How Bad is This Credit Shit, Really?

The old Fed Chair, Paul Volker on Bloomberg really lays it out there...

Former Federal Reserve Chairman Paul Volcker said the U.S. financial system, dependent upon securitization rather than traditional bank loans, is broken, and may contribute to the weakest expansion since the 1930s.

``This bright new system, this practice in the United States, this practice in the United Kingdom and elsewhere, has broken down,'' Volcker said today at a banking conference in Calgary. ``Growth in the economy in this decade will be the slowest of any decade since the Great Depression, right in the middle of all this financial innovation.''

The former Fed chief projected ``a lot'' more losses from the collapse in the mortgage-backed debt market, after the more than $500 billion tallied so far, should the U.S., European and Japanese economies fail to pick up. He urged changes in financial regulations, echoing calls among sitting officials and legislators.

I submit that securitization of debt has as a principal purpose and that is the avoidance of risk by exactly the institutions that are supposed to take on risk; actually there are two purposes, the second one being huge commissions to brokers and brokerage firms. Things are very bad and the closer we get to the election the greater the risk that politicians will do the demagogue thing and bring everything down. Our corrupt political system is as much at fault as anything.

But but but....What about the tax rebate that all the usual suspects said would result in us stupid consumers pissing away? We were supposed to dump them in stores, car dealerships, and cocaine shipments, but hasn't happened. Instead, us fucking morons didn't take the bait. We are saving the rebates instead of pissing them away.

That rebate boost was supposed to stimulate consumption until august of this year instead after a recovery of retail sales, real personal spending and consumption in April and May real retail sales and real personal consumption spending have fallen already in June and July. So consumers stopped consuming in spite of the tax rebates instead of spending such rebates (so far only 30% of them have been spent).

Son of a bitch, the real problem is that we are not stupid enough. It was thought that our voting patterns proved we could be trusted to do what we were told so long as the bribes were big enough. After all, how can anyone exist without two Rolex watches? Since the rebates didn't work, look for Congress to pass a law limiting our educations to third grade (or whatever grade it is where kids learn to add and subtract, which some say is first year in college) in order to save the country.

A complete layout of everything you want to know about this but are (rightly) afraid to ask is at The Big Picture.... Also HERE