Black Monday: the day after

ENGLISH ABSTRACT

Understanding Black Monday. IT IS NO “NEGATIVE BUBBLE”, as silly bulls say.

a) It’s a low fundamentals issue, STUPID !!!

From yesterday on, global markets  are anticipating the real size of the  Main Street’s REAL RECESSION. The  shadow financial  – formal finance meltdown – credit crunch – deep recession chain is working from August 2007,  WITH NO COUNTERBALANCE in terms of policies and rules. Just post factum inadequate interventions on the consequences (even them, chaotic in Europe), and nothing upon the factors: neither Obama, nor McCain of course, are dealing prospectively with them (SEE OUR subcrime key document; in sum, long run deflation from a low global effective demand, hyper – concentration of income and wealth, imbalances and over-unemployment generated by: Reaganism, US private debts system and the post- communism “2nd Great Transformation”).

Prof. Roubini confirms today the title of our blog (which was inspired, last January, by our readings of Prof. Roubini himself):

The global economy is now already in a recession (as GDP is now contracting in all advanced economies and sharply slowing down in emerging market economies). We need now to take steps avoid a global depression.

And today’s rge papers aggregation “Are We Headed Towards a Global Recession?” specifies further:

IMF: The global financial crisis may have “extremely serious” consequences – including famines – in developing countries in Africa and Latin America.

◦ IMF: Signs of deceleration are most pronounced for several Emerging Asian economies that are tightly linked to the global manufacturing cycle: Philippines, Thailand, Malaysia, Taiwan PoC, Singapore, Hong Kong SAR, and—to a lesser extent—India.

b) In Europe, an institutional factor adds up. The ususal no-EU keynesian and structural policies issue. The one, that already made EU the only 0 growth world region (Aglietta and Berrebi).

WAKING UP FROM A DREAM: the gloom understanding that European finance is not free from the consequences of the $ 10 tr. global SHADOW FINANCE MELTDOWN. As Breakingnews said yesterday (see quotation in our Black Monday  post),

” It shouldn’t have come to this. A year ago, Europe looked well placed to fend off financial ills. True, the UK had US-style problems with a housing bubble and a big trade deficit, but the eurozone had few bubbles, balanced trade, reasonably prudent governments, a firm central bank and a strong tradition of government guidance and support in banking. 

It turned out, though, that some European banks had dabbled too much in overvalued and overly complex US assets. The authorities have also been slow.”

c) POLICY IMPLICATIONS.

After Reaganism, which blend of Socialism?

We quote from our ” AAA updates on subCrimes” static page, par. 2 on policies.

The Oct. 6 BLACK MONDAY, mainly but not only in  European stock markets (worst from 1987 Black Monday) confirms thet WE WERE RIGHT ON CONDEMNING THE PAULSON – BERNANKE  hurried up plan. Markets don’t care about it, and discount the recession is on and its size is much worst than they expected. Therefore the issue moves to the alternative between:

a) a financial (pseudo-) socialism: once failed again, the finance K party will move to nationalisations and direct State and SWF re-capitalisations … . It would eventually cure the financial meltdown, not the risk of the recession giving rise to a long depression in the 2010s.

b) a Keynesian socialism: redistribute drastically  income and wealth  (through policies, rules and Robin Hood fiscal policies) in order to gradually sort out of the 1990s longrun global deflation (Aglietta and Berrebi, Chesnais).

More in our .pdf –  subcrime key document.

SLATE

TODAY’S PAPERS

Drowned World Tour

By Daniel Politi
Posted Tuesday, Oct. 7, 2008, at 6:29 AM ETIt’s a new week, and the bad news keeps getting worse. “The global financial crisis has taken a perilous turn,” declares the Wall Street Journal. Hopes that the massive bailout package approved by Congress last week would give investors some breathing room were quickly dashed as soon as the markets opened. And pretty much the whole world is feeling the pain. Markets in Asia, Europe, and Latin America closed deep in the red yesterday, a pattern that was repeated in the United States. The Dow Jones industrial average plunged 800 points, or 7.7 percent, before rebounding late in the day to close down nearly 370 points, or 3.6 percent. It marked the first time the Dow fell below the 10,000 mark since 2004. USA Today helpfully puts it in perspective and points out that the Dow has lost nearly 30 percent since Oct. 9, 2007.

The New York Times and Washington Post highlight word that the Federal Reserve is considering a plan to buy large amounts of unsecured short-term debt–so-called commercial paper–in an effort to revive the financial system. This “radical new plan” (NYT) would essentially make the Fed “a major funder of a wide range of U.S. businesses facing imminent cash shortages,” explains thePost. While the growing financial crisis is putting pressure on government officials to act, the Los Angeles Times points out that if there’s a clear message from yesterday’s worldwide sell-off it’s that investors are increasingly concerned“that government intervention won’t be enough to stave off a potentially severe global recession.”

CRONACA DI OGGI

TENGONO LE BORSE EUROPEE, ma non recuperano il crollo storico di ieri, mentre a NY il Dow Jones scende di oltre  il 5%, S&P del 5.7%, a conferma della bocciatura del, e sfiducia nell’ affrettato ed elettorale Piano Paulson. I titoli finanziari di NY al loro minimo dal 1997 (solo oggi -25% Morgan Stanley e BoA). In caduta libera le grandi banche inglesi (-50% in 2 giorni  HBOS e RBS), forzando un Piano Straordinario di Gordon Brown tra i $60 e 90 bn. Paul Krugman commenta:

Britain leads the way?

 

According to the FT,Gordon Brown, the UK prime minister, on Tuesday night ordered a massive taxpayer-backed cash injection to rebuild the balance sheets of Britain’s high street banks, in effect part-nationalising the sector at a cost of tens of billions of pounds.

DA LEGGERE OGGI:

Marco Onado su Il Sole 24 ore.

– la autocritica del CEO UniCredit, Aless. Profumo, in una lunga intervista a La Repubblica: abbiamo fatto il passo più lungo della gamba e sottovalutato il financial meltdown. Il fatto: gli azionisti (le fondazioni bancarie) che ricapitalizzano la prima banca italiana, al momento si guardano bene (in piena crisi e tentativo di rilancio, risanamento) dal dimissionare Profumo (responsabile di una strategia di crescita del tutto azzardata e FUORI TEMPO rispetto al ciclo mondiale, come lui stesso e’ costretto ad ammettere POST FACTUM), ma lo mettono SOTTO TUTELA. Escludendo le liquidazioni, nel 2007 e’ il manager più pagato d’Italia.

– DA IERI, ripreso oggi in Italia su La Stampa, l’incredibile udienza parlamentare di Mr Fuld PADRE-PADRONE di Lehman Bros (che i nostri lettori conoscono MOLTO BENE).

– IERI SERA ottimo dibattito alla morente LA 7 (che la Telecom vuol chiudere), all’Infedele, con parterre de rois che includeva dei Grandi come Marcello DeCecco ed un lucido, mordace Tony Negri. Peccato che, dopo averla tenuta a bagnomaria con Tronchetti Provera, ora la chiudano di brutto. L’ultima voce libera, troppo ose’  per la thanato-politica cavalier-leghista.

ORA LEGALE 13: il punto.

MERCATI VOLATILI. Abortisce un primo tentativo di rimbalzo delle borse europee in mattinata, che dura appena un’ora. A mezzogiorno nuova spinta verso il positivo, MENO CHE  A  MILANO. Qui Piazz’affari appesantita specie da una  UniCredit senza pace. Le ammissioni a denti stretti di Profumo (intervista cit.) non rassicurano molto: costui ha sbagliato proprio tutto,  con una iper-crescita non proporzionale alla capitalizzazione, in tempi di deflazione mondiale strutturale e di evidente (ad ogni osservatore onesto) preparazione della catastrofe della shadow finance, con tutte le conseguenze che oggi si dipanano.

Alle 13: Milano sullo 0%, resto Europa + 1%. UniCredito -4.4%, Telecom – 5,5% e  sotto gli E 0,9, Impregilo – 7%, e sospesa per ribasso Tiscali (-15%).

Nel pomeriggio escono i 3 Nobel della Fisica: gli svedesi hanno fregato il Gabibbo, e dato il Nobel a 2 giapponesi che avevano sviluppato la sua scoperta. Che figura di merda ci fanno a stoccolma!

CHIUSURA BORSE

Come avevamo previsto, oggi nessun nuovo tonfo ne’ recupero dell’abbassamento fundamentals-driven di ieri, LUNEDI NERO. A Milano (-0 .6%) problemi specifici:

– LA POPOLARE continua a tonfare (qualcuno deve sapere perche’),

– UniCredit insensibile alle dotte auto-critiche EX POST, perde un altro 4% perche’, mentre ieri S&P aveva mantenuto il rating stabile, questo pomeriggio Moody l’ha abbassato.

– Pianto greco del CFO Telecom: a queste quotazioni frazionali sotto €0.9, improbabile si facciano vivi gli  investitori potenziali, come SWF libici, Q8 e russi.

Obama New Deal on the road: Barack is the candidate, Hillary has a future behind

Illustration by Doug Chayka, The Nation 

8 june update: a superb Hillary gave by far the best speech of her life, in the neoclassic scenario of the Natural Building Museum, Washington. She took up our points below, summarised in a nice image: 18 million breaks in the upper glass to women’s career, broken forever. And finally joined Obama for the Presidentials.

She shouldn’t be sorry: Obama is her angel.

Hillary’s Presidency would have compared to Bill, like GWB to this father: unless she stroke Iran (precipitating the world in a catasrophic oil crisis), she might not have doubled in 2012 (the year the Maja calendar ends …). Angel Barack came to save her, and America first of all, from a last Reaganian-age presidency – at odds with a Great Depression requiring  absolute novelties, a political paradigm shift.

Call it Destiny Athens-style,  Providence Jerusalem’s style or Spinoza’s necessity: a synthesis of the two.

5 June UPDATE: with Primaries over, Presidentials now fully on, the Subcrime crisis takes the hegemony of the narrative and the political fight; Iraq and foreign policy in 2nd place (and also an economic issue: see our blog sub-title inspired by Joe Stiglitz). 

FIRST OF ALL: a look back to the primaries. A fine observation by Matt Bai, a brilliant pen at Sunday Times, the NYT magazine, has underlined a conflict of paradigms between the two strategist:

the Pollster (mark penn) vs the Ad Man (daniel axelrod)

No wonder the latter won: a systemic approach overweighted a piecemeal one:

Mr. Penn, on the other hand, is a pollster, and pollsters tend to look at campaigns as a series of dissectible data points that either attract voters or drive them away. Get a health care plan and an economic plan that 70 percent of people say they view favorably. Pay attention to words that move the dial in focus groups, like “real solutions for America” or “ready to lead on Day 1.”

Mrs. Clinton’s relentless focus on pragmatism and specificity, as well as her willingness to shift slogans, are not simply a result of her own personality but also of Mr. Penn’s strategic outlook, which values testable ideas and phrases over more sweeping imagery and themes.

New Socialism looks at America as a model of democracy

Comments stress that:

a) Hillary has not lost: Obama won, by charismatic leadership (aggregating a coalition external to the traditional Dem electorate, that now needs to be reunited –  a novel coalition of blacks, young people and liberal professional sorts, rather than their traditional blue-collar and TU base), and a successful funds raising machinery from ordinary people donations, based on mastering web 2.0 politics and marketing.

b) She definitely broke upper barriers to women– although not at her immediate advantage; and didn’t lose for being a woman: mostly for voting the Iraq war,  having Bill always at her side, and conducing an unimaginative campaign, that instilled many doubts about her supposed “experience” and managerial capabilities. “Hillary has always been a policy wonk, a functionary attuned to bureaucratic process, but she has never shown executive ability, which makes her quest for the presidency problematic.” (Camille Paglia, April 29, The Telegraph

c) The US are at a secular cross-road: not only far away from slavery and near-apartheid; closer in time: away from an Afro-American culture of closed identity and opposition. The one expressed by a wrong prediction, in the instant book A Bound Man: Why We Are Excited About Obama and Why He Can’t Win – by old-fashion Black intellectual Shelby Steele. “Assimilation, not blackness, is the road to success” he writes. It is worth noting that these Afro-American pundits stood on Hillary’s side, while Kenyan young professionals are now organising a web-worldwide campaign for Obama, independent form Obama’s organization (like Irish people were proud of Kennedy).

d) A LESSON FOR THE WORLD (see this week’s leader, The Economist): no other democracy choses her leaders in such an open and massively participated process, that the dual competition has stressed so much: Barack and Hillary, each one of them has often collected more votes than all the Republicans together. Hillary: no one ever arrived no. 2 in Primaries with so many votes, in % and absolute number. Compare it with all the other countries: they will look like gerontocracies (Italia: non è un paese per giovani – see our June 2 post below), mafia regimes and disguised fascisms: WHAT THEY ARE IN FACT. W AMERICA !!!

e) Deeprecession’s own comment: the new socialism has NOTHING in common with always-Zarist and monocratic Russia, or Mao and Deng’s Chinas. New Socialism looks at America as a model of democracy, with further, minor improvements towards a mix of delegated and direct democracy (Hanna Arendt), but without populism (always associated with false forms of direct democracy: see e.g. the idiot in Italy, Beppe Grillo).   

WSJ CAPITAL By DAVID WESSEL

Election Won’t Lift Economic Clouds

June 5, 2008; Page A2

John McCain and Barack Obama, understandably, are focusing mainly on how to win the White House in November. But it’s none too soon for the candidates and their economic advisers to contemplate the economy that the next president will inherit in January 2009.

The article focuses on 3 issues: housing, energy and credit crunch. Our view is much more pessimistic: January 2009 will not yet be the worst point of the US crisis, even less for the global one. But this leaves room for a timely policy affecting both the crisis itself and distributive issues (Robin Hood policies).

        June 4. Barack Obama, although still unofficially, is the Dem candidate today. As more superdelegates joined him, the Illinois senator on Tuesday locked up the 2118 delegates he needs for victory at the August convention. See his mail to supporters from StPaul: barackmail_stpaul_080604 The Nation has opened an oL vote for suggesting Obama’s ticket. Until now: 21% Jim Webb equal to  Bill Richardson, 18% John Edwards,9% Hillary Clinton, Kathleen Sibelius and gen. Wesley Clark, 6% only Al Gore. Obama’s rally in St Paul, yesterday night

More than 20 000 people filled the stadium to hear Obama — its largest crowd. An additional 15 000 watched on giant television screen outside. Somewhere among the crowd in the arena as Obama spoke, Greg Adkins quietly shed a few tears.

“It was great, and it was historical, and it was really significant,” said Adkins, an engineer from the suburban town of Stillwater who is African American. “I’m a lifetime Republican, and I was touched and moved.” As the crowd filed out of the arena, he still occasionally dabbed at his eyes. “That certainly touches me that he’s African American. That really speaks deep in my heart,” he said. “I hope it speaks to the African-American community that “yes, we can’.” – guardian.co.uk © Guardian Newspapers Limited 2008

The political group we cooperate with, MoveOn.org (see picture above), joined the Obama camp on February 1, when Edwards (closer to the TUs, more representative of a traditional, old Lib politics, although presenting the better and more radical political program among the dem candidates) retired. It was a daring, good and timely decision: for the first time ever, MoveOn was taking position in Primaries. History calls, we answer. We think Obama is already the President IN PECTORE, although the battle will be hard, since:
1) America is fully into the Subcrime recession,
2) badly needs a New Deal
3) and Obama is the only man that might and will deliver it.
There is a sense of destiny and Spinozian necessity in all this. We’ll fight hard, but Obama New Deal ALREADY belongs to History, translating people’s fears and hopes into a wide-ranging set of policies to fight the Subcrime recession, and avoid its degeneration into a depression. Obama new Deal will be written in early 2009, when Subcrime will hit hard: shadow finance collapse still on (after the weakest Lehman, financial sanctuaries under attack and Fed protection challenged), dollar plunging, unemployment jumping in the US. Global crisis abating any decoupling barrier and resistance: during 2009 even Germany, then China and lately, perhaps even India will be affected.
OBAMA NEW DEAL’s first financial and fiscal proposals, will be approved by the US legislative powers in Spring 2009.
As for its international components, they must and  will include, among others:
a) a reshape of Bretton Woods institutions, that will take a few years, charging them of new tasks in order to: regulate global finance (IMF), promote a coordination of Keynesian measures prioritising the poorest and the unhealthy  (WB), counteract- discourage  “beggar your neighbour” protectionism (WTO), and coordinate carbon policies (a 4th, new World Authority: the WCO, Word Climate Organisation, with effective powers). 
b) An immediate change from  G8 to G12: inclusion of Brazil, China, India and South Africa. G12 will immediately deal with the $ fall, that Fiat’s Chairman Marchionne has just defined (in an interview at Trento’s Economics Festival) a “criminal” competitive policy.
c) Global “Robin Hood” policies, making pay the Subcrime crisis to Subcriminals. We are very happy that our

https://enzofabioarcangeli.files.wordpress.com/2008/06/subcrimebiosocialscience1.pdf 

slogan, has been independently adopted by an Italian minister we usually don’t agree much with (although he recommends Marx and Gramsci!): Mr Tremonti, applying a Robin Hood Tax to Oil Companies. Actually, in this CC blog, we had copy-left, not copy-rights on Robin Hood policies !!!  
June 5 update: listened at Focus Economia (radio 24);  it seems that Tremonti oil tax will target windfall profits along the chain, and create a fund to support the hit categories: a True Robin.