What Was the Financial Crisis of 2008 Like?

 

I just posted a number of items on X, a selection of charts and commentary from my blog during the Financial Crisis of 2008. 

Its all original and unedited. 

I wanted to recapture the feel for the crisis, what we were thinking and hearing, and how it unfolded in all its fraudulent ugliness and uncertainty. 

There was panic selling in the world markets.   Banks and financial institutions were falling like a house of cards.   

It was mostly a time of fear and uncertainty, as an avalanche of financial fraud and the mispricing of risk came crashing down around us.

It's worth a reminder for those who have forgotten what a serious market decline is like.

You may see the postings on X here.

 Below is a small sampling of the charts. 

 Here is a summation of the Five Major Causes of the financial crisis according to Joe Stiglitz in 2008:

1. Reagan's nomination of Alan Greenspan to replace Paul Volcker as Fed Chairman
2. The Repeal of Glass-Steagall and the Cult of Self-Regulation
3. Bush Tax Cuts for Upper Income Individuals, Corporations, and Speculators
4. Failure to Address Rampant Accounting Fraud Driven by Excessive and Flawed Compensation Models
5. Providing Enormous Bailouts to the Banks without Engaging Systemic Reform for the Underlying Causes of the Failure

I would like to say we have reformed the system of most of these failings.  But alas, we have not.

In retrospect the major bull market in gold found its start here as nations and individuals rushed to buy physical gold, dislocating the relationship between the physical and paper markets.  

Obama's failure to reform, which was the mandate that underwrote his election, was a critical failure.  And he never followed through on it over his eight years as president.  

 

 

Bank Bailouts Were Larger Than US Cost for WWII

All the Gains from the End of the Tech Bubble Bust Were Wiped Out

Stocks and Precious Metals Charts - A Conspiracy of Silence

 

"In a room where people unanimously maintain a conspiracy of silence, one word of truth sounds like a pistol shot."

Czesław Miłosz, Nobel Prize lecture, 8 December 1980

"To some generations much is given. Of other generations much is expected. This generation of Americans has a rendezvous with destiny. In this world of ours in other lands, there are some people, who, in times past, have lived and fought for freedom, and seem to have grown too weary to carry on the fight. They have sold their heritage of freedom for the illusion of a living. They have yielded their democracy.

I believe in my heart that only our success can stir their ancient hope. They begin to know that here in America we are waging a war against want and destitution and economic demoralization. It is more than that; it is a war for the survival of democracy. We are fighting to save a great and precious form of government for ourselves and for the world."

Franklin D. Roosevelt, Democratic National Convention, 1936 

"The threat to our democracy is real and growing. But it didn’t start with the MAGA crowd. It started with the dark money crowd — which won’t be satisfied until it owns every member of Congress, every lifetime-appointed federal judge, and every key politician in every swing state. Until there is a groundswell in America demanding serious campaign finance reform, this is the best democracy that money can buy."

Pam and Russ Martens, American Democracy Is Under Grave Threat, 7 September 2022

"The greatest need is for intellectual reappraisal, and a good place to begin is with a statement from a paper co-authored by Minsky that “apt intervention and institutional structures are necessary for market economies to be successful.” Rather than waging old debates about tax cuts versus spending increases, policymakers ought to be discussing how to reform the financial system so that it serves the rest of the economy, instead of feeding off it and destabilizing it. 

Among the problems at hand: how to restructure Wall Street remuneration packages that encourage excessive risk-taking; restrict irresponsible lending without shutting out creditworthy borrowers; help victims of predatory practices without bailing out irresponsible lenders; and hold ratings agencies accountable for their assessments. These are complex issues, with few easy solutions, but that’s what makes them interesting. As Minsky believed, “Economies evolve, and so, too, must economic policy.”

John Cassidy, The Minsky Moment, The New Yorker, February 4, 2008

They are more openly normalizing fraud, cruelty, and injustice.  

Most leaders and their elite servants stand by in complicit silence.

Have a pleasant weekend. 

Just Gold and Silver

 

"Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves."

Norm Franz, Money and Wealth in the New Millenium

Stocks and Precious Metals Charts - Restating the Obvious

 

"We have now sunk to a depth at which the restatement of the obvious is the first duty of intelligent men.   It is not merely that at present the rule of naked force obtains almost everywhere.  Bully-worship has become a universal religion."

George Orwell, Review of Bertrand Russell's Power, 1939

"Perpetual war is always so planned as to eat up any surplus that might exist after meeting the bare needs of the population. It is a deliberate policy to keep even the favoured groups somewhere near the brink of hardship, because a general state of scarcity increases the importance of small privileges and thus magnifies the distinction between one group and another.

The essence of oligarchical rule is not father-to-son inheritance, but the persistence of a certain world-view and a certain way of life.  A ruling group is a ruling group so long as it can nominate its successors.  Who wields power is not important, provided that the hierarchical structure remains always the same.”

George Orwell, 1984, June 8, 1949

"All political thinking for years past has been vitiated in the same way. People can foresee the future only when it coincides with their own wishes, and the most grossly obvious facts can be ignored when they are unwelcome."

George Orwell, Politics and the English Language, 1946


I'm still on vacation but I am closely watching a number of markets to see if we are reaching some sort of turning, or a crescendo of this mad mispricing of risk.

As you may recall some time ago I had suggested a higher than usual probability of a severe market correction by the end of October, and then shortly afterwards changed it to the end of November.

The reason for this is the fairly obvious and very determined actions of Bessent and his cronies to prop the markets up, for their own profits and at the behest of Trump, who views it as an emblem of his success.

A number of 'very important people' have jumped on the bandwagon since that time.  And with good reason.  The elements of a debacle in the financial markets are apparent to all the major players.  

But, let's see how long Donnie and his crime family can string this one out.

At this point it is only one event away, and there are a number of candidates to choose from.

Lawlessness is very much in fashion, nourished by the lack of even reasonable consequences.

"Robbery, rape, and murder they call empire — and where they make a desert, they call it peace."
 Tacitus, Agricola, circa 98 AD

Have a pleasant evening.