Friday, May 30, 2008

Debt Rattle, May 30 2008: The Inevitable

Dorothea Lange "If you die, you're dead – that's all" June 1938
Nettie Featherston, wife of a migratory laborer with three children. Near Childress, Texas.
(Ilargi : Nettie was 40 years old in the picture. She died in 1984, 86 years old.)

Ilargi: Isn’t that funny: It’s starting to look as if the banks who are consulted for setting the LIBOR rate have helped out troubled borrowers by understating their own (inter-bank) borrowing costs. This has saved these borrowers $45 billion in ARM resets to date.
  • Why did the banks do it? For one: They don’t want to be seen borrowing at high rates, that makes them look desperate. Second, they also know of course that it will keep defaults, foreclosures and other inconveniences down. For now. Which saves both Washington and Wall Street from some nasty trouble. For now.
  • What’s wrong with bogus LIBOR rates? First: Just ask anyone -think: pension and mutual funds- who has invested in the underlying securities, expecting returns to go up. Second: the rates will eventually go up anyway, potentially plunging a huge group of borrowers into misery all at once, when rates go through the roof.

Sounds like good enough reasons for me. But there may be a much bigger, largely hidden reason. The LIBOR rate sets daily valuations for $350 trillion in derivatives and -corporate- bonds (this is according to Bloomberg, it's probably more than that, if you ask me).

If I didn't know better, I'd think there's a fierce competition for crime of the century going on here.

PS: What do you think the chances are that we leave that tribe in the Amazon alone? We haven't learned a single fukcing thing since 1492, have we? We still "discover" people, just as Columbus discovered a continent. When we're done with these people, the handful kept alive will be caged in a zoo, and we'll buy tickets to go see them. If there's one thing you can say about Mankind; there's nothing kind about man.

LIBOR Mess Promises to Squeeze ARM Borrowers
An international uproar over allegations that some banks intentionally manipulated LIBOR, a key interest rate used to determine rate adjustments for many adjustable-rate mortgage holders, is likely to have a real-world impact for many adjustable-rate mortgage borrowers, sources told Housing Wire Thursday.

At the heart of the debate is a report by the Wall Street Journal, first published on April 16, that questioned the accuracy of the benchmark lending rate; the Journal provided evidence that suggested some major banks were helping keep reported LIBOR rates artificially low. The WSJ Journal revisited the story on Thursday, ahead of adjustments to the LIBOR system that appear likely to be introduced by the British Bankers Association on Friday.

The one-month and six-month dollar LIBOR is used to benchmark a large number of adjustable-rate mortgages in the U.S.; the one month rate has remained extremely low, currently at 2.46 percent, and has fallen dramatically from 5.22 percent just six months ago. The six month LIBOR follows a similar trajectory.

The result has been an veritable erasing of any potential adjustable-rate payment reset shocks for subprime and Alt-A borrowers — certainly a positive outcome for millions of potentially troubled borrowers, given that the U.S. is still facing a flood of subprime resets through the end of this year (Alt-A resets don’t begin in earnest until the middle of 2009, according to available data).

The WSJ estimates that an artifically-depressed LIBOR may have given homeowners and other consumer debtholders a $45 billion break through the first four months of this year. What happens with that sort of unintended stimulus vanishes? It’s not known exactly how many borrowers with adjustable-rate mortgages are tied to LIBOR, versus the yield on short-term Treasuries, but HW’s sources suggest that number could be as large as half of ARM borrowers.

That number is likely even higher among subprime borrowers, our sources said. “We’ve got an entire class of borrowers right now that is absolutely dependent on LIBOR sitting low,” said one source, an MBS analyst who asked not to be identified by name.

“Tinkering with the how the rate is calculated doesn’t seem likely to push it down, although I can see plenty of reasons it might jump upward.” The Journal, citing sources close to the BBA, said that any changes to LIBOR calculations aren’t likely to represent a “radical redesign.” Which means that — even if only for a brief moment — the interests of millions of subprime borrowers and those of the banking crowd are in alignment.

Libor Proxies Gain as Traders Seek Truth With Swaps
Traders are starting to use alternative measures for borrowing costs as the British Bankers' Association struggles to keep the London interbank offered rate as the global standard.

Libor, the benchmark for 6 million U.S. mortgages and more than $350 trillion of derivatives and corporate bonds, has been called into question since the Bank for International Settlements said in March some lenders may have understated borrowing costs to keep from appearing like they are in financial straits.

One option growing in popularity is overnight indexed swaps, a gauge of expectations for central bank rates. The Federal Reserve uses the one-month OIS rate to set the minimum bid level when it lends cash to banks through its Term Auction Facility. The Fed has auctioned $510 billion through the TAF since December.

"The OIS rate is something I look at a lot more closely than I used to," said Nish Popat, head of fixed income in Dubai at Emirates NBD PJSC, the Persian Gulf's biggest bank by assets. "It gives you a better idea of where the lending and borrowing level between banks is and it's a market-traded price.'

Study Casts Doubt on Key Rate
Major banks are contributing to the erratic behavior of a crucial global lending benchmark, a Wall Street Journal analysis shows.

The Journal analysis indicates that Citigroup Inc., WestLB, HBOS PLC, J.P. Morgan Chase & Co. and UBS AG are among the banks that have been reporting significantly lower borrowing costs for the London interbank offered rate, or Libor, than what another market measure suggests they should be. Those five banks are members of a 16-bank panel that reports rates used to calculate Libor in dollars.

That has led Libor, which is supposed to reflect the average rate at which banks lend to each other, to act as if the banking system was doing better than it was at critical junctures in the financial crisis. The reliability of Libor is crucial to consumers and businesses around the world, because the benchmark is used by lenders to set interest rates on everything from home mortgages to corporate loans.

Faced with suspicions by some bankers that their rivals have been low-balling their borrowing rates to avoid looking desperate for cash, the British Bankers' Association, which oversees Libor, is expected to report Friday on possible adjustments to the system. That report isn't expected to recommend any major changes, according to people familiar with the association's deliberations.

In order to assess the borrowing rates reported by the 16 banks, the Journal crunched numbers from another market that provides a window into the financial health of banks: the default-insurance market. Until recently, the cost of insuring against banks defaulting on their debts moved largely in tandem with Libor -- both rose when the market thought banks were in trouble.

But beginning in late January, as fears grew about possible bank failures, the two measures began to diverge, with reported Libor rates failing to reflect rising default-insurance costs, the Journal analysis shows. The gap between the two measures was wider for Citigroup, Germany's WestLB, the United Kingdom's HBOS, J.P. Morgan Chase & Co. and Switzerland's UBS than for the other 11 banks.

One possible explanation for the gap is that banks understated their borrowing rates. The BBA says Libor is reliable, and notes that the financial crisis has caused many indicators to act in unusual ways. "The current situation is extraordinary," said BBA Chief Executive Angela Knight in an interview.

A BBA spokesman says there is "no indication" that the default-insurance market provides a more accurate picture of banks' borrowing costs than Libor. Representatives of the 16 banks on the Libor panel either declined to comment, didn't respond to questions, or said they provide accurate rates.

The Journal's analysis doesn't prove that banks are lying or manipulating Libor. Analysts offer various reasons why some banks might report Libor rates lower than what other markets indicate. For one, since the financial crisis began, banks have all but stopped lending to each other for periods of three months or more, so their estimates of how much it would cost to borrow involve a lot of guesswork.

Ilargi: Even the Economist, capo di tutti cheerleaders, puts US property prices decline at "a staggering" 18% in the past year. The Case-Shiller graph suggests about a 30% drop in 2 years. Oh, we'll get to the 80% I predicted, don't worry. Or do worry, if you still own property in the US. Or the UK, or Spain, or Holland, or.....

House prices through the floor
As house prices in America continue their rapid descent, market-watchers are having to cast back ever further for gloomy comparisons. The latest S&P/Case-Shiller national house-price index, published this week, showed a slump of 14.1% in the year to the first quarter, the worst since the index began 20 years ago.

Now Robert Shiller, an economist at Yale University and co-inventor of the index, has compiled a version that stretches back over a century. This shows that the latest fall in nominal prices is already much bigger than the 10.5% drop in 1932, the worst point of the Depression.

And things are even worse than they look. In the deflationary 1930s house prices declined less in real terms. Today inflation is running at a brisk pace, so property prices have fallen by a staggering 18% in real terms over the past year.

Ilargi: Until now, the southern European countries were known as Club Med in the financial world. That name has been "updated".

Today, they are "PIGS" (Portugal, Italy, Greece, and Spain).

Euro suffering from 'reserve currency curse' as investors pull out
Long-term private investors are pulling their money out of the eurozone at the fastest rate since the creation of the single currency, according to a report by the French bank BNP Paribas.

Foreign direct investment (FDI) in plant and factories has turned deeply negative, reaching minus €149bn (£117bn) over the past year. It dropped to minus €19bn in March alone as the soaring euro pushed labour costs in southern Europe to uncompetitive levels. The annual exodus of private funds from eurozone equities and bonds has reached almost $280bn.

Taken together, the total outflows have topped €400bn in 12 months and may spell trouble for Europe's industry as the economic downturn gathers pace. Airbus is leading the rush to hollow out production inside the currency bloc, switching operations to the US, Mexico and India. "It really worries me that private accounts are selling assets like this," said Hans Redeker, BNP's currency chief.

The euro is being held aloft by central banks in Asia, Russia, and the Middle East seeking an alternative to the dollar as a place to park their mushrooming currency reserves. In effect, the eurozone is now suffering from the reserve currency curse. While Asian funding has helped ease the credit crisis in Europe, it has also pushed the exchange rate to damaging levels.

There is a trade-off effect. The eurozone has gained financial flows, but has lost industrial and investment flows. These official investors appear to be picking and choosing eurozone bonds more carefully than before, demanding a higher premium for Latin debt. Data collected by the Bank of New York Mellon shows large withdrawals from Italy and Greece since August.

The eurozone racked up a record current account deficit of €15.3bn in March, seasonally adjusted. BNP Paribas said the so-called "PIGS" (Portugal, Italy, Greece, and Spain) are dragging down the trade performance of the bloc.

All have suffered a relentless loss of competitiveness since EMU was launched. The deficits have reached 10pc of GDP in Spain and 14pc in Greece. None has begun to narrow the gap in unit labour costs with Germany, ensuring that the inevitable adjustment will be more severe when it comes.

Indeed, Spain's inflation surged to a record 4.7pc in May. The country now faces the most acute "stagflation crisis" in the developed world. House prices have fallen 15pc nationwide since September, according to the developers' association (APCE). Madrid University warned this week that Spain's property slump could throw 1.1m people out of work.

Mr Redeker said the 'PIGS' quartet was now facing "collapse", with mounting signs of stress in France as well after consumer confidence fell to the lowest level in 20 years. French property sales fell 28pc in the first quarter.

"There are a lot of ugly surprises in store as deleveraging finally hits Europe. Investors are going to stop treating the eurozone as if it were Germany, and take very close look at the deficits of the southern countries. We can expect bond spreads to widen significantly," he said. "We will discover in this downturn whether the eurozone is really an 'optimal currency area'. This is the test."

Jean-Claude Trichet, the president of the European Central Bank, told Italy's Il Sole that the euro had been a shield against the financial storms of the past year. "We've strangely forgotten what happened in the 1980s and 1990s when we all our national currencies created so many problems. Today, we've had an impressive correction in global finances. Imagine what would have happened without the euro," he said.

Fresh fears for US economy as corporate profits tumble again
Corporate America caused fresh fears of a US economic downturn yesterday as first-quarter profits fell at an annual rate of 6.2 per cent, their sixth consecutive quarter of year-on-year decline. Profits in non-financial businesses for the first three months of this year fell by an annual 2.6 per cent while those in financial groups were down by 12.2 per cent, before writedowns.

Economists said that the figures raised questions over the Federal Reserve's expectation that its past series of steep cuts in US interest rates, alongside a fiscal boost from tax rebates to American consumers, will suffice to stave off a severe downturn lasting into next year. Some analysts argued that the worst may be over because the profit figures for the first quarter of this year were higher than the final quarter of last.

The toll on financial firms abated, with their profits down only $3 billion (£1.5 billion) in the first quarter, against a $74.4 billion plunge in the previous three months, while non-financial businesses recorded a quarterly profit gain. However, a number of economists said that the continuing slide in profitability, against a year earlier, remained ominous.

Rob Carnell, of ING Financial Markets, said: “A negative spin would be that, after so many quarters of declines, we seem no nearer a turn in the profit cycle.” Persistent concern over the profitability of “America Inc” took some shine off an upward revision to the US economy's growth in the first quarter. That lifted Wall Street hopes that the economy will avoid a technical recession, despite the slowdown's depth.

Overhauled data upgraded first-quarter growth to a still anaemic 0.9 per cent annual rate, from an initial estimate that GDP had risen only 0.6 per cent on an annual equivalent basis. The upward revision came as cuts in America's estimated appetite for imports in the first quarter (Q1) flattered its trading performance compared with the initial data.

Imports of goods and services in Q1 are now estimated to have fallen by 2.6 per cent, against the 2.5 per cent rise previously reported. Exports were also weaker than first thought, rising only 2.8 per cent, rather than 5.5 per cent as initially reported.
However, America's net trade showing in Q1 is now shown to have added 0.8 percentage points to growth - four times its previously calculated contribution.

Could the end be nigh for stocks?
“We are on the cusp of an equity meltdown that will shred and slash portfolios like Freddie Kreuger,” says Société Générale’s Albert Edwards in a recent note. “We are not through the worst of this crisis. The worst is still to come.”

The legendarily bearish strategist recommends investors cut global equity exposure in their portfolios to 30%, with 50% in AAA-rated government bonds – a bet, says Ambrose Evans-Pritchard in The Daily Telegraph, “on gruelling ‘Japanese’ deflation”.“This truly is the stuff of sandwich boards and loud hailers – a message that the end is nigh,” says Paul Murphy on’s Alphaville.

Still, from Edwards, that’s no surprise – he has “ploughed a lonely furrow” over the past decade, says The Economist. “He turned bearish on the stockmarket more than 10 years ago, just before the dotcom boom that took share prices into the stratosphere.” Still, for investors who took his advice on a long-term view, the result hasn’t been bad – equities have (just) been outperformed by government bonds.

The core of Edwards’s argument is that stockmarkets are entering an “ice age”, in which the prospect of slow earnings growth will lead to a decline in valuations. In essence, he expects low inflation or deflation – partly the result of the credit crunch – to mean lower nominal earnings growth going forward and a steady decline in p/e ratios as investors adjust to this new world. Japan is the template – “the comparison ... is uncanny”, says Edwards.

This could lead to a brutal bear market. “We expect global equity prices to fall by up to 75% from their peaks as a deep global economic downturn unfolds over the next few years,” he says. “The credit bubbles which sustained economic bubbles in many countries (especially the US, UK and Spain of the majors) will suffer badly from The Great Unwind as inevitably as night follows day.”

Edwards’s views are a long way from the mainstream, but although his thesis hasn’t yet been proved right, it isn’t clearly wrong either. Often unremarked upon amid the earnings-driven bull market, “equities have been de-rating for several years”, says The Economist (see chart, above). “Who is to say that the process has stopped?”

Bad Omens for Banks?
Nobody was expecting an easy year for U.S. banks, but many observers thought the bulk of the industry's credit troubles would come in the first quarter. Now, it seems the rest of the year may be even worse. Case in point: A May 28 announcement from KeyCorp. Mounting loan losses at the regional bank company suggest the banking industry's troubles with bad loans are just beginning.

Cleveland-based KeyCorp, which holds $97 billion in assets, says the year's net loan charge-offs—a measure of how much bad debt the bank may have to write off—could almost double previous predictions for 2008. The bank expected charge-offs of 0.65% to 0.9% of total loans just three weeks ago, but now says they could be in the range of 1% to 1.3%.

The main culprit is the bank's portfolio of loans to residential homebuilders, KeyCorp said in a Securities & Exchange Commission filing. Losses have also increased on education loans and home-improvement loans.

Investors responded May 28 by fleeing banking stocks. KeyCorp shares tumbled 11%, to 19.59, on May 28, just above the stock's 52-week low. Other similar, regional banks suffered, too. Shares of Wachovia, Fifth Third Bancorp, and Regions Financial all dropped 4% or more to 52-week lows.

Subprime securities had already decimated Wall Street banks and other financial firms. For investors, the worry now seems to be shifting from debt securities to simple, traditional loans, and from Wall Street to Main Street. "Near-term credit trends appear to be getting worse," said R.W. Baird analyst David George. Those hoping for a recovery in the second half of the year will be disappointed, he wrote in a May 28 note, "as loss rates appear to be rising."

Higher losses on loans to developers and homeowners are disturbing enough. But what also unnerved investors was the suddenness of the change in KeyCorp's outlook. Estimates for losses jumped just a month after the company's most recent earnings announcement. That suggests, Deutsche Bank analyst Mike Mayo wrote on May 28, "either misjudgment before, or a significant deterioration in, asset quality."

The news flow from banks had been relatively quiet since they reported first-quarter financial results in April.
After months of a credit crisis and a weakening economy, most banks did see profits fall. But since the collapse of Bear Stearns in March, there was a sense that losses on subprime-related securities had peaked. Major banks "have now probably weathered the worst marks on holdings of various asset-backed securities" and other debt instruments, Stifel Nicolaus analyst Anthony Davis noted earlier this month.

However, other troubling trends remained, and threatened to get worse. There is no sign the depressed housing market is perking up. In data released May 27, the S&P/Case-Shiller national home price index dropped 14.1% in the first quarter of 2008, the largest drop in 20 years. Loans to struggling homebuilders are a primary credit issue right now, according to Davis' note, but concerns are also rising about consumer loans.

Investment bank hedges crumble in second quarter
Investment banks have been trying to hedge against losses from the mortgage meltdown and broader credit crunch for at least a year. But as parts of the credit market showed tentative signs of improvement in the second quarter, some of those hedging strategies failed.

That could exacerbate already weak performances when big brokerage firms Lehman Brothers, Morgan Stanley and Goldman Sachs report quarterly results in coming weeks, analysts say. These firms still had $158.6 billion of exposure to mortgage-related securities and other asset-backed securities at the end of their fiscal first quarters, according to Bernstein Research.

As efforts to hedge such risks break down, big brokers may now be judged on how quickly they can jettison these holdings permanently. "Until these firms can significantly reduce their exposures to these troubled asset classes, their earnings will be beholden to the directional movements of the credit markets and the effectiveness of their hedges," Brad Hintz, an analyst at Bernstein, said earlier this week.

"While the second-quarter results of these firms are important, we believe that the balance sheet evolution these firms exhibit this quarter is a more important measurement of the health of these companies," he added. Big investment banks often hedge mortgage holdings and other exposures to things like leveraged loans by betting against market indexes that track derivatives linked to these types of assets.

The ABX indexes track derivatives tied to some subprime mortgage-backed securities. The CMBX indexes focus on commercial mortgage securities, while the LCDX indexes track leveraged loans. CDX indexes cover credit default swaps, widely used derivatives that provide insurance against defaults.

Since April, the value of derivatives tied to corporate bonds and commercial mortgage debt has rallied, but the actual bonds haven't. Spreads, a measure of the extra interest rate paid on debt that's riskier than U.S. Treasury bonds, have narrowed by more than 50% on credit derivatives linked to investment grade corporate debt. At the same time, spreads on the bonds themselves have narrowed by less than 30%, according to Ken Worthington, an analyst at J.P. Morgan.

"The performance of the cash positions and the index-based hedges have diverged, resulting in less effective or value-destroying hedges," he explained. Such divergence between cash and derivative spreads is known as basis risk. Worthington and other analysts reckon it's going to be a big drag on brokerage firm's earnings during the second quarter.

Ilargi: I am no expert on the legal aspects of it all, Kerl Denninger is better at that, but as far as I can see, making emergency measures, such as the Term Auction Facility, permanent, is simply illegal.

Fed might accept foreign collateral: Kohn
The Federal Reserve is actively considering creation of a lending facility that would accept "very safe" foreign collateral from "sound" global banks in case of a widespread liquidity crisis, Fed Vice Chairman Donald Kohn said Thursday.

A new global discount window is "under active study," Kohn said. "It is possible that over time, major central banks could perhaps agree to accept a common pool of very safe collateral, facilitating the liquidity management of global banks," he said, stipulating that such loans only be made to sound institutions.

Kohn's suggestion came in prepared remarks wrapping up a special conference in New York on liquidity in money markets that was sponsored by the New York Fed and the Columbia Business School. "Market functioning remains far from normal," Kohn said, pointing in particular to large spreads between overnight bank rates such as Libor and other short-term rates. Such large spreads indicate that markets still are in shock.

Kohn argued that the Fed and other central banks had prevented a global run on Bear Stearns and possibly other major financial institutions in March, but the emphasis of his talk was on what lessons central banks and the financial system should take from the liquidity crisis that spread like topsy from subprime mortgages to asset-backed securities to the collapse of one of the world's biggest investment banks.

"One of the things we have learned over recent months is that broker-dealers, like banks, are subject to destructive runs when markets aren't functioning well," Kohn said. The biggest question is: What to do about the broker-dealers and investment banks that, since the run on Bear Stearns, have now been given unprecedented access to the Fed's lending facilities? Should that access be continued on a permanent basis? Or should it be provided only in emergencies?

Kohn had no simple answer to that question: "Unquestionably, regulation needs to respond to what we have learned," he said. "Whether broader regulatory changes for broker-dealers are necessary is a difficult question that deserves further study." Permanent access to the Fed's balance sheet at attractive rates would distort markets without well-designed and well-executed supervision.

On the other hand, everyone in the markets knows that the Fed will step in with funds in an emergency, so in some sense the markets have been irredeemably distorted already. Kohn suggested that the term auction facility, which was created in December and expanded in early May, should be retained on a permanent basis after the crisis is over. The TAF allows banks to bid to borrow funds from the Fed's discount window for 28 days.

"The Fed's auction facilities have been an important innovation that we should not lose," he said. "They have been successful at reducing the stigma that can impede borrowing at the discount window in a crisis environment and might be very useful in dealing with future episodes of illiquidity in money markets."

Standard & Poor under fire for optimistic outlook
Standard & Poor’s was attacked yesterday for its overoptimistic outlook for $34 billion of US mortgage bonds even after the ratings agency announced a series of downgrades. The agency lowered its ratings for 1,326 classes of American mortgage-backed alternative A bonds, which are backed by mortgages sold to borrowers one rung above sub-prime.

So-called Alt A mortgages – nicknamed “liar-loans” – are often sold to people not eligible for prime mortgages, possibly because they are self-employed and unable to prove their income. S&P said it assumed that should some of the bonds default entirely, it believed that investors would be able to recover two thirds of the value of the bond.

Toby Nangle, fixed income investment manager at Barings, said: “They are sticking with a very optimistic set of assumptions. One might assume that you could recover 66 per cent at the top of the housing market but not in the current environment.”
The downgrade for such a substantial chunk of mortgage-backed bonds reinforced concerns that the worst is not yet over for the global credit crisis.

While bonds that have used sub-prime debt as collateral have already been downgraded to junk or written off as worthless, fixed-income specialists are expecting the rate of defaults to extend to less risky borrowers such as Alt A, second-line mortgages such as home equity loans and also prime. Mr Nangle said: “The rating agencies are still playing catchup. They are still far too conservative.”

At the same the Bank for International Settlements – the central banks’ bank – accused ratings agencies of ignoring signs of a severe slow-down in the US housing market and of factoring in the effect on to the value of some of the securities they rate. Next month the Securities and Exchange Commission is expected to propose rules that will force ratings agencies to apply a more transparent risk ranking for different types of debt.

The regulator is expected to tell agencies to differentiate more clearly between the risk associated with ordinary corporate and local government bonds and those backed by mortgages.

Eroding Loss Coverage at Banks a “Worrisome Trend,” FDIC Says
Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation continued to see their loss coverage ratios erode during the first quarter, despite ever-increasing provisions for expected loan losses — a troubling trend that suggests the full impact of the mortgage crisis has yet to be absorbed by many of the nation’s insured banking institutions.

According to the FDIC’s latest quarterly profile of banks, released Thursday, loan-loss reserves increased by 18.1 percent to $18.5 billion — the largest quarterly increase in more than 20 years — but the larger increase in noncurrent loans meant that the coverage ratio fell from 93 cents in reserves for every $1.00 of noncurrent loans to 89 cents. That’s the lowest loss reserve level since 1993, the FDIC said.

“This is a worrisome trend,” FDIC chairman Sheila Bair said. “It’s the kind of thing that gives regulators heartburn. “The banks and thrifts we’re keeping an eye on most are those with high levels of exposure to subprime and nontraditional mortgages, with concentrations of construction loans in overbuilt markets, and institutions that get a large share of their revenues from market-related activities, such as from securities trading.”

Loans that were noncurrent — defined as 90 days or more past due, or in nonaccrual status — increased by $26 billion to $136 billion during the first quarter, the FDIC said. That followed a $27 billion increase in the fourth quarter of 2007. Almost 90 percent of the increase in noncurrent loans in the first quarter consisted of real estate loans, but noncurrent levels increased in all major loan categories.

And then the Brits woke up to realize that they had the most obvious and laughable property bubble in the world
My only question is - what took so long? Gordon Brown, get ready to be blamed for the biggest housing crash in UK history. Even though in the end the Housing-Ponzi-Scheme-obsessed Brits only have themselves to blame.

Anyone in the US want to give our friends in the UK any advice when it comes to housing crashes? Here's mine, it's pretty simple: Last one out's a rotten egg... Any suggestion that Britain's overblown, over-hyped and over-valued property market is due for a soft landing after the excesses of recent years has just been exploded. We've had the boom: welcome to the bust.

House prices have fallen for seven successive months. Over the past six months, prices have dropped at an annual rate of 11.4% and over the past three months at a 16.1% annualised rate.

The International Monetary Fund has said that 30% of the rise in house prices in the UK cannot be explained by economic fundamentals: a fall in prices of that magnitude is now on the cards. A crash was inevitable.

Northern Rock to double debt management staff
Northern Rock is to more than double the number of people who work in its debt management arm, according to a document seen by the BBC. The internal memo said the recently nationalised bank had the equivalent of 176 full time workers in the division at the end of April.

But this number is set to increase to 444 by the end of March next year, the memo reportedly said. It suggests Northern Rock is expecting to see a big increase in the number of people having trouble paying their mortgage.

In a trading statement issued earlier this month, executive chairman Ron Sandler said the level of mortgages three months and over in arrears was 0.95% at the end of April, up from 0.57% at the end of last year. The bank is trying to reduce its loan book from £100 billion to about £50 billion as part of moves to repay about £24 billion of Government debt.

As part of the post-nationalisation restructuring, staff numbers are being slashed from about 5,400 people to 3,400 by 2011, with most jobs going this year. The memo said the number of customer service staff at Northern Rock would be cut from 1,152 to 478 next year, eventually falling to 369 by 2011. Contact centre staff numbers will also more than halve, from 744 to 350.

But there are no plans to make cuts among staff dealing with savings as bosses try to increase deposits held.
Northern Rock was nationalised in February after the credit crisis forced the bank to seek emergency funding from the Bank of England.

Under the plan to slash the bank's assets and repay the Government loans, Northern is stopping its pro-active mortgage retention programme, with customers instead being offered help to transfer their mortgages to other lenders. Earlier this year Mr Sandler said Northern Rock had between £25 billion and £30 billion of mortgages coming up for renewal this year.

Recent figures have suggested more and more people have been finding it harder to make ends meet this year as household budgets are squeezed by soaring fuel and food costs. Government data showed a total of 27,530 mortgage repossession orders were made during the first three months of 2008, up 17% from the same period a year ago.

The Government was right on house prices: they're falling even faster than we thought
When Caroline Flint, the Housing minister, wandered into a meeting with her briefing notes visible to photographers, most of the attention focused on her embarrassment and the fact that the Government was now planning on the basis house prices would fall this year. But the depth of Ms Flint's gloom attracted less comment.

To recap, she told colleagues that prices would, at best, fall by between 5 and 10 per cent this year, and that there was a good chance the decline could be more substantial. Though this humiliating little episode occurred just three weeks ago, at the time Ms Flint's warning was much more downbeat than most forecasts.

It is becoming increasingly clear, however, that while her PR skills may have been lacking, Ms Flint's analysis was spot-on. Nationwide Building Society's snapshot of the housing market in May, published yesterday, was its gloomiest monthly report since it began such surveys in 1991. Nor is there any prospect of the survey proving to be a statistical blip.

Economic data from GfK on consumer confidence and the CBI on the retail sector, also published yesterday, made equally gloomy reading. This has become a vicious cycle. Consumer confidence is at its lowest level since 1990, says GfK. Not surprising given the fact that the correlation between house prices and confidence in the UK is higher than in any other major industrial country.

Equally unsurprising is the fall in retail sales last month reported by the CBI. If consumers are worried about the future, they don't spend so much. Against this backdrop, it would be reasonable to expect the Bank of England's Monetary Policy Committee to cut interest rates next week.

Unfortunately, its hands are tied by the darkening outlook for inflation, a threat reiterated by the CBI's data, which showed prices in the retail sector rising at their fastest rate for 16 years during May. Not that interest rate cuts would necessarily have the desired effect. Cutting the cost of borrowing ought to result in improving confidence amongst both existing and new homeowners.

But with the mortgage market in turmoil and so many borrowers coming to the end of very cheap deals arranged two or three years ago, a very large number would see no reduction in monthly repayments even if the MPC were to cut rates.

Future pensions less than minimum wage
The average UK household can expect to see its income fall by 53 per cent on retirement, new research from Fidelity International, a pension provider, has shown. The resulting pension is less than many expect and lower than the minimum wage.

According to Fidelity's annual retirement index, a worker on the median salary of £457 a week - £23,764 a year - will receive just £215 a week in retirement, including savings and state benefits. That is £6 below the minimum wage. The research also highlights the gulf between the prospects for workers in final salary, or defined benefit, schemes and those in increasingly common money purchase, or defined contribution, plans.

Fidelity said that final salary pensioners could expect to retire on two thirds of salary after 40 years of service. A money purchase pensioner, whose pension is tied to contributions and investment performance, will replace 38 per cent of their final salary.

The gap is likely to grow because companies have exploited the shift to money purchase schemes to cut employer contributions. Simon Fraser of Fidelity said: “Many young people do not even open a pension, and those who do usually pay just 5 per cent of their salary.”

The cost of soaring public and private debt levels
Is Kevin Phillips right that something funny is going on in the economy? Yes, although just how funny is less clear. The numbers do suggest he's correct about one thing at least: public and private debt has indeed reached unprecedented levels.

Recently, we described Phillips' thesis, in his new book "Bad Money: Reckless Finance, Failed Politics, and the Global Finance of American Capital" that the U.S. economy has been run by a Washington-Wall Street mercantilist alliance for the benefit of the finance sector. Phillips doesn't flat-out predict that the resulting distortions will result in a crash. He says it's too early to say.

But he meaningfully quotes a number of authorities, such as Yale economist Robert Shiller, to the effect that it will. Phillips relies heavily on charts, which we like. In this column, we look at one that is at the heart of his book: public and private debt as a fraction of Gross Domestic Product.

It looks like a barbell, with peak debt of 299% in 1933 falling to below 150% from the 1950-1980s, spiking again to a recent 353%. We've checked the numbers -- updating them to 2007 -- and he's right.

Phillips calls this "The Great American Debt Bubble". He says, somewhat melodramatically, that the financial media haven't been running it recently "Analogies to the 1920s would have been too disturbing." This hurts our feelings. Early this year, we ran a chart of the unprecedented level of foreign holdings of federal debt, which is one part of America's dubious debt development, and is equally disturbing, especially because it suggests the dollar is very vulnerable.

Phillips is also right that that the finance sector has been involved in this leveraging up more than any other sector -- because of securitization, derivatives and highly leveraged hedge funds. He traces this finance sector debt expansion to easy money and to a series of bailouts orchestrated by the Federal Reserve, going back to the Arab rescue of Citibank in 1981.

Ilargi: ” of the most terrifying bank runs in history”? What kind of "journalism" is that??

Bear's Final Moment: An Apology and No Lack of Ire
Bear Stearns Cos., a powerhouse on Wall Street for nearly nine decades, ceased to exist Thursday in a meeting that lasted about 11 minutes.

Gathered in a crowded second-floor auditorium of Bear's Madison Avenue headquarters, several hundred stockholders voted to approve their company's sale to J.P. Morgan Chase & Co. for $1.4 billion. In doing so, they sealed a deal made in haste two months ago amid one of the most terrifying bank runs in history.

The meeting was led by Chairman James Cayne, 74 years old, who ran Bear Stearns as chief executive for 14 years before stepping down in January. Mr. Cayne, a tough-talking former broker, has operated largely below the radar since the leadership transition.

As the votes were counted, Mr. Cayne made his first public comments in months, expressing for the first time his own sadness at the shocking turn of events. "I personally apologize," he said, according to attendees, fiddling with the microphone as he spoke. "Words can't describe the feelings that I feel."

Mr. Cayne said Bear ran into "a hurricane" and summed up his feelings on the firm's demise as "remorse" as opposed to "anger." Moments later, the deal was approved -- by holders of 84% of Bear Stearns's stock. No questions were asked.In early 2007, before the rout, Bear's market capitalization was $25 billion.

Ilargi: Through the past week, the Wall Street Journal ran a free, 3-piece, exposé of the Bear Stearns situation. It’s still all cheerleading the cabal; after all, the paper is part of it. Click on the link to see all.

The Fall of Bear Stearns
Twelve hours after agreeing to sell Bear Stearns Cos. for $2 a share, Alan Schwartz wearily made his way to the company gym for a much-needed workout. It was 6:45 a.m., March 17, and Bear Stearns's chief executive had slept little since hammering out the ugly details of his fire-sale deal with J.P. Morgan Chase & Co.

When Mr. Schwartz, already dressed in his business suit, trudged into the locker room, Alan Mintz, still in his sweaty gym clothes, made a beeline for the boss. "How could this happen to 14,000 employees?" demanded the 46-year-old senior trader, thrusting his face uncomfortably close to Mr. Schwartz's. "Look in my eyes, and tell me how this happened!"

Two and a half months later, Mr. Schwartz still isn't quite sure. To Mr. Mintz and others, he has blamed a market tsunami he didn't see coming. He told a Senate committee last month: "I just simply have not been able to come up with anything, even with the benefit of hindsight, that would have made a difference."

But many who lived through the seven tense months before the deal say Bear Stearns imploded because it was at war with itself. Buffeted by the most treacherous market forces in a generation and hobbled by indecision, the firm's leaders missed opportunities that might have been able to save the 85-year-old brokerage.

Those missteps are expected to have a lasting impact beyond the people who once worked at Bear Stearns or owned its stock. Unlike Wall Street meltdowns in decades past -- from Drexel Burnham Lambert Inc. to Long-Term Capital Management -- the Bear Stearns collapse spurred direct intervention from the Federal Reserve. That step is likely to increase the central bank's role in solving future financial catastrophes and bring securities firms further regulation in the bargain.

As shareholders prepare to approve the deal on Thursday -- at a price that angry investors forced up to about $10 a share -- interviews with more than two dozen current and former Bear Stearns executives, directors, traders and others involved in the action paint the first detailed picture of the fractious last weeks before the Fed helped underwrite J.P. Morgan's purchase of the trading powerhouse.

Months before regulators pressured the firm to sell itself, nervous traders futilely begged Mr. Schwartz and his predecessor, James Cayne, to raise more cash and slash Bear Stearns's huge inventory of mortgages and the bonds that backed them. At least six efforts to raise billions of dollars -- including selling a stake to leveraged-buyout titan Kohlberg Kravis Roberts & Co. -- fizzled as either Bear Stearns or the suitors turned skittish.

And repeated warnings from experienced traders, including 59-year Bear Stearns veteran Alan "Ace" Greenberg, to unload mortgages went unheeded. Top executives resisted, in part, because they were concerned the moves would upset the delicate calculus of appearances and perceptions that is as important on Wall Street as dollars and cents. If Bear Stearns betrayed weakness, they worried, skittish customers would pull their money out of the firm, and other financial institutions would refuse to trade with it.

Instead of managing these fickle forces, though, a brokerage whose culture and fortune were rooted in the trading floor's steely manipulation of risk was swamped by them.
Part One: Missed Opportunities. As the firm's fortunes spiraled downward, executives squabbled over raising capital and cutting its inventory of mortgages.
Part Two: Run on the Bank. Executives believed they were about to turn a corner, but rumors and fear sent clients, trading partners and lenders fleeing.
Part Three: Deal or No Deal? The Fed pressured Bear Stearns to sell itself, but a misstep in the hastily drawn agreement nearly scuttled the deal.

Fed's Fireman On Wall Street Feels Some Heat
As the credit crisis batters Wall Street, Timothy Geithner has been the Federal Reserve's man on the front lines. The president of the Federal Reserve Bank of New York has worried more about the economic impact of the crisis than most of his Fed colleagues and has pressed hard for aggressive action, say people close to the central bank.

His involvement culminated in the March rescue of Bear Stearns Cos., which is expected to be taken over on Friday by J.P. Morgan Chase & Co. in a deal brokered primarily by Mr. Geithner and Treasury Secretary Hank Paulson. Controversy over that move has Mr. Geithner feeling some heat.

Many on Wall Street say he helped avert a catastrophic loss of confidence. But even with the crisis seeming to ebb, criticism over the rescue has lingered. Many argue that the deal creates so-called moral hazard: It could encourage market participants to take more risk because they expect the Fed to rescue them if they fail. Privately, a few Fed officials share those concerns, according to people close to the central bank.

In April, 17 Republican congressmen called for a hearing on the bailout, saying it "exposed the American taxpayers to unknown amounts of financial loss." Vincent Reinhart, a former top Fed staffer who worked with Mr. Geithner, said recently that the rescue "eliminated forever the possibility that the Federal Reserve could serve as an 'honest broker.'"

When the Fed tries to manage another crisis, he said, market players will expect it to contribute money. As early criticism of the rescue swirled, the president of the Dallas Fed, Richard Fisher, sent Mr. Geithner an email in Latin: "Illigitimum non carborundum," along with his translation, "Don't let the bastards get you down." Mr. Geithner replied that his grandfather had the same slogan on his kitchen wall.

Mr. Geithner, 46 years old, has had a hand in responding to financial crises for nearly 15 years -- first at the Treasury Department, and since 2003, in his current post at the New York Fed. Fed Chairman Ben Bernanke has set the Fed's overall strategy during the current crisis, and Mr. Geithner has been instrumental in executing it. At times, Mr. Geithner has counseled Mr. Bernanke against acting too aggressively, which would risk signaling panic, and on other occasions about the danger of not acting aggressively enough.

Ilargi: Rule no.1: Never trust anything said or done by the World Bank, the IMF, the Asian Development bank, the African Development bank etc. They use these emergency loans to get a tighter grip on the countries they are "helping“. They done so for decades, and they won’t stop. Why do you think Paul Wolfowitz was made World Bank President? To do the Lord's work?

World Bank Forms $1.2 Billion Credit Line to Combat Food Crisis
The World Bank said it will establish a $1.2 billion loan facility to help impoverished countries ease social and economic strains caused by rising food prices. The plan includes the launch of derivative products and $200 million in grants to the world's poorest countries, the Washington-based lender said today in a statement.

The funding will boost the World Bank's support to agricultural and food projects to $6 billion next year, up from $4 billion this year. Total lending by the bank reached $24.7 billion in 2007. Government-funded lenders from Abidjan to Washington are scrambling to make hundreds of millions of dollars available in loans and grants to prevent a reversal of progress made in recent years fighting malnutrition.

World Bank President Robert Zoellick called last month for a "New Deal" to end hunger worldwide, a reference to social programs in the 1930s designed to pull the U.S. economy out of the Great Depression. "These initiatives will help address the immediate danger of hunger and malnutrition of the 2 billion people struggling to survive in the face of rising food prices," Zoellick said in the statement.

The announcement follows the Inter-American Development Bank's decision May 27 to form a $500 million line of credit for countries in Latin America and the Caribbean. Food prices that rose 68 percent worldwide between January 2006 and March this year threaten the well-being of the world's poorest citizens, the IDB said.

The World Bank said today it approved $5 million in grants for Djibouti, $10 million for Haiti and $10 million for Liberia.
The World Bank is also setting up risk-management tools to hedge against bad weather or crop failure. The bank's governing board is considering a facility for Malawi that would use financial derivatives to protect the country against drought.

"Should Malawi suffer a drought, then it would be protected against a rise in the price of imported maize," the bank said in the statement. Earlier this month, the Abidjan, Ivory Coast-based African Development Bank said it aims to raise $500 million to help subsidize fertilizer costs to farmers on the continent. The AFDB gives low-interest loans to poor countries to help boost economic growth and cut poverty.

The Asian Development Bank, based in Manila, said in a report earlier this month that the global rise in food prices may push 5 percent of low-income households in the Asia-Pacific region into poverty this year. "The effects of high prices on Timor-Leste and the Fiji Islands are of particular cause for concern," the ADB said May 8.

Dominique Strauss-Kahn, the managing director of the International Monetary Fund, said in April that rising prices for wheat, corn and soybeans could wipe out a decade of progress in the developing world.


spinlily said...

I'm tired of hearing how terrible it is that real estate prices are tumbling. They still haven't tumbled down to affordable, and many renters are struggling terribly to survive frequent rent increases.

Yes, the equity on our home has gone down, but we still have a home, and our mortgage payment is only half what an equivalent rent payment would be. We have shelter. Let's have some sympathy for those who are still out in the middle of this storm.

Farmerod said...

spinlily, renters will get lower prices soon, I'd think. As more houses become vacant and prices decline, more rental supply will be created, driving down prices. So renters don't need sympathy so much as wisdom not to buy a house at the moment.

As for you and your equity; I'll suggest that the comfort you currently have with your mortage payments will decline as your equity shrinks at an ever-increasing rate. Note that a full financial analysis of rent v. own would include property taxes, maintenance and cost of capital which would probably already show renting as the better option.

Finally, may I suggest to you that you won't get a lot of sympathy on these pages if you return in a few months bemoaning your new financial situation.

spinlily said...

That's a bit hostile.

Even if our house were worth nothing, we would have paid low rent for some time. We got a good deal. We were lucky.

I promise I won't come back and complain, and I don't know why anyone would come back in any case if they are greeted by comments like yours.

Anonymous said...

I agree, spinlily, that outtatcontrol was unwarrantedly hostile. You apparently bought your house quite a while ago before the inflationary boom took hold since your expenses are reasonable and not creating hardship. If one had a crystal ball, I guess the strategic thing to do would be to have sold your house at the peak, and then rent until the market bottoms out. But good crystal balls are hard to find, though it was pretty obvious to me that the bubble was going to burst big time for the last three years, and I tried (unsuccessfully) to talk my niece out of buying a very expensive home.

Anonymous said...


I notice a couple of days ago a slight chink in your “armor of certainty” that we were going into a deflationary depression. You seemed to leave the door open to the possibility that what we could be going into a hyperinflationary depression. I think this is what happened in the Weimar Republic or right now under Mugabe in Zimbabwe. I do not see this phrase as an oxymoron. If a government chooses to vastly expand the money supply, this can result in a lack of incentive to producers of real goods and services. So you have a vastly expanding money supply and a shrinkage in real goods and services.

Someone just lent me Peter Schiff’s book, Crash-Proof. My knowledge of the dismal science is very weak, but it appears to me that his analysis of the economic situation was similar to your own. When you consider that he wrote the book 18 months ago, his predictions are right on. One area he seems off on is the bear equities market in Asia, though he would probably say that this is only temporary as they adjust to gearing away from USA consumerism. He does predict the complete collapse of the USD with ensuing major inflation – maybe not hyperinflation where you bring your money in a wheelbarrow to the grocery store, but serious double digit inflation.

So, it seems that we ultra bears divide into two prognosticating groups; the deflationary and inflationary depression predictors. This seems pretty important tactically – like whether you are going to run into the mouth of the cannon or away from it.

I don’t understand the Fed well enough to understand how they “print” money. With anti-laundering watchdogs everywhere, actually printing paper money would be a very difficult way to monetize the debt. Lowering interest rates on funds so far does not seem to be increasing the money supply, as banks are still too cautious and timid to lend and leverage like before. Yet I read that M3 is expanding at an annual rate of 17%. So how would/does the Fed “print” money and monetize the debt? Enquiring minds want to know.

Anonymous said...

The above "anonymous" post was from me. Screwed up the comment thing.

Anonymous said...

Spinlily, don't let outacontrol chase you from this site. Most comments are well reasoned and respectful.

My question is who will own all the houses in 20 years? The banks? Warren Buffett? Drug dealears? The government? Sovereign wealth funds? Or will they all be bulldozed while we live in caves?

Farmerod said...

spinlily et al

I was going for exasperation, not hostility.

You see, I might be convinced to have sympathy for someone who had been renting up until a couple of years ago and then bought something at the top of the market especially if that person had been more-or-less duped into such a deal. But a renter-sympathy graph would be closely aligned with house prices.

Conversely, the owner-sympathy graph would be trending sharply higher ... for those people who are incapable of knwoing what's going on. For people who do come to this site and have read the articles and especially the moderators' analyses, the sympathy graph should not be trending upward because they should know better.

thegri, I trust this post, if not up to site-standards for respect, at least meet the site-standards for reason (unlike your previous post which met neither).

scandia said...

Ilargi, I watched a film , a film that has haunted me all day. It is a moving picture response to your recent question, " What Is Life Worth".
It is a vision of 2027, not all that far away. The film's images resonate with the photographs you have been sharing of The Great Depression.. Just a time difference.
I recommend " The Children Of Men".
Please view without the children present. It is troubling. One of the darker possible outcomes.

Anonymous said...

I have questions about the WB loans/grants program. I know that they have routinely used loans to "enslave" (turn the people into debt slaves) other countries. So how is it supposed to work in this instance? My impression is that these countries are already on the financial ropes.

Farmerod said...


The book Confessions of an Economic Hitman will partly answer your question.
(The link is a book excerpt)

Ilargi said...

That guy is Outta Control, I tell you. Which is kind of a warning?!

Apart from the perceived albeit not intended exasperated/rating hostility, he makes some valid points though. There's a lot more costs in owning a home than just mortgage payments, for one thing.

And spillinly sort of started, saying (s)he is tired of hearing complaints about high home prices. Fine and nice that you have an apparently good deal, but plenty people have plenty to complain about. And may be tired of people flaunting their better fates.

Plus, let's see in a year, when an additional 30-50% of property values will have evaporated. By then, telling people you're tired of their laments may be a risky way to go. There are people who deserve what they have coming, but there are also many many millions who will be caught unawares, with no homes, no jobs and no assets of any kind, just plenty debts.

I think many, if not most, people who feel they are in a good position will find out that that ain't worth much when those around you are desperate.

Anonymous said...

I read The Economic Hitman. I guess my point is how can you squeeze more blood out of the turnip. Seems like the turnips are pretty well sucked dry at this stage. The populations of these countries are now dirt poor, as well as shortly-to-be-starving. I'm thinking the Bank is desperate because if social unrest, riots, chaos ensue...they won't get ANY of their previous loans repaid.

Anonymous said...


Sorry for implying that your original post was not well reasoned. It was a mean spirited thing to say and I apologize.

Anonymous said...

I think if I showed up, like a tramp on a dark day at spinlily's home, I would likely find a hot meal and a welcome.

As far as a well reasoned response to your feelings, about the many renters struggling to survive rent increases, you are told they would be foolish to 'buy a house'? I would expect the next advice to be that they should eat cake instead of bread.


spinlily said...

What I wanted to get across is that I think we should use another indicator of spreading economic malaise besides home prices. There is more than one way to look at home prices, and whom high or low prices are good for. It's rather like a pyramid scheme in that the sooner you bought in the better you're doing.

I think we might consider using income vs. prices or some other indicator of how crappy the economy is and how irresponsible some of the people are who have been playing with our livelihood. IMO.

Anonymous said...

Spinlilly's right. Looking past housing prices at household incomes, or (Gasp!) personal incomes...and the and we seem little of the froth the financial media gushed over the last 8 years or so.. People didn't go in for real expensive homes (on average) because they were making more money than before (on average). So, people have had to simply sunk more and more of what income they had into their housing costs. Add in rising food and energy and something just ain't right.... In other words ... things have been shaky for a long time ... about te point in the Kevin Phillips graph when debt level took the trip up the hockey stick.

Anonymous said...

I have seen upclose a indicater that troubles me,specificly ,the price for scrap steel.I dont know who,{probablly chinese}but someone is paying 40-50c a lb for any and all scrap steel here,which is causeing chaos.I keep thinking that somewhere someone is stockpileing a whole lot of refined steel with which to continue manufactureing even if the usa is not shipping.
This can also apply to peak...the energy needed to refine steel is lost...unless you recycle the steel into new products.With the exchange rates,ect. we are not going to have much of a pile of scrap around when we have to create this new,low-energy/alternitive powered will all be in china..

I am begining to fear where every thing will be in a year...I might look at 40% unemployment as a good thing if we stay out of war with Iran.When all around you are broke,desperate,and hungry,life will not be good for anyone.I will be keeping my self away from crowds,and the city,and be liveing a fairly private,secluded existance,as much as possible

I have heard tonight on rachel madow,of air america fame, just how much wealth is being destroyed/transfered by this war.My god,they are bankrupting my country....
I will laugh in the face of anyone who says that the rich have the right to rule this country because they own it....It has been run for the benifit of the rich for the last eight years,and it will be a miracle if our country survives the experience
Has anyone figured out how any sort of techno-civilazation will possible after we hit -20% on the backslope of peak?By haveing let Bush,and the oily companies run the world,we are looking at a very dim future.These times will not end well;Transition will be very very hard...
Its getting rougher around the shops,and the iron erection companies,and construction crews.Oregon is always a year or 2 behind the world economicly,but now,work is finishing up,projects are being cancelled...and no new work.snuffy

Unknown said...

Babes in the woods.

Greenpa said...

Ilargi- " If there's one thing you can say about Mankind; there's nothing kind about man."

sigh. yeah, I have days like that too. You might like e.e. cummings version:

pity this busy monster, manunkind

that poem ends with, as I recall-

us doctors know a hopeless case when we see one.
hey, there's a helluva good universe next door; let's go.

e.e. had plenty of bad days, too; with abundant reason.

I try to remember he also had good ones.

Right now, here-

In Just-Spring
when all the world is mud-luscious and puddle-wonderful

hang in there! :-)

My other favorite-

"They're all mad, but me and thee. And thee's a little queer."

Ilargi said...


I notice a couple of days ago a slight chink in your “armor of certainty” that we were going into a deflationary depression. You seemed to leave the door open to the possibility that what we could be going into a hyperinflationary depression.

I guess I need to state that I never said any such thing. It's not possible to defuse all words people put in one's mouth, but this goes far.

Bigelow said...

Scrap steel anonymous:
“By haveing let Bush, and the oily companies run the world, we are looking at a very dim future.”

Corporate vetted presidential candidates are part of a staged Democracy charade to begin with. We let the one which sports the bigger flag lapel pin rule. So Gore actually won the election after all; but there was a coup! The elites were fighting amongst themselves. And I suspect “a very dim future” for we-the-people was the plan all along.