Capitulation, Japanese-Style

Apparently, Japan's market has now gone down to 1982 levels. Oh, it gets even worse--DJIA futures are down 352+ points last time I looked. [It got worse--see chart above.]

http://www.bloomberg.com/apps/news?pid=20601101&sid=aRTtcZqFRnII

Sigh. I wish I could go to sleep and wake up in May 2009, when I think the Dow will be back up to 10,000. In any case, I call capitulation. I called it too early before, but I call it now. October 24, 2008. Capitulation.

Update on October 24, 2008: no 1,000 point drop today, but it's still a bad day--DJIA still down 200+ points.

Atwood on Debt

Atwood hits the nail on the head in her 10/21/08 NY Times Op-Ed:

Atwood Op Ed

But at some point we stopped seeing debt as a simple personal relationship. The human factor became diminished. Maybe it had something to do with the sheer volume of transactions that computers have enabled. But what we seem to have forgotten is that the debtor is only one twin in a joined-at-the-hip pair, the other twin being the creditor. The whole edifice rests on a few fundamental principles that are inherent in us.

In my "OCM" post, I made the same point:

OCM Post

It wasn’t just leverage that caused this financial collapse—it was the attenuated way in which various people could make money. For example, a mortgage broker could loan hundreds of thousands of dollars over the phone to an applicant or after meeting him for half an hour and filling out some forms. After this initial contact, the broker had no interest whatsoever in the applicant/debtor. The broker received a fee from the bank for giving it the loan, and the bank sold the loan it generated to other investors as part of a larger package. The story is old now, but deserves to be told, because too many people miss its crucial point: attenuation leads to irresponsibility.

Somebody Saw It Coming

Check out the Economist's cover, dated March 2007. Hat tip to "Escape from Brooklyn" blog:

http://escapebrooklyn.blogspot.com/

South America Decoupling from U.S.?

Is South America finally decoupling from the U.S.? The CS Monitor seems to think so:

http://www.csmonitor.com/2008/1024/p06s01-woam.html

Greenspan at the Confessional

I hate to kick a man when he's down, but the NY Times beat me to it:

http://www.nytimes.com/2008/10/24/business/economy/24panel.html

I remember Greenspan raising interest rates towards the end of his tenure (ah, the days of earning 5% on basic money market accounts). Greenspan did see the excess--just not soon enough.

As Tom "American Treasure" Toles implies in this 3/4/05 Washington Post cartoon, how independent was Greenspan? Was much of Greenspan's unwillingness to raise rates was because of the Bush administration's policies and Greenspan's desire not to lose his job?

Living on a Prayer

From The NY Times:

http://www.nytimes.com/2008/10/23/garden/23foreclosure.html

Forty-four percent of employees live paycheck to paycheck, according to a survey conducted by MetLife in late 2007, and 48 percent of American households have less than $5,000 in liquid assets according to Edward Wolff, an economist specializing in the study of poverty and income distribution at New York University.

Funny: Bernanke to the Rescue

In these volatile times, we gotta have some humor. Here's a funny Bernanke montage explaining the monetarian philosophy (i.e., when times are bad, the government should inject/drop money to stimulate the economy). Make sure the music is on--it's the music that makes everything so good:

http://moneyhelicopters.ytmnd.com/

Hat tip to Prof. Mankiw.