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Best Of The Exchange: The Modern Stealth Depression, Conversations With Nick & Toni and WaMu


Minyans make sense of stealth depressions.

With the launch of The Exchange, Minyans now have a forum in which to express their viewpoints, comment on articles and meet other like-minded financial souls. Minyanville publishes "A Best of the Exchange" each Friday to highlight the many insightful posts and discussions going on behind the scenes.

Become part of The Exchange and let your voice be heard!

(Editor's Note: Some of the following posts may have been modified slightly from their original form.)

Prof. Depew composed Five Things You Need To Know: The Modern Stealth Depression, discussing the similarities between times during the Great Depression and today. The response was huge.

Prof. Harrison
: One of the best articles to have ever graced thy Minyan pages.

Minyan Tim: I really didn't think you could top yesterday, I'm wrong. Great job and just one question, when's the compliation coming out?

Minyan Scott: I'm ready for that book. "A Depression doesn't run hot and fierce like some crazed meth burner. A Depression is methodical, purposeful, patient. It will build a shelter out of tree branches and newspaper, light a small, well-contained campfire and wait you out, brother. While you feed on the empty calories of denial and popcorn, it will quietly gather shards of broken dreams and fashion them into a terrible weapon of blunt force reality." That is SUCH good writing, it makes me green with envy. Never stop.

Minyan Van: Pepe, you're priceless; this is why MV is light-years ahead of the pack.

Minyan Ronald: Just when we thought it couldn't get any better, Prof Depew kicked it up a couple of notches!!

Prof. Harrison wrote an article entitled Conversations With Nick & Toni, it was an important conversation transcribed for the Minyan faithful. Much debate followed.

Minyan David: This is not going to be 'just another recession'. Let that sink in. It isn't over yet because it hasn't really started yet. When housing values drop by 50%, when interest rates are in the high teens, when the Dow is at 5000 and gas is a dollar a gallon only then can we start the long, slow, hard slog back to rebuilding this country. We need to rebuild our manufacturing base and start producing products that are better and cheaper than the rest of the world. This involves using what has become some very dirty language... sacrifice and hard work. Fancy accounting tricks and government bailouts are not a solution... restoring our currency and, more importantly, our work ethic are.

Minyan Mr. Bacan: Yes, But I will take inflation any day over deflation. Todd mentioned this as "The devil we know, versus the devil we do not know." So I think it is time for the government to spend like a drunken sailor on shore leave. But this time spent on things that actually move us forward. In other words, INVEST in the country and its future and economy. Not just silly spending. Technology, new industries, infrastructure. The debt crisis, is like an heroin addict. The addiction has now reached the levels, where the patient can no longer take fixes of more drugs (as mentioned on Minyanville).

So there are two choices:

1. Go "Cold Turkey", which will cause deflation and be very painful.
See John Lennons song "Cold Turkey", about how he got off heroin
and for fitting lyrics.

2. Substitute methadone (inflation), and get the patient addicted to a lessor drug. At least the patient will function, and can be weaned off this drug in the future (with higher interest rates once some growth returns).

Minyan Dan: Cheap stuff never helped anyone. Cheap food, cheap inflatable Brett Favre figures, cheap Halloween decorations...There's a reason we have an oil shortage: we keep throwing it away. Gas is never going back to a buck a gallon. Not unless someone uses neutron bombs on the Middle East from the Med to the Pacific. Texas-owned politicians are making WAAYYYY too much money on this clustertruck to expect them to stop buying wars.

Prof. Jeffery's article, WaMu's Plea For Calm, about the current state of Washington Mutual sparked some interesting conversations.

Minyan Doug: Prof. Jeffery, why does the TPG anti-dilution protection make it hard for Wamu to raise money? I think what is hard is that the company would have to decide to dilute the regular shareholders, but that does not mean that private equity firms would not want to put new money in.

Prof. Jeffery: Good question. Under the agreement Wamu is obligated (from my understanding) to make up the difference between where TPG bought their shares - $8.75 and the actual stock price. So, if Wamu issues more shares to raise capital, it dilutes the current shareholders - including TPG. But since Wamu is on the hook for further TPG losses, it just has to give the capital right back.

Minyan Jordan: Just a little note from the ground level. I bank at Wamu in San Diego. My wife and I removed all our cash on Sunday evening (transferred to HSBC). Monday morning we went in to get the last pennies and there had been a line out the door in the morning. I spoke to other friends in town and many others were clearing out their accounts.

Minyan Matt: I think the FDIC reports about 1 billion in deposits at IndyMac are uninsured. So users of all banks are asking the question today. Reporters are doing articles on the effect of government and corporate working accounts which of course would typically have more than 100,000 in them.
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