spinning faster and faster

[solarbird]

Motley Fool says It's So Much Worse Than You Think, in large part because there's a Goldman/Sachs report out that if there's no recession, housing prices will fall by 15%, but if there is (which seems inevitable) then it'll be 30%. Now a lot of us are already aware of that, but it includes some neat details, like at 30% price decline, 39% of mortgages are "below water," or negative equity, or, are for more money than the house would make, if sold. MarketWatch notes that housing prices haven't fallen like this since the Great Depression, which we've already noted before, and that value declines are accelerating - leveling off is nowhere in sight, and Kevin Depew at Minyanville makes the argument that Bernanke's recent speech laid the groundwork for the nationalisation of Fannie Mae and Freddie Mac.

None of this can really start to bottom out until all the bullshit around CDOs and the many other parts of the credit collapse get taken apart properly. The monoline insurers are a pathetic joke; MBIA, a supposedly AAA-rated company, can't even estimate its own losses in January. I can't even fathom how anybody can go along with this pretense that the AMBAC "bailout" means anything. It just doesn't. It can't. And Karl at Market Ticker talks about how the rest of the credit market is reacting to that reality.

Bernanke's other action is to try to save things through economic stimulus, but that's failed. Citigroup in particular is in trouble, with serious questions about its cash levels and inability to raise new capital. And thanks to all this, bond auctions are failing at ever-higher levels. (Of course, default rates on munis will rise during this recession, but not at all to the tune of 20% for ports).

It really feels like things are spinning out of control badly now, with parts flying off in different directions. If you've ever seen the original Dawn of the Dead, it's kind of like that moment at the beginning of the film, in the TV studio, where they're broadcasting emergency messages and one of the engineers realises it's all bullshit and they have lost, but most of the people are still either in denial or pretending to be. That's about what it feels like right now. Hopefully I'm really, really wrong.

ETA: Dollar is hitting new lows against the dollar basket every day. Not huge shifts lower, really. This evening's new record low: 73.330. I've heard rumours of some banks setting a target down at 60. Oh, and if you missed it: oil hit a new record today in both raw and inflation-adjusted numbers, at US$104.52/barrel. It closed at that high.

Comments

[lisa-marli.livejournal.com]

We have been playing economic voodoo since the 1980s. Right as of now, Bush has exactly followed what Hoover did in the 1920s. Hoover cut taxes drastically at the beginning of the decade. We roared for a while on the huge tax cuts (especially the rich, but even the middle class felt better). Then we crashed even faster as the borrowed life caught up with everyone.
I've actually been expecting it since the first minor crash of 2000. Especially with the way Bush Borrowed his way out of that slump. Very bad form.

[denelian.livejournal.com]

erm... okay, so this may not be THE question to ask...
but, for me, living hand to mouth and at least 2 more surgerys away from being able to physicaly care for myself...
do i need to withdraw my savings? not to start a run (because we all saw how WELL that did, in 29), but seriously... i will literally be UNABLE to work for at least a year. maybe more.
so... take it out and bury it in the backyard? are we going to see a general bank failure, despite all the "insurance"
and will it even matter, cuz i can't push a wheelbarrow full of cash anyway...

[emrecom.livejournal.com]

Jesus Christ--my joke about buying Argentinian pesos doesn't seem like so much a joke--as long as I immediately move to Buenos Ares.

I too am at a loss answering what seems to be the basic question left in the wake of all this: What is of actual value?

And being in NYC, I have to wonder at how the hell the real estate boom--still giddy but starting to stall the tiniest bit--will survive what i suspect/guess will be a sort of fragmented series of things falling apart. I mean, okay, a huge amount is foreign investment, but if the dollar increasingly means fuck-all, will they--can they--do better by defaulting in some way? And then what happens to the neo-yuppie hoards who are 'buying' with vast credit debts? And what about the seemingly endless new, super-ultra-mega-luxury projects started two or more years ago in what are basically ghettos they assumed would be gentrified?

The Dawn of the Dead analogy is horrifically apt.

[solarbird]

Just make sure you're FDIC insured and stay under the $100,000 per account maximum and you'll be fine. I think they'll pay that even if they have to monetise to do it.

[solarbird]

The real estate boom is over. See those housing stats? Even if NYC and Seattle metro are still not actively declining, it's over.

NYC was a participant. Seattle sat most of it out because of the severity of the 2001 tech-bubble recession for us. You guys will do worse than us; you'll probably end up down about national average, despite having been part of the boom proper; we'll end up down - note down - less than average by benefit of having sat it out, and a few other advantages as well, such as the GMA putting a serious limit on worthless exurbian bullshit.

The "what is of actual vaue?" question - and, thanks to the bullshit with the ratings agencies and banks refusing to take this crap seriously back on their books so it can be properly marked to market rather than theory, nobody knows - is what's killing the credit markets. Nobody has any trust (nor, given reality, should they) in the system, and nobody's acting (e.g., Bernanke and the Fed) to make all this bullshit transparent again.

So as a result, the markets are crashing - credit markets are already crashed, other markets are falling over slowly - and it'll stay that way until it can't.

[emrecom.livejournal.com]

I agree. And yet the reality on the ground here is that 500 sq ft studio apartments in dubious nabes continue to sell for half a million. The diff being that a year ago they'd sell for half a million and change.

Again with the Dawn of the Dead analogy.

[mojave-wolf.livejournal.com]

I go with Death Race 2000.

Even Republican economists (which is, well, most of them) have to have seen this coming years off. My explanation:

Bush's real favorite movie isn't High Noon. It's Death Race 2000. And when they came to him in '98 or so and said they needed him for their figurehead in 2000, he said sure, as long as they made sure that the country looked more like that movie, cause after all, 2000 was coming up and it sure seemed different from the movie and that was just bothering him.

So they did the best they could to give him his dream and keep themselves insulated from the fallout, apparently not realizing that it really is more fun to live in a first world country than a third world one, for the most part, even for the people who have money.

[solarbird]

One thing I meant to mention earlier is that the Market Ticker guy has a petition that I think addresses the transparency issue, tho' it touches upon some other stuff and I think it shouldn't. I didn't want to sign his - you may be fine signing his, he's not a spammer - so wrote my own letters instead covering the transparency question. (I got no replies, of course, like y'don't.)

[denelian.livejournal.com]

100,000? i wish!
hell, i'm happy i still have about 1,500.

thanx, though... i read your stuff for interest, and to get some idea of what it all means. i don't UNDERSTAND it, but you post a description of something, and it almost, almost makes sense...