“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."

Friday, October 10, 2008

Pretend that it is Christmas. Do Not Open the Market.

"The time to act is now. You may think that things can’t get any worse — but they can"

As we wake this morning, we are at the abyss.

Iceland, its currency, banks,investments and financial independence lies shattered like a fallen icicle. Full hair raising panic rules in Asia and Europe.

Our Rulers and Masters have done too much for too long and then too little too late. The wisest thing they can do today is pretend that it is Christmas. Do not open the market. Get on the planes and follow Paul Krugman's advice.

Did I just say Paul Krugman?

Moment of Truth

By PAUL KRUGMAN New York Times
Published: October 9, 2008

Last month, when the U.S. Treasury Department allowed Lehman Brothers to fail, I wrote that Henry Paulson, the Treasury secretary, was playing financial Russian roulette. Sure enough, there was a bullet in that chamber: Lehman’s failure caused the world financial crisis, already severe, to get much, much worse.

The consequences of Lehman’s fall were apparent within days, yet key policy players have largely wasted the past four weeks. Now they’ve reached a moment of truth: They’d better do something soon — in fact, they’d better announce a coordinated rescue plan this weekend — or the world economy may well experience its worst slump since the Great Depression.

Let’s talk about where we are right now.

The current crisis started with a burst housing bubble, which led to widespread mortgage defaults, and hence to large losses at many financial institutions. That initial shock was compounded by secondary effects, as lack of capital forced banks to pull back, leading to further declines in the prices of assets, leading to more losses, and so on — a vicious circle of “deleveraging.” Pervasive loss of trust in banks, including on the part of other banks, reinforced the vicious circle.

The downward spiral accelerated post-Lehman. Money markets, already troubled, effectively shut down — one line currently making the rounds is that the only things anyone wants to buy right now are Treasury bills and bottled water.

The response to this downward spiral on the part of the world’s two great monetary powers — the United States, on one side, and the 15 nations that use the euro, on the other — has been woefully inadequate.

Europe, lacking a common government, has literally been unable to get its act together; each country has been making up its own policy, with little coordination, and proposals for a unified response have gone nowhere.

The United States should have been in a much stronger position. And when Mr. Paulson announced his plan for a huge bailout, there was a temporary surge of optimism. But it soon became clear that the plan suffered from a fatal lack of intellectual clarity. Mr. Paulson proposed buying $700 billion worth of “troubled assets” — toxic mortgage-related securities — from banks, but he was never able to explain why this would resolve the crisis.

What he should have proposed instead, many economists agree, was direct injection of capital into financial firms: The U.S. government would provide financial institutions with the capital they need to do business, thereby halting the downward spiral, in return for partial ownership. When Congress modified the Paulson plan, it introduced provisions that made such a capital injection possible, but not mandatory. And until two days ago, Mr. Paulson remained resolutely opposed to doing the right thing.

But on Wednesday the British government, showing the kind of clear thinking that has been all too scarce on this side of the pond, announced a plan to provide banks with £50 billion in new capital — the equivalent, relative to the size of the economy, of a $500 billion program here — together with extensive guarantees for financial transactions between banks. And U.S. Treasury officials now say that they plan to do something similar, using the authority they didn’t want but Congress gave them anyway.

The question now is whether these moves are too little, too late. I don’t think so, but it will be very alarming if this weekend rolls by without a credible announcement of a new financial rescue plan, involving not just the United States but all the major players.

Why do we need international cooperation? Because we have a globalized financial system in which a crisis that began with a bubble in Florida condos and California McMansions has caused monetary catastrophe in Iceland. We’re all in this together, and need a shared solution.

Why this weekend? Because there happen to be two big meetings taking place in Washington: a meeting of top financial officials from the major advanced nations on Friday, then the annual International Monetary Fund/World Bank meeting Saturday and Sunday. If these meetings end without at least an agreement in principle on a global rescue plan — if everyone goes home with nothing more than vague assertions that they intend to stay on top of the situation — a golden opportunity will have been missed, and the downward spiral could easily get even worse.

What should be done? The United States and Europe should just say “Yes, prime minister.” The British plan isn’t perfect, but there’s widespread agreement among economists that it offers by far the best available template for a broader rescue effort.

And the time to act is now. You may think that things can’t get any worse — but they can, and if nothing is done in the next few days, they will.


  1. At a time such as this, how can the American public contemplate turning the future over to Barack Hussein Obama?

  2. LONDON (MarketWatch) -- The main national European shares indexes all plunged more than 9% on Friday morning, capping a week of turmoil in equity markets when policymakers and central banks tried to shore up financials and limit overspill to the global economy.

  3. Yes, if you are just waking up and reading this, go back to bed. The best thing to do in a hurricane is stay indoors and DO NOTHING.

    Oh, and as a non-American who just had a very bad day, can I suggest that you Americas who are thinking of voting for Obama are crazy. Fucking crazy.

  4. On 24 September we said this:

    "Forget how we got here. Forget who did it. Forget who will benefit. The rumblings are unmistakable. Time is short. Without action the entire financial system is coming down. There will be no place to hide.

    We need leadership to make decisions that will be unpopular and probably finish political careers. That is the type of men we need but not what we have.

    Courage and action. We are down to days."

  5. How did Rufus put it?

    " Short selling is like me asking to borrow your car and then going out and sell it. Does that make sense?"

    The return of short sellers to the US market after a near-three-week ban was blamed for contributing to a sharp drop in prices on Thursday as General Motors and Morgan Stanley led stock markets sharply lower.

    In another rollercoaster trading day, shares in Morgan Stanley fell 25.9 per cent to $12.45, while GM sank to its lowest point since 1950, down 31.1 per cent to $4.76.

  6. Here is your CHANGE motherfucker:

    CROWN POINT, Indiana (CNN) -- More than 2,000 voter registration forms filed in northern Indiana's Lake County by a liberal activist group this week have turned out to be bogus, election officials said Thursday.

    The group -- the Association of Community Organizations for Reform Now, or ACORN -- already faces allegations of filing fraudulent voter registrations in Nevada and faces investigations in other states.

    And in Lake County, home to the long-depressed steel town of Gary, the bipartisan Elections Board has stopped processing a stack of about 5,000 applications delivered just before the October 6 registration deadline after the first 2,100 turned out to be phony.

    "All the signatures looked exactly the same," Ruthann Hoagland, a Republican on the board. "Everything on the card filled out looks exactly the same."

  7. No shit!

    "Europe Is Heading Toward Recession, Says IMF" -DW

    that explains why these guys make the big bucks.

  8. October 10, 2008
    Stopping ACORN
    Clarice Feldman
    ACORN is rapidly becoming a major issue, with the Republican base outraged over the voter registration fraud investigations in ten states. An online petition has been created to demand an investigation of it and that the government take steps to stop its continued violations of election law.

    While there, take a look at the website of this new organization,

    American Thinker

  9. There are, as always, two sides to the ACORN story. Seems that in NV, the ACORN people had turned over, previous to that raid all the information demanded in the search warrant.

    Project Vote relies on staff from ACORN, which stands for the Association of Community Organizations for Reform Now, to do field level voter drives.

    ACORN's internal checks, Mellor said, included tracking forms assigned to canvassers using serial numbers and worker sign-offs on each form and following up with listed voters by phone to verify they had taken part in the registration drive. The search warrant mentions those procedures.

    That cooperation and meetings with state officials also are mentioned in the search affidavit, as is a subpoena from the state that was delivered to ACORN in September asking the group to resubmit information on several employees it had previously turned over to county elections officials. The forms were resubmitted, Mellor said.

    "The raid was a stunt designed perhaps to make them look tough on voter fraud," said Matthew Henderson, the southwest regional director for ACORN. "We don't think fraud is a rampant problem. This was a politically motivated stunt, that is all there is to it because those new voters can reshape the electorate of Nevada."

    Henderson said many voters registered through ACORN are "working people and people of color and there may be corners of the political world where a high injection of new voters like those is unsettling some."

    The state is one of several viewed as a battleground. The Secretary of State and Attorney General are Democrats.

    "If this were a stunt I would have put Ross (Miller) out there with a shotgun like Buford Pussey," said Miller's spokesman, Bob Walsh. "I'll grant them their cooperation, though it is grossly dishonest not to bring up the felons in their official statements they released."

    But, said Walsh, "at the end of the day, it is our job, not ACORN's, to enforce election law and that is why we acted."

    So the prosecutor grants that ACORN has cooperated with the investigations. In another article, it was said that ACORN alerted officals in NV to the fraudilent registration applications.

    Open borders and open voting, the cancer spreads, but no worries, those folk are not Muslims.

  10. The US public can contemplate turning the future to Obama, because they do not trust the bankers from Goldman Sachs, duece, to do the right thing.

    They do not trust the deregulator to start regulating.

    They seem to want more Federal intervention, not less. So they will turn to the folks they know will change the atmosphere.

    Given that they have been taught to believe there are only two choices, they see little other option.

  11. James Pethokoukis @ US News & WR tries to slam Obama, but ends up comparing GWBush to Jimmie Carter, with Carter appearing good light, by the comparison.

    Choose from column A or B, no other choices allowed, sorry.

  12. Krugman doesn't seem all that pleased that the economic collapse that he has been forecasting for the last 8 years is finally happening.

    Counter-intuitively, an economic downturn before the election favors Obama, impending collapse and chaos may favor McCain.

  13. As they say at the WSJ

    As the day progressed, traders say, fear seemed to feed on itself, and people began selling stocks wholesale.

    Some investors reacted badly to reports that the government is considering taking a direct financial holding in some major American banks -- a potential intervention intended to reassure the markets. The news fanned fears that the worst isn't over for the American banking system, and some investors are worried about bank failures.

    The way some investors see it, if the government feels the need to intervene more drastically, the problem might be even larger than it had seemed. That kind of self-reinforcing fear is symptomatic of a secular bear market, where bearish sentiment trumps fundamentals.

    "We've seen unprecedented intervention, and markets yawned it off. That shows how dire it is," says Greg Collins, chief executive of Fountain Hill Investments in Orlando, Fla.

    "A lot of people are hopeful that this market will put in a bottom," he says. "Ultimately, they've been forced to get out of the way, because the selling pressure is so high. Every time there has been strength in the morning, everyone says maybe we'll get some type of bounce." Instead, he says, "strength has just been an opportunity to sell. Until we see some signs of stabilization, it is a trader's market."

  14. It is a sign of the times, that when McCain promised to cut Social Security bemefits for all those currently working, there was not even a murmur raised.
    In the past such news would have been trumpeted as an attack upon all that is held dear, in America.

    The shit on the sandwich is spread so deep, now, that his comment in a national debate, it goes unnoticed.
    Not even hardly mentioned by his opposition. Fuckin' amazing turn of events. That's to be sure.

  15. It is tight in Missouri, flipping back to Team Maverick at RCP's "No Leaners" map.

    McCain is up, +0.4%

  16. There is to much to even contemplate a cut and paste.

    Fuckin' amazing

    America the Banana Republic

    The ongoing financial meltdown is just the latest example of a disturbing trend that, to this adoptive American, threatens to put the Land of the Free and Home of the Brave on a par with Zimbabwe, Venezuela, and Equatorial Guinea.

    by Christopher Hitchens

  17. The only way McCain can win is to identify the states that he Just Has To Carry, send Sarah out to do 3-a-days in them, and take his sorry ass back to Az, and quit answering the phone.