Tuesday, August 26, 2008

SAR #8239


The credit crisis is contained; it will not spread
beyond the known universe.


Terrorific: As I watched televised images of combat ready police and paramilitary forces deployed in Denver, I wondered why the Democrats weren't holding their convention in America.

Which number gets the headline? Sales of existing houses increased 3.1% in July, over June, but dropped 13.2% from the previous year. One third of these sales were foreclosed properties. . The house head-count, on the other hand, showed an increase of 3.9%, giving the country an 11.2 month supply - the highest ever. It will take a year to get rid of the houses now on the market, even if not another house is built or comes up for sale.

Absent: Pollyanna: According to participants at the weekend gathering of central bankers, the majority did not believe the financial and credit crises are even close to being over.

Important Arcanae: The spread between LIBOR and predicted average federal funds rate over the coming three months (LIBOR-OIS spread) is used to judge how easy or tight credit is. Over the decade before Aug 08 the spread was .11%. It is thought that .25% would indicate a postive trend back to normal. Right now it is .77% and forward markets suggest it will increase to .85% by January and not drop to the .25% level until mid-2010. Another 18 months to 2 years of tight credit isn't going to do the world's economies much good.

Bustles and Hoola Hoops: The fall of the Roman Empire took longer than the mini-series on TV ran. So too will the transition from the American Empire to whatever comes next. While waiting for Armageddon we will need to keep on living, an undertaking worthy consideration.

Truth In Advertising, Not: Proponents and the press both keep referring to hydrogen fueled cars - and the mythical 'hydrogen economy' - as 'zero-emission technology'. Not true. Just as the US has not reduced its carbon emissions, it has simply shipped its air polluting industries to China, making hydrogen is as energy consumptive and carbon emittive as burning gasoline. Instead of spreading small amounts over the interstates, producing hydrogen would concentrate it in plants, like electrical power plants. Sure, that would make carbon capture and sequestration possible, if carbon capture and sequestration were possible - but that's another fairy tale.

New Contest: For the usual prize, I'm going to begin posting just the headers to Paul Krugman's gems and you, dear reader, get to supply appropriate content. Some recent ones: A Very Good Jeer, Synchronized sinking, Mmmmm arugula.

After You: Banks extend credit only if they trust the borrower to pay the money back. In a recessionary world, the prospects of being paid back dim. Thus, not trusting they'll be paid back, banks cut their loans. With no credit to operate, the economy weakens further. Banks, fearing additional losses, seek more capital. No one trusts that banks have been honest about their losses, so capital is not forthcoming. No capital, no loans. No trust, no loans. No credit, no growth. Take the rest of the day off.

2 comments:

kwark said...

I don't see why you're so negative. I mean Reuters just reported that ". . .some analysts said it [the economy]showed embryonic signs of stabilization that could herald a slow turn for the better if maintained." Don't you feel so much better now? And how about this one "Fewer Americans went without health insurance last year for the first time since President George W. Bush took office as more people received government coverage." See, our Free Enterprise system really WORKS!

Anonymous said...

I love it..

Hydrogen = zero emission. I don't see why you can't understand this? You mix hydrogen and o2 and get h2o and no C..

Very easy maths..

Very easy stoichiometry.

Hydrogen also magically appears in our fuel tanks (not refueling stations because it actually requires energy to pump it into your tank) from no where hence no need to worry about making it.

There is a reason it is called "the hydrogen mirage." It is always 20 years away from being reality.