What will this month be called?

[jducoeur]

A light question about a serious topic: when the historians write about the roller-coaster ride we're in the middle of, what will they call it?

I mean, every important historical event gets a catchy name, from "Watergate" to "9/11" to "Black Monday". It's clear to me that this September is one that they'll be talking about for decades to come, which means that they *will* settle on a common name for it eventually. How long it takes for such a name to arise ranges from days to years, but there's no time like the present.

So here's your chance to influence the history books. What would *you* call this mess?

Fine print: Winner will be selected by consensus of historians in 20 years. It is not guaranteed that any entrant will win. Chances of winning are directly proportional to relevance and pithiness of name, but it is entirely possible that these will not matter. Bad puns do not guarantee victory. Keep your hands inside the ride at all times.

Comments

[selkiechick]

The last straw

Course- I don't know if that's being optimistic or pessimistic.

[antoniseb.livejournal.com]

They will call it "The start of the world as we know it".

Or perhaps they'll call it "The End of Democracy".

[rufinia.livejournal.com]

National Fuck This Noise I am Hiding My Money In My Mattress (That I Bought With Cash So They Can't Repo It) Month.

[alexx-kay.livejournal.com]

52-Pickup

[richenza.livejournal.com]

the '08 House-of-Cards collapse.

[mindways]

Yeah - I'm guessing "collapse" will be part of it.

The Capital Collapse? The Investment-Bank Collapse?

[meiczyslaw.livejournal.com]

If anything, I think yours is most likely. As much noise as is being made about this, there are indications that it's less bad than the Recession of 1980-81, and no one's got a catchy name for that one.

To give you some perspective (quoted from Larry Elder (http://news.yahoo.com/s/uc/20080925/cm_uc_crlelx/op_247514;_ylt=Ah9oroNMuK0MmjICKd.OCqD9wxIF)):

At the Great Depression's nadir, 25 percent of adults were unemployed, including nearly 50 percent of urban black adults. Economist David Wheelock, of the Federal Reserve Bank of St. Louis, says that by the dawn of 1934, nearly half the urban homes with mortgages were in default, and 7.3 percent of housing structures had been foreclosed. Today 6.4 percent of mortgages are delinquent, 2.75 percent are in the foreclosure process, and 0.6 percent of all housing units are bank-owned.

But what about since the Great Depression? Take the recession of 1980-81. In 1980, inflation averaged 13.58 percent, unemployment increased from 6.3 to 8.5 percent, and the prime loan rate reached an astonishing 21.5 percent. According to the Mortgage Bankers Association, today's delinquency rate is only a little higher than in 1985. And in 1999, the foreclosure rate set records.

According to the FDIC, in the almost two-year period of 2007 and 2008, 15 banks failed. Similarly, during Clinton's last two years in office, 1999 and 2000, 15 banks also failed. In the recession-free years of 1988 and 1989, there were 1,004 bank failures. And since the Great Depression, the average number of yearly bank failures has been 94.

Now, Elder might be cherry-picking his numbers, but that he can cherry-pick indicates that this mess is not as bad as Wall Street wants us to believe.

I'm beginning to think the bail-out might be a boondoggle.

[goldsquare.livejournal.com]

All I know is, every weekend Paulson works late, scares the eff out of me. :-)

The problem with naming it, is we don't know the outcome yet. "The End of America", "The End Of Capitalist America", "The Socialism of America", or otherwise.

I'm prepared to call it "Bush's Collapse", to go with "Bush's War" and "Bush's Torture Program" and "Bush's Domestic Spying" and so forth.

[runolfr.livejournal.com]

How about "Bleak September"?

[dsrtao]

I hope we don't call it "The Second American Revolution"

[snarkyman.livejournal.com]

Wall Street Socialism

I mean, what else do you call the privatization of profits and the socialization of risk?

Scary thing is, I'm not sure we have any choice. If these investment banks and their insurers are allowed to collapse, would it create another great depression?

[serakit.livejournal.com]

Everyone's private bank accounts are federally insured up to one million dollars. That's certainly more than most have lying around and enough to ensure that you can continue to survive at a modest lifestyle. Right? So it might cause some of the very wealthy to lose some wealth...

[jon-libby.livejournal.com]

Not $1,000,000. It's $100,000. That decimak is important.

[jducoeur]

Yeah, as pointed out, it's only $100k, which is actually within the range that ordinary middle-class people have.

More importantly, you underestimate the scope of the problem. If there's a *true* financial meltdown, government guarantees are irrelevant: they won't be able to cover it. Even the government's resources are limited -- as a number of people are pointing out today, the proposed bailout is going to stretch them horribly, and essentially cripple the government for at least several years.

If things really melted down, so would the government. In all likelihood, those guarantees would go out the window in the face of a general default, the US dollar would crash, we'd hit hyperinflation, and essentially all personal financial assets would be wiped out. (*Except*, note, possibly those of the super-rich, who are mostly smart enough to diversify their holdings overseas. Although it's likely the the entire world economy would be flattened, so it's not clear that there would be any safe havens from the earthquake.)

People treat the US government as if it's impossible for it to default. But the reality is that governments *do* default, and it's pretty horrible when they do so...

[zachkessin.livejournal.com]

Also while your bank account has FDIC if no one can get credit it will really be bad.

[snarkyman.livejournal.com]

You completely missed my point. I do not mean commercial banks that take individual deposits that are insured up to $100K per account. I said investment banks, like Goldman Sachs. What happens if these institutions are allowed collapse? What happens when your employer cannot get credit to continue manufacturing widgits and therefore has to layoff all everyone in the company? What if the same thing happens to 20% of all US employers? Or to 50%?

[meiczyslaw.livejournal.com]

I've been asking a different question lately:

If these investment banks fail, how long would it be before someone else takes their place? It's not like the money's disappeared -- it's still out there somewhere.

Are we really in dire straits, or is it just Wall Street?

[jducoeur]

It's not like the money's disappeared -- it's still out there somewhere.

That's really not true -- or at least, it's only half the story. It's true that *real* assets haven't disappeared, but *credit* has, and credit is enormously crucial to the working of the modern economy. There's a credit economy that has built up, laced through the real economy and probably at least its size.

So while yes, you can claim that the economy should in some sense keep working, the reality is that many, many businesses will crash and burn because the credit system that they have built their businesses around no longer exists. That'll hit all sectors of the economy, including many that seemingly are all about physical objects.

(The simplest example, oft-cited recently, is cars. It's lovely to claim that cars could still be made, and people would still want them. But without credit, most people simply can't buy them, so the automakers will for the most part go bankrupt. And without easy access to buying cars, many people will have to greatly change their job habits, causing huge disruptions in the practical economy...)

[meiczyslaw.livejournal.com]

See, I still don't get where credit has gone -- credit is created by leveraging assets. You deposit money with a bank; people can then borrow against that money at some rate. (The bank is only required to keep some small percentage.) They then re-deposit the money at the bank, which means the bank can re-lend it.

There's some lag time while this happens, of course, but money can still be made, and anyone who's a low risk should still be able to get capital. (Assuming there isn't a bank panic -- mass psychology is a big player in all this.)

Though, if our two statements are both correct, this means that the economy runs on too-easy capital, meaning that we're screwed even with the bail-out.

(Also, I'm not sure that the car example is a good one -- car companies own their own lending companies -- but I do grok what you're saying.)

[dryfoo.livejournal.com]

Credit is today's money exchanged for future money. Future money exists because of the belief that it will exist. The financial writers call this "market confidence". If people no longer believe in the guarantees that support future money, then future money simply disappears, like the protagonist in a time-travel paradox. Without market confidence, there is no credit.

Money is not a substance. Money is not a barter good. Money isn't even gold anymore. Money seems like particles that have no rest-mass. They only get mass from the energy of their motion.

> anyone who's a low risk should still be able to get capital

From who? Via what financial machinery? Short-term credit vibrating back and forth between banks is the current of the financial markets. And even if your hypothetical Mr. Low-risk got his loan, what would he do with it? Invest in building up his company to create what? For what customers?

No. Money really can just disappear. Sometimes it's a wonder that it's there at all. (Having just compared money to Marty McFly, photons, and AC current, I'm going to stop now, before invoke a metaphor of virtual particles. Ooops, too late.)

[meiczyslaw.livejournal.com]

My problem is that I don't see it that way. If the big investment firms are overcommitted, that means that there's an opening for new players in that market. If you've got money to lend, now's the time for you to get involved.

(And speaking of loans -- did you notice that no-loans-ever-Microsoft took out a $40 billion loan the other day to buy back some of its stock?)

[jducoeur]

If you've got money to lend, now's the time for you to get involved.

True in theory -- problem is, most of the people with money to put into that have been taking a bath in the crisis. Remember that a huge fraction of that money is already *in* the market, and has been sinking recently: that's driving most people *away* from the market, into safer havens.

It's true that some smart people are going to time the market right, buy while things are low, and make a *serious* killing. But market timing is always risky, so some will probably lose their shirts in the process. We've already seen some of that: some folks invested in the investment banks only a few weeks ago, to capture what looked like a good opportunity, and lost everything.

Really, it's nothing new -- high risk gets high reward. Uncertainty is making things risky right now; some people will reap those rewards.

did you notice that no-loans-ever-Microsoft took out a $40 billion loan the other day to buy back some of its stock?

I hadn't, but that's not surprising. The reality is that Microsoft is the bluest-chip stock there is nowadays: despite Google and Apple, they're still a very reliable money-spinner. But they're one of the more extreme cases of looking "safe" in dangerous times...

[meiczyslaw.livejournal.com]

[...] some people will reap those rewards.

For examples, see JPMorgan and Warren Buffet.

I think the bottom line is that we're talking about $700 billion -- which is one of the estimates of the cost of the Iraq War.

[jducoeur]

See, I still don't get where credit has gone -- credit is created by leveraging assets.

Correct -- the problem is, to a large degree, that the assets have been over-leveraged. (Sometimes to a preposterous extent: I've taken to referring to some of these 30-fold-leveraged companies as "subprime" just to drive the point home.) Even some perpetrators have tacitly admitted that, in the fact that they are switching over to different structures that don't permit such extreme leverage.

(Assuming there isn't a bank panic -- mass psychology is a big player in all this.)

Arguably the principal issue. Most people admit that the main purpose of the bail-out is purely psychological: by providing an amorphous sense that things might get better, it theoretically helps avoid a credit panic. (Which we're hovering dangerously close to -- my general sense is that the markets are hanging on Congress, to see what happens before deciding whether to panic or not.)

Though, if our two statements are both correct, this means that the economy runs on too-easy capital, meaning that we're screwed even with the bail-out.

Quite possibly so -- the main benefit of the bail-out is that it potentially allows the air to be bled out of the mess gradually, instead of crashing suddenly in a total crisis of confidence. There's no question that things have to be unwound, though, and I suspect the choice is at best between an irritating recession and a genuine crash...

[meiczyslaw.livejournal.com]

I've taken to referring to some of these 30-fold-leveraged companies as "subprime" just to drive the point home.

From what I've been reading, 30:1 is actually a rational leveraging ratio. The companies that have folded supposedly had a 60:1 ratio.

More on psychology:

If you notice in a previous post, I mentioned that the foreclosure rate in 1999 was worse that today's -- yet does anyone remember this kind of near-panic? Much less hearing about it?

[jducoeur]

Basically true, although it all comes down to assessment of risk. While things were frothy, everyone was sure that foreclosures would be Low Low Low. Now, everyone is worried that the rate is rising and will continue to rise. That's not entirely irrational -- all those unwise ARMs are starting to tick upwards, and are gradually getting worse. So there is reason to believe that we're still basically at the tip of the iceberg, and that the rate will rise; that *uncertainty* is a large part of what's making things crazy.

But all that said: yes, a lot of people are just as irrationally worried now as they were irrationally sanguine before. Herd psychology is very powerful...

[metahacker.livejournal.com]

There was an article in the paper today about theh history of the word "meltdown", which is being bandied about a bit.

[etherial.livejournal.com]

Back in January, I proposed that the theme for the year was "Reap the Whirlwind".

[dervishspin.livejournal.com]

The Panic of 08.

It's not just September.

[ladymacgregor.livejournal.com]

But I think the previous posters are missing the point. There's been a lot of OTHER issues than just the market. Daniel Krakkenson, Duke Morguhn, other horrible happenings (with that list, I almost hesitate to include "the death of my cat Sable", as it seems much more trivial, but it happened as well, and affected me, at least).

It may be taken, and it's not that catchy, but I'm leaning toward Black September. (Something is niggling me that a label like that was involved years ago when the Olympic athletes were taken hostage and later killed, but I can't look it up right now).

Or maybe A Sable September?

[meiczyslaw.livejournal.com]

I hope that crack about Black September was sarcasm.

If not: "Black September" was the name Palestinians gave to September 1970, when Jordan expelled the PLO. This name was appropriated by the terrorist organization behind the massacre in Munich of 1972.

[ladymacgregor.livejournal.com]

Actually, it wasn't sarcasm. I was typing hastily at work and only vaguely remembered the reference, and didn't look it up (as I said). I vaguely thought that "Black September" referenced the month that the Olympic athletes died, NOT that it was the actual name of the terrorist group that caused their deaths. Ack. Now that I know that, I withdraw the name.

[dryfoo.livejournal.com]

We won't really know what to call it until we see how it turns out. After all, if things had turned out differently, the book might have been called, "Mordor's Triumph, or the Rape of Gondor" instead of "The Return of the King".

Or how about, "Stories My Crazy Grandpa Ahab Told Me" instead of "Moby Dick"?

In 20 or 30 years, this month might be referred to as The Pre-Obama Era. If not, the most widespread name for it might be something in Chinese.