naked capitalism

Dave Raithel says:

Re Sullivan: I mostly dumped him over his defense of the “War on People Who Had Nothing To Do With Blowing Up The Twin Towers”, and his need to be loved by some god, etc., but I took a look and he caught, for the most part, what I caught. Beautiful kids. My mother was only 17. I can relate. Too bad Sarah’s politics are so fucking proto-fascist…

dh says:

The link to: Where Was the Safe Place for Savings from 1929-1933? Jesse’s Café Américain (hat tip Michael Panzner)

FREAKED ME OUT!! NOw I have to look at bond behavior in 1929……..oh great!

FYI:

Dexia Kommunalbank Deutschland AG, a unit of the world’s largest lender to local governments, canceled a 1 billion-euro ($1.5 billion) sale of covered bonds, three people with knowledge of the transaction said.

The cancellation is due to “unfavorable market conditions,” according to an e-mailed statement from UniCredit SpA, one of the banks working on the sale. The Berlin-based unit of France’s Dexia SA planned to sell five-year debt, said the people, who declined to be named because the details of the issue are private.

Sales of the notes, which are backed by loans to public sector institutions or mortgages, have slowed amid the fallout from the credit crisis as investors demand higher rewards to buy the securities. Treasury Secretary Henry Paulson is looking to create a version of the European bond market to help revive the U.S. mortgage-bond market.

“This is a sign that the market is in a critical condition,” said Ralf Burmeister, head of covered bond and financial research at Landesbank Baden-Wuerttemberg in Stuttgart.

dh says:

Some FYI History:

However, there was a worldwide adverse shift in the credit markets that more than overcame the beneficial impacts of sharply lower interest rates. A constantly increasing number of political and business entities with suspect credit were frozen out of the bond markets and thus faced substantially more difficulty in borrowing money. In November, 1930, several large Italian banks closed.

On May 7, 1931, the Federal Reserve Bank cut its discount rate to the all time record low of 1 1/2%. This caused a slight flurry in the securities markets, and then the decline resumed. After all, ALL business indices were DOWN.
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Commodity prices were slipping steadily lower. Low interest rates stimulated nothing but savings accounts. These were still paying 4% to 4 1/2% interest, and constituted excellent “investments” under current conditions. However, since the banks were now getting less than this on government bonds and other high grade loans, this interest rate was expected to come down, too.

High grade bonds were still strong, but the decline in stock prices continued. Very light trading indicated that a drastic lack of buying interest, rather than desperate selling pressure, was dragging prices down.

Railroad car loadings – which normally ran over one million per week – were 747,732 in the middle of May, bringing railroad activity to a Depression low. Steel production fell sharply to 42% of capacity. Desperate for business, the smaller mills were actively undercutting list prices.

… holiday sales had been disappointing, and by January, 1932, wholesale and department store sales were declining sharply.

1 1/2 million railroad workers finally accepted the 10% wage cut. This was far less than the decline in the cost of living, so they were still doing very well. N.Y. City quickly floated $100 million in short term bonds at 6% – the highest interest rate that the city had had to pay since WW I – to cover its budgetary problems. Low interest rates don’t necessarily translate into easier monetary conditions. Additional borrowing was predicted, and the banks provided a $150 million short term credit line.

April 1932:

1 1/2 million railroad workers finally accepted the 10% wage cut. This was far less than the decline in the cost of living, so they were still doing very well. N.Y. City quickly floated $100 million in short term bonds at 6% – the highest interest rate that the city had had to pay since WW I – to cover its budgetary problems. Low interest rates don’t necessarily translate into easier monetary conditions. Additional borrowing was predicted, and the banks provided a $150 million short term credit line.

Auto production rose sharply towards the end of April, but auto registrations were still 50% below 1931 levels and auto and truck exports were practically nil. U.S. exports and imports for the first quarter of 1932 plummeted 20% below the last quarter of 1931 – and 33% below the first quarter of 1931. In April, trade was 36% below April 1931 – less than 14% was accounted for by falling prices. World trade was grinding to a halt.
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U.S. Steel wages were slashed 15% for 200,000 workers as the giant corporation’s losses mounted. Federal salaries were cut 10%. Nevertheless, for these workers – who still had full time jobs – the declining cost of living still easily outstripped their wage cuts.

Nasty… !!

Richard Kline says:

Just when you thought it was safe to go back in the water . . . !

This is the perfect visual metaphor for the proposition that perfectly defined and weighted _contextual_ arguments can be wholly undone by discontinuous conditions. Investors may have the problem of ’sharks in the pool’ sussed, but they’ll come to bloody pieces anyway when the swimming tigers get ‘em.

doc holiday says:

Chris,

Thanks for that! I just skimmed over a few things there, looking for a few connections to general bond activity, but the part you broke out, is worth pondering!

Is that my DNA that I see there?

Juan says:

Chris,

Thanks.

I read that as ’saving capitalism from itself’ through creation of a vertically organized partnering of capital, govt, and labor, i.e. corporatism (which, as I expect you know, took a wide variety of forms and was implemented in quite a few nations during the interwar period, partic post 1928).

Any opinions re. this time around?

Yves Smith says:

Palin.