Oh well, I can always live in my car

..or maybe not

Alan Sullivan is blogging the latest financial news.

The worst thing anyone can do in any situation is to panic, but unfortunately, that’s exactly what some might be doing. The financial markets need someone like Rudy Giuliani, who reacts to crisis by being the calmest person in the room. Hopefully, someone like that will step forward.

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About marypmadigan

Writer/photographer (profession), foreign policy wonk (hobby).
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29 Responses to Oh well, I can always live in my car

  1. You’re such a Pollyanna :)

    And markets are driven by finances, not personalities. Banks and investment firms are collapsing because they are out of money, not because they’re panicky.

  2. And a couple of guys behind the reporter in this clip are probably setting the correct mood.

  3. mary says:

    LOL. Making out behind the clueless newsguy is one solution.

    The event (in this case, finances) is one factor, but the way people react to it is just as important. During the blackout in NYC during the late ’70, most people panicked, some people destroyed stuff and looted businesses, and it was a mess. During the blackout in 2003, civilians directed traffic, people helped each other out, people partied, and in the end it was ok.

    If Wall Streeters and the govt. refrain from jumping out of windows and seeking trade isolationism, and if we all make fun of the media, we should be ok.

  4. If Wall Streeters and the govt. refrain from jumping out of windows and seeking trade isolationism, and if we all make fun of the media, we should be ok.

    Want a bet?

    There will be, of course, a bounce in time, simply because things do not go solely in one direction forever. But the financial fundamentals for the US at this time are simply not good. The amount of debt that the US has taken on to fund the war and to prop up the economy for so long have finally taken their toll.

    I expect that the dollar will continue to fall, that the economy will continue to sour, and the foreign holders of US debt will continue to worry.

    Bookmark it.

  5. mary says:

    It’s not just the US economy. Britain is already looking at a recession, and so is Europe.

    The amount of debt that the US has taken on to fund the war and to prop up the economy for so long have finally taken their toll.

    No, it’s not all about ‘the war’. The war is a relatively small part of the economy. The housing bubble was a worldwide (or at least a west-wide) phenomenon. When that bubble slowly bursts, it’s going to cause worldwide repercussions.

    If it was only our economy, I wouldn’t be so concerned.

  6. No, it’s not all about ‘the war’.

    Didn’t say it was. But the fact is that it has been an expensive war, and it was paid for with loans from China. Partly because of that, we’ve seen a devaluation of the dollar, which has contributed to the current crisis.

    The war is a relatively small part of the economy. The housing bubble was a worldwide (or at least a west-wide) phenomenon. When that bubble slowly bursts, it’s going to cause worldwide repercussions.

    Going to? Already has. It’s useful to remember, however, that the housing bubble was a credit bubble. The US economy has been running on credit for quite a while, again mostly from loans from Asia. Now that the credit has begun to dry up, we’ll see how the real economy works.

    The US government has refused to bail out Lehman because there simply isn’t enough money in the system to do so. If AIG goes under, watch out.

  7. mary says:

    The US government has refused to bail out Lehman because there simply isn’t enough money in the system to do so.

    Cite? Do you have proof that this is the real reason the govt. has refused to bail out Lehman?

    In any case, this news is much more frightening:

    Russia halts trading after 17% share price fall

    Russian shares suffered their steepest one-day fall in more than a decade on Tuesday, losing up to 20 per cent, as a sharp slide in oil prices and difficult money market conditions triggered a rush to sell.

    The heads of the Russian central bank, the finance ministry and the financial market regulator met on Tuesday night for an emergency discussion on ways to halt the crisis.

    Some people think this is good news, but they’re thinking in terms of politics and not trade. Bad news for Russia is bad news for us too

  8. mary says:

    The US government has refused to bail out Lehman because there simply isn’t enough money in the system to do so.

    Cite? Do you have proof that this is the real reason the govt. has refused to bail out Lehman?

    In any case, this news is much more frightening:

    Russia halts trading after 17% share price fall

    Russian shares suffered their steepest one-day fall in more than a decade on Tuesday, losing up to 20 per cent, as a sharp slide in oil prices and difficult money market conditions triggered a rush to sell.

    The heads of the Russian central bank, the finance ministry and the financial market regulator met on Tuesday night for an emergency discussion on ways to halt the crisis.

    Some people think this is good news, but they’re thinking in terms of politics and not trade. Bad news for Russia is bad news for us too

  9. Cite? Do you have proof that this is the real reason the govt. has refused to bail out Lehman?

    Sure:

    At what point does the government run out of money to lend to troubled banks?

    Many public institutions are themselves going bankrupt. The FDIC (Federal Deposit Insurance Corporation) has only $53 billion of funds, and has already committed almost 15% of it to bail out depositors of IndyMac. The FDIC’s deposit-insurance premiums weren’t high enough, and now it is asking Congress to raise them. Plus, the agency claims only nine institutions are on its watch list. IndyMac wasn’t on the watch list until June, the month before it collapsed. Studies done by experts in banking suggest that at least 8% of U.S. banks are in big trouble. Eight percent of the roughly 8,500 that the FDIC essentially is insuring equals about 700 banks. Another 8% to 16% also are shaky, so some 700 potentially are going bust and another 700 eventually could join them. Yet the FDIC is watching only nine institutions. It’s a joke.

    What recourse will the taxpayer have?

    The taxpayer’s bill is going to be huge. I estimate this financial crisis will lead to credit losses of at least $1 trillion and most likely closer to $2 trillion. When I made this analysis in February everybody thought I was a lunatic. But a few weeks later the International Monetary Fund came out with an estimate of $945 billion, Goldman Sachs (GS) estimated $1.1 trillion and UBS (UBS) $1 trillion. Hedge-fund manager John Paulson recently estimated the losses would be $1.3 trillion, and late last month Bridgewater Associates came up with an estimate of $1.6 trillion. So, at this point $1 trillion isn’t a ceiling, it’s a floor. And the banks, as I’ve said, have written down only about $300 billion of subprime debt.


    And
    :

    The end result of the global economic slowdown may be the U.S. announcing national bankruptcy as the government cannot afford the bailouts that it promised and the market will not bail out the government, Martin Hennecke, senior manager of private clients at Tyche, told CNBC on Thursday.

    The estimated $300 billion cost of the Fannie/Freddie bailout will probably be considered as a loss that the government will have to take, therefore passing it on to taxpayers, he explained.

    “We already have $3 trillion of debt, as far as the U.S. government is concerned. These debt figures across the U.S. economy are rising very sharply.”

    When the government can no longer pass the United States’ “immense debt” on to taxpayers, it will turn to the holders of U.S. dollars, leading to the eventual downfall of the currency, Hennecke said.

  10. Cite? Do you have proof that this is the real reason the govt. has refused to bail out Lehman?

    Sure:

    At what point does the government run out of money to lend to troubled banks?

    Many public institutions are themselves going bankrupt. The FDIC (Federal Deposit Insurance Corporation) has only $53 billion of funds, and has already committed almost 15% of it to bail out depositors of IndyMac. The FDIC’s deposit-insurance premiums weren’t high enough, and now it is asking Congress to raise them. Plus, the agency claims only nine institutions are on its watch list. IndyMac wasn’t on the watch list until June, the month before it collapsed. Studies done by experts in banking suggest that at least 8% of U.S. banks are in big trouble. Eight percent of the roughly 8,500 that the FDIC essentially is insuring equals about 700 banks. Another 8% to 16% also are shaky, so some 700 potentially are going bust and another 700 eventually could join them. Yet the FDIC is watching only nine institutions. It’s a joke.

    What recourse will the taxpayer have?

    The taxpayer’s bill is going to be huge. I estimate this financial crisis will lead to credit losses of at least $1 trillion and most likely closer to $2 trillion. When I made this analysis in February everybody thought I was a lunatic. But a few weeks later the International Monetary Fund came out with an estimate of $945 billion, Goldman Sachs (GS) estimated $1.1 trillion and UBS (UBS) $1 trillion. Hedge-fund manager John Paulson recently estimated the losses would be $1.3 trillion, and late last month Bridgewater Associates came up with an estimate of $1.6 trillion. So, at this point $1 trillion isn’t a ceiling, it’s a floor. And the banks, as I’ve said, have written down only about $300 billion of subprime debt.


    And
    :

    The end result of the global economic slowdown may be the U.S. announcing national bankruptcy as the government cannot afford the bailouts that it promised and the market will not bail out the government, Martin Hennecke, senior manager of private clients at Tyche, told CNBC on Thursday.

    The estimated $300 billion cost of the Fannie/Freddie bailout will probably be considered as a loss that the government will have to take, therefore passing it on to taxpayers, he explained.

    “We already have $3 trillion of debt, as far as the U.S. government is concerned. These debt figures across the U.S. economy are rising very sharply.”

    When the government can no longer pass the United States’ “immense debt” on to taxpayers, it will turn to the holders of U.S. dollars, leading to the eventual downfall of the currency, Hennecke said.

  11. mary says:

    Roubini also says:

    Leaving aside the fact that we are going to have a pretty nasty recession and international crisis, the global economy is going to grow at a sustained rate once this downturn is over. There are significant financial and economic problems in the U.S., and that’s why I’m bearish about the U.S. But the emergence of China and India and other powers is going to shift global economics and politics radically, and the world is going to be more balanced in the future, rather than relying on one engine, which has been the U.S. There are big issues ahead: How do you integrate the 2.2 billion Chinese and Indians into the global economy? There will be transitional costs and the displacement of workers, both blue-collar and white, in the advanced economies. But I’m quite bullish about the state of the global economy, and I’m positive about the medium and long term.

    I agree – as long as we keep away from panic, rabid trade wars and isolationism, things should settle down.

  12. I agree – as long as we keep away from panic, rabid trade wars and isolationism, things should settle down.

    Note that while Roubini is positive about the overall global economy, he is fairly non-committal about the overall future of the US economy.

    And again, panic has little to do with it. This is a financial crisis, not a morale crisis, nor anything to with trade wars or isolationism.

  13. mary says:

    Note that while Roubini is positive about the overall global economy, he is fairly non-committal about the overall future of the US economy.

    I know that, but a rising tide floats all boats. Trade and finance are not like politics and war. Cooperation is key. When others benefit, we benefit.

    You have to stop being so America-centric. There is a world outside the US, you know.

  14. Well, there we go. AIG too was deemed too large to fail, and 85 billion tax dollars are shoveled into it. As the taxpayers don’t have that money, it needs to come from loans, which means further devaluation of the US dollar.

    With time running out after A.I.G. failed to get a bank loan to avoid bankruptcy, Treasury Secretary Henry M. Paulson Jr. and the Fed chairman Ben S. Bernanke convened a meeting with House and Senate leaders on Capitol Hill about 6:30 p.m. Tuesday to explain the rescue plan.

    They emerged just after 7:30 p.m. with Mr. Paulson and Mr. Bernanke looking grim, but with top lawmakers generally expressing support for the plan. But the bailout is likely to prove controversial, because it effectively puts taxpayer money at risk while protecting bad investments made by A.I.G. and other institutions it does business with.

    What frightened Fed and Treasury officials was not simply the prospect of another giant corporate bankruptcy, but A.I.G.’s role as an enormous provider of financial insurance to investors who bought complex debt securities. That effectively required A.I.G. to cover losses suffered by the buyers in the event the securities defaulted. It meant A.I.G. was potentially on the hook for billions of dollars worth of risky securities that were once considered safe.

    If A.I.G. had collapsed — and been unable to pay all of its insurance claims — institutional investors around the world would have been instantly forced to reappraise the value of those securities, which in turn would have reduced their own capital and the value of their own debt.

    “It would have been a chain reaction,” said Uwe Reinhardt, a professor of economics at Princeton University. “The spillover effects could have been incredible.”

    This is heading quickly toward national bankruptcy.

  15. I know that, but a rising tide floats all boats.

    Not the ones that sank.

  16. You have to stop being so America-centric. There is a world outside the US, you know.

    I know that you’re trying to be ironic here, but as the world markets are currently set up, the US economy is the global economic engine. If it falls, everyone else feels it.

    As Roubini says, the global economy is in for a bumpy ride, but is fundamentally sound. With the US economic engine faltering, everyone will need to adjust.

  17. maryatexitzero says:

    This is heading quickly toward national bankruptcy.

    Damn, I knew capitalism and warmongering would be the end of us. We should have listened to those earnest, well-meaning socialists when we had the chance. We could have been part of a glorious revolution.

  18. maryatexitzero says:

    Don’t worry about us – save yourselves…

  19. Damn, I knew capitalism and warmongering would be the end of us.

    Oh. I hadn’t realized that’s what I was saying. Thanks for straightening me out.

  20. Damn, I knew capitalism and warmongering would be the end of us.

    Oh. I hadn’t realized that’s what I was saying. Thanks for straightening me out.

  21. Oh look. Someone is out of money. Or am I being all “capitalist this” and “warmongering that” by mentioning it?

  22. maryatexitzero says:

    If you’re not trying to say that we’re inevitably doomed because of our decadent capitalist/warmongering/Republican ways, then are you trying to say?

  23. If you’re not trying to say that we’re inevitably doomed because of our decadent capitalist/warmongering/Republican ways, then are you trying to say?

    I’m saying exactly what I said above. The US government is in a bad spot, is running out of money, and is risking national bankruptcy. I posted several links to non-communist sources to back that up, and from that you interpret hogwash that you then attribute to me.

    I don’t think I said anything about doomed, inevitable, capitalist, or warmongering. The closest I came was in pointing out the the expense of the Iraq war has significantly contributed to the enormous US debt.

    If you think that is some kind of stupid socialist rant, well, I don’t know if you can be conversed with.

  24. If you’re not trying to say that we’re inevitably doomed because of our decadent capitalist/warmongering/Republican ways, then are you trying to say?

    I’m saying exactly what I said above. The US government is in a bad spot, is running out of money, and is risking national bankruptcy. I posted several links to non-communist sources to back that up, and from that you interpret hogwash that you then attribute to me.

    I don’t think I said anything about doomed, inevitable, capitalist, or warmongering. The closest I came was in pointing out the the expense of the Iraq war has significantly contributed to the enormous US debt.

    If you think that is some kind of stupid socialist rant, well, I don’t know if you can be conversed with.

  25. mary says:

    I didn’t say that it was some kind of stupid socialist rant, I said that it was an earnest, well-meaning socialist suggestion.

    I already acknowledged that the US economy is in serious trouble. It’s heading downhill now, but in the long run, the outlook for the world economy (and thus the US economy, since we’re all intertwined) is good. Do you agree that the long-term outlook (once we get over this issue) will be good?

    The dot com bubble burst quickly, but a housing bubble sort of slowly dissipates. Things will get much worse before they get better.

  26. mary says:

    I didn’t say that it was some kind of stupid socialist rant, I said that it was an earnest, well-meaning socialist suggestion.

    I already acknowledged that the US economy is in serious trouble. It’s heading downhill now, but in the long run, the outlook for the world economy (and thus the US economy, since we’re all intertwined) is good. Do you agree that the long-term outlook (once we get over this issue) will be good?

    The dot com bubble burst quickly, but a housing bubble sort of slowly dissipates. Things will get much worse before they get better.

  27. Do you agree that the long-term outlook (once we get over this issue) will be good?

    The global economy will recover. I doubt that the US economy will get anywhere near what it once was.

  28. mary says:

    Our economy was big in comparison to others, which really wouldn’t benefit us in the long run. It takes some adjusting, but being the ‘biggest’ economy around is an imbalance that can’t go on forever, nor would we want it to.

  29. This adjustment would include things like foreign ownership of some of your largest institutions. Morgan Stanley is currently trying to sell half of itself to China.

    If that isn’t desperation, I’m not sure what is.

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