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Friday Night Thoughts

Another Friday, another bank failure. The Georgian Bank, which 99% of most Americans had never heard of until today, will cost the FDIC approximately another one billion dollars. But there is a difference between the bank failures that have been announced during the past year and the bank failures (Lehman) and close calls (Wachovia, Washington Mutual, Merrill Lynch) that convulsed the United States financial system one year ago. The difference is that the FDIC and the Federal Reserve, having learned from the experience of 2008, are letting the air out of the balloon slowly now. Instead of a tidal wave of failures the United States government is simply allowing a slowly rising tide of financial insolvency to flood the U S economy. It's a proven tactic for politicians because it has the effect of postponing the inevitable banquet of consequences where pols (as someone said of the healthcare debate) might find themselves not at the table, but on the menu.

While it is uncanny how deft today's politicians have become at deflecting responsibility for the financial mess we are in, the cause of our current dilemma rests squarely on the shoulders of taxpayers and consumers that spent more than they earned, borrowed more than they could afford and lived lifestyles that bore no resemblance to their own actual economic condition. Such is the stuff of all economic bubbles. However, these same people that overextended themselves are now deep into the process of righting their personal financial affairs. The household savings rate is now at historically high levels. Household debt reduction is also at similarly high levels. Individuals and households got the message that life has changed. However, the Congress shows no such discipline and the legacy of this policy will be stagnant growth, high unemployment and no wealth creation. It is this trifecta, which last manifested itself in the 1970's, that will send many Congressmen into retirement. But will anyone remember this when it all comes apart?

Lately much has been said about voter anger. The legacy media continues to either ignore the legitimate Tea Party protests or portray other exhibitions of voter anger as the result of fringe movements. This is nothing more than an exercise in avoidance. The real voter anger will come in a few years when the full effect of a deflated dollar, diminished personal family wealth, and today's children find out that they can't get a job....and that may be a best case scenario. It assumes, for example, that the United States will still enjoy the national security it has today and that it has suffered no military defeat or terrorist attacks.

Our country skates on thin ice today wherein that thin line separates our economy and security (domestic and foreign) from very serious trouble. As Kevin noted earlier, some believe Republicans are leaderless while Democrats are out of control. Others believe Democrats are leaderless while Republicans are irrelevant. Whichever is the case, an earthquake is coming. Evidence of it is in the popular culture where apocalyptic stories permeate television and books. (Hell, even bomb shelters are on the rise (pardon the metaphor).) One wonders if anyone in Washington is actually paying attention.


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Comments (23)

"One wonders if anyone in W... (Below threshold)
GarandFan:

"One wonders if anyone in Washington is actually paying attention."

I seriously doubt it. Just watch one of Pelosi's pressers on Tuesday. You have to wonder what planet she's on. And she's the LEADER of the House. As for Reid, is he even alive?

CAN YOU SEE ME? CAN YOU HEA... (Below threshold)
kathie:

CAN YOU SEE ME? CAN YOU HEAR ME? The answer is no. The Democrats are on a mission that they have been planning for a decade and by God, they will achieve their goal. Anyway that is what they are thinking.

Heck, just look at gun and ... (Below threshold)
CDR M:

Heck, just look at gun and ammo sales. Through the roof!! As is a lot of survival equipment. You are right, the politicians and the MSM still haven't gotten it. Real people have and that knowledge is spreading. People tend to take notice what is going on around them and take that as reality and are starting to question the media and government. Real people in the real world don't see the glimmers of hope that the MSM and White House are selling. That is why the polls continue to decrease for the White House. The people are not buying and they are watching very closely now.

I blame ACORN for the banki... (Below threshold)
Burt:

I blame ACORN for the banking failures. I saw a video of one of their agents advising clients to put their money in a tin box and bury it in the back yard. If banks can't get the depositers they will go under.

Do you believe that the gov... (Below threshold)
Pink Pig:

Do you believe that the government is vitally important to economic health? It sounds like it.

I've heard a lot of doomsday pronouncements in my years, but nothing has ever happened.

Pelosi always cmes across a... (Below threshold)
SamIam:

Pelosi always cmes across as a bonafide lunatic. I think she is a sociopath who knows that she is helping bring down the American system and relishes it because she believes it will usher in a utopia.

The Democrats are doing a s... (Below threshold)
davidt:

The Democrats are doing a smash and grab, as theives call it.

Do you believe that the ... (Below threshold)
wait just a minute:

Do you believe that the government is vitally important to economic health? It sounds like it.

I've heard a lot of doomsday pronouncements in my years, but nothing has ever happened.

And it is precisely because of stupid old farts like yourself that we find ourself with many of these structural problems. People warned you for years - sometimes few people, sometimes many, depending on the crisis - and people like YOU said, well, exactly what you've just said. Not enough people listened, and they passed the bill down to my generation.

I don't think so. Guess what; my generation gets to choose the previous generation's nursing home. Or lack thereof.

It isn't that we need the gov't to save us, it's that we need them - for crying out loud - to STOP any of a thousand things they are doing to make things worse. They're mucking about on a scale - in dollar amounts - that the world has never seen.

Some things are intentional, in terms of delaying our crash landing in return for making it worse when it comes. Others are a side effect of various power grabs and policy obsessions.

As it stands now, we are far beyond the point of no return. Too much damage has been done, too much funny money has been spent. They are, as davidt points out, doing a smash and grab, but they lack full comprehension of the effects of their actions.

Unless we come up with some sort of snappy name for this, the Great Depression is going to get renamed much the same way the Great War did. An honest look at the numbers shows that a number of metrics are already worse than that.

Gerald Celente has it right; people who lose everything and have nothing to lose... lose it.

If the earthquakes don't ge... (Below threshold)

If the earthquakes don't get you, it'll either be 2012, Y2K, or killer bees.

Meanwhile, part of any problems you have is that your leaders are - at the least - not as effective as they could be. In the case of some tea party leaders, they're dramatically incompetent. In the case of others like Beck, they're mostly just clowns and they're helping drag us towards Idiocracy rather than trying to put the brakes on it. Certainly, Beck has to be a showman in order to get attention, but it's not like he's trying to look at specific policies and think things through. And, it's not like he's encouraging his followers to 24ahead.com/glenn-becks-five-points-explained do things that would be much more effective than childish stunts like sending tea bags.

Good post. Several points:... (Below threshold)
F:

Good post. Several points:

If blame is to be apportioned, put Barney Frank and Fannie Mae/Freddie Mac at the top of the list. And the speed with which he threw ACORN under the bus makes it obvious he knows he has to reverse course entirely. Loyalty? Not from Mr. Frank.

American "taxpayers and consumers" might bear a lot of responsibility for what went wrong, but not all of them. My wife and I maintained a minimum credit card balance, paid it every month, and kept a healthy savings account. Responsibility did not pay dividends, though: our house is worth half as much as when we bought it, but because we were careful to make the mortgage each month we don't even qualify for government help. Responsible citizens like my wife and me appear to be the fools in this scenario.

Congressmen being sent into retirement? Bring it on. For the lot of 'em.

"Legacy media." Not. They have turned out to be less of an inheritance than an embarrassment. How about "lapsed media?"

F

wait just a minute,<p... (Below threshold)
Ennis:

wait just a minute,

The problem with "your generation" is that you are spoiled, lazy, weak and way too full of "self esteem". You have had everything handed to you on a silver platter, too.

Perhaps if your parents had not wasted so much money on you and your every little whim we all would not be in this situation.

I left home and had a job, my own apartment and car at 18. I paid cash to put myself through college-money I earned myself. I bought a house eight years ago after living for decades in apartments and saving up enough money so I would have enough to put 30% down when I bought one. I didn't get a big fancy house, I got one that is rather small by most people's standards but at least the mortgage payments do not exceed 20% of my monthly salary. I pay cash for just about everything-from groceries to furniture to cars. I have one credit card that has a $578 balance on it.

Can you say the same? I don't think so.

Instead of working your way through college without a scholarship, taking out a loan or getting any help from mom and dad like many in my generation did your generation sent your parents into hock paying for it or you overextended yourselves with student loans and credit cards.

Instead of getting a job and saving up to buy a old "beater" car with cash you either expect your parents to give you brand new one or went into debt buying a brand new one with little or no money down.

You have to have the latest toys, too. I have a cell phone, it is 5 years old and it is a "pay as you go" phone that I only use in emergencies. It costs me $10/month. You, on the other hand, have the latest, most expensive, phone you can buy and it is either constantly plastered to your ear or you are wearing out your fingers texting inanities at everyone. All this indicates to me that you are spending alot of money on a cell phone contract.

Don't tell me that is not so because I know too many people who have spoiled little wallet leeches sucking them dry just like you.

One other thing...

I look at you and the rest of your "generation" and I think of two words-job security. The last time a position opened up where I work my old boss got so fed up and disgusted with the lack of qualifications and knowledge (despite the applicants having college degrees), unreasonable demands, arrogance and general selfishness of "your generation" that he eventually stopped even considering anyone under the age of 35.

I can feel it building too ... (Below threshold)
w:

I can feel it building too but there won't be any earthquakes until enough people realize it's not about "democrats versus republicans", old versus young (that's just a wedge the government uses), or whatever. It never has been. It's about "them versus us", government versus we the people. That trend has been apparent since old Joe Kennedy went to Washington, (he knew which way the wind was blowing). If (or perhaps this time it's becoming when) enough choose to no longer be serfs, then heaven help us...and them! History is replete with the examples of what follows... and I think at least some of our fellow citizens learned those lessons too, hence the gun/ammo sales, stockpiling of other provisions and sales of revolutionary era flags. With our governments constant issuing of home grown "terrorist threats" warnings they see the possible storm coming too...Let's hope and pray our Jacobin phase comes less costly...Good luck y'all

There's downright deception... (Below threshold)
egoist:

There's downright deception, me thinks, too. I have peeked in on the debt [nearly] every night for about 10 or 12 years. Lately (last several months), it isn't really moving up. Are we to believe that? FDIC is busted, intent on borrowing from the busted banks. What money did they use for last night's action?

"It can't happen here, and not now" cries - from my friends - have become less frequent. Either they've changed their mind or think my decades of advice to secure their money in things (rather than dollars) is so kooky that they no longer worth their breath.

There is a lot of ruin in a... (Below threshold)
Paul:

There is a lot of ruin in a country. Look at Zimbabwe. It's been declining for decades. How about the Russia, from the corrupt Czars to Putin, over a 100 years of killing, murderious, depopulating ruin.

We've got a good hundred years yet to slide.

Enjoy.

"One wonders if anyone in W... (Below threshold)
Salt Lick Author Profile Page:

"One wonders if anyone in Washington is actually paying attention."

My Senators and Congressmen have responded to my letters -- suggesting they reform Medicare and Social Security before tackling the entire health care system -- by telling me they intend to what they think best, which is "reform" the entire system. All indications from their letters and their town hall meetings are that they see themselves as the peoples' Guardians, not representatives.

@ Ennis "Perhaps if your pa... (Below threshold)

@ Ennis "Perhaps if your parents had not wasted so much money on you and your every little whim we all would not be in this situation."

If you're talking about the Boomers, you're right. If you're talking about the generation X'ers, they're getting it done in the sand where the Boomers eff'ed up mawking about peace signs instead of getting it done in the jungle--and the Democrats screwed to the pooch there too, come to think of it.

If you don't currently own ... (Below threshold)
Dobby:

If you don't currently own a gun, buy one. Or maybe buy a couple, with plenty of ammunition. And if you need any medical procedures or dental work done, get it done as soon as possible. Try to get in the best physical shape as possible. It the crap hits the fan and the dollar collapses, you better be ready and prepared. The government is broke and they won't be able to help you. Self reliance will be the key going forward. We live in interesting times.

Do you believe tha... (Below threshold)
Angry Youngster:
Do you believe that the government is vitally important to economic health? It sounds like it.

I've heard a lot of doomsday pronouncements in my years, but nothing has ever happened.

Nope. We believe the government is extremely dangerous to our economic health and needs to be neutralized.

If you think "nothing has ever happened" you apparently haven't noticed the current economic meltdown. We're at about 10% unemployment, and that's according to the official figures, which are based on the number of people seeking unemployment benefits; the real number of jobless is probably somewhere more around 15%, and that's not counting the underemployed.

So what's it going to take before you admit we've reached doomsday, 20% unemployment? Breadlines? Shanty towns? Gold at $10,000 an ounce? The fun has only just begun, believe you me.

The problem with "your generation" is that you are spoiled, lazy, weak and way too full of "self esteem". You have had everything handed to you on a silver platter, too.

Ought to be more careful about those sweeping generalizations, pal. I'm from that generation you're talking about, and I resent your implication that we're all like our fool colleagues--and no small number of fools in your generation, Ennis--who voted the far left and its Satanic cult leader into office last year.

Perhaps if your parents had not wasted so much money on you and your every little whim we all would not be in this situation.

That doesn't describe my folks at all, nor many people's parents, I suspect. If people from your generation have been indulging anybody's whims, it's been mainly their own, just as they were doing back in the 1970s when things turned out a lot the same way as they have now. Some old hippies just never learn, do they?

I left home and had a job, my own apartment and car at 18. I paid cash to put myself through college-money I earned myself.

Well, as Matt Foley might say, La-de-frickin'-da! So where's an 18-year-old supposed to get a job these days, oh buffoonish and arrogant sentimentalist? In case you haven't noticed, your generation pushed through minimum wage laws to slice the bottom rungs off the economic ladder and a huge accreditation scam that practically requires kids to get a college degree before anyone will even look at their resumes! Predictably, this has led to colleges being flooded with barely literate high school graduates and massive unemployment for young people. How's anybody supposed to take responsibility for himself when you meddling old do-gooders are practically forcing my whole generation into dependency, huh?

Instead of working your way through college without a scholarship, taking out a loan or getting any help from mom and dad like many in my generation did your generation sent your parents into hock paying for it or you overextended yourselves with student loans and credit cards.

Instead of getting a job and saving up to buy a old "beater" car with cash you either expect your parents to give you brand new one or went into debt buying a brand new one with little or no money down.

Again, where's anybody supposed to get a job these days, especially with you government-sucking leeches minding the store? How's anybody supposed to pay his way through college with your leftover socialist education subsidies running the tuition up to astronomical rates?

Yes, my parents paid my way through college, but I can tell you my they never went into hock over me, and I was happy enough driving the old castoff they gave me because it was still a good dependable car years after it had lost virtually all of its resale value. I sure as hell didn't go into debt or ask anybody else to go into debt for me for anything. A lot of my pals at college drove old second-handers or just plain walked and hitched rides with their buddies because they didn't have cars at all. It's mighty presumptuous of you to claim we've all been living in the lap of luxury, gramps! Especially when some of us have spent time in our "beaters" backed up behind someone from your generation driving his ugly new Hummer down the road at 10 MPH.

You have to have the latest toys, too. I have a cell phone, it is 5 years old and it is a "pay as you go" phone that I only use in emergencies. It costs me $10/month. You, on the other hand, have the latest, most expensive, phone you can buy and it is either constantly plastered to your ear or you are wearing out your fingers texting inanities at everyone. All this indicates to me that you are spending alot of money on a cell phone contract.

Sez you, gramps; I've never gotten myself a cell phone yet! A lot of the youngsters I know have them, yes, but they're hardly the latest, the most expensive, or even the most fashionable models. Thanks to the internet and lots of free market competition, those cell phone contracts and the fancy applications kids can install on those phones are also getting dirt cheap. All communications technology is getting dirt cheap, in fact, especially if you can persuade the kids to settle for last year's model. When it comes to buying toys for the kids, your parents never had it so good as ours do!

Don't tell me that is not so because I know too many people who have spoiled little wallet leeches sucking them dry just like you.

Which is to say, none of those people had the backbones to say "no" to their kids. In other words, they're bad parents. And their being bad parents is the kids' fault because...?

I look at you and the rest of your "generation" and I think of two words-job security. The last time a position opened up where I work my old boss got so fed up and disgusted with the lack of qualifications and knowledge (despite the applicants having college degrees), unreasonable demands, arrogance and general selfishness of "your generation" that he eventually stopped even considering anyone under the age of 35.

And therein lies your crowning hypocrisy: we're supposed to get jobs and make a living the same way you did, but now you arrogant geezers won't even consider us for employment! You've left my generation at the government's mercy.

When I look at you and what your arrogant kind have done to my generation, I think of two very ugly and immediately applicable words, old man: abortion and euthanasia. Your promiscuous hippie pals ran around rutting like rabbits and then murdered a full third of my generation to avoid the consequences of their actions. Along the way, they taught my generation that human life is expendable, especially in the pursuit of pleasure. Now you oldsters are sucking the very last few drops of funding out of Social "Security" and it's due to go belly up inside of two years. Our government is run by murderous leftist thugs and our youngsters are already unemployed and angry.

If I were you, gramps, I'd keep my mouth shut and stop drawing so much attention to myself from a bunch of pissed-off youngsters who either already know or are about to find out what happened to their inheritance. Better keep your guns handy for the day when two youngsters in government uniforms show up at your front door for a government-mandated "end-of-life planning session" with you.

There is a major disconnect... (Below threshold)
Rick Caird:

There is a major disconnect here. If we go to the actual reference, we are told Georgian Bank had deposits of $2 billion and assets of $2 billion. Hence, their net worth is zero and it should cost almost nothing to close it down. But, we are told that the cost to FDIC will be $892 billion or pretty close to half the value of their assets. How can that be? The only way that can happen is if the value of their assets are overstated on the books. That is exactly what is happening at many, if not most, of our banks.

Our financial system is insolvent and the Fed and the FDIC are complicit in allowing this accounting fraud to continue. That is also why banks are reluctant to lend. They need to have capital available to offset assets they know are over valued on their books. Complicating all this is the fact our whole shadow banking system is gone. The shadow banking system consisted of those who bought the securitized debt, and by doing so recycled money back into lending.

I don't blame the consumer as much as Hugh and others do. If credit is cheap and your prospects look good, then credit seems OK. The problem comes when the asset prices (i.e your house) stop rising and decline in value plus the market tanks. In that case, what looked like acceptable debt is suddenly way too much debt. Total debt in our economy is declining because there is not as much money to lend, consumers are paying down debt, and we are getting a tremendous amount of defaulted debt. We are also hiding defaulted debt. Foreclosures are slow because if a bank forecloses, it has to write down the value of the loan because the real estate value is not as great as the loan. That decreases their assets and bring the bank closer to being seized. Credit card debt is defaulting rapidly. Commercial Real Estate loans are in trouble.

It is going to take a long time to clear all this out. It is not a pretty picture. There are plenty of ways yet to mess up and I expect government to do exactly that. Raising taxes and massively restructuring our health care system are good ways to mess up. Then, too, Barney Frank wants to bring back CRA. Lovely.

Rick

Rick

If you haven't gotten yours... (Below threshold)
Juan Gonzalez:

If you haven't gotten yourself a gun yet, do so. Desperate times will make people desperate for what others have, and if you believe that pronounced societal breakdown can't occur "here" then you are naive.

Ennis:"..your genera... (Below threshold)
Les Nessman:

Ennis:
"..your generation sent your parents into hock paying for it.."

So the children sent the adults into hock? Maybe the adults should have acted, you know, ADULT and said 'no'.

I don't mean to pick on one comment by just one commenter but I think this is an indication of an escalating Generation War that is to come.

Worse times are ahead people, try to stay calm.

Interesting comments. I'm n... (Below threshold)
Papa Ray Author Profile Page:

Interesting comments. I'm no better at most in figuring out what is going to happen in the next few years. After 9/11 I made more of an effort to take stock of our families situation regarding security and survival. I didn't like what I found and resolved to do as much as I could to make it as good as I could.

With limited funds it can be difficult. I couldn't have a $30K bomb shelter built or make large purchase items like a generator that would run my whole house.

But over the last eight years I've done most of the things experts say need to be done in order to be ready for most emergencys. But as far as a full scale economic breakdown, there is not much anyone can do unless they are a millionaire. And even then, if your a dumb millionaire who hasn't studied what will happen and what you will need to do, well, someone else will be occupying your fancy survival digs and you will be out on your ear or dead.

One of the smartest thing I have done is beefed up my library because without an economy there won't be any internet, phones or library to go to, if indeed you can still travel at all.

One of the most important things our family has going for it is location. We are removed from most everybody, our closest neighbor is five miles away.

The thing people living in cities need to know is to load up your car and get the hell out unless you have built yourself an impregnable lair with almost unlimited resources.

Because after about a month people will be desperate and will do almost anything to feed their families. Including of course taking it away from you.

If you think the government (state or federal) is going to be able to feed and care for millions of people, your wrong. Oh, they might make an attempt for a few months but it won't be able to much longer than that.

Every thing runs on money or credit and without that it will revert to barter, theft, and slavery to those that have the most hired guns. Think middle ages.

I have no answers but just prior planning as best as we can do and prayer.

Papa Ray
Central Texas

"" .... the cause rests ...... (Below threshold)

"" .... the cause rests ... on the shoulders of taxpayers and consumers (who) spent more than they earned, borrowed more than they could afford and lived lifestyles that bore no resemblance to their own actual economic condition .... ""

BS.

The cause was that Dodd and Franks and 0zero et al facilitated their cronies looting of several Trillion Dollars by way of KGB/Chi-Com-styled "bank-loans" to millions of criminal aliens and other bums who lacked the means even to open and maintain viable savings accounts. It's America's "taxpayers" and America's "consumers" who are being raped and looted and pillaged and their confiscated wealth squandered to fill the World-Trade Center-like hole where once stood the feral-gummint building in which was stored America's sovereign wealth.




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