Todd

I think the key to the timing and extent of recovery is the lagged response of the BRIC economies, China in particular. On the one hand many investors believe China can adjust quickly from an export-led to a domestic demand-led, and keep growing. On the other hand, those who can remember what we were all talking about before the liquidity crisis, the pressures on the Chinese economy of resource and energy constraints and the effects of fundamentals-led commodity inflation, might believe that while those problems may have receded due to short-term demand destruction, they have not gone away.

Rather than make a guess, I would prefer to wait and see what lurks here.

A Banking Revolution?

Extra ordinary times Extra ordinary measures !!

I think after some time the european leaders will get tired to follow the U.S. government’s way all the time. Isn’t it more a “new wave trend” to support the banks? On the other hand side I think that before the Euro was much stronger than the U.S. Dollar the europeans didn’t have any shame to make profit by this fact and now that might come back in this way.

Only a fool will trust a banker. Voltaire said that if a banker jumps out of a window it’s because there is a profit doing so.
But with the announced moves by governments, one can more or less saferly under banks stewardship, provided no advice is taken from the avaricious bastards. They only think of profit – for themselves, damn the client.

Who wants to sink alongwith the Titanic (USA) in trying to save it?

It is most surprising that the US government has “STILL NOT” identified its “CORE PROBLEMS”.
Due to this whatever steps they have taken will bring “ZERO” results as the solutions are only effective
once the core problems have been identified. Let me repeat the core problems once again.

1) The Twin Deficits (The Budget Deficit and the Trade Deficit)
2) The National Debt
3) Unemployment

In the coming Near future (3-5 Years) Crime and Law and Order will also
become a Major Core problem .

The G-7 or G-10 don’t realize the seriousness of the problems. Anyone and I mean ALL who try to
coordinate and try to save USA will sink along with it. You may well ask WHY ?

The National Debt of USA has now crossed $ 11,300 Trillion and with the debts of other Industrialized nations (G-7 or G-10) coupled together it will be a miracle if they can manage/save their ownselves under such conditions. Right now Japan is in a bad position and if they take the corrective action and invest in its own economy Instead of US T-Bills/T-Bonds they can rectify and correct their imbalances and in a few years improve their economy. The same can be said of France, Germany, Italy, Switzerland, Russia, Netherlands/Holland. China is in a Unique position of Strength as the only effect this Recession/Depression or best called “Global Meltdown” . Do the G-7 and G-10 think that is going to blow away with a “Coordinated” action ? If they think This then they are Totally and Completely wrong . They have not fathomed the seriousness and the threat they are facing. The don’t know the size and Seriousness the USA is facing because as I repeat above “THEY HAVE NOT IDENTIFIED THEIR CORE PROBLEMS YET”.

The size and seriousness of the problems each country knows its own problems “EXCEPT USA”.

It is advised for ALL countries save yourself. USA’s problems are more Far Reaching and with far wider implications than they know because they have not addressed the core problems let alone identified it.

Todd,

I am still left wondering what the problem is that this is mean’t to fix? Is the UK government saying they have carefully assessed the balance sheets of these banks and all is good. Comment elsewhere suggests that the latest acts “improve the chances of recovery”. I wonder what the odds are now?

Propping up the banks is no doubt a good idea to prevent an absolute collapse of western economies. However, pumping money into the markets way back in the 30s led to hyper-inflation in Germany, followed by re-armament and eventually WWII.

UK retail market is grossly overborrowed and the government is insisting that the banks go back to lending as much as in 2007. I do not trust this type of money management.

Frankly speaking nobody has any idea of when things will recover. If investors feel confident again the global markets could rally sharply and we could go from one of the worst market routs on record to one of the biggest rallies on record.

I also do not think anyone can say we are headed for a global recession simply because nobody seems to be able to define in clear terms what a global recession is. (do not confuse a slowdown with a recession, they are not the same)

We will not have a clear idea where things are going until the end of the year but my feeling is (and it is just a feeling) that we will pass out of this panic phase and slowly see things improve from now on. We probably have some months to go in this bear market, but it will end..they always do.

Greg Atkinson
http://www.shareswatch.com.au/blog

Hi Todd

I think the government has even gone too far than they should have. What does anyone expect? We are solidly on SOCIALISM HIGHWAY now. The same nationalisation stuff that Hugo Chavez and co had been accused of for years on end.

I asked a question of you the other day; that what should happen to those who made mincemeat of a well-intended accounting system called MARKED-TO-MARKET? The bankers that precipitated and benefited from this crisis are being made to get away with a slap on the wrist, while poor people pay the price. If you recognise and share profit for a transaction that later goes awry before maturity, marked-to-market demands that you pay back (variation margin of sort). What the bankers did by creating these structured product and getting rich therefrom is exactly what they did at ENRON by sharing profits from shady SPV transactions.

That said, all governments’ efforts today will be temporary if they dont fix the corporate governance issues and deceptions that led to this collapse in confidence. Where i live here in Nigeria, the same trick was played on the people by banks in the stock market. As much as the more developed stock markets are more sensitive to government intervention, here, it is a free fall due to the erosion of confidence. Fear is pervasive in the stock market here.

So, we may get a breather in the global economies now, but failure to fix these issues, and to sort out the legal black spots that led to ENRON and to this major financial crisis, the illness will keep relapsing. Is that what we want? The common man is totally distrustful of the bankers, and of the governments who are apparently in cahoots. And for the right reasons too.

Charles, not sure if you have seen the below, if not then some interesting changes to frequent terminlology:

NEW STOCK MARKET TERMS………

CEO –Chief Embezzlement Officer.

CFO — Corporate Fraud Officer.

BULL MARKET — A random market movement causing an investor to mistake himself for a financial genius.

BEAR MARKET — A 6 to 18 month period when the kids get no allowance, The wife gets no jewelry, and the husband gets no action.

VALUE INVESTING — The art of buying low and selling lower.

P/E RATIO — The percentage of investors wetting their pants as the market keeps crashing.

BROKER — What my broker has made me.

STANDARD & POOR — Your life in a nutshell.

STOCK ANALYST — Id*ot who just downgraded your stock.

STOCK SPLIT — When your ex-wife and her lawyer split your assets equally between themselves.

MARKET CORRECTION — The day after you buy stocks.

CASH FLOW– The movement your money makes as it disappears down the toilet.

YAHOO — What you yell after selling it to some poor sucker for $240 per share.

WINDOWS — What you jump out of when you’re the sucker who bought Yahoo @ $240 per share.

INSTITUTIONAL INVESTOR — Past year investor who’s now locked up in a nuthouse.

PROFIT — An archaic word no longer in use.

This immediate reaction by the stock markets is a good sign but so far nothing has been done to address the core problem – correct values of mortgage backet securities. Until new accounting and reporting practices are put in place noone will dare touch these ‘in’securities. Unless the US government follows with similar measures proposed by Europe I’m not so sure the US markets will react in the same way.

This rollercoaster ride on the stock market is not over yet. I am sure that the dow jones industrials will drop at least another 8 to 10%befor e October 31 Triple witching hour. The banks were practically throwing money at new home owners to buy. Now they are feeling the pinch. Wake up and smell the coffee.

These guys do not have a clue!!!!! They supposedly did not see it coming, so why do you think they have the answers! I have a high school education; even I know that some day you have to pay for what you buy! You can only buy so many houses when people only make $5 or $6 and hour! Try raising the minimum wage!!!!!!!!

Today the markets are up a bit, but when again tomorrow when more bad economic news comes about the economy, they will be dropping again! People need to be put back to work in jobs that don’t require them to buy things.; until the conomy recovers! Giving the same greedy guys money without restrictions gives them the means toprey on us again! Get used to it, we can not buy things on credit forever! someone has to pay to run this big government! So the days of ” I will gladly pay you tuesday for a hambuger today are over!”

Worl leaders should take initiative to inject Gold along with liquid cash in to the market will solve the present crisis. Gold is trading 3 to 4 times more than actual price. why? for what?
Shyjunan

Tracking the progress of the stock markets in the last two weeks was like watching a giant leaking super-tanker speeding rudderless for a massive crash on a not so distant shoreline. Thanks to the Justice League of America, Europe and Asia, the leak has been plugged and this huge behemoth has been steered away this Monday from a rocky grinding halt and towards let us hope more peaceful and prosperous seas.

All we hear in the news hour-to-hour now that the Crash of ‘08 is under way is that the banks worldwide need to start lending to one another so everybody–businesses, consumers, main/high-streeters, et alia have quick and EASYaccess to even easier CREDIT !!!

Is it not this worldwide terrible addiction to Easy Credit that got us where we are having consumed to the point of total bankruptcy? All the treasuries of the USA, Europe, Asia and the Middle East are worried about and focused on is to continue the addiction and get us deeper into the pipe dream that we can always “Fly now (and maybe) pay….later???”

Such sad attempts at a solution/cure is like guaranteeing more heroin to crazed addicts in the hope they will not overthrow the powers that be. Wake up world!! and get back to the real fundamentals–such as Ben Franklin’s advice three centuries ago–”neither a borrower nor a lender be!!” Or in the 1950s when the joke was that banks only loaned to people who did not need the loan, i.e., had more than enough collateral to cover their borrowings.
–

Carl Springer
Bangkok, Thailand

scaremongering worked and finance people got away with their bounty.

actually it is a sad day when the very people who have robbed the wealth of almost everyone in the planet will mostly stay where they are with their pockets full, to hit another day.

the bailouts will not work fot economies at large because they buy time only.

the balance sheets changed hands but problems of the world are still the same.

Kamal,

You forgot to add “Sara Palin” to your list, never mind you are forgiven!

First of all, the Anglosaxon concept of free finance markets have failed. There are alternatives, though. Take Germany, e.g. Capitalism isn’t going down as a whole. As the Nigel Lawson explained in TIME magazine, ups and downs are part of free markets. Maybe this time the recession will be a bit deeper and longer … anyway, we don’t see the future. All I can do now, is collect news clips and wait till they become history. – Overall, I’m not really worried. But what will the future U.S. president do?

Wallstreet is on the rise, oil price is rising.
And i ask my self why?Why would you start messing with the oil price again?Cheap oil is what the economy needs right now.Leave it be.
But no, they are at again on day after Europe presents there solution.
Profittering has started again.

Cliche’s and lies.
This weekend again I read everything available on the crisis in my 2 dailies and also watched the interview with George Soros. Again all cliche’s and misleading information, although Soros came close to an explanation of what triggered this crisis. But only close.

The book by Paul E. Erdman ‘ The crash of 79 ‘ makes for nice reading in the context of our present day crisis.

To be really informed though, everybody ought to watch the video on
http://video.google.com/videoplay?docid=-9050474362583451279
and after that read the book ‘ The natural economic order ‘ by Silvio Gesell. And after that google WORGL, a little town in Austria and become familiar with how they succesfully fought the crisis in 1932/33. A correctly functioning economy with no in- or deflation.
The video and the book will paint the reader a picture, how at the moment, the world-community is strangled by an idiotic system, kept alive by politicians, governments, business and the media. The book gives the solution to get out of this mess and in WORGL they proved it right.

And all of above mentioned information has nothing to do with capitalism, socialism, communism or whatever -ism.

It’s just common sense.

DeeJay.

well, I believe this is as much a terrorist act as 911. So I believe the same steps should be taken to correct it as was taken to rectify 911.

Dear Mr Benjamin,

As regards your questions:

Do you think the steps governments and authorities have now taken will be enough to restore confidence?

I assume you mean ‘inter-bank lending’-type ‘confidence, as opposed to PUBLIC ‘confidence’ that said governments know what they’re doing.

Re: Banks and Markets, I’ll wait and see, as will we all.

I suspect the glass is one of those clever ‘party-novelty’ glasses, which is half-empty, no matter how much the governments keep pouring in.

As regards ‘public confidence’, if you notice some, please report it. THAT would be NEWS.

How long do you think the economic downturn could last and how deep could it be?

*No, no, no! This is a G-Rated forum. I am NOT thinking that! Neither is anyone else!*

But seriously, Mr Benjamin, how long is a piece of string?

This is a ‘guess and be wrong’ situation. It will take as long as it takes, to climb back up from ‘down the rabbit-hole’, whose depth is purely fictional — but very deep.

Do you think stock markets have already fully discounted the worst of a global recession?

You answered that better than I could have done: The question is whether the worst of the market rout is over? It’s unclear.

Unclear. Quite.

One thing that is clear, had authorities not taken bold steps over the weekend, the selling would have accelerated, further undermining confidence in governments ability to act and further damaging the financial system and economies.

I have ISSUES with gamblers and gambling. Seems to me, the gamblers (Stock Markets) will do what gamblers ALWAYS do: gamble until they lose it all, again.

This time, Mummy and Daddy didn’t just give them more money; they authorised them to drain their (that’s ‘our’, actually) bank accounts, and credit-cards.

I agree that they DID NOT have any choice, because of how LATE they caught on to the size and seriousness of the problem.

I do hope Mummy and Daddy keep an eye on their Statements, in future! Parenting classes, perhaps in ‘tough-love’, wouldn’t hurt.

And no more cakes and crisps, or trips down the pub, until the Markets grow up and move out, and live on their OWN money!

Mr Benjamin, ‘global recession’ isn’t a gloss for something more SERIOUS, by any chance, is it?

Here in the UK, we’re in a proper old Depression. Nobody’ll say so now, but Chancellor Darling as much as said so in early September. That was BEFORE the gamblers all lost our shirts in Atlantic City.

(For non-Americans: Atlantic City, New Jersey, was [it may be better, now] a very old, very gone-to-seed city, on the New Jersey shore, where gambling has been ‘legal’ — but was Mob-owned — for simply ages. Bodies washed up on the Jersey shore, from Atlantic City. Not all of them went in swimming by CHOICE).

There are expectations that central banks will cut interest rates further and there’s pressure on governments to stimulate their economies.

What happens when there’s nothing left to cut? The US is down to virtually nil, already.

Can they go into negative numbers? ‘Here, Markets, we’ll PAY you to borrow our money!’

*I believe I can say, with a straight face, that ‘frozen Markets’ are remarkably difficult to ’stimulate’.*

How are governments expected to accomplish this nearly impossible feat?

Given those aforesaid governments’ stunning foresight, preparedness, cool-headed, well-thought-out, and pre-emptive actions, to stave off the ‘global systemic meltdown’, I’d have to say — mind, I’m just guessing, here — ‘you’re joking, right?’

…[I]t’s too late to avoid a global recession. The work of central banks and governments isn’t over.

*Suppressing the urge to quote Yogi Berra*

This is the worst financial crisis since the Great Depression, coming out of it will be a long and painful process.

Lovely use of British understatement, Mr B! One could not have understated the situation better, if one were Mr Hodson, and he has British understatement down to perfectly flat affect! (One suspects he asks the laundrette for extra starch in his affect, after a thorough pressing. Perhaps one should ask him?)

Quite remarkable, for an American, sir. You have understated the severity of the matter so much, that your tone corresponds to what we’re EXPERIENCING, here in the UK. Not bad reporting, old man. Not bad at all.

*Not bursting into a cheerless rendition of ‘The Worst Pies in London’ from Sondheim’s ‘Sweeney Todd, the Demon Barber of Fleet Street’.*

Have a lovely ‘dead-cat bounce’, or whatever today’s market rally is.

Uma

bill gates in his interview to fareed zakaria ,and bloomberg, the mayor of new- york , to hard talk programme on bbc were not so pessimistic .as for me i do agree with them as i trust in america though russia’s leaders( putin, medvedev and others) are using this new opportunity to push forward antiamerican feelings, blaming usa for current financial troubles.it’s strange that americans cowadly swallow up all their rough accusations without any responce.have you lost your dignity?

@ Carlos Araujo

:-D Voltaire said that if a banker jumps out of a window it’s because there is a profit doing so.

Voltaire, and you, were right!

@ Gregg Barrett

;-) ROFLMAO!

@ Khalal Ahmad Khan, and Andreas, in Stockholm

No, nobody has addressed the CORE problem yet. The CORE problem is that ‘laisser-faire, free-market capitalism’ has proven to be as much of a failed experiment, as Soviet, and Maoist ’socialism’. There must be some regulation, but nobody — particularly in the USA — knows how much, nor how to go about doing it.

There cannot be only ’socialist’ distribution of wealth, because it doesn’t move around enough, and everyone is poor. On balance, I prefer ‘everyone is living on too little, but housing, food, and medical care are GUARANTEED’, to ’some people become ultra-super-megarich, and others live in the street, even if they HAVE jobs’. I think socialism has a great deal to offer some of the world’s poorest countries.

BOTH systems are plagued by corruption and greed. I have ZERO faith in the ‘free-market’, so beloved of Reagan (and post-Reagan) USA. It has made the gap between the absurdly rich, and the USA’s own Third World, wider, and more impossible to bridge.

I don’t know who will dare to address this ‘core problem’, but until someone does, everything else is a sticking-plaster on a meteor-crater.

@ Craig Rogers

Yep. :-( We PAY these economists and government officials. They work for US. I don’t go back to someone who gave me a bad haircut. Why do we have to keep looking to the SAME clueless trolls for answers?

You people are living in la-la land. Do you really thing it’s over?What is McCain or Obama’s plans in regards?
No one knows.
It seems to me that this “war on global recession” has been given as much rhought, planning, and is to be executed with as much coordination as the “war on terroe”, and we all know how that went. Yeah, let’s durge Wall Street and send CEO’s to Guantanomo!

yes the bottom line has been achieved last friday. The very bold moves from Europe & also US will stabilize the financial system – but the price is high. A few investement bankers have brougth in much more regulation from government side than most of the countries communistiques parties could not have achieved within dozens of years

Well-run companies have found it hard to get a credit not only in recent weeks or months. Banks preferred for a long time to risk their money on the stock markets that provided 30% returns rather than hand out a credit to a small or mid-size business which offered only 10% of return into the banks balance sheets. In this respect the banking system has not served the world well for a long time.

Is the worst over? No for sure. Thats because the players in the markets are still the same. The attitudes are the same. Everyone of them does well. 800 points plus today so where is the crisies?

Stock markets? Well, remember the NIKKEI holding over 30.000 points? Is Japan still alive with the NIKKEI far away from that? The world will have to learn that stock market indicies do not reflect the true value and strength of a company or an economy. The crisies will be shorter the faster people accept this change in paradigma. Without that change we are already up for the next crisies while still stuck in this one.

Markets seen the worst? No. I guess with a true recession occuring the DOW will pay a visit to the 7200 points and go even below. But the with stocks rising a day by 800 points, you can see that there is enough buyer money out there. Just you may wonder who owns whom after the crisies comes to an end.

Confidence? If bankers do not lend amongst each other because they do not have any confidence in each other then why should anybody else in the world have any confidence in any bank or banker? Change the players on the field since the ones out there now carried the ball into their own end zone only to fumble it there! Only new fresh players bring trust and confidence back.

Governments done enough? Well they did not start their job yet. That job will be no change market rules, make new laws change oversight bodies regulate financial instruments and finally make Wall Street managers personally responsible for where they lead their banks, brokers, sales-people and investment firms.

Just like the Greenspan era of easy credit, low interest rates and unregulated markets set the banking system up for the current crisis, the current focus on calming the markets by committing to ever increasing financial bail-out packages will set us up for the next crisis. That is unless proper new regulatory measures are put in place and executives should be held responsible. Why are the CEOs and Board members who sat for years and watched risky trades generate extraordinary profits not held to account ? Profits were booked for high risk trades and little or no capital was put aside. None of the people in charge asked the right questions, none acted prudently with the shareholders’ money, but acted as a heard – trying to boost their bottom lines. The tragedy is that it paid off. Taxpayers, who never saw the big bonuses, and who may wish for better schools and hospitals are now instead bailing out banks. Yes, the markets will calm down, but heads should roll – does collective guilt mean no guilt ?

Did actions of world leaders inspire confidence in the markets? Maybe. Do they make me confident? Absolutely not. I think world leaders have clearly demonstrated over the past few weeks that they don’t have any idea what the hell they are doing. We keep hoping that our leaders are the smartest people available, but they are not. To paraphrase “Deep Thoat” of Watergate fame, “the truth is these aren’t very bright people, and things got outta hand.”

The capitulation in the week just past was WAY OVERDONE for two reasons – loss of CONFIDENCE and DELEVERAGING. The intense bickering on Capitol Hill before stitching up the US$700 billion rescue package whilst EU were equally divided – each waiting for the other to take the bitter medicine to thaw the frozen credit market. The panic and disintegration of banking woes reverberate into emerging economies – the global meltdown was staring at G7 and the IMF right in the face. They had to act in a massive co-ordinated way and Paulson finally fell backward to admit that he had to rescue the banks’ balance sheet as priority rather than an undisclosed free hand to do whatever he like to dispensing “rescue” with the Congress-given US$700 billion largesse. Not one of the cash-rich sovereign states showed and put their money on the table – China, Japan, Saudi Arabia, Norway, Brunei, East Asian economies and even relatively unscathed Australia. The US and Europe expected the rest of the world to cough out the hard-earned savings to rescue them while stubbornly refused to take all and whatever medicine needed for their turnaround recovery. China is frustrated – the US sold them US$600 billion of toxic asset of the two Freddies agency bond – that is one third of the external reserves. They are NOT putting in anymore.

Finally, the weekend past saw the EU and Paulson crawled to grim reality – take the bitter medicine in co-ordinated action to thaw the credit market. Stock markets across the world applauded and recovered some lost grounds due to previously grosssly oversold conditions. Some equity valuations were completely and irrationally out of kilter – some semblance of reality in valuation is coming back.BUT don’t expect much more until the real economy worked through its excesses and recover maybe 2 to 3 years down the track.

The weekend EU package and Paulson’s decision to buy bank equity BOUGHT TIME to rework through the banking sector balance sheet. It is NOT the solution – the fundamental painful adjustments in macro-economic adjustments are still to come. Much of Asia and Australia remain undisturbed yet although their real economy will be hurting as EU and US sink into deeper recession. BRIC countries will recover first as well as countries with strong external reserves BUT IT WON’T BE SUFFICIENT to halt the global economic slowdown and recession for many. The recovery path will be slow and painful – much depends on how US re-organise his house in order post the election.

I think the next 6 months will be interesting, particularly when one is looking at Bureaucrats who usually make it their mission in life to AVOID work being tasked with such a huge and important financial undertaking. I do not have confidence that they would know which mortgages to save and which to not save…all I can see is a lot of red tape which will just deepen the problem.

Let’s hope that the banks and other financial entities don’t continue to lend to people who can’t afford to pay it back.

Let’s see these institutions put in proper credit checking criteria instead of boosting their sales so they can give themselves big bonuses.

I’m no financial whizz, but I can’t quite fathom the behaviour of the market. The word “confidence” is bandied about, but I don’t see how anyone can have confidence in a system that is spectacularly broken and needs the intervention of governments around the world just to keep it alive.

A lot of reckless people lost a lot of money over the past few weeks. Now, after the bailouts, a few rich people are making a lot of money as the market rebounds (perhaps temporarily). Tax-payers’ money is used to prop up a broken system, and is now being used, by extension, to make a few rich people richer as they take advantage of the situation. The whole thing stinks. Without the reluctant taxpayer running to the rescue, the system would now be dead.

I do believe that a price must still be paid. Unfortunately, the tax-payer has to foot the bill (for those who constantly clamour for lower taxes).

The market problems are symptoms of a deeper problem, and, as others have written, the long-term effects will be worse than the short-term meltdown of a corrupt and failing capital system.

So, the markets may rebound, mainly to the advantage of a rich few, but there will be long-term effects that all of us will have to suffer, resulting in an eventual erosion of wealth and progress across the globe. It may be that when governments eventually start to take their hands away from the rudder, the ship will still sink. Time will tell.

(By the way, I’m no socialist, but I do believe in fairness, the punishment of corruption, and believe what my eyes tell me – that the capital systems around the world have failed, both economically and morally.)

Focusing on the stock exchanges as a barometer of the health of the global money supply is a false indicator. This spasm has uncovered long hidden problems. Not only has Laissez-Faire Greed been the operating principle of business leaders worldwide, but the U.S. federal government has been exposed as the worst government money can buy.
We have passed thru one end of quarter and for some businesses end of year as well. We have at least an end of calendar year and two more quarters before the ‘books’ will start to indicate where all the money has gone. If accountants can live up to the standard that we need them to perform at then perhaps we will be able to arrive at conclusion based on reality in late 2009. And that is just the macro-econ.
In the meantime all the citizens who have been living on credit and now realize that they do not have the perceived equity to back it up plus those who have lost their jobs or retirement income will be defaulting on credit card debt. Add this to the shrinking of the consumer econ and etc etc etc. Fiscal feces will be hitting fans blades for some time to come.

I think the steps taken by the EUROPEAN govts, in particular the British, will restore some measure of confidence in the markets. Hopefully Paulson, will stop trying to protect his cronies on Wall street and act in the best interests of all us Americans.

For Americans 2009 will be a bumpy ride.

Where has the discussion gone about the credit rating institutions? At the bottom of this mess is the shady if not illegal practice to put lipstick on pigs by Moody and S&P. The mere fact that AAA rated securities including subprime mortgage packets were sold by major US banks on the global market says a lot of how blind (or rotten) things had gotten. A new international framework for rating and risk grading assests and securities is now absolutely crucial. Without tackling this problem we can throw as much taxpayer money we want at the banks, it won’t make any difference in the long run.

If a plan maker loses customers due to faulty design and numerous accidents occur we don’t solve the problem by giving the company more money to survive.

It’s easy to see a rebound especially after world governments have injected staggering amounts to keep the banking system propped up.How is it though that our governments can brandish around tax dollars to the same institutions that led us to the brink in the first place?.Sure a buoyancy was created to the fiscal system when world leaders announced their undivided support for it.Reality though is light years away for there are no guarantees that these measures will hold.Keeping afloat small and medium businesess would have been a better option because they are the nuts and bolts of society.Rather than keeping narrow minded executives feeling secure and snug again.Have any of these world leaders talked to the man in the street for his/hers views about it?.

Wallstreet is on the rise, oil price is rising.
Why would you start messing with the oil price again?Cheap oil is what the economy needs right now.Leave it be.
But no, they are at it again, one day after Europe presents their solution.
Profiteering has started again.Take it slow.

I disagree strongly with your assertion that the banking system is the lifeblood of any economy. While that may be true for the modern situation we have, it is certainly not universally true. Profit and manufacturing is the lifeblood of any economy. Borrowing may be necessary to an extent (in some industries), but more borrowing is done through the stock-market (which is why this is such a major crisis, nobody has wanted to risk their dollars).

Credit(Debt)-based economies inevitably fail, as has been seen through history. The banking system should be based in government, not owned and operated by agents of private institutions. This creates a huge potential for a boom-slaughter-money print cycle, which we are seeing now.

a) the bankers extend credit to business
b) the resultant extra cash creates massive over-expansion and over-supply, with temporary unsustainable ‘prosperity’
c) they slow the money printing press
d) the markets start to crash, people scream for more ‘liquidity’ (printed cash)
e) the bankers open the spigots once again, enabling them to take an even larger stake in the wider economy itself, at a small percentage of the cost they would have had to pay.
f) go to a)

Sound money, please…

The Problem is so big & complex that it will take a while to even think that enough has been done.
One thing is pouring in mega billions. The next thing to do is to reform the entire financial system. Because if the world leaders stop short of equally making radical steps to make structural reforms now. All the money being poured now will all be a waste.

Just to throw in a quizzical, historically slanted shot: When banking started in the Middle Ages with the Italians and the Knights Templar, it is a commonly accepted historical truism that banks lent to governments, never the other way around. The Templars fell due to their intrasigence with the French king Philippe le Bel, not the trumped-up heresy charges. If one accepts this truism, what does it say that the State, which issues the money (and sets its value) in the first place, now is forced to rescue private banking? One can imagine the screams of horror from the medievals at this thought; “The State?? In our affairs?? Never! Let the competitors fail, the fiscally healthy shall survive!”

Why are many media financial experts acting as if the credit crisis is virtually over? We anin’t seen anything yet! NOTHING has been done to unravel the miasmire of toxic debt that the banks are holding. When the true figures in terms of valuations eventually come out the banks will still be bust – even with the massive injection of government money.

Without questions, not enough has been done yet to restore confidence in the banking system most especially with the world economy crisis.
Factually, the most laudable action right now will be execution of strategic measures that will bring about the revival of the market (Nigerian Govt. most concerned here) instead of going public with decisions yet to be solidified.
How can the banking system be trusted when rates are too stiff and extremely unfavorable needless to mention it’s non-flexible nature?

the banking system (most especially in Nigeria) should try to come to terms with the fact that lending to extort will not only worsen the situation of the economy, it will also bring trust in the system’s operation and accessibility to the most possible minimum.

All that is needed most especially in this type of situation is going back to the drawing board to check out where priorities were misplaced.

The ultimate question is “IS THE SYSTEM DESIGNED TO CRASH THE ECONOMY AND IMPOVERISH THE MASSES”

As a matter of fact, the system here in Nigeria seems to be more bent on making profits than restoring faith and trust to the system.

SHAME SHAME SHAME

Using tax payers money to fix a system for the wealthy. Yes the banks were closing but I am sure I read somewhere other banks where buying them so what is the problem. One mans mis fortune is anothers fortune.

Well then I suppose it was just taking too long and all the powers that be saw there huge investments going down the tube so something had to be done.

Oh and what about the average person yes they could not get credit and yes they may have lost some super but then in the large scheme of it all they are worse off as this tax payers money is going to hurt us.

Governments for the people SORRY should be FOR THE RICH

The collapse of the banking/investment system was long over due. Many historians and economists have been alarmed at the degree of financial mismanagement endemic in US and Europe that mirrors the terrible era od President Hoover and the greed of uncontrolled capitalism. The salaries and profits made from ordinary bank customers and working people has fueled an economy based on short selling, gambling on positions on commodities and making the fast buck at the expense of John Doe. President George W Bush and Prime Minister Gordeon Brown have proved to be the men od the day taking Roosevelt type action, however unpopular. This time all countries need to punish all fat cats who have destroyed much of our retirement and other savings. We even must make the so called business study schools start to teach real economics and not ways to make the fast buck. Five years ago I heard Mr Goldspan warn America and teh Worled that the current expectation of rapid profit was unsustainable. What a pity we the public did not force our leaders to listen to his words and regulate the financial instituitions. Now we all must tighten our belts for the enxt ten years before normality is again restored in the market place. If we sen five or six senior CEOs of financial instituitions to prison as was the case in ENRON we will prove democracy works and capitalism is not the same as unbridled greed.

Gordon Brown saves the planet from financial breakdown.
Who is this Gordon Brown, who is highly rated by the winner of the Nobel winner on economics ?

As Nancy Pelosi suggest a second financial suport plan of +/- $1 trillion USD is not out of the question, we need to stand behind our American investors, banks and finacial institutions if we (Americans) are to continue being the number one economic global leader, timing is everything during this financial crises.

Richard Kennedy
Kalispell, MT

Dear Todd!
In general, banks collect money and then gave a loan for people and companies. There is no doubt, that in all banks all over the world, so called “professional” managers make the decisions to whom they can borrow money, and to whom they can’t.
As it appeared, former CEO of Leaman Brothers made his “correct’ decisions and earned, doing this, for the last 8 years about $300 mln (!) – the huge amount of money even for such wealthy country like the USA.
Don’t you think, that banks may restore confidence by reducing salaries of their CEO’s and managers? Personally, I will be pleased to hear from them: “Yes, we are sorry for our bad decisions. WE made some mistakes, that is why this financial crisis started. Now we are reducing our salaries by 50% (60%) in order to help the country to overcome the crisis.”

Dear Bill

Gordon Brown is now the Sage of Kirkcaldy.

I am pleasantly surprised that investors trust the government guarantees. In Italy, for example, the national debt is so huge that, when asked where the money would have to come in a worse case scenario, the official answer was that spending would have to be cut elsewhere, given that the probability that the state would be able to borrow the money was extremely low. Such cuts, though, would have implied very, very many additional unemployed in the public sector. That is, a crash of the state, just the same, one way or the other.

Henry Paulson made over $700mn personal wealth on a system he now says is broken and he will fix for us. How about he start by giving back us back that money before taking any more of ours?

Poulson bail out is still a rip off.

Bush created the problem with his de-regulation and Americans are then hoodwinked into buying the bad debt that the greedy bank CEO’s built up.

Banks must get back to the strusted institutions that they once were.

If it takes regulation, lets have regulation.

Congratulations,well done the United Kingdom for showing the way and firing those gready CEO’s.

I’ve sent a great deal of analysis and policy suggestions to James Carville an Obama supporter/advisor…
My plan looks at this not as a bail out, but a swimming pool. You have the shallow end where goverment securities and trust funds have to be invested securely, wadeing end where there is a bit of a bolder step and deep ends where the developers and investment bankers dive in…
My analysis of the Congress/Senate Bail out plan strongly disagrees with the “Mark to Market” concept that ultimaly forces more banks into collapse… I feel that you need to stabalize the 25% (for arguments sake) of the devaluation in the mortgage market assets… By just restructuring them into a (SAM Loan “Shared Appreciation Mortgage:) via a second position and/or bank stocks that secure large bulks of mortgages via a derivitive that has value, but lower rates of return than the market value… This way you don’t loose the 25% to the market, you just simply restructure it in the form of low interest goverment loans, bonds and/or tax free municipals that give the financial markets something that is investable grade… There is nothing wrong with maintaining value of the sub-prime lending if it is done constructively… Sub prime was in response to less consumer confidence/spending as occures with all war time economies putting an end to the old Myth that war is good for an economy… Myself and the old Treasure Secretary that got fired when we advised Bush of the near 2 trillion war cost and future down turn ended up being correct…
So, if you want a plan… Look to James Carville and see if Obama wishes to support it… It will get things back to normal, free up mortgage funds for smaller homes that can be built onto in the future and fee up business and bank to bank lending… And if States get loans then they should use it for more housing projects that can be resold in the future and more direct state SBA type programs that create new business ventures… I personally believe in human capital.. If you have a business degree that should be as good as equity and allow those graduates access to cash to create new businesses… It is a shame that you will give students money to get the business degree, but not fund any of their professional plans upon graduation…
Harvey Carroll, Jr..
Just a quick note…

hello everyone,
well restoring confidence is far away.

The markets had an accident and now they are being operated on to reduce the effects produced by the wounds.After reducing the blood clot the doctors(Economist) have to think about recovery.Then after months of recovery they might think about restoring the similar confidence.

So its better to think about recovery first .Then then if they can bring back the golden days we can think about restoring the same confidence.But i am quite sure restoring confidence will not be easy and people will now have to think 10times before investing.
When your security guard fails to protect your belongings when burglary occurs,it is difficult to trust him.

Thank you
Abhinav

N.B:
[Well this is my first time in CNN so if I break a rule inform me.And also please inform me about the basic rules of blogging here.]

My confidence was never shaken…
…In fact, at this momentous point in history, I’m even more confident that the grand majority of our elected officials are complete twits! ( …not a Brit, but I do so love that word )

Speaking as a U.S. taxpayer and investor, it has been an absolute wonder to witness just how little our political leadership knows about the workings of our economy. The credit bubble may have finally burst, but the bubble in boneheaded thinking seems immune to any and all pricks. ( …and with so many floating about)

I realize there is plenty of blame to go around, but it seems that we are all now paying in large part due to our political leadership’s long delayed appointments with good governance.

I’m a fairly optimistic fellow, and I’m not entirely cynical when it comes to government, but I do worry about the challenges we face in with a slowing economy, credit crisis, ballooning deficits, rising health care costs, pricey education, retiring workforce, etc…
A tsunami of tough challenges ahead with no strong leadership or plan to inspire much confidence.

To steal a bit from some ancient wisdom:
It is indeed the best of worlds when a leader is both loved and respected…
…and it may be just as well that a leader be respected more than he/she is loved.
…but in times of crisis woe to those whose leadership commands neither love nor respect.

My question is who bails me out when I am in a personal financial crisis? We (taxpayers) are lending money to the banks so they can lend it back to us with interest and this seems to be okay with everyone? I feel like I am taking crazy pills. The federal bank should become a direct lender to the people and not to this institutions that don’t seem to have a handle on how to manage money. If I was able to borrow money at 1.5% interest my payments would be cut in half. It is great that credit card companies can borrow money from the Fed and then charge 29.9% interest. I think they put the Mafia in jail for a similar scam. There is no middle class anymore. There is only people with money and people with no money bottomline. The only vote we should have 11/4/08 is a vote of no confidence for our goverment.

Have just watched the Poulson turn around live from Washington and the announcement that they are now going to take public ownership and control banks.

Looked like Poulson and his gang were going to vomit any moment during the press conference !

“If you unexpectedly find yourself in a hole…
…Then keep digging!”

This is the prevailing logic so far, and I get it. …I think. …replace bad debt with good debt and keep things rolling.
Vanishing value = vanishing confidence = no new money = deflation = job loss = more sky falling

Fine…

But I’m curious…
Since we taxpayers have been asked(force) to get more in the game… is there any way from here on out to follow the money??
Any way to keep a journalistic eye on what our fellow ‘camarada’ are doing with this new money ???

Just a humble question to business journalists everywhere that would go a long way to rebuilding this investor’s sense of confidence.
Thanks.

YES, IT WILL GIVE CONFIDENCE TO THE INVESTOR, AND SURELY WE WILL COME OUT FROM THIS THE GOVERNMENT OF EUROPE AND U.S.A. DONE WHAT THEY CAN DO BEST. IT IS APPRECIABLE.

BUT NO ONE KNOW FUTURE. LET’S SEE!!!!

Hi Todd, I partly agree about the fear and greed factors, may I ask my fellow bloggers that the situation world is facing now, it is definitely cumulative effect of financial mismanagement over a period of time, why did not anybody foresee it coming ? Why sudden hue and cry? why great minds and financial wizards like Warren Buffer or George Soros could not forecast it ? Is it possible that a group of people in Wall Street have taken the entire world for a ride ? Can you please shed some lights on this ?

I am trying to get a 30 year fix FHA loan, on Friday when the stock market was RED, the intrest rate was 6.87%. Today, Tuesday, after the market rebound over 900 points, it is at 7%, why it is higher today, than Friday? What can we expect?

What I have seen is that the average American wants the cake and eat it too. Nobody wants to wait and save for anything. Drive down any street in any town and look at the two new cars and how new the neighborhood is. Look at the power wheels in the yard and the very large above ground pool. Oh don’t forget to look at the $100 a pair jeans the kids are wearing, plus the ipod, cellphone and the Nintendo DS or whatever the pocket toy is called.
People need to learn to save.
And so people know that I own my home, drive a 8 year old car, don’t wear $100 a pair jeans and I have cash in my pocket

Today John McCain said his new economic plan calls for “purchasing mortgages directly from homeowners . . .” He doesn’t get that homeowners do not OWN their mortgages. They OWE their mortgages. Homeowners can’t sell their mortgages to anyone.

Q: WHAT DOES IT TAKE TO RESTORE CONFIDENCE?

A: IT TAKES TIME, STUPID!

Banks in the US as a sector have developed a face since the 1980’s that has moved away from creating value. Investment Banks as a sub-class have transferred the “value creation” earned over the last 40 years into high payouts to staff who have become experts at hiding the loss of underlying value of the Banks and underwritten companies.

People and investors now sense this loss of value and are reacting accordingly.

All of these trillions of dollars will not restore confidence if the messengers are the very ones who preached let the markets prevail as they will.

To vineet

The global sentiment has become – Guarantee more cash and the problem is solved. Well what problem? Ability to gamble and take yet more risks?

I am not interested in only restoring confidence by investors, I want the core problem addressed and properly dealt with. This problem is a lack of transparency and correct risk assessment and rating. Why do you think banks are reluctant to give shortterm loans? After all this is what banks do and live off. The answer is they have no idea how much empty worthless paper they and others are sitting on.

Confidence will only return after someone tackles this fundamental problem head on and acts resolutely to reform regulation accordingly. I personally would like to see legal investigation into just how these so called sub-prime mortgage securities could be given AAA ratings and dumped onto to the global financial markets on the scale we are only now beginning to see the effects of. If this is (was) not bordering on being criminal then financial legislation is (was) highly questionable and needs immediate correction.

Time for more engineers (your truly) in the financial sector perhaps?

I think that this all is end of globalisation and that no any help from any side will help to fix all current problems.

Pres. Bush wanted to put Social Security in the stock market. 401 retirement funds are being lost, on the bridge to no where and bailout inflation will erode whats left. Buy American and support your community

“Restoring Confidence” seems to be 2008 parlance for Jim Jone’s directive to “…drink the Kool-Aid.”
Mortgage Backed Securities are distressed because the borrower is unable or unwilling to service the load and the underlying value of the real estate has dropped dramatically. Now enters the U.S. Congress with H.R 1424 which does a number of “Restoring Confidence” things. It allocates funds to buy distressed mortgage backed securities, it restricts executive compensation for organizations that require more than a $300 million injection and suspends mark-to-market accounting rules. However, nowhere in this legislation is there any support for the underlying real estate – that gives economic value to the mortgaged back security, so what we’ve done is supported the price of an asset so that our financial institutions can get those nasty securities off the books. Adding insult to injury, the suspension of mark-to-market accounting allows our financial luminaries to report mortgage backed securities at other than fair market value. This props up the balance sheets but once again nothing has been done to prevent the slide in real estate prices or shore up the homeowner so that we can have a reasonable expectation of cash flow for that Mortgage Backed Security.

Please do not “Drink the Kool-Aid.”

There sems to be an essential piece of information still not announced.

What is the actual ‘toxic asset $’s by bank required to be corrected?

Surely a large part of the problem is the vagueness surrounding each bank problem? Is it true that the AIG derivative problem is $660 billion?

We can lick any problem once we know the finite extent and the chosen solution will become understandable.

So let us see the actual numbers for AIG, NCC, Goldsborough Sachs, JP Morgan et al.

The unknown is always more concerning than the known.

How about it Mr.Paulson? Let us see the facts now. No need to be coy.

The Central Banks and Global Govts have done their best to stem the crisis, but the entire global lending is priced on LIBOR / EURIBOR and that is too high and not feasible for companies to borrow money at such high cost. Soon the companies will downsize their operations and jobs will be lost. High Libor / Euribor and similar interbank rates will only speed-up our entry into global recession. Their should be systamatic reduction of credit and not chok the markets w/o funding. Yes easy credit to individuals should be curtailed but normal corporate credit should be reinstated asap. The central banks have to depend on banks to let credit flow into the economies but the banks are not supporting the actions taken by central banks and global Govts. Interbank and Corporate lending at resonable cost (LIBOR / EURIBOR) should be reinstated ASAP.

The times where growth was linked to cheap oil is already past. ASPO (The Association for the Study of Peak Oil) says the peak oil should happen around 2008 – 2010. That’s it.

1. The prices of oil rose because we were getting closer to peak oil and speculation developed on this and then all prices rose because everything is linked to oil.
2. Growth projections fell; we lost confidence in the future (destination unknown).
3. Market failure (even if it was already toxic from the inside and 10 times overvalued)

Who is going to say the world is going trough peak oil? Who is going to tell the truth to restore confidence? There is no confidence in a word of liars! Is it a world of liars?

Welcome back Todd!

I don’t know how anyone can really come to logical conclusions, or even analyze this crisis, when few, if any of us know the truth of the situation.
If it’s like other things that have transpired in government, politics, or “big business”, then there is a lot of dirty stuff going on that only a handful of top people know about. Buildings can’t stand on crumbling foundations!
There are a lot of intelligent bloggers out there with some really insightful thoughts, from which those “financial experts”could take a few lessons.
I don’t think more government intervention can fix this mess, but some regulation is in order.
Can time be the best healer?

I wonder where is the money for the government bailout for the banks coming from. The typical option using taxpayers money, to save the banks which has the taxpayers savings stored in them. I find it so funny, that people believe that the bailout will help. Middle class tax money saving Middle and Rich people’s savings.

Why must it always be the middle class that have to have to take the shit all the time. When can governments realise they have to start taking action on the rich bankers that have caused all these problems, tax them and take their assets away for the bailout plan. That is a better solution to solve this problem.

I think a slowdown or a recession happens when the global economy grow at a high speed where the measurements of growing economy are calculated wrongly. For example oil price was about 147/barrels which is a huge gain for some gorverments/Companies but the gain does not reach the real people who deserve it. If price goes up and taxpayers salary does not go up, then the slow down will keep coming as we will not afford to buy things or get more credit, as more jobless increase. The flow of money is very important when the global economy grows. Pumping more money to the Banks at this time is the wastege of time, for sure if one does not have means of repaying the credit he will not be getting credit from banks, cash flow will stop at the banks.

The solution is to create new jobs and pay taxpayers what they deserve.

Ahmed Musallam

As Darwin said, it’s survival of the fittest, as Adam Smith wanted, the government should stay out of it. This is capitalism, not communism.

The G7 countries need to also learn from the emerging economies in terms of how regulation has helped these economies from a total colapse of thier financial institutions.

Consider China is now positioned to pay back its dues to the US and international world for securing its oil for the past seven years since it joined the WTO.

Of course, western hard work led to the technology and consequent lives saved in securing that oil for the past 50 years.

China has had its share of sitting around and slurping its noodles from hammocks for hundreds if not thousands of years waiting for the west to catch up. We also in turn owe China thanks for funding what amounts to a glorified Habitat for Humanity/subprime building project. Next, the US should renovate its electricity infrastructure and help China and NE Asia do the same.

Discussing the real issues that Americans, in the age of information, are ready, willing and able to comprehend is the real issue and CNN is poised to make that happen

Best Regards,
Andrew
Seoul, Korea
82-19-456-3883

Just got a notification from Wachovia they have implemented new monthly commercial service fees on business checking. Looks like we’ll get hit with the same “nickle and dime them to death” fees that we’ve come to expect from the airline industry. They will always find a loophole to boost profit margins. I’m mad as hell at the banking industry in general and these added fees are just another way into the public’s pocket. As if the bailout wasn’t enough!

In turn, I believe if these government officials would stop misleading the country and actually give a damn about its people; its people would support them. Though, time and time again, the government officials who were elected sought to have their own ideas and choices reflected and this is only part of the reason for our demise these days.

Paulson and Bernanke would have resigned or better still sacked if they are the team managers for the British Football Team and Australian Cricket Team respectively if they come back home with the current result on the table.
Can anyone tell me the rationale for their being gainfully employed up till now.
When will they join the jobless claim list.
Will they accept the “R” word if Obama wins?
Thanks.

The crisis is not over by a long shot! Greed and avarice, the root problem of this mess, needs to be addressed first. I still see plenty of punters in the wing waiting to make a killing.
In the end, the bankers will arrange things in such a way that they will profit whatever the means.
Just a thought: why not devide the 700bn to give to every american citizen 18 years of age and over the $400.000.- it equates to and let the funds trickle UP for a change?

Government has the power to stop the economy crisis by inplementing good global policy.

I’m not sure if I’ll word this how I mean it but I’ll try!! It seems like the markets rode up with crude prices… now crude is continuing to fall and the markets go right with it. Is it really that people aren’t spending money on gas or that they are tired of paying for grossly overpriced crude oil? I am inclined to think it is the latter. Like most Americans I am tired of the grossly high crude prices. But I’m even MORE tired of hearing that demand is down so therefore the economy is bad. Why should we accept paying $100/barrel to OPEC? And why should we accept that oil continues to drive all other markets? Turn on the TV early. If oil’s down overseas then you can almost bet your bottom dollar (and boy is it EVER the bottom dollar) that the stock markets will be down! WHY?

All the financial bailouts to rescue the economy are being applied from ‘the top down’ to the benefit of large corporations and banks. Our economy was built on a foundation of individual consumers and small businesses. It would seem to make sense to ’save’ the foundation so we could rebuild a stronger economy.

Why not give each taxpayer that filed a return a check for $200,000? The check would be taxable at the federal and state level. I would be more than happy to retire my debts and buy a few items to stimulate the economy.

There would be a lot of interesting side effects – welfare and unemployment systems would be ‘reset’, state governments get a windfall, illegal immigrants would not benefit etc. etc.

I think all what has been done so far is only a pain killer. To get rid of the sickness the way the economy works need to be fixed. First step: Stop usury and deal closely with products and services.

http://www.islameconomic.com

There are about 350Million Americans, give each a million dollars to pay dept, morgage, invest in homes, stocks instead of banks. Lets bailout the Americans.

Todd, why do people cling to this “Free Market Myth”?
7000 years of history refutes the very primise. Tax and spend, public works projects building infrastructure has worked. It was old when the Nubian Pharos used it. It was best employed by Emperor Hadrian, the “New Deal” was a copy of his plan.
Now as population growth slows we need to start developing a “Dynamic steady-state economic dvelopment”.
This is an entirely new idea for the economy and society. One we must approach and soon. “Zero population growth” is an ideal we are trying to achieve, once achieved we must have an ‘Dynamic steady-state economy”. We can no longer depend on the forced growth of supply side economics or even the more restrained growth of demand side economics. The current economic crisis demonstraits the failure of how the “Free market myth” has been implimented.
I see things differantly,
Thank you, Mira

I am not an economist nor do i hold masters or doctorate degrees, but my two cents view of whats happening is simple… our markets are free markets..the question should not be “Has enough been done?”, it should be “Did we do too much?” In my point of view, how bitter this may sound, is that we should just let the markets to themselves. No amount of government bail out/rescue/intervention would do our markets any good. They only add to the uncertainty. My solution is… we should bite the bullet and lets just ride this out, no more govenment intervention! The market will correct itself on its own in time. The different government’s meddling with it is adding up to the volatility. Sometimes, we just need to let go.

Markets won’t stabilize until house prices find a bottom–it could be another year to find the rock bottom.

Thanks to you Todd, and other candid economic advisors, so far my investments have survived intact. I feel like a survivor of a theater fire. Those that listened to conventional financial advise and stayed in their seats are now charred corpses.

I’m going to echo the sentiments of many here. I go for long walks these days and often ponder these financial strange days.

Before comsidering whether these massive government bailouts are necessary, someone needs to explain to me where all the banks’ money went, in the first place.

What money? Big banks have reported ever increasing profits for decades. That money.

Since WWII, large banks around the globe have raked in billions, literally and possibly for some of these big banks, trillions.

So, where did all this money go?

The way it seems to me is that for once in all these decades, these big banks are set to lose a lot of their money. Not all of it but huge chunks. However, they do not want to lose the money they have, so they are plotting to have taxpayers around the globe pay for these losses.

I see high crimes all around the banking community. I expect to see many heads roll and I hope governments do the chopping or else, I guarantee that grass roots movements will go after these crooks and the sleeping politicians and burocrats that were supposed to be looking out for their tazpayers.

So. Where’s all the big banks’ money that they had accumulated for 60 years before this crisis?

Hi again,

Further to my earlierr suggestion that the $700Bn bailout package, largely to buy up ‘toxic debt ‘and free up credit, can only be evaluated when compared to the actual amount of ‘toxic debt’. If the US government and the financial regulators such as the Federal Reserve Bank will not tell us how much there is, investors will come to their own conclusioins. From the look of the markets aacross the world this Occtober 16 morningg, investorsare not yet immpressed by the vaarious rescue packages implemented across the world.

More data to put existing figurs in context, please!

Andy Soper, Grahamstown, South Africa

I think the main issue right now is the decoupling of products, their production costs and their consumption costs. When one listens to all the gurus, they are with their wet fingers up in the air trying to find out which way the wind is blowing, instead of finding out whether the world needs all this production and how much does it actually cost to produce anything.
Look at oil, the prices spiked in the summer months in the Northern Hemisphere – which consumes most energy – when normally energy consumption goes down. Now in the approaching winter season prices go down!
Many of the commodities are purchased by some traders on ridiculously long future trends.
When commodity exchanges were created they served the coming season of production and consumption, now some bright guys see the oil being finished in some years ahead and are banking other people’s money on some distant future when we run out of oil.
I think the world has to regulate the commodities system, as there does not seem to be any connection between the cost of production and the purchase price. The way to do is perhaps to treat the main commodities as we treat money i.e. not as a product. Maybe like kind of way that Norway does in exchanging oil for other assets while the economy has to produce its own products. Oil does not make an economy richer. It just puts more money in somebody’s pocket.
There are too many countries that use oil and energy as some kind of political leverage betting on the price rises and funding irresponsible adventures.

Dear Mr. Benjamin,

Let me take your questions in order

Do you think the steps governments and authorities have now taken will be enough to restore confidence? No?

How long do you think the economic downturn could last and how deep could it be? It will last for some time and probably will be the deepest since the crash of 29, perhaps the deepest of all.

Do you think stock markets have already fully discounted the worst of a global recession? No. They cannot discount what no one can understand.

The problem is a potential melt down of the world financial system. It is not the sub prime mortgages. It is not the derivative securities. It is the fundamental flaw in a monetary system of fiat money coming home to roost. The reserve currency of the the world is the dollar. The dollar has been debased continuously for decades. Since Nixon terminated gold exchange in 1972 the world monetary system has been entirely a fiat system. The value of the dollar has risen in the past few days, but only because the alternatives are still less attractive. What is the value of the Pound, Euro Yuan or Yen if the reserves behind them are valueless.

The “rescue plans” are Band-Aids on a major haemorrhage. We must rethink the world monetary system and develop an alternative to the broken wreck we are now using. Here is a chance for the UN and the World Bank to deal in something other than pointless verbiage. Here is a chance to really fix something on a global scale. I am frightened of the potential power of a world government, but I am more frightened of the alternative of the obsolete concept of individual nations trying to run the world and particularly the financial system.

Mike

NO MORE GOLDEN PARACHUTES—BUSH AND McCAIN ARE BRINGING THAT TO A STOP—-NOW THE CEO’S WILL ONLY GET A
SILVER PARACHUTE WITH A MAXIMUM OF ONLY 25 MILLION.
THOSE REPUBLICANS SURE KNOW HOW TO STRIGHTON THE ECONOMY OUT.

I THINK I WILL VOTE FOR OBAMA.

Personally, I do believe that these days on US and other stock markets around the globe are historic. Mainly cause it seems like some kind of a loss for someone to an ordinary folks, and it concerns morgages again for the ordinary folks and things like that.
First and the major issue is “Who created all this?” (on the account to ordinary folks. And who initiated the collapse? Why did he pull out his sack of money with fully capitalistic reasoning, and why areYou guys now guided and conducted with socialistic rasoning by Your governments.
The answer would provide the direction to that previous question or concern (whatever) of regaining lost confidence in the banking system
Another thing brings huge sadness in all this historic affair:
Cal me an Obama fan, but this smells all like a specially prepared meal just for him for the day when he steps up as a President of USA.
And by the way, who cares about the Banks with ruined reputation. No one clever would issue even a Salvage Title for them.

I think that we are so far to find the end of this crisis. In my opinion, the governament of USA is the gilty of this issue. In particular, Mr George W Bush, that was worried about war and forgot to make the mainly lesson of economy. All of the world, including my country (Brazil), can be prejudiced because one president comitted many mistakes in his governament.

Oil price was below 70 dollar today.
Why isnt anybody chearing? I am.

Can someone explain to me how it is that speculation is not a primary driver in the price of oil? This was stated over and over again by financial people during the recent meltdown and Congressional investigations on the role speculation played in the housing markets and energy costs.

I’m not a professional financial expert but an average Joe and when I see the price of oil drop 50% and OPEC forecasts a tiney associated one-half of one percent drop in demand for 2009, its real hard to believe that specuatiors have not once again raped the American consumer of hundreds of billions more.

It seems to me that speculation of fundamental commodities like food and oil should be carefully regulated. Help!!!

Well i think the dollar will fall in about a few weeks if they keep pumping money into a system that has gone wrong.
togheter with the new trading discusions (started in europe yesterday) leading to a new coin the amero. a coin like the euro but for the whole american area (north and sound). Anyway its not our confidense, its confidense between the banks. To get that back goverments should provide better havier regulations. While trading between countries, should be based on reserves the country has. For example a small country as island should not be allowed to have banks with several multimilion euro’s or dollars. There are simply not enough people living there to pay it back ever.

Registred-comercial Banks themselves should trade money, with a party in between like the IMF-bank or so; a single bank that can gurantee how much each back has lended from other parties. (and so could warn, if things mess up) I’m sure that would gurantee confidense.
But ‘as long as banks are not sure what other banks have’, its a problem.
Another point it should become forbidden to lend money from another bank by a bank. It sould only be allowed again with that IMF-Bank in between. This way money trade routes get clear.

And to solve this entirely create 3 banks. An american-based IMF bank a European and an Asian. Those banks can handle their region while if its over their region then they can connect to their other party.

ofcourse control of these 3 banks should be continously monitored electronicaly by computers, not by humans. So any global transaction would never be faster then those banks can control them. (computers can do work fast).

In later stadia when people get rid of coins, but will only use plastic money or an inplanted chip; then we will see that those banks could also control their payments.
That would help against terrorists too. But you all will also loose some freedom by it, but like terror politics will convince you that a big brother is watching you will be better for you.

…

The root of the problem has to be addressed, which is irresponsible lending. 20 years ago you could only borrow money if you could show that you could pay it back. Until recently someone with no income other than govt. benefits and no budgeting skills could receive a phone call offering them a loan, and when they said yes, the cheque is delivered by courier that day! That loan which was never going to be repaid is the first burst of hot air into the system, then on it goes. Until you have whats happening today – too much hot air in the system, and the system exploding.

The government should introduce some regulation, not too much, but enough to bring back responsible lending, loans should have a level of risk attached to them so that when they are sold on the traders know what they are buying, thus preventing the hot air from getting in.

Also these loans should all be unravelled and a level of risk attached to them, and a reslistic value put on them, the last one left holding the parcel has to take the hit on this. Or the institutions who have been trading these, get together and come up with some way where they share the loss. The Govt should make this a condition of their support and give the lending institutions a year to do this.

There is no confidence because the consumers are still struggling. Because the consumers can’t make ends meet, their spending is in an involuntary boycott.

Solving the current worldwide problems will take more than piling
cash into financial coffers. Seems to me that the people who have
allowed this to happen should be called to account. It also seems
to me that there are far too many men at the big end of town still
wining and dining whilst too man women across the globe work
in sweat shops or tread the boards in the retail stores at less than
$20 per hour before they take the 1 1/2 journey home to wash, iron, nurse, teach, cook and balance the budget. Meanwhile, the children of those in affluent societies sit eating McDonalds, drinking coca cola and ingesting violent, riding skateboards, graffiting property, drinking
alcohol or watching degrading, sexually explicit television, movies,
music video clips and advertising.

To make things better, we should be looking at the root of our
problem.

We are not just financially bankrupt, we are morally bankrupt.

Hi,

Here’s a quick comment on the economy. No, not enough has been done. Here’s a good idea. Why not make adjustable mortgages illegal. Lower them to a reasonable, affordable rate for everyone. Alot of people with bad credit can’t get a reasonable rate and are locked in. They could afford to pay their mortgage if it was lower and wouldn’t worry about losing their home. That way they’d have more money to spend at the grocery store, mall, on their home, pay bills, etc, in turn, help the economy. I think there’s a lot of people out there in the same boat. I think this might help a big percentage of Americans and restore their faith in the economy.

I am confused by the way “gas price drop” is reported. The price went up from $1 to $4 during republican presidency. Now, it is drropped from $4 to $3, just a dollar. But , it is $2 high from the right price.

As I understand it Bush will follow the UK and pump $250 billion by buying shares into any American bank that signs up.

I note with surprise that he hasn’t demanded that the CEO’s of these banks that require this injection of capital to stay afloat are sacked, that two members nominated by the Government get seats on the board to make sure that the publics money is protected and there are no more excessive gambles on Wall Street, as the UK Government has done.

Hasn’t he learned anything.

It will need time… and we all know that time is money.

Can someone explain exactly how the government is going to dictate how the first traunch of money must be used by the banks? How will oversight occur and by whom? Who will determine when and how this money is going to be disbursed?

I have the following suggestions and questions that are open to comment by anyone who can answer with real knowledge and facts:

1. The banks or current holders of the mortgage should be required 1st to auction off the houses on which they have foreclosed to recoup some of their money and to establish the “gap” between the current value and the mortgage amount. If treasury is going to reimburse mortgagees for this gap, either preferred stock should securitize the repayment of this money OR treasury ought to be able to to require that the new buyer of the house put up 20% of the purchase price at current market value and that this amount be split 50/50 between the bank and US Treasury. When the house is resold in the future, the profit over the mortgage amount should go first to Treasury with interest, next to the bank, and last to the homeowner.
3. Does anyone think our government should buy the forecosed morgages? How will treasury administer evaluation, sales, etc.?
4. The mortages that are [about to be] in arrears should be renegotiated to allow the current owners to stay in the house, unless there is no reason to think any new terms will work long term based on the owners’ financial situation.
5. Every effort should be made to reduce having the any money from the US Treasury go out to banks without security and upside for the taxpayers.
6. Is there going to be an accounting related to the bail out money so that taxpayers have full disclosure and so Treasury can make mid course corrections as the money goes out?
7. What percentage of mortgages are actually in foreclosure? I read somewhere that at the worst point in America’s economic history, the percentage was around 12%. Can anyone confirm this? Does this fact warrant our government essentially socializing the mortgage banking industry?
8. Why can’t CNN devote a broadcast to explaining the current mortgage crisis and exploring the creative ways the best minds in the country have for dealing with this crisis?
9. Who is going to regulate mortgage lending practices to make sure there is enough equity by the buyer and best practices used by the mortgagee so that default and overlending are avoided in the future?
10. If the mortgage crisis is managed properly, how long should it take to get his piece of the economy’s prolapse handled?

If we had all of the good paying jobs back, that might correct alot of the problem. When you go from making $20 or more on the hour, to minimum wage, then hell yes you’re going to lose your house and your car and your way of life. Our government doesn’t have a clue, what the American public needs. If they weren’t all wealthy then maybe they would know how to fix the problems we face. But what does the American public keep doing? They keep electing the wealthy to run this country. When are they going to get a clue. I guess this country has to fall completely on it’s a** before anyone gets it.

Real change for the better won’t happen unless the blood sucking Federal Reserve Bank is abolished. And that goes for central banks in other countries as well. They are all privately owned!!! All that interest is going to the few banking elite!! There is no real reason why Congress cannot print its own money. Abolish the Federal Reserve for crying out loud!

Quote by President Woodrow Wilson after the Federal Reserve was created;

I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.” -Woodrow Wilson, after signing the Federal Reserve into existence

NOT ONLY CEOs from failed banks that received bailout rescue were not sacked in US unlike German example, it seems that the partying is continuiing oblivious to the sacrifice of ordinary Americans and the pains felts in other parts of the world. It is not just the AIG shame but Simon Bowers from the Guardian claims that a cool US$70 billion -almost equal to 10% of the recent bailout money – were either paid or earmarked to be paid as pay and bonuses to management staffs of these rescued precious sacred cows who stuffed up America and brought misery to much of the world’s other financial markets.

George Bush and Paulson should have set legal strictures that these abilout moneys should be spend on reworking the economy – not enriching private pockets of incorrigible crooks. Was this done? Simon Bowers says the banks declined to comment on his news story.

Will there ever be confidence in financial institutions?? It seems endless greed and irresponsiblity are the only two evils that prevailed and continues to prevail, is it not??

how does a cent-less (obama) lawyer/ senator become a millionaire and according to what he said at the first debate ,” that his grandmother had to scrape to send him to university” does he aspire to harvard .i am sure that in the uk there would serious questions asked .

It seems, once again, that my beliefs will go against the grain. With the exception of one or two comentators on this board, three months ago I said that oil would go down and fast. At the time, the majority of comentators allowed themselves to be swirled into the hysteric belief that oil would surpass $200 in the short term and $250 in the mid – long term they were convinced of $500. So why did I go against the grain? Quite simply, I took what I thought would be a general attitude toward consupmtion, i.e. a waking up call. That coupled with the speculative element in the price, which would turn at the flick of a switch, there was no doubt that oil could only go one way.

So now I am in a similar attitude toward this so called mega crisis. In years to come we shall talk about this event as the crisis that never was. Let us not mistake a hiccup for an on comming brain tumor, although the media would have us believe differently, naturally. (Worth pointing out that circulation numbers are well up). I have witnessed how behaviour patterns have changed amongst people who’s status hasn’t taken a turn for the worse and who’s prospects for the future look as bright as ever – I include myself in that category. So why have I reduced my monthly petrol bill by almost 50%, why am I now buying ‘own brand’ products?

It is this lack of confidence that will be our downfall and not a handfull of unpaid mortgages. I don’t, for one moment, deny that quite a few of us began living beyond our means; over-confidence can be just as damaging, but we are a flexible community and that aspect can and will be dealt with.

There is just too much cash out there, trembling with fear and hiding in dark undisclosed crevices, waiting for the rumour of a wandering hooligan box of matches humming the tune of ‘Burn Baby Burn’, to disipate.

A few hands will have to be slapt, regulation will have to be stiffened and a few words of positive comment. That is the best prescription for the current ailment.

The problem is not the confidence, the problem is the process of how money is created .

It is absolutetly obvious, if one can see the relations, that there´s a certain amount of either neglect or bad will, in the construction of these release packages.

That this construction of the monetary system, by it´s foundation in1931, since long has lost it´s relevance in a modern world of IT and it´s flowing information.

But since there´s probably more people than me alone, who can see the whole picture, a brighter future will come no doubt.

Paulson is fixing the Banking system the way Tony Soprano fixes New Jersey.
No attempt is being made to enforce transparency, so that what is owed to whom and by whom is apparent and rational lending can take place.
No attempt is being made to claim back the $70 billion is bonuses the Bankers are taking this year for destroying their companies.
Why did Paulson insist on immunity from prosecution?
Because it is what every criminal wants. How much of the losses have been incurred through criminal practises in lending and accounting?
This is blatantly transferring money from the taxpayer to gangster organisations, where it will disappear without trace.

Wall Street bankers in line for $70bn payout
Staff at six banks set for huge payouts despite being beneficiaries of the $700bn US bail-out .

Present the evidence of this Article from the British Guardian to your Audience.
Under German law, this is a criminak offence of the CEOS against their companies and their shareholders ( the owners of the banks ).
Why can the yget away with this innthe US ?

Klaus

From surplus to deficit, the party is over as we all can see. Unfortunatly
we all have suffered. The next move we can all prepare ourselves for
is, to roll up our sleves and do our part to heal this great country. After all this is our country and our future…………………

The experts are constantly telling us not to panic, not to sell, be in the market for the long run. It seems, however, they fail to follow their own advice because they are clearly selling like crazy. Could it be the experts benefit by everyone else not selling and they are protecting their own assets, rather than ours?

Be it so great that we have socialism or communism, with no money we can not support the poor so the are on their own now, they could get lucky and starve to death or get busted for petty crimes and go to jail ” work camps”. Upper middle class to mean you have three meals a day, have you guys never been to third world country?

To R. Zucaro, Don’t try to wrap your head aroung the dollar amount, but try to wrap your head around what kind of people create this amount of grief and tradgedy, while some our country’s finest (you know the ones that didn’t join the Air Guard to avoid the Vietnam war draft) are doing their best to defend the country abroad from all aggressors foreign, while the domestic agressors destroy lives here and damn near ruin the country. Most people that have been commenting on the blogs I’ve read are wounded, stunned and angry. Extraordinary times call for even more extraordinary measures to re-store confidence and the plan should include seizing wealth and jail. The damage is coast to coast and has affected every local government and common household. This makes the twin towers look meek by comparison. We’ve been pursuing and punishing foreign aggressors for six years. Now is the time to pursue and punish those that have sat so smuggly safe and dictated our futures. Stop being stunned and act as if it isn’t business as usual and respond. We have all been challenged, America ,and it’s time to do what Americans have always done, respond with overwhelming and total disdain and disregard for domestic agressors. How do you like me now Todd? And no, government will not be there when you as an individual citizen of the U.S. want to be bailed out. That wouldn’t be cost effective, but then what is anymore. Does anyone anymore want to remove term limits? Maybe invoking a single term limit might be more cost effective. It sure would be more efficient. This f…..g thing is so massive, I don’t want to believe it happened in America.

Throwing money into financial institutions like Goldman Sach, Morgan Stanley is like throwing fresh water into the ocean, thinking now we can drink water while we swim in the ocean.

Unfortunately, Paulson has put wolf’s in charge of the chicken coop. There’s only one outcome to this. Greed is a disease. Incurable, worst than being an alcoholic. There aren’t may people out there who’d forsake greed for a better life. Maybe, the Buddha.

The last time we suffered, poor people got the rich people out of trouble. Give the money to the poor. They will create the jobs and these hiher uppers who have lost, might find a job then. But people forget. Maybe find all the folks out there over 80, their collective consciousness might bring some reality to who saved the rich mans behind!

Give it to Goldman Sachs, the money will only dissapear.

The core problem of current US financial crisis is the irresponsible act of few individuals making billions and leaving millions of bystanders taking the rot. Prosecute those people who create credit default swaps and ban these instruments, stop speculations in money markets and commodities markets. only by putting basic and responsible dealings can US able to wheather is financial storm with ease.

If the high interest rates on Credit Cards are NOT adjusted downward in a legal and orderly manner, we WILL see a real depression!
(It’s so FUNNY how people define ‘recession’ and ‘depression’.
No 2nd vehicle, no flat screen tv, having to rent a house. LOL)
When the MASSIVE credit card debts DEFAULT on the poor banks, there WILL be bread lines!

Make loan sharking illegal. It would be way better for the overall economy to let organised crime handle the usury business, instead of government backed financial institutions.
Higher interest rates for riskier borrowers IS a recipe for disaster, like driving a bus faster down a mountain road.
If ALL lending, credit cards, car loans were restricted, BY LAW, to less than TWICE of prime, the CULTURE of Credit would could be developed!
Credit risks beyond twice of prime? no loan! (LET them eat cake!)

Further to my previous comment, compared to the mortgage crisis, HOW big is the overall debt crisis? (credit card and car loans)
When is that boot going to fall?
SomeBODY calculate to amount of ‘risky’ money that is owed at exorbitant interest rates 15 to 25%!!!!!!! legalised LOAN SHARKING!!!

All this effort to unfreeze the credit market, which the ‘Economy is built on’, THAT is the CAUSE of the problems!!!
JUST MAKE SURE projected Income can cover repayments and the only way to do this is with legislation!
Most people who talk about the great American FREE market economies are idiots who do not know the definition of FREEDOM!
Wildness is, like animals, doing what you please. Freedom is the ability to choose between right and wrong. Governments who do not employ laws, (stop signs, police officers, jails AND financial restrictions) are NEGLIGENT. It is NOT freedom to ALLOW people, businesses, and governments to LIVE BEYOND THEIR means. It IS WILDNESS. Price controlling INTEREST rates would bring us back to the freedom of not losing out imaginary, paper, wealth.
SIMPLE FORMULA – NO ability to repay NO loan!!!

Shakespeare was not only a great poet, he was a BRILLIANT economist!
“Neither a Borrower nor a Lender be!”

Q1.Do you think the steps governments and authorities have now taken will be enough to restore confidence?
A1. I think the economic problem comes from our wrong economic development which destory the nature environment. That ’s the reason to think about what we do really need for our living quality standard and how we can respect the nature values in each country with the major economic system. The enough level is about how we can live heathier and happier with our original life values with the economic development._ How can we have the chance to open our economice door which connect the real resources from each country?

Q2How long do you think the economic downturn could last and how deep could it be?
A2 That depends on how each country really faces the basic problems and what they can do to change the way of economice system? The bank is the resource door to let people have chance to mark the each part in the work market but we just ues it to create the same thing a lot at the same time. We still have the trouble to change the wrong marketing as we really borrow too much money on overdevelopment. But we still have chance to find the new economic door when we start to work together as that ’s what we really need now.

Q3.Do you think stock markets have already fully discounted the worst of a global recession?
A3 I don’t think so , especially when the govement start saving the market. I think eachone who know the management will understand how to use “the speak of numbers” to create different views, right?

Economists and Their Combined Wisdome (sic, intentional)
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

If all economists were laid end to end, they would not reach a conclusion.
George Bernard Shaw

>>>>>>>>>>>>>>>>>>>>>>>>>>
My Wisdom: Shut up already. Most of us live paycheck to paycheck. If you want to provide value, how about speaking to the vast majority of your listening audience?

I’m waiting for the Fed’s to push Bankers into doing Adjustable Rate Automobile Loans.

I wanna get a Ferrari….sure it’ll be repo’d in 24 months…what’s left of it.

That was sarcasm.

Todd,
You are one of the few who call things as they are, but even you have shied away from the horrifying underlying truth!
The collapse of confidence in the banking industry was not in the main one of a collapse in public confidence but one of bankers themselves not trusting each other. Governments stepped in, not to rescue public confidence, but bankers’ confidence; the public are only just beginning to worry!
Consequently, as the recession bites and the public themselves start to lose confidence in the banking system, who will be able to rescue it? Western governments have already shot their bolt and are now all up to their ears in debt, leaving us with no effective lender of last resort to combat a real run on the banks.
Can we rely on the Middle and Far eastern countries to continue to lend to the West under this scenario? Would you advise them to?
Now tell us whether the worst is over?

Hi Todd,

you are one of the few reporters who speak frankly without being afraid to be punish by their supervisors. Many thanks for that.

From my point of view its far from being over.

I wonder if even Warren buffet is now concerned of telling the full truth.

In the beginning he said it was going to be a long and deep recession and now that we start entering it he recommends to by US stocks. It’ s a contradictory isn’ t it ?

Kind regards

Johannes, Berlin

The present financial dilemma we find ourselves in is due to the creative genius of a few wall street MBAs, whom we are told, are essential if the US is to maintain its status within the world financial markets. Their creative genius has given us such financial instruments as derivatives, hedge funds and credit default swaps, to name a few. When broken down their creative genius is nothing more than an attempt to circumvent the rules created to maintain a stable financial system. By inventing financial instruments, which were beyond the understanding of the regulators whom were responsible for the system’s stability; these creative geniuses have managed to bring the entire financial system of the world to the edge of the abyss.
The solution to our present dilemma is very simple. It lies in our definition of capitalism. Capitalism is a market driven system. Capitalism rewards investors who take risks and also punishes investors who take risks. The end result lies in the amount of risk taken or avoided. In playing the game “king of the hill” our creative geniuses were willing to risk all to win the game and become billionaires. The only problem is that they were trying to create wealth out of electrons. The entire world financial system is computer based and ergo wealth is created and destroyed via the flow of electrons. The basic idea behind the creation of their new money was to bet heavily that certain stocks would go down in value. By purchasing insurance against the drop in value of these stocks they would rake in the dollars when the stocks fell. Unfortunately the idiots who sold them the insurance did not understand the risk behind what they had agreed to. Firms like AIG bet that the value of the insured stocks would not fall. They were wrong because they did not know that the game was rigged. Rumors were spread about the fragility of Leman Bros. and that is where the dominos started to fall.
Now for the solution! The Federal Government is the only entity with the legal right to print money and since electronic money is not really legal tender then it is not real money. The Federal Government is not responsible for the actions of a few creative geniuses trying to print electronic money, which by the way is counterfeit and illegal and which could get you 20 years in a federal pen. It is the obligation of the federal government to bring all of these creative geniuses to justice for counterfeiting and disrupting the financial system of the entire world. What they did is no different than what some kids in high school did a few years back with a high end color printer, color scanner and a little creativity. The difference is that the high school kids did not cause the entire financial system of the world to crash.
In the end the capitalist system we have been operating under should be allowed to cycle through its highs as well as its lows with no interruptions from the federal government. Those who invested in the system should take the pain it dishes out just as they would have enjoyed the pleasures it might have given. There is no guarantee that the value of a stock will go up just as there is no guarantee that tomorrow will come. History teaches us that everything is cyclic which brings us back to the wall street bailout. The $700 billion is now being used by the banks to buy other banks and as a backstop for other banks that will be in trouble very soon. We will be better off if we allow the house of cards to collapse so that we can build a more robust system with severe penalties for those who abuse it. Let us go back to legal tender backed by precious metals and or commodities, which have real value. Leave the electrons to the physicist.

Satisfactory customer services for any product sold are key to ANY business success. When a product/service fails then that business’s money-back guarantees or at the very least some sort of compensation offered does get the customer to come back again.
Wall street offers nothing back/no compensation for their failed products.
Why would anybody go back, again, to that “store”?!!

We all are talking about Bail outs and new stimulus packages. Why not the US and all governments ask the CEO’s MANAGers of all banks and involved in the housing market losses to pay back the Bonus’es they got in last years from time when the whole process started. This will help the normal tax payers and one who can not pay back these taxes should work on low salary and normal work for defined years in government office.

Everyone should be responsible for his own deeds. Mass / normal tax payers should not be the only one to clear this mess of wall street.

Rajesh, Germany

You pose questions that Governments, regulators and all the experts that CNN,CNBC, BBC can muster cannot answer. The blind are leading the blind and have yet to find the person with one eye. But think of this. The ideology of the US Republican party and human greed has done more damage, physically and financially, to this world that any terrorist organisation could ever do. When will that stop?

No , not enough has been done to fix the problem everyone forgets you got to spend money to make money so why not on the middle class and on new energy in the USA .

Do we know what caused it, who caused it,how deep is the problem,we are really far from having fixed it or having done enough. Let the culprits go to jail first. Lack of any regulations have caused this.This is far from over with all the financial messing around the Wall streets boys have been doing.

Propping up the banks is no doubt a good idea to prevent an absolute collapse of western economies. However, pumping money into the pockets of those shitty bankers who created this mess is only worse.
the appropriateness of depleting the capital that taxpayers just injected into the banks through the payment of billions of dollars in bonuses, especially after one of the financial industry’s worst years is beyond my fathom

Jami

i think we are very close to a US stockmarket bounceback. Since the stock market simply reflects activities in the real sector of the economy, i think it is fair to say that a V-shaped recovery is underway for the US and of course the rest of the world. World leaders have already done their own part to get banks to start lending to each other again. We have seen Bailout and stimulus packages by the world magor ecoomies (in Great Britain, US, and of course the 27 trillion YEN in Japan). Although we may see slight increases in the interbank lending rates going forward, i think that will be an indication that they are now ready to lend, but need some extra charges just in case… What this means is that confidence has been restored, but banks would still remain courteous- which is exactly what is needed to jump out and really stay out of this type of mess. There has been many blames on mortgage lendings, especially that of the US. in my views, if the US consumer does not spend above his/her income, then the Japanesse auto industry would never have exported itself out of the late 1990’s recession, and interest rates would currently be well into the negative. Also the European companies that benefit from outsourced jobs would not have popped up. the Chinesse food and clothing industry would not have found markets in North America.
The bad news though is that many companies are announcing layoffs in tens of thousands. This may further slow down the recovery process since purchasing power will soon be hurt in the US. The strict trade union laws in Europe may mean that Europe will not be hurt as much in terms of low purchasing power. this means that those countries they export to may beging to see their balance sheets and of course ther share prices edge up slightly. The good news is that both the US and Gordorn Brown realised that ‘Monetary Policy need to be backed up by Fiscal Policy.’ With the conventional definition of recession-negative figures in two consecutive quarters- I think we may have a recovery somewhere around Mid December. Although this is not enough time for Monetary Policy, or the more time taking Fiscal Policy to filter through the economic figures. The idea is that given the conserted efforts by Western Central banks Including those in Asia, and the psychological effects of these announcements, we may see an earlier than expected recovery.
Thanks
Ulasi Joshua Ikechukwu
Joshua Ikechukwu Foundation.
Economics Dept
University Of Nigeria Nsukka, Nigeria

I do not think that this is time to play partisan politics in Britain and the US. The Western Credit crunch. The ISAVE struggle should not have been witnessed in the sort of new economic order we now have. Brown and Cameround, Obama and Mcain should find this moment as an opportunity to contribute their best in salvaging their economies, not a time to profit from the financial doom of their electorate.

Mr. Barack Obama should re-orient the tech sector of US economy in such a manor that they should concentrate on the tech intensive part and the service part should be left to global partner.

So that the US companies stay competitive and get benifited by the tech as well.

For the jobless he should encourage and arrange to re-orient/retrain to settle them gracefully.
No amount of feeding will help rather then give them the tool to make way themselves.

Thanks,
Sharat Kumar
India

Everyone, is blaming the GM’s and say that they misread the market, but anyone who wants to can see that GM and Ford have plenty of small cars. It’s the consumer who has chosen to buy the Hummers instead of the Cobalts. Let’s put blame where it belongs in this demand driven economy.

The G20 are meeting today.
Can someone give President Bush this message, so that he may give them some hope?
The present financial meltdown started in the US.
It started where it hurts most in the US. The Housing market.
Tthe bell-weather Industry that determines the wealth of the ordinary man in the street., and consequently the US Economy!
To an American, his house is the cradle of his wealth. Take that away from him and the Nation suffers.
Give him back his home and the Nation will prosper and flourish and along with the US, the Global Economy will be revived as well.
It can be kick-started with a $400 billion money-back-to-house-owners program, that will eventually put back $5.5 trillion into the Global Economy, by reviving the ‘TOXIC’ sub-Prime Mortgage Paper.
Put cash back into Main Street and Detroit will sell its cars again.
Jobs will be saved and jobs will be made.
That will be the easiest, the cheapest and the quickest way out of the present catastrophic Financial Situation.
And for the future?
Prevent the periodical repetition of the housing meltdowns by insulating the Housing Industry from the ravages of the repeated see-sawing of the Fed Prime Rate.
Let a house be sold at fixed interest for the duration of the loan, by Federal Assistance if Necessary, through a Government backed, Federal Fixed-Interest Mortgage Assistance Program.
Houses should be sold like cars. Equal payments for the life of the Mortgage!
Ion Livas
ionlivas@gmail.com

Since the housing market crash and many foreclosures, who’s been paid the mortgage premium insurance, that most home owners are requied to pay on their home loans. If the payments have been made why is the banks having difficulty with cash flow?

In defense of the three Auto Executives; they did not come from Detroit alone.
Each had a group of other Executives, Accountants and Lawyers with them in the plane.
Add to this the weight of hundreds of pounds of documents they brought with them, flying down to Washington by he Company Executive Jet, was probably cheaper and much safer.

Ion Livas
ionlivas@gmail.com

the major problem being missed to help boost the economy falls with one group and one area: the middle class mortgage rate.
Conforming loan limits are too low and rates are too high to impact mortgage holders in major cities. For Example: In Atlanta, the conforming loan max limit is $417,000. The average middle class home is $500k-$700k. The current interest rates for these loans are 7-7.5%. Not attarctive! Move the conforming Max to $650k or $700k with the interest rates around 5.5-6.2% and watch the Economy go crazy recovering. The Real Estate Industry impacts almost every industry. Wood, Steel, Concrete, Plastics, Brick, Stone, Landscape, Fabrics, etc. Mortgage rates are going down, but they are not in the $500-$750k area. Offer these Re-fi and Purchase rates and see what happens!!! Glenn Green