ALERT! Not Your Usual Financial Update!

Big Things seem to be underway around the world. For starters it looks like there are people out there who do not believe what is coming out of the US and will not put their money where the US mouth appears to be.

There are a number of hedgefunds in the process of rolling over. Barry Ritholz draws attention to the news from London on this today, and wonders why UK newspapers are more upfront about it than the crowd here are Rolling Over. Following the links Ritholz points to leads to this discussion about why the Fed made the announcement it did two days ago, and what it is trying to accomplish. In this view one or more of the big New York banks are about to go belly up: Which Bank Will It Be?

Couple of things to learn from this. When the financial powers that be and the press talk about sub-prime mortgages, and dealing with foreclosures, they are NOT using the words and the language in the way normal people do. They are talking about bank failures and debt defaults within financial institutions. So just make that mental conversion next time.When they talk about mortgage holders they don't mean people they mean banks.

Why are they doing this? I think is because they can't admit they have been wrong in any way at all. I think Bush’s refusal to admit errors is symptomatic of the way everyone in his population cohort thinks. There is some kind of disgrace, or dishonor, associated with an admission of either error or ignorance. Since that admission can’t be made these folk need to keep on doing the same thing over and over again, and every time it comes up with the same result, abject failure and a bigger problem to clean up. So I believe financial breakdown is just a symptom of a psychotic breakdown among people who cannot stand public shame and humiliation for being failures.

They would rather accept the public humiliation of being recognized as idiots and liars (shows real strength of character and the ability to withstand peer group pressure)than say 'sorry we were wrong about that' and take the internal hit to their self-esteem. Real fragility of self-conception there perhaps.

This means their word is not to be depended on. There are cultures which are based on “my word is my bond”, “no sooner said than done”, “all you have to do is ask”, these kinds of sayings which encapsulate a relation between language use, action commitment and personal honor or integrity. In some cultures the weighting in that triad is towards honor and integrity. Lying to someone is a huge insult, being caught lying to someone who thought they were a friend is an even bigger insult, lying to a former friend who knows he is being lied to by someone he thought was a former friend is not just an insult but a personal betrayal of deep and momentous consquence.

Imagine how much worse this becomes when billions of dollars entrusted to people who said they were friends and were accepted as friends are involved.

These cultural type reflections bring us to the meat of the matter today. Margin Calls Collapse Bushco’s Carlyle Capital. Bush senior built his political machine using family loyalty and an almost feudal type of distribution system to cement ties starting from the intelligence world that was trying to recover from Cointelpro and the Rockefeller Commission investigations. Then he moved out through military ranks to seed corporate managements and so on into the political parties. Loyalty is word given (even if the language is always wierded out) and is repaid in kind. Margin calls on Carlyle tell us that family’s word, and that of its proxy retainers, is no longer worth the air that carries it and the breath that passes it beyond the mouth.

Extreme view? Could be. Check this out. Who wants to unpeg their country’s ties to the dollar? Unpegging Dollar Ties. Still wondering why Cheney has been sent to the area again? Anyone who knows anything really about the recent US knows which family has managed the Arab oil producer account, and which national group has the most developed sense of honor in its social, political and business relations.

I think the Spring of 2008 might be right up there with the Spring of 1968 as a season for things to remember. You know like in 1942 when things seemed a little discouraging and this movie came out Casablanca with that wonderful song which unfortunately became the theme for one of those British comedies with Judy Dench and “Lionel” You must remember this. It’s a song from the depths written in 1931.

So that’s one way of looking at it, and in a way it is a vindication of the old principle that they brought it on themselves because they are getting back only what they have been putting out. Just like the case of Saturn/Ouranos and the mastery of the Times, there is justice and it will be done, in its own way. What goes around comes around, or, in other words do unto others as you would be done by.

If it is not that yet it is this. When did you last read a US newspaper talking about the danger of a new depression?
Barry Ritholz drew attention to this Washington Post backgrounder on the Fed bail-out
What the Fed is Doing and Why.

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I think we are just hanging in the balance at this point and a shift in one direction or the other will determine on which side we land. I have read a few comparisons of our current situation with the era of the great depression. Some of the similarities give you reason to pause and wonder if it could happen again.

I just noticed the Wall Street Journal has a copy of Treasury Secretary Henry Paulson's remarks from his speech today on the recommendations of the President's Working Group on Financial Markets. Worth watching to see how the markets, domestic and global, respond to the latest attempt to calm fears.