Now you see it now you don't. That's life.

I am no economist . I completely agree with the content of the article.
Portugal Presidente ( who is a economist ) , blamed american authorities for having allowed the creation of countless esoteric finantial instruments ( derivatives ) that were ,at least partially, responsible for the crisis.
Wall Street became ( and still is ) , Las Vegas.
American bankers play with Zillions everyday.
Authorities should regulate the banking system so that a new crisis will not happen in 10 or 15 years from now.

Right on! Unless congres can find a way to punish the executives responsible for Wall Street's fiasco there should be a nationwide revolt. Take away their yachts and parade them down Wall Sreet in sack cloth and ashes!

Former House speaker Newt Gingrich (R-Ga.) said in an interview yesterday: "We have now launched big-government Republicanism. If we saw France do this, Italy do this, we would have thought it was crazy. We would have had pious speeches about the folly of bureaucrats running businesses."

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/19/AR2008091903997.html?hpid=topnews

Well, the poker game will start with $500 billion (that is equal to the current budget deficit for fiscal 2008, more that Pentagon's budget of $480m) to start a "toxic debt" fund. Mind you, there will also be additional layers of "toxic debt" such as defaulted credit card loans, car loans, college loans, other consumer and installment loans and past due interest, etc.......

Then there will be the bickering in the Congress...another "economic stimulus" package. The last one was $150 billion and didn't work. So, this one has to be at least $300 billion to make a dent, may be $500 billion.

Then comes the acid test: Who says that banks will sell their "toxic loans" at current price of, say, 30 cents on the Dollar? The government cannot force them to sell, perhaps they want 50 or 60 cents? What will happen next? Raise the debt ceiling on this deal?

Finally, a big, nasty recession will come after this clean up. It does not matter who owns the debt owed (government or private banks). At the end of the day, there has to be real income streams to pay back the debt, directly or via additional taxes on INCOME, or perhaps consumption in form of a federal sales tax!!!!

I have been following the writings of Dr. Ettefagh and he is absolutely correct. In August of 2007, he wrote that the jitters of Wall Street are just the tip of the iceberg. He was 100% correct.

This is going to be a loooooooooooong haul deal for every one living in America.

PRESIDENTE BUSH TENTA EXPLICAR O INEXPLICÁVEL

Depois de envolver + de USD 800 bilhões de recursos do tesouro americano ( do povo) , para salvar os especuladores do capital volátil, quem de fato esperaria do presidente Bush outra explicaçao ?

A fala do presidente, para iludir os cidadãos, não é fácil atingir os objetivos. E a minoria de privilegiados devem estar comemorando com champagne Cristal ou uma mais cara ainda e não falsificada, como falsificaram os dados do mercado financeiro mundial.

A crise americana vai ficar na história e por que :

- Pagando jrs, negativos para uma dívida de USD 9,5 trilhão, o país está economizando em encargos financeiros anuais mais de USD 400 bilhões.

- A especulação financeira, com base no territorio americano, volta , a partir de agora, bem capitalizada, a monitorar e agredir mercados como o brasileiro , para usufruir de ganhos bem fáceis, em titulos do governo, em ações e comodities.

Tem exemplo~melhor para incentivar o crime financeiro, do que a decisão americana ? Os bobos estão no mundo todo.
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A DECISÃO AMERICANA, DE ONTEM, CRIANDO UM FUNDO,
PARA A GARANTIA DOS GANHOS DE ESPECULADORES, DEVE
ACOMODAR ALGUNS BILHÕES EM TÍTULOS POBRES DE ORIGEM CONTESTÁVEL.

Os americanos resolveram acabar definitivamente com a crise, porque já conseguiram se beneficiar de tudo o que era possível extrair dela.Mas os ganhos será de uma minoria e as perdas da grande maioria de seus cidadãos.

A decisão de ontem à noite, criando um fundo para acomodar os títulos pobres, acabou de sacramentar a valorização do capital especulativo e improdutivo, em detrimento dos interesses da sociedade.

Os Bancos Centrais mostraram, mais uma vez, que realmente continuarão a serviço dos cartéis especuladores, que voltaram com força redobrada para cometerem os mesmos abusos e erros, pq estão imunes à penalidades. Cuidado, BRASIL.

Enquanto isso, mais de 900 milhões de pessoas estão passando fome no mundo inteiro e mais 4 bilhões trabalhando e pagando impostos para garantir as fortunas dos mais ricos.

E o mundo vai sair dessa crise bem fabricada e administrada pelo sistema financeiro americano, com OS RICOS MAIS RICOS E OS POBRES + POBRES.

A auto-regulamentação do sistema financeiro deverá continuar intocável. Voltou o excesso de liquidez para as especulações …
E os Bancos Centrais, mantidos pelo povo, mostraram que realmente estão a serviço da agiotagem mundial.
A maracutaia dos títulos podres, que serão jogados nesse Fundo, deve parir novos bilionários no mundo da fantasia.
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TESOURO AMERICANO ASSUME ATIVOS INCOBRAVÉIS, MAS PASSIVOS COBRAVÉIS.

Telvez essse seja o melhor negócio do século XXI para os especuladores. Jogaram nos cassinos sabendo antecipadamente que iriam ganhar às custas de sacrifícios de milhões de pessoas. Ñ existe loteria melhor no planeta.

E como serão analisados os Bancos Centrais e as empresas de avaliação de Riscos que mostraram que estão a serviço do sistema financeiro e não a serviço da sociedade para a sua fiscalização e monitoramento ?.

E os bilhões e bilhões de USD ganhos desonestamente, o governo oficializou como “honestos” e, a partir de hoje, com auto regulamentação intocável, novos bilionários continuarão surgindo do dia para a noite na especulação financeira.

O impressionante é que a sociedade civil realmente é desorganizada e sempre paga a conta dos outros, sem cobrar ou exigir explicação.

A euforia agora chegou com o reinicio da manipulação da cotação do dólar, das bolsas de valores e de mercadorias e das taxas referenciais de juros, em paises como o Brasil. Crime é para ladrao d galinha ou d prato d comida
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A certeza que ficou é a de que os bancos centrais e as empresas de avaliações de riscos, se uniram para salvar os ganhos e a atuação tranquila do capital volátil.

Essa mesma agilidade que tiveram para salvar ganhos dos especuladores, tambem deveria existir para limitar os ágios para as taxs referenciais de jrs; para agilizar o monitoramento correto do sistema financeiro; para fiscalizar as comodities cartelizadas e, principalmente, aumentar a produção mundial de grãos, para que mais de 900 milhões de pessoas não continuem vivendo em absoluto estado de miséria.

Resumindo essa novela de crise fabricada e administrada pelos americanos, o Estado está se mostrando cada vez mais impotente para defender os interesses do cidadão (ã).

E qual é a diferença entre comunismo social e capitalismo democrático ?.
Tem mais, quais as empresas brasileiras que reduziram a produção em função da crise americana ?

Quanto o BC brasileiro ainda deve do Proer para os controladores de Bancos Falidos ? !!!

If you watch C-span you get the real news. I have been watching C-span for years and have witnessed what this administration has done to the financial market. I am not surprised at all. Thank God we didn't give them Social Security.
Pat L.

Are you serious? Please tell me are yoou serious? Typical Post crap.

well, U.S. Treasury paper is yielding below inflation...this means, the interest rates are negative (in real terms)....this means the U.S. Dollar will devalue further....and all of this is before the new "rescue plan" goes in practice.

It is now a critical time. The debt vs. productivity (i.e. income) ratio is very high and it has gotten to a saturation point where really does not matter these days whether the debt is held by the private sector or the public sector. The main issue is whether it can be paid back.

So, in a concerted effort between Wall Street and Washington, The U.S. Dollar MUST BE devalued to make the proportion of debt to overall income/productivity more acceptable. That, by itself, is a tough task as a mere 25 cent increase in gasoline price is now a household budget breaker.

Too bad, really. There was a time when the "Developed World" was financing the "developing world". Now, it seems that the "developing world" (i.e. China, Saudi Arabia, other oil and energy countries) or third-world and third worldish countries (including Russia, perhaps) must now finance the developed world.

So, the article above is correct. Wall Street has indeed lost its way.

"Tell me how this ends."
--Gen. Petraeus

It is only a 1.5 trillion dollar tsunami....so what is the big deal folks? :-)

Thanks for the article. We have to see whether there will be a wakeup call some time in the near future.

I share the Author's views, but a lot of what is happening was to be expected.

For the past few years, many people raised alarms about the US housing market, derivatives and the practices of investment bankers. In recent days, I have been going through articles and newsletters I saved as far back as four years ago and I am astonished with the accuracy of many ot their predictions.

I had some paper losses in recent weeks (collateral damage), but I can count myself as one of the very lucky investors because, at the advice of my bankers, I had pulled all my savings away from US and the USD a long time ago. All my investments are in the real economy (companies that produce real products).

I always remember a wise man said once that "it is when the tide goes out that we can see who has been swimming naked".

And a roman general, reporting to his emperor, said that he had seen the enemy and “they are us”. The Americans managed to do more damage to themselves than Al Qaeda, the “axis of evil” and all other assorted enemies combined. September 11 pales when compared with the misery this crisis will create in the US and, unfortunately, also around the world. I suspect it is just starting and this time it cannot be blamed on terrorism.

Mr. Ettefagh,

Yes. We have had no effective Democratic Party since WW II so there is no counterballance to the "masters of the universe" on Wall Street and in the White House. Can you believe that an American Vice-President once said, "Why are they [Latin Americans] attracted to communism? Because we exploit them."
--Henry A. Wallace.

Chris

Ralph, Ron, & Cynthia:

Now they're planning the crime of the century
Well what will it be?
Read all about their schemes & adventuring
It's well worth the fee

So roll up and see
How they rape the universe
How they've gone from bad to worse

Who are these men* of lust, greed, & glory?
Rip off the masks & let's see

But that's not right, oh no, what's the story?
There's you & there's me

That can't be right

Mr. Ettefagh appears to forget that is the duty and mission of every working American to kiss rich butt. That is the meaning of the 'Reagan Revolution' and the full consequence of its deregulatory zeal. This episode is simply an example of how this works in practice.

This is a conservative country. We like to give the money makers maximum freedom. We don't care about the consequences for individuals, their families or communities. I doubt there will be any significant changes.

Everyone has now started to realize that there, indeed is something seriously wrong with the "almighty market" economy.

Either it has lost its steam and become highly speculative to the benefit of its advocates and manipulators and to the detriment and loss of ordinary people.

Indeed sooner or later we need a democratic socialistic model (however stingy that word might sound to Americans) to create a balance together with a healthy balance between "human greed" and "human rights".

The best description of the whole mess in 3 sentences by Former NYBanker. Can't say it better than this.

Mr. Ettefagh's literary hyperbole detracts from his thesis and overlooks a fundamental cause of today's systemic financial problems, to wit, a 1980-90s change in the culture of commercial banking from sound credit analysis to "package & sell" investment banking.

Compounding the errors of perspective created by this "evolution", was the exalted reverence for young "rocket scientists" who could develop sophisticated financial algorithms, but who had no experience in dealing outside one standard deviation or with unusual situations which had occurred in their childhood or before.

The era of the new generation's interest in making their mark on the world (and a lot of money for themselves in the process) came with the denigration of experience (usually represented by grey hair) with its temperate business conservatism.

So as mid-life envy hit experienced senior management (or perhaps preceeded it with a pink slip), the kids were left to mind the candy store. No surprise then, that everyone now has to pay for their excess.

We've had 30 years worth of deregulation - the neo-liberal mantra preached by both major parties, the establishment press and almost every university economics department in the country. It is central to the current disasters. And if you want to identify a central figure in the legislated career of deregulation, there's no more resplendent a culprit than the man at McCain's elbow - Phil Gramm.

In 1999 John McCain's friend and now his closest economic counselor, then a senator from Texas, pushed through the Gramm-Leach-Bliley Act. It repealed the old Glass-Steagall Act, passed in the Great Depression, which prohibited a commercial bank from being in the investment and insurance business. President Bill Clinton cheerfully signed it into law.

A year later Gramm , chairman of the Senate Banking Committee, attached a 262-page amendment to an omnibus appropriations bill, voted on by Congress right before a recess. The amendment received no scrutiny and duly became the Commodity Futures Modernisation Act which OK-ed deregulation of investment banks, exempting most over-the-counter derivatives, credit derivatives, credit defaults and swaps from regulatory scrutiny.

Thus were born the scams that produced the debacle of Enron, a company on whose board sat Gramm's wife Wendy. She had served on the Commodity Futures Trading Commission from 1983 to 1993 and devised many of the rules coded into law by her husband in 2000.

http://www.ft.com/cms/s/0/dd9aa390-84d6-11dd-b148-0000779fd18c.html

From financialization of the economy to the socialisation of finance.

A small step for lawyers, a huge step for mankind.

Who said economics was boring?

Simply and clearly said. Thank you.

And from now on, it will be hard rock and no more rock and roll. I especially liked the "no bull" reference.