It is New Year's Eve...look into my crystal ball!

http://www.bloomberg.com/apps/news?pid=20601109&sid=auQGPgEZ42k0&refer=exclusive

Let's look at this one again: This seems to be the best and only way forward for the US auto industry.

If anyone has any better ideas other than an endless pit of bailouts I'd like to hear them (from Phil Rothman).

http://sternfinance.blogspot.com/2008/11/should-gmchrysler-file-for-bankruptcy_05.html

Or Here: http://www.voxeu.org/index.php?q=node/2574

You can't be an American male with an atom of testosterone and not have your blood boiling after watching this short film.

http://www.youtube.com/watch?v=mGU3iHW7npU

Now this is funny horse racing.

http://www.youtube.com/watch?v=n4UyyDDAjbU&feature=related

Don't ask me!

This is an absolute MUST READ.

Once again Jim Hamilton lets us know how to think.

http://www.econbrowser.com/archives/2008/12/federal_reserve_1.html

I realize things are bad. But never let the world get you down so much as to not take the time to admire beauty.

Have a wonderful Christmas Eve.

Joe Jihadi has a bad day: Part V.

This video may not be suitable for our more sensitive viewers or for those who do not wish to see a terrorist about to launch a rocket propelled grenade at our brave service men get whacked by our brave leathernecks.

Macroeconomics in action because it is your tax money.

Great Depression Part One: Addendum.

I forgot to mention that World War One not only gave us the initial impetus that led to the Great Depression but it also gave us the Russian revolution, Lenin, Stalin, and also a certain corporal from the German army who later had some pretty nasty things on his mind. I am prepard to say if there was not a Great Depression then there would not have been a Hitler.

Waving bye-bye. Cool horse race.

http://www.youtube.com/watch?v=p6Qy4g6sy_Y&feature=related

This has to hurt.

It's Friday. Rock out and get pumped with some of my favorites.

I cried myself to sleep many many nights knowing Chrissie Hynde would never be mine. And I am not kidding.

http://www.youtube.com/watch?v=wtMm0lfUMCY&feature=related

Randy Parker Hall of Fame: Ayaan Hirsi Ali

This Ladies and Gentleman is Ayaan Hirsi Ali. She sits on top of all in the Randy Parker Hall of Fame because she is one of the few in the world that has the guts to call what is going on by name, that is, Islamo-Fascism. This tiny and meek woman has more courage than the entire country of the Netherlands who threw her out at the first sign that Islamo-Fascists would retaliate against the Dutch if they tried to protect her from the fatwas against her. Thank God the US took took her in. Think wrong thoughts and express them and you will be killed. Ask Theo Van Gogh what he thinks about this. If that is not fascism, then what do you call it? (Read about her Dutch experience here: http://www.slate.com/id/2141276/ ) We are a country of laws and a place that let's people think and say what they want, no matter how hair-brained, without the threat of being whacked. Look at how disgusting it is to listen to Bill Ayers, but yet there he is jabbering away. And I'll defend his right to do it even though I would rather watch Dr. Phil reruns all day and listen to Barbara Streisand's political philosophy all night. If you don't like that approach of letting folks speak their minds, then I am sure Saudi Arabia is calling you.

And let us not mince words.....ISLAMO-FASCISM.

Messing with a cab driver.

I have to admit, I find it funny when people get "played with" as long as it is friendly and not pernicious. Here a bored G.I. has some fun with an Iraqi cab driver.

http://shock.military.com/Shock/videos.do?displayContent=179387&page=16

Step IV...The Killer.

This nice graph from Bob Carpenter shows how CDOs crumbled. If a collateralized debt obligation was constructed out of BBB residential mortgage backed securities, the CDO had a number of different mezzanine levels. The higher up you go the sooner you get paid. But note, when a CDO was constructed out of the 3% of Residential Mortgage Backed Securities in an investment portfolio (on the left side, purchased with borrowed money), if one percent of the BBB (and BBB means risky) mortgages began to defalut, that would gobble up 33% of the payments waterfall in the CDO (on the right side). One percent default and we are already way up the cash waterfall into the AAA region (and AAA means not so risky). Would you like to do the math on 2% default?

Subprime mess...Whamo! Step III

Thanks again Bob:

When some do not pay the mortgage, some of the holders of Mortgage Backed Securities get stiffed starting from the bottom up.

The Great Depression: Part III

http://www.funnyeconomist.com/Lecture.mp3

Here is an mp3 of a speech I gave at Rhodes College last March entitled "The Great Depression and Modern Business Cycles". I promise I will break everything down in this speech in greater detail over time. I hope you learn something and even better have some fun while you listen. It takes about a minute and a half to download and the speech with questions and answers is a little over an hour.

Perhaps of some value.

Subprime mess...Step II.

From Bob Carpenter at the Richmond Fed:

Everyone pays their mortgage ... everyone gets paid and all are happy.

Let's walk through it.....Subprime mess step-by-step. Step I

This nice graph from my friend Bob Carpenter at the Richmond Fed shows visually what mortgage securitization was essentially about.

Beverly Hills has nothing I want. Neither does the People's Republic of Massachusetts.

Rat Face and his Jack Ass side kick search for the guilty http://online.wsj.com/article/SB122895461803096429.html

They do it to themselves ... and then blame others. Pathetic.

Let Radio Head tell the truth.

Santa Baby, I have been a awfully good boy!

This is what I want for Christmas.

It's Friday! Strap in and blast off. Crank this up and enjoy!

This is Jeanie Shrimpton from the 1960s. You might know some hot tomato that can tie her, but you can't beat her. Watch this video and get pumped up!

Recessions by the numbers...

Average length of Post-WWII US recessions = 11 months

Length of 1981-1982 recession = 16 months (July 1981-November 1982)

Length of preceeding two recessions in 1990-1991 and 2001 = 9 months (July 1990-March 1991 and March 2001-November 2001)

Length of current recession = beginning of the 13th month

So we can expect recovery to commence sometime around May since this recession could not be any worse than 1981-82 right? I don't know about that! We did not have a dysfunctional financial market back then. We do now and it is clinging to life by the unprecedented actions of the Federal Reserve. Is all the financial jetsom and flotsom going to be cleared away by May 2009? I am a betting man and I'll take all the action you got if you say yes. Recoveries are led overwhemingly by housing starts and spurts in non-residential business fixed investment. I don't mean to be a snit, but I would not look there for my salvation any time soon. Nationally there is approximately an 11-month inventory of unsold homes and I don't hear too many CEOs saying they have all the funding they could want for their next capital replacement project.

Moreover, the last two recoveries we have had were completely different than any of the other recoveries we had in the entire 20th century. The recoveries that began in 1991 and 2001 were the weakest and most drawn out we have seen heretofore. It used to be that the most rapid period of economic growth occurred right after recessions bottomed out. Not so anymore. The upshot is even if the economy bottoms out in 2009, do not look for a rapid return of vigous economic growth right away. Could we wind the clock forward to June of 2010 please? We are in deep trouble right now and I don't seem to be getting the message across.

Every Prate Fan in the world neeeds to listen to this race.

Listen to the whole race ... It won't take long.

http://www.youtube.com/watch?v=MVifEvlIBBo&feature=related

Joe Jihadi has a bad day: Part IV

This is the Taliban on Dirt Bikes vs. an A-10 Warthog. Guess who wins?

Remember, I'm from Chicago.

Many of you have been asking me if Chicago is the most corrupt city in the country. The answer is Hell No!

That title far and away goes to New Orleans and Louisiana in general. It is no joke to say half of Louisiana is under water and the other half is under indictment. When Katrina came and went people wondered how much it would take to put New Orleans back together again. I said $300 billion...$150 billion for the material and labor and $150 billion in payoffs to get anything done. Go ahead and chuckle ... but it be "for true" as they say down there ... or "True Dat!"

Detroit gives their answer.

Without putting the auto companies in receivership or government driven Debtor in Possession we will be pouring money down a rat hole. They lose $25 billion a quarter.

Pay up sucker.

Here are the numbers...look for yourself.

From VOX Economics @

http://www.voxeu.org/index.php?q=node/2667


Table 1. Estimated Size of the Global Asset-Backed Securities (ABS) Securitisation Market, Classified by Collateral Employed (in billions of dollars)Prime Mortgage-Backed Securities
$3,800
Subprime Mortgage-Backed Securities
$780
Commercial Mortgage-Backed Securities
$940
Consumer ABS
$650
High-Grade Corporate Debt
$3,000
High-Yield Corporate Debt
$600
Collateralized Debt Obligations
$400
Collateralized Loan Obligations
$350
Other ABS
$1,100
Total
$11,920
Source: Compiled from a variety of sources including Goldman Sachs, JP Morgan Chase & Co, Lehman Brothers, Markit.com, Merrill Lynch and IMF Staff estimates.

Take a look at this picture. The trouble is in red.

This picture shows how the worst of the foreclosure mess is pretty concentrated in California, Florida, Las Vegas, Phoenix, Atlanta and Northern Virginia. Remember, California has 30% of the market value of the nation's housing stock.

I got good news and bad news...what do you want first?

These graphs are from Jim Hamilton's blog. The one on the left shows that unemployment is not falling as rapidly in this recession as it did in 1981-82 or 1973-75. That is the good news. The bad news is the graph on the right. It shows the Fed has dropped interest rates farther and faster than before. Since the recession does not look like it is letting up, the Fed is out of gas for this avenue to promote recovery.

Rock out on one of my favorite songs if you are feeling bad. Things are not cool and you heard it from me.

http://www.youtube.com/watch?v=0CU0LO1gFRA

Two minutes and fifty-four seconds with the funny economist.

Here is an mp3 of an interview i did with KTRH radio in Houston. Except this ain't so funny.


http://www.funnyeconomist.com/Interview.mp3

How about a laugh? This is why we love kids.

This picture shows how underwriting standards crumbled.

The last mortgages made were the first to default...meaning the housing bubble was perpetuated only by bringing in more and more of the "fringe" borrowers. Any wonder why it all came apart?

This picture pretty much says it all....

We listen to all sides here. Blame the Academics too.

This meltdown, as was the Great Depression, is a disaster for the profession.

From Phil Rothman:

http://www.voxeu.org/index.php?q=node/2618

Randy Parker Hall of Fame: Joe Louis

Joe Louis is an American icon. He fought in WWII and famously said "whatever is wrong with America ain't nothing Hitler can fix".

One tough hombre. But more than this Joe Louis never trash talked nor acted in an unsportsmanlike way. People would goad him and say nasty things like most athletes do today. All Joe Loius would say, over and over was "I'll be there and I'll be on time". Then he would commence to pound the big mouths into oblivion. For this wonderful legacy of shutting the big mouths up with dignity, Joe Louis will forever be in the Randy Parker Hall of Fame.

Title I:Look out Ducks...I'm getting one of these! or Title II: Joe Jihadi gonna get his butt peppered soon!

This needs to be considered seriously. Things are really this bad.

http://www.guardian.co.uk/commentisfree/cifamerica/2008/dec/02/global-economic-recession-inflation

This must be dealt with NOW!

http://gregmankiw.blogspot.com/2008/11/what-is-fed-to-do.html

Every investor needs to read this from ECU Finance Chair Scott Below.

http://www.funnyeconomist.com/Dragons.pdf

You are 26 minutes and 26 seconds away from true economic intellectual power.

Jim Hamilton tells you what you need to know. Listen to this and you will know what to think. Click on the link below and then click on the podcast.

http://www.econbrowser.com/archives/2008/12/podcast_on_the.html

Jackass talk about Christina Romer...

http://www.tnr.com/politics/story.html?id=208a7b29-a401-4ee5-8ef7-3a9d0c80fb4f

If this is not Terrorism and Misogyny then what name do you call it?

The link below is the mentality and naked barbarism that we are fighting in the civilized world against Islamo-Fascists. And don't give me any cultural sensitivity crap!

I apologize for the photos, but you need to be aware of the pure evil mindset we are confronting. I hung out with a bunch of muslims in graduate school. I asked why they all had beards? They told me it was the way of the prophet Mohammad and to also tell yourself apart from a woman. I asked if they really needed a beard to tell the difference between a man and a woman? I assume the acid bath will now help the differentiation process along.

This is disgusting, pathetic, and sub-human.

http://www.nytimes.com/2008/11/30/opinion/30kristof.html?_r=1&scp=3&sq=accepted%20terrorism&st=cse

The Great Depression: Part I

Archduke Ferdinand and Family

Some have been asking me to embark on a historical tour of the economic history of the Great Depression via my blog.

That's a good idea...so here is Part I of what will be an extensive and multi-entry posting. I hope you enjoy the ride, we have a ways to go.

Let's start at the start...reason number one for the Great Depression can be placed at the feet of World War I. It is somewhat disturbing to read original historical documents from this era as they only refer to "The War". Of course they did not know about the wars to follow as this was to be the war to end all wars. The carnage is ghastly and ghoulish to reflect upon. In a major battle such as the Battle of Verdun, over one million casualties occurred as the weapons of modern warfare had advanced but the tactics of battle had not. It was a machine gun war with Civil War tactics.

Anyway, the social, political, financial and economic upheaval that resulted from WWI was never to be replaced after the war was over. The world had changed drastically but all the world's leaders wanted to do was go back to the pre-1914 days where all believed it was a better world. The only trouble was there was no piecing it back together. The mechanisms in the pre-WWI world that promoted stability, such as flexible wages and prices and cooperation and coordination amoung countries on the gold standard were nowhere to be found after 1918. So the leaders around the globe went reaching for what they knew and set the world up for the next calamity. Most all countries set about restoring the gold standard after it had been suspended during WWI, and the seeds for the coming Depression had been sown.

Here is a nice summary of this very topic in an exchange I had with Peter Temin in my second book:

Randall Parker: If I could try to sum up, if you’ll indulge me, we can break it down later if you want. One of the major un-doings was the shock from World War I and the Depression should be viewed in the context of the overall second Thirty Years War trying to re-establish the status quo ante in a changed world leading to contraction and a sustained downturn. World War I was the shock and the propagating mechanism was the gold standard. The resumption of the gold standard announced the continuation of the policy regime that existed before the War. But more than this, it was the fundamental adherence to the gold standard mentality, that it was a prerequisite for prosperity, that actions outside of it were not in the realm of discussion and were not taken seriously and that deflation was the prescription and the only way to cope with falling demand. This mentality and the universal commitment to this system, and thus the difficulty for any one country to take independent action, determined the depth and severity of the Depression and drove the world economy into the ground. Does this about sum it up?

Peter Temin: Yes. I think that’s quite a good summary.

The re-establishment of the gold standard brought about the recession of 1920-1921 and that recession was reason number two for the Great Depression. We shall have more to say in this regard in my next Great Depression posting.

For anyone with an interest in a deeper analysis, Peter Temin's Lessons from the Great Depression and Barry Eichengreen's Golden Fetters are two books that are not to be missed.

And anyone who wants to read a debate I got into with CNBC's Donald Luskin about re-establishing the gold standard (I took the "no" side) can follow that debate here:

http://www.opposingviews.com/questions/should-the-us-return-to-the-gold-standard

Pick either or both of these.

Seems we have to fight Islamic extremists and pinheaded academics....


http://online.wsj.com/article/SB122809544395968075.html

http://www.nypost.com/php/pfriendly/print.php?url=http://www.nypost.com/seven/12012008/postopinion/opedcolumnists/devils_in_mumbai_141647.htm

It is official! Recession started in December of 2007.

The U.S. entered a recession in December 2007, according to the National Bureau of Economic Research.

http://www.funnyeconomist.com/dec2008.pdf

This is an absolute must read!

From Jim Hamilton...

The Japanese would not do this and paid a big price. We need to do it and now. Another month of deflation and it will certainly focus the mind.

http://www.econbrowser.com/archives/2008/11/time_for_a_chan.html