$1 USD, that's like $1 CAD?

[Andrew]

The US didn't learn anything with the last gas shortage in 1973 when they had to ration.

Because as soon as they got cheap energy again they continued building large vehicles.

I'm sure they will find another cheap energy source and continue building large vehicles rarely anyone needs.

ECB Raises Rate to Seven-Year High to Fight Inflation

Those fools they should do what the US does and decrease rates and pretend there is no inflation!

[Tatar Khan]

Hah, oil is surging through record prices over the past couple days. Now at almost $144. Stock markets went down a lot as well.

Don't worry it is all speculation and we will see $50 oil soon. ;)

No $50 somewhere in the range between 80 and 90 most likely.

And this time it was the International Energy agency that raised the alarm with the report that supply of oil would be tight.

[Andrew]

Oil went down, now back at another record. currently $145 per barrel.

Fannie and Freddie Shares Fall by as Much as 50 Percent

Hurray the government will bail them out to prevent them from collapsing. These two companies represent around 50% of total mortgages (I think that's what the news said). What happened to the profits over the past 10 years? Did the government get the profits? Nope. But the government gets to pay for the losses. More money printed and higher inflation for everyone while corporate execs get golden parachutes.

How about let them collapse and other corporations will take over the market?

EDIT:

Crisis Deepens as Big Bank Fails

IndyMac Bank, a prolific mortgage specialist that helped fuel the housing boom, was seized Friday by federal regulators, in the third-largest bank failure in U.S. history.

Chinese Government is Top Foreign Holder of Fannie Mae, Freddie Mac Bonds

Woot give more money to the Cinese.

[Tatar Khan]

I am all for letting the companies go down if they screw up, however with the financial sector there needs to be more carefulness and failure of that sector can really destroy the world's economy. So when it comes to large players governments are forced to come in and bail them out to prevent the run on the financial sector from occurring as people will begin to panic and start taking money out of the banks and other financial institutions (cash value out of insurance policies) and cause the problems there thus creating a self fulfilling prophecy and even greater run at financial industry.

[Andrew]

to prevent the run on the financial sector from occurring as people will begin to panic and start taking money out of the banks and other financial institutions (cash value out of insurance policies) and cause the problems there thus creating a self fulfilling prophecy and even greater run at financial industry.

Too late

Customers wait at IndyMac to withdraw money

Charles Tengeri, a retired school teacher, was the first customer to emerge from the Pasadena headquarters of the bank.

He held a check for $171,000 -- an amount that he said represented most of his savings.

Two-hundred people were in line when the bank opened. A security guard at the door was allowing 10 people at a time to enter the branch.

EDIT:

The run on the failing bank was on CBC the national.

Indymac is second largest failure in FDIC 75 year history.

EDIT:

Police show up at IndyMac Branches in Encino, Northridge as waiting customers clash

Awesome. People are only insured up to $100,000. But if they owe the bank money they have to pay back every penny.

I hope more people run on the banks. Because it is their right to withdraw their money whenever they want.

Bush: Financial system is 'basically sound'

President Bush urged lawmakers on Tuesday to move quickly to help prop up mortgage giants Fannie Mae and Freddie Mac, while declaring the nation's financial system to be "basically sound."

Wait, Bush wants lawmakers to pump billions into the financial sector to prevent them from collapsing, yet says everything is fine with the financial sector?

Yep Bush is correct. The financial system is doing great. Ignore the fact that the 3rd largest bank failure occurred last week.

I remember they were saying everything was fine back in September 2007. It seems they are still saying the same crap.

And I just saw a news article stating bernanke and others are now worried about inflation. WTF did I say about inflation back in 2007? How can a economics noob like me know that inflation will be bad, yet all these pros that are paid millions don't know anything?

EDIT:

June CPI rise biggest in 26 years on energy surge

Nope no inflation there either.

EDIT:

Inflation: Price jump worst since '91

Hmm, wasn't there a recession in early 1990s. Nah a recession can't happen now. If we ignore it a recession wont happen!

[Tatar Khan]

Oil prices extend retreat on U.S. supply data.

I guess people are getting the drift that oil is overpriced, and that price won't hold.

Well if you look at these numbers it is quite obvious:

[Andrew]

I need to know what superscripts 1, 2, 3, 4, are.

Is exchange rates the price of oil in Euros? How is inflation decided (which version?)? I presume combined is the inflation and exchange rates? Or is combined just the nominal plus inflation (so it becomes the real)?

Difficult to understand the chart :(

Oil prices decreased now, but by next week we will be at new records just like the past 5 years. All we need is a hurricane Katrina type storm to head towards gulf of Mexico and we will see $200 per barrel.

EDIT:

Also with inflation being at 5% or so in the US, the price of oil won't be going down because USD is still becoming more and more worthless.

[Tatar Khan]

I need to know what superscripts 1, 2, 3, 4, are.

Is exchange rates the price of oil in Euros? How is inflation decided (which version?)? I presume combined is the inflation and exchange rates? Or is combined just the nominal plus inflation (so it becomes the real)?

Difficult to understand the chart :(

I like the questions.

here is the answers

Definitions

[Anathema]

Cartoon explaining the credit crisis

Is this more or less how it happened?

[Andrew]

Cartoon explaining the credit crisis

Is this more or less how it happened?

I've seen that before in slideshow format. It is kind of a simplification of what happened.

[Tatar Khan]

Yeah it is pretty close to what happened, thankfully in Canada we are smarter than US so 40 years mortgages and no downpayment options have been scrapped.

[Andrew]

In interview right now Bank of Canada governor was asked about stagflation.

Says the market creates challenges. Denies stagflation, and that growth will continue. Temporary spike in inflation, caused only by energy. Core inflation is ok. Inflation will go back down to 2% (what they target) eventually.

Bank of Canada did not cut the interest rate. Good.

Say goodbye to 40-year mortgages

The funny thing is the 40 year mortgage was introduced 2 years ago. Turned out to be a bad idea. But at least corporations profited from it while they could.

[Andrew]

Yah, I'm double posting but this is worth the possible discussion.

What's a Bank Run? And how do you get on the FDIC's secret problem list?

One major reason is that if the public knew which banks were in trouble, the likelihood of a "bank run" might go up. A run occurs when a bank doesn't have enough cash in its reserves to pay all those depositors who want their money back.

So the FDIC has a secret list of problem banks that could fail, currently it has 90 banks listed. It is secret because they don't want consumers to know so they can go take their money out of the bank.

So citizens do not have the right to know whether their bank is about to fail. I thought the free market allowed for free and all information about everything so consumers and businesses could make the best informed decisions. This is a terrible thing to do. It is good for the banks, but not good for consumers since the banks get to keep their money multipliers while only having ~10% in reserve. There are 7500 banks in USA. I think they could easily cut that in half.

Trouble persists for some IndyMac customers

Some people have run into more problems when they tried to deposit IndyMac cashier checks at other banks.

Sheryl MacPhee said she waited in line two hours Tuesday at an IndyMac branch in San Marino to liquidate a certificate of deposit. But when she took it to a Washington Mutual branch in South Pasadena to deposit, she said a manager told her their new policy was not to accept IndyMac checks. If the customer insisted, she said she was told, it could take eight weeks or more to access the full amount.

"Sure, IndyMac will give you a check," MacPhee told the Los Angeles Times, "but what good is it if no other institution will accept it?"

So you finally get a cheque from your failed bank, but other banks will not accept the failed banks cheques. So you are completely screwed and lost all your money.

[Tatar Khan]

What's a Bank Run? And how do you get on the FDIC's secret problem list?So the FDIC has a secret list of problem banks that could fail, currently it has 90 banks listed. It is secret because they don't want consumers to know so they can go take their money out of the bank.

So citizens do not have the right to know whether their bank is about to fail. I thought the free market allowed for free and all information about everything so consumers and businesses could make the best informed decisions. This is a terrible thing to do. It is good for the banks, but not good for consumers since the banks get to keep their money multipliers while only having ~10% in reserve. There are 7500 banks in USA. I think they could easily cut that in half.

Trouble persists for some IndyMac customers

So you finally get a cheque from your failed bank, but other banks will not accept the failed banks cheques. So you are completely screwed and lost all your money.

Well Andrew you answered your own question. If the citizens know that the bank is close to fail they will make it fail by doing a run on it, than they will try to deposit to the other banks and other banks will refuse because they are not sure of the funds that the failing bank has.

[Andrew]

I'm glad banks are protected from citizens who want the money they put into banks.

Treasury Secretary Henry Paulson braces public for months of hard times

Treasury Secretary Henry Paulson sought to reassure an anxious public Sunday that the banking system is sound, while also bracing people for more troubled times ahead.

Right, the banking system is sound, but people should brace for more troubled times. Just like when 1 year ago they said everything was fine, but it has only gotten worse.

Freddie Mac chief executive gets US$19.8 million in 2007

Freddie Mac chairman and chief executive Richard Syron pocketed nearly US$19.8 million in compensation last year, according to a U.S. Securities and Exchange Commission filing Friday, even though the mortgage company's stock lost half its value in 2007.

If Syron stays at the helm of Freddie Mac through the end of next year, he will receive nearly $20 million in stock awards if the board says he has met certain goals. Of that, he is guaranteed to get $8.8 million in stock grants this year regardless of performance.

So the company loses money but a single person gets paid $20 million, and will continue to get paid in the future no matter what.

[Tatar Khan]

If we allow those banks to go down than the chain can and most likely will cause the other ones to fail thus plunging the whole country in chaos. So by denying few people the right to get their money now and this moment the other people who have money in other banks are being protected. Inconvenience for the few for the good of the many. Plus, there is Federal Deposit Insurance Corporation in US (it is like CDIC in Canada), so people should worry less as their money are protected. And second if they did have more money than FDIC protects than it their fault for being stupid enough to keep all their money in the bank rather than investing it.

And sure the executives are getting stock grants. Great but stocks are tied to performance of the company so if the company is going down so will the stocks and than executives will be left with nothing. In other words they are being tide more and more to the performance of their institutions to make sure they do their best to bail them out.

[Andrew]

And sure the executives are getting stock grants. Great but stocks are tied to performance of the company so if the company is going down so will the stocks and than executives will be left with nothing. In other words they are being tide more and more to the performance of their institutions to make sure they do their best to bail them out.

The second link I had said that the CEO gets $8.8 million no matter what his performance is. So that part of his pay is not tied to performance. Although the stock price would determine how much his stock options are worth. But he is getting paid even if he loses half the companies worth (which is what happened). So I guess the people at the top of the food chain get paid and are successful no matter what and it is always the people at the bottom taking the losses (customers and line staff workers).

EDIT:

House votes to offer as much as $300 billion in mortgages and to back up Fannie and Freddie. Bush says he'll sign it. Senate approval is likely.

Large deficits for the past 8 years. Check

Magically create $300 billion to bail out banks that took large risks. Check.

Inflation and USD devaluation? check.

[Andrew]

First Priority Becomes Eighth Failed Bank; SunTrust Buys Assets

The FDIC has closed 36 banks since October 2000, according to a list at fdic.gov. The U.S. shut 12 banks in 2002, the highest in the period, and 2005 and 2006 had no closures.

EDIT:

And Now Brace For the Bigger Wave of Mortgage Defaults

[Tatar Khan]

The second link I had said that the CEO gets $8.8 million no matter what his performance is. So that part of his pay is not tied to performance. Although the stock price would determine how much his stock options are worth. But he is getting paid even if he loses half the companies worth (which is what happened). So I guess the people at the top of the food chain get paid and are successful no matter what and it is always the people at the bottom taking the losses (customers and line staff workers).

$8.8 million in in stocks or stock options is not $8.8 million in cash. You can't use the money unless you sell the stock. Liquidating $8.8 million in stock will cause the price to drop on the stock radically so there would be huge loss for liquidator. Stock options are always designed in such a way that they can't be converted to stocks the same time the are issued but only later, and it is always the call options that allow to buy at the certain price, making them usefull only when price goes up. There is really nothing the person can do with that $8.8 million because it can't be used as collator and converting it to cash will cause huge problems for that person.

[Andrew]

CAD is now at 94 cents. Noooo. Guess I should have travelled internationally last winter. Meh, more money in my bank.

Although it is interesting how people with student loans can afford to go south. It's almost as if they could care less about paying it off early. Or maybe they are and havn't said anything about it (pretty sure they still complain about it). Guess I'm jealous ;)

[Andrew]

FDIC Warns of More Bank Troubles. Might not have enough money to insure everyone

"I fully expect the FDIC insurance fund to be depleted," Ryan added. "The FDIC is going to be one of what is going to be an increasing string of government bailouts."

Now is a good time to withdraw money. ;)

Don't worry this is normal, just like previous recessions.

Wait why is the line so high... uh oh.

Nothing out of the ordinary here either.

Source:

http://research.stlouisfed.org/fred2/categories/122

[Tatar Khan]

CAD is now at 94 cents. Noooo. Guess I should have travelled internationally last winter. Meh, more money in my bank.

Although it is interesting how people with student loans can afford to go south. It's almost as if they could care less about paying it off early. Or maybe they are and havn't said anything about it (pretty sure they still complain about it). Guess I'm jealous ;)

Nah, I just heard a lot of them have a plan for their student loan. It is called declaration of bankruptcy after they finish their studies. Most do not understand what would be the consequences except no need to pay off the debt.

[Andrew]

Nah, I just heard a lot of them have a plan for their student loan. It is called declaration of bankruptcy after they finish their studies. Most do not understand what would be the consequences except no need to pay off the debt.

I don't know of anyone who has done that and I don't think anyone will (they're no where near bankruptcy). I'm pretty sure they changed the laws a decade or more ago that made it near impossible to do anyways.

http://www.student-loan-bankruptcy.ca/ (found via google)

http://www.bankruptcy-canada.ca/student-loans/studentLoan.htm better link.

[Andrew]

CIBC says Canadian gasoline could spike to C$1.75 a litre if storms ravage Gulf

BRING IT!

Hurricane is gonna hit gulf of mexico. Monday should be fun when it hits. Bush has already declared an emergency.

[Tatar Khan]

Yes my portfolios in energy sector are going to boom. Hurricane! Hurricane! Hurricane! slam those oil platforms!!!