more neither Arthur nor Martha ...

  .. some swindles they push ...
    .. come back to bite 'em
Here is an interesting graph:

I got the graph from Barry Ritholtz here, cited by Mike Whitney here. Ritholtz quotes his source: Ron Griess of The Chart Store.
The thing that I find sooo interesting is the point of down-turn; it well pre-dates the identified start of the so-called 'derivatives melt-down:' "the collapse that began in late July 2007 with the emergence of the subprime crisis," atimes/W Joseph Stroupe. Then a Q: If I can see this, why can't others - or if they can/have done, why no, or at least so little, chatter about it? Ritholtz's final comment is "Astonishing ..." and I agree, but for a different reason; apart from the obvious, i.e. the dramatic "over the cliff" decline, but also from the timing of the chart's peak, i.e. the start of the crash (of housing starts, remember.) According to this article in The Economist, US house-prices are "down 30% since their peak in mid-2006." According to the graph, housing starts peaked on or about 1/31/06, i.e. start-'06. As usual, there are lags, so now to my biggest Q (here): What happened, before late July 2007, before mid-'06, before even start-'06 - what triggered it all; the house-price falls, the house-start stalls, then the Wall-St rout?
An interesting forensic question; I have addressed it in a slightly different form starting looong ago, seems the 1st mention that I made of the Howard/Costello CGT-halving might have been 030805 (YYMMDD, and then Oh, s**t! - I'm still moaning about it!) Before we leave this, you might ask Q: *Exactly* why is this sooo interesting?" - and the answer is A: Because the 'derivatives mess' is *secondary*, being financial finagling based partly as it is on the (hyper!)inflation of house prices (as good as criminally aided and abetted by Howard/Costello in Aus), which in turn in the US is based on the true, real reason behind all of these problems, namely the (hyper!)irresponsible 'printing' of US$s, and the resulting asset-price bubbles. IF ... THEN; the massive bail-outs, by many estimates now into multi-trio figures are all being directed at a secondary problem, all that dough landing who-knows-where (but we can make a 'good' guess (actually, of course bad one)) - but the 'primary' cause stays largely unacknowledged, let alone treated - much less cured. Q: How incredibly odd is that!!? A: Utterly, (terminally!) gobsmacking!


  1. IF the mortgage and credit crisis in 2006/07 was caused by the inability of a large number of American home *owners* (i.e debt-laden wage-slaves) to pay their mortgage loans as low introductory-rate (and too often *sub-prime*) mortgages reverted to regular interest rates; THEN those morgages were *created* a year or so earlier ... in 2005/06, which was when through the roof high were inflation-adjusted US house prices (and UK house prices, and AUS house prices).


    One factor: What Bush's 2004 campaign slogan "the ownership society" reflected -- a spin doc's phrase to rally support for Bush's tax-cut proposals morphing into Bush's illogical conclusion that "... if you own something, you have a vital stake in the future of our country."

    As if merely *being* (and not necessarily being an *owner* of anything but your particular Deoxyribonucleic acid) isn't sufficient to have a vital stake in the future of *our* country/ies.

  2. GWBush's "ownership society" was neither his alone (I dimly recall Howard hopping on a similar/same theme; 'monkey see' all over again), nor even *relatively* new - the same "ownership society" was being touted - ta ra! Before, and as an active component in the run up to, the 1929 crash. One of the leading 'PR-magicians,' in fact *the* actual inventor of the term PR ('public relations;' at the beginning simply a 're-branding' of propaganda) was - TA RA! (note case-shift): Bernays.

    On the "where there's smoke" principle, pushing low-income sheople into house-buying was certainly a factor, but it gets 'arguable' when it come to handing out the label "main." Another factor was 'securitisation,' whereby 'sub-primes' were bundled-up into packets then cut up ('tranched;' detested US-speak, spit!) - into MBSs, 'mortgage-backed securities' - which were then re-sold. The idea of this was two; a) to spread risk, and b) to make some extra dough (what else? Yet another try at the proverbial 'free lunch.' (But who pays the 'extra?')) But that is still not all, since it was a) deregulation, plus b) the so-called 'masters of the financial universe' that a) made it possible and b) put it all together. This process of securitisation itself had costs as well as benefits; one the latter was it got the 'sub-primes' off the lenders' books, and a *REAL BIG* 'downside' (another spit!) - was that knowing the risk was going off the books, the lenders took little (massive understatement) - took as good as no notice as to whom they were lending. Hence, the so-called NINJA-loans; No Income, No Job, (and) no Assets. And yes, there were loans with 'sucker-bait' (spit!) introductory terms, like low- to zero-interest which would later 'reset.' Plenty of people saw this coming; Whitney comes 1st to mind, and I was reading him - and shrieking along with him.

  3. Another factor: Bubbleman Ayn Rand fan Grünspan (Greenspan).

  4. as usual ...

      .. say one thing ...

        .. do a (different!) other


    G'day (again) orana gelar,

    Grünspan (like it!): "Irational exhuberance!"

      (in the backgound: "Print, print, print ...")

    I also recall him saying (apology-like), that he had put his faith in the 'good side' of people, only to be (bitterly!) disappointed. (Haw!)


    BTW, I reiterate my point; the finance-crash is one thing, and the Stuka-type (from Sturzkampfflugzeug) dive in industrial activity quite another. My (informed) guess is that the 'real' economy crash is far more significant - but is not getting much attention (in the US) - with the rest of the world *really* getting worried (aka they've all got the s**ts, but bad). I've mentioned it before; they (mainly the US) must not only a) restore demand, i.e. get more disposable income into the sheople's grubby little paws (ideologically near impossible), but also b) they (pretty-well only the US) have to start producing something of real value (i.e. not weapons) to sell, in order to trade their way up, out of the *DEEP* hole they've dug for themselves (nigh on physically impossible?)

  5. Haw! It's the "Herd and Hive" effect. Recall a) bees doing their 'fly yonder' dance, but done by Wall-St types in Armani suits. Then, b) lemmings.

  6. Recall that I don't make this stuff up; a) I read, b) I think & sometimes c) I write based on a & b. Here is a nice 'little' article that fingers some whos, hows & whys:
    Apr 30, 2009
    The hard and simple maths of crisis
      «In our present day, the principle is illustrated by two, diametrically different, equally valid explanations for the world financial crisis. One is chock full of arcane and esoteric mathematical formulae, how they rose, and how they fell. That's the hard-to-understand reason.» 
    Bon reading.

  7. Oui, c'était lecture très bonne.

    If you've not seen it already, you'll find this article by Felix Salmon interesting:

    Recipe for Disaster: The Formula That Killed Wall StreetA small extract (that says so much):

    «Li's Gaussian copula formula will go down in history as instrumental in causing the unfathomable losses that brought the world financial system to its knees.»

  8. I may eventually have made it to the Salmon piece on my own - but limited time + the threat of complex formulae put me off, so thanks for the tip. Back to Delasantellis, note that 'user pays/downward pressure on public services' plays a part; specifically undemocratic, short-sighted abandonment/abrogation of 'the same education for all' principle. Even though we can now add a few names to the disaster, it doesn't help much. I note a) the breathless irresponsibility of loading the sheople up with ever more debt (a bit like mining the earth without respecting finite boundaries; thanks for that graph), and b) the perhaps terminal irresponsibility of (mainly) Greenspan's printing - now being accelerated by Bernanke & Co. Note also the 'free lunch' aspect, and that it's not the US *sheople* so much as the so-called 'élite' (excepting that no criminal element should ever be termed 'élite.') The US 'bad guys' (more detested Ameri-speak; spit!) couldn't get away with half so much - if the corresponding (and equally criminal) so-called 'élites' in allied/supporting countries didn't 'play along.' Boo! Hiss! Final note (for now), in Aus it isn't just Howard/Costello & Co, but Rudd and his ilk too. Both the Lib/Lab ugly twins have broken the democratic covenant 'for the people.'
    Restore the Enlightenment! Give us back our democracy! Where, oh where, are the adults?

  9. Back to sorting the factors:

    A. American dream; becoming ...

    B. Boom, Bubble in bricks and mortar (housing); facilitated by ...

    C. Con governments' "ownership society" policies; founded on ...

    D. Dangerous right wing ideology (and supporting demagoguery); in combination with ...

    E. Equally dangerous right wing popularist trickery to keep ruling; providing 'freedom' (not for people, but) for hypergrowth (i.e. infectious spread) of ...

    F. Financialisation, financial markets, financial entities and their furious spread of (ultimately f'n toxic stuff), e.g. CDS and CDO markets; these two feeding on each other, and all founded upon ...

    G. Greed; along side ...

    H. Hubris, taking the form of ...

    I. Irrational exuberance (see also M. for Masters of Universe); based on ...

    J. Judgements that were flawed, left, right, and centre; going right back to ...

    K. Keynesianism rejected; and replaced by (blind)trust in other theories, like ...

    L. Li's recipe for disaster; his copula function crap catching the eye of ...

    M. Masters of the Universe (see H. Hubris); and

    N. Nah, don't worry, I'll not go anywhere near 26 factors; however ...

    O. One can't omit -- ordinary sheople and our herding instincts.

    P. Printing $

  10. Q. Quite nice, but don't forget -

    R. Racism; the good-school/bad-school coding.

    S. Sheople; they've been herded alright, but I don't think they've been irresponsible, just reactive - to their (immoral, undemocratic) psycho-manipulations, done by the marketing-PR/criminal 'élite' propagandists.

    T. Terminal, or recoverable? The sheople's incomes have been driven down, their debts through the roof. Housing-prices have collapsed, and demand with it (except necessities.) Health, US-style, is another financial disaster, and will be everywhere the US models are copied. Q: Can sheople's incomes ever be restored?

    Over to U.

  11. V. Very well ... Values; they hate us for our ... (no, not those whom they routinely demonise, but them 'Strict Father' types of the right) ... for they hate ...

    W. Women (even though some of them are ...), particularly mothers (their frame: "nannies" or "nags").

    X. Xtend to "Other"; hence their xenophobia, etc

    Y. Indeed, why?

    Zee, I couldn't get to 26 factors.

  12. Alphabet soup may lead to indigestion; trying a different track.

    After WW2, Germany went through currency reform. Everyone was issued with a little sack full of money, but I don't know how they handled existing debts, or those who had sacks full - of the old dough.

    One possible way out would be currency reform on a world-wide basis - but it had better be both egalitarian and equitable; going so far as to properly punishing 'bad guys,' whilst giving the already disadvantaged a fair break. And close all loop-holes leading to/enabling rip-offs. Do you think there is such a system, either in theory (good) or practice (better?)

  13.   «Erhard's first step was currency reform: the abolition of the Reichsmark and the creation of a new currency, the Deutsche Mark. He carried out that reform on 21 June 1948, installing the new currency with the concurrence of the Western Allies but also taking advantage of the opportunity to abolish most Nazi and occupation rules and regulations in order to establish the genesis of a free economy. The currency reform, whose purpose was to provide a respected store of value and a widely accepted legal tender, succeeded brilliantly. It established the foundations of the West German economy and of the West German state.» 

  14. It's time.

    Time to get the snotty-nosed academic economists to do a proper theory job, mediated by so-called 'professional' economists with real-life experience - in some field other than 'how to rip the sheople off even more' - and together with *real* ethicists (as opposed to 'Church' and other erring ideologist types) - to set the foundations for building a proper, democratic(no more cheating), egalitarian, Enlightenment-type world, instead of the current shitty, (US, Israeli + horrible hangers-on), crime riddled disaster. Time, in other words, to get neighbourly human, instead of "Me, me, me!" greedy-crook.

  15.   «In hindsight, ignoring those warnings looks foolhardy. But at the time, it was easy. Banks dismissed them, partly because the managers empowered to apply the brakes didn't understand the arguments between various arms of the quant universe. Besides, they were making too much money to stop.» 
    Q1: Where, *exactly* where, was all this 'making too much money' coming from?
    Suggested A: It was always a racket; one simply can't get blood out of a stone. For every so-called 'winner' there has to be a loser, unless these 'masters of the financial universe' were simply helping themselves directly to Greenspan's printing - by devious (crooked) methods. It should be rather simple mathematics, to see if the 'rich getting richer' actually got more than the amount by which the 'poor got poorer,' in which case they, those fat-cat rich getting ever filthy-richer quite literally were outright stealing (as opposed, say, to merely 'creaming off,' i.e. 'simple' swindling.)
    Q2: Where, *exactly* where, is all these bail-out *trios* going?
    See why I think the currency-reform should actually punish the rip-off artists?

  16. Mmm ... currency reform. The Chinese are currently talking about it. Not acting on the ideas being discussed, as yet. Imagine if Beijing instructed its foreign-exchange-currency managers to boycott the next Treasury auction.

  17. Without digging up supporting quotes (can do), that article "currently talking about it" contains at least one statement that is misleading if not an outright, total and vicious lie: "The resulting massive US trade deficit with China is one of the main global imbalances which the US government says has to be removed to set the world economy back on a more sustainable growth track." (One thing in there might actually be correct: "the US government says...") IMHO, that trade deficit is entirely deliberate - and is driven by the US, and has nothing to do with current world economic crisis - except possibly as yet another of the disgusting US 'free lunches'. As discussed in this thread, the current crisis has *all* to do with the US printing dough, and entrapping its own citizens into debt-traps, whilst at the same time screwing its own citizens' incomes down into unsustainably low levels, then building financial castles in the air - which are now crashing the system - so there (all of which aware and erudite readers such as orana gelar (g'day) already know.) Then, one suggestion from the Chinese I saw was to switch from the $US - to IMF-SDRs (!!? - special drawing rights), at which point I nearly jumped right out my (1st floor) window - since the IMF is, as "Economic Hit Man" showed, a big part of the world's *problems* - and thus can hardly be expected to be part of any smart solution... back to the currency reform drawing board.

  18. Any speed-readers, or those with more time available than I have at the moment, wishing to explore China vs. the $US could start here:
    China Business
    Jul 30, 2008
    Breaking free from dollar hegemony
    By Henry C K Liu
    Part 1: Breaking free from dollar hegemony 
    Part 2: Developing China with sovereign credit 
    Part 3: History of monetary imperialism 
    Part 4: Gold, manipulation and domination 
    Part 5: Restoring China's national destiny 
    Or (tall order), get The Complete Henry C K Liu here.
    Bon reading.

  19. Indeed, that lie did lie within AFP's particular reporting. And as we know, the lies are mostly spread under cover of (half)truths. So some truth -- that the Chinese are talking about currency reform -- was reflected in the AFP's reporting.

    Here's the People's Daily take on it:

    «Top officials of the Obama administration have shrugged off the idea of Governor Zhou Xiaochuan's brain child of launching a super-sovereign reserve currency, in place of one issued by a specific nation, in an aim to shoot the frequency and intensity of global-level financial crises. Washington claims the greenback remain "very strong" and Zhou’s SDR (special drawing rights) modeled currency is fictional.»

  20. Long story short: the US has been getting away with (economic!) murder - as well as the other sort, for a looong time - since WW2, say. Or at the very latest, since when Nixon declared the US bankrupt in 1971, going 'off' gold and onto oil. The world went along with this (having more or less *nooo* choice, hence a possible future headline: 'Cowered, coerced - and/or outright criminal?') But, and it's quite a big BUT: they (the US) started some trends, they're mentioned above, namely printing (far!) too many $s, at the same time gutting their own manufacturing sectors (notable exception: arms), downsizing, outsourcing wherever possible, including shipping as many jobs(plus pollution) overseas - deliberately pushing all of the preceding, as far as they possibly could.

    The point - if, as seems likely, the US sheople can simply no longer be the engine driving the economy via their consumption, China has nothing (apart from 1.9trio of otherwise worthless fiat US$s) to lose, from cutting the US loose - by, as orana gelar suggested above, boycotting the next US Treasury auction. IMHO, gotta happen. Sometime. Soonest?

  21. A more modern article:
    China Business
    Apr 22, 2009
    Part 4: Brzezinski's G-2 grand strategy
      «Early indications suggest that the Obama team will likely not be able to revive the US economy within the four years of its first term and China may become the convenient scapegoat for US policy failure. Chinese policymakers will be disappointed if they are not realistic about deep-rooted US hostility toward China. China must avoid open conflict with the US, but Chinese policymakers must understand that the US will never be China's friend as long as the communist party is in control of China.» 
    There's lots more good, applicable stuff.