America 's Financial Apocalypse Heralds Decade Long Depression

[Crewleader]

Economics / US Economy Sep 14, 2008 - 04:28 AM

By: Mike_Stathis

Despite attempts made by Greenspan and Bernanke, there is no way to avert the payback period that has been building for over two decades. Over this stretch, America has consumed much more than it has produced. As a result, both consumer and federal debt have ballooned to record levels. And now, the payback period is upon us. The bailout buffet won't end with Fannie and Freddie. There's a lot more where that came from because the “Fed's food court” remains open, as does that of the U.S. Treasury. In fact, the autos are in the process of being bailed out with $50 billion in “loans.” I expect the airlines to also receive some form of a bailout as well.

Washington 's Three Stooges

http://www.marketoracle.co.uk/Article6256.html

[DontTreadOnMe]

1. Epic Failure

[mrJJ]

USA! USA! WE'RE NO. 1

C&P from another du user

USA! USA! WE'RE NO. 1 ! Our currency reserves are better than ... Botswana? Maybe? Kinda?

US foreign currency reserves have sunk to about $72+ billion, according to the International Monetary Fund (IMF).

The southern African nation of Botswana's foreign currency reserves stand at about $6 billion.

Yeah! USA! USA! WE'RE NO. 1 ! Our foreign reserves are about 10 times bigger than Botswana's !!

Oh yeah. Botswana is a nation of 1.8 million people, while the US is a nation of about 300 million people -- there are 166 times as many Americans and there are Botswana citizens.

Which means that on a per capita basis (per person), Botswana's foreign currency reserves are $3,277 while on the same basis ours are about $250 -- so the Tswana have have 13 times the foreign currency reserves per person we have.

OK what about a more suitable match up? How about USA versus Greneda! Oh wait, we already kicked their asses.

What about Hong Kong? I read somewhere that their foreign reserves are falling! Yeah, Go USA! Ooops, they were falling by a billion or so, but they were up at the end of August by $400 million and currently stand at $158.1 billion.

That's Hong Kong.

Not China.

Hong Kong, with its population of about the same size as New York City, has twice the foreign currency reserves of the entire U S of A. (China of course has around $1.8 trillion, about 23 times as much foreign reserves as the US).

Of course, a small country like Botswana, or a city-state like Hong Kong, or a big third world factory town like China, have to save foreign currency because they need dollars. We make our own goddamn dollars, thank you very much, and as long as the world accepts our manufactured dollars for their manufactures, we don't need no stinkin foreign currency reserves.

Oh wait a minute. If Freddie and Fannie default on the several trillion dollars worth of mortgage backed securities and other debt instruments, the world probably won't accept dollars any more.

Well, if so, we've always got that $72 billion or so in foreign reserves

Does that mean were screwn?

[HamdenRice]

6. That was my post

Btw, it's an unwritten rule of DU etiquette to credit and link to other DUer's writings.

I think that some may miss the point in reading what I wrote. The lack of US foreign reserves is due in part to the fact that the dollar is (was?) the world's reserve currency and therefore the US does not need to accumulate foreign exchange. If it ceases to be the world's reserve currency then we are in trouble.

The question is how long the dollar will maintain the confidence of the world's central banks.

[lib2DaBone]

11. Not too long 'till SmirkBoy pisses off the entire planet...

.. I think the dollar is in real trouble. The Iran Oil Bourse, that I believe is using Euros? (Remember all the undersea transmission cables that "Accidentally" got cut on the weekend that Iran tried to start trading in Euros? (Wink..WInk..) Venezuela trading oil in Euros. Iraq Signs Oil deal with China. Embassy blows up today in Yeman... an they Still DON"T GET IT? Arrrrr....

[truedelphi]

13. You say: We make our own damn dollars...

The US Treasury just printed up 80 Billion to GIVE to the Federal Reserve.

First time ever.

It's supposed to be} the Federal Reserve that does that, said one of TV's expert financial talking heads.

[FirstLight]

2. This explains some of the how and why..

..and some of the what if...


but I'd like to see a breakdown of this in a timeline and real "on the ground" ramifications.

when does massive unemployment hit? when all the banks go under and the businesses can't pay employees or pay to run things because nothing is selling because nobody has any money?

how does this REALLY LOOK?

[sendero]

5. Nobody really knows...

.... but the economic apocolypse lurched forward in a big way today with the failure of Lehman and Merrill.

There are several BIG banks that are about to fail, WaMu in particular.

I think some are expecting a big "crash" event but I don't think it will play out like that. There will be a slow churning loss of jobs, deflation, general economic stagnation and decay that will last for years, maybe even 10 or more.

Don't wait for a lightning bolt from the sky, do whatever you can to prepare now.

[northernlights]

7. what do you consider massive unemployment?

The real numbers are around 15%, so it's double-digit already, and has been for a while. If I remember correctly, it was about 25% in the great depression.

[anigbrowl]

8. Another vote for 'no-one really knows', but you could do worse than look at Japan.

There are significant differences between our economy and theirs, but a number of similarities between the state of the union right now and the state of Japan in the late 80s/early 90s. So we might see a long-term stagnation as opposed to people jumping out of windows.

[alittlelark]

3. FAIL.

:evilfrown:

[Odin2005]

4. Am interesting related article I found on that same site

http://www.marketoracle.co.uk/Article5949.html

We. Are. FUCKED.

[GoesTo11]

9. All this debt, loans, debt, failure = less $ for anything else

This was the goal. Make the debt big, so that the rest of government is small enough to drown in a bathtub.

[melody]

10. bingo n/t

[gopbuster]

12. OT:SEC Issues New Rules to Protect Investors Against Naked Short Selling Abuses

NOW they outlaw naked shorting, the scumbags have used this technique to rip off the little guy for years

This is a new article, someone feel free to post it in LBN, here or other if it hasn't been already as I can't yet due to low post count



SEC Issues New Rules to Protect Investors Against Naked Short Selling Abuses
FOR IMMEDIATE RELEASE
2008-204

Washington, D.C., Sept. 17, 2008 — The Securities and Exchange Commission today took several coordinated actions to strengthen investor protections against "naked" short selling. The Commission's actions will apply to the securities of all public companies, including all companies in the financial sector. The actions are effective at 12:01 a.m. ET on Thursday, Sept. 18, 2008.
Additional Materials

* New Short Selling Rules

"These several actions today make it crystal clear that the SEC has zero tolerance for abusive naked short selling," said SEC Chairman Christopher Cox. "The Enforcement Division, the Office of Compliance Inspections and Examinations, and the Division of Trading and Markets will now have these weapons in their arsenal in their continuing battle to stop unlawful manipulation."

In an ordinary short sale, the short seller borrows a stock and sells it, with the understanding that the loan must be repaid by buying the stock in the market (hopefully at a lower price). But in an abusive naked short transaction, the seller doesn't actually borrow the stock, and fails to deliver it to the buyer. For this reason, naked shorting can allow manipulators to force prices down far lower than would be possible in legitimate short-selling conditions.

Today's Commission actions, which are the result of rulemaking under the Administrative Procedure Act, go beyond its previously issued emergency order, which was limited to the securities of financial firms with access to the Federal Reserve's Primary Dealer Credit Facility. Because the agency's exercise of its emergency authority is limited to 30 days, the previous order under Section 12(k)(2) of the Securities Exchange Act of 1934 expired on Aug. 12, 2008.

The Commission's actions were as follows:
Hard T+3 Close-Out Requirement; Penalties for Violation Include Prohibition of Further Short Sales, Mandatory Pre-Borrow

The Commission adopted, on an interim final basis, a new rule requiring that short sellers and their broker-dealers deliver securities by the close of business on the settlement date (three days after the sale transaction date, or T+3) and imposing penalties for failure to do so.

If a short sale violates this close-out requirement, then any broker-dealer acting on the short seller's behalf will be prohibited from further short sales in the same security unless the shares are not only located but also pre-borrowed. The prohibition on the broker-dealer's activity applies not only to short sales for the particular naked short seller, but to all short sales for any customer.

Although the rule will be effective immediately, the Commission is seeking comment during a period of 30 days on all aspects of the rule. The Commission expects to follow further rulemaking procedures at the expiration of the comment period.
Exception for Options Market Makers from Short Selling Close-Out Provisions in Reg SHO Repealed

The Commission approved a final rule to eliminate the options market maker exception from the close-out requirement of Rule 203(b)(3) in Regulation SHO. This rule change also becomes effective at 12:01 a.m. ET on Thursday, Sept. 18, 2008.

As a result, options market makers will be treated in the same way as all other market participants, and required to abide by the hard T+3 closeout requirements that effectively ban naked short selling.
Rule 10b-21 Short Selling Anti-Fraud Rule

The Commission adopted Rule 10b-21, which expressly targets fraudulent short selling transactions. The new rule covers short sellers who deceive broker-dealers or any other market participants. Specifically, the new rule makes clear that those who lie about their intention or ability to deliver securities in time for settlement are violating the law when they fail to deliver. This rule also becomes effective at 12:01 a.m. ET on Thursday.

# # #



http://www.sec.gov/news/press/2008/2008-204.htm