A Level Gaze

A Level Gaze

"What effect must it have on a nation if it learns no foreign languages? Probably much the same as that which a total withdrawal from society has upon an individual."
--G.C. Lichtenberg

Monday, September 24, 2007

The Most Important Post You will Read This Year

Although this blog is basically moribund at this point, I feel an obligation to spread the word about this post by Karl Denninger by any and every means necessary. It is about the housing market, the credit markets, and the US economy in general.

Although I disagree fairly thoroughly with his politics, he is an extraordinarily sharp cookie when it comes to financial matters. And in this post, he cranks it up at least 3 notches.

An excerpt to whet your appetite:

If you think this housing market mess won't get that bad, you're very wrong. Well, at least the market says you're very wrong. Take a look at this; the CME now lists housing futures.... where you can place futures bets on the price of housing in major markets. Have a gander..... they don't see a bottom coming for years.

Now maybe you can tell me how we can have any "home equity withdrawals" to fund consumer spending if this view is correct? Oh, and by the way, these futures are of course priced in nominal dollars - add inflation and things get REALLY bad.

Ok, so what has really happened here up until now?

We need to identify this with some degree of confidence if we are going to figure out what's coming around the bend! Why? Well, I hear the rails singing and past experience tells me that this usually means you better get the hell off the tracks..... but am I right or wrong?

Let's postulate a few things from what we do know, because it has been published.

First, Bernanke pulled the safety pins out of the banking system when he waived the 10% affiliated capital limits. This was done for ONE bank back earlier this year, but just recently, he did it for four large primary banks. WHY? One can assume that their affiliated entities, which are the "trading" or "securities" arms of these organizations, were on the verge of collapse!

I urge you to read the whole post.

posted by David at 9/24/2007 12:32:00 AM ::

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