February 10, 2009
What The Abyss Looked Like
Okay Lasseiz-fairites. I was able to get my inner-Hamilton on last fall because I felt that Sec. Hank Paulson had "stared into the Abyss" and that the first TARP funds were to protect from immanent disaster.
Rep. Paul Kanjorski (D PA11) has an interview describing what the Abyss looked like:
On Thursday at 11:00 a.m. the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S., to the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped a $105 billion in the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn't be further panic out there.
If they had not done that, their estimation is that by 2:00 p.m. that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it.
This was not a trillion dollar sop to Unions, or a crisis to socialize medicine over. This was the US Treasury stepping in as lender of last resort.
Hat-tip: PA Water Cooler (video at the link).
Posted by John Kranz at February 10, 2009 8:04 PM
That's a load of horse manure. Don't believe it.
Think about it for a minute. Do you realize how much $5.5 trillion is, and how much $105 billion will not stem such a tide anyway?
Do you realize that money merely doesn't disappear when it's withdrawn? It was hardly evaporating into thin air. People had started dumping money markets on September 17, ever since the Reserve Primary Fund "broke the buck" the day before, and putting into safe paper: bank CDs if the amounts were low enough for FDIC insurance, and Treasury securities otherwise. The money was simply being transferred from one form of savings to another.
"By their estimation" is no more than doom-mongering. They were merely extrapolating what was happening throughout the entire day, when it probably wouldn't have happened at all. Worse, their extrapolation was an outright lie. By 11 a.m., they had "noticed" $550 billion. Even if it had happened in one hour, how could another $5 trillion have been withdrawn in only three more hours?
How could $5.5 trillion have disappeared when the Money Fund Report reported last August that money market assets exceeded $3.5 trillion for the first time? Do you really believe that money markets surged by $2 trillion in just the following month?
Look, my friend, don't take this the wrong way, but god damn, think about things before swallowing this kind of guff. Whatever any politician tells you, even Ron Paul, be skeptical: "believe not every spirit, but try the spirits whether they are of God: because many false prophets are gone out into the world."
"The whole aim of practical politics is to keep the populace alarmed -- and hence clamorous to be led to safety -- by menacing it with an endless series of hobgoblins, all of them imaginary." - H.L. Mencken
That's a load of horse manure. Don't believe it.
Think about it for a minute. Do you realize how much $5.5 trillion is, and how much $105 billion will not stem such a tide anyway?
Do you realize that money merely doesn't disappear when it's withdrawn? It was hardly evaporating into thin air. People had started dumping money markets on September 17, ever since the Reserve Primary Fund "broke the buck" the day before, and putting into safe paper: bank CDs if the amounts were low enough for FDIC insurance, and Treasury securities otherwise. The money was simply being transferred from one form of savings to another.
"By their estimation" is no more than doom-mongering. They were merely extrapolating what was happening throughout the entire day, when it probably wouldn't have happened at all. Worse, their extrapolation was an outright lie. By 11 a.m., they had "noticed" $550 billion. Even if it had happened in one hour, how could another $5 trillion have been withdrawn in only three more hours?
How could $5.5 trillion have disappeared when the Money Fund Report reported last August that money market assets exceeded $3.5 trillion for the first time? Do you really believe that money markets surged by $2 trillion in just the following month?
Look, my friend, don't take this the wrong way, but god damn, think about things before swallowing this kind of guff. Whatever any politician tells you, even Ron Paul, be skeptical: "believe not every spirit, but try the spirits whether they are of God: because many false prophets are gone out into the world."
"The whole aim of practical politics is to keep the populace alarmed -- and hence clamorous to be led to safety -- by menacing it with an endless series of hobgoblins, all of them imaginary." - H.L. Mencken
Posted by: Perry Eidelbus at February 10, 2009 10:31 PMLet me add one last thing: motive. Why would politicians and central bankers lie about any of this? Why, indeed? The Great Depression was the first big opportunity for the dark powers to soften Americans up to the idea of government intervention to "save" the economy, notwithstanding the New Deal only made things worse. This manufactured crisis is being used to destroy all confidence in the free market, a return to which is the only thing that can save us, and to instill in people the belief that only government can save them, when in fact it only leads to economic damnation.
Posted by: Perry Eidelbus at February 10, 2009 10:51 PMI'll put you down as a "no" then.
I think the text in the speech is overwrought, Perry, and quickly accept your concerns about crises as an underpinning to undermine liberty.
Yet I remain unconvinced that the first half of TARP did not perhaps stop a cataclysmic, ATM cards stop working scenario. That would have handed our new Democrat overlords a clearer and more compelling reason to proceed with nationalizing the means of production.
I can never prove it. This clip certainly offers no proof. And your skepticism is well placed. But I believe that Paulson was scared.
Posted by: jk at February 11, 2009 10:57 AMYou're unconvinced because instead of trusting in the free market (as Hayek would tell you), you cling to what government would have you believe, that it has the ability to save us. As I've said before, you're trusting the arsonist to put out the fire he started. Irrational borrowing and excessive spending got us into this. Too many easy dollars via cheap credit. Why do you think the same things will get us out?
Remember what Bastiat taught us: money is conserved. If it's drawn out of one thing, it's put into another vehicle. There was going to be no nationwide banking collapse, but the feds have you convinced that somehow they stepped in just in time.
I'm not just skeptical. I clearly showed that "5.5 trillion by 2 p.m." is clearly a lie. You're still falling for it, and your argument comes down to 50% nationalization is better than 100%.
Posted by: Perry Eidelbus at February 11, 2009 11:26 AMI've heard this story from a couple of sources now - that $550 billion had been withdrawn. I'm with Perry on the second paragraph - the money just doesn't exist.
I'm more concerned about the first paragraph. IF it's true that there was an electronic run on the bank, then what's also true is that we know who and we know where the money went. I'm not the expert economist the way the rest of you guys are, but it seems to me that if that were true, there would be hearings and names would be named - from the records of who did the withdrawing. Given the mid-September timing, that would be tantamount to an engineered crisis with the intent of manipulating the upcoming elections.
Are we talking about an Oceans-Thirteen-esque "reverse big store," with someone like, say, George Soros in the lead roll, rigging the game in order to throw the election? Could it be done? I don't know, but it seems to me that if there was that big and that sudden a run on the bank, it would have to have been planned, right?
That's the logical conclusion of what I've been reading. Someone like Soros, given his 1992 dealings with the Bank of England, is certainly the kind of character that could conceive of such a scheme.
Seems to me it would be the basis for an interesting novel. I don't know, fellows - any thoughts on what might be an interesting conspiracy theory?
Posted by: Keith at February 11, 2009 6:17 PMI did see some more conspiratorial reflections out there. I gotta admit that I am an Occam's Razor kind if guy, pretty slow to buy conspiracy theories. Like Nixon in 1972, this one seemed so much in the bag it is hard to think foul play was worth the risk.
As far as hearings, you can withdraw money from a money market and you can short the British Pound. I like the novel idea, though, sounds like a good yarn.
Posted by: jk at February 11, 2009 7:53 PMKeith: why bother with names, when such a list would clearly be too long to have any meaning? It would take ten Bill Gates to come up with $550 billion. It's more like 5.5 million Americans who saved $100,000 each in money market instruments.
Big deal. There was actually no conspiracy. The pullout of $550 billion is nothing to worry about and could not have destroyed anything. As I said, the money doesn't evaporate. People were simply putting it into other forms of savings. It's no different than the various stock exchanges tanking because people are ditching equities in favor of high-quality paper. The money is merely transformed.
There was a conspiracy, but Soros is just part of it. It's all about leftists all across the world who wanted to retake the most powerful political office. I've known since the 2004 election that the 2008 election would be 1992 all over again: the Democrats would hammer on the economy, because that's what they win on. Remember that the 1990-1991 recession had ended in March 1991, but NBER didn't admit it until December 1992. Convenient, huh?
"The media, naturally, wants to make the 2008 presidential election a close remake of 1992: the American people are stupid enough to elect a Clinton, after being deluded into thinking George Bush wrecked the economy." - Perry Eidelbus, December 17, 2007
"Today I'll admit a fear I've recently expressed in private, that the Fed may tighten too much and create a recession in the next couple of years. An economic crisis is all Hillary would need to capture the White House, just like her husband seized upon -- never mind the recession had ended 20 months prior to the 1992 election." - Perry Eidelbus, November 6, 2005
And I'm on record as predicting on November 3, 2004, that the Democratic candidate would campaign on universal healthcare and universal employment. Obama's shills have said he's not looking for government-run healthcare, but Obama has made it clear he wants everybody insured. And when he's talking constantly about "millions of jobs," I can claim victory about the employment prediction. But note in particular what I said about the media making things appear as worse than they actually are.
And American voters were stupid enough not to see this. They fell for Obama's promises of peace, land and bread.
Posted by: Perry Eidelbus at February 11, 2009 10:02 PMKeith: why bother with names, when such a list would clearly be too long to have any meaning? It would take ten Bill Gates to come up with $550 billion. It's more like 5.5 million Americans who saved $100,000 each in money market instruments.
Big deal. There was actually no conspiracy. The pullout of $550 billion is nothing to worry about and could not have destroyed anything. As I said, the money doesn't evaporate. People were simply putting it into other forms of savings. It's no different than the various stock exchanges tanking because people are ditching equities in favor of high-quality paper. The money is merely transformed.
There was a conspiracy, but Soros is just part of it. It's all about leftists all across the world who wanted to retake the most powerful political office. I've known since the 2004 election that the 2008 election would be 1992 all over again: the Democrats would hammer on the economy, because that's what they win on. Remember that the 1990-1991 recession had ended in March 1991, but NBER didn't admit it until December 1992. Convenient, huh?
"The media, naturally, wants to make the 2008 presidential election a close remake of 1992: the American people are stupid enough to elect a Clinton, after being deluded into thinking George Bush wrecked the economy." - Perry Eidelbus, December 17, 2007
"Today I'll admit a fear I've recently expressed in private, that the Fed may tighten too much and create a recession in the next couple of years. An economic crisis is all Hillary would need to capture the White House, just like her husband seized upon -- never mind the recession had ended 20 months prior to the 1992 election." - Perry Eidelbus, November 6, 2005
And I'm on record as predicting on November 3, 2004, that the Democratic candidate would campaign on universal healthcare and universal employment. Obama's shills have said he's not looking for government-run healthcare, but Obama has made it clear he wants everybody insured. And when he's talking constantly about "millions of jobs," I can claim victory about the employment prediction. But note in particular what I said about the media making things appear as worse than they actually are.
And American voters were stupid enough not to see this. They fell for Obama's promises of peace, land and bread.
Posted by: Perry Eidelbus at February 11, 2009 10:04 PMKeith: why bother with names, when such a list would clearly be too long to have any meaning? It would take ten Bill Gates to come up with $550 billion. It's more like 5.5 million Americans who saved $100,000 each in money market instruments.
Big deal. There was actually no conspiracy. The pullout of $550 billion is nothing to worry about and could not have destroyed anything. As I said, the money doesn't evaporate. People were simply putting it into other forms of savings. It's no different than the various stock exchanges tanking because people are ditching equities in favor of high-quality paper. The money is merely transformed.
There was a conspiracy, but Soros is just part of it. It's all about leftists all across the world who wanted to retake the most powerful political office. I've known since the 2004 election that the 2008 election would be 1992 all over again: the Democrats would hammer on the economy, because that's what they win on. Remember that the 1990-1991 recession had ended in March 1991, but NBER didn't admit it until December 1992. Convenient, huh?
"The media, naturally, wants to make the 2008 presidential election a close remake of 1992: the American people are stupid enough to elect a Clinton, after being deluded into thinking George Bush wrecked the economy." - Perry Eidelbus, December 17, 2007
Posted by: Perry Eidelbus at February 11, 2009 11:37 PMContinued, since I guess there's a spam filter preventing the posting of a comment with too many links.
"Today I'll admit a fear I've recently expressed in private, that the Fed may tighten too much and create a recession in the next couple of years. An economic crisis is all Hillary would need to capture the White House, just like her husband seized upon -- never mind the recession had ended 20 months prior to the 1992 election." - Perry Eidelbus, November 6, 2005
And I'm on record as predicting on November 3, 2004, that the Democratic candidate would campaign on universal healthcare and universal employment. Obama's shills have said he's not looking for government-run healthcare, but Obama has made it clear he wants everybody insured. And when he's talking constantly about "millions of jobs," I can claim victory about the employment prediction. But note in particular what I said about the media making things appear as worse than they actually are.
And American voters were stupid enough not to see this. They fell for Obama's promises of peace, land and bread.
Posted by: Perry Eidelbus at February 11, 2009 11:39 PMContinued, since I guess there's a spam filter preventing comments with more than a link or two.
"Today I'll admit a fear I've recently expressed in private, that the Fed may tighten too much and create a recession in the next couple of years. An economic crisis is all Hillary would need to capture the White House, just like her husband seized upon -- never mind the recession had ended 20 months prior to the 1992 election." - Perry Eidelbus, November 6, 2005
Posted by: Perry Eidelbus at February 11, 2009 11:41 PMAnd I'm on record as predicting on November 3, 2004, that the Democratic candidate would campaign on universal healthcare and universal employment. Obama's shills have said he's not looking for government-run healthcare, but Obama has made it clear he wants everybody insured. And when he's talking constantly about "millions of jobs," I can claim victory about the employment prediction. But note in particular what I said about the media making things appear as worse than they actually are.
And American voters were stupid enough not to see this. They fell for Obama's promises of peace, land and bread.
Posted by: Perry Eidelbus at February 11, 2009 11:43 PMPerry: you are on record for those predictions, and rightly so. You are an astute observer of the political realm, and a clear thinker. That's one of the reasons I count on your opinions.
I want to be on the record too - if a movie gets made about a bunch of wealthy evil capitalists conspiring to swing the American political process, by moving half a trillion dollars out of America and taking it overseas to manufacture an economic crisis, then you heard it here first, and I want a piece of the action. I'm going to start writing it tonight; think it'll sell?
I do understand that wealth is conserved, and it seems to me that if the Kanjorski quote is true, then the only way that kind of money could be removed from the American economy would we to electronically transfer it overseas. For that to happen "in the matter of an hour or two" would require something on a par of Soros calling Buffett and the rest of the club, and them all moving not just their personal wealth, but the capital of the corporations they control and influence.
It's that "in the matter of an hour or two" that bothers my untrained mind. What would be the odds of those 5.5 million Americans all deciding to grab their month all on the same morning? Mr. Spock couldn't calculate those odds. It seems, again to my untrained mind, this would have to be more like fewer people and bigger accounts being moved.
When I mention the naming of names, it just seems to me that if this was done electronically, then somewhere there's a record of who, from where, and to where - and I'm saying if it really happened, they should put up or shut up. I only see three possibilities:
(1) It really happened, and it was a deliberate conspiracy of some major players - in which case we ought to know who committed what would amount to an act of economic terrorism;
(2) It really happened, and it was just a remarkable coincidence of everyone getting the same urge to draw down their money at the same time; or
(3) It didn't happen, and the speaker is a prevaricating colostomy bag.
Posted by: Keith at February 12, 2009 12:25 PM"if the Kanjorski quote is true"
Do you mean that is it true what Kanjorski said, or that is what he said true? There's an important logical difference there.
What Kanjorski said was an outright lie. You don't have to proceed any further. Five hundred fifty billion dollars in money markets alone is an impossible sum for Soros, Buffett and all others to control.
Even if the money were transferred overseas, what of it? They're still dollars. Foreigners would have to convert them to other currencies for anything but dollar-denominated assets, and the dollars would come home. Foreigners use the dollars to buy crude oil, invest in U.S. stocks, buy U.S. Treasury securities, etc., and the dollars would come home.
What happened starting on September 17th is that countless individual investors started pulling out of money market funds, ever since a big one "broke the buck." They simply put the money into other forms of savings. It was a "coincidence" in that many people had the same reaction at the same time, but hardly a "remarkable" one.
Nothing to worry about. There's no "economic terrorism" here.
Posted by: Perry Eidelbus at February 12, 2009 3:25 PMNUTS! I just read Michael Moore is doing the movie. Another of his crockumentaries. That just skewered my hopes for fame and a fast buck. Guaranteed he won't even give me credit for the idea.
Perry: I defer to your knowledge, and thank you for the quick education. I'll join you in putting Kanjorski into my Possibility #3 box. I'm shocked, shocked to discover that an elected official can lie to us with impunity like this.
Posted by: Keith at February 12, 2009 4:12 PM | What do you think? [15]