Rapidly falling prices of assets that many people have invested their whole economic life on makes the population clamor for government intervention on an industry deemed to be too big to fail.
“The words of my grandfather always go through my head [...]. He would always tell me, the only people who survived the Great Depression were those who had money to spend when everyone else was broke. Those who saved while everyone else spent like crazy”.
“I think the best case scenario is that the dollar only loses half its value.”
Thanks for the link, Jorge.
Here’s a brilliant conference by Hans Rosling on how developing countries are pulling themselves out of poverty. Besides being the most sui generis and amusing talk on economics I’ve ever seen, he presents viscerally the difference an extra $10 per day on income can have in the quality of life.
I was surprised that he didn’t point out that, on his presentation, the listed means for development are almost opposite in importance to the goals, which could indicate why attempting to follow the same path once you’ve reached development leads only to stagnation.
Using his Gapminder tool, checked Costa Rica’s progress on GDP (graph after the text). Even knowing the effects that the Carazo administration had on our country, it was still shocking to see on the chart how far backwards we had ended up in terms of GDP.
Presenters, take notice: that’s how you give a talk on a dry subject.
Detailed fiat currency article over at Technocrat, with a very spirited discussion on the comments. I completely disagree with Thomas Lord’s points, but an anonymous poster already went through a lot of work calling bullshit! on them. I’d never heard of the Working Group before (more on that group on The Telegraph).
Remember Cramer flipping out? I think we ain’t seen nothing yet.
Singaporean banks try to reassure local investors that they won’t be affected by the sub-prime mortgage problems in the United States. On France, their biggest listed bank, BNP Paribas, freezes $2.2 billion worth of funds and the European Central Bank injects around $130 billion into euro-zone money markets, trying to soothe things. Boy that’ll do wonders for inflation.
‘When the ECB starts being vocal about injecting liquidity, if they ever wanted to create a sense of panic that would be the way,’ said Tom Hougaard, chief market strategist at City Index.
Earlier, the European Central Bank said it had injected into the money market an unprecedented 94.84 bln eur in a move to meet a liquidity shortage amidst what it called ‘tensions’ in the euro area money markets.
And from Bloomberg:
“Today’s step by the ECB looks like a sign of panic,” said Sergi Martin, who helps oversee $9.6 billion at Credit Andorra in Andorra. “We might see more of this in the coming days.”
And on Technocrat, a reader relays an anecdote of how mortgage are having a dramatic effect on overall health:
Santa Clara county (south west of S.F.) has, for a few years now, suffered from little outbreaks of West Nile disease. Well, now the foreclosure rate is sufficiently high that a serious concern has become abandoned homes with unmaintained swimming pools in the yard, breeding mosquitos like mad.
It’s a small, small world.
PS: Of course, the Euro drops to the lowest it’s been in a while.
China has decided to start swinging its economic club, threatening the U.S. to affect the value of the dollar by selling some of the $1.3 trillion and change they own, unless the U.S. backs off the tough trade talk and economic chest banging that Congress has engaged on.
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
Two officials at leading Communist Party bodies have given interviews in recent days warning – for the first time – that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress. Shifts in Chinese policy are often announced through key think tanks and academies.
Described as China’s “nuclear option” in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.
It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.
Here’s the original Telegraph article. Technocrat has an editorial comment by zogger that minces no words:
Housing is just a single manifestation of the over all problem, it just is one of the “pops” here that could happen. Over inflating the money supply to postpone this collapse point is what caused this along with the deliberate market and interest rate manipulations. Nothing is based on real productivity anymore, it is based on how much smoke they can blow in front of how many mirrors.
Boy is Iran going to pay for this one…
It’s official. Costa Rica’s educational system has gone down the drain.
I stopped by Torneca today to buy six screws of a specific size. As soon as I arrive at the cashier, their system goes down. A flustered lady singals a bored-looking fellow and asks him to write me a manual bill for the screws, each one worth 81 colones (about $0.15). The fellow disappears, blank bill in hand.
Five minutes later he returns triumphantly, having written on the bill “6 screws – 81 colones”. He hands it to the woman, and then the fun begins.
Woman: “That’ll be 81 colones.”
Me: “Are you sure?”
Woman: “Yes, look”, she replies, showing me the bill.
Bored Guy: “Oh, no, that’s 81 each…”
Woman (Confused): “But why didn’t you put the total in?”
Bored Guy (Apologetic): “Well… I didn’t have a calculator…”
Me, just wanting to get the hell out: “It’s OK, it’s 486 colones.”
It’s 6 times 8, you know, not like I just calculated the square root of pi to the 12th position and elevated to the power of the number of people in the store. Still the woman ignores me, probably thinking I’m trying to rip them off by pulling a number out of a hat, and proceeds to rummage through her stuff to find a calculator. After stabbing it with her chubby fingers, she turns back to me.
Woman: “That’ll be 480 colones.”
I hand her the 500 colones I have in hand. She gives me back my change. I check it – she just gave me 105 colones.
Me (showing her the coins): “You should have given me twenty.”
The Woman is absolutely flustered by now but, probably deciding to trust me, takes out 20 colones and hands them to me. Her eyes pop out of her head when I hand the 105 back. I didn’t bother to explain – she’s probably still trying to figure it out.
Jim Cramer flips out on a CNBC interview and starts yelling about how bad things are for the fixed income market right now. He starts of easy enough with choice bits like
Bernake needs to open the discount window. That’s how bad things are out there. Bernake needs to focus on this.
and
Bernake is being an academic. It is no time to be an academic.
and then completely loses it and screams:
HE HAS NO IDEA OF HOW BAD IT IS OUT THERE! HE HAS NO IDEA! HE HAS NO IDEA! I HAVE TALKED TO THE HEADS OF EVERY SINGLE ONE OF THESE FIRMS IN THE LAST 72 HOURS AND HE HAS NO IDEA OF WHAT IT’S LIKE OUT THERE! NONE! AND BILL POOLE HAS NO IDEA OF WHAT IT’S LIKE OUT THERE! MY PEOPLE HAVE BEEN ON THE BUSINESS FOR 25 YEARS AND THEY ARE LOSING THEIR JOBS AND THESE FIRMS ARE GONNA GO OUT OF BUSINESS AND HE’S NUTS! THEY’RE NUTS! THEY KNOW NOTHING!
Funny thing is that he’s advocating not a reasonable economy but for the Fed to show up and bail out the financial institutions like Bear Stearns that have gone way over their heads and stand to loose big in the current subprime mortgage meltdown.
Found via BoingBoing.
A delightful podcast with John Allison, chairman of BB&T, about why self-interest is good and how it can help you run a better company. From the EconTalk description:
John Allison, CEO of BB&T Bank, lays out his business philosophy arguing for the virtues of profits, self-interest and production. His definition of justice, one of the core values of his firm, is that those who produce more, get more. He argues that Bill Gates would do more for the world improving Microsoft than running his foundation and giving away money. Allison praises Atlas Shrugged and refuses to let his bank make loans to companies that use eminent domain to acquire property. Is this any way to run a company? Does Allison really run his company this way? How does he deal with the gap between his philosophy and our popular culture’s view of business and profits? Listen as Allison and host Russ Roberts discuss BB&T’s unusual business strategy.
Overall the EconTalk podcasts are both entertaining and enlightening, but so far this one is my favorite.
PS: This is the one I mentioned, Jorge.
I’ve heard many complaints regarding CAFTA, and most of them boil down to the same issue: foreign corporations are bigger, and they’ll swallow our poor competitors whole. People with this argument often use words indicating size, implying that by girth alone these behemoths will squash our tiny industry.
What most of these people actually mean, and what they never tell you, is that they’re afraid that these companies are just plain better. It’s not their magnitude that scares competitors here, but the fact that having actual competition would require them to get off their bloody asses and produce something that’s up to international standards.
Allow me to tell you a story.