"There will be enormous, enormous losses..."

October 5, 2008 9:04 PM

This American Life gives you Another Frightening Show About the Economy.. The guys who brought us The Giant Pool of Money (previously) explain the credit crunch and why it's so scary. And not in the Halloween fun-to-be-scared sense.
posted by justkevin (169 comments total)

Don't comment, just go listen. NOW. Very, very scary and enlightening.
posted by Auden at 9:15 PM on October 5, 2008

aaaaaaaaaand

Metafilter: Very, very scary and enlightening.
posted by Ambrosia Voyeur at 9:20 PM on October 5, 2008

Heard the podcast this evening, wow.

We're fucked.
posted by hellojed at 9:23 PM on October 5, 2008

I was putting together a post on this very thing...don't miss out on the accompanying podcast Planet Money.
posted by schyler523 at 9:24 PM on October 5, 2008

Any transcripts for those of us who prefer to skim over it?
posted by furtive at 9:35 PM on October 5, 2008

...for those of us who prefer to skim...?
"The Financial Crisis, as Explained to My Fourteen-Year-Old Sister"
posted by blueberry at 9:39 PM on October 5, 2008 [36 favorites has favorites]

America! Fucked, yeah!
Ain't no way to save the motherfucking day, yeah!
America! Fucked, yeah!
Bailouts are the only way, yeah!
Capitalism, your game is through, 'cause the U.S. done fucked up through and through!
America! Fucked, yeah!
So print more cash and cradle your balls!
America! Fucked, yeah!
What you gonna do when there's no more jobs now!
posted by you just lost the game at 9:55 PM on October 5, 2008 [4 favorites has favorites]

I'm a little disappointed we didn't see some major bailing out this weekend. The Asian markets are tanking tonight. Fun times.

Also, Andrew Sullivan points out This letter Barack Obama wrote to the treasury secretary last all the way back in march. Of 2007 warning about the subprime mess.

One of the indicators that tanked last month was the number of new cars being purchased. Ford sales were down 16%. Kind of crazy.
posted by delmoi at 10:09 PM on October 5, 2008 [1 favorite has favorites]

Here's a transcript for the "Giant Pool of Money" episode.
posted by WCityMike at 10:14 PM on October 5, 2008

The information is good and useful, but Ira's mannered, precious stylings are (as always) far beyond annoying, and the whole tone of this is simplistic, cutesy and in a sad way almost condescending. It's a story told like "Highlights" magazine for adults.
posted by twsf at 10:19 PM on October 5, 2008 [2 favorites has favorites]

Hmm... If this podcast is accurate, couldn't the treasury buy commercial paper directly, in order to keep the gears greased over the next few weeks, so to speak?
posted by delmoi at 10:20 PM on October 5, 2008 [1 favorite has favorites]

Who was that singing "No Depression" over the closing credits? It sounds like the Carter family. I thought it was an Uncle Tupelo song.
posted by boots at 10:32 PM on October 5, 2008

I think it's a little over the top for him to claim that credit default swaps are "so complicated you need to be a physicist to figure 'em out" (or whatever). They're no more complicated then car insurance.
posted by delmoi at 10:35 PM on October 5, 2008 [1 favorite has favorites]

Capital is money, capital is commodities. By virtue of it being value, it has acquired the occult ability to add value to itself. It brings forth living offspring, or, at the least, lays golden eggs. --Karl Marx
posted by ornate insect at 10:41 PM on October 5, 2008 [3 favorites has favorites]

Hah. Phill Ghram jammed a law into an appropriation bill that banned regulation of Credit Default Swaps back in 2000.
posted by delmoi at 11:00 PM on October 5, 2008

Didn't listen to the link, but boots, it is an old Carter Family song.
posted by Pinback at 11:04 PM on October 5, 2008

It's a radio program, not an news article. You have to hear the urgency in the voices of the people interviewed, and the earnest concern in their voices, stretches of silence, etc., to really get what what the producers of the program are trying to get across. You can do other things while listening to it, and can't be that busy regardless, if you're on metafilter and taking a bit of your time out to comment about the lack of a text version. Besides, there is something inherently interesting about the pauses of a guy who is carefully choosing his words, something that you just can't get in print. (And I say this as a guy who was a print journalism major as an undergraduate!)
posted by raysmj at 11:19 PM on October 5, 2008 [1 favorite has favorites]

60 Minutes: A Look At Wall Street's Shadow Market
posted by homunculus at 11:28 PM on October 5, 2008 [4 favorites has favorites]

I'm having trouble putting the pieces together. I think I understand CDOs (thank you " Giant Pool of Money") and I think I understand CDSs (maybe). These credit swaps set up all these interconnected risks and obligations so that otherwise sound companies can be taken down because they're vested in these CDOs and someone else in the web of trust is financially unsound. And because CDOs are unregulated and have no requirement for disclosure, no one can tell who is exposed or not.

Now their saying that 'Commercial Paper' is the grease on which every day business run and... (now I'm stretching)... it's the drying up of these short term loans that are going to turn this from a financial crisis to an economic one. And these lines of credit are drying up because the funds don't know who to trust, because of the lack of disclosure. So they're choosing to trusting no one. Have I got it?

In which case, what delmoi said, why aren't they bailing out the commercial paper market directly?
posted by adamt at 11:35 PM on October 5, 2008

Only when the last tree has died. and the last river been poisoned ... will we realise we cannot eat money. Cree Indian saying ...
posted by strawberryviagra at 11:35 PM on October 5, 2008 [11 favorites has favorites]

I think it's a little over the top for him to claim that credit default swaps are "so complicated you need to be a physicist to figure 'em out" (or whatever). They're no more complicated then car insurance.

Of course you're right, delmoi. That's why the whole system is crashing. Everything was all so simple, obvious, and straightforward, but those highly paid guys with math degrees are just a bunch of idiots.

If only they'd consulted you before signing those papers, this whole mess could have been avoided.
posted by Malor at 11:49 PM on October 5, 2008 [3 favorites has favorites]

Wait a second. The system isn't crashing because they didn't understand what they were doing. The system is crashing because they knew they were doing something superbly risky and did it anyway because of greed and irrational exuberance.
posted by Justinian at 11:52 PM on October 5, 2008 [21 favorites has favorites]

This is the most straight forward explanation I've read. And the most terrifying. It'd be interesting to hear them predict what the short and long term consequences in the same simple, understandable manner.
posted by twirlypen at 11:55 PM on October 5, 2008

The system is crashing because they knew they were doing something superbly risky and did it anyway because of greed and irrational exuberance.

plus who cares if you BK your company in the end as long as the bonus checks clear.
posted by troy at 11:59 PM on October 5, 2008

Very interesting podcast - many thanks for posting. I'm still pushing through it (while doing a bunch of other things this AM), but a few key points.

Well, we have seen the Commercial Paper market starting to seize up; a headline last week that should have grabbed everyone's attention and the podcast didn't explain in sufficient detail - Warren Buffett invested $3B into GE.

Why was this significant? Doesn't Buffett invest in lots of companies?

Yes, but GE is a AAA rated entity; in other words, perfect credit, totally trustful. But even GE couldn't get money, they couldn't obtain a short term unsecured loan (which is what the Commercial Paper market is all about).

There was lots of cash out there, but GE (as well as other business entities) couldn't get money from the Commercial Paper market for terms longer than overnight - if at all. Over the weekend I caught up with some of my buddies who are active in the Commercial Paper market, and they mentioned there were lots and lots of bids but absolutely NO offers (i.e., lots of requests for funds but nobody was offering to lend).

We're still seeing LIBOR relatively high (compared to "official" US Treasury rates), and this morning yields on US Treasuries are getting very, very low again, with the 3M T-Bill down to 0.45%. This is an indication that folks are worried about getting cash back from market entities (e.g., 3M, other companies that are seeking to borrow) and instead are dumping short term money into US Treasuries.

The "disconnect" between the US Government borrowing / lending rates, and those we actually see in the market - what I've previously called a "tale of two yield curves" seems to be widening somewhat.

However just this morning Bernanke and The Fed announced that they'll begin to lend directly to States and companies if necessary.


delmoi -- "I think it's a little over the top for him to claim that credit default swaps are "so complicated you need to be a physicist to figure 'em out" (or whatever). They're no more complicated then car insurance."

This is something that has always annoyed me about finance; I believe that if you can't explain something like a Credit Default Swap (or CDO, or Synthetic CDO, etc) to your grandmother than you don't understand it yourself. I don't think this guy tried very hard to understand them, at least at a high level (the math might get a little involved depending upon the variant of CDS, but you don't need to understand the math to understand precisely how the instruments work and the simple swaps employ simple math).


adamt -- "So they're choosing to trusting no one. Have I got it?"

Absolutely correct; we're still not really sure who is holding what on their balance sheets, and until we do many market counterparties are simply not lending money. US Treasuries are the only place that folks will invest short term money now.


Justinian -- "Wait a second. The system isn't crashing because they didn't understand what they were doing. The system is crashing because they knew they were doing something superbly risky and did it anyway because of greed and irrational exuberance."

Precisely. And we see this behaviour in every asset bubble we've observed over the past four or five hundred years. We were discussing the panic of 1837 in another thread, and I mentioned that we always see greed and euphoria giving way to revulsion and panic as the bubble collapses. It doesn't matter what the currency or the political system is - these are just characteristics of pretty much any asset bubble we've studied in detail.


One thing that's interesting - Standard and Poors have rolled out a Commercial Paper index; this will help add come clarity to the market. I'll see if they have replicated back in time as it might help folks to understand the stress we're seeing in the short term money markets.


On a personal note - curious that guy from RiskMetrics is mentioning he become concerned about the Credit Default Swaps market when he noticed they were being used for speculation; I previously mentioned that was when I "lost the faith" as well.
posted by Mutant at 12:20 AM on October 6, 2008 [34 favorites has favorites]

Wow. Does anyone know if it's actually true that somebody slipped language into the signed-into-law plan that allows the treasury secretary to do the deals as stock injection plans and not pure bailouts? Whoever did that is MY NEW HERO.

I don't expect the Treasury Secretary for Goldman Sachs to do any such thing, but it's only a month until the election after all...
posted by Justinian at 12:31 AM on October 6, 2008

Please - swap your thens and thans - it's getting confusing
posted by strawberryviagra at 12:32 AM on October 6, 2008

Well at least there's nothing to worry about.
posted by philip-random at 12:45 AM on October 6, 2008

As a follow up to delmoi's point and in response to a couple of questions I got in email, I can provide these references that might help folks understand just how simple a Credit Default Swap is.

Investopedia has a fairly decent two page explanation.

Here is illustration of how a Credit Default Swap is structured. In this image, the Reference Asset is owned by the Investor, who is concerned about loss. The Investor purchases protection against default from the Protection Seller.

The Protection Seller receives periodic payments from the Investor and if there is a default (this is a grey and potentially wide area) then the Protection Seller covers the losses experienced by the Investor.

Janet Tavakoli has a very good explanation of Credit Default Swap's [ .pdf] on her website. This explanation is excerpted from her book, Credit Derivatives: A Guide to Instruments and Applications, which was one of the first books published on these instruments.

Her book is a good read, very accessible and light on the math. However if you're seriously interested in these instruments, I've got a list of more advanced books in my profile; Das ("Credit Derivatives and Credit Linked Notes") is very highly regarded by practitioners.

So, just to reiterate delmoi's point once again - these instruments are fairly easy to understand, absolutely no reason to be intimidated by their arcane sounding name.

In fact if you read the Investopedia article I've liked to you'll have a decent understanding of the instruments and how they're used.

And if you read Tavakoli's pdf that I linked to above, you'll be experts.

Hope this helps!
posted by Mutant at 1:00 AM on October 6, 2008 [26 favorites has favorites]

The information is good and useful, but Ira's mannered, precious stylings are (as always) far beyond annoying, and the whole tone of this is simplistic, cutesy and in a sad way almost condescending. It's a story told like "Highlights" magazine for adults.

Hey, that's the This American Life style. Frankly, I find it extremely useful. I generally consider myself widely knowledgeable on a range of subjects, but the money markets and everything to do with them have always been pretty much impenetrable jargon jungles. Anything that sets out to explain things simply is a winner in my book - between TAL and Mutant's detailed write-ups, I feel pretty well versed, whereas three months ago I knew nada.
posted by Happy Dave at 1:04 AM on October 6, 2008 [4 favorites has favorites]

I just listened to The Giant Pool of Money, and oh my god, I think I just understood the sub-prime mortgage crisis. Excellent show. Thanks for posting this.
posted by patr1ck at 2:34 AM on October 6, 2008

The current economic woes look a lot like what my 96-year-old grandmother still calls "the real Great Depression." She pinched pennies in the 1930s, but she says that times were not nearly so bad as the depression her grandparents went through. That crash came in 1873 and lasted more than four years. It looks much more like our current crisis.

http://chronicle.com/temp/reprint.php?id=477k3d8mh2wmtpc4b6h07p4hy9z83x18
posted by robbyrobs at 2:37 AM on October 6, 2008 [4 favorites has favorites]

Also, I find listening to the 1920's radio network quite soothing when contemplating the whole mess. Not sure why.
posted by Happy Dave at 2:39 AM on October 6, 2008

I was unaware of the double edged affect of Greenspan dropping interest rates to 1% to prop up the stock market after the dotcom bust. I knew that the low rate caused people to buy homes they ordinarily could not afford but was not unaware that it caused institutional investors to buy up mortgage backes securities because the low interest rate had reduced the yield on US treasury bonds. So the fire was burning from both ends...
posted by PenDevil at 3:00 AM on October 6, 2008

Yes, but GE is a AAA rated entity; in other words, perfect credit, totally trustful. But even GE couldn't get money, they couldn't obtain a short term unsecured loan (which is what the Commercial Paper market is all about).

There was lots of cash out there, but GE (as well as other business entities) couldn't get money from the Commercial Paper market for terms longer than overnight - if at all. Over the weekend I caught up with some of my buddies who are active in the Commercial Paper market, and they mentioned there were lots and lots of bids but absolutely NO offers (i.e., lots of requests for funds but nobody was offering to lend).

Yes, but there is still a lot of capital out there, just in non-financial companies, right? With Buffet willing to go in, I think he's signalling to other large investors that this is a buying opportunity (that is, many companies will be undervalued because of the tightening lending pipeline than because of fundamentals) Wall street may be crumbling but perhaps alternative and creative sources of finance are emerging to replace them?
posted by vacapinta at 3:16 AM on October 6, 2008 [1 favorite has favorites]

There's a massive auction of Fannie Mae and Freddie Mac CDSs set for today.
posted by PenDevil at 3:28 AM on October 6, 2008

On Wall Street thousands of protestors demonstrated against the proposed $700 Billion bail out plan.
posted by nickyskye at 4:03 AM on October 6, 2008 [3 favorites has favorites]

PenDevil -- "...but was not unaware that it caused institutional investors to buy up mortgage backes securities because the low interest rate had reduced the yield on US treasury bonds. So the fire was burning from both ends..."

That point actually captures the origin of the problem succinctly and in it's entirety; because yields on US Treasuries were kept so low for so long, Institutional Investors such as Insurance Companies, Pension Funds and the like were (are) desperate for yield.

These entities typically have long term obligations, and need to earn relatively high interest rates in order to be able to fund someone's pension in thirty years time. Because US Treasuries were yielding far, far less than the investors needed they moved out on the risk / reward continuum in search of higher yield.

In other words, they acquired riskier assets simply because there were no other alternatives.

As demand for assets such as CDOs surged, additional players rushed to the market to sell their own Structured Products.

A cycle resulted where demand for Structured Products meant something was needed to populate the CDO. That something was a mortgage, and as the supply of Prime Mortgages that could be used for such purposes was depleted, folks starting moving down the quality chain. First Alt-A and then SubPrime mortgages were used to structure CDOs.

Although the initial wave of CDOs were indeed relatively safe (overall not as safe as US Treasuries but still safer than, for example, investing in bonds offered by some Developing Nations) these later products, offering higher and higher yields and based upon lower quality loans, were far, far riskier.

I've got some research from J.P. Morgan [ .pdf ] that will give you an idea of the yield pickup - and hence explain the demand - that some of these products offered (this was from 2005) - on page 14 we see:

• AAA rated CDOs paid about 53 basis points (or 0.53%) above LIBOR
• BBB rated CDOs paid 315 basis points (or 3.15%) above LIBOR

So we clearly had a bubble in Structured Products, and in fact bubbles in many other forms of Credit Derivatives (e.g., CDOs, CDs, Synthetic CDOs, etc).

Finally, in case you folks are curious about the paperwork involved in a CDO, I posted the term sheet for an actual deal here. Note that unlike claims made in other threads, these document do indeed carry extensive warnings and disclaimers (about three pages worth alone in this document, and before an institutional investor could actually purchase a tranche in a CDO, there were additional, more voluminous warnings to wade through).


vacapinta -- "Yes, but there is still a lot of capital out there, just in non-financial companies, right? With Buffet willing to go in, I think he's signalling to other large investors that this is a buying opportunity (that is, many companies will be undervalued because of the tightening lending pipeline than because of fundamentals) Wall street may be crumbling but perhaps alternative and creative sources of finance are emerging to replace them?"

Yeh, good point. Some fund managers are indeed bullish and have started purchasing equities again.

On the other hand, there still is a lot of fear in the markets, so maybe it is a good time to buy, if ones got a long horizon.

But when the Commercial Paper markets begin to seize up, there may indeed be money but everyone, absolutely everyone is hoarding it.

We're starting to see speculation that the unsecured credit markets may never again be as large. Lots of chatter about the growth of secured short term lending. I don't really have a view, just something that we were talking about, but on one hand, it would provide lower, and in some cases, much lower borrowing rates.

So it seems that those who have would get; in other words, if you don't have any collateral then you ain't getting a loan. I'm not really sure how beneficial this would be in the long term.

On the plus side to all of this (and you folks know I always look to the sunny side of any market event), it seems as though we're seeing the final death throes of that Shadow Banking System many people were nervous about.

Sigma, a Structured Investment Vehicle, or SIV run by London based Gordian Knot, collapsed after J. P. Morgan withdrew it's credit lines.

Sigma was significant in that it was the last SIV to remain after a series of high profile collapses. SIVs were once a $400B plus industry, which many criticised calling them a "shadow banking system" due to the funds and liquidity available from private sources.

SIVs allowed many financial institutions to acquire assets but not report beneficial ownership, as these instruments were kept off the firms balance sheet.
posted by Mutant at 4:14 AM on October 6, 2008 [20 favorites has favorites]

I'm not even going to look. (Anyway, I can't. That particular show isn't playing for me here. Blocked or something.) I'm just going to hope I have enough cash in the bank and that the cash isn't completely devalued and that the bank doesn't implode and...

It feels a bit like a very bad storm is coming my way and people are trying to explain to me exactly why the storm developed. That's nice and all, and I'll read all about storm formation later, but right now I'm not very much interested in why there are tornadoes coming directly at me. What I would like is a reliable heads up when there's a flying piano or cow or swarm of broken glass coming my way, and good general advice on taking immediate shelter from such things if it's not too late.
posted by pracowity at 4:33 AM on October 6, 2008 [1 favorite has favorites]

PenDevil - that auction is functionally meaningless. Its a reverse auction to set the level of the payment sellers of FNM and FRE protection have to pay to the holders of the CDS, but since FNM and FRE debt has effectively been nationalized and FNM and FRE debt securities trade near par the price the auction settles at should be very close to zero

SIVs are no where near as nefarious, and much much dumber then anyone realizes. It was just a big pile of capital that was levered like crazy used to make a bunch of money by owning long and borrowing short. Sort of Finance 101 that under sort of stress they would collapse.

Mutant - It is my understanding that the vast majority of CDS on CDO were not tradeable. The swap contracts were written with reference to the original counterparties, and if either one wanted to sell the instrument on they had to get the others agreement. Also out of interest why do you find the use of more traditional CDS as speculative instruments problematic? Seems a rather elegant solution to profit from a differentiate view on a businesses credit quality.
posted by JPD at 5:04 AM on October 6, 2008

It feels a bit like a very bad storm is coming my way and people are trying to explain to me exactly why the storm developed. That's nice and all, and I'll read all about storm formation later, but right now I'm not very much interested in why there are tornadoes coming directly at me.
posted by pracowity at 7:33 AM on October 6

The tornadoes are here. They're on top of you now. These kinds of sell-offs on Wall Street and mass media attention don't happen prior to disasters, they are the after effect of the disaster. We were already in a recession. Job loss numbers are jobs that were already lost months ago. When the trend hits the front page of TIME magazine, the trend is over.

In my opinion, the bailout marked the end of the bank crisis phase of this larger problem. Now we move in earnest into the widepsread hedge fund failure phase, which will take down all manner of non-financial stocks, and with a global slowdown, we have to see if China slides into a depression.

But on the plus side, here comes $70 oil.
posted by Pastabagel at 5:09 AM on October 6, 2008

The TAL show still didn't have an answer for what I'm supposed to do with all this Flooz now!
posted by Pollomacho at 5:17 AM on October 6, 2008

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.” - Thomas Jefferson 1802

In which case, what delmoi said, why aren't they bailing out the commercial paper market directly?

Disaster capitolism bay-bee.
http://www.nakedcapitalism.com/2008/09/mussolini-style-corporatism-in-action.html


But even GE couldn't get money,
Bank run in Greece

A lawyer I know was mentioning that some of the school disctricts he does work for could not get short term loans to cover payroll.




But hey - as you are unemployed and using a free wi-fi you can connect to Metafilter just before it is shut down go back through the 'the bailout' threads and ask all the 'the bailout is needed' people how they are doing. Metafilter - might even be cathartic
posted by rough ashlar at 5:22 AM on October 6, 2008 [1 favorite has favorites]

An interesting thing happened to my wife and I yesterday that is a prime example of how bad things are. It was a beautiful, sunny day so we decided to go out to brunch at some outdoor place and get away for a minute. We were walking down one of DC's hipster hotspots when we passed an abandoned storefront, windows broken and boarded, urine scent, etc. tucked in between two packed restaurants. There was a woman clamboring around in the place using Obama stickers and signs to cover some of the more obvious ugly spots. We asked her about it, she said she was the owner of the building and for the third time in the last few months she's had a lease fall through and f she's going to have to be saddled with paying the taxes on the place, she might as well make it a billboard for Obama. Though the location would be prime real estate for a new club or restaurant, no one, NO ONE can get financing. She had a very famous gormet chef, who shall remain nameless, even float a proposal by the bank for a new restaurant, nothing, rejected. NO ONE can get financing and no investors are willing to partner with a chef no matter the location, no matter how great the proposal. I said, half joking, that maybe the bail out would free up some cash, she turned holding up an Obama sign and said, "this is the only thing that can save this place."
posted by Pollomacho at 5:38 AM on October 6, 2008 [4 favorites has favorites]

Now I understand counterparty risk in CDSs but I wish I didn't.
posted by smackfu at 5:43 AM on October 6, 2008

Ira's mannered, precious stylings
I generally like the presentations on This American Life, but that didn't stop me from laughing when Garrison Keillor referred to Ira Glass as 'I regress.'
posted by Killick at 5:43 AM on October 6, 2008 [1 favorite has favorites]

"The economy is in shambles, we are all doomed . . . BUY A SAAB 93 TURBO!!"
posted by billysumday at 5:59 AM on October 6, 2008 [4 favorites has favorites]

In the book F.I.A.S.C.O. an insider's view of aggressive banking and the rise of derivatives, they talk about unsuspecting midwestern pension fund managers who lose their entire fund by not understanding the small print, and the banker says with some glee "we ripped their face off!"

America, you just got your faced ripped off.
posted by StickyCarpet at 6:02 AM on October 6, 2008 [1 favorite has favorites]

In Crowd

And so the C.G.I. resembled a live-action Facebook network (Illuminati, Class of 2008), complete with status updates (John McCain: “As of this morning I am suspending my campaign”) and declarations of shared interests (Armstrong: “I happen to be a real fan of magnolia trees, and I found out that so is the President”).

posted by acro at 6:21 AM on October 6, 2008

60 Minutes last evening had a well done segment in which it was made clear that the taking down and the skirting of regulations made it possible for the mess to come about...alas, we now hear from the Right that it is all the fault of so and so at such and such a place making bad mortgages to minority people and that caused the entire mess. In fact, you have to go back to Ronnie and Jimmie et al to see the loosening of regulations and oversight that has been taking place which, in turn, has allowed greed to do its thing.

Both parties are at fault, but I would claim the GOP much more so, as they are the ones constantly harping, ie McCain, on a "free market" (with, of course, price supports) and getting rid of too much regulations...We will hear from both parties now about the need for oversight...but it will not be long before loopholes will be found and/olr made and we will once again create another mess.

Those who forget their history will have to bail out those who need it again and again.
posted by Postroad at 6:24 AM on October 6, 2008 [2 favorites has favorites]

Thank you to all the FPP posters and commenters for this Canadian's crash course in American finance (pun intended).

And now for a few humble suggestions for songs to add to the Panic Mix on your iPod (along with the excellent track by the Carter Family mentioned above):


Money's Too Tight To Mention - Simply Red
Brother, Can You Spare A Dime? - Bing Crosby
Safety Dance - Men Without Hats

and, of course,
Money from Cabaret
posted by Quiplash at 6:29 AM on October 6, 2008

she turned holding up an Obama sign and said, "this is the only thing that can save this place."

That's not depressingly naive at all.
posted by xmutex at 7:06 AM on October 6, 2008 [2 favorites has favorites]

Standard and Poors have rolled out a Commercial Paper index; this will help add come clarity to the market.

Really? Standard and Poors is going to bring clarity to the market? Well, I suppose that would be a welcome change, given how integral they were to causing the mess:

Until recently, Moody's, Standard and Poor's, and other agencies gave top ratings to securities backed by home mortgages — even those that turned out to be at high risk of default.

"These ratings were way, way off," Dodd said. "And obviously, there's an inherent problem if the agencies are being paid by the very people they're rating. You have some legitimate underlying questions of how reliable those ratings can be."

Rating agencies are paid by the Wall Street firms that bundle mortgages into securities for sale. The rating agencies coached Wall Street on just how many risky mortgages they could pack in, said finance professor Joseph Mason of Drexel University.

"The builders of the securities wanted to push the envelope. And I would say that the credit rating agencies, in order to maintain business in this highly lucrative and fast-growing area, went along with the game," Mason said.

Those credit ratings turned out to be overly optimistic. And when more and more homeowners started defaulting on their mortgages, investors were caught off guard, setting the stage for the current credit backlash...Standard and Poor's declined to comment on the criticism. Moody's didn't return a call for comment. In recent weeks, rating agencies have been steadily downgrading securities backed by high-risk mortgages — a move critics say is too little, too late.
posted by mediareport at 7:24 AM on October 6, 2008 [1 favorite has favorites]

Please buy my new book, Dow 3,600.
posted by snofoam at 7:25 AM on October 6, 2008 [5 favorites has favorites]

My wife and I listened to that show; I'm not a huge TAL fan (yes, Ira can be annoying), but the recent series on the economic crisis has been extraordinarily enlightening, and this MeFi thread has enlightened me further, so thanks to justkevin for posting it and to those commenters (special gold star, as usual, to Mutant) who have added useful information here. (No thanks to the jerkoffs who show off their alleged brilliance by snarking at the show and those who learn things from it.)
posted by languagehat at 7:27 AM on October 6, 2008

Mutant, you're my favorite. :)

And now I'll let the big kids talk again.
posted by six-or-six-thirty at 7:32 AM on October 6, 2008

You forgot

I'm Busted

Ray Charles Flavor

I'm Busted

Johnny Cash Style
posted by The Whelk at 7:35 AM on October 6, 2008

she turned holding up an Obama sign and said, "this is the only thing that can save this place."

Anyone seen the other post about magical thinking? Yeah.

Obama ain't gonna save you. Save yourself.
posted by TheOnlyCoolTim at 7:42 AM on October 6, 2008 [1 favorite has favorites]

I'm thinking someone should redo the song about the titanic, but make it "sad when that great bank went down."
posted by snofoam at 7:42 AM on October 6, 2008

alas, we now hear from the Right that it is all the fault of so and so at such and such a place making bad mortgages to minority people and that caused the entire mess.

That's the worst (and to me the most bizarre) thing about this crisis - they've somehow managed to blame poor people and minorities for this gigantic clusterfuck brought to us by the Masters of the Universe. And the right wing and their media are eating it up - I heard Peggy Noonan blame the CRA (fast becoming code for "urban blacks caused this") while praising the virtues of deregulation on her book tour this weekend and it made me shake my head in disbelief. Move over "Welfare Queens who drive Cadillacs", the new GOP meme for the 21st Century has arrived.
posted by longdaysjourney at 7:54 AM on October 6, 2008 [7 favorites has favorites]

One of the indicators that tanked last month was the number of new cars being purchased. Ford sales were down 16%. Kind of crazy.

Don't worry, delmoi, the big three US automakers just got a $25,000,000,000 bailout of their own.
posted by Sys Rq at 7:54 AM on October 6, 2008

Wow. Does anyone know if it's actually true that somebody slipped language into the signed-into-law plan that allows the treasury secretary to do the deals as stock injection plans and not pure bailouts? Whoever did that is MY NEW HERO.

No one "slipped that in" but it was obvious from the get-go that equity for the "taxpayer" was the number one concern of liberal opponents of the bailout. Just read posts in the earlier bailout threads. It was a hugely contested issue and I was surprised that we ended up getting but the idea that it was just "slipped in" is absurd. It was by far the biggest and most controversial sticking-point in the law.

Also, the government doesn't get equity exactly, it gets warrants for shares in the companies if the government doesn't get it's money back from the assets.

That line was probably the most annoying in the whole program.
posted by delmoi at 8:06 AM on October 6, 2008

" Ira's mannered, precious stylings " - ever hear NPR's version of A Christmas Carol? Ira Glass plays Tiny Ira, who suffers from over sincerity.

I love Ira Glass and TAL, and the shows referenced helped me (of little brain) understand this murky mess a little better.
posted by katiewa at 8:11 AM on October 6, 2008

It's good to hear something that talks about the financial mess in the context of already having passed the bailout. Thanks for posting.
posted by lunit at 8:12 AM on October 6, 2008

TheOnlyCoolTim: "Obama ain't gonna save you. Save yourself."

How exactly do I fix the financial system myself? Should go out and re-regulate the banking system on my own? Go tell them to un-freeze the short-term loan market? Tell me, please.
posted by octothorpe at 8:23 AM on October 6, 2008 [3 favorites has favorites]

I don't much like Ira Glass either, but he did a good job on this story. I see in the NYT that the Dow just fell to below 10000 for the first time since 2004. Bad times are coming.
posted by RussHy at 8:25 AM on October 6, 2008

Thanks for the post, justkevin. I heard the story in the first act on NPR the other day on my drive home and was wanting more.

Also, I'd just like to thank everyone who understands this stuff (especially Mutant) for breaking this stuff down over the last several threads and giving their opinions and useful links on the matter.
posted by educatedslacker at 8:30 AM on October 6, 2008

Does someone have a link to an MP3 download that doesn't require iTunes?
posted by Nelson at 8:31 AM on October 6, 2008

On the bottom left area of the page there is a "Full Episode" link. Right-Click, Save As.
posted by Optamystic at 8:35 AM on October 6, 2008

Nelson, why don't you go to the first link in the post and click on the link that says Free Download.
posted by snofoam at 8:38 AM on October 6, 2008

While there were certainly poor people who got houses they couldn't afford, it's really pissed me off that it's become a successful meme that they're responsible for the mess. Besides the lenders and investors, people seem too willing to overlook people that bought "investment" properties to either flip or just later sell with no knowledge of real estate.
posted by drezdn at 8:53 AM on October 6, 2008 [1 favorite has favorites]

> Only when the last tree has died. and the last river been poisoned ... will we realise we cannot eat create pulp, the raw material of paper, from which we can print more money. Cree Indian saying ...

FTFY.
posted by davemee at 8:54 AM on October 6, 2008

How exactly do I fix the financial system myself? Should go out and re-regulate the banking system on my own? Go tell them to un-freeze the short-term loan market? Tell me, please.

Forget the financial system. Set yourself up to be among the less-fucked in case of depression. I, for example, took a "job" that should be rather more secure for the next few years. I live a low-expenses lifestyle. Should things get bad enough that I'm no longer getting paid (at this point I still very much doubt this), I have and can easily acquire more various other useful skills. Finally, give me some clothes, a tent, and a sleeping bag (I already have these things), water to drink and food to eat, and maybe even a place to take a hot shower from time to time, and I'm good.
posted by TheOnlyCoolTim at 8:59 AM on October 6, 2008

Thank you, here's the MP3 link to Another Frightening Show. Unfortunately the obvious URL for the earlier show (Giant Pool of Money) doesn't work, but this link from Odeo does.

(Dear TAL producers. I would gladly pay $1 to download old episodes, but please don't require iTunes. Alternately, how about you just keep serving old podcast URLs?)
posted by Nelson at 9:01 AM on October 6, 2008 [1 favorite has favorites]

i use the word a day screen saver, as i was just listening to this my screen faded into it APOCALYPSE. i think i peed my pants a little.
posted by andywolf at 9:06 AM on October 6, 2008 [3 favorites has favorites]

Dear TAL producers. I would gladly pay $1 to download old episodes, but please don't require iTunes.

They're from audible.com, so they don't require iTunes or an iPod, just a player that can play audible files.
posted by smackfu at 9:08 AM on October 6, 2008

I'm confused as to why people would think that the Republican party, which has been extremely successful in exploiting racial, cultural, and class differences in order to win elections would suddenly abandon that stance during the current situation.

Besides if you've bought into the free markets solve all problems you need to come up with some regulatory reasons why markets failed. The added bonus is that it's at least tangentially related to the great republican bugaboo and whipping boy Bill Clinton. So you get to blame Bill Clinton and the minorities rather than look at a fundamental shift towards deregulation as a primary source of market failure.
posted by vuron at 9:08 AM on October 6, 2008

Oh, Nelson, if you only knew how awesome the iPod is. And how well iTunes handles podcasts (I mean, podcasts were originally developed for the Apple ecosystem). I mean, if any consumer product deserves 17 billion thumbs up, it's the iPod (+iTunes). The best thing since sliced bread? No, the best thing since sliced bacon.
posted by snofoam at 9:10 AM on October 6, 2008 [1 favorite has favorites]

TheOnlyCoolTim: "... give me some clothes, a tent, and a sleeping bag (I already have these things), water to drink and food to eat, and maybe even a place to take a hot shower from time to time, and I'm good."

That's great for you if you think that you could survive on the street but there are 300 million other people living in this country, too. Not everyone is as abled, young and healthy as you are. There could be serious consequences to real people's lives if they don't have jobs and can't afford rent, heat, gasoline, clothes, medicine, etc. Most people's American Dream doesn't involve sleeping rough under a bridge in the winter.
posted by octothorpe at 9:26 AM on October 6, 2008 [5 favorites has favorites]

I particularly like the TAL segment because it mentioned the speculative nature of the CDS market. Their analogy of buying fire insurance on someone else's house made it very clear that this was speculation, not investment. This is a part of the CDS market that the 60-minutes segment didn't even mention, and so they failed to show why this problem is so big. It seems to me that the crisis would have been MUCH more manageable if the CDS deals had only involved principle parties in the transactions.

For background info, I've been following the crisis on Calculated Risk, Naked Capiltalism, and Marginal Revolution, among others, and as a consequence I feel like I started out 3 or 4 days ahead of the broader news outlets. By the time the mainstream news noticed the crisis, I had been stewing about it for a week. That interval is getting smaller. This weekend the blogs talked about weakness in European banks, and whaddya know, Monday morning the news leads with woes in the european financial sector.
posted by csw at 9:29 AM on October 6, 2008 [2 favorites has favorites]

That's great for you if you think that you could survive on the street but there are 300 million other people living in this country, too. Not everyone is as abled, young and healthy as you are. There could be serious consequences to real people's lives if they don't have jobs and can't afford rent, heat, gasoline, clothes, medicine, etc.

Sure, not everyone can do the things he's describing, but for the most part, everybody is capable of cutting back. That's his real message, he's just giving examples of how he himself is doing just that.
posted by symbollocks at 9:39 AM on October 6, 2008

That's great for you if you think that you could survive on the street but there are 300 million other people living in this country, too. Not everyone is as abled, young and healthy as you are.

I wouldn't be on the street, I'd be in the woods or possibly some fields. And the fact that there are many millions unable to cope as I would be is why I don't wish any depression upon the country. At the same time, when depression looks quite possible I'm not going to sit around and be totally unprepared for it because Obama/McCain Palin/Jesus/The Free Market/whatever is going to make everything all better. I'm voting for Obama as the better choice of the two allowed candidates to prevent or ameliorate depression, but I'm not going to depend on him.
posted by TheOnlyCoolTim at 9:39 AM on October 6, 2008

Kudos to TAL for getting that show out in time to still be relevant. And for those who hate Ira Glass, fine, call me when you have created the best radio show of all time, ever. I have also been seeing the same thing as csw. Finance blogs like CR have been well ahead of the curve, but the cycle is getting shorter and mainstream media are more often hours behind instead of days. I just hope we don't suddenly start considering James Howard Kunstler a realist instead of a curmudgeon any time soon.
posted by snofoam at 9:41 AM on October 6, 2008

In my opinion, the bailout marked the end of the bank crisis phase of this larger problem. Now we move in earnest into the widepsread hedge fund failure phase, which will take down all manner of non-financial stocks... But on the plus side, here comes $70 oil

Dow under 10,000 today, for the first time since 2004. Oil below $90\bbl.
posted by ninjew at 9:45 AM on October 6, 2008

One of the indicators that tanked last month was the number of new cars being purchased. Ford sales were down 16%. Kind of crazy.

16%? Pah. Mortgage lending here was down 95% last month.
posted by bonaldi at 9:47 AM on October 6, 2008

Well, have fun camping! The adults will be busy trying to get the economy rolling again.
posted by elwoodwiles at 9:53 AM on October 6, 2008 [5 favorites has favorites]

Well, have fun camping! The adults will be busy trying to get the economy rolling again.

Have fun getting foreclosed on and being out on your ass with nowhere to go and no plan. Quite adult. I guess in this shit-hits-the-fan much more than I expect scenario that has me living in a tent in some woods, the fixing shit, building shit, just plain digging ditches, or whatever I would do for cash or barter in the local economy doesn't count. I also guess the various kinds of work currently performed by the people I know who prefer to live in vans, RVs, and tents magically don't count towards the economy. Because they live in a tent or a van, which makes them homeless, which makes them bad people.
posted by TheOnlyCoolTim at 10:05 AM on October 6, 2008 [1 favorite has favorites]

Well, have fun camping! The stubborn adults who learned nothing at all from this mess will be busy trying to get the economy rolling again.

FTFY

Survivalism or Stubborness, why are people so blind to anything in between?
posted by symbollocks at 10:08 AM on October 6, 2008

If you really think it's going to get so bad, you might find a handgun more useful than a sleeping bag.
posted by Nelson at 10:18 AM on October 6, 2008

I will pay good money not to have this thread be about Konolia Raefellolo Palin Obama a doomsayers vs Joe Sixpack survivalist pissing match.
posted by Happy Dave at 10:20 AM on October 6, 2008

Second that!
posted by wowbobwow at 10:21 AM on October 6, 2008

Survivalism or Stubborness, why are people so blind to anything in between?
Because the inbetween position -- one of an America greatly reduced in global power and forced into negotiation amongst nations of roughly equal economic strength -- is so unpalatable as to be unthinkable for many.

If it's not USA #1, well, hell, the world musta ended. Where's ma gun, ma?
posted by bonaldi at 10:22 AM on October 6, 2008 [4 favorites has favorites]

But Happy Dave, what do you propose we DO talk about here? You're taking away all our options. How about that toy arrow tax cut? Damn politicians in bed with the toy arrow lobby.
posted by snofoam at 10:25 AM on October 6, 2008

Why wait for the meltdown? Get a jump on the competition! Start looting now!
posted by BitterOldPunk at 10:26 AM on October 6, 2008 [3 favorites has favorites]

Alternate response to Happy Dave:

What is this "good money" you are referring to? Is this something we would have to have a non-failing global economic system to understand?
posted by snofoam at 10:27 AM on October 6, 2008 [1 favorite has favorites]

If you really think it's going to get so bad,

I guess you missed the several parts where I said I don't at all expect it to get that bad? I most likely expect to be making the rent in my current situation just fine. I see it as an off possibility that I have to move to more-cramped more-roommates quarters or crash with people for a while. I have pretty much no expectation of living in a tent for anything more than a camping trip. Just sayin' if things came to that I'd be just fine.

If you really think it's going to get so bad, you might find a handgun more useful than a sleeping bag.

There were Hoovervilles in the last Depression without things getting all post-apocalyptic that everyone needed a handgun.
posted by TheOnlyCoolTim at 10:31 AM on October 6, 2008

Happy Dave, what do you propose we DO talk about here?

It's possible to talk about the very real changes that may or may not happen to the US economy and wider US (and global) society as a result of the turmoil in the markets without leaping on every mention of sleeping bags, guns, SUVs or wide-screen TVs as evidence that people in the thread with other opinions and thoughts about where things may be going aren't a) crazed M16 toting compound survivalists or b) bloated Middle America free marketeers.

As bonaldi said (in his inimitable Glaswegian directness), there is the middle ground, where the US simply stops being a superpower. As a Brit, I know the end of Empire (or geopolitical dominance, whatever you want to call it) can come without societal implosion. It took a global depression and a horrific war to bankrupt Britain and lead us to our current position. Hopefully we'll get away with just the depression in the case of the US, as there's a lot more really nasty weapons around these days.
posted by Happy Dave at 10:31 AM on October 6, 2008 [1 favorite has favorites]

As a Brit, I know the end of Empire...

I was kidding, but this aspect in particular is interesting to me. I know only a bit about post-war Britain, but weren't things bad there for decades? And given the inherent structural unsustainability of our country with sprawling exurbs and such, I feel like the disaster survivalist thing is part of a realistic continuum. I could see lots of people squatting in abandoned suburban homes.
posted by snofoam at 10:45 AM on October 6, 2008

Keating Economics: John McCain and the Making of a Financial Crisis
posted by ornate insect at 10:50 AM on October 6, 2008 [1 favorite has favorites]

I feel like the disaster survivalist thing is part of a realistic continuum. I could see lots of people squatting in abandoned suburban homes.

That's not survivalism (IMHO). That's just radically down-to-earth practicality (and an option I would gladly take if power structures broke down to the extent that I could get away with it).

Survivalism is something different than a vision of diverse, low-energy lifestyles. It's a back-to-the-earth lifestyle coupled with an "I'm gonna save my ass and screw everyone else" attitude that neglects the fact that your own well being relies on other people's well being.
posted by symbollocks at 10:56 AM on October 6, 2008

I will pay good money not to have this thread be about...

Man, if only I could securitize the income from what people will pay money to have threads not be about.

I was astonished to find that the story about CDSs and the credit crisis as I learned it from MeFi threads was correct.
posted by a robot made out of meat at 10:57 AM on October 6, 2008

I mean, if any consumer product deserves 17 billion thumbs up, it's the iPod (+iTunes). The best thing since sliced bread? No, the best thing since sliced bacon.

As the owner of several iPods (2nd gen 10 gig; 4 gig Mini; iPod Touch; 4th gen Nano; Shuffle) may I just say that the iPod is the best thing since slicing!

But you can download This American Life episodes right from the site as MP3s and play them on any inferior media player, or right on your computer.
posted by Fuzzy Skinner at 11:06 AM on October 6, 2008 [1 favorite has favorites]

Good point, symbollocks. Survivalism does typically get associated with wacko isolationist groups. But, the idea of increased self-sufficiency seems to be experience a groundswell of popularity in non-totally-wacko culture. And, while the idea of patching jeans may seem like some kind of caveman skill that was lost when we created civilization and Old Navy, I guess it technically is not a survival skill.
posted by snofoam at 11:07 AM on October 6, 2008

House Panel Faults Lehman’s Leadership

...One Lehman document among thousands reviewed by the House committee showed that four days before the bank filed for bankruptcy protection, Lehman’s compensation committee was asked to grant $20 million in “special payments” for three executives who were leaving...

...Another document showed that executives were warned in a January 2008 meeting that the company was facing liquidity problems. Yet the firm moved forward with capital outlays, including $5 billion in bonuses, $4 billion in shares and $750,000 in dividend payments between 2007 and the firm’s bankruptcy filing on Sept. 15.
posted by ornate insect at 11:08 AM on October 6, 2008

I feel the need to speak up and say that I find the use of the term 'precious' in this thread regarding the 'stylings' of Ira Glass a little homophobic. Precious is a term used to describe objects and children. It is generally diminutive. It is not suitably applied to a grown man. Particularly combined with the word 'stylings' it connotes a man who is delicate and not masculine. Please choose your words more carefully, homophobia is not well tolerated in the blue.
posted by PigAlien at 11:20 AM on October 6, 2008 [1 favorite has favorites]

I love TAL and Ira Glass, and I don't think it is homophobic to refer to Ira Glass's stylings as precious. Or twee. He is deliberately being cute and non-threatening. He is being precious. But I don't think that makes him gay, and I don't think anyone was trying to say he was gay, and I don't think anyone in this thread really cares if he is gay or not.
posted by snofoam at 11:27 AM on October 6, 2008

Perceiving Ira Glass as precious, overproduced, overmannered or feminine isn't homophobic, per se, it's a realistic application of the current spectrums of gender performance in our culture. Just talking that much and with that candor and affability makes him less than macho by US standards, ffs. Also, his voice isn't exactly basso. Gender performance and sexuality are not the same thing, and commenting on the former doesn't have to imply the latter.

He's not gay, btw, he's married to a woman.
posted by Ambrosia Voyeur at 11:35 AM on October 6, 2008 [1 favorite has favorites]

I was kidding, but this aspect in particular is interesting to me. I know only a bit about post-war Britain, but weren't things bad there for decades? And given the inherent structural unsustainability of our country with sprawling exurbs and such, I feel like the disaster survivalist thing is part of a realistic continuum. I could see lots of people squatting in abandoned suburban homes.

Clearly the comparison is inexact - Britain in the mid-twentieth century was reeling not only from the Great Depression, but also the rise of industry in other countries and the flow of power and money away from the colonial monopolies that had made it rich.

I'm only in my mid-twenties, so by the time I was even slightly conscious of it, Britain was well past the days of austerity and rationing and into the post-war cycle of boom and bust. I vaguely remember the family not having a lot of money in the late Eighties, numerous redundancies in the early Nineties and then the slow climb into Naughties prosperity (although that in itself is based on unsustainable levels of consumer debt, but that's for another thread). Throughout all of this, the UK has continued to punch above its weight on the world stage militarily and economically, despite divesting itself of nearly all of the countries that it once dominated.

While the US doesn't have a visible empire abroad, it does have closely-bound relationships around the world (China, the Caucasus, Iraq) where it is committed economically, militarily or both. The end of American dominance in these areas may mean a slow pulling back from these commitments. At home, there are a lot more Americans than Britons, and the standard of living in the US has been funded and supported by the financial and economic support of dozens of countries and industries (oil, manufacturing, finance).

As you say, the spread-out exurb style of living may see its end in this current crisis, but I sincerely doubt it will end up in violence and mass instability (the preponderance of automatic weapons and strong individualist ethos in the US aside). Despite what SF authors and filmmakers would have us believe, Americans are fundamentally collaborative and hospitable people (on small scales) and the collapse of the spread-out, strip mall and suburb way of life may allow for some emergence of that spirit where currently there is a degree of isolation and 'I've got mine Jack' ways of thinking.
posted by Happy Dave at 11:36 AM on October 6, 2008

Precious is a term used to describe objects and children. It is generally diminutive. It is not suitably applied to a grown man.

That's just sexism.
posted by Ambrosia Voyeur at 11:37 AM on October 6, 2008

msnbc.com has live coverage of the congressional hearings right now, if anyone is interested.
posted by enn at 11:37 AM on October 6, 2008

Another question for the Mutants, et al. out there about CDS. If the analogy about buying fire insurance on someone else's house is accurate, is there a problem in the industry corresponding to arson or malicious neglect by the non-owner? I wouldn't get a lot of sleep at night if I knew there were a bunch of people who stood to gain if my house burns down. Not that I'm sleeping that well these days anyway. But especially in a financial environment where, as they mention in the show, perception is key to valuation, could a guerrilla whisper campaign be a successful low-cost, high-payoff strategy? Note that I am NOT endorsing this, just trying to identify weaknesses in the system.
posted by sapere aude at 11:40 AM on October 6, 2008

TED spread is off the charts.
posted by geoff. at 11:49 AM on October 6, 2008

Joe Sixpack survivalist

Is Joe Six Pack already making beer and storing it in six pack form in a shed out in the middle of nowhere? Will he be able to afford six packs otherwise? If he can afford six packs all the time now, why doesn't he cut it out, save some dough and go back to school, invest in a new business? What type of six packs are we talking about anyway?
posted by raysmj at 12:06 PM on October 6, 2008 [1 favorite has favorites]

As you say, the spread-out exurb style of living may see its end in this current crisis, but I sincerely doubt it will end up in violence and mass instability (the preponderance of automatic weapons and strong individualist ethos in the US aside). Despite what SF authors and filmmakers would have us believe, Americans are fundamentally collaborative and hospitable people (on small scales) and the collapse of the spread-out, strip mall and suburb way of life may allow for some emergence of that spirit where currently there is a degree of isolation and 'I've got mine Jack' ways of thinking.

My own fantasy has various black/gray markets rising up and supplanting most established industry (as it crumbles due to lack of credit and or oil) by the end of the century, and although I don't hold out much hope of that happening on a large scale, I am certainly working towards that on a personal and community level as much as I can.

I want that! I want to be able to go into an abandoned house and fix it up without fear of the police kicking me out and throwing me in jail. I want to be able to ride my bike in the street without having to worry about commuter traffic running me over. I want to be able to get to know my neighbors without them acting like that's an odd thing to do. I want my country to stop acting like assholes abroad (as well as at home plz). I want people to treat the environment as if they actually lived in it. That's the world I want my kids to live in, even if I can't.
posted by symbollocks at 12:15 PM on October 6, 2008 [7 favorites has favorites]

3 month t-bills are at .47%! The yield curve is not really a curve at all anymore, is it?
posted by geoff. at 12:16 PM on October 6, 2008

Well, I don't want to get into a pissing-match here, I'm just annoyed when people think "I don't worry - I'll be fine..." is any sort of solution. Really, this is much, much larger than any of us, this is an event that will effect the future of our nations, our communities and our families. Considering that, I think it is important to figure out how to make moves that lead to some sort of economic growth. Does that mean we continue with the current system? No, not at all. It does mean there must some sort of financial system, however, and we should be thinking about how we would like the system to operate and what goals that system will have.

Being adult means facing things.
posted by elwoodwiles at 12:21 PM on October 6, 2008 [3 favorites has favorites]

Earlier in the day, the TSX index plunged almost 1,200 points, by far the biggest one-day point drop on record for the Toronto Stock Exchange.

And this is when I discovered that the Stocks app on my iPhone can't handle four-digit displays. After -999.99, it started off again at zero.
posted by Quiplash at 12:30 PM on October 6, 2008 [2 favorites has favorites]

Yeah. I just lost $207,000 in four hours.

No retirement for me.
posted by tkchrist at 12:40 PM on October 6, 2008 [1 favorite has favorites]

The best part about peak oil will be thousands of carhenges around America. They will be our giant heads of Easter Island.
posted by snofoam at 12:43 PM on October 6, 2008

Joe Homebrew?
posted by The Whelk at 12:45 PM on October 6, 2008 [1 favorite has favorites]

Is Joe Six Pack already making beer...?
Not only making it, but growing the hops from which it is made. I will be prepared!
posted by exogenous at 12:50 PM on October 6, 2008

Is Joe Six Pack already making beer...?
Not only making it, but growing the hops from which it is made. I will be prepared!

I'm assuming that if you turned that shot around you'd see vast fields of barley stretching out into the distance as well then?
posted by Pollomacho at 12:53 PM on October 6, 2008

Still working on that! Meanwhile, I have a couple of 50-pound sacks of barley to tide me over, along with a bunch of yeast. Mmm, liquid bread.
posted by exogenous at 12:57 PM on October 6, 2008

Precious is a term used to describe objects and children. It is generally diminutive. It is not suitably applied to a grown man.

FYI, I believe here it is being used to mean "affected." Which doesn't have much of anything to do with sexuality...
posted by 912 Greens at 1:14 PM on October 6, 2008

What you gonna do when there's no more jobs now!
posted by you just lost the game

Eponysterical.

Also, y'all forgot the most bailout-appropriate song about money ever, now with the kind of special dancing accompaniment MeFi's all about.

Go Nigel, Go.
posted by rokusan at 1:14 PM on October 6, 2008

Yeah. I just lost $207,000 in four hours.

No retirement for me.

Are you joking tkchrist?

The market went below 10,000 today for the first time since Oct. 29, 2004.
posted by nickyskye at 1:20 PM on October 6, 2008

A friend told me his retirement fund has gone down 14% in the last year. It was hard for me to be sympathetic. I told him mine had gone down 14% as well: from about $100 to $86.
posted by Fuzzy Skinner at 1:30 PM on October 6, 2008 [1 favorite has favorites]

tkchrist: "Yeah. I just lost $207,000 in four hours.

No retirement for me."

Ouch, I'll stop whining about losing $22K this year-to-date.
posted by octothorpe at 1:33 PM on October 6, 2008

And -poof!- suddenly the world has much less wealth. This part I still don't quite understand. Like, I cannot escape the intuition that at some point, that wealth should be reduced into a physical force, energy to do things, and that just doesn't come and go. This economy, it is a puzzle.
posted by Free word order! at 1:40 PM on October 6, 2008

So on the CNN frontpage right now it says "with the Dow down as much as 800 points during the session".

What's funny is throughout the day I've seen more or less the same sentence up there with 500, 600, 700 there. Someone needs to teach CNN about the <strike> tag.
posted by TheOnlyCoolTim at 1:45 PM on October 6, 2008 [1 favorite has favorites]

Free word order! writes "And -poof!- suddenly the world has much less wealth. "

The world never had that much wealth. This is just the result of everyone sobering up and admitting it.
posted by mullingitover at 1:52 PM on October 6, 2008 [2 favorites has favorites]

Free word order!: What helps me understand is if you don't define money as "stuff", but rather define it as power (in the political or philosophical sense). Banks can loan each other power, and the result is that if bank A loans bank B 85% of its power (with interest), bank A believes that they still maintain their power, while bank B uses the power for something else. If you notice, fractional reserve banking (which is the example above), is inherently greasing the wheels of the velocity of money (or the speed and ability to effect change). The net result in the destruction of wealth (decline of the belief of power) is a severe reduction in the ability for businesses to run.

That's why this is a really, really big deal.
posted by amuseDetachment at 1:57 PM on October 6, 2008 [1 favorite has favorites]

This is just the result of everyone sobering up and admitting it.

What about all the people like me, who were perfectly sober, perfectly willing to live within our means, invested in some of the most perfectly safe options available for retirement -- and are now jobless and with a decimated financial portfolio because a bunch of drunken pirates took off with the economy while aided and abetted by our own government? I never touched a drop of irrational exuberance, yet somehow I've ended up with the worst hangover of my life. I want to see those people hanging from the mast. Paulson needs to deploy the stock injection, and deploy it hard.
posted by melissa may at 2:27 PM on October 6, 2008 [7 favorites has favorites]

And -poof!- suddenly the world has much less wealth. This part I still don't quite understand.

Free credit meant people could bid higher on houses. Relaxed standards allowed more people to the bidding. Because of this, among other things, a $100,000 house suddenly became a $500,000 house, even though it was the same house. The economy treats this as an asset that has gained $400,000 in added value (despite nothing being added to the asset), and thus the economy has grown by $400,000 - wealth materializing out of thin air. All that wealth that appeared from nowhere then got traded all though the system, lent out, used to purchase things, dispersed far and wide into the world economy.

Now that the house is only worth $300,000, and the guy who owes $500,000 for it ain't paying up, all that magical wealth, dispersed throughout the world, is evaporating back to the place whence it came - thin air.
posted by -harlequin- at 2:56 PM on October 6, 2008

mullingitover, amuseDetachment, -harlequin-: Wealth = belief of power. Thanks, with that definition pieces seem to fit. For most of the time "belief of"-part can be ignored and just assume wealth=power, but in these times of doubt, believed power declines and in human relations that matters as much as decline of power in physical sense.

It also means that propping up belief of power can be done quite independently of actual power. Economic growth can be based on feeding illusions of individual power. Up to a point.
posted by Free word order! at 3:04 PM on October 6, 2008

Well, I don't want to get into a pissing-match here, I'm just annoyed when people think "I don't worry - I'll be fine..." is any sort of solution. Really, this is much, much larger than any of us, this is an event that will effect the future of our nations, our communities and our families. Considering that, I think it is important to figure out how to make moves that lead to some sort of economic growth.

There is an army of people across the nation and the world right now willing to work hard to do whatever it takes to shore up the future. All that is needed for mass-mobilization of the people is... something we can do. Anything.
But the advice is always "Do nothing" and "Don't panic".

Right now it seems that there are no options other than "I don't worry - I'll be fine..."? No-one has a satisfactory alternative, so it's not surprising that people are acting as we are.
posted by -harlequin- at 3:07 PM on October 6, 2008

Goddammit, This American Life. I just spent ANOTHER harrowing Monday fending of panic attacks thanks to your fucking podcast. Seriously, so many of my anxiety attacks lately have been induced by the show that my partner has all but forbidden to ever listen to it again.

All whining aside, TAL is really picking up the slack for irresponsible infotainment journalism. It's good to know that there's at least one show out there that is not only not lying to you, but is doing its doing everything it can to authentically inform you.
posted by treepour at 3:33 PM on October 6, 2008

The little aussie bleeder has hit US70c for the first time in years. I liked it better when the USD was sliding into oblivion.

I'm glad I got the new TV this week because import prices are about to go through the roof here.
posted by Talez at 4:04 PM on October 6, 2008

And -poof!- suddenly the world has much less wealth. This part I still don't quite understand. Like, I cannot escape the intuition that at some point, that wealth should be reduced into a physical force, energy to do things, and that just doesn't come and go.

I don't think "belief in power" is quite right in describing this. The stock market is nothing more than our attempt to get around the fact that companies have to make money OVER TIME, when we might like to own all those earnings now. The price of stock is in a very real sense the "value" we've assigned to all future earnings, taking into account not just how successful we think a company will be, but also things like how much less a dollar will be worth in $20 years compared to now. It's a complex calculation to value future earnings, and enormously sensitive to little changes in assumptions (like inflation will be 4% rather than 5% over the next 20 years, or the company will grow at 10% versus 8% every year).

That's why stock prices, and the stock market in general, can move around so much and apparently create and destroy wealth. But it's not really destroying anything; how the company will do in the future--the amount of money they will make--is going to happen, is going to be a real outcome. It's just our assumptions about it that change, sometimes irrationally (then stocks become a very good deal), and sometimes rationally (like if we plunge into the next Great Depression--companies will make much less money).

I think the -poof!- this week isn't just magical wealth that never really existed disappearing, although some of that may have occurred (people's assumptions became MUCH more realistic, very quickly). It's also a reflection of the fact that many, many companies are going to be making a lot less money if unemployment spikes up and no one has any money to spend.
posted by iminurmefi at 4:16 PM on October 6, 2008

Yes, it's true that share prices are the present-day value of future returns (efficient market hypothesis, etc. etc. etc.), but if you look under the stock market valuations, the value of money itself is the belief in the ability to effect change (or more accurately, the belief in the ability of your debtors to effect change for you).

Leverage on the stock market isn't that big of a deal, as you said, not much destruction of wealth is going on there. The real destruction of wealth is visible on the liabilities markets, e.g. bonds, CDOs, etc. This destruction is reducing the present-day value of future returns on stockholders.
posted by amuseDetachment at 4:31 PM on October 6, 2008

melissa may writes "What about all the people like me, who were perfectly sober, perfectly willing to live within our means, invested in some of the most perfectly safe options available for retirement -- and are now jobless and with a decimated financial portfolio because a bunch of drunken pirates took off with the economy while aided and abetted by our own government?"

There is no such thing as a perfectly safe investment. There is no real line between investing and gambling, just lower and lower risk premiums until you get to the point that you have the least risk possible for the lowest possible reward. Even if all your savings is in gold boullion buried a mile underground in a safe with 3-foot this steel walls, there's a very real, albeit small, chance that a meteor strike will wipe out your retirement fund.

There is no secret cabal of drunken pirates, just people who subscribed to the fallacy that there are 'perfectly safe investments.' I wish I had a Euro for every time someone has told me that real estate could only go up in value in the past eight years.
posted by mullingitover at 4:33 PM on October 6, 2008

I clearly meant NPV when I mentioned EMH, the whole sentiment/valuation talk mixed me up...
posted by amuseDetachment at 4:33 PM on October 6, 2008

Interesting conversation I had with a friend over the "main street" portion of this whole debacle.

-If this forces people to be more skeptical/knowledgable about investing, it's a good thing. I imagine the "hr guy explaining the 401k plan in the breakroom" is going to be real interesting at all of the companies that still have employees.

-examining the whole concept of Homeownership equals now you're a real grownup. Everyone is quick to blame homeowners getting in over their heads on stupidity/greed. It's easy to forget that 10 years ago, due to lack of long-term job security and uncertainty about wages, most of my peers (20-somethings then) felt like owning a home was completely out of reach. It's not like that bleak outlook removed home ownership from the list of things you "should" do.

-if this helps destroy the suburban mcmansion industry, then it's a good thing in the long run.I watched a tv special on the foreclosure crisis, and all of the houses were made of particle-board, and out in the middle of nowhere. From what I could tell the value of the houses was directly tied to the number of cars you could get into the garage.

I know everything that's happening now is capital-B bad, but I cant help but feel a little bit of optimism. Maybe a lot of the conspicous excess of our society that some of us have been shaking our fists at for years is going to go away. I can't be the only personkind of crossing his fingers hoping the big-box retailers are somehow gonna get dragged down as well.
posted by billyfleetwood at 4:36 PM on October 6, 2008 [3 favorites has favorites]

Are you joking tkchrist?

Well. Only a little. Including the last month and the 401k's (and a few trades) on paper it was about $207K loss. Is that "real?" I dunno. Real enough.

2004 was not so bad since some of that was still in equity in a house we sold in 2005. And then, ARGH!... put into stocks in 2006.

So between this and capital gains the last two years, the wife and I have gotten kinda fucked.

I'm uh... tipping past my mid forties (the new thirty five) this month so retirement will be not so easy unless I get real lucky.
posted by tkchrist at 6:08 PM on October 6, 2008

Yeah. Like I posted in another thread, I'm 33 years old. I've been saving since I was 25. That's 8 years, going back to the beginning of 2000 right before the market started tanking. So I'm quite badly underwater on all my long term holdings. Yeah, yeah cost averaging hold for the long term stiff upper lip bullshit whatever. The market would have to have a whole bunch of 30%+ return years in a row to catch up to where I need to be to be on track at my age.

Anyone want to bet on when we'll see a bunch of 30%+ return years in a row? 'Cause it better be soon.
posted by Justinian at 6:40 PM on October 6, 2008

(note: I do "cost average" every year. It's still all underwater. Badly)
posted by Justinian at 6:41 PM on October 6, 2008

The podcast mentions good reporting in the NY Times about AIG. I think they're talking about this article if anyone wants to read more.
posted by smackfu at 7:43 PM on October 6, 2008

Well I 'paniced' today, and sold about 10% of my stock portfolio and 80% of my emerging market bonds, right after listening to this podcast on the way to work.

Frankly, I've been following those who we're right on the bubble and the aftermath for a while (Calculated Risk, Roubini, Setser, etc.), and I thought I had made decisions accordingly. For instance, I don't own many US equities or corp bonds.

Then my CA muni bonds started losing value. Ok maybe the the 2024 Tulare sewer bonds were a bad idea (-20%), but 2012 CA GO bonds (-5%)? If I could sell them at any price now.

Then the dollar start appreciating, oh well I'm still playing with house money on that bet, but who knew Europe was going to be fucked and the dollar and yen would be winners from all this. Luckily, I bought my Prius last summer.

Oh yeah the Prius. Paid $25k for a 2006 w/carpool tags this past summer. I don't think that will look too good when gas goes back down to $2/gal. At least I can take the carpool lane to my job interviews, if (when?) I get laid off.
posted by stchang at 8:14 PM on October 6, 2008

Huh it looks like the fed will start buying commercial paper.
posted by delmoi at 9:26 PM on October 6, 2008

What's becoming more and more apparent is that putting one's savings into a 401k is quite a bit riskier than it otherwise appeared. Like Taleb says, you're facing moderate upside with an unquantifiable risk of total loss. Not. Good.

What are our alternatives then, for retirement? No retirement? Treasury bills and out of the money options for everyone?
posted by wuwei at 10:23 PM on October 6, 2008

Paulson needs to deploy the stock injection, and deploy it hard.

FWIW, stock injection will take away value from any stocks that you own that get injected into. Better than zero from a bankruptcy...

Irony: my spendthrift friends were totally right. Saving money was a losing proposition relative to buying consumer goods. An ipod would have held its value better than VEU.
posted by a robot made out of meat at 5:08 AM on October 7, 2008

I don't think that will look too good when gas goes back down to $2/gal.

I don't think gas is going back to $2, if that makes you feel any better. (Do "carpool tags" entitle you to use the carpool lane with nobody else in the car? If so, that seems like a mockery.)
posted by languagehat at 6:00 AM on October 7, 2008

On Friday I injected my IRA with some of my quarterly savings, thinking that the newly passed Bailout Bill would make it a non-lethal time to buy (I'm also 35+ years from retirement). Since it takes a couple days for the funds to clear my bank account, I watched the markets tumble on Monday not knowing when the funds would actually clear. I was on the edge of my seat watching the DOW move while periodically checking my account. I felt like I was playing Plinko.
posted by yeti at 6:08 AM on October 7, 2008

Do "carpool tags" entitle you to use the carpool lane with nobody else in the car? If so, that seems like a mockery.

I know the Virginia suburbs of DC allow hybrids to get special tags allowing them to use the HOV (carpool) lanes. Considering this includes the Ford Escape SUV, which gets worse mileage than plenty of small cars, it is a mockery.
posted by exogenous at 7:28 AM on October 7, 2008

Considering this includes the Ford Escape SUV, which gets worse mileage than plenty of small cars, it is a mockery.

And then there are the Lexus lanes, don't get me started!
posted by Pollomacho at 8:13 AM on October 7, 2008

Do "carpool tags" entitle you to use the carpool lane with nobody else in the car? If so, that seems like a mockery.

Yes they do. I agree it is a dumb idea, and California doesn't issue them anymore. Anyone who got the stickers when they were available can sell their cars for 3-4k more than a similar used car.
posted by stchang at 11:01 AM on October 7, 2008

Right now it seems that there are no options other than "I don't worry - I'll be fine..."? No-one has a satisfactory alternative, so it's not surprising that people are acting as we are.

Yeah, its a coping strategy. Realistically, other than calling my congresscritters and living under a balanced budget while trying to sell a house, there doesn't seem to be anything else to do. If I started worrying about worst-case scenarios that could happen, but probably won't, I'd end up eating a bullet or something.

All whining aside, TAL is really picking up the slack for irresponsible infotainment journalism. It's good to know that there's at least one show out there that is not only not lying to you, but is doing its doing everything it can to authentically inform you.

TAL, at its worst, is monologues by middle-class geeks patting themselves on the back for their teaspoon activism. Dan Savage teaching his son about same-sex marriage? Please.

At its best, the extended narrative format that uses extended sound clips and multiple perspectives provides the best alternative to the dueling talking heads of mainstream "news," and provides critical perspectives behind some important issues. "The Giant Pool of Money" works as an episode because it lets the tape roll and the interview subjects rhetorically hang themselves.
posted by KirkJobSluder at 12:06 PM on October 7, 2008

In other news: Pakistan's foreign exchange reserves are so low that the country can only afford one month of imports and faces possible bankruptcy.
posted by homunculus at 1:19 PM on October 7, 2008

Pakistan's foreign exchange reserves are so low that the country can only afford one month of imports and faces possible bankruptcy.

On the plus side: cheap heroin all around!
posted by Pollomacho at 2:10 PM on October 7, 2008

This American Life single-handedly justifies the existence of radio. All the rest could go away and my only reaction would be a yawn.
posted by mullingitover at 2:24 PM on October 7, 2008

Im sure pakistan could find someone who would want to buy some nuclear bombs.
posted by Iax at 5:57 PM on October 7, 2008

I'll chip in a sawbuck if you guys will. We could take turns bringing the nuclear bomb to meetups and ridin' it Slim Pickens style!
posted by Justinian at 10:26 PM on October 7, 2008

I'll chip in a sawbuck if you guys will. We could take turns bringing the nuclear bomb to meetups and ridin' it Slim Pickens style!

You have now been recorded on the internet as wanting to purchase a nuclear weapon. Please report to Detention Level C.
posted by cimbrog at 9:56 AM on October 8, 2008

We're not trying to buy a weapon, we're trying to buy the whole country. Imagine the meetups, it'd be like burning man times 100.
posted by drezdn at 10:16 AM on October 8, 2008

White House considers taking ownership stakes in private banks to deal with credit crisis
posted by homunculus at 10:57 PM on October 8, 2008

Taking ownership is what they should have done in the first place. The 700billion is nothing but wealth transfer.
posted by Justinian at 11:30 PM on October 8, 2008

McCain's Housing "Solution": A Gift from Taxpayers to Banks
posted by homunculus at 1:41 PM on October 9, 2008

NYT article about Alan Greenspan and deregulation & derivatives - spitting mad, I am.
posted by killy willy at 8:39 PM on October 9, 2008

Paul Krugman: If a new financial rescue plan is not announced soon, the world economy may experience a slump as severe as the Great Depression.
posted by homunculus at 9:39 PM on October 9, 2008