Unlike some Bloomberg commentators have implied when they said that “we’re all in this mess together,” (ie., if the US goes bankrupt, it’s not just the US’s problem) the rest of the world should not be held accountable for what were originally US administration accounting problems and US I-banking greed which caused the original off-balance-sheet recordings and lack of accounting transparency.

Enron?  This is basically Enron Redux, but over most of the US financial industry.

Fact 1: American consumers didn’t save any money (there has been a negative overall savings rate for years).
Fact 2: The Bush administration “printed” TRILLIONS of dollars it didn’t have so that it could finance its illegal war in Iraq.
Fact 3: Top US Banking companies slid items off their balance sheets onto “hidden” balance sheets in order to get around accounting rules and hopefully earn some more money by doing it (read David Smick’s The World Is Curved for these details - Smick knows it inside and out).
Fact 4: American consumers bought into the easy and cheap money - consumers can be held responsible, too, for making poor financial decisions.  Taking on extra mortgages, or even a first mortgage when one cannot afford it.  The culture of materialist greed needs to come to an end sometime.
Fact 5: The US Fed was already in great debt and deficit before this whole mess started, and was already looking ahead to the greater demographic problems coming up as a result of overpromises and underpayments in Social Security and Medicare.

How much of this is the rest of the world’s problem?  The rest of the world bought US Treasuries and stored US dollars as reserve currency (a sweet deal which some speculate Iran has been punished for trying to get out of).  Since oil is traded in dollars, one can’t totally hold other countries responsible, since they have no choice if they want to buy oil.

People scoff at all the bailouts, but you know what?  The rest of the world has been bailing America out for decades by buying US Treasuries for their central banks because they had to because the greenback is the reserve currency.  This is how the US prints money: “virtually” by issuing new debt.

Return to the debates about whether the auto industry should get a bailout… is America like the US auto industry? Does anyone really want to buy GM cars anymore?

What if “They” (the Fed, central banks, hedge fund managers, I-bankers, etc.) knew all along how bad it was going to be and the last 6-8 months have been a careful, steady public letdown, slowly leaking the info out to the market so as to hopefully attenuate the crash rather than to let it all come tumbling down at once (because to do so there could be more collateral damage than we’re seeing now)?

I think basically that’s what’s happened anyway.  As if Citigroup CEO didn’t know the trouble he was in, yet they made like they were going to “save Wachovia” etc. etc.  That’s probably the real reason the deal didn’t go through…it was just a public relations performance.

Same with the early November bear market rally.  Again, “let’s just give the public a little something to feel some ease about,” you can imagine the logic going.

A tumble down ten flights of stairs two at a time is arguably better than a direct fall down twenty flights of stairs.

I think that’s what we’re seeing.

And another example of this “hush-hush now, tell them about it later” is the big giraffe in the room, its neck growing longer by the day.  That giraffe is INFLATION, baby…. what else do you think is going to happen to all of these printed dollars?  This week it just got worse with another stimulus ($800 billion) planned by Paulson (Wake up, Terence Corcoran - it’s a stimulus given by the REPUBLICAN adminstration - not Obama here, he’s not in office yet, remember?  Your argument about disaster socialism doesn’t hold, and besides, Naomi Klein’s original argument doesn’t either.).

I mention the giraffe in the room because there’s a SECOND example of “hush-hush now, tell them about it later” and of course, that is the 800-pound gorilla in the room, known as MEDICARE and SOCIAL SECURITY.  I can give you one hint: 2012.  We’ll talk about that later…..:)

Well, it’s been just about a month and a half now that markets have really been in the nosedive.  Maybe slightly more.  It really started to dive maybe just by the end of September.  October was the worst month on record (for several measures) since the post-war (WW2) period.  But November hasn’t really been much better, even though there haven’t been any new financial scandals - just this auto bailout business.

But ever since yesterday it seems we’re on a new roll-down again.  Here’s what I’ve learned. Just about all of this comes from BNN reports - they interview key players in the industry on a daily basis:

(1) Canada’s Royal Bank is almost two-thirds the size of US Citigroup (compare market caps of about 55 billion to only about 35 billion (and the latter might actually be closer to 25 billion).
(2) October was actually a deflationary month.  That’s right.  No inflation in October, but actual deflation.
(3) Canada’s Bank of Nova Scotia and TD are starting to make writedowns on bad debt… others might follow them…
(4) Oil’s under $50/barrell now…. serious stuff.
(5) Citibank fell below $5.00 today.  That’s insane.  They say it’s looking to go to zero… I bought in around $18.00 and I’m glad I didn’t buy more at $9.00…. I’ll keep waiting at this point.
(6) Teck Cominco in Canada is cutting its dividend.  Could be the first of many.

Basically, we pretty much really are in freefall… the early November rallies were comforting, and some of the aid packages probably have helped a great deal, but I guess overall there is still too much uncertainty and too many hedge funds still making redemptions.  (Saturdays are redemption days).  November is also historically known as the time when tax-loss selling for the year begins, so we’re probably seeing some of that, too… I really doubt holiday spending is going to improve anything.  I think not much is going to improve until February, once markets start getting used to Obama in the House, and maybe once one of the auto companies finally goes bankrupt.  Kick out those old white guys who still flew in private jets to the Congress meeting today.  They should be ashamed.