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RX For Revisionist Bunkum: A Lehman Bailout Wouldn’t Have Saved The Economy

Tyler Durden's picture




 

Submitted by David Stockman via Contra Corner blog,

Here come the revisionists with new malarkey about the 2008 financial crisis. No less august a forum than the New York Times today carries a front page piece by journeyman financial reporter James Stewart suggesting that Lehman Brothers was solvent; could and should have been bailed out; and that the entire trauma of the financial crisis and Great Recession might have been avoided or substantially mitigated:

What happened that September was the culmination of circumstances reaching back years - of ordinary people too eager to borrow, of banks too eager to lend and of Wall Street financial engineers reaping multimillion-dollar bonuses. Even so, saving Lehman from complete collapse might have shielded the economy from what turned out to be a crippling blow.

That is not just meretricious nonsense; its a measure of how thoroughly corrupted public discourse about the fundamental financial and economic realities of the present era has become owing to the cult of central banking. For crying out loud, yes, there would have been a Great Recession - even had Lehman been pawned off to Barclays with a taxpayer guarantee or if it had been bailed-out in some other manner.

In fact, the Barclay’s logo did end up on Lehman’s 7th Avenue glass tower shortly after the September 15th screen shot below. Yet the decision to allow Lehman’s stock and bondholders to take a severe haircut first did not cause the thundering collapse of the housing and credit markets, nor the loss of the artificially bloated level of consumption spending, jobs and income that had accompanied the giant financial bubble that finally burst in September 2008.

The villain is the Greenspan Fed and the rampage of debt and speculation its cheap money and “wealth effects” coddling of Wall Street had engendered over the previous two decades. When Greenspan took office in 1987, total credit market debt outstanding was $10.5 trillion, but by the time of the Lehman event it was nearly $53 trillion. This means that the debt burden on the US economy had soared by 5X during a period when nominal GDP grew by only 2.9X. That’s called leveraging up big time—–and it fueled a party of consumption and speculation like the nation had not experienced since the 1920s, or even then.

 

Moreover, within the household sector the explosion of debt was even more stunning owing to the Greenspan policies of cheap mortgage rates and the overt encouragement of American families to raid their home ATM machines. As shown below, household debt ballooned from just $2.7 trillion when Greenspan took charge of the Eccles Building in August 1987 to nearly $14 trillion on the eve of the crisis.

 

And there can be little doubt as to what explains the above mountain of household debt. American households were raiding their home ATM machines - that is, cashing out the equity in their homes - in order to indulge in a massive orgy of consumption spending that they had not earned. In fact, at the peak in 2005-2007, households were extracting cash from their ATMs at nearly a $1 trillion annual rate, ballooning their disposable incomes by upwards of 8%. That is, they were buying flat screen TVs, granite top kitchen counters, restaurant dinners and trips to the mall with money they hadn’t earned, and based on rapidly rising leverage ratios that couldn’t be sustained.

What caused the Great Recession, therefore, was the day of reckoning when the household borrowing mania reached its limit. As shown below, the swing in household spending funded by withdrawals from home ATM machines was massive and violent. At its peak extent between 2006 and 2010 - it amounted to a reversal of nearly $1.4 trillion. Yes, when a gigantic, artificial spending bubble of this magnitude is pricked, the repercussions do cascade through the main street economy taking down sales, jobs and incomes as they go.

Accordingly, the chart below explains the Great Recession, not some revisionist gumming from the bowels of the New York Fed as to how the economy could have been “saved” if only Tiny Tim Geithner had gotten the word on Sunday evening September 14th that Lehman was “solvent” after all. In fact, the name on the glass tower above had nothing to do with the crash of household borrowing at upwards of 30 million home ATMs depicted in the graph below.

Moreover, what caused the recession to be so painful and deep is that the phony prosperity of the Greenspan era could no longer be fueled by pushing households deeper into debt. By the fall of 2008, “peak debt” had been reached in the household sector, and a modest deleveraging was begun owning to upwards of $1 trillion in mortgage defaults. But this wasn’t a recoverable loss of “aggregate demand”  per the Keynesian mantra at the Bernanke Fed. The US economy was drastically squeezed by the Great Recession because artificial mortgage fueled spending was being liquidated all across America, not because punters in Lehman stock and bonds lost their shirts, and deservedly so.

 

Household Leverage Ratio - Click to enlarge

 

In short, the Great Recession was about the abrupt end of the great financial party conducted by the Maestro. During his 19 year reign, the nation underwent a collective LBO, raising it leverage ratio from a historically sound and sustainable 1.5X national income to 3.5X on the eve of the Lehman collapse. Those two extra turns of debt amounted to $30 trillion at the time the US economy buckled in 2008; they were a measure of both the folly of the Greenspan/Bernanke spending party that had been financed by the Fed’s cheap money policies, and the enormity of the adjustment that was brought to bear on the US economy when the bubble finally collapsed.

 

Not surprisingly, upwards of $12 trillion in household wealth was destroyed by the financial crisis and the deep recession which followed. But given the enormous inflation of housing prices and risk asset values which had been driven by the debt bubble, it is ludicrous to suggest that save for not saving Lehman, the housing crash pictured below would not have happened. In fact, between late 1994 and early 2006 home prices in America rose each and every month for about 125 straight months, rising by nearly 140% over the period.

 

Needless to say, the above wasn’t sustainable and didn’t reflect either the free market at work or greed running rampant in the towns and cities of America. It was the cheap money and Wall Street coddling policies of the Fed which generated the housing binge, and the gambling hall known as Lehman Brothers that had gone along for the ride.

It is therefore especially misfortunate that mainstream journalists like Stewart take up the revisionist line that Lehman was “solvent”, and that a great mistake was made in not throwing it a life line. Well, it just doesn’t fricking matter whether it was “solvent”.  It was self-evidently illiquid because it - like the rest of Wall Street - had funded tens of billions of illiquid, opaque and drastically over-valued long-term assets in the short-term money markets. It was a classic, massive funding mismatch and there is no doubt whatsoever about what caused it, and why it happened.

What caused it, of course, is the fundamental tool of Fed policy - that is, pegging the money market rate (federal funds) and holding it rigidly in place until a well telegraphed decision to change it is announced from the Eccles Building.  Stated differently, Fed policy inherently offers a big fat yield curve arbitrage to Wall Street and a guarantee that it can be taken to the bank day after day.

By contrast, in the pre-Fed era money market rates could move by hundreds of basis points per day, and that most definitely did deter large banks from loading up on illiquid assets and funding their books with hot money. To be sure, there were plenty of punters prior to 1913, but the game was played in the call money market and their were no illusions among the participants.

Broker loans were instantly callable, and were called without hesitation by the street’s bankers when frothy markets took a dive. Needless to say, speculation was held in check by the discipline of the call money market and no one proposed to make a living by generating giant balance sheets with recklessly mismatched funding.

The latter is a disease of the Greenspan/Bernanke/Yellen era of Keynesian central banking and massive manipulation of financial market prices and rates. Its why the balance sheet of Goldman and Morgan had reached $2 trillion with hundreds of billions of hot money funding, and why Lehman’s $800 billion balance sheet was not even remotely liquid. Indeed, the idea that the Wall Street gambling houses were “solvent” but only needed a liquidity injection goes to the very heart of the matter, explains why financial crises have become endemic in the current era and why bailouts have become standard operating procedure.

Central bank apparatchiks like Tim Geithner and journalist fellow travelers like Stewart would have viewed the call market panics of the pre-Fed era as “bank runs” that needed to be stopped at all hazards. By contrast, they were, in fact, a healthy financial therapeutic that kept speculation reasonably in check.

But money market pegging by the central bank, to use Friedman’s phrase, always and everywhere causes bank runs and liquidity crises in the canyons of Wall Street. Tempt the titans of finance with the opportunity to scalp prodigious profits by ballooning their balance sheets with sticky assets that yield more than the pegged cost of hot money, and they will do it every time.

And when a black swan comes calling, the value of all those sticky assets will not be what’s on the books, but what can be salvaged in a plunging market when hot money lenders want their money back….and now.  So of course Lehman was insolvent and massively so. It had funded itself so that its assets were only worth their fire sale price.

The great error of September 2008, therefore, was not in failing to bailout Lehman. It was in providing a $100 billion liquidity hose to Morgan Stanley and an even larger one to Goldman.  They too were insolvent. That was the essence of their business model.

Not surprisingly, Greenspan co-architect in creating this madness was Alan Blinder. As he told Stewart in today’s article,  there was no doubt that the Fed could have saved Lehman and should have:

"Of course the Fed can stop a run,” said Mr. Blinder, the economist. “That’s what it’s all about.”

That’s right. Its policies inherently generate runs, and then it stands ready with limitless free money to rescue the gamblers.  You can call that pragmatism, if you like. But don’t call it capitalism.

 

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Tue, 09/30/2014 - 22:42 | 5273647 Newsboy
Newsboy's picture

Ebola in the US will cover for the (bigger) part-2 of the great financial reset.

Tue, 09/30/2014 - 23:18 | 5273784 junction
junction's picture

No errors were made by the Bush kleptocrats.  Lehman Bros. competed with Goldman Sachs so Treasury Secretary Hank Paulson, former CEO of Goldman Sachs, got rid of his firm's competition.  Why not let AIG go bankrupt?  AIG owed Goldman Sachs some $12 billion in credit default swap payments so AIG had to be rescued so Goldman Schs could get paid 100 cents on the dollar, even if that meant AIG retirees got jammed.  Everything makes sense if you think of the competing Wall Street interests as Mafia crime families with no vowels at the end of their names.

Tue, 09/30/2014 - 23:24 | 5273798 Richard Chesler
Richard Chesler's picture

Stopping Hitler was a big mistake.

 

Tue, 09/30/2014 - 23:35 | 5273834 0b1knob
0b1knob's picture

Actually Lehman probably could have been saved.   The reasons why they weren't:

1.) Nobody liked Dick Fuld.  Other banksters wouldn't piss on him if he were on fire.  

2.) The govenment had said repeatedly that the moral hazard of bailing everybody out couldn't be allowed.  Somebody had to be sacrificed.  Since nobody liked Lehman they were "it".

3.) Lehman didn't "play the game."   They didn't "donate" millions to entrenched politicians.  Killing them was a useful object lesson of what happens to those not willing to purchase influence.

4.) Lehman was worth more dead than alive.  Because of the billions in CDS written on Lehman by the 'tards at AIG the banksters could make a lot more money killing Lehman (and looting AIG) than they could by saving Lehman.   Lehman was like Marilyn Monroe once 20th Century took out that $3 million life insurance policy on her a month before her "suicide". 

 

Tue, 09/30/2014 - 23:47 | 5273850 DoChenRollingBearing
DoChenRollingBearing's picture

O/T, but maybe not so much.  MANY US small towns are in trouble too: losing jobs and talent, and in decline.  Yet some of those who remain are among our country's best and friendliest people.

I just visited with five friends I had not seen in 45 years.  The town's population was but 500 back when I lived there (late 1960s).  It is less now.  They are losing services, the county is consolidating...

Those four years I spent there were probably the happiest of my childhood.  And it was truly wonderful seeing these people after so long.  Genuine and friendly people.  I am often wound up into a ZH/bearing buying/databasing mentality that I often forget to be human and socialize with real friends.  Well, I found some (again) just on Sunday while on my "SMS Trip".

Very few have even heard of the place.  Fewer still have been there.  Even less had such wonderful years there.  Visit a small Southern town in the middle of nowhere where the Bearing Guy learned so much about real humanity.

"Bethune, SC"

http://goo.gl/oT3BDT

Wed, 10/01/2014 - 00:09 | 5273904 0b1knob
0b1knob's picture

I grew up in a small town in central Indiana.   I still visit from time to time.  The changes are remarkable.

1.)  The number of Amish is astonishing.  Amish have dozens of children and are constantly buying land for new communities.  The effect of differential birth rates is astonishing even over a period of one decade.

2.)  There are hispanics everywhere.  Many more Moslems (you can tell by the way the women dress) than you would think.   Whites were once 90%+ of the population.  Possibly barely over 50% now.  Blacks also seem to be disappering.   People say they are going back to the south.

3.)  The average age of the remaining anglos is probably about 50.   All the young men join the military, move elsewhere for work or destoy themselves with meth.   The ratio of young women to young men is about 3 to 1.

4.)  Empty houses and abandoned fields everywhere.   Old people move to Florida, die or go to nursing homes and their houses just sit empty.  No one wants them at ANY price.  A lot of marginal farm land is going back to forest.

5.)  There are coyotes everywhere.  When I was young I never saw a single one.  Now you can hear them howling all around at night.   Any pet let out at night gets eaten.   Some people claim wolves have started to reappear although I doubt it.  But then at the nadir of any civilization the wolf packs always return to the cities.

Wed, 10/01/2014 - 00:18 | 5273910 DoChenRollingBearing
DoChenRollingBearing's picture

Bethune (not yet) has no coyotes, but they always have had alligators...

Parts of SC are doing just fine, but parts are seeing the economic devastation we see in so many places post-Lehman (2008).

The young ones there in Bethune do not seem to share (but I was only there less than three hours) the mentality that we did as young kids.

Some of the same you write about is the same there too (farm land going back to woodland, abandoned homes & businesses).  I did not get a good reading on the state of young people in my town, so cannot offer anything there.  Hispanics (Mexicans) are about half of Leroy's work force.  No Muslims.  Yet.

Wed, 10/01/2014 - 00:25 | 5273924 X.inf.capt
X.inf.capt's picture

+1

 

Wed, 10/01/2014 - 01:53 | 5274000 TruthInSunshine
TruthInSunshine's picture

http://pissinontheroses.blogspot.com/2014/09/maximum-alert-dallas-ebola-...

CDC's time line of the Dallas Ebola victim's flight date and symptom onset date indicates a greater than 50% probability that the Dallas Ebola victim ACQUIRED HIS INFECTION DURING HIS FLIGHT.

Per the Center For Disease Control's very own Ebola simulation model, 50% of all Ebola infections develop symptoms five and a half days after infection (flight time from Lagos to Dallas is 17 hours and 20 minutes). Given that the Dallas victim's symptom onset occurred within 6 days of his Liberian departure flight; it is most likely that he/she was infected on that flight by someone else on that flight who was actively shedding Ebola virus.

*Since the Dallas victim is most likely a secondary infection, patient zero from that flight is still on the loose* and more victims are to follow in the near term. The situation is potentially catastrophic because of the massive number of potential secondary victims who have no African travel history and are likely to not attract attention in any Emergency room until massive hemorrhaging has started.

Rest of article with time charts:
http://pissinontheroses.blogspot.com/2014/09/maximum-alert-dallas-ebola-...

Wed, 10/01/2014 - 00:19 | 5273911 Harry Dong
Harry Dong's picture

Didn't realize we were that close dochen. (I know I owe you a few bucks. Can you wait until I get my tax refund?)

Wed, 10/01/2014 - 00:27 | 5273925 DoChenRollingBearing
DoChenRollingBearing's picture

 

 

Nobody owes me anything!  My blog is non-commercial and cannot even accept donations! 

Will you have money you need to give away?  Think very hard, and give it to where it will be used correctly!

Of course you have my permission to wait until you get your tax refund...

(LOL ?)

Wed, 10/01/2014 - 00:12 | 5273907 Harry Dong
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You do realize that you give up your anonymity when you sign up your zero hedge acct?

Tue, 09/30/2014 - 22:42 | 5273650 Greenskeeper_Carl
Greenskeeper_Carl's picture

What a load of shit. 'See what happens when money isn't taken from taxpayers at gun point and given to us? Let that be a lesson to you.'

Tue, 09/30/2014 - 22:54 | 5273711 Greenskeeper_Carl
Greenskeeper_Carl's picture

Second time the ghostery app on my phone has done this. Sorry everyone. Fucked up the thread. I typed something, hit save, got 'unable to connect', so I hit refresh, and this happened. Don't know of it's the ghostery app itself, or something to do with the fact that this site loads something like 50 different trackers and cookies on you when you visit it( for real , I challenge any of you to find a website that has more cookies and trackers than this one. It's literally the worst site I've ever been to).

Tue, 09/30/2014 - 22:58 | 5273729 Newsboy
Newsboy's picture

It's the NSA, and CIA, and DIA, and FBI, and it's all cross-correlated, and in our computers.

Just coming here makes us third tier security risks, with an option to upgrade.

Tue, 09/30/2014 - 23:08 | 5273750 NoDebt
NoDebt's picture

Thought you were exaggerating until I saw all the dupes, below.  Next time could you accidentally dupe with some T&A pics or something?  You and your phone are effectively launching a DDOS attack on the board.

Wed, 10/01/2014 - 10:06 | 5274905 RaceToTheBottom
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We are what we load, dude....

Tue, 09/30/2014 - 22:50 | 5273651 Greenskeeper_Carl
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Greenskeeper_Carl's picture

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Tue, 09/30/2014 - 22:47 | 5273657 Greenskeeper_Carl
Greenskeeper_Carl's picture

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Tue, 09/30/2014 - 22:46 | 5273658 Greenskeeper_Carl
Greenskeeper_Carl's picture

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Tue, 09/30/2014 - 22:45 | 5273660 Greenskeeper_Carl
Greenskeeper_Carl's picture

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Tue, 09/30/2014 - 22:45 | 5273661 Greenskeeper_Carl
Greenskeeper_Carl's picture

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Tue, 09/30/2014 - 22:46 | 5273662 Greenskeeper_Carl
Greenskeeper_Carl's picture

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Tue, 09/30/2014 - 22:44 | 5273663 Greenskeeper_Carl
Greenskeeper_Carl's picture

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Tue, 09/30/2014 - 22:45 | 5273664 Greenskeeper_Carl
Greenskeeper_Carl's picture

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Tue, 09/30/2014 - 22:45 | 5273665 Greenskeeper_Carl
Greenskeeper_Carl's picture

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Tue, 09/30/2014 - 22:44 | 5273666 Greenskeeper_Carl
Greenskeeper_Carl's picture

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Tue, 09/30/2014 - 23:08 | 5273751 NoDebt
NoDebt's picture

Wow.

Wed, 10/01/2014 - 01:46 | 5274009 zhandax
zhandax's picture

Might I suggest 'NoScript' or Adblock instead?  You will need Firefox, although with what we now know about Google (Chrome), that may be a good thing.

Tue, 09/30/2014 - 22:44 | 5273671 Jim in MN
Jim in MN's picture

Get a fucking hold of yourself Carl.  It's just a gopher.

Tue, 09/30/2014 - 22:53 | 5273705 Al Huxley
Al Huxley's picture

LOL

Tue, 09/30/2014 - 22:57 | 5273724 disabledvet
disabledvet's picture

Normally I would submit some 3rd Reich loving rant of epic proportions here...I'm just feeling spent this pm.

We're not even on opposite sides ironically.  Its like some inner English head chopper is inside me via a vis counterfeiting...not that the current English PM is any different.

The Royals were smart to not only send their massive gold holdings to Nova Scotia during WWII...but to keep it there ever since.

Tue, 09/30/2014 - 23:24 | 5273803 emersonreturn
emersonreturn's picture

great as always to see you jim in MN.

Tue, 09/30/2014 - 22:54 | 5273685 Yen Cross
Yen Cross's picture

 O/T look @ the f/x markets

  YAHHH, No "Central Bank" buying going on right now. usd/jpy is yoked to the upside, and the risk pairs are yoked to the downside.

 I mean, come on! It's so blantant! Fuck... When the BOJ started their "shenanigans in 2012" it was bad. Now it's just fucking  RIDICULIOUS !

 If Putin were smart, {savy smart} He'd buy a biz-illlion calls on usd/jpy, and use Denis Gartman's name for the transaction.

 I'm not a betting man, but RUB/JPY looks like a good (risk tolerance) trade.

Tue, 09/30/2014 - 22:53 | 5273707 techstrategy
techstrategy's picture

Stockman is great.   Intellectual honesty is rare these days. 

Wed, 10/01/2014 - 00:02 | 5273888 Harry Dong
Harry Dong's picture

When did stockmann convert? My fellow euker player is still full bore trikle down, is he not?

Wed, 10/01/2014 - 00:52 | 5273948 Augustus
Augustus's picture

Stockman writes just well enough to fool the rubes into forgetting his disaster investments and bankruptcy.

Tue, 09/30/2014 - 23:04 | 5273731 ebworthen
ebworthen's picture

David Stockman telling it like it is, once again.

End the FED, jail the crooks.

Kepp up the good work David.

Tue, 09/30/2014 - 23:10 | 5273760 NoDebt
NoDebt's picture

Just remember they're all tough guys when they're in no position to do anything about it.  Put him in at the Fed or Treasury and he'll be toeing the corporate line within 24 hours.

Tue, 09/30/2014 - 23:22 | 5273796 ebworthen
ebworthen's picture

Nah, I can hear it in his writing, he means it, and he is pissed off like me.

"Hangin' mad" you might call it.

Wed, 10/01/2014 - 00:05 | 5273893 Harry Dong
Harry Dong's picture

No offence eb, but you do know this guys Reagan history?

Wed, 10/01/2014 - 01:50 | 5274017 zhandax
zhandax's picture

If he means it, that simply confirms he has given up on getting back 'in'.  I can respect that.

Tue, 09/30/2014 - 23:11 | 5273764 Yen Cross
Yen Cross's picture

  The crooks number under (50). Fry the numbers runners (banksters)

 Banksters are the collectors for the primary dealers... A few "freshly steamed" nooses over some "Central Park" lamp posts should send a message.

   Those ISIS guys are rookies. You want to see the head, rot with the corpse.

Tue, 09/30/2014 - 23:45 | 5273848 KuriousKat
KuriousKat's picture

It's like My House got Robbed and my  Insurance company sent the check to the crooks..I tried calling my agent about it but they won't answer my calls.

Wed, 10/01/2014 - 00:01 | 5273880 Seasmoke
Seasmoke's picture

It's like I took my house out the driveway for a test drive and the equity value dropped $100,000. That may be ok for a fucking car, but not our houses !!
How people just sat there and didn't hang the real criminals who stole their deposits and equity, is beyond me.

Wed, 10/01/2014 - 02:03 | 5274024 The9thDoctor
The9thDoctor's picture

Houses are so poorly made nowadays that they should depreciate like cars.

sarc?

Wed, 10/01/2014 - 01:34 | 5273971 Richard Chesler
Richard Chesler's picture

It gets better, just because they want to help, Obozocare will send you a free bill for the stuff the crooks stole.

 

Wed, 10/01/2014 - 08:30 | 5274464 Oldwood
Oldwood's picture

Its not really our stuff anyway. They just try to infer it so we will protect it as our own, but inevitably it always goes back to its rightful owner, those who have printed it. 

Tue, 09/30/2014 - 23:27 | 5273802 GooseShtepping Moron
GooseShtepping Moron's picture

I think it's interesting that, according to James Stewart (Now see here, Mr. Potter...), Lehmann was "solvent" because its assets were in rough parity with its liabilities, even though its liabilities consisted of utterly illiquid and uncallable MBS garbage. But considering that modern banking is basically built around the Bagehotian notion of maturity transformation, one could make the case that Lehman was just doing what banks are supposed to do and hence "bailing them out" (i.e. replenishing them with money market funds) was actually the right strategy, at least from the limited perspective they were working within at the time. At any rate, I can get a sense of what the proponents of QE were arguing for.

Don't get me wrong, I'm entirely with Stockman on this one (as I almost always am), but what he has done here is written an indictment of the entire maturity transformation scheme itself, not just the 2008 financial crisis. According too its own lights, Lehman really was solvent. Once those lights have been revealed for the fata morgana that they are, the logic implied in the whole system is also called into question. The takeaway must be that collateral can never be significantly less liquid than the claims made against it. This seems like simple common sense when stated so plainly, but it also destroys one of the main sources of bank profitability - the big fat yield curve.

This goes to show that capital and collateral need to be segregated into strict liquidity tiers rather like the atmosphere is fairly sharply separated into a troposphere, a stratosphere, a mesosphere, and so on. These layers do interact with each other, but they do so according to certain physical constraints and they do not invade each other by main force. An organically developed economy would naturally develop such features and they would have been codified into law by the wisdom and experience of the financial actors. The fact that we had a Lehman moment at all is evidence that the whole financial "atmosphere" has long been out of balance, and I think Stockman would agree with that assessment.

Wed, 10/01/2014 - 01:03 | 5273959 Augustus
Augustus's picture

A requirement that banks match maturities would require that most of their assets be limited to overnight call loans at variable rates.   The Fed guarantees and injections allows for much more stable and beneficial terms for borrowers.  Lehman had certainly made any number of ill advised investments and is not the example to use when trying to complain about liquidity injections.

Tue, 09/30/2014 - 23:52 | 5273864 talisman
talisman's picture

1. No mention of repeal of Glass-Steagall, the root cause of the crash??

2. Annihilation of Lehman=a favor to competitors closest to the puppeteers controlling the strings

Wed, 10/01/2014 - 00:06 | 5273898 teslaberry
teslaberry's picture

the reason articles like this are being written by the new york times is because ALL THE BANKS ARE STILL INSOLVENT AND THE SECOND THE MARKET CRASHES ---WHETHER NOW OR TEN YEARS FROM NOW, THEY WILL ALL AGAIN DEMAND A HUGE BAILOUT. 

 

RINSE WASH AND REPEAT. GET THE NY TIMES ON BOARD. 

 

 

Wed, 10/01/2014 - 00:53 | 5273951 One And Only
One And Only's picture

This was a fantastic piece of writing.

Wed, 10/01/2014 - 00:55 | 5273952 Spungo
Spungo's picture

The recession could have been avoided if they bailed out the porn industry like I suggested

Wed, 10/01/2014 - 01:04 | 5273956 One And Only
One And Only's picture

I would like to add though that the stock and bond market at one point represented the epitome of capitalism. In this day it represents an extension of the state/government.

The markets today are really the medium in which the government funds it's pensions:

The government issues bonds -> The Banks buy them -> The Fed buys them from the banks (with money created out of thin air) -> People collect pensions and welfare babies collect welfare = economists state that the economy is healthy

It's really communism in the costume of capitalism.

When did the FED start TAPER?

Where is the R2K since?

Wed, 10/01/2014 - 01:18 | 5273972 bid the soldier...
bid the soldiers shoot's picture

You can dick around with all your statistics till the cows come home.

A Lehman Bailout Wouldn’t Have Saved The Economy

especially if bringing down the economy was the name of the game.

I'm sure David Stockman, of all people, is aware of the fact that NBER called, what is now referred to as the GREAT RECESSION, in December 2007. So Greenspan, the Fed, Paulson, the Treasury all had time during 2008 to get as much of the house in order as was possible.

The beauty part is that the Fed and Treasury concealed from the American Public that there was a recession in the TEN MONTHS BEFORE A PRESIDENTIAL ELECTION.

You see, the recession occurred during a Republican administration and wouldn't help Republican candidates.

As a matter of fact, if the the Fed had announced the recession, in addition to Obama (ugh) the Democrats would have ended up with a filibuster proof Senate and we would not have gone through that fucken crap with the 41(?) Republican know-nothings.

Wed, 10/01/2014 - 05:51 | 5274186 Comte d'herblay
Comte d'herblay's picture

The real dickheads are those who actually blame one political party for anything.

Where in christ's name have you been???  At a fucking Hilary for Queen rally???

This has nothing to do with political parties.  NOTHING!

 

Wed, 10/01/2014 - 12:15 | 5275579 bid the soldier...
bid the soldiers shoot's picture

If you had bothered to read any of my previous posts, your fromageness, you'd know I am one of the few who don't blame any political party for this irrecoverable mess.

Rather have I said for three years or more that the real culprit is PEAK OIL and the US MILITARY's fear of what PO's eventual impact on the Pentagon's fighting capability would be.

IT"S AS SIMPLE AND AS CRAZY AS THAT.  

BUT THEN THE CREATION OF THE SUB-PRIME BUBBLE, ITS BURSTING AND THE RESULTING RUINATION OF THE WORLD"S ECONOMY IS PRETTY CRAZY ALL BY ITSELF.

 

 

My reference to the election of 2008 had to do with the filibuster in January 2009, when no one knew what was happening  --  except you, apparently  --  we were treated to the spectacle of the relatively unoffensive, liberal Republican Senator from Maine becoming the DECIDER of how big the Troubled Asset Relief Program was going to be.

I always liked Olympia Snowe, but TARP was not like some old toaster at a garage sale for which Sen Snowe would give $780 billion and not a penny more didn't sit well with me, as I like everyone but you, didn't know what was going on and in January 2009 wanted to give Bernanke what he asked for.

Wed, 10/01/2014 - 14:07 | 5276231 Comte d'herblay
Comte d'herblay's picture

Everyone but me????

There were so many people against Paulson's demands that never got a word in because the Jews of Wall Street amassed and demanded what that they be made whole and don't give them any shit. And they got it and have been getting trillions in additional newly minted FRNs for doing nothing!!!

I knew who was in charge of the FED and had been for 25 years, as well as Treasury, and nearly every financial nexus of any import in the world. The Jews. Greenspan, Bernanke, Geithner, Gensler, and the biggest shmendricks in New York, all taking trillions in bonus money for fraudulent mortgage applications, and the derivatives therefrom, led by Lehman Brothers, More Jews, and Dick Fuld the premier Jew who took down a billion just for himself.

If you didn't know what was going on it's because you haven't been paying attention to the ethnic group who, if they were all Sicilians, Irish, or Germans, would be screaming CONSPIRACY!! from the roof tops. 

Snowe was no more Republican than hilary Clinton is. 

Wed, 10/01/2014 - 14:33 | 5276400 bid the soldier...
bid the soldiers shoot's picture

 

So when the stones of the Temple of Dagon were crashing down on Jew and Gentile alike, the only attention you paid to the Senate debate and passage of TARP was the fact that Snowe was a RINO and if she was holding out, it must have been for a patriotic reason and had nothing to do with the fact that her co-partisans had threatened to take away her seniority if and when the Retardicans controlled the Senate again.

Nice.

A confession.  Way back in the beginning of 2009, I had no idea of what  a Credit Default Swap was.

Now I wonder why should an economy which created such derivatives not end up in the toilet of the Marshalsea?

Why should a nation whose regulators permitted such derivatives not sink to the very bottom of the cesspool of History?

Rhetorical -- do not answer.

Wed, 10/01/2014 - 15:15 | 5276592 Comte d'herblay
Comte d'herblay's picture

The economy or the perpetraItors should sink???  

In my capitalist notebook it says it should be the Perps, and numero uno and duo:  AIG and Goldman Sucks, with Bear Stearns and Lehman the frontrunners for taking a tour to the bottom of the Marianas Trench.

Your notion that we--- the majority---- should suffer because a minority of ethnic greedy bastards,  not one of which has so much as had Eric peek under their bedsheets, let alone their book, nay, have been enriched quadrupally for their conspiracy, is just a tad cockeyed, bon ami.

 

 

Wed, 10/01/2014 - 16:23 | 5276959 bid the soldier...
bid the soldiers shoot's picture

Come, come Monsieur, economics is warefare by a different means.

You want my money and I want yours.

Yes both the economy and the perpetrators should sink.  Just as the innocent and the Wehrmacht were consumed in the firebombing of Dresden

And the children and Viet Kong burned up by napalm in Vietnam.

I know you know better than to say if we get them on this go round, IT WILL NEVER HAPPEN AGAIN.

Of course it will.

And it will be a tad cockeyed.  That's what black swans are.  Cockeyed

And not just the cocks.

 

Wed, 10/01/2014 - 16:54 | 5277078 bid the soldier...
bid the soldiers shoot's picture

You misaprehend me.

My point wasn't that the DEMs are less responsible than the REPs.

It was that the American System can not prevent a Secretary Of Treasury of one party and the Chairman of the Fed from the same party to withhold information in an election year or not and then for the lickspittle media to ignore the behavior.

Our democracy is a lie and needs to be deleted.

Wed, 10/01/2014 - 08:42 | 5274484 Oldwood
Oldwood's picture

Most definitely the obstructionist Republicans fault that Obama has had to rely only on his phone and pen!

Seriously, was there anyone on the planet that did not blame Bush for all of this? Even before the 08 election? And what of the 2010 election creating a republican held house? 

Jesus, does anyone think a politician will do anything more than USE this mess to advance themselves and/or their agenda?

Wed, 10/01/2014 - 01:55 | 5273974 Radical Marijuana
Radical Marijuana's picture

You can call that "pragmatism," however, it was actually another turn of the worm of the methods of organized crime being able capture control over the government, which appears like a boa constrictor.

For those who are able and willing to deliberately ignore the realities regarding how the persistent application of the principles and methods of organized crime has almost completely captured control over the American government, as well as able and willing to deliberately ignore the reasons how and why that happened, here is a Fantasy Wish List of idealized solutions:

"NESARA = National Economic Security and Recovery Act

NESARA does away with the Federal Reserve Bank, the IRS, the shadow government, and much more ...

NESARA implements the following changes:

1. Zeros out all credit card, mortgage, and other bank debt due to illegal banking and government activities. This is the Federal Reserve’s worst nightmare, a “jubilee” or a forgiveness of debt.

2. Abolishes the income tax.

3. Abolishes the IRS. Employees of the IRS will be transferred into the US Treasury national sales tax area.

4. Creates a 14% flat rate non-essential new items only sales tax revenue for the government. In other words, food and medicine will not be taxed; nor will used items such as old homes.

5. Increases benefits to senior citizens.

6. Returns Constitutional Law to all courts and legal matters.

7. Reinstates the original Title of Nobility amendment.

8. Establishes new Presidential and Congressional elections within 120 days after NESARA's announcement. The interim government will cancel all National Emergencies and return us back to constitutional law.

9. Monitors elections and prevents illegal election activities of special interest groups.

10. Creates a new U.S. Treasury rainbow currency backed by gold, silver, and platinum precious metals, ending the bankruptcy of the United States initiated by Franklin Roosevelt in 1933.

11. Forbids the sale of American birth certificate records as chattel property bonds by the US Department of Transportation.

12. Initiates new U.S. Treasury Bank System in alignment with Constitutional Law.

13. Eliminates the Federal Reserve System. During the transition period the Federal Reserve will be allowed to operate side by side of the U.S. treasury for one year in order to remove all Federal Reserve notes from the money supply.

14. Restores financial privacy.

15. Retrains all judges and attorneys in Constitutional Law.

16. Ceases all aggressive, U.S. government military actions worldwide.

17. Establishes peace throughout the world.

18. Releases enormous sums of money (PP'S) [PPP=Prosperity Program Pkgs.], for humanitarian purposes.

19. Enables the release of over 6,000 patents of suppressed technologies that are being withheld from the public under the guise of national security, including free energy devices, antigravity, and sonic healing machines."

I kind of envy people who can propose such "solutions," which are based on being able to deliberately ignore the FACTS that the real world is controlled by lies backed by violence, which is how and why the banksters, as the biggest gangsters, were able to control the US government to do what was done in response to the financial crises in 2008.

Coming up with realistic solutions after fully facing those FACTS is almost infinitely more difficult than proposing a Wish List of impossible ideals, which could be implemented through a series of political miracles that can be promoted by people who deliberately ignore how the real world is actually controlled by integrated systems of legalized lies, backed by legalized violence.

A realistic set of solutions can not be based on deliberately ignoring those facts, in order to sing the equivalent of silly little love songs. But nevertheless, such silly little political love songs are far more popular than radical truths ...

P.S. Speaking of "turns of the worm:"

For those who may enjoy falling down the rabbit hole:

http://kauilapele.wordpress.com/2014/09/30/preston-james-vt-9-30-14-alie...

After one more fully faces the FACTS regarding the degree to which the real world is controlled by systems of lies backed by violence, there are apparently infinite tunnels of such deceits, where the lies are different at every level, and there does not appear to be any end to that!  After one attempts to more seriously comprehend the degree to which the real world is actually controlled by level after level of LIES, and the political economy is actually built on the maximum possible enforced frauds, which almost everyone has managed to somehow come to terms with ... like Stockman, et alia, without even talking about that bigger picture, but rather, only zooming in to magnify a few of the smaller aspects of what is wrong ... it can become quite a bit more interesting to attempt to speculate just how FAR those systems of enforced frauds go, especially through the heart of what might well be some of the biggest standing deceits about basic human history?

Of course, I can NOT say for sure, and probably never will be certain, but nevertheless, consider that it was possible for the established systems to transform hemp, the single best plant on the planet for people, into being "marijuana that is almost as bad as murder," and to back up those legalized lies with legalized violence for decade after decade! AFTER one assimilates the magnitude of some of the more demonstrable HUGE LIES, it then becomes interesting to speculate about how BIG are some of the other possible even BIGGER LIES?

The Lehman Brothers events were actually nothing more than minor hiccups in the overall trends of the systems of enforced frauds that have been dominating human civilization more and more for a long, long time. In that context, it is quite wild to wonder about the astronomically amplified sizes of some of the BIGGER LIES, which could render the creation of the public "money" supply out of nothing as debts appear as relatively trivial by comparison.

Within the areas of things that I am relatively sure of, that the monetary system is an enforced fraud, that has been driving vicious spirals of social insanity, appears quite clearly the case. It is within that context that I place events surrounding the collapse of Lehman Brothers.

MEANWHILE:

AFTER ONE BECOMES OPEN TO CONSIDER ANY ONE EXAMPLE OF THE WORLD BEING CONTROLLED BY LIES BACKED BY VIOLENCE, IT IS NATURAL TO ASK WHAT ELSE IS BEING SIMILARLY LIED ABOUT?

As far as I can tell, the ANSWER appears to be PRETTY WELL EVERYTHING, to quite astonishing and flabbergasting degrees!

Wed, 10/01/2014 - 02:06 | 5274030 The9thDoctor
The9thDoctor's picture

You lost me with a national sales tax.

Abolish the income tax and replace it with... NOTHING!

Sun, 10/12/2014 - 15:31 | 5278172 Radical Marijuana
Radical Marijuana's picture

I put that in quotes, as a fantasy wish list ... such things do not have to make any realistic sense ... However, the USA managed without an income tax for a longer part of its history than with that tax. Furthermore, most of the money made from the income tax is being used to pay the interest on the debts to the banksters, who corrupted the government to allow them to make the public "money" supply out of nothing as debts. Therefore, theoretically, IF the USA stopped paying those odious debts, then a personal income tax could be abolished.

HOWEVER, THE REAL PROBLEM IS THAT ANY SUCH CHANGES WOULD HAVE TO HAVE A NEW COHERENT MURDER SYSTEM TO BACK THEM UP. Such a fantasy is absolutely on the top of any fantasy wish list, BUT, its inherent paradoxes are WHY all the rest of the fantasy wish list items will not actually happen. What is going to happen is Peak Insanities, with debt insanities provoking death insanities. The prospects that enough people could agree on better death controls are practically zero ...

Instead, the extrapolation of the established systems controlled through the maximum possible deceits and frauds is what is actually on the real agenda, because the real world is actually controlled by lies and violence, which generates a situation so totally entangled in crazy contradictions as to be incomprehensible. The only things that actually exist are the dynamic equilibria of different systems of organized lies operating robberies, and the only realistic future is to muddle through the madness of that situation, towards Peak Insanities manifesting.

Wed, 10/01/2014 - 03:21 | 5274086 bid the soldier...
bid the soldiers shoot's picture

 

the ANSWER appears to be PRETTY WELL EVERYTHING

What to do?

When the patient is incurable and suffering, isn't putting him out of his misery the best course?

Or continue to feed him false hope that salvation is just around the corner and if he can just endure the cruelty of life for an additional century or two....


Thu, 10/02/2014 - 00:19 | 5278318 Radical Marijuana
Radical Marijuana's picture

I believe that the worst consequences of having built everything on the basis of being able to strip-mine the planet's natural resources at exponential rate are still decades away for many people in North America. (Some places have already run more into those limits, while, for others, their ability to continue to grow on the basis of increased strip-mining is still possible.)

The most probable futures are for the diminishing returns from being able to strip-mining the planet to manifest hard and fast over the next few decades, which will cause the financial systems to collapse into chaos, which will result in various sorts of Peak Social Insanities, because everything we have been doing for thousands of years was based on still being able to do more of that, and nothing about the established systems has been willing nor able to admit those basic facts, nor adapt to those basic facts.

Therefore, global civilization will run into the walls of diminishing returns, and limits to a finite planet, going as fast as possible, and then bounce off, over cliffs whose bottoms can not now be seen. While there are plenty of theoretical creative alternatives, our society seems collectively way too insane to do anything else than allow its collective madnesses to get worse, as it continues to operate on the basis of the maximum possible evil deliberate ignorance towards what it was really doing, while it continues making "money" out of nothing as debts, in order to "pay" for strip-mining the planet.

We are headed to the BIGGEST BOOM/BUST there has ever been! Much bigger than anything in previously known human history. The ruling classes have apparently been covertly preparing for that by staging false flag terror attacks, in order to start more genocidal wars, and prepare to impose democidal martial law. The vast majority of the people ruled over have continued to be Zombie Sheeple, who have deliberately ignored the ways that they were being fleeced to exhaustion, and being set up to be slaughtered.

Personally, I do not expect a trajectory of "an additional century or two" ... but only a few more decades of exponential growth strip-mining the planet. What I expect is that human beings will continue to overall behave with the maximum evil deliberate ignorance towards the future, and thereby set themselves up to have the majority mass murdered before another Century passes. However, it appears, at least in North America, that we likely could get by with another decade or two of strip-mining, because there are still enough resources left to sustain doing that, for a while ???

However, the basic realities are that nothing has been done to deal with the real limits of a finite environment approaching faster and faster. It therefore appears that nothing will be done, until it is way too late to do anything worthwhile, since almost nothing has been done so far. Overall, the human species is behaving in ways which are controlled by enforced frauds, in a manner which is criminally insane, and the consequences of that are coming towards future generations, like a relatively slow motion train wreck. However, it is possible that people who are already 60 or 70 years would not live long enough to actually see that happen anyway ...

It is young people, and those not yet quite born, who are being fed the most "false hope." The younger you are, the more you are being lied to, cheated and robbed by the political system you were born into. Not only were you born into debt insanity situations, you were also born into a world where the strip-mining of the planet had already been almost competed, at least to the points where there were clearly diminishing returns from doing that.

Everything is set up to benefit rich old people, while that system screws young poor people. The rich old people may well continue to get away with living their lives in the ways that they were accustomed to, turning natural resources into garbage and pollution as fast as possible, while enjoying that, since they were making "money" from doing so. However, they were actually building everything on the basis of being able to strip-mine the planet, in totally unsustainable ways, transferring debts onto future generations, while more seriously leaving behind a poisoned, polluted planet, whose natural resources had been high-graded to hell.

Theoretically, there are lots of creative alternatives which could be integrated to build better systems. However, IN FACT, the real world is controlled by lies and violence, or systems of enforced frauds, that are going to continue to stampede the human species into head-on collisions with real limits, and then bounce back from that over cliffs of crazy collapses into chaos and mad mass murders.

Young people need a real, radical revolution. However, there are currently no good reasons to believe that they will not actually continue to be tricked and destroyed by the currently established social and political systems, which operated on the basis of evil deliberate ignorance, so much, for so long, as to make all other theoretically possible creative alternatives impossible to ever actually implement in time to avoid the consequences of operating civilization through social pyramid systems, which were based on the maximum possible deceits and frauds, and therefore, were able to operate with attitudes of evil deliberate ignorance towards the future that was thereby actually manifesting.

Wed, 10/01/2014 - 08:50 | 5274508 Oldwood
Oldwood's picture

Obviously the answer is to cop a good buzz and fall into the rabbit hole once again. The answer is humanity. How we live, how we choose to deal with one another and how we choose to perceive reality, which is the whole purpose of getting high. No stoner has ever fixed anything outside of their own mind, and maybe that is all we can ever do. We can fix nothing if we can't fix ourselves and very few actually can do that.

Wed, 10/01/2014 - 23:03 | 5278371 Radical Marijuana
Radical Marijuana's picture

Oldwood, it is clear from you previous posts, including the one above, that you are a utterly biased ignorant idiot when it comes to "drugs," since you presume that they are somehow all the same, and only get people uselessly "stoned."

In fact, there are huge differences between different drugs. The vast majority of drugs are poisonous in overdose, and can be fatal. Those drugs tend to decrease consciousness, to the point where one can die from an overdose. HOWEVER, there is a small group of drugs which are NOT fatal in overdose, but rather actually INCREASE CONSCIOUSNESS.

It is clear that guys like you Oldwood, are deliberately ignorant and biased about the personal history of people who changed their lives, and changed their world, because they did psychedelic drugs. I could give you many, many examples, however, one of the most famous ones surround the original history of the Apple Corporation:

http://www.cannabisculture.com/node/28634

Of course, I expect that you will never read that, nor look any deeper into the basic issues, such as the challenges of attempting to reconcile post-modernizing sciences with ancient mysticism. The theory that enables atomic bombs to be built takes mind-boggling thoughts to attempt to assimilate:

https://www.youtube.com/watch?v=7D0BeLz5blM

Bill Hicks - Today a young man on acid realized...

 

Wed, 10/01/2014 - 23:35 | 5278506 Oldwood
Oldwood's picture

Oh, smack! You got me good on that one. As they say on the commercials your experience may vary.

Just had an experience with some forty something friends a few weeks back in the mountains of Colorado smoking some hypothecary weed around a fire pit. Strong in deed compared to thirty years ago. While one was convinced he saw NSA satellites spying on him (the sky was incredible at 2am) and I was definitely lost in great contemplation while listening to the dark side of the moon, we awoke hours later, a little bit more worn, but no more enlightened.

I have been around drugs from pot on up, my whole life. My brother in law is an alcoholic, functioning but broken. There are lots of people doing every kind of drug imaginable, yet on the whole its hard to see a lot positive in it, and known a few that have died. If it works for you, I'm happy for you, but there are many many more that have their lives ruled by them and many times ruined by them. Its sad to believe that the only way a person can be their best or even intelligent, is with drugs, but maybe that is my bias and ignorance that I have acquired over so many years. We used to be told that age brought wisdom but now in our modern age, wisdom is ignorance, poverty is prosperity, and war is peace. Go figure.

Thu, 10/02/2014 - 23:23 | 5283143 Radical Marijuana
Radical Marijuana's picture

Oldwood, I agree that, mostly people tend to misuse and abuse drugs, including psychedelic drugs, rather than use them in ways that end up overall beneficial. However, I would not blame the drugs, but the social situation in which those people live, where the worst drugs tend to be the most legal, while some of the best drugs are illegal.

Tragically, when I was younger, I was able to still be somewhat optimistic, and idealistic, about the future. However, the more I learned, the worse everything got. I now believe that the REAL world is so totally dominated by entrenched systems of huge lies backed by violence that there is no reasonable hope for the future, & NO good ideas have any hope in hell of ameliorating that social madness!

When I was younger, I used to be able to believe learning was a worthwhile thing to do, however, over time, I have learned that society is so totally controlled by the entrenched systems of legalized lies & violence, that there was no practical point to discovering and demonstrating more rational evidence, nor more logical arguments, because those do not change systems of lies backed with violence.

When I was younger, I used to have a lot of fun. Now, I find that I no longer enjoy getting 'high.' I no longer am able to believe in any good hope. The basic FACTS are too dismal to be enabled to be overcome with any creative, alternative ideas! The established systems are so totally dominated by entrenched legalized lies & legalized violence that nothing is going to stop that from happening and automatically getting worse & worse, faster! All established social pyramid systems have grown for thousands of years, to be dominated by people who specialized in being dishonest, and violent, while those they controlled became like idiots.

The best drugs that INCREASE CONSCIOUSNESS continue to be criminalized, while that appears like it will continue to be the case for a long, long time. When I was younger, I believed it was possible
to reverse those EVIL effects of the established war on consciousness waged by the ruling class against those they were ruling over. However, I now have no longer got that mojo to believe.

My sense of intellectual integrity compels me to face the basic FACTS that everything important is getting worse, faster, with no end in sight of that happening. Psychedelic drugs assisted some individuals to change ... However, the established systems responded by BIGGER lies, backed up with more violence, always getting worse. I WISH that I could time-warp, back to my younger days ... I would like to still believe that there IS reasonable hope ... But, "hope" now appears to me to be so utterly irrational, that I can barely indulge in those "hopes" anymore, and so, I no longer bother to take drugs that are psychedelic, since the ONLY trips I get now are ones that lead towards increasing my consciousness of how terminally screwed up, sick & insane the society that I am living inside of IS increasingly becoming!

Inside of that cultural context, I believe that the majority of people tend more to misuse drugs that use drugs. More people probably caused harm, rather than benefited. However, I would not blame the drugs, but rather, I would insist that the drug laws themselves are far worse than the drugs, and make drug abuse a bigger problem, rather than prevent that.

 

Wed, 10/01/2014 - 01:50 | 5274013 Uber Vandal
Uber Vandal's picture

The article neglects to mention why there was "overt encouragement of American families to raid their home ATM machines", and why the chart goes up at a roughly 45 degree angle from 1987 to present for Credit Market Instruments.

The answer is the Tax Reform Act of 1986.

Up until that time, interest on consumer loans, including credit cards and new automobiles, were tax deductible.

Had that not occurred, the outcome may have been slightly different.

 

Wed, 10/01/2014 - 02:59 | 5274074 Latitude25
Latitude25's picture

The real issue is that GS should have been liquidated.

Wed, 10/01/2014 - 04:26 | 5274130 Watson
Watson's picture

There seems to be some confusion between being (funding) illiquid, and being insolvent.

If you are really insolvent (liability's exceed assets) then, of course, you should be shut down.

But a lot of problems occurred in the crisis because borrowing lines dried up.
The error, IMO, was that the authorities replaced those private sector borrowing lines with central bank lines, but at an insufficient charge. Not only should the government money been at a _very_ big % rate markup, but, in addition, there should have been a substantial fixed charge to get at the money - a charge paid by a permanent claim on part of the equity capital (with no buy-back rights).

It would probably mean that existing stockholders in a solvent but illiquid institution get heavily diluted - am appropriate remedy.
And if they were very heavily diluted it would make sense for both existing and new stockholders to vote for a wind-up - a further market-related remedy.

Watson

Wed, 10/01/2014 - 05:48 | 5274179 Comte d'herblay
Comte d'herblay's picture

What's a 'market'?

Wed, 10/01/2014 - 05:46 | 5274176 Comte d'herblay
Comte d'herblay's picture

Trashcan - fire- bank trick.

Point to Lehman, while Lord Blankfein calls in some chips to save his cue ball ass.

 

 

Wed, 10/01/2014 - 05:53 | 5274181 WSP
WSP's picture

Come on Stockman---I KNOW YOU ARE SMARTER THAN THAT so who are you trying to fool here?  Are you controlled opposition helping to frame the discourse as if the politicians and bankers in charge are incompetent rather than corrupt?

Those of us who are well-studied know that the the Lehman /2008 was a well-planned and coordinated and controlled meltdown.

Lets take it straight from the horses mouth----2008 was

"a skillful, coordinated effort to seize control and consolidate the four centers of power: political, monetary, intellectual, and ecclesiastical... [in] the creation of a worldwide economic power superior to the political governments of the nation-states involved."

Look it up Stockman if you don't know---HINT---TRILATERAL COMMISSION----AKA GLOBALISTS---AKA CRIME SYNDICATE!!!!!

We ALL NEED TO EXPOSE THE CONTROLLED OPPOSITION FOR WHAT THEY ARE------NONE OF THIS IS INCOMPETENCE---THESE CRIMINALS KNOW EXACTLY WHAT THEY ARE DOING BE SURE OF THAT

The crime syndicate wants to bankrupt and impoverish us for their new world order-----if they succeed make them do so in the light of day, not with controlled opposition that tries to make us think that what is happening is incompetence rather than a coordinate criminal plan to destroy us to bring in their new world order!  CONSPIRACY?  YES---CONSPIRACY FACT!!!!!!!!!!

Yes, knowing the truth might not change anything if enough people don't wake up, but that is still no excuse to be ignorant of what is truly happening to us.

Wed, 10/01/2014 - 13:55 | 5274190 Comte d'herblay
Comte d'herblay's picture

Here's how much James Stewart, financial guru's credibility sucks:

He had a short list of stocks,  must owns in 2007, and his top pick was New Century.  That move cost me $35,000 when a month later they declared bankruptcy.

Fuck James Stewart and the horse he rode in on.

 

 

Wed, 10/01/2014 - 06:42 | 5274241 Sandmann
Sandmann's picture

I thought REPO 105 took down Lehmann

Wed, 10/01/2014 - 07:19 | 5274296 Dre4dwolf
Dre4dwolf's picture

See when they talk about "the economy" they mean "the pockets of  CEOS in the top 500", you, are not part of "their economy", but they want to pillage the "economy" you belong to to bailout THEIR "economy".

 

Think about it, what economy are they trying to save? the one you and I transact in ? or the one they use to funnel trillions of counterfeit dollars out of?

Wed, 10/01/2014 - 07:33 | 5274322 sam site
sam site's picture

Wall St fraud and rising consumer home equity debt only masks the fundamental problem that America lost it's manufacturing jobs to foreigners and that's the basis of any economies wealth.

Fraud and debt are short term work-arounds when you lose your wealth or income.  We lost our jobs because Americans failed to protect their competitiveness from the ravages of expensive Big Government regulators and expensive monopoly government protected Allopathic health care. 

Combine these two expensive job destroying costs with a poisoning agenda of our food, water and medicine by the EU Organized Crime Cabal that took over America in the 1913 Fed Act, and you have a scenario that chemically dumbs down our workers and disables their health.  

Few understand that America was captured through Toxic Injury that handicapped our work force and made them sheeple loyal to the estavlishment. 

So you have an expensive poisoned and unhealthy workforce, demanding Big Government protection from all threats in life.  America is an extinct species and when TSHTF the sheeple aren't going to know what hit them in the finishing blow.

 

 

Wed, 10/01/2014 - 08:09 | 5274417 Raoul_Luke
Raoul_Luke's picture

Which, of course, puts the lie to the entire Keynesian premise.  All that borrowing fueled consumption should have generated oodles of productive capacity and a sustainable, much larger economy, if Keynes' theory was anything other than a redistributionist wet dream...

Wed, 10/01/2014 - 09:09 | 5274581 Oldwood
Oldwood's picture

They create money which they loan to us, telling us to go forth and be productive to ensure and protect the value of that they have created. We have built we have produced and now we see that all we have is valued upon the original product, money, that they created and regardless of our efforts it value is declining. In the face of this the continue to offer us more loans at even lower rates.....we must borrow, they must lend, to keep the ship afloat. Yet we see values continue to decline while our assets in real property are increasingly indebted. As this spirals downward, as money loses value (returns to its mean) we are left with the nothing we began with except that those who created this money now possess endless wealth that we have created, technologies and resources that we have developed, yet we have nothing, not even the ability to care for ourselves, the one thing most precious, that we did begin with. The one thing we could put no price on...our freedom and liberty, gone. They own our homes, our cars, our sources of food and warmth. They taken it away from us through dependency that has eliminated those skills as well as legislated away our rights to cut a tree or build a fire or shoot an animal to survive. We can no longer access waterways without permission, and not long will we be able to fart in the public airspace. This is what money has bought us.

Wed, 10/01/2014 - 09:58 | 5274860 RaceToTheBottom
RaceToTheBottom's picture

While I think that the Greenspam was a major part of the modern problems, I think a lot of the problems on the charts stem from 1971, whcih is when Nixon cut the gold cord....

Wed, 10/01/2014 - 10:14 | 5274959 Oldwood
Oldwood's picture

I'm no economist, but I would imagine that no rigid standard would hold up under a true growth environment. What they have done though is to use this as an excuse to eliminate any real controls and then create such a complicated web of lies and deceit that no one can really figure it all out enough to really put their finger on the source or the absolute blame. the one thing they have done is create so much fear that most are afraid to do anything that would upset the apple cart for fear of bringing it all down on our heads.

Thu, 10/09/2014 - 17:04 | 5277856 RMolineaux
RMolineaux's picture

In my opinion, this item is lacking in balance in that it promotes the group-think prevalent on ZH which wants to blame every mischance on the Fed, when other actors should be sholdering more of the blame.  Who was it who promoted the home equity loan program and sub-prime vehicle purchases?  These "products," contradicting all basic sound banking practice, were promoted by the commercial banks and car manufacturers.  Admittedly, the Fed failed to apply its regulatory responsibilities, due to Greenspan's personal bias against regulation.  But it was the commercial banks who principally promoted this foolishness.

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