Turmoil and strife in the financial world: fear itself
CNBC has gotten to the point where the events it relates resemble a horror movie of the economic variety. Financial markets around the world reel, countries like Iceland are going bankrupt. Nobody seems to know what’s what, what’s next, or why all the moves by various governments have failed to reassure Wall Street, Main Street, and all the other streets on earth.
I’ve been wondering how 1929 would have gone if we’d had round the world twenty-four hour cable news coverage of the fall. I can’t imagine it would have helped to have heard all that panic. Don’t get me wrong, I’m not against information. But one of its effects is to increase the fear—which, after all, makes the situation worse, in the immortal words of FDR.
I plan to write more about this when I have a bit more time. But my impression is that hugely complex systems such as the world economy are inherently difficult to understand, but ordinarily we rely on the fact that they run smoothly. When things go wrong, it becomes clear that no one is in charge and no one, not even the experts, knows exactly what is happening. Those we relied on are found wanting, and all bets are off. Panic ensues, and the results are not pretty.
It is quite possible that progress in information technology, especially instant money transfer, made the world financial market inherently unstable. The mathematics behind it is known: it is the same that used in epidemiology, namely theory of branching stochastic processes and percolation theory. Panic is an epidemy of the sort, and history of epidemics show that when human communities achieve certain threshold size and density, viral epidemics strike. Delays in information transfer used to play stabilizing role, enchancing system inertia. Globalization removed some brakes on panic spread.
You are spot on here Neo. This has proceeded from a very manageable problem (mortgage defaults) to a fear of what is next to sheer panic as everyone tries to reach safe ground.
I look at the prices of stocks of very good companies that will be in business long after this passes. They are priced so low I cannot help myself, I am buying a few shares here and there; yet the prices go lower still. When every person who wants to scramble to safety has finally sold, and that may take awhile longer, the opportunities to buy sound enterprises at bargain prices will abound.
The tragedy is that none of this need have happened, if not for the unintended consequences of the well intentioned CRA and the mark-to-market accounting rule.
I do agree that the availability of instant news, rumor, innuendo, and more has been like gasoline thrown on a fire. So few people understood the reliquification plan when it was touted as a “bailout of Wall Street.” Well now people should see quite clearly that what is happening is deflation on steroids. But they don’t. The only thing that can stop deflation is the belief that prices will not fall any farther. The Fed, Treasury, and some Wall Street types are trying to stem the tide. However, when much of the selling is driven by computer programs, how do you induce confidence in a computer?
There is over three trillion $ sitting in money markets, treasuries, and mattresses. Just a few hundred billion of that entering on the buy side could put a bottom in, but the fear is too great. It is absolutely true that, “The only thing we have to fear is fear itself!!”
when they couldnt get the vote on the bail out, the market went up.
when they made the vote work on the bail out, the market collapsed.
those who are really wealthy are being helped now in a way that nothing else would work. they are still liquid…
better to buy ford and gm at 2 and 3 dollars instead of 20 and 30 dollars…
in a few years, they will pop up faster.
so ride it to 14… reposition… then let it collapse as the money market guys try for liquidity and the inexperienced (like my office made today giving advice… sell it alll… duh) sellling everything off…
they aer going basement hunting… the money market and funds guys drove it down… while the big independents waited… as the funds panic, the price falls… then the big guyd buy at basement… the funds get a bit of cash… then they wait… it drops again… then they buy.
basiclly the wealthy and independent are gutting the retirement accounts while they are temporarily at bargain basement prices…
people such at tactics and strategy…
which is why someone that doesnt such at it could march and take over a nation…
I believe that ‘market’ house values of $12 trillion (end 2006) are going to drop by about 30-50%. So $4-6 trillion in value is/has disappeared.
But the details of who has lost how much is not yet clear, and the panic by the top guys is that they don’t know how to avoid eating it.
There are some 4 million houses, now, that need to be sold/ bought before house values can be called somewhat stable.
The bailout should be more focused on the US gov’t buying low cost housing — to decide later on the renting/ resale policies.
More proof that a Democrat caused the Great Depression
FDR’s policies prolonged Depression by 7 years, UCLA economists calculate
newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx?RelNum=5409
“Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump,” said Ohanian, vice chair of UCLA’s Department of Economics. “We found that a relapse isn’t likely unless lawmakers gum up a recovery with ill-conceived stimulus policies.”
turns out that the boomers did an incredible thing!!!
they were suckers who were given the ability to generate great wealth through voting and allowing themselves to be controlled.
when they are ready to sit back and enjoy all that wealth and retire… the people they are used to voting for, finish the job, and make it so the people who got rich, now can take the other persons fair share of the efforts!!!
they voted themselves into cash slaves, who now are being cashed out… just as ratinoing will make them leave the mortal coil early..
all under the idea of socialist goodness…
Tom Grey- Liberty Dad,
One of the ideas I have seen that makes sense to me is to suspend the capital gains tax on rental real estate for a five year period. There are pools of money called “vulture funds” that are waiting to buy foreclosures to rent and then sell when the market goes back up. Giving those investors a reason to start buying would help get some of the foreclosures off the market.
Of course, none of this will happen in an instant Time and patience will be required. But there is no patience when the MSM, the dems, and such shills as CNBC keep hyping how bad it all is. More gasoline on the fire.
Is time to fire these Democrats in their own words Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Crisis
You are correct, Neo. Even as early as the 1870’s, telegraph lines made financial panics worse by infalming fears. Minor issues or problems acquired much more significance by being transmitted down the telegraph, and rumors similarly grew in imagination into “obvious truths”.
We demand sunshine
We shall have cold sleet on stone –
Mysterious Ways.
Branching stochastic
Percolation theory:
Wikipedia!
as proof that the left has lost its mind, and that they are about to seize control of the world steering wheel..
Switzerland’s Green Power Revolution: Ethicists Ponder Plants’ Rights
Who Is to Say Flora Don’t Have Feelings? Figuring Out What Wheat Would Want
online.wsj.com/article/SB122359549477921201.html?mod=todays_us_nonsub_page_one#articleTabs%3Dcomments
genetics research may start having problems
I’ve heard many different explanations for what went wrong, but the one that resonates the most for me is this one:
In the 1930’s, we, as Americans, went through the Great Depression. Life was bitter and harsh, but it taught important lessons. The value of hard work. The importance of saving. These lessons led us to rebuild our nation after the Depression and war.
In the 1960’s we began to forget. It wasn’t that individual people were forgetting, it was that they had never learned. Young people born after the war had no memories of hardship and privation. And though they were told about these things, they had never lived them, and so they didn’t see the point of all that self-denial.
by the time the 1990’s rolled around, we had almost completely forgotten. Everyone alive in the 1930’s was either old or dead. And so we began to repeat the mistakes of the 1910’s and 1920’s. Instead of saving, we borrowed and spent. Instead of self-denial, we practiced self-indulgence. And instead of running the system our parents built for us, we began gaming it, never thinking it might fall down.
It’s now approaching the 2010’s, and the system is starting to fall down. And the lessons taught to our parents are about to be taught to us.
And we will pass them on to our children.
Who won’t listen.
Children never do.
maybe this shows how different it is today because of connections.
World Bank Under Cyber Siege in ‘Unprecedented Crisis’
http://www.foxnews.com/story/0,2933,435681,00.html
The World Bank Group’s computer network – one of the largest repositories of sensitive data about the economies of every nation – has been raided repeatedly by outsiders for more than a year
My gut tells me that oil prices were climbing not entirely due to demand-supply considerations, although that most certainly may be the largest variable. I think that Russia, Venezuela, and Iran have been in collusion to effect the outcome of our elections. The first two countries were cutting production of oil for two years in a row and I never bought the reasons given for it. These three countries have a lot riding on the outcome of this election, and need I elaborate further on what that outcome would be? They see the ballistic missile defense shield as the prize. Obama wants to end it. They stand to benefit hugely from President Obama’s decision.
Russia has the capability to hack into the World Bank’s computers. The data there could be downloaded regularly and can be used to model how markets would react if oil prices should really lurch ahead, which they did.
Russia and Venezuela had the surplus money that they could have funneled to intermediaries, who would then buy futures options on oil. They could manipulate the oil markets to push oil prices higher and thereby keep pushing the U.S. economy closer to the brink of recession.
I would further speculate that George Soros’ group down in Curacao could also have played a role in helping to assist this. I mean, everyone wins when it is coordinated like that. There were reports months ago of an investigation into whether or not the Russian mafia may have been involved in the oil futures markets. I never heard if that investigation went anywhere or turned up anything.
The timing of everything is just too fortuitous for certain interests. They had motive, means, resources, and rewards all in common.
I work in quantitative finance.
The LAST THING that you want to do is rely on television outlets like CNBC for financial analysis.
They’re currently pushing a narrative which is that we’re experiencing the market crash of 1929. Everything that they report, every comment that they render, is intended to further this narrative. These are people who are hired because they speak well and have nice teeth. They are not economists, analysts, traders, or in any other way competent to render analysis of the current market environment.
They’re dramatizing a story that they themselves have created because it’s dramatic and easy to convey. Don’t assume that because they are on television that this is actually the state of affairs.
I do stock research for a small management firm in Portsmouth, NH, and I NEVER even watch those shows. I used to watch Louis Rukeyser some years ago, but that’s about it.
Eventually this is all going to settle down and people will start paying attention to the fundamentals of the companies who have been drastically oversold. The value is going to be obvious. A lot of people are going to miss the eventual move upwards again. Typical of the sheeple: buy high and sell low.
What most worries me, and I wonder how much this is a factor in some of the selling: a President Obama’s economic and tax policies. I just read a petition that was circulated among 100 top economists and they all agree that Obama’s policies will lead to stagnation, possibly a severe recession.
If McCain pulls out an upset, the rally will be explosive.
If McCain pulls out an upset, the rally will be explosive.
I agree. I know people who are pulling money out and planning to pull out and sit out an Obama Presidency.
The factions Obama is part of are anti-corporate, and anti-success. They may get their wish and find out what it is like to live in a world they wish to create. They are getting a taste of it now.
The issue is that government regulated industry into giving loans that would never be repaid.
Industry took what resources they could and worked to make sure that government was the final destination of the bad loans.
Derivatives, MBS, etc…
Ants find the sugar.
And government is always stupid before it is evil. You may have to look close, but it’s always that way.
Pray for all of us. The U.S. Government is working hard to repeat the very worst of FDR’s mistakes in a matter of weeks rather than years.
I wonder what the war will look like that ends this thing?
An interesting market “statistic” today is that
the following ETF’s each actually closed up 5%+ today (from yesterday):
XLF, IYR, RKH, IWN, EWY, FXI, ITB…
How much international money this last week has been eagerly going into the purchase of Russian, PRC, N. Korean, Iranian, Saudi, Venezuelan, if you get my drift, national debt/bond instruments and/or “equities” as an alternative to America’s fall from perfection?
Buy American or from our LOYAL allies, from energy to cars to clothes to food; Watch the world turn around.
A lot of people have forgotten where real money comes from, and they need to be reminded…
As if we didn’t already have enough to worry about:
Meteorologists Predict Worst Autumn Ever
rickl,
if you look back on that issue you will find that hansen (not victor david hansion, nasa’s hansen), has no meterological degrees, and when i was a kid he was peddling a global ice age. when his models kept predicting ice and it kept getting warmer, he swtched to global warming, and the rest you are aware of for the most part.
right now the sun is in cycle 24, or rather its still hanging in between cycles starting to break records in how long its face has remained spotless.
the sun controls the earths temperature by overhwelming degrees, and the greenhouse effect is minimal… however accepting the argument leads to the same totalitarianism that healthcare eventually does.
we are on many raods ot the same place and are not willing to make the fundemental and moral hard choices that are right, but not pc to not keep walking till someone else makes the choices for us and there are no more to make.
oh… forgot to say… very funny video… thanks for the laugh!
I think that Russia, Venezuela, and Iran?
Actually, all these three oil-exporting countries recently had difficulties to support their oil and gas companies to finance further development of hydrocarbon deposits. As old fields peak out, and new rigs are expensive, the output plummets. I read an article of Anatoly Chubais, head of Russian energy monopoly, that in case of cold winter several megapolises would need emergency evacuation because natural gas supply is not adequate for heating thousands of apartments blocks.
Let us read facts not conspiracy theories
This gets back to a point made by Philip Bobbitt in Terror and Consent: historically, the bad guys have used all the tools that civilization gives them in their wars against civilization. That is why the “Market State” (Bobbitt’s term; see The Shield of Achilles) will not be Barnett’s happy connected world, but a world whose connections will not only be the target of but the highway for the attackers.
I hope the US Military’s NetCentric Warfare plans provide for this.
Hannibal Gaddafi was briefly arrested in Geneva in July
njcommuter,
that is the fundemental difference between the US and the end justifies the means states…
everyone wants to withdraw to see where they stand before they re-enter things…
You can’t reassure people without the decapitated heads of the guilty in your hands, Neo.