Of Coal Mines & Canaries
The roundup below is from Furtherism - A Rejection of Kabuki, which you'll be hearing from often, it's run by a very old gonzo economist friend who is starting into blogging. Before Christmas, I drafted a post about how this thing is going to unspool bad, but held off because, well, we had one last Bing Crosby Christmas. That was worth it, but I know this financial shit in my bones. Or maybe lungs.
Bottom line, the likelihood of the spreading globo-riots coming here this year is high. We screwed up: the solution to the financial crisis was to tell it to eat itself. Stick those transactions where the sun don't shine, where it never did. We didn't declare the unregulated, illegal, hopelessly opaque tangle of Casino Credit Default Swaps null and void so that 15% of mortgage failures in their value basis wouldn't take down the whole system. A maximum default of 15% called the values of all bets into question and froze a highly leveraged system into final crystals. Stupid! Stupid.
In turn, those casino bets devalued the high-yield Collateralized Debt Obligations bonds they rested upon, then they seeped down into sure-thing Money Market Funds, the surest of which broke the buck. Why? When the back-street gamblers broke the banks, the casinos weren't honest. They didn't say to their patrons, "All bets are off. Take your markers, it's a raid. Go home." Instead, they kept everybody playing, went to the cops who were on their take, and demanded to be made whole. The cheek.
The failure to declare off-book transactions as null and void is what's dragging everything down. Those deals are illegitimate, irretrievable, bets scrawled down on scraps of paper which will never be accounted. That's why the Troubled Asset Relief Program hasn't fixed the problem. It can't, it never will. The gas in the air everyone's running from is lethal, and no one is talking about it. They're either running or dead:
You think Obama is going to save us? Remember, he is not a messiah that can perform magic and miracles. That job is left to us collectively. But in the meantime, let's see whether the canaries are chirping:
From Russia: The Guardian is reporting:A wave of protests swept across Russia yesterday in one of the first signs of mass discontent with the Kremlin's handling of the financial crisisFrom China: RIA Novosti is reporting20 million Chinese workers have received "pink slips" and are headed back to the hillAt the same time, however, groups of wealthy Chinese are treking to America to by foreclosed propertiesFrom Switzerland:Wealthy attendees of The World Economic Forum were informed that the global financial crisis has destroyed 40% of the worlds wealthFrom Great Britain:The rich are buying gold to keep (literally) in their mattresses.From Saudi Arabia:Economists here are referring to the current troubles as The Greater Depression.From USA: