I think we’ve avoided the bank failure problems that happened then so it hopefully won’t be as bad but then we’ve got a whole new bag of problems unimaginal then. hedge funds, credit swaps and ridiculous “notational” values. Again ‘credit’ unsustainable.

but above all….the die-off of demand by a shuttered and ignored middle class (workers) is the major problem of next year. If demand continues to fall….the values of the Dow can’t but vaguely rally and then fall again. I was thinking that our friend, an accountant professor and daytrader, predicting a 5000 Dow was being overly extreme….but hell we’re almost there.

read Marriner Eccles at wiki’s Great Depression: wide differences of income between the rich and the middle and then bankruptucy for the many after a financial collapse and a market admidst lowering incomes has only one way to go in a consumer culture: Down.

Only a massive return to Demand side economic principals, away from purely supply-side reactions such as the huge giveaways to the banking entities can turn this around. Probably 2 trillion in govt. projects, job’s programs, to increase income and demand can turn this around and it has to done next year!!

Temporary rally’s will come and go…but with demand continuing to fall?

I expect the bottom will see a reduction in the price of housing and most other such infrastructure by a factor of at least 4 in present dollars — below cost to build, so building will nearly stop for a decade or more.

Personal incomes will drop by about a similar factor, perhaps a little more. Good guess would be by a factor of 5.

However, the costs of most goods and services will not decline that much, because they are still based on costs to produce.

I expect, however, that foreign countries will cease to loan money to the U.S. government, so that most federal spending deficits will go directly into inflation. Expect an inflation rate of least 400%.

Trade will become balanced: No more credit for imports.

The result, after about 5 years, will probably be a standard of living about that of Argentina today. However, the standard of living of Argentina and other countries will have declined even more. Countries that have been loaning money won’t have it to loan, because all such money is fiat currency, with no backing other than the credit of the issuing country.

Ultimately, this is not just about exotic financial instruments. It is about credit-based currencies, and that will become clear in the months ahead.

This is it. Micro-management of (in this case, artificially low) interest rates is exacerbating risks of systemic failure in the Treasury bond market.

Governments need to let the market set interest rates – and if they don’t like the interest rate they have to pay on their debt- they should run balanced budgets.

I believe gold to be a poor investment but a good safety net.

This uncertainty/fear measure shows that no one has a feel for which way is up nor do they have a feel for the magnitude of “hedge fund failures”.

One thing to keep in mind: many of these “failures” are now technical in nature caused by the downdraft of forced selling.

Sure, the fundamentals of the economy are weak, but $0.60 is *way* to low for Term Loan A bank debt to be trading at, and that is where it has arrived at over the last few weeks.

Reality will set in, and “closing the markets” will not get us there.

Mr. Roubini has been truly on point throughout and leading up to the crisis, so I hesitate to publicly disagree with him like this.

However, this seems to me to be a product of the panic and the crowd he was hanging out with in London…I hope.

Close the markets and you risk “realizing the greatest fears of the investor” that the value of whatever investment they are holding is nil or close to nil. Marked to market and trading in such times are not the culprits, the correction of past excesses is the main event.

We may even see a curious situation where trading is halted, no money is technically lost on the exchanges but hedge funds close down anyway, because, investors (particularly those with large stakes) are pulling out $ as fast as is humanly possible. When you see queues of ordinary people ( read, non-millionaires) outside their banks and financial institutions requesting to close investment accounts and enquiring about company pension schemes/funds, that’s when the crap has hit the fan, ‘cos the masses are usually the last ones to hear the bad news.

Traditionally, right after a US election, the newly elected (or re-elected) president enjoys a post-election bump in approval ratings. This is true even in the case of close-fought elections like 1960 Kennedy-Nixon or 1948 Truman-Dewey (although Bush-Kerry 2004 was apparently an exception). Psychologically, people have a tendency to close ranks and buy into a collective decision, at least for a honeymoon period.

Here is a list of New York Stock Exchange special closings since 1885. Note July 31 – November 27 1914 (for the outbreak of World War I), several one-day closings in November 1929 (to deal with heavy-volume paperwork, supposedly), and March 6 – 14 1933 (national banking holiday), and September 11 – 14 2001. Nothing for Pearl Harbor, but they did delay the start of trading on January 24 1925 for a solar eclipse.