'This American Life' Today: Awesome, & Why I'm Now + We Are Headed For A Depression

jueco2005 · Mar 2, 2009

They can't allow banks to fail because that is how money is created. In essence they would kill the money making mechanism.

Quote from Troy McClure:

This is a good question and I haven't heard anyone in charge answer it well, maybe someone has.

"Too big to fail" is the usual answer, but why? Bernie Sanders (I-VT) said "A bank that is too big to fail is a bank that is too big". Amen.

Perhaps it is all money down the rathole either way. If the FDIC takes over the bank depositers will need to be paid. Banking-business relationships will be destroyed. Too disruptive.

OTOH, if you could get past one hell of a month, new banks would start popping up everywhere.
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DataCruncher · Mar 2, 2009

is there a transcript somewhere? I prefer that to a podcast

drsteph · Mar 2, 2009

Quote from Debaser82:

If it's that simple what's stopping them from providing what is needed now.
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Because the beast has gotten away from its handlers.

Money supply destruction is being balanced by this insane money creation in the form of bailouts. While I have no doubt that the situation is being more than closely managed, the equation in the end is simply too complex and has too many variables to manage it with any great deal of precision. There will either be too much or too little money created. Too much, and we get inflation. Too little, and we have deflation, which wants to predominate although try to see prices in your daily necessities going anywhere but up.

This has got to be akin to walking the high wire across the twin towers in a violent breeze. Swing one way, swing another, hope to god you make it across.

Add mass pyschology and who knows where the hell it takes us.

Good luck to those in charge - if they pull this off I will be amazed.

gnome · Mar 2, 2009

Quote from drsteph:

Because the beast has gotten away from its handlers.

Money supply destruction is being balanced by this insane money creation in the form of bailouts. While I have no doubt that the situation is being more than closely managed, the equation in the end is simply too complex and has too many variables to manage it with any great deal of precision. There will either be too much or too little money created. Too much, and we get inflation. Too little, and we have deflation, which wants to predominate although try to see prices in your daily necessities going anywhere but up.

This has got to be akin to walking the high wire across the twin towers in a violent breeze. Swing one way, swing another, hope to god you make it across.

Add mass pyschology and who knows where the hell it takes us.

Good luck to those in charge - if they pull this off I will be amazed.
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Best to bet on inflation at some point. BS Bernanke is all but promised (threatened?) to "double and redouble [print-money], as much as necessary" to stave off deflation.

The cure will be worse than the disease... but the death-knell will be a bit later.

HomoSalmon · Mar 2, 2009

Quote from drsteph:

While I have no doubt that the situation is being more than closely managed, the equation in the end is simply too complex and has too many variables to manage it with any great deal of precision.
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I cannot agree more.
But I believe gnome is right. At the end will be too much money, for one reason: some institutions are absorbing it like sponges, and some people is postponing consumption, but most of savings (including 401k and other retirement saving in a aging society) will be used sometime in the future AND there is not enough innovation (=productivity improvement) due to offshoring to balance the equation.

trackstar · Mar 2, 2009

Quote from gnome:

Best to bet on inflation at some point. BS Bernanke is all but promised (threatened?) to "double and redouble [print-money], as much as necessary" to stave off deflation.

The cure will be worse than the disease... but the death-knell will be a bit later.
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I think jumping the gun on that could be pretty darn painful just the same...

ByLoSellHi · Mar 2, 2009

Quote from DataCruncher:

is there a transcript somewhere? I prefer that to a podcast
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Soon there will be.

http://www.pri.org/business/bad-bank.html

vrtrop22 · Mar 2, 2009

this is so sobering. I pray for America right now guys. I hope our current administration does everything that it can and I would say the same if John McCain was our president. It is really scary out here economically right now. I am pretty sure I am going to be laid off in a week or so according to rumors. Hopefully, I can make trading full time work out.

stock_trad3r · Mar 2, 2009

Quote from ByLoSellHi:

If anyone here caught 'This American Life' today on National Public Radio, it was amazing.

They basically simplified the banking crisis and housing crisis, and laid out the case, after consulting with economists, people that worked out bank systemic failures in the past, regulators, etc., that we are on an inevitable course towards nationalizing the banks, and that they won't announce it, because they have to have the tens of thousands of federal employees in place, and all the paper work completed, before making the announcement.

They spoke about how Citi and BofAmerica hold 25% of all U.S. bank deposits, and how J.P. Morgan, Morgan Stanley and many, many other banks in addition to Citi and BofA are insolvent, and how they are insolvent by literally trillions, as the value of their assets + capital is swamped by the amount of liabilities they have - mainly due to decimated real property values on the inflated loans they made.

Unless housing values rose 30% or maybe more in the next year or so, which won't happen, there's no way around nationalization.

Banks also have the U.S. government over a barrel, because if they fail, trillions of deposits will be lost, and we will have a 'depression so large it will render the Great Depression a footnote by comparison.'

They also shatter the misconception that insolvent banks should loan money out they're receiving from the U.S. Government (taxpayers), as such banks are least able to do so, because that would further decimate their balance sheets.

One bank analyst at Deutsche Bank Group wrote a memo to U.S. regulators, saying they could either save the banks with taxpayer dollars now, or save them with taxpayer dollars later, when the unemployment rate topped 20%. He also stated unemployment would rise to at least 12.5% regardless.

Finally, an economist at Duke (I believe Duke) was interviewed, and states the last time that Household Debt as a per capita % of GDP was this high was - you guessed it - 1929. I'm trying to find a chart illustrating this.

Edit - One chart:

You would do yourselves a favor to listen to the podcast, which is free to download for a week, beginning tomorrow:

http://www.thisamericanlife.org/Radio_Episode.aspx?episode=375

It's called 'Bad Bank.'

P.S. - As bad as things are in the U.S., insolvency is even greater in Europe and some parts of Asia. Ouch!
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wrong

nothing wrong with the economy. The debt load is sustainable.

sprstpd · Mar 2, 2009

Quote from vrtrop22:

I am pretty sure I am going to be laid off in a week or so according to rumors. Hopefully, I can make trading full time work out.
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That's not a good situation to be in to start your trading career. Not that it can't be done, but the odds are definitely stacked against you. Maybe consider a different backup plan.