world banks were supposed to be facing 4.1 Trillion dollars of losses. Our big 4 banks seem to have taken only 200 billion or so in losses. Who has taken the rest? I have not seen an accounting of it lately.

http://mauberly.blogspot.com/

EOM

We need a NATION WIDE STRIKE for Real healthcare reform

of mortgage related assets to the Fed that have been taken as collateral for repurchase agreement(loans to the banks) and these have not been marked down for losses. So in part you are correct, but these will never be marked down under current policy.

Then there are commercial real estate loans that are on the books of the 4 big banks. Something like 500B. Then there are 900B or so of off balance sheet assets that will have to be consolidated to the bank books and then there are 600B or so of mark to model assets on the books as well.

These numbers come from a recent Roubini article.

None of these has been written off. The mainstream financial press seems to be ignoring them for now.

http://mauberly.blogspot.com/

I've followed economics in the blogosphere for 4 or 5 years now. I read Bonddad, Stirling Newberry, Ian Welsh, and the crew here in general. I check in with Barry Ritholz, Paul Krugman, Mike Shedlock and Calculated Risk routinely. There's a decent range of opinions there, and I think it has generally stood my wife and I in good stead - we resisted buying a house in a pricey part of L.A. when we moved here two years ago, and moved our retirement savings into bonds in October of 2007.

We took these steps because I found the analysis by the above sources to be well reasoned and well founded. The picture painted was of an unsustainable course that was destined to result in disaster. That has been largely borne out. But now that we are well into the disaster, I am finding a growing divergence of views, where once it seemed a fairly consistent chorus of 'This cannot last!'.

In particular, I am of the opinion that while the conditions that gave rise to the collapse of last fall are still in existence (which they largely are), that we risk further crashes, let alone managing a sustainable recovery. Yet I am seeing what seems like some very credible analysis pointing to a stronger recovery than I would have thought possible over at Bonddad's. I am not trying to call him out, on the contrary, his data-oriented approach is one that I respect, to the degree that I am wondering if I am holding onto my 'doom-n-gloom' viewpoint out of an emotional attachment instead of dispassionately re-assessing the situation. I missed out on this rally because I was convinced the crisis wasn't over, and I don't see how buying in now is a great idea.

The last thing I am asking for is investing advice. But I would be interested to see what people think about what New Deal Democrat has been saying over at Bonddad's (http://bonddad.blogspot.com/2009/09/why-im-bullish-kiss-edition.html). Emotionally I am with Invictus, but I don't have a lot of respect for emotion-based-analysis - that's why I was drawn to people like Bonddad, Ian, Stirling and so forth.

On the one side we have big-shitpile: still big. Option Arm Recasts, commercial real estate issues, state government budget crises, a poorly crafted stimulus, tapped-out consumers (debt wise), severe wage/income/wealth inequality to name a few headwinds. On the other side we have the irrationality of markets, continued denial by the manufacturers of conventional wisdom, regulatory and policy capture by TBTF, and the 8000 lb. gorilla that is the Fed. Gov't. So how do people think it will shake out? I am of the opinion that if the crisis to date has resulted in tacking ~5 points on to unemployment and lopping a few points off GDP, then when the rest of the debt bubble bursts why won't that repeat? I don't have any numbers to back that assumption up though...

I guess the topline question is - will the steps taken (and ones likely to be taken given who is at the reins) muddle us through sideways in a prolonged economic malaise, fail to avert a crash, be wildly successful, or something else? I'm having a hard time arguing with NDD's statistical analysis and they've been debunking a good bit of the deep doom analysis at other sites. I'd love to know what people think (and wish Ian and Stirling still posted here).

Thanks,

-Doug McElroy

The Fed's pump priming exercise could keep the economy humming along for several years. We've seen this before. In fact, that's all we've seen in the past 50 years. This is why so many people are looking at the technical picture and seeing a repeat of 2002 and 2003 when the market bottomed, took off like a shot, moved into oversold territory, and then stayed there for four years while a massive housing bubble built up. Economically, the Fed has been successful in stirring up the speculative juices in housing, in derivatives, mergers and acquisitions, etc. The question becomes, is this enough to sustain itself? Can even a mini bubble be created? These are critical questions because the Fed is not likely to create a traditional economic recovery since we don't have a traditional recession. We don't have the usual manufacturing and service sector inventory build-up, we don't have threatening inflation, and we therefore did not have Fed-engineered high interest rates that choked off the economy. What we had instead was a Ponzi scheme that reached a classic tipping point, when the music stopped because of credit default fears, not because of unbearable interest rate levels.

This is why another bubble is the only way out. In fact, an even bigger bubble is required because this is the nature of bubbles. Like Ponzi schemes, ever-increasing amounts of debt are necessary to keep asset prices inflated. The Fed has done this to a degree by exploding its balance sheet, and the Treasury has accommodated with trillions of dollars of new debt to be paid by the taxpayers. The amounts involved - about $3 trillion of direct government finance not counting various guaranties - is a bit short of the incremental $4 trillion that was being added to the bubble every year by 2007. This is the problem: the government needs to issue much more debt to restore the economy to where it was in 2007 and get it to grow again. It hasn't done that so far. It has only replaced a portion of the private sector financing that has disappeared. Just as important, it cannot withdraw any existing credit without sinking the economy worse than where it was before.

Bernanke is doing everything his training has taught him, but it is not enough. Unless the U.S. doubles up or triples up, and unless global savers are willing to buy all this new debt, the economy will at best lumber along in its current trough. More likely it will sink to lower levels.

...exports and in country gas pipeline construction. An Aussie mate of mine is there now; working massive OT hours and pulling in 100k+ per year. Recession? What recession?

...never drank the kool-aide and some others who've givin it up. I gave it up long before I left. There's an underground economy that will become more and more mainstream and cash isn't king; good pot, good organic veggies/meat, and barter on all levels will help America's majority to survive their dip into third world economics 101.

...as a blue meanie. Not going to happen. It's here, now!

The dark secrets of the trillion-dollar oil trade

Revealed: The ghost fleet of the recession

"A glut of oil caused by the recession means that crude available for immediate purchase is currently cheaper than that bought on longer-term or "future" contracts – a practice known as "contango". The result is that independent traders have been rushing to buy the cheaper "spot" oil and storing it wherever they can – namely in under-employed tanker fleets – in anticipation of a sharp rise in price as the global economy begins to recover. The resulting profit can be anything between 15 and 20 per cent – tens of millions of dollars – even after the cost of hiring a tanker is deducted."

The economy is going nowhere, but they've used the money to inflate oil prices. Logically it's only going to cause a glut, as producers are not cutting back, just all possible storage capacity is being filled up for higher prices to come. Ergo, bubble. Then they are going to have to start dumping it on the market and prices go down. Since storing the oil isn't exactly free and there is no cartel controlling the situation.....

Would you think this chart suggests higher prices?

http://www.wtrg.com/daily/crudeoilprice.html