Two of the most accurate forecasters of the credit crisis anticipate that economic conditions will deteriorate further. Nouriel Roubini, who has been consistently been on the dire end of the opinion spectrum, characterizes our current situation as stag-deflation. Meredith Whitney, who was the first banking analyst to call the crisis in financials, and has made some notably astute calls, recently said her outlook for the industry had been “too optimistic.”
In a comment in today’s Financial Times, Whitney gives some recommendations for the financial services industry, all of which are sensible. But the most striking part of the piece is her downbeat reading:
I am more bearish today than I have been in the past 18 months. In so far as the market has impacted on the economy, capital destruction has been so intense that multi-trillions in capital raised by institutions through both private and public capital has gone to plug holes and not stabilise the effects of shrinking liquidity to corporations and consumers. More than $3,000bn (€2,365bn, £1,955bn) of available credit has been expunged from the markets and therefore corporate and consumer borrowers so far this year.
I estimate that the mortgage market will shrink for the first time in US history and that the credit card market will be 18 months behind it. While just over 70 per cent of US households have access to credit cards, 90 per cent of these people use credit cards as a cash-flow management vehicle, or revolve payments at least once a year. While the credit card market is small relative to the mortgage market, it has grown to play a key role in consumer liquidity. Declining liquidity here will have disastrous effects on consumer spending and the economy
I strongly recommend reading the entire piece. One of her suggestions for regulators to focus on encouraging regional rather than national lending operations. Whitney stresses, as we have, that local/area knowledge is necessary for sound credit judgments; reliance on FICO scores has proven to be a disaster.
Whitney does not call for breaking up big banks (and that would be more interventionist than anything on the table right now), but the idea that big banks are better has proven to be a canard. One of the key selling points, that bigger banks are more efficient, is utter baloney. Every study ever done of US banks has found that the industry has an slightly positive cost curve, meaning that costs rise as assets under management grow beyond a certain size threshold (some studies have found as low as $100 million, but the more common level is in the low-mid single digit billions). That means that all the cost savings achieved in mergers could have been realized by each institution separately.
So what has been the real impetus behind bank consolidation? Bank CEO pay is highly correlated with the size of the bank.
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Does the cost curve include or exclude bailouts? :)
Whitney makes very thoughtful comments in the article. I recall about 2 years ago, Bernanke saying that this would be contained to subprime and be in the 125 billion range. Roubini upped that to 1 trillion, then two trillion. It went to 3 trillion almost overnight, and now the cost looks to be around 8 trillion. WW-II cost about 3.6 trillion in adjusted terms according to Ritholz.
At some point, taxes must rise to pay for this mess. After WW-II, top marginal tax rates went to 90%, and were 70% when Reagan took office. I am afraid that we are going to see those kinds of rates again in the near future.
“reliance on FICO scores has proven to be a disaster. “
Can you please elaborate? I thought the FICO scores cannot be blamed for the sub-prime mess since FICO scores did exactly what was expected: identify who had poor credit. If loans were still extended to them and these sub-prime loans defaulted, then that is what FICO was predicting anyway. However, the problems occurred when the CDOs, SIVs, etc. were created.
“reliance on FICO scores has proven to be a disaster”
Thank heavens this is finally beginning to be recognized. The only thing these ever measured was the willingness to pay on time. They are a device to justify charging outrageous fees and make the consumer feel like they deserved it.
Without any component measuring ability to pay, they couldn’t possibly have been good for anything else.
m
Whitney has nailed this crisis from the get go and as it has progressed she has been consistently reliable in her forecasts. Like a voice in the wilderness, she should be listened to.
The concern for all readers should be that she is more bearish now than at any time in the past 18 months.
I also suggest that if you have some time check out Marc Faber’s CNBC Asia appearance from earlier today. Here are the links:
CNBC Asia Marc Faber video 1
CNBC Asia Marc Faber video 2
CNBC Asia Marc Faber video 3
CNBC Asia Marc Faber video 4
CNBC Asia Marc Faber video 5
veerar,
Did I say subprime? I was talking about the more general issue of using FICO as a proxy for borrower creditworthiness. I know of people who are money good and sloppy about paying on the due date. Borrower commitment and stability of employment (which generally means stability of employer) are big issues in judging creditworthiness; FICO gives you zero insight here.
And check out the Alt-A pool Mish has been following Dreadful defaults, even though the FICO scores were good (over 700 if memory serves me right).
Whitney is spot on. The problem is that so many economists and pundits believed (and still continue to believe) that somehow the fallout will be limited to the financial markets and the impact on the real economy almost nil. Did anyone watch CNBC early last week? The stock market has 3 good days in a row and these nitwits are convinced we’re out of the woods. Yahoo Finance had a headline this morning to the effect of “Stock markets down on fears US economy may be heading into a recession”. May be heading into? There’s still way too much of this silliness out there for us to have hit bottom. Wait and see what happens in 6 months when unemployment starts to peak and consumer spending heads into the abyss out of necessity. What we’ve been seeing since mid-September has just been the leading edge of what’s coming over the next year or so.
SalvatoreMA said (in part) at some point, taxes must rise to pay for this mess.
I’m afraid the only tax that can be imposed will be on the value of the dollar itself. The only way to settle this debt will be monetization. I think this has begun in earnest, with the FED buying debt from Fannie Mae, etc.
Why would anyone invest in a company with limited growth potential?
I work in the industry that generates FICO and would like to respond. The FICO score has played a tremendous role in the last three-four decades to democratize credit. I would urge you to read the history of what has been achieved by the FICO score.
There are a number of reasons why the FICO score was not enough to prevent bad loans. Most of the reasons can be traced back to the origination system of which the FICO score was a small part. For example, the loan originator has to verify employment, bank balances, and income in addition to the FICO score. All of these other requirements were eliminated or ignored over time (e.g. NINJA loans) and that is what contributed to the problem significantly.
Yves and Mish are right in showing highly delinquent pools with a 700 FICO score. This happened because these subprime borrowers could refinance before going delinquent on their mortgage or any other loans and hence could keep their FICO score high. If the other checks and balances were still in place, these borrowers would not have been able to keep a FICO score of 700.
Your daily government solvency watch: Treasury CDS tick 68.4, worse than some private corporations. 10 years hit 2.82%. TIPS continue to underperform.
Tyaresun,
If you are a lender in a far flung location relying upon Fico as the driving force behind the creditworthiness of a borrower, how do you differentiate a 720 borrower with managable debts and a decent history of employment against someone who has a 600 score with minimal debts, sizable assets, and a long record of employment? Would it not be more prudent for a local banker to interviewed these potential borrowers as well as reviewing the employment and/or future prospect for employment in the region? How about the ways to cheat by free-riding by using Authorized user accounts? I agreed with MISH/Yves and many who advocate the return to local lending with bankers who have vested interest in seeing good quality borrower get credit extended. FICO just got lucky during a hot streak in the credit bubble….
Please re-read “Fooled by Randomness” before according Whitney any particular authority based solely on her being “the first banking analyst to call the crisis” and the fact that she “has made some notably astute calls”. Ditto for Roubini. Judge their arguments on their merits and the evidence they present, rather than on what you believe to be their track record.
Large Bank Efficiency: not paying for all that useless checking of income, employment, and apparently, criminal record, as well as accepting anyone’s appraisal.
And FICO!!! I have never, ever, been late on a credit card payment! or any other payment for anything – EVER, no defaults, no late payments – EVER!. Employeed as a gubermint weenie, so you know I’m gonna have a job. And yet my FICO score is mediocre. I used to think there was something wrong with me – now i realize these finance guys really have no clue what they are doing.
There is one consensus right now and you nailed it on the head, Too Big to Fail is a serious problem. As companies get larger, they risk more inefficiencies for higher CEO pay.
Which brings me to the question: How can we effectively reduce the size of inefficient companies while allowing efficient companies to further grow.
The solution is to restrict the capital available to less efficient enterprises. One simple way to do this is to remove the tax on dividends completely. By doing so, we would create an internal incentive for firms to return capital to shareholders as opposed to reinvesting it to grow the business. Those who do reinvest to grow the business, would only be able to do so after justifying the high margins available to them for overcoming the capital gains tax.
In effect, as we stand today, a CEO can say to his shareholders ‘look, I just made you all 3$ a share, but if you let me keep it all I can make you more on that 3$ plus you’ll get to keep more of it due to taxes. If I pay you the 3$ now, you’ll only get 70% of it because of taxes.’ Businesses should return all 3$ immediately and allow the market to reallocate the capital, unless they have a strong reason for keeping the funds to grow.
This idea is not fully mine, please read Milton Friedman’s seminal work “Capitalism and Freedom” for more on this idea.
I don’t understand Whitney’s recommendations, frankly. I’d like to know why, at this time, we have a financial system in private hands using public money. We are getting the worst of both worlds by not nationalizing the biggest banks, for dumb ideological reasons. Thus, we are simply triaging a financial sector that is destined to shrink dramatically. And this shrunken sector is then supposed to take up its obligations to the government, which, what with loans and the assets it has taken as collateral, is up to the mid trillions point. That’s crazy. The sector will either be smaller but healthy – that is, its obligations will be eaten by the gov – or smaller and convulsive – as attempts to pay back the government prove worse than the disease they were supposed to cure.
The answer to the credit card crunch is not to allow the credit card industry, yet again, to bleed its customer base in the name of (oh laughable term) ‘democratizing’ credit. A nationalized bank could actually loan at a much more reasonable rate, thus forcing competitors to actually align their rates with the reasonable return that comes from their ability to borrow at superlow rates and lend at superhigh ones. And a nationalized bank might be just the thing to deal with the kind of loans that GM will need to survive. It is way past time to do this.
I’m predicting the end of the debt kiting scheme known as the Federal Reserve in 2009
Whitney is lame-brained about recommendation number 4.
I’m more concerned about the comsumer’s solvency than the consumer’s liquidity. People aren’t just underwater on their houses, their underwater on the lives. Too many owe more than they can earn in the next 3 years, giving those teetering on the brink of insolvency a better chance at becoming insolvent accomplishes the exact opposite of what it intended.
The only exception to that may be student loans – a bet that the student will be able to increase earning power more than they could without the loan. And even then I’m skeptical – if people aren’t studying in a field with occupations that pay significant wages above median (at least 30%) then the loan is a bad bet.
Question: isn’t stag-deflation just another name for a conventional phillips curve recession?
Stag-flation, when it was named, was shocking to those who could not fathom that both unemployment and inflation could run rampant at the same time; and thus, was borne Reaganomics, as the progressive economics of the prior 50 years had supposedly been repudiated.
But stag-deflation would call precisely for conventional Keynesian remedies, at least by the old school books.
But stag-deflation would call precisely for conventional Keynesian remedies, at least by the old school books.
I think we would be very wise to look at primary causes and not secondary effects. This wasn’t originally a liquidity trap, and there are plenty of borrowers desperate for money. Nobody’s willing to lend to them at reasonable interest rates, true, but there can be a lot of different reasons for that.
I think we’re seeing a national solvency crisis. My thinking is in a comment here.
If I’m right, the interventions by the government are likely to exacerbate the problem until something snaps.
Roubini is now being optimistic, but maybe he’s going to be an Obama economic advisor and that’s now the party line. I don’t think much of his writing the past month or so, and now he’s restricted it by cancelling my free account. Has he cancelled others also?
Whitney continues to gain my confidence. This article is very interesting and I like the re-regionalization idea. Breaking up the big banks is a sensible thing to do, but politically very very difficult, and our foreign creditors who are big shareholders of those banks will also resist. This is a foreign vs. US issue. From the perspective of a US citizen, much of what is going on makes little sense, because it’s done to help other constituencies.
She also doesn’t mention the purple elephant in the room: the CDS overhang that has been estimated to be on the order of $50 trillion. That may be the “real” reason why methadone is needed here and cold sweats cannot be tolerated, but again it affects and is done for the benefit of constituencies other than the normal US voter.
The sooner the better on the graduated income tax Salvatore.
Shareholders will do the rest by quitting the equity markets and significantly lowering P/E for the next decade at least.
So what has been the real impetus behind bank consolidation? Bank CEO pay is highly correlated with the size of the bank
And watch the bust coming at the end of the executive pay boom. You can help by discouraging the use of the word “earnings” as in, from today’s Reuters on Huff Post,
“Instead, people with knowledge of Ford’s strategy say the automaker is considering more symbolic moves, including reducing the pay of its chief executive, Alan R. Mulally, who EARNED more than $21 million last year.”
EARNED?
He had been a top executive of Boeing, where he had worked for 37 years, and had no previous experience in the auto industry …Mr. Mulally had risen as far as he was bound to at Boeing. He was passed over twice this decade for the chief executive’s job.
Losing a total of $15.3 billion in 2006 and 2007, Ford fell to No. 3 in 2007. It surprised Wall Street by earning $100 million in the first quarter 2008…But Mr. Mulally acknowledged that Ford still expected to lose money in the second quarter and in 2008 over all, and that it still had too many workers in proportion to the number of cars and trucks it could sell. The company said that its automotive operations lost $2.9 billion in the third quarter.
In November 2008, Mr. Mulally said that his company was working hard to “transform our business” into a more profitable one that meets 21st century demands for fuel-efficient vehicles.
Following Paulson’s rhetoric who with every other sentence is always “working hard,” Mr. Mulally says “we’re working hard–” –$500,000,000 hard? $21,000,000 hard?
from the article:
“Third, delay the introduction of accounting rule FAS 140 until 2011 or 2012. These moves to bring off-balance-sheet assets back on balance sheet for the sake of transparency are a mirage. The primary assets that will come back on to balance sheets are credit card loans. Frankly, there is more transparency in off-balance-sheet master trust data than in on-balance-sheet accrual accounting. Banks cannot afford it now and it will further constrain credit.”
Yup, the academics are playing with the machinery again. First it was Fas 157 in the spring forcing folks to mark to markets that didn’t exist, because after all they are all crooks, liars and cheats and we need transparency!(I always found it strange that short sellers never needed said transparency)
Well, with their wishes come true, what with banks all being insolvent with crumpled capital ratios these academics are back for more with Fas 140. That’s right folks, next spring when we just might be in a rally they want us to bring app 5 trillion back on non existent balance sheets.
Of course in the rarefied air they live in these book keeping changes that cause mayhem are not their concern.
Tip of the week. Next time set up the rules so we don’t need 157, 140and 90 million pages of IRS code so that people won’t spend all their time thinking of ways to avoid taxes and enhancing their returns to pay the ones they owe.
No worries. They won’t do that. It takes all the fun out of this.
I’m alarmed over, CHICKENS
Pilgrim’s Pride Corp., the nation’s largest chicken producer, filed for Chapter 11 bankruptcy protection on Monday, hobbled by its debt load and volatile feed prices.
The Pittsburg, Texas-based company sought bankruptcy protection in a filing with the U.S. Bankruptcy Court for the Northern District of Texas on Monday, saying that as of Sept. 27 it had $3.75 billion in assets and $2.72 billion in debt.
See Also: CHICKENS & Profit Margins
Bill Lapp, principal at Advanced Economic Solutions in Omaha, said he anticipated that food prices would increase between 7 percent and 9 percent next year. He explained that the cost of ingredients like corn and soybean oil remained well above historical averages, even as they have come down from the highs of earlier this year.
“For the last 21 months, food manufacturers, restaurants and livestock producers have been absorbing significant costs that, in my view, are likely to be passed on to consumers in 2009 and beyond,” said Lapp, a former chief economist at ConAgra Foods.
“Stag-deflation” Hmmm.
How’s that any different from plain old deflation? Japan has had it for ten years – that’s pretty “stag” if you ask me but it never got the name.
The IRA reports that the EU is fixing to declare a moratorium on CDS payouts.
http://us1.institutionalriskanalytics.com/pub/IRAMain.asp
We hear from a very well placed Buy Side investor with extensive business interests in the US and EU that three primary banking institutions in Europe, two French and one German, have such significant CDS exposure and other problems that they cannot even begin to fund the payouts anticipated over the next quarter.
The funding squeeze reportedly is exacerbated by a near-collapse among weaker players in the hedge fund market, who were accustomed to receiving loans from one large French institution, which then stupidly converted the loans into equity. That’s right. This past summer, when the bank put out a call for redemptions of $4 billion in hedge fund investments, says the source, only $400 million was returned. And the French bank also used these same hedge funds and others to reinsure some of its own CDS exposure. Sound familiar? Yup, just like AIG.
Unlike the approach taken by Paulson and Geithner to bailout AIG and JPM (via the Bear Stearns rescue), however, the investor claims that EU officials are considering a moratorium on CDS payments by the three Euroland banks in question. The banks would be given ten years to write down their CDS and hedge fund exposures and would receive additional infusions of capital by their respective governments. The source claims that French banks have such huge exposure to both hedge funds and CDS, sometimes linked together, that the positions are beyond the ability of the EU governments to bail them out without a cessation of CDS payments.
The IRA was not able to obtain a comment from EU officials over the weekend about these allegations. We’ll be making some calls Sunday night and Monday. But if this unconfirmed report turns out the be true, then the beginning of the end of the CDS market as we have known it will be at hand. And ironically, the catalyst for the final solution will come not from the failure of a US dealer, but instead by a moratorium on CDS payments by an EU bank.
I’ve used local credit unions for 25 years now. I wouldn’t put my money in a national bank for anything.
I hate JP Morgan Chase with a passion for taking over 5 years to settle my mom’s simple estate. After the hell they put us through, I really am experiencing a lot of schadenfreude at their troubles.
If they gave a damn, about their customers, their shareholders, or anything but their own pocketbooks, they wouldn’t be in this mess. To hell with them. If my disabled sister and nephew’s trust funds weren’t there, I wouldn’t mind seeing them fail completely.
FICO doesn’t even know my husband changed jobs five years ago.
Idiots.
Enough with the inane comments!
What’s the hedge in a deflationary scenario? What increases in value when the value of most things is declining? Maybe another way to put it is what *doesn’t* decrease in value in a deflationary spiral?
I would think staples like grains, but I don’t have a clue.
The financial ruling class is forcefully, financially raping America under the guise of saving us. We have the worst of two worlds, a private Federal Reserve unilaterally spends three trillion dollars of public money to ensure that the banking crooks who got us into this mess don’t go bankrupt. This is allowed to happen in broad daylight because the financial sector pays huge campaign contributions to the slimy politicians. The ineffectual Federal Reserve should be disbanded and the banks nationalized.
What’s the hedge in a deflationary scenario? What increases in value when the value of most things is declining? Maybe another way to put it is what *doesn’t* decrease in value in a deflationary spiral?
It’s dollars and shorts until it’s not, Angeleno. Deleveraging will drive down the value of everything, particularly as real interest rates and hence discount rates rise. But the end outcome of a severe deflationary spiral would be the bankruptcy of the Treasury or hyperinflation, depending on policy decisions.
If you feel nimble enough to play that, go ahead. I’m not, and I know it, so I’m cowering in economically insensitive commodities. Even they will get pounded in USD terms for a long time.
It’s not about efficiency, it’s about bailouts. All the pig men are welfare queens.
Whitney understands the need for credit and its impact on our consumer driven economy. Doubt that her proposals will be followed as the pony has left the barn so to speak and the political machine both coming in and going out and have never been fond of the truth so preparing Americans for hard times and real change is the last item on the political to do list.
Angeleno, the answer to your question is easy: cash, by definition, increases in value during deflation.
Now ask yourself this question: given the way the government is throwing money around, does it really seem plausible that the best asset to hold is a dollar bill?
As soon as commodity prices bottom and the deflationary impact of their decline is removed, it will start to become apparent that inflation is a much bigger threat than deflation. Posters here continually confuse currency strength with economic strength. We can and probably will have shrinking real GDP coincident with a decline in the real value of a dollar. Real wages and real spending power will be under pressure, but that’s not deflation, that’s a crappy economy.
The commodity bubble that just burst had its roots in a belief that commodities are an effective hedge against inflation. Most commodities are not, simply because when the price goes up, more can be produced. There is a lag, which helps convince people that the commodity is a good hedge, but ultimately commodity prices are set by the marginal cost of production. The best you can hope for is to keep up with inflation but to do that you cannot pay a price over the marginal cost.
If you insist on using commodities to hedge, focus on ones whose production cannot easily increase. Some would say gold fits the bill. I do not agree, because there is so much gold floating around in the world that the marginal unit of supply usually does not come from a mine but from a vault or a jewelry drawer, and there is no way of knowing what price people will require to part with their gold – for most people, it has no intrinsic utility.
Basically we have learned – once again – that the world is not in fact running out of corn, copper, oil, and gold coincidentally at the same time. Next time everyone is saying that we are running out of oil, check the price of copper – if it is also through the roof, you will know that the high price is cyclical rather than a sign of depletion.
Over long periods of time, equities are the best way to combat inflation’s effect on your wealth. That’s your trade right now: buy equities. They will almost certainly do better than bonds, cash, gold, or any other asset class over the next 10 yrs.
> moratorium on CDS payments
Why not? Health insurance companies can deny coverage if you get something awful, and just refund your premiums and declare you retroactively uninsured.
So? Sauce for the gander.
I agree with Carlos.
Time to start thinking about what comes next.
Google the treasury System versus the federal reserve System.
It’s a four pager that could be two.
Old as the hills and I don’t know much about the author.
Monetary reform.
The end of debt-money creation by the private bankers, who instead lend real money after it has been created.
100 percent reserve banking.
Another, and maybe the best, of those Friedman views.
Also, the Chicago Plan.
Monetary reform.
Anon @ 4:04 said: "The financial ruling class is forcefully, financially raping America under the guise of saving us. We have the worst of two worlds, a private Federal Reserve unilaterally spends three trillion dollars of public money to ensure that the banking crooks who got us into this mess don’t go bankrupt. This is allowed to happen in broad daylight because the financial sector pays huge campaign contributions to the slimy politicians."
I agree & believe the debt rape which is now extending to our children and grandchildren will continue until sufficient numbers of workers turn off their TV reality shows & video games to assess what is actually happening to our country & take action to stop it. It is our collective inaction that is enabling it.
I learned first hand the difficulty of moving Congress in a desired way. Earlier in this crisis I joined Mish's crusade against the TARP by calling and faxing dozens of our elected congress folks. The unprecedented number of calls and faxes to Congress by ordinary citizen opponents of the TARP clearly evidenced that the voter's wanted Congress to reject this massive, ill-planned legislation. The House held back on Round 1 but after the lobbyists went to work and the Senate sweetened the bill with a few income tax cuts the House caved in later that same week. Suprisingly to me (a political neophyte), after Congress knew what the voters expected, they gut punched the concerned voters in favor of the lobbyists and large campaign contributors. Obviously being fed up is not enough to produce reform. Saying "I won't take it anymore" is not enough to produce reform. Calling and writing Congress is not enough. Voting and electing a candidate who promised change is apparently not enough.
Workers have been bled dry over the last 10-15 years with stagnant real wages, combined with a massive shift of risk from the corporation to the individual worker as existing pension and health benefits were eliminated in favor of 401(k)s and health savings accounts. It's time that corporations and Washington realize the power of “Joe the Voter.” There are a large number of Joes that are tapped out. Washington is not bailing out their decimated retirement plans. The bailouts and asset purchases are only for Wall Street, whose criminal greed precipitated the crisis. How well could Congress and the corporations function without the day to day work of “Joe the Voter”? Perhaps a buyer's strike over the Christmas holidays this year along with the first national workers' day off demanding the end of financial bailouts and their replacement with well thought out plans to aid “Joe the Voter”, his children and grandchildren would be a better approach to the financial crisis facing us. Why should our elected representatives in Washington have better retirement and health programs that the people who elected them?
December 21, a Sunday, is the winter solstice. It is the longest night of the year, the time of maximum darkness. It is a time of special symbolism. Across cultures it is regarded as a time of rebirth, as the days grow longer overcoming the darkness of winter. Monday, December 22, could be the day that “Joe the Voter” takes action by staying away from stores and work to demonstrate to the PTB that Washington, the banks and campaign contributors have pushed “Joe”, his children and grandchildren too far. “Joe” is awake and watching. His back is against the wall.
I agree with anonymous at 4:04.
Abolish the federal reserve system of today and absorb all of its branch banks, but not its member banks, into Treasury.
Rather than nationalizing the banks, we need to nationalize the nation’s money.
And put the people back in charge of their economy.
It is time once and for all in this country to put an end to the insane practice of the taxpayers going to the bankers to borrow money that the bankers do not have.
And then have to pay that money back, with interest.
This, when the government could create all the new money in the first place.
Debt-free, at no interest.
United States Dollars.
Or would we rather keep paying three times for every bag of groceries that we buy.
If smaller banks are better, it would make sense to give TARP money to them instead of the big money-center banks. If the big guys fail, their assets would be up for sale to healthy regional banks.
Unfortunately we’re going in the opposite direction with the bailout.
She says some good things but a couple stand out. One is the comment that the law restricting credit card companies to holding their promises, i.e. their rates, at the levels they offered them is “restrictive” and will “evaporate $2 billion in consumer spending.”
A number of thoughts on this:
1. They will offer money if they can make money on it. If rates shoot up to 29% and creditees cannot pay them back, then we’re right back to square 1.
2. She sounds like she’s hedging her bets and is looking to work for credit card companies.
3. The government cannot pickup the pieces after more irresponsible lending. We taxpayers shouldn’t bail out the credit card companies.
Anon @ 4:04 said: “The financial ruling class is forcefully, financially raping America under the guise of saving us. We have the worst of two worlds, a private Federal Reserve unilaterally spends three trillion dollars of public money to ensure that the banking crooks who got us into this mess don’t go bankrupt. This is allowed to happen in broad daylight because the financial sector pays huge campaign contributions to the slimy politicians.”
Right on the nose my friend. So what to do? You can check out http://www.dunwalke.com and see the tapeworm economy defined. The woman who runs solari.com said in an interview that the reason that mortgages weren’t being re-fi’d directly by Treas (couldn’t we all afford a mortgage at 1-3% interest?) was that this would expose the (many) completely fraudulent mortgages, taken out in the names of illegals, faked appraisals, etc. Or that the same property was “sold” several times, abetted by crooked players along the way…
Of course, the Fed should be abolished, if only for the fact that they haven’t been any more effective in handling crises than the previous 150 years we didn’t have them.
We’d also have to declare derivative like CDSs, etc as illegal and irredeemable. This will be the hand grenade in some very rich people’s oatmeal, but I don’t care.
On one rumor-line I heard that Obama’s administration will declare a bank holiday after he comes into office. Accounts within the FDIC limits will be protected, all others will be effectively gone. Well, it’s a rumor, so who knows?
Yeah, these are not necessarily likely scenarios, mainly because the non-stop raping and robbing would have to stop, but the rentier classes so enjoy it. Wanna bring the system to its knees? Let’s have a couch potato revolution. If we all sat at home, didn’t spend at the mall, didn’t deposit money into Fed member banks, stopped paying the bills, who could enforce compliance on everyone? The game stops if we all are sitting on the bench.
There, now that’s quite a bit to digest. Keep thinking outside the box, go talk to your friends and neighbors more, quit watching tv, learn something new every week and take every opportunity to become more self-sufficient.