On November 13, I wrote that because the risk of mortgage companies and banks going bankrupt was so high, that it was therefore inconceivable the Fed would allow it to happen.

It's confidence.  If (for example) Etrade collapses, faith in such institutions-- in stocks, in investing, etc-- also collapses.  So you get a recession on worry alone, not even counting the actual money that evaporates.

I figured there was no way the Fed would allow that to happen, that they would pull out all the stops, risk inflation next year, risk everything just to prevent recession now.  If nothing else, it's an election year. 

I even bought Etrade stock in a "put my money where my mouth is" stand.  I wasn't buying Etrade, I was buying faith in the U.S. economy.

Well, I was wrong.   Etrade's stock has fallen 40%, even after Citadel gave it $2.5B, temporarily boosting the stock price.  And Citigroup is down 30% even after The Prince gave it $8 billion.  And Warren Buffett and Bank of America gave Countrywide $3 billion, and it is almost certainly going to be bankrupt soon.

I can be wrong, what the hell do I know.  But Warren Buffett?

On Friday it was announced that the unemployment jumped from 4.7% to 5%.  About 50k less jobs were made in December than were expected.  That sent the markets down, down.  But then exactly the wrong thing happened.

Bush held a press conference after meeting with his "Working Group on Financial Markets."  Instead of saying the obvious, such as, "Holy Crap!  What the hell is happening!  People are losing first their houses, now their jobs!  Holy mother of God!!"  what he said was, "the fundamentals of our economy are strong."  He said that in September, too.  And the markets-- the thing he was meeting about-- all collectively went, "Holy Crap!  What the hell is happening!  People are losing first their houses, now their jobs!  Holy mother of God!!"

Even worse, there is a not preposterous interpretation of Fed-speak that suggests there won't be big rate cuts soon, but actually rate increases.  And now Paulson, today.

You may not care about this stuff, feeling that it is removed from your daily lives, but I assure you nothing matters more.  Unless you are in the healthcare, law, or defense business, you're in for a special kind of recession: it won't affect the very rich, they have buffers; it won't affect the very poor, they have nothing; but it will kill the middle class. And middle class can be simply defined as anyone who has a job they need.

Look, it's not surprising that Obama won the Iowa caucuses, in that either he or Hillary would have been believable winners.  But for the Republicans to pick Huckabee-- that's middle class Republicans-- it's telling you that they're scared. 

If you want a tie in to psychiatry-- and wealth creation-- here's what you do to become a millionaire in a year: go to a small city-town, something like Pensacola, Albany, Mobile, etc-- somewhere where most people are employed by a key industry (manufacturing plant, office park, etc); or to a Hispanic-heavy area (construction workers/contractors)-- and set up a psychiatric clinic.  Hire a psychiatrist, three or four bachelor's level therapists,  and wait.  As the businesses close or cut back, and as construction ceases,  volumes of people will flow in, miserable and in need of Medicaid and SSI or SSD.   And here is also your semiotic tie-in: all those people who were previously "contractors" or "homeowners" will suddenly be "psychiatric patients." 

Because that is what we have.  We obviously don't have a sound economic policy; and the country isn't designed to offer aggressive social services.  So the default mechanism for dealing with poverty in our country is to herd them into psychiatry, with its legend of the Chemical Imbalance, promise of treatments independent of environment, and, of course, the opportunity to apply for SSI.

Medicaid pays about $30 med visit, $100 per therapy hour, every week.  That's $430/month per "patient."   Hop to it.

The other thing you can do is stand outside of the homes that will soon be for sale-- try Florida or Inland Empire-- hold up $300, and wait for one of them to trade their house for the plane fare out of there.

The 2004 election was a referendum on Iraq.  2008 will be a referendum on your total debt.  Believe it.