why i am scared $hitless

[fishpoopoo]

$2 trillion of subprime loans made from 2002-2007 is ... a drop in the bucket compared to ...

$62 trillion (notional) of credit default swaps in the U.S. alone

$1.3 quadrillion (notional) of global derivatives contracts exposure

I think the $700 sub-prime mortgage "bailout" package is going to compare to a total estimated cost of $5 f*cking trillion when all is said and done.

I woke up this morning and literally puked meditating over this.

I wish I was joking, but I ain't.

If you have the means, I would urge you to start acquiring physical gold coins.

And take steps to open up a Swiss bank account denominated in Swiss Francs ... not increasingly worthless U.S. dollars.

Before the rush when everyone starts to panic.

If I'm wrong, and I hope I am, then the worst you will have done is to be prepared.

[RIROCKHOUND]

Why I am scared %$%$%$%$less...

b/c FPP is scared %$%$%$%$less!

[JohnR]

FPP - $hit, if your puking I'd better start puking too.

[nightfighter]

Yup. $700 Billion will look like it was a steal for the taxpayer when the final tally comes in for the Bill that Congress ultimately enacts.....

[spence]

I think this is a reasonable fear. I remember reading an article some time ago about LB having their derivative holdings rated AAA. We all know how that went.

That being said, I think there's a better chance that this crisis will deflate, the economy won't crash, we'll see a recession, and the power of Wall Street will shift over the next decade or so to Bejing, Tokyo and Dubai.

For our children to enjoy our quality of life, America will need to lead the World to energy freedom, which we are more than capable of doing.

This isn't just a market correction, it's a way of life correction. We can no longer consume so much more per capita than the rest of the world.

-spence

[RIJIMMY]

wee - I have no reason to doubt you, I just cant fathom the $ amounts you have. I cant imagine that much can be traded out there.

And I am sad to say I agree with Spence. This is a way of life correction. My wife and I have good careers, but for years I have been wondering why I see so many people with really nice cars, and they dont appear to people who make big $. Factor in plasma tvs, fancy cell phones, ipods, etc. I couldnt swallow how people could afford all this. Growing up, my parents did not have a credit card until I was in High School. I think everyone has been livin high after the boom of the 90s and there was no foundation to support it.

[striperman36]

Here is a April story about 50 trillion US CDS
http://www.moneymorning.com/2008/04/...llion-problem/


I would think 62 trillion is not far off.

Interesting article as it explains the multiplier and how the exposure of risk compounds beyond the original loan.

[justplugit]

Originally Posted by RIJIMMY

wee - I think everyone has been livin high after the boom of the 90s and there was no foundation to support it.

We are living in a false economy as it's been based on buying stuff and services, mostly on credit. As jobs dry up who's going to be buying stuff or hiring others to do what they can do themselves?

We have a service economy which has nothing to do with essentials. No more manufacturing, producing steel or based on agriculture. These are the essentials.

People want others to clean their house, do their lawns, have their nails done, drive an expensive car, go on vacations they can't afford , eat in expensive restaurants, drink exclusive wines, and so on. These are not essentials. Although some would argue they are.

Essentials are, a roof over your head, clothes to wear and 3 squares a day, aside from those there are few additional essentials.

IMHO the danger is having an economical domino affect as people pull in their buying and service addictions.

[fishpoopoo]

Originally Posted by spence

For our children to enjoy our quality of life, America will need to lead the World to energy freedom, which we are more than capable of doing.

This isn't just a market correction, it's a way of life correction. We can no longer consume so much more per capita than the rest of the world.

-spence

That's what I'm concerned about. The prospect of future generations. Unless something is done now, our children will inherit and toil under some severely adverse conditions. Like a (literally) bankrupt nation.

I don't think either party has a clue right now about how to "fix" or even address our economic problems. And I mean that.

Only one congresscritter - who is a disciple of the Austrian School - "gets it." Unfortunately, Ron Paul has been viewed as somewhat of a loon by the mainstream. Maybe people will pay attention, now that Keynsian and Monetary intervention are spectacularly blowing up in our faces.

[buckmanjr]

I heard some interesting talk the other day about the US dept and I'm trying to recall what it was. I think it mentioned that the US dept is 67% of our yearly GNP and that at times this country has approached 100%. I think the dept % for Japan was 200% and that most european countries have a dept to GNP much worse then ours. Cheer up.

[Nebe]

pardon my uneducated view on everything, but what is going on now is quite simple.

In the name of capitalism, this great country of ours has enabeled businesses to outsource jobs here in the US.. That boosts corperate profits.. In the mean time there are millions of workers who lost their jobs and had to find lower paying jobs.. House prices soared off of the notion that many americans viewed home ownership as a source of income from re-financing..State government turned a blind eye to higher housing costs because come re-evaluation time, it means more tax revenue.. thus as a result, a huge false economy was created.
Comparing it to fishing is simple-
This country is broke because the average guy who works a manufacturing job, or any sort of job that could be outsourced is flat broke..(we will call them the pogies) As a result, small businesses across the nation who cater to this group of people (we'll call them the schoolie bass) are experiencing huge profit loss because they are not selling anything (eating pogies)..Now they are dieing off from starvation or at at the very least are extremely thin.. From there banks who are issuing them credit (bluefish) are forced with great pressure to make up for the losses, so they dabble in mortgages to help the broke pogies fatten up to make the schoolie bass fatten up..

The problem with everything is that corporate profits (the dogfish) have kept on climbing and climbing and climbing (getting fatter and fatter and fatter) And not much has been done to protect the pogies..


Now what we have is a huge fish kill. The dogfish are dieing, the bass, the blues and the pogies are all suffering from a large ecosystem crash..

Why? because the goverment (Fisheries managment) slashed over fishing laws for dogfish and let them feed and reproduce and did nothing to protect the base of the food pyramid.. (the pogies) Also, fisheries managment was too busy throwing a huge party for themselves (Iraq) based upon the notion that if they had that party, it would improve moral well being in its ranks and racked up huge debt, when in reality, that huge party budget should have been spent improving water quality for the pogies, regulating dogfish levels, and also, protecting the striped bass, who not only provide food for the dogfish (well not in real life) but would also fertilize the water with thier poop, and in turn would create the right balance for phytoplankton to grow, which the pogies eat...

Make sense?

[RIROCKHOUND]

Can I buy some pot from you...

Thats quite the analogy...

[fishpoopoo]

Originally Posted by Nebe

Make sense?

Not quite.

Since 1987 Alan Greenspan opened up the floodgates to the money supply, to bail out Wall St. on several occasions and make a lame attempt to ignite growth during downturns.

This hot money found its way into the hands of consumers in the form of cheap and easy to get mortgages and zero percent APR credit cards.

Folks went nuts with the spending on houses and imported crap.

Things were great as long as house prices kept going up and rates stayed low. People could buy and flip homes homes with artificially low monthly payments, extract home equity, and buy more imported $hit from overseas. Folks didn't save a dime.

Then the bubble popped, mortgage payments reset to much higher payments, and folks got caught with their pants down.

All the while, the weak dollar (caused by money printing) and demand from Chindia made gas prices skyrocket. So we end up spending more on imports (more $/bbl crude).

Folks chose to make bad decisions with cheap money, and consume rather than invest and save.

Now, I understand we're a service economy and we don't make jack anymore. We don't export anything but jobs, it seems.

This is a reflection on the natural evolution of economies, but also a failing on the part of U.S. industry. Example: Do the Big 3 build anything right now that we want to drive? Why do so many people drive Japanese cars now?

On top of that, investment and savings that you and I make goes into things like building factories and upgrading infrastructure here in the States. All of which produce a future benefit.

Economy = Consumption + Investment + Gov't Spending + Net Exports.

Which one of these line items produces a future benefit to us?

Hint:

Not consumption!

Not government spending!

We're importing more than we export!

[fishpoopoo]

an ironic p.s.

when oil prices shot up 50%+ this past year, u.s. companies were re-thinking overseas contract manufacturing, because the cost of shipping was getting prohibitive.

so if there was a bright spot in energy spiking up ... it would have meant the return of manufacturing jobs here!

now that the world economy is going into the toilet, it's possible crude will hit $50/bbl and we'll have cheap gas again, for a short while.

[EarnedStripes44]

One thing about oil, is that you cant eat it. Those wealthy gulf states, in order to feed people, have to import lots agricultural products like wheat, commoditties that have seen a dramatic price increase. Their answer to high prices has been to pour capital into agricultural production in the economic back waters of Sudan, and other East African countries that can hardly feed themselves. The Nile River system, among others, is lined with fertile soil. Couple this with low labor & production cost, and you have an economic surge comparative to other african economic sectors, oil not withstanding. They speak of agricultural independence as we speak of energy independence. The only thing is, they are doing something about it.

The answers to energy self suffiency are all around us, for crying out loud, our wives and girlfriends bathe in it every summer; its essential to our grandmothers tomatoes. The answers arent simple, but thats just a start. Its as if ambition and ingenuity have been replaced by greed in this country...

[Nebe]

Originally Posted by RIROCKHOUND

Can I buy some pot from you...

Thats quite the analogy...

It was more about comedy than anything..

[spence]

Originally Posted by fishpoopoo

so if there was a bright spot in energy spiking up ... it would have meant the return of manufacturing jobs here!

I'm already hearing this at companies I visit.

-spence

[buckman]

Originally Posted by Nebe

It was more about comedy than anything..

It was well done, well thought out and and pretty damn entertaining

[Nebe]

hey I try.

[GattaFish]

FPP,,,, You are spot on,,,, No question,,,

[JohnR]

Originally Posted by EarnedStripes44

The answers to energy self suffiency are all around us, for crying out loud, our wives and girlfriends bathe in it every summer; its essential to our grandmothers tomatoes.

Our Misery ?

[GattaFish]

Originally Posted by JohnR

Our Misery ?