On Point, on NPR, had a good segment on this too.  A caller made a point that the dollar is already down.  If Chairman Ben lowers the fed funds rate, then the dollar will depreciate that much more. 

I think if we (the American public collectively) panic, then things start to unravel and we go into a deep recession.  And if we go into a deep recession, the world goes with us.  As long as consumers keep spending and the credit market doesn't panic, then we should weather this just fine.

But you know fear tends to spread and feed on itself.

If that's not scary enough, the Dollar is at historic lows against the Euro and near the Yen.

There's no wiggle room, because the inherent value of America, production, has been destroyed by outsourcing and ag subsidies.

There's no small business and family farms have been eviscerated by big dollar lobbyists and the corporate socialism they've forced through state and federal legislative processes.

Bernanke is cowering, because he's got the best numbers in the world and they're pointing towards the end of the line.

Conservatism kills.

If people lose faith, then we are in trouble.  But we're not at the end of the line until then.  And if the public starts adopting bearish opinions, then things will get bad.  Market economics can create self-fulfilling prophecies like that.  The whole thing only has meaning because we give it meaning.

To a certain extent, the more you spread the fear, the more you help contribute to the problem. 

and I have no idea how. What I meant to post was something to the effect that "Have faith" was President Hoover's message in 1929, and he kept saying it as the crisis deepend, right up until the American people elected FDR in a last ditch effort to avoid fascism or socialism or both, since the capitalism of that day seemed to have broken down completely.

If you suddenly decide something lacks value and everyone suddenly agrees with you, then that makes it so.  Our economy mostly works on consumption.  So, if you and everyone else decides they don't want an iPod or an iPhone or the myraid of other material possessions and superfluous services that permeate our market, then the economy contracts.  The same is true of all of these fancy financial products investment banks and financial service companies have brought us.  If you decide a securitized debt instrument is worthless and other investors agree, well credit markets get tight. 

And everyone listens to Treasury Secretary and Chairman of the Fed like they are the Oracle of Delphi.  Were they to proclaim some particularly earth shattering news like some of what is in these diaries, then markets would go into a nosedive.  They'd have to suspend trading on the exchanges it would be so bad.

but my remark about Hoover and trust was referring to the tunnel vision Hoover projected, oblivious as he was to the jobs lost, the farms taken over by banks, and so on. He believed that if only the rich guys would stop panicking, all would be well, but the greater-fool schemes just kept cascading down.  We all remember the story of how, in the 1890's (I think it was) one incipient bank panic was short circuited by bank depositers seeing a millionaire (Gould?) arrive at the bank in question, and deposit a million dollars. 'Twas before the days of the Federal Reserve, and trust was restored. Things are not quite so simple today.

You mentioned securitized mortgages, suggesting I not hold them if I disliked them. As it happens, such instruments are for mega banks, private equity, and hedge funds, not small fry like me. The high-falutin' computer-driven fancy financial Ponzi-like stuff is actually beyond the understanding of most of the Wall Streeters themselves; if they start caving in, well, katie bar the door. I agree, the conspicuous consumption of trivia has got out of hand, but that's not subject to my control, either, nor should it be. 

Precisely. Well put. We are witnessing a complex financial pyramid scheme that has begun to collapse upon itself.

unless of course we are losing our asses!

I rarely use foul language (unless for emphasis) - check.  Seriously, this is some scary shit. 

The fed does need to wake up.  But so do our trade representatives.  So does Congress - stop the bleeding of jobs to India and China.  So does the DOL - do their god-damned jobs and start protecting the working class.

What scares me is when investors like this - normally pimping stocks - change their tune.  Cramer is the Capitalists' Capitalist.

This is what happens when checks and balances no longer exist - when government represents special interests over national interests.  We need a fundemental change.

the  interview with Morgenson is right on; in fact, it doesn't go far enough in my opinion. She describes this debacle correctly as a "financial" one, a shuffling of papers, not a decrease in production as happened in, say, 1929, because America now does not have much industrial production; she talks about securitizing mortgages, packaging them in different slices for remote and unknown investors; she talks about the hedge funds like the ones recently sort of bailed out by Bear Stearns, and so on and on.

But, when asked "who is responsible" for the collapse of the subprime market, the defaults by hedge funds, and the blowout in the stock market, she never once pinpointed the basic business philosophy underlying this entire generation of stock brokers, financiers, mega corporate CEOs--- and the conservatives of the Bush Administration. It is the peculiar emphasis on short-term bottom line profits, intense personal aggrandizement, i.e., greed, a sort of "the hell with everything and everybody else," resulting in a parasitism on the system which has utterly distorted the entire rationale of society.

What we have today in the age of globalization, is promoted as a free masrket based on profit, in which market forces will solve absolutely every problem efficiently, mysteriously working out to the benefit of society as a whole.

This is a hoax. The Markets are not free, and some problems are not best solved by depending on the profit motive, despite what ideologues say. Profits and the profit-motive do an outstanding job in many cases, but, like so many human-devised theories, when carried to their logical extreme, they result in, frankly,an irrational mess. Capitalism as practised under the ideologues is mutating into ssomething else entirely, as yet unnamed, with results as yet unknown, and the transition is getting ugly.

 

Is this annotated version.  I think it explains things rather nicely . . .

the helicopter stuttering by, but the entire musical background was great, as were the very enlightening comments.

Being a Realtor, the whole mortgage mess is only too familiar to me, including Bernecke's helicopter comment... from the beginning I was steering my clients away from the wild west mortgages, but some thought they knew better than me, and buyers bought my listings with on-the-edge financing. We would not be in this situation now if the great American public had not aided and abetted the untrammeled greed and con schemes of Wall Street.

The thing is, subprime loans enabled many fine people finally to realize their dream of home ownership, and many of them will manage to survive the re-setting of their mortgages.  But many others will not, and this fact, plus the misleading and fraudulent statements by lenders and the byzantine manipulation of securitized loans and deritives thereof will bring down the house of cards, is bringing it down.

If you have a tall mug of coffee and a block of free time, you might want to skim my diary from July 28th: Must Fools in Paradise Ignore Canaries in Mineshafts?

Bernanke's only available tool (besides reassuring happy talk) is to pump liquidity (as sui juris' apt link explains, "free money") into the financial markets. Bernanke and the Fed will likely do so to keep the bubble inflated for as long as possible--if possible for another year and a half so that the eventual implosion can be blamed on the Democrats.

But reality has a nasty way of whacking us full in the face when we least expect it. In any case, I moved my assets to money market cash this spring. Perhaps I am being excessively cautious and am stupidly missing a record-breaking market rally, but I can now watch events with a certain equanimity as I make a modest 5% relatively risk-free.

various diaries have raised substantially the same warning signals, often in substantially the same words. Your excellent 28 July diary on Canaries in Mineshafts should be forwarded to every Democratic politician, especially those currently running for office.

Back in 2006 I wrote about the War on Terror and Globalization in http://www.raisingka... and in other places remarked on the distortions in the American economy, including a recent comment: "...Nowadays the figures show that we are a far more unequal society, with CEOs' incomes and those of Wall Street finaciers grossly inflated to obscene levels, and the lower levels of society including the middle class falling further and further behind--- we are more like a pre-capitalist society now, with a spread worse even than under the Communist system.  I do not consider that we live any longer under a true "capitalist" system, but are in transition to a different system, perhaps a mature capitalism or corporatism, which I call corporate feudalism...
"Today's dominant motive is completely that of the bean counters' bottom line for everything and everybody in every relationship, including that of sports stars and health care--- even when it is inappropriate. The dogma of an unregulated "free market" solving all of society's needs is a fraud, since mega corporations seek every political advantage they can wring out in order to dominate a market, distort the market, and increase profits, no matter what the social costs, which are generally ignored and ultimately passed on to society in general--- the mega corporations are in fact parasites."

We cannot expect the current crop of Democratic think tankers, the Rubin economists, to come up with an alternative economic philosophy, yet that is exactly what we need, and quickly. The ever resiliant and contentious Democratic grassroots will simply have to do it for them.

Teddy--

Your description is very apt. Maybe it could be combined with "corporatist" to give us "corporatist feudalism."

The de-unionized workers, serfs, and white collar in-out-boxers serve the looters and holders of the wealth and dare not demand a change. One needs, after all, to keep his job to pay on the student loan, the health insurance, the mortgage, the credit card bill, and the car loan and still be able to feed and clothe the kids. It is corporatist feudalism, cradle to grave. It is the 21st century equivalent of 14th century serfdom and indentured servitude.

One way to define capitalism to describe it as an economic system in which labor is a commodity which is bought and sold on the open market. George Will in a recent diatribe against raising the minimum wage argued exactly this point: labor is merely a fungible commodity, the minimum cost of which should be zero. When the political/economic/opinion elites who run the system display that kind of cavalier let-them-eat-cake attitude, it is clear that they have no interest in improving the lot of those who serve them.

I'm just puzzled that there is not more populist/social democratic activism bubbling up from below or from out-of-the-box thinkers at our universities. What will it take? Is it only a real market meltdown which will bring the dominant elites to their senses?

As for sending my Canaries and Mineshafts to any Democratic politicians, I see little point, for not even a staffer would give it even a cursory glance. As for our congressmen and senators, their culture is one of issuing sound bites and garnering campaign contributions, not one of anticipating and avoiding disasters, domestic or foreign. What is expedient at the moment or in anticipation of the next election is all that they require or seek.

At least until the whole edifice collapses because of inattention to its very foundations.

Don't forget that the point of conservatism is to empower and protect aristocracy, and the point of aristocracy is to empower and protect aristocracy.

It's been that way since the first agricultural economies developed, aka ancient egypt, and it will continue that way as long as democracy is not protected.

Conservatism is the antithesis of democracy, that's the Achilles heel of the right-wing, they are inherently antithetical to America.

Do you ever feel like Cassandra?  Cassandra as you might recall from Greek mythology was the daughter of King Priam of Troy.  Apollo was so enamoured with her that he gifted her with prophecy.  However, when she spurned his advances, Apollo cursed her so that no one would believe her predictions (Greek mythology is pretty awesome like that).  Thus, when she predicted the danger of the Trojan Horse, no one listened.