Treasury Secretary Paulson made a really, really good effort to help keep steeply declining asset values backing these Structured Investment Vehicles from being marked to market. Hopefully one or two of the entities involved will survive long enough to offer him a well-deserved well-paid, post-administration titular position. He kinda went out on a limb there for those guys. Though sadly, as investor confidence ?shatters?, it appears another mechanism to delay price discovery is still needed. If it doesn?t appear soon, the bullet-biting and belt-tightening is likely to continue unabated. As mortgage resets, declining real property values, defaults and foreclosures erode both cash flows and the underlying equity who?s going to loan these guys money? Is a rate cut enough?
[Meanwhile] if you are feeling encouraged by [end-October?s] report of 3.9% GDP growth do yourself a favour. Don?t bet on it. Read Peter Schiff [hyperlink], and read it all the way through. It?s short. You need to have some idea of where these numbers come from and how they are adjusted. It?s getting harder and harder to believe these numbers have any direct link to reality. This latest report needs to be adjusted for the rapidly falling integrity index. Inflation at 0.8 per cent??These people must all have someone else to do their shopping for.
Here?s an extract from Schiff?s commentary:
?Yesterday, as the dollar fell to new record lows and oil and gold prices surged to new highs, Wall Street remained fixated on wholly meaningless government data that managed to report the lowest inflation in the last half century. These bizarre numbers were integral in allowing the Commerce Department to report 3.9% annualized GDP growth in the third quarter, which was heralded by the bulls as evidence that a resilient US economy had shrugged off the problems in the housing and mortgage markets. However, the government?s ability to make ?economic growth? magically appear is based purely on statistical finesse.?
Here?s a MarketWatch report: ?As odd as it sounds, the government reported that inflation was at a four-decade low in the third quarter, primarily because import oil prices rose so much.?
If you don?t understand that, welcome to the confusing world of national accounting, where up sometimes is down, and where sometimes one plus one can equal zero.
Beyond irony: pay no attention to the man behind the curtain.
Okay, am done now.
?The visible hand ecoecon.wordpress.com/