Stilltitled

The mistakes of the past cannot be undone. All that can be done is to minimize their costs and then truly reform the system so that they are not repeated.

thomas palley, the liquidity trap, and the moral response to financial excess

Phases of Grief

1. Shock – agony and disbelief
2. Chaos – this isn’t working
3. Introspection – how can we make this work?
4. Re-adaptation – how can we mitigate the pain?
5. Restitution – serenity now

Everybody is sitting on the edge of their seats wondering how investors will react

—Douglas Scheidt, an associate director in the SEC’s investment-management division

“Saxon Birdsong said putting money in Treasuries now is a ‘safety play.’”

“Were the financial crisis to end today, the costs would be painful but manageable, roughly equivalent to the cost of another year in Iraq. Unfortunately, however, the financial crisis is far from over, and it is hard to imagine how the US government is going to succeed in creating a firewall against further contagion without spending five to 10 times more than it has already, that is, an amount closer to $1,000bn to $2,000bn.”

—Kenneth Rogoff

The S&P

“I’ve been doing this for the last 30 years, and this ranks right up there with the crash of 1987 with regard to how my stomach feels”

—Bernard McSherry, SVP at Cuttone & Co., one of the largest floor brokerages at the New York Stock Exchange.

• Grew sevenfold from 223.92 to 1,527.46 between Dec. 4, 1987, and March 24, 2000
• Doubled to 1,565.15 on Oct. 9, 2007, from 776.76 five years earlier, but since then…
  • Financials are down 52% since the February 2007 record
  • Energy is down 27% since the May 2008 record
• Fell 4.7% September 18th to 1,156.39 
• Fell 7.6% from the 15th through the 17th
  • A couple of issues:
    • The government backstop on Bear Stearns ($29b)
    • The government seizure of AIG ($85b)
    • The bankruptcy of Lehman (+$700b)
    • The first nationwide decline in US home prices since the 30s
    • Writedowns connected to subprime (+$500b)
    • Credit Default Swaps (CDS) hit $62t in notional value in 2008, up from $144b 10 years ago
• Trading patterns suggest more losses, “so-called retracements of 50%typically precede further declines, according to some traders who look at historical prices and charts to make decisions.”

You could get some rally, but I don’t think you’ve made a low. The whole way down we’ve consistently seen lower highs and lower lows, and that pattern has yet to be broken.

—John Roque, managing director and technical analyst at Natixis Bleichroeder

• Futures rose 1.5 percent to 1,180.4 at 12:03 p.m. in London

“We’re closer to the end than the beginning. The reason fear is so good is that what idiot is left that hasn’t sold? It means there are a lot of people on the sidelines with dry powder.”

—Jim Paulsen, chief investment strategist at Wells Capital Management in Minneapolis, with $220 billion under management.

The private market screwed itself up and they need the government to come and help them unscrew it

—House Financial Services Committee Chairman Barney Frank

The oppressive power of the U.S. is on the decline. The world no longer has the capacity to absorb fake U.S. dollars. This is hitting back. The regime of Israel, which is the core of aggression, is nearing the end.

—Iranian President Mahmoud Ahmadinejad

Lehman Brothers, Merrill Lynch, Fannie Mae and Freddie Mac have all essentially collapsed. But just as at the start of the summer, economists can’t even agree whether the country is in a recession.

—DAVID LEONHARDT – NYTimes