February 25, 2009

Is there really a credit crunch?

President Obama announced that the economy is hurting because of a credit crunch. But my teenage son, who recently got his first credit card, is still getting a couple of offers per week for a second credit card.

Perhaps he's the only one in the country. If so I really don't think he's going to be able to pull the economy out of the doldrums singlehandedly because most of his credit card bill line items look like this:

Burrito Barn $3.49
In-N-Out Burger $2.99

I think we need an economic strategy that goes beyond my son saying, "Why, yes, I will have fries with that."

My published articles are archived at iSteve.com -- Steve Sailer

27 comments:

Anonymous said...

We are all so proud of your awesome son and your N=1 sample.

Gene Berman said...

Yeah. And, if I were you, I'd check out that "In-and-Out Burger."
Awf'ly suspicious name. Just sayin'.

Steve W. said...

"Will you have fries with that?"

"Yes I can!"

jimbo said...

Mmmm. I mostly don;'t miss California, but I do miss In N'Out...

josh said...

$2.99?!

Tell your son to start paying his taxes!

Anonymous said...

Why didn't YOU feed your child? Is he working? Who will pay for those huge meals? I have three independent restaurants with licenses to sell bottles of wine, and any alcoholic drink known to mankind. Most drinks are more expensive than the two "foods" your son ate. Wholesale food costs for me went up 20%. And, I cannot, in my heart pass that onto a customer. I can't even sell you a bottle of water for under $3, and a lot more if you want the good water. People, particularly, ones who are young, and those with bad credit do get credit card offers. Do the math and figure out why. It's not a fluke that the less expensive AMEX cards are good for $300 in store coupons if you return them.

Anonymous said...

"Mmmm. I mostly don;'t miss California, but I do miss In N'Out..."


Funny. The only thing I miss about the Midwest is White Castle.

E.D. Kain said...

I think the point is, sometimes with all these comparisons to the Great Depression, the national image of which is long, black-and-white soup kitchen lines, dusty fruit pickers, beat up trucks...well, contrast that to the image of teenagers taking out credit cards and people basically still living mostly as though things were just fine...it's just not what people expect to see. We expect those long soup kitchen lines, and without them it's easy to deny anything is really that wrong...

Anonymous said...

I haven't seen evidence of a credit crunch in our part of OH. Our nanny just got a low-downpayment mortage on their first house fine with little backing beyond their relatively low earning potential.

Perhaps "credit crunch" is doublespeak for banks and other institutions no longer willing to buy up and trade in assets at grossly inflated valuations - valuations needed to support the bubblicious ponzi scheme politicians and their wall street backers profited handsomely from recently. They are trying to reanimate the corpse with pitchforks, fear mongering and cries of "credit crunch".

In trying to re-inflate the RE bubble these politicians will largely only prolong the pain, debase the currency and magnify the environment of fear, uncertainty and doubt investors and consumers would naturally have over an inevitable readjustment after a series of bubbles.

No market mover is going to trust Obama, his tax-cheating flunkies or Congress to accurately price assets with their clumsy heavy-handed interventions. The only sure way to profit in the confusion of this headless leadership is to skim from the TARP via graft and corruption.

a_c said...

On the other hand:

It used to be that credit-card companies lured customers with cash rewards. Now American Express Co. is paying to get rid of them. The card issuer is offering selected customers a $300 AmEx prepaid gift card if they pay off their balances and close their accounts.

The unusual move underscores how quickly conditions have deteriorated in the credit-card market. The current economic morass was provoked by spiking mortgage defaults. But as the economic crisis widens and unemployment climbs, there is growing concern that credit-card defaults will soar into the stratosphere as well.

http://online.wsj.com/article/SB123542259989852121.html

Pat Shuff said...

Fully 2/3rds of credit provided in our economic system is non-bank lending.

That is, it is hedge funds, sovereign wealth funds, pension funds, insurance companies and both foreign and domestic private investors who have extra capital they do not need at the moment, and they are willing to lend that money into the economy.

These are the buyers of securitized debt instruments.

This market is closed.

Both ASF (American Securitization Forum) and Federal Reserve statistics say that there has been essentially no securitized debt issuance over the last six months.

None.

That market is closed because this class of investors was gang raped by the pernicious and outrageous fraud up and down the line within the market.

The fact of the matter is that this 2/3rds of the credit provided to our market has left and is not coming back until the misrepresentation ends and they can be assured that it will not happen again.

This is not some manner of conjecture or fear-mongering - it is a fact that there is absolutely no way we can maintain our standard of living or economic output at anywhere near former levels with 2/3rds of credit capacity gone, nor can we replace that 2/3rds of the former capacity via other means.

To put this in perspective we are talking about a $50 trillion (roughly) credit universe for the United States; 2/3rds of that is ~$30 trillion dollars. It is simply not possible for the government or Fed to replace this, which is why even with a commitment of $9 trillion as has been made thus far the economy is not responding; 2/3rds of what disappeared is still gone and yet trying to actually fund $9 trillion through T-bond sales would cause an immediate implosion in the Treasury market.

http://tinyurl.com/bmmze5

Svigor said...

Funny. The only thing I miss about the Midwest is White Castle.

The ultimate in drunk-food. They should deliver, as a public service.

We have Krystals in the south but they seem to be a dying breed.

I miss Jack-in-the-Box...

Blode0322 said...

Analysis of the problem: politicians always trying to encourage consumption (It's good for the economy!) at the expense of investment (it's good for the economy too, but if you encourage investment you seems boring and stodgy).

Politicians should concentrate on removing unnecessary regulations, starting with the ones that cost business the most.

Tino said...

There is no credit crunch. There is a slight tightening in credit, from the Federal Reserve data that I looked at, but hardly a crunch (and the action is at the margin, the least useful loans are not being made). As someone pointed out much of credit is not banking, and much of investments aren’t credit anyway, they are self-financed. The economic decline is driven by mass psychology. In some respect it’s a good adjustment, American households savings more, just hurtful when it happens too fast and leads to a collective action cycle of too little demand.
The crisis will end by itself in a year or so. The “shock doctrine” Obama exploitation of the crisis is what will be the major long lasting impact of this.

What is striking to me is the level of mass hysteria in the US right now. Whatever happened to a stiff upper lip, national character etc? You had a negative growth of 3.8% one quarter, fine. Sweden had negative growth of 8% in one quarter in 1993, on top of two years of negative growth, and I don’t remember people panicking as much as the US media is doing now. Sometimes the economy goes into a recession, even a deep one. Counting all countries since a 150 years or so back there must have been dussins, maybe hundreds of recessions worse than the one the US is having now. Get over it.

Eric said...

It's still raining credit card offers at my house. It may be that other forms of credit have dried up, but when you're charging 20% interest plus merchant fees you can afford a few deadbeats.

Ronduck said...

Tino said...

What is striking to me is the level of mass hysteria in the US right now.

The US media loves to scream doom, that is how they get their Democrats elected.

My mother had Obama's latest speech on last night and the man was saying "we will rebuild". You would think we were recovering from WW2 or an asteroid strike.

headache said...

Ronduck sed:
"My mother had Obama's latest speech on last night and the man was saying "we will rebuild". You would think we were recovering from WW2 or an asteroid strike."


Funny you mention that. When Mandela took over in South Africa, courtesy Bill Clinton, he instituted a so-called "reconstruction and development" programme. Most whites were scratching their heads. The only infrastructure which needed reconstruction was that which his ANC thugs had destroyed during their orgies of violence in the townships. And the development levels under the Apartheid government were much higher than anything in Africa and anything which the ANC has come up with since then.

After a while I realised this was a similar wording to the post WWII Reconstruction and Development programmes such as the Marshall Fund. The idea was to act as if those evil Boers had just destroyed the country in a huge racial war, and now the savoir Mandela (another “Messiah”) would come in and heal the land.

However, the only thing which has happened in the past decade, leaving aside the hideous crime and corruption wave, is that infrastructure development has been below replacement levels. That’s why they have frequent power cuts and the next looming crisis is the water supply (One reason for this is that the ANC discontinued the grand Lesotho Highlands water supply scheme initiated under Apartheid). Essentially the ANC are living off the structures implemented under Apartheid, albeit in a rundown state. I guess the money needed to finance their lavish lifestyles just precludes taking care of infrastructure essentials.

Pat Shuff said...

"The asset-backed debt markets, which provided at least 50% of the Big Three's financing needs, have been virtually stalled since Lehman Brothers Holdings Inc.'s bankruptcy filing in September, and deals to fund loans to auto dealers haven't been done in the market since 2007."

-WSJ 2/28/09
http://tinyurl.com/dg5s3r

~~~~~~~~~~~~~~~~~~~~~~

For the total asset backed security issuance collapse in all things automotive, just for example..in prime and nonprime auto loans, leases and dealer loans just visit the included chart above. To zero. Zero dot zero.


~~~~~~~~~~~~~~~~~~~~~

Government and governments
have stepped in as temporary stop gap lenders of last resort replacing the collapsed shadow banking system that consumed the securitizations
(secretizations?...mystery meat.) Trillions and counting. Having sat on a hot burner a cat doesn't return to even a cold one.

~~~~~~~~~~~~~~~~~~~~~~~~~

"And the essential game plan is clear: use the power of the Fed, the FDIC and the Treasury to create government-sponsored shadow banks, such as the Term Asset-Backed Securities Lending Facility (the TALF) and the Public-Private Investment Fund (the P-PIF).

The formula? Take a small dollop of the Treasury’s free-to-spend taxpayer money (there is still $350 billion left) to serve as the equity in a government sponsored shadow bank, and then lever the daylights out of it with loans from the Federal Reserve, funded with the printing press. That’s the formula for the TALF, to provide leverage, with no recourse after a haircut, to restart the securitization markets.

--Pimco's Paul McCulley

http://tinyurl.com/bof8hy


In other words tax, spend and print the way to prosperity. Not a good track record. An attempt to resurrect the past...anger, bargaining,
denial...the impulse to return to the paradigm after the shift for all else is unthinkable...where there be dragons.

"Is there really a credit crunch?" is simply flabbergasting as it prolongs, broadens and deepens (Eastern Europe?) A testament to the sweet mouthings of a venal and duplicitous political class and towering incompetence of the tabloid Fourth Estate in most things especially finance, a parroting echo chamber for all from those whom haven't, don't and won't get it either.

The rollover needs in the coming months and year of every industry, sector and government(s) are testament to the prior build up of lucrative, bogus debt issuance. That was then and this is now, no lenders in sight. What's left after thirty or fifty trillion globally evaporated is stuffed under the mattress.

I'm not some survivalist living off the grid with gold buried in backyard, just a retiree with savings assets to mismanage and too much time on the hands. As with iSteve's area(s) of expertise, delving down into the devils in the details where weighty matters hinge, the blogosphere has been and is the only game in town for awareness since the piercing of the credit bubble.

"Is there really a credit crunch?" Like, wow.


"You may not be interested in war," Trotsky once said,
but war is interested in you." Finance, too.

Anonymous said...

---The ultimate in drunk-food. They should deliver, as a public service.

We have Krystals in the south but they seem to be a dying breed.

I miss Jack-in-the-Box...---

I am one of the blessed. I live only a few blocks from a White Castle in Jersey City. It is across the street from the liquor store. Talk about location, location, location...If only there was a Waffle House close by though.

Dutch Boy said...

There is no credit crisis, there is a debt crisis (and it's not going away in a year). Bad debts will have to be written off and foreign debt renegotiated (it is too massive to be paid back).

Anonymous said...

In the realm of conspiracy theories:

Obama on Spanish Language Radio: We Will Have a Mass Amnesty, and New Round of Chain Migration and the takeover of the Census by the WhiteHouse gang and the talking up of massive economic problems looks like:

1. Manipulation of whites to keep them in the Obama ledger.
2. Vote buying blacks and hispanics.
3. Gerrymander.

Anonymous said...

There's a horrific credit crunch - at least in the retail sector. Ask any CFO - or better yet the CFOs of Circuit City, Goody's, KB Toys, Mervyn's, Gottchalks, Ritz Camera, etc.

Anonymous said...

Essentially the ANC are living off the structures implemented under Apartheid, albeit in a rundown state

I suppose I guessed that already, just good to have it put so clearly.

America, welcome to your future.

Anonymous said...

There's a horrific credit crunch - at least in the retail sector. Ask any CFO - or better yet the CFOs of Circuit City, Goody's, KB Toys, Mervyn's, Gottchalks, Ritz Camera, etc.

The so-called "Credit Crunch" is a propagandic fig leaf for the monied interested to have their pols rewrite the rules and fix the system in anyway possible to steal public funds.

"Credit Crunch" implies that good, hard-working people well deserving of credit don't have access to it. This is not the case at all. Lenders are still falling over themselves to find if any such unicorn still exists.

What we have is natural correction away from reckless practices of extending massive credit to individuals and entities who have no possibility of repayment.

Circuity City and Best Buy are naturally going to contract after artificially growing based upon consumers using bubble-inflated housing prices to finance more toys than they could naturally afford from earnings and savings.

Ronduck said...

Headache said...

The idea was to act as if those evil Boers had just destroyed the country in a huge racial war, and now the savoir Mandela (another “Messiah”) would come in and heal the land.

Your mention of Mandela as Messiah brings up a point I was thinking about. The Left is avowedly atheistic but whenever it has a large program it wants to push it uses religious language profusely. The Welfare State in Britain was billed after the war as "building a New Jerusalem". Here in the States, Martin Luther King was billed as a new Moses, and his legal name was Michael King, not Martin Luther King. Think of the progression from Moses to MandelaChrist to ObamaMessiah.

First Moses came to lead the Chosen People into the Promised Land ( and to slaughter the heathens). Then MandelaChrist came to save the world, but was crucified in Robbins Island. Then ObamaMessiah came to judge the wicked and inherit the Earth.

Its significant that both MLK and the ANC were Soviet financed. Now that we have Obama it's as if the Cold War never ended, except the Soviet Union fell apart and we seem to have lost.

Despite all of this religiosity by the Left, if Bush uses the word crusade in a speech that is obvious proof that Bush is plotting genocide.

Anonymous said...

White Castle has grown slowly. Why? They don't use leverage. Or francises. I wish they'd hurry up and put one near me.

headache said...

Ronduck sed:
"First Moses came to lead the Chosen People into the Promised Land"

Funny you mention that. Tutu himself always said the story about Moses leading the Jews out of Egypt to the promised land was his inspiration to lead the black people out of Apartheid South Africa (Egypt?) to the promised "New South Africa" (paradise?).

I guess he was confused which was the paradise, but maybe he was thinking of Zimbabwe, which is the ultimate wet dream of every black radical.