| | | 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.
| suzy q
User ID: 335299
12/4/2007 11:14 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
To explain what I mean by the carry trade. This is when rich folks have borrowed a currency with a low interest rate, convert it to other currencies and invest it making higher yields. Then they are easily able to convert it buy the currency again to pay back the loan. The problem is now that too many people took advantage of this seemingly cheap finance scheme and when the crash comes and exchange rate begins to fluctuate rapidly, there will be a rush to the exits. Everyone will be buying that currency to cover their leverage and it will spike. The spike could be significant! Just like with Long Term Capital Management, too many people with one way bets always reverses sharply. |
| Anonymous Coward
User ID: 335443
12/4/2007 11:49 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Injection of reality.
Britain's Market Going Down at Fastest Rate in History
December 3, 2007 (LPAC)--The British pound sterling interbank market has collapsed at the fastest rate in modern history, Daily Telegraph financial editor Ambrose Evans Pritchard wrote today. Things are so bad, that even the Milton Friedmanite monetarists are panicking and desperately demanding rate cuts by the Bank of England. "This is one hell of a shock to the financial system. A market that has taken 30 years to build has completely imploded in a matter of months. Lenders have been squeezed savagely. We've moved into a different era," The Telegraph quoted Friedmanite "economist" Prof. Tim Congdon of the London School of Economics saying. Total sterling assets have dropped by about half of a trillion pounds just from mid-August, from 3.244 trillion pounds to 2.876 trillion, according to data from the Office for National Statistics data. The volume of market loans in the banking system fell from 640 billion pounds in August to 249 billion pounds by end-September, showing that British banks have been hit even harder than U.S. banks, despite claims that the "subprime crisis" is a U.S. problem.
Even U.S. bank Morgan Stanley is warning about the British credit crunch, and advises clients to get away from Britain's debt-laden economy. Morgan Stanley warned that the FTSE -- London's leading stock market index -- could fall by 16% over the next year, and that house prices could go down 10%. The UK budget deficit is now near 3% (one of the worst in the OECD), and household spending is 97% of disposable income - as it was in 1988, before the last housing price wipe out in Britain.
Guardian economics editor Larry Elliott is even more blunt - he wrote today that a house price "free fall" could soon wipe 50,000 pounds - 25% -- from average house "values". Britain "has its own sub-prime time-bomb ticking away.... Things are going to get very nasty indeed."
[link to www.larouchepac.com] |
| Anonymous Coward
User ID: 335443
12/4/2007 11:53 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Good call OP. Going on three years now. Yup, can't be long. Quoting: Anonymous Coward 263324
you must be an example of the me generation who cant think further than your next meal(that means soon to you) in finance, like sunspots, soon can be anywhere from 11 to 24 years or more |
| Anonymous Coward
User ID: 335443
12/4/2007 11:55 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
What has been going on in the US to do this, did Carter and Nixon open the door for this rot?
"Delusions, survival and credit. People want to keep accessing credit when they cannot stretch it financially instead of cutting down spending drastically or do whatever it takes to find an extra job. Talking of jobs, did you know that in 1972, wages reached their peak. Today, real wages are nearly one-fifth lower - inflation adjusted!" |
| Anonymous Coward
User ID: 337603
12/9/2007 8:26 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
outstanding credit market debt jumps 1.2 trillion to 47.86 trillion last quarter
for those of you who think the bubble has burst and the economy is collapsing, wrong, but it's taking more and more debt creation just to keep it floating.. last quarter it took 1.2 trillion of new outstanding debt to keep the system afloat, which breaks the old record of around a trillion by quite a bit...
this is the number to watch.. if it continues to accelerate it means we haven't collapsed yet... only when it stops accelerating and starts to plummet has the shit really hit the fan.. we haven't seen NOTHING yet!!
[link to www.federalreserve.gov]
divide the total number here by the GDP listed here
[link to www.economagic.com]
and you get 342% debt to GDP ratio, a high not seen in human history ever before during times of economic expansion. |
| Anonymous Coward
User ID: 337603
12/9/2007 9:48 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The Shock of a Thousand Trillions
by The Mogambo Guru
"So imagine my horror when I learned that there was no error! We are talking about a quadrillion freaking dollars! Instantly I knew that she was doing that on purpose to give me a heart attack!"
Today we are going to Rgemonitor.com for the Mogambo Laugh O' The Day (MLOTD) concerning gold, in the award subcategory, "A joke that does not make fun of people so damned stupid that they have no clue of what the last 4,000 years of economics and gold says about why they should be buying gold with both hands with every penny at their disposal, and selling the kids into slave labor to get a few extra bucks with which to buy gold, and since they are slaves and thus somebody else's problem now, they won't need their stupid piggy banks, and these parents can help themselves and use whatever money is in them to buy a little more gold. Later, when gold has zoomed up in price and you are finally rich, happy and generous instead of being poor, hateful and stingy, you can buy the kids back! Probably at a discount! And certainly better trained to follow orders and able to work 20 hours a day chained to a sewing machine for weeks at a stretch!"
Anyway, this is not about Fabulous Mogambo Financial Plans (FMFP) that always seem to take a backseat to some stupid "child-labor laws" I never heard of, or how some stupid judge wastes the court's time with some pointless diatribe about how I am the most "despicable father" he has ever seen in his life, but about the MLOTD, which is from a Financial Times quote about how the economy is in such bad shape, and how we have such a disastrous penalty to pay for being so damned stupid as to allow the Congress to allow the Federal Reserve to create so much excess money and credit.
Now, things are so bad that a reader at Felix Salmon's Market Movers blog is moved to darkly say, "Gold is for optimists. I'm diversifying into canned goods." Hahaha! Gold is for optimists! Hahaha!
The Times went on, not about this terrific joke, but about economist Nouriel Roubini, of Roubini Global Economics and former director of the Treasury Department's Office of Policy Development and Review, who "has long been positioned firmly on the gloomy side of the outlook scale - but the past week's batch of predictions has been ominous even by his own dark standards. In fact, they're nigh on apocalyptic. Or, in other words, a 'generalized systemic financial meltdown.'"
In his own words, Mr. Roubini said, "Losses due to subprime alone will be as high as $400 to $500 billion and this does not count losses due to near prime, prime mortgages, auto loans, credit cards, commercial real estate, leveraged loans, loans to the corporate system; if add it all up losses could end up - in a US recession - as being as high as $1,000 billion or $1 trillion. The financial bloodbath thus has only started and a hard landing of the economy is clearly ahead of us."
A trillion? It used to be that a trillion was a lot of money, but my eyes opened when I saw the Opednews.com article by Sharon Kayser, titled, "Hey Buddy, Can You Spare $1,000 Trillion?"
Instantly, I knew that someone had erred! A thousand trillions? Hahaha! What a preposterous number!
So I was instantly on the phone to call Ms. Kayser so I could tell her that there has been an error in the title, and then maybe, you know, she could drop a line to my boss and tell her what a nice guy I am and how firing me right before Christmas is so tacky, no matter how well-deserved, or maybe she could get me a job there with her or something.
So imagine my horror when I learned that there was no error! We are talking about a quadrillion freaking dollars! Instantly I knew that she was doing that on purpose to give me a heart attack!
The actual excerpt is that "there is currently at least a $1,000 trillion dollar black hole in the world economy", what with "$600 trillion in world liabilities, plus more than a $400 trillion-derivatives neutron bomb, all of which will go off when the Westerners (from EU and US) will no longer be able to borrow."
So, with trembling hands I feverishly punched the calculator, adding 400 trillion plus 600 trillion, which is 400,000,000,000,000 and 600,000,000,000,000,and then I think, "That's too many zeroes! It won't even fit on my calculator screen, for God's sake!"
So I do it by hand, and it keeps coming out as "1,000,000,000,000,000", and it looks so weird that I knew that had to be wrong. It can't have that many zeroes in it!
So, I go to the dictionary and look up "quadrillion", and it says that it is "a one followed by fifteen zeroes." Except in Britain, where it is 24 zeroes, for some reason.
Anyway, it really IS written out as $1,000,000,000,000,000!
That number must have stunned me into insensibility, as the next thing I knew, it was later in the day, things were coming into focus, people are yelling at me to wake up and get back to work, and asking when I am going to do a little work around here, and how about getting a little work done? Naturally I responded to their inquiries by yelling obscenities and spitting on them, when right in the middle of the discussion about my work habits, here comes Ms. Kayser again, saying, "Talking of jobs, did you know that in 1972, wages reached their peak? Today, real wages are nearly one-fifth lower - inflation adjusted!"
If I wasn't so engrossed in teaching some manners to my fellow office workers, I would have said, "No, but I do know that you can't have economic growth if prices are rising faster than incomes!"
Now that I think about it, this is a perfect segue to a Loud Mogambo Discussion (LMD) of how inflation eats away at the buying power of your income, and how the damnable Federal Reserve and the despicable Alan Greenspan destroyed the dollar and the American economy when he was in control of the Federal Reserve and how this means that anybody who sees Alan Greenspan should be able to slap his nasty little face, and maybe beat him with sticks, and throw rocks and him and his nasty little car and when he has to pay a lot of money to have the dents taken out and repainted, maybe he will think to himself, "Hey! That Mogambo Idiot (TMI) was right! I was a stupid little man who created too much money and credit, and now we are going to be destroyed by inflation in prices! For example, look how much the repair shop wants to fix my stupid car!" Ugh.
Mogambo sez: Another day, another wheeze from the morons who think that they run things, as they frantically drive down the price of gold, silver and oil with their market manipulations, meaning that all you gotta do is walk over and pick up a few bargains every time they do this. Ahh! Life is sweet!
P.S. To get The Daily Reckoning sent directly to your inbox, sign up for our free email newsletter, or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.
Richard Daughty, the angriest guy in economics
The Mogambo Guru
Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it.
The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning and other fine publications. |
| Anonymous Coward
User ID: 337603
12/9/2007 9:49 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The dollar's perfect storm worsens
Europe's inflation is likely to prompt its central bank to raise interest rates -- five days before the Fed is expected to lower them here. That's bad news for the buck.
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By Jim Jubak
On Nov. 13, I wrote that the U.S. dollar was being pummeled by a perfect storm. Just three weeks later, the storm is even stronger. The force of the winds punishing the dollar is building, and there's a real danger that the currency will tumble out of control.
What has changed so much in just three weeks? Inflation in Europe has picked up and is now above the range the European Central Bank has said it will tolerate. There's a good chance the bank will raise short-term interest rates to 4.25% from 4% when it meets Thursday.
With U.S. interest rates on hold or headed lower, the result would be another big boost to the euro, another hit to the dollar, a continued move away from the U.S. dollar by central banks in Asia, Russia and the Middle East, and higher prices for gold and, more importantly, oil.
That's a lot of fallout from just one quarter-point increase, but the global economy and financial markets are so precariously balanced that any increase in wind velocity can cause massive damage.
So just how good a chance is the "good chance" that the European Central Bank will raise interest rates Thursday?
Here's the situation the bank faces. You be the judge.
Inflation on the uptick
Inflation jumped to 3.3% in Germany, the European Union's biggest economy, in October. That has led economists to raise their estimates for inflation for the European Union as a whole to 3%. Before the data from Germany, the consensus forecast for EU inflation stood at 2.7%.
Even 2.7% would have been worrisome: It would have been a slight advance from October's 2.6% and left the trend headed uncomfortably higher.
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But 3% would present the bank with a crisis. Unlike the U.S. Federal Reserve, which doesn't publish a specific inflation target, the European Central Bank clearly states what level of inflation it finds acceptable. The bank has pledged to keep inflation "below but close to 2%." A 3% reading on inflation, the highest level in six years, would be way above that target.
Other signals point in same direction
And the 3% inflation figure isn't an isolated number. Other inflation indicators are pointing upward, too. Money-supply growth, which the bank uses to judge the likelihood of future inflation, has been running way above the bank's target of 4.5%. The bank calculates a 4.5% level of growth in the money supply is not inflationary.
But, the money supply grew by 12.3% from October 2006 to October 2007 -- the sharpest growth since July 1979. That was on the heels of an 11.3% year-over-year growth in September.
* Discuss on Jim Jubak's message board: Will Europe kick the dollar while it's down?
The bank may be on the edge of the kind of inflationary spiral it fears. At the same time as German inflation is at a 13-year high, German unemployment has dropped to an almost-15-year low. That gives workers clout to negotiate pay increases above the inflation rate. The chief economist for Germany's DGB trade-union federation, the largest union federation in Germany, told a Berlin newspaper last week that inflation had negated the pay raises it had negotiated this year.
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Cuts in interest rates might head off a recession, but they are a bad idea, MSN Money's Jim Jubak says. Why? Because while cutting rates would bail out the stupid or greedy, it would lay the foundation for the next asset bubble to burst.
The country's 1.3 million-member civil-servants union has announced that it will look for a pay raise of 6% to 7% in 2008. Those are exactly the kind of raises that central bankers fear will set off an unstoppable inflationary trend, in which rising inflation prompts pay raises that in turn drive inflation higher. As if to confirm these fears, Germany's BASF (BFASF, news, msgs), the world's largest chemical maker, has announced it will raise prices by as much as 15%.
Balancing concerns
The European Central Bank has kept interest rates at 4% since June after raising rates nine times since December 2005. The bank has justified holding rates steady by pointing to fears that growth in the European economy might be slowing. But the bank may not be able to keep interest rates on hold much longer.
Why only "may not" instead of "certainly won't"? Because, like the U.S. Federal Reserve, the European Central Bank is keeping one eye on inflation and the other on the crisis in the debt markets. European financial institutions have suffered huge losses as a result of the meltdown of mortgage-backed debt. Barclays (BCS, news, msgs), for example, wrote down $2.7 billion in mortgage-backed assets Nov. 15. HSBC Holdings (HBC, news, msgs) set aside $3.4 billion in its third quarter to cover losses as a result of defaults on U.S. mortgages.
Continued: Credit crunch looms in Europe
1 | 2 | 3 | next > |
| Anonymous Coward
User ID: 341584
12/17/2007 8:11 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Re: Bush Says US Economy Is Safe and Sound. 17th Dec. 2007 Quote
BECAUSE THEY WERE STUPID TO TAKE VARIABLE LOAN.
IS IT POSSIBLE THEY DID NOT UNDERSTAND WHAT IS
THE DIFFERENCE BETWEEN A FIXED AND VARIABLE RATE?
<<
They were lured in, they are at the bottom of the food chain, not too bright, but the fraudsters that lured them in knew. Also, they couldn't get in with standard loans, and were told their value would go up, etc.
The purpose of the rate freeze is to prevent fraud lawsuits against the banksters, by foreign investors. Think they could find any fraud in the loan packages they bought?
Quoting: alfalfa 272605
Also, don't forget Shrub's "Ownership Society." That was his pitch to the black folks to stay in line, don't complain and I'll give you "a little sumpthin, sumpthin." The banks started loosening the qualifying standards for mortgages and raising the value of homes in the urban core right after he introduced his "Ownership Society."
I put two and two together right away. When my sister-in-law, who is a mortgage specialist, told me about a potential client of hers with a 720 credit score that wanted to refinance but couldn't because of a stiff prepayment penalty, my first question to her was "Is she black?" And, low and behold, she was!! There is no way someone with a 720 credit score should get a mortgage with a prepayment penalty. I know white people with much lower scores who didn't get one. and don't try to tell me she was stupid to take that loan. She was flat out lied to by another mortgage banker.
These bastards created this scenario to make the common people think that the economy was rosy during Bush's administration to cover up all of the crap they were pushing through. And now, at the end of it, they are picking up all their marbles and taking them home! It was always a trap!!! It wasn't just a few bad apples ruining everything for the rest of us-- it was planned and executed by BushCo and his global banking buddies.
The good news is that most Americans did not fall for this trap. We are the ones that are now going to pick up all of our marbles and keep them out of the hands of the bankers, oilmen, energy brokers and politicians! Don't buy ANY Christmas presents. Do some baking. Invite your neighbors over for a drink. Anything but buy, buy, buy! |
| Anonymous Coward
User ID: 344762
12/24/2007 11:28 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The World's Largest Banks Are Now Trapped
by Gary North
by Gary North
DIGG THIS
The subprime mortgage crisis constitutes the worst banking error in my lifetime. Nothing else comes close.
It has visibly begun to unravel. The European Central Bank on Tuesday, December 18, opened a line of credit of $500 billion to commercial banks.
The Federal Reserve System under Greenspan was the prime instigator. It forced down short-term interest rates by supplying the overnight bank-to-bank loan market with sufficient liquidity to drop the rate to 1%. This encouraged banks to make loans at low rates.
These loans were short-term loans. The borrowers then went out and bought long-term assets: bonds and mortgages. This is known as the carry trade. The pioneering central bank in the carry trade was the Bank of Japan. It lowered short-term rates from about 7% in 1990 to just above zero in 1999, where it stayed until mid-2006. But the yen is not the world's reserve currency. The U.S. dollar is.
Through a complex combination of government-licensed monopoly (Federal Reserve System), implied government safety nets for mortgage investors (Fannie Mae and Freddy Mac), creative finance (asset-backed securities), and credit-rating services that were either stunningly naïve or compensated in ways not beneficial to objective analysis, brokers marketed a series of high-commission, fast-sale investment packages that sold like hotcakes until August, 2007. Then, without warning, they stopped selling.
These packages had sold all over the world. European banks got in on the action, marketing these investment packages to their clients.
Americans have seen all this before: the savings and loan crisis of the 1980's. The S&L's were borrowed short (depositors) and lent long (home buyers). Then the rules changed. The government in 1980 abolished Regulation Q, which had limited the rate of interest that banks and S&L's could pay to depositors. A rate war began.
The government had little choice. Money market funds, which had been invented around 1975, were not under the banking system. They were not bound by Regulation Q. They were paying high rates on short-term money. Depositors were pulling funds out of banks and buying money-market funds. The banks were hemorrhaging.
As soon as the banks could compete with money market funds, the S&L's were doomed. Their money was tied up for 30 years. Depositors (legally, owners) were cashing in. It was It's a Wonderful Life without the honeymoon money.
Then Congress stepped in with its own honeymoon money: about half a trillion dollars, if you count interest on the national debt.
That was the test of the mortgage carry trade. The system failed. We are now in the midst of another similar test. It is much larger. It is worldwide. It is affecting capital markets that were once far-removed from mortgages.
MAKING HAY WHILE THE SUN SHINED
You have heard of NINJA loans: no income, no job or assets. These were loans made by local mortgage brokers to first-time home buyers. Poor people were offered loans at rates far lower than conventional loans. The brokers told the prospective debtors that they could re-finance later to get long-term loans. This was not put in writing, and so it cannot be proven. But everyone in the industry knew it was being done. Therein lies the trap for America's largest banks. "Everyone knew."
If lawyers can persuade juries that everyone knew, America's largest banks are on the hook for more money in reparations than they have as capital. Why? Fraud. They sold investors, including European banks, investments known to be fraudulent.
Here it is, folks: what we have dreamed about. The money-grubbing lawyers are about to wipe out the money-grubbing bankers. There is only one hitch: the world's economy could crash. Darn!
In the December 9 issue of the San Francisco Chronicle ran a great headline:
MORTGAGE MELTDOWN
It had even better subheads:
Interest rate 'freeze' – the real story is fraud
Bankers pay lip service to families while scurrying to avert suits, prison
The author, Sean Olender, is a lawyer. He explained what he thinks the Secretary of the Treasury Henry Paulson and the banks are really up to. It's not about helping poor homeowners. (You probably suspected this.)
The present bailout proposal was not the first one. He describes earlier ones.
First the Treasury Department urged the creation of a new fund that would buy risky mortgage bonds as a tactic to hide what those bonds were really worth. (Not much.) Then the idea was to use Fannie Mae and Freddie Mac to buy the risky loans, even if it was clear that U.S. taxpayers would eventually be stuck with the bill. But that plan went south after Fannie suffered a new accounting scandal, and Freddie's existing loan losses shot up more than expected.
The first was the old standby: a government-funded bailout. This was the now-familiar S&L solution. It did not pass muster. It may a year from now. The second was a bailout by two of the perps. But their capital is tied up in mortgages. The flow of investors' new funds is faltering. These two agencies need honeymoon money. They are in no position to provide it.
Now, just unveiled Thursday, comes the "freeze," the brainchild of Treasury Secretary Henry Paulson. It sounds good: For five years, mortgage lenders will freeze interest rates on a limited number of "teaser" subprime loans. Other homeowners facing foreclosure will be offered assistance from the Federal Housing Administration.
Mr. Olender is not persuaded by the sincerity of the offer. He perceives this as a judicial move, not an economic move. He sees it as the government's attempt to place a legal moat around the banks' castles.
The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value – right now almost 10 times their market worth.
Not being a lawyer, I am willing to ascribe economic motives as well. If whole neighborhoods face eviction, they are likely to decline very rapidly into residences of illegal drug salesmen and crackheads. These houses are not in upscale parts of town. Once in decline, borderline neighborhoods are almost impossible to restore. The value of the lenders' capital is at risk. Keeping homeowners in their homes does make economic sense. The flow of mortgage payments remains. The houses are maintained. But I digress.
The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.
And, to be sure, fraud is everywhere. It's in the loan application documents, and it's in the appraisals. There are e-mails and memos floating around showing that many people in banks, investment banks and appraisal companies – all the way up to senior management – knew about it.
That is the supposed key to the prosecution: "Everyone knew." If everyone knew, then defrauded investors have a legal case. Anyway, they would have a case if they were not trying to collect from the real masters of America, the multinational banks.
There are lots of people who would like to muzzle subpoena-happy New York Attorney General Andrew Cuomo to buy time and make this all go away. Cuomo is just inches from getting what he needs to start putting a lot of people in prison. I bet some people are trying right now to make him an offer "he can't refuse."
Here we have an attorney general who understands how his immediate predecessor became the Governor of New York: handing out lots of subpoenas to big business CEO's. Cuomo has a severe case of subpoena envy.
Mr. Olender then gets to the heart of the matter: the bottom line. What is the bottom line? The bottom line.
The catastrophic consequences of bond investors forcing originators to buy back loans at face value are beyond the current media discussion. The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail, resulting in massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC.
I see what he is getting at. There appears to have been fraud at every level. But this, it seems to my judicially untrained eye, is the very loophole the banks need. If everyone knew, as seems likely, and nobody blew the whistle, which is clear in retrospect, then these practices were common. If they were common, then they were not criminal. The government knew, and the government did nothing. Ditto for the Federal Reserve, the Comptroller of the Currency, and every other regulatory agency – Federal, state, and local.
When a criminal conspiracy acts in a criminal fashion, it can be prosecuted. But when a criminal conspiracy has been licensed by the government, and has de facto run the government of every major nation for a century, it will be difficult to get a conviction. None dare call it criminal.
Mr. Olender is correct in his observation regarding the magnitude of this economic liability.
The problem isn't just subprime loans. It is the entire mortgage market. As home prices fall, defaults will rise sharply – period. And so will the patience of mortgage bondholders. Different classes of mortgage bonds from various risk pools are owned by different central banks, funds, pensions and investors all over the world. Even your pension or 401(k) might have some of these bonds in it.
This is the domino effect. The subprime mess cannot be contained. It is like an untreated cancer cell. It will spread.
Mr. Olender means well, but he suffers from an affliction that is almost universal where the banking system is involved: terminal naïveté.
Perhaps some U.S. government department can make veiled threats to foreign countries to suggest they will suffer unpleasant consequences if their largest holders (central banks and investment funds) don't go along with the plan, but how could it be possible to strong-arm everyone?
How? The same way the Bank of England and Parliament have been strong-arming the British since 1694. If you were to identify the longest-running, most successful example of political strong-arming in modern history, you could do no better than to study the Bank of England's relationship with Parliament.
This example is today universal. Every nation on earth has a central bank except Andorra and Monaco. Monaco has a casino instead. Andorra has sheep, but at least only the sheep get sheared. It is different for the rest of us.
What would be prudent and logical is for the banks that sold this toxic waste to buy it back and for a lot of people to go to prison. If they knew about the fraud, they should have to buy the bonds back. The time to look into this is before the shredders have worked their magic – not five years from now.
What would be even more prudent and even more logical would be to abolish central banking. But the world is neither prudent nor logical when it comes to fractional reserve banking and the bubbles it creates.
Yet this bubble is like no other in my lifetime. It is tied to housing, and the entire Western world has been affected. The home-owning masses feel rich because their homes have risen in price. Why has this happened? Because buyers of houses just one price range down have sold and want to move up. Houses are rising because suckers at the bottom were lured into preposterous loans. I don't mean the home buyers, who got in with no money down. I mean the suckers who lent them the money.
Here is why the government is getting in. If the government bails out the new homeowners, it baptizes the entire procedure retroactively.
The goal of the freeze may be to delay bond investors from suing by putting off the big foreclosure wave for several years. But it may also be to stop bond investors from suing. If the investors agreed to loan modifications with the "real" wage and asset information from refinancing borrowers, mortgage originators and bundlers would have an excuse once the foreclosure occurred. They could say, "Fraud? What fraud?! You knew the borrower's real income and asset information later when he refinanced!"
This is what the freeze bill is all about. It is going to sail through Congress. The President will sign it. As soon as it's law, the banks are far safer than before. There may be lawsuits, but judges will know where their bread is buttered.
Mr. Olender goes on to name names and identify culprits. Here, I have decided not to follow his lead.
CONCLUSION
The economic losses are gigantic and will grow. The trickle of bad news is going to become a flood over the next year. It will wear down the resistance of perma-bulls, who believe that the Federal Reserve can save the day and save the stock market. All over the world, the repercussions of bad loans, carry-trade leverage, and relatively tight money are going to be felt.
This has been a huge pool of investment errors. This has sucked in the best and the brightest people on earth, those who allocate capital. They trusted Alan Greenspan. They trusted artificially low interest rates. They trusted fiat money. That trust has been betrayed, as always. But this time, it has been betrayed on a scale that puts the world's banking system at risk.
The bailouts have only just begun. |
| Anonymous Coward
User ID: 345161
12/25/2007 1:25 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
LEAP/E2020 Alert: Breaking phase ahead for the global financial system in 2008
- Public announcement GEAB N°20 (December 15, 2007) -
16/12/2007
The rapid aggravation of the global systemic crisis as its phase of impact unfolds [1] has brought our researchers to estimate that the contemporary global financial system will reach a breaking phase in the course of 2008.
Crisis follow-up indicators now show that we should no longer only fear the failure of some large financial institution (and of many small ones) in the US first and the in the rest of the world (cf. GEAB N°19), but that the global financial system itself is structurally hit.
The network of global central banks’ repeated incapacity to control the « credit crunch » when the two historical pillars of the contemporary global financial system (a US economy in recession and a US dollar in decay), reflects the growing surge of centrifugal forces within this very system.
Indeed it is no more a matter of competence or of magnitude of the corrective actions implemented by central bankers. These times are over since summer 2007 and, according to LEAP/E2020, we are now witnessing an increasing divergence in economic interests among the different components of the global financial system.
The expected failure of the Fed’s most recent attempt to coordinate a joint action of the main central banks in order to feed the banks in US dollars [2] , is particularly revealing. This action meant to restore confidence in the financial system by two means:
. reinstating the now moribund inter-banking market, by proving the existence of a « joint force de frappe (strike force) » of global central banks.
. enabling large financial institutions in distress to anonymously restock in US dollars, in exchange of their assets being accepted as discount window collateral (i.e. worth their value some months ago, when they were still worth something) [3] .
Of course the first goal is predominant, as reinstating of interbanking market is the only means to bailout banks in distress in a sustainable manner. However, it is already clear that the target has failed to be reached [4] . The LIBOR (London Interbank Offered Rate), a key indicator of the health of the interbank market, has not moved an inch from its highest levels ever reached [5] . “Psychologically” speaking, the global stocks decline recorded after the action of the central banks was announced, proves this if any message went through, it is that the situation for large US banks is even worse than announced in the past months [6] .
Concentration of US Commercial Bank Derivatives on 09/30/2007 – Source Federal Deposit Insurance Corporation (FDIC) - Comment: 7 banks [7] concentrate 98% of all derivatives, i.e. USD 155,400 billion; while the other 929 banks own 2% only, i.e. USD 2,900 billion.
According to LEAP/E2020 research team, it is already a fact that after it lost control over interest rates (cf. GEAB N°16), the US Federal Reserve has now lost two more of the attributes that characterized the post-1945 global financial system: its credibility as a proactive player capable of influencing heavy market trends [8] , and its capacity to organize and drive global central banks altogether along its own rhythm and goals. In doing so, it has just lost the ability to steer by itself the entire global financial system, an ability it has gained after 1945.
Even though today, financial markets are mostly receptive to the loss of the first attribute [9] , our researchers estimate that it is the loss of the second attribute (and the impact on the system’s leadership) which will result in the global financial system’s break sometime in the course of next year, probably by summer, when the effects of the ongoing US recession will start being fully felt and when Asians and Europeans will decisively be compelled to impose their own priorities to the “Fed-pilot”.
In this 20th issue of the GlobalEurope Anticipation Bulletin (December 2007 issue), our team describes in detail the characteristics of the growing divergences between the four main central banks (US Federal Reserve, European Central Bank, Bank of England, Swiss national Bank).
According to LEAP/E2020, these crucial trends, coming at a time when the entire magnitude of the US recession effects has not yet been reached (in Asia and the US in particular), illustrate the rapid increase of centrifugal forces which, according to our anticipations, will lead the contemporary global financial system to a break point by summer 2008.
This break point will entail numerous disastrous effects for the world’s largest financial institutions, in particular for all those who do not yet fully understand the meaning of ongoing tendencies and therefore who remain largely involved in the US dollar system currently imploding. These institutions will experience, to a much larger degree, what those who failed to anticipate the subprime crisis experienced, now being on the verge of disaster [10] .
Meanwhile, for depositors and investors, this breaking phase will convey risks of considerable loss comparable to the two previous breaking periods (1929 and the years that followed [11] , and 1973 and the end of the 1970s). According to our researchers, the ongoing rupture is even more disastrous than the two previous ones due to a disproportionate importance of the financial sphere in contemporary economy. For that matter, LEAP/E2020 comes back on this aspect and describes possible protections further in this 20th issue of the Global Europe Anticipation Bulletin.
US banks quarterly change in domestic loans (in blue) versus domestic deposits (in red) – Source FDIC - Comment: There is a historical disconnection between loans and deposits since 2006, illustrating the dangerous spiral US banks have entered
By summer 2008, it will be possible to distinguish more clearly the lines along which the global financial system will reorganise once the break point has been reached. According to our team, it is a fact that the Europeans (the Eurozone essentially), together with Japan and China, will have to compose with Russia and oil-exporting countries in order to structure a new system.
The evolution will be painful for the US (and for all related operators) as, inevitably, the new system will no longer be organised along their interest as it was the case in the past sixty years. The next US Administration (that will be in charge from January 2009 onward) will have a task high on their agenda: to handle as well as possible this historic change, conveying new economic and financial constraints, in a context of economic recession. Europeans and Asians too will have to keep in mind this aspect if they want to avoid the break from turning into chaos.
[1] Cf. GEAB N°18 in particular for the sequencing of the impact phase.
[2] In exchange of practically any counterpart and anonymously, the approach suggests a panic and a public bail-out of banks. For more detail, see information available on the US Federal Reserve website.
[3] By this trick, the US Federal reserve is only sparing time; indeed it would require a miracle for these assets to recover the value they had until summer 2007. Indeed, the Fed is only granting loans to those banks which must reimburse them in the course of 2008… or follow the example of Northern Rock in the UK, failing and embezzling dozens of billions of the US tax-payer’s US dollars. It is instructive to read on that matter the table of Discount Collateral Margins accepted by the Fed in the framework of its bailout action, where we can see that the Fed accepts to lend at 70 to 80 cents for the dollar assets worth less than half of that on today’s market (cf. GEAB N°19).
[4] Source: Reuters, 12/14/2007
[5] Source: Bloomberg, 12/13/2007
[6] Besides daily announcements of new provisions against subprime- and other CDO-related losses, the FDIC (Federal Deposit Insurance Corporation, which insures member-banks of their federal insurance system deposits for up to USD 100,000) indicated in its November 28 press-release that the net revenue of US banks fell by USD 28.7 billion in the third quarter of 2007.
[7] See here list of US main commercial banks.
[8] On this matter, it is worth reading this very interesting article by Paul Krugman in the International Herald Tribune, 12/14/2007.
[9] … and to the fact that the anonymity granted to banks coming to the Fed in need of refinancing, prevents from knowing which institutions are on the verge of going bankrupt. The Fed is thus trying to prevent a “Northern Rock effect”.
[10] By the way, LEAP/E2020 wishes to indicate that Lehman Brothers, one of US two largest banks with Goldman Sachs, which avoided the subprime debacle by getting rid of them as early as end of 2006, also happens to be the only large financial institution whom a leader of its London branch directly contacted our team in Spring 2006 asking for more details on the fundamentals of our anticipations of the subprime crisis. Indeed we announced, as early as February 2006, the bursting of the US real estate bubble and described its financial effects (which gained us at the time a sulphurous reputation among traditional financial spheres). It is worth noticing that most of the other large US and EU financial institutions which contacted us after only did it from Spring 2007 onward, i.e. once it was too late to react efficiently. This anecdote provides a good illustration of the use of anticipation in a complex system such as our world’s: enabling oneself to act before a problem occurs because once it has occurred, it is usually too late to solve it. As a matter of fact, it can make the difference between a USD 886 million- worth of net benefit in the fourth quarter announced by Lehman Brothers (Source: CNN/Money), and a USD 49 billion provision against the failure of one’s investment funds announced by Citigroup (Source: CNN/Money).
[11] On that matter, it is worth reading the work document n°197 published by the Bank of International Settlements, entitled « One hundred and thirty years of central bank cooperation: a BIS perspective », written by Claudio Borio and Gianni Toniolo, which provides the historic perspective required to evaluate the turmoil ahead of the global financial system. |
| Anonymous Coward
User ID: 345161
12/25/2007 2:10 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Crisis may make 1929 look a 'walk in the park'
Last Updated: 11:02pm GMT 23/12/2007
Page 1 of 3
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As central banks continue to splash their cash over the system, so far to little effect, Ambrose Evans-Pritchard argues things are rapidly spiralling out of their control
Twenty billion dollars here, $20bn there, and a lush half-trillion from the European Central Bank at give-away rates for Christmas. Buckets of liquidity are being splashed over the North Atlantic banking system, so far with meagre or fleeting effects.
# Read more from Ambrose Evans-Pritchard
# Is the crisis getting worse? Get the latest comment
# The financial outlook in 2008: Experts' predictions
As the credit paralysis stretches through its fifth month, a chorus of economists has begun to warn that the world's central banks are fighting the wrong war, and perhaps risk a policy error of epochal proportions.
The Fed's Ben Bernanke, the BoE's Mervyn King, the ECB's Jean-Claude Trichet
Faces of power: The Fed’s Ben Bernanke, the BoE’s Mervyn King, the ECB’s Jean-Claude Trichet
"Liquidity doesn't do anything in this situation," says Anna Schwartz, the doyenne of US monetarism and life-time student (with Milton Friedman) of the Great Depression.
"It cannot deal with the underlying fear that lots of firms are going bankrupt. The banks and the hedge funds have not fully acknowledged who is in trouble. That is the critical issue," she adds.
Lenders are hoarding the cash, shunning peers as if all were sub-prime lepers. Spreads on three-month Euribor and Libor - the interbank rates used to price contracts and Club Med mortgages - are stuck at 80 basis points even after the latest blitz. The monetary screw has tightened by default.
York professor Peter Spencer, chief economist for the ITEM Club, says the global authorities have just weeks to get this right, or trigger disaster.
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"The central banks are rapidly losing control. By not cutting interest rates nearly far enough or fast enough, they are allowing the money markets to dictate policy. We are long past worrying about moral hazard," he says.
"They still have another couple of months before this starts imploding. Things are very unstable and can move incredibly fast. I don't think the central banks are going to make a major policy error, but if they do, this could make 1929 look like a walk in the park," he adds.
The Bank of England knows the risk. Markets director Paul Tucker says the crisis has moved beyond the collapse of mortgage securities, and is now eating into the bedrock of banking capital. "We must try to avoid the vicious circle in which tighter liquidity conditions, lower asset values, impaired capital resources, reduced credit supply, and slower aggregate demand feed back on each other," he says.
New York's Federal Reserve chief Tim Geithner echoed the words, warning of an "adverse self-reinforcing dynamic", banker-speak for a downward spiral. The Fed has broken decades of practice by inviting all US depositary banks to its lending window, bringing dodgy mortgage securities as collateral.
Quietly, insiders are perusing an obscure paper by Fed staffers David Small and Jim Clouse. It explores what can be done under the Federal Reserve Act when all else fails.
Section 13 (3) allows the Fed to take emergency action when banks become "unwilling or very reluctant to provide credit". A vote by five governors can - in "exigent circumstances" - authorise the bank to lend money to anybody, and take upon itself the credit risk. This clause has not been evoked since the Slump.
Yet still the central banks shrink from seriously grasping the rate-cut nettle. Understandably so. They are caught between the Scylla of the debt crunch and the Charybdis of inflation. It is not yet certain which is the more powerful force.
America's headline CPI screamed to 4.3 per cent in November. This may be a rogue figure, the tail effects of an oil, commodity, and food price spike. If so, the Fed missed its chance months ago to prepare the markets for such a case. It is now stymied.
This has eerie echoes of Japan in late-1990, when inflation rose to 4 per cent on a mini price-surge across Asia. As the Bank of Japan fretted about an inflation scare, the country's financial system tipped into the abyss. |
| Anonymous Coward
User ID: 345161
12/25/2007 2:11 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
In theory, Japan had ample ammo to fight a bust. Interest rates were 6 per cent in February 1990. In reality, the country was engulfed by the tsunami of debt deflation quicker than the bank dared to cut rates. In the end, rates fell to zero. Still it was not enough.
When a credit system implodes, it can feed on itself with lightning speed. Current rates in America (4.25 per cent), Britain (5.5 per cent), and the eurozone (4 per cent) have scope to fall a long way, but this may prove less of a panacea than often assumed. The risk is a Japanese denouement across the Anglo-Saxon world and half Europe.
Bernard Connolly, global strategist at Banque AIG, said the Fed and allies had scripted a Greek tragedy by under-pricing credit long ago and seem paralysed as post-bubble chickens now come home to roost. "The central banks are trying to dissociate financial problems from the real economy. They are pushing the world nearer and nearer to the edge of depression. We hope they will eventually be dragged kicking and screaming to do enough, but time is running out," he said.
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Glance at the more or less healthy stock markets in New York, London, and Frankfurt, and you might never know that this debate is raging. Hopes that Middle Eastern and Asian wealth funds will plug every hole lifts spirits.
Glance at the debt markets and you hear a different tale. Not a single junk bond has been issued in Europe since August. Every attempt failed.
Europe's corporate bond issuance fell 66pc in the third quarter to $396bn (BIS data). Emerging market bonds plummeted 75pc.
"The kind of upheaval observed in the international money markets over the past few months has never been witnessed in history," says Thomas Jordan, a Swiss central bank governor.
"The sub-prime mortgage crisis hit a vital nerve of the international financial system," he says.
The market for asset-backed commercial paper - where Europe's lenders from IKB to the German Doctors and Dentists borrowed through Irish-based "conduits" to play US housing debt - has shrunk for 18 weeks in a row. It has shed $404bn or 36pc. As lenders refuse to roll over credit, banks must take these wrecks back on their books. There lies the rub.
Professor Spencer says capital ratios have fallen far below the 8 per cent minimum under Basel rules. "If they can't raise capital, they will have to shrink balance sheets," he said.
Tim Congdon, a banking historian at the London School of Economics, said the rot had seeped through the foundations of British lending.
Average equity capital has fallen to 3.2 per cent (nearer 2.5 per cent sans "goodwill"), compared with 5 per cent seven years ago. "How on earth did the Financial Services Authority let this happen?" he asks.
Worse, changes pushed through by Gordon Brown in 1998 have caused the de facto cash and liquid assets ratio to collapse from post-war levels above 30 per cent to near zero. "Brown hadn't got a clue what he was doing," he says.
The risk for Britain - as property buckles - is a twin banking and fiscal squeeze. The UK budget deficit is already 3 per cent of GDP at the peak of the economic cycle, shockingly out of line with its peers. America looks frugal by comparison.
Credit paralysis |
| Anonymous Coward
User ID: 345161
12/25/2007 2:13 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
In Europe, the ECB has its own distinct headache. Inflation is 3.1 per cent, the highest since monetary union. This is already enough to set off a political storm in Germany. A Dresdner poll found that 71 per cent of German women want the Deutschmark restored.
With Brünhilde fuming about Brot prices, the ECB has to watch its step. Frankfurt cannot easily cut rates to cushion the blow as housing bubbles pop across southern Europe. It must resort to tricks instead. Hence the half trillion gush last week at rates of 70bp below Euribor, a camouflaged move to help Spain.
The ECB's little secret is that it must never allow a Northern Rock failure in the eurozone because this would expose the reality that there is no EU treasury and no EU lender of last resort behind the system. Would German taxpayers foot the bill for a Spanish bail-out in the way that Kentish men and maids must foot the bill for Newcastle's Rock? Nobody knows. This is where eurozone solidarity stretches to snapping point. It is why the ECB has showered the system with liquidity from day one of this crisis.
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Citigroup, Merrill Lynch, UBS, HSBC and others have stepped forward to reveal their losses. At some point, enough of the dirty linen will be on the line to let markets discern the shape of the debacle. We are not there yet.
Goldman Sachs caused shock last month when it predicted that total crunch losses would reach $500bn, leading to a $2 trillion contraction in lending as bank multiples kick into reverse. This already seems humdrum.
"Our counterparties are telling us that losses may reach $700bn," says Rob McAdie, head of credit at Barclays Capital. Where will it end? The big banks face a further $200bn of defaults in commercial property. On it goes.
The International Monetary Fund still predicts blistering global growth of 5 per cent next year. If so, markets should roar back to life in January, as though the crunch were but a nightmare. There again, the credit soufflé may be hard to raise a second time.
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FEDS working paper by David Small and Jim Clouse
Comments
Got Gold?
The bottom line is that the entire banking system is based on debt. Debt is money, money is debt. If you don't understand that, or you're in denial of that you don't understand monetary policy, macroeconomics or post-Keynesian banking: AND YOU NEED TO. This paper you call money is only valuable if the banks can create more debt. Once a critical mass of debt has been reached only two possible things can happen: A deflationary collapse (you don't ever want to experience that), or runaway inflation created at the central level in an effort to postpone the deflationary collapse. There is ONLY one class that gains value in such an environment: fixed supply commodities. Gold, silver, wheat, oil, etc. (And for those who think consumption goes down in a deflationary environment: LOL. You're cute).
Posted by See the Future on December 23, 2007 6:49 PM
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Not a bad piece, except that the writer ignores the reality of Central Banking.
It was Tim Congdon - referred to in the article - who recently let the cat out of the bag in the FT.
link
The fact is that the longer the Northern Rock fiasco goes on, and the more money is actually minted and lent by the Bank to Northern Rock, then the more money the taxpayer will make.
That is the reality of Central Banking. The money created by the Bank costs nothing, but makes (at current base rate) 5.5% and this "seignorage" is the privilege of those who create money.
It's about time a quality newspaper like the Telegraph actually followed the FT's lead and printed the truth, because that opens up the way to simple but radical solutions which will not cost "tax payers" a penny.
Such as the creation of a "default fund" into which this seignorage may be paid, and from which any losses - after the shareholders have taken the first hit - would come.
Posted by Chris Cook on December 23, 2007 6:46 PM
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Perhaps a useful follow up would be a point by point set of actions that ordinary folk can dollow immediately to better insulate themselves from the meld down scenario the writer outlines.
Posted by John Ish Ishmael on December 23, 2007 6:39 PM
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Kudos for an excellent article Ambrose. The only thing I'd take issue with is the comment that the 4.3% inflation figure may be a "rogue" figure. It's "rogue" alright, but not in the way the Fed and the Bureau of Labor Statistics (BLS) would hope. Both the Fed and the BLS are desperate to obfuscate any price increases behind hedonics (quality adjustments) and computer- modeled substitution and geometric weighing. The BLS & Fed want to ignore the staggering increases in the costs of healthcare, education, housing (until recently!) fuel and food, and instead emphasize the great deals we can get on cheap plastic Chinese lawn furniture and Ipods. They hope the American people, scared stupid by both the Administration & T.V., won't catch on, and that the rest of the World, still in need of the UberConsumer, will ignore & play along to save this gravely wounded economic system.
The problem is that the Internet has provided a forum for a lot of v. smart people (e.g., you, Barry Rithholtz at the Big Picture and many others) to seriously challenge the bought & compromised status quo.
In the end, isn't it all about extending America "Full Faith and Credit"??
Posted by John Badalian on December 23, 2007 6:27 PM
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I believe that this is the most important quote from the article.
___
"Liquidity doesn't do anything in this situation," says Anna Schwartz, the doyenne of US monetarism
and life-time student (with Milton Friedman) of the Great Depression.
"It cannot deal with the underlying fear that lots of firms are going bankrupt. The banks and the
hedge funds have not fully acknowledged who is in trouble. That is the critical issue," she adds.
___
In my view, the fundamental problem is that corporate interests have successfully advocated policies that bankrupt the middle class, such as the H-1B visa program.
Between 1998 and 2000 Microsoft expended tens of millions of dollars to expand the H-1B visa program. As this 2 October 2000 article notes at its start, "As the 106th Congress winds to a conclusion this week, members of the House and Senate are poised to vote on the high-tech industry’s most important lobbying issue of the year, an immigration bill that would expand the number of work visas available for skilled foreign workers.
If approved, it would mark the second time in less than two years that the computer industry has successfully argued for an increase in the six-year visas."
link Daily Telegraph readers should not be surprised to learn that corrupt barrister-lobbyist Jack Abramoff and his team played a central role in this corrupt legislative activity. (The author's investigative article on this topic is in press. It will be published soon in The Social Contract. Copies available on request - see my email address in the author's 2005 article: link
These special visa programs have become "bloated government subsidy programs" with over 25 million visa admissions in just five visa programs between 1975 and 2005 (details on request.) The cumulative economic impact of these destructive programs can no longer be ignored, even if further wealth accumulation by such "robber barons" as Bill Gates, III is imperiled, IMO.
Recall it was Milton Friedman who noted in a July 22, 2002 article that the H-1B visa program is a "government subsidy." link
_____
Here is a Wikipedia article about Anna Schwartz to help you understand her clear understanding of the U.S. economy. (Anna was born in 1915)
link
It is a bit strange that we have to learn this news from a UK paper. I live in San Luis Obispo, California, USA...
Posted by Dr. Gene Nelson on December 23, 2007 6:19 PM
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That is a very scarey piece,but as always with this govenment whatever they do will be too little too late.
Posted by Mr Barnett on December 23, 2007 6:13 PM
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I hope this article is a contrarian indicator. If one truly looks at the likely losses from creditors of all types, it looks like this averages out to about a 10 to 15 percent haircut. Obviously some take a bigger haircut, some take less, but even 500 billion in losses is insignificant compared to global gdp. This is "animal spirits" working in reverse. This is purely a fear response. I sure hope that this article is the peak of the fear
Posted by dude in the usa on December 23, 2007 6:06 PM
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Don't worry. Be happy. And by the way, Brother, can you spare a dime?
Posted by bosco on December 23, 2007 6:04 PM
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You seem to imply that it should be even easier
to borrow money - surely this is the reason for
the mess in the first place?
Moreover, why should those who are financially
prudent get such a poor return on their savings?
Do you want to encourage more savers or more
spenders?
Posted by alex on December 23, 2007 6:01 PM
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MY question, is this a suprise? I was reading and hearing of this situation 3yrs ago. Its like a train wreck, even at 15mile per hour, seeing it coming, there was time to make moves. But is seemed as if the train driver accelerated even in the end. why?
When the axe finally falls, those with cash, will buy up everything for pennys on the dollar. Perhaps I answered my own question...
Posted by dresan on December 23, 2007 5:58 PM
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All of the coverage omits the central point. The securitisation process is so sloppy and the financial system is so corrupt that in about 40% of CMO's the holders of the paper cannot prove that they own the mortgage. Judges in the US are starting to throw out foreclosure suits. The Banksters are in real trouble and lawsuits will follow.
Posted by Bill Jones on December 23, 2007 5:47 PM
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Gordon should be charged with treason for leaving this country's finances, and by extension the economy and all our defences and the police police and again by extension the National Security in a perilously dangerous state.
Posted by Ken Hall on December 23, 2007 5:46 PM
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The solution to this credit crisis is very simple. The credit markets at the moment are like a lake full of radioactive waste, which is why the horses (read banks) are refusing to drink from it even with the additional liquidity being pumped into it. What should be done is a total cleansing of the lake by banks recognising and making provisions for their toxic loans. It is then and only then that the horses will start drinking and investor confidence will be restored.
Posted by anthony on December 23, 2007 5:41 PM
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Ambrose, you are so right. Enjoy this Christams. 2008 could bring a Black Christams - unless you own gold.
Posted by oldasiahand on December 23, 2007 5:38 PM
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Finally someone has realised what will probably happen after western world has borrowed so much over the last decade. the new super powers in 2015 will be Russia, China and the middle east, after they buy up everything on the cheap. big financial upheaval will happen in 2008, I recon John
Posted by JOHNDONNALANE on December 23, 2007 5:36 PM
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Brown will go down in history as the worst chancellor this country has ever had the misfortune of knowing.
It looks like his economic miracle has come to an abrupt end.
Posted by Ad on December 23, 2007 5:32 PM
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Wouldn't it be in the interest of banks for the
interest rates to go sky high, to say 15%? This
would allow them to rake in massive amounts of
interest, like in Volker's 80s, on the back of the
preceding loans splurge.
Isn't this what the interbank rate is telling us -
banks want more interest?
And isn't this just as plausible as a UK housing
crash seemed a year and a half ago?
link.
html
Posted by gordong156 on December 23, 2007 5:17 PM
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Hmmm,
To deliberately crash the world economy.
For a premier developed nation to borrow enormously from a premier developing rival nation, and then default the debt.
The borrower is so large that the default effectively resets the world economy, the lender so dependant on the former to finance its development is totally pole-axed by the default.
It is painful to reset the clock for the developed nation, permanent damage is done to its international authority, but everyone takes the hit, and most importantly the rival developing nation previously set to overtake is now frozen in amber for a couple of generations at least.
Those that have infrastructure will pick up the pieces and move on, those that have chronic pollution, poor infrastructure and demographic time bomb a generation away will be permanently devastated.
It's a crackpot conspiracy theory, probably with no economic merit at all, but it is deliciously dark is it not?
Posted by Matthias Gris on December 23, 2007 4:34 PM
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Hysterical headline,
or oh!
what I will say to grab attention,
let time tell if you are as I feel you will be shown to be, well just hysterical.
Posted by John on December 23, 2007 4:28 PM
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This is really worrying. It makes a mockery of wealth as defined by assets (namely property) and we may see wealth defined by total liquidity and by that I mean gold, not fiat currency.
Inflation is a cheat, looks like we will all lose unless we act now (convert assets to cash and convert cash to gold) UK is becoming a banana republic by the day.
Posted by Carlos Ponzi on December 23, 2007 4:16 PM
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To attempt to pin this problem on the government smacks of opportunism.
It is simply an Economic Cycle that has
ended..big style
Posted by shaun gibbs on December 23, 2007 4:05 PM
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Surprise! The piper is to be paid...since when did global financial markets think it could operate on the 'never never' principle?
Posted by N. Waters on December 23, 2007 4:00 PM
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That is what happen,s when you put all your trust in so called experts and disengage your own thought process
Posted by Michael Elbourne on December 23, 2007 3:49 PM
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If we work hard enough at talking ourselves into a recession, we will succeed.
Posted by Tom K on December 23, 2007 3:02 PM
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editorialstaff net notes: Money sharks continue to bloody the waters, waiting patiently for "big meat". The potential for world calamity means nothing to greed crazed twenty something speculators, calmly waiting to buy assets at 5 to 12 percent of their value. With U.S. equities and banks on sale at "buy one, get one free" terms, the petro dollar Czars of Asia and the Levant are testing the waters, and Free World tolerance for hostile state ownership of serious national brands. Some ninety thousand callow youth, undoubtedly the brightest people in their hedge fund trading rooms, grind on, blithely unaware/unconcerned about the carnage in their wake, lusting for the profits that will flow to the quickest hands,in any global disasters their actions entail. Oddly enough, like the creative destruction done by earthworms keeping the planet alive, and human intestinal bacteria keeping humans alive, if one can get past the nasty processes involved, the end result from this potential gory financial creative destruction may weigh heavily in favor of a world that can survive some foul human traits. One doubts that the perpetrators of this bloody financial storm will learn any lasting lessons about the horrors that sharp lending and investment practices visit upon the least of us. The rest of us must inculcate our own survival lessons, in all our generations. While our major criminal classes, lawyers, bankers, and politicians are absolutely not, like our internal bacteria, and earthworms, necessary to life on Earth, they will greedily consume us, all unawares of our hopes, dreams, and freedoms. To survive, mankind must accept these criminal classes, for what they are proved be. They share the limitless appetites, the moral standards, and the intellectual depth of the the more necessary bacteria and earthworms that make our lives possible and they hunger after big meat. Ware!
Posted by Franklin D. Lomax on December 23, 2007 2:45 PM
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This titanic Financial Whirlpool is barely begun. By the time it ends, it will drain out bonds, stocks, banks, and currencies. Maybe even entire countries.
Posted by Timon of Athens on December 23, 2007 2:44 PM
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You have left out the cynical and often stealth flooding of the labour markets with low skilled mass immigration.
Now the central banks and government seem to think rampant inflation caused through rampant double digit money supply/credit growth based on outright fraud can be ignored just because wages are not rising due to this unlimited mass immigration!!
The trouble with this is that one of the pillars of moneytarism (even Adam Smith) is that wages rising are NOT the cause of inflation - any extra credit and money in the economy not matched by productivity is.
Swapping ever more expensive houses amongst a hugely growing low skilled population which doesn't leave people better off in terms of production per person (gdp per capita), which in the real world means low wages but dropping purchasing power also (inflation).
If the central banks ignore the very real inflation occuring in basic living costs, food prices, energy, utility bills to offset their credit and tax break focused unproductive housing inflation fraud deflating, this general rate cut stimulation will lead to more unproductive demand - the end result will be another credit boom - but not in house price inflation - this time in simply lending out money which is greatly *below the rate of real world inflation* to all sorts of people, growing the money supply very quickly, and this will end in hyperinflation.
As I see it there are 3 main possibliities:
1. Intervention and bail outs. Credit and liquidity with rate cuts is given to the banks to bail them out, ignoring inflation. End result the citizen/taxpayer pays through high prices and inflation or taxation socializing the losses while the profits are carried away by the banks.
2. Non intervention - The banks are left with deflating assets and have to raise capital to shore up thier balance sheets.
If the housing market deflates, and instead of rewards for the sleezy lending excesses these reckless insitutions go under. Credit and GDP will contract, as the unsound debt backing assets collpases. But this will affect the real productive base of the economy through debt deflation and very tight money conditions.
3. Intervention but no producer bailouts - a consumer bailout.
Just as the housing rise was not inflationary (not raising wages while housing got insane and debt got insanely cheap) specific subsidies in the form of government vouchers and tax breaks which give purchasing power over real estate can only be spent on real estate and are deductable from income for real estate for targeteed groups - young buyers and homeowners first home buyers etc.. to help them raise families and produce longer term. This will neutalise some of the worse effects of the boom in assets going to the older generation, and young productive workers will have a chance to start thier own families)
In reality this is much like keysean stimulation of government spending on long term projects - but applied at the consumer not bank producer level to bail out of a slump in demand an debt deflation through domestic production and redistribution.
This will offset debt deflation effects in the general economy and the total ceasing up of credit. They are the same as taxpayer subsidies, but are applied at the consumer level, not at the producer level, and thus will not give the bailout to banks, so they can carry on lending in credit excesses in another bubble, but to consumers and taxpaying citizens.
If prices are going to cost 15% more next year, while you can get credit at 6% in 2007 I see another way the money supply is going to rise.
Posted by Tony on December 23, 2007 2:23 PM
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so whats the answer for the proverbial man in the street. sell your assets and hoard cash or expect inflation and buy property?
Posted by George M Thomson on December 23, 2007 2:03 PM
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Isn't off balance sheet accounting and other dodgy practise simply "criminal deception" in the real world?
And how can central banks fix the present problem? In the BSE crisis the demand for beef collapsed until consumers were confident that meat supplies were not infected. As I recall, flooding the market with cheap beef didn't do the trick.
Or am I missing something here?
Posted by don on December 23, 2007 2:01 PM
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This second Great Depression, as they are calling it, has not happened accidentally. This is a manufactured depression, created by the global elite in order to destroy the middle class.
Posted by John Stang on December 23, 2007 1:45 PM
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Based on Ambrose Evans-Pritchard sanguine comments on “oil, commodity, and food price spike”, I assume he does not drive, buy things or eat. As an economic history lesson, forget Japan, this looks like early 20th century Germany prior to the hyperinflation. Don’t we ever learn?
Posted by Andrew on December 23, 2007 1:25 PM
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The Crash is inevitable, and it's going to be a biggie. The fault, as always, will lie with government driven credit expansion which the market will have to correct with a crash. The blame, as always, will be shifted onto evil capitalism by those who caused it- governments in bed with central banks.
The governments will try to do things to ameleoriate the effects of the crash, and will make it worse by doing so, just as the disastrous policies of the US New Deal turned the crash of 1929 into the Great Depression. The more they interfere, the worse things will be and, speaking just of the UK, we have a government who interfere, interfere and interfere again.
But I repeat myself in saying that the tragedy will be that the blame will be flung in the wrong direction- at free markets and capitalism, rather than the inherently flawed central banking system and belief that governments "run" the economy. They will use the crash to justify greater intervention. The lessons are never learned.
Until we can learn to take government out of the economy; until we can all realise that the basic problem is the central banking system and their addiction to flooding the market with inflationary fiat paper created out of thin air; until we can switch off the printing presses at the mint and return to stable currencies, these problems will occur again and again.
Times is gonna be hard from here on in.
Posted by Ian B on December 23, 2007 1:19 PM |
| Anonymous Coward
User ID: 345161
12/25/2007 2:15 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Why are we wasting billions of our government money bailing out a housing / mortgage market which is about to collapse shortly anyway?
The money is pouring out to line the pockets of the scamsters who caused all this!
Look carefully at what will replace the housing and financial market now the oil has gone and we are left with nothing!
The only UK industry left is Defence and even that is being sold off abroad.
Our supply chain-shipping, ports, has been sold abroad to non-UK interests.
Our manufacturing has gone - our utilities are being used as a prop to foeign interests who -looking further than the end of their noses -are looking at long term steady cashflow.
Its time to have a strategic think over where this country is to be in five, ten years and start ploughing in the cash to where it really matters-after all we are in competition with countries whose interest and markets are certainly hostile to the population of the UK-however, judging by the above the London moneyman are not much better.
Posted by graeme reaper on December 23, 2007 1:01 PM
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Another excellent article. I assumed that we would hit a recession in 2008 and depression in 2010. The pound should hit $1.78 in the near-future when the BoE cuts interest rates and the "carry trade" unwinds. The strength of the pound as kept inflation at bay so a falling pound will led to surging inflation later next year. Will the Boe raise rates and trigger a collapse? The falling pound should give Gordon the Moron some relief when our exports increase due to the falling pound, as per US recently.This is a false dawn due to the underlying weaknesss in the UK economy. Pity the poor Tories will face one hell of a mess when they win the next election.
Posted by ian jackson on December 23, 2007 1:00 PM
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Close the banking szstem down and start again from scratch. If this is not done voluntarily it will have to be done involuntarily when the debt based pyramid scheme collpases.
Money should be issued interest free by independent government agencies who are responsible for controlling the money supply and inflation.
The issuing of bonds and gilts b governments and corporations where thez pay interest to bankers to borrow money that does not even exist should be banned.
Posted by Alan Heaton on December 23, 2007 12:59 PM
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Good - maybe at last house prices will now decrease to a sensible level, which as the single most massive expense in anyone's life the Bank of England has disgustingly failed to address.
Market forces, boys, didn't you learn that at school?
I hope the B of E get bad dreams at night over their failure to raise interest rates quick enough, and substantially enough, despite the fact that over the last 5 years the price of an average house has almost doubled.
This is a heinous thing to happen and we now seem in a situation where because no one is naming and shaming it like they were in previous years, there's a real danger it will get normalised and become an irreversible fact of British living.
Bring on the goddamn *so called* recession, bring it on, and blame it partly on the B of E.
Posted by Joe on December 23, 2007 12:43 PM
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Those that have heeded the warnings and have socked away enough dry goods for a few years are ahead of the game those that still have not caught it is all going down to the bottom will be standing agape with their worthless fiat money.
There is another side of the coin on this issue that is not mentioned and that is that people are coming out of the Eddie Bernays haze and dropping consumerism all together a profound change is taking place it will be a new world by sept 2008.
Hope you all have been wise and paid attention.
Posted by dave on December 23, 2007 12:41 PM
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A sobering read.
Well, it's taken a long time, but Mr Brown's image as "a man of prudence" is finally disappearing, together with the rest of the smoke and mirrors.
I've never understood how anyone could see him as prudent, when it was all so obviously built on mountains of debt.
Unfortunately, we will all now suffer as a consequence.
Hard choices are called for, but no politician (of any clour) will take them - denial & deferal is the name of the game - right up to the bitter end.
Posted by IanT, Berkshire on December 23, 2007 12:38 PM
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No control from central banks then things get out of control.Why did
they let asset bubbles run wild?
Posted by Joe Sixpack on December 23, 2007 12:35 PM
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Worse, changes pushed through by "Gordon Brown in 1998 have caused the de facto cash and liquid assets ratio to collapse from post-war levels above 30 per cent to near zero.
"Brown hadn't got a clue what he was doing," he says."
You must be wrong, Ambrose. "Prudence" never did anything wrong neither did he make a mistake. Ever.
Just ask him and he will tell you confidently, that it is not he but everyone else who is out of step.
Posted by Terry Harris on December 23, 2007 12:18 PM
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Sounds like a pretty damning endictment of one Gordon Brown's management of our economy!
Of course, Nanny State knows it's really all that nasty (insert suitable scapegoat's name here)'s fault, not our Dear Leader's.
Posted by Andy on December 23, 2007 12:16 PM
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These fears are now becoming too mainstream which makes them very unlikely.
Posted by kk on December 23, 2007 12:12 PM
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Gordon Brown should be 'hung drawn and quartered' for the destruction he has done to this country as chancellor just so that he could buy votes to get Labour re-elected.
He and Labour should be held fully accountable for this mess whilst we have to suffer the medicine to correct it.
Tax cannot go up any further so spending must drastically be cut whatever the consequences, but like a gambler I am quite sure he will carry on throwing good money after bad till things collapse.
Posted by George on December 23, 2007 12:06 PM
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It is surely time to ask ourselves if the present financial system can survive.
As far as I am aware, all monetary systems which have not been linked to a physical commodity have eventually failed.
Why should we assume that it will be different this time?
As I understand it (and I would be grateful to be corrected by others who understand this subject better than I do) there is a fundamental difference between 1929 and 2007.
In 1929, despite the depression, the world remained on a gold exchange standard.
That is to say, although individual citizens could not exchange bank notes for gold, central banks could exchange dollars for gold.
When Nixon ended the link between the dollar and gold in the early 1970s, the entire world started using money backed not by an object which had a physical existence, but by debt.
The problem with debt, is that the banks only create the principal, never the interest owed, so that the world always owes the banks more money than actually exists at any one time.
Unless it is possible to generate more debt (money) to cover this shortfall, some market participants are doomed to go bankrupt.
For this reason the money supply must be in a continual state of inflation.
If I understand the theory correctly, an unregulated chain reaction of banruptcies and write offs within a debt currency system could cause the money supply of a debt currency to deflate very quickly to a small fraction of its pre-crisis size.
On the other hand, until this point is reached, there is no limit to how much debt/money can be generated.
This means that Central Banks can accept worthless collateral from financial institutions and replace it by legal tender with real purchsing power without limit.
In this context it is worth recalling that the global sum of interest rate derivatives as calculated by the Bank for International Settlements reached 346 trillion (000 000 000 000)dollars in June 2007.
In an interest rate derivatives crisis this is a lot of money that the banks might have to inject into the banking system in a very short space of time.
(Bear in mind that US 3rd quarter GDP was 13 trillion dollars).
Deflation is not the only danger we are facing, if central banks try to monetize our losses, hyperinflation is also a possibility (hopefully an unlikely one.)
Shouldn't we start asking what we should do if it turns out Central Banks cannot solve our monetary problems?
I should be grateful for comments from those who understand this matter better than I.
Posted by huw on December 23, 2007 11:48 AM
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Your comments, Ambrose, are spot on.
The true magnitude of the debt crisis is still unknown.
What is certain, though, is that the yawning gap between credit and reality will lead to global economic and political disaster unless a solution is found.
My new book, A House of Cards from fantasy finance to global crash, just out link analysis and concrete solutions instead of Cassandra-type gloom.
Posted by Paul on December 23, 2007 11:44 AM
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Thanks for having the clarity and honesty to tell it like it is.
If interest rates are dropped far and fast enough to restore capital flows, what happens next; another leg to the bubble economy followed by a greater misallocation of capital.
Will this not make the eventual correction more painful, and how will society react then?
Posted by Stephen on December 23, 2007 11:42 AM
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There is a significant difference between today and
1929.
In 1929, few consumers were up to their eye
balls in debt. Unless all those who are in the black rush out and 'invest' in the economy - we really are in a pickle. It won't help if credit written shoppers rush out - that will only delay the inevitable!
We are about receive our comeuppance. Fasten the
hatches.
Posted by Wonderkid on December 23, 2007 11:33 AM
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Before the general election in 2005, I was having a conversation with a Labour supporting colleague.
I said to him that I planned on voting Tory but I hoped that Labour would win.
He thought this was illogical even after I had explained to him that in the next four years, before 2009, the country's economy would hit the wall and Gordon Brown would have to carry the can.
This is not due to central bank incompetence.
It is the known result of the economic policies deliberately followed by the international banking cartel.
They wish to precipitate a depression.
This is their age old method for increasing their grip on power.
Everything else is a smokescreen.
They will use this coming worldwide depression to call for centralising monetary control.
Posted by David WA Robertson on December 23, 2007 11:15 AM
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Peter Spencer allegedly wrote in July:
The Item Club is an economic forecasting group which uses Treasury data and economic models in its research.
The MPC needs to rebalance the economy and cool the housing and financial markets, without jeopardizing exports
Peter Spencer
Item chief economist Peter Spencer says: "Everyone is getting worried about monetary growth and interest rates.
"But the economy is not going to take a tumble, particularly with the global picture so firm.
"The Bank has acted forcefully, but it now needs to be careful not to squeeze the UK economy too hard.
"The MPC needs to rebalance the economy and cool the housing and financial markets, without jeopardizing exports."
The club expects interest rates to move up to 6% and then stabilise, which, it says, should be enough to halt the excesses in the housing market.
Seems like he doesn't know what he's saying either.
Posted by Keith Langley on December 23, 2007 11:00 AM
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It is really a terrible picture to see.
Serious it is, but alarming to such an extent?
The credit bubble is deflating fast but rightfully so: the idea that any banker could have a free lunch and every Englishman a villa in Spain is finally proving to be untrue.
The bubble had to burst sooner or later and is is bursting now but apart from some bankers and buy-to-let artists I cannot see many casualties to be made.
Posted by m Van Egdom on December 23, 2007 10:38 AM
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Buy gold now. End.
Posted by Patrick Mockridge on December 23, 2007 10:36 AM
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I fear you are right the additional deflationary effect which is so far really unmentioned is this.
Banks decide how much they can lend and how much activity they can undertake by a uniquely stupid measure called VAR (Value At Risk).
What has happened has made almost all of the assumptions which underlie this measure invalid.
All of the banks are battling with the fact that their risk management systems have turned out to be wrong and to drastically under price risk.
This means sadly that most of the worlds banks are now technically insolvent.
This is going to be very bad and very messy close to a trillion dollars has gone from the world economy and the leverage effect of banks taking diminished risk levels will multiply that many times over.
Posted by Cassandra Point Two on December 23, 2007 10:25 AM
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This obsession with low interest rates = inflation is the biggest psychosis of the 20th century.
Nearly all businesses borrow.
So high interest rates put up their costs, leading to inflation.
What is the biggest item of household expenditure? The mortgage.
High interest rates = higher cost of living to real people in the real world and more profits for banks.
How convenient that mortgage interest is not counted in the RPI.
And mortages themselves are fraud, they should be calculated on the same basis as a bank loan - half the cost to the borrowers. Fraud.
Posted by Bonaparte on December 23, 2007 10:18 AM
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A superb read sir.
I expect sentiment to 'about turn' part way into 2008 as the cracks in the dam worsten,and the real effects of high oil prices filter through.
As stated, Brown has nothing left in reserve-and if only people would realise that at this part of the cycle there should be at least 'something' in the pot.
Brown will be left borrowing on credit cards-to pay off credit cards
A dismal situation almost beyond belief.
Posted by Antony Graham on December 23, 2007 10:15 AM
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Will someone please enlighten ma as to why cuts in the interest rate will help the credit crunch (itself created by having interest rates too low for too long) and increase liquidity in the market..
Posted by cww on December 23, 2007 9:55 AM
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Obviously the Germans would prefer a D-mark but that is a done deal for Europe.
In fact a single currency has numerous advantages beyond interest rate policy.
The British POUND is now exposed (to George Soros and the desperados) because it needs 3% interest rates but STERLING would max-out in the ensuing crossfire.
Inflation may be the least of our problems as the banks wage war on each other with increasing venom.
The rats are in a sinking ship.....some may need to learn quickly how to swim backwards to shore. Standby for life-boat drill....
Posted by richard bond on December 23, 2007 9:46 AM
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The central bankers have only themselves to blame for this very unnecessary credit crisis.
They panicked post 9/11 by lowering interest rates too far and then leaving them there for far too long resulting in a colossal property and consumer boom.
Even within the MPC's remit there was no real need to do so.
Lessons to be learnt? No, they simply failed to learn from history.
Posted by cww on December 23, 2007 9:42 AM
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Yet more evidence that Gordon Brown's 10 years at the Treasury is about to be revealed as a sham built on debt & wasteful public spending.
The satisfaction of his unmasking is offset by the realisation that he is going to bring the country down in the process.
Posted by George S on December 23, 2007 9:38 AM
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How typical that:
A) a relatively simple case of American banks not keeping to their own quality-of-lending rules should spark such a large problem with other banks not keeping to their own safety rules and
B) we get the professional doomsayers telling us thet "disaster" is on the way which sparks off all kinds of inappropriate actions, causing a crisis where none actually existed.
Posted by Robert MIllar on December 23, 2007 9:24 AM
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When the world economy, is run for the benefit, of a few (private) American banks, what does one expect.
The Fed in private hands is the cause of the world's troubles.
Posted by Peter Barnes on December 23, 2007 9:19 AM
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The Central Bank's choices are simple: let the banks fail or let the money fail. A US 1929 style depression or a German 1922 style hyperinflation.
Posted by George Weinbaum on December 23, 2007 9:07 AM
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Yes I would like agree that the financial world is going to witness tough times ahead.
This is not being realised by the most fund managers .
Posted by kishore naik on December 23, 2007 8:47 AM
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'Brown doesn't know what he is doing' - spot on
Telegraph.
Worryingly, Alistair Darling's hapless
handling of Northern Wreck, the sale of our gold
reserves at prices 3 times less than today,
destruction of UK pension funding, changes to
CGT and IHT has turned the pantomine into a
gigantic farce.
The idiots at the heart of New Labour have systematically dismantled a goldilocks economy.
Borrowing at the time of Black Monday was £60bn and guess what? By April 2008 we will be back there again.
They have given away our assets then run up a
monumental level of debt and the financial
system has run out of cash.
What now Brown's fable of 'the end to boom and bust!' My prediction for the New Year - a collapse of the £ to parity with the dollar
Posted by mike donnellan on December 23, 2007 8:24 AM
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What we are witnessing, in its early stages, is the collapse of the fiat currency experiment that started in 1971, when the US under Nixon decoupled the dollar from its gold peg.
Since then we have had raging inflation, market "innovation" that has involved piling paper claim on paper claim in ever more complicated ways, the massive overexpansion of the financial sector, and the creation of an enormous debt bubble which has far outstripped the underlying economic base.
We have become slaves, in the UK, to this monster, with personal and corporate debt at never-seen levels.
The central banks will fight this collapse in every way possible the only way they know - more paper and more debt - but the bubble was so vast that they are almost certain to lose; indeed, intervention will only delay the inevitable, as entities that ought to be put out of business (think Northern Rock) are allowed to carry on on life support, dragging down their healthier competitors.
You correctly point out that the collapse has so far only been felt in the corporate debt market - expect equities, government bonds and property to collapse in 2008.
Gold and silver will be the safe havens.
It is not all bad news - the crisis will be the catalyst for a long-overdue reform of our welfare system, and foreign wars will become unaffordable, forcing us to withdraw from Iraq and Afghanistan.
And bankers, hedge fund managers and estate agents will be forced to seek more productive work!
Posted by Paul Amery on December 23, 2007 7:55 AM
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Dear Ambrose,
How can you sleep at night?
...this, by the way, is not a derogatory comment.
I intend to inquire how anyone, especially with your keen insight, can sleep at night, knowng what's about to hit this planet.
Australia's "past" treasurer, Mr Peter Costllo, had shot a passing comment over the then oppositions bow warning all and sundry of a financial tsunami about to hit.
To which the then, to be diposed, Aus Governement and its press, white washed this statement as ( in my words) the ranting of a desperate man.
As a poitical observer I noted with interest that this was one of the very few comments of Mr Peter Costello's I agreed with.
By the way my original question still stands.
Posted by Mark Thompson on December 23, 2007 6:44 AM
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It is my view that the action of the central banks in throwing bucketloads of money at anyone who wants it, is feeding into future inflation and creating an extremely dangerous situation.
The Commercial Bank's losses are not limited to the amount of debt defaults on subprime mortgages, because the losses include all the SIV's which have only a small subprime component.
Tainted investment vehicles need to be dismantled so that the taint is removed and value is restored to the remaining components. This will limit losses.
Once the losses have been limited as far as is possible, the Banks have to be left to sort out their own problems by whatever means are traditionally available.
At the moment we are heading for a financial apocalypse which can only be avoided by a change in the policy of central banks.
Posted by Nick W on December 23, 2007 6:24 AM
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Got to love that Tim Congdon, he's been banging on about this for years. The Tories should stick him on the MPC when they're in power.
Posted by John Wade on December 23, 2007 6:07 AM
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Hyperinflation is not going to save us from this mess.
"Gearing", the very name suggestive of the moral hazard that promotes outrageous risk as something to be desired, will swamp even the largest government efforts to bail out the troublemakers.
We desperately need some investors and banks to begin the failure process so that transparency returns and we can assess the damage and move forward.
It will be scary and difficult, but it must be done.
Let's legislate that level 2 and level 3 assets be marked correctly, and let the market correct as required.
If that means recession and or worse, then let's get on with it so that we can get it over earlier.
We don't want to worsen the problem with hyperinflation and/or more risk, or lengthen the amount of time necessary to recover.
Let's have some true leadership; not the phony immitation that's parading around our central banks debauching our currencies as if it won't matter.
Wake up everyone, we've got a real, serious problem.
If they say moral hazard isn't the issue anymore, you can bet that moral hazard's fingerprints are at the core of it.
Shame on all involved for this pathetic greedy mess we're in.
Greed has run totally amok. God bless the true victims (if there are any), and Godspeed some punishment to those who knew better but tried to take advantage while the getting was good. Let's get our collective act together early in 2008 before it's even worse later.
Shakespeare had it right.....the bankers need to go.
Posted by DougS on December 23, 2007 5:46 AM
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Wow! Hello Fed. Anybody home?
Posted by Thomas Davis on December 23, 2007 5:44 AM
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With the demographics of the world turning down it will be hard to avoid this crisis.
What is really scary is a book written in 1994 predicted the brown stuff would hit the fan in 2008-2009.
Posted by Joe Banks on December 23, 2007 5:37 AM
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The strange thing about all this is that it is just beginning. Let's name just a few items about to take place:
ARM reset rates will be arriving in force over the the next twelve months.
Forclosure rates will rise for both subprime and prime mortages as a recession hits.
The commercial real estate problems are just getting going.
There is still much toxic ABS/CDO waste prodcts that have high ratings because they are "insured."
Credit insurance kingpins, like MBIA, are going bust and when they do, ABS/CDOs will be down-graded and banks will have to take the toxic sludge onto their books destroying what's left of their captital ratios and then they will have more to hide from their peer banks and intra bank distrust will rise further.
Hedge funds,will be bringing their degraded securities back to their imbilically connected mother banks, capital ratios will....
Corporate junk has yet to take it's turn.
The world of Muni and State fund problems will follow California's lead and start a downward spiral of their own as city/state governments try to raise cash to replace losses.
These are just a few that come to mind. I would hate to see a complete list.
I wonder why no one wants to talk about nationalizing banks.
SPT
Posted by S Tomczak, Ph. D. on December 23, 2007 4:33 AM
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Why are the stockmarkets moving up 1%to2%
one day, down 1% to 2% the next day, up the same amount the next day etc.,etc,- most odd considering the above scenario.
One must conclude this is an organised phenomena that allows shadowy figures to obtain a return of 1% PER DAY average.
Presumably this ritual will continue until the "fixers" have accumulated enough to protect themselves from the coming wreck.
Watch out the rest of us when "enough is enough" time is decided.
Posted by Stephen Vine on December 23, 2007 4:22 AM
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One of the few writers on financial matters who
understands his subject and tells it how it is.
By the end of this, Britain will be an economic shambles presided over by the architect who created it.
Posted by Scott on December 23, 2007 4:14 AM
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Why not change the reserve ratio rules and seize physical assets from insolvent debtors?
The Great Depression was a direct cause of the Second World War.
Another depression could lead to the Third World War - with the possibility of major use of weapons of mass destruction.
We must avoid this possibility at any cost and through any policy.
This is the time for "Roosevelt in Reverse" I think.
Posted by Andre Carrington on December 23, 2007 4:06 AM
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I am always a sucker for informed doomsday writing.
But to say that unless rates are cut to zero immediately, we risk a hyperdepression, makes the Book of Revelation look Pollyannish by comparison.
Bankers should cut the promiscuous fearmongering. Yes Virginia, asset prices do decline.
Yes Virginia, when you are highly leveraged on inflated asset prices, you get screwed.
Capitalism involves risk as well as rewards. Monetizing asset price bubbles is an insanely dangerous and self-interested economic prescription.
Posted by E. Cartman on December 23, 2007 3:32 AM
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The best and brightest, the ones who went to Oxford and Cambridge, to Harvard and Yale, got us into this mess.
My Grandma has more economic sense than these 'financiers' and she's been dead 10 years. What a farce!
Posted by John Hargreaves on December 23, 2007 3:03 AM
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...and the BoE hasn't yet realised that any rate-cut simply feeds the BTL market, which is what has distorted house-prices even more than the housing undersupply of a voraciously immigrant-hungry economy in the cities - and we are now - doh! - an urban society.
Posted by jaytt on December 23, 2007 2:19 AM
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Thank you, Anna Schwartz: the banks know who's in trouble, but they won't say. Great!
This is good news only for non-houseowners, non-investors, non-taxpayers; bad news for the housebuyers/ professionals who want or need to stay in this country.
We've all been warned.
Posted by jaytt on December 23, 2007 2:13 AM
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The dodgy loans must be removed from the banks books.
This can be done by re-enacting the HOME OWNERS LOAN CORP. of 1933.
It purcased over 1 millon loans in 1933/4.It some times reduced the principal of the loan by as much as 50%, and cut all the interest rates to ^6percent.
It used govt bonds to buy the mortgages.
The losses will be horrendous but we would know the truth and the crisis would end.
Posted by benman on December 23, 2007 1:28 AM
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As long as reserve banks are in the hands of vested interests, the public will be the primary victims of this financial debacle.
Western governments must have been aware of the problem long before the crisis surfaced and did nothing about it because our politicians have also become a vested interest group.
Posted by George Brouxhon on December 23, 2007 1:25 AM
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| Anonymous Coward
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12/25/2007 2:18 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Global stock markets are at historic, all-time highs.
Doom/fear mongers wrong again and again. |
| Anonymous Coward
User ID: 345161
12/25/2007 2:19 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
It would appear that China, India, Russia and some other countries will do well out of this, China and India in particular can barter, and then sell the outcomes of their barter, ie stabilizing their internal economic basics and needs whilst getting what they ask for on the open global markets, controlling inflation that way to. Japan, Taiwan South Korea and others can ride this to security by doing the right thing. |
| Anonymous Coward
User ID: 345161
12/25/2007 2:23 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Global stock markets are at historic, all-time highs.
Doom/fear mongers wrong again and again. Quoting: Anonymous Coward 341598
So who do you work for?, obviously not the interest of common citizens. The Global market will change not disappear. Your statements are reminiscent of Ny and US headlines prior to and during the great crash of 1929. |
| Anonymous Coward
User ID: 333944
12/25/2007 2:34 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Global stock markets are at historic, all-time highs.
Doom/fear mongers wrong again and again. Quoting: Anonymous Coward 341598
Exactly what happens just before a major downturn. We better brace for this one though. |
| Anonymous Coward
User ID: 346474
12/28/2007 8:24 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
ASIA HAND
SE Asia offers haven from US turmoil
By Shawn W Crispin
BANGKOK - To decouple or not to decouple, that is the question that will loom over Southeast Asian economies and markets throughout 2008.
Global investors are bracing for the possibility of a US recession next year, an increasingly likely scenario as the staggering scale of the subprime housing loan crisis comes into clearer view. Many now wonder whether Southeast Asia's trade-geared economies, after decoupling to varying degrees from their historical reliance on US-destined exports, now represent a countercyclical shelter against the US's anticipated economic storm.
Asian markets, led by China and India but closely followed by many Southeast Asian economies, have this year provided a high-growth, high-return hedge against the financial doom and gloom
emanating from the US. China's and India's stock markets were up in dollar terms around 175% and 66% year-on-year through the second week of December, while Indonesia, Singapore and Malaysia climbed 50%, 26% and 38%, according to official national statistics.
Markets across the region dipped slightly this week on revived concerns of a US recession, as investors uprooted capital to cover subprime-related losses in America. But while US capital markets are still major factors in determining Southeast Asia's economic performance, past strong correlations between US demand and regional export growth has weakened significantly in recent years. Demand in China, Europe and, to a lesser degree, the Middle East all buoyed regional exports this year, helping to fill the economic gap left by slackening US demand.
The great regional hope going forward is that China, where only around 30% of total gross domestic product (GDP) is derived from exports, will be able to sustain growth in Southeast Asia's more trade-geared economies. There are varying degrees of regional vulnerability to a US recession. Exports destined for the United States in 2006 accounting for nearly 20% of total GDP in Singapore and Malaysia, 13% in Vietnam, 9% in Thailand, 7% in the Philippines and less than 5% in Indonesia.
At the same time, there is growing statistical evidence that the region has in recent years decoupled significantly from the US's demand cycle and that a slowing US economy could accelerate that process. According to investment bank Credit Suisse, the percentage of Asia's exports (excluding China and Japan) to the US fell over the seven-year period spanning 2000-2006, dipping from 21% in 2000 to 15% in 2006. Regional exports to China, on the other hand, in 2006 accounted for 19% of the region's total, up from 13% in 2000.
The research forecasts that a 10% dip in US imports next year would, measuring first-round impacts, shave 0.9 percentage points off GDP growth in Singapore, 0.8 pp in Malaysia and the Philippines, 0.6 pp in Thailand, 0.2 pp in Indonesia, and 0.1 pp in Vietnam. Most importantly, China would see a mere 0.3 pp decline due to sliding US demand for Asian exports, according to Credit Suisse, which goes on to state that "there is no statistically significant relationship between China's growth rates and those of the US".
To be sure, China's growing consumption of Southeast Asian-produced goods is still partially linked to the US - through China's processing and re-exporting the region's intermediate goods to US markets. Yet some regional economists point to growing evidence that China is consuming rather than re-exporting a growing percentage of its Southeast Asian imports, crucially including electronics and raw materials.
Commodity plays
High global commodity prices and seemingly insatiable Chinese demand for raw materials have buoyed several Southeast Asian economies, including Thailand, Malaysia and Indonesia. In particular, natural resource-rich Indonesia has piggybacked on China's economic boom, offsetting the negative economic impacts of a decade-long de-industrialization process through ramping up energy and commodity exports.
Malaysia has profited from spiking global palm oil exports, Thailand from value-added foods, and Vietnam from food commodities. HSBC regional economist Fredric Neumann ventures that even if the US goes into recession, global commodity prices would not collapse due mainly to Chinese demand. "It represents the first time that the commodity price cycle is not directly linked to US demand," Neumann says. "That's where you've really seen a Southeast Asian decoupling [from the US]."
It wasn't that long ago that Southeast Asia was more widely associated with its 1997-98 financial and banking meltdowns, underperforming economies and poor corporate governance records. After 10 years of varying degrees of de-leveraging and corporate restructuring, the region's economies' robust growth rates and strong current account surpluses now seem comparatively sound vis-a-vis the US and its subprime loan problems.
Most governments in the region now have plenty of fiscal room to implement countercyclical spending policies to help cushion the potential blow of a US slowdown on their domestic economies. Credit Suisse notes that domestic demand is already growing strong in China, with overall GDP expanding 11.9% year-on-year in the second quarter of this year, and is now gathering pace in several Southeast Asian economies.
Rising bank loans, growing cement sales and falling interest rates are, counter-cyclical to the US, revving Indonesia's economy, where GDP is on pace to grow 6% this year and next, according to Credit Suisse. Malaysia, meanwhile, is taking aggressive steps to boost domestic demand, including a recent boost to civil servant salaries and a government decision to allow beginning next year the 5 million contributors to the Government Provident Fund to make early withdrawals for home financing purposes.
Singapore, whose percentage of total exports to the US has fallen by half from 20% in the mid-1990s to 10% today, continues to defy economic logic through its extraordinary domestic demand-led growth, including a go-go construction boom which has helped lift GDP growth to around 8% this year. The island state recently flexed its financial muscle when the state-run Government Investment Corporation paid US$10 billion for a 9% stake in subprime loan hit Swiss investment bank UBS, making it the financial institution's largest shareholder.
Even politically troubled, economically laggard, Thailand is showing new signs of consumer and investor confidence, spurred in part by the myriad populist spending pledges all political parties on the hustings have promised to implement if elected at the December 23 polls - though most economic analysts agree that a full economic recovery in Thailand depends on a smooth transition from military to democratic rule.
Some economists argue that for Southeast Asia's decoupling story to hold, Europe must continue to grow strongly and consume a growing share of the region's non-commodity exports. The appreciation of the euro vis-a-vis the dollar (on a trade-weighted basis at its lowest level since the 1960s) and some regional currencies would nominally support that trend. But Europe's banks are also highly exposed to the US's subprime problems, and should broad investor confidence collapse, all emerging markets, including Southeast Asia's, would likely see massive capital outflows.
Other analysts believe that sustained fast growth in China will save the day. HSBC's Neumann points to potential capital upsides for the region, as China is expected to invest as much as $200 billion of its qualified domestic institutional investor (QDII) outward investment program into Southeast Asia and South Korea. The economic forecast may be gloomy in the US, but for global investors looking for a countercyclical safe haven from a US recession, they could do worse than punting on Southeast Asia's slowly but surely decoupling economies.
Shawn W Crispin is Asia Times Online's Southeast Asia Editor. He may be reached at swcrispin@atimes.com |
| Anonymous Coward
User ID: 348735
1/2/2008 11:24 AM | | Anonymous Coward
User ID: 349334
1/3/2008 5:48 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
[link to www.larouchepac.com]
'The Next Domino' in the Crash Is the Biggest: Financial Derivatives
January 2, 2008 (LPAC)--With ripples from the financial crash already hitting the real U.S. economy and companies, it will only take a rise in corporate debt defaults to 5% from the current 1.4%, to blow up a derivatives market far larger than anything that has crashed so far. This is the $45-50 trillion mass of financial derivatives called credit default swaps (CDS), which have ballooned tenfold in three years, and are called "the next domino" in the crash for early 2008 by one New York financial manager, who says it will be "far more severe" than anything that has happened so far in the mortgage meltdown and otherwise.
Again, banks are in the greatest danger of going under in this potential $45-50 trillion blowup; it is banks--not the "monoline" bond insurance companies already reported in big trouble--which have issued 44% of all CDS, and hedge funds another 22%. Fitch Ratings Agency is already projecting a corporate bond and loan default rate of 4-5% in the first half of 2008--particularly by home builders and commercial real estate companies in the United States and Europe--enough to collapse a large chunk of the CDS bubble.
The financial manager compared the CDS bubble to a huge, brand-new insurance industry whose providers reserve nothing for future losses. "Imagine what will happen if $45 trillion ... experiences an actuarial average of 5% losses, and no one [in the banks] has $2.25 trillion sitting around to foot the bill!"
[link to www.larouchepac.com]
Hedge Fund High-flier Says Banks Are Going Down
January 2, 2007 (LPAC)--The big banks will shrink, and the smaller banks just disappear in the coming financial meltdown, French hedge fund big name Arpad Busson told The Times of London in an interview Dec. 31. Busson is known for warning in 1987 that the financial system was on the way to meltdown, in the crisis forecast by Lyndon LaRouche earlier that year.
Busson told The Times three days ago: "This is the first time in my 21 years in the business that I've seen systemic risk. I think we are now one-third of the way through the banking problem.... The big banks can battle against these massive write downs. They can shrink," he said. "What I'm concerned about is the medium-sized and small banks. This is going to create another round of consolidation among banks, which is a pity if you end up with ten banks that control the world."
hiding
[link to www.larouchepac.com]
Chaos Bespeaks Economic Shitman December 31, 2007 (LPAC)-- American statesman Lyndon LaRouche said today that Alan "Bubbles" Greenspan's dire New Year's Eve warning that "something unexpected" will happen soon, which will "knock us all down," provides the true setting for the unleashing of chaos by a faction of the Anglo-Dutch financial oligarchy, which is now occurring around the world. LaRouche pointed to Pakistan, Southwest Asia, Kenya, South Africa, Yemen, and the FARC/Chavez moves in Ibero-American as in-progress chaos operations run by the Anglo-Dutch financier crowd. Greenspan's NPR interview, reported in MoneyNews.com today, quoted him, "What I have to forecast is that something will happen which is unexpected, which will knock us down ...The odds of that happening, I think, are rising, because we are getting in vulnerable areas."
Greenspan added, "What I point out is that we're in a turning phase, and that the extraordinary improvements that have occurred in the world economy in the last 15 years are transitory, and they're about to change ... So, I think this whole process will begin to reverse." Interest rates, Greenspan said "now are set by the supply of investment money worldwide; a force much larger than the concerted efforts of central banks, including the Fed ... We and all other central banks lost control of the forces directing higher prices in homes."
Greenspan admitted his miserable record at forecasting, despite sitting at the helm of the Fed for nearly two decades: "The record of forecasting not only of myself and of companies I have developed, but of the profession as a whole, is not particularly spectacular," Greenspan said. "Ive been forecasting since the early 1950s. I was as bad then as I am now." Apparently, a belated confession of an economic shitman. |
| Anonymous Coward
User ID: 349334
1/3/2008 5:50 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The big banks can battle against these massive write downs. They can shrink," he said. "What I'm concerned about is the medium-sized and small banks. This is going to create another round of consolidation among banks, which is a pity if you end up with ten banks that control the world."
American statesman Lyndon LaRouche said today that
Alan "Bubbles" Greenspan's
dire New Year's Eve warning that "something unexpected" will happen soon, which will "knock us all down," provides the true setting for the unleashing of chaos by a faction of the Anglo-Dutch financial oligarchy, which is now occurring around the world. LaRouche pointed to Pakistan, Southwest Asia, Kenya, South Africa, Yemen, and the FARC/Chavez moves in Ibero-American as in-progress chaos operations run by the Anglo-Dutch financier crowd. Greenspan's NPR interview, reported in MoneyNews.com today, quoted him, "What I have to forecast is that something will happen which is unexpected, which will knock us down ...The odds of that happening, I think, are rising, because we are getting in vulnerable areas."
Greenspan added, "What I point out is that we're in a turning phase, and that the extraordinary improvements that have occurred in the world economy in the last 15 years are transitory, and they're about to change ... So, I think this whole process will begin to reverse." Interest rates, Greenspan said "now are set by the supply of investment money worldwide; a force much larger than the concerted efforts of central banks, including the Fed ... We and all other central banks lost control of the forces directing higher prices in homes."
Greenspan admitted his miserable record at forecasting, despite sitting at the helm of the Fed for nearly two decades: "The record of forecasting not only of myself and of companies I have developed, but of the profession as a whole, is not particularly spectacular," Greenspan said. "Ive been forecasting since the early 1950s. I was as bad then as I am now." Apparently, a belated confession of an economic shitman. Quoting: Anonymous Coward 349334 |
| Anonymous Coward
User ID: 349334
1/3/2008 6:52 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
On every $1 billion that the Federal Reserve receives
in bonds from the government, the Federal Reserve Bank
is legally allowed to create another $15 billion in
new credit to lend to states, municipalities,
businesses, and individuals or to give away overseas,
to charity or the Iraq War. Added to the original $1
billion in bonds issued in debt, the Federal Reserve
Bank has the ability to legally create $16 billion of
created credit for interest-bearing loans. The only
cost to the Federal Reserve Bank is approximately
$1000 spent for printing the $1 billion that was
loaned to the Government.
The Society of Bankers create money out of nothing by
writing numbers in their ledger books, and then giving
loans to the American people with this money. This
allows the people to write checks or take cash
(Federal Reserve Notes) on the numbers written in
their accounts, and then requiring payment with
interest. Money is simply numbers. These numbers are
posted in a ledger book, on checks, or on dollar
bills. Using this process, most banks are legally
allowed to lend out up to 50 times of what they have
on deposit, creating the money out of nothing and then
charging interest on it.
Money is quite inexpensive to make. The institution
that makes the money has a tidy profit!
With the current federal debt, “we the people” could
sign over the whole of the United States to the
Society of Bankers and still owe them three more
United States. The debt of this country continues to
climb at a staggering rate, destined never to be
repaid. The United States and most of the world has
become totally enslaved to the Society of Bankers,
owned lock, stock and barrel by the Vatican and its
interests, a fraternal society of old Roman Empire
control. ~ E. Manning
The time is come, the day draweth near: let not the
buyer rejoice, nor the seller mourn: for wrath is upon
all the multitude thereof.
For the seller shall not return to that which is
sold, although they were yet alive: for the vision is
touching the whole multitude thereof, which shall not
return; neither shall any strengthen himself in the
iniquity of his life. Ezekiel 7:12-13 |
| Anonymous Coward
User ID: 341598
1/3/2008 6:57 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Despite all the copy-N-paste bullshit, the DOW is still over 13,000.
 |
| Anonymous Coward
User ID: 349334
1/4/2008 10:56 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Despite all the copy-N-paste bullshit, the DOW is still over 13,000.
All that shows is how unintelligent you are, as that issue is discussed and exposed on this thread many times, so you are more than likely a shill.
Fed Boosts Size of Next Two Emergency Auctions to $30 Billion
By Daniel Kruger
Jan. 4 (Bloomberg) -- The Federal Reserve said it will increase the size of two scheduled auctions of emergency loans by 50 percent to $30 billion beginning with the next offering, scheduled for Jan. 14.
The Fed will continue the loan auctions, designed to increase the amount of cash available in the banking system, ``for as long as necessary,'' it said in a statement released today.
The second auction will be held on Jan. 28. Results will be announced the day following each auction and the sales will settle three days after. The Fed will announce its plans for February by Feb. 1, the statement said.
The Board of Governors of the Federal Reserve System established the temporary Term Auction Facility, dubbed TAF, in December to provide cash after interest rate cuts failed to break banks' reluctance to lend amid concern about losses related to subprime mortgage securities. The program will make funding from the Fed available beyond the 20 authorized primary dealers that trade directly with central bank.
The Fed uses the TAF to auction funds to institutions that are eligible to borrow at their discount window. All TAF credit must be fully collateralized, and TAF accepts a broad range of collateral at the same values and margins applicable for the other Federal Reserve lending programs.
On Dec. 21 the Fed and European Central Bank loaned $30 billion in 35-day funds at an interest rate of 4.67 percent, 2 basis points more than at the initial auctions four days earlier. The rates were less than the 4.75 percent banks are charged to borrow directly at the Fed's discount window, suggesting the central bank was making progress in alleviating a credit crunch. The Fed auctioned $20 billion in each of those instances.
Policy makers have cut the Fed's target rate for overnight loans between banks by 100 basis points to 4.25 percent since September, and the discount rate by 150 basis points.
To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net
Never underestimate the power of idiots in large groups.
-Omega
_____________________________________________
America is at that awkward stage. It's too late to change the system from within, yet too early to shoot the bastards.
_Claire Wolfe
Evil Twin SubscriberModerator
Forum Moderator
User ID: 6907
1/4/2008 2:54 PM
Re: Fed Boosts Size of Next Two Emergency Auctions to $30 Billion Quote
As long as it takes...LOL
-------------
eviltwinglp@hotmail.com
This is my helmet. There are many like it, but this one is mine.
"The moment a person forms a theory his imagination sees in every object only the traits which favor that theory." Thomas Jefferson
Omega Subscriber
Total Unequivocal Bad Fuckin' News
User ID: 34699
1/4/2008 2:58 PM
Re: Fed Boosts Size of Next Two Emergency Auctions to $30 Billion Quote
As long as it takes...LOL
Quoting: Evil Twin
I believe the whole frickin financial system is *Enron'ed*.
Never underestimate the power of idiots in large groups.
-Omega
_____________________________________________
America is at that awkward stage. It's too late to change the system from within, yet too early to shoot the bastards.
_Claire Wolfe
Eagle # 1
User ID: 347671
1/4/2008 3:09 PM
Re: Fed Boosts Size of Next Two Emergency Auctions to $30 Billion Quote
Your RIGHT, Omega. Only thing IS, we can't prove it, YET ! Give it two weeks more, and the dam will burst !
Eagle
Omega Subscriber
Total Unequivocal Bad Fuckin' News
User ID: 34699
1/4/2008 3:15 PM
Re: Fed Boosts Size of Next Two Emergency Auctions to $30 Billion Quote
Your RIGHT, Omega. Only thing IS, we can't prove it, YET ! Give it two weeks more, and the dam will burst !
Eagle
Quoting: Eagle # 1 347671
Shoot-at the rate the markets have opened the year doom could come Monday morning.....
We can hope bro......
Never underestimate the power of idiots in large groups.
-Omega
_____________________________________________
America is at that awkward stage. It's too late to change the system from within, yet too early to shoot the bastards.
_Claire Wolfe
"A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences." - Proverbs 22:3
Silence is consent.
von Doom
User ID: 350112
1/4/2008 4:43 PM
Re: Fed Boosts Size of Next Two Emergency Auctions to $30 Billion Quote
Auctions...
They sure do have a sense of humor
Anonymous Coward
User ID: 272315
1/4/2008 4:44 PM
Re: Fed Boosts Size of Next Two Emergency Auctions to $30 Billion Quote
Their legally grabbing the land, (houses)
Enigma
User ID: 70637
1/4/2008 4:49 PM
Re: Fed Boosts Size of Next Two Emergency Auctions to $30 Billion Quote
I wonder if that will be enough?
makes you wonder...
sort of feel like being on an out of control toboggan at the top of a very long and steep hill...
will we hit a tree?>?
or make it to the bottom?
time will tell...
got preps?
sillygalah
User ID: 36218
1/4/2008 4:56 PM
Re: Fed Boosts Size of Next Two Emergency Auctions to $30 Billion Quote
Thanks for the thread and the dates Omega. It's always good to look back on this site a bit and find the REAL story. Do you thing it's interesting (I do) that Wall Street had this story during trading and the news had no effect on the market which closed down 256 points on the Dow? Maybe that word 'emergency' frightened them? Definitely worth a BUMP.
malu
User ID: 121616
1/4/2008 5:00 PM
Re: Fed Boosts Size of Next Two Emergency Auctions to $30 Billion Quote
this is quoted from somewhere else on the same subject:
This will not work. The problem is not liquidity but solvency. There is plenty of credit, but few ways to repay the loans. Throwing another $30 billion into the market place just contributes to inflation. Manufacturing has been in decline for 30 years and the schools are not turning out a workforce able to compete in the high-tech global market.
The really sick part is that our business leaders all looked at their own bottom line, exported jobs (with government blessing), imported cheap goods, and now that everybody is out of work and unable to make their payments these same leaders stand there scratching their heads and wondering just what went wrong!
malu
User ID: 121616
1/4/2008 5:24 PM
Re: Fed Boosts Size of Next Two Emergency Auctions to $30 Billion Quote
off topic but not really:
A new crisis is emerging, a global food catastrophe that will reach further and be more crippling than anything the world has ever seen. The credit crunch and the reverberations of soaring oil prices around the world will pale in comparison to what is about to transpire, Donald Coxe, global portfolio strategist at BMO Financial Group said at the Empire Club's 14th annual investment outlook in Toronto on Thursday.
"It's not a matter of if, but when," he warned investors. "It's going to hit this year hard."
Mr. Coxe said the sharp rise in raw food prices in the past year will intensify in the next few years amid increased demand for meat and dairy products from the growing middle classes of countries such as China and India as well as heavy demand from the biofuels industry.
"The greatest challenge to the world is not US$100 oil; it's getting enough food so that the new middle class can eat the way our middle class does, and that means we've got to expand food output dramatically," he said.
[link to www.financialpost.com]
sillygalah
User ID: 36218
1/4/2008 5:55 PM
Re: Fed Boosts Size of Next Two Emergency Auctions to $30 Billion Quote
Hi MALU - thanks for joining in - I enjoy your posts. Yes you are so right. "This will not work". Throwing money around all the time the way they are - TPTB are just trying to put out fires. This reminds me of how the bankers went about things in 1929! There are plenty of books on the subject and I'm sure you have read them. For those that haven't, if you go to google and ask, there's plenty of info'.
I saw and printed that story about the food shortages yesterday. It's certainly on topic and I really get the feeling this time that the sulphur is about to hit the water. I did hear this morning on ABC 24 hour news radio that Bangladesh has a critical shortage of rice. Not good.
My mum and dad are well in their 80s and normally don't pay a great deal of attention to the news of the day. However a few weeks back my mum heard on the news that the credit crunch problem was as much as a trillion dollars. She rang to tell me that she had never heard them use the word TRILLION before. "This could be it" she said. The markets
My guess is 40 billion next time. 50 and 75 in Feb, then 100 on up to a half a trillion by Dec 2008. whoo hoo |
| Anonymous Coward
User ID: 349334
1/4/2008 10:59 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Lone trader caused 100 dollar price for oil
Fri Jan 4, 11:41 AM ET
NEW YORK (AFP) - A lone trader out to win a little fame made the purchase that took oil prices to the historic 100 dollars a barrel level this week but he lost 600 dollars on the deal, analysts said.
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The trader has been named by US and British media as Richard Arens who runs a one man oil brokerage, ABS.
"The magic figure was hit apparently on the back of a single trade, rumoured to be a local intent on fame," Sucden analysts wrote in a commentary Thursday on the record breaking deal.
Arens offered 100,000 dollars on the New York market on Wednesday for 1,000 barrels of oil, producing the much talked of 100 dollars per barrel which sparked anguish across the financial markets.
He later sold on the contract for slightly below 100 dollars, taking a 600 dollar loss.
"It was just for the form; he wanted to be the first in the world to buy oil at 100 dollars," said Antoine Heff, an analyst at NewEdge.
The new price record came as a shock to the markets although many had been saying 100 dollars was inevitable at some point given strong demand and supply constraints.
Oil slipped back slightly but hit 100 dollars again on Thursday.
On Friday, profit-taking pushed the price back again, with quotes in late Asian trade of 99.23 dollars for New York's main contract, light sweet crude for delivery in February.
The initial spike to 100 resulted from "really just one trade which was like a stunt," but more trades pushed it above 100 dollars again on Thursday, said Victor Shum, of international energy consultancy Purvin and Gertz in Singapore.
"We have eased off from the 100 dollars level primarily because of some profit taking," Shum said.
Analysts say rising oil demand has outstripped growth in supply. They point to booming Asian economies like China and India and insufficient investment by oil exporters, which has led to a decline in spare production capacity.
Geopolitical tensions and new buying interest from speculative investors like investment funds are also behind the quadrupling in the oil price over the last five years, analysts say.
A weakening US dollar, which makes oil more affordable for buyers in stronger currencies, is another factor cited for the rise in prices. |
| Anonymous Coward
User ID: 351774
1/8/2008 6:42 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Enter 2008: The System Breaks
By: Jim Willie CB, GoldenJackass.com
-- Posted Friday, 4 January 2008 | Digg This ArticleDigg It! | Source: GoldSeek.com
EDITOR NOTE: My Spanish needs work, since ‘Tonterias’ was misspelled in the title, which prompted a couple corrections from Latino readers. Disculpame! Last week’s attempt to smash the Wall Street corrupt trumpets of information earned a special kudo from a veteran NYSE floor trader. Tom said, “What a crock we hear every damn day? I have been on Wall Street 28 years. This is just unreal. What we hath wrought?!?”
The year 2008 will be the year that THINGS JUST PLAIN BREAK. It will be a truly deadly year, unavoidably lethal to the US Economy and especially to the US banking sector. Nothing has been repaired. Some tangible solutions will be offered in the next section, all legitimate in a real world. However, we do NOT live in a real world, but rather in a Fairy Tale world of US Hegemony and Wall Street with a choke hold around the US entire system. Managed inflation is the policy never to be reversed, until total breakdown occurs. Treason is rampant, called simply Power Games. All attempts so far are to shore up the existing system, to enable Wall Street to sell as much of their damaged asset backed bonds to suckers, and to avoid international lawsuits against Wall Street firms. In 2008, an alarming sequence is assured of enormous damage that puts the entire US economic and financial system in a perilous situation. The powers survived the end of 2007, with heavy usage of band aids, rubber bands, and paper clips, but reality continues to itemize a relentless sequence of unfixable, tragic, intractable problems. The pressure points are big banks suffering from insolvency, prime mortgage bonds destined for massive losses, consumers without kitties to rob to keep spending, a worsening housing market from chronic inventory bloat, and deepening problems in the lending industry frozen from insolvency and distrust. Pitch in a global resentment of US fraud and heavy handed tactics, especially from the last couple decades.
What a prospect! Almost all of Wall Street firms are bankrupt, but still in control of the financial media. Citigroup is dead in the water, inevitably to enter restructuring without admission of bankruptcy and surely with no formal filing of such. Heck, even Goldman Sachs might be bankrupt, if they ever produced an honest balance sheet. The goal of Wall Street henchmen, who are clearly guilty of the grandest larceny even seen since Rubin opened the door to gold leasing at the USTreasury, is for the (mostly) men in three-piece suits to fleece their elite firms for personal gain as much as possible before their broadly suspected insolvency is recognized as clear bankruptcy. They choked on their own toxic mortgage fecal IN-securities, with the leverage in the derivatives backfiring on them. The hidden factor is new Basel rules on accounting, which in my view seems like a bankruptcy judge ordering Discovery Phase of bank assets during a Bankruptcy Proceeding. True to form, the Wall Street firms continue to operate in defiance, as they created a lunatic new Tier-3 balance sheet item. The greatest feat to date is the Wall Street urged Congressional adoption of the subprime mortgage freeze, dubbed ‘The Teaser Freezer’ in clever tones. A voice tells me that Basel might push for prosecution of Wall Street bankster criminals.
My 2008 forecasts will be saved for the Hat Trick Letter, but a preview overview can be listed. First, let us all revel at the Severe Comedy that has become US Presidential Politics. Good looks, meaningless promises, catchy campaign slogans, bulging campaign coffers, these all accompany a truly futile procession of charlatans offering hope. Harken back to November 2006, when a new Congress was elected. They, under new leadership have done not a blessed thing promised to turn the country away from its disastrous course, regarding the war, the economy, taxation, budget allocation, in a follow through mandated by voters. Expect nothing at all in change from any viable presidential candidate, who all seem like midgets. If one revolutionary candidate in particular is elevated by voters, his life will likely meet an early demise, by accident, of course. The hidden secret which just cannot seem to find its way above ground is that Neocons are not Republicans, not Democrats. The current Bush is a known Neocon, a bizarre label to be sure. In my view Clinton was a Neocon also, certainly cut from a different cloth than most traditional Democrats. His central policy was to create the foundation for the Fascist Business Model, wherein the finance sector merged with the state. Two candidates, one on each side, represent uninterrupted Neocon rule and the inexorable march to a military state, the former 911 Mayor and the former First Lady. But mine is not a political pen. Somehow, the name NeoFascist does not sound as appealing to American voters as the mysterious Neocon. Call a spade a spade! Numerous legal executive decrees confirm the label clarification and trend. The pathetic fact of life is that in my travels and conversations with countless American adults, my experiment has been grossly revealing. After almost 40 direct questions on US soil, directly asking “What is Fascism?” to Americans, not one single correct answer. After all, a nation gets the government it deserves. The United States is on a sad but unstoppable march to Third World status, complete with totalitarian rule. Nothing can block the path. One hundred years ago, H.L.Mencken called the USGovt the best government that money can buy, and deemed the American landscape attractive like any circus. Nothing has changed, only the depth and severity.
THE SYSTEM FAILS, BREAKS, FREEZES
The year 2008 will start with a resumption in the disorder breakdown buzz, a resumption in the gold climb, and new chapters in big bank bankruptcy throes, and eventually a nearly complete loss of respect and integrity in the US Federal Reserve. The word ‘Bankruptcy’ will not be used until a big bank actually files for bankruptcy. The ring of the word Bankruptcy is more accurate, since it implies Hemorrhage, another great word. The collateral damage will include most bond insurers going bust, but holding firm to ‘AAA’ ratings in pure corrupt manner. The collateral damage will include most homebuilders going bust. However, the centerpiece of 2008 woes will be the PRIME MORTGAGE BUST, felt much like the stage falling through the floor in the Victorian Theater. The decline in housing prices will continue to push prices down another 5% to 10% in the new year, killing off prime mortgage portfolios and their bonds. The bust will take down the entire US banking system, which is now reeling and tipsy, like a punchdrunk boxer after enduring ten rounds of a pure beating, bloodied, wobbly, dizzy, blurred in vision. The mortgage debacle will extend to the commercial property arena, the degree of which will be uncertain.
The people have been misled for almost a full year on the mislabeled mortgage debacle as a subprime phenomenon. That is the exposed tip of the iceberg, since it is total mortgage debacle problem. In 2008, the avalanche of failed mortgages of innovative adjustable variety will occur, with California providing the epicenter of failure and most publicized wreckage. US lending institutions once took pride in their absurd innovation in mortgage products, like fully borrowed down payments, like paying less interest than accumulates, like the borrower having no income or job. Next they will be embarrassed at the systemic stupidity and universal ridicule. In the 1970 decade, we suffered STAGFLATION in an ugly era. In 2008, we will suffer a much more powerful bout of stagflation, with continued USEconomic recession (in third year for those based in reality), rising price inflation (already running over 10%) sure to attack even the doctored Consumer Price Inflation. In fact, 2008 might see progress with the CPI adopting the house price component and putting off the owner equivalent rent, all boasted progress.
The mirrored central damage will be to the USEconomy, from both an exhausted household consumer and a lending climate reluctant to supply urgently needed credit. The dependence upon consumption will be unmasked as fatally flawed finally. Households will fail on car loans and credit cards as an echo to mortgages, resulting in severe loss of independence and freedom. One can live in a house for free, but not ride a car or carry plastic for long without consequences. To compound the problem of credit supply, Wall Street burned our allies by cheating them blind. Expect a backlash felt in the year 2008, including international ugly lawsuits and unexpected Wall Street broken glass like a seven year delayed Krystalnacht. The entire banking system will go bust in the Untied States this year, in a highly visible manner, as the entire world watches in total horror. The nation in custodial duty for the world reserve currency, the USDollar, will suffer a failed banking & bond system, which undoubtedly will result in a grotesque USEconomic recession. It is just a bit late in its arrival. The parade of disasters will be mindboggling, offering little respite. Even the Plunge Protection Team, armed with $1500 billion in black bag money, pilfered largely from Fannie Mae in the two districts harboring the home towns for the sitting presidents from 1988 to 2000, will not be capable to stem the tsunami of stock market sell orders. They might focus attention on the biggest and baddest corporations, but the banking stock index collapse reveals how the PPT could only hold up the S&P500 index, but not their buddies in big banks. SADLY, 2008 IS THE YEAR THE SYSTEM JUST PLAIN BREAKS.
People will run for cover. People will react with increasing anger. They will bristle with anger and frustration, even spark isolated riots, from rising food prices, rising gasoline prices with spotty supply, lost jobs from rising costs and outsourcing, lost homes from predatory lending followed by foreclosures. People will suffer realize that finances are not safe in banks, as bank runs spread amidst the fear in isolated cases, and some stock accounts are frozen unavailable amidst financial service conglomerate bankruptcies. The time honored Glass Steagall Law made impossible the merger of banks, brokerage houses, and insurance firms, for a reason. As banks fail, insurance and stock brokerage will be put at risk. The removed rule used to forbid shorting stocks on a downtick, but now will also render the system vulnerable. 2008 IS THE YEAR THE SYSTEM JUST PLAIN FREEZES.
CONFUSION WILL REIGN SUPREME
The year 2008 will bring with it a level of confusion never seen before in the nation’s history. Economists will be found befuddled, scratching their heads, dazed, and without solutions. Politicians will be confused as to what to advocate, unsure what is potentially effective. The entire argument of ‘Inflation vs Deflation’ will turn into a crazed debate, with ignoramuses spouting all manner of drivel without knowledge of what inflation is, how it is caused, the frustration in producing it intentionally, and the broken apparatuses no longer able to function when their levers are pulled. When inflation is not only misunderstood but also indoctrinated in heretic fashion, the concept becomes a gathering large cloud intended for confusion of the masses. When the banking system is seized up as it is, the mechanisms to spew money into the system fail to function. When banks distrust each other more than individuals for their claimed collateral, the system fails to distribute money, even at lower interest rates. Issuing loans to individuals will fall to a low spot on priorities.
A huge event occurred in 2006, that being the flip of housing into a deflating asset. A huge event occurred in 2007, that being the flip of mortgage bonds into a deflating asset. As the entire risk price model system continues to disintegrate, the powerful teeth of deflating assets held by banks will render the banks themselves as utterly impotent agents to stir inflation. Ironically, as credit derivatives are sold off, the USDollar might actually benefit. Many writers talk about USFed Chairman Bernanke as stepping soon to the table with a mission to drop money from helicopters. Wow, are they ever popping some stupid pills?!? The events in the last four months have taught anybody with a lucid brain, a keen eye, and an active pulse (which eliminates the majority of investors) that the US Federal Reserve has become far more than a little bit IRRELEVANT. The banking system is so broken over here that the London LIBOR has become strained to the hilt. The hapless clueless hidebound USFed cannot recognize the problem of insolvency within the banking system, and cannot treat the problem with lower interest rates. That will certainly not stop them from cutting rates, since Goldman Sachs, acting as lead sled dog among the Wall Street harnessed team, has ordered them to do so. If lower rates will not solve the bank problem, why are we given lower rates? Simple, because it supports the stock market from an ugly bloody crash. The system cannot afford for stock assets to flip into a deflating asset.
The confusion to reign in year 2008 will center on the challenge to actively produce price inflation, while leaning upon broken banking entities. Confusion will reign from requests to Bernanke to ‘do his helicopters thing’ when the winds of deflation will be so great that the cash drops are scattered into the deflation vortex. The desperate urgings made to Bernanke miss the lessons of the last four months. His primary perceived plan is to rescue the Wall Street banks, probably with far more redemptions, monetizations, and refunds delivered in basements and back rooms than the public will ever know. Such is the nature of the Fascist Business Model, to take care of the large corporations whose interests are merged with the USGovt, payola for the partners. The irony of the massive infusions of money, either with USFed injections or foreign capital infusions, is that they are extremely focused to rescue the ailing banks from insolvency. Except that they only rescue the ailing banks from illiquidity. Add money into an insolvent picture, account for it as an equity stake, and nothing is accomplished on the insolvency side. The new partners only have a larger share in the bankruptcy, better described as a vampire, walking dead. The system is not activated, no jobs produced, no new loans granted.
The confusion in 2008 will culminate in the ratcheting upward of the official rescue attempts, measures, freezes, adoptions, initiatives, and eventual grand platform, as my forecast has steadily called for. Each plan will be recognized as insufficient and limited, thus motivated the next desperate measure. The Grandiose Resolution Trust Corporation will be granted broad powers, and rule for a full decade, with a possible cabinet appointment creation. Another ugly irony is festering. Neither the Administration and Congress is willing to press forward to initiate ANY broad rescue just yet, since the first pig in line would be the Wall Street thieves, thugs, and conmen whose fingerprints are all over the mortgage bond debacle laced with criminal fraud. So the entire banking system will continue to slide into quicksand. Once politicians enter the picture, the problem worsens, no exception.
GOLD WILL RISE
Meanwhile, gold will rise for many reasons, few being the traditionally recognized ones. Gold will rise from gradual recognition that the banking system is destroyed. Gold will rise from the perceived need to generate price inflation, whether such efforts are successful or not, an expectation concept. Gold will rise from the Competing Currency Wars, as nations urgently print more money to stave off recession and grotesque asset deflation. The slowdown will hit China also, which has begun to hike prices but which will find itself saddled with overcapacity. Gold will rise primarily because the global money supply is rising at an astronomical rate, think Weimar, go global. Gold will rise because the smart ones will realize that the Untied States might seek war as a diversion amidst the crisis. Gold will rise from in response to failures in most policy initiatives, perceived symptoms to systemic breakdown. Gold will rise as the global revolt against the USDollar continues, with the current focal point being the Persian Gulf nations who must defend themselves from the ravages of inflation. The entire price inflation argument is somewhat a straw dog, in a loose sense. The USDollar decline has prompted costs to rise, not wages, the result being economic dampers cast across the US landscape. This prompts monetary inflation motivation. Remove China and price inflation could be easily generated. However, the system cannot succeed in producing price inflation without killing the USTreasury Bond complex altogether, as long-term rates would rise to smash and upend the credit derivative pyramid. More evidence that the USFed is the most irrelevant player at the table. Gold will rise as the globe finally reckons that the USFed, traditionally the most powerful among the central bankers, is IMPOTENT, TOOTHLESS, AND IRRELEVANT.
The chaos in the financial sector will be matched by growing chaos in the beehive of the USEconomy, the business complexes, the neighborhood communities. Watch for lawless behavior to rise, as chaos envelops the system. Watch for civil disobedience to crop up, as high crimes among Wall Street bankers and USGovt leaders go unaddressed. In the year 2008, the bylines will be 1) BREAKDOWN, 2) CHAOS, 3) FUTILITY OF TOOLS, 4) ABSENCE OF OPTIONS, 5) CONFUSION. Gold will rise as the bylines hit the press & media strewn with these messages. The system breaks in 2008. Denials will be laughable.
GOODBYE TO MANY
The year 2007 said goodbye to quite a long list of notables. The music world lost Dan Fogelberg, Porter Wagoner, Ike Turner (beat me), and Tommy Newsome, plus opera stars Luciano Pavarotti and Beverly Sills. Hollywood and the entertainment sphere lost Joey Bishop, Joel Siegel, Charles Nelson Reilly, Jack Valenti, Tom Poston, Ingmar Bergman, Merv Griffin, Robert Goulet, Yvonne DeCarlo, Tom Snyder, Jane Wyman, and Marcel Marceau. The political arena lost LadyBird Johnson, Art Buchwald, Tom Eagleton, Henry Hyde. The writing world lost Sydney Sheldon, Norman Mailer, Kurt Vonnegut, and historian Arthur Schlesinger. The sports world lost Phil Rizzuto (the Scooter), and recently Sean Taylor (Washington Redskins). Also lost were restauranteur Bob Evans, spirited Jerry Falwell, and astronaut Wally Schirra. The bizarre corner lost Tammy Faye (Baker) Messner, Leona Helmsley, Anna Nicole Smith, and Evil Knievel. Closer to home, my family lost my mother Maureen, who coined the name Jackass for me, due to my persistent outspoken, stubborn, and mischievous manner. She called me ‘My Charming Rogue’ affectionately. She is missed deeply, her effect felt.
THE SOLUTIONS ALWAYS THERE
Greed is powerful, especially when subjected to those in charge of the world reserve currency for several decades. Rescinding the Bretton Woods Accord, wherein the USDollar was tied to gold, unleashed Pandora’s Box of financial evils. The abusive usage of monetary inflation as a remedy for excessive debts is perhaps the most pernicious destructive phenomenon in the last century. In a vicious disguise, monetary inflation kills entire industries, fleeces savers dry, transforms asset managers into casino players, and causes pervasive cost inflation, all of which impoverishes a nation. Tragically, all nations who hitched their monetary wagon to the Untied States risk tremendous damage from shared inflation wreckage. See Saudi Arabia, the entire Persian Gulf, even Hong Kong. Europe will not be spared either. The competing currency wars renders all as victims. The last deaths occur with the nations whose currencies rise, since they enjoy a rush of investment and enjoy reduced costs, but their export trade is harmed badly.
Over dinner tables when the Hat Trick Letter was inaugurated, my father repeatedly asked me what solutions could be offered. A literature professor not versed in financial matters, he grew weary of incessant talk by me on the unfixable nature of the current system. My pragmatism owes to his constructive nature. My constant reply was that the system would resist all solutions, since they would cause severe pain for both the system and its leaders, the Ruling Elite. My sassy reply was that a solution article would be an exercise in futility. My offering was ten solutions, which even he realized were totally impractical in today’s day and age. Now, four years later, my list seems comical and totally outside the real of possibility. For humor and completeness, as much as a treatise on the many sins committed by our economic and banking chieftains, here is my list.
HOW TO FIX THE USECONOMY & FINANCIAL SYSTEM:
- dismantle the US Federal Reserve
- back the USDollar with gold or silver or coal or Great Lake fresh water
- balance the USGovt budget
- end all monetization efforts to support financial instruments
- enforce all regulations against outsized futures contract positions
- remove all lobbyists from Congressional contact
- dismantle the military defense network with contractors in US firms
- end all fractional banking practices (lend 10x deposits)
- tighten all financial accounting, with felonies charged routinely
- severely limit the credit derivative contract creation and its system
- prosecute the fraud from the $1500 billion Fannie Mae theft (1988 to 2000)
- separate Goldman Sachs from Dept Treasury, due to insider trading risks
- separate JPMorgan from USFed, due to insider trading risks and extreme collusion
- prosecute JPMorgan for serving as the Enron instructor
- end all illicit talks between stock & commodity regulators with Wall Street
- require 30% down payments on all home mortgage loans
- end all private deals between Chinese leaders and Wall Street for IPO stocks
- dismantle at least 75% of the foreign US Military bases, bring soldiers home
- dismantle all US security agency participation in contraband trafficking
- dismantle the Bank of Baghdad as central clearing house for that trafficking
- dismantle all tight relationships with USMilitary and Halliburton
- install a broad manufacturing base in the United States, even if attached to prisons
- institute framework for foreign receivership of US capital structure and policymaking
- give China, Japan, Saudis, and Persian Gulf Coop Council seats on US Prez Cabinet
- give China, Japan, Saudis, and GCC veto power on US federal budget approval
- create a Cabinet level post of Special Prosecutor with ties to International Courts
- create a Cabinet level post to manage the housing & mortgage Resolution Trust Corp
- encourage numerous voter referendums annually, which bypass Congress
- reduce the influence of Israel in dominating security and military related policy
- forbid any US citizen from working as World Bank or Intl Monetary Fund directors
- end all tax incentives to relocate business overseas (which kill US jobs)
- end the Alternative Minimum Tax burden completely
- rescind the Medicare payment system and its entire program
- install legitimate economic statistics for GDP, CPI, Jobs, and more
- install proper Cost of Living Adjustments in Social Security and USGovt pensions
- install tax incentives to save from income outside the 401k & IRA pension systems
- dismantle all the concentration camps (230 of them) on US soil, recently completed
- reopen a 911 Commission to issue a verifiable report, not a whitewash BS report
- end all chemtrail experiments in the upper atmosphere to control weather
- release American Medical Assn cures for cancer which are available in Latin America
- begin massive US infrastructure repair, a reconstruction initiative with foreign funding
- admit to the world that the Untied States has become a Third World nation
OK, YOU TELL ME, DOES A SINGLE ITEM HAS MORE THAN AN INFINITESIMAL CHANCE ??? Happy New Year. Be sure to take cover during a truly deadly year upcoming. The country might not be recognizable by the time the 2009 page is turned.
Jim Willie CB, editor of the “HAT TRICK LETTER”
home: Golden Jackass website
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-- Posted Friday, 4 January 2008 | Digg This Article | Source: GoldSeek.com
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| Anonymous Coward
User ID: 357007
1/17/2008 10:29 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The End of Economics
January 16, 2008
Doug McIntosh
Over 15 years ago, during the orgy of self congratulations the USA underwent at our "victory" over the Soviet barbarians in the Cold War, one Francis Fukuyama wrote a book called "The End of History." In it, the good professor, Harvard I think, postulated now that the Soviet barbarians had been outlasted the world would usher in a new, peaceful era based on Western Democratic values. Or at least Disneyland uber alles for another 50 years. Coke, Pepsi and Disneyland are at the core of economic vision of this New World Order of ours.
Of course, things turned out differently. For instance the Soviet Barbarians are still barbarians, just in a more ethnic way. Incidentally, if you click on my archive page link at the bottom of the page you will find a list of all my essays, going back nearly 10 years here at gold-eagle.com. One of them talks about Vladamir Putin, who I called the new Rasputin. I wrote it a looooong time ago, when people still had illusions the 700 years of terror commonly called Russian history had been magically removed.
There are two individuals who have had the most impact on history in my view. Jesus Christ and Genghis, or Chingis, Khan. The birth of both militant Islam and brutal Russia may be laid at Chingis' sword, He was the one who sacked Kiev and Baghdad. The sacking of these two cities cut both Islam and Russia off from Europe and the revolutions soon to come in ideas, culture, science, politics and other areas. And that will be the death of the West.
The death of the West will come in the economic sphere first; indeed, it is already well underway. One of the reasons I have not written more recently is I find myself with little to say at this point. Like Dolly Parton says in her song, "What part of no don't you understand?" The modern, fiat dollar system, based upon infinite creation of debt, and the looting of the common man by mutant bankers, hack politicians the NWO elite perverts is kaput. Argue with me, call me an idiot, do whatever you like: the economic system is going down. The Revolution of 1913, the final subversion of the American Republic, has failed. It lasted some 95 years. During it we saw the American Republic turned into an Imperial power, its people and culture debased; its politics turned into an open sewer. The fiat Federal Reserve note, once the reserve currency of the entire planet, now is not accepted at India's Taj Mahal due to its collapse in value. Even the strangely named Canadian dollar, the Loony, the bird I think, is worth more than our FRN. The wages of economic sin is a debased currency. Only precious metals reflect the true failure of the Federal Reserve and its destruction of the American economy and society. It really is the debt stupid!
However, that doesn't really matter anymore. We have simply reached a point in the corporate entity called the USA, where the social chaos is about to overwhelm us. I think 2008 will be a lot like 1968, turbulent, chaotic ; with an underpinning of violence, social disorder and a sense of being overwhelmed emotionally on a daily basis. I was 14 then; I remember the sense of a system in crisis very well. America is dead. The New World Order has killed it. We are like the Chinese and their sentence for people who commit murder. They tied the corpse to the murderer and made him carry it around. We are now carrying the corpse of the American Republic tied to this Imperial entity we have allowed thugs and criminals to create since 1913. The stench is getting unbearable. The rest of the world is tired of our mind games. They are taking us down. Hard.
Ah, I am just being negative. No, I am being realistic. Over Christmas I think the balance tipped. It felt like to me a starter pistol had been fired and a wave of chaos was released globally, beginning with the Bhutto murder, Kenya and the like. For me personally, two events have convinced me the American economy, and then our society are failing. The first relates to the economic anarchy, yes that is the proper word, overwhelming the USA. Whether it was the dismal retail environment, the open inflation in food and energy, the talk of $200 oil by the end of this year; the unraveling of the housing bubble, there is a measurable, documented feeling of impending economic doom. Although my view is there is nothing impending about it.
The canary is bellowing its little lungs out: the roof beams are shaking and the dust is pretty thick. Those perpetual frauds called the American stock markets are off to their worst start since 1904, yes 1904, that being 9 years before the vile beast called the FED was created. Hell, I don't even have to be a doomer anymore. I mean, I called it and I called it right. We are going down, as an economy, as a culture, as a political system and maybe even as a unified people. Gold will absolutely protect you from economic chaos, although silver is for the day to day spending. Unfortunately, we are moving beyond economic chaos into the economic collapse arena.
The second thing that has convinced me American culture is in serious trouble is the level of social anarchy. In particular, the case of the Carnation, Washington grand parents, their children and grandchildren, being slaughtered on Christmas Eve by one of their own is absolutely #$%^&& intolerable to me. And I am in a real mean mood about it, along with many other things. Pirates for instance. There have been numerous media accounts of attacks upon motorists on highways in several parts of the country, especially the Saint Louis area. This is what the New World Order, their Federal Reserve, their mutant culture of Paris Hilton, Britney Spears and the rot called politics have brought us to. Open Piracy on our highways and a visit to grandpa and grandma that ends up a horror movie. The system will either change, or the Spirit will allow it to be destroyed. The foreigners are the instruments of destruction of both our economy and our Imperial pretenses. They will destroy us with our bonds, our Treasury notes, and our debt. They will own us all; when they do they will not tolerate either piracy or Christmas Eve horror movies.
We are simply beyond it all now. We may pull back from the abyss, or we may hurtle into it headfirst. There have been periods of tremendous economic reform in our history. In fact, the vile beast called the Federal Reserve was the NWO effort to stamp out the antitrust and corporate accountability reforms of the late 1800's and early 1900's. Reforms in response to the excess of the Robber Barons, like the Rockefellers and J. P. Morgan. And guess who owns a large part of the Federal Reserve? Citibank and J.P. Morgan. They are pigs, but they are smart pigs. The filth they wallow around in has destroyed the American Republic. There may yet be one more turn of the people rising up against the feudal thugs who have enslaved us. Or we may be going into the final economic death spiral. 2008 will be the year that decides our fate. Of that I am sure. America will have radical change, fundamental change, or we will collapse into ourselves. If we do that, we will take the entire planet with us. Of that I am also sure. God, gold and guns. The order is up to you. |
| Anonymous Coward
User ID: 357072
1/17/2008 12:44 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Threat of Sovereign Wealth Funds
Jim Willie CB
Jim Willie CB is the editor of the "Hat Trick Letter"
Jan 16, 2008
Use this 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, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.
The Sovereign Wealth Fund (SWF) movement has begun to expand in a powerful manner, and will not go away. In fact, it will expand on a grand basis since foreign nations have had their fill of USTreasury Bonds, and see grand risks ahead for any US$-based investments. The SWF fund movement is intended to pursue the two prime commodities, GOLD & CRUDE OIL, the premier financial anchor and commercial fuel in the increasingly upside down world. Several stories have emerged, on Chinese and Arab managed funds purchasing giant equity stakes on cash infusions for large crippled US banks. Regard the movement as creditor receivership in stages, as the mammoth credit masters for the USEconomy over the last 30 years are slowly taking over in stages major US corporations, the latest stage focused upon bank bailouts. In the past few months, a total of $60 billion has been poured into the Western big banks, more with each passing week seemingly. Rather than to permit the banks to go bust with grotesque messy embarrassing bankruptcies, the creditor (benefactors) have dispatched grand sums of billion$ to fill cash coffers, in exchange for large stakes in their capital structures. This is NOT capital infusion, but rather capital extraction. The US banks has sold stakes to foreigners for cash, relinquishing some control in the process.
Step back to see that the SWF fund phenomenon has three major effects. 1) They are vehicles used to gain more control of US corporations. Investments are not handouts, but rather purchases of greater controlling interest. 2) They are agents to continue the powerful commodity bull market. Their new strategies tilt in favor of energy, metals, in all forms, acquisitions of entire companies, commodity stockpiles, and futures contracts. 3) They have become oppositional forces against central banks, which have systematically abused powers to interfere with free markets. The hundreds of billion$ in the SWF coffers renders them major players in whatever market they participate. They have supplanted hedge funds as the big private players, ever since hedge funds choked on large plates of subprime slime cuisine. The SWF funds are probably purchasing gold bullion far more than is publicized. They are mostly run in secrecy. USGovt officials actually believe they have the right to know how foreigners invest their savings, an incredibly arrogant notion. They fear opposition to the failing paper game. Perhaps the Manhattan Made Men believe their cartel activities are their business, but foreign savings are also their business. A tax on their air is next, the trouble being it carries a horrid stench.
FOREIGN FUNDS FLEX MUSCLES
The rest of this decade will see powerful displays of Sovereign Wealth Fund, as they form dynamic formidable investors. Morgan Stanley chief currency economist Stephen Jen said of emerging market economies as a major source of capital flows, "[They are] a watershed in the balance of world economic power. [These funds] have been particularly active with financial active with financial institutions in the developed world, which they broadly consider as strategically important. In our view, this is not a fad but the beginning of a long-term trend, as the sovereign wealth fund will form the most powerful new category of investors in the world, with Japan likely the next new member." In my view, the SWF funds have the potential to resist Western central banks and their manipulative behavior intended to prop up the USDollar and USTreasury Bond. SWF funds also can oppose cartel efforts to suppress gold. Lately, not much secrecy has been shown. The birth and growth of the SWF fund movement represents the flip side to the US hemorrhage of debt and inflation export. Collectively, McKinsey Global Institute estimates these new so-called Power Brokers held between $6.5 and $6.9 trillion at yearend 2006, one year ago. By 2012 they are estimated to hold $11 trillion, growing by $700 billion per year, or $2 billion per day. They serve as a dynamic force have to date invested in companies, property, natural resources, as well as investment vehicles. As commodity supplies become more scarce and supply lines become more vulnerable, the SWF funds work to secure national interests, securing supply lines, from the young energetic emerging economies, not the old strained developed economies.
In the 1990 decade, and early 2000 decade, hedge funds flexed their muscles, demonstrated their power, and earned both respect and animosity. Hedge funds have been blamed for several effects, like pushing up crude oil prices via speculation, even aiding and abetting the mortgage finance bubble. They grew in size to 9000 funds controlling $1.6 trillion in total. They stand first in line for carnage, having taken huge losses in the mortgage bond and Collateralized Debt Obligation (CDO) bond debacle. Most have suffered losses, while the great minority of smarter ones have profited on the opposite side of trades. In the process, hedge funds generally have lost a great deal of collective power, in a tarnished image. Meanwhile, the SWF funds have taken over as the prominent funds in the news, making their presence felt. In their arena, being entities connected and funded by major governments, they are huge in size. The SWF funds are the sharks operating in the ocean of liquidity, much fewer in number than the thousands of hedge fund minnows. Many hedge funds are over $1 billion in size though.
ONE COULD CONCLUDE THAT FOREIGN INSTITUTIONS HAVE BEGUN TO SHUN US$-BASED BONDS. CENTRAL BANKS ARE INCREASINGLY TURNING TO SOVEREIGN WEALTH FUNDS AS PROFITABLE INVESTMENT VEHICLES. SWF FUNDS ENABLE A CHANGE IN COURSE, ONE WHICH THREATENS US BANKERS TO THE EXTREME. UK BONDS ARE IN THE SAME SEWER PIPE AS THE US BONDS. AFTER SWF FUNDS BUY UP BIG SLICES OF US BANKS, THEY CAN PURCHASE GOLD FREELY AND PULL THE DOG CHOKER ON US BANKERS IF NEED BE, RESTRAINING THEM.
BAILOUTS WREST CONTROL
As the USDollar has suffered valuation losses versus almost every currency, US$-based assets have grown more attractive. Only to those already deeply involved up to their necks, in danger of losing not only big money but their reputations. Imagine the specter of big Arab sheiks participating in bankruptcy courts! They don't have shareholders, but they do have pride! The Abu Dhabi Authority captured the most news with their $7.5 billion investment in Citigroup. The biggest transactions were the $8.5 billion acquisition by Toronto Dominion for Commerce Bancorp of New Jersey. Then there was the $8.1 billion buyout by Nokia Oyj (telecom firm in Finland) for Navteq of Chicago. Temasek of Singapore will invest $4.4 billion in Merrill Lynch. The Chinese Investment Corp will send $5 billion to Morgan Stanley. UBS is taking $1.73 billion from a Saudi, a month after bringing in $10 billion from a second Singaporean SWF fund. Bear Stearns is also on the receiving end from a Chinese firm, or selling end, just plain bleeding end.
By this time next year, expect another 20 such mega-$B investments in what must be regarded as a capital hemorrhage. It is funny that the Dubai Ports World deal was nixed 18 months ago, when it would now probably be welcomed. The US bank situation has changed the landscape, where desperation colors the deals more favorably. No longer is the United States turning inward, protecting itself from outsiders, and practicing jingoism. Distrust and xenophobia have given way to tin cup efforts on the global circuit. The transition from hegemon bully to beggar will take time, quite the adjustment. Some corporate psychologist staffs will be working overtime. Having a military does have its advantages. So does having a truly mindless consumer mindset among its millions of swarthy natives.
Numerous other smaller merger & acquisition (M&A) deals do not make headlines, but they add up. An odd one caught my eye, with a Turkish fund coming to agreement on a buyout of Godiva chocolate maker of New Jersey for $850 million. JPMorgan has brokered many such M&A deals last year totaling $36.4 billion, edging out Goldman Sachs with a $35.3 billion total. Foreign firms accounted for $105.3 billion of the $230.5 billion in purchases of US businesses. American businesses are up for sale, whereas up to now mainly USGovt officials and legislators have been up for sale. Controversy is certain to come with some deals. One might have expected more resistance to the Dubai purchase of a significant stake in the Nasdaq Stock Market, which in early January won approval by the Committee on Foreign Investment in the US (CFIUS). In the past year or more, other deals outside the financial sector were involved. The $9.5 billion deal by Kuwait Petroleum for a 50% stake in the Dow Chemical plastics business, and the $11 billion deal by Saudi Arabian Sabic for the General Electric plastics business, were prominent.
These guys in Wall Street make me want to puke. They make money in good times in straight business, but they make bad times worse with their fraud. During national elections, they finagle indexes and make money there too. See the 2006 midterm US elections and the alteration of the GSCommodity Index weight for gasoline from 9% to 2%, sparking a major selloff going into the November voting period. They make money with insider information on Plunge Protection Team maneuvers to intervene on markets. They made money in selling Initial Public Offerings for major Chinese banks in 2006, like ICBC bank, on sweet deals undoubtedly laced with scummy reciprocation among government officials. Now they make money in brokering deals to sell off American corporation interests. Such is the nature of the Fascist Business Model, loaded with corruption, cronyism, inefficiency, influence peddling, and unprosecuted fraud, eventually leading to a transformation of the political system toward totalitarianism. By the way, those who doubt such a path are challenged to find a single exception in modern history.
CITIGROUP OBITUARY IN DISGUISE
The Citigroup obituary continues. The worst earnings report ever detailed a $9.83 billion loss, amounting to a $1.99 per share loss in Q4. Only 4200 job cuts were formally announced, but 17k to 24k eventual total jobs cuts are expected. Their statement said, "the Q4 reserve for job cuts is a down payment" while "the first stage in head count reduction" described the initial job cuts. They admitted a divestment of more core assets, citing attention needed to the balance sheet, risk management, and expense control. They have cited $17.4 billion in writedowns to date, including over $1 billion in credit cards, which comprise 5.5% of their loan portfolio. The credit card loss is a dire signal. Citigroup also suffered a debt downgrade, with a negative outlook given. Art Cashin of UBS from the NYSE floor, always colorful with a phrase, said "Citi wrote off not only the kitchen sink, but the entire kitchen." They cut their dividend by 41%, in direct violation to a public stated pledge. They expect another 14% decline in housing prices, no doubt the most honest forecast on housing on Wall Street! This saga casts a grand insult to the legacy of outgoing CEO Sandy Weill.
A bankruptcy comes of a magnitude never seen before in US bank sector history, a grand failure. Citigroup would do well to beat the courts to the punch, restructuring before a bankruptcy court takes on that duty. Their statement on Tuesday contained no mention of pending lawsuits of multiple variety, an innocent omission. With tin cup in hand, Citigroup is touring Asia and the Middle East, seeking $14.5 billion in cash as it plans to sell more capital. They want money from guys who earn it, as opposed to printing it or defrauding for it. Good tidings, the tour was a success! In exchange for convertible preferred shares, the funds are coming from a Singapore fund, the Kuwait Investment Authority, Saudi Prince Alwaleed, hedge fund Capital Research & Mgmt, the state of New Jersey, and former CEO Sandy Weill.
CITIGROUP IS THE FOCAL POINT FOR THE REQUIRED MONETARY STIMULUS THAT WILL TAKE GOLD WELL PAST $1000 AND TOWARD $1500 IN PRICE. It is an ugly microcosm of the catastrophe. Their bailout is sure to spill over. What ails Citigroup is the housing crisis, the mortgage debacle, exhausted consumers, and the imminent USEconomic recession. The enlightened are well aware of the recession showing its sharp fangs since summer. One must be dumber than a dairy cow to believe the USGovt statistics nowadays. The banking policies and stimulus packages are intended to prevent a recession with Gross Domestic Product decline of worse than MINUS 4%, since the 4% figure is the size of the lie from gimmicks to lift the official GDP figure.
Additionally, Merrill Lynch just announced a $6.6 billion sale of preferred stock to a group that included the Kuwait Investment Authority, the Korean Investment Group, and a unit of the Japanese Mizuho Financial Group. Merrill Lynch is expected to post a $15 billion loss this week. In these deals, cash comes in, stock is diluted, capital is forfeited to foreigners, while corporate core is enhanced. THESE ARE NOT CAPITAL INJECTIONS. Then there is Canadian Imperial Bank of Commerce (CIBC), announcing a $2.5 billion loss. It plans to seek C$2.75 billion in stock sales to rebuild its corporate core.
A NEW SAUDI SOVEREIGN FUND
In this spirit, against this backdrop, the Saudis do not want to be eclipsed by the $200 billion Abu Dhabi sovereign wealth fund in the news. The Saudis plan to launch a SWF fund expected to dwarf the Abu Dhabi fund and become the world's largest. Once more, the media tells the story backwards. The Financial Times of London mentioned the wave of Asian and Middle Eastern money, "playing an active role in channeling capital to Western companies, particularly financial companies hard hit by the US mortgage meltdown." NO! They are channeling cash as they buy capital stakes, and equity stakes. CAPITAL IS SENT TO FOREIGN HANDS. It is ironic that the center of 20th Century capitalism neither comprehends what capital is, nor practices much free market capitalism anymore. The Saudi Arabian Public Investment Fund is expected to lead the effort to establish the new SWF. Very likely, a large number of Saudi royal family members from numerous branches are to contribute to a monolith SWF fund. Their wealth is scattered widely in myriad funds.
King Abdullah has embarked on an ambitious initiative of infrastructure projects, expanding the budget and projects scheduled for 2008. So the Arab leaning toward private equity firms and hedge funds has shifted weight toward bailouts of beleaguered insolvent US banks. Going across the grain has been local infrastructure investment inside Saudi Arabia. One should note that the Saudis are doing what the United States refuses to do, invest in its own massive internal structure, one in far worse state of deterioration than the Saudi's. Then again, the US is on the fast track to Third World status.
The recent follow through on the Saudi SWF fund came in the form of criticism by the chief economist of the National Commercial Bank, the kingdom's biggest state bank. Said al-Shaikh has urged the Riyadh leaders to reduce the USDollar exposure of their invested assets. He pushes for both a managed fund and a break of the US$ peg to the Saudi riyal, directly citing both risk of loss from US$-based assets and risk of erosion in real terms from price inflation tied to the US$ peg itself. The tightly held peg has kept the front door of the House of Saud wide open to permit rampant price inflation to rush in. The economist said, "Time has come to reconsider the continued pegging of the Saudi riyal to USDollar, provided that this is done gradually, taking into account the unfavorable impact on official reserves, which are mostly denominated in dollars. [The government should set up a SWF fund] to increase the returns on investment of most government surpluses, which are currently invested in USTreasury Bonds. [The kingdom should] diversify government investment across all asset types, countries, and different currencies, to reduce risks and increase profitability... The continued weakness of the dollar and declining interest rates would shrink returns achieved by these investments. With the continuing rise of inflation rates, the real returns may become less and even risk dwindling." These are strong words stated by the top economist at the top bank in Saudi Arabia. He is setting the ideological foundation for greater diversification by Saudi investment managers, like for gold.
Several Saudi officials, such as the finance minister and central bank governor, actually claim that the US$ peg is the cornerstone of economic stability. That was yesterday; this is today. The US$ peg has been the EXACT OPPOSITE, ushering in massive price inflation. Last week, King Abdullah stressed that economic growth must be consistent with efforts to protect against price inflation. A compromise is being floated, whereby they keep intact the US$ peg, but they order an upward revaluation in the riyal currency versus the USDollar. The defacto PetroDollar standard continues to be at huge risk. If the Saudis break, look for a quantum drop in the USDollar valuation across broad currency exchange rates. They are under pressure, pretending to be best buddies with the Infidels.
CHINA & AUSTRALIA
The situation in China requires a note. The State Admin of Foreign Exchange (SAFE) director Hu Xiaolian warns about continued USFed rate cuts, saying "If the US federal funds rate continues to fall, this will certainly have a harmful effect on the USDollar exchange rate and the international currency system. [However,] the USDollar's dominant position in international currency markets is unlikely to change in the near term." The Chinese have steadily commented that the falling world reserve currency motivated the sale of some US$ assets. They urge the investment shift back to Asia or elsewhere in search of better returns. The Chinese economy posted a November trade surplus of $26.28 billion, down from $27.1 billion in October. The surplus is up 52% for the first eleven months, on an annual basis. Exports grew at 22.8% from last Nov2006, while imports grew at 25.3% from a year ago. The faster rate of imports testifies to generating domestic demand, still inadequate to weather a Western economy slowdown.
Some financial analysts call the entire Chinese bank system worse than any subprime problem. At a Wharton forum in 2005, the Citigroup Chairman for their Chinese subsidiary assessed, "The four major state owned banks in China are technically insolvent. They have weak governance, bureaucratic cultures, and staggering levels of non-performing loans." In 24 months since its successful $22 billion Initial Public Offering, the largest IPO in history, ICBC bank has a market capitalization higher than Citigroup ($120 billion). Chinese major banks have an estimated 40% to 60% non-performing loans on their books, earning a Moodys 'E+' debt rating, near the bottom of barrel. Their exposure to US subprime slime loans is a mere $13.5 billion, according to Moodys. The state owned enterprises provide funding massive projects for infrastructure and factories, compiling 65% of loan volume but accounting only for 25% of the national gross domestic economy. Their banks suffer from chronic corruption, lack of qualified staff, and credit management problems. Regardless, many Western firms pitch in for investment stakes, viewed as options on Chinese growth. Their leaders hope to grow their way out of any significant ball & chain debt problems. ICBC grew earnings by 62%, and the Bank of China grew earnings by 52%, each in the first half of 2007. A pattern is seen of papering over non-performing loans (NPL) using equity stakes taken by foreigners. Although Chinese banks such as ICBC claim the NPL ratio has fallen from 34% to 4%, Moodys points out how ledger item reshuffling is their answer, as they merely mosey NPL loans to the 'Special Mention' column in a shell game akin to US shady accounting.
Chinese credit growth in the first eight months of 2007 matched the entire 2006 year. Loans to the Chinese private sector and non-financial government enterprises run at 160% of Chinese GDP, which is kind of big. If a recession hits China, their banking system could enter a downward spiral with momentum. Nicholas Vardy of The Global Guru said, "A back-of-the-envelope calculation shows that much of China's $1.3 trillion in reserves could be eaten up by banking bailouts." Experts believe China will require another 15 to 20 years to mature in its banking system. Vardy calls Chinese banks the #1 global subprime problem.
China is not only the #1 minerals customer for Australia, but its 4th largest foreign investor with A$42 billion in projects. China's biggest iron ore trader Sinosteel has bid A$1.2 billion for Perth-based Midwest Corp in what would be the premier buyout by a Chinese firm of a metals company. A lower bid was in place by Murchison Metals, a company backed by Japanese and Korean rivals. Australians are on the defensive politically. Barnaby Joyce said, "If an Australian company tried to become involved in a key aspect of the Chinese economy, the Chinese would block it." Joyce urges the Aussie Foreign Investment Review Board (akin to CFIUS) to intervene if a Chinese state owned attempted to acquire any Aussie assets. China regards Australia as very attractive for supply source, since it is politically stable, has plentiful resources, and has proximity to China. The shipping costs paid by China are $50 less per metric tonne for iron, compared with costs to ship from Brazil. Deals continue at a steady clip. Anshan Iron & Steel entered a joint venture with Gindalbie Metals for A$1.8 billion on two iron ore projects. Citic Pacific is investing A$5.2 billion in an iron project. Aluminum Corp of China will soon embark on a A$3 billion deal with aboriginal groups in a bauxite mine and refinery. Lastly, a deal between Yilgarn Infrastructure Ltd of Australia and five Chinese companies is worth A$3 billion to develop a railway line and ocean port facilities to ship iron ore. Yilgarn chairman John Saunders said, "China is no longer interested in just being a buyer. They want to control the means of production and the transportation infrastructure."
China will continue to press onward with commodity investments. The year 2008 will mark China as the #1 gold producer, now that South Africa has fallen significantly in gold output. Soon, the Chinese government will likely purchase all of its national gold output, just like Russia. A conclusion comes to mind: CHINA IS THE PREMIER CAPITALIST NOWADAYS, as the US crackpots suffer the losing fate of their lunatic financial engineering, chronic inflation, counter-productive emphasis on war, and mindless economic policies. BUT, China has banking challenges extending to its rapid industrial expansion. The handing of the baton from the US to China will not be smooth. The music in the background is "Glory Days" by the boss Bruce Springsteen, played for GOLD and its numerous investment trombones.
THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.
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| Anonymous Coward
User ID: 358114
1/19/2008 12:06 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
The Panic Starts
Author: Jim Sinclair
Dear CIGAs,
There is no doubt the Fed and the PPT are meeting right now. A drop of over 300 points on the Dow after the Chairman of the Federal Reserve speaks publicly presages a 1000 point break in the Dow Jones Industrial Average coming quite quickly, if not tomorrow.
Unless the equity markets can be calmed, a panic is about to happen, making the statement "This is it" a horrible reality.
If the equity markets cannot be calmed then:
* Recognize this is the Formula happening like everything else much sooner and much bigger in its implications than anticipated.
* Gold will rise to $1650 as an almost immediate effect of what will be done to attempt to fend off a total panic starting to take place in general equities, therein threatening to be followed by all credit markets of all kinds.
* The funds and hotshot short term traders in gold shares will be killed by the upward explosion of the gold price about to occur.
* The PPT and the Fed will step out of gold’s way because gold is one of the tools used in 1930 by Roosevelt and in 2000 by Bush. It will be used again now on the upside.
* Gold is the only insurance there is against what all this means because a panic in equities will blow the financial system, already coming apart, to smithereens.
* All country funds would shut down on any further investments in "at the wall" financial institutions.
* The rollover in credit and default derivatives would exceed the entire foreign debt of the USA.
* The rest of the $450 trillion dollar mountain of derivatives would start a disintegration like nothing you have every seen in your lifetime.
* Consumer demand would slam shut.
* The auto industry might as well go into liquidation this coming Monday, avoiding the June 2008 rush.
* The US dollar would burn a hole in the floor going directly to .5200 or lower.
* As the dollar disintegrates gold would rocket to and through $1650 in days.
* The markets for general equities would all have to institute total trading halts every 100 points on the downside for 30 minutes each.
* All commercial call loans would be called.
* All debtors one day late on any payment, lacking grace period, would be liquidated. All debtors over one day of the grace period would be liquidated.
* It is clearly visible to anyone with eyes or a mind to think that the PPT has lost all semblance of control in the equity markets and will soon in all remaining markets.
* The commercial paper credit market which is almost dead will die totally.
* Should no emergency action take place soon, you will see an old fashioned panic of the 1929 variety.
* Just as emotional fools sell gold and gold shares, be assured that more emotional general equity fools will unload and bring the averages down more than ever in history in one day.
* Recognize this is the Formula happening like everything else much sooner and much bigger in its implications than anticipated.
* Emergency action will be all splash and theatrics but truthfully the cat is out of the bag. It buys some time but corrects nothing. It makes the Formula 100% correct.
* There now must be EMERGENCY ACTION because the Chairman of the Fed has BOMBED OUT PUBLICLY and a PANIC is about to occur. Expect EMERGENCY ACTION in days, not weeks.
If you have not protected yourself, you may only have days to do so now. |
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