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9-19-08 Crisis End Game--Paul Krugman NY Times

Updated on September 19, 2008

Op-Ed Columnist Crisis Endgame By PAUL KRUGMAN Published: September 18, 2008

On Sunday, Henry Paulson, the Treasury secretary, tried to draw a line in the sand against further bailouts of failing financial institutions; four days later, faced with a crisis spinning out of control, much of Washington appears to have decided that government isn't the problem, it's the solution. The unthinkable - a government buyout of much of the private sector's bad debt - has become the inevitable. Skip to next paragraph

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The story so far: the real shock after the feds failed to bail out Lehman Brothers wasn't the plunge in the Dow, it was the reaction of the credit markets. Basically, lenders went on strike: U.S. government debt, which is still perceived as the safest of all investments - if the government goes bust, what is anything else worth? - was snapped up even though it paid essentially nothing, while would-be private borrowers were frozen out.

Thus, banks are normally able to borrow from each other at rates just slightly above the interest rate on U.S. Treasury bills. But Thursday morning, the average interest rate on three-month interbank borrowing was 3.2 percent, while the interest rate on the corresponding Treasuries was 0.05 percent. No, that's not a misprint.

This flight to safety has cut off credit to many businesses, including major players in the financial industry - and that, in turn, is setting us up for more big failures and further panic. It's also depressing business spending, a bad thing as signs gather that the economic slump is deepening.

And the Federal Reserve, which normally takes the lead in fighting recessions, can't do much this time because the standard tools of monetary policy have lost their grip. Usually the Fed responds to economic weakness by buying up Treasury bills, in order to drive interest rates down. But the interest rate on Treasuries is already zero, for all practical purposes; what more can the Fed do?

Well, it can lend money to the private sector - and it's been doing that on an awesome scale. But this lending hasn't kept the situation from deteriorating.

There's only one bright spot in the picture: interest rates on mortgages have come down sharply since the federal government took over Fannie Mae and Freddie Mac, and guaranteed their debt. And there's a lesson there for those ready to hear it: government takeovers may be the only way to get the financial system working again.

Some people have been making that argument for some time. Most recently, Paul Volcker, the former Fed chairman, and two other veterans of past financial crises published an op-ed in The Wall Street Journal declaring that the only way to avoid "the mother of all credit contractions" is to create a new government agency to "buy up the troubled paper" - that is, to have taxpayers take over the bad assets created by the bursting of the housing and credit bubbles. Coming from Mr. Volcker, that proposal has serious credibility.

Influential members of Congress, including Hillary Clinton and Barney Frank, the chairman of the House Financial Services Committee, have been making similar arguments. And on Thursday, Charles Schumer, the chairman of the Senate Finance Committee (and an advocate of creating a new agency to resolve the financial crisis) told reporters that "the Federal Reserve and the Treasury are realizing that we need a more comprehensive solution." Sure enough, Thursday night Ben Bernanke and Mr. Paulson met with Congressional leaders to discuss a "comprehensive approach" to the problem.

We don't know yet what that "comprehensive approach" will look like. There have been hopeful comparisons to the financial rescue the Swedish government carried out in the early 1990s, a rescue that involved a temporary public takeover of a large part of the country's financial system. It's not clear, however, whether policy makers in Washington are prepared to exert a comparable degree of control. And if they aren't, this could turn into the wrong kind of rescue - a bailout of stockholders as well as the market, in effect rescuing the financial industry from the consequences of its own greed.

Furthermore, even a well-designed rescue would cost a lot of money. The Swedish government laid out 4 percent of G.D.P., which in our case would be a cool $600 billion - although the final burden to Swedish taxpayers was much less, because the government was eventually able to sell off the assets it had acquired, in some cases at a handsome profit.

But it's no use whining (sorry, Senator Gramm) about the prospect of a financial rescue plan. Today's U.S. political system isn't going to follow Andrew Mellon's infamous advice to Herbert Hoover: "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate." The big buyout is coming; the only question is whether it will be done right.

Warren Buffett Pessimistic About Economy 6-25-08 AP

The Oracle of Omaha says head for the bomb shelters!
OMAHA, Neb. (AP) -- Billionaire Warren Buffett has 
already said he thinks the U.S. economy is in a 
recession, and now he says the economy is getting 
Buffett told CNBC in a live interview Wednesday 
that all the data he sees from Berkshire Hathaway 
Inc. subsidiaries shows the economy weakening. 
"Everything connected with construction and with 
consumer, I see weakness, and if anything, it's 
accentuating a little bit." 
Buffett also said he thinks inflation is picking 
up, especially in steel and oil, so it should be a 
concern for the Federal Reserve. 

George Soros is Not Optimistic on Market Outlook 4-11-08


"I consider this the biggest financial crisis of my lifetime," Mr. Soros said during an interview Monday (4-7-08) in his office overlooking Central Park. A "superbubble" that has bee swelling for a quarter of a century is finally bursting."

Here's a link to Louise Story's fascinating article about Soros in today's NYTimes.


How Did We Get in This Mess?

3-19 How Did We Get In This Mess? David Leonhardt explains
 in a short article in today's N.Y.Times
 "...It really started in 1998, when large numbers of people
decided that real estate, which still hadn't recovered 
from the early 1990s slump was a bargain. At the same time,
Wall Street was making it easier for buyers to get loans. 
It was really transforming the mortgage business from a 
local one, centered around banks, to a global one, in which 
investors from almost anywhere could pool money to lend.
"The competition brought down mortgage fees and spurred 
innovation, much of which was undeniably good. Why should 
someone who knows that they're going to move after 
just a few years have no choice but to take a 30-year, 
fixed rate mortgage?
"As is often the case with innovations, though, there was 
soon too much of a good thing. Those same global investors, 
flush with cash from Asia's boom or rising oil prices, 
demanded good returns. Wall Street had an answer: 
subprime mortgages.
"Because these loans to to people stretching to afford 
a house, they come with higher interest rates--even 
if they're disguised by low initial rates--and higher 
returns. The mortgages were then sliced into pieces and 
bundled into investments, often known as collateralized 
debt obligations, or C.D.O.'s (a term that only appeared 
in this newspaper only three times before 2005, but every 
week since last summer). Once bundled, different types 
of mortgages could be sold to different groups of investors.
"Investors then goosed their returns through leverage, the 
strategy around. They made $100 million bets with only $1 
million of their own money and $99 million in debt. If the 
of the investment rose to just $101 million, the investors
would double their money. Home buyers did the same thing, 
by putting little money down on new houses, notes Mark 
Zandi of Moody's Fed under Alan Greenspan 
helped make it all possible,sharply reducing interest rates, 
to prevent a double-dip recession after the technology bust 
of 2000, and then keeping them low for several years.
"All these investments, of course, were highly risky. 
Higher returns almost always come with greater risk...."
 March 18--The Dow was up 420 points or 3.5% on the expectation of a big Fed interest rate cut. 

The Fed cut it's short term rate by 3/4 point , the highest single day-cut in a long time.

Some had expected a full point cut. It will be interesting to see what the stock market does


March 18 The failure of Bear Stearns and its rescue by the Fed and JP Morgan Chase may well be the first rather than the last bank failure. The market is up today, but it's not clear at all that the worst is over. There is a good possibility of more bad news to come.

Feb 12-Shoes Continue to Drop

According to a fron page article in today's NYTimes, the mortgage crisis has spread beyone subprime

loans and is now pinching people with good credit, "sucking in all borrowers" according to Matt Zandi, chief economist at Moody's ...economists say that rate cuts and the $168 billion stimulus

package are unlikely to make a significant dent in the large debts weighing on many Americans, because

banks have tightened lending standards and expected rebates from the government will not cover most house a result more borrowers appear to be giving up on their homes as prices fall "noting a change in social attitudes toward default."

On a more positive note, slightly more than a third of American homeowners have paid off their mortgages completely. The NYT article by by Vikas Bajaz and Louise Story is linked below.

A headlined article on the NYT front page of the business section reads "Bad Bets and Accounting Flaws

Bring Staggering Losses (to hedge funds)

Jenny Anderson reports that this will be the year with the highest number of hedge fund failures given the huge number of new and untested hedge funds, according to Bradley Alford, founder of Atlanta-based

Alpha Capital Management. Anderson's article is linked below.

Meanwhile the inventive wizards of Wall Street have recently invented an entirely new financing concept called SPACS, short for Special Purpose Acquisition Companies earlier called "blank check companies." SPACs sell shares to raise money for an unspecified one big acquisition which they must make within 18 months or return the money, less expenses, of course. Anyone interested in being SPACked can read an article by Andrew Ross Sorkin linked below.



Federal Reserve Cuts Key Rate by 1/2 Percent

Wednesday afternoon, January 30, the Federal Reserve announced a half-point cut, bringing the Fed Funds rate to 3 percent. This comes on top of the 3/4 point cut announced last week, indicating continuing concern about the economic outlook.

More Shoes Drop in New York and Paris

Two big bond insurance companies are in big trouble stemming from the subprime mortgage fiasco. See linked NYTimes story below.

The biggest drop in existing home sales reported. See link below.

One of France's largest banks, Societe Generale, reported $7.1 billion loss due to a secret rogue trader's speculation with the banks's money in European index derivatives. More on this linked below.

1-21-08 Stock Markes Plunge 7% in Europe and Steeply in Asia on Fears of U.S. Inflation

"There is indeed some panic" said Thomas Mayer, chief european economist of Deutsche Bank in London..

Stock Market Down 300 Points 1-17-08


The Dow plunged 300 points and other averages declined as well as markets reacted to continuing bad news stemming from the subprime mortgage fiasco. Congress and the President are considering steps to reduce the depth of what now nearly everyone predicts will be or already is a recession in the United States. Fed Chairman Ben Bernanke told a House of Representatives committee that he supports an "explicitly temporary" infusion of cash into the economy in the form of tax rebates of possibly $80 billion. He said that measures to forestall or shorten a recession are a separate issue from making the Bush tax cuts permanent or allowing them to expire. Other measures might include increasing the level of Unemployment Compensation payments and extending the benefits beyond 26 weeks. A provision for accelerated depreciation of capital equipment purchases, proposed by Republicans is also under consideration. Everyone agrees that measures must be undertaken ASAP if they are to have a chance of avoiding or shortening a recession this year.

Stock Outlook for 2008 Unclear

U.S. and most world stock indexes ended up for 2007, but the outlook for 2008 is uncertain as additional developments in the subprime mortgage crisis continue to unfold. Here's an article from the 1-1-08 NYTimes linked below.

Bad News from Fed is Good News for Stocks

The Dow soared 316 points today following remarks by Federal Reservef Vice Chairman, Donald Kohn, which ingited investor hopes for an interest rate cut in December. Kohn pledged that the Fed would "follow flexible and pragmatic policy making" and "act as needed" in dealing with current volatile economic conditions. "Uncertainties about the economic outlook are unusually high," he said.

CitiGroup in Deeper Trouble Than Previously Acknowledged 11-27

Yesterday there was another indication that the CitiGroup's predicament and that of other banks exposed to the subprime mortgage fiasco is worse than previously admitted. Yesterday CitiGroup announced a $7.5 billion capital injection from the Abu Dhabi Investment Authority in return for a 4.9% equity stake in the bank. Whether or not this cash injection will be sufficient for CitiGroup to pull out of the deep hole which it has dug for itself, only time will tell. Moreover, it gives cause to wonder how many other institutions are similarly vulnerable, institutions who are not in a position to tap into Middle East oil money for a bailout. ???

Having had unsatisfactory personal experience with a CitiGroup credit card and watched an incredibly obtuse and arrogant representative of the bank testify before a Congressional committee investigating credit card "tricks and traps" for the unwary, I can't gin up much sympathy for the bank's current troubles.

Continuing Uncertainty Over How Much More Bad News is Yet to Come Resulted in Another Sharp Decline in Stocks on Monday Nov. 26

Investors bailed out of stocks again today and bought Treasury bonds because they fear more bad news stemming from the subprime mortgage fiasco and resulting credit crunch.

The Dow was down 237 points or 1.8% and the Nasdaq fell 2.1%.

The Wall Street Journal reported that Citigroup's accountants are debating over whether additional $41 billion of mortgaged-back securities onto it's balance sheet on top of the $21 billion hit it has already taken. Whether or not Citigroup takes the additional hit this year, the black cloud isn't likely to evaporate.

An Ugly Week for Investors Michael Grynbaum in the NYT

Stocks plummeted to their lowest level since April in another ugly week for investors who remain frightened by continuing credit crisis. Michael Grynbaum's report in today's NYTimes (11-22) is linked below.

Another subprime casualty--Freddie Mac 11-20


from The Wall Street Journal

Freddie Mac's net loss for the third quarter more than doubled to $2.03 billion on higher credit-loss provisions and the marking to market of securities, reflecting housing-market weakness and the deterioration of mortgage credit. The home-loan investor said the fair market value of its net assets fell by $8.1 billion in the quarter. Freddie Mac has hired an adviser to study capital-raising options and said it is considering cutting its dividend by half. The shares fell 6% in premarket trading.

[Comment: in this observer's view we're nowhere near the end of the bad news.]

Floyd Norris Explains What's Happening to the Stock Market and Credit Markets

In a long article the NYT's senior financial writer, Floyd Norris, comments on what's happening to the stock market, credit market and the housing market.

Suddenly it's not so easy to borrow. That's true for home owners, and its true for companies.

"That is the core of a financial crisis, when too many peo0le head to the exits simultaneously," said Robert Burner the dean of the business school at the University fo Virginia.

Investors bought mortgage and other loans thinking they were completely safe, and some did so with borrowed money....The markets are very paniced and illiquid. Its very difficult to find buyers even for AAA securities....The real problem is that lenders and investors fear things will get much worse. "This is what we would characterize as the first correction of the modern neo-credit market", sad Mr. Malvey of Lehman Brothers. "We've never had a correction with these types of institutions and these types of instruments."

"Financial panics don't happen during depressions," said James Grant, the eidtor of Grant's Interest Rate Observer. "They happen on the brink of depressions."

Not all panics lead to economic downturns, and if this one continues pressure will grow on the Fed and other central banks to lower the short-term interest rates they control and thus stimulate the economy.

But central banks do not always determine what happens in credit markets.

Here's a link to Floyd Norris's article.

What's a Fed Chairman to Do? Alex Berenson in NYT 8-5.2007

"The fine line between creating a bubble and risking a slowdown."

Mortgage Mania Didn't Grip Everyone by Gretchen Morgensen in NYT 8-5-07

The seized-up U.S. mortgage market claimed more victims both here and abroad last week. The American Home Mortgage Investment Corporation, once a big lender, closed its doors, laying off more than 6,000 workers. In Germany, IKB Deutsche Industriebank received a $4.8 billion bailout from a government-owned group that said it would cover potential subprime losses at the bank.

In a report last week, Charles Peabody, an analysy at Portales Partners, an independent research firm in New York, characterized the state of the mortgage market this way: "Investors finally realized that there is such a thing as a bad mortgage loan. As a matter of fact, there is such a thing as a whole bunch of bad mortgage loans."

As a result, Mr. Peabody noted, investors are no longer interested in most of the risky loans that mortgage bankers have been creating lately. Bankers can sell only the highest grade pieces of those wonderful securities pools that were so popular among investors until about five minutes ago.

Michael Farrell, CEO of AnnalyCapital Management, is an excellent person to consult on what is likely to happen next.

Annaly is an investment management company that oversees a a portfolio of strictly high grade assets. The company invests solely in mortgages backed by government-sponsored entities like Fannie Mae, Freddy Mac and Ginnie Mae. Investors understand that it has little exposure to the current credit crunch and have bid up its shares almost 8 percent this year. The shares also pay a generous dividend of 6.4 percent at current prices.

"I look at this sort of like 1990 and 1991," Farrell said, "referring to the savings-and-loan cricis. "Against that backgfound you had a $7 trillion economy that gave birth to the $300 billion Resolution Trust Corp. Now we have an $11 trillion economy and we've already seen $2 trillion of market capitalization going away" before many loans in the pools have actually defaulted, he said.

What about the people who argue that the impact of the morthgage mess will be muted because risks have been spread well beyond the banks and into many parts of the financial world? Mr. Farrell takes the opposite vbiew. Spreading the risk beyond the banking wywstem will make the task of fixing the mess much harder.

"Even if the Fed eases, it is probably not going to help the housing market," he said. "This repair cycle is going to take a lot longer because it is not concentrated in the banking system like it was in the 1190s. Back then, they could repair the banking system by dropping interest rates. Now they can't bail out rich hedge fund guys in Greenwich."


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    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      10 years ago from Birmingham, Michigan


    • profile image

      Gaspar de Portola 

      10 years ago

      Both Buffett and Soros have a habit of usually being correct. That's bad news!

    • profile image


      11 years ago

      so the market responded to the rate cut by shooting up 120 and then back down 160. if the investors don't respond well to rate cuts, and they haven't to the last three, why is the Fed bothering when all it's doing is deflating the dollar.

      I mean, why don't we just print out 10 trillion dollars and just hand it to the bleeding top 10% who represent the stock interest of 90% of the market. Gee, maybe then they will gamble happily again without worrying about the fact that maybe 50% of what they are playing with selling and reselling is uncollectable debt.

      How come it doesn't work like this in Vegas, like, when you lose 500$ at blackjack, the manager rushes out to you and hands you 1000$ more? What is it compulsive gamblers don't get about what "risk" means?

      Jump out of the windows already.

      Lowering interest rates is the WORST possible thing the Fed could choose to do to appease these greedy vultures. There is no 'enough' for them, short of printing out money and handing it to them for nothing and even that wouldn't be enough.

    • Debt Free Project profile image

      Debt Free Project 

      11 years ago from U.S. and Parts of Canada

      I'm with you IDunn. Here comes the inflation... it's OK... we'll just print more money and drop it from Helicopters to the poor American Middle class. How about some sound actions for once.... maybe getting back to a gold standard?.... or not.

    • profile image


      11 years ago

      saw that. inflation. yay, maybe milk will go to 7$ a gallon now.

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      11 years ago from Birmingham, Michigan

      The Federal Reserve just announced a 1/2 point reduction in the federal funds interest rate. This comes on top of the unprecedented 3/4 point cut last week. This unprecedented action indicates conintuing fears for the economic outlook.

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      11 years ago from Birmingham, Michigan

      Thanks for your comments.

    • rogue nestling profile image

      rogue nestling 

      11 years ago

      Bah, then someone will try & profit from feeding people dirt, or the government will provide even more unneeded bureaucratic jobs instead of providing real employment to those who need it, and the Agency for Feeding Dirt to the Needy will spend 90% of our tax money on administration, and 10% actually providing dirt to the hungry.

      Good article, Ralph, and Iounn has provided some great reference & points as well. I'm not one for grasping the complexities of economics, and it's nice to have those who know & follow this information to decipher it & share it with us.

      I can see the more tangible side of it from a great slowdown in the local market (Oil & Gas).

      Thank you. :)

    • profile image


      11 years ago

      look what creating an oil bubble for the profit of the few did to these people:

      Poor Haitians resort to eating dirt

      "...Food prices around the world have spiked because of higher oil prices, needed for fertilizer, irrigation and transportation. Prices for basic ingredients such as corn and wheat are also up sharply, and the increasing global demand for biofuels is pressuring food markets as well.

      The problem is particularly dire in the Caribbean, where island nations depend on imports and food prices are up 40 percent in places..."

      I wonder if our elite will be happy when americans have to eat dirt too. we're such capitalists, I suppose they will try to privatize it. :|

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      11 years ago from Birmingham, Michigan

      Very interesting. I'll take years to unravel this mess.

    • profile image


      11 years ago

      smart business or high crime? whatcha think?

      FBI is probing 14 companies over loans

      "...Agency officials did not identify the companies under investigation but said the wide-ranging probe, which began in spring 2007, involves companies across the industry, from mortgage lenders to financial firms that bundle home loans into securities sold to investors..."

    • profile image


      11 years ago

      yw, watched the drop today too, what like, neg 136 pts, something.  even with the .75 interest rate cut. 

      I think you're right.  It's not bottomed out yet.

      ooh, just looked again


    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      11 years ago from Birmingham, Michigan

      Tnx. Good article. More bad news to come. Market hasn't bottomed yet.

    • profile image


      11 years ago

      this was a good article from today Financial Times:

      The start of the great unwinding

      "This is hyperfinance. In the space of five frenetic days, stock markets have plunged and recovered; the US Federal Reserve has cut interest rates to 3.5 per cent; so-called "monoline" insurers, revealed as a small but vital valve in the financial machinery, have wobbled; and one Jérôme Kerviel has lost EU5bn for a venerable French bank.

      If the US suffers a recession in 2008 or 2009 it will not be due to an industrial decline or an oil price shock. It will be a recession that began in the financial system..."

      thought you might like to look at it, ralph.

    • profile image


      11 years ago

      Shares suffer biggest fall since 9/11 - Mon Jan 21, 7:30 AM ET The FTSE 100 on Monday suffered its biggest one-day fall since the attacks on the World Trade Centre more than six years ago as the worst fears about the prospects for the global economy took hold.

      Bear country seen looming below Dow 12,000

      Reuters - Fri Jan 18, 7:15 PM ET

      NEW YORK (Reuters) - Major U.S. indexes have broken key technical support levels, leaving the stock market vulnerable to further declines and the turbulence could get worse, according to chart watchers.

    • profile image


      11 years ago

      saw that

      thought I was the only one watching around here, should have known you were too.

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      11 years ago from Birmingham, Michigan

      Stock markets down 7% in Europe and steeply in Asia as well on fears of effects of U.S. recession.

    • profile image


      11 years ago

      :p haha, I think you and I are the only ones who care at all. maybe if everyone was less apathetic, we wouldn't be in this economic mess to start with. but thx.

      I love your Hubs. :)

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      11 years ago from Birmingham, Michigan

      Thanks. Good information. I hope everybody reads your links.

    • profile image


      11 years ago

      another note, what is predicted growth rate this year? 1.2, something like that?

      in china they are predicting 10.9% growth.

      in the U.S. when the wealthy were taxed at 91% we experienced our highest economic growth:

      "There is no historical evidence that tax cuts spur economic growth. The highest period of growth in U.S. history (1933-1973) also saw its highest tax rates on the rich: 70 to 91 percent."


    • profile image


      11 years ago

      ah, and market at the moment:

      ^DJI 12800.18 -256.54

      ^IXIC 2504.65 -98.03

      ^GSPC 1411.63 -35.53

      I'd by lying if I said I didn't look everyday to see when it's going to really plummet to the bottom.  I'm going to laugh my ass off.  At some point, everybody has to accept the consequences of their choices.

      That's sure what they say to the working poor. ;)

    • profile image


      11 years ago

      ralph, from today, again:

      "Wary employers clamped down on hiring and pushed the unemployment rate to a two-year high of 5 percent in December, an ominous sign that the economy may slide into recession. President Bush explored a rescue package, including a tax cut, with his economic advisers."

      nice double whammy there.  they are going to take money from the majority by removing their jobs, and then give another tax cut to the wealthy.  roflmao

      depression here we come.

      I fail to see why people don't get that if half of americans have to use 75% of their income on rent or mortgage, they don't have money to spend and the economy suffers, because the cost of housing doesn't calculate into "inflation".  That is what the housing bubble did.

      Then to combat it, they stifle wages, downsize, offshore, etc and people have even less to spend and it's going to help the economy how exactly?

      Then insult to injury, they start removing funds for the final flailings of the increasing poor, and moreso, they then lower taxes on the wealthy AGAIN to make what little we do fund for bottom line survival fall squarely on the backs of the middle class they are in process of killing.

      and they think *I* hate america.  :| 

    • profile image


      11 years ago

      2-2-08 "Overview: Oil and gold break new ground"

      I think you're going to see a lot of this, this year. It wouldn't surprise me if oil went to $150, or more. I put a bit of it in my last Bhutto thread because it's related in part to the situation in Pakistan and which is likely to ignite crap all over the Middle East.

    • profile image


      11 years ago

      yeah, I mean, the way it was hidden in with other stuff, it's people's pensions and seemingly prime stuff too and then there are the other waves... the job losses throughout the housing industry even to supplier (like plumbing etc) and then the wave of service jobs lost from lost business in a cycle. wall street will try to salvage profit through even more outsourcing and more merging yada thus compounding the problem.

      it's always short run with investors it seems, no long run understanding.

      this is exactly the cycle that made the Great Depression a Great depression. It took FDR's New Deal to drag us out of that one albeit it was helped along at the end by WWII which was a time when we still manufactured in this country. we don't anymore. there's not even a trickle-down profit level for americans in general in waging war in this country anymore which, however repulsive, could have been viewed as the only silver lining in the despisable Iraq invasion if there had been.

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      11 years ago from Birmingham, Michigan

      There's not a lot to be optomistic about. There's still more bad news out there in the subprime mortgage crunch.

    • profile image


      11 years ago

      I bet.

      Fed is between a rock and a hard place. I think recession.  If they keep rates up, housing and then financial guts the economy.  If Bernanke keeps lowering them, inflation and that will eat the economy. 

      I think the economy will just be eaten this year.  Oil. Gold.  That's what they are all saying because all that's bad for us bodes well for those... the few profiting off the misery of the many - what else is new.  I read that with the dollar's probable continual decline that even T-bonds would be no good in the not too distant future which would be weird because usually if stocks fall, bonds rise but it seemed feasible the way the author put it.  I might have the link floating around if you want me to send it.

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      11 years ago from Birmingham, Michigan

      The stockmarket crystal ball for 2008 is cloudy.

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      11 years ago from Birmingham, Michigan

      I'm with you Linda. Thanks for the comment.

    • profile image


      11 years ago

      thanks for the articles...clearly what is going on in the markets have me very concerned and I think the FED should do something to bail out all the people that might loose their homes. On the other hand, we have to stop the lenders from raping the innocent that had no idea what they were signing.

      As far as Bear Stearns and Goldman Sachs prices tanking on Friday in the markets...I don't feel one bit bad as the have ripped off so many people with their manipulations of stock.

      Thanks again for the articles.



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