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

[Andrew]

Oil prices slide to six-month lows under $97

Yet I'm paying the same at the pump as when it was $120 a barrel.

So I expect it to drop to $1 a litre. But I doubt that will happen.

[Tatar Khan]

You should not forget that the contracts for oil prices have been already made and the price on those contracts is higher than current market price so the pumps will keep their prices high. There is always a delay with regards to the price going down, however the prices have to problem going up immediately, the reason is the stickiness of the prices.

[Andrew]

Yah! Gas prices are increasing 9 cents (7%) on Monday.

We never even saw the price decrease from the past two weeks that other parts of Canada had. Woohoo!

Looks like its time to adjust my budget for a much higher expenditure on gasoline than expected.

Ok so analysts expected oil prices per barrel to drop to $80 or so, we are at $100, yet gas prices are the same. So no matter what happens still the same amount coming out of consumers wallets.

[Andrew]

Lehman Brothers Files for Chapter 11 Bankruptcy

Lehmans is currently trading at $0.19, and it lost 95% of value today. Back in February 2007 it peaked at $89.

It is a 158 year old company. I guess they bet too much that housing prices would increase 10% every year for infinity.

Actually looking at other banks, they all lost 10-20% today. AIG lost 53%

[Tatar Khan]

Well it takes one big guy to fall to make all the small players on the stock market to run for the hills. Since thanks to the internet and discount brokerages their number has increased dramatically so did the response of the small investors. Except for the number of the small investors everything remained the same, the small investors still follow the philosophy buy high (when market almost hit the peak like in 1999) and sell low when the market has record losses.

[Andrew]

U.S. House plans vote on $50 billion to stimulate economy

What the hell is wrong with them? The reason for the bad economy is because they have been spending more than they make.

Average American owes more than they have, federal budget deficit for past 25 years or so, trade deficit for a long time I think.

And of course the solution is to spend another $50 billion on top of the Billions they spent on the cheques which were useless.

Amid fears of wider economic damage from turmoil on Wall Street, the roughly $50 billion would aim to spark needed road, bridge and other construction projects that help create jobs, with details still being worked out, the aide said.

Oh, they are actually deciding to spend this money on public stuff which will be beneficial for the future. And not plasma tvs. Sounds like a good idea now.

U.S. stocks slammed; Dow industrials shed 504 points

Last time it was this low was July 2006. And it was the worst day for the Dow Jones since 9/11. And people thought the bottom of this was back in February when the other big bank failed. Looks like a dead cat bounce.

I'm also sure the employees of Lehman who had shares in their retirement fund will be happy to know they are now worthless. Haha you worked there for ~30 years, had shares worth $67 last year which are now worth 21 cents. No more dividends for you! :(

Now Manchester United's £56m shirt sponsor is on the verge of going bust

United's principal sponsor AIG has run into serious financial difficulty, just days after XL, the name on West Ham's shirts, went bust.

Spending $100 million to put a logo on a soccer team shirt for 4 years? That's a great investment! Good thing they are asking the Federal reserve for $44 billion in short term investment so they can keep wasting money. How about banks stick to doing bank stuff?

Nation's largest insurer tries to raise cash and avoid credit downgrades. Fed asks Goldman and JPMorgan Chase to raise $70B for firm. Shares end down 61%.

New York State gave the nation's largest insurer the power to transfer $20 billion in assets from its subsidiaries to use as collateral for daily operations, said Gov. David Patterson. In exchange, the parent company will give the subsidiaries less-liquid assets.

Even the State of New York gave them $20 billion!?

I need to start a business. Become profitable during boom times, and when things go bust because I start sucking at my job I'll get a bailout. Free money for everyone!

Lehman Employees Scarfing Up Free Meals, Swag

EDIT:

Apparently AIG just lost its rating which is what they were wanting to prevent with all this borrowed money. Looks like another bankrupt company, the largest insurer in USA.

Paulson says prepared to act to ensure stability

U.S. Treasury Secretary Henry Paulson said on Monday the U.S. financial system remained sound despite current stresses and said he was prepared to take further actions if necessary to maintain stability.

They've been saying that for the past 1.5 years. So all these banks failing is normal and a sign of a sound financial system?

11 banks so far have failed (I don't think they count bailouts) in 2008. 27 banks failed from October 13, 2000 - December 2007.

http://www.fdic.gov/bank/individual/failed/banklist.html

EDIT: September 17

Why WaMu Can’t Fail

So what are we talking about? We’re talking about risk to the depositor and to the Federal Home Loan Banks of $239 billion. Let me remind you that the FDIC or the Federal Deposit Insurance Corporation has $45 billion. We are talking about a bank with $181 billion of deposits. They cannot afford to let this bank fail.

So if WaMu fails FDIC will run out of money (until they print/magically create more).

EDIT: september 18

How SEC Regulatory Exemptions Helped Lead to Collapse

In 2004, SEC exempted five firms from required capital/debt ratio regulations. They are: Bear Sterns, Lehman Brothers, Merrill Lynch, Morgan Stanley, and Goldman Sachs. That worked out well.

Bush bailout proposal sent to Congress seeks authorization to spend as much as $700 billion to buy troubled mortgage-related assets.

EDIT:

Treasury Seeks Asset-Buying Power Unchecked by Courts

The Bush administration sought unchecked power from Congress to buy $700 billion in bad mortgage investments from financial companies in what would be an unprecedented government intrusion into the markets.

Through his plan, Treasury Secretary Henry Paulson aims to avert a credit freeze that would bring the financial system and the world's largest economy to a standstill. The bill would prevent courts from reviewing actions taken under its authority.

So basically they are doing whatever they want ignoring any laws.

[Andrew]

For the first time since the passage of Glass-Steagall in 1933, there are no significant investment banks left

Basically everyone is farked.

Maybe if it gets even worse then Bush can enable Directive 51 and become a dictator.

Crude oil climbed more than $25 a barrel, the biggest gain ever, as the dollar weakened the most against the euro since January 2001, boosting the appeal of commodities as a hedge.

$25 in one day and it had nothing to do with a hurricane or any extreme supply/demand changes. Yep in a single day 25% increase is easy.

Don't worry the $700 billion bailout will solve everything and make the worthless loans worth something!

Even though we were told all the previous bank bailouts, the government tax rebates etc were supposed to fix everything.

Hello inflation!

McCain wants to limit bank execs salary to $400,000

Fury at $2.5bn bonus for Lehman's New York staff

$2.5 billion BONUS for bankrupting a large company. Sounds like fun.

WaMu loaned millions to California home flippers convicted in fraud scheme

Most hilarious story showing how CRAZY the housing market was. Please read the first couple paragraphs. A gardener bought the house he was gardening for $660,000.

[Andrew]

Dirty Secret Of The Bailout: Thirty-Two Words That None Dare Utter

A followup on my sept 15 post about bailout adding a provision that gives a person infinite power.

Part of the bailout bill:

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

I'm sure this is in the best interests of Americans. ::)

China banks told to halt lending to US banks

So where exactly is the $700 billion coming from if China doesn't buy the debt?

[chatfsh]

The southeastern part of the U.S. is experiencing significant gasoline shortages.  Not only are we faced with long lines at the gasoline stations, but we

[Andrew]

A large bank in England is about to fail along with another bank in USA.

The huge European bank Fortis is apparently about to fail.

Wachovia approaches potential buyers

Bradford & Bingley Set for Nationalization, Takeover

I've heard about the gas shortages, people are phoning 911 to try to find it.

911 Callers Looking For Gas In Metro Atlanta Jam Emergency Phone Lines

I presume you are in that area? Hmm, I just did a google search on gas shortage and it does seem to be a big problem.

Makes me think I should go buy gas shortly. I need to get some extra anyways, just too lazy to get some yet.

[Egeides]

But that’s ok.  I’ve been able to escape this reality by immersing myself into the world of A Song of Ice and Fire.  I just finished reading A Storm of Swords and will start reading A Feast for Crows soon.  Fun.

Ahh, that's what bank people do ;D

[Andrew]

Citigroup Inc. to Acquire Banking Operations of Wachovia

Once that was announced DOW went down 4% and NASDAQ and S&P500 went down 6%. Toronto Stock Exchange dropped 6%.

They are also voting on bailout package, which is why the Dow went down. So of course if it will pass otherwise those that do not vote in favour will be unpatriotic. Even though there are provisions in the bill which give unlimited amount of power to a single person.

I hope the bill fails. How can they come up with a plan in a week or two? This bailout plan might not even work but who cares lets throw invisible money at the problem.

EDIT:

The bill failed!

Of course with the stock market going down with this news it will be more of a reason to pass another crappy bill.

Stocks are falling more.

Why should the government buy worthless assets? If they are worthless, they are worthless. If no private entity wants to buy them then there is no reason for the government to buy them. That $700 billion would be better spent on infrastructure (transportation, hospitals, education etc)

[chatfsh]

Yes, it

[Tatar Khan]

Why should the government buy worthless assets? If they are worthless, they are worthless. If no private entity wants to buy them then there is no reason for the government to buy them. That $700 billion would be better spent on infrastructure (transportation, hospitals, education etc)

Well if financial system fails you might as well forget about the infrastructure (transportation, hospitals, education etc). With the crash of financial system the whole economy will collapse.

[Andrew]

Bailout plan was approved by Senate.

Apparently they increased the amount by 100 billion.

Senate unveils its version of the bailout bill, although it's unclear what earmarks for racetracks, "wool research" and "wooden arrows designed for use by children" have to do with Wall Street

New Tax earmarks in Bailout bill

- Film and Television Productions (Sec. 502)

- Wooden Arrows designed for use by children (Sec. 503)

- 6 page package of earmarks for litigants in the 1989 Exxon Valdez incident, Alaska (Sec. 504)

Tax earmark “extenders” in the bailout bill.

- Virgin Island and Puerto Rican Rum (Section 308)

- American Samoa (Sec. 309)

- Mine Rescue Teams (Sec. 310)

- Mine Safety Equipment (Sec. 311)

- Domestic Production Activities in Puerto Rico (Sec. 312)

- Indian Tribes (Sec. 314, 315)

- Railroads (Sec. 316)

- Auto Racing Tracks (317)

- District of Columbia (Sec. 322)

- Wool Research (Sec. 325)

Awesome. More bullshit spending by the government.

US debt hit 10 trillion on September 30. link

I'm sure adding another $800 billion wont be a problem.

EDIT:

Hmm, I ws expecting markets to be up 2% today because of the bill being passed, but it started out down 1.5%. I guess people don't buy into that crap.

[Andrew]

Bush signed the bailout bill since congress passed the senate version.

Stock markets were up 3%, but once it was announced that it passed they went to -1.5%.

The markets would have already had the bailout bill adjusted into the market. So I guess no one should expect a 20% increase in the DOW overnight since the bailout bill will not solve any of the problems other than transferring more wealth to the wealthy.

EDIT:

Was bored so skimmed through an economic paper. What Has Government Done to Our Money?

I've mentioned this book before in other threads.

At first, when prices rise, people say: "Well, this is abnormal, the product of some emergency. I will postpone my purchases and wait until prices go back down." This is the common attitude during the first phase of an inflation. This notion moderates the price rise itself, and conceals the inflation further, since the demand for money is thereby increased. But, as inflation proceeds, people begin to realize that prices are going up perpetually as a result of perpetual inflation. Now people will say: "I will buy now, though prices are `high,' because if I wait, prices will go up still further." As a result, the demand for money now falls and prices go up more, proportionately, than the increase in the money supply. At this point, the government is often called upon to "relieve the money shortage" caused by the accelerated price rise, and it inflates even faster. Soon, the country reaches the stage of the "crack-up boom," when people say: "I must buy anything now--anything to get rid of money which depreciates on my hands." The supply of money skyrockets, the demand plummets, and prices rise astronomically. Production falls sharply, as people spend more and more of their time finding ways to get rid of their money. The monetary system has, in effect, broken down completely, and the economy reverts to other moneys, if they are attainable--other metal, foreign currencies if this is a one-country inflation, or even a return to barter conditions. The monetary system has broken down under the impact of inflation.

Wonder if that will happen in the US. I guess it probably wont because ordinary citizens will never realize that it is happening and they will have enough to keep them happy (such as the serfs in medieval Europe who tended to the land while paying exorbitant taxes to the wealthy).

A final indictment of inflation is that whenever the newly issued money is first used as loans to business, inflation causes the dread "business cycle." This silent but deadly process, undetected for generations, works as follows: new money is issued by the banking system, under the aegis of government, and loaned to business. To businessmen, the new funds seem to be genuine investments, but these funds do not, like free market investments, arise from voluntary savings. The new money is invested by businessmen in various projects, and paid out to workers and other factors as higher wages and prices. As the new money filters down to the whole economy, and the people tend to reestablish their old voluntary consumption/saving proportions. In short, if people wish to save and invest about 20% of their incomes and consume the rest, new bank money loaned to business at first makes the saving proportion look higher. When the new money seeps down to the public, it reestablishes its old 20-80 proportion, and many investments are now revealed to be wasteful. Liquidation of the wasteful investments of the inflationary boom constitutes the depression phase of the business cycle.

Scarily this resembles what is occurring now. The government is borrowing money (money it has not earned) and lending (or granting) it to failed banks.

All these limits, of course, rest on one fundamental obligation: the duty of the banks to redeem their sworn liabilities on demand. We have seen that no fractional-reserve bank can redeem all of its liabilities; and we have also seen that this is the gamble that every bank takes. But it is, of course, essential to any system of private property that contract obligations be fulfilled. The bluntest way for government to foster inflation, then, is to grant the banks the special privilege of refusing to pay their obligations, while yet continuing in their operation. While everyone else must pay their debts or go bankrupt, the banks are permitted to refuse redemption of their receipts, at the same time forcing their own debtors to pay when their loans fall due. The usual name for this is a "suspension of specie payments." A more accurate name would be "license for theft;" for what else can we call a governmental permission to continue in business without fulfilling one's contract?

Yep, banks screw up but do not have to be liable for it.

The governments and the banks, persuaded the public of the justice of their acts. In fact, anyone trying to get his money back during a crisis was considered "unpatriotic" and a despoiler of his fellowmen, while banks were often commended for patriotically bailing out the community in a time of trouble.

He even knows about how if you don't bail out the banks you are unpatriotic!

See, anyone who tries to get their money out of a bank is unpatriotic. Everyone should trust the banks to keep their money until it suits the bank best.

Precisely how does the Central Bank go about its task of regulating the private banks? By controlling the banks' "reserves"--their deposit accounts at the Central Bank. Banks tend to keep a certain ratio of reserves to their total deposit liabilities, and in the United States government control is made easier by imposing a legal minimum ratio on the bank. The Central Bank can stimulate inflation, then, by pouring reserves into the banking system, and also by lowering the reserve ratio, thus permitting a nationwide bank credit-expansion. If the banks keep a reserve/deposit ratio of 1:10, then "excess reserves" (above the required ratio) of ten million dollars will permit and encourage a nationwide bank inflation of 100 million. Since banks profit by credit expansion, and since government has made it almost impossible for them to fail, they will usually try to keep "loaned up" to their allowable maximum.

Rothbard perfectly explains it here. Banks expand ratios as much as possible to maximize profit because there is absolutely no risk in doing so because the government will not allow a bank to go bankrupt. A bank will unsafely maximize profits for as long as possible, and when things get bad, they will wait for a bailout. Then they will continue to maximize profits.

Since the first edition of this book was written, the chickens of the monetary interventionalists have come home to roost. The world monetary crisis of February-March, 1973, followed by the dollar plunge of July, was only the latest of an accelerating series of crises which provide a virtual textbook illustration of our analysis of the inevitable consequences of government intervention in the monetary system. After each crisis is temporarily allayed by a "Band-Aid" solution, the governments of the West loudly announce that the world monetary system has now been placed on sure footing, and that all the monetary crises have been solved. President Nixon went so far as to call the Smithsonian agreement of December 18, 1971, the "greatest monetary agreement in the history of the world," only to see this greatest agreement collapse in a little over a year. Each "solution" has crumbled more rapidly than its predecessor.

To understand the current monetary chaos, it is necessary to trace briefly the international monetary developments of the twentieth century, and to see how each set of unsound inflationist interventions has collapsed of its own inherent problems, only to set the stage for another round of interventions. The twentieth century history of the world monetary order can be divided into nine phases. Let us examine each in turn.

Some good points are made here relating to todays problems. After each crisis they apply a band aid solution announcing that everything is ok. This has been done for the past year or two. They give out billions of dollars to failed banks, then say that the financial sector is sound, and then a month later something worse comes along. We are now at a point where $800 billion will finally solve the problem, but I'm guessing it is possible that within a year or less we will see another multi billion dollar bailout that will "fix" the problem.

I guess we will never learn from past mistakes.

[chatfsh]

After striking an agreement in

[Andrew]

I've been reading this thread, and the fun stuff about how they keep trying to fix the economy but it keeps failing.

Here's what Bush said about the tax rebate checks back in January 2008

Bush urged Congress on Friday to quickly pass the package without any further spending. "I strongly believe it would be a mistake to delay or derail this bill," Bush said.. That was for $150 billion package.

It passed. The $600 cheque for some Americans was supposed to help the economy (woohoo flat screen!). And then comes September 2008 when Bush wants the $700 billion package passed as fast as possible or else bad things would happen (woohoo cheap bank takeovers!). Well it passed but the stock market keeps falling. US stock market down 7% today, and DOW is below 10,000 for first time in 4 years. Currently at 9500.

What is wrong in Europe? Is it because the banks gave out money to people that couldn't pay it back? House prices overinflated? Or is it different reasons than in North America?

TSX is down 9% with Venture down 14%. I think Alberta oil people are crapping there pants as the price of oil is low. Low oil prices and less demand means another oil bust for Alberta. Apparently Saskatchewan is the new "Alberta" since they have more oil and potash. Hopefully Saskatchewan can handle new infrastructure, unlike Alberta where people were living in tents and municipalities were going bankrupt, unable to handle the demand.

EDIT:

Stock markets ended up not as bad.

[nemafakei]

"What is wrong in Europe? Is it because the banks gave out money to people that couldn't pay it back?"

In short: we bought all your junk.

(Ok, there are also some local effects contributing as well).

[chatfsh]

And the saga continues

[Andrew]

After Bailout, AIG Execs Head to California Resort for $440,000 vacation.

Less than a week after the federal government committed $85 billion to bail out AIG, executives of the giant AIG insurance company headed for a week-long retreat at a luxury resort and spa, the St. Regis Resort in Monarch Beach, California, Congressional investigators revealed today.

AIG documents obtained by Waxman's investigators show the company paid more than $440,000 for the retreat, including nearly $200,000 for rooms, $150,000 for meals and $23,000 in spa charges.

Thanks Congress! I was very worried about the wellbeing of millionaires. Glad to see they are being taken care of.

[chatfsh]

Citigroup is asking for a mere $60billion in damages as a result of Wells Fargo swooping in to steal the golden franchise.  It

[Andrew]

Asian/Europe markets almost crashed last night.

Be sure to watch American markets today!

[Dante]

I have to admit, I don't find the comic all that funny. Just the situation.

[Andrew]

Fed gives $37.8 billion loan to AIG

So the feds bail out AIG. Then the execs go on a $440,000 vacation on October 3. Then the government gives them more money.

Sure glad these banks are not allowed to fail. Think of how badly this would affect the resort industry!

Yes, Dow's Record Was Year Ago Today

52Wk High: 14,279.96

52Wk Low: 8,579.19

-39.43%

Nice to see a stock market lose 39% of value in one year.

Dow is currently still going down breaking 52 week low. A bit of panic going on before the bell closes.

EDIT:

Barclays bankers jet off to Italy for lavish £500,000 banquet as country faces up to financial crisis

Quick! Send them more bailout money!!

EDIT:

Bush Plans Statement Tomorrow to `Assure' Nation

Uh, oh. Whenever Bush gets involved things get worse.

EDIT:

Found another good quote from the Rothbard paper.

The Central Bank thus became armed with the almost unlimited confidence of the public. By this time, the public could not see that the Central Bank was being allowed to counterfeit at will, and yet remain immune from any liability [74] if its bona fides should be questioned. It came to see the Central Bank as simply a great national bank, performing a public service, and protected from failure by being a virtual arm of the government.

EDIT:

Stocks may crash Friday. Overseas markets are down ~10%.