The Genie Has Left the Bottle. But Is It Useless to Resist?

Know what's going to destabilize the financial system?
GOVERNMENT ASSIMILATION OF TOXIC DEBT THAT INHIBITS THE MARKET'S ABILITY TO CORRECT ITSELF

Bailout expanding to insurers
Treasury to take stakes in firms as distress spreads beyond banks
Insurers, including The Hartford, Prudential and MetLife, have pushed the Bush administration to include them in the plan. Many firms have taken losses from mortgage-related securities and other investments and are struggling to replenish their coffers.
http://www.msnbc.msn.com/id/27368452/

AIG Tapped $90.3 Billion From Government Credit Line
Oct. 24 (Bloomberg) -- American International Group
Inc. has used $90.3 billion of a U.S. government credit line since it was bailed out last month, an amount exceeding the size of the original loan meant to save the insurer.
http://bloomberg.com/apps/news?pid=20601208&sid=aNYcIjrc7.g4&refer=finance

Paulson Takes Stake in Regional Banks
Oct. 24 (Bloomberg) --"The Treasury began purchasing stakes in a number of regional U.S. banks, as the government stepped up its efforts to halt the freeze of credit to businesses and households."
http://bloomberg.com/apps/news?pid=20601208&sid=aXGtkUB_OG0U&refer=finance

No curbs on Wall Street pay despite meltdown
AP, Friday, October 24, 2008
NEW YORK - Despite the Wall Street meltdown, the nation’s biggest banks are preparing to pay their workers as much as last year or more, including bonuses tied to personal and company performance.
“Taxpayers have lost their life savings, and now they are being asked to bail out corporations,” New York Attorney General Andrew Cuomo said of the AP findings. “It’s adding insult to injury to continue to pay outsized bonuses and exorbitant compensation.”
http://www.msnbc.msn.com/id/27367042/

Addicts keep using to avoid the consequences of using--a druggie debt trap. Their hearts and minds -- wracked from years of self-centered, selfish, and ego-centric behavior -- know no other way to exist. They are self-inflicted victims of the ultimate insanity, clinging desperately to the false hope that they can continue the same self-destructive behavior... but somehow achieve different results. It is pure fantasy, and a deadly one. For most, there are only three outcomes: jail, institutions, or death. For the blessed few, there can be recovery, but only if the addict is willing to admit the problem exists and make a conscious decision to change.

America stands at the crossroads of the addict. Americans are addicted to credit, cheap food, and easy living; somehow, somewhere along the way to nirvana we were certain these things would bring us, these things we cherished most became our heroin.

But the dealers got arrested and the whole world is going crazy. Global markets are rising and falling hundreds of points in the space of a few minutes, all non-food commodities are in deflation, people everywhere are losing their minds with worry; everyone in general, is sweating and shaking (even the Saudis). These are the initial withdrawal pangs that precede delirium-tremens: the DT's. Our leadership is stuck in a tragic loop of throwing more and more money at problems that more and more debt will never solve. EVER. The money pit we created has no bottom. Paulson, Bernanke and Co. are savagely beating the Treasury printing presses bloody to increase the flow of currency as if the presses were horses, trying to gain a few furlongs on the problem... to no avail. They could print money until the printing of it uses up all the paper in the world and it will not change the stark reality that America is BROKE. We finally leveraged our financial system to death; the day of Wreckoning (sic) when this truth will emerge is at hand.

Things could get ugly from here.


America is not the Lone Ranger in this debacle; the entire world is invited. In the unlikely event that prices do not move from today’s closing levels, here is how September-October will rank on the list of worst two-month periods for U.S. stock indices (thanks to Bill Norris's 10/24/2008 New York Times article United Panic for the numbers):

Dow Jones Industrials (1920 to 2008)
1. April-May 1932, down 39%
2. March-April 1932, down 31%
3. October-November 1929, down 30%
4. October-November 1987, down 29%
5. August-September 1931, down 29%
6. September-October 1929, down 28%
7. September-October 2008, down 27%
8. November-December 1931, down 26%
9. April-May 1931, down 25%
10. September-October 1987, down 25%

Standard & Poor’s 500 (1928-2008)
1. April-May 1932, down 39%
2. September-October 2008, down 32%
3. March-April 1932, down 30%
4. August-September 1931, down 29%
5. October-November 1987, down 28%
6. September-October 1931, down 25%
7. May-June 1932, down 24%
8. April-May 1940, down 24%
9. September-October 1929, down 24%
10. September-October 1987, down 24%

Nasdaq composite (1971-2008)
1. September-October 2008, down 34%
2. February-March 2001, down 34%
3. October-November 1987, down 31%
4. October-November 2000, down 29%
5. September-October 1987, down 29%
6. November-December 2000, down 27%
7. August-September 2001, down 26%
8. April-May 2000, down 26%
9. August-September 1990, down 21%
10. July-August 1998, down 21%

The mega-rich are still mega-rich; the upper-crust, the middle class, and the poor became much poorer in the last 60 days. Together we stand at a critical and fleeting point--the point where we can either face our problems and recover financial integrity, or say 'screw it' and continue down the same path that brought us to this marvelous point. One thing is certain... if we keep doing what we're doing, we'll keep getting what we're getting.

Whichever we choose, the moment of truth is at hand. One day, if we're lucky, our progeny will say to themselves... of us, their ancestors... "We stood at the turning point..." I hope the tale they tell will have a happy ending. I hope they are not disappointed by everything we are doing and about to do to try to assuage the angry, ravenous beast of ruin confronting us.