Monday, October 17, 2011

October 17 2011: Diamonds in the Rough


Lewis Wickes Hine Dinner Time January 22, 1909
"Dinner time. Family of Mrs. A.J. Young, Tifton, Georgia" (See also the picture in TAE October 15)


Ilargi: Bit of an unusual post today.

First, a series of short videos in which Stoneleigh aka Nicole Foss talks about finance and energy.

Then, a call from Ashvin Pandurangi to the TAE community to participate in an interactive project he's starting. Ashvin is looking for diamonds in the rough, things that can help us make it (better) through a financial collapse.

He then writes about the first such diamond himself: the banking system of North Dakota.








5 short videos of Nicole Stoneleigh Foss talking about finance and energy to the Swedish team of Andersö&Boman. The location is an old retired tugboat in the old port in the center of Stockholm. The date is October 11 2011.


Finance and Bubbles




Nuclear Power




Cheap Energy




Decoupling




Alternative Energy










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Ashvin Pandurangi:




Searching for Diamonds in the Rough



Attention Members of The Automatic Earth Community!!

We are pleased to announce the beginning of a new series of articles that will focus on models, ideas, concepts, developments, etc., that could potentially play a significant role in shaping our collective futures during or after upcoming periods of financial and/or industrial collapse.

It will be an interactive process and will draw upon the knowledge and resources of everyone in the TAE community who is able and willing to participate! Anyone who wishes to participate must simply email the idea to [taediamonds at gmail dot com], along with a few supporting sources of information on the concept (articles, papers, videos, other relevant material, etc.).

The ideas will be collected and reviewed in the order they are received. Once they are briefly reviewed, the first four ideas will be listed in a poll on TAE website, and everyone will be allowed to vote for a full week on which idea they are most interested in hearing about in further detail .

Once a winning idea is established by the TAE community, the originator of the idea will be contacted and given a chance to produce his/her own write-up on the idea and for it to be published as a lead TAE article. If the originator declines, then another member will do a short write-up on the idea whenever time permits.

After the relevant article is published, the entire process will re-start. To make this work, a few loose guidelines should be followed:

Only one idea can be submitted by each person for each period. Once a winning idea for a period is established, another idea can be submitted.

2) The idea must have some existing foundation for its potential importance or success in the future (i.e. no ideas about people escaping Earth on a space shuttle and colonizing Mars with a sustainable Green society).

2) The idea must focus on the actual or potential actions of individuals or small groups that have or could unilaterally accomplish their goals, rather than relying on top-down "solutions" (i.e. no ideas about organizing protests to affect systemic political change).


Example: North Dakota's model of a state-owned central bank and independent monetary system, and its viability as a model for other states post financial collapse (sorry, this idea will be the first entry to kick things off and is now officially off the table).

Please email ideas and any questions to the address listed above. Thank you and we look forward to hearing from all of you soon!








Ashvin Pandurangi:



North Dakota's Monetary Magic






Amid of all of the chaos and confusion in the global economy, there exists a humble bastion of relative economic peace and prosperity, and it exists in the developed world no less. It's known as the state of "North Dakota". Typically flying well under the radar of any mainstream analysis or even casual reference, it was first the subject of a recent piece in the New York Times entitled The North Dakota Miracle and then another piece critiquing the NYT article, written by Ellen Brown in Yes Magazine. The NYT piece superficially credited "oil" with North Dakota's 3.3% unemployment rate, consistent budget surplus and stable financial system.

That prompted Ellen Brown to pen her critically perceptive piece entitled,

North Dakota's Economic 'Miracle' - It's Not Oil

Ellen Brown: "Oil is certainly a factor, but it is not what has put North Dakota over the top. Alaska has roughly the same population as North Dakota and produces nearly twice as much oil, yet unemployment in Alaska is running at 7.7 percent. Montana, South Dakota, and Wyoming have all benefited from a boom in energy prices, with Montana and Wyoming extracting much more gas than North Dakota has. The Bakken oil field stretches across Montana as well as North Dakota, with the greatest Bakken oil production coming from Elm Coulee Oil Field in Montana. Yet Montana’s unemployment rate, like Alaska’s, is 7.7 percent.

A number of other mineral-rich states were initially not affected by the economic downturn, but they lost revenues with the later decline in oil prices. North Dakota is the only state to be in continuous budget surplus since the banking crisis of 2008. Its balance sheet is so strong that it recently reduced individual income taxes and property taxes by a combined $400 million, and is debating further cuts. It also has the lowest foreclosure rate and lowest credit card default rate in the country, and it has had NO bank failures in at least the last decade."


The availability of energy and material resources is always a fundamental factor contributing to economic stability and growth, but focusing only on that conveniently allows us to skate around the stark financial discrepancy between North Dakota and every other struggling American state. Which is, of course, the existence of a state-owned central bank in ND that clears checks, guarantees student loans and business development loans, and issues credit money within the state and independently of the privately-owned Federal Reserve System.

Yep, you heard right! While the powerful institutions of Europe, the Middle East, Latin America and Southeast Asia have so far been inextricably locked into the devastating effects of corrupt Fed monetary policy, such as trade imbalances and high inflation, and entire multi-trillion dollar economies are descending into insolvency through incurable deficits, one single agricultural state within the U.S. has escaped the Squid's blood funnel in a magical sleight of finance that can only be described as Houdini on steroids. As described by Ellen Brown below, North Dakota has certainly reaped the benefits of its monetary courage.

North Dakota's Economic 'Miracle' - It's Not Oil

"Access to credit is the enabling factor that has fostered both a boom in oil and record profits from agriculture in North Dakota. The Bank of North Dakota (BND) does not compete with local banks but partners with them, helping with capital and liquidity requirements. It participates in loans, provides guarantees, and acts as a sort of mini-Fed for the  state.

...The BND also has a loan program called Flex PACE, which allows a local community to provide assistance to borrowers in areas of jobs retention, technology creation, retail, small business, and essential community  services."

...According to the BND report:

'Financially, 2010 was our strongest year ever. Profits increased by nearly $4 million to $61.9 million during our seventh consecutive year of record profits. Earnings were fueled by a strong and growing deposit base, brought about by a surging energy and agricultural economy. We ended the year with the highest capital level in our history at just over $325 million. The Bank returned a healthy 19 percent ROE, which represents the state’s return on its investment.'


It's understandably a common reaction these days to hear the word "debt" or "credit" and cringe with disgust. The last thing our world system needs to regain health and stability is more credit (debt) when there is already tens of trillions of dollars worth of outstanding liabilities that cannot come close to being paid off with current and future revenues. Well, that sentiment is very true for the global system as a whole, but not necessarily for localized components of the system which are attempting to distance themselves from the broader debt machine and weather the ongoing financial storm.

At the state and local level, a transparent, state-owned and well-manged central banking institution could help local farmers and entrepreneurs with maintaining their productive operations, and expanding when it's deemed prudent to do so. Almost none of the credit money generated would finance operations outside of the state or be funneled through the TBTF national banks, which are best described as the insatiable tape worms living in the digestive tract of a developed capitalist society. North Dakota's monetary officials know that, once those guys get involved, all productive capital flows will simply become parasitic, i.e. wasted in graft and mis-allocated towards unnecessary and speculative projects.




Protester at October 6 2011 Occupy Wall Street Gathering



It is certainly true that North Dakota's cozy unemployment and public debt situation will become less comfortable after the next huge leg down in the ongoing global financial crisis. It must still live according to some fiscal rules of the broader union, and it will be forced to pay for the mistakes of a misguided nation through oppressive tax policy and decreased commercial activity with other states. However, it is unlikely that its economic situation will deteriorate as quickly and as severely as many other states, such as California or New York. A comparison to the former, written by Law Professor Timothy Canova in his paper The Public Option, is presented by Ellen Brown:

North Dakota's Economic 'Miracle' - It's Not Oil

"In contrast, California is the largest state economy in the nation, yet without a state-owned bank, is unable to steer hundreds of billions of dollars in state revenues into productive investment within the state. Instead, California deposits its many billions in tax revenues in large private banks which often lend the funds out-of-state, invest them in speculative trading strategies (including derivative bets against the state’s own bonds), and do not remit any of their earnings back to the state treasury.

Meanwhile, California suffers from constrained private credit conditions, high unemployment levels well above the national average, and the stagnation of state and local tax receipts. The state’s only response has been to stumble from one budget crisis to another for the past three years, with each round of spending cuts further weakening its economy, tax base, and credit rating."


The major medium to long-term obstacles for ND are, of course, energy and environmental issues such as peak oil, climate change, water contamination, topsoil degradation, etc. That is also another reason why its state-owned and managed monetary circuits will be invaluable during and after a collapse of the global financial system. ND will be one of the few states to have both the proper incentives (collapsing demand for energy) and some of the critical institutions necessary to efficiently re-allocate resources towards alternative energy systems, sustainable farming and environmental preservation.

In addition, once the U.S. dollar is eventually poised to devalue into near worthless pieces of paper, North Dakota will have a state-issued currency and banking model that facilitates local production and exchange and one that is the envy of all of its neighbors. It is always a possibility that such envy will attract more danger than respect, but the opposite could also be true. Communities and states will be desperately searching for models to placate their residents and stabilize their economies once it is clear that the federal government and reserve banking system is only capable of producing counter-productive policies. Many of them will not have to look much farther than North Dakota.











Economics has met the enemy, and it is economics
by Ira Basen - Globe And Mail

After Thomas Sargent learned on Monday morning that he and colleague Christopher Sims had been awarded the Nobel Prize in Economics for 2011, the 68-year-old New York University professor struck an aw-shucks tone with an interviewer from the official Nobel website: "We're just bookish types that look at numbers and try to figure out what's going on."

But no one who'd followed Prof. Sargent's long, distinguished career would have been fooled by his attempt at modesty. He'd won for his part in developing one of economists' main models of cause and effect: How can we expect people to respond to changes in prices, for example, or interest rates? According to the laureates' theories, they'll do whatever's most beneficial to them, and they'll do it every time. They don't need governments to instruct them; they figure it out for themselves. Economists call this the "rational expectations" model. And it's not just an abstraction: Bankers and policy-makers apply these formulae in the real world, so bad models lead to bad policy.

Which is perhaps why, by the end of that interview on Monday, Prof. Sargent was adopting a more realistic tone: "We experiment with our models," he explained, "before we wreck the world."

Rational-expectations theory and its corollary, the efficient-market hypothesis, have been central to mainstream economics for more than 40 years. And while they may not have "wrecked the world," some critics argue these models have blinded economists to reality: Certain the universe was unfolding as it should, they failed both to anticipate the financial crisis of 2008 and to chart an effective path to recovery.

The economic crisis has produced a crisis in the study of economics – a growing realization that if the field is going to offer meaningful solutions, greater attention must be paid to what is happening in university lecture halls and seminar rooms. While the protesters occupying Wall Street are not carrying signs denouncing rational-expectations and efficient-market modelling, perhaps they should be.

They wouldn't be the first young dissenters to call economics to account. In June of 2000, a small group of elite graduate students at some of France's most prestigious universities declared war on the economic establishment. This was an unlikely group of student radicals, whose degrees could be expected to lead them to lucrative careers in finance, business or government if they didn't rock the boat. Instead, they protested – not about tuition or workloads, but that too much of what they studied bore no relation to what was happening outside the classroom walls.

They launched an online petition demanding greater realism in economics teaching, less reliance on mathematics "as an end in itself" and more space for approaches beyond the dominant neoclassical model, including input from other disciplines, such as psychology, history and sociology. Their conclusion was that economics had become an "autistic science," lost in "imaginary worlds." They called their movement Autisme-economie.

The students' timing is notable: It was the spring of 2000, when the world was still basking in the glow of "the Great Moderation," when for most of a decade Western economies had been enjoying a prolonged period of moderate but fairly steady growth.

Some economists were daring to think the unthinkable – that their understanding of how advanced capitalist economies worked had become so sophisticated that they might finally have succeeded in smoothing out the destructive gyrations of capitalism's boom-and-bust cycle. ("The central problem of depression prevention has been solved," declared another Nobel laureate, Robert Lucas of the University of Chicago, in 2003 – five years before the greatest economic collapse in more than half a century.)

The students' petition sparked a lively debate. The French minister of education established a committee on economic education. Economics students across Europe and North America began meeting and circulating petitions of their own, even as defenders of the status quo denounced the movement as a Trotskyite conspiracy. By September, the first issue of the Post-Autistic Economic Newsletter was published in Britain.

As The Independent summarized the students' message: "If there is a daily prayer for the global economy, it should be, ‘Deliver us from abstraction.'"

It seems that entreaty went unheard through most of the discipline before the economic crisis, not to mention in the offices of hedge funds and the Stockholm Nobel selection committee. But is it ringing louder now? And how did economics become so abstract in the first place?

The great classical economists of the late 18th and early 19th centuries had no problem connecting to the real world – the Industrial Revolution had unleashed profound social and economic changes, and they were trying to make sense of what they were seeing. Yet Adam Smith, who is considered the founding father of modern economics, would have had trouble understanding the meaning of the word "economist."

What is today known as economics arose out of two larger intellectual traditions that have since been largely abandoned. One is political economy, which is based on the simple idea that economic outcomes are often determined largely by political factors (as well as vice versa). But when political-economy courses first started appearing in Canadian universities in the 1870s, it was still viewed as a small offshoot of a far more important topic: moral philosophy.

In The Wealth of Nations (1776), Adam Smith famously argued that the pursuit of enlightened self-interest by individuals and companies could benefit society as a whole. His notion of the market's "invisible hand" laid the groundwork for much of modern neoclassical and neo-liberal, laissez-faire economics. But unlike today's free marketers, Smith didn't believe that the morality of the market was appropriate for society at large. Honesty, discipline, thrift and co-operation, not consumption and unbridled self-interest, were the keys to happiness and social cohesion. Smith's vision was a capitalist economy in a society governed by non-capitalist morality.

But by the end of the 19th century, the new field of economics no longer concerned itself with moral philosophy, and less and less with political economy. What was coming to dominate was a conviction that markets could be trusted to produce the most efficient allocation of scarce resources, that individuals would always seek to maximize their utility in an economically rational way, and that all of this would ultimately lead to some kind of overall equilibrium of prices, wages, supply and demand.

Political economy was less vital because government intervention disrupted the path to equilibrium and should therefore be avoided except in exceptional circumstances. And as for morality, economics would concern itself with the behaviour of rational, self-interested, utility-maximizing Homo economicus. What he did outside the confines of the marketplace would be someone else's field of study.

As those notions took hold, a new idea emerged that would have surprised and probably horrified Adam Smith – that economics, divorced from the study of morality and politics, could be considered a science. By the beginning of the 20th century, economists were looking for theorems and models that could help to explain the universe. One historian described them as suffering from "physics envy." Although they were dealing with the behaviour of humans, not atoms and particles, they came to believe they could accurately predict the trajectory of human decision-making in the marketplace.

In their desire to have their field be recognized as a science, economists increasingly decided to speak the language of science. From Smith's innovations through John Maynard Keynes's work in the 1930s, economics was argued in words. Now, it would go by the numbers.

The turning point came in 1947, when Paul Samuelson's classic book Foundations of Economic Analysis for the first time presented economics as a branch of applied mathematics. Without "the invigorating kiss of mathematical method," Samuelson maintained, economists had been practising "mental gymnastics of a particularly depraved type," like "highly trained athletes who never run a race." After Samuelson, no economist could ever afford to make that mistake.

And that may have been the greatest mistake of all: In a post-crisis, 2009 essay in The New York Times Magazine, Princeton economist and Nobel laureate Paul Krugman wrote, "The central cause of the profession's failure was the desire for an all-encompassing, intellectually elegant approach that gave economists a chance to show off their mathematical prowess."

Of course, nothing says science like a Nobel Prize. Prizes in chemistry, physics and medicine were first awarded in 1901, long before anyone would have thought that economics could or should be included. But by the late 1960s, the central bank of Sweden was determined to change that, and when the Nobel family objected, the bank agreed to put up the money itself, making it the only one of the prizes to be funded by taxpayers.

Officially, then, it is known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel – but that title is rarely used. On Monday morning, Prof. Sargent and Princeton University Prof. Sims were widely reported to have won the Nobel Prize in Economics.

The confusion is understandable, and deliberate, according to Philip Mirowski, an economic historian at the University of Notre Dame. "It's part of the PR trick," Prof. Mirowski argues. Awarding the economics prize immediately after the prizes for physics, chemistry and medicine helps to place economics on the same level as those other natural sciences.

The prize also has helped to transform one particular ideology into economic orthodoxy. Prof. Mirowski, who is co-writing a book on the history of the economics prize, notes that throughout the 1970s and 1980s, economists whose work supported neoclassical, pro-market, laissez-faire ideas won a disproportionate number of those honours, as well as support from the increasing numbers of well-funded think tanks and foundations that cleaved to the same lines.

People who rejected those ideas, or were skeptical of the natural sciences model, were quickly marginalized, and their road to academic advancement often blocked. The result was a homogenization of economic thought that Prof. Mirowski believes "has been pretty deleterious for economics on the whole."

The road to hell is paved with good intentions, rational expectations and efficient markets
Many critics of neo-classical economics argue that it has a powerful pro-market bias that's provided an intellectual justification for politicians ideologically disposed to reduce government involvement in the economy.

The rational-expectations model, for example, assumes that consumers and producers all inform themselves with all available data, understand how the world around them operates and will therefore respond to the same stimulus in essentially the same way. That allows economists to mathematically forecast how these "representative" consumers and producers would behave.

During a recession, say, a well-meaning government might want to enhance benefits for the unemployed. Prof. Sargent, for one, would caution against that, because a "rational" unemployed worker might then calculate that it's better to reject a lower-paying job. He's blamed much of the chronically high unemployment in some European countries on the presence of an army of voluntarily unemployed workers, and spoken out against the Obama administration's recent efforts to extend unemployment benefits.

Indeed, under the rational-expectations model, most market interventions by governments and central banks wind up looking counterproductive. Meanwhile, the efficient-markets hypothesis, developed by University of Chicago economist Eugene Fama in the 1970s, has dominated thinking about financial markets. It posits that the prices of stocks and other financial assets are always "efficient" because they accurately reflect all the available information about economic fundamentals.

By this reasoning, there can be no speculative price bubbles or busts in the stock or housing markets, and speculators with evil intentions cannot successfully manipulate markets. Conveniently, since markets are self-stabilizing, there's no need for government regulation of them.

Critics point out that both these theories tend to ignore what John Maynard Keynes called the "animal spirits" – playing down human irrationality, inefficiency, venality and ignorance. Those are qualities that are hard to plug into a mathematical equation that purports to model human behaviour.

These models also have failed to take into account the profound changes wrought by globalization, and the growing importance of banks, hedge funds and other financial institutions. Yet they have successfully provided a "scientific" cover for an anti-regulatory political agenda that is popular on Wall Street and in some Washington political circles.

Inside jobs: Pay no attention to that banker behind the curtain
The Great Depression of the 1930s led many economists of the day to question some of their discipline's most fundamental assumptions and produced a decades-long heyday for Keynesian economics. So far, the Great Recession has led to less of a fundamental shift.

Notre Dame's Prof. Mirowski believes that more rethinking is necessary. "Everyone thought the banks would have to change their behaviour, but they got bailed out and nothing changed. The economics profession has also been bailed out because it is so highly interlinked with the financial profession, so of course they don't change. Why would they change?"

Indeed, economics may be the dismal science, but there is nothing dismal about the payoffs for those at the top of the heap serving as advisers and consultants and sitting on various boards. Unlike some disciplines, economics has no guidelines governing conflict of interest and disclosure.

In 2010, the Academy Award-winning documentary Inside Job exposed several disturbing examples of academic economists calling for deregulation while working for financial-services companies. And in a study of 19 prominent financial economists, published last year by the Political Economy Research Institute at the University of Massachusetts Amherst, 13 were found to own stock or sit on the boards of private financial institutions, but in only four cases were those affiliations revealed when they testified or wrote op-eds concerning financial regulation.

This year, the American Economics Association agreed to set up a committee to investigate whether economists should develop ethical guidelines similar to those already in place for sociologists, psychologists, statisticians and anthropologists.

But there appears to be little enthusiasm for the idea among mainstream economists. Prof. Lucas of the University of Chicago, in an interview with The New York Times, objected: "What disciplines economics, like any science, is whether your work can be replicated. It either stands up or it doesn't. Your motivations and whatnot are secondary."

Several billion pennies for their thoughts
The critics, however, are more numerous and considerably better financed than the French students a decade ago. In October, 2009, billionaire financier George Soros said that "the current paradigm has failed." He resolved to help save economics from itself. He pledged $50-million toward the establishment of the New York-based Institute for New Economic Thinking (INET), with a mandate to promote changes in economic theory and practice through conferences, grants and campaigns for graduate and undergraduate education reforms.

Perry Mehrling, a professor of economics at New York's Columbia University, is the chair of the curriculum task force at INET. He says his graduate students at Columbia are growing increasingly frustrated by at the tendency to define the discipline by its tools instead of its subject matter – like the students in Paris a decade ago, they find little relationship between the mathematical models in class and the world outside the door.

Prof. Mehrling believes that economics education has become far too insular. Never mind cross-disciplinary study – even courses in economic history and the history of economic thought have all but disappeared, so students spend almost no time reading Smith, Keynes or other past masters. "It's not just that we're not listening to sociologists," Prof. Mehrling laments. "We're not even listening to economists."

He says he has no problem with teaching efficient-markets and rational-expectations theories, but as hypothesis, not catechism. "I object to the idea that these are articles of faith and if you don't accept them, you are not a member of the tribe. These things need to be questioned and we need a broader conversation."

The challenge, as Columbia University economist Joseph Stiglitz said at the opening conference of INET, is that "we need better theories of persistent deviations from rationality."

Some of those theories are coming from the rapidly growing field of behavioural economics, which borrows insights about human motivation from cognitive psychology: A paper titled The Hubris Hypothesis of Corporate Takeovers, for example, examines how the egos of ambitious chief executive officers can lead them to pursue takeovers, even when all available evidence suggests that the move could be a disaster.

It is not yet clear how such new approaches can evolve into workable models, but they hint at what a post-autistic economics might look like. Prof. Mehrling is cautiously optimistic. "There's a recognition that things we thought were true aren't necessarily true," he argues, "and the world is more complicated and interesting than we thought – so all bets are off, and that's exciting intellectually."

Change comes slowly in academia. The few jobs that are available don't generally go to people who challenge orthodoxy. But over the next decade, as the post-crash crop of economics students make their impact felt in government, business and schools, the lessons learned may well seep into the mainstream.

Theories based on assumptions of rationality, efficiency and equilibrium in the marketplace are likely to be treated with a great deal more skepticism. Homo economicus is a lot more anxious, irrational, unpredictable and complex than most economists believed. And, as Adam Smith recognized, he has a moral and ethical dimension that should not be ignored.

Today, the Post-Autistic Economic Network continues to publish its newsletter, now known as the Real-World Economic Review. It remains a thorn in the side of mainstream economics. In an editorial in January, 2010, the editors called for major economics organizations to censure those economists who "through their teachings, pronouncements and policy recommendations facilitated the global financial collapse" and pointed to the "continuing moral crisis within the economics profession."

It is unlikely that Prof. Sargent will acknowledge any of this when he travels to Stockholm to accept his (sort of) Nobel Prize in December. Nor is he likely to speak about what role, if any, his models really might have played in "wrecking the world." But he did make one concession in his interview with the Nobel website this week: "Many of the practical problems are ahead of where the models are," he admitted. "That's life."




Millions of homes lurk on bank inventories, casting doubts of rebound
by Toluse Olorunnipa - McClatchy Newspapers

Officially, there are 3.5 million homes for sale nationwide. But there are millions more lurking in the shadows — hidden neatly away on banks' balance sheets, stalled in foreclosure court proceedings or simply occupied by nonpaying owners as lenders wait months or years before taking action.

The housing market's ballooning shadow inventory — buoyed by a yearlong foreclosure slowdown — stands as the most menacing obstacle to the recovery of the residential real estate market.

Clustered mostly in hard-hit cities and states, there are more than 4.5 million homes either owned by lenders or headed for foreclosure. In Miami, for example, there are about 200,000 shadow homes, dwarfing the 30,000 properties that are listed on the active market. Even as prices in Miami have shown signs of stability this year, an impending wave of foreclosures threatens to keep real estate values deflated.

"A lot of people don't understand how much inventory is set to come on line in the next 18 to 24 months," said Jack McCabe, the CEO of McCabe Research & Consulting in Deerfield Beach, Fla. "When you compare what the Realtors show as inventory to what's out there, you realize we have a long way to go."

A McClatchy analysis of four years of foreclosure data and thousands of property records found record-high levels of shadow inventory in several housing markets across the nation. Though real estate trade groups routinely leave these shadow properties out of monthly reports, their influence on home values has grown sharply in recent years.

In the supply-and-demand-reliant real estate market, the national supply of homes is officially listed at about 3.5 million, or about nine months' worth; sales are on track to reach about 5 million this year. But once shadow inventory is added, that supply more than doubles, to at least 7.5 million. A healthy housing market has about a six-month supply of properties, which would be about 2.4 million.

The wave of homes yet to hit the market consists of discounted distressed properties, which tend to drag down neighborhood values. Economists say the housing industry will not normalize and recover until most of the foreclosures work their way through the system — a process that probably will last several more years.

What Is Shadow Inventory?
Shadow inventory can be broken into three categories:
  • Properties that lenders have repossessed but haven't put up for sale. These homes are referred to as real-estate owned, or REOs.
  • Properties that are caught in the clogged foreclosure process.
  • Properties that are severely delinquent in loan payments and almost certainly headed for foreclosure, but haven't yet entered the process.


Calculating the size of the shadow market has proved difficult, and estimates range from 1.6 million to 7 million homes.

For its analysis, McClatchy determined the number of bank-owned homes by calculating the difference between the number of homes lenders have repossessed since 2007 and the
number of homes they've sold to new owners over the same period.

McClatchy also calculated the number of homes in the foreclosure pipeline: properties that have begun the process or are so far behind on payments that foreclosure is virtually inevitable. The analysis didn't include homes that are currently listed for sale. Data from the real estate research firm RealtyTrac, the U.S. Census Bureau and the data firm Lender Processing Services and real estate trade group figures were used in the analysis.

The McClatchy analysis found the following shadow inventory:
  • 644,000 houses already owned by lenders but not yet for sale.
  • 2.2 million homes whose owners have received initial foreclosure notices or notices of default but haven't yet been foreclosed on.
  • 1.9 million properties whose owners are 90 days or more behind on their payments but haven't yet been served with foreclosure notices.


In hard-hit markets such as Miami, Sacramento, Calif., Las Vegas and Cleveland, McClatchy culled thousands of property records for lender-owned homes and checked whether those homes were being listed on the open market. In a large number of cases, they were not.

Bank of America has owned a small two-bedroom on Northwest 80th Street in Miami since August 2008, when it repossessed the home from the estate of Lucile Moore. Three years later, the property isn't listed for sale on the open market, part of the bank's growing collection of unlisted properties. Bank of America didn't respond to a request for comment about this property.

The bank hasn't paid last year's $2,000 property tax bill. That's an occasional side effect of having behemoth financial institutions as property owners. In foreclosure-riddled Cleveland, financial institutions owe millions in overdue property taxes and grass-cutting fees for vacant and abandoned homes. "I've seen plenty of cases where the banks don't take care of the homes and we have to take them into court to try and get them to pay the fees," said Mark Parks, projects manager of the Cuyahoga County Fiscal Office in Ohio.

Lenders Avoiding Losses
CitiMortgage has owned a crumbling 111-year colonial home on Laisy Avenue in Cleveland since June 2008, and it owes the city more than $7,500 in fees for grass cutting and property taxes. The home isn't listed for sale. Citibank spokesman Mark Rodgers said the lender was considering donating it to a nonprofit organization.

In the aftermath of the largest home-repossession campaign in history, mortgage lenders are holding properties off the market as a matter of strategy. Flooding the fragile market with an additional 500,000 to 1.1 million homes — many of them deteriorating and selling at deep discounts — would cause already weak prices to fall further.

Mortgage lenders have shown no indication that they're planning to ramp up foreclosure sales, and a growing number of vacant homes have sat idle on banks' balance sheets for several years.

According to the data firm CoreLogic, which has one of the more conservative estimates of shadow inventory, mortgage debt outstanding in the shadow inventory is about $336 billion. Liquidating REO homes through the sales process usually leads to significant write-downs on bank balance sheets.

Wary of seeing such large losses appear in earnest on their books, lenders have been reluctant to deal with bad loans head-on, said Ira Rheingold, the executive director of the National Association of Consumer Advocates. "They're afraid," he said. "They don't want to take those paper losses. Their books show that they have these assets that are worth 'X' amount of money. But those values are not real."

In Maricopa County, Ariz., public records show that Bank of America owns about 1,300 properties clustered in cities such as Phoenix and Mesa. Most of those homes aren't being marketed for sale on the lender's designated website for bank-owned properties, where only 440 Phoenix-area homes are shown for sale. Bank of America spokesman Rick Simon said some of the homes not listed on the open market might be advertised directly to investors.

In many parts of the country, the federal government is the largest institutional property owner, as government-run Fannie Mae, Freddie Mac and the Federal Housing Administration hold about 250,000 homes. While at least 100,000 of those aren't yet on the market, a review of public records in several states showed that Fannie and Freddie were more likely than other lenders were to liquidate foreclosed homes quickly.

"We don't have a shadow inventory, because our inventory consists of homes that are on the market and homes that we're bringing to market," Fannie Mae spokesman Andrew Wilson said. "Our goal is to sell as quickly as possible."

A Worsening Outlook
In recent years, the government has directed billions of dollars toward curbing the massive foreclosure crisis, pitching programs that facilitate mortgage modifications and low-stress refinances. While the various measures have had some success, all have fallen far short of expectations, and the growth of the shadow inventory has been virtually unabated.

The outlook for shadow inventory has worsened considerably over the last year because of lender paperwork problems that have gummed up the foreclosure system. A year ago, major mortgage servicers discovered that employees were systematically cutting corners in the foreclosure process, often signing thousands of false or incomplete legal documents each day.
As details of the "robo-signing" scandal began to spread, lenders hit the brakes on all foreclosures, setting off a yearlong slowdown that continues today.

Banks are struggling to prove that they have legal standing to foreclose, and it now takes them an average of nearly two years to repossess a property, according to Lender Processing Services. In states such as Florida and North Carolina, where foreclosures are handled in court, the timeline is even longer.

More than a million foreclosures that were supposed to be completed this year have been pushed into the future, prolonging the housing crisis, RealtyTrac found. In August 2010, before the foreclosure slowdown, banks repossessed more than 12,000 homes in Florida. In August 2011, there were only 5,000 repossessions.

Nationwide, there are 2.2 million homes stuck somewhere in the foreclosure process, and many of those cases have completely stalled.

"I've got dozens of foreclosure cases in my office that started in 2008 and are still open," Miami foreclosure defense attorney Dennis Donet said, "with lenders doing absolutely nothing to move these cases forward."

South Florida security guard Lebert Cosley has spent nearly four years fighting a foreclosure on his two-bedroom condo in Lauderdale Lakes, a suburb of Fort Lauderdale, Fla. As the bank stalled the case while it searched for crucial documents, Cosley's condo association decided to foreclose on him earlier this year, a practice that's become more common recently.

"The bank just stopped sending me information about the case," said Cosley, 65, who claimed that he was a victim of mortgage fraud and is still fighting the case in court. "Then the condo association finally did the foreclosure."

Lenders also are waiting longer before taking action against millions of homeowners who have stopped paying their mortgages. Nearly 2 million homeowners who haven't paid their mortgages in three months or more haven't received foreclosure filings. About 800,000 of those haven't made payments in more than a year, according to Lender Processing Services.

While some of the holdup can be attributed to foreclosure prevention efforts — mortgage modifications, for example — several banks are using delay as a financial strategy, said Daren Blomquist, a spokesman for RealtyTrac.

Lenders basically are letting delinquent homeowners stay in their homes as a lesser-of-two-evils option. Foreclosing more quickly would mean more empty homes and additional maintenance costs for banks to shoulder. Lenders, already dealing with a mountain of paperwork challenges for homes in foreclosure, would only be adding to their documentation woes by speeding up new filings.

"There are more distressed properties than their foreclosure departments can probably handle," Blomquist said. "Because the foreclosure pipeline is so full, the lenders have delayed foreclosing on those properties."

Additionally, banks aren't selling homes fast enough to justify more aggressive foreclosure filings. Even at the currently slowed pace, foreclosure starts are three times higher than foreclosure sales are, meaning that properties are being loaded onto the conveyor belt much faster than they're being taken off. "It's kind of like a pig in a python," Blomquist said. "As you start to see more of foreclosure sales and that inventory is cleared out, then you'll begin to see more new filings."

But as lenders hold off on foreclosures, struggling homeowners are strategically gaming the system as well. So-called "strategic defaults" have grown in popularity. Under a strategic default, homeowners quit paying mortgages they deem bad investments, but they keep living in the homes or renting them out and pocketing the income.

Chae duPont, a Miami foreclosure defense attorney, said a growing number of her clients were opting to default on underwater mortgages if they were unable to get satisfactory loan modifications. "They're making a decision to continue living in the property for 18 to 36 months and then they negotiate a short sale," she said. "It's not an easy decision, but sometimes it's the only thing that makes financial sense."

In Clark County, Nev., there are more than 28,000 homes where owners haven't paid their mortgages in more than three months but haven't yet been hit with foreclosure filings. Lenders, who already own more than 30,000 homes in greater Las Vegas, don't seem to be in a hurry to take on more: The average foreclosure timeline in Clark County is 19 months.

Nationwide, 2.5 million homeowners are 30 to 60 days behind on payments, a sign that the stagnant economy and tepid housing market continue to push more people into the foreclosure pipeline.

Given the grim outlook, lenders have begun to consider new alternatives to foreclosure. Short sales have increased this year, and real estate agents say the once-onerous process of selling a home for less than what's owed on it has become more streamlined.

Banks also are cutting deals with homeowners who agree to hand over the keys to houses rather than go through legal battles. In some cases, lenders are forking over wads of cash to convince troubled borrowers to leave their homes amicably.

"We have been making enhanced financial relocation offers, primarily in states where the foreclosure timelines are extended," said Jason D. Menke, spokesman for Wells Fargo. "We've been offering as much as $10,000 or $20,000 to borrowers who are willing to do a deed-in-lieu or a short sale."

More aggressive foreclosure-prevention measures, such as principal reductions and debt forgiveness, generally have been kept off the table. In the meantime, the stalled foreclosure machines are beginning to gear back up again, Blomquist said.

In California, new foreclosure filings jumped 55 percent from July to August, led by huge increases by Bank of America, according to RealtyTrac. That's not good news for borrowers such as Jill Demmel. She said she stopped making payments on her three-bedroom house in east Sacramento in December 2008, after a severe case of drug-resistant meningitis put her in a hospital for six weeks and forced her to take a year off her job as a lawyer.

Her lender, JPMorgan Chase, filed a foreclosure notice against her in April 2010. Demmel, 57, is working again but said she couldn't make the $67,000 in back payments and fees she owed. She said one bank representative suggested that she was trying to avoid paying her bills. Her request for a loan modification was turned down in August, a week after the bank sent her a notice that the home she shares with her mother was about to be auctioned. "This has been the worst experience of my life," Demmel said.

Meanwhile, a group of attorneys general has spent the past year trying to negotiate a settlement with major U.S. banks that are accused of wrongfully foreclosing on homeowners. The process has been slow, as the banks have rejected calls for widespread principal reductions and public officials have called for steep penalties. California Attorney General Kamala Harris pulled out of the negotiations last month, saying the proposed agreement was "inadequate."

McCabe, the Deerfield Beach consultant, said it was in lenders' best interest to keep hundreds of thousands of struggling borrowers from entering the foreclosure pipeline, even if it meant writing down principal balances for underwater homeowners. "Unless they agree to do principal reductions coupled with mortgage modifications, these delinquent properties will eventually have to be sold," he said. "Which means more banks will fold, because they can't stomach those losses."




Europe's lost decade as $7 trillion loan crunch looms
by Ambrose Evans-Pritchard - Telegraph

Europe’s banks face a $7 trillion lending contraction to bring their balance sheets in line with the US and Japan, threatening to trap the region in a credit crunch and chronic depression for a decade.

The risk is "Japanisation" without the benefits of Japan, without a single government, or a trade super-surplus, or 1pc debt costs, or unique social cohesion. Even today, the jobless rate for youth is near 10pc in Japan. It is already 46pc in Spain, 43pc in Greece, 32pc in Ireland, and 27pc in Italy. We will discover over time what yet more debt deleveraging will do to these societies.

Stephen Jen from SLJ Macro Partners says the loan to deposit (LTD) ratio of Europe’s lenders is 1.2, much like Japanese banks in the early 1990s at the onset of the country’s Lost Decade (now two decades).

How Europe allowed this to happen will no doubt be the subject of many enquiries. Suffice to say that it was an intellectual failure by everybody: lenders, economists, regulators and the European Central Bank. The ECB misread the implications of the global capital surplus in the middle of the last decade (like the Fed) and gunned the M3 money supply at double-digit rates (like the Fed).

This great error further juiced the fatal flood of lending from North Europe to Club Med. Interestingly, it is what US lending did to Germany in the late 1920s. When the music stopped -- when Wall Street cut off loans, as Germany has now cut off loans to Spain -- trouble ensured within two years. Weimar limped on, but not for long.

The Japanese eventually trimmed their LTD ratio to the current safe level of 0.7pc, the same as US banks. It is a fair bet that new bank rules and market pressure will force Europe to do likewise. Mr Jen said this means slashing the loan book from $19 trillion to nearer $12 trillion, given the dearth of fresh deposits.

It will be an ice-cold douche for the world. European banks have $3.4 trillion of cross-border loans to emerging markets (BIS data), three-quarters of the total. They account for 46pc in Asia, 63pc in Latin America, and 90pc in Eastern Europe. Either these banks will cut funding to Eastern Europe, or they will curtail loans at home. Most likely they will do both. Mr Jen said a lot of nasty "feedback loops" will blight the whole European region for a long time.

The sheer scale of Europe’s bank excesses -- roughly equal to Alan Greenspan’s household bubble in America -- shows what EU leaders are up against as they thrash out their latest "Grand Plan" to save Euroland. Angela Merkel and Nicolas Sarkozy have bowed to pressure from Washington and the International Monetary Fund for bank recapitalizations, by compulsion if necessary. Lenders must raise core Tier I capital ratios to 9pc or 10pc.

This is a wise precaution given that Germany plans to impose a Greek default on Europe’s banking system. But it is also "pro-cyclical". It tightens credit further. Lenders threaten to shrink their loan books to meet the target rather than dilute their share base by raising money in a hostile market.

If governments are forced to step in, it will not be much prettier. The IMF pitches fresh capital needs at €200bn, but what if Credit Suisse is nearer the mark at €400bn? Such sums would push the public debt of several states over the danger line, intensifying the vicious circle as banks and sovereigns drag each other down.

Indeed, it you look at each components of the Grand Plan, every one creates a secondary chain of consequences that may ultimately prove self-defeating. It is why I fear there may be no plausible solution to Europe’s crisis. The structural damage has already gone too far.

We are told the Franco-German plan will offer Greece debt-relief worth having, perhaps a 50pc haircut for banks. Investors are understandably furious. This unpicks the voluntary accord for 21pc haircuts agreed in July. "A deal is a deal," said Charles Dallara from the Institute of International Finance (IIF). Moreover, 50pc is not enough. It creates a banking panic without actually solving Greece’s problem.

A third of Greece’s €364bn debt is owed to the IMF, EU, and ECB. That is deemed untouchable. Angela Merkel has so far managed to deflect popular anger over bail-out loans by insisting that they have not cost German taxpayers one Pfennig.

Stephane Deo from UBS said Greece might have to "repudiate its debt entirely" with a 100pc haircut for banks to give itself enough oxygen to breathe again. This would be an earthquake.
No sane investor believes this will stop with Greece. Portugal is in much the same trouble, despite the heroic austerity drive of premier Pedro Passos Coelho -- a latter day Marques de Pombal. The country’s total debt will top 360pc of GDP next year, and its current deficit is stuck near 10pc of GDP. This mix is worse than in Greece. It is untenable.

We all told too that the EU’s €440bn bail-out fund (EFSF) -- at last approved after high drama in Slovakia -- will be ramped up with "leverage". It is assumed that the German lawmakers will tamely go along with this, a mere three weeks after finance minister Wolfgang Schäuble seemed to promise that no such that leverage would occur.

The proposal du jour is Allianz’s "Achleitner Plan", letting the EFSF guarantee the first tranche of losses on bonds: 40pc for Greece, Portugal, and Ireland; 25pc for Italy and Spain. This would boost coverage to nearly €3 trillion of debt issuance.

This plan is dangerous. It concentrates risk, like a Lloyds spiral syndicate, or the "CDOs" and other instruments of legerdemain in the US subprime bubble. There is a high chance that this bluff would be called if Europe tips into a double-dip recession.

Credit markets have already begun to issue their verdict. Yield spreads on the EFSF’s 10-year bonds have almost doubled over Bunds since July. French spreads jumped last week to a post-EMU record of 92 points. Remember that France’s banking liabilities are 409pc of GDP (ECB data), compared to 338pc for Spain, 331pc for Germany, 250pc for Italy, 213pc for Greece.

Any such leverage must inevitably cost France its `AAA’ rating, with parallel effects in Austria as it struggles with a wave of fresh woes in Hungary, Ukraine, and the Balkans. This sets off its own treacherous dynamic.

Even if the IMF and the China-led `BRICS’ were to step with in half a trillion or so, this would could create a fresh problem. Foreign purchases of EMU bonds would force up the value of the euro. The effect would tighten the trade noose even further on Spain, Italy, and France. Perhaps that is why Brazil’s Guido "currency war" Mantega likes the idea. It is exchange manipulation behind diplomatic cover.

There is much talk of EMU fiscal union, most recently the "Soros Plan". But what Germany means by EU economic government is better policing of Club Med budgets, not debt-pooling or eurobonds. It should be clear after the ruling of the German constitutional court last month and the fiery debates in Bundestag that Berlin will not alienate its sovereign fiscal powers to the EU.

Merkozy’s Grand Plan may buy time. It may shift the stress point from one part of the unworkable structure to another. But it cannot conjure away the 30pc gap in competitiveness between Germany and Latin Europe that has built up over fifteen years. It is this intra-EMU currency misalignment that is asphyxiating Club Med and destroying the banks.

The ECB can of course can save Euroland, if it is willing to launch stimulus a l’outrance with bond purchases near 20pc of GDP -- like the Bank of England. A reflation policy would undoubtedly lift the South off the reefs, perhaps by targeting M3 growth of 5pc in Italy and Spain for three years. It would allow EMU laggards to claw their way to back to viability.

Any such attempt to correct North-South imbalances from both ends requires an inflationary boom in Germany. That is the price that Germany must pay. But as events have made all too clear over recent months, this runs smack into German ideology and the Teutonic granite of the Bundesbank.

So perhaps there is no solution for EMU after all. Kultur is the ultimate economic fundamental.




Banks must take bigger losses on Greek loans, says German finance minister
by Phillip Inman and Helena Smith - Guardian

Limit on writedowns rejected in run-up to EU meeting that is expected to allow Greece to default on half its debts

German and French banks must accept bigger losses on their loans to Greece, the German finance minister has conceded, signalling his rejection of intense lobbying by Deutsche Bank for only limited writedowns on loans to Athens.

Wolfgang Schäuble said banks must be better capitalised to prevent an escalation of the eurozone crisis and collapse of the financial system. "We need better regulation and we also need a better capitalisation of banks, which is what we are doing in the short term. Not everyone will like it, but it is the best way to ensure that we don't have an escalation in the crisis due to a collapse in the banking system," Schäuble said.

His comments come ahead of an EU council meeting next weekend that is expected to allow Greece to default on at least 50% of its debts and unveil a "bomb proof" firewall to protect other vulnerable countries.

Schäuble admitted banks had lost trust in each other and were refusing to conduct normal lending – either to other banks or commercial businesses. But a demand for further writedowns could force several governments, including Angela Merkel's Berlin administration, to nationalise or part-nationalise several institutions.

Belgium, in particular, has come under pressure in recent weeks following concerns that it will need to spend billions of euros rescuing its banks despite already pumping €5bn (£4.4bn) into Franco-Belgian group Dexia.

Up to 30 banks in the eurozone may need extra capital after writing off Greek debt. BlackRock, the US investment firm, said an investigation of Greek banking found that some the country's major institutions will need to be temporarily nationalised should a default be agreed.

The Greek prime minister, George Papandreou, issued an impassioned plea at the weekend for a "viable solution" to the debt drama wracking Europe, telling his EU counterparts that failure would lead to "catastrophe". With Athens descending into chaos as Greeks step up strikes, protests, sit-ins and walkouts, the embattled socialist leader appealed for patience, telling the nation there could be no easy exit from the worst crisis to hit the country in modern times.

"Greece is not Atlas who can bear all of Europe's problems on its shoulders," he said, alluding to the EU dithering that has been widely blamed for failing to solve the crisis. "No European country could do that – not even Germany," he told the mass-market weekly Proto Thema.

Papandreou, who faces a crucial parliamentary vote this week on a new round of belt-tightening measures ranging from pay and pension cuts to layoffs in the public service, said the time had come, once and for all, to tackle the issue at the centre of the crisis: Greece's colossal debt. In an admission that took many by surprise last week he said the issue of lightening the country's debt load had not only become a top priority but was "where the big problem lies".

As part of a Franco-German plan to avert a disorderly default, eurozone finance ministers have signalled they will ask banks to accept losses of up to 50% on Greek bond holdings. It is seen as the only way of stemming a crisis that now threatens the global economy. Eurozone officials have said openly that a "haircut" of as much as 60% for Greece's private creditors is under consideration – almost three times that agreed in July when EU leaders approved a second bailout for the country.

On Sunday German media reported that the head of Deutsche Bank, Josef Ackermann, who is also chairman of the global banking lobby, was engaged in ferocious behind-the-scenes negotiations to write down Greek debt by 50%. At €360bn, the Greek national debt is projected by the International Monetary Fund to peak at 179% of national income next year. A wave of protests, increasingly violent strike action and the takeover of government buildings, has brought a sense of lawlessness to the country, with ministers unable to enter their offices.

Government officials say Greece will run out of cash by 10 November if it is not given a fresh instalment of aid by international lenders, who have become increasingly critical of Athens' failure to implement economic and structural reforms. With a two-day general strike due to begin on Wednesday, Papandreou has turned his own office into a crisis centre for ministers who increasingly complain of being under siege.




Lack of ECB firepower weakens Europe’s Grand Plan
by Ambrose Evans-Pritchard - Telegraph

Top officials from the US Treasury and the International Monetary Fund are privately worried that Europe’s `Grand Plan’ to overcome the debt crisis is fundamentally deficient and may fail to restore market confidence.

G20 finance ministers praised Europe’s efforts to “maximise the impact” of the EU’s €440bn bail-out fund (EFSF) and ensure that the region’s banks are “adequately capitalised”, but there were heated exchanges behind closed door as the Anglo-Saxon states, and India rebuked Europe’s leaders for failing to grasp the nettle and mobilize the full lending power of the European Central Bank.

“They clearly have more work to do on strategy and details,” said US Treasury Secretary Tim Geithner. “In financial crises, it is more risky to act gradually and incrementally than to act with bold force”.

Diplomats say Mr Geithner’s plan to use the ECB as a guarantor of eurozone sovereign bonds was dismissed out of hand, while the EU failed to offer clear assurances that bank recapitalisation would be carried out with sufficient speed and scale to halt an incipent run on the system.

Olli Rehn, the EU’s economics commissioner, said Brussels will announce a “very serious plan” over come days to beef up banks and strengthen the firewall against contagion. German foreign minister Guido Westerwelle politely told the US to mind its own business. “I cannot understand some of the comments of our American friends. You can’t solve a debt crisis with more debt,” he told Bild Zeitung.

The Atlantic rift threatens to become serious if the crisis escalates. There is a growing frustration in Washington that the ECB has acted half-heatedly, confining itself to modest purchases of Italian and Spanish debt rather deploying overwhelming force to break the vicious cycle.

Jacques Cailloux, Europe economist at RBS, said any attempt to solve the eurozone crisis without the ECB playing a key role in shoring up the system is doomed to failure.

Jean-Claude Trichet, the ECB’s president, said late last week that the bank has done “all it could” to shore up monetary union and has now exhausted its role of “lender of last resort”. The institution is constrained by its mandate and by the fierce opposition of Germany’s Bundesbank to further “fiscal” actions, a government responsibility.

The EU must thrash out the details of its `Grand Plan’ before next week’s deadline. The broad outlines include fresh capital for banks, a scheme to leverage the EFSF to around €2 trillion, and debt relief for Greece.

German finance minister Wolfgang Schauble told ARD television last night that `haircuts’ for private holders of Greek debt would be more than the 21pc already agreed, ripping up a deal reached in July.

Josef Ackermann, head of Deutsche Bank, said plans to leverage the EFSF may be illegal. “We cannot allow a rescue fund of this magnitude. The (constitutional) court would’t permit, and nor would the people,” he said.

The likely formula is a scheme where the EFSF guarantees the top tranche of losses on sovereign debt, allowing the fund to boost bond coverage to €2 trillion or more. It exposes creditor states to huge losses if the gamble fails.

Mr Schauble told G20 colleages that Germany is willing move towards EU “fiscal union”, meaning extra EU powers to police budgets and punish EMU violators. It does not mean a debt-pool, eurobonds, or shared tax and spending.




UK economy brought to grinding halt by euro crisis
by Robert Winnett - Telegraph

British taxpayers may be dragged into a rescue package for the eurozone after a leading forecaster warned that the crisis has brought this country’s economy “grinding to a halt”.

The Ernst & Young ITEM Club, which uses the Treasury’s forecasting models, warns today that the economic situation is “worse than we thought”. It concludes that the “bright spots” in Britain’s economic recovery have “dimmed to a flicker” because of the ongoing crisis in the single currency.

George Osborne, the Chancellor, and Tim Geithner, the US Treasury Secretary, are becoming increasingly exasperated at the lacklustre response of European leaders to the ongoing single currency crisis.

Europe is expected to finalise plans for a two-trillion euro bailout for the single currency area over the next week. However, there are growing fears that the package will fall short. The International Monetary Fund (IMF) is expected to be asked to help shore up Italy and Spain, if this becomes necessary – a move which could lead to British taxpayers facing a multi-billion pound bill.

The euro turmoil has led to the respected Ernst & Young ITEM Club cutting by almost fifty percent its prediction for British economic growth in 2011 since the summer. It is now expecting the economy will grow by just 0.9 percent this year, signalling almost zero growth before the end of the year.

The forecaster also warned that the recent announcement from the Bank of England that it as adding another £75 billion of quantitative easing was unlikely to help restore Britain’s recovery. It recommends that the Bank should consider cutting interest rates from 0.5 percent to 0.25 percent.

Last night, Peter Spencer, the chief economic advisor to the Ernst & Young ITEM Club, said: “It’s worse than we thought. The bright spots in our forecast three months ago - business investment and exports - have dimmed to a flicker as uncertainty around Greece and the stability of the Eurozone increases. “With the UK recovery grinding to a halt, new measures are now needed to help stimulate growth. We think there is scope for targeted tax relief and spending measures to help put us back on track.”

The ITEM Club also forecasts that the UK’s unemployment rate will increase to 2.7 million people by the spring of 2013. Mr Spencer said: “With the public sector cuts starting to feed through in the UK, it’s vital that the private sector labour market continues to stay afloat.” He added: “The housing market is an important driver of the construction industry and consumer spending. Cutting stamp duty, particularly for first time buyers would, in our view, be money well spent.”

Finance ministers from across the G20 spent the weekend in Paris discussing the eurozone crisis. European leaders will meet on Sunday for a summit which is expected to agree a continent-wide rescue package worth up to two trillion euros. The scheme is expected to unveil new help for Greece, which may be allowed to technically go bankrupt and default on some of its debts. Many European banks will also be offered state money to shore up their balance sheets.

However, there are concerns that the scheme will not go far enough and that the European Central Bank will not pay a central role. Mr Geithner, the US Treasury Secretary, said: “They clearly have more work to do. It’s all in the details." “In financial crises, it is more risky to act gradually and incrementally than to act with bold force.”

However, he added that he thought that European leaders had now recognised it was in their interests to resolve the crisis. “Even though the world has a big stake in Europe doing this effectively, Europe itself has the strongest interest,” he said. “I think they’ve come to recognise that, if you underdo it, it’s going to be more expensive.”

However, European leaders are poised to ask the International Monetary Fund to offer temporary loans to countries such as Italy and Spain to bypass the financial markets.

Until now, the IMF has funded about a third of the bailouts of Greece, Ireland and Portugal. But, helping single currency countries to stop the contagion spreading, may require a broader use of resources that would go far beyond the IMF’s traditional role of providing rescue loans to cash-strapped governments. “What has been asked of us is instruments that are more flexible, more short term, that allow countries in good economic health but in difficulty to [borrow],” Christine Lagarde, the managing director of the IMF, said.

She said that world leaders would consider the new scheme at a summit in Cannes, France, early next month. The new borrowing scheme may also be useful to developing world countries concerned that the impact of the eurozone crisis may spread globally as banks are more wary about lending to governments.

Mr Osborne has said that he is opposed to the use of IMF funds specifically to bailout the eurozone. Britain will not be involved in the EU bailout for the single currency. However, he has indicated that Britain may be prepared to help underwrite an IMF scheme available to all countries.

Mrs Lagarde has previously said that the IMF’s financing may have to double to almost eight hundred billion dollars – a move which would increase Britain’s liability by about £20 billion. The Chancellor said: “We are supporters of the IMF; we’re members of the IMF. And there’s a debate about whether it needs more resources, but that is separate from the Eurozone having to stump up money for its own bailout funds.

“And we’ve been very clear here, as have other countries round the world, that building up the IMF resources should be for the whole of the world not just for the Eurozone, and so they are distinct issues. And certainly we would not support IMF resources that were only targeted at one continent or one group of countries, like the Eurozone.”




Europe finally listening to Geithner
by Phillip Inman - Guardian

There are six days to save the world. That's according to the US treasury secretary, Tim Geithner, who told the G20 finance ministers' summit in Paris on Saturday that only a massive firewall would protect the eurozone against contagion from a Greek default.

It's a message that the US president, Barack Obama, and his battle-hardened finance boss have sent across the Atlantic several times in the last six weeks. Geithner has popped up in European capitals three times in that period to deliver the message in person.

Until a few days ago it was something the French and Germans closed their ears to. No amount of calls for "shock and awe" shifted their position. There was simply a stubborn refusal to define the Greek situation as anything more than a local difficulty, and definitely not a crisis.

Six days is not a long time to design a mix of insurance policies, guarantees and bank capital top-ups worth upwards of €1.5tn (£1.3tn) that are credible to the financial markets and avoid making politicians look like they have spent every last euro cent of taxpayer funds. There is a huge industry in trying to second-guess the direction of travel in Paris and Berlin after Nicolas Sarkozy and Angela Merkel said they would reveal a killer plan next Sunday.

What kind of insurance and guarantees are in the pipeline? How much will vulnerable banks (and other private investors) be told to write off in bad loans to Greece and how many euros must the banks find to fill the void left by these bad investments? Hedge funds, pension funds and the super wealthy are all placing bets on how negotiations will work out. Will the euro stand or fall?

Betting against Sarkozy and Merkel cobbling together a deal is bold and risky. Most likely they will unveil a package of measures that lacks the clean lines and firepower of the "big bazooka" demanded by many economists, but will be just enough to kill the Greece problem and defend Italy, Spain, Portugal and Ireland. French and German banks, which lent billions of euros to Greece, Ireland and Portugal, will also be sheltered by the deal.

Geithner is convinced the French and Germans now recognise the problem, but reading his body language and the way he spoke about the prospects for meeting the six-day deadline, he was more circumspect. He said there was an enormous amount of detail to work through before plans would look convincing and hinted that time was running desperately short.

Geithner is also concerned that Merkel in particular is more concerned about rushing through reforms of the system before tackling the problems at the heart of the crisis. Some 38 pieces of EU legislation have either been put on the statute or are in the pipeline.

There have always been several problems with this rush to legislate, at least on this scale. First it distracts from the immediate problem of tackling the EU's debts. It whacks banks and other financial institutions when they are already on their knees, and the legislation heaps costs on the finance industry that, in turn, hamper growth. Without banks to lend, especially to smaller companies, we have no investment.

It is this last point that most exercised Geithner. He openly warned the EU against rushing to ball-and-chain the banks and make a crisis certain.

There is a flaw to the Geithner plan of massive guarantees and insurances for Wall Street that keeps them afloat and lending, and it can be seen in a park only a stone's throw from the New York stock exchange. The Occupy Wall Street campaigners are disgusted that propping up the banks means allowing the old rapacious bonus culture to go unreformed.

Geithner argues there are many on Wall Street who are suffering because they are paid in shares and not cash. Some US bank shares are down by a half or more since the summer. But that ignores the wider picture.

If the euro is saved, with billions more in taxpayer loans and guarantees, those bank shares will rocket and the bankers will be back in clover, more than they are already. The US treasury secretary worries that Europe needs international investors on board, only to reckon it can win a game of chicken. When countries have borrowed so much from US pension funds, Middle Eastern petrodollar sovereign funds and the Chinese, they need private investors.

In 2008 the US treasury dared the markets to bet against the government and lost. It wants the EU to heed that experience.

Left to their own devices, traders panic, fearful on behalf of their investor clients that further losses lie just round the corner. The panic, far from being the invisible hand of the markets lauded by many right-wing economists, is a bludgeoning stick causing pain and unemployment wherever it strikes. In these circumstances, reforms to tackle banks, brokers and investors should be delayed while protester-friendly taxes on wealth go ahead.

There is another crisis looming, possibly in only a few years. But it will come from another direction –the savings in China, Germany, Japan and the US looking to spark another asset boom. Tackling that situation poses even bigger problems for politicians. But first we need some sustainable growth, and to avert a euro debt crisis.


129 comments:

Greenpa said...

from previous thread- I seem to have a knack for putting up a comment simultaneously with a new post-

souperman2: "Well I guess we are at Peak Evolution. Thats it humanity has stopped evolving."

One sees that idea stated quite frequently- but I assure you, it's a physical impossibility, just as much as for gravity to suddenly cease operating.

What it means is that the person stating that opinion has an extremely incomplete concept of evolution and how it works.

For those seriously seeking to understand population dynamics, here's a one place to start:

http://tinyurl.com/lu7mqc

r/K theory; makes great sense- but data doesn't confirm. etc, etc.

Attempts to explain human population dynamics are typically fraught with baggage: personal, cultural, educational, religious, Disney movies, and what you had for breakfast. Just so ya know.

lautturi said...

Here's a bit about the drive for public banks in US, just in case you have missed this. Already 14 US states are pushing forward the idea following the example of North Dakota.

Stephen Zarlenga has excellent book on the history of money. It also has lots of info about public banking.

He is one of AMI institute people. Kucinich is their man and actually introduced a law in Congress about public banks but that didn't fly very well. No surprise there...

Bernard Lietaer is also very much in favor of local currencies. The man is Belgian and actually ex-central banker... So he knows what he's talking about. Here's his excellent TED speech, you can find more on him here.

I've talked/written about public banking in Finland for maybe a year but so far it hasn't really caught the attention of public. However, this MIGHT change as I was talking about this on Saturday in central plaza of Kuopio as part of the demonstration movement. Got one newspaper lady interested in this...

I've also made a couple of Utube movies about the issue but they obviously need English subtitles. If there is interest, I might work on those. However, there are some already available in English so I'm not sure if my efforts are necessary.

steve said...

they manufacture tons in north dakota, lots of skid steer loaders and attachments and farm equipment.
huge manufacturing relative to the population. most states manufacturing has gone way down

p01 said...

7 billion large mammals who want not only food and shelter, but also more "stuff" they start seeing on teevee courtesy of Hollywood. I have no illusions about where this is headed. Just so that SA does not start a rant again, I have to specify it is not MUST, but WILL head to that place where all exponential growth goes to rest.

jal said...

"But first we need some sustainable growth, and to avert a euro debt crisis."

Austerity as far as the eye can see.

Even China will not see growth under EU austerity.

Smaller gov. means austerity.

Only one area will have growth ... Debt.
Financing debt will be done with leveraging funny "capitalization/printing".

You got to do what you got to do ... to save the finance industry.

jal

el gallinazo said...

About the Paul Farrell population article:

I like Paul Farrell in general, and he got a lot of it right, but he certainly had a blind spot in his extensive discussion of the "philanthropist billionaire" part played in this. The Rockefeller Bros clan were the financial founders of the Eugenics movement from the early 20's. After WWII, because their sponsored activities with the Nazi medical establishment cast bad PR on their activities, they simply dumped the word "eugenics." After their globalization (putting the world under the total control of our Platonic and wise philosopher-king bankers) activities, including the founding of the Trilateral Commission, The Council on Foreign Relations, and the Bilderberg Group, their second highest priority over the years has been to curb the population explosion among "the inferior races," which has included many documented atrocities in Latin America in particular.

Obviously their activities, despite the billions expended, have not met with success. There are those who can make a solid case that they have moved their efforts in this regard to clandestine methods including government assisted black ops such as slowly poisoning the populations nutritionally (with Frankenfoods), chemically (chemtrails), and electromagnetically. The case for the Frankenfoods is undeniable but I am still researching the latter two and do not wish to debate them here. I wonder if Nick Rockefeller eats Monsanto corn.

A certain branch of deluded Libertarian Anarchists (I am an anarchist skunk of a different stripe), claim that if these MotU are trying to curb and reverse the exponential population growth, then it must be ipso facto a good thing, and articles like Farrell's are just part of a devious MSM campaign. To make an analogy, here is their logic:

1) David Rockefeller figured out that an all out thermonuclear exchange threatens not only his life but the control and power of his clan.
2) He starts investing his resources in preventing such a war out of self-interest (of course being a sociopath) and does it in a typically ruthless and immoral fashion.
3) Thus an total thermonuclear exchange is beneficial to the planet as a whole and should be encouraged.
4) Apparently enlightened people who do not agree with us in this regard hate babies and human life and are at best dupes of the NWO.

Ash said...

lautturi,

Please consider submitting your writings, videos, etc. about public banking that go beyond the specifics of the ND model for the "contest" (heavy emphasis on the quote unquote).

Similarly, if people have their own blogs or have otherwise produced works on ideas/models for the future, please consider submitting them in an email with the appropriate links.

[taediamonds at gmail dot com]

sumacarol said...

I like the idea that Ash’s new series focuses on the actual or potential “actions” of individuals or small groups that have or could unilaterally accomplish their goals. As I mentioned in the last series of comments, it seems that, even among those that are aware of the problem, the actions that need to follow are still in scant supply, at least based on my small probably inadequate sample that includes myself on the list of folks coming up short.

Ash said...

Greenpa,

Just to be clear for my own sake, are you suggesting that r/K theory is a good example of how people grossly oversimplify evolutionary theory and its implications for human population dynamics?

On a similar note, what is your opinion on "multi-level selection theory"?

Frank said...

@el G A few years ago I stumbled over an Indian site, that attempted to discredit the "Actually, we do have enough Indians and don't need more" meme by pointing out that the loudest drumbeater for it was a Tata.

Unfortunately for the site, they linked to a 10 year old study that said that India, even after subtracting the national parks had XX hectares per person, which was plenty. The next link was to a current study, which got the same XX, by the simple expedient of not subtracting the national parks.

If the richest guy in town says there is a brushfire coming which will destroy everyone's house, rendering the whole town homeless, it is legitimate to argue whether the brushfire exists. It is really stupid to claim it is only his problem because his house is worth 4x yours, when the result will be having neighboring tents in the refugee camp.

Greenpa said...

Ash: "Just to be clear for my own sake, are you suggesting that r/K theory is a good example of how people grossly oversimplify evolutionary theory and its implications for human population dynamics?"

Pretty much, yes. It was an entirely honest attempt by MacArthur et al to understand what they were looking at; but like everything else in the world, it got picked up and tweaked and misunderstood by lots of people with agendas - across all spectra. It's still a very useful way to start the thinking; as long as you don't stop the thinking.

"On a similar note, what is your opinion on "multi-level selection theory"?"

I prefer to go down a level to attempt to comprehend that problem. Does evolution function at the level of the single celled organism? Sure. Up a notch; now you've got multi-celled organisms - does evolution work on them? Sure. So- exactly why would it NOT operate on groups of groups?

Can we see and comprehend it? Not at all easy- does one cell in your spleen understand your entire existence?

lautturi said...

@ Ash

My writings are very, very simplistic and thus probably useful mostly for entertainment value only. However, I'll see if I can come up with something to stir the thinking up (so to speak). As being non-native English speaking my production rate isn't really stellar.

jal said...

Re.: taediamonds

My message at market ticker.

Karl, your calling is not politics.
Your calling is teaching.

Its time for you to start teaching the teachers.
[Q]If you choose to teach you should have known up front that these are the economic realities of the profession, and thus you won't make a lot of money. You might make a big difference in a kid's life, but your profession can't be entered into for the pure intention of extracting large economic rents, because you won't be doing so. In other words you teach because you love doing it, not because it is economically rewarding.[/q]

How to manage EXPONENTIAL GROWTH AND LEVERAGING in order to achieve a stable sustainable social economic system.
jal

Boris said...

Ellen Brown new article on public banking:
http://www.opednews.com/articles/THE-PUBLIC-OPTION-IN-BANKI-by-Ellen-Brown-111014-55.html

Also, her book “Web of Debt” is fantastic.

Bigelow said...

@el gallinazo
Dirty Electricity: Electrification and the Diseases of Civilization

Ash said...

lautturi,

Just about anything is welcome, as long as it's potentially "productive" (in the broadest sense of the word). It can be written already or simply an idea to be written on later at any length, by you or someone else.

Unknown said...

Glennda from Berkeley said...

California almost had a chance at this, but Jerry Brown vetoed it. Maybe small city banks can start the foundation for something like what the German public banks have that form the foundation for a state bank.

from www.thatbaldwinguy.com

"Feasibility of an Alternative Economic Model Not Even Given The Chance."
September 27, 2011 at 10:12 am

Gov. Brown Vetoes State Bank Feasibility Bill

"Governor Jerry Brown, yesterday, decided that the feasibility of a state bank in California is not even worth the effort, as he vetoed AB 750; a bill that would create a task force charged with determining the possibility of state banking in California. This is truly unfortunate given the exponential success (throughout the global economic depression) of the State Bank of North Dakota. Instead, Governor Brown will continue to rely on austerity; an economic model already deemed unfit for the task with respects to recovery. (Just look at the Schwarzenegger Administration for example) One must question the motives behind such a decision given the outline and objective of the bill. It cannot be argued on grounds of any fiscal impact, as there were none. The objective of determining an alternative economic model over the current fiscal policies of California is most crucial, especially with unemployment in the double digits and budget deficits that will continue to plague our Golden State."

His letter states that we should use existing resources. Too bad that doesn't mean the existing structures can allow CA to form its own bank.

"To the Members of the California State Assembly:

I am returning Assembly Bill 750 without my signature.

This bill would mandate yet another "blue ribbon" task force: in this
case to examine whether California should establish a state bank.

This is a matter well within the jurisdiction and competence of the
Assembly and Senate Banking Committees.

Rather than creating a new entity, let's use the resources we have.

Sincerely,

Edmund G. Brown Jr."

Maybe Occupy California should start to sprout signs saying "Revisit AB750".

lautturi said...

@ Boris

Thanks for the Ellen Brown article, she is one of the leading promoters of public banks in US methinks. Her book is excellent, like you mentioned. Maybe TAE-troopers could get her write something here, too?

p01 said...

For those still thinking there will be a civilized discussion at the bank/deposit box when the runs start:
You Can't Be A Protestor & Customer At Same Time.

These people are trying NOT to be customers anymore.

Nassim said...

The economic crisis has produced a crisis in the study of economics – a growing realization that if the field is going to offer meaningful solutions, greater attention must be paid to what is happening in university lecture halls and seminar rooms. While the protesters occupying Wall Street are not carrying signs denouncing rational-expectations and efficient-market modelling, perhaps they should be.

re: rational expectations

Rather ironic giving out a faux Nobel in economics to someone who espouses "rational expectations" - a bit like giving the real Peace Prize to someone who starts wars and killls his own citizens by remote control.

Jack said...

Nicole Stoneleigh Foss
Thanks for the videos
I always prefer videos over reading.

lautturi said...

@ Ash

Sent an email containing rough idea about what I've recently been working on. Hope it's not too weird, LOL

I hope you use open office. If not, there's a .pdf file included, too.

newgrowerjoe said...

Don't know how to send a proper email to Ash here: but one rough diamond notion is as follows:

One of the main conundrums we will be facing with the decline of available money and affordable fuel resources is "how the heck to get about".

The bicycle - a fantastically efficient machine - is however limited to the 150 - 200 watts of output that we ourselves are capable of on a sustained basis (at best).

However, the use of light electric motors, (and particularly the hub motors that are now so commercially successful in China, and exported here to the US and elsewhere in kit form) represent a major increase in the capability of the the bicycle. Currently, a $1000 investment in equipment will convert a bicyle into a machine that can haul yur butt around at 20-25mph for distances of 10-15 miles before recharging.

Our family has taken our second car off the road, cause we no longer use it.

My bike can haul myself, and 2 kids and their stuff around town at speeds comparable to those of a car.

150 lbs of grain from the feed store? no problem.

That bike there sitting there curbside waiting for the recycle truck? Strap it on!

1200 - 3000 mpg equivalent depending how fast you go.

peter said...

Lautturi said
"..As being non-native English speaking my production rate isn't really stellar."

I enjoy reading anything you write and hope you find the time to do much more.

Ash said...

newgrowerjoe,

Please send the idea to [taediamonds at gmail dot com] with examples of how communities have used or could use it constructively.

Thanks.

Gravity said...

There were good points made on population dynamics in the previous thread, but my comment had some of the baggage that Greenpa mentioned, some hasty assumptions and generalisations, ideological and cultural biases.

Also, I prefer to incorporate the human use of tools and abstract skillsets as an evolutionary driver of the species, which does negate some selection pressures on physical attributes, but extends adaptive selection into memetic viability within and between populations.
There must be natural selection in the comparative fitness of ideas, wherein the natural predator of an idea is a better idea, affording greater advantage in application.

I do like the diamonds idea, I'll surely come up with something under extreme pressure.

Joe in NC said...

El G,

Re: God (from last thread)

Haven't read all the material...but on the surface, I don't see how the god you believe in could be linked to the causation of any wars to date. I like that.

el gallinazo said...

Stoneleigh

Outstanding videos. You are unequalled in your capacity to construct complicated ideas in the most clear and concise manner. So many of our pundits lose sight of the obvious fact that the purpose of communication is communication.

Markets

Stoneleigh always says that the markets move on the collective emotions and then the MSM finds a reason after the fact. Other bright people say its movements tend to reflect the liquidity or lack thereof that the central banks trickle surreptitiously down their inside pants leg to their masters. But I am starting to believe, at least for the last several weeks, that these wizened and crafty money changers of the temple are actually believing on a face value the inanities coming out of Europe. "We have a plan to make a plan, and it will be a real plan as soon as we can plan it." Market up a gazillion points. A week later, "We can't fix the problem like a clap of thunder." Market down. These people have been lobotomized. Look for a brains plate specials in your favorite French restaurant.

Joe from NC

I do not proselytize my beliefs in the metaphysical area because I am of the persuasion that the higher the percentage of people who share my beliefs, the more likely they are to be low quality fertilizer. But since you persist, I would say that the two realist things in the universe are consciousness and the free will to evolve. We are all tiny individual pieces of consciousness, split off from the mind of god, and set adrift to see whether we can evolve our way back to a grander vision. The people who are causing these wars and suffering are making bad choices and will continue to do so until they wise up. Earth was constructed because bad choices slap one here in the face like a cold, dead fish, far harder and faster than less severe dimensions. This is a tough love school for accelerated learning and not for timid souls. God is rooting for us to make good choices in the same sense that a parent might watch a child take a test but not intervene or the child would learn nothing from the experience.

agtefc said...

@ el G....

Good day :)

you said...

"But since you persist, I would say that the two realist things in the universe are consciousness and the free will to evolve. We are all tiny individual pieces of consciousness, split off from the mind of god, and set adrift to see whether we can evolve our way back to a grander vision."


_________________________________

nice :)

Ash said...

For anyone interested in receiving a frequent, but not TOO frequent, update on the global financial meltdown in progress, which is also relatively mainstream, but not necessarily CNBC/BlOOMBERG mainstream, I have come to respect the Telegraph's daily Debt Crisis: Live thread. The Guardian has a similar one, but I like this one better.

Here is one of the latest updates that pours a bucket of ice cold water on the Euro bulls who are too slow to have already comprehended this simple concept a year ago:

"This might be quite a tough one to digest so soon after lunch, but M&G Investments' Tamara Burnell has set out her reasons why it may be difficult to put into practice the idea of "leveraging" the value bail-out fund (aka the European Financial Stability Facility, aka the EFSF).

She writes:

'The fundamental problem will be persuading investors that they would ever be able to call on the insurance policy provided by the EFSF/ESIM/ESM when they actually need to.

The main supposed benefit of ESIM is the strap line that it doesn’t require any cash to fund. However, this is also its weakness, in that it will still lack the fire-power to deal with a liquidity problem experienced by an individual sovereign.

If investors refuse to buy a sovereign’s bonds for any reason (as they have recently) even with a partial loss share arrangement, then it will still require intervention by the ECB or possibly the IMF, who have access to cash to step in and provide the liquidity.

So the idea that a sovereign insurance policy provided by the very same (or, at best, ‘related’) group of stressed sovereigns would provide “reassurance to the market” seems a ludicrous one'.
"

el gallinazo said...

Joe in NC asked a couple of days ago why Geithner was against further funding of the IMF to deal with the European "crisis." I replied that they would prefer that the Fed slip them the money under the table. Ash replied that the funding was politically impossible at this time. I agree. The US must supply 17% of IMF funds through standard appropriation bills entered in the House. How are congresscitters going to respond to a 12 figure appropriation bill? It would only embarrass O and Timmy. The question is not whether the Fed would do it or can do it, but rather, can they hide it.

As to Timmy's next job, a Florida legislator is trying to repeal the law against dwarf tossing.

lautturi said...

@ peter

I wonder which of my writings you appreciate - the few passages here on TAE or the endless (mindless?) musings on my Finnish site?

I've noticed a tiny but regular visitor flow from the NA continent to my site. However, I'm positive the google translator produces pretty much useless garbage when applied to my texts. I guess some readers from this side of the pond read Finnish after all.

Ash said...

I'm feeling somewhat proud to call Richmond, VA my hometown, as we have effectively managed to stop Obama's corrupt presidency right in its tracks by rendering his teleprompted drivel impossible...

[no doubt Governor Bob McDonnell (R) had a hand to play in this one]

President's Teleprompter Stolen in Virginia

Welcome to Richmond, punk!

el gallinazo said...

Re the TOTUS(less)

It shows in retrospect just how much W lowered expectations, that the quiche eater demographic regarded Obama as brilliant during his campaign. Just stay aware that whether you root for the blue team or the red team, they are the same franchise and their players are paid by the same cartel.

Sorry for the interruption. As an American dissident living in a foreign country, I have to duck and cover when I hear a drone overhead.

Lynford1933 said...

El G

If you hear them, they are not doing it right.

Hombre said...

El G post @ 9:36 Oct. 17
I don't always agree with you, but always appreciate your wit.
That was one of the best posts I have come across on this blog or any site. You don't write like either a buzzard or a plumber!

Unknown said...

I've been noticing the OWS messaging is starting to include more and more suggestions to take one's money out of the big banks (and put it into local banks and cu). What do you guys think would happen if this went real big real fast?

Hombre said...

I don't know anything about this guy -- Bob Hoffman -- but an interesting article I ran into. It's a year old but I hear many things that mesh well with Ilargi and the StoneLady!

http://tinyurl.com/3fqhnbg

From the article...
"Gold, Stocks, futures, etc.
Get out now. Just get out. Cash is king. There is a boom coming, little doubt in that. Do you really want to risk your entire financial future and your retirement on this economy. Really? You are a fool if you do. Waiting til early to mid 2011 might be okay, but why chance it?
Sit this one out. Start now. Get out now. Really. Now. And for God's sake, don't buy gold, silver, or crap like that. You cannot buy food with gold.

lautturi said...

Bill Black had "fun" with Congressional hearing in April 2010. A bit old, yes, but as we were speaking about diamonds here (^_^)

el gallinazo said...

Thanks, Hombre.

Always appreciate your comments as well.

I didn't plumb like a buzzard or a writer either.

Being a self-employed and skilled plumber was a wonderful way out of the corporate malaise on a practical level after I had burned my suits and ties. Also lost interest teaching chemistry in the junior concentration camps. I send a little prayer up to my Uncle Joe, a Byelorussian born NYC master plumber who took me under his wing in my mid 20's and paved the way for me to get into the union. Then I put the skill on the back burner for 25 years until I arrived in the Caribbean and dusted off the golden sawzall :-)

Actually, being a buzzard and a plumber have more in common (beside basic personality traits) than it might appear. The motto of the AFL-CIO union was that "The Plumber protects the health of the nation." So do we buzzards. Another thing that buzzards and plumbers have in common is attention to strict personal hygiene. Buzzards are the most meticulous groomers of all birds. Plumbers and buzzards would both be dead in a matter of weeks otherwise.

And as a bonus, there is the plumbers' riddle, usually posed by electricians.

Question: What is dumber than a plumber?

Answer: Two plumbers.

Ash said...

Hombre,

"And for God's sake, don't buy gold, silver, or crap like that."

Ill-thought out statements such as that don't do any good, and simply provide those critical of near-term deflationists with plenty of fodder, which turns out to be justified criticism. You can't expect anyone to take you seriously when your advice for everyone boils down to "don't buy crap".

el gallinazo said...

CHS appears to be starting a series on debt slavery American style. So far, nothing really new for the regulars here, but put together in a nice, tidy, well written package.

http://www.oftwominds.com/blogoct11/debt-serfdom-now-norm10-11.html

As an aside about CHS, his interviews I have watched have been disappointing because he is quite reticent and polite. One would need a skilled interviewer to bring him out such as Bonnie Faulkner. Instead we get people like Mad Max who would rather hear their own voices than anyone else's, and have a need to shore up obviously weak egos with visions of grandeur.

Keiser does his best interviews when he interviews people who cow him with their intelligence combined with some (or in the case of Karl D more than some) assertiveness. He did shut up for Stoneleigh as well.

umaperegrina said...

Hombre, El G, re: "9:36" - I heartily concur.

Thanks for the links to Bob Hoffman, Hombre.

Lautturi - thanks for the Bill Black video and your participation on this blog. I appreciate your perspective and your comments. Wish I could read Finnish!

umaperegrina said...

Ash (and, I assume Ilargi and Stoneleigh),
Great idea to focus on great ideas. This one is particularly interesting to me personally. I have enjoyed getting to know a bit about North Dakota, as my son and family moved there a year ago. On a visit last spring my husband and I went to Bismarck and opened a savings account with BND (you can open a savings account as a non-resident, but must be a resident of the state to have a checking account).

We didn't really get the idea that the customer service rep appreciated the distinction of being the only state bank in the country, but maybe it's old hat by now. It also didn't sound like they have many personal accounts - most of their day-to-day business is centered on state agencies.

They may be doing better than most banks around the country, but they still pay the same lousy interest rates on savings. :)

el gallinazo said...

I think Yogi Berra (as usual) summed up TAE message in one short sentence.

"The future ain't what it used to be."

(Berra lived in my home town when I was in Little League and he was an active player for the Yankees. He used to appear at the award ceremonies, when his schedule permitted, and give a little speech. He has always been an American treasure.)

el gallinazo said...

You have to dance while the music still plays. Charles Prince, former CEO of Citigroup

"Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.

The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position."

The BOA derivatives book is rumored to be in the area of $53 trillion, or about the size of the earth's annual GDP.

http://www.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit.html

Hombre said...

Ash - As to the statement you mentioned, "don't buy that crap", I agree. (I have a modest stash of "junk" silver coins) But much of the article I thought was pretty rational and rather congruent with TAE postings.

I didn't always agree with Thoreau, (ex: his anti-Irish bias) but found his writings profound and good advice for the most part.

Cheryl said...

My goodness gracious, I know stocks.

Two Sundays ago, I told you to buy. If you had listened to me, you'd have > 6% more stocks in your pockets.

The markets are 12% higher and we're about to get this show on the road. It's about strength. It's about commitment. It's about doing what needs to be done.

Hubby wants to Kiss Frau Merkel's mushy feet, and I might even let him if she continues to put that Teutonic stength to work for us.

Ash said...

Stocks finally got the BIG NEWS they were waiting for from Europe! The Guardian reports, sourced from anonymous EU "diplomats", that France and Germany have agreed to boost the EFSF up to 2 trillion euros by getting the insolvent nations to insure losses on their own debt...

But wait, then Dow Jones reports that The Guardian report is "totally wrong"...

Then Bloomberg also says no deal has been reached...

Then WSJ says "no EFSF deal until til Friday" and the 2 trillion figure is "simplistic"...

Yet, The Guardian article is still front page and Reuters is still referencing it as some kind of credible source.

I'm pretty sure this is all good for confidence in the system, though. Oh yeah, and AAPL missed earnings estimates :-0

Nassim said...

“Almost 70% of home loans in our database now offer up to 95% of a home's purchase price, which is the highest loan-to-value ratio levels we've see in more than two years, up from 49% 12 months ago," says RateCity CEO Damian Smith.

Lenders enticing borrowers with low deposit requirements

Deflation? Not in Australia.

bosuncookie said...

Cheryl swooping in like an intinerant mockingbird to squawk bogus "good news." Fly away, silly bird.

Nassim said...

He did shut up for Stoneleigh as well.

Thank you. That was quite funny. :)

progressivepopulist said...

If any of you all are familiar with Chris Hedges, this brief interview is unlike anything you've probably ever seen. Very moving.


http://www.youtube.com/watch?v=Tj8UlxhfJLw

scrofulous said...

Ash, from the Guardianthis:

" France and Germany have reached agreement to boost the eurozone's rescue fund to €2tn (£1.75tn) as part of a "comprehensive plan" to resolve the sovereign debt crisis, which this weekend's summit should endorse, EU diplomats said."

Does something or someone get thrown to the wolves in that endorsement,? I mean other than the taxpayers.

Ash said...

scrofulous,

First, we should note that The Guardian report has been refuted by several sources. But assuming something similar is agreed on this weekend...

ZH reported on a solid analysis of the now popular insurance scheme for the EFSF. It's lengthy, but here are some of the most relevant parts:

"Again, Spain and Italy cannot insure themselves when they are both at clear and present risk of being cut off from market funding at affordable interest rates and are therefore unlikely to make good on any notional guarantees they have offered to the EFSF, should the EFSF have to call on these guarantees. Taking Spain and Italy out of the €726bn guarantee pot would reduce it to €494bn.

This [pre-existing EFSF commitments] reduces the EFSF resources to either €346.9bn or €310.1bn, depending on whether the IMF co-funds the second Greek programme.

[There is] €310bn if France remains among the insured and no banking sector support is provided by the EFSF, around €260bn with a €50bn provision for banking sector support, and less than half that if France were to join the insured.

With a potential first loss guarantee of just 10%, the resulting maximum amount of new debt issuance that could benefit from a guarantee could be up to €3.1trn without EFSF support for bank recapitalisation or, in the more likely case of a €50bn bank recapitalisation contribution, up to €2.6trn. A 20% first loss guarantee (a figure that seems to be in the air quite a bit) would imply maximum issuance amounts of around €1.55trn or €1.3trn, respectively, and a 40% first loss guarantee would result in maximum issuance amounts of around €777bn or €650bn."


So, along with the taxpayers, France's sovereign rating and debt probably gets thrown to the wolves for very little impact (1-1.5 trillion euros is not nearly enough to "ring-fence" Italian and Spanish sovereign debt for long). And that figure is assuming Belgium and France do not need to be insured, and investors are OK with only 20% insurance on these toxic bonds, which they most likely are not.

ogardener said...

Hillary Clinton - War Criminal

Ash said...

Also re: France somehow managing to stay out of the insured category,

"Professor Ansgar Belke, from Berlin's DIW Institute, said any leveraging of the EFSF would be "poisonous" for France’s AAA rating and would set off an uncontrollable chain of events.

"It counteracts all efforts made so far to stabilize the eurozone debt crisis, which are premised on the AAA rating of a sufficiently large number of strong economies. In extremis, it would probably cause the break-up of the eurozone", he told Handlesblatt.

France is already vulnerable. It has the worst budget deficit and primary deficit of the AAA states in Euroland. (Yes, Britain is worse, but the UK has a sovereign currency and central bank. Chalk and cheese.)"


http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100012681/a-leveraged-efsf-is-pure-poison/

ogardener said...

Blogger bosuncookie said...

Cheryl swooping in like an intinerant mockingbird to squawk bogus "good news." Fly away, silly bird.

The apparition Cheryl reminds me of that tune Crazy Miranda.

Supergravity said...

There are occupy groups around here now, this thing is huge. Hopefully Chris Hedgers is right, and the movement can't be easily co-opted or infiltrated by provocateurs.
The media would try to falsely portray the movement by exaggerating elements of militant socialism and making the political consciousness of the crowd seem less sophisticated. Much of the crowd does seem genuinely confused in ideologies, although they collectively identify oligarchy as a common foe.

I dont know if such a leaderless movement can exist for long, how it steers itself or how its supposed to substantiate its goals without the use of democratic institutions. But at least its better than apathy.

Occupy oligarchy.

Patrick said...

Greenpa, Ash, I'm not an evolutionary biologist but the subject fascinates me. I'm currently reading "What Darwin Got Wrong" by Jerry Fodor and Massimo Piattelli--Palmarini. The former is a philosopher and the latter a molecular biologist. Basically their thesis is that evolution is far more complex than the Neo--Darwinian conception of natural selection.

Are either of you familiar with it?

Needless to say they are toiling in the fields of science and not creationism.

el gallinazo said...

The elite will not relinquish power voluntarily and they are tried and true sociopaths of the vilest order. If they cannot co-op the movement into "harmlessness," which means either ineffectiveness or even a cadre, such as they did with the Tea Party into Kochsuckers, then it will be agent provocateurs, martial law, and mass killings of unarmed and peaceful protesters. Like Tail Gunner Joe, they have no shame. Without their privilege, they are empty shells, unable to peel their own grapes. At heart they feel it is either total control and sumptuousness or personal extinction.

A moderator said...

Cheryl

We are putting up with your bumptious stupidity, but do not cross the line into the despicable.

Stoneleigh said...

Cheryl,

Counter trend rallies are par for the course. This one is correcting the decline from May 2nd. When it is over, look for the larger downtrend to resume. Bear market rallies can be sharp, but they are a trap for all but the fleet-footed professional traders who know how to play volatility.

sumacarol said...

The folks in OWS may have multiple messages (not unlike the European leaders with their bailout plans??) but they seem to be the counter to endless pillaging of citizens. I seriously wonder where Greece would be today if not for people going to the streets or for politicians fearing people taking to the streets? The pillaging of the people is continuing for sure, but would it not be worse if there was no response from the people?

Has anyone on this blog had any first-hand experience of any of the OWS events anywhere that they could share? I spent some time at one this week and there were the beginnings of procedures for making decisions on a consensus basis, committees had been established for various functions etc. However, the decision-making was quite time-consuming and testing of one’s patience, at least for my part. At the same time, I was surprised that participants were as cooperative as they were to engage. There was clearly fear of police hiding in the midst (being somewhat older than most I felt like a suspect….) There were some very articulate folks in the crowd who know how to organize, quite unlike most that end up being interviewed by the media. Unfortunate that this action is starting so late in the season – winter will be a challenge.

Ash said...

Europe collapsed into revolutions and wars, and all I got were these lousy cookies...

"Bizarre eurozone story of the day - the German finance ministry has apparently been handing out fortune cookies around Berlin, which are filled with "positive" mottoes such as "Progress due to a stable Europe."

Some 16,000 of the cookies were produced at a cost of €4,000, and were distributed between August and Germany's national day on October 3.

They could become collectors' items if the euro does collapse, assuming they haven't all been eaten...


http://www.telegraph.co.uk/finance/financialcrisis/8782663/Debt-crisis-live.html

Cheryl said...

Censorship: The suppression of opposing viewpoints.

A sign of strength and security in the transparent brilliance of one's views?

Ash said...

EFSF false rumor updates:

"A senior EU source has told me that there is no agreement between France and Germany as “very difficult” negotiations drag on over the size of a leveraged EFSF bailout fund and the size of the haircut to be given on Greek debt held by private investors."

..."There is agreement on the principle but not on the figures,” said the official. “Talks are very difficult, especially on private sector involvement but also on the leveraged EFSF figure.”

There are hopes that more informal meetings in Frankfurt tonight might break the deadlock at a leaving ceremony for Jean-Claude Trichet, the departing head of the ECB."

..."Meanwhile, the German language version of the Financial Times is reporting that Wolfgang Schauble, the country's finance minister, has told politicians that the bailout would be expanded to a maximum of €1 trillion."

Ash said...

The Guardian's "man in Brussels", David Gow, should be immediately fired for his blatantly manipulative and false report and subsequent refusal to publish a retraction or even apologize. The Guardian itself should be censured for not taking any corrective action yet.

"We have some words from David Gow, our man in Brussels whose story last night on hopes for a euro debt deal have boosted stock markets around the world. Not everyone was all that convinced, but Gow is unrepentant:

"Well, thank you, we don't need to go to the summits on Sunday and can take the rest of the week off," smiled Pia Ahrenkilde Hansen, Barroso's spokeswoman, at your correspondent.

The Guardian's exclusive report on a Franco-German deal on two core elements of the "comprehensive deal" - boosting the firepower of the EFSF to around €2trn and recapitalising banks - brought a happy smile to the face of stock markets and EU officials.

And, while people cautioned, understandably and correctly, that there are plenty of technical details to be ironed out, nobody ridiculed it. Journalist friends yes, a bit, "people familiar with the talks" no."


A bit? Almost every source conceivable, journalist or not, has made statements ranging from "no deal has been reached" to "[The Guardian report] is 'totally wrong'". Merkel may end up chocking this guy to death if she can only afford to get the fund leveraged to 1 trillion and the markets puke.

On an entirely different note, "business blog" ZH has been getting a lot of mainstream attention lately. Deutsche Bank referenced their PrimeX report yesterday, and The Guardian referenced its analysis on bank earnings today:

"Several US banks have recorded benefits from declines in the value of their own debt. Although that should be a bad thing, it means a bank could theoretically buy back its own debt for less - and can book a profit as a result.

Stripping out the debt, the profit was just 3 cents a share.

Business blog Zerohedge has not done much to hide its contempt for the debt accounting - saying that it leads to investors trying to compare results on an "apples to unicorns" basis."

Hombre said...

If I could, I'd vote to let Cheryl post her simplistic and bumtious insertions...
1 - they are good for a chuckle.
2 - we get an elegant and concise response from the StoneLady!

souperman2 said...

I have been to OWPortland

The common thread through all the movements around the world over the last year or so is the fact that 99% of the population have no voice.
This is the key in my opinion and must be the one and only issue front and center.

The 99% do not have representation.
The Government[s] only represent the interests of the 1%.
Get the money out of politics and return democracy to the people.
Then and ONLY then can we deal with all the demands.

Coming up with a list of demands, as if thats all the government needs so they can address them, is simply admitting defeat.

Lets focus on insisting on representation.

The people WANT to address the big issues, fraud and corruption, resource depletion, environmental degradation, human suffering, etc. but it will never happen until we remove money from the equation.

Hombre said...

"Police said about 70,000 people gathered in Athens at the start of a 48-hour strike in one of the biggest protests yet against Papandreou’s latest program of cost-cutting and tax rises."

http://tinyurl.com/Greek-Streets

jal said...

Cheryl has yet to advise people to take profit off the table so that they could have any money to invest in the lows.

Her advise is not to be taken seriously until she can do that.

A gambler always brags about their winning and never tell about their bad bets.

jal

el gallinazo said...

I&S state that the globe is going into a severe deflationary collapse of credit. Credit is multiple claims on the same assets. If credit falls by 90%, then 90% of what people thought was money they owned will disappear into that alternate universe. As 90% of the chips are being pulled off the gaming tables, one would have to be either damn powerful, lucky, or clever to go against these odds and actually increase one's assets.

I&S state that a major goal of this blog is to help people learn how to conserve as much as possible of their assets, financial, physical, and mental (spiritual?), in order to physically survive the crash. It is a very conservative outlook in the true sense of that word and not conducive to the most blatant speculation. Cheryl is taunting people here to "invest" in high risk assets. He is a troll on the site. No regulars on the site are interested in doing this. For every site with TAE position on this, there are 50 sites concerned with financial speculation. His posts are like someone posting about celebrity poker on a French cooking site. One can only speculate on his motives.

Punxsutawney said...

The following video probably doesn’t qualify as a diamond in the rough as it’s not necessarily transferable out of the area where it is practiced, but is a great example of using a natural solution to solve a human need. And what I really liked was its simplicity and the ability to think about its benefits generations ahead, something sorely missing from our current Western lifestyle.


http://www.snotr.com/video/7331/The_Living_Bridge

soundOfSilence said...

Yeah Cheryl it’s censorship they are going to hit you with. You’re amusing up to a point. Your constant need to work your fetishes in, however, is boorish at best.

You’re flat (probably in more ways than one). So you are up 6% from a week ago Sunday. That’s stellar really. What’s that work out to on an annualized basis? Pulling up the one year chart for the Dow I see it’s roughly were it was about August 10th and well ... really not all that far off from where it was about this time last year.

If you’re going to run your mouth when you’re up 6% in a week you ought to stick around and give equal air time to your lousy calls when the market goes and drops a few hundred points after you run your mouth.

el gallinazo said...

For those unfamiliar with CDS's, since they play such an important part in the European crisis, here is a thumbnail. First, one must speak of them in general because they are individual contracts between two parties and can vary. But in their simplest, they are a contract where one party agrees for a fee to make a second party whole for any losses they may take on defaulted debt. This makes them appear to be basic "insurance" hedges. But they are not so for at least two basic reasons. The first is that as the writers of the contracts have no regulation, they are not responsible for maintaining a fund to make good on losses as in the good old days of insurance. The second reason is that one need not own a particular piece of debt to buy a policy which is referred to as a naked CDS and is simply a gambling device in the casino gulag of modern finance.

Let's compare it to homeowners' insurance which everyone is familiar with. Georgeos owns a McMansion valued at $1M. He has an electrical problem and he asks an electrician named Goldie to repair it. Goldie comes in and notices that the construction electrician did really shoddy work well below code. Not only does Goldie not fix the old work, but he himself does even shoddier and more dangerous work. Goldie then tells 100 buddies about it as a tip asking each one for $100,000 for the information. All 100 go to their insurance brokers and buy a fire insurance policy on Georgeos's house. So where normally, there would only be $1M riding on the "health and wellbeing" of this house, now we have $101M. Suddenly vandals start tossing flaming jars of gasoline over the surrounding walls and the police scratch their heads as to the motive. Georgeos was always well liked and respected in the community :-)

An important thing to understand about this process is that it involves a form of credit expansion. The "insurance companies" must regard the possibility of the Georgeos house going up in flames as a potential liability and these policies can usually be bought, sold, and factored independent of the original writer's consent. As the publicly acknowledged probability of the house burning down increases, then the liability on the policies also increase, and they can be sold at a higher price.

CDS's are part of the global derivatives market, which is often estimated to be 15-20 times the size of the planet's GDP. They call this nominal, as the math jockeys try to hedge their bets so that in the event of an EVENT, most of the contracts would cancel out. But this canceling either ignores counterparty risk , assumes that the world's debt slaves would pick up the difference as with AIG in September 2008, or assigns an arbitrary number which is probably far smaller than an the actual risk. Most derivative policies are triggered by changes in interest rates, not defaulting debt, but owing to the gigantic size of the "market," CDS's are still huge.

el gallinazo said...

So a giant problem the euroclowns are now facing is how to "resolve" Greece's debt issue without triggering all the CDS's on Greek sovereign debt, which are undoubtedly larger than the actual default will be. They have been trying to do this by "structuring" the hair cut of the bondholders as "voluntary." If the bondholders agree beforehand to these losses, then they are trying to tell the arbiters of default, then the CDS's should not be triggered. The idea of course is absurd. It's like a mugger holding a gun to your head and saying either your wallet or your life. Since he gave you a choice, your decision was voluntary:-) But there is another problem with this non-triggering, "soft default" idea. The current global Ponzi needs credit/debt expansion to feed the shark. Only the derivatives market has been able to feed it. If the powers agree that the Greek default is not a real default, then they destroy the credibility of the derivatives market. It's as if Murray the Bookie decides that Bagobones did not really win in the 5th for some bogus reason. Nobody would want to bet with Murray in the future - just throwing away your money. So the euroclowns are in a Catch 22. Either they permit the Greek default to trigger a CDS event with unknown consequences or they destroy the derivatives market with unknown consequences.

el gallinazo said...

An additional aside: "Tyler Durden" of ZH has voiced fanatically intense support in favor of naked CDS's. This is one of at least two good reasons to maintain a certain skepticism toward "him." The other might be that he has adopted the pseudonym of a homicidal, multiple personality disorder, fictional character. I am pleased that Ilargi didn't choose Hannibal Lecter as his pseudonym.

jal said...

Here is a good joke on you from ZH

Citigroup will pay USD 285mln to settle SEC charges for misleading investors about selling CDOs related to housing market, according to SEC.

Where will the 285mln go? ... It will be deposited in a bank account at Citi ... hahahahah

jal

Ash said...

El G,

Very good analysis of CDS.

I'm not sure TD is necessarily in favor of naked CDS, or any shadow derivatives for that matter. I believe he is very vocal about how the Europeans are merely ensuring the demise of their sovereign bond markets in a chaotic manner by limiting the various ways in which people can express their discomfort with these deteriorating markets. That's just a part of the catch-22 you mention.

By banning naked short selling of equities or naked CDS while still attempting to maintain the credit ponzi via bailouts of sovereign countries and banks, they are just creating a highly unstable compound that will release its energy with that much more force. What probably irks him most, as I'm sure it does for most of us as well, is that they pretend it's actually a sustainable solution to ban short-term speculation within the logic of this system.

Hombre said...

El G - Good, helpful synopsis of CDS's for we who aren't economic scholars.
So, the "Euroclowns" are faced with a fork in the road (both routes potentially catastrophic). As your pal Yogi would say... "when you come to a fork in the road... just take it!"
:-)

Punxutawney - Beautiful video and people!

sumacarol said...

Punxsutawney, thanks for the living bridge piece -- beautiful and sustainable!

Ash said...

BTW, I think Palahnuik's "Fight Club" was a pretty brilliant representation of Marxist philosophical themes, such as the concept of "alienation", self-destruction and, of course, the rise of the proletariat against the corporate state.

TD of ZH would probably be hard-pressed to agree with any of that stuff, though.

Ash said...

I know it's a bit passe to make references to Adolf these days, but I can't resist:

MERKEL SAYS EURO IS STABLE, HAS PROVED ITSELF IN TURBULENT TIME

MERKEL SAYS 'WE SHALL NOT ALLOW' EURO TO FAIL

HITLER SAYS "By the skillful and sustained use of propaganda, one can make a people see even heaven as hell or an extremely wretched life as paradise."


Fortunately, MERKEL just isn't very skillful with her propaganda.

el gallinazo said...

Ash said...
El G,

I'm not sure TD is necessarily in favor of naked CDS, or any shadow derivatives for that matter.
______________________________
I am sure of what he writes repeatedly. He is certainly in favor of naked CDS's. Whether this is because he views them as less toxic and an antidote to the euroclown BS is open to speculation. Might be like saying, I am in favor of the use of this highly toxic anti-cancer drug because the cancer is even (a little bit) worse. Or it might be his Atlas Shrugged the "free" market is always right.

***Naked*** shorting of stocks is a bit different; it is simple counterfeiting. It can destroy perfectly healthy companies under many situations. As I understand it, it is permitted for the primary dealer TBTF under some bogus market maker BS and currently never prosecuted anyway.

Re The Fight Club

Agree that it is brilliant when taken from that angle. However, even Palahnuik did not write it with those themes (consciously) in mind, as his retrospectives indicate. Sometimes a cigar is just a cigar.

Ash said...

El G,

"I am sure of what he writes repeatedly. He is certainly in favor of naked CDS's."

Fair enough. I just skim the front page mostly, and especially those pointing out how stupid European policy is, so probably missed those statements.

"However, even Palahnuik did not write it with those themes (consciously) in mind, as his retrospectives indicate."

Not so sure about that. Seems like a hell of a coincidence. And Wikipedia indicates he was influenced by the philosophy of Michel Foucault and Albert Camus, and those guys certainly adopted many Marxist themes in their work, although they by no means agreed with all of Marx.

Greenpa said...

El G:
"Question: What is dumber than a plumber?

"Answer: Two plumbers."

lol. And perhaps a good place to recall the origin of the word, "plumber". Lead poisoning can cause a little dumbing. An ancient truth, perhaps, along with the madness of hatters?

Greenpa said...

El G- love the fire insurance metaphor; really very comprehensible.

Part of the dilemma we face though is that even understanding it is no longer useful. Of the several people I know who I can see myself telling the insurance metaphor to- I can also predict their response with near 100% certainty: "Wow. That's really sick and awful." pause. "And it's really depressing that there's not one single thing I, or you, could possibly do about it."

And, there isn't. We're just going to have to figure out how to survive in the Great Compost Heap Of Civilization, as it all slowly rots.

Not one of the entities who still think they are in some kind of "control"; from the freshman Pee Tardiers to the Owners, have any real control at all. We're just watching all the incredibly vast inertia of past inputs play out.

Ilargi said...

In the next post, which will go up tomorrow, I will put up a poll in which you can vote for your favorite Diamond in the Rough, our new series run by Ashvin. It seems a bit useless to put it up now, as most of you have already read the October 17 post, and are likely to miss anything put up at the top of it.


.

Ric said...

El G writes: The other might be that he has adopted the pseudonym of a homicidal, multiple personality disorder, fictional character.

I read ZH for news and analysis--but, and I don't know how to put this except that the site exhibits a certain glee about pain. To each his own.

Stoneleigh said...

sumacarol,

I am planning to drop in on Occupy Ottawa once I return to Canada in November. If I have time I may drop in on Wall Street as well.

el gallinazo said...

Ash,

You got me to thinking anew about The Fight Club. I was familiar with the ZH libertarian connection before I read the book, and it colored my evaluation. More on that latter. No question that as a first work of a student writer "amateur," is is amazing.
_____________

Re Equities Markets and the euroclowns

Excellent combo piece at ZH by TD on a Rosie synopsis.

http://www.zerohedge.com/news/david-rosenberg-insanity-fixing-excess-leverage-more-leverage-and-relentless-euro-rumormill

Everything they write is valid but they left out the elephant in the middle of the living room. Which is the German Constitutional Court. It ruled recently that it would require a German constitutional amendment with a universal referendum before this backstop leveraging of debt liability could be allowed. To assume that the Court is so stupid that it could be fooled by this silly soft shoe dance is ridiculous, and the German debt slavery, far better educated than their Usanistani brethren, are against it and support the court by at least 3 to 1. Merkel, despite the worst of intentions, is not going to pull it off. (As to Ash's comparison with Adolf earlier, they key is not Merkel's eloquence or lack thereof, but rather the Germans have not suffered 13 years of depression at this point in time.) I cannot see any outcome but a huge "correction" in the world equities markets when all this BS is shoveled onto the compost heap and the Greeks default. Debt slaves should at that point pull out the collective pitchforks and tell their elected pimps and unelected central banksters, "No more bailouts for the TBTF."

Greenpa

Your attitude toward the current status of the Kochsucker Tea Party is well merited, but should bear no reflection on its origins. It originally had a lot of very bright and thoughtful people who saw the economic catastrophe coming and tried to do something political about it. Charlie McGrath of Wide Awake is one of the best known. When it was taken over by the fascists Koch Brothers and their psychotic stooges like Perry, Palin, Bachman, etc., these people left in droves.

As a former "progressive," I see the primary initial agenda of the Owners is to split the protest movement into bogus left and right factions fighting each other; let's call it the blue team and the red team.. They would rather kick martial law down the road a bit longer if possible. So let's say the protest movement is composed of libertarians, of the Ron Paul stamp, and (for lack of a better word) progressives of the Chris Hedges stamp. Or someone who integrates the two individually such as CHS. Do they have anything in common? Well a few things.

1) End the Fed
2) Prosecute the financial criminals and claw back their gains
3) Break up the TBTF, let their bondholders take the losses, and let them go through standard bankruptcy
4) Fight back against the NWO and the global banking cartel
5) Repeal the Patriot Acts; repeal the Dept of Homeland Security; stop the "legal" groping of children by thugs at airports.
6) End the Empire
7) End the resource wars
8) Throw the corrupt politicians out of office (90+%)
9) End corporate influence in elected politics
10) Throw the tax code in the trash heap.
11) Stop assisting multinationals to off shore American manufacturing.

I think this is pretty good common ground for starters.

Perhaps it is time to start focusing on this common ground.

Lynford1933 said...

I think it would be awfully hard for a Greek policeman to look into the eyes of his mother or sister on the other side of the line. The local police will give up pretty soon. Now foriegn cops are altogether different.

For every long there is a short. Though Cheryl talks about longs, there is just as much money to made with shorts. Picking and timing work the same both ways. Another recent factor is the HFT are there an instant befor your trade and pick up a little on each trade whether long or short and probably both at the same time. If you are going to win consistantly, you must be a HFT.

"Not one of the entities who still think they are in some kind of "control"; from the freshman Pee Tardiers to the Owners, have any real control at all. We're just watching all the incredibly vast inertia of past inputs play out."

Quoted from Greenpa (and agreeing) my question is this. What if we find a real diamond in the rough or at least one we think is a really good one, what "good" will it do if we have no (or very little) control to make it happen? How do you say waste of time without getting up the ire of the local moderator?

I believe the "lifeboat" entry was an absolute jewel and gives a path for an individual to follow. I have done as much along that path as I want to do and even more toward survival. If these "diamonds" are meant for the individual, super, if meant for TPTB, forgetaboutit because they have a different "lifeboat". I (for one) am really looking forward to your new web site.

el gallinazo said...

Occupy the Board Room!

http://tinyurl.com/4y3rjxp

Skip Breakfast said...

Stimulus spending. Many economists insists that our governments need to keep spending like mad in order to keep the economy from stalling and crashing. Bridges to nowhere, that sort of thing. The knock-on effect is supposed to get people spending again. But as for many folks, something doesn't ring true about the argument.

For one thing, economists are relying on past experience where spending did indeed work. But economists seem to be brazenly over-confident that their models have actually served to explain these past phenomena. The complexity of the system, and thus the true implications of "spending," may actually be yet unaccounted for in these models. And it dawned on me that spending did indeed work in certain past instances, because the underlying economy still had huge potential for wealth generation that was not yet outstripped by the costs of the system itself--this is something that spending advocates never seem to mention.

Agreed, spending allowed a reallocation of dollars back to productive sources, thereby kick-starting growth all over again. But what if the underlying wealth potential is vastly less than the costs of the system? This is where common sense seems to warn us something is amiss in the spend-to-save scenario. Building useless pyramids to the sky probably won't work if the money that is freed up to go shopping has nowhere to go that can be considered a source of true wealth generation, like mines, or inventors of goods that make our lives better and more productive (I'm a bit skeptical that iPads are such a good, mind you). What if we simply have too many people and a world that is too unproductive, limited largely by resources and capacity to grow without regressing in terms of quality of life, so spending truly sens us nowhere but closer to the precipice of collapse? Without the possibilty of real wealth creation--magic pharmaceuticals and yet-unknown clean fuel supplies--it just seems like the spend-to-save scenario has met its match in terms of the realities of a complex system nearing the end of its cycle.

Ash said...

Lynford1933,

"What if we find a real diamond in the rough or at least one we think is a really good one, what "good" will it do if we have no (or very little) control to make it happen?"

Well, that depends on a lot of factors, some of which are personal to you, now doesn't it? At what scale and at what time does an idea become within our "control" and "good" [enough]? The Danish philosopher Kierkegaard believed that an individual could achieve anything he/she could conceive (but he wasn't foolish enough to say this was true of groups or even of the material realm). For some, that is all existential mumbo jumbo, and for others, it takes on a practical significance. Materially, we can probably all agree that individuals, families and even relatively large communities do in fact have control over many aspects of their existence, and those who do not right now, may gain control in the future. So where and when do we draw the line?

"God is not like a human being; it is not important for God to have visible evidence so that he can see if his cause has been victorious or not; he sees in secret just as well."

Ash said...

Also, I believe the existentialist known simply as "Ruben" was correct when he said this:

"As an analogy--Stoneleigh also cautions against getting swept up in anger. I think there is a much greater chance of diffusing or redirecting the anger if we spend some time thinking about the likely stories, and coming up with other stories--different ways to explain what has befallen us, and different stories of how we will find our way out."

Gravity said...

Gravity is an algorithmic recursion.

Gravity said...

Gravity is a recursive algorithm forever.

Ash said...

Catch-22 on display:

Greek 1-year bond yield = 188%

http://www.zerohedge.com/news/european-cds-ban-sends-1-year-greek-bond-yield-188

Archie said...

@ El G (3:35 pm, Oct. 19th):

You list 11 points of agreement between the so called leftist/rightist dichotomy that TPTB nurture for their own benefit. Far be it for me to argue that all of them are not worthwhile pursuits.

Unfortunately, I think you have it wrong that the preferred dichotomy pits the "Ron Paul Libertarians" vs the "Chris Hedges Progressives (Liberals?). IMO, the game is to pit the "Conservatives" vs the Progressives/Liberals". It is a subtle but significant difference.

By definition, the Conservatives are disposed to preserve existing conditions, institutions, etc., or to restore traditional ones, and to limit change. But progressives/liberals favor or advocate progress, change, improvement, or reform, as opposed to wishing to maintain things as they are, especially in political matters.

This is why I do not believe that the OWS supporters and the Tea Party supporters will ever find common ground, even though there are many specific grievances that are shared. The T-P is really looking more to tweak the system while the OWS are looking to fundamentally reset the societal paradigm. I would say though, that if the TPers could get past their ideological hang-ups about "progressive society" ideas, then great strides can be made. IMHO, the OWS people are only looking for a fair and open discussion of EVERYTHING that is American Society and Culture. Their one, non-negotiable position is that what we have now IS NOT the best we can do.

Great article here from Rebecca Solnit that looks deeply into the current movement and occupations and fleshes out the idealistic possibilities.

p.s.- Sorry to hear that you are a former "progressive". I find it to be a code of honor rather than a chink in the armor.

Joe in NC said...

False flag? Or is there more to it?

What's the CIA doing at NYPD?

El G,
I agree with you on the combo piece at ZH by TD on the Rosie synopsis - I think anyone interested in the Europe debt situation should read it.

Joe in NC said...

Debt Panic in China's Wenzhou

Andy Xie quote:
"I have to conclude that this business is now a Ponzi game, relying on new money to pay off the old money"

Gravity said...

In the fire insurance analogy, the fire department itself has bought naked insurance on highly combustible buildings they would otherwise be inclined to quench the burning of.

snuffy said...

Cheryl

Will you be here giving advice on skinning rats when it all blows up?

Woulda,coulda,shoulda,will drive a person mad.

Bee good,or
Bee careful

snuffy

NZSanctuary said...

el gallinazo said...
The elite will not relinquish power voluntarily and they are tried and true sociopaths of the vilest order. If they cannot co-op the movement into "harmlessness," which means either ineffectiveness or even a cadre, such as they did with the Tea Party into Kochsuckers, then it will be agent provocateurs, martial law, and mass killings of unarmed and peaceful protesters.

There are plenty of "developed" countries in the Western world where a mass killing of protestors would spark total revolution. Given the number of phones and cameras out there, the basis for any such killings would not be able to be hidden from the general public unless access to the internet was also immediately revoked from the population. That combination would, in turn, likely spark a total breakdown in acceptance of civil authority.

There are so many modern populations that are wedded to a life of "perceived" freedom after decades of relative peace at home, that any real authoritarianism will swiftly fail, in my view. Full on martial law would also be almost impossible to credibly justify now. I am getting the feeling that even creating faux enemies to try to galvanize populations will likely be met with very limited success if real authoritarianism is imposed. The elite have played that hand solidly already within recent living memory. How would a "terrorist" attack against a protest be perceived now?

What other options are open to the owners and their lapdogs?

el gallinazo said...

Archie

The Tea Party no longer exists. They have either left to support Ron Paul or become Kochsuckers, the latter maintaining the title for the most part. I obviously was referring to the Owners wishing to split ***the dissident movement.*** They are afraid that it could become a majority. Of course they will rely on the ultraconservatives, the name your minority haters, and the 300 lb couch potatoes as their "citizen" bulwark against change as well as our finest in blue like Tony Baloney, and then there is always NORTHCOM.

I try to use the terms left and right as little as possible. They are several hundreds of years old, French, and meant little at the time they started. Anyway, I think I have more in common with Ron Paul than Paul Krugman. Does that make me left or right? Not that I agree with much of Ron Paul's agenda, but at least he wants to end the wars, end the looting, end the Patriot Acts, end Homeland Security, end the Empire. And Paul Krugman? Is he a progressive? Was he a progressive 10 years ago? Is moveon.org progressive? Is George Soros? Is AIPAC? Is Obama advisor and CEO of GE, Jeffry Imelt?

I guess they have Marcy Kaptur, but one honest woman doesn't make an army. When Kucinich caved to O'bumma on their little drone ant mating healthcare flight together, he saw my last nickel of support as his wings fell off (Greenpa gets it :-)

I have little use for labels; I am more interested in very specific positions on issues. I am not sure what I would call myself at this point. However, when I was a progressive, I believed that an enlightened federal government was the key to the kingdom of God. Now I would like to starve and bury that beast and rely on the local communities. I am not saying that a person cannot call himself a progressive and hold that opinion as well, but for me it doesn't work. If I were forced to give my political views a name, it might by as a social anarchist.

thethirdcoast said...

@El G:

Re: Occupy the Board Room

Ever see the opening scene of the film Dogma?

Lynford1933 said...

Ash: Thanks for the reference.

I found one in an e-mail I sent yesterday to friends and neighbors but I doubt it will make anyone's list. This diamond example comes from Lifeboat #5 and #6: Share with your neighbors and friends and when TSHTF, of which we all pretty much agree will happen, then they will help you. In this very direct sense maybe Kierkegaard is correct for the size community I can affect. This is probably too simplistic to gain much traction when the world needs saving.

"Hi All: The Martha Washington asparagus are producing mature seeds now. Each plant is offering dozens of red seed pods. If you want some, come on by and I'll show you how to plant them. It takes three years of TLC before they produce but from then on you will have fresh asparagus in season for 20+ years. Lyn"

I sure hope this diamond idea comes up with something but I have serious doubts the future will change course much ... the cliff is very near, the inertia is great, the black swans are circling and looking more like our friend El G every month.

Archie said...

@El G,

Small "a" anarchy is comfortable with me. But affiliation with any of the current "party" nominees (liberal, progressive, conservative, libertarian, anarchist (?), et al) seems pointless and that is (I think) the consensus of the OWS supporters. It is a new paradigm that they seek and that is "progressive" in the old way of thinking but is most welcome to this aging non-conformist. My kids and grandkids have way more at stake here than I do. Something drastic needs to change and I care not what the repercussions are to me. Like so many of the 99%'ers, I did everything "right" according to the prevailing wisdom of the day. Piss on the TPTB and those who support the status quo.

jal said...

“Halifax's Irving Shipbuilding was awarded the $25 billion contract to build 21 Canadian combat ships and Vancouver's Seaspan Marine was handed a $8 billion contract for 7 non-combat vessels.”

Now that’s a real good place to invest (EROI) ... if your going to war.


Didn’t we just lately decided to buy a few billion dollars worth of american jet fighters.

Did I sleep through a declaration of war?
Is someone going to invade Sable Island?

I would go and get my memory checked out at an emergency room but by the time they would get around to me, I would probably be fit only for the vultures.

I was under the impression that the electric grid needed more than $33B to bring it up to par.

Hey! I thought that we were running a deficit. That means we are spending money that we don’t have.
This must be the Canadian stimulus package to prop up the debt economy.

Now there is a reason for the OWS, (Ottawa).
Stop corporate welfare.

jal

el gallinazo said...

jal said...

Did I sleep through a declaration of war?
_________________________

After a fashion. Just call it the North American Union. Consider Canada to be Tonto to the Lone Ranger down south. Harper should read the biography of Quisling, particularly the last chapter, another hero of the far north.

xtropy27 said...

I couldn't watch Stoneleigh's whole Nuclear Energy video... because it seemed surprisingly uniformed of new Nuclear technologies. I suggest that she reads Stewart Brands book 'Whole Earth Discipline'' to learn more about IFR (Integral Fast Reactor) & Thorium Reactor technologies. These are often referred to as 'Stage 4' Nuclear Reactors. Dr. James Hanson, of NASA... and many other esteemed scientists, are big supporters of 'Stage 4' reactors... which can use existing nuclear waste as Fuel... and use 99% of the fissile material, producing only 1% waste. It's also estimated that there's enough fuel to be sourced from current nuclear waste to power IFR reactors for 1000 years. So no new fuel would have to be mined and refined. Current, 'Stage 2' 'Light Water Reactors', tragically, use only 1% of the fissile material... leaving 99% as nuclear waste. If Japans Fukishima plant was a 'Stage 4' nuclear facility... the problems that occurred there would have been avoided because those 'spent' fuel roads (with 99% of their nuclear fissile strength intact) would never have existed. Also... there are many short term solutions to a Nuclear Energy switch over that would not take very long to enact. A possible immediate solution is installing portable small scale reactors... both on land... and grouped together on water. For example, right now, Russia is creating barges with small scale Nuclear plants on them. And of course, the US Navy has many ships that are Nuclear powered by small scale plants. Also see 'Babcock & Wilcox' (google them) for a western multinational that's creating small scale units that can be manufactured & installed in a flash. I have the greatest respect for the information that 'theautomaticearth' brings to light. Which is why I am fairly stunned to have encountered this seeming gap in the knowledgebase of the AE braintrust ? Keep up the great work...

seychelles said...

Hold your nose and read it.
Cris Sheridan summarizes the
Sanders Report. Conflicts of interest galore at the Federal Reserve.

http://www.financialsense.com/contributors/cris-sheridan/2011/10/19/latest-fed-audit-reveals-numerous-conflicts-of-interest

Nassim said...

I only wanted a size 14½

I think we will one day miss globalisation. :)

Stoneleigh said...

xtropy27,

The videos were meant to be short. Getting into a discussion of next generation nuclear technology was beyond the scope of that one. I'll be doing a longer interview on the same subject with Jim Puplava soon, so I can get into it then.

I am not a fan of newer reactor designs either. We do not have the reprocessing facilities or plants that run on thorium. A massive build-out now would require far more time, energy and money than we will have available. Nuclear power is a further attempt to solve the problems of complexity with more complexity. That kind of intensification only works during periods of expansion.

Alexander Ac said...

Pipedreams of carbon capture and storage technology (CSS are fading away, what a "surprise":

Longannet carbon capture scheme scrapped

Ash said...

Stoneleigh said..."Nuclear power is a further attempt to solve the problems of complexity with more complexity."

No worries, though, because advisor to Angela Merkel and Wharton Business School Professor, Jeremy Rifkin, has just laid out the solution to both Europe's economic woes and the world's energy predicament:

[/SARCASM, in all capitals to signify sarcasm coupled with tragicomic disbelief]

"Rifkin, in the Spanish capital to speak today at a Del Pino Foundation conference, has advised Merkel, French Premier Nicolas Sarkozy and Spain’s Jose Luis Rodriguez Zapatero that the global economy’s fundamental problem stems from the end of a growth model based on fossil fuels. [OK, not bad so far...]

Sustainable expansion will only return when officials and executives can produce “the third industrial revolution,” the University of Pennsylvania’s Wharton School professor argues in a book of the same title due to be published next month. [Becoming very skeptical, but let's see what he has to say...]

The shift will involve harnessing Internet technology to manage a decentralized network of renewable power generators based in homes and offices, he said. Domestic hydrogen batteries and computer software will allow consumers to buy and sell power over a smart network, he said.[?!?!?]"

Ash said...

Link for above found in, what else, Bloomberg News in an article about why Merkel won't let the EMU break up:

Merkel Won’t Let Euro Split, Could Cause ‘Dark Age,’ Rifkin Says

Greenpa said...

"Nuclear power is a further attempt to solve the problems of complexity with more complexity."

Yes. And, it's an attempt to fix the really horrific dilemmas of our Tumor Economics by growing the tumor bigger.

Joe in NC said...

Nice "short film" from KD:

Hypocrisy... And Danger....

Ash said...

Euro market gamecast update:

Down by 40 (.4%). 4th and long in its own endzone. 30 seconds left. No timeouts. Can it get the first down and preserve some remote semblance of hope for 20 seconds? Or will it get sacked for a game-ending safety? Find out later today.

Hombre said...

Ash – Kudos... An interesting article you linked, which includes this oxymoronic jewel of language - “sustainable expansion.”
Isn't that much like a bubble? Don't they burst over time?
I believe the only sustainable expansion in the universe is the universe itself (possibly—if it is infinite). As to this little planet I believe Copernicus trumped Genesis a few centuries ago.
quote - “Sustainable expansion will only return when officials and executives can produce “the third industrial revolution...”"

I do hope we can somehow transition to a “sustainable reality” which will mean living simpler, with less convenience, less waste, and more cooperation. How we get there from here without a worldwide cataclysm is beyond the scope of my small mind.

Xtropy27 – I appreciate your optimism and confidence but do not share your enthusiasm for nukes as our “way out.” Complexity is at the heart of our predicament, and the earth is a dynamic entity, moving and changing and shifting in ways that make nuclear constructions a potential deadly hazard.

Greenpa said...

Ok; a serious question for Stoneleigh- have you looked into the physics and economics of this concept?

http://tinyurl.com/3dqd9js

It was a new one to me. Yes, it uses thorium; but NOT for fission, rather merely as a heavy element chemical dope for a laser, to increase the laser's output.

Not a reactor. The claims being made reek of the usual fantasies surrounding such things; but- this is actually something different.

Part of my problem with it- it has been my firm understanding that lasers cannot "create" new energy; they simply accumulate and redirect the energy they are pumped with. In which case I don't see the point to the laser in this turbine scheme; why not just heat the water with the pumping energy?

Laser induced nuclear fusion would be different; there the plasma allows nuclear energy to be released. But that's not what they're selling here.

Is it that the laser is taking 3X energy at lower concentration, and delivering 1X energy at 3,000° - which could be used to create very energetic steam? Sure, you can get insanely hot steam- but the energetics are still 3 in, 1 out. Or something like that. Yes? No?

I just get this whiff of snake oil here.

el gallinazo said...

Xtropy27

Please give me a URL describing a working, commercial sized thorium reactor. I would love to see the details of how one is doing in the "real world" after a certain period of operation.

Greenpa said...

This is their "explanation"; they ARE claiming to use nuclear decay as the power input:

"LPS's proprietary thorium-fueled laser-turbine electricity generators, which are protected by 20 patents, use a Tesla coil to drive a spark-plug-like device which accelerates the natural decay of thorium. The emitted alpha- and beta-particles are used by proprietary electronics to stimulate a gas laser into emission in a sub-critical reaction that never emits dangerous radiation like gamma-rays."

Yay Tesla coils. Still. Bizarre is not always phony... just usually.

el gallinazo said...

Greenpa

Did they mention whether the Testla coil comes from a Chevy or a Ford? Unless the universe has changed since I was last in university, there is no way that a voltage potential is going to effect the rate of decay. Thanks for going through the link. Any more juicy tidbits?

Here is another laser application beyond possible nuclear fusion that would produce a positive EROEI.

Aim a low powered laser at the spot where a teenage son's butt meets the couch behind his favorite video game console.

Ilargi said...

New post up.





Like Gypsies in the Dust




.

xtropy27 said...

Hi Stoneleigh, Folks...

Here are some links to follow upon re: IFR, and other 'New Nuclear' (Stage 4, et al) reactors.

Short term, immediate, solution:

'Navy Nuclear'... until IFR, and or Thorium reactors come online, this interim step would see large barges with multiple (4 ?) small reactors onboard... anchored offshore and powering large cities, etc. Remember... US Navy ships currently use small unit nuclear power plants. We could either assemble a group of these very units on one barge... or use the small units offered by Babcock & Wilcox and Hyperion. The existing US Navy units are already in production... so they'd probably be the quickest install (?)

Russians already have 1 such unit in operation, and are building more:< http://en.wikipedia.org/wiki/Russian_floating_nuclear_power_station >

Baseload & Footprint... "Gwyneth Cravens points out that "A nuclear plant producing 1,000 megawatts takes up a third of a square mile. A wind farm would have to cover over 200 square miles to obtain the same result, and a solar array over 50 square miles" ('Power to Save the World: The Truth about Nuclear Energy' Gwyneth Cravens < http://www.amazon.com/Power-Save-World-Nuclear-Energy/dp/0307266567 >

'Renewistan'...

< http://peakenergy.blogspot.com/2009/01/saul-griffith-renewistan-and-energy.html >

'Renewistan' Footprint... a landmass larger than Austrailia. A non-starter.

Nuclear battery:
< http://www.time.com/time/magazine/article/0,9171,2050039,00.html >

< http://www.hyperionpowergeneration.com/ >

Babcock & Wilcox:

< http://www.babcock.com >

IFR:

< http://bravenewclimate.com/2008/11/28/hansen-to-obama-pt-iii-fast-nuclear-reactors-are-integral/ >

Stewart Brand's 'Whole Earth Discipline' covers this issue in great depth. < http://search.barnesandnoble.com/Whole-Earth-Discipline/Stewart-Brand/e/9780143118282/?itm=1 >

El Gallinazo... 'A working, commercial size Thorium reactor' ? Not yet buddy. Stay tuned though.

A transformed energy generation reality is essential. So what will it be ? 'Renewistan' or the economical 'Baseload' & 'Footprint' of 'Stage 4' nuclear ?