Friday, November 09, 2007
It's An Implosion Of Debt
A lot of auto and CC debt was securitized, but that engine will break down under these numbers too.
The bankruptcy bill is going to have to be revisited in a major way. Bad debt is bad debt. It has to be written down. If you try to keep people chained to debt they really can't repay, you take the whole economy down. Here's a couple of posts I wrote in 2005 about what was happening. I am not happy about being right.
As for commercial paper, we are heading into deep dodo:
Look at the fall in nonfinancial debt. It looks as recessionary as you can get. Financial debt is rising, securitized is dropping, and nonfinancial is dropping. The bottom line is that the financial companies are stuck with this stuff, and its performance. The performance is increasingly shifting to the "vile" category.
Gleeful lip-smacking over "Weimar Republic Hyperinflation", "Wheelbarrows of Government-Fiat Paper", "Total Global Economic Collapse", all with the "I TOLD YOU SO! HAW! HAW!" of Eighties Survivalists gleefully predicting "When Push Comes to Shove, The Most Plentiful Food Source In Our Cities WILL BE HUMAN FLESH! Prepare to Do What Must Be Done to SURVIVE!" And a lot of "Abominable Fancy" gloating, like Left Behind fanboys reading for wish-fulfillment.
Speaking of Left Behind fanboys, some bona-fide Christianese is leaking into a lot of the blog comment threads, along with the more usual "3 Ayem Phone-ins to Art Bell" tone. Christianese tag lines like "Coming One World Currency", "Coming One World Economic System", and "Coming One World Government" are popping up. The only thing missing is the all-caps "SIX SIXTY-SIX! DON'T TAKE THE MARK!", but given the online meltdown, that's just a matter of time.
The Headless Unicorn Guy
Still, for some of these financial companies it IS apocalypse now. If you were doing what you were supposed to be doing, it's hard times. If you got all frisky and risk-delusional, it's "Last one out, please turn out the lights".
A lot of these securities have a lot of value in them. What's disappearing rapidly is the confidence-added value.
The problem for some of these issues is that since qualification at origination was light, we all just have to wait to find out how many bad apples are in the barrel. After everyone is able to size that up, the prices on a lot of these will go up.
I don't think investors are going to want pigs-in-a-poke ABS for a while!
There was life after the dot.com bust, the 87 crash, etc. There will be life after the great debt implosion as well. After this is over, we can stop throwing money into vacant houses and start putting money into stuff that will actually pay off long term.
I can't wait for the end of this. Still, the end of this is going to look a lot like the beginning rather than some movie landscape.
Maybe some people want an apocalypse because they think some magical new world will arise from it. But it isn't going to happen.
It seems that doomsayers of all stripes overindulge in schadenfreude joy over another's pain when their predictions of doom and moral failure are finally fulfilled. They seem to think that their moral purity will protect them. I'm personally of the opinion that when the collective ship goes down everyone's butt is going to be in the water regardless of who was freakishly paranoid enough to be wearing a lifepreserver the entire trip. (And BTW, good luck holding on to those personal waterwings when everyone is getting panicky.) I wish there was a way to tell these people to stop the holier-than-thou act and help with the bailing.
Oh, and MOM, for your collection of debt stats.
"The U.S. asset-backed commercial paper market had its biggest weekly drop in two months as $40 billion of mortgage-related writedowns by banks gave investors more reason to avoid buying the debt.
Debt maturing in 270 days or less and backed by mortgages, credit-card loans and other assets fell $29.5 billion, or 3.4 percent, to a seasonally adjusted $845.2 billion for the week ended yesterday, the Federal Reserve in Washington said today. The broader commercial paper market had its first contraction in six weeks, declining less than 1 percent."
" The asset-backed commercial paper market has fallen for 13 straight weeks, shrinking about 29 percent to its lowest level in 22 months since reaching a peak of $1.18 trillion on Aug. 8. The broader commercial paper market declined $15.6 billion in the past week to $1.87 trillion, according to the Fed data.
Yields on three-month Treasury bills have tumbled 54 basis points this month to a 12-week low of 3.36 percent, signaling increasing demand for safer assets."
As for the cp stats, look at that graph. There was a fall in nonfinancial debt after Katrina, but it wasn't near as large. It's the nonfinancial debt that worries me. I don't see containment on that graph - I see diffusion.
Great post -- I had no idea non-financial was falling. Combined with transports (ports/trucks), tax revenue collection, and consumer sentiment, it does appear things are about to really get nasty.
I know how grim it was after the tech crash. And a bunch of folks who did finally find jobs afterwards were pushed down into low paying work. I expect the same to happen after this crash, whenever the financial market finally sorts itself out. It's not going to be pretty or pleasant and I wouldn't wish this on my enemy.
A good crash, could set the foundations for a better politico, socio, economic era.
After all, a lot of the folks that were getting the easy credit to cash in on the mythical asset boom, voted GOP esp in those new burbs with the escalating RE values. The neo liberal thesis of markets rule, especial the capital ones worked as long as debt substituted for income, when doctors cannot collect on debt and other professionals suffer income loss because their customers cannot use debt to pay for the services, then support for the current way things are will fade.
A real cash will eliminate lots of the money following into campaign chests and lobbyist's pockets, eliminating a lot of the bought an paid for government.
But yea, it is going to be painful.
And yea, me and mine are going to suffer too.
Cupio dissolvi...These words have been going through my mind for quite a long time now. It's Latin. They mean "I (deeply) wish to be annihilated/to annihilate myself", the passive form signifying that the action can be carried out both by an external agent or by the subject himself...Cupio dissolvi... Through all the screaming and the shouting and the wailing and the waving of the rainbow cloth by those who invoke peace but want appeasement, I hear these terrible words ringing in my ears. These people have had this precious gift, this civilization, and they have got bored with it. They take all the advantages it offers them for granted, and despise the ideals that have powered it. They wish for annihilation, the next new thing, as if it was a wonderful party. Won't it be great, dancing on the ruins?
When I read this, I was reminded of a passage in Walter Miller's great novel A Canticle for Leibowitz:
...children of Merlin, chasing a gleam. Children, too, of Eve, forever buiding Edens--and kicking them apart in berserk fury because somehow it isn't the same.
Once folks paid to watch staged train crashes.
Or folks tear each other apart in coliseums.
Or took picnic lunches to watch battles.
So this obsession to view disaster is a human thingee.
As to the present situation, before one praises it, one must decide if it is viable. If not viable, then it does not matter if one praises it or eagerly awaits its ending.
If the question is if the American form of capitalism so great, why then so much inequality. If it is based on a fraud, then it is a not so good thing and praising it is a good thing.
Also, the "pay to watch bad things happen to other people" examples you mention are different from hoping for a societal collapse which will include oneself...
I can think of 2 exceptions. fundamental Christians esp US southern poor and fundamental Moslems mostly poor. Both long for the destruction of the material prosperity and their ascendancy in some spiritual world.
My other point is that lots of folks like to watch destruction. Likewise most folks do not understand how that destruction will affect them. In the case of the train crashes, folks were killed by flying pieces of machinery. In the case of the battle (1st battle of Bull Run, US Civil war) some were collateral damage. In the case of Ancient Rome, it was a prelude to losing their greatness.
In any case, regardless of the temperament of those awaiting a collapse, from the Mise folks (the Austrian Economic folks) on the right to the lefties awaiting the eclipse of the GOP in an economic downturn. The question is if the present structure can continue, or must collapse.
If it must collapse, then attitudes do not matter in the least.
Kindly remember that the only constant in the universe is change and all thing have an ending.
Before deciding whether the "present structure" is unstable or not, we have to identify what that particular structure is. Some talk of the "system" as if it is one coherent structured reality, but it isn't.
I'm finding this conversation interesting, but a bit confusing.
Consider David's point about the desire for destruction being a disease of prosperity. That is pretty broadly true. After all, the various immigrant populations coming here are largely coming here to participate in things as they stand. Nor is that search just an economic search. Many come here because of what is relative security and stability. The Chief certainly did!
Also, Christian populations may wish to go to heaven individually, but relatively few of them want to go now. The religion explicitly states that we can not create heaven on earth. I would say that most Muslims I have known are very similar to Christians I have known.
The Caliphate now crew is actually the creation of prosperity and dissatisfaction. In structure, the radical movements in countries like Egypt are extremely similar to movements in SA. A country that has managed to achieve real prosperity for say 5-10%, and little hope of leaving poverty for the balance of the people is going to be subject to revolutions similar in nature.
Of course, they and their loved ones will be caught up in the rapture and not suffer in the tribulation.
I am not sure how few they are, but sufficient to buy a heap of the 'Left Behind' series literature. My view is a bit biased on this as I have sampled the Pentecostal and Charismatic flavors of Christianity at various times.
"present structure" has several parts to be sure. Too much money flowing into politics via lobbying and campaign funding. Too little concern for the American Worker. Very large amounts of financial instruments based on fraud and questionable mathematical modeling.
Why too much follow the leader in the right wing side.
Lets say that I desire a job, security in my old age, and freedom from dying cold, shivering and hungry in a cardboard box.
I prefer a progressive government, but could hang with a traditional conservative one.
I see one benefit of the great depression was the destruction of the wealth that corrupted the prior governments. I believe that the only way out of the present corruption is the elimination of great wealth that can buy government.
Where any good times will come from is a mystery to me. Factories are too automated to bring large amounts of employment. Maybe health related, ecology related and social related business ventures paid for party/entirely by public funds are my best guess.
Never the less, analyzing the doom sayers for nihilistic tendencies is a waste of energy and virtual ink. I have lived through several periods of times from fall out shelters to survivalists to Y2K freaks. I have had unmarked depression era roadside graves pointed out to me where folks died looking for work by the survivors.
How bad can it get? Who really knows? Yea in past times folks survived, but that was in a time when folks and their relatives had farms to fall back on or unskilled labor. Not now.
We do vote. Only the people can vote. They are scared of that vote.
It's the voters who have not held our government accountable for the twists and turns and lies and elisions. I think it is because the voters themselves don't want to confront the hard realities.
One follow the other, I think. Say an truly independent government might have encouraged savings and discouraged debt. One when under the sway of great wealth buying government would the government allow the reckless accumulation of debt.
The purpose of leaders is to lead for which they get wealth, power and fame. These leaders by the virtue of leadership can encourage the ordinary citizen to save or spend recklessly. When I watch TV I see commercials praising the use of credit cards. OK maybe freedom of speech and all that, but where are the commercials encouraging savings and prudent consumption. Or commercials encouraging self made gifts instead of going to the mall?
If a green Martian landed and viewed the TV, what would he conclude the leadership was directing the citizens to do? Using the might of government, the power of media and the most persuasion known to man, the citizens are encouraged to get into debt and spend recklessly.
Yea the citizens have a responsibility, but when media is controlled by a certain group, then how in the heck are the citizens supposed to divine truth? Rather like the citizens of the USSR being bombarded by a message of the state. How does one find truth?
So I very much object to the idea of a willingly deluded citizenry where communications, leadership, and the dissimulation of knowledge are controlled by those of great wealth whose objective is to maximize their wealth. It is those of great wealth deluding the citizens. Then blaming those citizens for following their lead.
Of course, the other thing I see here in these posts, which I've seen on other lists, is the demonization of those you don't agree with. You might try talking to someone who reads those Left Behind books. You might find out that there actually are areas you can agree on. Might come in handy if things get ugly and you can't surround yourself with folks that think just like you, vader. As for inequality, name me one economic system, anywhere, where there are not have and have nots. It exists even in prisons. People are not equal and you can't make them so.
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