How big of a crisis should we expect?
Treasury Secretary Tim Geithner said we would not have another Lehman-caliber meltdown on our hands. But he never said there wouldn't be pain.
Does it do any good to say that the world is on the eve of another financial crisis, as I hear so many people saying? Does it do any good to catcall me for saying that Treasury Secretary Tim Geithner was just being upbeat and hopeful when he said there will be no more Lehmans?
No and yes. No, it does not do any good to proclaim we are on the eve of the next financial crisis, because it's the degree of crisis that matters. People seem to forget that the center almost didn't hold during 2008. It was only the destruction of trillions of dollars of capital that allowed us to bottom, with a tremendous number of financial institutions in this country being wiped off the face of the earth, including many that had been with us for some time, including Bear Stearns, Lehman Bros., Merrill Lynch, Fannie Mae, Freddie Mac and three reconstituted and quasi-nationalized companies -- General Motors (GM), American International Group (AIG) and Citigroup (C).
Are we going to get that kind of crisis? That's where the second point comes in, Geithner's point. There is a grave misconception about what Geithner told me last week and what I am reading, say, in the mocking Twittersphere.
Here's what Geithner said: There will be no more Lehmans. Europe will not let it happen. That means there will be no more catastrophes that freeze credit worldwide and pretty much wreck every economy out there.
What did he not say? That there won't be shotgun marriages, Citigroup-AIG-like quasi-nationalizations and banks that are allowed to disappear gracefully.
He took Lehman off the table.
What does that mean? OK, we call it the Great Recession. We put "Great" in because we want to analogize it to the Great Depression. We use "Recession," not depression, because we did not have 25%-30% unemployment -- remember, 91% of the people in this country are employed -- and we did not have the wholesale failure of the U.S. banking system. People forget that the issue in the Great Depression came down to whether the democracy was in jeopardy.
Which brings me to the second analogy: the near return to Great Depression levels in 1937, brought on by the false sense of security that we were able to raise rates, and the belief that we had to raise rates in order to "cool" the economy. Our Fed chairman understood this to be the worry, and he is still working to prevent it from becoming a reality.
But the Europeans are on a collision course with 1937 and even took a page from the handbook, foolishly raising rates twice. They are about to repeat the errors of the United States in 1937. Again, not Lehman but a really bad moment that will cause them to put into action what we put into action after the barn door had already been wide open: an anti-Lehman game plan.
There's a lot of talk about Chubby Checker right now, because the Fed chairman is doing Operation Twist, which is the lowering of rates with the hope that someone -- the government? the people? -- will take advantage of them to refinance. It's not going to work, because regulators are requiring the banks to force people to put up too much money to get those rates, and the government is stubbornly sticking by the issuance of short-term notes instead of a gigantic, liquidity-insuring offering of hundreds of billions of dollars in long-term bonds.
At least Bernanke is singing the right tune. In Europe, though, they've got a different crooner going. It's all about Sam Cooke, and the central bankers there clearly "don't know much about history." Which of course will then lead to "A Change Is Gonna Come," and it isn't a good one.
So, remember, no more Lehmans does not mean no more pain. It doesn't mean no more point losses. It just means no more possibility that the center might not hold. Now if only they knew history over there and had some political will, which Geithner said is the sticking point for those who actually want to do the right thing in Europe.
It translates into staying the course, playing it with high-yield stocks and taking a beating on those that don't. If you can't stand that beating, sell some of those stocks. I know most won't, because the losses, if you bought in the past year, are now bordering on the horrific. But to get a real bottom, someone has to capitulate. Decide now if it has to be you.
At the time of publication, Cramer had no positions in stocks mentioned.
I wonder how many people are aware of one of the main contributors to our economic crisis, which became apparent when the housing market started to crumble in California, where foreigners have no problem walking away from loans obtained for house-flipping speculations using fake IDs. California’s deficit is presently nearly the same as what foreigners here illegally cost them, with more than $52 million in welfare checks given to foreigners for their anchor babies EVERY MONTH in Los Angeles County alone. The cost of educating, providing free health care and monthly checks for the offspring of millions of foreigners who have no respect for our laws (statistically they have twice as many children as citizens) is eating us alive, while many law-abiding citizens having to pay taxes, provide their own medical care and support their own families are driven to poverty trying to compete with the foreign competition who consume all the U.S. government handouts they can get. Would our country even be in crisis if not for the millions of foreigners here illegally, many paying $thousands to smugglers for the opportunity to exploit U.S. taxpayers? Not surprising, Obama (who has illegal immigrant relatives from Kenya here on the dole, also) is doing everything in his power to ensure this travesty continues.
the source of our problems is absence of leadership. at every level. scary times indeed.
91% of the population employed??? How can that be reported as a fact. How about you try using only about 82% of the population in this country is employed.
Have you noticed that our leaders are really afraid to talk about Canada? No major problems up there. How come? Could it be the Canadians haven't spent 10 TRILLION on the military in the last ten years? Or could it be they make people buy houses with a large down payment? Or could it be because they believe in manufacturing jobs? Or could it be even the right wingers up there like their health care system? Nope, shhhh...don't mention Canada.
We are to Canada what Mexico is to us. It's very sad.
unemployed, underemployed, working under the constant threat of unemployment, temp jobs with no benifits, companies closing their doors, streets with boarded up shuttered small businesses. i think you're a bit out of touch with what the regular usa citizen is seeing cramer.
OK, we call it the Great Recession. We put "Great" in because we want to analogize it to the Great Depression. We use "Recession," not depression, because we did not have 25%-30% unemployment --
America is being raped by a corrupt corporate and financial system that is completely out of control. Our big banks with billions in assets have been getting billions in 0% loans to play the market. These same pigs that caused our meltdown are manipulating the commodities market and driving up the price of gas on our hurting people. Everyone knows this; But, nothing is done to stop it. Banking is using our own money to rob us.
No one should pay a bank 600k for a 200k house when the tax payer backs the loan. All such government guaranteed loans should be made directly for a low interest. This would reduce home buyer and studenr notes by more than half and leave trillions in the hands of our people.
Our big corporations are making record profits from slave labor and paying low to no taxes. They are getting special treaties tax breaks and all possible help to outsource. These giant hogs are holding 3 trillion shareholders money.
When the CEO of Disney made 600 million in salary and God knows what in bonuses had children in Haiti working for 12 cents and hour. Government and anyone else that supports this insane greed are contributing to the destruction of America.
We need to force our public owned corporations to pay our minimum wages wherever they go. This would be a good starter for bringing back jobs and showing a little respect for workers. Germany has labor represented on their corporate boards and the are now the second biggest exporter in the world.
It has become obvious that banks, wall street and big corporations run our country. It is equally obvious that they own our government.. The self seeking pigs will destroy our nation and all its great potential if we don't unite against them. They are united, they love slave labor and know exactly what the want. "Everything."
“Pretty much the western economy is in the dust bin of history folks”
No name, I pretty much agree with you. Not because it is impossible to correct but because there isn’t the political will to do what is needed. That’s because it will be painful but of course not as painful as a hyperinflationary depression. Soon we will be up close and personal with a third world existence. What a shame. The destruction of the most advanced high tech economic system in history is IMHO a crime that ranks right up there with the worst ever committed on this planet. It will cause untold misery and death.
I still think Cramer is a good individual stock picker. He can spot a good tree but doesn’t realize that the whole forest is now on fire.
The Fed. has set this down fall up with low interest rates that make the tax payers pay to make more millonairs on Wall street.
@ bgdog I like what you say about America and the troops but 3/4 of those guy should not even be there .do you know what it cost just to put them in gear. I think most are there because its the best paying job they could find at the time, and that sucks for all. the cost is to high ,to many intitlements. I hope I am wrong
Nope, shhhh...don't mention Canada.
Could be because they have a key set of demographics shared among the stable advanced nations?
Norway, Australia, Canada...
1) Small populations 2) Overabundance of natural resources relative to population, that is paying off huge in the commodities sector (because prices have been driven very high), 3) No environmental laws to stop the exploitation of those resources.
Sorry. It's not cause their governments have "figured it out" or that they have "manufacturing jobs" (that's actually quite funny, all those countries have very small manufacturing sectors). It's because they export their natural resources.
And that allows them to have a large amount of flexibility. Oh sure, they've put those funds towards good use. Norway keeps a soveriegn fund for the population, Australia bankrolled it's social security about 15 years ago, and Canada gives the benefits back to some of the population.
They happen to be lucky, that's pretty much it. The middle east sits on one of the most precious resources of our time. Do we think they are just the best countries ever?
The negative results of this administration are glaring. Can be so blind as to fail to see this administration is directly in the way of recovery in American industry and jobs for the unemployed?
That is why Obama, for the welfare of the American people must do the honorable thing now and resign.
so if i buy a "high yielder" that yields 7% per year and the market goes down 7%
in 2 days why is that a good strategy when the sds is going up 14% in 2 days?
i think cramer failed arithmetic
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