The Fed is finally buying short-term Commercial Paper. I am pleased to see that, partly because it is part of what I suggested here. Now, when the Fed, or the government, through (now captive) Fannie and Freddie, start writing new mortgages, I will be satisfied that they have found a way forward which allows misbehaving banks to fail.

I may need to 'invest' in some commercial paper to wrap up all the lumps of coal that I will be giving to my family this Christmas. It occurred to me that if the commercial paper is flammable, these generous presents won't even need to be unwrapped, but could be just tossed into the fireplace 'as is', thus saving my family members the energy they would have to expend in unwrapping them. The latest forecasts are that this will be the worst holiday shopping season since 1991. I think the forecasts are wrong. I think it will be much worse than that.

I love how people keep revising their expectations downward, and then say something like, but it isn't 1929, in the great depression unemployment reached 24%. What will they say when unemployment reaches 15%? Oh even in the great depression unemployment peaked at 24%. (Oh wait we live in the age of inventive numbers, we can always change the formula...

I heard an analyst the other day say, we had the great war, and then Hilter's war came along and we had World War I and World War II, we should try to avoid having a great depression II. Even if this "downturn" doesn't reach that scope, (I continue to believe there is potential in the economy with the right policy, not that a painfull adjustment isn't still necessary), it is going to be very very ugly before it is over. This is still just the beginning really. Deleveraging, moving from debt to savings, the drain of foriegn capital inflows to emerging economies, all this is going to take time, and a exact a fearfull toll.

The emerging economies may have felt insulated from the debt binge in developed economies, (even countries with higher savings rates were living off asset bubbles), but what they failed to realize was that without the excess capital in developed economies they wouldn't have the foreign capital investment that has fueled much of their growth. Even if they weren't at a basic level living off the buying power of consumers buying on debt.

So no one is safe. Think of how long the debt economy has been building for. Think of the trillions of dollars of unsupported wealth it created. This is what some, as economists are so fond of saying, needs to reach equilibrium. The scales were skewed for so long, that it will take that much "make up" for things to be right.

Have fun.

That's what they've indeed been doing. According to John Williams at Shadowstats, current unemployment is pushing 15% counting those who've given up looking for work. The official U6 number is about 11%.

We've had a stock slide of 30% or so in the last year, and people are putting their money under the mattress for the first time since the depression. We've had a 20% slide in home prices in the last two years, with probably another 20% to go. The debt ceiling was raised to $11.3 trillion and counting. Williams says that Bernanke is printing money off the charts, so we will have some nice hyperinflation once we get through this bout of deflation.

No one is safe, but the Asian and Petro economies have hundreds of billions of reserves while we have trillions of debt. I wonder when they start repatriating some of that money?

Repatriate what money, exactly? With each passing day it becomes clearer all the time that all this money and wealth was a 'just so' tale. And now that the magic spell is broken there's nothing to prevent it from all disappearing.

The Chinese and Japanese own over a trillion in treasuries and GSE debt. I don't know how much the Petro states own. Seems they could sell that debt and exchange for their own currencies or buy physical things. Of course if they did, Americans would be able to buy even fewer of their exports, but that may be a fait accompli anyway.

What country would you suggest the dump them in? I doubt that anybody anywhere is interested at present. Of course, if they wait to maturity, they can force the issue, but that isn't what you had in mind, is it?

Equity and real estate investments in the US would be another thing though. It might even be beneficial for US workers. Corporations, at least the large ones, are trans-national anyway and I don't think it will really be a bad thing if the centers of gravity of the ownership moves offshore - if it isn't there already.

How ya doin, Phil? I have to admit I'm beat. Down over 50% just in six months. Of course, like you, I'm a buy and hold investor.

I'm not doing particularly better than you, down about 40% since May. I have two accounts, an ordinary one and an IRA.

The ordinary account is now all municipal-based money market. The IRA has enough in the short-term note (including, I notice, some from Bear-Stearn and Lehman, unfortunately) money market fund to cover the next required withdrawal.

I do have a Pension which has been reliable since I retired in 2001, but I guess I need to worry about them too. As of the current year, it is about 50% fixed benefit and 50% market based. However, the fixed benefit is paid from market based assets so it is obviously of some concern too.

And then, there is the fallback of Social Security, which is, of course, still solvent (no thanks to Bush).

With all the central banks printing money like there is no tomorrow, it is only a matter of time before everybody begins to realize that money is a bad joke. That should result in a massive swing to hard assets. Unfortunately, I have no idea how that will work when money is considered worthless.

Gold? It is difficult for me to think of it as anything more than another commodity, and one which is in massive oversupply at that. I saw a gold dealer (or maybe miner) on CNBC some time ago stating that the stored gold would meet the next 20 years of industrial needs. If the system crumbles, then I would expect that holding some sort of gold certificate would not give you a great expectation of ever receiving real gold.

What is really important is to design and implement a future in which there is no cross-coupling allowed between the various financial services: commercial banks, brokerages, VCs, mortgage lenders, etc. I mean to write about this but it can't help being tremendously wordy.

Since the world has been coming to an end, I've written a lot of inflammatory schtick on Faith Based. Youse might be interested.

That word "youse" or "yiz" needs to get accepted.

I have no faith in faith. Thou sayeth that I might be interested in your "inflammitory schtick". If so, where should I be looking for it.

As to "youse" and "yiz", both related to "y'all", I would suggest you read the Wickipedia entry on the letter "thorn".

In one word: ARITHMETIC

The monetary and financial problem always skirts around the $62 Trillion or $56 Trillion.

NOBODY has grappled with THAT number, nor with the other numbers. Neither top-down nor bottom-up.

All one sees is someone like Liz Ann Sonders sounding every bit as knowledgeable and penetrating as Bernanke and Krugman and even Volcker. They are all out there mouthing hard-learned shibboleths and demonstrating that economists can't deal with real-world numbers.

We have to have people decompose the problem into numeric chunks from different directions until the solution adds up to the total -- total mortgages, total home equity loans, total CMO, total CDS, etc. It is extremely disheartening to hear all the BS artists expounding without numbers. Basically, they are repeating PRINCIPLES, just like Mellon and Hoover.

I'd put Williams of Shadowstats in charge. And Jeff Faux.

Phil: you can easily see my posts by clicking on my name. The hot ones are on fray's "faith-based" subset.

I am a bit more than halfway through Kevin Phillip's "Bad Money" and find that he has included significant names and numbers. The book came out earlier this year and seems to have covered up to around September 2007. He outlines pretty much everything that was suddenly discovered by Paulson and Bush just a couple of weeks ago. I think this suddenly elevated panic was planned some time ago, just like the planning for Iraq preceded 9/11 by quite a bit. Bush is as much a master of intimidation and intimation as Mohammed Ali was before his fights.

Sovereign: All one sees is someone like Liz Ann Sonders sounding every bit as knowledgeable and penetrating as Bernanke and Krugman and even Volcker. They are all out there mouthing hard-learned shibboleths and demonstrating that economists can't deal with real-world numbers.

LeRoy: Well, as I always like to say, there are three kinds of economists in the world. Those who can count. And those who can't.

Sovereign: Basically, they are repeating PRINCIPLES, just like Mellon and Hoover.

LeRoy: Mellon's big 'principle' was this: Gentlemen prefer bonds. It's the dirty little secret of American political economy that no one ever dares to speak: the ultra-rich in America have a decided preference for very large budget deficits, and they pulled the strings with George W. Bush to make sure that exactly that would happen. Large budget deficits require the issuance of large amounts of U.S. government bonds, and that gives the uber-wealthy a nice convenient place to 'park' their wealth. Like they want to risk it in the stock market! HA! U.S. government bonds have had the reputation of being the safest investment in the world. Don't pay doodly-squat in interest, but hey, when you get that wealthy, you're not interested in getting even wealthier, you are only interested in capital preservation and maintaining your lordship over all the lesser beings.

Or have people forgotten how alarmed the filthy rich folk were back in 1999 and 2000 when we were talking about actually paying down the national debt? Horrors!

But by running up the national debt to outlandish levels, they have created an economic catastrophe.

We ought to hang them all.

"Or have people forgotten how alarmed the filthy rich folk were back in 1999 and 2000 when we were talking about actually paying down the national debt? Horrors! "

It should be pointed out that Greenspan was equally aghast at the idea. As I remember, it had something to do with not having a reason for printing money.