in July compared to the same time last year. This is the first annual decrease since March 1987, before the reunification of Germany.

Meanwhile another indicator of price movements, wholesale prices, also dropped -- by 10.6 percent in July year-on-year, the biggest fall since the data began to be compiled in 1968. This leaves Germany with minor deflation - the country's inflation rate made headlines when it went to zero in May, it then climbed up to 0.1 percent in June before dropping again in July. The price drops, which were larger than expected, can be blamed on the fact that the price of crude oil has almost halved over the past year, going from around $147 a barrel to around $65 -- this also happened in 1987, the last time Germany saw this kind of deflation.

The drops are also explained by a fall in food prices, which had been experiencing a global high and which are now between 1.2 percent and 3.3 percent lower than in July 2008. Additionally the current recession is also responsible for Germany's deflationary situation -- an oversupply of goods and services, a looming credit crunch, worsening unemployment, shrinking national growth rates and, generally, weaker economic activity all play a part.

Deflation can be of concern to an economy. A little short-term deflation is generally considered relatively harmless by economists -- in fact, it can even stimulate the economy because consumers, encouraged by lower prices, are likely to spend more. However if it goes on long term it can lead to a worsening downward spiral of declining demand and increasing unemployment such as that seen during the Great Depression of the 1930s.

The same deflationary trend has been seen in other European Union states. But fortunately, most analysts are predicting that Europe's deflation won't last long. "We expect the current episode of extremely low or negative inflation rates to be short-lived," said Jean-Claude Trichet, president of the European Central Bank, in a statement released earlier this month. The inflation rate preferred by the European Central Bank, the body charged with keeping the euro zone currency stable, sits at around or just below 2 percent. And although Germany's current deflation may go on for several months longer, other recent data has shown that markets are slowly recovering.

Factors that could worsen deflation rates are the feared credit crunch and a rise in unemployment, both of which would mean less money circulating in the economy. So far the most noticeable effect of the recent deflationary figures has been on the euro's exchange rate. Because Germany is the largest economy in the euro zone, the country's inflation indicators have had a significant effect on the currency, which fell to a two-week low against the dollar and also dropped against the pound.




Colonial, Major Bank, Fails in South
Colonial's Assets Sold to Rival in 6th-Largest Collapse on Record; Blow to FDIC

Regulators seized Colonial Bank on Friday after reaching a deal to sell its branches, deposits and most of its assets to rival BB&T Corp. in the sixth-largest bank failure in U.S. history. The demise of Colonial, a regional bank based in Montgomery, Ala., with assets of $25 billion and 346 branches in five states, signals an ominous phase in the nation's banking crisis. Even as some large institutions show signs of stabilizing, a slew of regional lenders remain on the ropes. And regulators appear to be giving up hope that some of them can be saved.

Colonial, a unit of Colonial BancGroup Inc., is the largest bank to fail since Washington Mutual Inc.'s banking operations collapsed last September and were sold to J.P. Morgan Chase & Co. Colonial's slide came largely as a result of aggressive real-estate lending in Florida and other frothy markets. The company had been teetering for months, but federal and state regulators gave it time to try to secure a financial lifeline from outside investors or another bank. Those prospects dimmed in recent weeks. A planned deal between Colonial and a Florida mortgage company unraveled amid a federal criminal investigation. Colonial said last week that the Justice Department is investigating one of its lending units and related accounting irregularities. That prompted federal regulators to start shopping Colonial to potential buyers, according to people familiar with the situation.

Aside from BB&T, a regional bank in Winston-Salem, N.C., that has avoided the brunt of the financial crisis, bidders for Colonial were scarce, even though the Federal Deposit Insurance Corp. offered to shield buyers from some potential losses, according to a person involved in the talks. "No one wanted to touch this thing," said Morgan Keegan & Co. analyst Bob Patten. The FDIC agreed to share losses with BB&T on $15 billion of the $22 billion in assets included in the deal. Colonial's inability to find a buyer, and the limited interest in the FDIC auction, is a reminder of the industry's lingering troubles, experts say. Colonial, founded in 1981 by Alabama real-estate developer Robert E. Lowder, for years had a coveted franchise. But the severity of the losses facing the bank scared away several buyers, according to the person familiar with the talks.

Colonial's collapse will cost the FDIC's dwindling deposit-insurance fund an estimated $2.8 billion, the agency said. The fund stood at just $13 billion as of March. "Our industry-funded reserves have covered all losses to date," FDIC Chairman Sheila Bair said on Friday. In another sign that the pace of failures is accelerating, the Office of Thrift Supervision on Friday seized Dwelling House Savings and Loan Association, the 73rd collapse of a U.S. bank so far this year. The tiny Pittsburgh thrift's deposits and some of its assets were sold to PNC Financial Services Group Inc.

To help stop the bleeding, federal officials are discussing ways to relieve banks of some of their bad assets, such as troubled real-estate loans. One plan under discussion, referred to within the government as "Spinco," would allow banks to spin off bad assets into a separate entity, which would be owned by existing bank shareholders, according to people familiar with the plans. The new entity would have an FDIC guarantee that would enable it to raise money. The plan is in early stages of discussion, these people say.

BB&T, which recently repaid the $3.1 billion capital infusion it got under the federal Troubled Asset Relief Program, has been growing through a string of acquisitions. The Colonial acquisition is one of BB&T's biggest ever. BB&T will pick up hundreds of branches in Texas and throughout the southern U.S.. As Colonial's chairman and CEO, Mr. Lowder, 67 years old, repeatedly rebuffed overtures from potential suitors, pushing Colonial to keep growing. He orchestrated 68 acquisitions in five states. And he focused on real-estate lending such as residential mortgages and construction projects. Even when the real-estate boom seemed to be ending, and regulators were warning banks to scale back on such lending, Mr. Lowder forged ahead.

"We've always been a real-estate bank," he said in a 2006 interview. "We understand real-estate lending. For us, we think it's a good, safe market to be in." Mr. Lowder developed a reputation on Wall Street for being involved in every corner of the bank. Senior executives addressed him as Mr. Lowder. "It was a very old-school type of banking model where the CEO really ran things and there wasn't a whole lot of debate," says Kevin Fitzsimmons, a banking analyst with Sandler O'Neill & Partners.

As he was building the bank, Mr. Lowder was pursuing other interests that made him a major figure in Alabama, particularly at his alma mater, Auburn University. As a trustee there since 1983, appointed by Gov. George Wallace, he wielded considerable clout, particularly in the university's vaunted football program. In the mid-1990s, he won a fierce legal and political campaign against Alabama's governor and state lawmakers to retain his seat on Auburn's board. ESPN in 2006 named him the most powerful booster in college sports.

Ever since the banking crisis erupted, Colonial has been regarded as a potential casualty as swelling loan defaults depleted its capital buffers. Efforts by Mr. Lowder's team to stabilize the bank repeatedly fell short. In June, Mr. Lowder announced he was retiring, handing the reins to two of the bank's longtime directors. Mr. Lowder couldn't be reached for comment on Friday. Colonial's downfall illustrates the problems with the current patchwork bank-regulatory system. In 2008, Colonial's primary regulator, the Office of the Comptroller of the Currency, began raising concerns about the bank's commercial-real-estate portfolio. That June, Colonial said it was ditching its OCC charter, opting instead for state regulation in Alabama.

Last fall, despite the worries of some federal regulators about the bank's troubles, the Treasury Department granted Colonial preliminary approval to receive taxpayer funds through TARP. The $550 million in bailout cash it was slated to get was conditioned on Colonial raising at least $300 million of capital from private investors. That was a tall order, given the bank's woes. Earlier this year, Colonial lined up a capital injection from Florida mortgage lender Taylor, Bean & Whitaker Mortgage Corp. that would have required the company to yet again switch its main regulator, this time to the federal Office of Thrift Supervision.

But that deal fell apart this summer after Colonial and Taylor Bean were raided by federal agents as part of a criminal probe. Taylor Bean has since been forced to shut down. Meanwhile, the inspector general of TARP has asked for an investigation of how Colonial was approved for the funds. The FDIC, Federal Reserve Bank of Atlanta, and state of Alabama all slapped Colonial with severe restrictions this year. But by that time, many of the bank's problems were beyond repair.

Federal bank regulators recently began working on a private agreement to prohibit any bank with significant problems from switching charters to escape tough regulation. The Obama administration's proposed overhaul of banking rules would try to make this impossible. At a Colonial branch in Atlanta on Friday afternoon, customers came and went with no indication that BB&T already had dispatched employees to Colonial markets to prepare for the takeover. "It's business as usual," said Brian Rouse, an assistant bank manager, adding that customers could deposit and withdraw funds normally. There were no long lines inside the branch, an automated-teller machine or drive-through.




Colonial, 4 other banks fail
Late Friday, the FDIC also said that four other banks had failed. Outside of Colonial, the largest collapse of the day was Community Bank of Nevada in Las Vegas, which went under with assets of $1.52 billion and total deposits of about $1.38 billion. Its failure will cost the FDIC's Deposit Insurance Fund an estimated $781.5 million

The Nevada bank did not find a buyer, leaving the FDIC in control of its assets. The agency immediately created a new institution, the Deposit Insurance National Bank of Las Vegas, which will remain open for approximately 30 days to allow depositors access to their insured deposits and give them time to open accounts at other insured institutions. Banking activities, such as direct deposit, writing checks, and using ATM and debit cards, will continue normally through the transition.

Dwelling House Savings and Loan Association in Pittsburgh closed its door for the last time Friday. The FDIC said PNC Bank will assume control of its assets. It was the first Pennsylvania bank to fail this year. As of March 31, Dwelling House held assets worth $13.4 million and total deposits of $13.8 million. The FDIC estimates that this closure will cost the its insurance fund $6.8 million. MidFirst Bank of Oklahoma City assumed all deposits of two failed Arizona banks, Union Bank in Gilbert and Community Bank of Arizona in Phoenix. Community Bank of Arizona had assets of $158.5 million and total deposits of approximately $143.8 million. Union Bank had assets of $124 million and total deposits of approximately $112 million.

The two failures, the first in Arizona this year, will together cost the FDIC's insurance fund around $86.5 million. The 77 bank failures so far in 2009 has more than tripled last year's total of 25. 




FDIC chief says parts of regulatory plan won't fly
Federal Deposit Insurance Corp. Chairman Sheila Bair is pushing back against key pillars of the Obama administration's financial overhaul plan, saying they wouldn't survive in Congress and calling her own alternatives more viable. In an interview with The Associated Press, Bair said Congress won't approve two major parts of the package: Expanding the Federal Reserve's authority to regulate the largest financial companies and giving a proposed new consumer protection agency examination and enforcement powers over banks. Such authority now belongs to her agency and other bank regulators.

"There's a lot of resistance from a lot of different quarters to a lot of the things the administration has submitted," Bair told the AP Thursday. "That is a reality the administration needs to deal with." Bair said alternatives she has backed would "provide a framework that can actually get through Congress." Her ideas include empowering a new agency to protect consumers from abusive mortgage and credit card products — but having bank supervisors enforce those rules. She said she supports "90 percent" of what the administration has proposed. But on giving the new agency enforcement powers, she said, "I just don't think that works."

Bair's statements highlight Treasury's uphill struggle to sell the administration's proposed financial overhaul to Congress and the public. Since the plan was rolled out in June, industry groups have balked at rules they say will burden companies and raise borrowers' costs. Bank industry lobbyists are leading the charge against major parts of the plan. Congress has objected to concentrating more power in the Fed. Critics say the central bank failed to properly use its consumer protection authority before the crisis erupted. Bair and other federal regulators have voiced their own opposition to parts of the plan, in what some Obama administration officials have dismissed as efforts to protect their turf.

Fed Chairman Ben Bernanke has questioned the need to create a consumer financial agency that would strip the central bank of some of its duties. Bernanke has said he thinks oversight of consumer protection should stay with the Fed. In response to such resistance, Treasury Secretary Tim Geithner has angrily demanded that regulators line up behind the plan — even though Treasury has no authority over independent agencies such as the FDIC, the Fed and the Securities and Exchange Commission. Bair says she's raising legitimate policy questions. As head of an independent regulatory agency, she said she has a duty to tell Congress her opinion.

Amid concerns the plan is faltering, top Treasury officials have defended it in a series of interviews this week. They have insisted the plan is on track and have played down differences among regulators. In the interview, Bair said "there's a lot more congeniality and conversation and exchange of views than the press gives us credit for." "It would be great for everybody to be in line on all of this, and eventually we will be, but part of that really is and should be the legislative process," Bair said.

In a separate interview, Deputy Treasury Secretary Neal Wolin told the AP, "What's important is, at the end of the day, that we all keep our eyes on the prize, make sure we're all pointed toward comprehensive reform of the financial services sector." He said it's not surprising "that in understandable Washington style, (regulators) defend their own institutions." He said Bair's view that the administration plan can't pass Congress could become "a self-fulfilling prophecy." Bair countered that dismissing the different views she and other regulators have aired isn't "helpful." "I think there are basic, fundamental policy issues here that need to be looked at," she said. Her objections relate to the administration's plans for a new Consumer Financial Protection Agency, with authority to make and enforce rules for financial products.

The Fed now has authority to make those rules. Bank regulators, including the Fed, FDIC and Office of the Comptroller of the Currency, enforce them. Wolin said this structure has led to uneven enforcement of rules intended to protect consumers from predatory lending and other abuses. "It is important that there be one institution that has as its focus consumer protection ... and that the rule-writing and supervision and enforcement for consumer protection be done all in one place," he said. But Bair said it is vital for bank regulators to maintain oversight over both consumer issues, and bank safety and stability. "It is interrelated in a way that is very, very difficult to tease out," she said.




Ilargi: Very interesting from Reggie Middleton. Loss rates 4 times higher than in Fed calculations, that's quite a feat. I left in the Elizabeth Warren video, though I posted it a few days ago. It's a must see. I left out the multitude of tables Middleton closes the article with. Click the title to go to the original.

Fact, Fiction, Farce and Lies! What happened to the Bank Bears?
by Reggie Middleton

I have some good news and some bad news. The good news is that that market neutral strategy illustrated through the blog research is working like a charm (I will be posting some results soon). The market has been on a massive bullish tear, to the dismay of market bears. Well, the new strategy works and it allows us to profit from both bullish and bearish moves. I have transformed my personal portfolio to the market neutral strategy. The bad news is that the problems that caused those of us who know how to count to be bearish are still abound and have apparently been conspired into the bin of ignorance.

 Accounting boards, banks, media and sell side analysts in general appear content to ignore the facts, change the way we count losses (after all, losses are,,, well,,, losses. Right???!!!), and generally sweep the banking problems under the rug in anticipation of bubbling our way out of the problem or at least concealing it long enough through accounting shenanigans to allow accounting profits to somehow paper over economic losses. Good luck with that. Underlying fundamentals are still deteriorating, albeit potentially at a slower pace, as share prices are literally flying through the roof. Those who are in the market and are bullish or not market neutral are, in my opinion, playing with fire. It is gambling to buy stock just because the stocks prices are going up. I know it feels good when the prices go higher after you buy the stock, but the underlying fundamentals are atrocious and if one were to get caught in a nasty correction, one could not have said it was "impossible to see coming".  This is exactly the same scenario that played out in the dot.com bubble. Bulls were justified because share prices went higher, not because underlying values increased. When reality hit (and it always does hit, that's whey they call it reality) folks were literally wiped out.

I will anecdotally illustrate some of that fire investors are playing with in the banking sector. While I was browsing through the extremely interesting, if not controversial Zerohedge.com blog, I came across this video of Elizabeth Warren, who heads the Congressional Oversight Committee's investigation of the banks. I will like my readers to listen to it then continue reading this post.

 



Wells Fargo and over $100 billion of economic losses????



 In the case of Wells Fargo, we have applied high LTV ARM loss rates to calculate the losses on HELOCs (which comprises of total 1-4 family junior lien mortgages and line of credit) since the direct HELOC data was not available for WFC. The total losses in these loans are expected to skyrocket as can be seen from the raw, and unbiased NY Fed and FDIC call sheet data (see The Re-Release of the Open Source Mortgage Default Model and Green Shoots are Being Fertilized by Brown Turds in the Mortgage Markets). It is a small wonder why the Treasury failed to use this government data to run the bank stress tests, for if they did the outcome would have been far different, and decidedly much more negative. We have taken a conservative approach in valuing the loan losses due to which the total loan losses in the HELOCs alone would be 56.4% or US$62.1 billion.

We have segregated the total HELOC loans as owner occupied and non-owner occupied based on the proportion mentioned in the FDIC data derived spreadsheet for each respective states. Than, applying the default rate assumption made in this sheet for High Risk ARM (owner occupied - 65% & non-owner occupied - 95%) we calculated the total default rate for each state.

Further, we applied the recovery rate based on the current LTV to arrive at the total charge-off in the next two years.

The total losses are expected to jump to US$187.4 billion in the adverse case in the coming two years. Wells Fargo's current Tangible Common Equity (TCE) stands at 3.28%, which is significantly lower than the prescribed limit of 4%. According to our estimate, the bank's TCE would fall to 1.56% at the end of 2010 after adjusting for accounting and economic losses. Considering the massive anticipated losses in the next two years, Wells Fargo's capital would fall short by US$34.3 billion and not US$13.7 billion as shown by the SCAP result (see America, You have been outright lied to! Bamboozled! Swindled! Hoodwinked! The Worst Case Scenario, Welcome to the Big Bank Bamboozle!, and The Real Stress Test Results) to maintain a TCE ratio of 4% in the pessimistic case. As Wells Fargo has raised US$8.6 billion capital it would still be required to raise additional US$25.65 billion as a safeguard against a deeper economic downturn or a recovery marred by another negative dip, OR a recovery hampered by lingering unemployment OR a recovery contrained by floundering property sector OR a recovery pulled down by mediocre growth. 

Here is the Wells Fargo Eyles test, Texas Ratio and Tangible Equity trends using FDIC and NY Fed data as fed though our forensic model, incorporating off balance sheet entity risk.

  Click graphic to enlarge


wfc_eyles.png 


Wells share price is up nearly 400% since March while nearly every compreshensive credit metric (if calculated using real, unbiased data in a real, unbiased fashion) forecasts a very, very different outcome.


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Federal Reserve Vs Our Computation - Loan Loss Estimates

Our Analysis

Methodology to compute loan loss rate: Real estate 1-4 family mortgage loans

Real estate 1-4 family mortgage loans comprise prime loans and Alt-A loans. Since the complete breakdown of loans into prime and Alt-A is not known for Wells Fargo, we have assumed the default rate of Alt-A loans in the US. Thereafter, we adjusted this default rate to factor in the prime real estate 1-4 family mortgage loans. We computed the net loss rate for two years (2009 and 2010) based on the Alt-A default rate to arrive at the overall default rate. We then applied the recovery rates, based on the decline in the housing prices and LTV, to calculate the total loss rate. We assumed the loss rate to be 20% lower than the loss rate of the Alt-A loan in each state as some proportion of the loans could be prime loans. The S&P Case-Shiller Index has declined around 18.9%, 29.3% and 29.2% since 2005, 2006 and 2007, respectively, as majority of these loan value have been wiped out completely due to the severe correction in prices while the LTV still remains very high. Based on the current LTV, we have assumed the recovery rate to derive the loss rate for 2009 and 2010.

The total impaired loans would thus have a loss rate of 31.2% in the coming two years while loss rate in the real estate 1-4 family first mortgage would be 20.1%. The Federal Reserve loss rate of 7-8.5% is far too optimistic to give a true picture.  




Loophole in government program to buy toxic securities could cost taxpayers
Without safeguards, traders in the $40-billion program could use inside information to profit -- and any losses would be largely borne by taxpayers.

A controversial $40-billion government program to buy toxic securities from ailing banks has a flaw that law enforcement and financial experts say could allow traders to illegally profit from inside information. Critics of the program say that without adequate safeguards, traders could use the tens of billions of dollars provided by the government to manipulate prices and exploit the price swings in other trades. Because the government is providing 75% of the program's money -- $30 billion -- the manipulations could lead to significant losses by taxpayers.

"It is a conflict by design," said Neal Barofsky, the special inspector general for the banking rescue program who has urged tighter controls on the nine trading firms selected to participate. The Treasury Department, which is in charge of the program, says it intends to closely monitor trading activity to prevent illegal insider trading and profiteering at the expense of the public interest. But Barofsky said the government probably stands little chance of beating Wall Street at its own game.

"The Treasury cannot possibly match wits with the innovation and aggressiveness of Wall Street," he said. "If you give them a set of rules and there are technicalities and legal loopholes and things we haven't thought of, they are going to find that out, not because they are bad, but because that is what they are supposed to do. They are supposed to seek out profits at all costs." The program, known as the Public Private Investment Partnership, or PPIP, allows the nine investment firms to use the government money and $10 billion in private funds to buy up toxic securities held by banks.

The firms, chosen last month from a field of about 100 applicants, have already begun assembling pools of private investors to buy the securities, composed of troubled mortgages that have festered on banks' ledger books and hampered their return to health. The toxic securities, which could total $2 trillion, plummeted in value during last fall's credit crisis and became virtually impossible to sell because of uncertainty over their worth. Under the government's plan, traders would jump-start the market by making offers to banks for the securities, thereby setting fair prices for the securities and trading them on the open market. Sales could begin as soon as this month.

The chosen investment firms could earn large profits or bonuses on those trades, but their risk of losses is largely borne by the taxpayers, who are putting up most of the money. The danger is that traders in the government program could wield enormous influence in the market -- and there are no explicit restrictions on how they could use that influence to profit inside deals of their own. For example, a trader could privately buy up groups of toxic mortgages on the cheap then later drive up the price by purchasing similar mortgages using government money. The practice, known as "front running," could be technically illegal, but the firms are not barred from coming into the program with such securities and then trading them, Barofsky said.

"If being a trader in the program gives you information that enables you to do trades on the side, that isn't going to go over very well with the public," said Lynn Turner, former chief accountant at the Securities and Exchange Commission. "The inspector general is right."

The practice of using side deals strikes many experts as a return to what created the financial crisis in the first place. During the Wall Street boom years, massive profits were made by companies trading in unregulated side deals, while ordinary investors earned a fraction of those profits in regulated markets. Now, the Treasury Department seems to be explicitly creating its own miniature version of that system, said Mark Sunshine, senior consultant at First Capital, a commercial lender based in Florida. "[President] Obama has not required any tougher rules in the PPIP program at a time when he wants tougher rules," Sunshine said.

Barofsky said a simple solution would be to construct a "wall" between traders in the public program and those in other parts of the firms, thus preventing the manipulation of prices with inside information. But while the Treasury Department is still finalizing its rules for the program, it has rejected the wall, saying it would dissuade veteran traders from joining because they would be barred from making other trades. The program would be left with junior traders -- the only staff members that investment companies would be willing to isolate from their main businesses.

In a letter to the inspector general, Treasury officials said that investment firms privately told the department that they would not get involved in the program if there was an attempt to wall it off. The Times asked all nine firms about their current trading practices in mortgage-backed securities and their plans for internal controls once trading begins using taxpayer money. The firms declined to answer all of the questions, including identifying who would lead their trading teams.




Race is on as U.S. home buyer tax credit nears end
Samantha Kielar is scrambling to find a house in Colorado before the doors slam shut on an $8,000 first-time buyer's tax credit she needs for her downpayment or home repairs. The clock is ticking fast. Qualified borrowers need to have house offers accepted by the end of September to assure lenders enough time to beat the November 30 federal deadline to close deals, industry executives said.

"I am willing to settle for something" to finish buying quickly, said 20-year old Kielar, who works at the Denver County Jail, and is a part-time student. The tax credit carrot "is speeding up the process," she said, adding that "$8,000 could help remodel the house, redo carpets and cabinets." For loans backed by the Federal Housing Administration (FHA), which require a minimum 3.5 percent downpayment, the $8,000 can be also be applied upfront toward the purchase rather than later on tax returns like other mortgages.

The National Association of Realtors projects 350,000 additional first-time buyers will own homes thanks to the tax credit, said spokesman Walter Malony. First-time buyers are injecting life into the most severely battered housing market since the Great Depression. Home sales have risen for three straight months, a ray of hope after three years of tumbling sales that swept prices down more than 30 percent on average and drove record foreclosures. The state of housing is critical to the overall economy. While stabilizing, housing is unlikely to quickly recover as long as unemployment stays at the highest rate in more than a quarter century, most economists agree.

But various federal stimulus offers, mortgage rates that sank to record lows in April and pockets of economic strength make home buying more fathomable. Odete Gomes, a 30-year old women's wholesale clothing buyer in New York City living with her parents and six-year old son, said the soon expiring tax credit "kicked me in the butt to not lose this opportunity" to buy her first home. "Especially now with the government helping you a little bit, you just gotta go for it," she said.

Average 30-year home loan rates of 5.29 percent in the past week were above the all-time low of 4.78 percent set in April, but much lower than 6.52 percent a year ago, said home funding company Freddie Mac. Rigid credit standards will prevent the type of wholesale lending that fueled a record home sales and price spree early this decade. Still, distressed prices, plenty of available properties and low borrowing costs should keep housing from falling apart anew once the home buyer credit disappears, said Gregory Miller, chief economist at SunTrust Bank in Atlanta.

"These programs are giving housing a boost," he said. "When the tax credit expires, the housing market should have even more legs under it" and gain traction on affordability. "Housing is on a sustainable path," Miller added. "We have those who wanted to buy before but couldn't afford the price, and those who would have bought before but couldn't sell the existing house. Both of those groups are lined up to buy now." The real estate industry is making a full-court press to get the Obama administration to extend the program, though health care and other priorities may derail those efforts.

Realtors said many borrowers remain unaware of the credit and its expiration date. "There needs to be an extra rush by buyers, because the transactions need to close by November 30 and that will put some types of transactions in peril," said Sherry Chris, president and chief executive of Better Homes and Gardens Real Estate in Parsippany, New Jersey. Once aware, some potential first-time buyers, who tend to be younger and have less savings, will be unable to clean up their credit enough to get loans approved for the deadline. Documentation has intensified since the financial crisis spawned by massive losses on loans made when standards were lax. The process has been prolonged as a result.

Gomes, who with a friend is buying a new $280,000 home in Newburgh, New York with an FHA loan, has an estimated closing date of September 30, almost two months from purchase commitment. Some transactions, including foreclosures and short-sales, take much longer to complete. Property owners are also expected to sweeten offers to lure potential buyers to capitalize on demand spurred by the tax credit in its final stages. "It wouldn't surprise me if sellers started coming out of the woodwork and began to offer incentives and began to become a little more proactive in selling their homes," Chris said.




'Fastest Dying Cities' Meet for a Lively Talk
Here's an idea for saving Rust Belt cities: Tell bloggers and radio stations to stop calling your town a basket case. That was one suggestion from representatives of eight of the 10 cities labeled last year as America's fastest dying. They met at the Dayton Convention Center last weekend to swap ideas about how to halt the long skid that's turned cities like Detroit, Cleveland and Buffalo, N.Y., into shorthand for dystopia. The city representatives lunched on $6 sloppy Joes and commiserated through Power Point strategy sessions: Lure back former residents, entice entrepreneurs and artists, convert blighted pockets into parkland.

What emerged was a sense of desperation over the difficulty of rebounding from both real problems -- declining populations, dwindling tax bases -- and perceived woes. Valarie McCall expressed frustration at marketing a city that still echoed the image of the polluted Cuyahoga River catching fire. "That was 1969," said Ms. McCall, Cleveland's chief of governmental affairs. "Come on, I wasn't even born then." Last year, Forbes.com used long-term trends of unemployment, population loss and economic output to devise a list of "America's Fastest Dying Cities." A few months later, Peter Benkendorf was eating chicken tacos when he hatched the idea for the symposium.

Mr. Benkendorf, a 47-year-old Dayton resident, said he was angry the article ignored efforts by the cities to attract small businesses and entrepreneurs. He thinks these cities are poised for reinvention. "For a long time, people thought granddaddy was going to come back and make everything all right again," said Mr. Benkendorf, referring to the manufacturers that decades ago built the economies of cities like Dayton. "People have begun to realize that's not going to happen."

Mr. Benkendorf, who directs an arts program affiliated with the University of Dayton, named the symposium, "Ten Living Cities." Dayton skeptics called it "Deathfest." One was college student Joe Sack, 22. "It's like a gambling addict [trying] to help an alcoholic," he said while at work in a coffee shop. "It's hard to see what they can learn from each other." Dayton, which has a population of 155,000, has since 1970 has lost more than 1,000 manufacturing jobs a year and a third of its residents. NCR -- the cash-register and ATM maker -- once employed more than 20,000 here. This summer the company said it would move its headquarters and 1,000 jobs to Georgia.

The cities' meeting began Saturday with Forbes reporter Joshua Zumbrun telling the city representatives and about 100 visitors that his story was among his most popular. Then he apologized for any hurt feelings. Representatives of Dayton, Detroit, Cleveland, Buffalo; Canton and Youngstown, Ohio; Flint, Mich.; and Charleston, W.Va., took turns talking about their plans. There was little discussion of how cities might pay for the initiatives. Dayton Mayor Rhine McLin ran to the podium for her talk. "If you look under the surface, you will see that we are developing a boutique city," she said. She didn't elaborate on what she meant.

But the city is working with hospitals, universities and a U.S. Air Force base to rebuild neighborhoods. About 500 abandoned structures will be razed this year with $3.5 million in federal stimulus money. Neighbors can annex the empty lots or the city will plant prairie grass and call them parks, said John Gower, Dayton's director of planning and community development. "We can't go back and recreate the neighborhoods of the 1950s and 1960s, but we have a huge opportunity to create a new form for our cities," Mr. Gower said. "People want to live in beautiful places near green space."

In a historic reversal, the cities are embracing plans that emphasize growing smaller. In Buffalo, where more than a third of the students drop out of high school, Michael Gainer, executive director of Buffalo ReUse, is putting young people to work dismantling some of the thousands of abandoned homes and selling the scrap materials. A councilman from Charleston described how the city lured "The Worlds Strongest Man Competition." It was shown several times on ESPN, she said. Matt Bach, public relations manager for Flint's convention and visitors bureau, said the image most closely linked to Flint was a scene from Michael Moore's 1989 documentary "Roger and Me": a woman skinning a rabbit to make a fur coat. The Dayton audience groaned in sympathy.

Mr. Bach described how he is fighting back. After a Canadian radio station aired a "This Ain't Flint" campaign to cheer up listeners depressed about Ottawa's economy, Mr. Bach orchestrated a letter-writing and email effort to stop the ads. The station awarded Flint more than $60,000 in free radio time that Flint used to air spots about vacationing in Michigan. Youngstown Mayor Jay Williams talked of helping startup companies. This month, his city was named by Entrepreneur Magazine as one of the 10 best in the U.S. to start a business.

Mr. Williams, a tall 37-year-old with a background in banking, argued that some who have moved out of Youngstown may consider moving back. A University of Pittsburgh demographer is tracking former residents with the idea of telling them about the city's new direction. "We don't want to force anything on them," said John Slanina, a Youngstown native working on the project. "But we want people to know, 'Hey, Youngstown is changing, take a look.'" Mr. Slanina said he's optimistic about the future of his hometown. But for now he lives in Columbus, Ohio, and has no plans to move back.


101 comments:

ahkeem said...

A further interesting aspect of the French and German "recovery" is that their infrastructure is or will be less dependent on imported oil than any US recovery (if and when it occurs). This may be a further factor in relative national fortunes.

Anonymous said...

o my

Did you ever hear of Kurzarbeit? That's state-sponsored furloughs where the employees work less, or not at all (Kurzarbeit Null) and get all or part of their wages paid by the Government. Now that's a stimulus! Without it, your prediction of a total collapse in the Fall might have come true. But with the mighty Keynesian stimulus of Kurzarbeit, they managed to pull through. Well, a few bank bailouts were there, too. Admittedly, the Keynesian stimulus in Germany may have been much more efficient than the US version. Of course there is also a big stimulus program for alternative energy (feeder tariffs, the solar or wind energy producer gets guaranteed above-market rates for twenty years or so.

Anonymous said...

God am I sick of hearing anything that Limie fucktard Ambrose Evans-Pritchard has to say about ANYTHING.

Ilargi has expressed his aversion to conspiracy peddlers many times, Ambrose Evans-Pritchard is the King of the "Bill Clinton had Vince Foster assassinated hallelujah choir."

Evans-Pritchard is a mega douche who shouldn't be drawing air much less a pay check.

Give him a rest.

Anonymous said...

Evans-Pritchard is the Hal Turner of effete British, has been, economic supremacist trash talker.

Pull the chord and flush the Loo.

The mere mention of his name brings a stink with it.

Anonymous said...

Regaring yesterday's post about housing prices in Calgary, it's funny that there's been a lot of talk about it, but no one has bothered doing a quick search for real estate prices there.

Here you rocket scientists go:

Calgary metro house stats:
2009 Year to Date Average House Price: $431,816 (down 8.1% from 2008)
July 2009 Average Selling Price:$436,782 (down 4.3% from same period 2008)
July 2009 Median Selling Price:$390,000 (down 4.5% from same period 2008)

Calgary Metro Condo Stats:

2009 Year to Date Average Condo Price: $279,885 (down 9.8% from 2008)
July 2009 Avg Selling Price:$285,032 (down 3.8% from same period 2008)
July 2009 Median Selling Price:$263,000 (down 3.8% from same period 2008)

Source: http://www.jimsparrow.com/market-stats.php

I think you fools have been trolled.

Dr J said...

"I think you fools have been trolled."

Not so fast, Einstein. The Canadian media is full of stories on the booming housing market at the moment. You have to read very carefully to understand that it is a volume increase while prices are actually still dropping. People reading that understandably get concerned that they might have made a mistake by exiting the market. I know this because it is a daily topic of conversation with my wife and she knows her real estate.

Anonymous said...

So you're saying that the media has been trolling as well.

Clearly I've been corrected by a rocket scientist. Not.

The point remains that you should check your facts before believing anything.

Bulcsú said...

"and banks can't continue forever issuing profit numbers that don't include the losses festering on their books."

WHY NOT?

Otherwise I agree with your post.

el gallinazo said...

The first and primary symptom of trolling is unwarranted discourtesy and arrogance.

Gravity said...

I recently suffered a phase-IV
ant invasion in my kitchen, when attempting to heat up some soup,
(free radicals give it a spicy flavor) I discovered they had infested the microwave oven.

As it turns out, ants seem to suffer no immediate ill effects from microwave irradiation up to 800 watts.

el gallinazo said...

Gravity

"As it turns out, ants seem to suffer no immediate ill effects from microwave irradiation up to 800 watts."

As you undoubtedly know being a science oriented geek, microwave ovens are tuned to resonate with quantum absorption bands of water. You may have just bred an anhydrous life form of ants. May be a new Star trek episode here.

Greg Tew said...

Could the relatively balanced trade in France (small deficit) and Germany (surplus) help these countries with their recovery? Certainly this is a boost to economic confidence. The single payer health care systems must also help with confidence that life will more or less continue as usual... We have neither of these sources of confidence in the US.

snuffy said...

the level of anxiety over events here and the consequence of becoming un-employed means likfe is better for most there than here i think...


snuffy

Sam Dug said...

Just found a great rant and wanted to share it:

"The crisis was an inevitable consequence of the corporatist ideology which still prevails. It prevails among mainstream economists, including those who think that a world of giant companies can be managed if only the banks are made a little smaller.

Procter & Gamble was already a great company in 1955. It made $59 million dollars. By the year 2000 it was making $5 billion doing essentially the same things. You can go down the list of the Fortune 500 and see much the same thing. An ever tightening financial noose envelops all those who fail to find a niche in the corporatist system. Credit card usury provides the foundation stone. Real estate and stock market bubbles create a few lucky winners and periodic cascades of impoverished losers. Those who fail to play in the markets are denuded by the destruction of money.

Making money is not enough in the corporatist system. Companies must make more and more and more and more and more money, year after year after year. The elites must be protected from the consequences of the disasters they engineer. Nobody in authority has anything for which to apologize. They are all simply doing what is necessary to keep them at or at least near the top of a heap which never seems to learn anything from experience and keeps buying bromides from the corporate right and empty promises from the corporate left.

With each successive election we get another cheerleader whose actions are a reproach to anyone who ever believed a word he said."

http://baselinescenario.com/2009/08/15/has-anyone-taken-responsibility-for-anything-weekend-comment-competition/#more-4674

Anonymous said...

"...companies must make more and more and more and more and more money, year after year after year..."

This is a direct function of fractional reserve banking.

Always owing more in interest than can ever be earned without engaging in speculative 'investment' i.e. gambling.

The whole system in the U.S. is like a self inflicted brain tumor.

Fractional reserve banking, the Bedrock of American Neo-Feudal Crony Capitalism, is born like the Devil's Spawn, a Bad Seed from the moment the mere thought of it is conceived of.

Debt slavery for all but the Criminal Class, it's baked into the cake from the get go.

You can't leave home without it.

Don't forget, October is 'Hug a Banker (to death) Month

:)
_

Anonymous said...

I hesitate to suggest that readers who are able to should consider stealthily withdrawing a month's worth of walking-around money from their accounts.
Kunstler


Isn't that suggestion preferable to the usual strident shout of, fire, plague and famine, one finds on the fear for bread sites.

-me worry?-

Ilargi said...

"Isn't that suggestion preferable to the usual strident shout of, fire, plague and famine, one finds on the fear for bread sites.

Why?

Coy Ote said...

"I hesitate to suggest that readers who are able to should consider stealthily withdrawing a month's worth of walking-around money from their accounts."

Not a bad idea (for those who can) but we still need to prepare in every possible for the longer term predicament as best we can.

jal said...

" ... withdrawing a month's worth of walking-around money from their accounts."

That means that + 60% of Americans can't ( they cannot meet their CC payments) and are out of luck.
jal

Coy Ote said...

A Denninger note you all may have seen...

USPS pension fund in dire straits.

"By the way, USPS is reporting a 13% reduction in mailed volume, and I'm willing to bet that a huge part of that is from bulk (junk) mailers who have had their business implode or simply have had to slash marketing budgets. Less junk mail, less revenue, and with a bloated bureaucracy you can guess what comes next."

Coy Ote said...

Jal - I would have guessed 75% around here.

Anonymous said...

The Reggie Middletown article is timely, thanks for including it.

I've been trying to find a stable bank in my area for treasurydirect.gov (so far without success), by going through the FDIC Call Reports myself for selected banks. Yuck.

I've managed to whittle down the list to a few, but now I'm going to go back and revisit this with similar assumptions.

More knowledgeable people here will of course suggest Martin Weiss' list. But that didn't work for me, as there are absolutely no solvent banks there on that list which are within a reasonable driving distance.

The scary thing here is that I live in a major metropolitan area.

If some blogger wants to make ad money, one could just come up with a FAQ on what to look for in these Call Reports. They have to be beyond nearly most non-accounting people, and consequently of no help at all to the average person.

If anyone has any advice on bank selection or interpreting FDIC Call Reports, I would be grateful. Thanks.

Anonymous said...

Ilargi said...

" Why?"

Because force recoils.

-me worry?-

Ilargi said...

"Because force recoils."

Why not a real answer?

Ilargi said...

"Could the relatively balanced trade in France (small deficit) and Germany (surplus) help these countries with their recovery? Certainly this is a boost to economic confidence. The single payer health care systems must also help with confidence that life will more or less continue as usual... We have neither of these sources of confidence in the US."

Any recovery is years away for everybody, and by then it will all have gone down so much and so deep that nary a soul will recognize the world they live in.

In relative terms, degrees of confidence may have some influence. But European countries don't seem to be anymore willing than North America to face worst case scenarios and act according to them.

In other words, nobody is preparing. That means much of scarce remaining resources is spent on the wrong issues, and what goes for minimum assistance now is so high as to be a direct danger to the recipients' direct future.

The difference between what people on both sides of the ocean presently perceive as their likely future lives, and what they will actually face, is much greater than the difference between their present circumstances.

Earnest Lux said...

Some of you cheerfull folks seem to think it's going to hold up for another 6 months from reading yesterdays comments.

I'm giving it 6 days, if that. The middle of next week has a number of nasty "crystal ball" effects kicking in and the "data plot" for the markets the week just gone gave me the feeling of "tiptoeing on very thin ice", big banks dropping again, FDIC broke, insiders selling, comercial real estate crash appears to have begun - 6 months, REALLY?

My two bob's worth: If the markets start moderate downward motion this monday and tuesday, then it's all downhill from there, and we'll be praying that the mayan calendar's prediction comes true in 2012.

Catastrophic cascade is possible before the end of August until the middle of September. Hideous economic fundamentals and really nasty astrological influences making for a herding lemming panic dive position near the closing bell, August 25. September 16th opening bell looks equally "MY CLIFF, MY OCEAN", then there is always WWIII, I'll call that for June 25, 2010.

I think I should shut the fuck up now, otherwise Nibiru drivel will start belching forth from my keyboard.

Anonymous said...

Blogger Ilargi said...


" Why not a real answer?"


Answers don't get much more real than that one, IM(H)O ;)

-me worry?-

David said...

WHAT IF . . .

What if, it takes a lot, lot longer for the denoument to happen?

What if . . .

The Market doesn't fade to pale white this October, November, December, January, February, March, April, May, June, July, August . . . .

What if . . .

The Great Bond Dislocation doesn't occur until 2012, 2013, 2014 . . . ?

What if . . . .

The Great Government is able to reflate bubbles ad infinitum for years, nay, decades, keeping the spinning balls in the air?

What if . . .

American society doesn't collapse en masse in 2011?

What if . . .

The dribbling Oil drum trickle simple oozes into a non-event over the next 7 years before collapsing into a flaccid non-entity over the next 2 decades?

What if . . .

The collapse of credit simply grinds on and on and on over a much longer period of time and dies not with a BANG, but with a sad, tired, whimper?

What if . . .

. . . as James Howard Kunstler has so aptly put,

It is a Much Loooonger Emergency than anyone here is willing to contenance?

Too long for most of you?

Sorry, you may be just disappointed at the extended longevity, and the lack of near-term fireworks, of it all . . .

Ilargi said...

"Sorry, you may be just disappointed at the extended longevity, and the lack of near-term fireworks, of it all . . ."

Right now I'm mostly just disappointed at your extended comment and its lack of near-term content.

Anonymous said...

I am not sure why anybody tries to put a date or even a timeframe for a collapse or stock market crash. It usually just serves to damage the credibility of the one making the prediction.

Illargi has said repeatedly that by such and such a date we won't even recognize the town we live in and other such statements and is continually wrong. Late last year he was claiming that we may not recognize our towns and cities by Christmas 2008 and that we would be looking at job losses of a million per month for 2009.

Obviously niether of these predictions were even close but the predictions (with an attached timeframe) keep coming with very little in the way of a "post-game" analysis as to why the previously proffered predictions did not come to pass.

I completely agree with Ilargi and Stoneleigh regarding the systemic issues that we face and I agree more or less on the overall picture of the future they paint but the timeframes that come and go with reality not even coming close to what was predicted should be a lesson to focus and hone in on the systemic issues we face and less time navel gazing as to when it is going to come down.

It will happen when it happens and I suspect that it will take a lot longer than anyone imagines.

Andrew

Rick James said...

Andrew - You make a very good point. I am inclined to agree with you. I was also not aware that Ilargi and Stoneleigh had made these predictions. Interesting.

Ilargi said...

"Rick James said...
Andrew - You make a very good point. I am inclined to agree with you. I was also not aware that Ilargi and Stoneleigh had made these predictions. Interesting."


Someone comes in and makes some statements and you believe them just like that. Now that's interesting.

Anonymous said...

Why do people write as if the collapse has not already started ?

Unemployment benefits are set to run out for a whole lot of people in the very near term and many of the economically traumatized probably don’t even notice the retail store they once shopped at in better times no longer exists--speaking of towns not recognizable.

And for those unemployed souls not lucky enough to make it in to the U3 radar screen, well, have a listen to Ronald Reagan’s anti “socialized’ medicine clip making the Right Wing dumb ass rounds and count your lucky stars that you cannot be refused treatment in an emergency room if your life is on the line.

It’s getting more surreal each and every day. Goofy, foaming at the mouth Medicare receptionists standing up to denounce health-care reform along with those waiting for some sports referee to officially blow the starting whistle for the economic collapse.

Aesthete

Rick James said...

Ilargi - Not that I believe him. I am not so stupid. I found it interesting what he was saying about not focusing on timelines and instead keeping the focus on the fundamentals. I agree with you and have obtained benefit from you and Stoneleigh. What I was hoping, was that you would address Andrew's claims, since I am obviously a much newer visitor to this site. I obviously want to hear both sides in order to make up my mind. So no, I do not blindly believe him.

Anonymous said...

Ilargi,

Why can't you just answer the question? What is the big deal?

As far as believing my statements your words are there for all to read in the archived daily blogposts so why even bother denying that you said those things. You did predict a million job losses per month in 2009 and you did say that we may not even recognize our towns by Christmas 2008. I can go through the archives and find the exact date of the blogposts if you don't remember. So it is not a matter of anybody "believing" me.

I am not a "troll" nor am I trying to be confrontational. Nobody is a bigger bear than me regarding the future and I am constantly stress testing and questioning my bearish thesis over and over and examining my logic. I am not trying to be threatening I am just asking your opinion as to why previous statements or predictions did not conform to the subsequent record in order to learn from you and either strenghten or weaken my own bearish thesis.

Peace

Andrew

Paleocon said...

"I hesitate to suggest that readers who are able to should consider stealthily withdrawing a month's worth of walking-around money from their accounts."

How can it hurt to keep saying such? I can't help but wonder why those who are able didn't already do that, almost a year ago. But better late than never, I guess.

As for when the next step down comes, the longer it takes, the happier I'll be. I'm living quite happily with a fear of impending collapse while remaining employed and improving my little nest. I'll be tickled pink if it lasts another year or two.

Bukko_in_Australia said...

count your lucky stars that you cannot be refused treatment in an emergency room if your life is on the line.

Aesthete, it's too bad those right-wing dumb-arses don't realise that if you've got a chronic condition like diabetes or high blood pressure or congestive heart failure, the ER doesn't help you there. Problems like that slowly get worse, and your life slowly goes downhill, until you're gasping for breath or in a hyperglycaemic stupor. THEN you can be seen in the ER (after 10-hour wait), except you're three-quarters dead.

It's a mark of the stupor of the rightist American sheeple that they don't have a basic undersanding of how sickness works. That's why they fall for such simplistic corporate arguments as "You can get all the health care you want -- just go to the emergency room." It's cruel of me to say, but people who are stupid enough to buy that lie deserve what's going to happen to them.

jal said...

@ Andrew
... why previous statements or predictions did not conform to the subsequent record... "

short answer from me ... Obama

Perhaps I&S can fill in with their details.
jal

Rick James said...

Wait a second, if Ilargi has documented these predictions in his posts, then can I get a link? If this is true, then why am I the problem?

Rick James said...

jal - If, big if, this is true then it really shows the danger of trying to engage in sooth saying. This does nothing to diminish Ilargi and Stoneleigh's overall message, since it is based on the facts. However, I&S are both humans and trying to pin specifics is always going to be hit or miss. Even the best forecasters are wrong almost as much as they are right.

Bukko_in_Australia said...

"I hesitate to suggest that readers who are able to should consider stealthily withdrawing a month's worth of walking-around money from their accounts."

How can it hurt to keep saying such? I can't help but wonder why those who are able didn't already do that, almost a year ago. But better late than never, I guess.


Paleocon, I've suggested that occasionally on forums where I participate, such as an Americans-in-Australia web group. I couch it in terms of being like hurricane or earthquake preparedness. I also mention having a stockpile of food in the house, as you would in a hurricane zone. I don't go to the "doom" scenario. Too confronting for most people.

Unfortunately, warnings like this are generally ignored. Not even derided, just left without comment. It does make assuage my conscience that at least I tried to clue people.

jal said...

@ Rick James

The Obama team has been announcing, repeatedly, that they avoided a complete meltdown of the credit system. There is no "IF".

There might have been other possible actions but the "lawmakers" chose the "bailouts".

In any case, it gave me time to prepare and to learn what has happened and what could be happening.
jal

Rick James said...

Jal - Absolutely.

Anonymous said...

@ Rick James,

I am in no way trying to diminish I & S overall message and I can see that the way that I approached this was wrong.

I stand by what I said since I know what I read and it is in the archives.....but I did NOT say it to undermine the message of this great blog.

I have my own ideas as to why the job loss numbers are not coming in as bad as what was predicted I was just interested to hear Ilargi's take on it.

Keep in mind that I have a worldview that is almost identical to our hosts in terms of what our future looks like so I am a friendly audience but obviously my approach was wrong since I was perceived as an attack of some sort.

Andrew

Ilargi said...

Andrew,

I know you’re serious, that’s not the point.

"Illargi has said repeatedly that by such and such a date we won't even recognize the town we live in and other such statements and is continually wrong."

No, I have not said that. And am therefore not wrong on this.

"Late last year he was claiming that we may not recognize our towns and cities by Christmas 2008"

You MAY not recognize your town is not the same as you WILL not recognize it. And that's certainly not just semantics. When I use the word MAY, there is a reason for that. I don’t tend to use words lightly in general. In the end, we deal with probabilities here, not certainties, simply because there ain't none, and I would never pretend otherwise. What are the odds I'll wake up with a blue face, red nose and green ears tomorrow morning, versus what are the odds that more and more stores will be boarded up by Christmas. What MAY happen?

There are, moreover, plenty comments here from people these very days who notice all the closures and failures in their communities. Do they still recognize them as they were before? Depends on how you ask the question, maybe. Go ask the right people, ask them the right questions, and off you go. There'll be plenty who’ll claim they don't recognize their towns, and for valid reasons. Which would prove my point. How wrong does that make me, even if I did use the term MAY? As in you MAY not recognize your town?

"..... and that we would be looking at job losses of a million per month for 2009."

Both the town recognition factor and the job loss numbers have been temporarily suspended by what I consider to be insane expenditures by the Bush and Obama governments, insane in that their effects are extremely short-lived and even more extremely expensive, robbing American citizens of the very means they will badly need to alleviate their miseries -or would have badly needed by now, since their money's long gone-. But while they have no money to feed their kids, at least they do have a banking system they don't need, a car industry with a huge overcapacity, and building and mortgage industries that are less relevant than an elephant tapdancing to the national anthem while submerged in a table top aquarium.

Government policies that are aimed at aiding citizens with their own tax money is one thing. That is what Germany and France are trying to do. Spending it on banks and meanwhile leaving the people alone with their fast shrinking means is another one altogether.

And yes, the one thing that I have misread is the willingness of the government to further impoverish its people, and the willingness of the people to accept it lying down. As for job loss numbers, even with all the money spent, U6 numbers are not that far from a million a month. But yes, as I said, I’ll admit that I didn't count on a $14.8 trillion and counting bail-out. And I'm by no means alone in that, you will have a very hard time finding a single soul who has, or would have, predicted such a thing a year ago.

Paulson had to lie, cheat and threaten Congressmen 10-11 months ago to get just $700 billion. We've come a long way, and things far too easily tend to seem and become normal. As hard as today's trillions were to imagine back then, which is when I wrote these things, it will be much easier, though, to now find people who would agree with me that without all that cash the things I saw a year ago would be reality already.

I do like to have these discussions, there are not nearly enough of them in my opinion, but not when my words get distorted. Meanwhile, what was certain back then has become inevitable now, because such a meshuggah lot of dollars have since passed under that bridge.

Oh, and Stoneleigh's approach of the subject is very different from mine, and she speaks for herself, I don't speak for her.

Rick James said...
This comment has been removed by the author.
jal said...

@ Ilargi
Thank you all!
Good night!
jal

Anonymous said...

"It's a mark of the stupor of the rightist American sheeple that they don't have a basic undersanding of how sickness works. That's why they fall for such simplistic corporate arguments as "You can get all the health care you want -- just go to the emergency room." It's cruel of me to say, but people who are stupid enough to buy that lie deserve what's going to happen to them."

Sure they understand it, they just don't want to have to pay for it but they will anyway as the US turns an insolvent banking system into an insolvent country.
fun fun fun til her daddy takes the t-bird away

Rick James said...

Ilargi said,

"Both the town recognition factor and the job loss numbers have been temporarily suspended by what I consider to be insane expenditures by the Bush and Obama governments, insane in that their effects are extremely short-lived and even more extremely expensive, robbing American citizens of the very means they will badly need to alleviate their miseries -or would have badly needed by now, since their money's long gone-"

So true Ilargi, but how does this not tie into my thesis that stimulus and Fed liquidity are what are keeping the market going up with a P/E of 143? If it is these things keeping the bottom from falling out, then what makes the possibility of the market tanking next year so wrong or unlikely?

Ilargi said...

"If it is these things keeping the bottom from falling out, then what makes the possibility of the market tanking next year so wrong or unlikely?"

19 weeks and change.

Rick James said...

Anything a bit more specific than that? You think that stimulus and government intervention won't keep the market up, but the implication of what you said above is that things are not as bad as they could be, on a superficial level which is sufficient for the market, so what is to keep things from falling apart while the government is able to support the economy/market and in effect replace the shortfall in the private sector?

Anonymous said...

Ilargi,

Thanks for your response. I was mainly interested in your view on the job loss numbers. The comment on not recognizing our towns was really not a fair criticism and I apologize for that.

I agree with you for the most part on the factors (mainly misplaced govt intervention) that make it hard to predict timelines and it is good to hear this from you:

"And yes, the one thing that I have misread is the willingness of the government to further impoverish its people, and the willingness of the people to accept it lying down."

As that is the one area that has surprised me the most as well. Thanks again for your post it was very helpful to me.

Andrew

Ilargi said...

You're welcome, Andrew

Funny how it can be good to be reminded of how crazy, and I mean utterly crazy, the bail-out total numbers as we have accepted them today would have seemed less than a year ago. This is some ride we're on, and we're all so surprisingly adept at adapting to things that change so fast. A few zeroes added here and there, we just go back to watching TV.

Greyzone said...

Rick James,

I read what you write and I realize that you are operating under the common delusion that the people around you are actually rational and will behave in rational ways. Thus, if the market is rationally a mess, then it should rationally collapse.

But it doesn't, at least not yet, does it? This is where Stoneleigh talks about psychology, herd behavior, etc. The market is made up of human beings who, via natural selection, are predisposed to have positive outlooks about the future. So they lean that way automatically. Unless this is discounted from their position, you cannot begin to understand those participants. They are not rational (for the vast majority) although they have rationalized that they are rational.

Rather, the market is lying to itself. And telling lies is something that we do very well. In fact, the evidence is there that we've been naturally selected to lie to some degree.

In short you are trying to nail down, in a rational manner, the behavior of irrational market participants. Don't you see the disconnect there? This is the same problem with predicting mass human behavior in any endeavor - we have no model that accounts for such irrational behavior, and worse, the models we do have assume exactly the opposite.

Anonymous said...

If you live in Detroit then you may not recognize your hometown. A quarter million a month is still pretty bad. Nothing is looking very good.

Ok the djia appears to look good but a few trillion will do that. We are just kicking the can down the road until we can find a patsy. Iran or h1n1 look like they are going to get the blame.

Steve From Virginia said...

First of all, the big, underlying problem; increasing oil prices as a backdrop against which all economic activity takes place. Date and time irrelevant although 1973 can be given for Japan and 1982 for Europe and the US.

The approaches were twofold; the US and Japan blew asset bubbles with easy credit, deregulation and 'investment spam' pro- growth propaganda. The 'idee fixe' was that rising asset prices and the acocmpanying 'waalth effect' would allow (some) participants a means to 'hedge' high prices for just about anything, including oil.

The Europeans initiated an economic union with a common 'Euro' currency. Along with this came reserve and inflation requirements, budget restraint, yadda yadda yadda. The Euros would have a valuable currency to barter for valuable oil.

The 'bubble metric' collapsed into ruin both in Japan and the US. Done in by oil via credit by remote control,

The Euros didn't have the same credit problems. They cobsequently don't have the immediate need for credit repairs which includes stimulus.

Keep in mind two things; one is that the credit crisis is just beginning. Any credit is turned into a pumpkin if collateral loses value and this is happening everywhere, including Germany and France. The only way these countries can avoid the deflation is by being completely debt free ... which they certainly are not.

Secondly is money cannot substitute for power/joules. At some point the strongly deflationary effects of oil depletion will be felt against all economies that have not taken steps to address the energy issues directly.

The only solution is sharp conservation and replacement of remaining fossil fuel energy with non- fossil fuel energy sources.

... waiting for some country to do this ... waiting ...

Ed_Gorey said...

@ Ilargi,

Ilargi said.....

"Funny how it can be good to be reminded of how crazy, and I mean utterly crazy, the bail-out total numbers as we have accepted them today would have seemed less than a year ago. This is some ride we're on, and we're all so surprisingly adept at adapting to things that change so fast. A few zeroes added here and there, we just go back to watching TV."

I recently tried to put the numbers in context for my dad.

Measured relative to our economy, in a single year, the taxpayer has been committed to paying for World War II -- three times. But we won't be using that dough to build a single B-24 or Sherman Tank. Instead, we're spending the money to feverishly run in place on a treadmill, and the tread is accelerating, and we're developing a cramp.

VK said...

@ Andrew

I have my own ideas as to why the job loss numbers are not coming in as bad as what was predicted I was just interested to hear Ilargi's take on it.

It's because while the private sector is contracting, government spending and guarantees are providing a backstop and limiting the amount of deleveraging that's taking place.

The Government has only allowed a little bit of deleveraging to take place by the trillions they've spent. This has limited job losses and they remain hidden by statistical fudging as well. The government can only do this for so long before reality hits.

The gamble has essentially been

1) Borrowing and spending has worked since the early 80's. Let's do the same thing this time!

2) If we instill enough confidence we'll actually make people borrow more and spend more - hence the huge propaganda effort.

It's all doomed to failure as you can only prop it up for so long. The government has given some viagra to the dying economy, it'll stick up for a few hours only to be deflated later - maybe permanently due to a viagra shortage. :)

Ed_Gorey said...

Sorry, I got my numbers wrong in a previous post. I used the phrase, "measured relative to our economy." Instead, I should have said, "If one measures the cost of WWII in current dollars (~ $5 trillion), then in a single year, the US taxpayers have been committed to paying for WWII -- three times.

Martin said...

Being of German mother tongue, it took me some time to get the joke of 'Kash für Klunkers' … 'Kash' might sound very German for English speakers, however, Germans use 'Cash' as well! ;)

Just a little nit-picking … ;)

el gallinazo said...

I have to open up a new bank account in the Miami/Ft. Lauderdale area in the next week. Anyone have recommendations on a "healthier" bank in that area. Just need typical services and a SDB. Thanks.

Anonymous said...

Just an odd footnote on trying to wake up the relatives to the Economic WaterFall we're about to go over.

Saw a member of the extended family last week who I had given up as a lost cause last year. Completely unsolicited, they said something that showed a dramatic jump in awareness of the scope of the collective economic dilemma. I asked where they heard that and they said, Market-ticker, Karl D's ranch.

I was quite surprised at the leap of knowledge about current economic events and just to test the waters asked what they thought housing would drop to by the end of next year. Last time we talked, they were convinced it would stop at 25%.

They said it was much worse and said the average house price would drop to 50% of peak. "That will put a lot of people 'underwater' in their mortgage payments" was the reply.

I said I thought it would go to at least 80%. They said that was too harsh, where did I hear that? I said TAE, and they said they read that blog too sometimes but it's much too 'pessimistic'.

This ties in with what someone wrote last week here about Karl D's place being a 'half way' point in that it has a more palatable form of economic meltdown scenario.

I was just amazed this particular relative got this far. I really can't claim any credit (not a pun) for the transformation. This person, like many I suspect, just couldn't go from Zero to full TAE in one jump.

I also think Karl D's form of America 'exceptionalism' (jingoism) has it's own comforting appeal but will eventually fade like an Autumn Rose.

Bigelow said...

@Ed Gorey

"If one measures the cost of WWII in current dollars (~ $5 trillion), then in a single year, the US taxpayers have been committed to paying for WWII -- three times. But we won't be using that dough to build a single B-24 or Sherman Tank. Instead, we're spending the money to feverishly run in place on a treadmill, and the tread is accelerating, and we're developing a cramp.”

Assured negligible financial controls and accounting. Quickly spending enormous amounts of money on crisis is central to making theft and fraud possible and inevitable. Candid officials admit they have no idea where money has gone. It has “disappeared”; again. It stops when there is nothing left to steal.

This might be the last wholesale wealth transfer to the US criminal hierarchy.

Anonymous said...

"This might be the last wholesale wealth transfer to ... the Entity formerly known as the United States.
.

ogardener said...

I had a chat with an old, dear friend the other day. Her spouse also refuses to accept the facts about our fraudulent, pyramid scheme economy. She informs me that her husband had to co-sign a loan to cover a fifty thousand dollar credit card debt for their thirty something daughter and husband who overspent. Imagine that.
Fifty thousand dollars in credit card debt. Needless to say she was very upset about it.

In my small town the local lumber and hardware store nary has a piece of lumber and the prices of hardware are out of this world. I have to drive 25 minutes to buy this stuff at Home Depot where the prices are a little more reasonable. Just a little example of how my town has changed since 2008.

Anyone noticing the high prices of dental work these days? Insurance barely covers the cost of anything dental except for extractions, some fillings and prophylaxis/cleaning. Root canals and bridgework? Forgetaboutit.

el gallinazo said...

Anon 8:15

KG will not disappear - he is too good a short term analyst. With the exception of I&S (because I an on the same page as them), you have to look at the other analysts and just take what they have valuable to offer and discount the rest. As Stoneleigh points out, KD has much valuable information to offer on a shorter term basis. One just must discount his politics. Same with Mish, except with Mish you have to realize that he will not take his logic to its final conclusion because it would be bad for his business.

Also

Mad Max is on a tear with Gollem Sucks. He is doing everything to goad them into a slander suit, but so far they won't nibble. It's fun to listen to and see the silence from the top bankster. He interviewed Tyler Durden this week, though the audio was poor. People should not conduct youtube interviews from a cell phone - there are still a few wires in the world.

I'll be leaving Hurricane Alley soon. If St. John is the one pin, looks like Ana is heading for the 7 and Bill for the 10. After 10 months one forgets how stressful this is.

Boutique sales here are way down. Shop owners are firing help and putting in long personal hours. Commercial rents are so exorbitant here and the landlords will kill off their golden geese that much quicker by not dropping their rents until they are down to 10% occupancy. This is a particular local stupidity.

el gallinazo said...

Anon 8:30

I just like "the former United States." Keeps symmetry with the former Soviet Union.

el gallinazo said...

Ogardener

Some local retailers are jacking up their prices to compensate for falling volume. Of course this is a death spiral strategy.

As to medical and dental, if you have major work, get the fcuk out of the former United States, particularly while air travel is cheap. For dental, go to Dr. Cepada in Cusco at 15% of USA prices and better quality, and when he is done, visit Machu Pichu :-)

Anonymous said...

In keeping with U.S. pop kulture and "The artist formerly known as Prince"

It could also be "The Country formerly Known as The United States"

Sam Dug said...

The Goldman Sachs (14) Business Principles:

http://www2.goldmansachs.com/our-firm/about-us/business-principles.html

#14
"Integrity and honesty are at the heart of our business. We expect our people to maintain high ethical standards in everything they do, both in their work for the firm and in their personal lives."

I would say, not so much.

bluebird said...

Anonymous @ 7:58 said "I've been trying to find a stable bank in my area for treasurydirect.gov (so far without success), by going through the FDIC Call Reports myself for selected banks."

As an alternative to a bank, link up to a Credit Union for TreasuryDirect.gov

Coy Ote said...

ogardener - "She informs me that her husband had to co-sign a loan to cover a fifty thousand dollar credit card debt for their thirty something daughter and husband who overspent. Imagine that."

That is quite extreme, but if you cut that back to anywhere from $5k to $20k you would be describing a whole lotta troubled families around here.


BTW, by December of 2008 this town had changed enough to be termed difficult to recognize, and I do mean in a downhill way. Still going in that direction!

I think we all generalize too much sometimes, I know I catch myself doing it. People would do well to not nit pick quite so much over some details and just absorb the things we are learning and sharing here. There are no sides to take in this predicament, IMO, and one has to stay out of any of the boxes which are prevalent among us.

Def:
Coy - "reticent or evasive, as in making a commitment"

Anonymous said...

“Sure they understand it, they just don't want to have to pay for it but they will anyway as the US turns an insolvent banking system into an insolvent country”

I don’t think they do understand it. The health-care opposition is so busy playing anti-socialized medicine tapes in their right-wing talk radio filled heads they fail to understand that the insatiable profit avarice of the insurance companies will have to be fed by decreasing numbers of people capable of affording it. Which in turn will raise premium rates even higher and throw even more of the formerly insured into the health-care gutter. Around and around and down and down it will descend--it’s a spiral.

Meanwhile, the right-wing talk-radio radio morons will congratulate themselves on thwarting the last possibility of Main Street to avert complete and utter financial ruin via a reformed health-care system. Sweet irony will also enter the picture at this point with an emboldened insurance industry raking their former front-line propaganda dupes and shrills over the financial coals in the form of premium increases and even more exclusionary treatment tactics. And that daily moment of intimacy with the favorite right-wing radio personality is going to feel mighty empty once relatives near and dear start to reveal their lack of health-care coverage and denied treatments along with the medicals bills to prove it.


Aesthete

scandia said...

El G...Thanks for mentioning Dr. Cepada in Cusco. I need dental work and was kicking myself I hadn't written down his name when you mentioned him before.I couldn't see how I could overcome the hurdles of speaking no Spanish( Dr. Cepada doesn't speak English?)and the hotel expense. However I just discovered Homestay in Cusco which makes all things possible again- an affordable accomadation plus help from host family.
Do you have any contact info for Dr. Cepada? e-mail or street address...?
Getting the dental work done is part of preparation.

ca said...

Ilargi --

Don't you think that there will be another bailout in 2010, an election year, which might further delay the major downdraft in the market?

jal said...

Re.: National Health Care
There NEEDS to be a National Health Care option.
There will be a National Health Care option.

Connect the dots … see Karl D. article “USPS Threatens Health Pension Default”

“Perhaps - just perhaps - this is one way they can stave off the implosion of one of the more-important public-sector benefit groups?”
------
jal

bluebird said...

Aesthete, in my family it isn't right-wing talk radio. Everyone leans left. They just have other priorities such as work, family, hobbies and vacations. They don't pay enough attention to what is going on around them, because they haven't been hit in the wallet, yet. Yeh, their 401k and ira have taken a hit, but that's not needed today. Besides, the stock market always comes back. Nothing to worry about as long as they have a good job and lots of discretionary income to eat in restaurants and travel. I had one sibling tell me it doesn't matter how much money the government uses to bailout banks because it keeps the economy flowing. It hasn't registered, at all, that these bailouts are being added to the debt for their kids and grandkids to pay off. Hey, their life is humming along very nicely, so far, so they see nothing to prepare for.

Anonymous said...

RE: I hesitate to suggest that readers who are able to should consider stealthily withdrawing a month's worth of walking-around money from their accounts.
Kunstler

Paleocon said: "How can it hurt to keep saying such? I can't help but wonder why those who are able didn't already do that, almost a year ago. But better late than never, I guess."

You answer your own question, I know people who, taking prognostications a touch to seriously, have quit their jobs and moved their family halfway across the country to live in the bush like idiots when they could have taken that past year to properly prepare themselves for what at some time in the future will unfold.

It is one thing to warn it is another to incite.

-me worry-

Ilargi said...

"I know people who, taking prognostications a touch to seriously, have quit their jobs and moved their family halfway across the country to live in the bush like idiots when they could have taken that past year to properly prepare themselves for what at some time in the future will unfold."

You contradict yourself.

Anonymous said...

Bluebird,

You're right of course, although most of the commited,vitriolic opposition(as opposed to apathy)comes from the right.

Check this gem out from Jon Stewart concerning Glenn Beck and the American health-care industry. Simply amazing:

http://current.com/items/90701166_jon-stewart-slams-glenn-beck-on-health-care.htm

Aesthete

DIYer said...

El G,

If you see Bill, say hi and wave him on over to Texas. It looks like Ana will just be a patch of thunderstorms by next weekend, but Bill might make it this far. And we need the rain.

Some financialblogorother posted this link last spring, it's a nerdy bank-evaluation tool. I used it to find a boring little bank (that isn't also a hedge fund) here in Texas, and maybe you can find a somewhat stable Fla. bank with it:
http://banktracker.investigativereportingworkshop.org/banks

Anonymous said...

You say:

"Around and around and down and down it will descend--it’s a spiral."

I say:
"but they will anyway as the US turns an insolvent banking system into an insolvent country”

Nice to see we agree Aesthete, by the way I think the healtcare bill pass which will only add to the government exponential debt burden and accelerate the spiral.

el gallinazo said...

DIY

Thanks.


Scandia,

I'll tell you a funny story about the Cusco dental thing. I always get a little altitude sick when I reach about 10,000 feet. The symptoms are a dull headache, tired, and loss of appetite. It is totally gone in three days, and even if go back to sea level, I am good at altitude for at least a month.

The other thing I learned in Nepal was to take acetazolamide, and to keep physical activity low until the symptoms disappear. So I went into this little farmacia a few blocks from the Plaza de Armas The pharmacist is a very pleasant thirty something woman by the name of Cecilia, and she speaks better English than I speak Spanish (which wasn't saying much). Anyway, we strike up a conversation and become somewhat friendly. The next time I go in, I ask her about dentists. She says there is a dentist less than 200 meters who is an excellent technician, very reasonable, and she has been going to him since she was in her teens. But his office is not fancy. If I want a fancy office she could recommend someone else, but Cepeda is the best dentist. So I go visit Dr. Cepeda. He does not speak a word of English. My dental condition has gotten pretty bad. He recommends that I get a super cleaning, about seven fillings, balancing my TMJ jaw with epoxy, and he tells me that I need caps on my two front top incisors. We talk money and he gives me a formal bill in advance of USD390 for everything. (The USD has dropped 20% against the Nuevo Sol since then). We work up a schedule of two hours a day for five days. I am not good with pain. Peruanos are apparently a lot better and he did not consider giving me Novocaine until I insisted.

I know absolutely nothing about caps other than older people get them and they complain about the expense. So he files my incisors down to these little triangles and I look like the Count on Sesame Street. He then glues on these new teeth on Thursday. When I get back to my room, I look at them closely and they really look and feel like hell. I figure that my frugality really screwed me up big time, and I'd have to go in for several grand to undo this work when I got back up north. So on Friday I go in for my final session. I get into the chair and Dr. Cepeda tells me to open up as wide as I can. He takes out a little hammer and shatters my new teeth. After spitting out the shrapnel, he glues on the real teeth, the others were just temps so no one mistook me for the Count. That was four years ago. They are a perfect match color wise and I have had no trouble with any of his work. I went back to him two years ago for some more filings.

Of course, Cecilia knows all the best specialists in the city as a pharmacist who has lived there her whole life, and she likes me (though for regular readers of TAE this sounds implausible). So I have done well there in the dental and medical area.

The Plaza de Armas of Cusco is 11,250 feet according to my GPS. It is cold there even though it's only about 10 degrees south latitude. In September, I would say the temperatures goes into the 40's F at night and it will just touch 70 at 2 PM. The $18 a night albergues (Cusco is expensive compared to the rest of Peru) will give you all the llama blankets you want, but they are really heavy and two or three feel crushing. Fortunately I brought my North Face O° F down bag. I opened it up as a blanket and it was toasty.

Everything I own is now taped into bins. I was going to bring them to STT tomorrow for shipment to FL, but the barges are cancelled in honor of Ana. I will dig up the info when I get the stuff to self storage in FL.

Dr J said...

"I think the healtcare bill pass which will only add to the government exponential debt burden and accelerate the spiral."

You need to consider how the current lack of universal health care is a drag on the economy. I recall a couple of years ago that Ford was spending more on health care than on steel for its cars. They were spending $4 billion pa, of which $2.5 billion was for retirees. People remarked that Ford was a health care company that made cars as a sideline. Also consider how health insurance considerations trap people in jobs when they could add more to the economy by moving to positions to which they are better suited or how it prevents them from contributing to the economy by starting small businesses. Add to that the enormous drag on wealth creation attributable to an unhealthy population with many years of productive life lost due to the effects of poor access to appropriate health services. All these things need to be factored into the equation when calculating the net cost of a universal system. I suspect doing so would put you money ahead.

el gallinazo said...

DIY PS

Yeah, Ana is a nothing. Won't stop them from shutting the place down though. The banks here close for Donkey Emancipation Day. The Science of Customer Disservice includes, "no," "we don't have that, or we don't do that." Most of the time you can find the stuff that the sales help says that they don't have on the shelf. I don't even bother to ask anymore.

If you want to wind up in jail, refer to a policeman to his face as a public servant. The biggest insult that I risk on my way out of here, is when they stop me at a revenue raising roadblock, I say, "Thank you for your service to the community."

As to Bill - Bill is serious but will probably hit somewhere between NC and NJ as a major. Does Texas really need a major? We (USVI) are almost out of the probability cone :-)

Anonymous said...

You contradict yourself.


I'll bite, how?



-me worry-

el gallinazo said...

Dr. J

It's angels dancing on the head of a pin. Moot. A dollar short and a day late. This turkey is dead, deceased, expired, bought the farm. They'll be doing surgery with boy scout knives before the USA gets universal.

el gallinazo said...

-me worry-

'I'll bite, how?'

By trying to fly under the radar.

Anonymous said...

'I'll bite, how?'

" By trying to fly under the radar."



What have we here,? The mouth of Sauron?

;)

-me worry-

Coy Ote said...

Aesthete - Thanks for the Beck link.

The guy is more contemptible even than I thought, and a complete mouthpiece-for-sale. Which would not be so bad except that he is all over the airwaves through Fox, giving him a much expanded audience for his dangerous and deceitful rhetoric.

Dr J said...

el g - I know. I have a tendency to rage against the dying of the light. Silly of me, really.

Dr J said...

Coy Ote - thank fully we have Jon Stewart, the most trusted newsman in America, now.

Ahimsa said...

El G,

Re banks in our area, we use Fifth Third Bank for convenience purposes -- a free of service charge "Club 53" checking account (free checks also) with a $100 minimum balance and a "Relationship Savings" which must be opened at the same time with no minimum balance required after opening it with $100. My husband gets his TIAA check on the mail and gets paid with a check at his job, no direct deposit. So we keep a minimal balance in accounts along with whatever amount needed to cover a few checks written per month. My husband's government employer also uses Fifth Third.

Good luck with Ana and Bill! Looks like we're on the cone of uncertainty as well.

el gallinazo said...

Thanks Ahimsa, They have a branch in Ft. Lauderdale too. Will call tomorrow to see if the branch has SDB.

scandia said...

El G, nice story of Cusco. I hadn't thought about altitude sickness.
I am thinking Feb, 2010. What would the temps be then?
Homestay prices for 2008 were posted as $14USD per day including 3 meals a day.
Appreciate any other info when you can access your files.
Best of luck on your move!

Ilargi said...

"You contradict yourself.

I'll bite, how?"


Read what you wrote, it ain't rocket science. Might want to leave your prejudices out, as in "idiots" and "properly prepared". Those are merely your opinions, the stuff thrown out of court as hearsay in seconds.

Ilargi said...

New post up.

thethirdcoast said...

@ el gall:

Thanks for the funny dental anecdote. I'm fairly young, but I count myself fortunate to have coverage in place when it came time to have my wisdom teeth removed. I've also been lucky to find extremely professional dentists here in the States.

As far as picking a bank, if it were my money, I'd head to a credit union or the "least-worst too big too fail" sort of bank.

Best hopes for a safe move to the mainland.

DIYer said...
This comment has been removed by the author.
RC said...

El G, I was going to comment that the DDS must be a Cepeda, but you corrected that. The pharmacists on the Plaza of all the little towns of Latin America know everything you ever need to know about the town and its persons and most either speak English to some degree or can call in a friend or family member who can.
Many of these pharmacists do more doctoring than the doctors and I think all do more prescribing. They often provide services like B12 shots, right there standing in front of the counter. They know and have all the common and cheap remedies for the insects that bite and they know how to avoid those insects. They know all the important things. El G, I knew you were ahead of the crowd in the gray matter department, but I can see you will plainly be fine in your Latin travels if you continue to confer with the farmacia savants. Dreda is the savant here in my little town. She knows all, sees all.
Now, a small suggestion, G. Once you arrive {or even while you are in Florida} speak Spanish all the time no matter how wrong it is. Read the local Spanish paper to add two nouns a day and two verbs a week. Bit by bit, over a year or two the thing will right itself and you'll be much more fluent. People will laugh at your hilarious usages and unintended double entendres. But we laugh at the way children speak also, but we aren't laughing at them, it's just that what they say is very funny by accident.
In my 30 years of observing the very sad general Gringo incapacity to grasp the idioma, it comes down to that. The ego doesn't like the laughing. There is also a more serious degree of ignorance {and perhaps mental illness} that sets in here. The non speaker begins to feel {and this may happen the first week they are here} that the native speakers are "talking about me and laughing". Usually this occurs in a restaurant where the folks at an adjoining table may be glancing our way in a friendly manner, and since I know the lingo, I have to say in 30 years I've never seen an actual case of
the imagined ridicule.
The gringo that adopts this view is the gringo that even I do my best to avoid.
I am not at all saying that G is in this category or the bad grammar category, but I will say this, and in fact do say it to the other North American English speakers here all the time.
Living in a country and not speaking the language is like swimming without getting wet. Why would you want to ever do that?
Buen Viaje G and enjoy being laughed at. Been there, done that,
laughed along with my fellows. What occurs is that the laughers become your mentors and they adopt you as a project. I learned Spanish by speaking it, I have no schooling. In order to expand my abilities beyond buying food and building homes I read {present and past tense} the most erudite newspaper I could find. I might add that although my IQ is considered off the scale, in school I never did any actual studying and as a result was one of the world's worst language students learning very little of several languages other than English which I seemed to absorb by, you guessed, reading the New York papers at the age of three. So, even though I, typical Gringo Flojo in the language department, never learned a damn thing in school, I learned French by being laughed at by my French wife and Spanish by being laughed at by everyone in town, and thus, I recommend the technique. BTW, for anyone amongst the readers who doubts the viewpoint of G about the Island Life, I must state that he is very accurate. He is also very accurate about his sociological navigations in Peru. I would accept the advice as Bible. BUT, be sure Dr. Cepeda isn't on a little vacacion before you go. Call that Farmacia to find out. Ask them anything. In Spanish.

Anonymous said...

dr. j,

raging against everything =

'much ado about nothing'

'a tale told by an idiot, full of sound and fury, signifying nothing'.

wakey wakey.