| | | Page 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28 | Watch, Its happening ,the global economic change.
| FHL(C)
User ID: 295483
9/9/2007 11:17 AM | | FHL(C)
User ID: 295483
9/9/2007 11:17 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU & FW
Several trillion dollars of imaginary money are in the process of evaporating.
Quote
Tight Credit = Higher Gold
The evolving metamorphosis underway in world financial markets is nothing more than the global re-allocation of available cash. The artificial liquidity created by government counterfeiting and accompanying facile lending policies is/was unsustainable, and the collapse of the sub prime mortgage business is merely the first symptom in what will continue to reorder the economic universe.
Several trillion dollars of imaginary money are in the process of evaporating.
Much like the dot com meltdown earlier this decade, the money disappearing never really existed in the first place, and was merely the novel creation of a bunch of fraternity brats who smirk at the tenets of classical economics.
The smirk is largely there to mask their ignorance of sound economic theory, but it is also emblematic of the disdain that those who govern and mange harbor towards those who are governed and managed.
Stemming from the fear that they might not actually be superior to those below them, and subsequently undeserving of the vast riches they hoard and squander, it's the attitude of those borne into the wealth and privilege they are bound to abuse.
History repeats itself once again.
Derivatives - financial instruments derived from other securities - are once again the bain of Joe Average investor's existence. Default credit swaps. Collateralized Debt Obligations. Its enough to make one ill.
But there are days of smug satisfaction ahead for Joe Average.
The upside about NOT participating in the ethereal world of Money Markets and Derivatives is that you won't suffer the immediate effects of tight credit because you (hopefully) don't leverage your assets 10:1.
If the bank that does allow you to operate on a leveraged basis decides that your maximum safe ratio is 3:1, then obviously the dollar value of your participation in global markets has diminished by a factor of 7.
There are several investment organizations who are now the less than ecstatic recipients of pretty substantial margin calls. This is essentially the outcome of the diminished risk the bank is willing to take.
And that is going to be the cause of the continuing vaporization of liquidity. As the proverbial ball of dung rolls downhill gathering speed, it quashes and besmirches all in its path while growing in size, using the victims to augment its mass and momentum.
The 'governments', essentially the largest organized crime group on the planet now, have the money presses working overtime to counter the liquidity flight with more inflationary liquidity. Picture a roaring fire. Picture trying to douse the flames with naphtha gas.
But it will affect you down the road. And that's why its important to understand now the correlation between tightened credit and a higher gold price.
If you entertain in your mind the idea that all of the currency prices quoted are quoted relative to how much gold they can buy ( and this in fact is reality, even if you don't buy it yet), then you can easily see that a nation that requires $650 of its dollars to buy one ounce of gold is going to need more dollars every time it prints more money.
The massive currency devaluation that occurs every time the United States government injects 50 billion dollars into the economy will ultimately equate to upward pressure on the gold price. Other governments are forced to mimic the U.S. inflationary remedy in order to preserve their own market liquidity, else suffer diminished competitiveness' through the effects of US counterfeiting.
Down here on the ground, where its highly unlikely we will be able to fabricate our own complicated financial instrument to sell to poor dupes through a vast complicit network of shops (banks) and ad agencies (media), our only defense is to accumulate gold now, while it only does take $650 of our dollars to get an ounce.
When it takes $1,000 to get an ounce, we will have made money, and preserved capital. Those who don't…well….you get what you pay for.
The realization will spread in spite of the concerted effort by a growing minority to suppress the price of gold. Those who have a vested interest in gold's devaluation are still able to spook investors by dumping $50 Billion into the market shorting gold, but they do so only because its cheaper than capitulation, and the historic humiliation that would be the resulting legacy.
Junior mining companies have historically provided good leverage to the price of gold, but the junior markets of the last couple of weeks make now sense, and are not an accurate reflection of value.
That sucking sound coming out of the junior markets is coming from 2 places:
1. Coventree Inc, and agencies like it, are defaulting on their ABCP (Asset Backed Commercial Paper), which is held widely by resource companies as a superior instrument to the more conservative Term Deposit. Every day, another mining and/or oil and gas exploration firm announces the inability to access funds on deposit with Coventree and others.
In classic financial psycho-babble, Coventree issued the following statement this week:
" While Coventree sponsors and administers these ABCP conduits, the ABCP issued by them are not obligations of Coventree or guaranteed by Coventree. The assets in such Coventree-sponsored conduits are not owned by Coventree and therefore cannot be used by Coventree in its business nor are they available to meet the obligations of Coventree to its creditors. Similarly, the liabilities of such Coventree-sponsored conduits are not obligations of Coventree - the recourse of the debtholders of a conduit is generally limited to the assets of that conduit."
In other words, we sold it to you, but we aren't responsible. Even though the principles of the company are ex-employees of Dominion Bond Rating Services, the company that gave the ABCP its R1, or triple 'A' status.
You can bet there's either going to be a huge investigation into this relationship, or else a huge cover-up.
2. The major funds, and the investment institutions behind them are generally leveraged at some huge ratio. As discussed above, many of those rations have been quietly yet irrevocably diminished by the holders of risk further up the food chain.
The standard reaction from any portfolio that gets a margin call is intense and indiscriminate selling. Witness the last week, and the resulting fire sale prices of gold ounces in the ground.
So buy gold. Buy lots. Buy it now. Then buy the juniors with ounces in the ground. Regard all investment advice as suspect. If it doesn't make sense, don't do it.
In the words of J.P. Morgan,
"Gold is money. That's it."
www.gold-eagle.com
[link to www.godlikeproductions.com]
[link to freewordofgod.yuku.com] |
| Anonymous Coward
User ID: 295899
9/9/2007 10:07 PM | | FHL(C)
User ID: 296081
9/10/2007 11:14 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Some good stuff here, heavy duty figures up to 1 yr old, are we entering the top of an infinite up curve in terms of amounts expanding year by year(day by day) uncontrollably, i think so, somethings are starting to give, so who is going to pay , the world, the US and some others, or combo?
[link to www.godlikeproductions.com]
US 'could be going bankrupt'
Edmund Conway, Economics Editor.
London Telegraph July 14, 2006.
[link to www.documentaries.ws]
The United States is heading for bankruptcy, according to an extraordinary paper published by one of the key members of the country's central bank.
A ballooning budget deficit and a pensions and welfare timebomb could send the economic superpower into insolvency, according to research by Professor Laurence Kotlikoff for the Federal Reserve Bank of St Louis, a leading constituent of the US Federal Reserve.
Prof Kotlikoff said that, by some measures, the US is already bankrupt. "To paraphrase the Oxford English Dictionary, is the United States at the end of its resources, exhausted, stripped bare, destitute, bereft, wanting in property, or wrecked in consequence of failure to pay its creditors," he asked.
According to his central analysis, "the US government is, indeed, bankrupt, insofar as it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments of various kinds''.
The budget deficit in the US is not massive. The Bush administration this week cut its forecasts for the fiscal shortfall this year by almost a third, saying it will come in at 2.3pc of gross domestic product. This is smaller than most European countries - including the UK - which have deficits north of 3pc of GDP.
Prof Kotlikoff, who teaches at Boston University, says: "The proper way to consider a country's solvency is to examine the lifetime fiscal burdens facing current and future generations. If these burdens exceed the resources of those generations, get close to doing so, or simply get so high as to preclude their full collection, the country's policy will be unsustainable and can constitute or lead to national bankruptcy.
"Does the United States fit this bill? No one knows for sure, but there are strong reasons to believe the United States may be going broke."
Experts have calculated that the country's long-term "fiscal gap" between all future government spending and all future receipts will widen immensely as the Baby Boomer generation retires, and as the amount the state will have to spend on healthcare and pensions soars.
The total fiscal gap could be an almost incomprehensible $65.9 trillion, according to a study by Professors Gokhale and Smetters.
The figure is massive because President George W Bush has made major tax cuts in recent years, and because the bill for Medicare, which provides health insurance for the elderly, and Medicaid, which does likewise for the poor, will increase greatly due to demographics.
Prof Kotlikoff said: "This figure is more than five times US GDP and almost twice the size of national wealth. One way to wrap one's head around $65.9trillion is to ask what fiscal adjustments are needed to eliminate this red hole. The answers are terrifying.
One solution is an immediate and permanent doubling of personal and corporate income taxes. Another is an immediate and permanent two-thirds cut in Social Security and Medicare benefits. A third alternative, were it feasible, would be to immediately and permanently cut all federal discretionary spending by 143pc."
The scenario has serious implications for the dollar. If investors lose confidence in the US's future, and suspect the country may at some point allow inflation to erode away its debts, they may reduce their holdings of US Treasury bonds.
Prof Kotlikoff said: "The United States has experienced high rates of inflation in the past and appears to be running the same type of fiscal policies that engendered hyperinflations in 20 countries over the past century."
Paul Ashworth, of Capital Economics, was more sanguine about the coming retirement of the Baby Boomer generation. "For a start, the expected deterioration in the Federal budget owes more to rising per capita spending on health care than to changing demographics," he said.
"This can be contained if the political will is there. Similarly, the expected increase in social security spending can be controlled by reducing the growth rate of benefits. Expecting a fix now is probably asking too much of short-sighted politicians who have no incentives to do so. But a fix, or at least a succession of patches, will come when the problem becomes more pressing."
[link to freewordofgod.yuku.com] |
| FHL(C)
User ID: 296081
9/10/2007 11:16 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
with thanks to the op of the original thread, and a bit more, go and read.
[link to www.godlikeproductions.com]
----------------------------
Anonymous Coward
User ID: 176222
1/3/2007 5:44 AM
Re: >>> BANKRUPT U.S.A <<< Quote
[link to www.indiadaily.com]
The biggest bubble of all - derivatives Trading Soars to $370 Trillion – it will be the root cause for global depression.
Alan Hershey
Nov. 17, 2006
Interesting data came out from the Bank for International Settlements. The global market for derivatives soared to a record $370 trillion in the first half of 2006. It is the highest ever and the bubble is bigger than any one can imagine.
The kind of euphoria in derivative trading has never been seen before. The amount of outstanding credit-default swaps contracts jumped by 60% at the end of last year. This year the rise is even faster. It is a typical pyramiding technique. Money is creating false concept of money and that in turn is creating ever larger conceptual money.
When the tide blow off and balloon bursts, the catastrophe will be unimaginable. The 1929 debacle and resulting depression will be miniscule to what is coming.
The derivatives were initially designed for hedging. It has now become the instruments of trade. An example of what can happen is as follows.
Recently when Amaranth, the hedge fund, did bet on the wrong side of the natural gas market, it lost billions in days and went out of business drowning the capital of many investors. But something more sinister happened in London credit swap market. On the news of Amaranth's problem, the credit swaps based on Amaranth funds collapsed creating massive problem for the London credit instuments markets. Even the little hedge fund was able to bring the market to its knees.
Think what can happen when many hedge funds collapse at the same time.
Remember 1987. Before the October crash public were arguing about the fact that the market will not give an inch on the down side. Every individual investor was in the elevator at the Penhouse level. Finally when the crash came, the brokers did not pick up their phones and Dow lost more than 20% in one day.
Something much more serious is getting cooked here. The complacency level, the sentiment indicators and above all the fundamentals are all ready to make the market collapse big time...
[link to freewordofgod.yuku.com] |
| FHL(C)
User ID: 296081
9/10/2007 12:47 PM | | IGASOP
User ID: 276015
9/10/2007 12:48 PM
 | | Re: Watch, Its happening ,the global economic change. | Quote |
You started this thread more than 2 1/2 years ago???
Well... hurry up! Still waiting!!!
LOL! |
| FHL(C)
User ID: 296081
9/10/2007 1:13 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
[link to www.jsmineset.com]
Derivatives And Lying - Two Art Forms That Go Hand In Hand
Author: Jim Sinclair
“Oh what a tangled web we weave, when first we practice to deceive.”
--Sir Walter Scott
Dear CIGAs,
You can play any financial game in a world developing in the global condition of Authoritarian Free Enterprise. Businesses are predators that seek to give the least at the highest price and lowest quality that the market will accept. Products are hyped for months that turn out not to work as expected, or the price is reduced only a few short weeks after the hyped ones have been hosed. How cool is it to overpay for an inferior good?
The public is also to blame. Today are investors not willing to pay a proper commission to a human being for a good execution of an order and for the margin crazies a small warning as they come within a hair’s breathe of a margin call?
Lying is no longer a character flaw. It is an art.
So one day just prior to 1990 it was discovered that if one computer was to make both sides of a trade and pass those trades out to two or more separate but same party, transactions in the billions could be created from $250.
The game will work as long as the same computer dissolves the trade by passing out to the other parties, who are supposed to be different but are in truth the same, the closing transaction simultaneously. Put them on at once and take them off at once. This is how the over the counter derivative was born.
Enron came along and invented 2000 straw partnerships. You might ask yourself why. Unfortunately some financial contractors inadvertently destroyed important documents. My wager is they were the trade records of the 2000 straw partnerships.
If there is a repeat of this, look for 500,000 straw entities, not a piddling 2000 as in the Enron case. Every amoral financial travesty grows and grows in the world dominated by the corporations who do not give a flying F about any member of the public other than the board of directors and themselves, if that goes even beyond themselves.
All of this goes along just dandy while prosperity is king and the almighty buck decides what is right. This is a period when the person who wins at life is that person who when the ends comes has the most toys, yachts, club memberships, custom made everything and maybe even a collection of husbands and/or wives.
Then all of sudden this generations of building mountains of exotic financial transaction that are considered to be money which results in a shadow and shadowy banking system that competes with the already shadowy establishment banking system and globally politicized central banks starts to titter.
As in any panic publicly seen or concealed, there is a rush to get the money. The lender stops lending to the borrower because the lender knows the collateral is worthless.
The derivative market is built on the considered worthiness of unworthy assets. Sure there are those who have acted in good faith, really believing that the over the counter derivative market has sound basis.
What those trusting souls fail to understand is that the foundational transactions that have given birth to this so called market are down right FRAUDULENT.
As the $20 trillion of credit and default over the counter derivatives begin to unwind they in fact cannot unwind because there is no one computer to match up the simultaneous trades and remove them harmlessly. This is what the spin phrase of "a loss of control in the back offices" means.
This is why I have said emphatically that a change in interest rates, no matter how fast or significant, an explosion of international liquidity, and all central banks working in accord cannot change the fact that the total mountain of garbage paper in size of over $30 trillion is all falling down. This is the ultimate case of the King has no clothes on.
This is why I have shut up over interim market moves. This is why I have not given you support and resistance in gold. Trader Dan has spoken to the traders. Monty has spoken to those that seek impeccable fundamental reasoning.
I have said one thing. Gold will go to and through all the Angels. Gold is going to and perhaps through $1650. I have warned against margin because the moves will be so significant that you need only a little to insure a lot.
[link to freewordofgod.yuku.com] |
| Anonymous Coward
User ID: 299205
9/17/2007 1:21 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
American Consumers are Losing their Crown
Peter Schiff
Sep 14, 2007
With the U.S. Dollar Index breaking decisively below its long-term support level, the sun is finally setting on the golden age of American consumption. As America's economic dominance fades, so too will the faith in the central thesis that has explained its apparent success and has shaped the majority of recent economic theory.
At issue is the belief that a nation can grow and prosper by borrowing from abroad in order to consume imported goods. To consume at the pace that it has, America exchanges income producing assets, such as companies or property, or interest bearing IOUs, such as Treasury notes or mortgage-backed bonds, for foreign made clothes, toys and electronics. Economists call these transactions "growth". But rather than discovering a new path to prosperity, America has simply stumbled on a short cut to financial ruin.
For years America has convinced the emerging market countries that their prosperity is a function of our consumption. It is argued that their export oriented economies would falter if not for the insatiable American willingness to consume (a "virtue" that is assumed to be uniquely American). As the dollar falls into the abyss, this myth will be shattered.
My forecast is that over the next two to three years the U.S. Dollar index will fall to 40; half of its current value. As this happens, much of America's economic power will be transferred abroad. The chart below approximates current per capita U.S. dollar GDP for thirty nations, including the United States, listed in descending order.
A 50% decline in the value of the dollar will simultaneously increase interest rates, consumer prices and unemployment in the United States, while causing stock and real estate prices to fall. Consumption, which accounts for better than 70% of U.S. GDP, should collapse as a result, producing a significant recession. My forecast is that U.S. GDP will contract by at least 20%. (The Fed may seek to mitigate the nominal decline with expansive monetary policy, but such moves will only result in an even greater contraction in real GDP.)
Assuming a 50% decline in the value of the dollar and a 20% fall in U.S. GDP, the above chart would look something like this:
Obviously, these projections are very rough. Not all foreign currencies will rise in step and not all foreign GDPs will remain constant at today's levels in local currencies. However it is the concept that is important. Notice how America falls from 6th place to 21st. America's per capita GDP falls from 58% of Luxemburg's, the top nation on the list, to a mere 20%. America's per capita GDP falls from 14 times that of Peru, the lowest nation on the list, to only 5.6 times.
China is conspicuously absent from the list. Its current per capita GDP is only about $2,200. However, were China to allow its currency to float freely, my belief is that the yuan would rise far more significantly than other currencies. I have no idea how much more significantly that rise will be, but let us assume that its rise against the dollar would be double the rate of the typical currency in the Dollar Index. That would result in China's per capita GDP rising to $8,800, just above Peru's but still below Brazil's.
Factoring in China's enormous population means that such a significant rise in its per capita GDP would have a profound impact on global consumption. Consider the following table, in billions of U.S. dollars, of the GDPs of the G-7 nations plus China:
Now consider the table with my assumptions regarding exchange rates and a 20% decline in U.S. GDP.
Under this scenario, China supplants the United States as the world's largest economy, not in 30 or 40 years as is commonly believed, but perhaps as soon as before the end of this decade. The U.S. retains its lead over Japan for second place, yet the margin declines from over 300% to just 10%. (My prediction is that the yen will rise more significantly than most other currencies meaning that Japan's GDP will likely surpass U.S. GDP as well.) Further, the GDP of the thirteen nations sharing the euro is currently about 12.8 trillion dollars. After the dollar's decline it will rise to a staggering 25.6 trillion, more then twice that of the U.S. As a result, considering the EU as a single nation, the U.S. economy would then rank forth among the world's largest, with its GDP declining from 43% of world GDP to only 21%.
Current ideology holds that a recession in the United States as severe as the one I am forecasting would be catastrophic for the global economy. But this short-sighted view overlooks the effects of such tremendous dollar gains in the GDPs of the rest of the world. Wouldn't the increased consumption of everyone else offset the effects of the decreased consumption of Americans? It is not as if factories around the world would shut down if Americans stopped spending. All that would change would be the nationality of the buyers.
As American consumer spending declines, foreign spending will rise to take its place. With an explosion in foreign purchasing power, consumers around the world will see the dollar values of their incomes and savings soar. Globally, goods will fall in price and consumers around the world will snap up the bargains. Goods that were formerly out of reach for many foreign consumers will now be affordable. The reverse will occur in America. As production is diverted away from poorer Americans to more affluent foreigners, consumer prices in America will rise sharply. Goods that Americans used to easily "afford" will now be out of reach.
As gold surpasses $700 per ounce, oil tops $80 per barrel, and wheat prices exceed $9 per bushel, Americans are already getting a taste of things to come. Prices for these and other commodities are rising as a direct result of the weakness in the dollar. As this weakness intensifies in the months ahead, commodity price increases will accelerate. However, as their own currencies rise, many foreign buyers will actually experience price decreases. The result will be even greater demand for commodities from abroad just as domestic demand subsides.
Further, as the world stops exporting so much of its savings to America, there will be far more capital available to foreign entrepreneurs to invest productively. Think of the crowding out effect of so much of the world's savings being lent to American consumers. Now imagine the foreign investment boom that would follow as foreigners reclaim access to their own savings.
The American propensity to consume is not a unique talent. Any nation can emulate it so long as it finds willing lenders and suppliers. Production on the other hand is an entirely different matter. It requires free markets, limited government, the rule of law, savings, capital and hard work. The world economy will not be brought to its knees simply because Americans stop consuming. Rather it is America's service sector economy that will collapse once the rest of the world stops propping it up.
For a more in depth analysis of the tenuous position of the Americana economy and U.S. dollar denominated investments, read my new book "Crash Proof: How to Profit from the Coming Economic Collapse." Click here to order a copy today.
More importantly, make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com, download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com, and subscribe to my free, on-line investment newsletter.
Peter Schiff
C.E.O. and Chief Global Strategist
Euro Pacific Capital, Inc.
1 800-727-7922
email: pschiff@europac.net
website: www.europac.net
Archives
Mr. Schiff is one of the few non-biased investment advisors (not committed solely to the short side of the market) to have correctly called the current bear market before it began and to have positioned his clients accordingly. As a result of his accurate forecasts on the U.S. stock market, commodities, gold and the dollar, he is becoming increasingly more renowned. He has been quoted in many of the nation's leading newspapers, including The Wall Street Journal, Barron's, Investor's Business Daily, The Financial Times, The New York Times, The Los Angeles Times, The Washington Post, The Chicago Tribune, The Dallas Morning News, The Miami Herald, The San Francisco Chronicle, The Atlanta Journal-Constitution, The Arizona Republic, The Philadelphia Inquirer, and the Christian Science Monitor, and has appeared on CNBC, CNNfn., and Bloomberg. In addition, his views are frequently quoted locally in the Orange County Register.
Mr. Schiff began his investment career as a financial consultant with Shearson Lehman Brothers, after having earned a degree in finance and accounting from U.C. Berkley in 1987. A financial professional for seventeen years he joined Euro Pacific in 1996 and has served as its President since January 2000. An expert on money, economic theory, and international investing, he is a highly recommended broker by many of the nation's financial newsletters and advisory services.
321gold Ltd |
| Anonymous Coward
User ID: 299205
9/17/2007 1:37 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Fears grow for British economy as panic over Northern Rock spreads
Experts warn that a decade-long borrowing binge has left Britain dangerously exposed to the fallout from the global liquidity crisis
Heather Stewart and Heather Connon
Sunday September 16, 2007
The Observer
US Treasury Secretary Hank Paulson flies in to London tomorrow to discuss the worsening global credit crisis with Chancellor Alistair Darling, as fears intensify that the lending squeeze could be the last straw for Britain's buy-now-pay-later economy.
Thousands of anxious customers queued outside branches of Northern Rock to withdraw their savings this weekend, ignoring calls for calm from Darling, after he helped broker an unprecedented emergency loan from the Bank of England to rescue the bank.
Article continues
City economists warned that a decade-long borrowing binge had left the UK economy dangerously exposed to the fallout from the credit crunch. 'I think the UK is extremely vulnerable to this,' said Danny Gabay, director of consultants Fathom. 'The UK has a double vulnerability. We are vulnerable because of our hugely over extended consumer sector, and because of our large financial services sector.
'This is a financial market event; but the longer it goes on, the greater the risk that it becomes a real economy event - and I think we are at a tipping point.'
As the Federal Reserve prepares to cut interest rates - perhaps by as much as a half percentage point - to restore confidence in financial markets, Darling and Paulson will discuss proposals for better transparency, to prevent a recurrence of the 'contagion' that has spread the impact of bad loans in the US housing market around the world.
But analysts are still scrambling to calculate the potential impact of the current squeeze. Ross Walker, UK economist at RBS, said: 'We were already looking for a noticeable slowdown next year, and now there are further downside risks.' He predicted that the Bank would have to cut interest rates twice by the end of next year, to prevent the downturn becoming too severe with growth slowing to 2.2 per cent, from almost 3 per cent this year.
Richard Donnell, head of research at property data firm Hometrack, said the latest evidence of the severity of the sub-prime crisis would rock confidence in a housing market already struggling to absorb five interest-rate rises.
'It's taken a good year for the impact of higher rates to reach London but, finally, the whole market's feeling the pain.'
It emerged this weekend that several financial institutions have run the slide rule over Northern Rock in recent weeks, as its advisers Hoare Govett and Merrill Lynch battled to avert a Bank of England bailout by finding a buyer.
However, most potential bidders have privately ruled themselves out of the frame. Lloyds TSB has been the favourite candidate, but banking sources indicated it was unlikely to be interested. HSBC - under fire from institutional shareholder Knight Vinke for failing to capitalise on its emerging-markets interests - is also thought unlikely to bid, despite its relatively small share of the UK mortgage market. Other leading banks, including HBOS, RBS and Barclays, are also seen as unlikely to be interested.
One bank executive questioned the logic of bidding for a bank whose name has been tarnished by the Bank of England bailout and whose customers - seen as higher risk -are paying low rates on their largely fixed-rate loans and therefore likely to move elsewhere when these expire. Rival banks are instead likely to focus on poaching that business. Nor is there much scope for cutting costs, as Northern Rock is already the most efficient mortgage bank.
'What do you get with Northern Rock?' asked the banking executive. 'You get a load of customers who are probably also ours already, and you do not get a branch network to speak of.'
Northern Rock's plight has also raised concern about the prospect of heavy losses among Bradford & Bingley's buy-to-let loans, which account for more than half of its mortgage book. James Hamilton, banking analyst at Numis, thinks the increasing threat that the credit crunch will spread into an economic slowdown means that the housing market will be hit - and buy-to-let is likely to be the first area to suffer rising defaults.
An analysis by Jon Kirk at Redburn Partners shows that B&B has the second highest ratio of loans to deposits after Northern Rock, with loans accounting for 1.8 times its savings and deposits base, compared with 3.1 times for Northern Rock. While B&B was quick to reassure on Friday that it is financially secure, securitisations and wholesale markets account for 42 per cent of its funding.
Financial disasters
2002
Investors lose millions in split capital investment trusts, devised for paying school fees
2001
Insurer Equitable Life is brought to the brink of collapse and the value of policyholders' investments crumbles
1995
Barings Bank brought down by rogue trader Nick Leeson
1992
Southdown building society forced to merge with Leeds Permanent
1991
Fraudulent bank BCCI becomes insolvent causing investors to desert smaller banks, some of which go bust
1991
Town & Country building society brought to its knees by bad loans
1988
Investors lose life savings after Barlow Clowes group closes
1973/5
Bank of England organises 'lifeboat' for small banks hit by widespread secondary banking crisis
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Audio: Ashley Seager |
| Anonymous Coward
User ID: 299205
9/17/2007 1:39 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
By John Galt
The following is an editorial and an opinion. It may or may not happen. But as of the date I finished this, and stopped editing, it is my best guess to answer your questions…….
There is a question, an email, which I receive on an almost daily basis which is the question that gave me inspiration for this editorial. While current events are so unstable, so unpredictable, and appearing to head into a grave new phase of war and financial disaster, the individual who has heeded the warnings about a fiat economy will survive, although the type of civilization they wake up to might cause a deep pause in thought. The “what’s next” is not a question about market activity, but that is quite predictable from a long term macro viewpoint. The real question in my book, yet unanswered, is what will be left of our society. In that, let’s try to answer both questions and not lose our sanity in the process.
“Luxuries are a necessary part of life”
And with that quote National Public Radio gave an update on Friday September 7th in their business segment from a young lady who obviously has never had to really work a day in her life or do without. I can speak from personal experience. I remember the days in the early 1990’s when the bills were tight and money was hard to come by. You learn to find interesting ways to spice up cans of Spaghetti-O’s and other canned pastas just to keep meals from getting totally boring. Luxuries are food, water, shelter and the ability to make an acceptable living for your family. The concepts that the citizens of this era have put forth as “necessary” are contributing causes to the steep decline as a society we are facing. It is not a requirement to own a video game, own an impractical vehicle or eat at luxury restraints while wearing designer clothes at least once per month. The fear that I hear, from those who get their hands dirty for a living and just try to earn an honest day’s pay, is that once again those who have the money and power are making mistakes which will destroy their lives.
[link to www.johngaltfla.com] |
| Anonymous Coward
User ID: 299633
9/18/2007 2:28 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
[www.elliottwave.com]
11/13/2006
'Not many people pay attention to bank credit and the money supply, but the Federal Reserve sure does. In fact, if you visit its Web site, you'll discover that the Fed tracks enough money and credit data to make your brain explode (unless you're an economist, in which case the damage is already done).
M1, M2, M3, Aggregate Reserves of Depository Institutions and the Monetary Base, Charge-Off and Delinquency Rates on Loans and Leases at Commercial Banks ... and more, so very much more -- all seasonally adjusted, or not, depending on your preference.
Now, the Fed goes to these lengths, because it's supposed to "control" the money supply. Yet this control is simply a means to a greater end for the Fed -- namely, to expand credit.
A growing money supply normally means growing deposits for financial institutions, which means -- presto -- more lending and borrowing, i.e. the expansion of credit.
And make no mistake: there's been borrowing aplenty, notwithstanding the unstable economy in recent years. Consider home equity.
Fed data shows that July 1997 was the first time the total amount of home equity loans reached $100 billion. And it took more than five years for that figure to double, not reaching $200 billion until September 2002.
How long do you think it took to double again?
Oops, if you blinked you missed it when it happened - homeowners had converted $400 billion of assets into debts in the final week of 2004.
What does it mean? Well, it reflected the acceleration of the trend toward reckless levels of debt. Mind you, I did say "reflected," as in, past tense.
Here's another way to look at it. The dollar amount of home equity loans increased by 30% during 2003; that amount increased by 35% in 2004; it increased by 10% in 2005; and through October, the dollar amount of home equity loans has increased by about 4% in 2006.
What does the rapid reversal of this trend mean for the economy and consumer spending in 2007 ?
Stay tuned; it's a question that could answer itself soon than (almost) anyone expects.' |
| Anonymous Coward
User ID: 300275
9/19/2007 10:58 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Greenspan Working To Destroy US Economy
Puppets of the elite posing as saviors once again
Steve Watson & Alex Jones
Infowars.net Editorial
Tuesday, Sept 18, 2007
Over the past few days Alan Greenspan has appeared in every major financial publication to explain exactly what is going to happen to the economy and what the next steps should be, while also deriding the Neocon administration for the current downturn. For this he has been lauded as some form of economic savior, yet a cursory examination of the facts reveals that the economic decline has long been in the pipeline and Greenspan and his ilk operate under the influence of those who continue to engineer the slow meltdown.
Alan Greenspan and Paul Volker, both former Federal Reserve Chairmen, along with current chairman Edward Bernanke, the Treasury Secretary Henry Paulson and Alistair Darling, Exchequer of the Treasury in England have been out in unison since last Friday announcing over and over that the economy is going to implode, there is going to be serious inflation, housing is going to go down between ten and thirty percent, and the Dollar is going to be replaced with the Euro.
See:
Greenspan: Euro Gains As Reserve Choice
Alan Greenspan warns of UK house prices drop
Greenspan alert on US house prices
Greenspan predicts falling house prices, rising inflation
With the effects of the credit crunch hitting more and more lower level lenders, it is clear to see that the fallout is spreading and propagating a general decline. We are seeing the unfolding of an overall meltdown that represents a gutting of the United States by neo-mercantilist institutions bent on the formation of a new global monopoly.
(Article continues below)
We are witnessing the unfolding of a crash exactly as predicted by Former World Bank Vice President, Chief Economist and Nobel Prize winner Joseph Stiglitz this time last year.
Stiglitz agreed that the process of hijacking and looting key infrastructure on the part of the IMF and World Bank, as an offshoot of predatory globalization, has now moved from the third world to Europe, the United States and Canada.
Stiglitz warned that the signs were there with plummeting real estate prices in the U.S., stating that a global economic depression could only be avoided if a correction was made.
But no correction will be made because the World Bank/IMF/Globalist doctrine betrays a focused agenda to deliberately foment economic turmoil, riots, and then enforced bondage to eternal debt. We have witnessed this time and time again, their own documents even confirm this as the chosen method of social control.
The shareholders of Federal Reserve, part of the same group of elite families that owns the bank of England, created the IMF and World bank to siphon government funds. Then they effectively steal the real assets of the third world countries that take their loans in some cases at 42% interest. These global loan sharks secure the water, power and roads which are then handed over to private, piratical, letter of mark companies.
The heads of such companies, together with the central banks come together within elite institutions such as the Bilderberg group to pull together their policies and discuss how to proceed.
Bilderberg have sworn to bring about what Jose Barroso, President of the European Commission and a Bilderberg member, refers to as the "post-industrial revolution," which in layman's terms translates as a global economic crash, another great depression and the total evisceration of the middle class. They are intent on achieving this by ensuring oil prices soar via a combination of conflict in the middle east and encouraging fears over peak oil.
At the 2005 Bilderberg meeting sources inside the group told reporters Daniel Estulin and Jim Tucker, who have built up a credible reputation for accurately forecasting future events based on leaks from Bilderberg conferences, that the elite wanted to consolidate by bringing down the standard of living in the US and Europe, fearing that the middle class is out of control and has been granted too much credit which must be offset by a phase of consolidation.
We now see figures like Alan Greenspan re-iterating the exact same mantra, that there has been too much "irrational exuberance".
Greenspan is now being lauded for doing the job of publicly destroying confidence in the dollar, publicly trying to destroy confidence in the banks, and publicly trying to destroy the economy, enabling a consolidation during a recession as set out exactly in globalist blueprints.
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500 billion globally has been pumped in not to save the markets, but to ensure a slow, gradual, non-panic inducing decline.
It is disgusting to see the very people, the elite central bankers that the founding fathers of the U.S. fought against, the very veracious criminals that took over the economy and bankrupted the country, present themselves as salvation.
It was the banks that issued the credit, the banks that overprinted the money and the banks that sent credit cards to 17 year old high school graduates. When the elite start positioning themselves, blaming the fallout of their own actions on scapegoats and posing as our guardians, alarm bells should be ringing.
Two and a half years ago they tried to pop the real estate bubble, a year and a half ago they tried again, and this year they have succeeded. While allowing credit to continue, the central banks had the larger institutions stop buying paper securities, now that has caused a major restriction in the issuance of credit. They are not the saviors, they are the perpetrators.
The crisis is an engineered one on behalf of a global elite who have long pushed for increased regionalization, a single currency and a market they can monopolize more effectively. |
| Anonymous Coward
User ID: 300275
9/19/2007 11:16 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
U.S. Banks Brace for Storm Surge as Dollar and Credit System Reel
By MIKE WHITNEY
By now, you’ve probably seen the photos of the angry customers queued up outside of Northern Rock Bank waiting to withdraw their money. This is the first big run on a British bank in over a century. It’s lost an eighth of its deposits in three days. The pictures are headline news in the U.K. but have been stuck on the back pages of U.S. newspapers. The reason for this is obvious. The same Force 5 economic-hurricane that just touched ground in Great Britain is headed for America and gaining strength on the way.
On Monday night, desperately trying to stave off a wider panic, the British government issued an emergency pledge to Northern Rock savers that their money was safe. The government is trying to find a buyer for Northern Rock.
This is what a good old fashioned bank run looks like. And, as in 1929, the bank owners and the government are frantically trying to calm down their customers by reassuring them that their money is safe. But human nature being what it is, people are not so easily pacified when they think their savings are at risk. The bottom line is this: The people want their money, not excuses.
But Northern Rock doesn’t have their money and, surprisingly, it is not because the bank was dabbling in risky subprime loans. Rather, NR had unwisely adopted the model of “borrowing short to go long” in financing their mortgages just like many of the major banks in the U.S. In other words, they depended on wholesale financing of their mortgages from eager investors in the market, instead of the traditional method of maintaining sufficient capital to back up the loans on their books.
It seemed like a nifty idea at the time and most of the big banks in the US were doing the same thing. It was a great way to avoid bothersome reserve requirements and the loan origination fees were profitable as well. Northern Rock’s business soared. Now they carry a mortgage book totaling $200 billion dollars.
$200 billion! So why can’t they pay out a paltry $4 or $5 billion to their customers without a government bailout?
It’s because they don’t have the reserves and because the bank’s business model is hopelessly flawed and no longer viable. Their assets are illiquid and (presumably) “marked to model”, which means they have no discernible market value. They might as well have been “marked to fantasy”,it amounts to the same thing. Investors don’t want them. So Northern Rock is stuck with a $200 billion albatross that’s dragging them under.
A more powerful tsunami is about to descend on the United States where many of the banks have been engaged in the same practices and are using the same business model as Northern Rock. Investors are no longer buying CDOs, MBSs, or anything else related to real estate. No one wants them, whether they’re subprime or not. That means that US banks will soon undergo the same type of economic gale that is battering the U.K right now. The only difference is that the U.S. economy is already listing from the downturn in housing and an increasingly jittery stock market.
That’s why Treasury Secretary Henry Paulson rushed off to England yesterday to see if he could figure out a way to keep the contagion from spreading. |
| Anonymous Coward
User ID: 300275
9/19/2007 11:21 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Good luck, Hank.
It would interesting to know if Paulson still believes that “This is far and away the strongest global economy I’ve seen in my business lifetime”, or if he has adjusted his thinking as troubles in subprime, commercial paper, private equity, and credit continue to mount?
For weeks we’ve been saying that the banks are in trouble and do not have the reserves to cover their losses. This notion was originally pooh-poohed by nearly everyone. But it’s becoming more and more apparent that it is true. We expect to see many bank failures in the months to come. Prepare yourself. The banking system is mired in fraud and chicanery. Now the schemes and swindles are unwinding and the bodies will soon be floating to the surface.
“Structured finance” is touted as the “new architecture of financial markets”. It is designed to distribute capital more efficiently by allowing other market participants to fill a role which used to be left exclusively to the banks. In practice, however, structured finance is a hoax; and undoubtedly the most expensive hoax of all time. The transformation of liabilities (dodgy mortgage loans) into assets (securities) through the magic of securitization is the biggest boondoggle of all time. It is the moral equivalent of mortgage laundering. The system relies on the variable support of investors to provide the funding for pools of mortgage loans that are chopped-up into tranches and duct-taped together as CDOs (collateralized debt obligations). It’s madness; but no one seemed to realize how crazy it was until Bear Stearns blew up and they couldn’t find bidders for their remaining CDOs. It’s been downhill ever since.
The problems with structured finance are not simply the result of shabby lending and low interest rates. The model itself is defective.
John R. Ing provides a great synopsis of structured finance in his article, “Gold: The Collapse of the Vanities”:
"The origin of the debt crisis lies with the evolution of America's financial markets using financial engineering and leverage to finance the credit expansion…. Financial institutions created a Frankenstein with the change from simply lending money and taking fees to securitizing and selling trillions of loans in every market from Iowa to Germany. Credit risk was replaced by the "slicing and dicing" of risk, enabling the banks to act as principals, spreading that risk among various financial institutions….. Securitization allowed a vast array of long term liabilities once parked away with collateral to be resold along side more traditional forms of short term assets. Wall Street created an illusion that risk was somehow disseminated among the masses. Private equity too used piles of this debt to launch ever bigger buyouts. And, awash in liquidity and very sophisticated algorithms, investment bankers found willing hedge funds around the world seeking higher yielding assets. Risk was piled upon risk. We believe that the subprime crisis is not a one off event but the beginning of a significant sea change in the modern-day financial markets.”
The investment sharks who conjured up “structured finance” knew exactly what they were doing. They were in bed with the ratings agencies----off-loading trillions of dollars of garbage-bonds to pension funds, hedge funds, insurance companies and foreign financial giants. It’s a swindle of epic proportions and it never would have taken place in a sufficiently regulated market.
When crowds of angry people are huddled outside the banks to get their money, the system is in real peril. Credibility must be restored quickly. This is no time for Bush’s “free market” nostrums or Paulson’s soothing bromides (he thinks the problem is “contained”) or Bernanke’s feeble rate cuts. This requires real leadership.
The first thing to do is take charge, alert the public to what is going on and get Congress to work on substantive changes to the system. Concrete steps must be taken to build public confidence in the markets. And there must be a presidential announcement that all bank deposits will be fully covered by government insurance. |
| Anonymous Coward
User ID: 300275
9/19/2007 11:23 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The lights should be blinking red at all the related government agencies including the Fed, the SEC, and the Treasury Dept. They need to get ahead of the curve and stop thinking they can minimize a potential catastrophe with their usual public relations mumbo jumbo.
Last week, an article appeared in the Wall Street Journal, “Banks Flock to Discount Window”. (9-14-07) The article chronicled the sudden up-tick in borrowing by the struggling banks via the Fed’s emergency bailout program, the “Discount Window”:
“Discount borrowing under the Fed’s primary credit program for banks surged to more than $7.1 billion outstanding as of Wednesday, up from $1 billion a week before.”
Again we see the same pattern developing; the banks borrowing money from the Fed because they cannot meet their minimum reserve requirements.
WSJ: “The Fed in its weekly release said average daily borrowing through Wednesday rose to $2.93 billion.”
$3 billion.
Traditionally, the “Discount Window” has only been used by banks in distress, but the Fed is trying to convince people that it’s really not a sign of distress at all. It’s “a sign of strength”. Baloney. Banks don’t borrow $3 billio unless they need it. They don’t have the reserves. Period.
The real condition of the banks will be revealed sometime in the next few weeks when they report earnings and account for their massive losses in “down-graded” CDOs and MBSs.
Market analyst Jon Markman offered these words of advice to the financial giants
"Before they (the financial industry) take down the entire market this fall by shocking Wall Street with unexpected losses, I suggest that they brush aside their attorneys and media handlers and come clean. They need to tell the world about the reality of their home lending and loan securitization teams' failures of the past four years -- and the truth about the toxic paper that they've flushed into the world economic system, or stuffed into Enron-like off-balance sheet entities -- before the markets make them walk the plank.”….” Since government regulators and Congress have flinched from their responsibility to administer "tough love" with rules forcing financial institutions to detail the creation, securitization and disposition of every ill-conceived subprime loan, off-balance sheet "structured investment vehicle," secretive money-market "conduit" and commercial-paper-financing vehicle, the market will do it with a vengeance."
Good advice. We’ll have to wait and see if anyone is listening. The investment banks may be waiting until Tuesday hoping that Fed-chief Ken Bernanke announces a cut to the Fed’s fund rate that could send the stock market roaring back into positive territory.
But interest rate cuts do not address the underlying problems of insolvency among homeowners, mortgage lenders, hedge funds and (potentially) banks. As market-analyst John R. Ing said, “A cut in rates will not solve the problem. This crisis was caused by excess liquidity and a deterioration of credit standards….A cut in the Fed Fund rate is simply heroin for credit junkies.”
The cuts merely add more cheap credit to a market that that is already over-inflated from the ocean of liquidity produced by former-Fed chief Alan Greenspan. The housing bubble and the credit bubble are largely the result of Greenspan’s misguided monetary policies. (For which he now blames Bush!) The Fed’s job is to ensure price stability and the smooth operation of the markets, not to reflate equity bubbles and reward over-exposed market participants. |
| Anonymous Coward
User ID: 300275
9/19/2007 11:27 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
It’s better to let cash-strapped borrowers default than slash interest rates and trigger a global run on the dollar. Financial analyst Richard Bove says that lower interest rates will do nothing to bring money back into the markets. Instead, lower interest rates will send the dollar into a tailspin and wreak havoc on the job market.
“There is no liquidity problem, but a serious crisis of confidence," Bove said:
"In a financial system where there is ample liquidity and a desire for higher rates to compensate for risk, the solution is not to create more liquidity and lower the rates that are available to compensate for risk. ... (The Fed) cannot reduce fear by stimulating inflation…
"It is illogical to assume that holders of cash will have a strong desire to lend money at low rates in a currency that is declining in value when they can take these same funds and lend them at high rates in a currency that is gaining in value. By lowering interest rates the Federal Reserve will not stimulate economic growth or create jobs. It will crash the currency, stimulate inflation, and weaken the economy and the job markets".
Bove is right. The people and businesses that cannot repay their debts should be allowed to fail. Further weakening the dollar only adds to our collective risk by feeding inflation and increasing the likelihood of capital flight from American markets. If that happens; we’re toast.
Consider this: In 2000, when Bush took office, gold was $273 per ounce, oil was $22 per barrel and the euro was worth $.87 per dollar. Currently, gold is over $700 per ounce, oil is over $80 per barrel, and the euro is nearly $1.40 per dollar. If Bernanke cuts rates, we’re likely to see oil at $125 per barrel by next spring.
Inflation is soaring. The government statistics are thoroughly bogus. Gold, oil and the euro don’t lie. According to economist Martin Feldstein, “The falling dollar and rising food prices caused market-based consumer prices to rise by 4.6 per cent in the most recent quarter.” (WSJ)
That’s 18.4 per cent a year, and yet Bernanke is still considering cutting interest rates and further fueling inflation.
What about the American worker whose wages have stagnated for the last six years? Inflation is the same as a pay-cut for him. And how about the pensioner on a fixed income? Same thing. Inflation is just a hidden tax progressively eroding his standard of living. .
Bernanke’s rate cut may be boon to the “cheap credit” addicts on Wall Street, but it’s the death-knell for the average worker who is already struggling just to make ends meet.
No bailouts. No rate cuts. Let the banks and hedge funds sink or swim like everyone else. The message to Bernanke is simple: “It’s time to take away the punch bowl”.
The inflation in the stock market is just as evident as it is in the price of gold, oil or real estate. Economist and author Henry Liu demonstrates this in his article “Liquidity Boom and the Looming Crisis”:
"The conventional value paradigm is unable to explain why the market capitalization of all US stocks grew from $5.3 trillion at the end of 1994 to $17.7 trillion at the end of 1999 to $35 trillion at the end of 2006, generating a geometric increase in price earnings ratios and the like. Liquidity analysis provides a ready answer".(Asia Times)
Market capitalization zoomed from $5.3 trillion to $35 trillion in 12 years? Why?Was it due to growth in market-share, business expansion or productivity?
No. It was because there were more dollars chasing the same number of securities; hence, inflation.
If that is the case, then we can expect the stock market to fall sharply before it reaches a sustainable level. As Liu says, “It is not possible to preserve the abnormal market prices of assets driven up by a liquidity boom if normal liquidity is to be restored.” Eventually, stock prices will return to a normal range. |
| Anonymous Coward
User ID: 300275
9/19/2007 11:28 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Bernanke should not even be contemplating a rate cut. The market needs more discipline not less. And workers need a stable dollar. Besides, another rate cut would further jeopardize the greenback’s increasingly shaky position as the world’s “reserve currency”. That could destabilize the global economy by rapidly unwinding the U.S. massive current account deficit.
The International Herald Tribune summed up the dollar’s problems in a recent article, "Dollar's Retreat Raises Fear of Collapse."
"Finance ministers and central bankers have long fretted that at some point, the rest of the world would lose its willingness to finance the United States' proclivity to consume far more than it produces - and that a potentially disastrous free-fall in the dollar's value would result.
"The latest turmoil in mortgage markets has, in a single stroke, shaken faith in the resilience of American finance to a greater degree than even the bursting of the technology bubble in 2000 or the terror attacks of Sept. 11, 2001, analysts said. It has also raised prospect of a recession in the wider economy.
"This is all pointing to a greatly increased risk of a fast unwinding of the U.S. current account deficit and a serious decline of the dollar".
Other experts and currency traders have expressed similar sentiments. The dollar is at historic lows in relation to the basket of currencies against which it is weighted. Bernanke can’t take a chance that his effort to rescue the markets will cause a sudden sell-off of the dollar.
The Fed chief’s hands are tied. Bernanke simply doesn’t have the tools to fix the problems before him. Insolvency cannot be fixed with liquidity injections nor can the deeply-rooted “systemic” problems in “structured finance” be corrected by slashing interest rates. These require fiscal solutions, congressional involvement, and fundamental economic policy changes.
Rate cuts won’t help to rekindle the spending spree in the housing market either. That charade is over. The banks have already tightened lending standards and inventory is larger than anytime since they began keeping records. The slowdown in housing is irreversible as is the steady decline in real estate prices. Trillions in market capitalization will be wiped out. Home equity is already shrinking as is consumer spending connected to home-equity withdrawals.
The bubble has popped regardless of what Bernanke does. The same is true in the clogged Commercial Paper market where hundreds of billions of dollars in short-term debt is due to expire in the next few weeks. The banks and corporate borrowers are expected to struggle to refinance their debts but, of course, much of the debt will not roll over. There will be substantial losses and, very likely, more defaults.
Bernanke can either be a statesman---and tell the country the truth about our dysfunctional financial system which is breaking down from years of corruption, deregulation and manipulation---or he can take the cowards-route and buy some time by flooding the system with liquidity, stimulating more destructive consumerism, and condemning the nation to an avoidable cycle of double-digit inflation.
We’ll know his decision soon enough.
Mike Whitney lives in Washington state. He can be reached at: fergiewhitney@msn.com |
| .
User ID: 300631
9/20/2007 10:11 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Spain faces frightening parallels to Britain
By Ambrose Evans-Pritchard
Last Updated: 12:51am BST 19/09/2007
Spanish officials have furiously denied reports that the country’s property market is heading for a crash or that a clutch of banks may be in the same boat as Northern Rock.
Miguel Angel Ordoñez, the Bank of Spain’s governor, told the Spanish parliament yesterday that the country’s financial system was “immensely solid” despite the dramatic fall in the share price of mid-sized banks and construction firms geared to the deflating property bubble.
“The current turbulence has highlighted the downside risks to growth but Spanish institutions face this episode from strength. Exposure to [sub-prime debt] is insignificant: the problem is we don’t know where the losses are, or who owns what,” he said. “The biggest favour the banks can do is to come clean on losses.”
The central bank also denied reports that its financial institutions had required “emergency liquidity” along the lines of Northern Rock, but the statement failed to end doubts since Spanish banks have been able to borrow unlimited sums cheaply from the European Central Bank’s window.
David Taguas, the prime minister’s chief economic adviser, said: “To talk about severe adjustments or a meltdown in prices is ridiculous. That sort of crisis is unthinkable. We have…one of the most efficient financial systems in the world. That’s insurance in times of turbulence.”
The reactions follow a scathing report on the Spanish banks by Citigroup that sent tremors through the Madrid bourse. The note downgraded Banco Popular, Banco Sabadell, Banesto and Bankinter, warning the credit crunch had changed the picture for Spanish lenders that rely on the wholesale capital markets. It was exactly this sort of funding that caused Northern Rock’s troubles. The Spanish banks’ shares have fallen almost 40pc since April.
“Spain’s mid-cap banks have some of Europe’s lowest core capital ratios (6.12pc) and the highest loan-to-deposit ratios (182pc). The freeze in credit markets reverses all the prior positives for investing in these cap banks,” said Kato Mukuru, the note’s author.
He added the debt-driven M&A deals that enriched these banks are likely to become rarer in the new climate, while a mismatch of maturities would eat into profit margins. The banks rely on three-month paper to raise funds, but their assets are on a 12-month cycle.
Adding to the woes, the spreads on Spanish AA mortgage bonds have leapt from 21 to 100 basis points over Euribor.
The banks are highly exposed to the Spanish housing market. After rising 270pc since 1995, house prices have begun to fall in parts of northern Spain, slipping 2.1pc in Barcelona and Madrid so far this year. Over 98pc of all mortgages are priced off floating Libor rates, causing mortgage payments to almost double in under two years. Construction has reached 18pc of GDP, more than Germany (15pc) at the height of the reunification boom.
David Owen, an economist at Dresdner Kleinwort, said Spain was in danger of a serious crisis. “House prices may fall, but what is even worse is that the corporate sector’s deficit has grown so large that it needs to find financing equivalent to 10pc of GDP every quarter just to stand still,” he said.
“In an environment of easy credit and low rates, these excesses are not an issue, but it can quickly unravel as the mood changes. The problem is that a country inside EMU can’t get itself out once it reaches tipping point: it can’t cut interest rates or let the currency fall.”
While the extreme levels of household debt in Spain are similar to those in Britain, the abilities of the two countries to act in a crisis are quite different. Spain may face a replay of Britain’s ERM crisis in 1992, but this time without the safety valve of easy exit. |
| .
User ID: 300631
9/20/2007 10:51 AM | | Anonymous Coward
User ID: 300631
9/20/2007 1:17 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
In response to Greenspan and Volker, former Federal Reserve Chairmen, Bernanke, current Chairmen, Paulson, Treasury Secretary, and Darling, Exchequer of the Treasury in England , who, according to Alex Jones, announcing that the economy is going to implode and set up serious inflation and the Dollar is going to be replaced with the Euro. The Dollar is falling and the Euro is rising in the financial market in Europe , a coincidence? Greenspan said that the European Central Bank has become “a serious factor in the global economy”. Image that!
[link to www.stevequayle.com] |
| FHL(C)
User ID: 301140
9/20/2007 11:36 PM | | Anonymous Coward
User ID: 301394
9/21/2007 1:26 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
should they be taken out, that is follow the dots, who benefits from the original setup?
zephyr
User ID: 2993
9/21/2007 1:10 PM
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Bond Exec out of London says exporting slimy subprime mortgage assets to Asia was intentional by the US
Quote
This is an except from a paid subscription that I maintain at www.goldenjackass.com and written by Jim Wiley.
◄ This is chilling! Kyle Bass of Hayman Capital in Texas has provided some clear indictments of Wall Street and their premeditated fraud. Some time a few years ago, he met a structured bond executive at a wedding in Spain. The bond pro (probably from London) described how the subprime mezzanine Collateralized Debt Obligation bonds were packaged at 10x to 20x leverage, only to contain the ‘BBB’ rated tranches of subprime debt. The bond pro explained that the ‘real money’ behind US insurance companies, pension funds, and other institutional money had stopped all purchase of mezzanine tranches of US subprime debt in late 2003. The bond pro actually admitted that they found a way to upgrade the debt securities, package them opaquely (obscurely in darkness), and EXPORT THE NEWLY PACKAGED RISK ASSET TO UNWITTING BUYERS IN ASIA AND CENTRAL EUROPE. The bond pro admitted with a straight face and no conscience that they targeted banks in Asia, the site of large trade surpluses, and other banks in Europe, whose accounts are derived from large petrodollar surpluses. They targeted vast pools of money, with full knowledge of the misrepresentation, operating under the motive to unload substandard bonds wherever they could. Big fees were at stake, so they had to find suckers. By hiding the subprime junk bonds in the mezzanine tranches, whereby the higher quality ‘AAA’ rated bonds are paid out first, the debt ratings agencies permitted the overall CDO to enjoy a triple ‘AAA’ rating undeservedly.
Bass summarizes, calling this the greatest Bait & Switch of all time. “This will go down as one of the biggest financial illusions the world has ever seen. Now that the underlying collateral has begun to be downgraded, it is only a matter of time before the ratings agencies downgrade the actual tranches of these various CDO structures. When they are downgraded, these foreign buyers will most likely have to sell them due to the fact that they are only permitted to own ‘super senior’ risk in the United States. I predict that these tranches of mezzanine CDOs will fetch bid of around 10 cents to the dollar. The ensuing HORROR SHOW will be worth the price of admission and some popcorn… The key reason the subprime problem exists as it does today has to do with the wanton disassociation of risk inherent in the machine that churns out subprime loans. Unlike the Savings & Loan crisis of the 1980s, the mortgage lenders of today are not taking their own balance sheet risk with underwriting loans.” These guys offloaded the risk from fatally flawed mortgages into falsely labeled bonds, were paid fees for volume of sales, and did not care, with no conscience as foreigners were targeted. They found willing buyers who routinely purchased any US$-based bonds rated ‘AAA’ without question. US institutional buyers had halted, so they targeted foreigners with fraud. The Wall Street firms did not want to be stuck with the flawed worthless mortgage bonds. The backlash has yet to be fully measured. My forecast is for a growing global boycott of US$-based bonds, climaxing with USTreasurys. Expect a parade of lawsuits in time. |
| Anonymous Coward
User ID: 302154
9/23/2007 3:59 AM | | Anonymous Coward
User ID: 302154
9/23/2007 4:37 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Ease of forex swaps vanishes in rush for cash
By Joanna Chung in London
Published: September 19 2007 21:52 | Last updated: September 19 2007 21:52
A few months ago, stoking a wider interest in the so-called foreign exchange swaps market was a difficult prospect. The forex swap market – like the money markets – has been taken for granted for many years as a place where many banks and companies carry out standard, daily financial operations.
But now, amid the global credit crisis, the forex swap market has started to grab attention. This month the problems in the interbank lending market have spilled over into this corner of the financial world, impairing the ability of banks and companies to manage currency exposures. |
| Anonymous Coward
User ID: 302154
9/23/2007 4:46 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Banks' dark off-balance-sheet world
Financial institutions have been running virtual savings and loans through special-purpose entities with flexible accounting and little oversight. No wonder they're in trouble now.
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By Bill Fleckenstein
With all of the problems that we have experienced thus far in structured credit, one might think that there would be more people scratching their heads about why there are so many off-balance-sheet entities in the financial community in the first place.
I wish I had a good answer. It's pretty obvious that little attention had been paid to these entities, at least from the perspective of potential problems.
Daylight: Enemy of chicanery
Of course, the fact that conduits, and special-purpose entities generically, reside off balance sheets is a reason why everyone has been caught by surprise. Because if mountains of this paper are away from plain sight, potential problems can't be anticipated, as you can't attempt to understand what you can't see.
For instance, Jim Grant of Grant's Interest Rate Observerreports that in the most recent 200-page annual report to the Securities and Exchange Commission from State Street (STT, news, msgs), only three paragraphs are devoted to the commercial-paper conduit that has caused it so much grief recently.
In any case, with the spotlight now trained on the structured-credit arena, institutional investors have become choosier about what paper they're willing to own, thus creating the illiquid environment that the short-term money-market funds and the banks currently find themselves in.
For the banks, this comes at an inconvenient time because they're trying to figure out how to deal with the $300 billion-plus of leveraged buyouts they've committed to finance. Conduits tend to roll at the same time. And last week was one of those occasions when a considerable amount -- more than $100 billion -- of asset-backed commercial paper needed to be rolled, meaning that the debt required refinancing.
Centauri, dorada, yada yada yada
Meanwhile, though London appears to be the epicenter of conduit angst these days, our homegrown Citigroup (C, news, msgs) appears to have plenty of exposure. That's according to a friend who in an e-mail to me rattled off the following list of its structured investment vehicles, or SIVs: Beta Finance, Centauri, Dorada, Five Finance, Sedna Finance, Vetra Finance and Zela Finance. He was able to obtain a portfolio commentary for Beta Finance, in whose summary I found three interesting items.
First of all, for those folks who can't quite wrap their arms around what an SIV, an SPIV (special-purpose investment vehicle) or a conduit is, those names all stand for pretty much the same thing: special-purpose entities that reside off balance sheets. Think of them as virtual savings and loans that can be quite sizable. There are no real rules that govern what they can buy. And because they're off balance sheets, they operate with little regulation.
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* How analysts missed a meltdown
Citigroup notes that the leverage in this particular vehicle, Beta Finance, is "only 14.24 times." Thus, Citigroup, a leveraged entity, owns a gaggle of leveraged S&Ls. That helps illustrate a point I've made many times: that the well of liquidity that bulls were citing two months ago as a reason to be bullish was just a wall of leverage. (It's worth noting that the net asset value of Beta Finance has declined 19% from its high and that Citigroup's other conduits are apparently down a similar amount.)
What lives beyond the adjectives?
Next, Citigroup says: "We highlight that all U.S. CMBS exposure is supersenior." What I find interesting in that comment: The company has taken pains to note that its CMBS, or commercial mortgage-backed paper, carries the highest rating -- implying that there might be a problem with lesser-rated tranches of commercial mortgaged-backed paper.
That echoes a data point provided by someone wishing to remain anonymous who resides near the top of the lending food chain at one of the world's largest banks. The source indicated to me that commercial mortgage-backed securities will also see problems. Though I did not get the impression from her that the timing was imminent, the weakness in the commercial version of the ABX index indicates that some pain is already being dispensed, even if little ink has been spilled on this subject.
Video on MSN Money
Jim Jubak
Paying more at the bank
The Fed seems determined to ride to the rescue of banks and the stock market. But don't expect to benefit personally from any interest-rate cut, says MSN Money's Jim Jubak. Instead, you can count on higher bank fees.
Singing an ode to opacity
It just boggles the mind how much leverage is employed by financial institutions and how little knowledge the world has of their workings.
As to why these infinitely leveraged black boxes (with extremely flexible accounting and disclosure rules) exist in the first place, I think we know the pat answer: so that financial institutions can employ them and utilize even more leverage than they are legally allowed to.
Which makes one wonder: Since these entities are designed specifically to circumvent the rules, why have they been countenanced by the rule makers? |
| Anonymous Coward
User ID: 302154
9/23/2007 4:49 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The Canadian Press Go to Google News
Paulson tells U.S. Congress current debt ceiling will be hit on Oct. 1
3 days ago
WASHINGTON - U.. Treasury Secretary Henry Paulson told the U.S. Congress on Wednesday the government will hit the current debt ceiling on Oct. 1.
He sought quick action to increase the limit, saying it was essential to protect the "full faith and credit" of the country, especially at a time of financial market turmoil.
The limit is US$8.965 trillion. Unless the U.S. Congress votes to raise it, the country would be unable to borrow more money to keep the government operating and to pay debt obligations coming due.
The United States has never defaulted on a debt payment but the decision on whether to raise the debt ceiling often means a prolonged battle in the U.S. Congress.
Paulson wrote congressional leaders that according to data now available, the Treasury expects to reach the ceiling on Oct. 1 - the first day of the new budget year.
That projection does not take into account moves the government often has to use, such as withdrawing investments from certain trust funds to create room for extra borrowing until the U.S. Congress finally approves a debt increase.
This month, the Senate finance committee approved increasing the limit on the debt to $9.82 trillion. That boost of $850 billion would be the fifth since U.S. President George W. Bush took office in 2001.
The House of Representatives approved an increase in May. The full Senate has not acted yet.
"The full faith and credit of the United States, to which we all remain committed, is a national asset and a cornerstone of the global financial system," Paulson wrote. "In light of current developments in financial markets, which would be exacerbated by uncertainty in the Treasuries market, I urge the Senate to pass the legislation reported by the finance committee to increase the debt limit as soon as possible."
The national debt is the total accumulation of annual budget deficits, which must be financed with borrowed money.
Democrats blame Bush's tax cuts and the war in Iraq for pushing the record debt. Republicans defend the tax cuts and say the deficit is on a downward trajectory in part because of the economic stimulus from the cuts.
Senate Democrats are expected to use the forthcoming debate on raising the limit to highlight the Bush administration's record on deficits.
The U.S. recorded four straight years of surpluses ending in 2001, Bush's first year. After that, deficits returned including a record imbalance in dollar terms of $413 billion set in 2004. The deficit has declined since. The administration sent Congress a budget in February that projects eliminating the deficit by 2012 while at the same time making Bush's first term tax cuts permanent.
Republicans campaigning to succeed Bush in the White House support his drive to make the tax cuts permanent. Democratic candidates have pledged to roll back the tax cuts received by upper-income families while offering tax relief to lower-income people.
Former Federal Reserve chairman Alan Greenspan said in his memoirs published this week that Bush and Republicans had abandoned the party's conservative principles of favouring small government by failing to fight against rising government spending.
Bush said in an interview on Tuesday that he "would respectfully disagree" with Greenspan's comments. He said "cutting taxes made a significant difference" in the country's finances by spurring economic growth in the wake of a recession and the Sept. 11 attacks.
Vice-President Dick Cheney, writing in Wednesday's Wall Street Journal, said Greenspan was "off the mark" by contending Bush had been fiscally irresponsible.
"The economic growth encouraged by the president's tax cuts is now producing sharply increased federal tax receipts," Cheney wrote. |
| Anonymous Coward
User ID: 302154
9/23/2007 4:51 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Bank Of England's Gold
Not Fit For Delivery
From Bill Murphy
LePatron@LeMetropoleCafe.com
9-20-7
Dear Friend of GATA and Gold -
Metal Bulletin's story appended here is strong evidence that Western central banks are having trouble mobilizing enough real gold with which to maintain their gold-price suppression scheme.
The story's reference to GATA's being "believed" to have made a freedom-of-information request in regard to the long-unaudited United States gold reserves is easily clarified: The request is still being devised by GATA's consultant, constitutional scholar and lawyer Edwin Vieira, with the hope of making it un-dodgeable by the Treasury Department. GATA hopes to submit the request in the next month.
Chris Powell , Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Why Bank Of England's Gold Has Lost Its Shine
By Carmelle Lawlor
Metal Bulletin, London
www1.metalbulletin.com
9-19-7
The Bank of England has revealed that it is in talks with the London Bullion Market Association following concerns over the quality of its stocks of gold.
The bank keeps around 300 tonnes of the yellow metal on behalf of the UK Treasury -- before Gordon Brown initiated his controversial sales programme in 1998 the tally was 700 tonnes -- but it has emerged that not all of this remaining metal is fit for delivery.
The bank declined to reveal how much of its stock might be affected but in response to a request filed by Metal Bulletin under the Freedom of Information Act the bank conceded that there could be a problem without disclosing specific details.
"The bank is currently engaged in productive discussions with the LBMA about this matter," Stuart Allen, deputy secretary of the bank, said in the e-mailed response. "Once that uncertainty has been resolved (hopefully in the near future) we should be able to brief you on the outcome."
With gold at 16-month highs above $700 per ounce and concerns that central banks in Europe -- most recently Spain's -- will trim their sales, the Bank of England's admission could spur gold higher at a time of economic uncertainty.
"The implications would be much wider than just the UK," a London precious metals analyst said. "What would be interesting would be the implications it would have for other countries that hold much more."
Under the LMBA's "London good delivery" standards, gold bars that have been held in storage for many years may no longer conform to the standards set by the association.
"There is some uncertainty about the status of LGD standards in respect of certain categories of gold bars that have been held in deep storage for many years," he wrote
"While it is possible that a number of bars held [on behalf of the Treasury] might fall into that category, I am sure that you will appreciate that until discussions with the LBMA about LGD standards have been concluded, it is not possible for us to provide further details," Allen said.
The bank would not say what tonnage falls into this category but did concede it holds gold in a number of different formats.
"I can confirm that gold is mostly held in the form of gold bars, but there are also some ingots and coins held," Allen said.
"None of the gold held by the bank on behalf of the Exchange Equalisation Account [the Treasury's gold] has assay certificates," he said.
Rumours have long circulated the bank's stocks might not be deliverable and hence might be worth less than official estimates.
This could be politically embarrassing for Prime Minister Brown, who already is held in low regard among many in the gold industry.
While chancellor he sold some 400 tonnes of gold at prices less than half today's rate, potentially costing the Treasury hundreds of millions of pounds.
Gold held in bar form contains cracks and fissures, suggesting that it is not pure gold, according to market observers. Some of the gold stored in coin form contains large amounts of base metals and would need to be melted down in order to be deliverable, they told Metal Bulletin.
"I would expect the bars to conform to LBMA standards, but if there are coins, then that is different. The LBMA doesn't deal with coins, and coins do contain a certain amount of base metals," said Societe Generale analyst Stephen Briggs.
When the gold was acquired, current methods of assessing quality did not exist and the gold would have been judged by weight, observers said.
"The gold has been acquired over the decades since around 1840. There weren't the same gold delivery standards in those days as there are today. If it weighed OK, it was accepted," said one analyst.
US gold sources said that they had similar doubts about their country's gold, which they say has not been examined by an external auditor since the 1950s. The Gold Anti-Trust Committee (GATA) is believed to have filed its own freedom-of-information request for more details but has yet to receive a response.
James Turk, a GATA member and founder and director of GoldMoney, a US internet-based gold investment company, expressed no surprise that the Bank of England's gold may be of poor quality.
"The gold shipped from the US in the 1960s and 1970s was coin-melt gold, which is 91 percent pure. (Coins contain base metal to harden the coin to help prevent wear and tear to the gold.) This gold is less than the acceptable standard of the London Bullion Market Association of 99.9 percent pure," Turk said in an e-mailed statement.
Still, analysts argued that though it may seem surprising that the gold does not conform to today's standards, the problem could be easily rectified.
"I would guess that it would be only a small proportion that doesn't conform to LBMA standards, and it would be an issue only if they needed to sell the gold," GFMS analyst Peter Ryan said. "Some of this gold was acquired 30 or 40 years ago and standards do vary, but it is not difficult to fix."
* * *
Join GATA at these conferences:
The Silver Summit
Thursday-Friday, September 20-21, 2007
Coeur d'Alene, Idaho
[link to thesilversummit.com]
New Orleans Investment Conference
Sunday-Thursday, October 21-25, 2007
New Orleans, Louisiana
[link to www.neworleansconference.com] |
| FHL(C)
User ID: 302253
9/23/2007 11:44 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
"The gold has been acquired over the decades since around 1840. There weren't the same gold delivery standards in those days as there are today. If it weighed OK, it was accepted," said one analyst.
US gold sources said that they had similar doubts about their country's gold, which they say has not been examined by an external auditor since the 1950s. The Gold Anti-Trust Committee (GATA) is believed to have filed its own freedom-of-information request for more details but has yet to receive a response.
James Turk, a GATA member and founder and director of GoldMoney, a US internet-based gold investment company, expressed no surprise that the Bank of England's gold may be of poor quality.
"The gold shipped from the US in the 1960s and 1970s was coin-melt gold, which is 91 percent pure."
telling stuff, and i wonder if it may be true that fort Knox is practically empty, as its is New York is supposed to have more gold physically anyway, but most of it belongs to foreign powers, but i wonder how long that will last if the US nationalizes gold like it did in the great depression era.
[link to freewordofgod.yuku.com] |
| FHL(C)
User ID: 305088
9/29/2007 12:28 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
[link to www.321gold.com]
Lone Anomaly to Ignite Gold
Jim Willie CB
Jim Willie CB is the editor of the "Hat Trick Letter"
Sep 27, 2007
Use the above link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.
The face of all the world has changed, since first I heard the footsteps of your official rate cut. Sorry, borrowed a front line from a Robert Browning love poem, who wrote about 'footsteps of your soul' to Elizabeth Barrett. On September 18th, notes were taken on a host of prices immediately before the US Federal Reserve executed its cut of 50 basis points in both the Fed Funds target and the discount rate. The reaction in the entire price structures for the financial markets generally has been profound in only one week. Stocks are up. Foreign currencies are up. Oil and natural gas are flat but now down a little. Gold and silver up, along with their precious metals mining stocks. However, the anomaly sticks out like a sore bruised discolored thumb. The USTreasury Bond yield curve has steepened. The long-term bond yield has risen 10 to15 basis points to the 4.65% vicinity in defiance. The short-term bond yield has fallen about 10 basis points, thus causing the spread to widen by 10 to 25 basis points. This is significant. The 2-10 spread on USTreasury yield spread has risen to more than 60 basis points wide. This is significant. Thank the Lord that the moronic statements coming out of the US Federal Reserve have ceased and desisted on 'inflation expectations' as a key to policy determination. How about avoidance of galloping economic recession, accelerating downslide in housing prices, unabated foreclosures, and the onset of credit derivative blowups??? They must deal with insolvency challenges as much as illiquidity issues. Insolvency is not fixable without huge capitulation, liquidation, and resolutions, complete with plowing under, all of which are steadfastly avoided. A nightmare comes!
FIRST, THE KNEEJERK REACTIONS
The stock market reacted in expected fashion. The Dow Jones Industrial Index and S&P500 stock index each have enjoyed a lift, the DJIA by about 2.5% and the SPX by almost 3.0% in the last week. Of course, the stock indexes are simply discounting a weaker USDollar, hardly worth the hollow hoopla by media wonks. The currency markets reacted in expected fashion. The euro lifted from the mid to upper 138 level above 141 in the last week, a true breakout, and might have stalled here. The Euro Central Bank might soon kick the USFed shins with their next and possibly last rate hike next month, which could trigger another final leg up in the euro. The British pound sterling lifted from 200 flat to above 201, in what might be regarded as a tepid move. England has big problems with early signs of a bank run (see Northern Rock). Nonetheless, England has placed itself in monetary quicksand by essentially guaranteeing bank assets. Memories are spurred of the George Soros successful challenge against the Bank of England, resulting in billion$ in profits. The Japanese yen has done nothing, affixed with an 86 handle. My favorite darling Canadian Dollar leaped from the upper 97 cent range past 100 parity, enough to grab some significant headlines.
The USDollar DX index has remained below the key 79 level for almost a full week. My take is that foreigners continue to sell it, while the US ministries buy it with printing press phony money. The implications to higher systemic USEconomic costs are total and complete. Price inflation is locked into the next chapter. In no example of past history has the USDollar fallen a quantum level without a surge in cost inflation. Some call it price inflation. Not me! When wages do not rise in coordination, then the system does not experience price inflation in a general sense. The US$ decline ushers in higher costs for energy, food, materials, metals, and all imported product prices which comprise 16% of the USEconomy. Rising costs without pricing power (even in wages) results in squeezed profit margins and economic slowdown. The USFed will surely fight it with easy money.
ENERGY PRICES GIVE TWO SIGNALS
The crude oil price turned down at the 82 mark. In my view, a geopolitical message is hidden, murky, but decipherable in a preface. Then two clear signals can be detected. The energy market is digesting the prospects of a wider war with Iran. Three profoundly powerful geopolitical forces might interfere with yet another mindless decision to strain the imperial war machine over-reach. Russia has put its weight behind Iran, as a partner on grand energy projects, military weapon shipments, nuclear technology export, and cooperative efforts to sell oil in non-US$ denomination. China has put its weight behind Iran, as a partner on grand energy projects also. If Iran is attacked by US Military forces, or by allied MidEast forces, or by a group employing fresh paint in false markings, Russia and China might engage in temporary embargo actions against the United States, even actions joined by Venezuela. The third factor at work stands clearly as superior Sunburn missiles pointed at US warships in the Persian Gulf, likely to destroy at least one aircraft carrier. Such a loss would be a huge black eye not desired.
Two clear signals can be identified on the crude oil price front. First, the oil price shot up by 20% in less than two months, a loud gong signal that the USDollar was in danger of an imminent decline. We saw it. Hidden within this signal is the emerging threat of a broader weakening of the PetroDollar defacto standard. Saudi Arabia, Kuwait, and the UAE are each fully engaged in a movement with the Gulf Cooperative Council directed toward abandonment of the US$ peg. The brief pullback in the oil price from 82 to 79 could be only a technical retrenchment before yet higher breakout prices. The energy market without any doubt stands as the most interfered with, the most inefficiently run, and the most easily disrupted in the entire world. Crazy leaders impose their imprints with socialist policy. Brigands raid facilities. Poor investment hampers future supply, when the future appears to have arrived. USDollar supporters use it to finagle vaporous support. The second signal is that a USEconomic recession is gaining credibility, sure to put downward pressure on the oil price. Well, if you rely on accurate statistics, remove silly gimmicks, and dish reality on a cold plate, the recession has been here for some time, with perhaps only one or two quarters out of negative growth since 2001. Deception, distortion, and doctored statistics go hand in hand in reporting economic performance, with fraud and mispricing and false ratings and opaque markets. Since early 2006, the US Gross Domestic Product has fallen steadily. If the true GDP goes to minus 4%, then the official Orwellian nonsensically hedonically elevated GDP will finally register an official recession.
[link to freewordofgod.yuku.com] |
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