• Just in case you missed it - the devil is in the details

Inauguration Day - no more fibbing (updated)

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January 20 2009 - Should we? Tough road ahead, first time on a global scale.

January 10 2011 update - we should have known better, as soon as the financial adviser team was announced - too bad, but perfectly understandable, trying to make a change would have been a really risky endeavor - an understatement.

Now (Summer 2011) recalling these words of a well known economist "Deficit spending is simply a scheme for the confiscation of wealth." .

Summer 2012 - same old www.slate.com/blogs/spitzer/2012/08/10/goldman_sachs_pros...

live.wsj.com/video/why-wall-street-always-wins-post-crisi...

www.capitalismwithoutfailure.com/2012/04/bill-black-fraud...

The Federal Reserve is a Ponzi scheme ...

www.theatlantic.com/magazine/archive/2013/01/whats-inside...

See it large if you missed the telltale details

heat--flowy, silkway, Églantine, and 1 other people added this photo to their favorites.

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  1. vingt_deux 63 months ago | reply

    funny i should come across this... i was reading jackson's 1832 veto message to the senate on the train this morning.

  2. NYCandre 63 months ago | reply

    @vingt_deux: interesting coincidence, and hopefully many more will read more about this. Amazing how little the real issues are discussed in public. Of course now is not the time to worry about the fundamentals, we have an "economy" to save. And when times are "good" who cares about the fundamentals?

    @doylesaylor: well, events are moving fast - in Krugman's own words (for those who forgot, Krugman is an intellectual powerhouse, who happens to also write a column for the NY times, and did before he got the Nobel prize*) :

    " from the 2/6/2009 NY Times...
    Meanwhile, our main line of defense against recessions — the Federal Reserve’s usual ability to support the economy by cutting interest rates — has already been overrun. The Fed has cut the rates it controls basically to zero, yet the economy is still in free fall.

    It’s no wonder, then, that most economic forecasts warn that in the absence of government action we’re headed for a deep, prolonged slump. Some private analysts predict double-digit unemployment. The Congressional Budget Office is slightly more sanguine, but its director, nonetheless, recently warned that “absent a change in fiscal policy ... the shortfall in the nation’s output relative to potential levels will be the largest — in duration and depth — since the Depression of the 1930s.”

    Worst of all is the possibility that the economy will, as it did in the ’30s, end up stuck in a prolonged deflationary trap.

    We’re already closer to outright deflation than at any point since the Great Depression. In particular, the private sector is experiencing widespread wage cuts for the first time since the 1930s, and there will be much more of that if the economy continues to weaken.

    As the great American economist Irving Fisher pointed out almost 80 years ago, deflation, once started, tends to feed on itself. As dollar incomes fall in the face of a depressed economy, the burden of debt becomes harder to bear, while the expectation of further price declines discourages investment spending. These effects of deflation depress the economy further, which leads to more deflation, and so on.

    And deflationary traps can go on for a long time. Japan experienced a “lost decade” of deflation and stagnation in the 1990s — and the only thing that let Japan escape from its trap was a global boom that boosted the nation’s exports. Who will rescue America from a similar trap now that the whole world is slumping at the same time?

    Would the Obama economic plan, if enacted, ensure that America won’t have its own lost decade? Not necessarily: a number of economists, myself included, think the plan falls short and should be substantially bigger. But the Obama plan would certainly improve our odds. And that’s why the efforts of Republicans to make the plan smaller and less effective — to turn it into little more than another round of Bush-style tax cuts — are so destructive.

    So what should Mr. Obama do? Count me among those who think that the president made a big mistake in his initial approach, that his attempts to transcend partisanship ended up empowering politicians who take their marching orders from Rush Limbaugh. What matters now, however, is what he does next.

    It’s time for Mr. Obama to go on the offensive. Above all, he must not shy away from pointing out that those who stand in the way of his plan, in the name of a discredited economic philosophy, are putting the nation’s future at risk. The American economy is on the edge of catastrophe, and much of the Republican Party is trying to push it over that edge."

    History in the making, at the edge. And that;s only the domestic view. Out in Eastern Europe, Russia is flexing its muscle.

    (*) Remembering his funny remark, when asked what he was going to do with his prize money, he said he hadn't figured out what to do yet, was still trying to figure out which bank to deposit it with ;-)

  3. doylesaylor 63 months ago | reply

    I agree Andre events are moving fast. Tonight on Lehrer News hour their political analysts came out in the open and said the conservative era was over. The consensus effort by Obama is dying because of the inability of the right to admit their politics have bankrupted the country. We are now facing hard choices. Apparently Japan is sinking faster than us, and they could be the first big economy to implode. That means this moment is just the edge of the abyss with things still not yet clear of the hard times coming. They predict on the news now 'double' digit unemployment. That low numbers of people losing their jobs qualify for unemployment. This puts enormous pressure on the political system to respond. The rhetoric from Obama will follow this and the chasm will open between the right wing Republicans and the nation. This is going to a be wild ride from here. Good Luck Andre my friend.

  4. vision revision 63 months ago | reply

    We can never return to the "way is was" when the economy was barely working. Americans driven by Madison ave, and Wall street were using their homes for credit, plus averaging $16,000 debt on their credit cards. American homes are so packed with stuff there is hardly room to move from room to room. Everybody driving age in the family has their own car, computer, and closet crammed full of clothes with tags still on many of them. I go to a lot of estate sales, and the stuff they paid top dollar for goes for a nickel on the dollar, and most of it goes unsold. Timothy "speed" Levitch in the documentary "The Cruise" hit the nail on the head when he said "this can't go on" when talking about New York City businesses on his tour bus. Leon Russell's "There's a Hard Rain Gonna Fall" hit it in the ninety's. The hard rain is falling now, and a worse storm is coming soon. The people on planet earth will have to change, and change fast, by using new ideas that are in harmony with Mother Earth. The greed and self aggrandizement has to end and a new man must emerge on planet earth, now.

  5. NYCandre 63 months ago | reply

    @doylesaylor: good luck to us all ! I don't know if I should be happier to have a decent captain in charge of a sinking ship - if that's what is happening.

    @vision_revision: indeed, had "economic prosperity" continued the way it has over the past N years, we'd have even more nonsensical consumption. This has been said many times. I 'm sure even the Beatles have adressed this in music. To quote a more serious source, E.F. Shumacher:

    en.wikipedia.org/wiki/Small_is_Beautiful:

    " Schumacher was a respected economist who worked with John Maynard Keynes and John Kenneth Galbraith. For twenty years he was the Chief Economic Advisor to the National Coal Board in the United Kingdom, opposed the neo-classical economics by declaring that single-minded concentration on output and technology was dehumanizing. He held that one's workplace should be dignified and meaningful first, efficient second, and that nature (and the world's natural resources) is priceless. "
    ...
    "[A modern economist] is used to measuring the 'standard of living' by the amount of annual consumption, assuming all the time that a man who consumes more is 'better off' than a man who consumes less. A [sensible] economist would consider this approach excessively irrational: since consumption is merely a means to human well-being, the aim should be to obtain the maximum of well-being with the minimum of consumption. . . . The less toil there is, the more time and strength is left for artistic creativity. Modern economics, on the other hand, considers consumption to be the sole end and purpose of all economic activity."

  6. vision revision 63 months ago | reply

    Feb 9 issue of the New Yorker covers Florida's mess that is extending everywhere. Catch it if you can Andre.

  7. NYCandre 63 months ago | reply

    Duly noted - thanks !

  8. NYCandre 60 months ago | reply

    What happened, and therefore how this could be cured and prevented in the future *if* there is somewhere the political will (no easy matter considering current balance of power), is very simple

    1- Money has been masqueraded as debt, and the purveyors of debt are in unregulated private hands.

    2- Derivative instruments /markets and lax regulation enabled an enormous leveraging of this excessive de-facto large scale private taxation (to put it politely)

    For an analysis of the crisis, discussed by Maurice Allais ( economics Nobel Prize '88) as early as the 90's, see
    fauxmonnayeurs.org/articles.php?lng=fr&pg=47

    And for an informative and entertaining video, see Paul Grignon's DVD video www.moneyasdebt.net/ which can be found on the net too,

  9. doylesaylor 60 months ago | reply

    Fiat currency or printed at will money is to the advantage of the U.S. because the dollar is the global exchange standard. Gold proved too damaging when it carried that role and Nixon pulled a fast one on the whole world by dropping Bretton Woods agreements that tied currencies together after WWII. Most states when their debt gets too high suffer great fluctuations in their money worth that soon yield crises in their economies. Not so the U.S. Sometimes others propose say the Euro as an alternative but all governments are obliged to keep dollars in reserve to cushion their state economies and would see such currency moves to another standard hurting their hoarded dollar wealth.

    The current crisis is being fought by the Obama administration as a re-inflation of the world economy. Hence if inflation takes hold the dollar will drop in value. If that becomes a plummet then the threat is a dollar devaluation which would rob the hoarded money in other national treasuries of their current value. For example a 25% devaluation makes a 100 billion 750 million over night.

    This brings up the U.S.'s chief creditor China. China is locked into a high voltage high wire act with the U.S. Any move to break the connection with the U.S. dollar from China would send the value of the remaining saved dollars in their treasury going down precipitously. They can not move away from the saved dollar without pretty bad consequences. Yet Obama is now moving toward an eventual devaluation of the dollar which effectively does the same thing as if China sold off the dollar.

    Is the dollar going to continue as the global currency? That question is likely the outcome of this world financial crisis. A question is a question but the answer is not yet clear.

  10. NYCandre 48 months ago | reply

    From no other than our own Alan Greenspan when he was still seeing straight:

    "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

    This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

    --- Alan Greenspan

  11. doylesaylor 48 months ago | reply

    Right now things look distinctly like deflation starting up. Gold has risen pretty high it's true which one could say is a sign of inflation. I think that is some sort of flight to safety, not a reflection of fundamental economy. Europe is moving toward stringent austerity which puts pressure on wages downward. Then debt gets more onerous. That is a contagion for Europe. And their contagion spreads toward the U.S. whose debt load weighs heavily too. There are a lot of inflationary efforts like the bailouts but they are short of the goal and have so far postponed wage and price falls. But a U.S. deflation is creeping closer and closer.

  12. NYCandre 40 months ago | reply

    A radical view and theory/ explanation of money that merits better attention by Jean Bayard
    jeanbayard.blog.lemonde.fr/2010/12/19/quest-ce-que-la-mon...
    Unfortunately in Fench only. The complete theoretical framework:
    www.bayard-macroeconomie.com/
    And recommendations to resolve our situation
    jeanbayard.blog.lemonde.fr/2010/11/28/sortir-de-la-crise-...

    Not sure how they relate to Maurice Allais's own recommendations in the 80's

  13. NYCandre 40 months ago | reply

    Sober reminder that so many people are out of touch - especially top decision makers, like Alan Greenspan - but great to see some honest voices
    www.youtube.com/watch?v=nBnKh6B2cMw&feature=related
    Best seller Greider's
    www.amazon.com/Come-Home-America-Redeeming-Promise/dp/160...
    www.amazon.com/Secrets-Temple-Federal-Reserve-Country/dp/...

  14. NYCandre 40 months ago | reply

    Gold
    Money

    "Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants - but debt is the money of slaves."

    Norm Franz, Money and Wealth in the New Millenium

    Walmart video, back in 2005
    sendables.jibjab.com/originals/big_box_mart

    ...

    1/10/2011 28.29 4/26 44.03 7/22 39.03 min 26.08 for a few days in Jan

  15. NYCandre 32 months ago | reply

    Wars
    No More Weapon Sales
    No more weapons sale

    Two years later, early 2011, unfortunately it has gotten worse if anything, at least for the "average" guy..and it's only going to get catastrophically worse
    Check this video .. The End of America”: Porter Stansberry Sees the Future ... And It's Grim

    Posted Feb 16, 2011 07:30am EST by Stacy Curtin

    If you thought the economy was starting to improve, think again. Things are actually going to take a turn for the worse -- much worse, says Porter Stansberry, founder of Stansberry & Associates.

    In a shocking video entitled “The End of America”, Stansberry paints a very grim picture of the future of the United States. According to Stansberry & Associates, the Web video has been seen by more than 7 million people since its launch late last year.

    Stansberry is not predicting the end of days or the collapse of our political union. But he is forecasting the end of America’s global economic dominance, ultimately resulting in rioting and protests across the country.

    With trillions of dollars of debt and a Federal Reserve that has engaged in two rounds of quantitative easing (and QE3 potentially on the way), his point is that the financial stability of this country is on shaky ground. “Sooner or later our creditors are going to say 'enough is enough',” he tells Aaron in the accompany clip. “We need a reliable currency that can’t be printed.”
    .....
    And mid august - not too hard to figure out who's right / wrong.
    finance.yahoo.com/blogs/daily-ticker/dow-20-000-vs-end-am...

    When it comes to the market views (and hairstyles), James Altucher and Porter Stansberry couldn't be more different.

    Altucher is perennially bullish and made a "Dow 20,000" forecast on The Daily Ticker earlier this year.

    Stansberry, on the other hand, caused waves when he discussed his "The End of America" video presentation in an interview here in February.

    Given all that's gone on in the past few weeks — S&P's downgrade, huge market swings, Europe's implosion, the debt-ceiling dysfunction, etc. — we thought it'd be fun to get Altucher and Stansberry together for an old-fashioned bull-bear debate.

    True to form, Stansberry remains extremely negative while Altucher is resolutely upbeat.

    "A lot of great things are going on," Altucher says, citing:

    * Stronger-than-feared economic reports such as ISM, jobless claims and housing starts.
    * Strong second-quarter earnings and attractive valuations on stocks such as Apple.
    * Corporations starting to put cash to work via mergers (See: Google-Motorola Mobility) and/or share buybacks.

    The Brewing Storm

    As you might imagine, Stansberry disagrees. He's recommending clients be 50% in gold and 50% in cash if they're not willing (or able) to actively short stocks.

    Stansberry believes Europe's debt crisis will only intensify in the coming year, predicting Italy's Unicredit will be "the next big domino to fall."

    If Unicredit fails, "Italy can't bail it out and Germany will not bail Italy out," he says, predicting Germany will leave the EU within the next 12 months.

    But Stansberry is even more bearish on the U.S., predicting the dollar will lose its reserve status and the Treasury "bubble" will burst. "There's a huge storm brewing," he says. "Everyone with any sense is leaving the [Treasury] market, including a lot of our trading partners and central banks."

    By his own admission, Stansberry has been wrong about the Treasury market, which showed incredible strength last week, even after S&P's downgrade.

    Altucher, of course, sees it differently. The "flight to safety" trade into Treasuries is a sign of "people's confidence in the dollar as the ultimate reserve currency," he says. "That'll continue to be the case as long as we continue to be the leaders in innovation, creativity, biotechnology, Internet technology. I don't see that changing at all; in fact I only see that growing."

    Stansberry's counter: Altucher is "mistaking liquidity for security," he says, noting gold also surged last week while last Thursday's 30-year Treasury auction was lousy, at best.

    As you'll see in the accompanying video, Altucher and Stansberry don't agree on much and could probably go back and forth with the point-counterpoints for hours, if not days.

    What do you think? Who's right or are they both just plain nuts?

    Edelson video Sep 2011

  16. NYCandre 20 months ago | reply

    How Andrew Jackson Killed the Second Bank of the United States

    "Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country.

    When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin!

    Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out."

    From the original minutes of the Philadelphia bankers sent to meet with President Jackson February 1834, from Andrew Jackson and the Bank of the United States (1928) by Stan V. Henkels.

    youtu.be/JaWXSCwLaBo

    "...It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth can not be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society-the farmers, mechanics, and laborers-who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government. There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing. In the act before me there seems to be a wide and unnecessary departure from these just principles.

    Nor is our Government to be maintained or our Union preserved by invasions of the rights and powers of the several States. In thus attempting to make our General Government strong we make it weak. Its true strength consists in leaving individuals and States as much as possible to themselves-in making itself felt, not in its power, but in its beneficence; not in its control, but in its protection; not in binding the States more closely to the center, but leaving each to move unobstructed in its proper orbit.

    Experience should teach us wisdom. Most of the difficulties our Government now encounters and most of the dangers which impend over our Union have sprung from an abandonment of the legitimate objects of Government by our national legislation, and the adoption of such principles as are embodied in this act. Many of our rich men have not been content with equal protection and equal benefits, but have besought us to make them richer by act of Congress. By attempting to gratify their desires we have in the results of our legislation arrayed section against section, interest against interest, and man against man, in a fearful commotion which threatens to shake the foundations of our Union.

    It is time to pause in our career to review our principles, and if possible revive that devoted patriotism and spirit of compromise which distinguished the sages of the Revolution and the fathers of our Union. If we can not at once, in justice to interests vested under improvident legislation, make our Government what it ought to be, we can at least take a stand against all new grants of monopolies and exclusive privileges, against any prostitution of our Government to the advancement of the few at the expense of the many, and in favor of compromise and gradual reform in our code of laws and system of political economy.

    I have now done my duty to my country. If sustained by my fellow citizens, I shall be grateful and happy; if not, I shall find in the motives which impel me ample grounds for contentment and peace. In the difficulties which surround us and the dangers which threaten our institutions there is cause for neither dismay nor alarm. For relief and deliverance let us firmly rely on that kind Providence which I am sure watches with peculiar care over the destinies of our Republic, and on the intelligence and wisdom of our countrymen. Through His abundant goodness and heir patriotic devotion our liberty and Union will be preserved."

    Excerpt from Andrew Jackson's Veto Message to the Senate on the Second Bank of the United States

    michael-hudson.com/2012/08/overview-the-bubble-and-beyond/

  17. NYCandre 16 months ago | reply

    www.bloomberg.com/news/2012-02-20/icelandic-anger-brings-...

    Icelandic Anger Brings Debt Forgiveness in Best Recovery Story
    By Omar R. Valdimarsson - Feb 19, 2012 7:01 PM ET

    Icelanders who pelted parliament with rocks in 2009 demanding their leaders and bankers answer for the country’s economic and financial collapse are reaping the benefits of their anger.

    Since the end of 2008, the island’s banks have forgiven loans equivalent to 13 percent of gross domestic product, easing the debt burdens of more than a quarter of the population, according to a report published this month by the Icelandic Financial Services Association.
    Enlarge image Icelandic Anger Brings Debt Forgiveness

    A cyclist passes an Icelandic national flag hanging in a popular shopping street in Reykjavik, Iceland. Photographer: Paul Taggart/Bloomberg

    “You could safely say that Iceland holds the world record in household debt relief,” said Lars Christensen, chief emerging markets economist at Danske Bank A/S in Copenhagen. “Iceland followed the textbook example of what is required in a crisis. Any economist would agree with that.”

    The island’s steps to resurrect itself since 2008, when its banks defaulted on $85 billion, are proving effective. Iceland’s economy will this year outgrow the euro area and the developed world on average, the Organization for Economic Cooperation and Development estimates. It costs about the same to insure against an Icelandic default as it does to guard against a credit event in Belgium. Most polls now show Icelanders don’t want to join the European Union, where the debt crisis is in its third year.

    The island’s households were helped by an agreement between the government and the banks, which are still partly controlled by the state, to forgive debt exceeding 110 percent of home values. On top of that, a Supreme Court ruling in June 2010 found loans indexed to foreign currencies were illegal, meaning households no longer need to cover krona losses.
    Crisis Lessons

    “The lesson to be learned from Iceland’s crisis is that if other countries think it’s necessary to write down debts, they should look at how successful the 110 percent agreement was here,” said Thorolfur Matthiasson, an economics professor at the University of Iceland in Reykjavik, in an interview. “It’s the broadest agreement that’s been undertaken.”

    Without the relief, homeowners would have buckled under the weight of their loans after the ratio of debt to incomes surged to 240 percent in 2008, Matthiasson said.

    Iceland’s $13 billion economy, which shrank 6.7 percent in 2009, grew 2.9 percent last year and will expand 2.4 percent this year and next, the Paris-based OECD estimates. The euro area will grow 0.2 percent this year and the OECD area will expand 1.6 percent, according to November estimates.

    Housing, measured as a subcomponent in the consumer price index, is now only about 3 percent below values in September 2008, just before the collapse. Fitch Ratings last week raised Iceland to investment grade, with a stable outlook, and said the island’s “unorthodox crisis policy response has succeeded.”
    People Vs Markets

    Iceland’s approach to dealing with the meltdown has put the needs of its population ahead of the markets at every turn.

    Once it became clear back in October 2008 that the island’s banks were beyond saving, the government stepped in, ring-fenced the domestic accounts, and left international creditors in the lurch. The central bank imposed capital controls to halt the ensuing sell-off of the krona and new state-controlled banks were created from the remnants of the lenders that failed.

    Activists say the banks should go even further in their debt relief. Andrea J. Olafsdottir, chairman of the Icelandic Homes Coalition, said she doubts the numbers provided by the banks are reliable.

    “There are indications that some of the financial institutions in question haven’t lost a penny with the measures that they’ve undertaken,” she said.
    Fresh Demands

    According to Kristjan Kristjansson, a spokesman for Landsbankinn hf, the amount written off by the banks is probably larger than the 196.4 billion kronur ($1.6 billion) that the Financial Services Association estimates, since that figure only includes debt relief required by the courts or the government.

    “There are still a lot of people facing difficulties; at the same time there are a lot of people doing fine,” Kristjansson said. “It’s nearly impossible to say when enough is enough; alongside every measure that is taken, there are fresh demands for further action.”

    As a precursor to the global Occupy Wall Street movement and austerity protests across Europe, Icelanders took to the streets after the economic collapse in 2008. Protests escalated in early 2009, forcing police to use teargas to disperse crowds throwing rocks at parliament and the offices of then Prime Minister Geir Haarde. Parliament is still deciding whether to press ahead with an indictment that was brought against him in September 2009 for his role in the crisis.

    A new coalition, led by Social Democrat Prime Minister Johanna Sigurdardottir, was voted into office in early 2009. The authorities are now investigating most of the main protagonists of the banking meltdown.
    Legal Aftermath

    Iceland’s special prosecutor has said it may indict as many as 90 people, while more than 200, including the former chief executives at the three biggest banks, face criminal charges.

    Larus Welding, the former CEO of Glitnir Bank hf, once Iceland’s second biggest, was indicted in December for granting illegal loans and is now waiting to stand trial. The former CEO of Landsbanki Islands hf, Sigurjon Arnason, has endured stints of solitary confinement as his criminal investigation continues.

    That compares with the U.S., where no top bank executives have faced criminal prosecution for their roles in the subprime mortgage meltdown. The Securities and Exchange Commission said last year it had sanctioned 39 senior officers for conduct related to the housing market meltdown.

    The U.S. subprime crisis sent home prices plunging 33 percent from a 2006 peak. While households there don’t face the same degree of debt relief as that pushed through in Iceland, President Barack Obama this month proposed plans to expand loan modifications, including some principal reductions.

    According to Christensen at Danske Bank, “the bottom line is that if households are insolvent, then the banks just have to go along with it, regardless of the interests of the banks.”

    To contact the reporter on this story: Omar R. Valdimarsson in Reykjavik valdimarsson@bloomberg.net.

  18. NYCandre 16 months ago | reply

    From no other than PIMCO's chief Bill Gross

    www.pimco.com/EN/Insights/Pages/Wall-Street-Food-Chain.aspx
    www.readability.com/articles/zlpu9noi

    " . .The whales of our current economic society swim mainly in financial market oceans. Innovators such as Jobs and Gates are as rare within the privileged 1% as giant squid are to sharks, because the 1% feed primarily off of money, not invention. They would have you believe that stocks, bonds and real estate move higher because of their wisdom, when in fact, prices float on an ocean of credit, a sea in which all fish and mammals are now increasingly at risk because of high debt and its delevering consequences. Still, as the system delevers, there are winners and losers, a Wall Street food chain in effect.

    These economic and/or financial food chains depend on lots of little fishes in the sea for their longevity. Decades ago, one of my first Investment Outlooks introduced “The Plankton Theory” which hypothesized that the mighty whale depends on the lowly plankton for its survival. The same applies in my view to Wall, or even Main Street. When examining the well-known wealth distribution triangle of land/labor/capital, the Wall Street food chain segregates capital between the haves and have-nots: The Fed and its member banks are the metaphorical whales, the small investors earning .01% on their money market funds are the plankton. Yet similar comparisons can be drawn between capital and labor. We are at a point in time where profits and compensation of the fortunate 1% – both financial and non-financial – dominate wages of the 99% and the imbalances between the two are as distorted as those within the capital food chain itself. “Ninety-nine for the one” and “one for the ninety-nine” characterizes our global economy and its financial markets in 2012, with the obvious understanding that it is better to be a whale than a plankton. Not only do Wall Street and Newport Beach whales like myself have blowholes where they can express their omnipotence as they occasionally surface for public comment, but they don’t have to worry as yet about being someone else’s lunch. "

    ...

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