I listened to a telephone conference 5:00PM EST on Thursday, October
02, 2008 with Nouriel Roubini, Barry Ritholtz, and Zach Gast.  I have
recently come to respect Mr. Roubini. …

Mark Gongloff at The Big Picture writes: Nouriel Roubini
is the NYU economics professor known lovingly around Wall Street as
“Dr. Doom” for his foresight in predicting the end of the financial
system as we know it. Blogger/strategist Barry Ritholtz
of The Big Picture and Fusion IQ, who hasn’t been much more optimistic,
is joining him this afternoon for a conference call to discuss the
credit crunch. Should be fun! And by “fun,” we mean “a reminder to
stuff our money in our mattress.”

5:08: Roubini starts out saying there are six things to think about. The first question has about 10 parts. Could be a long call.

5:11: The U.S. economy risks a negative feedback loop: Economic woes hurt creditworthiness, hurting banks, hurting credit, hurting the economy. Wash, rinse, repeat, lose your house.

5:14: The Fed’s next move is likely a rate cut.

5:14: Everything that’s going on in markets now? You know, stocks and credit being lousy? Expect more of that.

5:16: “The events of the last few weeks say we’re one accident away from a systemic financial meltdown,”
says Roubini. He points to previous accidents that nearly caused a
universe-eating financial black hole: Bear Stearns in March, Fannie and
Freddie in July and Lehman and AIG a couple of weeks ago. “We’re seeing
the beginning of a silent run on the shadow and traditional banking
system,” he says. “There’s a generalized panic” in the financial
markets.

5:20: And that’s not the scariest part, he says!
The scariest part is that, every time the government steps up its
response, the market reaction gets weaker and weaker.

5:22: “We are literally one step away from collapse of entire financial system and even the corporate system.”

5:24: This bailout package isn’t going to do the trick.
That’s why the market isn’t cheering it any more: Nobody trusts anybody
any more. “We’ve reached the point where $700 billion doesn’t make any
difference given reaction of market.”

5:26: The economy was already in “freefall” before September. We’re in for a severe recession, according to a litany of data.

5:28: Treasury should have done more — you can’t
just buy and park bad assets. You have to triage, shutting down weak
banks and deciding who to save. You have to recapitalize the banking
system so they’ll extend credit. You have to reduce debt. Earlier, he
said you have to guarantee all deposits, regardless of amount. “This plan in Congress is just a sham.” …

Take a listen to the complete  Audio Recording of the teleconference, or read the rest of the live blog description. (10/05/08)
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Tom Szabo writes: This might be the most important monetary discussion of the past
few decades, and Ed Bugos should get a lot of credit for starting it
with the excellent Who’s Bailing out Whom? 
I agree with Mr. Bugos wholeheartedly although I believe the situation
might be even more precarious than he states. I urge all of my readers
to at least read the piece by Ed Bugos and as much of the below
discussion as you can stomach. Also, I would ask that you forward this
to as many people as you know so they too will have a chance to
understand the truth before it smacks the U.S. and the rest of the
world in the face.

• The Federal Reserve is bankrupt. The U.S. Treasury Department
  quietly rescued — actually, took over — the world’s largest Central
  Bank on September 17.

• The idea that Federal Reserve Chairman Bernanke could fly his
  helicopter was a fraud; the Fed simply didn’t have any helicopter fuel.

• The U.S. Treasury Department, on the other hand, has copious
  amounts of helicopter fuel in the form of undiscounted government debt,
  and this fuel has now been made available to Mr. Bernanke. The more
  fuel the Treasury provides, the closer the U.S. dollar will get to its
  death.

• Just released Fed data confirms that initial test flights of Ben’s
  helicopter have been spectacularly successful. Up to $150 billion has
  been loaded on the helicopter so far and may already be fluttering down
  into the Monetary Base as I write this. The inflation of “high power”
  money by more than 15% in the course of 2 weeks (an annual rate of 300%
  or more) is unprecedented.

• Inflation of the Monetary Base is leveraged by fractional reserve
  lending. Should the banks actually start to lend again, we could very
  well see hyperinflation in the U.S. over the next 18 months.

• This is obviously bullish for gold and silver and bearish for the
  dollar, although it could take the markets a while to realize it (by
  which time an even more incredible sequence of events could overshadow
  this one, although I doubt it). I think the markets might need 2-3
  weeks more to absorb what just happened.

I wrote Thursday’s post about the Federal Reserve’s bankruptcy right before the new Factors Affecting Reserve Balances
report came out with data as of October 1, which confirmed my statement
that the Federal Reserve is a dead man walking. The Reserve Balances
report supports what Ed Bugos and several of my readers pointed out
Friday: a massive jump in the Adjusted Monetary Base during the second half of September. (10/05/08)
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Murray Feshbach writes: The bear is back. That’s what all too many Russia-watchers have been saying since Russian troops steamrolled Georgia in August, warning that the country’s strongman, Vladimir Putin, was clawing his way back toward superpower status. The new Russia’s resurgence has been fueled — quite literally — by windfall profits from gas and oil, a big jump in defense spending and the cocky attitude on such display during the mauling of Georgia, its U.S.-backed neighbor to the south. Many now believe that the powerful Russian bear of the Cold War years is coming out of hibernation.

Not so fast. Predictions that Russia will again become powerful, rich and influential ignore some simply devastating problems at home that block any march to power. Sure, Russia’s army could take tiny Georgia. But Putin’s military is still in tatters, armed with rusting weaponry and staffed with indifferent recruits. Meanwhile, a declining population is robbing the military of a new generation of soldiers. Russia’s economy is almost totally dependent on the price of oil. And, worst of all, it’s facing a public health crisis that verges on the catastrophic.

To be sure, the skylines of Russia’s cities are chock-a-block with cranes. Industrial lofts are now the rage in Moscow, Russian tourists crowd far-flung locales from Thailand to the Caribbean, and Russian moguls are snapping up real estate and art in London almost as quickly as their oil-rich counterparts from the Persian Gulf. But behind the shiny surface, Russian society may actually be weaker than it was even during Soviet times. The Kremlin’s recent military adventures and tough talk are the bluster of the frail, not the swagger of the strong.

While Russia has capitalized impressively on its oil industry, the volatility of the world oil market means that Putin cannot count on a long-term pipeline of cash flowing from high oil prices. A predicted drop of about one-third in the price of a barrel of oil will surely constrain Putin’s ability to carry out his ambitious agendas, both foreign and domestic.

That makes Moscow’s announced plan to boost defense spending by close to 26 percent in 2009 — in order to fully re-arm its military with state-of-the-art weaponry — a dicey proposition. What the world saw in Georgia was a badly outdated arsenal, one that would take many years to replace — even assuming the country could afford the $200 billion cost.

Something even larger is blocking Russia’s march. Recent decades, most notably since the breakup of the Soviet Union in 1991, have seen an appalling deterioration in the health of the Russian population, anchoring Russia not in the forefront of developed countries but among the most backward of nations.

This is a tragedy of huge proportions — but not a particularly surprising one, at least to me. I followed population, health and environmental issues in the Soviet Union for decades, and more recently, I have reported on diseases such as the HIV/AIDS epidemic ravaging the Russian population. I’ve visited Russia more than 50 times over the years, so I can say from firsthand experience that this national calamity isn’t happening suddenly. It’s happening inexorably.

According to U.N. figures, the average life expectancy for a Russian man is 59 years — putting the country at about 166th place in the world longevity sweepstakes, one notch above Gambia. For women, the picture is somewhat rosier: They can expect to live, on average, 73 years, barely beating out the Moldovans. But there are still some 126 countries where they could expect to live longer. And the gap between expected longevity for men and for women — 14 years — is the largest in the developed world. …

On the other end of the lifeline, the news isn’t much better. Russia’s birth rate has been declining for more than a decade, and even a recent increase in births will be limited by the fact that the number of women age 20 to 29 (those responsible for two-thirds of all babies) will drop markedly in the next four or five years to mirror the 50 percent drop in the birth rate in the late 1980s and the 1990s. And, sadly, the health of Russia’s newborns is quite poor, with about 70 percent of them experiencing complications at birth.

Last summer, Piot of UNAIDS said that bringing Russia’s HIV/AIDS epidemic under control was “a matter of political leadership and of changing the policy.” He might just as well have been talking about the much larger public health crisis that threatens this vast country. But the policies seem unlikely to change as the bear lumbers along, driven by disastrously misplaced priorities and the blindingly unrealistic expectations of a resentment-driven political leadership. Moscow remains bent on ignoring the devastating truth: The nation is not just sick but dying. (10/05/08)
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