We are in a worse situation than The Great Depression
Barry Ritholtz linked to a video of Paul Solomon of the PBS News Hour interviewing with Dr. Nassim Nicholas Taleb, famous economist and author of The Black Swan : The Impact of the Highly Improbable” and Taleb’s mentor, French mathematician, Dr. Benoit Mandelbrot, Professor Emeritus of Mathematics at Yale University. Dr. Mandelbrot, a pioneer in the development of chaos theory, is regarded as the father of fractal geometry. Both say that the present economic situation is actually more serious than the Great Depression. In fact, they fear the U.S. is in the worst situation it has been in since the American Revolution.

The reason, Dr. Taleb explained, is that “Never in the history of the world have we faced so much complexity combined with so much incompetence in understanding its properties.”

President-elect Obama promises to create 2.5 million jobs and has plans for a massive stimulus package costing at least half a trillion dollars if not $1 trillion dollars.

But where exactly would those jobs be created?

Business Week Journalist Michael Mandel asks Can Obama Keep New Jobs at Home? Mandel points out that a massive stimulus might just well go offshore.

Some startling facts in this article:

Imports have risen from the equivalent of 9% of gross domestic product to almost 19%. Even more astonishing, the value of imported goods now is equal to almost 40% of the output of U.S. manufacturing.

Trillions. Literally trillions of taxpayer money is now pouring to financial institutions. Today the Federal Reserve added $800 Billion more. The United States has now pledged $8.5 Trillion dollars to the financial crisis. To put that in perspective, one could have paid off, in their entirety, every house being foreclosed on for $320 billion dollars, the supposed root cause of the financial crisis. The entire home mortgages liabilities in the United States are $10.6 Trillion dollars

So, why is the United States pledging money worth 60% of the entire United States GDP?

This week's edition of Barron's contains an article entitled, "Does Extreme Stress Signal an Economic Snapback?" the thesis of which is carried in the subtitle: "More than a decade's worth of equity gains has evaporated. But history suggests that stocks won't fall much further." The article includes the following graph offered in support of the main thesis:

We are supposed to all think that our 201k's (formerly 401k's) are undervalued now and will at least grow back to the historic norm.

Don't know about you, but I find that graph FAR from reassuring: in fact, it appears to support the opposing thesis.

One topic no one mentions in the Detroit Bailout controversy is all the offshoring that has been, and still continues, in the auto industry.  GM just announced new plants in Brazil, Russia and India, coinciding with plant closings in America.
 
Guess where the bailout money will go?

Story

General Motors to invest $1 bn in Brazil plant

Wed, Nov 19 11:49 AM