SAR #8318

"I think it would be worse than the depression. We're talking about reducing the credit of the United States of America ... ... this is a road to disaster. I've always been a positive person and optimistic, but I don't see a solution here."

CEO Goldman Sachs CEO John Whitehead.

Bigger Pail: The administration, having rescued favored banks, now wants to rescue selected companies in sectors such as credit cards and car loans, but draws the line at aiding an industry with union workers making actual things.

I'll Cry If I Want To... On Monday the Fed gave a party to auction off $150 billion in short term notes. It got $12.6 billion in bids. It could sell less than 10% of the debt on offer. You'd cry too...

Meanwhile, Headed for the Ranch: At the G-20 today, Bush is scheduled to argue that free-market capitalism should not be abandoned as the group tries to find a way out of the economic disaster caused by free-market capitalism.

Glub, blurbble, gasp: Citi, Morgan, BA and the rest want to help people keep their homes mainly because they don't want to end up owning a bunch of houses that are, at best, worth 75% of the mortgage. Let the suckers pay the taxes.

Plan 'B': Scientists are now saying we need to formulate a backup plan to save civilization from catastrophic climate change, in case our current plan does not work. Our current plan?

Hank Calls an Audible: The original 3-page game plan was to spend $750 billion on Toxic Asset Repurchases from the banks. Paulson now says "this is not the most effective way to use TARP funds..." Nor, apparently, is bailing out GM and Chrysler, neither of whom employed him previously.

Two Step: In Mexico, former top energy officials expect that Mexico will stop exporting oil by 2012. Four years. The US gets 11% of its oil imports from Mexico.

This can't last. The center cannot hold. Not in Spain, not in China, not in Britain, nor in Portugal, Australia, Ireland, Hungary or Greece. And neither can it in the US; a hard rain is going to fall.

Gold Card: Giving Amex the $3.5 billion is paying the overdue bills for a few hundred thousand people who have been living beyond their means. Credit card companies that let their customers do this are a big part of the problem. It's a sad day when usury doesn't pay.

Coal for Christmas : China is in a depression; retail sales there are only up 22%.

Free Money: The Treasury is giving banks much better terms than the free market is offering. When Great Britain bailed out its banks, it got voting rights, seats on bank boards, 12% dividends, suspension of dividends to stockholders, vast reductions in executive bonuses, and required that the money be lent to homeowners and small businesses. The US got two press conferences and a president-elect.

Two Roads: It's simple: The US has more debt than it can repay. Either it defaults and seeks reorganization under some secret chapter of the UN bankruptcy code, or it will have to cut spending radically, permanently - for it has no industry and no savings on which to base a recovery. Default or Descent, both lead to the same place.

Some Doctor, Some Cure: The Dems propose making it a crime not to pay monthly premiums to the same bunch that feeds off Medicare. The plan includes taxing employer-sponsored health benefits and passing those funds directly to insurance companies.

Long and Slow: Here's an interesting recap of how we got here (It Started in Boston) and where the trail may take us (a 3 year recession, or worse). Lots of neat charts

Location, Location, Location: One out of three homeowners who sold a house in the last year lost money on the sale and discovered they were not living on Easy Street after all.

Cart & Horse: If the free market is so good at allocating resources, how did we end up with so much excess capacity? The current downturn is a bit more complicated than a lack of credit; the current system makes customer goods a lot faster than it makes good customers.

Porn O'Graph: Baseless worries about money.