Imminent and severe market correction

[gfresh]

The good thing is that it now seems they have the Senators **** scared, and maybe they are finally waking up to the magnitude. This is maybe a good thing. Inaction on policy initiatives to solve the problem at its heart have continued for many many months now.

So far, still don't see much mention of an attempt at tackling the housing crisis however. So far just looks like allowing conditions that may allow the re-inflatation of the credit bubble, and the blind hope that everybody will start borrowing willy nilly, and start buying again. Not sure if it's really going to work like that.

For a country (or the world for that matter) to prosper and grow, investments should at least have a productive element. Any system designed with the main aim being to build wealth at the expense of others without an increase in productivity is doomed to failure. It is no different to pyramid selling.

Would not like to be an American tax payer right now. All I see is a big iron ball pulling on their leg for the next decade. Not very good conditions for another economic boom.

I think you're dead right on the productivity there. How are these measures improving the productivity of American businesses that have been failing for the best part of 8 years (auto makers and airlines for instance) ? Only by improving productivity can their global competitiveness increase, real wealth be created, and a stronger economy created longer-term.

With real cash to burn, infrastructure being built to improve real productivity, and more importantly learn from the mistakes of the USA, the stage is set for Chinese economy to really romp all over the Americans in the next 10 years. If they play their cards correctly of course.

 

[pepperoni]

Agree with these posts ... these unproductive profits were never real ... and sooner or later this needed to be corrected, as it is now through the asset price drops and now the bailout.

IE - the average US family started with whatever assets and their 700k share in the US debts/deficit. The boom may have made them X but in return they get more US debt/deficit ... just a question of whether is $100k, $500k or more.

Either way you can bet the bailout will try to kick the can as far down the road as possible ... poor next generation will either be wage slaves of unprecedented proportions or see major upheavals/war etc.

 

[gfresh]

The frustrating thing is we are not much better here, with all our imaginary wealth and investment created through property rather than real productivity. While it might help those involved with building, construction, and the rest, it's not very useful unless we can somehow export houses worldwide

It would be an interesting to think how different our economy could be if we instead poured those billions of dollars into things that actually helped bring dollars into the country, rather than keep pushing house prices up and up. Really achieves nothing, and only helps destroy real wealth as more and more income is required to service an average mortgage, rather than putting it towards other wealth generating assets.

Mining may not be the most advanced way to produce real wealth, but at least it's tangible, and real new dollars are created. It's at least what we can draw upon, whereas many other countries do not have this opportunity. This ridiculous housing madness has to stop, and investment in real, wealth creating industries needs to be encouraged.

 

[Glen48]

Well the Bronco's went who is next Citibank. MQG Suncorp, J P Morgean this week.

 

[Macquack]

Well the Bronco's went who is next Citibank. MQG Suncorp, J P Morgean this week.

Have to be Mac bank aka the "Sharks", the financial "Storm's" next victim.

 

[white_goodman]

Have to be Mac bank aka the "Sharks", the financial "Storm's" next victim.

MQG, the ceo has sold out of everything im pretty sure if you look at company announcements

 

[zt3000]

If the current world financial crisis (centered in the US) has been created by unlimited credit creation combined with irresponsible lending by financial institutions, then how can throwing more money at it ( "mother of all bailouts") fix the problem?

Thats easy

Print more money lol, and it has the effect of devaluing the dollar, and hence devaluing the chinese 1.3 trillion US reserves ... lol

smart cookies i say

 

[Whiskers]

So, are you saying something will be dropped on us from a great height

Well, for the US anyway.

The are certainly going to have to wear a heavy economic burden for a long time yet.

It would be interesting to see what ROE the US Fed got out of all their 'investments' over the last week. Let me see, the Dow finished the week before at 11400, finished this week at 11400, so for an outlay of $400B, $500B or whatever, they are - treading water, or whatever the sludge they find themselves in.

Same again next week fellas?

Our thoughts & gratitudes go out to the good citizens of the US, who have pledged their hard earned tax's to subsidise the bail out of the world.

Thoughts and gratitudes be dammed. Thoughts, blame and serve you bloody right would be more like it.

It is the nonproductive use of money that was never there in the first place by financial institutions in the USA that started this mess. Followed by plenty of wheeler dealers, some on this forum, that think it is smart to make huge financial gains using questionable trading methods.

For a country (or the world for that matter) to prosper and grow, investments should at least have a productive element. Any system designed with the main aim being to build wealth at the expense of others without an increase in productivity is doomed to failure. It is no different to pyramid selling.

Now that the failures of short selling without owning something to sell have been revealed, particularly where the aim is to purposely devalue a company, we are well on the way to correcting the correction.

I'm inclined to agree with nioka to a large extent here.

Since it's essently the US's flu, born and bred out of their own unhygenic economic house keeping, isn't it better to quarantine it to there as much as possible than let it spread around the world?

If one steps back and tries to imagine what 'God' would do ... I suppose he would say something like you made your own bed, so now lay in it.

Seriously though, the US eventually had to wear the pain otherwise it would have been even more despised by the rest of the world, untrusted, even more extraordinarly self centered and incapable of any semblance of good economic management.

In the macro scheme of things, this may just have sealed the steady demise of the US as an economic power and allow time for the rest of the world to sort out a new era in world economic players.

 

[pepperoni]

If one steps back and tries to imagine what 'God' would do ... I suppose he would say something like you made your own bed, so now lay in it.

Id say the same if we hadnt been using AIG, MBIA and even cheap US funding for many big deals in aus over the last 5 years!

And if our banks had no exposure to the US , which they have to the tune of many hundred million.

And if our property speculators hadnt been taking advantage of said bond insurers, raters and funding sources to some degree.

 

[mayk]

FWIW, the trading is not productive, so wealth creation by trading should also be looked down upon. (Now almost most of the forums members including me do trading so just leave it at that). One more positive for investors over traders...And if media is to be believed, they are actually causing this turmoil

Nowadays people talk of billions (and trillions) as if they do not matters. Scary stuff. I guess, Billion is the new Million.

 

[Kauri]

GSE regulator James Lockhart says in their position as conservator the FHFA has directed Fannie and Freddie to start buying MBS issues immediately. SO the big sponge has been launched, and it will be interesting to see how having a motivated buyer changes the desire of banks to divest this paper at current pricing, or whether they"ll hold out for a bounce - either way it plays into the Fed & Treasury"s hands, but if there"s a lot of selling and no bounce that could be ominous.

Cheeers
...........Kauri

 

[Glen48]

Prof Steve Keen said on CH 9 he is selling his house, I have sold mine and it should settle to-day.

From The Money Markets:
View our 1-hour video "Plague to Pandemic"
They tell us interest rates to rise to cover the cost of the USA money troubles.

 

[dhukka]

So the investment banks are officially dead, I guess those nasty short sellers may have been onto something?

Goldman, Morgan to become holding companies
Companies get access to Fed lending in exchange for oversight

WASHINGTON (MarketWatch) -- In yet another extraordinary development for Wall Street, the Federal Reserve said late Sunday night that venerable investment banks Goldman Sachs and Morgan Stanley will become bank holding companies.

The Wall Street titans will be allowed to transition into holding companies following a mandatory five-day waiting period, and will be able to take advantage of credit from the Federal Reserve Bank of New York in order to complete the transition.

Upon completion, Goldman (GS) and Morgan (MS) , two of the biggest and most powerful investment banks on Wall Street, would join the ranks of and compete with Citigroup (C) , JPMorgan Chase & Co. (JPM) Bank of America (BAC) and others.

In becoming holding companies, Goldman and Morgan would get access to the Federal Reserve's emergency lending facilities. But that access comes at a price: greater scrutiny by regulators and new capital requirements.

 

[Glen48]

I wonder if things get so bad in USA if there will be another civil War?
From what I see there seems to be resentment by the Tax payer's being forced to bail out the very people who put the tax payers under water.
Why did Turnbull mention Rudd should look at a USA style bail out? What does Turnbull know?

 

[sassa]

Anybody know what the plan will be for next month?

 

[bean]

ALMOST ARMAGEDDON
MARKETS WERE 500 TRADES FROM A MELTDOWN
http://www.nypost.com/seven/09212008/business/almost_armageddon_130110.htm

 

[kransky]

if your really sick but you refuse to take that bad tasting medicine we know what happens in the end...

next they will just ban selling. that will keep prices going up

 

[Kauri]

Treasury is throwing a $700 bln price tag on the Troubled Asset Relief Program (TARP) and requesting a 6.5% increase in the debt limit to cover it. Less than two full months have passed since the last permanent increase to the debt limit was approved. If closed before the next presidential inauguration, the proposed increase (to $11.3 tln) would be the sixth under George W. Bush and a 90% increase from where it was when he took office in 2001. Mayhaps the shock and awe campaign he engineered was really aimed at the US populace... not poor old forgotten Binny...
The latest requested increase ($685 bln) is equal to half of the total debt
ceiling in 1983 $1.39 tln). The total is up more than eightfold in 25 years.
Doing that again in the next 25 years would mean a $92 tln debt in 2033. At
current population growth rates, that would push the per-American share to
$229,824, more than a tenfold increase from today, before the TARP is paid for.
Few expect American taxpayers to pick up the full tab but it suffers the
imagination to think that foreign reserves are going to grow far enough and fast enough to absorb the Treasury's debt, least of all at current low rates. -- but lets worry about that tomorrow...

Cheers
...........Kauri

 

[rub92me]

Treasury is throwing a $700 bln price tag on the Troubled Asset Relief Program (TARP) and requesting a 6.5% increase in the debt limit to cover it. Less than two full months have passed since the last permanent increase to the debt limit was approved. If closed before the next presidential inauguration, the proposed increase (to $11.3 tln) would be the sixth under George W. Bush and a 90% increase from where it was when he took office in 2001. Mayhaps the shock and awe campaign he engineered was really aimed at the US populace... not poor old forgotten Binny...
The latest requested increase ($685 bln) is equal to half of the total debt
ceiling in 1983 $1.39 tln). The total is up more than eightfold in 25 years.
Doing that again in the next 25 years would mean a $92 tln debt in 2033. At
current population growth rates, that would push the per-American share to
$229,824, more than a tenfold increase from today, before the TARP is paid for.
Few expect American taxpayers to pick up the full tab but it suffers the
imagination to think that foreign reserves are going to grow far enough and fast enough to absorb the Treasury's debt, least of all at current low rates. -- but lets worry about that tomorrow...

Cheers
...........Kauri

Don't worry, the show must go on. They're already inventing weapons of mass debt destruction which will blast all that debt to pieces.

 

[Awesomandy]

They're already inventing weapons of mass debt destruction which will blast all that debt to pieces.

It certainly looks like they've created their own WMDs. Currently, the people who are most likely to destroy the current American way of life are their economic policy makers, rather than Osama and co.