The Chart above came directly from the federal reserve. It shows that late this year, "Non-Borrowed Reserves of Depositiory Institutions" will hit zero.
In layman's terms this means all cash reserves of the banks will have been lent out; there won't be any more money to lend to anyone.
If banks have no money to lend, then consumers cannot buy things on credit. Even if they could buy on credit, businesses will not be able to borrow to restock inventory or get raw materials for manufacturing. With consumers not buying and with business unable to manufacture or restock, businesses will have to layoff employees. MASSIVE layoffs. Huge unemployment.
As folks lose their jobs, they won't have money coming in to repay any outstanding debts they already have. The bad debts will take out the banks. No credit, no business, no jobs. Total economic collapse.
The only hope they have of delaying (not avoiding) this massive collapse is to change the fractional reserve rules to allow Banks to lend even more money than they have in reserves.
When they make that rule change, they will have to pump several TRILLION in cash into the economy; which will result in almost immediate hyper-inflation. Other currencies will rise sharply against the U.S. dollar resulting in all imported goods skyrocketing in price. Since we don't manufacture anything in our country anymore, these skyrocketing prices will impact everything we buy.
As people find themselves unable to afford the basic necessities of life, social chaos will erupt.
Cities, dependent upon outside sources of food and other goods, will erupt into chaos sooner than outlying areas. There will be food riots. As happens anytime a major emergency occurs, the Blacks and Hispanics will do what they always do: loot, pillage and burn.
As the cities disintegrate into anarchy, folks in suburbs will soon find themselves targets of starving, violent two-legged animals. Without food to buy or steal in the cities, the savages will move to attack the suburbs to take YOUR food and YOUR goods.
When this takes place, you'd better make sure you have enough guns and ammunition to protect yourself, your family and your property. Shoot to kill. Don't worry about the law, because there won't be any law.
Dialing 911 will be useless because the looting, violence and anarchy will totally overwhelm local, county and state law enforcement.
Whether the feds change the fractional Banking rules now or not, the scenarios outlined above will take place. The only question remaining is WHEN the scenarios will take place: In September 2008, February 2009 or at some later date after the rules change once the hyper-inflation kicks-in.
Ladies and gentlemen, I am sorry to tell you that in our lifetime we will see the literal collpase of the United States. We will see oursleves a nation gone mad. It will be a madness that cannot be restrained, but which can only exhaust itself in blood.
When the time for bloodshed comes, I want all of you to know exactly who is to blame so those people can be hunted down and dealt with. To that end, let me make clear, all of the trouble coming at us later this year and into early next year is is going to happen because of our federal government borrowing itself (and us) into oblivion.
The government was aided and abetted by rich jew bankers - the federal reserve. The jew bankers refused to stop lending to our long-Bankrupt government and even went so far as to monetize government debt so the jew bankers could earn billions in interest for themselves, even though they knew the coming social chaos would take place.
When the collapse happens, it will be time to take up arms and overthrow the government of the United States by force, violence and assassinations. The politicos who got us into this mess must pay a price so terrible that others who follow them will knnow to behave -- or face the same fate.
The jew bankers in the federal reserve must also pay the same terrible price. Slaughter would be appropriate.
Folks are already e-mailing me asking "What can I do to protect myself." The short answer is prepare now. Start accumulating food to feed yourself and your family for upwards of a full year!
Stock up on canned foods. Lots of canned foods. They don't go bad for years and the price you pay now will be a lot cheaper than if you wait.
Buy large amounts of BREAD FLOUR to bake your own bread. If you cannot get BREAD FLOUR, buy "All Purpose Flour" and also "WHEAT GLUTEN" to add to it for baking bread. You'll need yeast for the bread, so buy yeast too.
Buy large amounts of dried rice and dried oatmeal.
Buy Honey. Cinnamon, brown sugar and white sugar. Lots of white sugar. Salt. Pepper.
When the crash happens and the supermarkets are empty it will be too late. Plan now. You only have until September of this year to prepare, so get to it.
You can cook some rice, open a can of food, pour the can over the rice, heat it up and have a full, healthy meal.
At breakfast, you can cook up some oatmeal, put honey, cinnamon or brown sugar on top and have a healthy breakfast.
Buy a gravity-fed water filter system and additional filters for it.
Have at least one hand gun for each mature teenager and adult in your family. Have at least one twelve guage shotgun for your family. Have at least one hunting rifle, a .308 or 30-06 to hunt for food. Have ammunition for each weapon and make certain you and your family know how to use them all.
It's gonna get ugly, folks. Real ugly. The feds may delay it awhile, but they cannot avoid it.
Although it is likely not until late September or early October (Oct. 7, 7:10 UTC just to single out the moment) that the real crash of the economy will become apparent, there are plenty of signs about now that the design of the Not really Federal and not really much in Reserves US Banking system and the design of the Zeppelin LZ-129 seem to share common design elements.
Assuming that you remember what happened to the Hindenburg on May 6, 1937 at Lakehurst Naval Air Station in New Jersey, this email from an aware reader should make perfect sense:
"George,
After seeing this chart from the St. Louis Federal Reserve Bank
can we dispense with the nick name Helicopter Ben and just move on to Hindenburg Ben? Because to me that looks like something going down in flames more than anything else I have ever seen. Am I reading this right in the amount of money the banks have in reserve that is non-borrowed is at a fifty year low? In fact in 4 months since it entered negative territory (for the only time in the 50 years on record) it has exceeded 50 years of positive values by 50% on the negative side? Does this not mean that the banks are not only insolvent but underwater more than they were ever positive?
Well, er, I think under the Patriot Act, I can't say anything negative about the US economic system, tempting as that might be since its hijacking by corporate interests, but the Act doesn't say anything about being mum on the banksters who have watered down the purchasing power of the US dollar in the name of political expediency, free lunches, and lobbyists with reckless abandon, all the while driving the financial system onto the rocks, as I've been writing about here since 1997.
No, wait a minute. It's not as bad as you think. It 's probably much WORSE than this chart shows. Why? Because this data series doesn't even start until 1958 or so. If the series went back to the last Great Depression, we would maybe see some pattern replay. The St. Louis Fed chart doesn't go back to the Roaring Twenties.
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The Fed now finds itself between a rock and a hard place: On the one hand we need to have lots of liquidity in the financial system, and so instead of demanding high quality assets to back up borrowing at the Fed's discount window, it's 'bring whatever you have' that would otherwise send honest accountants scurrying fleeing for fear of prison terms.
If the Fed didn't have this policy, we'd already be in a Depression.
Worse? The amount of malinvestment that has been run up since the last Great Depression (which in turn needs to be wrung out of the economy before honest growth can resume) absolutely dwarf's anything in history. When this thing all goes kablooey, it will make the South Seas Bubble look like a cakewalk and the Depression like a bad weekend.
Still, what's a Fed to do? If there's no liquidity, there's no "money" (such as it is) to buy oil and the consumer goods from China, since damn near all production has been outsourced along with incomprehensible foreign "customer service" agents. WASF. Got your survival garden in?
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America is the greatest country in the world. But, it has been hijacked by corporate interests who have only one thing in mind - fattening their bottom lines based on cost-reductions and "value-engineering". Starting with the banks, they have proclaimed themselves "too big to fail" and under this mantra, the money-printers will be working day and night through a summer of brownouts and rolling blackouts, soaring food prices, whopping foreclosure increases, civil disobedience, and all the rest that comes in a 'crack-up boom' before the real story unfolds and we get to size up what a real economic abyss looks like this fall.
This is not to be apocalyptic. This is a simple trend summation.
The top US commander in Iraq said Thursday he expects to recommend further cuts in US forces in Iraq before he relinquishes command in September because of improved security.
"My sense is I will be able to make a recommendation at that time for some further reductions," General David Petraeus said in confirmation hearings on his appointment to become head of the US Central Command.
Petraeus' upbeat forecast came as President George W. Bush made a new push for public support for the war, telling army paratroopers back from Iraq that a hasty pullout would increase the chance of another September 11-type attack.
"Withdrawal before success would send a signal to terrorists and extremists across the world that America is weak and does not have the stomach for a long fight," he said at Fort Bragg, North Carolina.
"Withdrawal before success would be catastrophic for our country," Bush added.
Senate Democrats, including presidential hopeful Hillary Clinton, pressed Petraeus on how he would deal with the growing threat posed by Al-Qaeda in Pakistan, and a loss of momentum in Afghanistan.
He said more troops may be needed to pacify southern Afghanistan, but argued that Al-Qaeda's main effort was in Iraq and it was appropriate "to do everything that we can there to pursue Al-Qaeda in Iraq."
Petraeus said one of his first trips as the Centcom commander would be to Pakistan, whose new government has struck a peace deal with Taliban insurgents.
Despite the improved security in Iraq, Petraeus acknowledged that the US goal of turning all 18 provinces to Iraqi security control by the end of the year will not be met, in part because of violent conditions around Mosul in northern Iraq.
And he said provincial elections, a crucial step in Iraq's political consolidation, are likely to slip from October to November.
Petraeus said he would make recommendations on further troop cuts following the withdrawal of the last of five surge brigades in July and a 45-day period of consolidation and assessment.
"I do not mean to imply that that would be a BCT (brigade combat team) or some major formation -- but it could," he told the Senate Armed Services Committee.
"But I do believe that there will be certain assets that, as we are already looking at the picture right now, we'll be able to recommend can be either redeployed or not deployed to the theater in the fall," he said.
A combat brigade consists of about 3,500 troops.
The general said security conditions have continued to improve despite the withdrawal of three of the five surge brigades, with security incidents falling last week to the lowest point in more than four years.
A chart he provided showed "weekly security incidents" -- attacks on infrastructure, roadside bombs, sniper and small arms attacks, and mortar, rocket and surface-to-air attacks -- dropping to about 400 in early May, from a peak of more than 1,500 a year ago.
The general attributed the improvement to military operations against Iranian-backed Shiite militias in the southern city of Basra and Baghdad's Sadr City.
Petraeus said he was looking for signs of Iran pulling back support for Shiite militias, or special groups.
"We know, though, that a number of the special group leaders have gone back to Iran, as they have been put under pressure in first Basra then other areas in the southern provinces and now in Sadr City," he said.
Petraeus was joined at the hearing by General Raymond Odierno, his former number two in Iraq and the Pentagon's choice to succeed Petraeus as the top general there.
The generals' confirmation appeared assured.
Senator Carl Levin, the committee chairman, said they would bring "unprecedented continuity of senior military leadership" with "unparalleled knowledge of the situation on the ground."
The change will put Petraeus in command of a vast portfolio of security challenges in a region that stretches from Afghanistan to Lebanon, and where demand for US military forces has exceeded the supply.
He faces a reconstituted al-Qaeda leadership in Pakistan, a resurgent Taliban in Afghanistan, an emboldened regime in Tehran, political strife in Lebanon, and instability in Somalia and the Horn of Africa.
"Engagement will be a central aspect of my responsibilities as the CENTCOM commander, if confirmed," Petraeus said.
"In most of the issues we'll address, a purely military approach is unlikely to succeed and our strategy must recognize that," he said.
According to a number of sources, Mahmoud Ahmadinejad is planning to bring his first reactor on line sometime in September 2008, which is just about in line with what the Israeli Mossad had estimated back in 2003 when the full extent of Iran's secret nuclear program became known.
The Iranian announcement came on the heels of a surprise announcement by the government of Israel confirming it had entered into third-party peace talks with Syria's Bashar Assad. The surprising confirmation on Wednesday was the first acknowledged contact between the two parties in eight years, which will be mediated by Turkey. Equally surprising was a statement from the United States saying it had no objection to the talks. Previously, the U.S. had rejected any peace overtures toward Syria as long as it was sponsoring Hezbollah and Hamas. In fact, President Bush seemed to have been blindsided by the news. According to transcripts of an interview he granted to the Jerusalem Post, Bush responded to the news by stammering; "I expect an explanation, but I'm – he made a decision that he made – or no decisions have been made, except the idea of trying to get some dialogue moving, which is – and I know him well, and know that he is as concerned about Israeli security as any other person that's ever been the prime minister of Israel. And so I presume the decision is made."
Despite the White House's official welcome of the news, privately, officials were furious. The New York Times quoted an "anonymous" (of course) "administration official" who called Israel's unilateral move "a slap in the face."
While Damascus and Jerusalem talk peace, Iranian-backed Hezbollah consolidated the gains it made in fighting against government forces in the streets of Beirut and elsewhere.
After six days of mediation between Hezbollah and the Lebanese government, Hezbollah emerged a clear winner in a settlement agreement in which Hezbollah was granted veto rights over the government, affirming its stature as "the preponderant military actor and the super political power in Lebanon," according to political scientist Hilal Khashan of the American University of Beirut. Khashan told the AFP that "it was an excellent deal for the Hezbollah-led opposition and a major defeat for the U.S.-backed government." The deal was brokered by the Qatari government. The Arab League played a major part in securing the deal, with both Syria and Iran declaring their support for Hezbollah's victory. Under the arrangement, Parliament will elect as president the current head of the Lebanese Army, Gen. Michel Suleiman. Gen. Suleiman will then appoint a new government – one in which Hezbollah holds enough seats to veto any decisions it doesn't like – such as disarming Hezbollah.
Meanwhile, Israeli military sources say that Iran is continuing to ship weapons and ammunition, via Hezbollah, to the Hamas-occupied Gaza Strip, including rockets, missiles and rocket launchers. According to the Mossad, these shipments have been stepped up in recent months, reaching a peak in March-April. Using fishing boats, Iran has successfully smuggled Iranian-made 120 mm mortars with a range of up to six miles. The Mossad says that the smuggling operation is overseen by the Iranian Revolutionary Guard using Syrian ports and Hezbollah operatives.
Meanwhile, back in Israel, Prime Minister Ehud Olmert is fighting desperately to keep his job while he is under investigation by police on charges of obtaining money by fraud, breach of trust, money laundering and tax offenses, according to Haartez. And fears are rampant within Israeli circles that Olmert may be considering trading the Golan Heights in exchange for a peace deal he can trumpet to deflect attention away from his legal problems.
If one sits down and connects the dots, one ends up with a very different picture than the one being presented by the mainstream media suggesting the Syrian-Israeli talks are representative of a major breakthrough.
It is worth remembering that it was the Persians who invented chess, and Ahmadinejad seems to be controlling all the pieces. In the first place, Ahmadinejad knows that Israel will attack its reactor the moment that they take it on line. He's been arming and training Hamas to serve as its proxy in the event of war, to harass the IDF on its flanks. To the north in Lebanon, Ahmadinejad has succeeded in rearming and re-equipping Hezbollah since the Lebanon War in 2006. The Mossad estimates Hezbollah is stronger now than it was before Israel invaded. Hezbollah has succeeded, for all intents and purposes, in taking over the Lebanese government.
Hamas controls all of the Gaza Strip. Mahmoud Abbas' Palestinian Authority barely has a handle on the West Bank – and in any event, would turn on Israel the second the opportunity presented itself.
Syria's insistence on the return of the Golan Heights as a precondition for peace is a Trojan Horse – particularly considering the timing. It was only last September that Israel destroyed a Syrian nuclear reactor that was only weeks from being operational. Syria has built one of the most formidable arsenals of missiles and rockets in the region, all of them aimed at Israel. From the Golan Heights, Syria would control much of northern Israel, as it did prior to losing the Golan to Israel in the Six Days War.
Israel is therefore surrounded with Hezbollah and Syria to the north, Hamas on both flanks, with al-Qaida sympathizers flooding in through Egypt and Jordan. Everything is in place for war except the pretext to start things off.
Starting up a nuclear reactor will do nicely.
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* The estimated Federal Reserve crash date around September stated by Leo’s economic advisor, Swiss-based Italian Marco Saba.
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Leo called me up on Skype together with Italian monetary reformer Marco Saba:
First we briefly broach the subject of Leo's credibility as a Grandmaster of the Illuminati in the eyes of Mr Saba..
Then the next topics are discussed:
-The Dollar versus the Euro and that basically both are doomed currencies;
-The potential crash of the FED/Dollar in September with the Euro following suit only three months after;
-The looming danger of Bush declaring Martial Law;
-That Saba favours Ron Paul as president, with Dennis Kucinich as vice-president, because Paul may be the only one candidate suitable for implementing monetary reforms by supplanting the FED and its Internal 'Racket' Service (IRS);
Most times, when we read about "landings" or "controlled descents" it has something to do with things aeronautical or economics.
A couple of examples: An American Airlines jet makes an emergency landing in Texas when a passenger window breaks on Sunday, or the Mars lander Phoenix touches down and sends back data. Or, on the economic side, China says it is not expecting a 'hard landing' risk from declining exports and Treasury Secretary Hank Paulson in the Middle East is working to avoid a hard (or crash) landing for the US economy by convincing at least one Dubai leader, sheikh Mohammed, to says "The Dollar Peg Will Stay..."
But, speaking of airlines, the CEO of Emirates Airlines, Time Clark, who I'd expect to have pretty good visibility on matters like oil prices, is reportedly says that oil will hit about $140 this year before leveling off...a departure from the street buzz of $200 oil this year.
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Nevertheless, when one looks at Wall Street lately, the buy and hold mantra which promoted the idea of just pouring money into a 401(k) program and blinding holding through thick and thin has certainly worn a bit thin. And I don't mean with the market gyrations of Monday, particularly, although being down more than 200-points for a while can be a little disturbing for those who have voluntarily locked themselves in the wrong casino.
The thing I keep in mind is that in early 2000, the Dow hit a high of 11,723. And if you click over to the Federal Reserves own calculator which does compound inflation calculations (which in non-banker terms shows how much the purchasing power of our money is being stolen by printing more money than the nation produces in added value), you can see that the Dow needs to be at 14,667.58 just have maintained purchasing power parity with 2000!.
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Whenever I write this inconvenient number down, people look at me like I have two heads. Many start to stammer, turn red in the face, and begin flailing around for any kind of excuse to cover up for the miserable performance of Wall Street's well-oil sales machine.
"George, that doesn't count dividends or stock splits, so you can't say that!" Oh, but I do. And in most of the funds I've looked at the dividends and sp-lits about make up for the compound cost of the management fees of the funds.
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On the other hand, in 2001, I bought a small about of physical gold for $275 or so, when I saw this coming. In order to just keep even with inflation gold needs only to hit $334.97 to equal the Dow...that is if the Dow could rally to 14,667.
The lesson of history here is pretty simple, isn't it? Paper assets have lost purchasing power over the longer term (since 2000) when compared with the hard assets like gold and silver. Don't forget we bought silver around $7 in 2005, and apprised you of the purchase in July or August of '05. Based on our $7/ounce cost, silver needs only be at $7.72 to break even with inflation.
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This buying physical assets is not just a long-term strategy. Just for the heck of it, I entered the CNBC Million Dollar Challenge and threw together a 2-minutes portfolio of four precious metals stocks. So far, it's up 7.9% and my game rank is 76,587. Just holding cash (which I did in a second account for benchmarking purposes) has a rank going into today's open of 411,714.
Awesome! See how nicely 'simple single decisions' can work out? I jump ahead of 335,127 other portfolios with a simple four stock PM portfolio and simply watch money dynamics move me up. Why people don't get it is just beyond me.
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My point? What's my Point?
We're living in an age where a huge 'transformation' is shaping up that will fully impact our lives in 2009 and beyond. One of the hallmarks of that change will be the shift away from aper and into real assets and things that can produce local value.
The really smart people I know are starting to localize, socialize, and demonetize. In two words: "Get local!".
Stories about 'new survivalists' are starting to pop up all over. And here's a story on the SF Gate web site (San Francisco Chronicle) headlines "From One Rat to Antoher: How one man went from living the urban rat race to living like a desert rat."
I've been writing about voluntary Deconsumption and voluntary downsizing of lifestyles for years now, I suppose to the distain of former colleagues in the six-figure world who thought (think?) I'm nuts. That may be, and all, but life's just a slightly longer version of the CNBC game: Make make a couple of fundamental good decisions to get in harmony with the general direction of the times and then ride the elevator stress-free.
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US Economy is a National Security Crisis: 'US Needs to Raise $6 Trillion and It is Simple,' Says Visionary William Glynn
Right now, China, Russia, India and Saudi Arabia basically own the United States. Our economy is the real target of terrorists and this is our potential downfall," says Glynn. His solution is transparent and uncomplicated... a 10% solution. "If we are to prevent another Great Depression we need to pass one simple law: All pension plans, endowments, 401(k)s and the like will be required to allocate 10% of their portfolios to buy back U.S. debt and currency.
Atlanta, GA (PRWEB) June 6, 2008 -- According to Bill Glynn, the founder and Managing Director of Collective IQ www.collectiveiq.com, ranked the #1 Corporate Venture Capital Platform in the world, and author of "Left on Red" www.billyg.net the real terrorist threat to America does not come in the form of a suicide bomber or from Islamic extremists. Rather, the Achilles Heel of the United States is our economy. According to Glynn, in the aftermath of September 11th almost a trillion dollars was wiped out of the economy, and we are still reeling as a result of it.
"Right now, China, Russia, India and Saudi Arabia basically own the United States. Our economy is the real target of terrorists and this is our potential downfall," says Glynn. His solution is transparent and uncomplicated... a 10% solution. "If we are to prevent another Great Depression we need to pass one simple law: All pension plans, endowments, 401(k)s and the like will be required to allocate 10% of their portfolios to buy back U.S. debt and currency."
With more than 40 trillion dollars currently invested in these types of accounts, Glynn asserts that some four trillion dollars could be freed up in a matter of days to wipe out the national debt, buy back the $1.6 trillion in U.S. debt currently owned by China and more. He suggests that approximately one trillion dollars go into a 10-year Zero Coupon Bond with the proceeds ultimately going back to the endowments and pension plans. "Rather than seeing this as simply giving money back to the government, it's really a 10-year interest-free loan that has incredible benefits," he explains.
He believes the immediate increase in world confidence with respect to the United States, the anticipated rise in the value of the U.S. dollar, as well as the boost to the overall economy would have far reaching and dramatic impact on equity prices. "In the very near term, the 10% allocation would almost undoubtedly be offset by a corresponding increase in the value of the remaining assets in these portfolios," Glynn continues.
If this law was enacted there would certainly be resistance at first. However, Glynn confidently predicts and openly challenges anyone to refute that there would be a massive uptick in U.S. and world markets if the National Debt were paid off. "It would cause one of the county's biggest celebrations: Liberation Day! The day the U.S. took back its economic leadership before it is squandered. This plan is so simple and powerful - I would be willing to debate any politician, pundit, talk show host or Presidential candidate on its validity," Glynn says.
Glynn believes that we should be a nation of savers, not borrowers. He is also calling for an increase in the minimum wage and for 5% of all wages (up to $50,000) to be placed into low-interest bearing "deficit or economy bonds." "This would create another account with a surplus of trillions of dollars that could be used to funnel money back into the economy for infrastructure, social security, health care and more. It would put America back into the hands of Americans... not foreign entities or governments," he concludes.
About Collective IQ: Collective IQ is a Global Asset Management and Advisory Firm focused exclusively on Corporate Venture Capital. In 2007, CIQ was ranked the top corporate venture platform by the leadership of the Strategic Venture Association.
Collective IQ is supported by one of the world's largest asset management companies with US$ 600 billion under management. CIQ works on behalf of its investors and corporate partners to deliver superior returns and to commercialize disruptive technologies.
About the Book "Left on Red : How to Ignite, Leverage and Build Visionary Organizations"
Venture capitalist Bill Glynn (Billy G), ranked one of the world's top innovators by Information Week magazine, presents an insider's view of the way great businesses are built.
"Left on Red" www.amazon.com reveals how visionary thinkers and risk-takers build great companies. Bill Glynn provides an insider's view into some of the world's coolest deals in a refreshingly politically incorrect, intelligent manner. Google, Apple, and YouTube are the products of leaders who break the old rules of business to bring their radical ideas to life. Armed with a wealth of examples and innovative insights, Glynn shows entrepreneurs and executives how to navigate a business landscape often littered with great ideas and innovators who are unprepared to lead.
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Folks we're 12209 -Craig
Urgent Update: Landry "5-Minute Chart Breakdown!"
I just had a call from my stock broker friend Robin Landry with an urgent report.
"George, the 5-minute chart is in breakdown mode if I am reading it right - means that the market may close down 350 or more today. Let me explain the technical picture:
Based on the movement in the 5-minute chart, either today or early next week we are likely to go down and test the 12,269 Dow level. now, if we get through that, the next major level of support comes around 10,986. Look for the PPT to be in action late session today or early next week unless something big changes.
Then if we get through that, the 10,986 level, we could see all hell break loose and Bob Prechter could be right. We could be looking at a retest within a week or two of the 7,400 levels which came in as the 2002 lows.
"OK, what about oil and commodities?"
"George there are two wave counts on oil. One of them says the price of oil shoots up to about $150 and then comes down to around $50. But the other says that oil have an extended fifth wave which would take it up to the $300 to $500 a barrel range."
I then asked Landry what he thought about the Big Picture. One of his concerns is that if it looks like we're going to take out the 12,269 level, then the Fed will have to come in with the PPT and they will have to pump like crazy. However, if you're keeping track, I think the Fed has burned through $450 billion of their $600 billion credit facility, and a major run in the markets now, especially if coupled with another major player bankruptcy of another investment bank, would put the quality of the US dollar in serious question.
If THAT happens, there would be a huge crisis of confidence in the currency, which would give us the momentum to the downside to attack the 10,986 level, and should that fail, then the way is open for 7,400. But, because the dollar would be collapsing, and remember this is what the predictive linguistics have been forecasting, then we could get a huge burst of inflation in the commodities and gold which are real things, as opposed to notional.
Landry (email: rlandry@allegiance.tv ) is hoping, like any rational person would, that events don't work out this way. But, in case you were wondering, this would lead to the kind of hyperinflationary blow-off top in commodity markets which I've been positioned for in my personal account for a couple of months. The trick, if it happens, will be to take the commodity gains at the top and then roll in to the very defensive sectors like foreign denominated paper and US Treasuries (like Jas Jain has been in for a good long while) because at that point, after a hyperinflationary burst, we could be setting up for the long Kondratiev Wave long Winter's night.
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This is not investment advice. You own your own paper, kiddo.
So along comes a bummer of a Friday and you're planning for the long weekend when "Whap!" the market starts to slide and oil goes screaming skyward. You click over to this site at 9:45 AM and read Robin Landry's prediction of a possible close down 350-points. Today, we have to ask the sometimes difficult question: "How did you do?"
OK, the drop was the eighth worst in the history of the Dow - but I reckon we could do even worse next week, not that key support (by Landry's work, 12,269) has been broken.
I don't mind sharing my portfolio's performance. I was down $39-bucks for the day, would have actually been a small gain, but coffee dropped a bit in the commodity market after being up earlier.. What the hell, right?
My outlook on the markets for quite some time has been that a person would have to be a darned fool to be loaded up on paper assets which are little more than paper with ink - the same kind of stuff that I can crank out of my laser printer.. Of course, because I won't break counterfeiting, or any other laws that I'm aware of, I won't put "Good for all debts Public and Private" on it, although even that is disappearing with some stores now requiring credit cards in order to comply with anti-terrorism laws, but that's another discussion.
A long term chart of the S&P sure looks like a double top is in to some of our readers.
Hi George, reading your site on daily basis; thanks for the common sense and the unfiltered info. Here's my question: recently I was in Europe and I tried opening an account in a European bank (in Paris to be exact), the manager looked straight into my eyes and said that they have a directive from high above not to open accounts for US citizens and actually they have asked every us citizen who has an account with them to leave the bank (banks name is ***), very disappointed I created a havoc about discrimination, human rights etc (with bankers? what was I thinking?), then I lectured my wife (she's French) about the freedoms in our country and rotten values in Europe; a week later I'm in LA in my bank (Bank of ******) where my friend is the manager and he told me that they've just asked all euro pen citizens to clear the bank; plain and simple, to take their money and get lost; what do you thing is going on? something is in works.
Yes. It's warring currencies! What have we been telling you? $139 oil is just the start! First we hy6perinflate and then we collapse. Quite simple. The monetarists mantra "Crack-up Boom" comes to mind, eh? For recent pointers, instead of going to Europe, next time try Argentina or still, Zimbabwe where the currency has become unusable. You see, that's the beauty of digidollars. Just slide the decimal point and keep on printing....
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'The Running Man' intro
I've just had a quick thought. If one watches the beginning of the film 'The Running Man,' they will see that the economy collapses in 2017. Now folks I put it to you like this, we're seeing the likely hood of this by October this year which is 2008. Now folks please take a look at 2017, now what if we add the 1 and 7 together? We get a figure of 8! So was that some sort of coding maybe for 2008? No one else seems to have thought of this yet.
Hi George, reading your site on daily basis; thanks for the common sense and the unfiltered info. Here's my question: recently I was in Europe and I tried opening an account in a European bank (in Paris to be exact), the manager looked straight into my eyes and said that they have a directive from high above not to open accounts for US citizens and actually they have asked every us citizen who has an account with them to leave the bank (banks name is ***), very disappointed I created a havoc about discrimination, human rights etc (with bankers? what was I thinking?), then I lectured my wife (she's French) about the freedoms in our country and rotten values in Europe; a week later I'm in LA in my bank (Bank of ******) where my friend is the manager and he told me that they've just asked all euro pen citizens to clear the bank; plain and simple, to take their money and get lost; what do you thing is going on? something is in works.
Yes. It's warring currencies! What have we been telling you? $139 oil is just the start! First we hy6perinflate and then we collapse. Quite simple. The monetarists mantra "Crack-up Boom" comes to mind, eh? For recent pointers, instead of going to Europe, next time try Argentina or still, Zimbabwe where the currency has become unusable. You see, that's the beauty of digidollars. Just slide the decimal point and keep on printing....
European Banking
I reported recently about how a European bank was deliberately discouraging an American from opening an account. Seems this is becoming widespread as another reader checks in with this:
"George, I got the same treatment from an Irish bank in Vienna about six weeks ago. My wife and I have had a trust account there since 1994 and tried to open two individual ones instead. Our account rep said she talked to two supervisors and both rejected it. Said that complying with US regs was beyond them now (this from a bank that practically wrote the book on serving US customers) and that they no longer accept US clients.
We are stuck there for now. A Singaporean friend of mine said to try HSBC in Singapore. The Asians want to scoop up all the business the Europeans are tossing away."
Nice to know that even though we may not be secure from terrorism, we are at least secure from some bankers...
The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.
"A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist.
A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets.
Such a slide on world bourses would amount to one of the worst bear markets over the last century.
RBS said the iTraxx index of high-grade corporate bonds could soar to 130/150 while the "Crossover" index of lower grade corporate bonds could reach 650/700 in a renewed bout of panic on the debt markets.
"I do not think I can be much blunter. If you have to be in credit, focus on quality, short durations, non-cyclical defensive names.
"Cash is the key safe haven. This is about not losing your money, and not losing your job," said Mr Janjuah, who became a City star after his grim warnings last year about the credit crisis proved all too accurate.
RBS expects Wall Street to rally a little further into early July before short-lived momentum from America's fiscal boost begins to fizzle out, and the delayed effects of the oil spike inflict their damage.
"Globalisation was always going to risk putting G7 bankers into a dangerous corner at some point. We have got to that point," he said.
US Federal Reserve and the European Central Bank both face a Hobson's choice as workers start to lose their jobs in earnest and lenders cut off credit.
The authorities cannot respond with easy money because oil and food costs continue to push headline inflation to levels that are unsettling the markets. "The ugly spoiler is that we may need to see much lower global growth in order to get lower inflation," he said.
"The Fed is in panic mode. The massive credibility chasms down which the Fed and maybe even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets," he said.
Kit Jukes, RBS's head of debt markets, said Europe would not be immune. "Economic weakness is spreading and the latest data on consumer demand and confidence are dire. The ECB is hell-bent on raising rates.
"The political fall-out could be substantial as finance ministers from the weaker economies rail at the ECB. Wider spreads between the German Bunds and peripheral markets seem assured," he said.
Ultimately, the bank expects the oil price spike to subside as the more powerful force of debt deflation takes hold next year.
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Morgan Stanley warns of 'catastrophic event' as ECB fights Federal Reserve
The clash between the European Central Bank and the US Federal Reserve over monetary strategy is causing serious strains in the global financial system and could lead to a replay of Europe's exchange rate crisis in the 1990s, a team of bankers has warned.
"We see striking similarities between the transatlantic tensions that built up in the early 1990s and those that are accumulating again today. The outcome of the 1992 deadlock was a major currency crisis and a recession in Europe," said a report by Morgan Stanley's European experts.
Just as then, Washington has slashed rates to bail out the banks and prevent an economic hard-landing, while Frankfurt has stuck to its hawkish line - ignoring angry protests from politicians and squeals of pain from Europe's export industry.
Indeed, the ECB has let the de facto interest rate - Euribor - rise by over 100 basis points since the credit crisis began.
Just as then, the dollar has plummeted far enough to cause worldwide alarm. In August 1992 it fell to 1.35 against the Deutsche Mark: this time it has fallen even further to the equivalent of 1.25. It is potentially worse for Europe this time because the yen and yuan have also fallen to near record lows. So has sterling.
ECB in no mood to rescue us from debtadvertisementMorgan Stanley doubts that Europe's monetary union will break up under pressure, but it warns that corked pressures will have to find release one way or another.
This will most likely occur through property slumps and banking purges in the vulnerable countries of the Club Med region and the euro-satellite states of Eastern Europe.
"The tensions will not disappear into thin air. They will find fault lines on the periphery of Europe. Painful macro adjustments are likely to take place. Pegs to the euro could be questioned," said the report, written by Eric Chaney, Carlos Caceres, and Pasquale Diana.
The point of maximum stress could occur in coming months if the ECB carries out the threat this month by Jean-Claude Trichet to raise rates. It will be worse yet - for Europe - if the Fed backs away from expected tightening. "This could trigger another 'catastrophic' event," warned Morgan Stanley.
The markets have priced in two US rates rises later this year following a series of "hawkish" comments by Fed chief Ben Bernanke and other US officials, but this may have been a misjudgment.
An article in the Washington Post by veteran columnist Robert Novak suggested that Mr Bernanke is concerned that runaway oil costs will cause a slump in growth, viewing inflation as the lesser threat. He is irked by the ECB's talk of further monetary tightening at such a dangerous juncture.
The contrasting approaches in Washington and Frankfurt make some sense. America's flexible structure allows it to adjust quickly to shocks. Europe's more rigid system leaves it with "sticky" prices that take longer to fall back as growth slows.
Morgan Stanley says the current account deficits of Spain (10.5pc of GDP), Portugal (10.5pc), and Greece (14pc) would never have been able to reach such extreme levels before the launch of the euro.
EMU has shielded them from punishment by the markets, but this has allowed them to store up serious trouble. By contrast, Germany now has a huge surplus of 7.7pc of GDP.
The imbalances appear to be getting worse. The latest food and oil spike has pushed eurozone inflation to a record 3.7pc, with big variations by country. Spanish inflation is rising at 4.7pc even though the country is now in the grip of a full-blown property crash. It is still falling further behind Germany. The squeeze required to claw back lost competitiveness will be "politically unpalatable".
Morgan Stanley said the biggest risk lies in the arc of countries from the Baltics to the Black Sea where credit growth has been roaring at 40pc to 50pc a year. Current account deficits have reached 23pc of GDP in Latvia, and 22pc in Bulgaria. In Hungary and Romania, over 55pc of household debt is in euros or Swiss francs.
Swedish, Austrian, Greek and Italian banks have provided much of the funding for the credit booms. A crunch is looming in 2009 when a wave of maturities fall due. "Could the funding dry up? We think it could," said the bank.
A number of market technical letters have been forwarded to me in the past couple of days reporting that a very rare technical confluence called the Hindenburg Omen has appeared in the markets having been confirmed with Monday's action. The Wikipedia write up goes like this:
The traditional definition of a Hindenburg Omen has five criteria:
That the daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows must both be greater than 2.2 percent of total NYSE issues traded that day.
That the smaller of these numbers is greater than 75. (this is not a rule but a function of the 2.2% of the total issues)
That the NYSE 10 Week moving average is rising.
That the McClellan Oscillator is negative on that same day.
That new 52 Week Highs cannot be more than twice the new 52 Week Lows (however it is fine for new 52 Week Lows to be more than double new 52 Week Highs). This condition is absolutely mandatory.
These measures are calculated each evening using Wall Street Journal figures for consistency. The occurrence of all five criteria on one day is often referred to as an unconfirmed Hindenburg Omen. A confirmed Hindenburg Omen occurs if a second (or more) Hindenburg Omen signals occur during a 36-day period from the first signal.
Getting ahead of events, as I forget and do every once in a while - being often accused of living about 10-minutes in the future anyway, you may wish to click back to the May 21 report where I laid some of the groundwork for the problem at hand under the headline (a little more than a third of the way down the page) "$130 Oil: Meantime Here on the Hindenburg". I don't usually quote myself, but let's see how the following looks now that the Hindenburg Omen has appeared:
"The Fed now finds itself between a rock and a hard place: On the one hand we need to have lots of liquidity in the financial system, and so instead of demanding high quality assets to back up borrowing at the Fed's discount window, it's 'bring whatever you have' that would otherwise send honest accountants scurrying fleeing for fear of prison terms.
If the Fed didn't have this policy, we'd already be in a Depression.
Worse? The amount of malinvestment that has been run up since the last Great Depression (which in turn needs to be wrung out of the economy before honest growth can resume) absolutely dwarf's anything in history. When this thing all goes kablooey, it will make the South Seas Bubble look like a cakewalk and the Depression like a bad weekend.
Still, what's a Fed to do? If there's no liquidity, there's no "money" (such as it is) to buy oil and the consumer goods from China, since damn near all production has been outsourced along with incomprehensible foreign "customer service" agents. WASF. Got your survival garden in?"
As you're probably suspecting by now, all this leads to what is likely the biggest story of the day in all of the press, yet one which only a very few, like Ambrose-Evans Pritchard, International Business Editor of the Telegraph over in the UK, has been putting in print. This headline ought to scare the hell out of you:
"RBS Offers global stock and credit crash alert:"
At hand, says the article, is the potential for disaster as inflation rears its ugly head, something I've referred to as the (von Mises) Crack-up Boom.
"How bad could it be?" you're wondering; after all the PPT will save the day, right?
Sadly, likely not. Although the President's Working Group on Financial Markets has a large bundle of cash in their Exchange Stabilization Fund which is specifically earmarked for maintaining economic order in currency markets (lest oil really go to $500 a barrel), a broad based global attack on the Dollar could easily swamp the small funds the government has. The game plan is to aggressively get ahead of the problem and remain one step ahead of disaster where the size is manageable.
"Has RBS been channeling you and Robin Landry?" one early-riser wondered in an email.
Most likely not. Presumably, these group of bankers can see the handwriting on the wall as well as anyone else, which in case you missed it, features a continuing collapse of the housing market, an inflation rate of finished goods in the Producer Price Index running at an unadjusted 17+% and oil that has been testing $140 for a breakout to $150 and above.
Oh, did I mention the flooding in the Midwest which means that ultimately, the US will have less food available for export, thereby putting us further behind the eight ball in the Balance of Trade department?
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Not to put too fine a point on it, but headlines like "Mississippi River breaks through Illinois levee" and "Corn equals record high on floods, soy up" should be enough to send you scurrying to put in a fall planting in that garden I've been urging you to put in..
Beyond that, it should be spurring you to some serious "dot-connecting'.
One example would be to note that "Bush will urge Congress to lift offshore oil drilling ban". Why? Because with a big burst of inflation in the works, members of congress will no doubt see that unless we get some domestic oil flowing, times will continue to get event worse, as the US Dollar collapse which I expect to return with a vengeance over the summer and into fall, pushes the price of oil toward $300, not just the obvious $150 target that could be mere weeks away.
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Now, back to the impact of high reliance on foreign oil and devastated crops. for a moment.
The Bureau of Economic Analysis released an update on Q!-08 International Transactions on Tuesday. The short version of it is this:
"The U.S. current-account deficit--the combined balances on trade in goods and services, income, and net unilateral current transfers--increased to $176.4 billion (preliminary) in the first quarter of 2008 from $167.2 billion (revised) in the fourth quarter of 2007. The increase was mostly accounted for by a decrease in the surplus on income. In addition, the deficit on goods and net unilateral current transfers to foreigners both increased. An increase in the surplus on services was partly offsetting.
I don't know if you're awake enough to check me on this, but this sure smacks of a 5.32% quarterly change. And that pushes out to a 23% annual rate of increase.
But of course, it doesn't. It's actually much worse than that because at some point the markets global go non-linear short the dollar. Recent jaw-boning about the mythical "Strong Dollar Policy" (so mythical that the Wiki entry is basically missing) has likely about run its course, and my the solstice, I expect we'll be completing the "bounce" phase of the buck's latest advance and be ready for the next leg down on the currency, which should spark the next huge spike up in oils and metals; these things run as tides.
Thanks to the magic of compounding interest, no one wants to talk about what happens with all that US debt paper sloshing around the world, but with food now coming into short enough supply that we could actually run out of corn before the 2009 crop comes in, I suppose the RBS experts are simply stating the obvious. Which is not spoken of in US MainStreamMedia (MSM) for fear of setting off premature panic. We'll have the well-seasoned, saw-it-coming type along soon enough.
In May, Larry Matlack of the American Agriculture Movement made the case:
“According to the May 1, 2008 CCC inventory report there are only 24.1 million bushels of wheat in inventory, so after this sale there will be only 2.7 million bushels of wheat left the entire CCC inventory,” warned Matlack. “Our concern is not that we are using the remainder of our strategic grain reserves for humanitarian relief. AAM fully supports the action and all humanitarian food relief. Our concern is that the U.S. has nothing else in our emergency food pantry. There is no cheese, no butter, no dry milk powder, no grains or anything else left in reserve. The only thing left in the entire CCC inventory will be 2.7 million bushels of wheat which is about enough wheat to make ½ of a loaf of bread for each of the 300 million people in America.”
To summarize: America keeps spending more than we produce enabled by formerly willing buyers of US debt instruments. With travel on the verge of collapse due to oil prices, I'm just guessing Boeing will have a tougher time selling jets, which in turn would hurt the balance of trade. With less grain to sell, grain sales overseas will drop, and this at a time when the compound interest which we've been promising on our debt-paper is passing into the non-linear compounding stage.
Yes, it ought to be quite a site to see.
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"This guy out in East Texas is a nutjob," you're thinking to yourself. "How can anyone have such an outlook and still claim to be optimistic?"
First, let me say it's not just me that holds the "get ready for worse than bad" - it's now the bankers at RBS who see it.
Secondly, the alternative view which seems more closely linked to reality than the MSM-spoon-fed pabulum is widely and commonly available for anyone who's willing to do a little slogging around on the 'net.
One good starting point is former presidential hopeful Ross Perot's website "Perot Charts" which explains it in boardroom level charts.
I suppose it would be duplication of previous suggestions to read up on what Ron Paul and other green/libertarian/Constitutionalists have been saying about banker-owned money policies that have resulted in the highest concentration of wealth at the top in history. So much so that it's becoming obvious to the degree that CNBC has a special report coming up June 26th "CNBC Presents: "Untold Wealth: Rise of the Super Rich". No, they haven't asked to interview me, either.
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For most of us, the trick will be simply preserving our wealth and property through the coming year. And remember, this is before we get to the likely quake windows (according to the predictive linguistics team at HPH) which comes between June 21 and about September 1 with a question mark about July 7-9, and then something big just before mid-December.
Unfortunately, those events will also add to the horrific economic disaster because as we read Tuesday: "American Red Cross: Disaster Funds are depleted." National Guard forces that would normally be on hand to lead recovery efforts, I don't need to remind you, have already been serving their country in the Bush-Cheney oil wars, although there's an economic stimulus to that which can't be overlooked in that it has kept unemployment in check and resulted in massive windfalls for certain companies with connections to the White House.
I won't even try to list the unreported news about the Wars, or for that matter items like the headline "USA Military Officers Challenge Official Account of September 11" which got no traction in MSM but which pops up in places like Pakistan. So, who's got the 'free press' franchise, at least by their market claims?
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So where does this stew put us at mid week? I mean besides the headline "Fed's Bear Stearns Books Look Prime for Cooking" which leads into a good summary of Fed accounting shenanigans outlined by Jonathan Weil today. And you know there are people raising a ruckus about the NY Fed's secret meetings to dole out Fed mercy payments to the banksters of the rich?
The Fed Open Markets Committee meets next Tuesday and Wednesday with a rate decision expected out around1 2:15 PM Wednesday. We can almost take "Pass" and hold at 2% to the bank now.
Will seat belts help? Nope, not a chance. Just projecting a 23% annualized rate in the current accounts deficit means that $172 oil is a slam dunk within a year, no matter what. Unless we crash, that is. Then oil collapses along with everything else.
That sets up a wonderful window for regular working people to 'fire-proof' their life savings. Seems to me that with headlines like "European bonds fall for fifth week on Interest-rate Speculation" that we may see a window of opportunity over the course of late summer to blow out of equities and roll into government-backed bonds (and not just of the US, BTW) in order to preserve purchasing power and wealth through what could be a wildly deflationary period following what I expect will be the fall in the Fall.
Heavy Duty Weather Control
The headlines that Russia is messing about with weather control comes as no surprise, of course. But, what does is that they use sacks of cement dumped out of planes to throw particular into the atmosphere. And that sometimes doesn't work out as planned and the bags drop unopened. Concrete proof of weather control?
QUOTE
RBS stock market alert: Fund managers react
Fund managers respond to the RBS prediction of a fully-fledged stock market crash.
Fund managers have reacted strongly to the forecast by the Royal Bank of Scotland of stock market crash and warn investors not to act in haste and panic.
The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.
Stock market storm: but do turbulent times really lie ahead?
"A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist. But Richard Buxton, fund manager at Schroders, says Mr Janjuah's comments are 'alarmist'.
"If you strip out anything stocks related to oil, energy and mining in the FTSE you will see that the market is already down by 30 per cent over the past year. We are in a bear market which has been masked by the performance of those sectors."
Buxton points out that many UK shares closely connected to the slowing economy are down between 50 and 80 per cent over the year already and it is too late for investors who have yet to protect their portfolios. They will merely crystallise losses, he says.
"Yes, we are in for a tough time and there may be another sell-off but average earnings are cheap and an awful lot of the bad news is already priced in. It is too late to sell, investors need to look through the volatility - I am investing aggressively on downturns. Any falls will be temporary - the falls are simply pushing down on a spring in valuation terms."
Robin Geffen, chief investment officer at Neptune Asset Management says that he finds it 'amusing' that the grim outlook from RBS has emerged just days after the beleaguered bank completed its Rights Issue.
He echoes Buxton's sentiments. "The RBS analyst is a bit late with his forecast, about a year and half late. We have already had a bear market in many areas of the market. The guy has got the financial world confused with the real world where the consumer is real and the building of infrastructure is real. Any parallels to the stock market crash in the late 1920's are ga-ga."
Geffen argues that there is value and opportunities to be found - he has around 10 per cent in cash and is selectively adding to his portfolios.
"I still like emerging market, oil, gas and mining stocks."
The RBS report warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets.
Such a slide on world bourses would amount to one of the worst bear markets over the last century.
"Cash is the key safe haven. This is about not losing your money, and not losing your job," said Mr Janjuah, who became a City star after his grim warnings last year about the credit crisis proved all too accurate.
Yet Martin Walker, fund manager at Invesco Perpetual says the market has de-rated to such an extent that he can't envisage the market falling much from here.
"Much of the market is trading on historic low valuations, aside from the resource and basic materials. Even if those sectors fall by half it will not make a massive difference to the overall fall in the FTSE."
Walker is keen on the pharmaceutical stocks such as GlaxoSmithKline and AstraZeneca because they are uncorrelated to the economic cycle.
"There are also great opportunities to invest in companies that are growing profits and growing sustainable dividends. BT is yielding 7.5 per cent - and it is a safe yield – that's fantastic value."
Leading portfolio manager John Chatfeild-Roberts at Jupiter admits that the US economy which is teetering on the brink of a recession is a concern and that stagflation (stagnant economic growth and rising inflation) remains a real threat to all Western economies. But he is looking to invest and make the most of the volatility.
He has recently increased his exposure to Japan which he reckons is the one major economy in the world that will benefit from the re-emergence of inflation.
He adds: "The portfolios remain very underweight the UK, which is still in the early stages of a significant consumer slow down. We are underweight financials and have no direct property exposure. On the other hand, we favour a variety of energy, infrastructure and emerging market plays and think that the current risk/reward ratio of investing in good quality corporate bonds to be very favourable. We will look to increase our exposure to these securities where appropriate. We do expect volatility to pick up over the summer months and look forward to taking advantage of this across the portfolios."
When we were chatting last Saturday morning, the Dow had just closed out the week at 12,307.35. This morning, I can't help but notice that the Dow has closed at 11,842.69 for the week and if you're awake enough to handle a calculator, pencil, of still have enough mental acuity to do it in your head, that's a little more than a 464 point drop for the week.
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If you're wondering why the market took a dive, there were plenty of 'reasons' proposed on MSM outlets. One of the reasons cited was Israel's Iran War dry run, which in turn caused a bump up in oil prices, leading to headlines like "Crude oil jumps on Israel-Iran bomb talk."
That in turn led to the Russian foreign minister warning against an attack, but the price of oil paid no mind and went up anyway.
A second factor in oil's rise was the continuing deterioration of the domestic situation in Nigeria, where rebels are suggesting that foreign workers exit while they can.
And all those headlines were extra-bad for the automakers, especially when mixed in with a Standard and Poor's plan to cut the credit/debt ratings of GM, Ford, and Chrysler.
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All of which gets us around to the question "What's next?"
In a mid-session chat Friday, Robin Landry made an interesting suggestions. "George, in one of your Peoplenomics reports, maybe you should lay out what life would be like with $500 oil, $25 gas, and all the rest of what could be coming..."
He then went on to explain how the next couple of weeks will be pivotal. One wave count would have us spent a little more time at these levels, but above 11,700, and then take off with a final moonshot of the Dow to well over 14,700 - maybe even as high as 16,000 or greater, before getting to the massive collapse that will come as the world's greatest-ever paper bubble collapses.
On the other hand, if we sink through the 11,700 level, and then under 10,000, we can pretty much expect the conclusion of the decline to take us down to the 2001-2002 kind of lows (with 7,400 as a target) and perhaps even below that.
So we'll just bide our time and see what comes next. The Big Players are winding up Q2 and balancing their books.
The specific problem is that Q1 ended with the Dow at 12,262.89 and the year began from a 2007 close of 13,264.82.
Not counting dividends, the Dow has lost 10.7% of its value in the first six months of the year, something that is not being widely reported in mainstream media.
To be sure, there aren't many mutual funds that invest as the Dow, so a look at the S&P is a little more fair. It ended 2007 at 1468.36 and closed Friday at 1,317.93. So excluding dividends and the hidden fees (which Bloomberg's Mike Schneider did a fine job of reporting on this week - click for short video) the year to date decline has only been 10.2%
Not that people will be able to do anything about it, as the PowersThatBe are still firmly in control. Expect to hear the term "buy and hold" all over mainstream media in the coming few weeks.
From: President of the United States Franklin Delano Roosevelt To: The United States Congress Dated: 5 April, 1933 Presidential Executive Order 6102
Forbidding the Hoarding of Gold Coin, Gold Bullion and Gold Certificates By virtue of the authority vested in me by Section 5( of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, entitled
An Act to provide relief in the existing national emergency in banking, and for other purposes~',
in which amendatory Act Congress declared that a serious emergency exists,
I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section to do hereby prohibit the hoarding gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations and hereby prescribe the following regulations for carrying out the purposes of the order:
Section 1. For the purpose of this regulation, the term 'hoarding" means the withdrawal and withholding of gold coin, gold bullion, and gold certificates from the recognized and customary channels of trade. The term "person" means any individual, partnership, association or corporation.
Section 2. All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion, and gold certificates now owned by them or coming into their ownership on or before April 28, 1933, except the following:
(a) Such amount of gold as may be required for legitimate and customary use in industry, profession or art within a reasonable time, including gold prior to refining and stocks of gold in reasonable amounts for the usual trade requirements of owners mining and refining such gold.
( Gold coin and gold certificates in an amount not exceeding in the aggregate $100.00 belonging to any one person; and gold coins having recognized special value to collectors of rare and unusual coins.
(d) Gold coin and bullion licensed for the other proper transactions (not involving hoarding) including gold coin and gold bullion imported for the re-export or held pending action on applications for export license.
Section 4. Upon receipt of gold coin, gold bullion, or gold certificates delivered to it in accordance with Section 2 or 3, the Federal reserve bank or member bank will pay thereof an equivalent amount of any other form of coin or currency coined or issued under the laws of the Unites States.
Section 5. Member banks shall deliver alt gold coin, gold bullion, and gold certificates owned or received by them (other than as exempted under the provisions of Section 2) to the Federal reserve banks of there respective districts and receive credit or payment thereof.
Section 6. The Secretary of the Treasury, out of the sum made available to the President by Section 501 of the Act of March 9, 1933, will in all proper cases pay the reasonable costs of transportation of gold coin, gold bullion, and gold certificates delivered to a member bank or Federal reserve bank in accordance with Sections 2, 3, or 5 hereof, including the cost of insurance, protection, and such other incidental costs as may be necessary, upon production of satisfactory evidence of such costs. Voucher forms for this purpose may be procured from Federal reserve banks.
Section 7. In cases where the delivery of gold coin, gold bullion, or gold certificates by the owners thereof within the time set forth above will involve extraordinary hardship or difficulty, the Secretary of the Treasury may, in his discretion, extend the time within which such delivery must be made. Applications for such extensions must be made in writing under oath; addressed to the Secretary of the Treasury and filed with a Federal reserve bank. Each applications must state the date to which the extension is desired, the amount and location of the gold coin, gold bullion, and gold certificates in respect of which such application is made and the facts showing extension to be necessary to avoid extraordinary hardship or difficulty.
Section 9. Whoever willfully violates any provision of this Executive Order or these regulation or of any rule, regulation or license issued there under may be fined not more than $10,000, or,if a natural person may be imprisoned for not more than ten years or both; and any officer, director, or agent of any corporation who knowingly participates in any such violation may be punished by a like fine, imprisonment, or both.
This order and these regulations may be modified or revoked at any time. /s/ Franklin D. Roosevelt President of the United States of America April 5, 1933
A TOP UK credit strategist from Royal Bank of Scotland is warning clients that the US stockmarket could fall 30 per cent within three months and lead to one of the worst bear markets of the past 100 years.
Bob Janjuah, a star credit analyst who correctly predicted the credit crisis before it kicked in last year, says the global economy is on a collision course with disaster because of high inflation, oil prices and continued fallout from the credit crunch.
He says the US may see a rally into July before short-lived momentum from America's fiscal boost begins to fizzle out and the delayed effects of the oil-price spike really do their damage.
He says that the fall in US markets will be echoed in Europe and emerging markets, which would have knock-on effects for Australia.
"A very nasty period is soon to be upon us -- be prepared,'' he said. "US Federal Reserve and the European Central Bank both face a `Hobson's choice' as workers begin to lose their jobs in earnest and lenders cut off credit.''
The crunch is, he says, that authorities cannot respond by lowering interest rates because oil and food costs continue to push inflation up to uncomfortable levels.
"The Fed is in panic mode. The massive credibility chasms down which the Fed and even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets.''
"The ugly spoiler is that we may have to see much lower global growth in order to get lower inflation.''
Local pain
Chief economist of AMP Capital Shane Oliver says that if the RBS analysts' predictions come true, Australia may well suffer even more badly than the US.
"In recent times our market has tended to magnify both gains and losses on the US markets,'' he said. "When the market hit its highs in November, the US market fell 19 per cent while our market fell 26 per cent.''
"Similarly, the rally from March to mid-May saw us rise by 18 per cent compared to 14 per cent in the US.''
ANZ chief economist Saul Eslake agrees that equity markets may not be pricing in a full-blown US recession and falls could be on the cards but he says that the analyst has it wrong when it comes to central banks and their fight against inflation.
"If interest rates need to go up, they will go up. They (central banks) may have to make difficult decisions but they will make them, so I do not share the analyst's view about the credibility of central banks.''
U.S. ECONOMY TO COMPLETELY, UTTERLY COLLAPSE IN SEPTEMBER!
EXPERTS NOW SAYING WHAT I'VE BEEN SAYING FOR THE PAST YEAR!
A long read but worth every moment. This expert provides exacting technical details about why the collapse is coming and why it cannot be avoided.
He also repeats what I published on this site last week, that Morgan Stanley is warning of a "catastrophic event" and the Royal Bank of Scotland is warning of a Stock Market collapse. He reveals that both MS and RBS are inside players in the illuminati and "they know what's coming."
Dollar to fall to metals in upcoming rallies, rate hikes soon wont be able to fix economic problems, real inflation understated for years, USDX contracts plummet,why arent people fleeing from the stock market... Exchange Traded Funds are a disaster, losses from global write downs, Fed still invited to intervene in spite of failures
The dollar has once again collapsed. Get ready for the next dollar debacle and the coming rally in gold and silver which have just broken out. The elitists have lost all credibility. The would-be lords of the universe have told so many pathological lies that no one "in the know" believes anything emanating from the forked tongues of Buck-Busting, Bear-Bashing, Big-Ben Bernanke and Hanky Panky Paulson. If our Fed Head and Treasury Secretary had been characters in the Walt Disney movie entitled "Pinocchio," their noses would have quickly grown to lengths that could have been wrapped around the earth's equator several times. God would have had to reverse the earth's rotation to extricate them.
Wall Street tells us the odds favor two quarter percent rate hikes to the Fed funds rate by the end of the year. We ask whether that would be before or after the economy collapses? If before, the Fed's rate hikes will destroy what is left of our economy, and the dollar will collapse, thereby erasing any benefits from the rate hikes. If after, you will see rate cuts instead of rate hikes as the Fed attempts to save the fraudsters on Wall Street who are not even remotely close to recovering from the credit-crunch despite what the elitists might tell you to the contrary. We ask who the morons are that make up these odds, and what planet they come from. They give aliens a bad name. These index predictions are just another form of jaw-boning and disinformation.
As soon as the economy starts its final descent into Davy Jones' Locker, which is likely to occur in the very near future, the Fed and the US Treasury will unceremoniously toss the so-called "strong dollar" policy into the nearest financial dumpster in order to save the economy and the fraudsters. Accompanying the "strong dollar" policy on its way to the dumpster will be the next round of derivative toxic waste that is on its way courtesy of the upcoming surge in fallout from tanking real estate markets in a process that will see the Fed blow what remains of its general collateral in exchange for such waste. Once the Fed's general collateral is exhausted, we will be ushered into a new hyperinflationary era characterized by direct monetization of US treasuries to fund our deficits and to absorb more toxic waste as it continues to pour down on elitist financial institutions like Niagara Falls.
A few measly quarter percent cuts will do absolutely nothing to slow the acceleration of inflation, especially if the Fed keeps the M3 at current levels. Only a double-digit Fed funds rate and greatly reduced M3 could have any eventual and meaningful impact on the inflation that is built into the system for at minimum the next year and one half at levels in the area of 15% to 18%, and even then the impact will not be felt until the current baked-in inflation has run its course. Direct monetization of treasuries to replenish Fed collateral and to absorb our growing deficits will put inflation beyond the point of no return, as will the breaking of OPEC dollar pegs.
As you can see, there is no way that any of the proposed diminutive rate hikes will have a positive impact on the economy, on the dollar or on the balance sheets of the fraudsters. Therefore, there will not be any rate hikes. Any increase in the Fed funds rate would be accompanied by an economic catastrophe of epic proportions that would occur as a direct result of the raising of that rate. Any rate hike would take a year to a year and a half to have an impact on inflation. By the time the anticipated Fed rate hikes could have any kind of impact whatsoever, the economy will already be in a state of rampant hyperinflation, and would be well on its way to depression, far too late to save the dollar or the economy. Ergo, the new elitist motto will soon become: "Damn the inflation, full greed ahead!"
The Fed's and the government's lies about inflation and other economic statistics have trapped them in an impossible situation. For instance, because they have tremendously understated official inflation for so long, they cannot impose a plausible solution to fight actual inflation. Any meaningful action they might take to give people relief by lowering the level of actual inflation must be scaled down to match what they are saying about official inflation and would therefore be totally ineffective and pointless. The same scenario holds true for other economic issues as well.
As if to accentuate the collapse of the dollar, open interest on the USDX plummeted on Wednesday by a gargantuan 20,461 contracts, from 46,665 to 26,204. This also means that since last week Tuesday, when open interest was boosted by the PPT by a huge 14,393 contracts to a total of 52,520 contracts to boost the dollar and to make it look as though Big Ben really meant business about the buck, the open interest has been cut by half, with a total of 26,316 contracts having been liquidated over the course of the past week.
The last time this kind of a breakdown in USDX open interest occurred was on December 19, 2007, when open interest dropped a whopping 22,966 contracts, from 57,389 to 34,423, when the spot USDX stood at 77.587. The spot USDX then plummeted to a double bottom of 71.459 on March 17 and 71.329 on April 22, before rebounding to a recent closing high of 74.146 on June 13. This week Friday, June 20, the spot USDX has already dropped to 73.030 from its recent closing high of only a week ago as the collapse of the dollar got underway once again. Between December 19 and June 13, the closing high for the spot USDX was 77.794 set on December 20, while the all-time low was set at 70.698 on March 17. If that pattern is followed again, we could be looking at a dollar breakdown to the low to mid-67 area. Then again, we could be looking at a total collapse as hyperinflation and severe recession continue to eat away at what is left of our hapless economy. Gold and silver are headed for outer space.
We further note that as of Friday, there were 25,382 USDX futures contracts for September, 2,362 for December and only a handful for later months. There certainly does not appear to be much interest in the "strong dollar" after September, which is when the supposed rate hikes are "expected" to occur.
Gee, we wonder if it could be that traders don't believe Ben-the-Bear-Killer and Hanky Panky about the "strong dollar" policy and have a sneaking suspicion that post-election America will mark the start of the final bloodbath that will destroy the real estate, stock, bond and derivatives markets along with the US and world economies? Royal Bank of Scotland has warned of the potential for a full-fledged crash in global stock and credit markets over the next three months as inflation voraciously consumes and destroys everything in its path worldwide. Morgan Stanley has predicted a "catastrophic event" in world currency markets during the coming months as occurred in 1992 due to opposing views between the Fed and the ECB about what to do about monetary policy and inflation and due to imbalances in the ECB itself. Both RBS and MS are elitist insiders high in the food chain of Illuminist companies. They know what is coming.
The ECB is history no matter what Trichet does. If he hikes to fight inflation, the weaker members will be destroyed. If he cuts to save the weaker members, Germany, the strongest member that is carrying virtually the whole Euro Zone economy, will bolt, and the EU will be shattered by hyperinflation. Germany is the holder of most of the Euro Zone's surplus dollar forex reserves which are being destroyed by inflation. Then on top of losing purchasing power with respect to its dollar forex, Germany's citizens are fed up with inflation from a euro they view as being too weak and the vast majority of them want the Deutsche Mark back. Germans are savers and they resent having their savings destroyed by a weak euro as their wages stagnate. Germany may soon join Ireland in their political rejection of the EU and its Lisbon Treaty. Adding to Trichet's woes is the fact that if he hikes rates, and the Fed does not follow through with its jaw-boning about rate increases, which they won't, the damage to the weaker EU members will be accelerated as their exports become more expensive in the US on account of the resulting much stronger euro versus the dollar. That would make them less competitive in the US and in nation's with currencies pegged to the dollar, forcing them into tighter competition with domestic companies and with other foreign exporters of goods to the US and to other dollar-pegged economies, thereby increasing their growing trade deficits to intolerable levels. Nothing could be more positive for the US than the break-up of the EU, which will delay the evil Illuminati's plans for a one-world government for over half a century.
In reviewing the movement of the yen versus the Dow, we are astounded that every human being drawing breath on the face of our planet and that every business entity with offices located anywhere on the globe are not fleeing in terror from the general stock and bond markets along with their related derivatives. The last time the Dow closed below 12,000 (11,972.85), on March 17, the yen stood at 96.88 yen per dollar and 152.731 yen per euro. On Friday, the Dow closed below 12,000 (11,842.69) with the yen at 107.42 yen per dollar and 167.855 yen per euro. So despite yen weakness in the range of 10 yen per dollar and 15 yen per euro, the stock markets have gone nowhere. If that doesn't freaking scare you, nothing will. The carry trade can no longer carry the markets. The de-leveraging from the credit-crunch, the destruction of corporate profits, stagnant consumer spending despite the stimulus, outrageous energy and food prices, the ongoing real estate debacle, the monetary profligacy of the Fed, wars for profit and eternal deficits in our budget, our trade balance and our current account are simply too much for the markets to absorb, even with the help of the PPT. We are headed much lower. We are 100 to 200 Dow points from a total catastrophe. If gold and silver start to rally and the PPT crashes the markets with yen-hits to drain liquidity, it will be all over but the crying for stock markets worldwide.
The real catastrophe comes when elevated levels of risk push rates up despite what the Fed does with its funds rate. LIBOR is up 1% despite the Fed's lower rates and this affects mortgages, credit cards, student loans and a host of other variable rate loans that are tied to LIBOR. Higher real rates of interest will destroy principal values for corporate bonds and treasuries that are already way underwater on account of rampant inflation, and that inflation will administer the coup de grace to bonds and treasuries as everyone flees to the only real money - gold and silver. When the towel is finally thrown in on the bond and treasury markets and all that money migrates into commodities, and especially into gold and silver, you will see gold and silver move in ways you never thought possible that will delight you with shock and awe as all the money in the world pours into the tiny precious metals markets and their related shares. Already, some mainstream analysts are calling for gold prices to rise to $5,000 an ounce and beyond as investors decimated by miniscule returns in the face of hyperinflation seek to protect themselves. This latest prediction came from Schroder Investment Management Ltd., which oversees $277 billion of assets globally.
This week, the PPT tried to blow out the specs' protective derivatives by driving stocks up at the beginning of expiration week for stock index and other options. The specs struck back once again like clockwork and pounded stocks into the ground, racking up huge gains to fund the coming precious metals rally. The PPT continues to press specs who are short oil to protect metals positions, and this is partly why oil keeps dropping and popping on short squeezes that are explained away with all kinds of jaw-boning pretexts in the fane-stream media. The elitists have driven oil up while metals were suppressed to use it as a suppressive counterbalance against precious metals. This will backfire as everyone exits oil and takes their proceeds into the gold and silver pits. Stark, raving fear and the need for a safe haven from tanking markets and rampaging inflation will take over where oil left off. Resource stocks will greatly benefit from lower energy costs as oil gets tanked to hit the next metals rally, so its time to LOAD UP!!! The bottoms are in and its up, up and away!
Don't worry, be happy. The fact that the ETF's are a disaster due to the piles of gold and silver they have put into elitists hands for naked-shorting, leasing and swapping against the owners of those piles, and due to the diversion of funds away from producers' shares, is nothing to worry about. Just convert your worthless paper (ETF shares, mint certificates and leveraged futures) into physical gold and silver bullion and then take possession of it. The elitists have unwittingly drawn many into knowledge about the gold and silver markets who otherwise might have stayed clear with their ETF machinations. We can turn their ETF gambit against them! Although you have been incorrectly instructed as to how to invest in gold and silver, that is what we are here for, to tell you how to do it right. The elitists have built their position on a house of cards. Their weakness is their lack of physical gold and silver in deliverable form. If you push them, their house of cards will collapse. Only a little push is necessary. Just empty out the COMEX cupboards and the dealers vaults by taking possession, avoid the casino leverage and we can take over the markets. Then you can gamble with impunity. Fabulous fortunes will be made. If you are not sure who you can trust, call us, we'll tell you. We've been in this for 50 years. You should also consider joining Jim Sinclair's battle against naked shorting. He has some great ideas about exposing these reprobates who are stealing from us. When people find out who they are, they will be ruined and their reputations will be destroyed. You must get proactive. Do not be lazy and keep your gold and silver in paper form, unless you are buying resource stocks, which are now dirt cheap. Holders of resource stocks will be the big winners when all is said and done. The whole reason we are now in the predicament we are in is because our citizens swill beer, view meaningless sports games and watch inane television programs while their country, their economy and their freedoms fall down around their ears! Do not be like them! Go after that gold and silver like your life depends on it, because it does!!!
Regional banks are now getting hit with defaults. Huntington Bankshares, National City and Sun Trust have as much as 20% of their loans in home equity loans. The FDIC says total outstanding home equity loans total about $625 billion.
The ABC/Washington Post consumer confidence index rose 1-point last week.
The rumor is that Lehman may have to cut 20% of its workforce.
Commercial real estate investment fell 69.5% in the first four months of 2008 yoy. That is $48.2 billion versus $157.8 billion.
The quarterly CEO Economic Outlook Index fell 5-points to 74.5 in the 2nd quarter, its lowest since 10/03. They see 2008 GDP up 1.3% not 1.5%.
We stated some time ago that the losses from global write-downs and losses from the credit crisis would reach $2 trillion. John Paulson says they will reach $1.3 trillion. Finally there is someone in our league in the securities business who is willing to tell it like it is. He sees no sign of stabilization. He manages $33 billion, returned 12% ytd May and last year his fund was up 6-fold. The GAO, the Government Accounting Office, has backed Boeing’s protest against the US Air Force, and its award of a $35 billion contract to Northrop Grumman-Airbus to begin replacing Stratotankers.
The MBA, Mortgage Bankers Association, purchase index for homes fell 4.3% and their market index fell 8.7%.
Another startling revelation is that the Fed doesn’t follow normal accounting rules, rather it creates and writes its own as it goes along. Picture an accounting system where a bank never had to recognize losses on any security it holds, as long as it continues holding them. That, too, is the Fed’s policy.
Now that the Fed has taken on Bear Stearns’ toxic garbage and may have to take on more garbage in its auction exchanges of Treasuries for junk, the Fed could become a bottomless pit for garbage. In addition, the Fed’s Board of Governors can change the rules anytime it wants.
The Fed has taken on $30 billion of Bear’s bonds probably worth on average $0.40 on the dollar. To put that in perspective, the Fed’s total capital was $40.4 billion as of 6/11/08. JP Morgan Chase will lend the Fed $1 billion to absorb any losses, which is laughable. Morgan is the Fed’s biggest shareholder, so they have a sweetheart deal. If there are losses they will never be taken. They can be held on the books indefinitely at cost, never being marked to market. If they followed FASB’s rules they would have to recognize a charge against net income whenever the securities declined in value.
This is a joke and this is how the Illuminists control our banking system and our lives and reap enormous profits. This is pure accounting trickery to avoid losses.
We want to see this manual, which is held in secret. We want exposure to what the Fed is doing. A reporter asked for one under the Freedom of Information Act, received it 18-days later, so redacted it was near useless.
How can anyone have any confidence in the privately owned Fed when such things go on?
What we do know now is that the Fed is lying about almost everything it does. That considered, Congress should disband the Fed and turn operations over to the US Treasury.
The risks associated with the vast, unregulated market for credit default swaps played a crucial role in the bailout – assassination of Bear Stearns, or at least that is the excuse to further enrich JP Morgan Chase, largest shareholder in the Fed.
The question now is will MBIA, the big bond insurance company, renege on a promise to shore up a crucial unit with $900 million in capital. We do not think so. They have written $137 billion in swaps, privately traded insurance contracts. In addition, MBIA insures $670 billion in municipal bonds and mortgage-related securities. We do not see how they can survive and if we are right, many bondholders will lose billions. Losses look to be $14 billion presently. The company no longer has an AAA rating.
House prices fell again in San Diego County in May, with the median reaching its lowest level, $380,000, since 9/03. That is down 23% yoy. The peak was in 11/05 at $517,500. That puts prices down 26.5%. We predict San Diego, dependent on the area, will fall 40% to 60%. As we forecasted April’s slightly higher prices were misleading. New homes and condos have gotten hit the worst. May sales fell 51% in those two categories. Resale homes fell 3% by comparison. Builders dumbly refuse to stop building.
Sales of bank-owned homes made up 36% of all resale purchases. Re-sales of single-family homes fell 3% yoy, but prices of re-sales fell hard from $557,000 to $420,000 yoy.
In the first half of 2008, 36% of buyers got jumbo loans in May – only 17% did.
The correction for San Diego, which led the charge upward several years ago, is 40% to 50% from the bottom. That will take place over the next two years.
Fifth Third Bancorp, Ohio’s second biggest bank, cut its dividend from $0.44 to $0.15 and must raise $2 billion.
National City Bank, Key and Fifth Third have more than $65 billion in additional losses. We forecast this would spread to banks all over the country. Do not have more than $100,000 in any bank account.
Office Max will eliminate 2,700 management positions.
The CFTC said the oil market was ripe for illegal manipulative activity, and imposed limits of the speculative positions on some trades made on overseas exchanges, particularly in London. All large trades would be reported to the CFTC.
The Confidence Board’s Leading Index rose 0.1% in May, matching April’s gain.
Phoenix based real estate lender Mortgages, Ltd. will lay off 17 of their 43 employees. They have halted making new loans in commercial real estate.
Weekly jobless claims fell 5,000 to 381,000. The 4-week average of initial claims rose 3,250 to 375,250.
If you can believe this, Treasury Secretary Henry Paulson wants the Fed, which caused all of our monetary, financial and economic problems, to intervene in the workings of Wall Street firms to protect the financial system that they destroyed. They would step in to avert events that pose unacceptable systemic risk. What this really means is that the Fed will further nationalize the financial industry via consolidation in a true fascist manner. The Fed has neither the statutory authority nor the mandate to anticipate and deal with risks across our entire financial system. This is a power grab, plain and simple. This takeover has been in the works for well over a year. The Fed wants to extend its open discount window and auctions beyond September when they expire, so they can stop a bankrupt system from collapsing. The loans will be extended and Wall Street and the banks can gamble and speculate to their hearts content.
Iron Ore price up 96% in ONE day; Dow Chemicals up 25% in ONE day
The largest iron ore mining company in the world has just taken a 96% price increase for iron ore and smaller iron ore companies are talking about increases of 100% or more!
Dow Chemical has taken a price increase of 25% on many of its chemicals and other companies are talking 75% increases.
This is the beginning of "hyper-inflation." The continuing slide in value of the U.S. Dollar is causing this to happen and there's no end in sight. . . . . until the entire world economy collapses.
The reason companies are taking these increases now is because they all know the collapse will be here by September and they want to make as much as they can before all hell breaks loose.
MORE CREDIT TURMOIL-WORSE THAN WHEN BEAR-STEARNS COLLAPSED!
FRESH BATCH OF "DARK" NEWS HITS BANKS
THE WARNING SIGNS ARE NOW EVERYWHERE - GET YOUR MONEY OUT WHILE YOU CAN!
Analysts have warned that the downgrades could set off fresh turmoil -- with some saying it could be worse than March's sell-off, when Bear Stearns collapsed.
QUOTE
Bond insurer, economic woes to feed fresh credit turmoil
LONDON, June 24 (Reuters) - More credit turmoil is yet to come as further problems emerge, including a massive shift in risk from bond insurers to banks, and fresh macroeconomic risks, leading bankers and investors said on Tuesday.
Global stock and credit markets have suffered in June as sentiment has worsened, with the tone darkening this week as fresh worries about the financial system have emerged.
The FTSEurofirst 300 hit a three-month low on Tuesday, while the iTraxx Europe <ITRAC5EA=> credit derivatives index flirted with the 100-basis-point barrier for the first time since April.
"For most of the year we have seen a market contraction which is the result of over-leverage," Jan Pethick, Merrill Lynch's (MER.N: Quote, Profile, Research, Stock Buzz) chairman of debt capital markets for Europe, the Middle East and Africa, said at the Euromoney Global Borrowers and Investors Forum in London.
"Now we are in for another dose," he said, as risk held by the monoline insurers could fall back on the books of the banks.
Moody's Investors Service last week dished out multi-notch downgrades to MBIA Inc (MBI.N: Quote, Profile, Research, Stock Buzz) and Ambac Financial Group (ABK.N: Quote, Profile, Research, Stock Buzz), formerly rated triple-A.
Analysts have warned that the downgrades could set off fresh turmoil -- with some saying it could be worse than March's sell-off, when Bear Stearns neared collapse.
One of the main conduits for losses from the credit crisis has been on complex structures known as collateralised debt obligations (CDOs). Some firms, such as Merrill Lynch and UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz), built up big holdings of these structures and then had to take billions of dollars of writedowns on them.
"The big assumption was that the banks could hedge them and that hedging devices would offset the risk," said Pethick. "We have found that these devices were not perfectly hedging our risk exposures ... It's a wake-up call."
One route to hedging was to buy CDO insurance from a monoline insurer -- deals that banks and the insurers are now seeking to unwind, the Financial Times said this week.
"We didn't know the full consequences of what we were dealing with ... the monolines are not going to be as robust as we thought," he said.
ECONOMIC WOES
Beyond the financial sector, the global credit crisis has left the U.S. economy teetering on the brink of recession, with fears now building that problems could spread elsewhere, speakers at the conference said.
As the U.S. economy suffers, "we don't see where there will be another engine of growth," said Rene Karsenti, executive president of the International Capital Markets Association.
So-far resilient emerging markets could suffer too, spreading the pain from the credit crisis.
"The shoes to drop could be in some emerging markets," said Louis Gargour, chief investment officer at LNG Capital, mentioning Argentina and Iceland in particular.
He also cited India's inflation of 11 percent and GDP growth of 9.2 percent as unsustainable.
"The other question is when does the European economy go into recession?" he asked.
Gargour and Larry Elliott, economics editor of UK newspaper the Guardian, identified Spain, Ireland, Italy and Portugal as being particularly vulnerable to a slowdown.
(Reporting by Jane Baird, writing by Richard Barley; editing by Elaine Hardcastle)
NEW MODEL OF (ECONOMIC) NASTINESS
HOMEOWNERS IN U.S., BRITAIN, SPAIN SHOULD EXPECT THEIR HOMES TO LOSE FIFTY TO SIXTY-FIVE PERCENT OF VALUE WITHIN THE NEXT THREE YEARS!
MORTGAGE "CALLS" WILL WREAK SOCIAL, NATIONAL, INTERNATIONAL HAVOC
The balance of probability must thus be for a global downturn which combines the inf
Since the late 1990s, bears like myself have been forecasting a major economic downturn in the United States, but wavering as to whether it would be more like the 1930s, with price deflation and really deep economic decline, or the 1970s, with unpleasant inflation but shallower economic decline. The urge to forecast gloom and despondency continues, even intensifies, but we need a new model for the type of depression we are to enter, as neither the 1930s nor the 1970s now seems to fit the bill.
The causes of the Great Depression have been analyzed ad infinitum, and there is still not general agreement as to their relative importance. The major downward revaluation of asset prices - stocks and to a lesser extent housing and real estate - that occurred after 1929 certainly played a significant role. From the Japanese 1990s experience, it would have been likely to lead
to a decade of below-par growth, but not necessarily to a catastrophic downturn. The lack of a significant downturn after the 1987 crash and the relative mildness of the downturn after 2000 also suggest that asset price declines are a contributing but by no means controlling factor.
Other contributors to the Great Depression were the sharp move towards protectionism epitomized by the 1930 Smoot-Hawley Tariff (although the world of 1930 was already highly protectionist by modern standards), the international banking crisis sparked by the 1931 collapse of Austria's Creditanstalt and the extraordinary stupidity of the Herbert Hoover administration in raising the top rate of income tax from 25% to 63% in early 1932. Other Hoover administration activities failed to improve matters, but do not seem to have made them much worse, though Smoot-Hawley and the income tax hike together push Hoover well beyond the unlucky and well-meaning James Buchanan on the list of America's worst presidents.
The 1970s stagflation was initially caused by excessive public spending for the Vietnam war, which created a severe deficit problem, exacerbated by sloppy monetary policy, particularly around the time of president Richard Nixon's 1972 re-election. The oil and commodities price hikes of 1973 played a supporting role in throwing the world into stagflation but were largely effects of loose monetary policy in the US, Britain and Japan rather than independent causal factors. After a remission caused by president Gerald Ford's conservative fiscal policy, further monetary and fiscal sloppiness under president Jimmy Carter brought a recurrence of the problem, which was only solved by the advent of Paul Volcker to the Federal Reserve chairmanship in 1979.
The sharp eye will immediately note that there is very little commonality between the causes of the two episodes. There was no surge of protectionism during the 1970s, nor was there a sharp stock market crash such as had precipitated matters in 1929 (though stock prices declined in real terms by three quarters between 1966 and 1982, undoubtedly producing a depressing effect on the economy). There was a banking crash in 1973 in Britain, a pretty spectacular one, but nothing like the 1931-33 global cascade of bank failures. There were no enormous tax increases during the 1970s.
Conversely, US fiscal management during the 1920s had been a paragon of rectitude under Treasury secretary Andrew Mellon. There had been some excess money creation in 1927-29, but interest rates remained securely positive in real terms. Just as most of the Great Depression's causal factors were absent in the 1970s, so none of the causes of 1970s stagflation were significantly present in 1929-32.
That suggests that the taxonomy of major downturns probably has more than two archetypes, and that we should not seek to fit the current episode closely to either the 1930s or the 1970s but examine it in its own right, expecting a major downturn if it occurs to be of some third type not closely resembling either.
This time around, we certainly have had the long-term fiscal and monetary sloppiness that caused the 1970s stagflation. However, we also have had an asset price bubble that seen in certain lights looks more severe than in 1929. We currently have a worldwide outbreak of protectionism similar to that of 1930, although much less extreme, and we have a banking crisis that if things go wrong may well resemble the rout of 1931-33. With presumptive presidential candidate Senator Barack Obama proposing increases in taxation on higher incomes, we may even have the equivalent of Hoover's 1932 tax policies, although presumably the rise will be less severe than the 38 percentage point marginal rate increase that Hoover imposed.
The Great Depression and the 1970s represent extreme cases of economic downturns. The Great Depression had a gigantic economic hole (in the United States) but no inflation at all, rather the opposite, whereas the 1970s was primarily about inflation, with the economic downturns being fairly mild and confined to manufacturing (though if you were in heavy industry in 1979-82 it wasn't fun.)
Both downturns were generally felt around the world, with the 1930s downturn being severe pretty well everywhere (probably least severe in Britain although the 1920s had been pretty unpleasant there) and the 1970s one avoiding the Middle East (because of their oil revenues) parts of Latin America (Brazil had an excellent few years until 1980 or so - its problems occurred during the 1980s) and the Asian Tiger emerging markets outside Japan.
Since this time around we have most of the symptoms of the Great Depression and the 1970s (albeit in lesser degree in the case of 1930s protectionism and tax rises) we could reasonably expect a downturn that shared the nastier features of both. It would have more depth than did the 1970s downturns outside manufacturing, and it be would unlike the 1930s be inflationary. It would also almost certainly include a major 1930s style asset price decline, although part of that would be obscured by the 1970s style inflation. For example, the US house price decline currently under way is likely to be substantially cushioned by increases in nominal incomes, as households receive pay increases that do not keep them ahead of inflation but nevertheless hold them within shouting distance of it.
Internationally, the downturn seems likely to be most severe in countries and regions where asset price inflation has been most intense. In the developed world, Japan should more or less escape it, as should South Korea and Germany. None of them have had house price or stock price booms of any magnitude in the past few years. At the other end of the scale, Britain (primarily housing) the US (both housing and the remaining un-deflated stock bubble from the late 1990s) and Spain (housing again) will probably have severe downturns, as may China (primarily real estate, but also stocks and the banking system in general.)
If we believe that the downturn is likely to share some of the characteristics of the 1930s, rather than being simply a repeat of the 1970s, then it is unlikely that oil producing countries and commodity exporters will escape problems. Oil prices have been driven up to levels considerably higher in real terms than the 1970s by demand pull from China and India. If China and to a lesser extent India suffer severe downturns, then oil demand must drop off correspondingly and it becomes unlikely that the 1970s pattern of continuing high oil prices even in a recession will be repeated.
If oil prices drop sharply, the political effect on oil producing countries will be considerable, and not necessarily pleasant. The Shah of Iran basically fell because of the 1973 oil price rise. He was already overspending in 1972-3, supported largely by bank loans, then he spent with total abandon in 1974 as higher revenues had appeared to make Iran's oil wealth inexhaustible. Needless to say, he then ran out of money, as the international banking system would not provide him with sufficient funds to complete the projects he'd initiated in the bubble year. 1976 and 1977 were thus years of relative austerity in Iran, much to the fury of the Iranian people who had come to expect a bonanza. It should thus have been no surprise that revolution occurred in 1979, although robust US support for the shah might have enabled him to overcome it.
This time around, the overspending oil producers are obvious: Venezuela and Russia. Venezuela will undoubtedly get into severe difficulty once the oil price collapses. This is on balance likely to favor US interests (and those of the Venezuelan people) provided that the crisis can be leveraged to remove Hugo Chavez from the country's leadership. If he remains, Venezuela will become another Cuba, with deep repression and a suffering and impoverished populace but forming no real threat to the United States.
Russia is a much more dangerous story, being both economically and militarily more powerful. The parallels with Germany of the 1930s are disquieting, although the move to aggression in an economic downturn would presumably take the form of an assumption of further authoritarian powers by Vladimir Putin, rather than his replacement by an even more sinister figure.
However a downturn in the oil price might well cause an aggressive Russia to intervene militarily in its neighbors, use the weapon of Gazprom's gas pipelines disruptively against Western Europe and devote 25% of output to the military, as did the Soviet Union in its most aggressive periods. Should that happen, Russia would become a considerably more dangerous threat to the world than al-Qaeda could ever dream of; it is to be hoped that western leaders, particularly in Europe, recognize the danger early and effectively.
The balance of probability must thus be for a global downturn which combines the inflation of the 1970s with the severe recession and geopolitical danger of the 1930s. Not an appealing prospect.
Martin Hutchinson is the author of Great Conservatives (Academica Press, 2005) - details can be found at www.greatconservatives.com.
QUOTE
American financial fiasco could take down world economy
Triple warnings this past week: the Royal Bank of Scotland fears a steep fall in the world stock market; the bank of all banks in the world, the BIS, Bank of International Settlements, in Switzerland, said that a worldwide depression is now a distinct possibility; Morgan Stanley, a leading American Investment firm, signaled similar pessimistic messages.
So what's happening out there? Frankly, all financial institutions are in deep trouble, and the reason is the American dollar. The situation is so dire that it's not going to make a hoot of difference who becomes the next president of the United States: it's beyond the power of the rulers of the American political and economic system to curtail severe damage to its entire economic enterprise. Neither Obama nor McCain can do anything to stem the disaster that will be fully employed by the end of this year.
Part of the cause is that the USA happens to be the most indebted nation on the planet and its people the least prepared to cope with peak oil and peak food. Even now Americans throw away up to 40 per cent of the food they buy, their high-powered and fuel-thirsty automotive park cannot be converted to more efficient vehicles for many years, while their exurban lifestyle makes car-sharing and mass transport impossible for most.
So what's so inevitable of the current monetary scene?
The world's entire Gross domestic product is some $50 trillion, of which the USA accounts for about $13 trillion. However, it owes more than $2 trillion to foreigners, of which Japan and China carry about half and Great Britain some 10 per cent with the remainder divided over many countries. Canada has less than one per cent. The American public carries $9 trillion in credit-card debt and even more in mortgages. Its national debt is close to $10 trillion while its Social Security and Medicaid has a future liability in excess of $50 trillion, burdening the average USA household with debt totaling more than $600,000.
And then there are the outstanding derivatives! They grew from $100 trillion 5 years ago to $500 trillion in 2007. Warren Buffet -- the world's richest man after Bill Gates and a most savvy investor -- wrote in 2002: "We try to be alert to any sort of
mega-catastrophe risk, and that
posture may make us unduly
appreciative about the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized receivables that are growing alongside. In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."
Now, when everything that can go wrong is going wrong, this financial WMD, this weapon of mass destruction, is no longer latent but out in the open ready to kill the American economy.
According to the LEAP think tank, based in Europe -- subscriptions cost 200 Euro or $300 per year -- in the next six months all factors affecting the economy will converge, and create a perfect socio-economic hurricane.
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The root of the problem is always money, basically the US dollar of which there are trillions too many in circulations, so many that its value is decreasing, and the world doesn't know what to do with them. It's this flood of money that drives up the price of all commodities, including oil, of course. Nobody wants more US dollars, unless its value increases.
But that can only happen when the US pushes up interest rates, which will cause the US economy to die within a few weeks, as the real estate market falls to zero by lack of affordable credit, interest on Adjustable Rate Mortgage loans skyrockets, drastically shrinking consumption, and corporate failures multiply exponentially and stock markets collapse.
No, higher interest rates are not the solution. However, to do nothing is not an option either, because soon nobody will accept U. S. dollars anymore.
Basically the US has lost the ability to govern its own economic policy. Thanks to its trillions of debts, it is now powerless to avoid disaster. No wonder banks are getting nervous.
The immediate consequence of America's economic collapse will be the end of the war in Iraq, because, suddenly, as the greenback disappears as the world currency, the US will be forced to live within its means. Since the war is the most costly of all its undertakings, the troops will abruptly go home.
Curiously the WMDs -- the weapons of mass destruction -- were not in Iraq: they are in the heart of America, right on Wall Street. Pity the veterans and the wounded; there will be no money to look after them -- no pensions, no jobs, no medical care.
Eventually a new financial system will emerge, but only after a period of tremendous turmoil and pain.
It has been almost ten full months now since the Fed first lowered interest rates. If you remember at first there was a lot excitement over the Fed cuts. The DOW and Nasdaq rallied to new 52-week highs a few weeks after the first rate cut in September. The rally and promise of more Fed intervention for the market made many big name commentators extremely optimistic about the market.
But just a few weeks later the market turned lower and has been stuck in a bear market ever since. The banking problems multiplied and inflation skyrocketed with oil rising almost double in price now from where it was a year ago. The rate cuts tasted good at first, but are no longer palatable.
When thinking about the financial markets sometimes it is best to take stock of things before trying to look ahead and decide if you need to make changes to your portfolio or figure out where to look for the best investment opportunities. A lot can be learned about looking at where the market was a year ago and comparing it to today.
A year ago from today the DOW, S&P 500, and Nasdaq were all climbing higher. They had experienced a fast and furious correction that took the S&P 500 down over seven percent in February of 2007. The financial media blamed that quick correction on "credit worries," a fast drop in the dollar versus the yen, and a huge correction in the Chinese stock market. Rumors also circulated that some billion dollar Bear Stearns hedge funds were in trouble.
Over the next few months as the market went higher everyone thought that all of these problems were gone. Then the financial press started to focus on oil prices that were making new highs and the threat to inflation that they posed. In July the market peaked as talk intensified that the Fed might actually start to raise interest rates by the end of the year. Indeed Fed fund futures a year ago were pricing in rates hikes by the end of 2007.
Fed officials gave repeated speeches and statements that sounded hawkish on interest rates. At the same time though the drop in real estate prices started to pick up and the value in "subprime" mortgage securities went into collapse. Rumors abounded that several large hedge funds were in trouble.
The Fed publicly ignored all of this. At its August FOMC meeting they released a more hawkish statement on inflation to prepare the way to raise rates. The market dropped hard that day and James Cramer blasted the Federal Reserve and Ben Bernanke on TV for knowing "nothing." His statement was one of the most watched moments in financial TV reporting as people watched it millions of times on the Internet.
At that moment he was right. Within two weeks the market went into a mini-crash and the Federal Reserve lowered the discount rate in what looked like a panic move. The value of "subprime" securities went to zero. They are still being counted as "level three" assets on the balance sheets of some of the world's largest banks but in reality they are worthless and have been worthless since last August.
The Fed changed course 180% degrees in August and began to slash rates in September. It continued its rate cutting campaign and has lowered rates in the past ten months at the fastest rate than it ever has before in history - faster than it did even during the Great Depression.
Since then we have seen the "credit crisis" worsen. We have seen the economy slow down, real estate prices continue to drop, inflation explode, and the Fed print about 30 billion dollars and hand that money to JP Morgan so that it could buy Bear Stearns and prevent a potential systemic bank run.
What a roller coaster! And it ain't over yet folks. You can expect to see more volatility and the overall downward bias in the financial markets to continue the rest of the year.
What I want you to do right now though is think about the situation last year and how it compares with today. Just like in June of 2007, right now we can look back on this year and see a big correction behind us. Just like the correction in February of 2007, this one we saw in the first quarter was linked to credit problems and the unwinding of the real estate bubble. And just like then we have seen the market rally after that correction and lots of big name experts come out and declare the worst behind us. For instance Abby Cohen of Goldman Sachs claims that there is going to be a second half economic boom that will make the stock market rise much higher than it is now into the end of the year.
Things are certainly different right now than they were last year. The US is in a bear market right now whereas last year it was approaching the tail end of a cyclical bull market. That is a huge difference. But there is one important similarity that you need to focus on right now. At this time last year most people were worried about inflation and were expecting the Fed to raise rates by the end of 2007. Right now everyone is worried about inflation and the Fed has talked very hawkish about inflation over the past few weeks. Most of the talking heads are looking for the Fed to raise rates by the end of the year. This is exactly the same spot we were in this time last year!
But what if the economy doesn't pick up steam in the second half of the year and the stock market continues lower? What if more banking problems materialize? Bank stocks are making new 52-week lows and have been falling fast this month. They do not seem to be forecasting an end to the credit crunch. And really they shouldn't, because there is no sign of a bottom in real estate and all indicators I follow suggest that we won't see one into at least the second half of 2009.
I think we are likely to see a Fall shock hit the market. Last year we saw the Fed do a 180 degree turn from talking about inflation to cutting rates like a mad hatter. This year I believe we will see the Fed abandon its talk of fighting inflation to once again intervening to bail out some bank, patch up the leaky economy, or in response to a stock market mini-crash. I think the situation right now is like it was a year ago - everyone is worried about inflation, but the bigger problems lurk in the cooked books the banks are carrying. In fact we are more likely to see more problems emerge and the stock market go lower as that is the primary trend right now.
In essence the Fed is playing a game of poker. It is bluffing when it says it is fighting inflation. It has no chips left and has bet everything on the slim chance that the economy has already bottomed. If something happens to make the Fed intervene again then it will be faced with a choice of fighting inflation by raising rates, which would have the effect of blowing up the banking system, or intervening to save the banking system, the economy, and the stock market, which of course would mean more inflation, a falling dollar, and falling bond prices. The Fed has proven that if it gets trapped into such a corner it will side to help the banks and the stock market a stable currency be damned.
If this is what we see happen in the Fall then the Fed will lose all of its credibility when it comes to maintaining a stable currency.
What do you need to do? You need to do what you should always be doing - keeping your pulse on market trends to figure out the best way to position yourself to make money is. You can profit from any situation. Right now we have a bear market and that means using bear market strategies.
I will leave you with one last thought for today. In the past ten years every time the Fed has gone on a campaign of lowering interest rates it has create a "bubble". In 1998 the Fed lowered rates to bailout the Long-Term Capital Management Fund. When it did so it put excess money into the banking system. There was a lack of good investments for that money to go into so it flowed into Internet and tech stocks and formed a bubble. When that bubble burst the Fed lowered rates again to try to make the stock market go back up. As a result they dropped interest rates to an artificially low point, which created a housing bubble.
We are now suffering through the fallout of the housing bubble - the direct result is a recession, bear stock market, and "credit crisis" from banks who went nuts during the bubble.
Now remember - every time the Fed cuts rates it creates a bubble, because it puts excess money into the economy.
Well, the bubble now is now in commodities and oil. A direct result is inflation, a falling dollar, and eventually a bear market in bonds. There are opportunities to profit from this and I believe gold and precious metal stocks along with tactical short selling against he broad market and bonds will be the best way to go. If the Fed abandons this current inflation fighting talk this Fall I expect we'll see gold prices skyrocket into the end of the year.
Of course this is looking ahead and that isn't always an easy thing to do when it comes to the stock market. I can't say with certainty that this is going to happen. But I do know the technical signs in the market that will appear over the next two months if this is indeed what is going to happen and I know how I will position myself. The next eight weeks are going to be some of the most important we've ever seen in the financial markets. Not because of what will happen during these weeks, but to see how the markets are positioned once they are over. As any technical signs appear to point us the way I will draw your attention to them and explain to you exactly what they mean so that you can take advantage of anything that may happen too. From chaos comes opportunity and opportunity is another way to spell profits.
This article is an except from a WallStreetWindow subscription article. The full article contains more price projections of what I see happening for the S&P 500 and gold for the rest of the year. You need to subscribe to my free weekly newsletter to get all future articles. Just click here .
By Michael Swanson WallStreetWindow.com
Mike Swanson is the founder and chief editor of WallStreetWindow. He began investing and trading in 1997 and achieved a return in excess of 800% from 1997 to 2001. In 2002 he won second place in the 2002 Robbins Trading Contest and ran a hedge fund from 2003 to 2006 that generated a return of over 78% for its investors during that time frame. In 2005 out of 3,621 hedge funds tracked by HedgeFund.Net only 35 other funds had a better return that year. Mike holds a Masters Degree in history from the University of Virginia and has a knowledge of the history and political economy of the United States and the world financial markets. Besides writing about financial matters he is also working on a history of the state of Virginia. To subscribe to his free stock market newsletter click here .
OK, here's the word from Robin Landry - who at the moment might be called "Mr. Pucker":
"We have violated the 34-year trend line and now we are at the point at which the bearish count begins to take precedence. In other words, if the market can't recover and cross back up through the 34-year trend line, we're toast."
Many times the market will go back up and touch the trend line in what is commonly referred to as the 'kiss of death'. The very same thing happened in 1987. When I counted five waves down, and then an A-B-C rally to the bottom of the trend line.
That was the day I exited all my client's equity positions and that was five days before the 508-point down day, which was a 25% decline and today the action will be very closely watched.
If you see a rally, back up (and right now that trend line is somewhere around 11,781-82 on my computer - it will be different on others) then there is two levels to look at for hope.
We have passed the March low - the next low is the January low at 11,643. The low so far has been 11,645 - talk about testing the lows!
Now, so far, I still have a bullish divergence for the Dow. So the hope of the rally is not over ...yet. But, as I said earlier, the odds are beginning to swing toward the bearish outlook. So short term, it's 'do or die'.
If we break these levels, really the next support is down around 10,984, at which time the possibility of the bullish count being correct goes away. Simple as that - it would be the bearish count.
9,700 and then there's virtually nothing until 7,400."
So we all swallow hard and watch the tape... Landry's office number is 405-275-6162.
QUOTE
HEY FOLKS I'VE TAKEN A QUICK LOOK AND
I BELIEVE THE ECONOMY IS LIKELY TO BE
COLLAPSED IN WEEK 42 BEING
OCTOBER ON THE 18TH IN 2008
ALSO KEEP YOUR EYES ON THESE DATES:
JULY 12 - WEEK 28 AUGUST 06 - WEEK 32 AUGUST 30 - WEEK 35
PLEASE NOTE WE HAVE WEEK 42 = 4+2 = PERFECTION 6 THE SIX OF THE HEX. THE HEXAGRAM OF WITCHCRAFT. THE HEXAGON ITSELF TURNED INTO A PERFECTION CUBE BY WAY OF THE 7TH POINT (6X7=42 WEEK). REMEMBER THAT THE 6 BECOMES A 9 REFLECTED BY ISIS WHICH IS COMPLETION. NOTE HOW SATURN (EL) IS THE GOD OF CHAOS, WAR AND DEATH. NOTE HOW THE 6, 8, 11, CUBE AND SQUARE RELATE TO SATURN. NOTICE THE OCTOBER BEING THE 8(OCT)BER. NOTE THE 10TH MONTH + 18 = 28. 28 BEING THE HOLY ANKH OF VENUS/LUCIFER. IF WE USE THE 4 X 7 WE GET 28 WHILST 4+7 GIVES US 11 OF EL. NOW WE HAVE THE 18TH ITSELF THE 6+6+6 9+9=1+8(9) 999 REVERSED 666 THE SQUARING OF THE 6 PERFECTION. THUS WE HAVE A HEXAGRAM WITH ITS 6 POINTS, 6 TRIANGLES AND 6 SIDES WITH THE INTERNAL HEXAGON. THE GREATEST SYMBOL OF WITCHCRAFT. NOW REMEMBER THE HEXAGRAM ON THE SEAL OF THE DOLLAR? NOTE THE LUCIFERIAN CIRCLE AROUND IT? THE COMPLETION 9 COLLAPSE TO BRING ABOUT THE NEW BANKING SYSTEM? THE HEXAGRAM IS THE GENERATIVE PRINCIPLE FOLKS. THE SEXUAL UNION WHICH BRINGS ABOUT TWO AS ONE BUT MORE IMPORTANTLY BRINGS THE LEFT/RIGHT HEMISPHERES OF THE BRAIN TOGETHER AS ONE DURING ORGASM. THUS A CONNECTION BETWEEN CONSCIOUS AND SUBCONSCIOUS AS PROVEN BY WILHELM REICH. REMEMBER HOW THE BRAIN IS CODED BY THE CUBE OF PERFECTION. SO WE WILL SEE THE POWER OF THE SCORPION ON THIS DAY AND HIS DEADLY KISS. THE SCORPION IS LINKED TO THE MONTH OF NOVEMBER BEING 11 (EL).
-CRAIG OXLEY
QUOTE
Barclays warns of a financial storm as Federal Reserve's credibility crumbles
US central bank accused of unleashing an inflation shock that will rock financial markets, reports Ambrose Evans-Pritchard
Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall "below zero".
"We're in a nasty environment," said Tim Bond, the bank's chief equity strategist. "There is an inflation shock underway. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth."
Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5pc by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. "This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that's possible. It has lost all credibility," said Mr Bond.
The grim verdict on Ben Bernanke's Fed was underscored by the markets yesterday as the dollar fell against the euro following the bank's dovish policy statement on Wednesday. Traders said the Fed seemed to be rowing back from rate rises. The effect was to propel oil to $138 a barrel, confirming its role as a sort of "anti-dollar" and as a market reproach to Washington's easy-money policies.
The Fed's stimulus is being transmitted to the 45-odd countries linked to the dollar around world. The result is surging commodity prices. Global inflation has jumped from 3.2pc to 5pc over the last year. Mr Bond said the emerging world is now on the cusp of a serious crisis. "Inflation is out of control in Asia. Vietnam has already blown up. The policy response is to shoot the messenger, like the developed central banks in the late 1960s and 1970s," he said.
"They will have to slam on the brakes. There is going to be a deep global recession over the next three years as policy-makers try to get inflation back in the box."
Barclays Capital recommends outright "short" positions on Asian bonds, warning that yields could jump 200 to 300 basis points. The currencies of trade-deficit states like India should be sold. The US yield curve is likely to "steepen" with a vengeance, causing a bloodbath for bond holders.
David Woo, the bank's currency chief, said the Fed's policy of benign neglect towards the dollar had been stymied by oil, which is now eating deep into the country's standard of living. "The world has changed all of a sudden. The market is going to push the Fed into a tightening stance," he said.
The bank said the full damage from the global banking crisis would take another year to unfold. Rob McAdie, Barclays' credit strategist, said: "The core issues have not been addressed. We're still in a very large deleveraging cycle and we're seeing losses continue to mount. We think smaller banks will struggle to raise capital. We're very bearish - in the long-term - on high-yield debt. The default rate will reach 8pc to 9pc next year."
He said investors had taken their eye off the slow-motion disaster engulfing the US bond insurers or "monolines". Together these firms guarantee $170bn of structured credit and $1,000bn of US municipal bonds.
The two leaders - MBIA and Ambac - have already been downgraded as the rating agencies belatedly turn stringent. The risk is further downgrades could set off a fresh wave of bank troubles. "The creditworthiness of many US financial institutions will decline in coming months," he said.
The bank warned that engineering and auto firms we're likely to face a crunch as steel and oil costs surge. "Their business models will have to be substantially altered if they are going to survive," said Mr McAdie.
A small chorus of City bankers dissent from the view that inflation is the chief danger in the US and other rich OECD countries. The teams at Société Générale, Dresdner Kleinwort, and Banque AIG all warn that deflation may loom as housing markets crumble under record levels of household debt.
Bernard Connolly, global startegist at Banque AIG, said inflation targeting by central banks had become a "totemism that threatens to crush the world economy".
He said it would be madness to throw millions out of work by deflating part of the economy to offset a rise in imported fuel and food prices. Real wages are being squeezed by oil, come what may. It may be healthier for society to let it happen gently.
QUOTE
QUOTE
Craig Oxley:
HEY FOLKS I'VE TAKEN A QUICK LOOK AND
I BELIEVE THE ECONOMY IS LIKELY TO BE
COLLAPSED IN WEEK 42 BEING
OCTOBER ON THE 18TH IN 2008
QUOTE
Outsider:
Week 42 also includes OCTOBER 13th the date of the Masonic Corner Stone laying ceremony of the WHITE HOUSE and also important for its TEMPLAR associations, which may indicate the possibility of FALSE FLAG attack against it on this date.
Both the Pentagon and WTC were attacked on the date of their Masonic Corner Stone being laid, on September 11.
This makes OCTOBER 13th one of the most likely dates for a FALSE FLAG attack on the WHITE HOUSE, wether it occurs this year, or a future year.
For what its worth, some astrologers on the internet are predicting that there will be NO US ELECTIONS in 2008, based on their reading of the planetary alignments at that time.
Craig, I believe you have very probably correctly identified week 42 as being the week in which the main economic crash will occur. Number 42 is a hugely significant number. See below for the reasons why...
QUOTE
The number 42 appears in various contexts in Christianity. There are 42 generations (names) in the Gospel of Matthew's version of the Genealogy of Jesus; it is prophesied that for 42 months the Beast will hold dominion over the Earth (Revelation 13:5); 42 men of Beth-azmaveth were counted in the census of men of Israel upon return from exile (Ezra 2:24); God sent bears to maul 42 of the youths who mock Elisha for his baldness (2 Kings 2:23), etc.
42 also occurs in other religions. There are 42 principles of Ma'at, the Ancient Egyptian personification of physical and moral law, order, and truth. In the judgement scene described in the Egyptian and the Book of the Coming/Going Forth by Day (the Book of the Dead (which evolved from the Coffin Texts and the Pyramid Texts)), there are 42 Gods and Goddesses of Egypt, personifying the principles of Ma'at, who ask questions of the departed, while Thoth records the answers, and the deceased's heart is weighed against the feather of Truth (Ma'at). These 42 correspond to the 42 Nomes (Governmental Units) of Egypt. If the departed successfully answers all 42, s/he becomes an Osiris.
In Judaism, the number (in the Babylonian Talmud, compiled 375 AD to 499 AD) of the "Forty-Two Lettered Name" ascribed to God. Rab (or Rabhs), a 3rd century source in the Talmud stated "The Forty-Two Lettered Name is entrusted only to him who is pious, meek, middle-aged, free from bad temper, sober, and not insistent on his rights". [Source: Talmud Kidduschin 71a, Translated by Rabbi Dr. I. Epstein]. Maimonides felt that the original Talmudic Forty-Two Lettered Name was perhaps composed of several combined divine names [Maimonides "Moreh"]. The apparently unpronouncable Tetragrammaton provides the backdrop from the Twelve-Lettered Name and the Forty-Two Lettered Name of the Talmud.
42 is the number with which God creates the Universe in Kabalistic tradition. In Kabbalah, the most significant name is that of the En Sof (also known as "Ein Sof", "Infinite" or "Endless"), who is above the Sefirot (sometimes spelled "Sephirot").[5] The Forty-Two-Lettered Name contains four combined names which are spelled in Hebrew letters (spelled in letters = 42 letters), which is the name of Azilut (or "Atziluth" "Animation"). While there are obvious links between the Forty-Two Lettered Name of the Babylonian Talmud (see further up this page) and the Kabbalah's Forty-Two Lettered Name, they are probably not identical due to the Kabbalah's emphasis on numbers. The Kabbalah also contains a Forty-Five Lettered Name and a Seventy-Two Lettered Name. http://en.wikipedia.org/wiki/42_(number)
QUOTE
It should also be noted that 42 days is the detention limit which people can be held without charge in the UK.
QUOTE
WORST WEEK SINCE THE GREAT DEPRESSION OF 1929
WORST JUNE SINCE THE GREAT DEPRESSION OF 1929
Week 26 which we can flip to get a 29 giving us 2+9=11=EL=CHAOS/WAR/DEATH or 2x9=18=666.
When asking Western school children about the significance of Waterloo, the answer will be something along the lines of ‘the decisive battle between Napoleon and an English lead European coalition’. In fact, the future of the European continent was perceived to depend upon the battle of Waterloo. If Napoleon won, France would have been confirmed as the undisputed master of Europe. If Napoleon was beaten, England would have become the leading power in Europe and greatly expand its sphere of influence.
What Western school children are not taught - for obvious reasons - is the much bigger story behind the official narrative, the story of one of the biggest frauds in human history. Nathan Rothschild, the head of the English branch of the Rothschild crime family, took advantage of his advance knowledge of the outcome of the battle by tricking the London Stock Exchange into believing that Napoleon had won. The resulting crash of the Exchange enabled Nathan Rothschild’s agents to buy the entire London stock market for a Penny in the Pound and seize control of the Bank of England.
This shameless fraud was ruthlessly repeated in 1929. The private owners of the U.S. Federal Reserve, Rothschild subsidiaries J.P. Morgan, Citi Bank and Chase Manhattan Bank were awash with money earned by financing World War I. Using their market power, Rothschild’s agents first engineered an artificial boom in the stock market, tricking smaller banks and private investors into putting huge amounts of money into the stock market and then deliberately crashed it, enabling the Rotschild agents to buy most of the U.S. stock market. The ripple effect of the New York crash also enabled Rothschild agents in other countries, such as Germany, to buy local corporations at a fraction of their actual value.
Eighty years later, it looks like our ruling psychopaths are at it again. They are systematically destroying trust in the U.S. dollar, causing holders of large amounts of greenbags to sell them. At the same time, the Rothschilds are preventing the European Central Bank from printing sufficient Euros for U.S. Dollar owners to exchange all of their holdings into Euros. That way Dollar owners are forced to buy gold instead, causing the gold price to explode.
Simultaneously, the Rothschilds are using their influence on the media sector to spread rumours of an imminent crash of the U.S. Dollar and international stock markets. As per usual, in the day and age of infowar, those rumours first started in the alternative Internet based media, only to spread into the mainstream business media. Last week’s ‘global stock and credit market warning’ of the Rothschild owned Royal Bank of Scotland means that the next Waterloo must be imminent.
All it takes is a trigger such as a thwarted USraeli attack on Iran or the blocking of the Persian Gulf for oil transports, followed by a major stock sell-off by Rothschild agents. Once the world’s stock and credit markets have completely crashed, the price of an ounce of gold will be in the thousands, enabling the Rothschilds and other owners of large gold holdings to buy the market for a fraction of their true value.
Andrew Winkler is the editor/publisher of Sydney based dissident blogs ZioPedia.org, Jews Anonymous and Power of No . He can be contacted at andrew@therebel.orgThis e-mail address is being protected from spam bots, you need JavaScript enabled to view it .
Now and then, this here web site has been called by various deniers of fact, a 'doom and gloom' site. The reason goes to the idea that "No one in their right mind would focus on 'worst case' outcomes unless they were a little crazy." If that's your opinion, your welcome to it, because the study of non-traditional economics I practice is no different that dozens of other professions, most of which are considerably more 'respectable'.
Take airline pilotry, just as a for instance. Do you want to be driven from point A to point B by someone operating at the precise limit of their abilities on a ceiling and visibility unrestricted (CAVU in hanger-talk) day? Is there a group of pilots that really train for the worst? You bet! They all do. I'd opt for the PIC (pilot in command) being an ex-fighter jockey turned sky bus driver who still gets up and wrings out a Citabria on weekends, or my person favorite, the A152 Cessna Aerobat, thanks.
Or, would you like to be operated on by a surgeon who was operating (on you) at the limits of his or her professional training, not knowing having any tricks up their sleeve in the event they "Ooops! Nicked an artery there, hemostat, please?" Again, even if it's minor surgery, I would take the doc who has 4-years of front line combat experience, or someone who's put 5-years in as a trauma doc in a high volume big city ER, over the "artiste" who is genius-level in specialty but lacks breadth and exposure to the worst of the worst-case possibilities. Stuff happens even, or maybe especially, in OR's.
Yet, somehow, when we get into the area of finance, and the now 11-year weather-eye this site has cast toward the storm clouds on the financial horizon, training for the worst somehow suddenly turns into a bad thing and I'm labeled an alarmist. (Nutjob is better, thanks)
Folks don't want to read the fine print that stocks and bonds can and do lose money, which you may have figured out by checking your account balances last week and today. And the few who read that don't want to believe or act on it. Go figure.
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Several weeks ago in one of my subscriber Peoplenomics newsletters, I outlined a "worst case" view for readers. I opined that we should all be setting up contingency plans for Dow 7,400. I reiterated that my long-time broker friend Robin Landry had gotten his managed accounts out of stocks and into bonds or cash on the sidelines two months ago based on his market models.
I've even gone so far as to admit that Jas Jain is right about rolling into bonds, but he may have been early. Time will tell on that, especially if we get one last serious bounce before the MOAC arrives this fall. (The MOAC I refer to is the "mother of all crashes" if you dozed off during earlier reports).
With that in mind, I talked Monday after the close with Robin Landry about what he expects this morning - and going forward...
"I expect the market to open down this morning a hundred or so points, and then we'll really begin to tell if the panic is setting in and we're heading for the test of the 10,984 level, which as I said yesterday is the real level at which the bullish count fades away. That wouldn't preclude a bounce from some area down here from an overbought condition, but there would really be no support once we go through that 10,984 area until the 7,400.
There will be some little rallies but no meaningful things.
So my prayer is that we turn before we get there but as I tell everyone, I believe in God, but I'm not sure He worried about levels in the Dow Jones Industrial Average.
There's end of the quarter window dressing. This is the time that the 10 984 could get a really good test. "
Landry's view may be that of an optimist compared with a knowledgeable market player in Europe who has shared some outlooks with me from time to time. As this morning's headline suggests, his really, really bad news is that the worst case now brings a Dow under 2,000 into view. Yes, you read that right - the MOAC would have 7,400 as a bounce point on the way to the near 'death of stocks'...
"George,
Have you checked your 1929 overlay lately?
1:1 since Oct 10 in price % DJIA, not time but price. According to that we should get a "snapper" today...(one last one) so lets see...(wouldn't trade on it, but lets keep on the look-out- today was a bit much..
Laundry is right, if we don't revisit in fact there are only two more ref points:
11, 440 (for the big 5-7% bounce, we touched 11454 today and missed out on it on Bear Stearns day due do FED discount manip on 3/17)) see 1929... and 9,500 for an interim stop then 7300 -9,100/9200 and 7,400 again.
Your head will be spinning... back to 10,900 and see you at 1,618 there after (Dow that is not SPX)...
All this to be completed no later than new years eve 2009 (that would be the latest date) in fact, most if it might be done in a year...The only thing the FED (Ali and Ben) achieved is to mess around with the time window by first hiking (delay) into May 06 and then lowering (raising expectations) more delays since July 07. They are part of the problem and not the fixers that they make us believe.
After that we will have "Obama Air" and "Billary Banks", not their fault, but their only choice...communism wandered from Moscow to the US of A.
You also will see that there is no "PPT" cause they will be curiously absent...(never were there in the first place)...They always make noise when the pressure is greatest (just like journalists give people what they want to hear- they are part of the system/universe, not outside it, but the public doesn't get it, otherwise they would hang from the proverbial tree , and my hunch is that might well happen when the people see the emperors have no clothes:
Sample Soc Gen cut = end of wave 3 Bear sterns surprise = end of wave 5 (look at SPX its clearer than Dow) April cut = near the end of wave II big (ABC up) and yesterday no action = acceleration, the ammunition is gone - poof!
The bureaucrats listened to the siren calls of WS and shot all their powder on the credit crisis but that was only part one, what they forgot is that there will be a nasty century recession on top of the credit crisis... To mind comes Jordin Sparks' song: " NO AIR" ....to breathe..."
Oh, oh. One of the interpretations of the predictive linguistics that have reminded us that October 7th at 7:10 is the center point for an emotional event that seems to be largely economic in content - the MOAC kind of thing) is that 7,400 this summer, then a bounce and fall collapse scenario which could push the Dow under 2,000 would fit perfectly with the expectation of this European contributor.
Needless to say that with subscriptions open to the next predictive linguistics run from www.halfpasthuman.com ($240 for what's usually a 7-part 7-8 week run) we'll be watching closely as immediacy values build getting closer to the 'event' and share what we are allowed from the series.
One macro-level view: The reports have been labeling 2009 as the year of 'transformation'.
It doesn't take too many brain cells to figure that a Middle East Mistake, with resulting $500-$1,000 oil, and a Dow of 2,000 would do a fair bit of 'transforming'.
Social fallout of this approach to 'transformation'? Oh, yeah. I can almost see the Billy Bob Thornton character reading a year-end brokerage statement this fall and saying "Yep, yep, yep..." as he reaches for....
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Bear with us: A Stock Mortem
POST MORTEM - From the Latin, after death.
STOCK MORTEM - From the Ureism, after the Friday close..
"It could have been worse" is about the best face that can be put on it, and even that would take a couple of shots of Jack with a beer chaser to blurt out without choking up for most folks, especially among the nearly 'grays' who have bought into paper assets as a means of holding value long-term. A dodgy proposition, at best, as I've mentioned.
Wrong on much of his work, at least Marx got 'owning the means of production' right. This was not a good week for the sheep of cannibal capitalism...
Besides breaking a 34-year trend line from the 1970's (varies by who's doing the counting, but it's around there), the closing Dow of 11,346.51 compared with last Saturday morning's 11,842.69. That's just 3.82 points from being a 500-point loss for the week. Close enough for a Saturday morning chat.
The truth of the matter is there's a simple reason for this week's rout: More sellers than buyers, a condition exacerbated by the end of quarter jockeying as fund managers want to show something other than the truth of this year's performance. And that is?
On December 31, 2007, the Dow closed at 13,264.82, so if you're pushing calculator buttons and worried about your retirement plans going "Poof!", you ought to come up with a drop of 1,918.31 for the year-to-date. That's only a 14.46% decline in the Dow, but I should remind you (if I can with a straight face) that dividends by the Dow 30 would soften that a bit. You may have figured out that's about as useful as KY with a locomotive.
On the other hand, flipping over to the www.Kitco.com chart site, and not to rub salt around in it, but the close of the 'yellow dog' was $833.30 on December 31, 2007. That same chart set reveals 926.80, although they may be having an issue with updating. www.ino.com reports the last trade on August gold was at$930.90 or $931.30, depending if you wand 100 ounces from the CBOT with an August delivery, or a NYMEX August contract.
Even using the Kitco figures, lowest of the group and closest to spot, you'd be looking at an 11.2% gain for the year to date.
The Blame Game
The conventional wisdom - shunned around here - is that a bear market is a decline of 20% - and to be sure, this market is there,; it's a bear.
Recall the 52-week Dow high is showing as 14,280 and the requisite 20% off that would put the Dow around 11,424...and since the Dow closed well under that this week, you're probably wondering where headline writers are getting their gumption to refer to this as the "brink of bear market" as in the Bloomberg headline "U.S. stocks slump, Pushing Dow average to brink of bear market".
"Gee, George, Maybe they are talking about the S&P, or something..."
Yah think? Let's test that theory, shall we? 52-week high for the S&P 500: 1,576.09 so 20% off that would be...1260.87. Take a gold star...that's why it's not officially a 'Bear".
Think the market can lose 1.4% next week? Think McDonalds might serve a burger today?
End of quarter portfolio cleaning aside, what's at fault? Take your pick of the headlines:
"Credit scores hit by card limits"
":Libya's threat to cut oil sends out the jitters"
"Stocks slump on oil, earnings news"
"Consumer confidence nears all-time low"
On this last, it's the worst levels since April and May of 1980. But, maybe it was actually worse in the last Depression. They only started measuring in 1952.
Yes, the mortgage market has problems, yes oil is expensive, and yes, the dollar is still overpriced relative to the goods and services produced by America and traded with the rest of the world - especially if you drop out financial products from the mix. Might want to save some for paper mache, though.
Is there a long term fix and a way to get America back on a sound footing? Oh sure. Go to a real currency with direct convertibility, and I'm not talking gold and silver. This weekend for Peoplenomics.com subscribers I explain how a BTU-based currency, set initially based on purchasing power parity and featuring a deliverability attribute, would thin down the Fat Cat Bankster system in no time.
Delivery clauses honesty, and without it you end up with things like....oh, the ABX maybe?
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We're in a world where BTU's are the most important underpinning of society, whether they come from oil, wind, solar, gas, or cord wood and food. A calorie or BTU-based currency system with absolute deliverability solves a lot of problems, unless of course, you live in Midtown and are a calorie sink. You might consider honest work, for a change...
Packaging financial product with a side order of carbon credits just perpetuates the banker class. What the world needs is honest trade and a BTU/caloric system with deliverability would thin down the banking model which has been on a Ponzi-like run for a long time - but more on this for subscribers.
More proof that BTU's rule? Oil hit over $142 this week.
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Fortis is a large bank and insurer in the Netherlands and Belgium. It took over ABN Amro last year, together with RBS and another bank. Last Thursday, its share lost 17% because Fortis attracted foreign capital.
I was shocked when I read the following, which was brought out 4hours ago:
American 'meltdown' reason for money injection Fortis.
BRUSSEL/AMSTERDAM (DFT) - Fortis counts within some days up to weeks on complete collapsing the American financial markets. That explains interventions of Thursday to the serial according to the bank insurer to reinforce itself with €8 billion. „We are on the nippertje ready. It goes in the United States much more badly than thought, Fortis-chairman Maurice say lip paunch, which continues that top man Votron stays on. Fortis expect bankruptcies under 6000 American banks which have cover now little. „But also Citigroup, General engines, there start complete meltdown in the US. Fortis picked up yesterday €1,5 billion with aandelenemissie. End previous year had Belgisch-Nederlandse the concern €13 billion to new shares spend for the adoption of ABN AMRO, for which the €24 billion paid. lip paunch bases its care on conversations with bankers. „Two months suffered did not know we that it goes badly this way in America. And it still much will go more badly. We have to a thick mattress necessary the coming eighteen months pass when we can introduce ABN AMRO. Two weeks suffered communicated the American matter bank and consultant of Fortis Merrill Lynch that certain €6,2 billion extra to capital necessary were. THE VEB required yesterday clarification of Fortis: top man Jean-Paul Votron kept by the end of April full that Fortis did not need the capital market after purchase of ABN AMRO on. In a year €30 billion to grant value have been destroyed. After Votrons last consent the rate of the share with 19.4% plummeted, already it climbed yesterday with 4.4% up to €10,65. The enormous disorder around the bank insurer has especially stocked at our zuiderburen in Belgium as a bomb. Whereas the ophef sets limits in the Netherlands to the financial world, it is at our zuiderburen the conversation of the day. The bank not only dominates the street picture there, moreover but has been rockly-hard found by the mokerslag for Belgian volksaandeel hundred thousands small beleggers. All Belgian newspapers opened yesterday with heuse rampenkoppen, in which the free fall of the bank insurer became broad uitgemeten. Fortis crasht', calamity day for Fortis' and Fortis lose 5.3 miljard', this way opened three authoritative newspapers. The panic around the concern is concerning the border even this way large that the national supervision holder tried CFBA forced reassuring words speak itself direction the become desperate savers. „The need seizure of Fortis is run no reason to the bank and your money eraf CFBAwoordvoerder to obtain, thus. „Meet the bank all legal requirements, but themselves simply very sharp aims have put. Maurice lip paunch claimt that all large shareholders yesterday evening unanimously support to „has promised. Just like in the Netherlands the arrows aim especially at top man Jean-Paul Votron, who seems himself have strained oneself lifting heavily to the adoption of ABN AMRO. But whereas the inhabitant of brussels in the Netherlands is called its bonus of €2,5 million one requires pay in Belgium is departure. Which goes wrong such large, must carry the impact and therefore dismissal to take, thus President Huybregts of the Flemish federation of placement clubs and Beleggers. The fall of the share is for him an affirmative that the adoption of ABN AMRO much too expensive and was timed badly. „The former shareholders of ABN AMRO take a bath in champagne, emphasise Huybrechts now. „Which goes wrong large, must go away. Fortis are real volksaandeel and with that faith you can deal not recklessly. Also the Belgian newspaper the standard is rock-hard concerning the top man: „The credit crisis has met all banks, but it is no excuse. Fortis the much have decreased more sharply, thus commentator. „Fortis have always denied that there still a capital increase came. That was therefore or leugens, or inexperience. Both are just as terrible, thus Votron must keep the honour to themselves. He is some which something has deserved to the complete operation. According to the Belgian mediums want announce to Fortis Thursday that the bonus of Votron would be crossed out, but this has not happened at the last moment nevertheless. Also it is already very speculated concerning its succession, where especially the name of Filip Dierckx falls. Votron themselves want know of no districts. „The shareholders stand behind me and also in the top of the concern have I only support got operation set up for these by me, thus under fire located Fortis-topman. Also he rejects the terugstorten of the meanwhile controversial bonus resolutely. „What I do with my money, are my matter. The bonus had do nothing with ABN AMRO, but concerned the year 2007, thus Votron. The top man has been, however, prepared receive a part of its salary in Fortis-stukken. Moreover Votron can count still complete on chairman lip paunch, which denies that the bank has himself on the adoption of ABN AMRO verkeken. „Votron the top man remains simply. At this moment intervene, which is difficult that is real leadership show.
BRUSSEL/AMSTERDAM (DFT) - Fortis rekent binnen enkele dagen tot weken op het volledig instorten van de Amerikaanse financiële markten. Dat verklaart volgens de bankverzekeraar de serie ingrepen van donderdag om zich met €8 miljard te versterken. „We zijn op het nippertje gereed. Het gaat in de Verenigde Staten veel slechter dan gedacht”, zegt Fortis-chairman Maurice Lippens, die volhoudt dat topman Votron aanblijft. Fortis verwacht faillissementen onder 6000 Amerikaanse banken die nu weinig dekking hebben. „Maar ook Citigroup, General Motors, er begint een complete meltdown in de VS.” Fortis haalde gisteren €1,5 miljard met een aandelenemissie op. Eind vorig jaar moest het Belgisch-Nederlandse concern €13 miljard aan nieuwe aandelen uitgeven voor de overname van ABN Amro, waarvoor het €24 miljard betaalde. Lippens baseert zijn zorg op gesprekken met bankiers. „Twee maanden geleden wisten we niet dat het zó slecht gaat in Amerika. En het zal nog veel slechter gaan. We hebben een dikke matras nodig om de komende achttien maanden door te komen wanneer we ABN Amro kunnen inbrengen.”
Twee weken geleden meldde de Amerikaanse zakenbank én adviseur van Fortis Merrill Lynch dat zeker €6,2 miljard extra aan kapitaal nodig was. De VEB eiste gisteren opheldering van Fortis: topman Jean-Paul Votron hield eind april vol dat Fortis na de aankoop van ABN Amro niet de kapitaalmarkt op hoefde. In een jaar is €30 miljard aan beurswaarde vernietigd. Na Votrons laatste bekentenis kelderde de koers van het aandeel met 19,4%, al klom het gisteren met 4,4% tot €10,65.
De enorme onrust rond de bankverzekeraar is vooral bij onze zuiderburen in België als een bom ingeslagen. Terwijl de ophef zich in Nederland tot de financiële wereld beperkt, is het bij onze zuiderburen het gesprek van de dag. Niet alleen domineert de bank er het straatbeeld, maar door de mokerslag voor hét Belgische volksaandeel zijn bovendien honderdduizenden kleine beleggers keihard getroffen.
Alle Belgische kranten openden gisteren met heuse rampenkoppen, waarin de vrije val van de bankverzekeraar breed werd uitgemeten. ’Fortis crasht’, ’Rampdag voor Fortis’ en ’Fortis verliest 5,3 miljard’, zo openden drie toonaangevende kranten.
De paniek rondom het concern is over de grens zelfs zo groot dat de nationale toezichthouder CFBA zich genoodzaakt zag geruststellende woorden te spreken richting de vertwijfelde spaarders. „De noodgreep van Fortis is geen reden naar de bank te rennen en je geld eraf te halen”, aldus een CFBAwoordvoerder. „De bank voldoet aan alle wettelijke vereisten, maar heeft zichzelf gewoon heel scherpe doelen gesteld.”
Maurice Lippens claimt dat alle grote aandeelhouders gisteravond „unaniem steun” hebben toegezegd.
Net als in Nederland richten de pijlen zich vooral op topman Jean-Paul Votron, die zich zwaar vertild lijkt te hebben aan de overname van ABN Amro. Maar terwijl de Brusselaar in Nederland wordt opgeroepen zijn bonus van €2,5 miljoen terug te storten eist men in België zijn vertrek.
Wie zulke grote fouten maakt, moet de gevolgen dragen en dus ontslag nemen”, aldus voorzitter Huybregts van de Vlaamse federatie van Beleggingsclubs en Beleggers. De val van het aandeel is voor hem een bevestiging dat de overname van ABN Amro veel te duur en slecht getimed was.
„De voormalige aandeelhouders van ABN Amro nemen nu een bad in champagne”, benadrukt Huybrechts. „Wie grote fouten maakt, moet opstappen. Fortis is een echt volksaandeel en met dat vertrouwen kun je niet roekeloos omspringen.”
Ook de Belgische krant de Standaard is keihard over de topman: „De kredietcrisis heeft alle banken getroffen, maar het is geen excuus. Fortis is veel scherper gedaald”, aldus de commentator. „Fortis heeft steeds ontkend dat er nog een kapitaalverhoging kwam. Dat waren dus ofwel leugens, ofwel onkunde. Beide zijn even erg, dus moet Votron de eer aan zichzelf houden. Hij is de enige die iets verdiend heeft aan de hele operatie.”
Volgens de Belgische media wilde Fortis donderdag aankondigen dat de bonus van Votron zou worden geschrapt, maar is dit op het laatste moment toch niet gebeurd. Ook wordt al druk gespeculeerd over zijn opvolging, waarbij vooral de naam van Filip Dierckx valt.
Votron zelf wil van geen wijken weten. „De aandeelhouders staan achter me en ook in de top van het concern heb ik alleen maar steun gekregen voor deze door mij opgezette operatie”, aldus de onder vuur liggende Fortis-topman.
Ook het terugstorten van de inmiddels omstreden bonus wijst hij resoluut af. „Wat ik met mijn geld doe, is mijn zaak. De bonus had niets met ABN Amro te maken, maar ging over het jaar 2007”, aldus Votron. De topman is wel bereid een deel van zijn salaris in Fortis-stukken te ontvangen.
Votron kan daarnaast nog altijd volledig op chairman Lippens rekenen, die ontkent dat de bank zich op de overname van ABN Amro heeft verkeken. „Votron blijft gewoon de topman. Op dit moment ingrijpen, dat is moeilijk, dat is echt leadership tonen.”
http://i247.photobucket.com/albums/gg145/2tuff2006/britishisrael4.jpg British Israel World Federation Movement's Destiny Magazine, February 1941 issue, page 31
The June 2008 Dow Crash and the coming first strike attack on Iran herald the end of dollar hegemony. BREAK-DOW!
They say that pictures speak a thousand words, so let’s start this with a picture:
Today, the Dow crashed through its eight-year support level at 11,750. There isn’t much below now to keep it from dropping all the way back down to the 7,500-range. What that will do to American investor psychology and worse, consumer confidence, and therefore spending, and therefore the economy, is only too apparent. The gold-attack on Monday obviously didn’t take. Gold recovered the following day and powered up by $26 the very next day to close in NY at $911. On Friday, gold confirmed its breakout, which means there will be little holding it back - just like there is now very little that’s holding the Dow up.
Unsurprisingly, the US war machinery is in full swing at this time. Troop and military asset movements into the Iranian theater are nearly complete, the Israelis have flown their practice-attack of 100-plus fighter jets over the Mediterranean, and Congress has again prostrated itself before its banking-guild rulers who want total government (and therefore banking) of all economic activity. Congress did this by passing the FISA Amendments Act of 2008 to give retroactive immunity to telcoms spying for the government, and by proposing a resolution (the already infamous H. Con. Res. 362) by which Congress demands that Bush completely blockade Iran in order to force it to stop enriching uranium. This, naturally, is a perfect setup for unleashing the long-planned bombing campaign on Iran. Congressmen know that Iran will not accede to these international demands.
End result: We will probably get another war because of all this, just like we got one back in 2002-03 when the Dow plunged into the chasm this recently broken support level has bridged for these past eight years (see chart above).
The problem is that this time, it is a bipartisan gang of US war mongers in our Congress who all appear hell-bent on forcing Bush to attack Iran with a preemptive strike, possibly even an unprovoked nuclear first strike – something that human history so far has not had to deal with.
It is also something that will cause the US to forfeit any legitimate claims of world leadership for the remainder of that history.
The War Currency Wars are rarely fought over national security issues, as political leaders often claim. At rock bottom, they are mostly fought over economic issues. Iraq and Iran (if Congress and the administration get their way) are the only two countries the US has ever attacked preemptively. They are also the only two oil-producing countries that ever went off the petrodollar. The alleged nuclear ambitions of a terrorist-sponsoring country cannot be the real reason for the planned attack – because terrorist-sponsor North Korea was not only allowed to develop nuclear weapons unmolested, it was even allowed to test-launch a potentially nuclear-tipped ICBM at the US without any military repercussions whatsoever.
There goes the "national security" rationalization for this planned attack.
This fact exposes the attacks for what they really are. tools of US monetary policy. The dollar has no real value internationally, save for the fact that the now militarily enforced necessity for countries to buy dollars in order to buy oil creates artificial demand.
The euro’s existence threatens all of this, now. Oil countries have a dollar-alternative in the euro, and so does the rest of the world. The euro is designed to not be quite as inflationary as the dollar is and has been. This is done by virtue of the ECB’s exclusive mandate of "price stability", another word for inflation fighting.
Yet Another War Currency Yet, even the euro carries the fiat-disease within it. Even the euro is structurally inflationary – just at a slower pace than th edollar. Ultimately, even the euro will fail, but it has served its intended purpose well: to sideline the US dollar and thereby the dollar-based US empire. The old US dollar empire has now served its own purpose as the engine for global growth and for achieving general globalization. Like the Jumbo Jets of yore that piggy-backed the early space shuttles perform their test flights before they could finally launch into space on their own power, the US economic mother ship has now fulfilled its purpose and is no longer needed.
In the globalists' view, the US can now safely be discarded because it has inherent "flaws."
America has a constitutional system that, even though it has been successfully neutralized to a large extent, was designed to protect individual freedom, and that makes some of her people insist on them. Such cannot be tolerated in a truly globalized world. It tends to make people of other countries want to simulate the US and to insist on keeping their countries’ sovereignty intact to protect their own tenuous freedoms.
In the final analysis, therefore, the euro is a war currency as well. It is a model currency, designed to centralize economic power in artificial, regional political bodies and away from sovereign national governments. It is a currency designed to abolish the nation state. It serves as the model to be implemented by other regions: North America next, then Asia and Africa, later North and South America combined, and eventually all of these regions will be forced to bow to a supra-regional, global control mechanism.
This will only achieved by more warfare – except it won’t be called "war" anymore. Future military campaigns will be called "peace actions", for they will ostensibly be waged to "enforce peace" – a linguistic and conceptual contortion that rivals anything George Orwell could have dreamed up.
The Peace Currency Gold is truly the peace currency. It needs no military to prop it up. It needs no centralized control system to regulate its supply, only the natural, ultimately decentralized controls of supply and demand. Wars may be fought over access to gold mines some day, but correct me if I’m wrong, so far this has not happened in history. Gold can easily be acquired in trade. Fighting a war over access would be self-defeating because it costs more than the potential benefit could yield. So, the world is now faced by an America that claims it wants to "spread democracy" while using its military to tyrannize countries that simply want to sell their oil for another currency. America has become what she always claims to be opposed to: an absolute tyranny that no longer even cloaks itself. Not surprising, given the role assigned to her by her globalist masters in ushering in the preconditions for eventual total centralization.
Gold is allowed to play its limited role in all of this because increased use of gold for investment purposes, and as currency, tends to weaken the dollar-empire and strengthen other regions (Europe), and nations (China).
Americans, however, have it within their power to mess up the globalist’s game plan for good. They have a chance to completely neutralize the eventual "winner" of the globalists’ remaining, hand-picked presidential candidates. They have a chance to boot out every Congressman and Senator up for reelection this fall who ever voted to pass measures such as the “Patriot” Act, the Military Commissions Act, or the upcoming vote on House Concurrent Resolution 362 discussed above.
They can also fire all who refuse to vote for Ron Paul’s Honest Money Act designed to reintroduce gold and silver as the peace currency.
If they achieve this victory, Congress will, for once, pay attention to their political will. Congress will then, for once, be a true check on presidential executive power. Such a Congress can then even be moved to abolish the Federal Reserve – but only if Americans start to pay attention to what power their choice of currency can convey to – or withhold from – their government.
It’s all up to them.
In the meantime, gold will have unbelievable bull runs as the US Fed carries out Vladimir Lenin’s instructions on how to “best” destroy the capitalist system – by debauching the currency.
Got gold?
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Global economy faces deep slowdown, warns central bankers' club
The global economy may be heading for a far deeper crisis than is expected and a bout of deflation in the world's biggest economies is now a possibility, according to one of the world's most highly regarded economic institutions.
The Bank for International Settlements has warned that many in the City and elsewhere may have underestimated the scale of the coming economic downturn in one of its most sombre portraits yet of the international financial system.
The Swiss institution - known as the central bankers' bank - issued the alert in its annual report, released today.
It warned that the sub-prime crisis in financial markets was merely a reflection of growing debt burdens in the developed world, which could soon contribute to a deep slowdown.
"The difficulties in the sub-prime market were a trigger for, rather than a cause of, all the disruptive events that have followed," it said. "Moreover... the magnitude of the problems yet to be faced could be much greater than many now perceive."
The warning will cause particular concern among participants in the financial sector, as the BIS was among the earliest major institutions to warn that the world could face a credit crisis and financial slump.
The report draws stark comparisons between the current crisis and a variety of others including the Great Depression.
It said: "Historians would recall the long recession beginning in 1873, the global downturn that began in the late 1920s, and the Japanese and Asian crises of the early and late 1990s respectively.
" In each episode, a long period of strong credit growth coincided with an increasingly euphoric upturn in both the real economy and financial markets, followed by an unexpected crisis and extended downturn.
"In virtually every instance, some form of new economic discovery or new financial development provided a further 'new era' justification for rapid credit expansion, and predictably became a focus for blame in the downturn."
Most sobering is the report's warning that developed economies including the US and Britain could face deflation.
It said: "The eventual global slowdown could prove to be much greater and longer lasting than would be required to keep inflation under control. This could potentially even lead to deflation, which would evidently be less welcome."
•Profitability in financial services is falling at its fastest rate in at least 19 years as the credit crisis continues to hurt, a new study indicates. A balance of 44pc of firms have reported a fall in profits in the quarterly financial services survey released today by the CBI and PricewaterhouseCoopers. It is the worst result since the survey began in 1989.
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US Mint Suspends Gold Coin Sales
GATA.org Submitted by cpowell 8-17-8
Dear Friend of GATA and Gold:
The U.S. Mint has suspended sales of American Eagle gold coins and is refusing orders from dealers, two coin and bullion dealers confirmed Thursday.
The mint's suspension of gold coin sales follows its tight rationing of sales of silver eagle coins, begun in May, when sales to the public were terminated and sales to the mint's 13 authorized dealers were tightly limited.
Word of the mint's suspension of gold coin sales came from the American Precious Metals Exchange in Edmond, Oklahoma, (<http://apmexdealer.blogspot.com/2008/08/news-alert-us-mint-suspends-sales-of.htmlhttp ://apmexdealer.blogspot.com/2008/08/news-alert-us-mint-suspends-sales-of.html) and from Centennial Precious Metals in Denver, Colorado.
The suspension is overwhelming evidence that the futures contract price of gold on the commodities exchanges is substantially below the physical market price and that, indeed, the commodities exchanges are being used as GATA long has maintained -- as part of a massive scheme of manipulation of the precious metals, currency, and bond markets.
Michael Kosares, proprietor of Centennial Precious Metals and host of its Internet bulletin board, the USAGold Forum (<http://www.usagold.com/cpmforum /http://www.usagold.com/cpmforum/), explained Thursday:
"The U.S. Mint buys direct from the refiners, and this suspension of gold eagle sales may be an indication that the supply line is already backing up, or that the mint expects that it will back up for the rest of the year. I wonder who would give up physical metal at these prices and under these circumstances except distressed sellers. The central banks are in a hunker-down mode as far as I can determine, and it's the mines that supply the refiners. So if the mint, which buys from the refiners, is having a difficult time locating metal, what does that tell you? I keep saying that we may get a surprising rubber-band effect later in the year when the pre-holiday/festival season kicks off in September/October. It may happen sooner. One of our indicators of approaching a bottom in gold is how many calls Centennial Precious Metals gets from our U.S.-based Indian clientele. Here's a quote from my office's report to me at the end of the day today: 'Today was a good day. ... There must have been an Indian convention where someone was handing out USAGold business cards.' That may give you a clue as to thinking in India proper and probably the rest of the Asian rim."
That is, through their agents the bullion banks the Western central banks, desperate to prop up a corrupt and totteringt financial system, have put gold so much on sale that even the U.S. Mint can't find any now. The price reported from the commodities markets is a fiction -- a scary one, perhaps, but a fiction no less.
You can strike a blow at the market riggers who are defrauding the world -- just buy a little real metal The dealers listed at the bottom right of this dispatch will be glad to help you do it.
CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc.
* * * Contact GATA info@gata.org
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Ephilution:
Here is a grasp of interesting and relevant quotes coming from a document from a British Defence think-tank called the Development, Concepts and Doctrine Centre (DCDC) which predicts what general societal changes will take place over the next 30 years or so:
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There will be an increased risk of humanitarian catastrophe in the most vulnerable regions, caused by a mixture of climate change, resource pressures, uneven distribution of wealth, the effect of disease and the failure of authorities to cope with population growth and urbanization.
Page 6
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Diseases. Several communicable diseases will continue to have a significant impact on population and development and, without effective control measures, may spread from developing regions to more settled and affluent areas. Some diseases will re-emerge in strength, like tuberculosis, malaria and cholera, as environmental changes occur and the pattern of human activity becomes more diverse and complex. HIV/AIDS will remain prevalent in Sub-Saharan Africa, Asia and Eastern Europe and, although a cure and/or vaccination is likely before 2035, its impact will be long-lasting. The social, economic and human costs of contagious and communicable diseases will remain high and are likely to slow economic growth drastically in the worst affected regions for at least the first half of the period.
Page 7
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Urbanization & Human Settlement. By 2035, 60% of the world’s population will live in urban areas.8 There will be a substantial growth in shanty towns and unplanned, random urban settlement, increasing the resource cost and environmental impact. In some cases, rapid, uncontrolled development will challenge the ability of growing cities’ infrastructure and governance to control and support the additional settlement and some cities may not cope. Similarly, populations will increasingly inhabit areas which defy nature and will be at significant environmental risk. This is particularly true in areas susceptible to volcanic and seismic activity and in low-lying coastal regions where extreme weather events and inundation are likely to occur with increasing frequency. This will result in an increase in humanitarian crises and a significant rise in mass migration.
Page 9
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Transnational Terrorism. Transnational and locally based terrorism, particularly Islamist, will continue to derive its energy and justification from political motivations, disadvantage and grievance, extending beyond poorer and more volatile regions to include the marginalized in middle-income and more affluent societies. The casualties and amount of damage inflicted will remain low, compared to other forms of coercion and conflict, but the effect will be magnified by reach (both physical and psychological), the scale of disruption to infrastructures and the sensationalist value inherent in the ‘Theatre of Violence’ and the ‘Propaganda of the Deed’. Based on technological availability and historic examples, chemical, biological and radiological elements will be viable and credible possibilities for terrorist attack throughout the period, together with a lower possibility of nuclear use.
Page 16
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Chemical, Biological, Radiological and Nuclear Weapon Proliferation. Access to technology that enables the production and distribution of Chemical, Biological, Radiological and Nuclear (CBRN) weapons is likely to increase. A critical indicator of risk is contained in the examples of North Korea and Iran - both in obtaining or seeking nuclear weapons and in exploiting their putative possession for political and economic advantage. In future, much proliferation and threat will be manifest in the ungoverned space between legality and realpolitik, together with the distinct possibility of the acquisition of CBRN material by non-state and rogue elements.
Page 17
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Disease. Infectious diseases in general will continue to have significant economic and social impact across many regions of the world. Beyond Sub- Saharan Africa, emerging economies such as India, China and Russia are likely to be challenged significantly by HIV/AIDS, with an estimated 10-20m sufferers in China by 2010.26 These and other regions will be affected by antibiotic resistant strains of other major diseases, like tuberculosis and hepatitis, whose incidence will be multiplied by global interconnectivity and travel. A major pandemic may be the instrument that causes a reverse in the process of globalization as national responses to contain infection will involve significant restrictions on personal mobility and interaction over a lengthy period. Some states may even be destabilized by the effort and resources required to address the situation.
Page 28
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US Economic Vulnerability. The perception of the US as an ultimate guarantor of international security and the health of the international economic engine, able to intervene politically and militarily in unstable areas and in the settlement of intractable problems, is central to the stability of the present international system. A US economic downturn, resulting in its reduced international posture, may lead to increased global tension, inter-state rivalry and a greater military provision, and possibly intervention, by other nations.
If an economic meltdown will indeed become a reality then it is likely that through the ensuing shock-wave engulfing society, chaos will not only manifest itself in rises in crime and unemployment, the general hygiene is also likely to plummet. Now this would in my opinion be an excellent staging base for our leaders to release biological weaponry on the public. After all, they then could always simply blame poor standards of hygiene for any sudden devastation brought on the populace caused by epidemics of infectious diseases. No terrorists needed, just blaming the degenerate and sorry state of society will do just nicely thank you.
As such, they then have a seemingly ideal explanation for any drops in population numbers without the need for resorting to the actions of foreign based terroristic agents, which after all may relatively easily be flagged as being insidious cases of false flag terrorism imposed by local governments themselves. We, the so-called 'useless eaters' (then: 'useless eaters gone wild' through hunger, discontempt and disease) then face extinction seemingly entirely through 'natural' means; no war and no foreign terrorists needed.
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DuckingDafta:
these first three pages in pdf just in case it 'get's lost' again or someone wants to read it offline.
Dr. Nouriel Roubini believes we face a housing bust, a huge credit crisis, an oil shock and a deep recession. Just for starts.
On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.
The audience seemed skeptical, even dismissive. As Roubini stepped down from the lectern after his talk, the moderator of the event quipped, "I think perhaps we will need a stiff drink after that." People laughed -- and not without reason. At the time, unemployment and inflation remained low, and the economy, while weak, was still growing, despite rising oil prices and a softening housing market. And then there was the espouser of doom himself: Roubini was known to be a perpetual pessimist, what economists call a "permabear." When the economist Anirvan Banerji delivered his response to Roubini's talk, he noted that Roubini's predictions did not make use of mathematical models and dismissed his hunches as those of a career naysayer.
But Roubini was soon vindicated. In the year that followed, subprime lenders began entering bankruptcy, hedge funds began going under and the stock market plunged. There was declining employment, a deteriorating dollar, ever-increasing evidence of a huge housing bust and a growing air of panic in financial markets as the credit crisis deepened. By late summer, the Federal Reserve was rushing to the rescue, making the first of many unorthodox interventions in the economy, including cutting the lending rate by 50 basis points and buying up tens of billions of dollars in mortgage-backed securities. When Roubini returned to the I.M.F. last September, he delivered a second talk, predicting a growing crisis of solvency that would infect every sector of the financial system. This time, no one laughed. "He sounded like a madman in 2006," recalls the I.M.F. economist Prakash Loungani, who invited Roubini on both occasions. "He was a prophet when he returned in 2007."
Over the past year, whenever optimists have declared the worst of the economic crisis behind us, Roubini has countered with steadfast pessimism. In February, when the conventional wisdom held that the venerable investment firms of Wall Street would weather the crisis, Roubini warned that one or more of them would go "belly up" -- and six weeks later, Bear Stearns collapsed. Following the Fed's further extraordinary actions in the spring -- including making lines of credit available to selected investment banks and brokerage houses -- many economists made note of the ensuing economic rally and proclaimed the credit crisis over and a recession averted. Roubini, who dismissed the rally as nothing more than a "delusional complacency" encouraged by a "bunch of self-serving spinmasters," stuck to his script of "nightmare" events: waves of corporate bankrupticies, collapses in markets like commercial real estate and municipal bonds and, most alarming, the possible bankruptcy of a large regional or national bank that would trigger a panic by depositors. Not all of these developments have come to pass (and perhaps never will), but the demise last month of the California bank IndyMac -- one of the largest such failures in U.S. history -- drew only more attention to Roubini's seeming prescience.
As a result, Roubini, a respected but formerly obscure academic, has become a major figure in the public debate about the economy: the seer who saw it coming. He has been summoned to speak before Congress, the Council on Foreign Relations and the World Economic Forum at Davos. He is now a sought-after adviser, spending much of his time shuttling between meetings with central bank governors and finance ministers in Europe and Asia. Though he continues to issue colorful doomsday prophecies of a decidedly nonmainstream sort -- especially on his popular and polemical blog, where he offers visions of "equity market slaughter" and the "Coming Systemic Bust of the U.S. Banking System" -- the mainstream economic establishment appears to be moving closer, however fitfully, to his way of seeing things. "I have in the last few months become more pessimistic than the consensus," the former Treasury secretary Lawrence Summers told me earlier this year. "Certainly, Nouriel's writings have been a contributor to that."
On a cold and dreary day last winter, I met Roubini over lunch in the TriBeCa neighborhood of New York City. "I'm not a pessimist by nature," he insisted. "I'm not someone who sees things in a bleak way." Just looking at him, I found the assertion hard to credit. With a dour manner and an aura of gloom about him, Roubini gives the impression of being permanently pained, as if the burden of what he knows is almost too much for him to bear. He rarely smiles, and when he does, his face, topped by an unruly mop of brown hair, contorts into something more closely resembling a grimace.
When I pressed him on his claim that he wasn't pessimistic, he paused for a moment and then relented a little. "I have more concerns about potential risks and vulnerabilities than most people," he said, with glum understatement. But these concerns, he argued, make him more of a realist than a pessimist and put him in the role of the cleareyed outsider -- unsettling complacency and puncturing pieties.
Roubini, who is 50, has been an outsider his entire life. He was born in Istanbul, the child of Iranian Jews, and his family moved to Tehran when he was 2, then to Tel Aviv and finally to Italy, where he grew up and attended college. He moved to the United States to pursue his doctorate in international economics at Harvard. Along the way he became fluent in Farsi, Hebrew, Italian and English. His accent, an inimitable polyglot growl, radiates a weariness that comes with being what he calls a "global nomad."
As a graduate student at Harvard, Roubini was an unusual talent, according to his adviser, the Columbia economist Jeffrey Sachs. He was as comfortable in the world of arcane mathematics as he was studying political and economic institutions. "It's a mix of skills that rarely comes packaged in one person," Sachs told me. After completing his Ph.D. in 1988, Roubini joined the economics department at Yale, where he first met and began sharing ideas with Robert Shiller, the economist now known for his prescient warnings about the 1990s tech bubble.
The '90s were an eventful time for an international economist like Roubini. Throughout the decade, one emerging economy after another was beset by crisis, beginning with Mexico's in 1994. Panics swept Asia, including Thailand, Indonesia and Korea, in 1997 and 1998. The economies of Brazil and Russia imploded in 1998. Argentina's followed in 2000. Roubini began studying these countries and soon identified what he saw as their common weaknesses. On the eve of the crises that befell them, he noticed, most had huge current-account deficits (meaning, basically, that they spent far more than they made), and they typically financed these deficits by borrowing from abroad in ways that exposed them to the national equivalent of bank runs. Most of these countries also had poorly regulated banking systems plagued by excessive borrowing and reckless lending. Corporate governance was often weak, with cronyism in abundance.
Roubini's work was distinguished not only by his conclusions but also by his approach. By making extensive use of transnational comparisons and historical analogies, he was employing a subjective, nontechnical framework, the sort embraced by popular economists like the Times Op-Ed columnist Paul Krugman and Joseph Stiglitz in order to reach a nonacademic audience. Roubini takes pains to note that he remains a rigorous scholarly economist -- "When I weigh evidence," he told me, "I'm drawing on 20 years of accumulated experience using models" -- but his approach is not the contemporary scholarly ideal in which an economist builds a model in order to constrain his subjective impressions and abide by a discrete set of data. As Shiller told me, "Nouriel has a different way of seeing things than most economists: he gets into everything."
Roubini likens his style to that of a policy maker like Alan Greenspan, the former Fed chairman who was said (perhaps apocryphally) to pore over vast quantities of technical economic data while sitting in the bathtub, looking to sniff out where the economy was headed. Roubini also cites, as a more ideologically congenial example, the sweeping, cosmopolitan approach of the legendary economist John Maynard Keynes, whom Roubini, with only slight exaggeration, calls "the most brilliant economist who never wrote down an equation." The book that Roubini ultimately wrote (with the economist Brad Setser) on the emerging market crises, "Bailouts or Bail-Ins?" contains not a single equation in its 400-plus pages.
After analyzing the markets that collapsed in the '90s, Roubini set out to determine which country's economy would be the next to succumb to the same pressures. His surprising answer: the United States'. "The United States," Roubini remembers thinking, "looked like the biggest emerging market of all." Of course, the United States wasn't an emerging market; it was (and still is) the largest economy in the world. But Roubini was unnerved by what he saw in the U.S. economy, in particular its 2004 current-account deficit of $600 billion. He began writing extensively about the dangers of that deficit and then branched out, researching the various effects of the credit boom -- including the biggest housing bubble in the nation's history -- that began after the Federal Reserve cut rates to close to zero in 2003. Roubini became convinced that the housing bubble was going to pop.
By late 2004 he had started to write about a "nightmare hard landing scenario for the United States." He predicted that foreign investors would stop financing the fiscal and current-account deficit and abandon the dollar, wreaking havoc on the economy. He said that these problems, which he called the "twin financial train wrecks," might manifest themselves in 2005 or, at the latest, 2006. "You have been warned here first," he wrote ominously on his blog. But by the end of 2006, the train wrecks hadn't occurred.
Recessions are signal events in any modern economy. And yet remarkably, the profession of economics is quite bad at predicting them. A recent study looked at "consensus forecasts" (the predictions of large groups of economists) that were made in advance of 60 different national recessions that hit around the world in the '90s: in 97 percent of the cases, the study found, the economists failed to predict the coming contraction a year in advance. On those rare occasions when economists did successfully predict recessions, they significantly underestimated the severity of the downturns. Worse, many of the economists failed to anticipate recessions that occurred as soon as two months later.
The dismal science, it seems, is an optimistic profession. Many economists, Roubini among them, argue that some of the optimism is built into the very machinery, the mathematics, of modern economic theory. Econometric models typically rely on the assumption that the near future is likely to be similar to the recent past, and thus it is rare that the models anticipate breaks in the economy. And if the models can't foresee a relatively minor break like a recession, they have even more trouble modeling and predicting a major rupture like a full-blown financial crisis. Only a handful of 20th-century economists have even bothered to study financial panics. (The most notable example is probably the late economist Hyman Minksy, of whom Roubini is an avid reader.) "These are things most economists barely understand," Roubini told me. "We're in uncharted territory where standard economic theory isn't helpful."
True though this may be, Roubini's critics do not agree that his approach is any more accurate. Anirvan Banerji, the economist who challenged Roubini's first I.M.F. talk, points out that Roubini has been peddling pessimism for years; Banerji contends that Roubini's apparent foresight is nothing more than an unhappy coincidence of events. "Even a stopped clock is right twice a day," he told me. "The justification for his bearish call has evolved over the years," Banerji went on, ticking off the different reasons that Roubini has used to justify his predictions of recessions and crises: rising trade deficits, exploding current-account deficits, Hurricane Katrina, soaring oil prices. All of Roubini's predictions, Banerji observed, have been based on analogies with past experience. "This forecasting by analogy is a tempting thing to do," he said. "But you have to pick the right analogy. The danger of this more subjective approach is that instead of letting the objective facts shape your views, you will choose the facts that confirm your existing views."
Kenneth Rogoff, an economist at Harvard who has known Roubini for decades, told me that he sees great value in Roubini's willingness to entertain possible situations that are far outside the consensus view of most economists. "If you're sitting around at the European Central Bank," he said, "and you're asking what's the worst thing that could happen, the first thing people will say is, 'Let's see what Nouriel says.' " But Rogoff cautioned against equating that skill with forecasting. Roubini, in other words, might be the kind of economist you want to consult about the possibility of the collapse of the municipal-bond market, but he is not necessarily the kind you ask to predict, say, the rise in global demand for paper clips.
His defenders contend that Roubini is not unduly pessimistic. Jeffrey Sachs, his former adviser, told me that "if the underlying conditions call for optimism, Nouriel would be optimistic." And to be sure, Roubini is capable of being optimistic -- or at least of steering clear of absolute worst-case prognostications. He agrees, for example, with the conventional economic wisdom that oil will drop below $100 a barrel in the coming months as global demand weakens. "I'm not comfortable saying that we're going to end up in the Great Depression," he told me. "I'm a reasonable person."
What economic developments does Roubini see on the horizon? And what does he think we should do about them? The first step, he told me in a recent conversation, is to acknowledge the extent of the problem. "We are in a recession, and denying it is nonsense," he said. When Jim Nussle, the White House budget director, announced last month that the nation had "avoided a recession," Roubini was incredulous. For months, he has been predicting that the United States will suffer through an 18-month recession that will eventually rank as the "worst since the Great Depression." Though he is confident that the economy will enter a technical recovery toward the end of next year, he says that job losses, corporate bankruptcies and other drags on growth will continue to take a toll for years.
Roubini has counseled various policy makers, including Federal Reserve governors and senior Treasury Department officials, to mount an aggressive response to the crisis. He applauded when the Federal Reserve cut interest rates to 2 percent from 5.25 percent beginning last summer. He also supported the Fed's willingness to engineer a takeover of Bear Stearns. Roubini argues that the Fed's actions averted catastrophe, though he says he believes that future bailouts should focus on mortgage owners, not investors. Accordingly, he sees the choice facing the United States as stark but simple: either the government backs up a trillion-plus dollars' worth of high-risk mortgages (in exchange for the lenders' agreement to reduce monthly mortgage payments), or the banks and other institutions holding those mortgages -- or the complex securities derived from them -- go under. "You either nationalize the banks or you nationalize the mortgages," he said. "Otherwise, they're all toast."
For months Roubini has been arguing that the true cost of the housing crisis will not be a mere $300 billion -- the amount allowed for by the housing legislation sponsored by Representative Barney Frank and Senator Christopher Dodd -- but something between a trillion and a trillion and a half dollars. But most important, in Roubini's opinion, is to realize that the problem is deeper than the housing crisis. "Reckless people have deluded themselves that this was a subprime crisis," he told me. "But we have problems with credit-card debt, student-loan debt, auto loans, commercial real estate loans, home-equity loans, corporate debt and loans that financed leveraged buyouts." All of these forms of debt, he argues, suffer from some or all of the same traits that first surfaced in the housing market: shoddy underwriting, securitization, negligence on the part of the credit-rating agencies and lax government oversight. "We have a subprime financial system," he said, "not a subprime mortgage market."
Roubini argues that most of the losses from this bad debt have yet to be written off, and the toll from bad commercial real estate loans alone may help send hundreds of local banks into the arms of the Federal Deposit Insurance Corporation. "A good third of the regional banks won't make it," he predicted. In turn, these bailouts will add hundreds of billions of dollars to an already gargantuan federal debt, and someone, somewhere, is going to have to finance that debt, along with all the other debt accumulated by consumers and corporations. "Our biggest financiers are China, Russia and the gulf states," Roubini noted. "These are rivals, not allies."
The United States, Roubini went on, will likely muddle through the crisis but will emerge from it a different nation, with a different place in the world. "Once you run current-account deficits, you depend on the kindness of strangers," he said, pausing to let out a resigned sigh. "This might be the beginning of the end of the American empire."
The Alliance & Leicester (A&L) bank has warned of "significant external risks" to itself if Banco Santander's planned takeover is rejected by shareholders.
More than 560,000 A&L shareholders are being urged in a letter to support the £1.3bn takeover, announced in July.
Roy Brown, the bank's acting chairman, said if the deal did not go through then the bank would be exposed to the worsening economic slowdown.
Investors are being offered one Santander share for three A&L shares.
If the deal takes place as planned this October, then A&L will be merged with Banco Santander's existing UK subsidiary, the Abbey.
This will create a much larger bank with 959 branches and 10% of the UK's bank current accounts.
In a document outlining the terms of the deal to shareholders, Mr Brown emphasised the risks involved in the deal not happening.
"There remain significant external risks presented by the deterioration in the broader economic outlook and the continuing turbulence in financial markets," he said.
"The A&L Board sees no obvious circumstances that are likely, materially, to improve conditions in the financial markets or the broader economic outlook in the near to medium term."
Need for shelter
The Abbey was bought by Santander, Spain's biggest bank, in 2004.
A&L and its suitor require a 75% vote in favour of the deal by A&L's shareholders by the deadline of Sunday 14 September.
The offer values each A&L share at 317 pence each, as of 8 August, in turn valuing the bank at £1.333bn.
Including an impending interim dividend, worth 18p per share, the deal represents a 53% premium to A&L's stock market value just before the takeover was announced in July.
The A&L Board is... acutely aware of the significant external risks presented to A&L
A&L statement
The need for A&L to shelter under Santander's wing is highlighted by figures in the 260-page document outlining the rationale for the deal.
First revealed at the start of August, they show that in the first six months of this year, profits at A&L evaporated almost completely, falling from £290m in the first half of 2007 to just £2m this year.
The bank goes out of its way to warn that it is "acutely aware" that its financial position may become even weaker because of the credit crunch.
Further shocks?
And it hints strongly that, on its own, its finances might be weakened further.
"The A&L Board also recognises the risk that further shocks to the financial system created by unfavourable developments at other financial institutions could generate widespread general adverse sentiment towards financial groups like A&L," the bank said.
"The A&L Board has concluded therefore that there is a risk of external events further eroding shareholder value and that the value to A&L shareholders of the greater certainty provided by being part of a larger organisation is considerable," it added.
To make sure that A&L's finances do not become even worse, Santander says it is prepared to inject, if necessary, up to £1bn in extra cash to cover any further losses on loans and investments.
To win over staff, every A&L employee is being offered 100 free shares in Banco Santander if the takeover goes through.
The Spanish bank expects that merging the A&L with the Abbey will save about £180m a year in running costs.
Santander says staff cuts are likely among the combined bank's workforce but an A&L spokeswoman said there had been no discussion about the scale of redundancies among its 7,300 staff.
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US bank 'to fail within months'
A "whopper" bank is going to "go under", Mr Rogoff said
The global financial crisis is set to get worse, with a large US bank likely to collapse in the next few months, a former IMF chief economist has warned.
Kenneth Rogoff's comments came as shares in Fannie Mae and Freddie Mac sank on a report that the home lenders would, in effect, be nationalised.
Despite hopes that the US economy had turned the corner, Mr Rogoff claimed it was "not out of the woods".
"I would even go further to say 'the worst is to come'," he said.
"We're not just going to see mid-sized banks go under in the next few months," said Mr Rogoff, who held the IMF role between 2001 and 2004.
"We're going to see a whopper, we're going to see a big one, one of the big investment banks or big banks."
Speaking at a conference in Singapore, Mr Rogoff, now an economics professor at Harvard, forecast that Fannie Mae and Freddie Mac would "probably" not exist in their present form in a few years.
"We have to see more consolidation in the financial sector before this is over."
On Monday, shares of Fannie Mae fell more than 22%, or $1.76, to close at $6.15. Shares of Freddie Mac fell almost 25%, or $1.46, to $4.39.
'Wrong move'
Shares in Freddie and Fannie first fell sharply last month on fears that they would run out of money to fund their business, forcing the US government to take radical steps to ease the panic.
The two firms are the backbone of the US mortgage market as almost all US lenders rely on them to buy their mortgages in order to access the funds to lend to consumers.
As mortgage guarantors, they must pay out when homeowners default on their loans.
With the housing market across the US crumbling, their finances have come under severe stress.
Problems in the US housing sector prompted the Federal Reserve to slash interest rates to 2% earlier this year.
But Mr Rogoff said the Fed was wrong to cut interest rates as "dramatically" as it did.
"Cutting interest rates is going to lead to a lot of inflation in the next few years in the United States," he added.
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WAG THE DOG: HOW TO CONCEAL MASSIVE ECONOMIC COLLAPSE
“I’m in show business, why come to me?” “War is show business, that’s why we’re here.” – “Wag the Dog” (1997 film)
Last week, Fannie Mae and Freddie Mac had just announced record losses, and so had most reporting corporations. Unemployment was mounting, the foreclosure crisis was deepening, state budgets were in shambles, and massive bailouts were everywhere. Investors had every reason to expect the dollar and the stock market to plummet, and gold and oil to shoot up. Strangely, the Dow Jones Industrial Average gained 300 points, the dollar strengthened, and gold and oil were crushed. What happened?
It hardly took psychic powers to see that the Plunge Protection Team had come to the rescue. Formally known as the President’s Working Group on Financial Markets, the PPT was once concealed and its very existence denied as if it were a matter of strict national security. But the PPT has now come out of the closet. What was once a legally questionable “manipulator” of markets has become a sanctioned stabilizer and protector of markets. The new tone was set in January 2008, when global markets took their worst tumble since September 11, 2001. Senator Hillary Clinton said in a statement reported by the State News Service:
“I think it’s imperative that the following step be taken. The President should have already and should do so very quickly, convene the President’s Working Group on Financial Markets. That’s something that he can ask the Secretary of the Treasury to do. . . . This has to be coordinated across markets with the regulators here and obviously with regulators and central banks around the world.” 1
The mystery over what was going on with the dollar the first week in August was solved by James Turk, founder of GoldMoney, who wrote on August 7:
“[T]he banking problems in the United States continue to mount, while the federal government’s deficit continues to soar out of control. . . . So what happened to cause the dollar to rally over the past three weeks? In a word, intervention. Central banks have propped up the dollar, and here’s the proof.
“When central banks intervene in the currency markets, they exchange their currency for dollars. Central banks then use the dollars they acquire to buy US government debt instruments so that they can earn interest on their money. The debt instruments central banks acquire are held in custody for them at the Federal Reserve, which reports this amount weekly.
“On July 16, 2008 . . . , the Federal Reserve reported holding $2,349 billion of US government paper in custody for central banks. In its report released today, this amount had grown over the past three weeks to $2,401 billion, a 38.4% annual rate of growth. . . . So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit. The logical conclusion is that they were intervening in currency markets. They were buying dollars for the purpose of propping it up, to keep the dollar from falling off the edge of the cliff and doing so ignited a short covering rally, which is not too difficult to do given the leverage employed in the markets these days by hedge funds and others.”2
Just as central banks manipulate currencies in concert, so gold can be manipulated by massive selling of central bank reserves. Oil and any other market can be manipulated as well. But markets can be manipulated by only so much and for only so long without fixing the underlying problem. There is more bad news coming down the pike, news of such magnitude that no amount of ordinary manipulation is liable to conceal it.
For one thing, roughly $400 billion in ARMs (adjustable rate mortgages) have or will reset between March and October of this year. Assuming 3 to 6 months for strapped debtors to actually hit the wall with their payments, a huge wave of defaults is about to strike, continuing through March 2009 – just in time for the next huge wave of resets, in option ARMs.3 Option ARMs are loans with the option to pay even less than just the interest on the loan monthly, increasing the loan balance until the loan reaches a certain amount (typically 110% to 125% of the original loan balance), when it resets. The $800 billion credit line recently opened to Fannie Mae and Freddie Mac may be not only tapped but tapped out, at taxpayer expense. The underlying problem is little discussed but impossible to repair – a one quadrillion dollar derivatives scheme that is now imploding. Banks everywhere are facing massive writeoffs, putting the whole banking system on the brink of collapse. Only public bailouts will save it, but they could bankrupt the nation.
What to do? War and threats of war have been used historically to distract the population and deflect public scrutiny from economic calamity. As the scheme was summed up in the trailer to the 1997 movie “Wag the Dog” --
“There’s a crisis in the White House, and to save the election, they’d have to fake a war.”
Perhaps that explains the sudden breakout of war in the Eurasian country of Georgia on August 8, just 3 months before the November elections. August 8 was the day the Olympic Games began in Beijing, a distraction that may have been timed to keep China from intervening on Russia’s behalf. The mainstream media version of events is that Russia, the bully on the block, invaded its tiny neighbor Georgia; but not all commentators agree. Mikhail Gorbachev, writing in The Washington Post on August 12, observed:
“What happened on the night of Aug. 7 is beyond comprehension. The Georgian military attacked the South Ossetian capital of Tskhinvali with multiple rocket launchers designed to devastate large areas. Russia had to respond. To accuse it of aggression against ‘small, defenseless Georgia’ is not just hypocritical but shows a lack of humanity. . . . The Georgian leadership could do this only with the perceived support and encouragement of a much more powerful force.” 4
Bruce Gagnon, coordinator of the Global Network against Weapons and Nuclear Power, commented in OpEdNews on August 11:
“The U.S. has long been involved in supporting ‘freedom movements’ throughout this region that have been attempting to replace Russian influence with U.S. corporate control. The CIA, National Endowment for Democracy . . . , and Freedom House (includes Zbigniew Brzezinski, former CIA director James Woolsey, and Obama foreign policy adviser Anthony Lake) have been key funders and supporters of placing politicians in power throughout Central Asia that would play ball with ‘our side’. . . . None of this is about the good guys versus the bad guys. It is power bloc politics . . . . Big money is at stake . . . . oth parties (Republican and Democrat) share a bi-partisan history and agenda of advancing corporate interests in this part of the world. Obama’s advisers, just like McCain’s (one of his top advisers was recently a lobbyist for the current government in Georgia) are thick in this stew.”5
Brzezinski, who is now Obama’s adviser, was Jimmy Carter’s foreign policy adviser in the 1970s. He also served in the 1970s as director of the Trilateral Commission, which he co-founded with David Rockefeller Sr., considered by some to be the “master spider” of the Wall Street banking network.6 Brzezinski, who wrote a book called The Grand Chessboard, later boasted of drawing Russia into war with Afghanistan in 1979, “giving to the Soviet Union its Vietnam War.”7 Is the Georgia affair an attempted repeat of that coup? Mike Whitney, a popular Internet commentator, observed on August 11:
“Washington’s bloody fingerprints are all over the invasion of South Ossetia. Georgia President Mikhail Saakashvili would never dream of launching a massive military attack unless he got explicit orders from his bosses at 1600 Pennsylvania Ave. After all, Saakashvili owes his entire political career to American power-brokers and US intelligence agencies. If he disobeyed them, he’d be gone in a fortnight. Besides an operation like this takes months of planning and logistical support; especially if it’s perfectly timed to coincide with the beginning of the Olympic games. (another petty neocon touch) That means Pentagon planners must have been working hand in hand with Georgian generals for months in advance. Nothing was left to chance.”8
Part of that careful planning may have been the unprecedented propping up of the dollar and bombing of gold and oil the week before the curtain opened on the scene. Gold and oil had to be pushed down hard to give them room to rise before anyone shouted “hyperinflation!” As we watch the curtain rise on war in Eurasia, it is well to remember that things are not always as they seem. Markets are manipulated and wars are staged by Grand Chessmen behind the scenes.
Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves and how we the people can get it back. Her websites are webofdebt.com and ellenbrown.com.
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Pictures of Queen Elizabeth taken May 2007 for her State Visit to the U.S. Note, how dark and dreary all the pictures are... The lights are out. Not a good portent for the future.
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There's A Law That Takes Away Money If You Leave U.S. Citizenship?
A lot of people probably can't understand why someone would voluntarily give up American citizenship -- but if someone wanted to do that, they'd now incur financial penalties for it.
[b]Congress just passed a new law that will stop your capital -- or at least a good portion of it -- at the border, should you decide not to be a U.S. citizen anymore. Is it, perhaps, in preparation for the possibility that Americans might rebel at the debt and taxes incurred by their government by leaving for lower-tax locales?
You probably didn't notice this little provision inserted into the Heroes Act of 2008, passed by Congress on June 17. The headlines in the press release about the law were about the increased benefits for veterans and families of deceased military.
But Richard Kohan of Price WaterhouseCoopers drew my attention to one section of the act, which states that anyone voluntarily giving up his or her citizenship will be taxed on all of his assets as if he or she had sold them -- paying capital gains on assets that have increased in value, even though they have not been sold. That's right. While everyone in the media is focused on keeping aliens out of America, Congress has voted to lock its citizens - or at least a good portion of their assets -- into America! Maybe they're thinking that patriotism won't be enough to keep the smart money from recognizing the coming increases in the tax burden.
Patriotism and Debt
We expect our elected leaders to be patriotic, to wear flap pins on their lapels? But how patriotic is it for our elected officials of both parties to drag our country into debt?
This year the Federal budget deficit will be a record $400 billion. That astonishing number will be added to our existing $9 trillion national debt. It's money that our government spends in excess of what it collects in taxes.
[For an instant update on our National Debt go to the moving numbers at www.Truthin2008.org -- a nonpartisan watchdog group on the national debt.]
Government officials say they're shocked at the record number of American consumers who are filing for bankruptcy. Yet those same politicians are spending America into an effective bankruptcy -- building a burden of current debt and promises of future debt that can never be repaid. Now, how patriotic is that?
Patriotism and Taxes
Do you consider it your patriotic duty to pay your taxes? Do you feel unpatriotic because you spend some time trying to figure out how to reduce your tax burden, by maximizing deductions whenever possible?
If that's not unpatriotic for you, is it unpatriotic for wealthy people, or corporations, to try to reduce their tax burden? Where do you draw the line? Perhaps it's most unpatriotic for our elected officials to construct a tax system that doles out benefits to special interest groups, pitting one group of Americans against another.
What's really unpatriotic, in my opinion, is trying to divide Americans through the politics of envy. Our country has moved forward because of our optimism and our belief that any American can build a better financial future. It has been our nature to honor those who have been successful, and seek to emulate them, not to destroy them because they have more assets or income.
Of course, that presupposes that the successful people accept their patriotic responsibility to give back to the society that made their success possible. And the facts show that Americans are the most charitable and generous people on the planet.
Think of Warren Buffett and Bill Gates, literally giving away their fortunes to help humanity. Or think of the people who filled sandbags along the Mississippi this month to save the homes of strangers.
When a government encourages the best in its citizens, by its policies and its example, patriotic citizens rise to the occasion. And when a government burdens its citizens, it inspires dissent and departures.
The Beatles famously left Britain, and Bjorn Borg left Sweden, when their governments raised taxes to such high levels that even these national icons departed. Are American lawmakers preparing for that kind of scenario with this new law?
Now in America, you can love it, or leave it -- but you can't take it all with you. And that's the Savage Truth!
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Not being understood by the American people about these events, but well known to all Russians, is that their War Leaders have embarked upon a course leading to Total World War as their only option for survival prior to their economic collapse, and which many economists state is likely to occur before the end of this year.
One such economist, Kenneth Rogoff, the former chief economist for the International Monetary Fund, and who states about the American economy that the ‘worst is yet to come’, has issued a dire warning that one of the United States largest banks is ready to fail ‘within months’. -Sorcha Faal; August 21, 2008; http://www.whatdoesitmean.com/index1128.htm
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Britain faces 18 months of negative growth, warns top fund manager Peter Hargreaves
The UK economy is staring down the barrel at eighteen months of negative growth, as a recession grips the nation and pushes the FTSE 100 below the 5,000 mark, one of Britain's most respected fund managers has warned.
Peter Hargreaves, one half of the Bristol-based investment management group Hargreaves Lansdown, said the torrid time ahead may see another small UK bank being rescued by a larger rival.
The banks reporting season in March could be the catalyst for further falls in London's leading share index, he added.
Co-founder and chief executive of the group, Mr Hargreaves said: "I think there will be a '4' on the front of the FTSE 100 - by the time all the gremlins have been discovered."
The company, which floated on the London Stock Exchange last May, expects the FTSE to stumble as traders return to the market in the autumn, falling in the run up to Christmas, by which time Mr Hargreaves said there should be a "platform on which to build".
More pessimistic than most, Mr Hargreaves expects the UK economy to suffer six quarters of negative growth - a recession is typically defined as two quarters of negative growth.
He said: "There's no money in the kitty to prime the pump. The bank's haven't got any. Neither has the Government.
"And people are repairing their own balance sheets - negative equity and other debts are scaring them into paying off debts and saving money. They are not paying money into the stock market or into the retail sector."
Mr Hargreaves named the commercial property sector as one for private investors to avoid. He warned that the sector has further to fall, as offices face periods of languishing empty - with public and private sector employers alike hold back on hiring.
Peter Hargreaves: 'There's no money in the kitty to prime the pump.' For the riskier investor there are a few silver linings amid the misery. Mr Hargreaves said Russia is a "screaming buy". With all the bad news priced in, he said Russian stocks were "very, very cheap and speculative". Gold, the traditional safe haven for private investors, has also come off its recent highs and would be worth picking up, he said.
Mr Hargreaves added: "Equity income funds are looking very cheap - they've bombed out of the market now, but they are paying 4pc dividends which is not bad."
The past 18 months have reminded people of the danger of profligacy, he said, which has helped boost the savings and pensions divisions at Hargreaves.
Despite a 16pc drop in the FTSE All Share in the year to the end of June, the group reported a 9pc rise in assets under management, to £11.1bn.
advertisement Mr Hargreaves said the company's pre-tax profit rise to £60.9m, up from £24.4m, was "nothing less than remarkable", given the testing time the group has suffered since it came to the stock market.
Looking ahead, Mr Hargreaves said: "Initially money will not be invested in the stock market and investments in which Hargreaves Lansdown specialises, but eventually when there is confidence we shall see investors once again putting a toe in the water."
The company said while investors continue to avoid the equity markets, it will target the SIPP (Self Invested Personal Pension) and corporate solutions markets in its "quest to continue gathering assets".
The group's shares warmed more than 2pc, up 3.5 to 164.25p.
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U.S. Says Banks on `Problem List' Rose 30% in Quarter (Update2)
Aug. 26 (Bloomberg) -- The U.S. Federal Deposit Insurance Corp. said its ``problem list'' of banks increased 30 percent in the second quarter to the highest total in five years as more commercial real-estate loans were overdue.
The list had 117 banks as of June 30, up from 90 in the first quarter and the highest since mid-2003, the agency said today in its quarterly report without naming any institutions. FDIC-insured lenders reported net income of $4.96 billion, down 87 percent from $36.8 billion in the same quarter a year ago.
``More banks will come on the list as credit problems worsen,'' FDIC Chairman Sheila Bair said at a news conference in Washington.
Regulators are adding to the list as bank assets, liquidity and other fiscal measures weaken. Nine banks have failed this year, including California-based mortgage lender IndyMac Bancorp Inc., which the FDIC is running as a successor institution, IndyMac Federal Bank FSB.
IndyMac's failure will cost the U.S. deposit insurance fund about $8.9 billion, exceeding a $4 billion to $8 billion estimate, said Diane Ellis, the associate director of financial- risk management. The FDIC discovered additional insured deposits and had time to value the assets, Ellis said.
Second-Lowest Earnings
Second-quarter earnings fell from $19.3 billion in the previous quarter, driven by higher provisions for loan losses, the FDIC said. It was the second-lowest net income reported since the fourth quarter of 1991 behind the $600 million reported in the fourth quarter of 2007, the agency said.
``The results were pretty dismal, and we don't see a return to the high earnings levels of previous years any time soon,'' Bair said.
Funds set aside by banks to cover loan losses more than quadrupled to $50.2 billion from $11.4 billion in the year- earlier quarter.
Loans 90 days or more overdue, deemed troubled by the FDIC, jumped 20 percent to $162 billion from $136 billion in the first quarter, the FDIC said. Real-estate loans accounted for almost 90 percent of the rise in the past three quarters, the agency said.
The deposit insurance fund fell 14 percent to $45.2 billion and the reserve ratio, or balance divided by insured deposits, was 1.01 percent. The FDIC is required to shore up the fund when the ratio falls below 1.15 percent.
Higher Premiums
The agency in October will consider a plan to replenish the account that will likely include an increase in the premiums charged banks, Bair said.
A greater share of the increase will be shifted to ``riskier institutions so that safer institutions won't be unduly burdened,'' she said.
Lenders on the ``problem list'' had assets of $78.3 billion at the end of the second quarter, triple the $26.3 billion in the first quarter, the agency said. The FDIC said IndyMac's assets represented $32 billion of the increase.
Many banks on the list have high levels of commercial real- estate loans, especially in construction and development loans, said John Corston, the FDIC's associate director of large bank supervision. The number of problem institutions will continue to rise, he said.
``Problem institutions continue to be scattered across the country,'' Corston said. ``However, we expect to see some migration to areas experiencing the greatest stress.''
Regulators rate banks based on their asset quality, earnings, liquidity and other fiscal measures. Banks are ranked on a numerical scale, with 1 being the highest and 5 the lowest. A rating of 4 or 5 places a bank on the ``problem'' list.
The FDIC is a Washington-based bank regulator that insures deposits at 8,451 institutions with $13.3 trillion in assets.
To contact the reporter on this story: Alison Vekshin in Washington at avekshin@bloomberg.net.
It was when “official government-approved” inflation figures were released that I really lost it last week, as that particular rate of inflation is now a staggering 5.6%. This is - as you can probably tell by the look of panic and terror on my face - Terrible, Terrible News (TTN).
And when you look at what John Williams at shadowstats.com calculates as inflation, according to the time-honored method of actually looking at real prices instead of the “qualified estimates” that are used today, you will see that annual inflation in consumer prices is actually running at over 13%! Some of the worst in American history! We’re freaking doomed!
Anthony Cherniawski of The Practical Investor is not interested in my dour assessment of the situation, and took a look at the Bureau of Labor Statistics’ Consumer Price Index for All Urban Consumers (CPI-U), which increased a whopping 0.5% (non-seasonally adjusted) in July, which is plenty bad enough for one month, but one’s tongue tries to hide by jumping down one’s throat when one learns that it was not a fluke, and that prices are 5.6% higher than in July 2007! 5.6% annual inflation is the best they can wring from admittedly-doctored statistics? Yikes! I’m screaming my guts out here!
Mr. Cherniawski coolly says that I don’t know the literal half of it, as “The alarming part of this report is the acceleration of inflation in the past 3 months. While the unadjusted rate for the past 12 months was 6.2%, the 3-month annualized rate of increase was 11.9%.” Yikes! We’re freaking doomed!
The report itself noted, without any hint of alarm, that “On a seasonally adjusted basis, the CPI-U advanced 0.8 percent in July, following a 1.1 percent increase in June.” Yow!
Some of the terrifying specifics were that the energy index rose 4%, which accounted for “about half of the overall increase in the all items index.”
The worse news for people who eat food is that “the food index rose 0.9 percent in July after rising 0.8 percent in June. Indexes for five of the six major grocery store food groups rose at least 1.0 percent.” In one freaking month! This is outrageous inflation!
This inflation in food may be why Heraldtribune.com interviewed Vicki Escarra, president and CEO of an outfit called America’s Second Harvest, which is “the nation’s largest food bank network”, and which is a name that they are soon changing to “Feeding America”, which seems oddly apropos, considering that in January, they surveyed their 200 food banks and found that “demand was up 20 percent over last year.” Wow! What an increase!
“We’re seeing more and more people visiting food banks for the first time because they’ve lost their jobs or they’re not getting raises”, she says. Yikes! People are reduced to begging for food because they are not getting raises!
Equally alarming is the news from John Williams at shadowstats.com, who says that real inflation in prices, as measured in a subset of the BLS Consumer Price Indexes, the CPI-W, “jumped to 6.2%”.
What makes the CPI-W inflation subset so interesting is that, as Mr. Williams explains, “The CPI-W is used for making the annual cost-of-living adjustments to Social Security payments” which would indicate that the federal budget line-item for Social Security, already one of the largest categories in the whole bloated federal budget that is already over $3 trillion a year, will be increasing by a theoretical 6.2%, just by virtue of mandated higher payments!
Then, to make it all worse, the Labor Department reported the latest survey of producer prices for July, the Producer Price Index, which went up by a stunning 1.2% for the month, where the only saving grace is that it is less than the 1.8% increase in June!
As Mark Gongloff so pithily explained in his Ahead Of The Tape column of the Wall Street Journal, “While consumers suffer inflation a the bottom of the pricing pipeline, producers feel it at the top”, and that producers will be very keen about passing higher costs along to the consumer as quickly as possible, because “to the extent inflation gets stuck with them, their profits suffer.”
And since everybody knows the ugliness of profits suffering, I will not go into it, as it usually means that I am going to be fired soon, and I don’t want to think about that right now, other than to say that “profits that suffer” is ugly in the best of times, and it will be Much, Much Uglier (MMU) this time, thanks to seemingly-impossible leveraged investment use of every freaking dime, real or imagined, here or in the future.
Okay, I will say one other thing; if you are not buying gold, silver and oil in a fit of terrified self-preservation, to the exclusion of everything else including back-to-school clothes for your stupid kids that make them look like mental defectives and cost a fortune, then you are almost certainly making the biggest mistake of your life.
Well, maybe the second biggest mistake after deciding to have the damned kids. Or maybe the third biggest mistake after deciding to get married in the first damned place and then having the damned kids in the second place, but you get the point.
Federal Deposit Insurance Corp (FDIC) might have to borrow money from the Treasury Department to see it through an expected wave of bank failures, the Wall Street Journal reported.
The borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank, the paper said.
The borrowed money would be repaid once the assets of that failed bank are sold.
"I would not rule out the possibility that at some point we may need to tap into (short-term) lines of credit with the Treasury for working capital, not to cover our losses," Chairman Sheila Bair said in an interview with the paper.
Bair said such a scenario was unlikely in the "near term." With a rise in the number of troubled banks, the FDIC's Deposit Insurance Fund used to repay insured deposits at failed banks has been drained.
In a bid to replenish the $45.2 billion fund, Bair had said on Tuesday that the FDIC will consider a plan in October to raise the premium rates banks pay into the fund, a move that will further squeeze the industry.
The agency also plans to charge banks that engage in risky lending practices significantly higher premiums than other U.S. banks, Bair said.
The last time the FDIC had borrowed funds from the Treasury was at nearly the tail end of the savings-and-loan crisis in the early 1990s after thousands of banks were shuttered.
The fact that the agency is considering the option again, after the collapse of just nine banks this year, illustrates the concern among Washington regulators about the weakness of the U.S. banking system in the wake of the credit crisis, the Journal said.
(Reporting by Sweta Singh in Bangalore; Editing by Erica Billingham)
I have a bad feeling about what’s about to happen. The Great Depression is the closest that comes to mind. I, like most, was not alive during the 1930s when it happened. Nonetheless, what once was feared in private is now being discussed in public. It’s going to be bad. It’s going to make high school seem like fun.
THE UNITED STATES OF AMERICA THE NEXT ARGENTINA
This Time is Different: A Panoramic View of Eight Centuries of Financial Crises by University of Maryland‘s Carmen Reinhart and Harvard’s Kenneth Rogoff makes for perfect reading when flying between the US and Argentina.
There is perhaps no better analysis than Reinhart and Rogoff’s on the history of sovereign defaults; and, as such, Reinhart and Rogoff’s paper was ideal reading material when traveling between the US and Argentina , for the sovereign defaults that happened in the past to Argentina will soon be happening to the US .
But a US default will make Argentina ’s debt defaults pale both by comparison and consequence. The US , unlike Argentina , is the world’s largest economy, the issuer of the world’s reserve currency and the world’s largest debtor—and a default by the US on its debt will shake the very foundations of our increasingly fragile global economy.
SOVERIGN DEBT LIQUIDATING AMBITION
The power of ambition is extraordinary. The power of ambition transformed the US from the world’s only creditor after WWII into the world’s largest debtor in less than fifty years. Wanting to emulate England ’s 19 th century empire in the 20 th , the US instead has mirrored England decline in the 20 th century here in the 21 st .
Credit and borrowing fueled America ’s ambitions in the 20 th century as it had England ’s in the 18 th and 19 th . During the 1980s, to pay for President Reagan expansion of the military, the US quadrupled its national debt in less than a decade by borrowing three trillion dollars during a presidency pledged to balance the budget.
When Reagan took office, US debt totaled one trillion dollars. When Reagan left office, US debt totaled four trillion dollars. Reagan’s vaunted slogan of fiscal conservatism was just that—a slogan; and while talk is cheap, the debts now have to be repaid.
Just as the costs of WWI forced England to abandon the gold standard in the early 1900s, post WWII military spending forced the US to suspend the convertibility of the US dollar to gold in 1971; and the consequences, e.g. burgeoning trade deficits and global currency instability, are now putting unsustainable strains on a financial system already in extremis .
Ambition has its price and the bill is now due and owing. The question is: how will the US pay what it owes? In Hyman Minsky’s Financial Instability Model, the US is close to “Ponzi status” if not already there since the US is having to roll its debt forward and borrow from others to pay the interest as it can no longer pay down the principle.
In 2006, in an article published by the St Louis Federal Reserve Bank, Professor Laurence Kotlikoff stated the US was “technically bankrupt” as there was no way the US could pay the $65.9 trillion it owed.
Evidently, Professor Kotlikoff was conservative in his estimate or we’re going downhill faster than he knew. Just three months ago, on May 28, 2008 Richard W. Fisher, President and CEO of the Dallas Federal Reserve Bank estimated the obligations of the US to be actually $99.2 trillion, 50 % higher than Kotlikoff’s figures.
Fisher stated: In the distance, I see a frightful storm brewing in the form of untethered government debt . I choose the words—“frightful storm”—deliberately to avoid hyperbole. Unless we take steps to deal with it, the long-term fiscal situation of the federal government will be unimaginably more devastating to our economic prosperity than the subprime debacle and the recent debauching of credit markets that we are now working so hard to correct.
Fisher should know what the US owes and the danger that sum represents. As President and CEO of the Dallas Federal Reserve Bank, Fisher is a part of the Federal Reserve
System—the very system that has indebted America into perpetuity when its credit-based money forced out gold and silver based money in 1913.
But in his speech Fisher said nothing about the role the Federal Reserve has played in America ’s fatal dance with debt, warning instead about the increasing costs of entitlements such as Social Security and Medicare.
Fisher is part of a larger effort to now blame America ’s entitlements as the primary cause of our problems, assiduously avoiding the role his own Federal Reserve Bank has played in sinking our once wealthy nation into perpetual indebtedness.
In truth, the entitlement program that poses the greatest threat to America is—and always has been—the Federal Reserve System. Without the Federal Reserve’s credit-based money whose compounding interest (paid to the bankers) is obliged to be paid for by a possibly unconstitutional US income tax [note: the Federal Reserve Act and Federal Income Tax were both instituted the same year in 1913], the US would not be indebted and bankrupt as it is now.
If Ben Bernanke and Richard Fisher et. al. at the privately owned Federal Reserve Bank resigned and stopped plundering the US for their own benefit at the expense of the public in order to line the pockets of their banker friends with public funds, the US might have a chance of successfully getting out of this mess.
But, of course, they won’t and the now privately controlled US government will continue to indebt the American public so insiders can continue to profit immensely at the public trough. But the question still remains, how will the US pay its unpayable debt? The answer is as clear as it is obvious. It won’t because it can’t.
DEBT & DESTRUCTION SOUTH OF THE BORDER
In their well-researched paper, Serial Defaults and Its Remedies , Reinhart and Rogoff write “Cycles in capital flows to emerging markets have now been with us for two hundred years”. If we are to understand the dynamics of serial default, it would do us well to look at these cycles and their relevance to what is happening today.
Serial Defaults and Its Remedies, Section 2. Capital Flow Cycles and the Syndrome of “This Time Is Different” :
..a pattern of borrowing followed by crisis is evident in the string of defaults during 1826-28 in Latin America that come on the heels of the first wave of massive capital flows from Britain into Latin America in 1822-25…A second wave of capital flows from Britain came during the 1850s and 1860s. The cycle ended with the crisis of 1873. The next wave of capital flows into emerging markets coincided with the shift of the financial epicenter of the world from London to New York . Among Latin American countries, the borrowing binge of 1925-28 was [financed] with “cheap” money from New York . Capital flows peaked in 1928, the year before the U.S. Stock market crash ushered in financial and currency crises around the world and eventually an international debt crisis during 1929-33.
Argentina is at the very epicenter of Latin America borrowings and defaults and a cursory judgment may well lay the blame for such on Argentina . But understanding the past is akin to sedimentary sampling and a deeper reading of events reveals far more than the too familiar story of a spendthrift deadbeat nation borrowing more than prudence would otherwise dictate.
The capital flows from England and the US in the last two hundred years to Latin America were flows of credit, not money. The distinction is critical in understanding what has happened during the last two centuries. It explains the basis of the British Empire and current American power. It also explains the exploitation of Argentina .
The British Empire was founded on the central bank invention of credit-based money and the subsequent ability to substitute this new “money” for costly gold and silver; and the issuance of paper money allegedly backed by gold and silver is a critical component in the confidence game of central bankers to pass off their printed coupons as the real thing.
What the private bankers accomplished with the creation of the Bank of England was the government’s “legitimization” of the bankers’ new credit based coupons, sic paper money—coupons upon which the private bankers could now charge interest just as they had when loaning actual gold (what a wonderful scam). The new coupons were a lot easier to come by, especially when the king gave them a monopoly over its issuance.
The advantage to the king was that the king now had an unlimited supply of “money” that could be used to finance his wars—wars which led to the establishment of the British Empire; the cost of which was transferred directly as a burden to the people as the new counterfeit debt-based money was now an obligation of the state, not of the king.
This was the genesis (genius to the bankers and government) of the modern income tax where the people are forced to pay interest on the credit-based money issued by their own government. This was also the beginning of credit-based markets, deceptively called capitalism in order to closely identify the newly counterfeit credit based economy with the real money it had replaced.
CAPITALISM THE SPREAD OF DEBT IN DISGUISE
The flow of credit from England and then from its surrogate successor, the US, to developing nations such as Argentina was but the flow of printed coupons designed to harness and indebt the wealth and productivity of new lands.
The “capital” was really only credit, thinly disguised debt in the form of paper money originally issued by central banks, the Bank of England in Britain and the Federal Reserve Bank in the US , the twin towers of monetary Mordor.
The wonderfully sounding idea of unfettered capitalism is but a smokescreen for bankers to leverage their coupons in the form of credit and thereby indebt and control the productivity and wealth of others. As such, it has accomplished its goal admirably but its success will now cost the bankers dearly.
Three centuries of indebting nations, businesses, and the citizenry with constantly compounding debt is no longer sustainable. This is why central bankers in London , New York , Paris , and Tokyo are in such distress. Debtors can no longer pay their debts, defaults are on the rise and bankers may actually have to find real jobs if their confidence game continues to disintegrate.
BANKERS’ FEARS
Lawrence Summers’ credentials as a banker are impeccable. Educated at MIT and Harvard in economics, Summers has served as Chief Economist for the World Bank, US Secretary of the Treasury and President of Harvard University.
Recently, in March 2008, Summers stated:..we are facing the most serious combination of macroeconomic and financial stresses that the U.S. has faced in a generation–and possibly, much longer than that…It’s a grave mistake to believe in the self-equilibrating properties of economies in the face of large shocks. Markets balance fear and greed. And when fear takes over, the capacity for self-stabilization is not one that can be relied upon.
On June 29, 2008 the Financial Times quoted Summers:… we are in an economic environment where we have more to fear than fear itself …
Lawrence Summer’s fears are not to be taken lightly. They are the banker’s equivalent of Jim Cramer’s televised fit of fear when interviewed on CNBC last year, see http://www.youtube.com/watch?
While Summers is rightfully fearful of the current economic environment, the rest of us have far more to fear from bankers like Lawrence Summers and others like him. Summer’s role in the manipulation of the price of gold is found in his 1988 paper Gibson’s Paradox and the Gold Standard co-authored with Robert Barsky, published in the Journal of Political Economy (vol. 96, June 1988, pp. 528-550).
The hubris of bankers such as Summers is stunning. Fixing the price of gold hoping to control interest rates and prices is like fixing the temperature of thermometers hoping to control global warming. Such is the short reach of Summers’ considerable intellect.
EVIL BANKERS FACT OR FICTION?
But the real danger of bankers like Lawrence Summers lies not in their untethered intellect but in their cold ambition and selfish greed that sees nations and people as but living fodder to be milked, used and discarded as they and others profit.
In 1991, Summers issued the following memo while serving as Chief Economist at the World Bank:
…developed countries ought to export more pollution to developing countries because these countries would incur the lowest cost from the pollution in terms of lost wages of people made ill or killed by the pollution due to the fact that wages are so low in developing countries…the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.
As the World Bank’s Chief Economist, Summer’s memo is a chilling reflection of the heartlessness that lies at the core of bankers and banking establishments. The World Bank itself seems to be a favorite watering hole for those of questionable intent.
Robert McNamara, the architect of the Vietnam War was President of the World Bank as was Paul Wolfowitz, the architect of the Iraq War. The current President of the World Bank, Robert Zoellick, is also an ardent supporter of the Iraq War (also on Zoellick’s considerable list of “credits” is his service as advisor to Enron, his membership on the Council on Foreign Relations and Trilateral Commission and his attendance at the secretive Bilderberg meetings from 1991 to the present and his role as Senior International Advisor to investment bank Goldman Sachs).
It is no coincidence that those heading the World Bank are closely associated with America ’s vast war machine. Bankers have profited from fueling the military ambitions of both England and the US for the past two centuries and continue to do so today.
But perhaps the most damning indictment yet of the World Bank and today’s bankers is John Perkins’s Confessions of an Economic Hitman (Barrett Koehler, 2004) in which Perkins reveals the hidden intent of the World Bank and US bankers to cold-bloodedly indebt third world countries such as Argentina and profit by their misery.
In their review of Confessions of an Economic Hitman, Russell Mokhiber and Robert Weissman write:
Remember Smedley Butler?
He was perhaps the most decorated Major General in Marine Corps history. In the early part of this century, he fought and killed for the United States around the world. Butler was awarded two Congressional Medals of Honor.
Then, when he returned to the United States he wrote a book titled “War Is A Racket” which opens with the memorable lines: “War is a racket. It always has been.”
“I was a high class muscleman for Big Business, for Wall Street and for the Bankers,” Butler said. “In short, I was a racketeer, a gangster for capitalism.”
In a speech in 1933, Butler said the following:
“I helped make Mexico , especially Tampico , safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. The record of racketeering is long. I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-1912. I brought light to the Dominican Republic for American sugar interests in 1916. In China I helped to see to it that Standard Oil went its way unmolested.”
Smedley Butler, meet John Perkins.
Perkins has just written a book, “Confessions of an Economic Hit Man” (Barrett Koehler, 2004). It is the War is A Racket for our times. Some of it is hard to believe. You be the judge.
In 1968, after graduating from Boston University , Perkins joined the Peace Corps and was sent to Ecuador . There, he was recruited by the National Security Agency (NSA) and hired by an international consulting firm, Chas. T. Main in Boston.
Soon after beginning his job in Boston , “I was contacted by a woman named Claudine who became my trainer as an economic hit man.” Perkins assumed the woman worked for the NSA.
“She said she was sent to help me and to train me,” Perkins said. “She is extremely beautiful, sensual, seductive, intelligent. Her job was to convince me to become an economic hit man, holding out these three drugs –- sex, drugs and money. And then she wanted to let me know that I was getting into a dirty business. And I shouldn’t go off on my first assignment, which was going to be Indonesia, and start doing this unless I knew that I was going to continue doing it, and once I was in I was in for life.”
Perkins worked for Main from 1970 to 1980. His job was to convince the governments of the third world countries and the banks to make deals where huge loans were given to these countries to develop infrastructure projects. And a condition of the loan was that a large share of the money went back to the big construction companies in the USA – the Bechtels and Halliburtons.
The loans would plunge the countries into debts that would be impossible to pay off.
“The system is set up such that the countries are so deep in debt that they can’t repay their debt,” Perkins said. “When the U.S. government wants favors from them, like votes in the United Nations or troops in Iraq, or in many, many cases, their resources – their oil, their canal, in the case of Panama, we go to them and say – look, you can’t pay off your debts, therefore sell your oil at a very low price to our oil companies. Today, tremendous pressure is being put on Ecuador , for example, to sell off its Amazonian rainforest -– very precious, very fragile places, inhabited by indigenous people whose cultures are being destroyed by the oil companies.”
When a leader of a country refuses to cooperate with economic hit men like Perkins, the jackals from the CIA are called in. Perkins said that both Omar Torrijos of Panama and Jaime Boldos of Ecuador -– both men he worked with – refused to play the game with the U.S. and both were cut down by the CIA -– Torrijos when his airplane blew up, and Roldos when his helicopter exploded, within three months of each other in 1981.
If the CIA jackals don’t do the job, then the U.S. Marines are sent in –- Butler ’s “racketeers for capitalism.”
Perkins also gives lurid details of how he pimped for a Saudi prince in the 1970s, in an effort to get the Saudi royal family to enter an elaborate deal in which the U.S. would protect the House of Saud. In exchange, the Saudis agreed to stabilize oil prices and use their oil money to purchase Treasury bonds, the interest on which would be used to pay U.S. construction firms like Bechtel to build Saudi cities.
For years, Perkins wanted to stop being an economic hit man and write a tell-all book. He quit Main in 1980, only to be lured back with megabucks as a consultant. He testified in favor of the Seabrook Nuclear power plant (“my most infamous assignment”) in the 1980s, but the experience pushed him out of the business, and he started an alternative energy firm.
When word got out in the 1990s that he was starting to write a tell-all book, he was approached by the president of Stone & Webster, a big engineering firm.
Over seven years, Stone & Webster paid Perkins $500,000 to do nothing.
“At that first meeting, the president of the company mentioned some of the books that I had written about indigenous people and said –- that’s nice, that’s fine, keep doing your non-profit work,” Perkins told us. “We approve of that, but you certainly would never write about this industry, would you? And I assured him that I wouldn’t.”
Perkins assumes the money was a bribe to get him not to write the book.
But he has written the book.
You be the judge.
Evil bankers? Fact or Fiction? You be the judge.
DEFAULT OR JUST DEADBEATS
While Reinhart’s and Rogoff’s work on sovereign default is worthwhile and important, their glaring avoidance of the geopolitical aspect of credit flows from England and the US to Latin America and other developing regions is indicative of the blind eye scholars turn to the activities of those who pay them.
Lawrence Summers was President of Harvard University where Kenneth Rogoff is now employed. It is not likely those who hired the likes of Summers would look kindly upon Rogoff should he begin asking questions whose answers would lead to truths Harvard’s trustees would rather not see the light of day.
So instead of dealing with the critical issues raised by John Perkins, Reinhart and Rogoff consider the phenomena of sovereign defaults as an innocent rite of passage much like high school through which developing economies must pass. Perhaps it is so, perhaps not.
But their “trained” eye wanders a bit, even to an untrained eye such as mine. According to Reinhart and Rogoff, the US is a “default virgin”, sic the US has never missed a debt repayment or rescheduled on at least one occasion. While this is strictly so, the US is nonetheless at the center of the largest default in monetary history.
In the 1970s, the US defaulted on its gold obligations under the Bretton-Woods Agreement. After overspending the greatest hoard of gold in history, 21,775 tons, between 1949 and 1971, the US had 7,000-8,000 tons of gold left and still owed perhaps over 31,000 tons to others.
In 1973, when the US officially refused to convert US dollars held by other countries to gold, it was the biggest monetary default ever. In that one act, as a consequence the entire global monetary system shifted from a gold-based system to a fiat-paper system.
Of the US default on its gold obligations, Professor Antal Fekete wrote in June 2008:
Thirty-five years ago gold, symbol of permanence, was chased out from the Monetary Garden of Eden , replaced by the floating irredeemable dollar as the pillar of the international monetary system. That’s right: a floating pillar. The gold demonetization exercise was a farce. It was designed as a fig leaf to cover up the ugly default of the U.S. government on its gold-redeemable sight obligations to foreigners. The word ‘default’ itself was put under taboo even though it punctured big holes in the balance sheet of every central bank of the world, as its dollar-denominated assets sank in value in terms of anything but the dollar itself. These banks were not even allowed to say ‘ouch’ as they were looking at the damage to their balance sheets caused by the default. They just had to swallow the loss, obediently and dutifully join the singing of the Hallelujah Chorus of sycophants in Washington praising the irredeemable dollar and the Nirvana of synthetic credit.
Debt virgin? Hardly, and whether the US defaulted or not is not just a question of semantics, it is a matter of truth—which, like credit, is now surprisingly hard to come by.
THIS TIME IT’S DIFFERENT
Carmen Reinhart and Kenneth Rogoff’s paper, This Time It’s Different , refers to the idea that sovereign defaults are a thing of the past. That we have somehow fixed what was wrong and it won’t happen again. Reinhart and Rogoff think otherwise.
But this time, in a different way it really is different. This time default will come to both banker and debtor alike. The bankers’ system itself is now collapsing under the weight of debt that the bankers’ debt-based money has produced.
Banks are finding themselves increasingly bankrupt as are the governments the bankers used to debase the world’s currencies. This time, not only will Argentina possibly suffer another sovereign default, so too will its creditor, the US , as will many of the US banks that issued that debt.
The default of the US will remain, however, outside the limited definition of default used by Reinhart and Rogoff. The US will not miss a payment or reschedule its debt. Unlike Argentina , the US prints the currency in which the Argentine and US debt is denominated. The US will print its way out of its debts. Argentina cannot.
Because of the enormity of the US debt, the amount of dollars necessary to print to pay down the debt will lead to the hyperinflation in the US and the destruction of the US dollar. Those who live by the sword sometimes die by the sword—though not often.
In that same article where Professor Kotlikoff estimated US liabilities to be $65.9 trillion, Kotlikoff also wrote:
The United States ..appears to be running the same type of fiscal policies that engendered hyperinflations in 20 countries over the past century.
Maybe this time it isn’t different..
DON’T CRY FOR ME ARGENTINA
SAVE YOUR TEARS FOR YOURSELF
In 1976, the Argentine military overthrew the democratically elected Argentine government. The first to recognize the dictatorship was the US . The second was the International Monetary Fund, and within 24 hours of recognizing the soon-to-be most brutal regime in recent history, the IMF arranged a loan to the military junta.
At the time, Argentina ’s external debt totaled $7 billion. When the bloody dictatorship ended with the return of democracy six years later, Argentina ’s debt totaled $43 billion, a debt owed mainly to US banks.
The common law concept of caveat emptor has particular relevance here, caveat emptor —Latin, “let the buyer beware", is a legal precept that buyers must take responsibility for the conditions under which the sale was made.
If you loan to a dictatorship, don’t expect to be repaid if a democracy emerges.
Richard Perle, former US Assistant Secretary of Defense and neoconservative lobbyist
Richard Perle who supported the Iraq War said those words shortly after the US invaded Iraq . While it is doubtful Perle believes the same applies for debts incurred by the US supported dictatorship in Argentina , the truth of Perle’s words extend beyond Perle’s situational principles or a lack thereof. In a court of law, an illegal contract cannot be enforced—unless, of course, the court has been bought off.
A critical distinction between the debt “owed” by Argentina and the debts owed by the US is that Argentina’s debt was illegally imposed upon Argentina by the IMF, the US and international bankers without the consent of the Argentine citizenry, The US debt, however, was incurred with the consent of the American people—or was it?
That, my fellow Americans, is a $99.2 trillion question.
BANKRUPT BE THE BONDS THAT BIND
Americans with their outstanding obligations now measured in trillions of dollars of outstanding US bonds have much in common with the Argentine people. We have both been enslaved and bankrupted by the same financial system.
While it is impossible for the debt burdened Argentines to do something about US banks, it is not impossible for Americans to do so. The US Federal Reserve Bank—the largest emitter of debt-based money in the world—while not an official US government agency is nonetheless still subject to the rules and laws of our land.
STIRRINGS IN THE ELECTORATE
Dissatisfaction, the beginning of change, is now occurring. The two political polarities are finally awakening to the fact that both have been callously used by those in power. The US has lurched right then left then right again, but it continues to go in the same disturbing direction, a direction now equally distasteful to those on the left and on the right.
In modern democracies, successful politicians must possess two qualities: They must say what the people want to hear and they must do what those in power want done.
It has been easy to manipulate those on the right as well as those on the left. The Republicans and Democrats have done so for years. But where’s the beef? The nation’s finances have been even more badly managed by the Republicans than the Democrats—and Iraq ? Sure, vote for the Democrats and stay mired in a conflict they promised they would end.
Both parties are controlled by the same money, the same money that now controls global governments and institutions such as the World Bank and the IMF, the same money that buys politicians, scholars, the military, lawyers, TV anchors, radio talk show hosts and anyone else whose influence they can use for their own ends.
There is a reason why we are indebted as we are and there is a reason why we are mired in a war that one wants except the few that do, the few that now control our nation and many others. In the midst of this most unreasonable world, there are reasons—whether you want to know them or not.
Humanity now finds itself at the beginning of a profound shift, a shift that will force us—if we are to survive, if we are to triumph—to put aside our differences to accomplish together what we obviously cannot accomplish apart.
The two political polarities must find common ground or they will soon find there is no ground at all. What is happening is bigger than money and power although it involves both. It involves humanity, it involves all of us and unless we find each other we will soon find there will be nothing left to find at all.
We are closer to the end than to the beginning. Keep your own counsel. Buy gold and silver. Keep the faith.
In Argentina , I read in a recent issue of Scientific American that physicists now believe that in the beginning of time the Universe was only one centimeter across. That knowledge heartened me. We have come a long way.
Though few may have noticed, the past few weeks may be regarded as a global economic turning point. Evidence is mounting that the United States is entering a recession, with increasing signs that it could morph into a depression. While the current Administration appears resigned to bail out or nationalize large tracts of American commerce, the presidential candidates drift towards Great Society era spending proposals. At the same time, America’s principal economic rivals appear to be charting courses that are not in line with U.S. interests.
The Russian invasion of Georgia has revived tensions that have not been seen since the most frigid periods of the Cold War. With the Olympic Games over, China can relax and now exert its muscle without risking any politically motivated boycotts. Between them, these global players hold well over a trillion dollars, or 10 % of U.S. government debt, which they can use in as leverage in any strategic, economic or political confrontation with the U.S. There is also evidence that America’s economic power is even waning in our own back yard. This week, Honduras, a traditional U.S. ally in Central America, announced that it was throwing its lot in with a Latin American trade bloc dominated by Venezuela and Cuba!
For two years I have warned readers of a severe, real estate led recession and encouraged extreme asset allocations to cash, particularly short-term, hard currency government bonds, and gold. Last year, I urged short positions in financials and U.S. stock markets. Some ridiculed me. The financials are currently down some 84 percent. Apparently, the real estate crash is biting deeper than just about any market “expert” had imagined.
The size of the problem is enormous. A fall of just 20 percent in U.S. house values, (which is confirmed by the latest Case Shiller data release) wipes almost $5 trillion from the wealth of American consumers and businesses. This amounts to more than one third of America’s GDP and half of the total U.S. Government debt! How could the fallout be anything less than systemic?
Imprudent lending behavior, inspired by the housing boom, placed the security of banks depositors and shareholders at undisclosed and unprecedented risk. The banking problem is so large that failures cannot be allowed. The government has bent rules regarding financial reporting and the Fed’s lending criteria to keep the financial ship afloat.
The main focus for now is on government sponsored lenders Fannie Mae and Freddie Mac, who are now understood to be hopelessly undercapitalized. Despite the complete predictability of this outcome, even conservative investors, including many banks, had been persuaded that securities issued by both Fanny Mae and Freddie Mac were risk free. And although shareholders for both entities are likely to be wiped out, corporate bond holders, and those individuals and financial institutions who hold mortgages backed by both the GSE’s, correctly assume that the government will back their assets. However, hundreds of billions, perhaps trillions, of Federal dollars will be needed to make whole all who foolishly loaded up on Fannie and Freddie debt. Unfortunately, the Federal cupboards are bare.
This week, the Federal Deposit Incurrence Corporation (FDIC) announced that its problem list had increased from 90 banks to 117. Worse still, the FDIC announced its fund had fallen below its legal deposit ratio, forcing it to increase its levy on member banks. This, just when the net income of its member banks, in desperate need of retained earnings, has fallen by some 86 percent. As more banks begin to fail, the ultimate cost to the Federal balance sheet is hard to imagine.
But, as the old saying goes, ‘What’s good for the goose is good for the gander.’ So, if government financial ‘favors’ are granted to reckless investment firms (Bear Stearns) and now mortgage borrowers, what about other economically vital ‘multiplier’ industries like: automakers, airlines, credit card and insurance companies and even corporate real estate lenders? The logical conclusion for this current drift is hyperinflation. In order to make good on its promises the Federal Government will have to resort to the printing press…with a vengeance.
With America facing severe recession, many regions around the world will suffer. So who will suffer least? Nations that have run relatively prudent economic policies and those who ‘produce’ goods required even in an economically depressed world will continue to prosper increasingly, relative to the U.S.
The differential may become magnified as America’s government hyper-inflates. Investors will then increasingly dump dollar paper assets and buy hard currencies, government bonds of ‘producer’ nations and gold. Investors ahead of this depression curve will likely suffer least!
Britain is facing "arguably the worst" economic downturn in 60 years which will be "more profound and long-lasting" than people had expected, Alistair Darling, the chancellor, has told the Guardian today.
In the government's gravest assessment of the economy, which follows a warning from a Bank of England policymaker that 2 million people could be unemployed by Christmas, Darling admits he had no idea how serious the credit crunch would become.
Darling's blunt remarks lay bare the unease in the highest ranks of the cabinet that the downturn is making it all but impossible for Gordon Brown to recover momentum after a series of setbacks.
The chancellor, who says that Labour faces its toughest challenge in a generation, admits that Brown and the cabinet are partly to blame for Labour's woes because they have "patently" failed to explain the party's central mission to the country, leaving voters "pissed off".
In a candid interview Darling warns that the economic times faced by Britain and the rest of the world "are arguably the worst they've been in 60 years".
To deepen the sense of gloom, he adds: "And I think it's going to be more profound and long-lasting than people thought."
The economic backdrop presents Labour with its toughest challenge since the 1980s. "We've got our work cut out. This coming 12 months will be the most difficult 12 months the Labour party has had in a generation, quite frankly," he says. But Labour has been lacklustre. "We've got to rediscover that zeal which won three elections, and that is a huge problem for us at the moment. People are pissed off with us.
"We really have to make our minds up; are we ready to try and persuade this country to support us for another term? Because the next 12 months are critical. It's still there to play for."
Darling has some words of comfort for Brown when he predicts there will be no leadership challenge against the prime minister. He also reveals that Brown has no plans to carry out an imminent cabinet reshuffle as he delivers a defiant put down to critics who have said that he could be replaced as chancellor.
"You can't be chopping and changing people that often," he says. "I mean, undoubtedly at some stage before the end of the parliament he will want to do a reshuffle, but I'm not expecting one imminently. I do not think there will be a reshuffle."
Darling does not name names, but says some people want his job and have been trying to undermine him. Many in the Treasury believe that Ed Balls, the schools secretary, has been less than supportive. "There's lots of people who'd like to do my job. And no doubt," he adds, half under his breath, "actively trying to do it."
The chancellor's remarks about the economy - in an interview conducted over two days at his family croft on the Isle of Lewis - highlight the nerves at the top of the government after the loss of Labour's 25th safest seat in Britain in the Glasgow East byelection in July. The Tories are comfortably ahead in polls as leaders return on Monday after the holiday.
Darling, who speaks about how the prime minister is one of his oldest friends in politics, admits Brown has so far struggled to connect with voters. Asked whether Brown can communicate Labour's mission, he says: "Yes, I do think he can. I do think he will."
Asked why Brown has not done so, Darling falters as he says: "Er, well. Well, it's always difficult, you know ... But Gordon, in September, up to party conference, has got the opportunity to do that. And he will do that. It's absolutely imperative."
The interview was designed to show the chancellor in a more personal light after a year in which he shouldered much of the criticism over the collapse of Northern Rock and the loss of discs containing details of half the population.
He said nothing in his interview of his tensions with No 10 after he was reportedly rebuffed by Brown when he pointed out the dangers of abolishing the 10p tax rate soon after he took over as chancellor.
Chancellor defends his decision to 'level' with people
The chancellor is standing by his assertion that the UK is facing its worst economic crisis in 60 years.
Alistair Darling told the Guardian newspaper that the downturn would be more "profound and long-lasting" than most people had feared.
Shadow chancellor George Osborne said Mr Darling had "let the cat out of the bag" about the state of the economy.
But Mr Darling told the BBC it was important to explain the "unique" problems faced by the global economy.
The chancellor admitted, in his newspaper interview, that the government had "patently" failed to get its message across that it understood people's concerns about rising living costs and growing job insecurity.
He said that voters were "pissed off" with Labour's handling of the economy, a key issue at the next election, and said it was "absolutely imperative" that ministers communicated their intentions better.
"This coming 12 months will be the most difficult 12 months the Labour Party has had in a generation, quite frankly."
When asked why he had been so frank, the chancellor told BBC News: "It's important I tell people in this country that we, along with every other country in the world, face a unique set of circumstances where you've got the credit crunch coming at the same time with high oil and food prices."
But he said the current government differed from past ones because it is prepared to "take action to help the economy and to help people get through this difficult time".
He cited the rescue package provided for Northern Rock and tax rebates due at the end of next month as examples of assistance offered by the government.
Ministers are expected to announce a package of measures next week to kick-start the moribund housing market.
The chancellor has been criticised for sending contradictory signals over possible measures to assist homebuyers, particularly the prospect of a temporary suspension of stamp duty on home purchases.
In a wide-ranging Guardian interview, Mr Darling said Labour had to rediscover its "zeal" if it wanted to be re-elected for a fourth term.
But he admitted that was "a huge problem for us at the moment".
Mr Darling hinted at tensions within Gordon Brown's Cabinet, saying there were "lots of people who'd like to do my job" and "no doubt, actively doing it", although he appeared to rule out an autumn Cabinet reshuffle.
The chancellor's remarks come after a summer of unremittingly bad economic news.
House prices are falling at their fastest rate in 18 years, leading to fears of a wave of repossessions.
Mortgage lending has slowed dramatically due to the credit crunch while key indicators have suggested that the economy could be poised to go into recession.
The economy showed no growth in the second quarter of the year while building firms and retailers have laid off thousands of staff amid fears that the economy will deteriorate further.
A member of the Bank of England's Monetary Policy Committee said on Friday that radical action was needed to ensure the crisis did not get worse and warned of a sharp rise in unemployment.
Mr Osborne said: "Who is telling the truth at the top of government?
"The prime minister says the economic situation isn't as bad people think and that Britain is well placed to weather the economic storm but the chancellor says we are at a 60-year low.
"Gordon Brown has briefed out stories that he has an economic recovery plan all worked out, meanwhile the chancellor says the downturn will be more profound and long-lasting than people thought.
"It's not clear whether Alistair Darling meant to tell us the truth about the mess 10 years of a Labour government has left our economy in, but he has certainly let the cat out of the bag."
Liberal Democrat Treasury spokesman Vince Cable said the government had been inconsistent with its message.
"Until very recently there was no problem, there was a state of denial, Britain was the strongest country in the western world, any problems we had were from overseas," he said.
"Now suddenly we've lurched into Apocalypse Now, the return of the Great Depression."
The Treasury said the chancellor's comments were "entirely consistent" with his previous statements.
A spokesman said: "These are the same difficult economic circumstances that every other country in the world is having to deal with.
"But with employment levels near record highs, interest rates that are historically low and the past decade of rising incomes and job creation, the UK is well placed to deal with this."
Integrity Bank of Alpharetta, Ga., on Friday became the 10th United States bank to fail so far this year, hurt by the very business it was built on — real estate lending.
Regions Bank of Birmingham, Ala., is assuming all of Integrity Bank’s $974 million in insured and uninsured deposits in 23,000 accounts, and about $34.4 million of the bank’s $1.1 billion in assets.
The remainder of Integrity’s assets are being retained by the Federal Deposit Insurance Corporation. The agency said it estimated that Integrity’s failure would cost its deposit insurance fund $250 million to $350 million.
Integrity Bank, which opened for business in November 2000, specialized in real estate lending in the Atlanta area with a self-described “faith-based culture.” Throughout the early part of the decade when the housing market was booming, Integrity Bank grew into a billion-dollar publicly traded company — but when the real estate market started faltering, the bank struggled.
A F.D.I.C. spokesman, Rickey McCullough, said late Friday that the bank had failed because of its aggressive pursuit of construction loans, coupled with falling real estate values and “inadequate risk management.”
Construction loans were 76 percent of the bank’s total loan portfolio. During the quarter ended June 30, the bank posted a net loss of $33.6 million.
Integrity’s five branches in Atlanta, which were closed Friday, will open Tuesday as Regions Bank branches. Regions has about $144 billion in total assets.
Integrity Bank is the first Georgia bank to fail since late September of last year, when NetBank — also based in Alpharetta — was closed.
“Despite today’s announcement, it is important to emphasize that the overwhelming majority of banks operating in Georgia, 96 percent, are well capitalized and have adequate reserves,” the chief executive of the Georgia Bankers Association, Joe Brannen, said.
The number of bank failures has shot up this year amid continuing mortgage defaults.
QUOTE
Is Your Bank About to Implode? The FDIC is Hinting, YES!
The lender carnage, death and destruction litter the home page of Aaron Krowne’s Mortgage Lender Implode-O-Meter like the beach at Normandy on D-Day. The infamous list has grown from September 2006 when Aaron started the website with approximately 10 failed lenders to a whopping 276 major U.S. failed lending operations today.
That comes out to about one failed lender every two days over the last two years. This is no anomaly- An anomaly is an irregularity, a mis proportion, or something that is strange or unusual, or unique.
Yes, 276 failed lenders are FAR from unique.
If you truly think about what is going on in our country right now and from the actual evidence on the ML-Implode.com website, your will realize that this is really not the “twilight zone” and our banking system is on the verge of complete collapse.
I think the question now is not “if” your bank will fail, but “when” will your bank fail.
Wall Street Journal - Exhibit A is the revelation by Federal Deposit Insurance Corp. Chairman Sheila Bair that her $45 billion deposit insurance fund may not be adequate to pay off account holders as banks continue to fail. This has been inevitable for months, but neither Ms. Bair nor Treasury wanted to admit the truth in public for obvious political reasons. Yet now we learn that the insurance fund shrank by $7.6 billion in the second quarter, bringing its reserve ratio well below the minimum required by Congress.
Quick Fact - The FDIC is a government agency that insures deposits in the U.S. against bank failure; it was created in 1933 to maintain public confidence and encourage stability in the financial system.
The frightening facts are that the US Banking system is in dire straits and our government does not want you to panic and make a run on your bank. It would be the Great Depression all over again in a heartbeat if we were all to take what little cash we Americans have out of these “insolvent” banking establishments and place it under our mattresses.
That would really make them fail and fast. But will our money be safer under our mattress than these banks of cards? Ms. Bair and the FDIC may be hinting to us all, YES!
ML-Implode has listed 276 various lenders that have met their deaths and another 19 on the ailing list of lenders “about” to implode. But only the FDIC truly knows the “true” state of our nation’s banks and the hints and news coming from this mighty agency is nothing short of frightening.
Slate - You can add the Federal Deposit Insurance Corp. to the list of entities that may be in line for a Treasury Department bailout, the Wall Street Journal reports, following an interview with the agency’s chairwoman. The FDIC is a bit cash-strapped these days as it props up failing banks across the country. It announced on Tuesday that 117 ailing banks are now under its care and that the FDIC holds an astounding $78 billion in distressed bank assets, the Guardian points out. And, the New York Times says, the FDIC sees the banking crisis going from bad to worse.
Moe Bedard - America, get your head out of the sand, turn off American Idol, turn off Squawk Box and get a clue to the true state of our economy and failing banking system. Your bank may be next!
One of our country’s fathers warned us about the banks and the evil they create over 200 years ago. Yet, here we sit, paying the price for letting these banks run wild for the last couple hundred years.
Thomas Jefferson:
“I sincerely believe… that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale.” –Thomas Jefferson to John Taylor, 1816. ME 15:23
Banking institutions, paper money, and paper speculation are capable of undermining the nation’s stability and could be a danger in time of war. The Constitution does not empower the Congress to establish a National Bank. Rather than trust the nation’s currency to private hands, the circulating medium should be restored to the nation itself to whom it belongs.
“The system of banking [I] have… ever reprobated. I contemplate it as a blot left in all our Constitutions, which, if not covered, will end in their destruction, which is already hit by the gamblers in corruption, and is sweeping away in its progress the fortunes and morals of our citizens.” –Thomas Jefferson to John Taylor, 1816. ME 15:18
“The banks… have the regulation of the safety-valves of our fortunes, and… condense and explode them at their will.” –Thomas Jefferson to John Adams, 1819. ME 15:224
“The States should be urged to concede to the General Government, with a saving of chartered rights, the exclusive power of establishing banks of discount for paper.” –Thomas Jefferson to John W. Eppes, 1813. ME 13:431
A National Bank
“The incorporation of a bank and the powers assumed [by legislation doing so] have not, in my opinion, been delegated to the United States by the Constitution. They are not among the powers specially enumerated.” –Thomas Jefferson: Opinion on Bank, 1791. ME 3:146
“It has always been denied by the republican party in this country, that the Constitution had given the power of incorporation to Congress. On the establishment of the Bank of the United States, this was the great ground on which that establishment was combated; and the party prevailing supported it only on the argument of its being an incident to the power given them for raising money.” –Thomas Jefferson to Dr. Maese, 1809. ME 12:231
Meeting the Banking Problem
“The monopoly of a single bank is certainly an evil. The multiplication of them was intended to cure it; but it multiplied an influence of the same character with the first, and completed the supplanting the precious metals by a paper circulation. Between such parties the less we meddle the better.” –Thomas Jefferson to Albert Gallatin, 1802. ME 10:323
“In order to be able to meet a general combination of the banks against us in a critical emergency, could we not make a beginning towards an independent use of our own money, towards holding our own bank in all the deposits where it is received, and letting the treasurer give his draft or note for payment at any particular place, which, in a well-conducted government, ought to have as much credit as any private draft or bank note or bill, and would give us the same facilities which we derive from the banks?” –Thomas Jefferson to Albert Gallatin, 1803. ME 10:439
“If treasury bills are emitted on a tax appropriated for their redemption in fifteen years, and (to insure preference in the first moments of competition) bearing an interest of six per cent, there is no one who would not take them in preference to the bank paper now afloat, on a principle of patriotism as well as interest; and they would be withdrawn from circulation into private hoards to a considerable amount. Their credit once established, others might be emitted, bottomed also on a tax, but not bearing interest; and if ever their credit faltered, open public loans, on which these bills alone should be received as specie. These, operating as a sinking fund, would reduce the quantity in circulation, so as to maintain that in an equilibrium with specie. It is not easy to estimate the obstacles which, in the beginning, we should encounter in ousting the banks from their possession of the circulation; but a steady and judicious alternation of emissions and loans would reduce them in time.” –Thomas Jefferson to John W. Eppes, 1813. ME 13:275
“Bank paper must be suppressed, and the circulating medium must be restored to the nation to whom it belongs. It is the only fund on which they can rely for loans; it is the only resource which can never fail them, and it is an abundant one for every necessary purpose. Treasury bills, bottomed on taxes, bearing or not bearing interest, as may be found necessary, thrown into circulation will take the place of so much gold and silver, which last, when crowded, will find an efflux into other countries, and thus keep the quantum of medium at its salutary level. Let banks continue if they please, but let them discount for cash alone or for treasury notes.” –Thomas Jefferson to John W. Eppes, 1813. ME 13:361
“Put down the banks, and if this country could not be carried through the longest war against her most powerful enemy without ever knowing the want of a dollar, without dependence on the traitorous classes of her citizens, without bearing hard on the resources of the people, or loading the public with an indefinite burden of debt, I know nothing of my countrymen. Not by any novel project, not by an charlatanerie, but by ordinary and well-experienced means; by the total prohibition of all private paper at all times, by reasonable taxes in war aided by the necessary emissions of public paper of circulating size, this bottomed on special taxes, redeemable annually as this special tax comes in, and finally within a moderate period.” –Thomas Jefferson to Albert Gallatin, 1815. ME 14:356
“Our people… will give you all the necessaries of war they produce, if, instead of the bankrupt trash they now are obliged to receive for want of any other, you will give them a paper promise funded on a specific pledge, and of a size for common circulation.” –Thomas Jefferson to James Monroe, 1815. ME 14:228
“Instead of funding issues of paper on the hypothecation of specific redeeming taxes (the only method of anticipating, in a time of war, the resources of times of peace, tested by the experience of nations), we are trusting to tricks of jugglers on the cards, to the illusions of banking schemes for the resources of the war, and for the cure of colic to inflations of more wind.” –Thomas Jefferson to M. Correa de Serra, 1814. ME 14:224
“It is literally true that the toleration of banks of paper discount costs the United States one-half their war taxes; or, in other words, doubles the expenses of every war. Now think but for a moment, what a change of condition that would be, which should save half our war expenses, require but half the taxes, and enthral us in debt but half the time.” –Thomas Jefferson to John W. Eppes, 1813. ME 13:364
“The State legislatures should be immediately urged to relinquish the right of establishing banks of discount. Most of them will comply, on patriotic principles, under the convictions of the moment; and the non-complying may be crowded into concurrence by legitimate devices.” –Thomas Jefferson to Thomas Cooper, 1814. ME 14:190
Where are we now in the credit crisis, and why isn't the massive Fed and ECB weekly lending working to loosen interbank lending? Why is the credit crisis not really improving? Where is this going next? We describe what may happen next as Credit Crisis II in this article.
Now that the credit crisis that started in 2007 is a year old, there has been a debate about whether the financial system will recover, or will the Western/world financial system end up like the Japanese financial system after the stock and real estate crashes in the 1990's. In that case, the Japanese banks more or less carried their tremendous losses for ten years, and Japan entered a mild but painful decade of deflation. To this day, Japan is battling some of the deflationary forces from that time.
The question now becomes, will the Western financial system recover some normalcy, or are things merely going to get worse and the world end up with a financial malaise lasting ten years like Japan's?
If the second alternative is the case, then the central banks which are merely propping up the financial institutions with their ‘temporary' lending will find they are taking the losses off the banks hands, taking them on to their balance sheets, and effectively monetizing the losses. The ECB and the Fed are both hoping to find a way out of having to keep the bad assets they took as collateral. They have lent hugely to financial institutions, taking their bad mortgage bonds, securities, derivatives as collateral. And at the same time, the financial institutions in question are carrying a sum total of $500 billion of losses on their books, the losses they admit so far, while estimates of ongoing losses from these bad assets runs well over $1 trillion. In effect, the Western credit industry is still crippled. Why is it so crippled still?
Either the financial industry earns its way out (will take ten or more years) and drastically pull back credit, or they find enough new investors to pony up new capital infusions, perhaps through stock sales. And new such investors are becoming increasingly hard to find. Hence, the central banks are the only alternative.
A theme now arises where it is becoming apparent that it is impossible to actually purge the escalating losses from the financial system, and that even big public bailouts don't purge the losses because of interlinkages between stocks, bonds and derivatives. If one class or institution is bailed out, the losses of capital merely move to the other class. And the losses are clearly so huge as of now, that they weigh on the currencies themselves and cause a fall in their exchange rates.
It is estimated that the USTreasury/Fed/FHLB has infused a total of $2 trillion and counting since Aug 07 to the various credit infusions to the US financial system, and that the ECB is in at similar levels. And even after $ 4 trillion worth of infusions over the last year has been thrown out by the Fed and ECB, the world credit/financial system is actually getting worse. What will be the outcomes into 09?
Bankrupt en masse
In effect, this means the Western banks, etc are bankrupt en masse. The only thing propping up the entire Western financial system, and its respective stock markets has been massive ‘temporary' lending, on an ongoing basis, by the Fed and ECB. Both central banks are beginning to balk at this situation. Even as they are starting to have second thoughts, the Western financial institutions continue to borrow more money than ever on a weekly basis. Why aren't things loosening up?
Can't stop or else
And, if the ECB or the Fed stops the emergency infusions, or even admit who the borrowers are, another round of collapsing banks/bank runs ensues as investors flee and pull their money out. In other words, the central banks have no choice but to continue the weekly $30-50 billion or so of infusions each for the Fed and the ECB, or else face a cascade of bank runs around the world.
…And each week the Fed and the ECB are effectively taking on another $30 or $50 billion of the bad assets from the various and sundry financial institutions scattered across the EU and the US. So, week after grueling week, the Fed and the ECB keep adding another $50 to $100 billion of bad assets to their balance sheets, as ‘collateral' and making ‘temporary' loans they keep having to roll over and extend the repayment on. Ie, the junk stuff is becoming a permanent resident on the central bank's balance sheets. If either the Fed or the ECB stop the weekly infusions, quite possibly the entire Western financial system stops dead. And we get a massive world stock crash.
The question now becomes, what happens when these two central banks finally decide they have to let go? You are not going to tell me they are going to keep infusing a combined $50 to $100 billion worth of financial bailouts each week forever? This massive temporary lending certainly has to end at some point.
And even with all this new money every week, the credit system is barely functional anyway right now. And this half dead world credit system is dragging economies downward, as there is less and less and less credit. This is a paltry return for all the bailouts and massive temporary lending.
Probably what is happening is that this is a classic case of a parabolic world credit peak, as more and more money is needed each week merely to keep the bubble from collapsing. And the only ones left to infuse this money are the central banks. No one else is willing to step in. Financial institutions won't lend to each other, and investors won't recapitalize the crippled banks. As financial institution's stocks fall, issuing new stock becomes prohibitively expensive.
Parabolic peak
One could say all that is happening is that all financial institutions in the world don't really trust each other, and won't lend to each other. And that an astounding $50 to $100 billion of weekly infusions from the Fed and the ECB is not fixing the situation, and that we are witnessing the final parabolic peak of the world credit bubble that has built up for the 63 years after WW2 ended. That, and the end of the USD and Yen driven credit/asset/finance bubble which ensued from the early 1970's.
So, before we continue, it might be said that the present development of the credit crisis, from August 07 to now, is Credit Crisis I. And the present state of affairs is that the Fed and the ECB have to infuse a weekly $50-100 billion plus into their respective financial regions merely to prevent a world finance implosion.
I also have noticed that the Credit Crisis I has had a one year periodicity of major new developments, ie that if one major sector had a problem on a given month, that the next year the same sector seems to reinvent a new worse manifestation.
I made a graphic to describe the general situation:
So, when the central banks stop this massive weekly lending, what happens? Massive forced deleveraging and probably world financial Armageddon. This would be Credit Crisis II, or Phase II. We will look into Credit Crisis II in a moment.
This is the conclusion we came to here at PrudentSquirrel, trying to ascertain where we are in the big picture on the Credit Crisis now. It is that the Central Banks are desperately trying to stave off Credit Crisis II, and they are losing, and probably knowing this, they will at some point confer together and pick a time to let the credit system implode, and try to weather the stock/financial crashes that will occur at that time. Likely, some currencies can collapse as well, and a great deal of FX (foreign exchange) chaos and restrictions will ensue for several years after the fatal date.
If it is true, as we suspect, that we are at the peak of a credit/financial bubble that started right after WW2 ended, and it is at a parabolic peak and cannot be sustained, then the world's central banks already know this too. They probably are trying to decide when to let go …They all don't have to agree, it only will take one major Central Bank to let go, then the others will be forced to follow.
The central banks in question would be the BOJ, the US Fed and the ECB, and likely the BOC. The Russian central bank is an odd man out and is a wild card, but not as central to the equation. Either all the major central banks listed keep up the same rate of infusions, or the end of the world credit system comes in a week or two after one ‘lets go'.
Now as to the USD strengthening now, and gold's vexing $100 plus volatility, it just seems best to make any protective moves well ahead of the fatal day. Once the situation gets out of control, Credit Crisis II begins, in a week from that point you will find it hard to make any changes. I view gold's present volatility as a total side issue, compared to what would happen if all one's money was tied to the financial system, the USD and so on, and then one's financial situation was frozen if the central banks decide to let go, and world foreign exchange restrictions are instituted. Gold is still one of the best ways to ride out what may come to pass.
Our present state of affairs in Credit Crisis I
Let's look at a few examples of why I am saying the world is at a parabolic credit bubble peak, and why the Central banks are finding they have no choice but to keep pumping out $50 plus billion a week of new ‘temporary' lending, or else face a real financial Armageddon…
The ECB, Spanish banks, and North-South EU dissention
How Spanish banks are creating mortgage securities to get ECB funding is a perfect example of our present financial crisis…and how the ECB seems to have no choice but to continue the short term funding of the entire EU financial system, and it is causing big dissention between the North EU and South.
By Ambrose Evans-Pritchard Last Updated: 3:06pm BST 21/08/2008
The European Central Bank has issued the clearest warning to date that it cannot serve as a perpetual crutch for lenders caught off-guard by the severity of the credit crunch.
Not Wellink, the Dutch central bank chief and a major figure on the ECB council, said that banks were becoming addicted to the liquidity window in Frankfurt and were putting the authorities in an invidious position.
"There is a limit how long you can do this. There is a point where you take over the market," he told Het Finacieele Dagblad, the Dutch financial daily.
"If we see banks becoming very dependent on central banks, then we must push them to tap other sources of funding," he said.
While he did not name the chief culprits, there are growing concerns about the scale of ECB borrowing by small Spanish lenders and 'cajas' with heavy exposed to the country's property crash. Dutch banks have also been hungry clients at the ECB window.
One ECB source told The Daily Telegraph that over-reliance on the ECB funds has become an increasingly bitter issue at the bank because the policy amounts to a covert bail-out of lenders in southern Europe.
"Nobody dares pinpoint the country involved because as soon as we do it will cause a market reaction and lead to a meltdown for the banks," said the source.
This "soft bail-out" is largely underwritten by German and North European taxpayers, though it is occurring in a surreptitious way. It has become a neuralgic issue for the increasingly tense politics of EMU.
The latest data from the Bank of Spain shows that the country's banks have increased their ECB borrowing to a record €49.6bn (£39bn). A number have been issuing mortgage securities for the sole purpose of drawing funds from Frankfurt.
These banks are heavily reliant on short-term and medium funding from the capital markets. This spigot of credit is now almost entirely closed, making it very hard to roll over loans as they expire.
The ECB has accepted a very wide range of mortgage collateral from the start of the credit crunch. This is a key reason why the eurozone has so far avoided a major crisis along the lines of Bear Stearns or Northern Rock.
While this policy buys time, it leaves the ECB holding large amounts of questionable debt and may be storing up problems for later.
The practice is also skirts legality and risks setting off a political storm. The Maastricht treaty prohibits long-term taxpayer support of this kind for the EMU banking system. Few officials thought this problem would arise. It was widely presumed that the capital markets would recover quickly, allowing distressed lenders to return to normal sources of funding. Instead, the credit crunch has worsened in Europe…” Bold emphasis is mine Telegraph.co.uk
Fannie and Freddie rescue dilemma- their stocks and debt are held by other banks Another perfect example of the impossible state of affairs in the world credit crisis is Fannie/Freddie. And that means that if the Fed/Treasury does a bailout, their stocks collapse in value, and all the other financial institutions take losses on that because they hold lots of Fannie and Freddie stock. Of course the stock is already in the tank, but the issue is still there and shows the interlinkages.
Then there is the question of the Fannie and Freddie bonds out. That is another can of worms, and the Chinese just stated this week that a collapse of Fannie-Freddie could lead to an economic catastrophe – their Central Bank advisor Yu Yongding stated. The Chinese hold hundreds of billions ($376 billion mostly in US agency bonds) of Fannie and Freddie debt and stock. In many respects, because of all these cross holdings of the Fannie Freddie bonds and stocks by banks everywhere, and by Central Banks, it would seem that the losses cannot really be removed from the financial system – ie purged. If Fannie and Freddie are bailed out, their stocks collapse and those losses now translate to all these other banks and central banks that hold them. It's virtually a no win situation.
These cross linkages reveal that it is virtually impossible, even with bailouts, to purge the ever growing $500 billion and counting losses of capital from the banking/financial system. The latest numbers being speculated on are the losses will be over $1 trillion (IMF) and $2 trillion or more (Roubini).
Now, maybe $2 trillion doesn't sound like a lot compared to the entire world economy. The trouble is, that capital is leveraged anywhere from 10 to 50 times by the financial system. Fannie and Freddie have 60 to 1 leverage.
Losing $2 trillion of capital will totally wipe out the entire world financial system for a decade because of the leverage at 60 to 1. Basically, unless those losses can be purged in some way, it has to be earned back over a period of years/decades. That essentially cripples the entire world financial system.
I remember a very well put quote from a banker last Fall 07 about the credit crisis then. (I'm sorry, I don't remember his name.) He stated “The credit deleveraging will not be denied.” I think that sums things up very well.
It appears that a relentless unwinding of the world credit/finance bubble with many dimensions and twists and turns cannot be avoided, even if the central banks were willing to try. The issue is the cross linkages and the fact that the capital losses in every corner of the world will not and maybe cannot be purged from the financial system, even with big public bailouts. There is possibly no way to do it other than to allow things to just unwind and try to re earn it all back the hard way.
Even if it appeared the central banks could figure out a way to purge the losses from the financial system, and take them on their books, then their currencies are in danger. The capital losses are there – period. The deleveraging of 60 to 1 credit is happening – period. The financial institutions don't trust each other – period.
The Fannie – Freddie bailout proposals are being discussed in the light that the US government/Treasury can just about double the so called national debt from $9 trillion by possibly adding another $5 plus trillion, as they effectively have to guarantee those GSE bonds. That is now playing into a debate on the US fiscal situation….as if the USD needed another problem.
In short, once again, we see that it appears impossible to purge the effects of so much lost capital to the world financial system. The deleveraging will not be denied. We see this a year after the Credit Crisis I exploded worldwide Aug 07.
End of a huge world bubble
If that is true, then the theory I laid out above, that we are witnessing a peak in a parabolic finance/asset/stock bubble of world proportions, is going to pan out. I think the entire credit crisis can be looked at from that perspective. We are merely witnessing the relentless unwinding of the biggest financial bubble in history. And, ominously, this particular bubble has grown from the end of WW2 to the present. That is one HUGE economic bubble, and this one envelops the entire world. This is not just a bubble in one country's economy.
The point of emphasizing it's from the end of WW2 is that we are not talking merely about a banking crisis, or whatever. We are talking about the deleveraging of the greatest economic/finance bubble in history. Once the level of leverage reached 60 to 1, it becomes impossible to stay ahead of the deleveraging, even for central banks. The implications are staggering. Every major economy in the world is involved. The outcomes of deleveraging this monster bubble, represented by the green oval, will be what I term Credit Crisis II. At 60 to 1 leverage, a loss of 1 to 2% wipes out the capital.
Whether it's the Chinese Central Bank (BOC), the Fed, the ECB, and then all the other world financial institutions of every type, insurance companies, gigantic retirement funds, other banks, you name it, the present losses of capital to the world financial system is pervasive worldwide. Nobody will escape the wrath of this deleveraging, and that is why I call it Credit Crisis II. Credit Crisis I was only the preliminary round…Credit Crisis II is characterized by the realization that the gigantic losses of capital cannot be purged from the financial system , even with big public bailouts. And that this deleveraging cannot be stopped. There are too many interlinkages. And, without writing a book on this, the next victim when Credit Crisis II unfolds, will be massive world currency instability. This will make any of the banking and currency crises we have seen since WW2 look like child's play. It is not clear when Credit Crisis II begins but it is threatening already.
British banks soon could be scrambling for short-term funding once more amid reports that supplies from Threadneedle Street and from Frankfurt may be drying up.
The Bank of England explicitly ruled out extending its Special Liquidity Scheme (SLS), while the European Central Bank is reportedly considering tightening its lending criteria.
The two central banks have been huge suppliers of liquidity to British banks. The SLS is thought to have provided £50 billion or more, while the ECB has lent banks €467 billion (£378 billion) - much of it thought to have gone to UK institutions.
Despite pressure from some British banks for an extension, the SLS will be closed to new applications from the week of October 20, the Bank said. UK banks have been campaigning for an extension to the scheme, under which the Bank provides banks with highly liquid government bonds in return for illiquid AAA-rated mortgage-backed securities.
As recently as Friday, Rod Kent, the chairman of Bradford & Bingley, called the SLS “a good idea” and contrasted its temporary nature with the permanence of the ECB liquidity window.
The ECB declined to comment on reports that it would change its rules soon, accepting only higher-quality collateral from borrower banks in exchange for cash. At present it accepts securities with credit ratings as low as A-. It also accepts private securities - instruments created by the banks and not traded on any public market. Some ECB officials are concerned that it has become a “dumping ground” for inferior mortgage-backed securities, according to The Wall Street Journal. The reform could come as early as Thursday, when the governing council meets and the ECB makes its monthly interest-rate decision.
While money market conditions have improved modestly in the past few months, banks are still hoarding cash. Three-month sterling Libor has been trading at 5.75 per cent, three quarters of a per cent above base rate, indicating continuing stress in the money markets. Before the crunch the margin was 0.1 or 0.2 of a per cent.
QUOTE
I had a feeling rather than War this may be just for Economic Collapse procedures. Of course the two can go hand in hand right now. -Craig
Community Support officers could do more police work
Community support officers should do more police work in order to save money, Home Office officials have suggested.
In a further disclosure from a leaked letter to the Prime Minister from the Home Secretary, it is proposed that police community support officers (PCSOs), who receive less training and are paid less than full police officers, be used as a cost-effective way to fight the increase in crime that it predicts will result from the economic downturn.
A paragraph removed from the later draft of the letter reads: "We have a robust position on expecting the police service to maximise efficiency gains including workforce reforms that will also see changes to workforce mix, of the kind that will reduce cost pressures eg greater deployment for suitable tasks of grades such as PCSOs that are cheaper than Police Officers."
The Conservatives said the latest passage disclosed the true attitudes and priorities of Home Office staff.
Dominic Grieve, the shadow home secretary, said: "While PCSOs have a role to play they are no substitute for real officers. The Government should be cutting red tape so what officers we do have can spend more time on the beat."
Tony McNulty, a Home Office minister, who earlier confirmed it was "blindingly obvious" that crime would rise in an economic downturn, denied that there would be any reduction in police numbers. He said that he would have removed any such suggestion from the letter.
A Home Office spokesman said: "The facts are that PCSOs play a vital role in Neighbourhood Policing teams and are an established and much valued presence in local communities. The Government is totally committed to supporting both PCSOs and police constables now and in the future to build on a decade of crime fighting success."
Before the employment report came out (which we'll get to in a minute) the futures were pointing toward a downward open following the market action Thursday which shaved more than 340-points off the Dow Industrials. That was followed, in almost predictable fashion, by the sinking of markets in Asia, and then Europe, as a follow-on.
One of my colleagues insisted (to the point of making a ceremonial 5¢ bet of the matter) insisted that the decline was simply a great entry point for some of his longs. His thinking was that yes, the US in making some progress in Iraq, the problems of the subprime market fallout may be overblown, and, and besides, no one is going to torpedo the US economy because as goes the US, so goes the world. In other words, the typical Ameri-centric view of things.
For my part, taking the other side of the argument (and wagering the princely nickel) I argued that the reason oil is coming down is that fewer people will be able to afford heat, the predictive linguistics hold not only one more major bank failure, but a financial 'lockdown' condition as the year goes on, and that many companies are 'blurring the lines' a bit when they talk about their sales.
Take for example the question posed yesterday in this column, relative to Wal-Mart's earnings. The underlying 'happy talk' in the MainStreamMedia (MSM) was that WM same-store sales were up prompting headlines like "Discount stores score big in August." Being up to my ears in work, I didn't have time to follow-up with Wal-Mart's investor relations department, but reader DM did (and our thanks for his diligence here) and it got him this admission out of WM's investor relations folks:
"Thank you for your call earlier today. I inquired about the same store sales as reported in our August sales release. According to the Director of Investor Relations, the US sales numbers are the actual numbers as reported each month, and are not adjusted for inflation. I hope this helps. Thanks again for your inquiry."
Helps? You bet!. What this means, when you read further stories like "Wal-Mart sales Climb on Back-to-School Discounts" that you can take the 2.8%/3% same-store sales and back out inflation.
Of course, once we open the "What's Inflation Really Running?" can of worms, things get ugly in a hurry! We could argue for a low of 2.4%, basis the Fed M-1 levels for the past 12-months contained in the most recent H.6 money stocks report. Or, we could argue for 8.8% inflation, based on the more current 3-month M-1 inflation rate (same report). Or, we could bounce over to the Bureau of Labor Statistics and hit the latest CPI numbers, which would argue for an inflation rate of 5.6% higher than it was a year ago.
In all but one of the figures (YoY M-1 from H.6) the Wal-Mart sales figures really reflected a decrease in sales, if you were to look at things from a units perspective, not just the gross dollars involved. Or, because so many companies have been downsizing their packaging, you would have maybe seen just as many boxes of 'whatever', but under it all, the dollars per pound of goods was flat to down.
My point is that lines are blurring. Corporate America is reporting sales that are in many cases, and I don't single out Wal-Mart because it's the current way of doing things generally, reporting sales that are "up" but only so long as you put inflation out of your mind.
But then again, it's that way with the Dow Jones Industrials, too.
I don't want to remind my colleague that on an inflation-adjusted basis, if you put in the Spring 2000 Dow Jones of 11,723 into the Federal Reserve's online inflation calculator, you'll see that in order to have just maintained purchasing power, the Dow would have to be at 14,677.58.
And, worse, since the thrashing in the markets on Thursday, on a purchasing-power (inflation) adjusted basis, the buy and holding of the Dow (excluding dividends, but also excluding commissions, yada yada yada) is down 23.773% since 2000. Of course, if you were a real financial genius, you would have been reading this site back in the fall of 1999 when I posted the paper "Death by Dot Coms: When Barriers to Entry Fail".
Not to put too fine a point on it, but it you'd have sold the Dow and parked your money in an inflation-adjusted Treasury position, you'd be about 20% better off than now, but that's all capital gains under the bridge now, isn't it.
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So there's my colleague, hatching out what I expect will be a nickel. And there's me, on the phone to my friend Robin Landry, the best market predictors I know, and I asked him about his take on things after the close Thursday because I had posted a rare special technical note for Peoplenomics readers, (link for subscribers) showing how we had just taken out what looked to my like critical support:
"If this is the third, (under Elliott Wave counts), it is actually the third of the third - and in that action Thursday, we had a one down, two up, and a three down, which does not appear to be complete yet. And, it's initial target is around 10,800. And then we will have a little 4, and then a five, and once we do get that 10,800, if we the panic, because that was the recently low back in July, the targets will be somewhere in the neighborhood of (for the Dow) somewhere in the 10,695 area..
If we break that, then I expect we'll go straight down to the 9,700 area I mentioned in my comments a while back.
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The interesting thing about what is happening now is that when we had broken the 200 week moving average, going into the July 15th low, we rallied back up to the 200 week average, recently, and it now turned down again.
Going on down from here, if this leg of the decline is from 13, 136 and you subtract 10,816, that equals 2,320 points. Then if you take the recent high of 11,865 minus 2,320 points, that gives you the 9,545 - which I think is where we're headed right now.
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We're in an oversold area and of course, I have told you that crashes happen when the market is oversold. So, does this have the chance to be the Big One? Absolutely! We are now in the timeframe for the major crashes to Occur - which are usually September into October.
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I have mentioned to you that the highs are usually seen in August. And so it's following the 'normal' yearly pattern and I suspect that whether it goes beyond the 9,545 to 9,700 levels, in fact we could see 9,,223, one of those little fours will hold for a rally. At what degree? I can't tell you because it will be shaped by the decline ahead.
But, would it surprise me to see a thousand point down day? No.
When you see the action that you saw the action on Tuesday - with a strong rally, that was a failed C wave of Wave 2. (Subscribers: see the earlier technical note this week on the rally set-up-G)
When a wave fails it does so because the momentum in the opposite direction is so great, that it can't reach its normal target. That's like a failed fifth wave on the upside. So all of the things are coming together.
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What is particularly bearish is that the 50-week moving average is now going down toward the 200-week moving average. When the 50-week crosses the 200-week moving average, things can really accelerate to the downside. you'll see all kinds of government actions trying to stop it.
They might - for a while - temporarily, but it doesn't change the ultimate outcome.
The other thing that I think is very telling is that since January of 2008, the Dow Jones 50-day moving average crossed through the 200-day moving average and the high in May rallied back up to the 200-day moving average. And then it accelerated down into the low of July the 15th.
This recent rally that's just ended Tuesday on the highs with the reversal, all it could barely do was test the high of the 7th of August or so, and then it accelerated down and broke back through.
Now you have the 50-day below the 200-day moving average and the 50-week is approaching the 200-week moving average.
Many times when they are in this mode, you get your crash, you get a rally, and then you get a test. The crash being the third, rally being the fourth wave, and the test being the 5th.
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This time if that happens we want to see bullish divergences. If we do not see bullish divergences, then it means that we're more than likely on our way to the 7,400 area without a subsequent 6-montyh to year rally in-between.
(Note, this would fit like a glove with the predictive linguistics which point toward a financial 'lockdown' in November and lots of bad woo woo through Feb-mar of '09 - G)
In other words, it appears the way things are going that we are lining up for a quicker downside resolution than what I had been anticipating because I thought we would have a decline down to 9,700 area, then a 3-6 month rally, and it could surprise us and set a brand new high.
But, we will learn more in this timeframe between now and the end of the year with the wave structure and the breadth of the decline. That'll give us a clue as to when the subsequent rally goes up, or whether we are in what Mr. Prechter describes as a Grand Super Cycle Decline that will last most of our lifetimes.
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The main thing to get from these comments of mine is that if you're in the market, you need to get out as soon as possible. It's better to be aggressive at getting out, and have to go back in, than to sit on the sidelines and watch everything collapse in front of you.
You know the saying "He who takes his chips and walks away, lives to play another day"? I was reminded in my readings Thursday that the best thing an investor can do is turn off CNBC. They are a perfect mirror of what is actually happening. They'll advice do this and this....a few days ago bullish, Thursday bearish - you can't play that kind of emotional roller-coaster and come out alive.
While I have it on, 90 percent of the time I keep it muted and I use it as a sentiment gauge - by who they have on and what charts they put up. It's getting so I can read lips...and you must have a plan and stick to the plan.
So, with such sage words, you might be asking, what are Landry's clients doing - if anything at this stage in the market. His answer:
"We are in short-term treasury ETF's and short the double Dow ETF with 5-10% of our funds."
If we take out that 9,300 kind of area, the next fourth degree down level is what?
"7400."
And then if we step back even further from the chart, what's the next fourth down of a larger degree?
"The next one of larger degree is at 3,059"
And is there one after that?
"777."
(Gulp!) The one after that?
"That'd be the 1933 low - you can look it up."
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All of which sets the tone for the real socioeconomic speculation of the morning, which goes something like this:
When the US entered the Great Depression of the 1930's, there was not a lot of linkage between the financial economy and the general economy of the Nation. In other words, paper finance, commodities, the military, and the development of technology were not so intertwined as they are today. The ,falling commodity prices, due to automation of farms, came first.
I would argue that there has been a grand blurring of lines, in order to keep the general economy alive, to such an extent that recovery from a potential crash will be much more difficult than ever before, and thus, the amount of suffering may possibly be greater.
My source in Geneva has put up an interesting page here which contains, among other things, two documents which you might want to take a read through this weekend. One is a strategic view by the UK Ministry of Defence "Development, Concepts and Doctrine Center". The key thing in this report (that I pointed out to subscribers last weekend) is that in the event of a major downturn in the economy, the risks of terrorism and the like might possibly go up dramatically because unemployed people will do many things for money or food. The other papers on the page may be of interest as well. That Treasury paper, for instance.
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As the economic lines have blurred, we have seen a return to weekend banking many years back, the move of bankers into investment, again, a blurring of the lines that was a precursor to the Great Depression. And now, we're seeing how finance has become a key tool in State Policy toward terrorist organizations.
We're blurring lines this time around in other areas, too. We didn't have a carry-trade in the 1930's experience and certainly the global inter-market linkages didn't exist.
So we come, over the next year or so to a fascinating point in history which will give us one of two possible outcomes.
The optimistic case is that because of inter-market linkages, the expansion of federal financial strategy toward foreign policy goals and anti-terrorism efforts, and all the like, will add systemic resilient to the point where the Global Economic System will be able to muddle-through a massive periodic correction of past excesses in the credit markets.
The pessimistic outcome is that the excesses in the financial instruments markets have now been spread around so much - touching almost every part of the USA systemically, that a Crash now will not only trash the banksters on Wall Street, but it will trash the Military, Agriculture, Industry, and Services. Each has become so intertwined with the financial system that the systemic decline threatening could essentially take down the whole country, not just the financial core.
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We shouldn't have too long to wait. A year at tops. But if you wake up one morning and read headlines about how the U.S. Dollar, currently in a counter-trend rally against other global currencies, has suddenly reversed course and is in decline again -- to the point where ships full of goods for the American market are turned around on the high seas to take their goods back home - then that will finally answer the question of whether expansion of the pool of players with 'skin in the game' really does as systemic stability, or whether it simply crashes the whole country.
Meantime, Russia is committed to a strong ruble policy, spending $4 billion to support it.
Me? Too close to call, I figure. As a student of history, I can see that without 9/11, the WOT and the subsequent Wars and Housing Bubble, the Crash to wipe out malinvestment should have happened in 2001/2002 when the Internet Bubble burst.
The intervening policy decisions (and you can carry that anywhere you will) have kept the game going, but with necessary expansion of participants. To the point where now, we read how fixed income gurus like Bill Gross are saying that the U.S. will have to buy assets to prevent a financial tsunami.
[Linguistic note: The Bloomberg story above is the first use I have seen in the MSM of our word "de-levering" which was introduced as a concept in the Tuesday August 12th report "Who are the "PowersThatBe" - which in turn was coined by my book writing insider source, who is shopping his book on the financial meltdown...]
Does all this blurring the lines change the outcome? I've got a nickel bet that long-term it doesn't and it just postpones the inevitable outcome. But, it sure gives financial writers something to write about.
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US Treasury Strategic Directions 2009 through 2011 (July,2008) from the Office of Intelligence and Analysis PDF FORMAT
WASHINGTON — Senior officials from the Bush administration and the Federal Reserve on Friday called in top executives of Fannie Mae and Freddie Mac, the mortgage finance giants, and told them that the government was preparing to place the two companies under federal control, officials and company executives briefed on the discussions said.
The plan, which would place the companies into a conservatorship, was outlined in separate meetings with the chief executives at the office of the companies’ new regulator. The executives were told that, under the plan, they and their boards would be replaced and shareholders would be virtually wiped out, but that the companies would be able to continue functioning with the government generally standing behind their debt, people briefed on the discussions said.
It is not possible to calculate the cost of any government bailout, but the huge potential liabilities of the companies could cost taxpayers tens of billions of dollars and make any rescue among the largest in the nation’s history.
The drastic effort follows the bailout this year of Bear Stearns, the investment bank, as government officials continue to grapple with how to stem the credit crisis and housing crisis that have hobbled the economy. With Bear Stearns, the government provided guarantees, and the bulk of its assets were transferred to JPMorgan Chase, leaving shareholders with a nominal amount.
Under a conservatorship, the common and preferred shares of Fannie and Freddie would be reduced to little or nothing, and any losses on mortgages they own or guarantee could be paid by taxpayers. Shareholders have already lost billions of dollars as the stocks have plunged more than 80 percent this year.
A conservatorship would operate much like a pre-packaged bankruptcy, similar to what smaller companies use to clean up their books and then emerge with stronger balance sheets. It would allow for uninterrupted operation of the companies, crucial players in the diminished mortgage market, where they are now responsible for nearly 70 percent of new loans.
The executives were told that the government had been planning to announce the decision as early as Sunday, before the Asian markets reopen, the officials said.
For months, administration officials have grappled with the steady erosion of the books of the two mortgage finance giants. A fierce behind-the-scenes debate among policy makers has been waged over whether to seize the companies or let them work out their problems. Even after the companies are put under government control, debates will continue over whether they should be independent and how they should operate over the long term.
The declines in the housing and financial markets apparently forced the administration’s hand. With foreign governments increasingly skittish about holding billions of dollars in securities issued by the companies, no sign that their losses will abate any time soon, and the inability of the companies to raise new capital, the administration apparently decided it would be better to act now rather than closer to the presidential election in two months.
Just five weeks ago, President Bush signed a law to give the administration the authority to inject billions of dollars into the companies through investments or loans. In proposing the legislation, Treasury Secretary Henry M. Paulson Jr. said that he had no plan to provide loans or investments, and that merely giving the government the authority to backstop the companies would provide a strong shot of confidence to the markets. But the thin capital reserves that have kept the two companies afloat have continued to erode as the housing market has steadily declined and the number of foreclosures has soared.
As their problems have deepened — and the marketplace has come to expect some sort of government rescue — both companies have found it difficult to raise new capital to absorb future losses. In recent weeks, Mr. Paulson has been reaching out to foreign governments that hold billions of dollars of Fannie and Freddie securities to reassure them that the United States stands behind the companies.
In issuing their quarterly financial statements last month, the two companies reported huge losses and predicted that home prices would fall more than previously projected.
The debt securities the companies issue to finance their operations are widely owned by mutual funds, pension funds, foreign governments and big companies.
Officials said the participants at the meetings included Mr. Paulson, Ben S. Bernanke, the chairman of the Fed, and James Lockhart, the head of both the old and new agency that regulates the companies. The companies were represented by Daniel H. Mudd, the chief executive of Fannie Mae, and Richard F. Syron, chief executive of Freddie Mac. Also participating was H. Rodgin Cohen, the chairman of the law firm Sullivan & Cromwell, who was representing Fannie.
Officials and executives briefed on the meetings said that Mr. Mudd and Mr. Syron were told that they would have to leave the companies.
Spokesmen at the two companies did not return telephone calls seeking comment.
The meetings reflected the reality that senior administration officials did not believe they could wait for some kind of financial tipping point, as happened with Bear Stearns, which was saved from insolvency in March by government intervention after its stock plummeted and lenders withheld their capital.
Instead, Mr. Paulson has struggled to navigate through potentially conflicting goals — stabilizing the financial markets, making mortgages more widely available in a tightening credit environment, and protecting taxpayers from possibly enormous losses.
Publicly, administration officials have tried to bolster the companies because the nation’s mortgage system relies on their continued ability to purchase mortgages from commercial lenders and pull the housing markets out of their slump.
But privately, senior officials have been critical of top executives at the companies, particularly Freddie Mac. They have raised concerns about major risks to taxpayers of a bailout of companies whose executives have received huge compensation packages. Mr. Syron, for instance, collected more than $38 million in compensation since he joined the company in 2003.
Although Mr. Syron promised regulators earlier this year that he would raise $5.5 billion from investors, he has failed to make good on that promise — even as Fannie Mae raised more than $7 billion. Mr. Syron was slated to step down from the chief executive position last year, but that was delayed when his appointed successor, Eugene McQuade, chose to leave the company.
With the possible removal of the top management and the board, it is no longer clear who would appoint new management.
Mr. Paulson had hoped that merely having the authority to bail out the two companies, which Congress provided in its recent housing bill, would be enough to calm the markets, but if anything anxiety has been increasing. The clearest measure of that anxiety has been the gradually widening spread between interest rates on Fannie- or Freddie-backed mortgage securities and rates for Treasury securities, making home mortgages more expensive. The stock prices of the companies have also plunged.
After stock markets closed on Friday, the shares of Fannie and Freddie plummeted. Fannie was trading around $5.50, down from $70 a year ago. Freddie was trading at about $4, down from about $65 a year ago.
With Fannie and Freddie guaranteeing $5 trillion in mortgage-backed securities, and a big share of those held by central banks and investors around the world, Mr. Paulson appears to have decided that the stakes are too high to take chances.
The Treasury Department is required by the new law to obtain agreement from the boards of Fannie and Freddie for a capital infusion. The exception is if the companies’ regulator, Mr. Lockhart, determines that the companies are insolvent or deeply undercapitalized it could take the companies over anyway.
Charles Calomiris, a professor of economics at Columbia Business School, said delaying a rescue would only increase the risks and costs.
“The last thing you want to do is give a distressed borrower more time, because when people are in distress they tend to take a lot of risks,” he said. “You don’t want zombie institutions floating around with time on their hands.”
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FDIC shutters Silver State Bank of Nevada
Son of presidential nominee John McCain was reportedly former board member; closing marks the 11th bank failure this year.
WASHINGTON (AP) -- Regulators on Friday shut down Silver State Bank, saying the Nevada bank failed because of losses on soured loans, mainly in commercial real estate and land development.
It was the 11th failure this year of a federally insured bank.
Nevada regulators closed Silver State and the Federal Deposit Insurance Corp. was appointed receiver of the bank, based in Henderson, Nev. It had $2 billion in assets and $1.7 billion in deposits as of June 30.
Andrew K. McCain, a son of Republican presidential nominee John McCain, sat on the boards of Silver State Bank and of its parent, Silver State Bancorp, starting in February but resigned in July citing "personal reasons," corporate filings with the Securities and Exchange Commission show. Andrew McCain also was a member of the bank's audit committee, responsible for oversight of the company's accounting.
The younger McCain, who is the chief financial officer of Hensley & Co., the beer distributorship of which Cindy McCain is chairwoman, is the Arizona senator's adopted son from his first marriage.
Andrew McCain's position on the Silver State board and departure were first reported Friday by The Wall Street Journal online.
Silver State Bank ran into difficulty because of a substantial amount of "poor-quality loans primarily related to real estate development" in southern Nevada and other distressed markets, FDIC spokesman David Barr said.
"When the housing market slowed down, people who bought raw land to build new homes didn't need that land so they couldn't do anything with it and repay their loans. So those loans went bad," Barr said.
Silver State Bancorp recently reported a net loss for the second quarter of $73.2 million, or $4.84 a share, compared with net profit of $6.2 million, or 44 cents a share, in the same period last year.
Construction and development loans have been the fastest-growing category of troubled loans for U.S. banks, and many banks have heavy concentrations of them in their lending portfolios, according to the FDIC. Some small banks are considered especially vulnerable. Delinquent loan payments and defaults by commercial and residential developers have surged to the highest levels since the early 1990s - the latter part of the savings and loan crisis.
The FDIC said Silver State Bank's insured deposits will be assumed by Nevada State Bank of Las Vegas. Its branches will reopen Monday as offices of Nevada State Bank in Nevada and National Bank of Arizona in Arizona.
The agency said depositors of Silver State Bank will continue to have full access to their deposits.
The 11 failures so far this year compare with three for all of 2007, and federal banking officials have said that more banks are in danger of collapse.
Silver State Bank has operated 13 branches in the greater Las Vegas area and four in the greater Phoenix-Scottsdale area of Arizona as well as loan offices in Nevada, Utah, Colorado, Washington, Oregon, California and Florida.
The FDIC estimated its resolution will cost the deposit insurance fund between $450 million and $550 million.
Regular deposit accounts are insured up to $100,000.
There were about $20 million in uninsured deposits held in roughly 500 accounts at Silver State that potentially exceeded the insurance limit, the FDIC said.
Concern has been growing over the solvency of some banks amid the housing slump and the steep slide in the mortgage market. The pressures of tighter credit, tumbling home prices and rising foreclosures have been battering many banks, large and small, across the nation.
The largest bank failure by far this year has been that of savings and loan IndyMac Bank, which was seized by regulators on July 11 with about $32 billion in assets and deposits of $19 billion.
The seizure of Pasadena, Calif.-based IndyMac, which was the largest regulated thrift to fail in the United States, prompted hundreds of angry customers to line up for hours in Southern California to demand their money. IndyMac also was the second-largest financial institution to close in U.S. history, after Continental Illinois National Bank in 1984.
The FDIC has been operating the bank, now called IndyMac Federal Bank, under a conservatorship.
The FDIC plans to raise insurance premiums paid by banks and thrifts to replenish its reserve fund after paying out billions of dollars to depositors at IndyMac. The fund, currently at $45 billion, is expected to take a hit from IndyMac of $4 billion to $8 billion.
Federal officials expect turbulence in the banking industry to continue well into next year, and more banks to appear on the FDIC's internal list of troubled institutions.
Of the 8,500 or so FDIC-insured banks in the country, 117 were considered to be in trouble in the second quarter -- the highest level in about five years and up from 90 in the first quarter. The agency doesn't disclose the banks' names.
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Silver State Bank customers with accounts exceeding $100,000 can contact the FDIC at 1-800-523-8177 to set up an appointment to discuss their deposits.
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Shiller: House Price Decline Could Be Worse than Depression
• Home price declines are already approaching those in the Great Depression, when they plunged 30% during the 1930s. With prices already down almost 20%, it's not a stretch to think we might exceed that drop this time around.
• There are about 10 million homeowners whose debt is higher than their home value, which has broad implications for how Americans feel about their wealth and spending habits (read: more pressure on consumer spending).
• The current hopeful consensus -- that house prices will bottom soon and then begin to recover -- is most likely a dream. Housing markets don't usually have "V-shaped" recoveries. And even if house prices stabilize in nominal terms, after adjusting for inflation, most homeowners will continue to lose money.
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friday the stock marker was propped up artificially much as before 911 - 2001 as sell offs took record tolls on the market ... seems some insider trading could be getting ready for 911 - 2008 ... jim mccanney
Everyone can look at the data and form their own conclusions. But when silver is in short physical supply, commanding injuriously high premiums and difficult to locate; when investors are piling into the silver ETF in droves, a 40% silver price plunge is not only not warranted, it smells.
It is difficult to imagine a legitimate reason that two U.S. banks could quickly and systematically amass a net short position on the COMEX which amounts to over a quarter of the entire action on that bourse. It will not be surprising at all if we learn that these two U.S. banks are taken to task by regulators for their actions. It will be even less surprising to learn that they have become the target of multi-billion dollar class action lawsuits by hungry lawyers representing silver investors everywhere.
Futures markets are supposed to answer the actual physical markets, not the other way around. In other words, futures markets are supposed to be a place where producers or large holders of a commodity can lay off price risk to speculators and thereby hedge against unforeseen adverse movements in the price of the commodity. Futures markets are definitely not supposed to be a place where a couple of well connected and well funded entities can bully the market with their own heavy handed trading.
If silver really was just taken down by a couple of very big U.S. banks to irrationally low levels, it won’t be long before the laws of supply and demand reassert themselves. Got silver?
Frank Barbera, Gold Stock Technician Even more to that point, we wonder at what point does an institution such as the Fed lose its credibility? At what point does an institution become irrelevant? The answer to that question is when events have taken on a life of their own, and when their words no longer have any real impact. We have fortunately not reached this point yet, but for all appearances seem to be heading in this direction at a rapid pace. The socialization of financial market bad debts has forced the Fed to act as the lender of last resort, placing its own balance sheet on the line for the ineptitudes which were sewn over so many years of the Greenspan Fed. How dare Mr. Greenspan comment on perils of the current collapse when he was the chief architect of the events now unfolding each and every week.
Bob Chapman, International Forecaster Why should gold go down if the dollar goes up? If the dollar goes up substantially, that means the euro is going down substantially, so gold should be exploding in the Euro Zone. If anything, a weaker euro should be more supportive of gold than a weaker dollar as there are just as many euros out there as there are dollars now, and because the people of Europe are far more attuned to the uses and purposes of precious metals than are their US counterparts. We sure hope the people in the Euro Zone loaded up on precious metals, which are now skyrocketing in their currency as the euro has gone from 1.60 dollars to 1.50 dollars in rather rapid succession. All fiat currencies will continue to lose against gold, including the dollar, so it is time to load up on the bargains you have been so graciously gifted with by your evil government and the Wall Street fraudsters!!!
Another scheme that financial companies have employed during the crisis is to regularly reclassify assets from Level 2 to Level 3 and vice versa. Level 3 assets have no market so values have to be guessed. Level 2 assets are ‘marked by model according to tangible data.’ Ergo if you have a beneficial model you move assets from Level 3 to Level 2 to generate better marks and earnings.
Which leads us to JP Morgan – For most of the US financial crisis the media and pundits hailed JP Morgan as having a ‘fortress-like balance sheet’ even though it has over $80 trillion of derivatives. JP Morgan CEO Jamie Dimon has been portrayed as the Financial Wizard of Oz.
So for the past several months most investors and people assumed that JP Morgan somehow managed to avoid all the crappy paper and ancillary problems that plague the industry. One group that thought otherwise averred that the Bear Stearns bailout was engineered to help JP Morgan obfuscate its problems and borrow massively from the Fed without public concern.
But the revelation of a relatively miniscule $1.5B write-down has destroyed the illusion of JP Morgan’s imperviousness to the financial mess. This has led analysts, investors and wise guys to re-examine JPM.
One disconcerting JPM fundamental is the amount of its Level 2 assets. An astute money manager alerted us that, “The market is obsessed with Level 3 assets levels but forgot to notice that of JPM's total $1.775 trillion in assets, $1.575 trillion are Level 2 or mark to model. The whole loan, MBS and Level 2 are what presents the real danger when the raters finally get there.”
Gary Dorsch, Global Money Trends Trading in foreign currencies is akin to judging a reverse beauty contest, and suddenly, the US-dollar's was looking a little less ugly than its peers.
Ambrose Evans-Prichard, Telegraph UK My guess is that political protest will mark the next phase of this drama. Almost half a million people have lost their jobs in Spain alone over the last year. At some point, the feeling of national impotence in the face of monetary rule from Frankfurt will erupt into popular fury. The ECB will swallow its pride and opt for a weak euro policy, or face its own destruction.
What we are about to see is a race to the bottom by the world's major currencies as each tries to devalue against others in a beggar-thy-neighbor policy to shore up exports, or indeed simply because they have to cut rates frantically to stave off the consequences of debt-deleveraging and the risk of an outright Slump. When that happens - if it is not already happening - it will become clear that the both pillars of the global monetary system [the dollar and the euro] are unstable, infested with the dry rot of excess debt.
Gold bugs, you ain't seen nothing yet. Gold at $800 looks like a bargain in the new world currency disorder.
Bill Fleckenstein, Fleckenstein Capital In any case, if we saw (as it appeared) heavy selling or short-selling in the futures market while demand for gold in the physical world was rising, that historically would be a very bullish development. What does seem quite clear is that some portion of gold's weakness has been a function of the dollar's strength. The dollar's violent rally owes to folks' beliefs that the economy is improving in the U.S., that the Federal Reserve intends to raise interest rates and that the rest of the world economy is slowing down.
The rest of the world may in fact be slowing down. But our economy is not about to get better, and the Fed is not about to tighten rates. Just the thought of the Fed increasing rates is laughable.
Eric Janszen, iTulip The current recession is more serious than all previous recessions since the early 1980s. This time inflation, unemployment, and a credit crunch are cutting into demand. Demand, in the economic sense, is the combined desire of consumers to spend and the availability of the cash they need to act on that desire. Recessions with declining demand tend to be self-reinforcing as falling demand leads to falling consumption leading businesses to reduce labor costs by laying off employees, leading to falling incomes and further reductions in demand.
Another unusual aspect of this recession is that traditional Keynesian techniques to stimulate demand by expanding credit through interest rates cuts is hobbled by a moribund housing market; housing has for decades been the primary mechanism for transmitting interest cuts to consumers by reducing a household's primary interest expense, their mortgage. The freed up money acts much like tax cut. Now, however, interest rates are rising, especially for those homeowners who took Greenspan's advice in 2005 and took out an adjustable rate mortgage when fixed rate mortgages were at 40 year lows, and tightening lending standards are cutting off home mortgage refinancing for millions.
Finally, a weak dollar since 2001 means "oil prices drive up the cost of everything that requires oil to grow, be dug up, blown, packed, scrubbed, crushed, shaken, warmed, cooled, pickled, packaged, processed, or moved – that is, everything on God’s green earth including your own hair and the hot water you used to wash it this morning." The only way to reduce that impact short term is to use less oil. A recession will help, as long as the dollar doesn't fall faster than oil demand.
Jack Lifton, Resource Investor As the 2008 political season nears its quadrennial crescendo and rock stars and war heroes are vying to be selected for the most militarily powerful job in the world it would seem that no one, certainly no politician, is willing to admit that America’s world economic-leadership is eroding at an almost perceptible daily rate. Candidates, and office holders, remind us that each of the U.S. Navy’s 12 carrier battle-groups is, by itself, more powerful than any other single nation’s entire navy! Yet they fail to mention that we cannot build armoured ships or vehicles, small arms, artillery, armour piercing ammunition, missile guidance, night vision equipment, computers, displays, or, believe it or not, nuclear propulsion systems, or aircraft of any kind, civilian or military, without minor metals, such as the rare earths. Most of which we are now, 100%, dependent on nations unfriendly to America, which, notwithstanding their being unfriendly, already practice resource nationalism. Some of them, such as China, have already openly begun to restrict the export — or utilization for items for export—of key industrial minor metals, so as to reinforce their own self sufficiency in these materials.
Bob Moriarty, 321Gold Homestake declined about 21% from the crash in late October 1929 through the end of that year, but through the entire decade of the 1930s Homestake was the highest gaining stock on the New York Stock Exchange. So, it’s entirely possible the market could crash and gold stocks go up. At some point in time, people are going to recognize the precious metals stocks, not all metal stocks, are the safest place to be.
Doug Noland, Prudent Bear It is not the nature of dislocated markets to let fundamentals get in the way of price movement. Markets, after all, live on fear and greed. Sinking energy prices and a short squeeze ignited U.S. stocks this week. And surging stock prices always entice the optimistic viewpoint, with many viewing runs in stocks and the dollar as confirmation that the worst of the financial and economic crisis is behind us. The bursting of the so-called Energy/Commodities Bubble is also viewed in positive light.
Yet if the key dynamic is instead a Bursting Leveraged Speculating Community Bubble, entirely different dynamics are now in play. Enormous short positions have built up, the vast majority as part of “market neutral,” “quant” and myriad risk hedging strategies. If today’s dislocation develops into a significant unwind of these positions, the market immediately then becomes vulnerable to a disorderly “melt-up” followed almost inevitably by a sharp reversal and disorderly decline. The unwind of bearish speculations and hedges would be a most problematic market development, unleashing a final bout of speculative excess and disorder that would set the stage for a major market crisis.
It is now clear that many within the leveraged speculating community have suffered huge losses over the past few weeks. For a “community” that was already suffering a difficult year, blowups in the popular energy, commodities and short dollar trades were a decisive backbreaker. Huge rallies in heavily shorted stocks and sectors have added further pain. One can now expect major redemptions at quarter and year-ends, a dynamic that likely ensures recent near-chaotic market conditions become the norm for awhile.
Jim Puplava, Financial Sense The US Mint has suspended the production of US Eagles. I was told by one dealer this morning, checking with him, they’re telling people delivery dates for silver Eagles won’t be till January, February of next year. One dealer I was talking to said that they can’t even get the plates – so what they were doing is they were ordering thousand ounce bars and they were melting the bars down to make one ounce coins because most people are buying either silver rounds – and I was told delivery dates right now are two months out. So this is August, probably late October. That’s how scarce it is. So, the other thing is get your physical metals because there is a gross discrepancy and divergence between trying to drive down the paper market price of silver. One dealer told me in July his sales were up four fold last year; and this month alone, his sales are up eight fold. One dealer was telling me today that he had never seen anything like this in his lifetime. On this Friday I just bought a ton of silver and I’ve been told it’s going to take two months to take delivery on that ton. And if the price goes lower, I’ll buy another ton. I’ve got a couple of dealers who store my bullion for me until it’s shipped overseas.
James Quinn, Wharton School, University of Pennsylvania We have outsourced our savings to the emerging economies, along with our manufacturing jobs. The Chinese are saving the money we’ve paid them for flat screen TVs and the Middle Eastern countries are saving the money we’ve paid them for oil. You need savings in order to increase investment. The emerging markets are making the vast majority of the investments in the world. While the U.S. endlessly debates drilling and construction of nuclear plants (none built in U.S. since 1987) and oil refineries (none built in U.S. since 1977), China brought four oil refineries online in 2008 and plans to build 30 nuclear reactors in the next twelve years. The Asian Century has begun, but the U.S. has tried to keep up by using debt. It will not work. If anything, this has accelerated the shift of power to Asia.
Nouriel Roubini, RGE Monitor Barron's: Unfortunately for the rest of us, you have a pretty good track record. How much more misery lies ahead?
Roubini: We are in the second inning of a severe, protracted recession, which started in the first quarter of this year and is going to last at least 18 months, through the middle of next year. A systemic banking crisis will go on for awhile, with hundreds of banks going belly up. The taxpayer's bill is going to be huge. I estimate this financial crisis will lead to credit losses of at least $1 trillion and most likely closer to $2 trillion. When I made this analysis in February everybody thought I was a lunatic. But a few weeks later the International Monetary Fund came out with an estimate of $945 billion, Goldman Sachs (GS) estimated $1.1 trillion and UBS (UBS) $1 trillion. Hedge-fund manager John Paulson recently estimated the losses would be $1.3 trillion, and late last month Bridgewater Associates came up with an estimate of $1.6 trillion. So, at this point $1 trillion isn't a ceiling, it's a floor. And the banks, as I've said, have written down only about $300 billion of subprime debt. I think $2 trillion is too high, but the number will definitely be huge.
Franklin Sanders, Money Changer Either this is the greatest silver and gold buying opportunity of all time, or the end of a bull market.
But it is NOT the end of a bull market. Time alone argues that. A bull market runs 10 - 20 years, and this one has run only 7, since 2001. Those who think silver & gold have fallen into the "bursting of the commodity bubble" completely misunderstand what drives them in the first place. Silver & gold are not commodities; they are money. When investors pile into silver & gold, it's not any commodity bubble forcing them there, but monetary demand. They aren't buying metals because they think all the Indian ladies are going to be wearing two nose rings instead of one this season, or that the American bourgeoisie will suddenly begin stockpiling sterling silver forks again.
They are buying metals because -- listen to this, get it straight once & forever -- they distrust fiat central bank currencies (or if you prefer, national currencies). The dollar is trash, the yen is trash, the euro is trash; all are equally insolvent, equally unbacked by anything expect a politician's or central banker's promise, which is not nearly as good as that of any madame at any bordello anywhere.
The dollar is rising? So, why? Did it become better, acquire more gold backing, solve its chronic balance of payments deficit last night? Come on. Did the euro get worse overnight? The yen? How much worse could it get? You are seeing competitive devaluations, all very much worked out collegially in advance by central bankers. Fundamentally meaningless.
What is NOT meaningless is that the Great Alternative Currencies, silver & gold, have long been advancing against ALL national currencies. All markets swing like pendulums, too far one way, then too far the other. Silver & gold prices became overbought -- a lot of people short dollars were long silver & gold. The dollar rallied, oil & commodities fell, sucking down silver & gold money. Look at the numbers. Even with gold down to $787.50 today, that's only a 21.5% correction, while always more volatile silver is down 37.4%. Friends, these are normal, not outlandish, corrections. Sober up.
Julian D. W. Phillips, Gold Forecaster The huge gap between the value of gold and the value of money must narrow. Whether it is through the rise in the value of gold and silver or through the fall of the value of money dictates the future of the financial system. Either way, gold and silver will prove to be the safe-haven it has been since money was part of man’s world. And the second half of this year is likely to be as dramatic as the first half but with a golden or silver sheen to it.
Steve Saville, Speculative Investor Many people will be asking the question: why is the US$ rallying when its fundamentals are so terrible? From our perspective, however, a more reasonable question is: why has it taken so long for the US$ to rally against the euro given that the US$ is extremely under-valued relative to the euro and the euro's fundamentals are just as bad?
The answer, we think, is that the currency market has believed that the US Federal Reserve would be as 'easy' as it needed to be to help the banking system through its crisis, while the ECB would continue to focus on minimizing currency depreciation. We think the market was/is right to believe that the Fed will do whatever it takes to maintain the solvency of the major banks, but traders now appear to be coming around to the view that the ECB will also be loosening the monetary reins. Take away the interest-rate 'prop' and the euro suddenly becomes free to fall under the weight of its own over-valuation.
Mike Shedlock, Mish’s Global Economic Trend Analysis It's NEVER "practical" for the Fed, the SEC, Banks, CEOs in general, the FDIC, Congress, the Treasury Department, or the President to tell the truth. This is what it all boils down to: Somehow it's never "practical" to stop a drunken credit-financed orgy, yet when the party ends, it's never "practical" to discuss the consequences. In this case, the credit orgy lasted so long, and there were so many players, that the most important truth right now that needs open, honest discussion is that the entire US Banking System Is Insolvent.
Government stupidity is the most liquid of all assets, spreading everywhere at the slightest provocation. Look for more of it and you won't be disappointed.
James Turk, Freemarket Gold and Money Report The time-bomb is ticking. The federal government is liquid because as its consolidated accounts state, it has “the power to print additional currency.” And print it will for one simple reason. The federal government is insolvent. Its debt obligations far exceed its financial capacity to repay those debts without debasing the dollar. Eventually it will take one ounce of gold or so to buy the Dow Jones Industrial Average. At that time I will recommend selling gold and buying the DJIA to ride the next cycle. But the DJIA still has to lose about 90% of its price in terms of gold for that to happen.
Christopher Whalen, Institutional Risk Analyst We're not sure who's going to win the presidency in November, but we are very sure that the safety and soundness of the nation's banking system is going to be an issue in this election - perhaps as prominent an issue as energy prices. Indeed, we think that the president-elect will be forced to meet with President George Bush and both men will ask the Congress to move on providing funding and new legal authority to backstop the FDIC. In the near-term Uncle Sam is going to be forced to get even more involved to head off a catastrophic contraction in the availability of credit to the private economy.
Jim Willie, Hat Trick Letter The US banks are fast approaching the early warning season in early to middle September. They are required (Wall Street firms excluded) to come forward and provide guidance on their earnings, their balance sheet damage (called impairment, since sounds better), and their profits (nonexistent, as in extinct). Wall Street firms have almost no stock or bond issuance, no private equity packaging, so business is largely dominated by management of their demise, along with management of their propaganda messages that seem shrill lately. The US banks will in my estimation announce bigger Q3 losses than Q2. Their BS-stories continue since they are actively seeking cash to shore up balance sheets. Their mortgage related losses will be ongoing, but now those losses will be joined by prime mortgage losses, commercial loan losses, car loan losses, credit card losses, and more. The USGovt can claim the economy is in good shape, that exports are booming, but a grand disconnect has occurred. Something like 460 thousand jobs have been lost this year, and most job gains are on paper, from the Birth Death Model nonsense. More paper deception, this of the labor market. Consumers might spend less if they were keenly aware of US-based unemployment running over 14%. The steep decline in USGovt tax receipts testifies to a recession. Most statistics testify to recession, like the Leading Economic Indicators. Reverse gear for the USEconomy is bad news for the USDollar. And all the horrendous disasters coming from Fannie Mae and Freddie Mac acid pits cannot be good.
"I think before we really get to the NEW WORLD, whatever that is, I think we will be into 2010."
EMPHASIS is mine.
Is it just wild speculation, or is this guy delivering a selected line - whether he knows what it means or more likely doesn't - as a piece of predictive programming?
NEW YORK - Lehman Brothers Holdings Inc. shares tumbled Monday amid investor uncertainty about how the nation's fourth-largest brokerage will find much-needed capital to help shore up its balance sheet.
There remains intense speculation that Lehman Chief Executive Richard Fuld might be forced to sell off its Neuberger Berman asset management division to help buoy the investment bank's ailing balance sheet. Analysts believe such a sale would generate between $7 billion to $8 billion.
A spokesman for Lehman declined to comment.
The most likely deal would be to sell Neuberger Berman to its top management, according to analysts. However, an outright sale of the prized asset has been seen as harmful to both Lehman's revenue stream and debt ratings.
Brad Hintz, a former Lehman Brothers (nyse: LEH - news - people ) chief financial officer who is now an analyst at Sanford C. Bernstein, said he believes the company should spin off Neuberger and sell some of its real estate businesses. He also projects the company will write down $4 billion to $5 billion in risky mortgage securities when it posts results later this month, and those losses could be offset by the Neuberger deal.
There also have been reports that Fuld will split the company into two separately listed firms - creating what analysts call a "good bank" and a "bad bank." The investment bank's $32 billion portfolio of risky mortgage securities would be allocated to a new company supported by new debt and equity.
That would free up the fixed-income and investment banking side of Lehman Brothers to operate without the problems caused by the mortgage portfolio. The split would also be funded through a major equity investment, most likely from a Korean or Japanese bank, according to several media reports.
Lehman shares closed down $2.05, or 13 percent, at $14.15, having earlier dipped as low as $13.03. The stock has traded within a 52-week range of $12.02 to $67.73.
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Bank Failure Count: 2008's 11th bank fails, McCain's son was director
In what I feared might become a regular feature here, the Federal Deposit Insurance Corporation (FDIC) arranged for the takeover of the 11th failed bank of 2008 on Friday. As I posted, the FDIC likes to close banks on Friday after hours so they can reopen as branches of the acquiring bank on the following Monday morning. According to the Associated Press, the bank in question is Nevada's Silver State Bank.
Nevada State Bank of Las Vegas will take over the insured deposits of Silver State -- which had $2 billion in assets and $1.7 billion in deposits at the end of June. AP reports that "[Silver State's] branches will reopen Monday as offices of Nevada State Bank in Nevada and National Bank of Arizona in Arizona."
John McCain's son, Andrew, who is also CFO of his mom's beer distributorship, "sat on the boards of Silver State Bank and of its parent, Silver State Bancorp, starting in February but resigned in July citing 'personal reasons.' Andrew McCain also was a member of the bank's audit committee, responsible for oversight of the company's accounting," according to AP.
The failure -- which was caused by "poor-quality loans primarily related to real estate development" -- will cost the FDIC deposit insurance fund between "$450 million [and] $550 million," according to AP. Silver State's motto was "When the casinos treat you poorly, let Silver State treat you like a valued customer," according to its website.
Although AP reports he was adopted by McCain and his first wife, Andrew is following in his father's footsteps. John McCain protected Charles Keating from government regulators because he had arranged a real estate deal for his second wife, Cindy. The failure of Keating's S&L cost taxpayers $3.4 billion. Taxpayers got off relatively cheaply bailing out Andrew's former colleagues.
So if you have money in a riskier bank -- one that is losing money and charging off large volumes of loans -- consider moving it into a bank whose profits have been growing this year. And congratulations to Andrew McCain for bailing out of Silver Lake before the FDIC took it over.
WASHINGTON - The Federal Reserve Bank of New York held an emergency meeting on Friday evening with top financial market representatives to discuss recent market developments, a Fed official said.
"Senior representatives of major financial markets met at the Federal Reserve Bank of New York Friday evening to discuss recent market developments," a Fed official told Reuters.
The official said New York Fed President Timothy Geithner, U.S. Treasury Secretary Henry Paulson and Securities and Exchange Commission Chairman Christopher Cox were among the participants in the meeting.
Financial markets have been on tenterhooks over the future of Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research, Stock Buzz) and whether the struggling investment bank, whose stock value has collapsed, may or may not be able to find a buyer. The talks at the New York Fed took place as discussions between Lehman and other parties continued.
The Treasury and Fed have been involved in talks regarding Lehman's future. Earlier on Friday, a source familiar with the thinking of Treasury Secretary Henry Paulson said Paulson was "adamant" no public funds be put on the line to help facilitate a sale. (Reporting by Glenn Somerville; Writing by Tim Ahmann; Editing by Gary Hill)
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Cramer: 'Dysfunctional' Banking System Puts U.S. 'Totally' at Risk of 'Great Depression No. 2'
CNBC host promotes taxpayer-funded federal bailout and Fed interest rate cut to stem financial problems.
The fragility of the U.S. banking system puts the country in a more dire position than many people realize according to CNBC “Mad Money” host Jim Cramer.
Cramer, in his September 11 “Stop Trading” segment on CNBC’s “Street Signs” told host Erin Burnett the situation puts the United States in danger of “Great Depression, No. 2.”
Burnett questioned Cramer’s assertion that banks should be bailed out by the federal government, in turn passing the cost off to the taxpayer. “It’s obvious the bank system is falling apart,” Cramer said. “Let’s save it before it goes to zero.”
Here is the blow by blow:
BURNETT: But, what I’m writing down is some numbers here – more broadly for the state of, of, of bailouts. You had the Bear [Stearns] bailout and they guaranteed the first $30 billion. We don’t know what the costs will be. Fannie and Freddie – numbers are all over the map, no one knows – $50 billion to $500 billion.
CRAMER: We don’t want a Great Depression, what’s the matter with that? We don’t want a Great Depression.
BURNETT: But OK, then you look at a Washington Mutual, you have a few hundred billion dollars in assets here. You got all these deposits. You’ve got to go borrow the money …
CRAMER: That was run by morons.
BURNETT: But my point is – you’ve got to go borrow the money to fulfill your FDIC insurance to $100,000.
CRAMER: Well, no, you just transfer – you close it one day, like my bank was…. I was banking at Crossland. The next day it opens as another bank, what do I care? My $100,000 was insured.
BURNETT: But, you care because taxpayers are the ones who’s going to be the paying you back for the ones who borrowed it.
Cramer argued it was necessary because otherwise, the U.S. would go into a depression:
CRAMER: We don’t want a Great Depression. I mean, we just don’t want one.
BURNETT: But, are we really at risk of a Great Depression? Most people would argue that we’re not in a full-blown recession.
CRAMER: Totally, totally. John Stumpf [president] from Wells Fargo said it was the worst since the Great Depression.
BURNETT: In housing, but that’s not everywhere.
CRAMER: If I wanted clean hands, if I wanted to be Andrew Mellon, I would call for – I would just say, “Listen, let’s just let the Great Depression, Number Two, happen. But, that’s where we are. That’s, we’ve been like that for a while. So, let’s try to avoid it if we can.
Burnett argued the economy was still growing. After one quarter of negative gross domestic product (GDP) at the end of 2007, the economy has rebounded with two positive quarters. But Cramer said there was a difference between the economy and the banking system.
“Well, one is the difference between the economy and the banking system,” Cramer said. “The economy really picked up in 1936 to ’38 because of armament orders, and World War II turned around the U.S. economy entirely, but there was still, the banking system was still very frail throughout the ’30s.”
Cramer told Burnett he was disappointed in Federal Reserve Chairman Ben Bernanke, who has studied the Great Depression. Cramer added there is a need for another interest rate cut at the upcoming Federal Reserve Board meeting on September 16.
“But you know, look – I hear you on the jobs, I hear you on the economy,” Cramer said. “I don’t really care. I’m talking about a dysfunctional banking system. We don’t want Citi (NYSE:C) to go out of business. We don’t want AIG (NYSE:AIG) to go out of business.”
House Speaker Nancy Pelosi, D-Calif., September 11 mentioned the possibility of another rescue package – this one for beleaguered investment bank Lehman Brothers (NYSE:LEH), based on its impact on the credit markets.
Great Depression references have been used liberally by the media in 2008. Networks have made endless connections to the Great Depression – more than 70 times in the first six months of the year and that’s just on the three broadcast networks..
The fourth-largest investment bank in the US, Lehman Brothers, has filed for bankruptcy protection, amid a growing global financial crisis.
Lehman had incurred losses of billions of dollars in the US mortgage market.
The move threatens to deal a further blow to the global financial system, as banks unwind their deals with Lehman.
Merrill Lynch, also stung by the credit crunch, has agreed to be taken over by Bank of America in a dramatic weekend of events for Wall Street.
Its impact is being felt around the world:
Stock markets and the US dollar have tumbled in reaction to Lehman's collapse, with banking shares hardest hit; UK bank HBOS saw its shares plummet 30%. Central banks have moved to reassure markets. The US Federal Reserve has broadened its emergency lending scheme and the UK and European central banks have injected a total of $39bn (£22bn; 28bn euros) into the financial system. There are fears AIG, once the world's largest insurer, could also face collapse. It is taking steps to raise money amid reports it is seeking a$40bn emergency loan from the Fed. Bank of America's move to buy Merrill in a $50bn deal means that three of the top five US investment bank have fallen prey to the sub-prime crisis within six months. In the UK, accountants PricewaterhouseCoopers have been appointed as administrators for Lehman. Anxious markets
Stock markets in Europe and Asia dropped sharply and the dollar tumbled against the yen, the euro and the Swiss franc as Lehman's failure raised fears about the strength of the global financial system.
The FTSE 100 index of leading UK shares was down 271 points, or 5%, at 5145.3 by midday. Banking shares have been particularly badly affected with HBOS down almost 30%.
Wall Street is also expected to open lower in what is likely to be a tense day of trading.
The Bank of England and the European Central Bank said they were monitoring developments and had pumped £5bn and $30bn respectively into money markets to help stabilise them.
Talks collapse
The chance that Lehman Brothers could collapse increased sharply after the strongest potential buyers pulled out at the weekend.
Barclays and Bank of America had been in talks to rescue the bank but negotiations faltered when it became clear that the US Treasury was strongly opposed to using government money to help clinch a deal.
The Treasury had given $30bn backing to Bear Stearns in order to secure its sale to JP Morgan in March.
Greg Wood, the BBC's North America business correspondent, said that police had cordoned off the bank's headquarters in New York and staff were leaving with cardboard boxes as onlookers gathered to watch the bank's demise.
"I think the whole history - 150 years of effort and hard work - that's the most saddening part for me," said one Lehman employee as she left the building.
The bank, which employs about 25,000 staff worldwide, including 5,000 in the UK, was founded in 1850 by three brothers.
'Extraordinary 24 hours'
Lehman Brothers said it intended to file for Chapter 11 bankruptcy protection, which allows a company time to reorganise and devise a plan to pay creditors over time.
It said that its broker-dealer division and asset management division Neuberger Berman Holdings would not be included in the filing.
The accounting firm PriceWaterhouseCoopers said the UK operations of Lehman Brothers have been placed under administration, and the business would be wound down in an orderly fashion.
Bank of America said it had agreed to buy investment bank Merrill Lynch for $50bn (£28bn), in a deal that will create the world's largest financial services company.
Three of the top five US investment banks have now fallen victim to the credit crunch. Lehman and Merrill join Bear Stearns, which was sold to JP Morgan for a knockdown price in March.
The BBC's business editor, Robert Peston, said that it had been Wall Street's most extraordinary 24 hours since the late 1920s.
He said that Merrill's sale was almost as shocking as Lehman's demise.
"The global financial economy has never in recent years been tested by quite such a combination of accidents and jolts to confidence," he said.
Insurer in trouble
In addition to Lehman and Merrill Lynch, problems at AIG, once the world's largest insurer, are also mounting.
Reeling from losses on its exposure to real estate, AIG has sought $40bn from the Federal Reserve to shore up its finances, the New York Times has reported.
To help prevent panic on financial markets, the Federal Reserve said for the first time it will accept stocks owned by banks as collateral for short-term cash loans, broadening its emergency lending programme.
Also 10 of the world's biggest banks on Sunday agreed to establish a $70bn emergency fund, with any one of the banks able to able to tap up to a third of it should they face any liquidity problems.
With the greenback plummeting after the news of Lehman Brothers’ bankruptcy, top investor Jim Rogers predicts that the dollar will lose its status as the world reserve currency status and has resolved to buy more gold despite a recent fall in the price of the commodity.
Rogers, who correctly predicted China’s resurgence as an economic superpower back in the 80’s as well as crude oil surpassing $100, says the global economy is in a recession that is going to get much worse while inflation will continue to skyrocket.
“Some countries lie about it. But, inflation in all countries is going to get worse. The next decade is going to see lot more inflation, which is not good,” Rogers told the India Business Standard.
“Frequently, since the prices of the commodities go up before the inflation numbers, one can stay ahead of inflation. But, if you get it wrong you might do worse. So, investing in those commodities, which are going to go up first or selecting the right commodities, is the key to stay ahead of the inflation and make a lot of money.”
Turning to the dollar, Rogers dismissed the greenback as a “flawed currency” that would continue to deteriorate for two to three decades, adding that he would seek to use the dollar’s recent rally as an opportunity to get out of the currency completely.
“I do not want to own any US dollars. Also, I would not urge you to buy US dollars. (The) dollar is going to loose its status as world reserve currency,” said Rogers.
“Some of the OPEC countries have already started and no longer take dollar, like Venezuela no longer accepts the dollar. Other countries are already looking and may be taking a package of basket of currencies instead of the dollar. I am not the only one who knows the dollar is in trouble. Anybody who watches the TV knows that the dollar is in trouble,” he added.
Rogers also said that the bull market in oil has at least another ten years to run and that oil prices will only go higher.
Speaking on the subject of commodities, Rogers recommended sugar, coffee and cotton and also said that he would be buying more precious metals.
“I am trying and want to buy some gold. However, whether this is the low in the gold, I have no idea, but if gold goes lower, I will add some more. Gold is something I do not plan to sell. Gold is something I will gift to my children,” concluded Rogers.
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Global banks pledge 70 billion dollars to ease credit crunch
WASHINGTON (AFP) — A consortium of 10 global commercial and investment banks announced plans Sunday to provide 70 billion dollars to help offset a credit squeeze amid an anticipated collapse of Wall Street giant Lehman Brothers.
Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley, and UBS, said in a joint statement they "initiated a series of actions to help enhance liquidity and mitigate the unprecedented volatility and other challenges affecting global equity and debt markets."
They agreed to create a "collateralized borrowing facility" of 70 billion dollars, with each bank contributing seven billion dollars, to help ease access to credit.
They also said they would work together "to help facilitate an orderly resolution" of the derivatives exposures between Lehman Brothers and its counterparties.
"These actions reflect the extraordinary market environment," the statement said.
"The banks are committed to continuing to work closely with one another as well as the US Treasury Department, the Federal Reserve, the Securities and Exchange Commission, governments and regulators around the world, and other market participants, to ensure the industry is doing everything it can to provide additional liquidity and assurance to our capital markets and banking system."
The 10 banks would be able to tap this facility, with any bank eligible for up to one-third of the fund. The amount may be expanded if more banks join the program.
The announcement came moments after the Federal Reserve announced new steps to ease access to emergency credit for struggling financial companies, by broadening the collateral to be used for central bank loans.
The unusual Sunday moves came as financial markets braced for a possible collapse of Lehman Brothers, a Wall Street giant whose failure could have wide-ranging implications for the financial system.
While there was no official news on Lehman's fate, analysts expected a bankruptcy filing that could affect a range of companies dealing with the Wall Street giant, with a potential to worsen the global credit crunch.
Gov. David A. Paterson of New York said on Monday that the state would allow the American International Group, a big insurance company, to lend itself $20 billion to bolster its capital as it faces potentially disastrous credit downgrades.
Shares in A.I.G. tumbled more than 60 percent on Monday morning as investors grew concerned that the firm lacked capital to withstand cuts to its debt rating. But Mr. Paterson reiterated the state’s support of the firm and declared A.I.G. "financially sound."
The firm approached the state for help, Mr. Paterson said, and government officials worked closely with the firm throughout the weekend. He vocally supported A.I.G.’s efforts to seek help from the Federal Reserve.
A.I.G. has sought a $40 billion bridge loan from the Federal Reserve as a lifeline, as the three-part rescue plan it had devised appeared to crumble, a person briefed on the matter said.
Mr. Paterson argued that New York taxpayers would not be put at risk by the state’s involvement.
The announcement appeared to help arrest the decline in A.I.G.’s stock. Trading below $4 shortly before noon, the shares recovered to about $6 in the next half-hour — still a loss of almost 50 percent from their Friday close.
Ratings agencies had threatened to downgrade the insurance giant’s credit rating by Monday morning, allowing counterparties to withdraw capital from their contracts with the company. One person close to the firm said that if such an event occurred, A.I.G. might survive for only 48 hours to 72 hours.
A.I.G. has already raised $20 billion this year. But even that amount of capital has not averted a crisis.
The firm’s sickly financial health was a prominent topic in weekend talks among Wall Street chieftains who gathered at the Federal Reserve Bank of New York to discuss the potential collapse of the investment bank Lehman Brothers. A.I.G. had become one of the biggest underwriters of complex debt securities known credit default swaps, used as insurance for a wide range of products, including the mortgage instruments that have been the bane of Wall Street for the past year and a half.
Eric Dinallo, the New York state insurance superintendent, has been deeply involved in discussions about A.I.G.’s survival, this person said.
J. C. Flowers & Company, a buyout firm focused on financial services firms, offered $8 billion for a stake in the business that would have given it an option to buy all of A.I.G. down the road. Kohlberg Kravis Roberts and TPG also said they would bid.
But all three withdrew at the last minute, citing anxiousness over the company’s precarious financial health.
A.I.G.’s extraordinary move of reaching out to the Fed for help may spur other noninvestment banks to try a similar move. Companies ranging from General Electric to GMAC have been hurting badly and would desperately love the liquidity that the Fed would provide.
It is not clear whether the Fed will acquiesce to A.I.G.’s request.
Before seeking a lifeline, the firm had earlier been reported to be interested in selling its aircraft leasing business, the International Lease Finance Corporation. Founded in 1973, the business has nearly 1,000 planes in its fleet. But people briefed on the matter said that unit bore special tax advantages that A.I.G. had decided would be lost on any other owner.
Investors, afraid that A.I.G. would have to absorb further write-downs in its already damaged mortgage securities and collateralized debt obligations, have driven down the company’s shares in recent days. The stock closed Friday at $12.14 a share, a decline of 46 percent for the week.
A.I.G.’s problems are not new. The company lost $13.2 billion in the first six months of 2008, largely owing to declining values in mortgage-related securities held in its investment portfolio and collateralized debt obligations it owns.
But the company’s outlook grew grimmer last week when Standard & Poor’s warned that it was considering downgrading the company’s debt as a result of further write-downs it might have to take.
As the credit storm has raged in recent months, insurance companies like A.I.G. have been better positioned than the nation’s banks and brokerage firms to weather it because accounting rules do not require insurers to mark the investments held in their long-term portfolios to market. Insurance companies like A.I.G. can hold their investments until they mature, riding out the ups and downs in the market for those assets.
But the moment it began trying to raise capital, A.I.G. had to open its books to potential investors who were likely to take a sharp pencil to the company’s portfolio values, analysts said. And with Lehman Brothers last week providing investors with a valuation for the same types of assets held by A.I.G., subprime and Alt-A mortgage securities, the investment bank’s marks can now be applied to the big insurer’s books.
As of the most recent quarter, for example, A.I.G. had $20 billion of subprime mortgages marked at 69 cents on the dollar and $24 billion in Alt-A securities valued at 67 cents on the dollar.
But Lehman officials on a conference call with investors last week said it was valuing similar subprime mortgage securities to those held by A.I.G. at 34 cents on the dollar; its mark on the Alt-A holdings was 39 cents. Those valuations suggest almost a $14 billion decline in A.I.G.’s holdings, after taxes, an amount representing 18 percent of the company’s book value.
Additional write-downs may also be required in A.I.G.’s collateralized debt obligations, which the company does mark to market because they are held in a short-term account known as available for sale. The company valued $42 billion in high-grade holdings at 75 cents on the dollar, while it marked another $16 billion in lower-rated obligations at 70 cents.
A spokesman for A.I.G., Nicholas J. Ashooh, said it was inappropriate to compare the markdowns of Lehman Brothers’ securities with those at A.I.G.
“We don’t think that’s valid, to look at somebody else’s portfolio markdowns and then infer what A.I.G.’s might be, because there’s so many variables,” Mr. Ashooh said, “what kind of risk is in the portfolio, what kind of collateral there is, and how the marks were calculated. We think we use a very thorough and conservative approach that includes third-party input and input from the rating services.”
A.I.G., which is based in New York, has also been under pressure from the derivatives contracts that its London-based financial products unit sold in connection with complex debt securities. Those contracts, called credit default swaps, acted as a type of insurance on the debt securities, making them more attractive to buyers. The swaps also gave speculators an opportunity to bet on the debt securities’ overall creditworthiness, which has declined in response to the turmoil in the housing markets.
When A.I.G.’s financial products unit sold the credit default swaps, it effectively promised to compensate buyers of the debt securities if the mortgages underlying them got into trouble. At the time, the securities were rated AAA, so it seemed at first that A.I.G. was not taking on inordinate risk.
But that picture changed as the housing crisis took hold and homeowners began to default. A.I.G. wrote down the value of its swap portfolio by $25 billion, telling investors that the markdowns did not represent a cash loss of that magnitude. It estimated possible cash payouts on the swaps of between $5 billion and $8 billion.
But because the debt securities covered by the swaps are so complex and opaque, it has been hard for investors to verify A.I.G.’s numbers on their own, and investors have grown impatient as A.I.G. reported big losses they did not expect in the last two quarters.
A.I.G. also said recently that it might have to post collateral to its swap counterparties, heightening concerns that the company would have to raise capital in tight markets. A.I.G. said in a filing with the Securities and Exchange Commission that if its own credit were downgraded one notch by Moody’s and Standard & Poor’s, its swap contracts would require it to post collateral of about $13 billion.
In addition, A.I.G. said some of the contracts gave counterparties the option to terminate their swaps, which would cost A.I.G. between $4 billion and $5 billion. A.I.G. said that it did not expect all of its counterparties to exercise that option, however.
As a result, when S.& P. announced a negative outlook for A.I.G.’s credit on Friday, investors understood the company might soon have to produce up to $18 billion
On Friday, less than a week after the government took control of Fannie Mae and Freddie Mac, the White House announced that there is no reason at this time to account for the companies in the federal budget.
That is great news for officials who prefer to hide the cost of the bailout since it is due, in large part, to their failure to adequately regulate the financial markets and steward the economy. But it is an insult to taxpayers, whose money is at risk, and it is a reckless gambit.
The Congressional Budget Office reported on Tuesday that the government’s finances are deteriorating rapidly: the budget deficit for this year is expected to reach $407 billion, more than double last year’s shortfall, and to exceed $500 billion in 2009. The takeover of Fannie and Freddie, necessary though it is, will add to the deterioration. Airbrushing that away will only open the door to uninformed — or negligent — decisions on spending and tax cuts.
The White House says that the extent of the government’s control of Fannie and Freddie does not warrant including the companies’ operations in the budget. That is absurd. The government has seized the companies, firing their executives and installing new ones, offering to invest up to $200 billion in the companies if necessary, and most significant, making an ironclad promise to pay their trillions of dollars in obligations, if need be.
The White House also claims that the risk to taxpayers is not yet serious enough to require that the costs be shown in the budget. But there is a very real cost to guaranteeing the obligations of Fannie and Freddie, even if the government never has to cough up a penny. The taxpayer is on the hook while the guarantee is outstanding — and the Treasury says that will last past Dec. 31, 2009, when its bailout authority officially ends.
The Congressional Budget Office has said that it will calculate the cost of taxpayers’ risk and include it in its version of the budget, which is separate from the White House version of the budget.
Having conflicting budgets is hardly a good way to restore confidence in the government’s financial management. But the C.B.O. accounting will prevent the White House from saying, in effect, “yes, bondholders, your investments are fully guaranteed, but you, dear taxpayers, don’t worry, it costs you nothing.”
As the government (read: taxpayers) assumes additional risks, it is more important than ever to get the accounting right. Accurately reflecting the budget cost of the Fannie and Freddie bailout would not lead to an explosion in public debt. Prudent accounting, accurately applied, would limit the amount that must be counted against the nation’s overall debt ceiling. Accurately accounting for risk would limit the cost of making good on the companies’ obligations to a figure that reflects the likelihood of taxpayers actually having to pay up.
No one yet knows the ultimate cost of the bailout, but it is already more than zero.
In an exclusive interview with CNBC.com, Wilbur Ross, chairman and CEO of WL Ross & Co., says he sees possibly as many as a thousand bank closures in the coming months. And this will create opportunities for investors.
"I do think a lot of the regional ones will (close), just as they did in the last savings and loan crisis in the 1990s," Ross said. (Watch the full CNBC.com exclusive interview with Wilbur Ross on the left)
Ross says he will be looking to pick up smaller distressed institutions. "There will be opportunities, but we will need federal assistance in them, because what we're mainly looking for is stable sources of deposits, not so much the loan portfolio."
Ross feels that there will be too many people willing to provide capital to the large financials, which makes them less of a bargain than smaller banks.
When asked about his views on Bank of America's [BAC 27.40 -6.34 (-18.79%) ] purchase of Merrill Lynch [MER 19.20 2.15 (+12.61%) ], Ross said that he didn't think that Merrill was in that dire a position.
"I think people in general felt better about Merrill's situation than about Lehman. I think ever since John Thain came in, he's done a wonderful job trying to fix what was a very difficult situation," Ross said.
He also noted that this was really now the second successful turnaround for Thain. "He (Thain)saved Merrill, went into BoFA ... Temasek, for example, went into something like a $5 a share profit out of this. So it's not a tragic ending."
"It will be very interesting to see where Thain ends up in the Bank of America hierarchy," Ross added.
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Chinese economists warn of the “biggest adjustment” in 30 years
While last weekend’s bailout of Freddie Mac and Fannie Mae received plaudits from Wall Street, it was also warmly welcomed by the Chinese government. Most immediately, Beijing was concerned about the tens of billions of dollars in bonds that Chinese banks hold from the two mortgage giants. At the same time, China’s manufacturers are desperate for any sign that the US will emerge from the subprime crisis, which has sapped consumer spending and therefore purchases of Chinese exports.
Several leading economists in China have begun to warn of major difficulties flowing from the economic slowdown in the US, Europe and Japan. After the expansion of the economy on the basis of selling cheap consumer goods to the US and other Western markets in the 1990s, a sharp decline in demand could lead to mass unemployment and provoke widespread social unrest.
In an interview with the First Financial Daily published on September 1, Li Xiangyang, deputy director of the World Economic and Political Research Department of the official Chinese Academy of Social Sciences (CASS), admitted that the subprime meltdown was a rude awakening for Chinese economists, who had long understated the risk of major global crises.
Li was referring to the fact that many Chinese economists adapted to Western neo-liberal theories in the 1990s, believing that the global recession in the 1970s and the Great Depression of 1929 were events of the past. “This conception has been dominating China’s economic circles for years,” Li said, adding that it had weakened an awareness of the emerging global downturn.
Since the Chinese Communist Party (CCP) regime turned to the capitalist market in 1978, the official Stalinist ideologues and academics have all but dropped their “socialist” window dressing and now openly serve the new capitalist elite. Dismissing the Marxist theory of capitalist breakdown as “outdated,” they claim that world capitalism has learned to regulate its contradictions and that the economic depressions, social revolutions and imperialist wars of the first half of the twentieth century will never return. Such arguments are now looking seriously flawed.
Li admitted China was facing the “the most serious external shock in the 30 years of reform and opening up”. China was a closed economy throughout the mid-1970s period of world stagflation—a combination of economic stagnation and high inflation. Its market reforms only began in earnest in 1978. Even during the Asian financial crisis in 1997-98, China escaped most of the impact because the developed economies in North America and Europe were largely unaffected. China still had a closed capital market, unlike today when hundreds of billions of dollars in “hot money” or speculative capital has flooded into the country. Li warned that it was now impossible for China to “decouple” from the global economic crisis.
The restoration of capitalism in the former Soviet Union in 1991 and China’s transformation into a vast sweatshop following the crushing of protests in Tiananmen Square in 1989 provided a much-needed boost to world capitalism. The low-cost goods made in China enabled US economic policy makers to maintain a cheap credit policy without the fear of inflationary pressures. Low interest rates formed the basis of the housing bubbles and debt-driven consumption in the US over the past decade, which in turn provided a huge market for Chinese goods.
Now this process is coming to an end. Li explained: “The subprime crisis was actually a ‘correction’ to years of debt-driven consumption in the US, marking the end of unsustainable economic growth based on ‘spending tomorrow’s income today’. However, the cost of this ‘correction’ was borne by the rest of the world. Within the US economy, the ‘spend tomorrow’s income today’ debts of private companies were socialised. The savers paid the bill for the lavish spenders, through government interventions. Meanwhile, American debts were globalised: global savers paid the bill for American consumers, through inflation and devaluation of the dollar. This is the privilege of being the holder of the world currency.”
The comments reflect a certain bitterness among the capitalist elite in China, which now confronts declining global demand and rising commodity prices, while the giants of US finance capital are being bailed out. Li called for China to develop its own transnational corporations, rather than simply remain an assembly line for Western multinationals.
Rising debts and insolvencies
Andy Xie, a former chief Asia analyst for Morgan Stanley, also warned in the financial magazine Caijing on September 1 that China was facing its biggest challenge in three decades. He pointed out that for the first time in 30 years, Europe, Japan and the US were contracting simultaneously, creating enormous difficulties for Chinese exports. In addition, a huge inflow of speculative capital had created unstable asset bubbles in China. Many companies and local governments confronted a crisis of insolvency if the bubbles burst.
More fundamentally, rising production costs were undermining the entire basis of China’s economic expansion as a platform for cheap manufacturing. Exports accounted for 40 percent of China’s gross domestic product (GDP) and contributed 4 percent of the country’s total annual growth. Xie said problems with exports could be traced back to 2004, when global commodity prices started to rise. Rising prices led to demands for wage increases. As a result, large numbers of labour-intensive firms, which had always operated on thin profit margins, had been pushed to the edge.
Xie pointed out that the sentiment among entrepreneurs was that things would get better. As a result, firms kept their production plans and attempted to maintain export growth over the past three years. Now, with the danger of a downturn in major markets, many exporters faced serious problems. Export corporations listed on the Hong Kong stock market had seen their share values fall by 50-80 percent in the past two years, raising fears of a collapse in the export industry.
Corporate debt had grown as manufacturers turned to real estate and share markets, only to suffer more losses. So far this year, China’s share markets had plunged by 59 percent, wiping out $US2.86 trillion in value. Local governments, which were dependent on selling land rights and taxing real estate transactions, were also heavily indebted.
Xie predicted that non-performing loans would increase substantially in the next 12 months as the property boom flattened out. “The problem is very serious,” he warned. According to one official estimate, some 65,000 small and medium firms went bankrupt in the first half of this year, throwing 20 million people out of work. Many employers simply fled without paying wages to workers or debts to the banks.
Xie, a staunch advocate of the market, opposed any government assistance for ailing enterprises. Instead, he called on the government to prevent bankrupt businessmen from fleeing with their assets and creating major difficulties for banks. “[T]he action of local officials to spend money to rescue them is very stupid. The money could be stolen. To protect China’s financial security, the most effective policy is to ban heavily indebted entrepreneurs from leaving China,” he wrote.
Xie’s solution to China’s problems is another round of economic restructuring—as was carried out in the aftermath of the Asian financial crisis a decade ago. At that time, Beijing implemented sweeping privatisation of state enterprises and public housing, joined the World Trade Organisation (WTO) and built a national highway network. Tens of millions of jobs in the state sector were destroyed, even as the costs of housing, education and health care skyrocketted due to the lack of public funding. According to Xie, these draconian “market reforms” laid the basis for the boom of the past 10 years.
Xie’s proposals to address the current crisis include developing Chinese transnationals, investing more in infrastructure and further deregulating the state-controlled financial system. Such a perspective is in line with calls by many economists in recent years for China to reduce its reliance on exports and expand the domestic market. But the transformation of a cheap labour platform into a consumer-driven economy inevitably confronts obstacles.
The domestic market
The Wall Street Journal on September 2 pointed to some of the difficulties in expanding domestic consumption in China. Far from increasing, consumption in China has declined as a proportion of GDP from around 50 percent in the 1980s to just 37 percent. Fixed asset investment accounts for 45 percent of the GDP, which has led to massive overcapacity. “Behind China’s macroeconomic imbalances lies a political calculation,” the newspaper explained. “With 10 million job seekers migrating into urban areas every year, China had to provide lots of jobs to avoid mass unemployment and social unrest. Because consumer income and spending were so weak, the government felt it had no choice but to pump up capital investment and exports.”
Huge vested interests oppose any shift to domestic consumption and higher wages. For local officials, jobs are already becoming harder to create. In the past decade, China has eliminated an estimated 20 million manufacturing jobs due to improvements in productivity. High wages are the last thing that provincial and local governments want as they confront growing competition for investment, not only within China, but from Vietnam and India.
Other methods of putting money into the pockets of consumers also face opposition. The government could lift interest rates on consumer deposits, but businesses would oppose any increase in their loan repayments. Further appreciation of the yuan would increase domestic purchasing power for imported goods but at the expense of export competitiveness. The government could reduce personal income tax but if that meant increased corporate taxes, it would be resisted by the powerful business elite.
A new labour law was introduced this year mandating employers to provide pensions, social insurance contributions and other benefits for workers. As is the case with other regulations in China, many businesses simply flout the law and enforcement is weak. China could increase domestic consumption by investing in public schools, healthcare and unemployment compensation, so that workers and the rural poor would not have to save in case of illness or job loss. But as the Wall Street Journal explained: “These measures are opposed by many local governments that often prefer to spend money on building roads and bridges. That behavior may boost GDP more quickly, but it also provides more opportunity for corruption and payoffs.”
So far, the economic slowdown has been gradual. But there are danger signs. The Chinese finance ministry recorded a 13.8 percent annualised growth in tax revenues in July—almost a fifth lower than the rates in the same month last year and the first half of this year. The announcement raised concerns that China has little room for stimulatory policies such as tax cuts to compensate for falling growth rates.
While it is still growing at around 10.4 percent, the Chinese economy is riddled with internal contradictions that could rapidly produce an economic, not to mention political and social, crisis should it be hit with a major external shock. That is why Chinese economists are nervously watching events in the US where a further financial meltdown could not only cause huge losses for Beijing, which holds hundreds of billions in US investments, but end the flood of foreign investment that has sustained the so-called Chinese miracle.
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Why The Fed Allowed Derivatives Trading on a Sunday
In an unprecedented move, the Fed and the International Swaps and Derivatives Association allowed derivatives trading today, on a Sunday, to "reduce risk associated with a potential Lehman . . . bankruptcy."
Lehman holds $ 800 billion in derivatives.
As the very even-keeled and level-headed chief executive of Pimco, the world's biggest bond fund, said:
"This is an extremely, and I stress extremely, rare event. It also speaks to the more general notion that, in today's highly disrupted financial markets, the unthinkable is thinkable." What is the "unthinkable" he's referring to?
Another great depression. Perhaps even a world-wide depression.
To see why derivatives are the key to the financial crisis in the U.S. and the world, and why the Fed allowed derivatives trading today, read this.
Update: Bloomberg today writes: "Bond-default risk soared worldwide as the collapse of Lehman Brother Holdings Inc. sparked concern than the $62 trillion credit-derivatives market will unravel."
“Train-wreck” doesn't even begin to describe what is starting to happen to the U.S. today with the financial crisis, an onrushing depression, and the failure of George W. Bush's war policy as he is faced down by Iran and the Russian bear.
But in an even broader sense, the West, as a civilization, after a century of world war and the utter failure of global finance capitalism, may have reached its limits.
Those with a vested interest in the status quo dismiss any suggestion that something is wrong. This includes Donald Luskin, author of an article in the Washington Post on Sunday, September 14, titled: “A Nation of Exaggerators: Quit Doling Out That Bad Economy Line.”
Luskin writes, “The relentless drumbeat of pessimism in the media and on the campaign trail” is “a virus.”
He continues: “Sure, there are trouble spots in the economy, as the government takeover of mortgage giants Fannie Mae and Freddie Mac, and jitters about Wall Street firm Lehman Brothers, amply demonstrate. And unemployment figures are up a bit, too. None of this, however, is cause for depression -- or exaggerated Depression comparisons.”
Continue reading, and you find out who Luskin is: a campaign adviser to John McCain.
We know that “where you stand depends on where you sit”—and who pays you for advice. So is a catastrophic meltdown coming?
If so, probably a majority of the people in the world are thinking: “Serves them right.” For the last 500 years, the West has been striding across the globe, armed to the teeth with firearms, warships, bombers, and—more recently—depleted uranium, enforcing the “white man's burden” by enslaving nations and peoples and confiscating everything of value—ranging from art objects to gold to oil—that can be carried away.
The financiers behind it all have also used the diabolically clever practice of creating money “out of thin air” to put the natives everywhere into debt, and, when that has proven insufficient, of doing the same to their own populations.
All this is rationalized by various brands of racism, cultural superiority, social Darwinism, historical determinism, “dominion of the Elect,” “God's chosen people,” etc. Or, simply, “might makes right.”
Some call it “The New World Order.”
So today, we Americans, denizens of the “land of the free and the home of the brave,” victors in two world wars, bearers of “democracy” to Afghanistan and Iraq, allies of the brave Israelis who hold high the banner of Judeo-Christian values among the ungrateful Palestinians—well, we Americans owe our own bankers almost $70 trillion at most recent count. With the government takeover of Fannie Mae and Freddie Mac, we owe holders of bad housing loans, including the governments of China, Korea, and Japan, another few trillion.
The bluster of Kissinger, Brzezinski, the Kristols, the Christian fundamentalists, and their paid-off politicians and media millionaires notwithstanding, America—indeed, the entire West—has been found out, perhaps even checkmated on the world stage.
The Bush/Cheney wars in Afghanistan and Iraq have blackened America's name forever. Iran has called our bluff. In Israel the gap between rich and poor is increasing as much as in the U.S. According to an article by Ian S. Lustick, the Palestinians have stood up to the Israelis to the point where more Jews are emigrating from that country than are moving in, and where those who remain are increasingly huddling around Tel Aviv as a safe haven. (Ian S. Lustick, “Abandoning the Iron Wall: ‘Israel and the Middle Eastern Muck',” Middle East Policy , Vo. XV, No. 3, Fall 2008.)
In the 1990s, the European bankers used U.S. and NATO forces to dismember Yugoslavia so George Soros and the Rothschilds could gobble up Balkan resources. But that strategy is failing in the Caucasus, where the Russians fought back against the genocidal attack by Dick Cheney's poodle, Mikheil Saakashvili, the New York-trained attorney the CIA got elected as the president of Georgia.
And now the people of Ukraine, the “Little Russians,” realizing what the West has in store for them, are rushing back into the Slavic fold and may be only a year or so away from reuniting with their “Great Russian” cousins across the border.
What is telling is to watch the Western financier press, chiefly the Washington Post and the New York Times , fume about Russian prime minister Vladimir Putin and his “authoritarian” manner. An example is the article by Times correspondent Ellen Barry on Putin's September 11 press conference in Moscow. She wrote, “In three-and-a-half hours, in tones that were alternatively pugilistic and needy, Vladimir V. Putin tried to explain himself.”
I'm sorry, Ms. Barry. You and your editors may think your writing is cute, but Vladimir Putin is the foremost figure on the world stage today. He will remain so after George W. Bush leaves the White House disgraced.
Putin is heir to an epochal movement of patriots who began in the 1970s to take back Russia from within. It started with a base of operations within the KGB and the Orthodox Church, led to Gorbachev's glasnost in the 1980s, and culminated in the Second Russian Revolution of 1991. At that point, the Western financiers gleefully rushed in to support an assault from the Russian “oligarchs” who were looting Russia of everything it owned.
The oligarchs were the shock troops of a financier assault that had already begun to overlap in the West with the Russian Mafia. Cheered on by the Washington Post and aided by academic advisors from places like Harvard, this international syndicate nearly destroyed Russia during the 1990s. But when Putin was appointed interim president by Boris Yelstin in 1999, and after winning the presidential election of 2000 in his own right, he began to fight back.
From the mid-1970s to today, thousands of Russian gangsters, along with many hard-line Bolsheviks/Stalinists, were allowed to emigrate. Many settled in the U.S. and are here today, and many more settled in Israel. In fact, one reason the price of condos in New York, Miami, Tel Aviv, and elsewhere has inflated so much reportedly is the flood of cash from racketeering.
The crooks have allied themselves with the Colombian drug cartels and have heavily infiltrated the world's financial systems, even setting up their own banks for laundering money and speculating in the commodities markets.
Today, Putin is cleaning out the remaining gangster class. His efforts reached a milestone in January with the arrest in Moscow of Semion Mogilevich, called “the world's most dangerous man.”
Putin has declared that the world will not be governed in a “unipolar” manner; i.e. by the U.S. military as the police force for the global financiers. This does not mean Russia has to be our enemy. In fact the world would be much better off, and much safer, if we joined with Russia as allies in keeping the peace.
But to do that our system would have to change, because finance capitalism is far too unstable to coexist with other nations as equals. It must either grow or die, because it always needs new victims to pay the interest on its usury practices and to finance its speculative balloons. As a last resort, it needs the kind of financial institution bailouts being engineered by Secretary of the Treasury Henry Paulson, where the only remaining stopgap is borrowing from public funds and adding to the national debt.
Once economic growth stops, as has now happened, and all the bubbles to restart it have blown up, as has also happened, the end really is nigh. Especially if the host—the U.S.—is bankrupt.
What is coming at us today isn't just another downturn. If people like McCain adviser Donald Luskin doubt it, maybe, instead of writing campaign propaganda, they should ask the fired CEOs of Fannie Mae and Freddie Mac, the stockholders of Lehman Brothers, whose shares have dropped ninety percent in less than a year, and the millions who are losing their homes.
Presidential candidates Barack Obama and John McCain are calling for “change.” Well, if I were standing on a beach with a 100-foot tsunami roaring in my direction, I would call for change too. Except I would not be standing around arguing about the meaning of the words “lipstick on a pig.”
By Richard C. Cook http:// www.richardccook.com
Copyright 2008 by Richard C. Cook
Richard C. Cook is a former U.S. federal government analyst, whose career included service with the U.S. Civil Service Commission, the Food and Drug Administration, the Carter White House, NASA, and the U.S. Treasury Department. His articles on economics, politics, and space policy have appeared on numerous websites. His book on monetary reform entitled We Hold These Truths: The Hope of Monetary Reform will be published soon by Tendril Press. He is also the author of Challenger Revealed: An Insider's Account of How the Reagan Administration Caused the Greatest Tragedy of the Space Age , called by one reviewer, “the most important spaceflight book of the last twenty years . ” His Challenger website is at www.richardccook.com . A new economics website at www.RealSustainableLiving.com is upcoming with partner/author Susan Boskey. To get on his mailing list, for questions and comments, or to pre-purchase copies of his new book, please write EconomicSanity@gmail.com .
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WaMu Rating Lowered to Junk by S&P on Mortgage Losses (Update3)
Sept. 15 (Bloomberg) -- Washington Mutual Inc., the biggest U.S. savings and loan, had its credit rating cut to junk by Standard & Poor's because of the deteriorating housing market.
S&P reduced its rating on Seattle-based WaMu to BB- from BBB-, leaving it three levels below investment grade, the ratings firm said today in a statement.
``Increasing market turmoil and the related impact from managing its concentrated mortgage franchise in this troubled housing and credit cycle led to the downgrade,'' S&P wrote. S&P cut its rating on the subsidiary bank to BBB- from BBB.
S&P followed similar announcements last week from Moody's Investors Service and Fitch Ratings. WaMu, which has reported $6.3 billion of losses in the last three quarters because of soured mortgages, said on Sept. 11 that it expects a third- quarter loan loss provision of $4.5 billion.
WaMu tumbled 73 cents, or 27 percent, to $2 at 4 p.m. on the New York Stock Exchange. The shares dropped another 20 cents, or 10 percent, to $1.80 in extended trading. They've lost 94 percent of their value in the past year.
``On a more positive note, we recognize that WaMu's holding company liquidity position is currently solidly positioned to meet all of its fixed obligations through 2010,'' S&P said. ``The bank is operating with adequate capital positions from a regulatory perspective and has demonstrated funding resilience as the deposit franchise has remained stable.''
WaMu slid 36 percent last week alone, a record decline. The lender ousted its chief executive officer and disclosed that its main regulator has told it to boost risk management and compliance. The bank on Sept. 11 said in a statement that retail balances at the end of August, of $143 billion, were ``essentially unchanged'' from the end of 2007.
WaMu's $1 billion of 5.125 percent notes due in 2015 fell 11 cents to 34 cents on the dollar today, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields about 27.9 percent, or 24.5 percentage points more than similar-maturity Treasuries, Trace data show.
To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net.
We have seen, in the dead of night, three major government bailouts in the last year, none of which had more than a few days' positive effect on the markets. Each was done by powerful men in powerful places in the wee, small hours. At the end of the next day, a few were made rich while the many were handed the bill.
First there was Bear Stearns. Then IndyMac bank. Fannie and Freddie followed rapidly. All engineered on Sundays while the markets were closed.
How many more bailouts have to occur before someone asks the questions no one wants to ask? Is this a systemic problem and where does it end?
It is no surprise to those of us who warned about the drunken credit binge on Wall Street that the day of reckoning would come. What we never anticipated was the reward in store for the gluttons who caused the damage.
Bear Stearns was sold to JPMorgan on March 17; billions of equity was transferred to the balance sheet of one of the top five banks in America while the liabilities were guaranteed by the government (a.k.a. the taxpayers). Through the use of very complicated devices the government moved to save the system. The executives of Bear walked away with bonuses and severance packages. Disaster temporarily averted.
On July 11, IndyMac was taken over by the government due to a "run on the bank" which depleted deposits literally overnight. With $100 million leaving each day, the feds had no option other than to shut the doors. The $52 billion FDIC rescue fund was tapped for $4 billion-$8 billion to pay off depositors and 4,000 employees lost their jobs overnight as IndyMac became runnerup to the largest bank collapse in history (Continental Bank in 1984). Net result: The banking system is saved for the time being.
Fannie and Freddie were seized by regulators Sunday after weeks of speculation that both were suffering losses far beyond their ability to cover. Voices like Bill Gross from PIMCO, with $800 billion in bonds, made clear their intention to stop buying bonds unless the Treasury acted to provide an implicit guarantee for all Fannie and Freddie obligations.
By Monday morning, Gross and his firm are $8 billion richer and the American taxpayers take on potentially $200 billion-$700 billion in losses. I guess the slogan "E pluribus unum" took on a whole new meaning as 300 million of us (the many) united, involuntarily, to give PIMCO (the one) a whole lot of money.
This is not unusual. The market rallied 300 points only to give it back the next day. But Fannie and Freddie did not fail – in the technical sense.
Is the system broken? And if so, who benefits as a result? Did Paulson and Gross identify a weakness and capitalize on it?
If the problems we are now witnessing are systemic and can potentially develop into a far worse crisis than anyone expected, what level of loss should the public be responsible for? Should we the people be on the hook for an unlimited amount of liability while not participating in any of the reward? At its face that seems very unfair, but as I was told at an early age, life is not always fair.
There is an even bigger question in all of this. How many commercial banks, investment banks and mortgage guarantors can the government take over before we as a country are forced to create money to meet all the obligations represented by these takeovers? It is not as if the government has surpluses from which to draw all the needed capital to meet these obligations. We will have to borrow or print it.
What if General Motors, Ford and Boeing need to be bailed out? What about airlines, drug companies, insurance companies ... shall I go on? We cannot and should not adopt a bailout mentality without first considering the long-term ramifications for the country as a whole.
Currently we are running about a $500 billion dollar annual budget deficit. This will be added to the national debt which currently stands at $9.6 trillion. Will we just run the national debt to $15 trillion, $20 trillion? And that doesn't even take into account the off-budget debt, reflected in future Medicare and Social Security obligations, which now exceeds $50 trillion. At what point will the U.S. dollar have any value if we can never pay any of it back?
The U.S. dollar has always been the currency the world turns to when there is trouble. The dollar has always represented safety, but can it maintain that trust if we just continue to print, borrow and move dollars around from balance sheet to balance sheet ad infinitum?
I have asked a number of questions so at this point it is appropriate to offer some answers.
We cannot continue employing the broken business model our current financial system represents. It doesn't work. We cannot leverage, inflate and deflate forever. There comes a day of reckoning when people will not tolerate the abuse of a system to enrich a few while decimating many.
I see vulnerability in America that must be addressed and time is of the essence.
For the first time in the post-World War II era, the American dollar is susceptible to competition from a currency based in an identifiable and universally accepted value. A currency that cannot be created out of thin air. Is such a currency available? Not yet. But you know the old saying, "Necessity is the mother of invention."
Right now the world has three very strong and prosperous countries competing on the world stage with huge amounts of capital, natural resources and gold that could easily, if they so chose, create a currency much like Europe did in the euro. But this time it could be backed with oil and gold.
Russia, China and the Arab nations are sitting on an enormous amount of oil, gold and U.S. dollars. What if those nations forged agreements (much like NATO, WTO, etc.) and offered an "ARC" dollar fully backed by gold or oil? (The holder of the currency could actually exchange the currency for a specified amount of gold or oil.)
A note is a promise to pay. For years in America a Federal Reserve Note (currency) was a promise to pay gold and silver at the Treasury. Today it is a note to pay debt. Debt that is exploding and can apparently be wiped away by the Fed overnight or, worse yet, transferred to the backs of American workers in the form of tax on future labor. But what if a group of nations offered a currency that had no recurring liability attached to it but actual "money" in the form of the ultimate currency (gold) or the ultimate natural resource (oil)?
In the past I would have viewed such a prospect as preposterous. Today it may well become a reality. Currently talks are under way with the Gulf Monetary Authority for just such a system.
If we think the government is capable of bailing everything and everyone out of every financial mess that may occur then we are fools. And perhaps we are being viewed as such by very hostile nations that would welcome the deterioration of our position on the world stage and would not flinch at our total demise.
In short, we have fattened our hearts in the day of slaughter and now is the time to acknowledge and accept that each of us is solely responsible for our own future. Not the government. The time of discussing the problems has come and gone. Now is the time to devise a plan and put it into action.
With gold and silver trading at levels 10 percent below stupid, it is time to put 10-20 percent of total assets into tangibles. Understand that the only answer to avoiding a meltdown is either a new currency or runaway inflation. To quote Harry Shultz, "If Bush bails them all out, the die will be cast for inflation unseen in the West since 1923 Germany. If no bail:1929. Gold helps you out either way."
You can either ignore the obvious or act upon it.
Ignorance is produced in ignoring the facts. It makes one ignorant. Acting upon the facts makes one wise, which is wisdom. This will be a time when many will prefer to deny what they see around them and hope against hope that the system will fix itself.
It will not.
The best analogy I can give is a person (the system) having a massive heart attack, a heart attack resulting from years of abuse of the victim's own body. He is rushed to the hospital where the doctors (the Fed) work feverishly to save his life. They are successful and the patient lives. The doctors then sit the patient down and explain that while they saved his life, without major lifestyle changes the patient will have another heart attack and die. He must immediately stop smoking, eliminate fatty foods and exercise daily. The patient refuses.
Thus is our system. This is not the first crisis. It will not be the last. The system is not willing to do what is necessary to get better.
Despite attempts made by Greenspan and Bernanke, there is no way to avert the payback period that has been building for over two decades. Over this stretch, America has consumed much more than it has produced. As a result, both consumer and federal debt have ballooned to record levels. And now, the payback period is upon us. The bailout buffet won't end with Fannie and Freddie. There's a lot more where that came from because the “Fed's food court” remains open, as does that of the U.S. Treasury. In fact, the autos are in the process of being bailed out with $50 billion in “loans.” I expect the airlines to also receive some form of a bailout as well.
Washington 's Three Stooges
But Greenspan and Bernanke have not been alone in what will surely be remembered as America 's Financial Apocalypse - the eventful period ushering in a decade-long depression, as predicted in my 2006 book by the same title. Certainly, President Bush did not create these trends. But his financial irresponsibility has accelerated their magnitude. In less than eight years, he has managed to increase the national debt by 90%. As the data shows, not only has he led the worst recovery since the post-WWII era, he has also positioned his successor with budget shortfalls for many years to come due to Part D Medicare, the Iraq War, and his tax cuts for the wealthy.
Combined with the staggering deficits for Medicare and Social Security , America 's economy will be in the gutter for many years to come even after the banking and real estate troubles cool down. No one else is talking about these issues because they're wrapped up in the daily drama. But save this article and others I've written because I've been mentioning the longer-term problems ever since writing my book. In a few years, more people will begin to address these issues once they are transformed into daily drama.
President Bush's attempts at a recovery have been so horrendous they've actually led to the current recession, which will turn out to be the worst in decades. I would venture to guess he is desperately pleading with officials to come up with even more gimmicks to hide the full realities of the economy so the worst will be reported only after he leaves office. But I will guarantee you if Washington and the Fed continue this reckless game of applying band aids instead of letting things play out, we will see a much bigger crisis down the road, similar to what happened after Greenspan tried to mitigate the dotcom collapse. You can bet this is going to happen because Washington does not understand the meaning of preemption.
Altogether, we have had eight years of no gains in real median wages, flat stock market returns, and minimal net new jobs. Despite what you have heard, after adjusting for debt spending, population growth and realistic adjustments to the GDP deflator, there have only been 3 or 4 quarters of GDP growth since 2005. If you adjust for military, government and minimum wage positions – i.e. jobs funded by tax payers and jobs that don't pay anything - there have been absolutely no net new jobs. Bush's largest gains have been with inflation, oil and food prices, debt, trade deficits, bankruptcies, foreclosures, and healthcare costs. If an assembly of the world's leading economic strategists were to design the most destructive economic disaster possible, they could not match the results of Bush's tenure. Even the most loyal Bush supporters will admit he has been an absolute disaster – that is if they're being honest. America is now more dependent on foreign nations than ever – not only for oil, but also credit and manufactured goods.
America 's “Resilient” Economy
Many of the pundits flood the propaganda networks with repeated denials of the problems, boasting how resilient the U.S. economy is. You know who they are. I'm not quite sure what they've been smoking. But it appears to be some sort of hallucinogen because they seem to expect Superman to bend the economy back into shape. Ladies and Gentlemen, in case mommy never told you, there is no Santa Claus and there is no Superman. And if you think Bernanke's printing presses have an endless supply of ink and paper, just wait until the real crisis appears. So you had better get ready because it's coming. It is virtually inescapable. And it's going to cause devastation around the globe. Of course I'm taking about the likely implosion of the CDS market.
Let's take a look at America 's “resilient economy.” Let's see…the entire financial system is in the process of blowing up. Already there have been over $500 billion in bank losses, with over $1 trillion more to come. Over one dozen banks have failed, with hundreds on deck. A handful of large hedge funds have blown up, with hundreds more on the way. Already, over $1 trillion has been transferred from the Fed to the banking cartel. But I estimate another $1.5 trillion will be needed to maintain liquidity as banks de-leverage over the next few years. Unemployment is now over 6% and inflation is over 5%, even with Washington 's manipulation of the data. Virtually every metric in the housing market is at multi-decade lows, except for foreclosures which are hitting new highs.
Taxpayers are now on the hook for billions of dollars of potentially worthless debt held by Fannie and Freddie. It's now official. America 's free market economy is really a socialist system for corporations. One could argue this to be a form of Fascism. My best estimate for losses due to the Fannie and Freddie taxpayer bailout are between $200 to $500 billion. The worst case scenario would be $800 billion. If this economy is resilient, I can't wait to see how it magically bounces back. When Superman fails to show up, Washington might consider giving David Copperfield a call. But this would be one illusion he won't be able to pull off. Get the popcorn ready.
The Economy Under a Microscope
Let's take a closer look at the economy. America imports oil, credit, and manufactured goods, while exporting jobs, junk bonds and inflation (via the dollar-oil link – see http://www.marketoracle.co.uk/Article5414.html for an explanation). That doesn't sound like the type of trade policy that would support claims of a superpower, unless you're only counting the number of nukes. Surely Washington is beginning to wonder how much longer Asia and Europe will continue fueling America 's credit bubble. They've already faced massive losses from sub-prime securities with much more carnage to come.
China holds about $1.4 trillion in U.S. Treasuries, but only due to their its surplus with the U.S. It can't dump Treasuries yet because the Yuan remains greatly undervalued. China pegged it to the dollar back in 2001, knowing the dollar would plummet so they'd lure dollars from U.S. consumers looking for bargains. What most people don't realize is that China 's support for U.S. Treasuries helps finance Bush's irresponsible spending sprees. By financing up to 90% of each annual deficit, China helps keep interest rates low in the U.S., which facilitates credit expansion for consumers to buy more imports - mainly from China (due to the low cost items created by China's currency peg).
Hidden Imports
Keep in mind when you buy that Dell computer or Fossil watch, you're really buying imports. Dell and Fossil actually resemble distributors more than manufacturers because virtually all of their products originate overseas. The same is true for most U.S. companies that sell branded goods. In many cases, the same is also true for the service segment of the economy. Many American IT and software development firms outsource projects to India , Canada , and other nations so they can escape the costly retirement and healthcare benefits Americans expect.
By no means does it end there. For several years, U.S. banks, tax providers, telecommunications and several other industries have outsourced to Asia - so much for the “strength” of America 's service economy. If this service economy is so “strong” someone explain to me how Asia has been able to increase its living standard by leaps and bounds in such a short period. Before you answer, keep in mind that income and wealth are finite over short periods since they are limited by human and natural resources. Make sense? If not, let me know and I'll do a write-up explaining it next time.
Corporate America 's new trend is to outsource even lower on the food chain to nations like Argentina , as a way to find more desperate workers to enslave at a lower cost. While these jobs seem like a Godsend, foreign workers will soon see the longer-term effects of corporate globalization. Already, many U.S. corporations have finessed themselves into the hip-pocket of foreign politicians and other officials to discourage unions, ensuring wages remain low and benefits never materialize.
?? (See Ya' Later) Yankee
As the economy continues its downward spiral, it remains to be seen how much longer China keeps its currency undervalued once it realizes U.S. consumers have no more money to buy their goods. Once the verdict is out, China could begin to focus on internal growth as the recession spreads globally. The global effects are already surfacing, with inflation soaring, real estate plummeting and foreign banks scrambling as they wait for the next Bear Stearns. The Chinese government could encourage its consumers to spend domestically. This would prove as a great strategy to buoy its economy since Chinese have amble savings (they save 25% of household income). Thus, once China is convinced U.S. consumers are finished, there is a good chance it will begin a gradual sell-off of U.S. Treasury securities. And this is going to be a huge problem.
The Middle East also has a huge trade surplus with the U.S. But unlike China , it has no incentive to hold U.S. Treasuries. Instead, Middle Eastern investors use their petrodollars to buy hard assets – commercial real estate like the Chrysler building, businesses and other critical U.S. assets. Yet, they still can't seem to find enough things to buy, so many Middle Eastern cities are being gutted and turned into modern architectural wonders. In the recent past when U.S. banks have begged for mercy, Dubai , Kuwait and Saudi Arabia have handed over billions from their sovereign “oil extortion” funds. But they've learned their lesson, so I wouldn't expect anymore bailout money anytime soon. Never fear! The Fed and the U.S. Treasury are here!
The Federal Reserve Disaster
The Fed needs to let a real recession run its course to clear out the trash so the economy can begin a real recovery and expansion. They've been playing this boom-bust game for several years now. And all we have seen are illusions of growth followed by the realities of mismanagement and excess consumption. Running the printing presses in overdrive won't get America out of this mess. It hasn't helped in the past and it's not going to now. In fact, using the money supply to hold off a recession and prevent bank failures ensures there will an even more devastating crisis down the road . Greenspan tried the same move in response to the Internet meltdown. And as we all know, this led to the current real estate bubble and banking crisis.
But even shutting down the Fed's printing presses is insufficient for a lasting and real recovery. Washington absolutely must restructure free trade so that the playing field is level for all participant nations. This implies that America structure a universal healthcare system. And America 's badly broken free market system must be repaired, because as it stands today, it represents socialism for the wealthy.
As a result of the combined actions of Washington 's Three Stooges, the harsh effects of this corrective period will send America into its worst recession in several decades. Thereafter, a silent depression will persist for many years as Americans struggle to keep pace with inflation, job quality continues to decline and opportunities for the working class vanish into thin air. While U.S. living standards have been in decline for over two decades, the silent depression will accelerate and make these declines more permanent.
It's highly unlikely the rest of the world will be able to escape the pain caused by Washington 's Three Stooges because the dollar-oil link is used to hold every nation financial hostage. China will feel the effects as will India ; and yes, even Brazil . Unlike America 's fate, these developing nations will mount a full recovery. And the lessons learned could strengthen the pressure to dethrone the dollar as the universal currency. But don't expect Washington to take this lying down. In fact, it might eventually lead to a major war.
Perhaps the only region that will have some insulation from the meltdown will be select oil-rich nations in the Middle East . But they aren't likely to walk out of this completely unscathed due to contained oil demand. But let's not forget that OPEC has control over pricing. The payback period is going to affect virtually everyone. And for those who think they will avert the payback – namely those most responsible for this mess - like Washington 's Three Stooges and bank CEOs - their payback will last eternity because their role in America 's Financial Apocalypse will be recorded in history books.
Bank customers in the UK were today urged not to panic about the safety of their savings as bank shares took a hammering in the wake of the collapse of American firm Lehman Brothers.
The investment bank was forced into bankruptcy after rescue talks failed, sparking fears that the credit crunch may claim more victims before it ends.
The news is likely to concern savers, and comes almost exactly a year since news of the Bank of England's emergency funding led to a run on Northern Rock.
However, Angela Knight, chief executive of the British Bankers' Association, moved to reassure UK savers their money is safe.
"Undoubtedly this is a momentous day, but it's important to note that Lehman's was an investment bank, and as such it's impact will not be felt directly by bank customers over here.
"Over the last year, the UK's banks have been recapitalised and are now on a sound footing. These events are once again closely allied to the US housing market - there is no need for anyone to start withdrawing their money, and we are not expecting anyone to do so," she said.
Despite her comments, market traders continued to offload banking shares, with HBOS - which owns Halifax and the Bank of Scotland - taking the biggest hit.
By mid-morning its shares were down 36% as traders speculated who would follow Lehman, Merrill Lynch and the insurance giant AIG into serious financial difficulties. Royal Bank of Scotland shares were down 14%.
A spokesman for HBOS said: "Like all the other banks we've been caught up in the fallout from Lehman's collapse. We are a very strong financial institution and one of the country's largest savings providers with a very strong capital position, something that was borne out last week when Goldman Sachs said we had the highest core equity tier ratio of any UK bank. There is no need for savers to panic."
Last week, Nationwide building society stepped in to save both the Cheshire and Derbyshire building societies after it emerged they didn't have sufficient funds to carry on trading. Other societies are though to be similarly at risk and could also seek help over the coming months.
The Building Societies Association declined to comment this morning.
Since the Northern Rock crisis the government has sought to shore up the Financial Services Compensation Scheme (FSCS), offering protection to 100% of the first £35,000 held by customers in savings accounts, and consulting on increasing the level to £50,000.
Consumer confidence in big companies has been severely tested in recent weeks. While many consumers have grown inured to the post-credit crunch banking crisis, the collapse of the holiday firm XL group has added to growing concerns about the state of the economy.
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As America collapses U.S.Government Secret Plans Revealed
A secret meeting of Congress discusses immanent martial law.
On March 13th 2008 there was a secret closed door meeting of The United States House Of Representatives in Washington. In the history of The United States this is only the fourth time a secret meeting was held by the house. Even though Representatives are sworn to secrecy by House Rules XVII, some of the members were so shocked, horrified, furious, and concerned about the future of America by what was revealed to them inside the secret meeting, that they have started to leak this secret information to independent news agencies around the world. The mass media said almost nothing about the secret meeting of the House, mentioning only one of the items being discussed. (The new surveillance techniques that are going to be used by the U.S. Government to watch all American citizens). The story was first released in a newspaper out of Brisbane, Australia revealing the contents of the secret U.S. Government meeting and plans for America including all of it’s citizens. Shortly there after, David J. Meyer from Last Trumpet Ministries found it and made it more available for the world to see.
Here is what was revealed:
The imminent collapse of the U.S. Economy to occur sometime in late 2008
The imminent collapse of the U.S. Government finances sometime in mid 2009
The possibility of Civil War inside the United States as a result of the collapse
The advance round-ups of “insurgent U.S. Citizens” likely to move against the government
The detention of those rounded up at The REX 84 Camps constructed throughout the United States
The possibility of public retaliation against members of Congress for the collapses
The location of safe facilities for members of Congress and their families to reside during massive civil unrest
The necessary and unavoidable merger of The U.S. with Canada and Mexico establishing The North American Union
The issuance of a new currency called the AMERO for all three nations as an economic solution.
Except for a few hundred thousand U.S. Patriots, most Americans have no clue what has really been going on within The United States over the past 100 years, and the sad thing is that most do not want to know the truth. The further you look into the rabbit hole, the deeper it gets. Go to any currency conversion site and convert U.S. dollars to Euros so you can see for yourself the massive decline of the dollar. Look at how much money is and has been spent on the Iraq War to date, ($12 billion per month). Look at our currency and when it stopped being backed by gold.
The Federal Reserve is not federal but a private bank who does not have Americans best interests at heart. We no longer have any manufacturing really based out of America and there is no way that our economy can survive this incredible strain very much longer. The IRS strong arms every American yearly with income taxes, yet there are no laws saying an income tax is to be paid.
The CIA is involved in everything from global drug trafficking and covert military missions, to assassinations around the world and including U.S. Soil. Look at JFK for instance. It did not take long after JFK announced that he was going disband the CIA that he was shot in Texas. America’s new StasiThe Department Of Homeland Security is and has been slowly eradicating our rights for a few years now. based organization called
House Bill H.R. 1955/S-1959 was read by the senate and then sent to DHS for some reason, but is now back and sure to pass. Once passed, this bill introduced by Jane Harman (D/CA), will be the proverbial last nail hammered into every American patriots coffin. H.R. 4279 or the Prioritizing Resources and Organization for Intellectual Property Act of 2008 which was recently passed by the U.S. House of Representatives, will give the government draconian powers to do just this. This legislation gives the government the power to seize property that facilitates the violation of intellectual property laws. The legislation also mandates the formation of a formal Intellectual Property Enforcement Division within the office of the Deputy Attorney General to enforce this insanity…
It has been revealed that F.E.M.A. has been building internment camps all over America granting Halliburton a massive $385 million dollar construction contract to make this happen. Most of these sites only need refurbished because they are mostly closed prisons, old WW2 internment camps still intact and other facilities taken over by the government. Some people have referred to them as F.E.M.A. Death Camps where the infamous Red list/Blue Lists will be used to decide who goes where.
Whether you believe that The NWO/Illuminati/Globalization is real or not, there is a lot of proof that exposes definite plans or plots by the rich, political and religious elite to bring on an era of the end times. It is almost like some individuals are trying to make bible prophecy come true in their own sick and twisted ways. Not to mention that the world only has about 10 to 15 years of drinking water left before the wars fought for oil today will be fought for water in the near future. It has been said that these powers want to depopulate the planet of over 30% of it’s human inhabitants in the coming years. Examine all of the executive orders that have been signed into place allowing the president to basically become dictator in control of all government from tribal to federal in the event of any national emergency.
If you did not know, In late 2006, Congress revised the Posse Comitatus Act and the Insurrection Act to make it far easier for a president to declare martial law. Those changes were repealed at the end of this January as part of Public Law 110-181 (HR 4986), the National Defense Authorization Act for Fiscal Year 2008 (signed into law by President Bush on January 28, 2008). Unfortunately it is not the great victory in which one might think because of the total militarization of all local and State police forces all across America.
Will there be martial law? Is martial law coming soon to America? When you see law enforcement being armed with automatic weapons, bullet proof vests and riot gear in small towns that have not had a murder or crime in years, then you have to ask yourself why.
The United States has more people locked up in prisons today than Russia and China combined. It comes out to one in every hundred Americans is behind bars. Our once great country that our ancestors fought and died for has become exactly the tyrants they were fighting. Fascists! When has America ever used words like Homeland? Never!
If you spend a few weeks reading all the info, watching the videos and following the links at The U.A.F.F., you will then have a better understanding of what has led to The Decline And Fall Of America. Remember that Knowledge is power! Learn, look, listen, read, share, prepare, train, stock up on food and water supply for one year.
Fill your pantry with non perishable foods, medicines, cooking oils, tinned meats and veggies. Flour, oats dried corn peas, beans and lentils.. Teach your self how to preserve food for storage. Check out your local potable/ drinking water supplies, non perfumed chlorine bleach is a good sterilizer for water, about 2 teaspoons full per 2 gallon bucket, stirred well and allowed to stand for at least 24 hours with a lid on it or until it no longer smells of bleach. Boiling water helps but it is not always enough to kill off the bacteria which can resist high temperatures.
Americans have been warned for years of the things to come, but have blindly looked away from the truth, which has been available for all to see. There are no more excuses not to prepare for the possible future. The time to act is now before it is too late. Check The United American Freedom Foundation for daily updates and news you won’t see in the mainstream media.
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Is the Illuminati Provoking Economic Collapse?
by Henry Makow Ph.D. – Sept. 15, 2008
(Remembering Svali's Words)
We may be on the verge of a stock market crash reminiscent of 1929.
I was watching CNBC when the news came across that Moody's had downgraded the Insurance giant AIG (American International Group.) This company was already on the ropes Monday when its stock crumbled to $4.75 from $11, %60 in one day. It was down from a $70 52-week-high. The company had gone to the Fed for a bailout. It was estimated it needed $40 billion.
Because of the Moody's downgrade, it emerges that it will need alot more money to avert bankruptcy. This is a massive company that holds the pensions of millions of employees. A money manager estimated that a trillion dollars would be lost if AIG declares bankruptcy. The whole world financial system could be taken down. He said banks in the Far East were already acting like this is inevitable, and the collapse already has been set in motion.
As you can imagine, the CNBC commentators were frantic. One demanded to know how the Fed can allow this to happen. "We know they print money," he said. Another wondered if the States whose pension funds were held by AIG could organize a bailout. Not enough time, he was told.
The bottom line is that Tuesday and the rest of this week could be ugly so be prepared. The second bottom line is that this Depression like the last appears to be caused by a deliberate contraction of credit. House prices are falling because banks don't have the money to lend to house buyers. As a result, portfolios holding mortgage backed securities are tumbling, taking banks with them. The Fed, after bailing out Fannie May and Fredie Mack, have let Lehman Brothers fail. AIG appears to be next and the dominoes will continue to fall.
At this time, it is important to remember that an Illuminati defector known as "Svali" said <>she was taught that the "end of the world" scenario<> involved an economic collapse. Remember the Illuminati is a Masonic cult founded and funded by the central bankers who own the Fed. Here is her full testimony given about ten year ago.
"Want to hear the end of the world scenario the Illuminati taught me? It was cult propaganda, but this is how they believed the New Order would be ushered in:
There will be continued conflict in the Mideast, with a severe threat of nuclear war being the culmination of these hostilities. An economic collapse that will devastate the economy of the US and Europe, much like the great depression.
One reason that our economy continues limping along is the artificial supports that the Federal Reserve had given it, manipulating interest rates, etc. But one day, this won't work (or this leverage will be withdrawn on purpose) and the next great depression will hit.
The government will call in its bonds and loans, and credit card debts will be called in. There will be massive bankruptcies nationwide. Europe will stabilize first,and Germany, France and England (surprise) will have the strongest economies, and will institute through the UN an international currency. Japan will also pull out, although their economy will be weakened.
Peacekeeping forces will be sent out by the UN and local bases to prevent riots. The leaders will reveal themselves, and people will be asked to make a pledge of loyalty during a time of chaos and financial devastation.
Doesn't sound pleasant, does it? I don't know the exact time frame for all of this, and wouldn't want to even guess. The good news is that if a person is debt-free, owes nothing to the government or credit debt, and can live self sufficiently, they may do better than others. I would invest in gold, not stocks, if I had the income.
Gold will once again be the world standard, and dollars will be pretty useless (remember after the Civil War? Our money will be worth about what confederate money was after the collapse).
All this said, it could just be cult propaganda taught to me and others to frighten us. It may be that none of this will happen. I sincerely hope not. I also strongly believe that God is able to stay the hand of the wicked, and to take care of our nation and others, if we turn to Him." http://giuli.com/svali/EssentialSvali.pdf
That noted, let's remember the words of Denis Healey, former British Defence Secretary and Secretary of the Exchequer: "World events do not occur by accident: They are made to happen, whether it is to do with national issues or commerce; and most of them are staged and managed by those who hold the purse strings."
I think we are in for a recession, maybe even a Depression but I don't think the Illuminati is ready to declare their New World Order just yet. However, this could be part of a larger scenario leading to World War Three, similar to the role the Great Depression played as a precursor to World War Two.
The Illuminati goal is to torture the human race until we cry out to them for world government, anything to stop the pain.
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Henry Makow Ph.D. is the author of "Cruel Hoax: Feminism and the New World Order." (www.cruelhoax.ca) His articles can be found at his web site www.henrymakow.com He enjoys receiving your comments, some of which he posts on his site using first names only. hmakow@gmail.com www.henrymakow.com/is_the_illuminati_proviking_a.html
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China may cut its dollar holdings - CICC(China Daily)
China, which holds a fifth of its currency reserves in Fannie Mae and Freddie Mac debt, may cut the portion held in US dollars, according to China International Capital Corp (CICC), one of the nation's biggest investment banks.
The US government this week seized control of the two mortgage-finance companies, which account for almost half of the home-loan market in the world's biggest economy, to prevent defaults from crippling them. China holds up to $400 billion in the two firms' debt, CICC Chief Economist Ha Jiming said in a report Thursday.
"The crisis has made Chinese officials realize it's a bad idea to put all their eggs in one basket," wrote Hong Kong-based Ha. "This will likely lead to greater diversification of foreign exchange reserve investments."
China held $447.5 billion of US agency bonds as of June 2008, according to the CICC calculations using disclosures by the US Treasury. It is likely to reduce the portion of reserves in dollar assets from the current 60 percent by purchasing more non-dollar assets with new reserves, he said.
Countries in Asia have stockpiled foreign exchange reserves since the 1997-98 financial crisis to act as a cushion against a run on their exchange rates. That in turn has increased pressure on policymakers to ensure higher returns from more than $4 trillion in assets.
China will expand its investments in corporate bonds and equities, according to Ha. Treasury and agency bonds account for 50 percent and 40 percent of total dollar assets held by the central bank, he wrote.
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Greenspan: This Is The Worst Economy I’ve Ever Seen
Sam Stein Huffington Post September 14, 2008
Former Federal Reserve Chairman Alan Greenspan offered a woeful outlook of America’s economic situation on Sunday, saying the crisis with the country’s financial institutions was as dire as he had ever seen in his long career, and predicting that one or more of those institutions would likely collapse in the near future.
"Oh, by far," Greenspan said, when asked if the situation was the worst he had seen in his career. "There’s no question that this is in the process of outstripping anything I’ve seen and it still is not resolved and still has a way to go and, indeed, it will continue to be a corrosive force until the price of homes in the United States stabilizes. That will induce a series of events around the globe which will stabilize the system."
Appearing on ABC’s This Week, Greenspan would not definitively say whether the government should come to the rescue of Lehman Brothers, which has been forced to consider a possible sale after its stock shares plunged drastically this past week. Instead he called the situation surrounding the investment bank — and the bailout that occurred this past spring of Bear Stearns — as a "once in a half century, probably once in a century type of event."
The circumstances for Lehman may, as Greenspan noted, be different. Bloomberg News reported on Friday: "Rising speculation that Lehman Brothers Holdings Inc. may fail is generating less concern among investors than when Bear Stearns Cos. imploded in March."
Much of the issue, Greenspan added, was the trouble in the housing market, which he predicted would become stabilized by next year. Pressed by host George Stephanopoulos as to whether another major financial institution — such as the struggling Washington Mutual, American International Group, or Merrill Lynch — would fail in the interim, the former Fed chair responded in the affirmative.
"I suspect we will [see one fail]," he said, "but in and of itself that does not need to be a problem. It depends on how it’s handled and how the liquidations take place. And, indeed, we shouldn’t try to protect every single institution. the ordinary cost of financial change has winners and losers."
In light of these dynamics, Greenspan noted that the government was left with tough decisions: which institutions are "so fundamental to the functioning" of society that they demanded a federal safety net? Earlier in the week, the former fed chairman noted that such choses extended to tax policy as well. In an interview with Bloomberg Television, Greenspan argued that the country couldn’t afford the tax cuts being proposed by John McCain without an equally massive reduction in spending.
"I’m not in favor of financing tax cuts with borrowed money," he said. "I always have tied tax cuts to spending."
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Run On The Bank? Americans Could Lose Their Deposits
You know it's bad when Yahoo.com features a story about fiscal armageddon
You know things are bad when Yahoo.com, the most trafficked website in the world and usually a purveyor of mindless celebrity gossip, cooking tips and dating advice, features a top story about how Americans could lose their bank deposits following the collapse of Lehman Brothers.
For the Internet giant to prominently report that there is already a "slow motion run on banks" is indeed a landmark event, and precludes even the most ignorant American from claiming they were not forewarned about the unfolding economic catastrophe.
The article points out that although the Federal Deposit Insurance Corp. guarantees individual accounts up to $100,000, the FDIC fund only has about $50 billion to "insure" about $1 trillion in assets across the nation's financial institutions.
When Americans realize the fact that banks are "going to run out of money", the article nonchalantly states, a run on the banks will accelerate.
The warning comes from top economist Nouriel Roubini, of NYU's Stern School and RGE Monitor, who correctly predicted the severity of the credit crunch. Roubini says there is already a "slow-motion run on retail banks" occurring nationwide.
He advises that people with accounts over $100,000 in value should at least spread them out among different firms.
The use of such inflammatory language like a "run on the bank," especially from the most visited website on the entire planet, is phenomenal and other news websites as well as financial advisors have been cautious to use such terms in an effort to prevent panic.
For example, we read in today's Seattle Post Intelligencer that, "Sara Hasan, an analyst with Seattle's McAdams Wright Ragen Inc., said she didn't even want to use the word "run" -- as in "run on a bank" -- during an interview, because "these are very touchy times."
Other advisors are more up front with their warnings.
"First off, go ahead and make a run on your banks. If you have money with a brokerage firm or bank that is in trouble, get your money the heck out of there!" writes Joe Ponzio.
"In reality, I don't want to cause a run on the banks; but, I won't prevent one by saying that everything is fine and that you should wait until it is too late. My recommendation: Move your important savings and checking accounts to banks that have a higher likelihood of weathering the storm," he adds.
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SECOND DAY IN A ROW: RUSSIAN STOCK MARKET SHUT DOWN AFTER CRASH
Today, Wednesday, September 17, 2008, the Russian Stock Market was again shut down after stocks crashed for the second day in a row. Yesterday the Russian market lost seventeen percent (17%) of its overall value, today it lost another ten percent (10%) of its overall value.
Trading on Russia's main stock exchanges has been suspended following steep falls in shares prices this week.
The shock developments on Wall Street this week spurred a sell-off in Russian shares, which on Tuesday sank to levels not seen since December 2005.
Following a plunge of 6%, the dollar-denominated RTS index halted trading on Wednesday until further notice. It is down almost 60% since its May peak.
Trading on the rouble-denominated Micex was also suspended.
This comes after shares on the Micex slumped by almost 18% on Tuesday to 888.17 points - its largest one-day decline since Russia's financial system collapsed in 1998.
"There is certainly a level of fear about the risks to the Russian economy not seen since the crisis of 1998, but the driving forces now are quite different," said Tom Mundy, a strategist at Renaissance Capital in Moscow.
Ebbing confidence
Russia's stock market, one of the best performing for the past few years, has been buffeted by a combination of events in the past few months.
With about 75% of the indexes made up of commodity firms, the decline in oil prices from a peak of $147 a barrel in late July has spurred investors to take profits.
Confidence was shaken further by Russia's invasion of Georgia last month with billions of dollars of foreign capital pulled out of the country in August alone.
Adding to this there have been mounting worries over the global credit markets, particularly after the demise of US banking giant Lehman Brothers and problems at insurer AIG this week.
While shares in emerging markets have been hit by the problems on Wall Street, Russian shares have borne the brunt of the sell-off.
Liquidity squeeze
Analysts said local banks had been affected by the global aversion to risk and had virtually stopped lending to each other.
The Russian central bank has been injecting extra funds into its money markets to ease liquidity problems at domestic banks, offering a record 361 billion roubles at its daily auction on Tuesday.
But despite this, lending between Russian banks continued to fall as the interest rate which they charge each other to borrow money overnight jumped to 11%.
This prompted the Kremlin to take additional steps on Wednesday to reassure investors about the stability of Russia's financial system.
The Finance Ministry said it would loan 1.13 trillion roubles ($39bn; £21bn) to three of the country's biggest banks to boost liquidity.
The money will be offered to Sberbank, VTB Group and Gazprombank for a period of three months to make it easier for them to lend to smaller banks at affordable rates.
"These are market-making banks capable of insuring the liquidity of the banking system," the Finance Ministry said in a statement.
GRAVE NEWS: "SAFE" MONEY MARKET FUND HAS "BROKEN THE BUCK"
The world financial crisis took a new and dangerous turn today as RESERVE PRIMARY FUND, the oldest money market fund in the United States and considered completely safe, "broke the buck" by valuing its deposits at 97 cents on the dollar.
This means instead of earning interest and profiting from their money market account, people who put their money in that money market fund now have only 97 cents of each dollar!
This is very, very serious news because when folks realize (tomorrow) that not even money market accounts are safe, they will try to pull their money out and . . . . . surprise surprise . . . . the money market won't have the cash on hand to give them their money back. Investors will be told they must wait a week, two weeks, perhaps even longer to get anything at all from their accounts. This will cause a panic and . . . . . . you know the rest.
Money market fund 'breaks the buck' on Lehman IOUs
The credit crisis has taken a new and dangerous turn: Shares of a large money market mutual fund have "broken the buck" -- fallen below the standard $1 a share -- because of losses on IOUs from brokerage Lehman Bros. Holdings Inc.
The Reserve Primary Fund in New York, which had $65 billion in assets at the end of August, said it cut its share price to 97 cents after marking down the value of $785 million in Lehman debt securities, following the brokerage’s filing for bankruptcy court protection on Monday. Read the fund's statement here.
The Reserve Primary Fund’s situation apparently was exacerbated as big investors have fled in the last two days, forcing the fund to sell other securities. Assets have dived by more than 60% since Sunday, Bloomberg News reported.
The fund, apparently seeking to dissuade other investors from leaving while it sorts out the situation with its Lehman IOUs, today said it would take up to seven days to meet investors’ redemption requests. Normally, money funds redeem investors’ shares immediately on request.
The fund also said it had valued the Lehman IOUs at zero for the moment. That, too, could be a move to discourage redemptions, because it’s conceivable the securities have some value.
The woes of Reserve Primary Fund -- the nation's oldest money fund -- are sure to set off a public relations blitz by other mutual fund companies to forestall an investor panic.
"The whole money fund industry is going to be out there trying to assure people," said Pete Crane, head of Crane Data, which tracks the industry.
Crane said the Reserve Primary Fund lacked a "deep-pocketed" parent company that could step in and buy out the Lehman IOUs. A number of other money funds have been caught with dicey debt over the last year as the credit crisis has deepened, but their parent firms have chosen to purchase the securities to keep shareholders whole.
Crane noted that the Evergreen Funds said on Monday that parent Wachovia Corp. agreed to back up Lehman debt in three Evergreen money funds. See the announcement here.
Money market funds, which hold a record $3.5 trillion, have long been considered relatively safe because they're supposed to limit their investments to high-quality, short-term securities. The funds don’t guarantee that they can keep their share prices steady at $1, but before today only one other fund has broken the buck -- and that was a small institutional fund, in 1994.
Money funds overall have taken in $400 billion in fresh cash this year alone as nervous investors have sold stocks, bonds and other assets and sought a haven where they believed their principal was protected.
Reacting to the Reserve Primary Fund's bomb, the Investment Company Institute, the trade group for mutual funds, said that it was "working closely with its members and with regulators, including the Securities and Exchange Commission and the Federal Reserve, to maintain open communications about market conditions and their impact on funds."
There’s high irony in the Reserve Primary Fund's troubles: The fund’s founder is 71-year-old Bruce Bent, who is considered to be the father of the money fund industry, which dates back to the early 1970s.
Just last week Bent was quoted in a Wall Street Journal story saying that "the purpose of [a] money fund is to bore the investor into a sound night's sleep."
A call to the company’s offices in New York wasn’t returned.
The price of Gold shot up by more than $90 per ounce today in vigorous trading, to hit $870.90, the largest single day increase in history. Gold later closed at $850 per ounce, still a $70 increase.
This is the final act in the economic collapse of the United States, as "those-in-the-know" get out of the stock market and out of the banks and buy up all the gold and silver they can before the final, total, economic collapse.
By the end of this week, Gold will once again hit all-time highs of more than $1030 per ounce as more and more people seek a safe haven for what little money they have left.
To put this is terms that even a moron can understand, the USA is now akin to the Titanic.
In December, 2006, I was on lookout and saw the iceberg dead ahead when the federal reserve announced it would cease publishing the M3 data in 90 days. I warned that without the M3 being reported, there would be no way that anyone could possibly know how much "one dollar" was actually worth because no one would know how many dollars existed in the world.
Even though I - and others - sounded this warning, no one even bothered to try steering us away from the iceberg.
We struck the iceberg in March 2007 when the Fed did, in fact, stop publishing the M3 data (amount of cash printed and put into circulation).
By June 2007, foreign investment into the US was down ninety percent with many not only refusing to buy US debt, but also removing what funds they had here. The USA, like the Titanic, was going down by the head.
With cash being pulled out of the US at enormous rates, the Banks started having "liquidity problems" in September of last year. They had loaned out all their deposits and didn't have enough on hand to fill customer demands to get money out.
By March 2008, the "sub-prime mortgage crisis" hit with full impact. There were so many non-performing loans and so many others pulling their money out that banks and brokerage houses couldn't even hide their lack of cash anymore.
This was sort of like the nose of the Titanic being underwater and the ass end of the ship having risen into the air - and that's a really BIG ass.
The hull (banking system) was never designed to take that kind of stress and so it began splitting apart -- with the collapse of Bear Stearns, then Lehman Brothers, the urgent sale of Merrill Lynch to Bank of America and so on.
As the splitting of the hull finished, the head of the Titanic was still underwater, but the ass end was once again level and above water. People on the back of the ship thought things were safe again. Boy were they wrong.
The ass end of the ship - our retail economy including retail banking - are now grinding slowly to a halt -- filling up with water. Very soon, the ass end of the ship will rise back into the air then, finally and dramatically, sink.
Nothing could save the Titanic and nothing can save the United States.
We have been spent into oblivion by our own federal government and allowed to go so far over our heads by the greedy jew bankers that nothing can stop it.
The end isn't far off. Those with gold and silver are sort of like the Titanic passengers with life jackets after the ship sank. Those with life jackets (gold and silver) at least have some hope of surviving or being rescued. The others will all drown.
The stock market is sort of like the Band playing on the deck of the Titanic as the ship sinks; it provides entertainment but its fate is also sealed.
That is the fate of the United States we see unfolding before our very eyes.
Those images will be in my mind as I and men like me, take revenge upon those responsible for this calamity.
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FDIC INSURANCE FUNDS INSUFFICIENT TO MEET RATIO SET BY CONGRESS
The Federal Deposit Insurance Corporation (FDIC) which insures citizen bank deposits up to one hundred thousand dollars, is running out of money due to all the bank failures this year.
According to a Senior Vice President of Risk Analytics, "We've got a ... retail bank run forming in this country."
Hal Turner Commentary: I have repeatedly warned all of you about this dire financial mess and repeatedly told you to prepare for a financial crisis worse than the Great Depression. In this story, they are openly telling us they may not have enough money in the FDIC to protect all depositors in banks that fail.
I urge you to get your money out of the Stock Market and perhaps even your bank immediately. It is your choice if you allow things to sit where they are, but don't be surprised if you wake up one morning and find yourself destitute.
My advice to those of you who failed to heed my earlier warnings is simple: Get out of the markets right now. Don't wait. There is no hope for the markets. They will not be coming back.
Yes, you're going to take a big loss but at least you'll have something left after the dust settles.
As of today, out of the top five U.S. Brokerage houses, only two remain: Goldman Sachs and Morgan Stanley.
Over one thousand U.S. Banks are going to fail including, I am told, UBS and Citibank.
The FDIC is already scrapping into reserves long thought sufficient, to bolster depositors for the eleven Banks that have failed so far this year. What are they going to do when 1,000 Banks fail? Where will they get the money from? The short answer: they won't.
Buy small denominations of gold and silver. Take physical delivery of the metal and hold on to it.
We are in for a financial collapse far worse than "the great depression" and there is no way at all to avoid it.
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September 17, 2008 posting ... regarding the past week's "banking" problems ... this is all about a broken system called "fractional reserve lending" ... or otherwise known as creating money out of thin air ... banks lending 20 times the money they had to lend ... banks loaning air to other banks and those banks re-lending this air to other banks ... phony money (debt money) ... phony wars ... phony taxes ... phony stock values ... etc etc etc ... companies selling stock as in the 401K programs and putting the money directly into top shareholders pockets before the month was out ... this is the failure of not obeying ancient law ... the ancients had laws regarding rules of charging interest ... this culminates the complete failure of the fractional reserve banking empire ... loaning more money than you have ... charging interest on phony debt ... only a banker could dream up that scheme !!! as i noted this was outlawed in ancient laws and texts and these people would be imprisoned for life according to ancient law ... the new national solution ... place this inflated bag of air debt onto the american pulbic ... enslavement for all future time as they take over the paper that shows ownership to your homes ... you pay and pay and pay but never ever will own ... PLANNED ECONOMIC ENSLAVEMENT ... european banker style ... the only issue is that this has been done many times in the past ... and now you are seeing it here ... only through the control of the media and "education" through the public schools could such a criminal system become entrenched and honored as the backbone of our national monetary system ... jim mccanney
And so it goes that this morning we have an attack on the US Embassy in Yemen, which has left 16 people dead. Attention and headline grabber for sure. That oughta keep the BIG story in finance off the lead at the news channels and keep the money honeys distracted.
Being a long-time news reporter I ask myself "Gee, what is really going on in the background that is being swept under the rug with a flashier headline, about a terrorist attack here?
Ah! Here we go: "Panic as Russian Market Suspended"
The Russian stock markets closed on Tuesday after losing what would be the equivalent of 1,836 Dow points.
So, why are we not hearing about this meltdown in Russia? You want to table a guess as to why? Because the MainStreamMedia in America has no interest in letting the cat out of the bag that a global economic Depression's second leg down is now gathering momentum.
Just like they didn't tell you leg one down was when the Internet Bubble burst and (coincidentally) was swung into two wars overseas immediately after 9/11.
I mention this as extremely important stuff because 1) we have our 'hot date' from the predictive linguistics team showing a 'prequel;' event around September 27th and then a big 'wham' along about October 7th. As you may remember, I've been worried about another 'terrorist attack' (besides AIG's accessing public money) for a number of months. And, if the Dow slips under 10,000 here in the next 19 days, I reckon the odds are extremely high.
And of course, the timing will be coincidental.
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My commodity broker JB called yesterday to ask if I'd seen where foreign investment outflows from the US had gone negative to the tune of $25.6 billion in the latest Treasury TIC report.
Maybe some folks overseas have figured out the obvious: This ends badly. So they're lightening up on buying U.S. paper products, if'n you know what I mean.
Golly - you thought Boeing or Grains were our biggest export? LMAO hell no. It's Paper Debt!
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Bush suddenly scraps comments on financial markets
WASHINGTON (AP) — With little explanation, President Bush on Tuesday scrapped a statement he planned to give on the tumultuous financial markets, abandoning any press coverage of his meeting with key economic advisers as more developments roiled Wall Street.
As announced by the White House, Bush was scheduled to make comments to a pool of reporters after huddling with a key financial working group led by Treasury Secretary Henry Paulson. Its members include Federal Reserve Chairman Ben Bernanke and other key government figures in the field of commerce.
Yet after the session began, the White House told the press never mind. Spokesman Tony Fratto said only: "We decided it would be best to limit public comment about markets today." He declined to offer any explanation about why limiting Bush comment would be best, or why on this particular day.
The meeting went on as planned.
After the session, White House press secretary Dana Perino offered only a one-sentence description of the session. She confirmed that Bush had been briefed by his working group on financial markets and said the president appreciated "their work to strengthen and stabilize the markets."
Bush's sudden no-comment came on a day when the turmoil on Wall Street came to seize the presidential campaign.
In a blitz of interviews, Republican presidential candidate John McCain on Tuesday blamed Wall Street's financial turmoil on unchecked corporate greed. His Democratic opponent, Barack Obama, dismissed McCain's call for a high-level commission to study the economic crisis as "passing the buck."
Meanwhile, Wall Street ended another chaotic day with a big gain, ending up 141, partly recovering from a horrendous day. The Dow Jones industrials on Monday slid 500 points in their worst point drop since the 2001 terrorist attacks. Investors remain worried that financial sector troubles are far from over.
Beyond canceling his statement, Bush twice brushed off chances on Tuesday to comment on the market conditions on many people's minds.
Touring Hurricane Ike recovery efforts in Texas, he declined to answer a question about the financial markets in Houston. Then in Galveston, a reporter shouted a question about the teetering state of insurance giant American International Group Inc., the latest Wall Street worry.
"We're here talking about the people of Galveston, Texas," he said tersely. Regardless of topic, the president often opts not to answer shouted questions.
The White House said that Bush's comments of a day earlier still held. He told reporters on Monday that financial market adjustments can be "painful," but reiterated his standard message — that in the long run, capital markets are resilient and the economy will bounce back.
Moscow's stock markets are to remain closed until Friday, as the government tries to stem a plunge in share prices and restore confidence in the economy.
Finance Minister Alexei Kudrin said 60bn roubles (£1.3bn) would be pumped into Russia's three largest banks to help bolster the financial markets.
President Dmitry Medvedev said supporting the financial system was the government's "most important priority".
The crash has brought back memories of Russia's financial crisis of 1998.
Then the rouble was devalued, the country defaulted on its debts, and many banks failed.
While the country's economy as a whole is now in far better shape, there is still great uncertainty over what is around the corner, leading to a collapse in confidence, says the BBC's James Rodgers in Moscow.
Investors flee
Financial regulators halted trading on Wednesday after stocks fell to the lowest level in nearly three years.
Russia was not alone. Markets around the world have dived this week as several big banking names have gone under due to the effects of the credit crunch.
But it has shocked a stock market which was hitting record highs as recently as May this year, helped by an economy riding high on record oil and gas prices.
While the global turmoil and a slide in the price of Russia's abundant oil are some of the causes, analysts also point to investors fleeing Russia in the aftermath of its war with Georgia.
About £20bn has been pulled out of Russia since early August, Reuters estimates.
The executive board of Micex, one of Russia's two main exchanges, called the situation "extraordinary".
In a bid to support the banking sector, the finance ministry has pledged billions of dollars of loans.
Facing a liquidity squeeze, central bank officials on Thursday cut the reserves banks were allowed to hold, forcing them to release billions of roubles.
Markets across Asia tumbled as a result of the Wall Street crisis. Chinese state media has blamed the US for unleashing financial "weapons of mass destruction" and sparking a global market "tsunami".
China's official People’s Daily warned on Wednesday that the US had set off a "financial tsunami" by allowing Wall Street lenders to trade in subprime debts and unstable financial derivatives.
In response to market turmoil, China's central bank cut interest rates for the first time in six years, from 5.85% to 5.31% signalling Beijing's intent to maintain economic growth and employment.
Regional stocks tumbled across East Asia on Thursday due to panic-selling brought on by fears of a financial meltdown on Wall Street.
The MSCI Asia Pacific Index of regional shares fell 4.1% on Thursday as traders in Hong Kong, Japan and China fled equity markets to safer investments such as gold, government bonds and currencies such as the Yen.
Thursday trading saw Japan's Nikkei 225 Stock Average falling 3.6% while the broader Topix index skidded 3.9%. Japan's central bank also pumped another Y1.5 trillion into money markets to fund banks increasingly wary about lending to each other.
Hong Kong's Hang Seng Index now stands at its lowest level in over two years after dropping 7.3% on Thursday and 15.2% in the previous six sessions. HSBC holdings and China Mobile, two of the biggest and most influential stocks on the Hong Kong market, lost 7.4% and 4.6% respectively.
The Shanghai Composite index in China crashed 5.8% while the Taiex in Taiwan sank 3.6%. South Korea’s Kospi index dropped 3.9% after hitting an 18-month low on Tuesday.
Signs of panic spread also spread to consumers with policyholders at troubled insurance giant AIG flocking to regional offices to terminate agreements despite an $85 billion US government bailout.
Asian markets have been hit hard all week after the collapse of investment bank Lehman Brothers and the forced discount sale of brokerage firm Merrill Lynch.
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The Line Is Drawn: Stop the Nation-Killing Bailout Now!
John Hoefle – Executive Intelligence Review September 19, 2008
Immediately upon hearing of the action by Treasury Secretary Henry Paulson to have the United States government assume the liabilities of Fannie Mae and Freddie Mac, Lyndon LaRouche declared the move "tantamount to treason."
"This is an un-Constitutional fraud," he said, adding, "We're going to hold these people accountable for this 'tantamount to treason' action." If they do this, he said, "they are going to jail."
For the past year, we have been warning that Paulson, Fed chairman Ben Bernanke, and the Plunge Protection Team were engaged in a systematic bailout of the bankrupt U.S. financial system, and, in doing so, were bailing out the global Anglo-Dutch Liberal system. Despite all the spin about "protecting homeowners," this is a plan to save the parasites by transferring their losses to the taxpayers.
How did such a travesty of justice occur? The policy itself comes from the core of the Anglo-Dutch Liberal financier oligarchy, which is determined to protect itself and its parasitic system at all costs. Organizing for the policy in the U.S. was a fifth column of oligarchic stooges, centered around creatures like Felix Rohatyn, George Soros, the Council on Foreign Relations, the Trilateral Commission, the Rockefeller Foundation, and others, with considerable help from the whorish U.S. media. Implementing the plan were corrupt public officials who turned this policy into law, to the detriment of the welfare of the people. This list includes Paulson, Bernanke, Senate Banking Committee chair Chris Dodd (D-Conn.), House Banking Committee chair Barney Frank (D-Mass.), Speaker of the House Nancy Pelosi (D-Calif.), and a host of others, who have consistently done the bankers' bidding and consistently blocked LaRouche's reform proposals. Paulson's action was specifically authorized by H.R. 3221, the deceptively named Housing and Economic Recovery Act of 2008, also called Dodd-Frank after its main sponsors.
These actions, far from saving the United States, will destroy it. Said LaRouche: "Once the American people figure out what Paulson, Dodd, Felix Rohatyn, 'Bailout Barney' Frank, and House Speaker Pelosi have done, they will be out for blood. I wouldn't want to be in the shoes of any member of Congress who signed their name onto the Dodd-Frank bill."
Tens of Trillions
To understand what this scheme is, and how it works, you have to step back and view it from the larger perspective of a bankrupt financial system: The devil is in the intent, not the details. As LaRouche has repeatedly declared, the global financial system died in the Summer of 2007; it has not come back, and will not come back. It is dead. The problem facing the banks, is that they still have trillions of dollars of bad paper on their books, paper whose real value ranges from zero, to pennies on the dollar. They can't afford to write it off, and they can't sell it. Despite their financial reports, they are bankrupt, and the bigger they are, the more bankrupt they are.
These big banks are zombies, walking dead, keeping their doors open only through thoroughly cooked books and a corrupt regulatory system. There is nothing they can do to save themselves.
This is the problem Paulson is trying desperately to solve, and the only way he sees to solve it is to bail out the banks by having the U.S. government buy the paper. He intends to save the financial system from bankruptcy by bankrupting the U.S. government, our economy, and our people.
No one knows what this will ultimately cost, because the financial system is still hemorrhaging as the effects of the death of the system work their way through the balance sheets of the commercial and investment banks, hedge funds, pension funds, money-market funds, insurance companies, and other speculators in the quadrillion-dollar-plus global financial casino. The Congressional Budget Office has estimated that the scheme will ultimately cost the government $25 billion, but that estimate is based upon a bailout of Fannie and Freddie, not the bailout of the financial system itself. LaRouche estimates that the bailout will cost tens of trillions of dollars, something the U.S. government cannot possibly pay, even with big tax hikes, and even bigger cuts in essential services. This plan will kill what is left of the U.S. economy, and, effectively, the nation itself.
Savage Downsizing
It is useful at this point to define just what is meant by "bailout" under such circumstances. Even the dumbest among the bailout circus crowd realizes that saving every commercial and investment bank, every fund, every speculator, is neither possible nor desirable. Many people who thought they were major players are already gone, thrown overboard as expendable. Bear Stearns is gone; Lehman Brothers appears on the verge of joining them; Wachovia is now run by a former top member of the Plunge Protection Team; and the FDIC is expanding as fast as it can to handle the failures it sees coming. Some of these dramas are being played out in the press, soap-opera style, to keep the focus on individual institutions and not the system itself.
Again: Pull back and look at the system as a whole. During the heyday of the bubble, the debt machine was taking in mortgages, credit-card receivables, corporate debt, and related items, and spitting out even larger amounts of securities on the back end. In 2005, for example, this securitization game took in $1 trillion in new mortgages, and turned it into $3 trillion in mortgage-related securities. This game of turning piles of debt into even larger piles of assets spun off huge amounts of cash, and as the pyramid scheme grew, the banking system grew with it. Then, suddenly, the music stopped, and Wall Street, the City of London, and other major financial centers found themselves with far more capacity than business, far too much expense for the suddenly reduced income. Suddenly these over-leveraged behemoths were struggling just to survive, their assets vaporizing, and no way to make the money they needed to cover the bills. Regardless of what the bankers try to do, the system must inevitably shrink until it finds equilibrium, and that is a long way down. The best they can do, from their standpoint, is to try to protect the system itself, saving as much of the core as they can. That means lots of bank failures, and lots of mergers, many of them with government assistance. The big banks will try to survive by gobbling up the little ones, aided by Federal life support. The government has already shown it will do as much as it can to protect the money and the parasites, while throwing the taxpayers, and the rest of the economy, to the wolves.
Stop It, Now!
This bailout must be stopped now, before it really gets rolling. Paulson must be stopped, and Dodd-Frank repealed.
"This bill must be immediately ripped up," LaRouche demanded. "It flagrantly violates the U.S. Federal Constitution, which specifically defines the general welfare as the law of the land. This bailout of speculators, at the expense of current and future taxpayers, is illegal."
This bailout scheme is a nation-killer, as the ultimate authors of the policy understand. If carried out, it will bankrupt the U.S. economy, and destroy the dollar. It will impose trillions of dollars in illegal taxes upon the public, bleeding us until we are dry.
Forget the legalistic nonsense being pumped out by Washington, and the hosannas being sung by those who think they are being saved. The Constitution is clear on the subject: The government's responsibility is to protect the General Welfare is paramount, and that is the law of the land. Neither Paulson, nor Dodd-Frank, can change that.
There can be no compromise here. Either we stop this travesty of justice, or the United States gets gobbled back up by the imperial system from which we fought a revolution to escape. It is time to rise up and fight!
Mark Patterson, chairman of private equity fund MattlinPatterson, told an audience of financial experts at New York’s Waldorf-Astoria this week that the U.S. could suffer up to 500 bank closures and that the chances of a new great depression are now as high as 25 per cent.
Following the collapse of Lehman Brothers, Patterson warned that 300 to 500 U.S. banks are set to fail over the next three years and as a result absorb all of the FDIC’s pool of funds.
Financial conditions are “probably more challenging than at any time since 1929,” Patterson said, speaking at Dow Jones’ Private Equity Analyst Conference this week.
“We’re not in normal times. If you don’t accept that there is at least a 20 to 25 percent chance of a financial markets led depression you’re fooling yourself,” he cautioned, adding that “Saharan-like” credit markets are overwhelming companies.
Following the collapse of Lehman Brothers, Patterson warned that 300 to 500 U.S. banks are set to fail over the next three years and as a result absorb all of the FDIC’s pool of funds.
As we reported on Monday, the Federal Deposit Insurance Corp., which guarantees individual accounts up to $100,000, only has about $50 billion to “insure” about $1 trillion in assets across the nation’s financial institutions.
This has led top economists like Nouriel Roubini, of NYU’s Stern School and RGE Monitor, to openly warn that a “slow motion run on the banks” is already occurring nationwide as individuals move their deposits to safer havens.
Patterson put the figure at 300-500 bank failures presuming that other well known investment banks survive, something he said “was not such a good assumption.”
“Who could blame him for such a negative outlook?” writes Marc Raybin of HedgeFund.net. “The markets are still reeling from the Dow Jones Industrial Average plummeting more than 500 points on Monday on the one-two-three punch of Lehman Bros. declaring bankruptcy, Merrill Lynch being acquired by Bank of America and American International Group, the world’s largest insurer with $1 trillion on its balance sheet, on the verge of filing for bankruptcy protection itself.”
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Nobel Prize Winning Economist: Crisis As Bad As Great Depression Or Worse
Describing the current situation as a “top down crisis”, Stiglitz also cited the $3 trillion cost of the Iraq war as a key factor in the economic downturn, saying it has increased the budget deficit and consumed resources that would otherwise promote growth.
Two time Nobel-prize winner and former chief economist of the World Bank, Joseph Stiglitz has warned that the current financial crisis will continue for at least another eighteen months and in many ways represents a worse situation than the one faced by Americans during the great depression of the 1930s.
“You can paper things over for a while but eventually you have to face reality.” Stiglitz told the nationally syndicated Alex Jones show yesterday.
“This is clearly the most serious problem since the great depression and in some ways worse in terms of the financial institutions.” Stiglitz commented, referring to the fact that lenders are unwilling to take risks to finance each other because they no longer have complete access to their own undertakings let alone those of other institutions.
“The reason, in part, is that while some of the same problems that occurred during the great depression and have occurred since, such as excessive leverage, pyramid schemes, bubbles, have happened before, the so called innovation of Wall Street, the financial innovations, that were supposed to manage risk, created a kind of non transparency that is now so great that no one knows exactly the magnitude of the risk they face.”
“It is particularly bad because our financial institutions are based on trust, you put the money in the bank and you trust that you can get your money out, so trust is absolutely essential for the functioning of our financial markets and the functioning of our economy.” he continued.
“The problem is that much of the news on what is going on in the financial markets comes from those who are making money out of the financial markets. So if you were one of the people involved with Lehman Brothers or AIG, you’re going to be talking up the economy. The head of Lehman Brothers was quoted last April as saying we have turned the corner, the economy is on the uptick. And the same thing goes for the president and the secretary of treasury.”
“The fact is that they are involved in salesmanship.”
Describing the current situation as a “top down crisis”, Stiglitz also cited the $3 trillion cost of the Iraq war as a key factor in the economic downturn, saying it has increased the budget deficit and consumed resources that would otherwise promote growth.
“This is the first war in American history that has been totally financed on the credit card… For the last five years as the war has gone on we have been a debt economy. It is the first war since the revolutionary war that we have had to turn to foreigners to finance, 40% of our national debt is now being financed by foreigners… Even as we went into the war we had a big deficit, and yet the president called for tax cuts for upper middle class Americans.” he said.
“And there is another level of trust, those in other countries have to have trust that the American economy is working well, they have to trust that when the president says everything is going well, it is. This administration has really burned that trust, the president said there is no problem, there’s just a few too many houses been built. Well if that is the level of analysis the Untied States is giving about the nature of its economic problems, no wonder everybody around the world is losing confidence. “
Stiglitz is no stranger to positioning himself in opposition to the establishment on the economic front. In October 2001 he caused controversy when he exposed rampant corruption within the IMF and blew the whistle on their nefarious methods of inducing countries to fall under their debt before stripping them of sovereignty and hollowing out their economies.
“It is clear that the Bush administration is not responding to these problems, partly because the problems are of their own making.” Stiglitz asserted.
Over the next twelve months, Stiglitz predicts that house prices will continue to fall, more mortgages will go into foreclosure and more financial firms will be put into crisis.
“I am particularly worried about what I call the ‘real economy’. Basically when the financial system starts getting weak, it is not in a position to provide credit, to provide loans, to provide mortgages and that means in turn that housing prices are going to fall further, businesses are going to contract, unemployment is going to grow and it is a downward vicious cycle… I don’t want to be obsessively pessimistic but you have to be in fantasy land to say that everything is fine, and even to say that we have turned the corner. We’re still in the downward phase of this economic cycle. We should not anticipate emerging from this for a year and a half or longer.”
In a long term prediction 22 months ago, Stiglitz told listeners of the Alex Jones show that he believed a global economic crash would occur within 2 years. With major financial institutions now folding every week, others touting mergers just to stay afloat and stocks continually plummeting on a daily basis it seems that prediction is coming to pass.
Stiglitz stressed that in order to emerge from the crisis, the economy needs a stimulus, that really works, consisting of increased aid for local government, stronger unemployment insurance and more investment in infrastructure.
“I would take advantage of this particular time in order to stimulate our economy in ways that provide the basis of our longer term economic growth. If our economy is growing then we will be better able to manage some of this financial turmoil.” he concluded.
I have just learned from a previously reliable source that Washington Mutual Bank - the sixth largest bank in the USA, has failed and will close this Friday.
Please spread the word immediately.
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October 2008, US Economy and Global Conflict
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Voice of the White House September 19, 2008
TBR News.org – September 19, 2008
“The terrible pending financial collapse is being frantically addressed by terrified members of Congress and the President, mainly because most of them are deeply in the pockets of the Wall Street types and also because a serious recession at this time is unthinkable because of the pending presidential elections.
Their solemn statements at ad hoc press conferences ( seen on all the major networks) will certainly be reflected in the media with cries of joy and exaltation “Joy! The Crisis is over! Stocks soar on News Of Assistance!” will echo throughout the land.
This will result in a brief flurry of upwards activity on the market but in the end, the damage is so severe that the collapse will continue its inexorable slide downwards to mass destruction (The American media is not independent. For example, the once-respectable Chicago Tribune is now owned by a big real estate tycoon who is highly unlikely to publish devastating comments about the collapsing real estate market.)
The Dow rose more than 400 points. Gold was up $46 at the close of the day. The dollar is falling...oil is holding steady. Our Congressmen now are going to ban short selling of financial stocks. The SEC issued an emergency edict prohibiting “abusive” short selling.
The pre-election saviors have solemnly announced a program of coordinated intervention...with $250 billion to be made immediately available to the financial industry to cover its bad debts, and with a future direct cost to American taxpayers of half a trillion dollars!
Bush and his right wing Republicans are directly and personally responsible for the deliberate removal of stock market and financial institution safeguards, put in place decades ago by Congress specifically to prevent what is now happening.
None of this activity was by accident but it was, has been and is now in progress because it is the stated Republican policy to stop any government control over American capitalism. Capitalism, if left uncontrolled, has a distinct propensity to large surges and even large collapses as any student of American business can attest.
Finally, after the terrible 1929-1938 disaster, Congress installed regulations to prevent these surges and collapses but Wall Street, which connived at Bush’s fake election in 2000, wanted to benefit from the surges and so this corrupt administration has eagerly rushed to comply.
Now, we see the fruits of their labors.
The American housing market has collapsed and the collapse is still in progress.
We see that many Americans, who have good credit and pay their mortgage bills on time, are in a terrible situation. As long as they keep their homes, all is well and good but if and when they want to sell them, then there is trouble.
The collapse of the American housing market means that while a homeowner may have a mortgage on a house once worth $200,000, this house now only can be sold for $125,000.That means that if the house is sold, the bank, holder of the mortgage, is now owed $75,000.
The banks are not going to walk away from so much money, so either the homeowner stands pat and continues to pay his mortgage, he signs an interest-bearing note for the $75,000 for the bank or he walks away from the house, has his credit ruined and leaves the mortgage holder to eat the house and the mortgage.
I ought to advise those of you being forced into foreclosure of an interesting situation.
The person who owns the house can be forced into foreclosure but in court, they have the right to confront the mortgage holder.
Let me tell you all something: Given all the slicing and dicing and resales the criminally greedy banks and lending agencies indulged in, at this point, no one in any lending institution knows who holds the actual mortgage and, believe this, they can never find them.
Just a little gift from me to you.
Tell your lawyer this and watch the other side twist and squirm! And not bring the holder into court as they must.
Your Mr. Harring has prepared a clear, uncluttered and accurate chronology of the background of this Republican-sponsored disaster. Be sure to remember who is to blame for your hiked up credit card payments and other delightful things come November next.” www.tbrnews.org/Archives/a2876.htm
Ameribank Inc. was shut down on Friday by the Office of the Thrift Supervision, making it the 12th bank this year to go under.
The Northfork, West Virginia bank had total assets of $115 million and total deposits of $102 million, according to a statement on the Federal Deposit Insurance Corporation Web site.
The FDIC was named receiver and announced that it entered into purchase and assumption agreements with Pioneer Community Bank, Inc., Iaeger, West Virginia, and the Citizens Savings Bank, Martins Ferry, Ohio, to take over all of Ameribank's deposits.
Ameribank has five branches located in West Virginia and three branches located in Ohio. Branches in West Virginia will reopen on Monday and Ohio branches will reopen on Saturday.
All customer accounts were automatically transferred to the two new banks and the full amount of their deposits will automatically be insured, the FDIC said.
Customers of the banks can still access their money over the weekend by writing checks or using ATM or debit cards, according to the statement by the FDIC.
A year of bank failures This year 12 banks have been forced to close their doors. In July IndyMac was closed down marking the largest collapse of an FDIC-insured institution since 1984. The Pasadena, Calif.-based bank failed because it backed risky home loans. With the special Alt-A home loan that IndyMac offered, a home buyer had to show little evidence of income and assets.
When IndyMac was shut down, it had assets of $32 billion and deposits of $19 billion. While the FDIC protected most of IndyMac customer's assets, some customers lost some of their deposits.
The FDIC insures the assets held by the 8,451 institutions with a total of $13.4 trillion.
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September 22, 2008
Russia-China Prepare Massive Gold ‘Shock’ For
Global Economy
By: Sorcha Faal, and as reported to her Western Subscribers (Traducción al Españolabajo)
Putin’s warning, however, has fallen
upon deaf ears in the United States as that financially beleaguered Nation
prepares to further implode their economy by injecting a staggering $1
Trillion into their stock and banking markets by doing nothing more than
printing up more money as they have completely bankrupted themselves, and which
has brought them to this latest crisis.
Not being explained to the American
people, in the millions of words currently assaulting them by their propaganda media
about their economic collapse, is the almost childlike equation that their
Nations debt is virtually worthless on the World markets as the US Dollar has
no real value as their US Federal Reserve System is broke, and as we can read
from their own statement, but in much more convoluted terms designed to completely
confuse their own people:
In simple terms: When the US Federal Reserve System announced it was broke,
the US Treasury turned on its printing
presses to create new Treasury Bills which have no value whatsoever, except
giving the illusion of liquidity to the unsuspecting American public so they
will cease withdrawing their dollars from their crashing banks and stock
markets prior to their savings becoming completely worthless.
To the astounding plan unveiled by the US Government to address their
financial collapse, one could justifiably be confused to if they are reading a pronouncement
from the old Soviet Politburo, instead of the largest capitalistic economy
system in the World, and as we can read as reported by the Bloomberg News
Service:
And, what the American economy, and its people, are
not even close to being prepared for is how both China
and Russia
are going to be dealing with the new “Peoples Republic of Wall Street” in demanding
their debts be paid immediately in full.
One particularly crushing response to the United States current crisis circulating
in the Kremlin today, written by Alexander
Dugin, described as the “New sage of the
Kremlin”, advocates the combining of both Russia’s nearly
$500 billion and China’s 20,000 tons
[est.]gold reserves to back a new gold-backed Eurasian Currency modeled on the
Euro, and which if implemented would ‘shock’
the American dollar to such an extent that it would cease exist on
International markets.
This report further notes that the United States is already preparing for
such a response from Russia and China by this past weeks invoking
of the Gold Reserve Act
of 1934 by the US Government in a desperate move to protect their money
markets for the first time since the Great Depression, and of which the vast
majority of Americans remain oblivious to the fact that their personal gold
holdings can still be confiscated by their officials at anytime of their
choosing despite the 1975 laws allowing these people to own gold again.
In all of these events, and as we have mentioned many times before, the
greatest enemy of these American people appears to be their own ignorance as
they, seemingly, have absolutely no idea on how to protect themselves, but
which even Russian schoolchildren knows is the exchanging of a collapsing
currency for one that is doing better, and which millions of ordinary Russians
did during the collapse of the Soviet economy by purchasing American
Express Travelers Cheques in US Dollars and British Pound Sterling.
To whatever becomes of these American people entering what is, in essence, a
Third World Economy, it remains a main fact that they continue to ignore the
many warnings from outside their country of the many catastrophes still to
come, even to their false bravado of laughing these warnings off as they plunge
into the abyss.
Watch it twice, three times if you have to. Go look at the other video, and the other Ticker referenced in there.
Now understand that there is no solution to this fast and vicious destruction of America's financial markets and financial companies until and unless the lying stops.
It has NOT stopped and in fact has gotten materially worse.
Folks, this meltdown will not stop until either:
ALL financials mark everything to the market, ALL OTC derivatives are traded on an exchange or declared void, and ALL balance sheets are transparent so we can determine who is broke and who is not. OR
The market has completely imploded with every financial stock worth zero as the hedge funds and others short each in turn into the ground, forcing each to be bailed out in turn. Those are the ONLY TWO CHOICES.
Nothing else HAS WORKED and nothing else WILL WORK. With each bailout you simply give people another target and a new way to kill the next company in line. This process will proceed from firm to firm until NONE ARE LEFT and credit availability in the economy is ZERO.
The Fed has expended more than half of their balance sheet, in excess of four hundred billion dollars. It has not stopped the cascade.
The Government has spent nearly a trillion dollars we do not have in bailouts and other miscellaneous nonsense. It has not stopped the cascade.
Indeed, all that has happened is that the velocity of the crash has accelerated dramatically.
There is NO WAY to fix this through adding "more liquidity" - the problem IS AND HAS BEEN THE LIQUIDITY in that this allows BANKRUPT companies to continue to operate and LIE instead of forcing them into the open where they can be liquidated under Chapter 11.
We are here precisely because of the intentional provision of far TOO MUCH liquidity by Alan Greenspan and now by Ben Bernanke.
You cannot solve someone's drinking problem by giving them another bottle of whiskey!
THE LIQUIDITY SWAMP MUST BE DRAINED.
We cannot have a "financial system" that is based on fraud and theft. We cannot have "financial institutions" that claim to be solvent when they in fact are not unless they are able to make up values that are much higher than the REAL value for their so-called "assets".
Wayne Angell was on "Fast Money" tonight claiming that the balance sheet of The Fed is "infinite" and that "they can't be downgraded."
Wayne, you need to be charged with treason for spewing that crap on national television.
Sure, "in theory" The Fed's balance sheet is infinite - they can coordinate with Treasury to print as much money as they want.
So was Weimar Germany's.
The word for what Wayne was promoting on Fast Money this evening is HYPERINFLATION where you find that a wheelbarrow is worth more than all the $100 bills you can stuff into it.
Does anyone remember how hyperinflation worked out for them? I seem to remember a gentlemen with the first name of "Adolf" that the world got out of that little exercise of an "infinite balance sheet."
Why does this path inevitably lead to political failure? Because as soon as lenders discern that this is occurring they shut off credit entirely.
Think about it - you have $1,000 to lend out. You detect that the government is printing and intentionally devaluing your money. If you lend it out at 10% interest but the government is hyperinflating at 100% a year, you lose about half of the money's value every year! So if you lend me that $1,000 when I pay you back you can only buy half as much as you could before! For obvious reasons you're not going to allow that - you will instead immediately spend your $1,000 on something of physical value such as land before it can be debased.
Hyperinflation kills all credit availability instantly for this reason and any credit-based economy immediately implodes. This results in enormous and immediate mass unemployment and a resulting rupture of the social and political fabric of a nation.
As for not being able to be downgraded, you obviously didn't hear S&P today, which stated quite clearly that the United States "AAA" credit rating is not a right and must be earned. Can't be downgraded eh? Oh yes The Fed can be - along with everything else.
Folks, we require over $2 billion a day in foreign investment in order to pay our bills.
This is what came out from China today:
"BEIJING, Sept 17 (Reuters) - Threatened by a "financial tsunami," the world must consider building a financial order no longer dependent on the United States, a leading Chinese state newspaper said on Wednesday.
"The eruption of the U.S. sub-prime crisis has exposed massive loopholes in the United States' financial oversight and supervision," writes the commentator, Shi Jianxun.
"The world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States."
"Infinite Balance Sheet" eh? See what foreign governments think of that sort of garbage?
Please understand - if foreign governments withdraw their support of our government funding via either scaling back their Treasury purchases or outright refusal to buy (or worse, they dump them on the market into this "fear spike" we're seeing now), we are absolutely and instantaneously screwed.
Michael Bloomberg, one of the few intelligent commentators out there (and a billionaire by his own hand) said exactly the same thing today:
"WASHINGTON (AP) — New York Mayor Michael Bloomberg is warning a 'next wave' of financial pain may come when foreign entities stop buying U.S. debt.
The billionaire mayor is speaking to an audience at Georgetown University, telling them it's not clear who is going to continue buying U.S. debt as financial firms try to cope with a crisis of confidence on Wall Street."
Mr. Bloomberg sees the same thing I do, but he's a bit more polite than I am about it.
Then there was S&P which made this quite clear as well:
"The $85 billion bailout of AIG on Tuesday by the U.S. Federal Reserve "has weakened the fiscal profile of the United States," S&P's John Chambers told Reuters in an interview.
"Lack of a pro-active stance could have resulted in further financial stress and put pressure on the U.S. triple-A rating," Chambers said. "There's no God-given gift of a AAA rating, and the U.S. has to earn it like everyone else."
Is that clear enough?
Congress MUST ACT RIGHT DAMN NOW.
Congress MUST stop The Fed and Treasury from printing any more money. The institutions that are insolvent must be forced into the open and put through bankruptcy.
We CANNOT wait until the next Congress and the election to stop this nonsense; that's five months in the future. By then The United States could easily be quite literally broke and forced into a hyperinflationary spiral!
Debt that cannot be paid must be defaulted.
Yes, this is painful.
Yes, it will hurt.
But as you can see it is already hurting plenty; the "alternative" isn't working and CAN'T WORK, as I've been pointing out for over a year!
We CANNOT get a true value on the market until this occurs.
It is NOT POSSIBLE.
In the BEST CASE if we do not act NOW, take your salary and assets and cut them by 30%. Everything else - cost of food, gas, electricity, etc - remains the same.
Worst case? Divide your salary and assets by three, but again, your costs remain the same.
If you are in the lower income echelon, you will go broke and become homeless.
If you are middle class, you will be living in a tenement or trailer. If you're lucky. If you currently own a home, you won't any more.
If you are upper-middle class, you will fall to lower-middle class, and all your luxuries will disappear. No more Lexus or nice vacations.
If you are "well off", you will be living in a modest home, what we now call "middle class", and some of you will go broke outright
The market was 500 trades away from Armageddon on Thursday, traders inside two large custodial banks tell The Post.
Had the Treasury and Fed not quickly stepped into the fray that morning with a quick $105 billion injection of liquidity, the Dow could have collapsed to the 8,300-level - a 22 percent decline! - while the clang of the opening bell was still echoing around the cavernous exchange floor.
According to traders, who spoke on the condition of anonymity, money market funds were inundated with $500 billion in sell orders prior to the opening. The total money-market capitalization was roughly $4 trillion that morning. The panicked selling was directly linked to the seizing up of the credit markets - including a $52 billion constriction in commercial paper - and the rumors of additional money market funds "breaking the buck," or dropping below $1 net asset value.
The Fed's dramatic $105 billion liquidity injection on Thursday (pre-market) was just enough to keep key institutional accounts from following through on the sell orders and starting a stampede of cash that could have brought large tracts of the US economy to a halt.
While many depositors treat money market accounts as fancy savings accounts, they are different. Banks buy a variety of short-term debt, including commercial paper, with the assets. It is an important distinction because banks use the $1.7 trillion commercial-paper market to fund their credit card operations and car finance companies use it to move autos.
Without commercial paper, "factories would have to shut down, people would lose their jobs and there would be an effect on the real economy," Paul Schott Stevens, of the Investment Company Institute, told the Wall Street Journal. Cracks started to show in money market accounts late Tuesday when shares in one fund, the Reserve Primary Fund - which touted itself as super safe - fell below the golden $1 a share level. It had purchased what it thought was safe Lehman bonds, never dreaming they could default - which they did 24 hours earlier when the 158-year-old investment bank filed Chapter 11.
By Wednesday, banks sensed a run on their accounts. They started stockpiling cash in anticipation of withdrawals.
Banks, which usually keep an average of $2 billion in excess reserves earmarked for withdrawals, pumped that up to an astounding $90 billion by Wednesday, Lou Crandall, chief economist at Wrighton ICAP, told The Journal.
And for good reason. By the close of business on Wednesday, $144.5 billion - a record - had been withdrawn. How much money was taken out of money market funds the prior week? Roughly $7.1 billion, according to AMG Data Services. By Thursday, that level, fed by the incredible volume of sell orders pouring in from institutional investors like pension funds and sovereign funds, had grown to $100 billion. It was still not enough to stem the tidal wave.
The banks knew something drastic had to be done. So did Paulson.
The injection of capital into the market was followed up by calls from Treasury Secretary Hank Paulson to major money market players like Bank of New York Mellon and State Street in Boston informing them that federal money was in the market and they should tell their clients the Feds would be back with a plan to stem the constriction in the credit market.
Paulson knew the $105 billion injection was not a real solution. A broader, more radical answer was needed.
Hours after Paulson made his round of calls to calm the industry, word leaked out that an added $1 trillion bailout of banks was being readied. Investors cheered. At about 3 p.m., news of the plans was filtering up and down Wall Street, fueling a 700-point advance in the Dow Jones industrial average through 4 p.m. Friday.
By that time, Paulson had announced the plan. It included insurance on money market accounts, a move that started in quiet Thursday morning, when the former Goldman Sachs executive saved the country from a paralyzing meltdown. mgray@nypost.com
VINDICATED AGAIN: NY Post confirms economy was 500 stock trades away from "Armageddon"
I must confess that I never, in my wildest imagination, thought the government would take on another TRILLION in debt to allay fears and delay the financial meltdown I had warned about.
So what do all the nay-sayers who smeared and belittled my projections have to say now that I was proved 100% right?
Incidentally, this is not over; not by a long shot. In fact, the "bail out" plan is not only going to fail, it is going to make the failure even worse.
The reason the US Treasury came up with a "bail out plan" is because the US Federal Reserve is broke; our central bank has no money at all to lend. They needed the Treasury to step-in to PRINT the Trillion dollars they need for the bail out.
The printing presses are already cranking out cash but the rest of the world is not fooled. They now realize that all U.S. Government debt (Bonds etc) is totally worthless because the US has been reduced to a banana republic that prints money to pay its bills.
In the not-so-distant future, the value of the US dollar will suddenly and dramatically plummet against world currencies as one or more governments finally decide to dump the US dollars they hold and reject the Dollar as a currency. Once that happens, and it WILL happen, the rest of the world will dump dollars and that will be the end.
The US Treasury will then be left with no choice but to "de-monetize" the dollar, making all dollar assets instantly worthless. Everyone who has "dollars" in any type of account or stock, will instantly find all their holdings are not considered "money" anymore. They will be instantly destitute.
As the country reels from the shock, the government will explain why the only way to salvage anything at all is to introduce new money "THE AMERO" and merge the U.S. with Canada and Mexico creating a new nation called the North American Union.
The citizens of those three nations, in hope of salvaging their life savings, will embrace the merger as "the only solution" and America as we know it will be gone forever.
Want to thwart their plans? Buy small amounts of gold and silver bullion and take delivery of the metal.
Also, open foreign bank accounts and wire transfer some of your cash to those accounts, to be held in the LOCAL currency: British Pounds, Swiss Francs, German Deutschmarks but NOT "The EURO."
The EURO is a totally worthless fiat currency backed with nothing and by no one.
Between the gold, silver and foreign currencies you hold, you may avoid being totally destitute when the big shots pull the plug on the Dollar.
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Celente Trend Alert - Economic 911 - Depression Next
9-18-8
"In 2008, Americans will wake up to the worst economic times that anyone alive has ever seen. And they won't know what hit them." -- Gerald Celente, 17 December 2007
RHINEBECK, NY 18 September 2008 -- In 2007, Trend forecaster Gerald Celente predicted that an "Economic 9/11" would hit Wall Street in 2008.* As the world knows, on 9/15 it did.
The financial world is in free fall and very few saw it coming. As the The New York Times wrote, "A year into the financial crisis, few dreamed that the situation would spiral down, so far, so fast." (NYT, 15 September 2008.)
Celente was one of those "few", accurately predicting both the speed and the spiral.
Even now, in the midst of the chaos, Wall Street, Washington and the media, are in damage control mode, still unwilling to acknowledge the dire implications of the acknowledged facts.
According to Celente, the worst is yet to come, and it's going to go global. He said, that the old adage, 'when America sneezes the rest of the world catches pneumonia,' holds truer than the newly minted "de-coupling" theory that global growth can be sustained absent a strong US marketplace. "Equity markets worldwide have collapsed and there is nothing in place that will support them," said Celente.
"Lehman's Brother's was the biggest bankruptcy in United States history and it won't be the last. There will be many more 'too big to fails' and there won't be enough money to bail them all out. First it was Bear Stearns; then it was Freddie Mac and Fannie Mae, A.I.G.; tomorrow there will be others," said Celente, Director of the Trends Research Institute.
"And the failures will extend beyond the financial sector," he predicted. "In the coming weeks, months and years, we'll see a steady stream of banks, giant retailers, consumer product companies, manufacturers, leveraged buyout firms and home builders going under. The next economic shoe to drop will be in the commercial real estate sector," he said.
Asked how he was able to see what others could not, Celente marveled, "How could they not have seen it coming? Virtually every day since July 24, 2007, when the Dow took a 226 point dive, we've been bombarded with a steady stream of dire economic news and depressing data."
When asked if the stock market has now bottomed, Celente said "don't ask me, ask Cramer." The CNBC Mad Money guru, Jim Cramer, asserted on July 29 that the market bottomed from "the panicked lows it hit on July 15. "
"It's black comedy," said Celente, "I don't know whose bottom he was talking about. Even now, when you turn on the business news, the "experts" who didn't see the panic coming are still telling us the market has 'capitulated' and a 'bottom' is being formed.
"But I wouldn't be surprised if the Dow sinks to 8,000. When you add up the data it equals Depression," said Celente, who also accurately predicted the 1987 stock market crash, the Asian currency crisis, the last two recessions and the dot.com bust, to name a few of his major calls.
Celente has been alerting subscribers, clients and audiences worldwide, for over a year, of the severity of the crisis and what to do about it. "Our bold forecast for gold to hit $2000 and the dollar to dive gained credence yesterday when gold had its biggest one day gain ever and the dollar plummeted.
"We've made scores of rock-solid recommendations on how to preserve capital and prepare for the turbulent times ahead. But despite the hard evidence and loud warning bells, many people are still in denial. They hear what they want and hope against hope. Conventional wisdom holds that the financial turbulence will pass and the long-term fundamentals are sound. They are not. Empire America is collapsing and neither the Fed, Congress, the President nor the Presidents-in-waiting will be able to do anything substantive to reverse the course.
To schedule an interview with Gerald Celente or to contact the Trends Journal reporter for this story e-mail: <mailto:Dskriloff@trendsresearch.com>Dskriloff@trendsresearch.com
*(See "Economic 9/11, Escape Plan," Trends in the News, 12 November 2007; "Economic 9/11," Top Trends 2008, Trends Journal, Winter 2008.) Trends Research | P.O. Box 660 | Rhinebeck, NY 12572
The Bank of East Asia has denied rumours that it is in financial trouble, after thousands of customers queued to withdraw their savings.
After weeks of global market turmoil, lines of people quickly formed outside the bank's branches in Hong Kong.
In a statement, the bank said the rumours were malicious and untruthful, and they had informed the police.
The speculation was believed to have been spread by mobile phone, and drove the bank's share price down by 11%.
The rumours started earlier this week and customers descended on branches on Wednesday, despite bank staff handing out leaflets to the crowds denying that the bank was in financial difficulty.
'Sound and stable'
"The management of Bank of East Asia hereby states in the strongest possible terms that such rumours have no basis in fact" said the statement.
"The management further confirms that the bank's financial position is sound and stable," it added.
It also said that its total outstanding exposure to US bankrupt bank Lehman Brothers was HK$422.8m (£29m), and to US insurer AIG was HK$49.9m (£3.5m).
On Friday, Moody's Investors Service changed its outlook on the Hong Kong bank's credit rating from stable to negative, citing a recent insider trading case that exposed "lacklustre internal controls" at the bank.
Last week, the bank revealed a trading loss of HK$93m (£6.5m) that it says was incurred by a rogue equity derivatives trader who "manipulated" valuations to hide losses.
The discovery forced the bank to revise down its earnings for the first half of the year.
'Rumours are unfounded'
The Hong Kong Monetary Authority also dismissed the speculation and said the banking system as a whole was "safe and sound."
"I can confirm, categorically, that these rumours are unfounded," said Joseph Yam, the authority's chief executive.
*** URGENT *** TREASURY SECRETARY AND FEDERAL RESERVE CHAIRMAN "TICKED-OFF" AT OBSTINATE CONGRESS; WILL PLAY HARDBALL BY REFUSING FURTHER INTERVENTION
*** BREAKING NEWS ***
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke departed Capitol Hill Tuesday allegedly quite perturbed at the "obstinate" attitude of Congress over their $700 Billion financial bail-out request!
Both men answered scores of questions in front of the Senate Banking Committee and both reportedly felt as though Congress refused to acknowledge the urgency of the situation.
I am told the real fireworks took place after the public hearings, behind closed doors in the Senate. According to one senate staffer who claims to have witnessed the exchange, Senator Chris Dodd allegedly ripped-into Henry Paulson asking who the hell he thought he was dealing with by demanding Congress just fork-over hundreds of billions of dollars in under a week?
Paulson allegedly replied, "do whatever you want but as for the Treasury, we will not be intervening any further in the markets. When the markets crash, the banks crash and the economy goes under - and they will - the voters will blame you and dump all of you this November!"
Senator Dodd allegedly got so furious at this reply that his face turned beet red and he started roaring curses at Paulson with phrases along the lines of "you fucking Wall Street douchebags. . . ." The senate staffer said Dodd and Paulson almost came to blows!!
If Paulson and Bernake do as is alleged, and refuse to further intervene into the markets, things will go downhill very fast - maybe by the end of this week. Stay tuned and spread the word: Get out of the markets now. Don't wait.
Money Markets In Absolute Turmoil Wednesday; Described by experts as being "seized up"
As I warned yesterday, the markets are not safe and today's turmoil in the Money Markets proves me right.
Banks are not lending to each other and in the rare case that they do, the rates they are charging are exorbitant. Credit is almost completely unavailable now.
If this persists, and it is likely to do just that, the economy will simply stop as businesses are unable to fund payrolls, fund raw materials for manufacturing, fund inventory re-stocking.
We are so close to absolute financial collapse that I cannot tell you strongly enough: GET OUT NOW.
I believe I remember vividly that I wrote at the beginning of this decade around 2002 or 2003 that it would be under President George Bush's watch that the financial collapse would begin in earnest.
It is a historical fact that the few years following 1929 witnessed the addition of 10,000 or so new millionaires in the US . I suppose these were those out of debt and who had prepared for the events of those days. Those days are now repeating themselves once again in our humble generation. Our nation today is definitely hurtin' for certain. And the blood is running in the streets!
“Gold posted a record two-day rally, topping $US900 an ounce, on surging investor demand for a haven from credit-market turmoil.” “Central banks in the US , Europe and Japan led a global plan to pump $US247 million into auctions to ease the worst crisis facing financial markets since the 1920s.” ''The world's financial system is under assault. It's going to take a long time to repair. People are full of Treasuries, and gold looks like another logical place to go.'' ''There's been a shift in market psychology,' said Ralph Preston, a futures analyst at Heritage West Futures.
''This is pure momentum buying. We'll see gold at $US1000 next week.'' “Since the second quarter of 2007, banks worldwide have posted $US518.1 billion in losses and write downs related to investments in subprime mortgages. The Federal Reserve has orchestrated takeovers for Bear Stearns, American International Group and Fannie Mae and Freddie Mac. Lehman Brothers filed for bankruptcy this week.” businessday.com, September 19, 2008
Remember the story of Yertle the Turtle? Of course you do. An old Dr. Seuss classic. In the story this one little turtle in his small little pond made the decision that he would become the richest turtle of all. Not content with merely catching flies with his tongue and enjoying the cool and clear water.
“It's a shame that greed and stupidity aren't illegal” Voices.kansascity.com, 9-19-2008
Most other turtles in the pond were happy but that greed from ole' King Turtle was infectious. And who were those first little turtles who first began to bear the pain?
“Six months behind on their mortgage, Dave Evans and his wife, Suzie, packed the contents of their modest blue house here into a rented truck one day in July. The move came after weeks spent alternately crying and searching in a frenzy for somewhere to go. "At the end, it was so close we could have wound up on the streets," Dave Evans says.” usatoday.com
Generally, the folks at the very bottom of the food chain are those who begin to hurt first. And the poor middle class turtles at the very bottom of the stack carrying the greatest weight on their backs are the first to cry out.
“…Yertle (banks & financial institutions), the king of them all, decided the kingdom he ruled was too small.” Dr. Seuss
Now you tell me if the above line doesn't sound like the banker and financial elite of the past 20 years? And the mentality of today's financial market makers? Already wealthy as King Midas yet they are still not content. They want more. Much, much more. They want the world and beyond. Greed, greed, greed…
“President Bush asked Congress on Saturday for the authority to spend as much as $700 billion to purchase troubled mortgage assets and contain the financial crisis.” “…would be the most sweeping economic intervention by the government since the Great Depression…” ccn.com, 9-20-2008
Wow! This crisis sounds for real! How about a further and real dramatization of the real time events of this past week or so.
“SLAM. Slam. Slam. Slam. Like a scene from a gathering of Mafia dons, the doors of 30 black Lincolns slammed shut as their besuited occupants stepped out into a Manhattan downpour – and into a global financial storm.” “That storm broke yesterday, with stock markets tumbling around the world.” “The collapse effectively began at 6pm last Friday. The place: the offices of the New York Federal Reserve. The occasion: an emergency meeting of the most powerful figures in American banking and finance aimed at staving off a massive bank collapse.” “Cookies and coffee arrived. Then ghoulish crowds began to gather, reminiscent of those that had assembled in Wall Street 80 years ago as the stock market crashed.”
“The United States is now in the throes of its biggest banking crisis in 70 years, stirring terrible memories of panics, bank failures, bankruptcies and mass unemployment. First Bear Stearns had to be rescued. Then the government had to take over Fannie Mae and Freddie Mac, the two largest US mortgage providers. Now Lehman Brothers.” “Indeed, just ahead of the market collapse, Lehman underwrote more mortgage-backed securities than any other firm.” “They may have driven their banks – and their shareholders – into enormous losses. But the former Masters of the Universe will never know what it's like to live in a subprime home.” "I think the least we are going to have to learn from this is that the whole of the financial sector simply cannot return to where it was before.” "It is terrible. Death. It's like a massive earthquake. It's final. Everybody is just finishing up." thescotsman.scottsman.com, 9-16-2008
And to sum up real well just what has happened this past week or so?
Ian L. Cooper, Gold World, 9-20-2008 - “…we learn that as much as $1 trillion could be needed to avoid an imminent meltdown.” “Worse, let's not forget these legendary institutions... each completely blown out of the water:
• Lehman Bros. and Bear Stearns... gone.
• Freddie and Fannie... now government-owned.
• Morgan Stanley and Goldman Sachs... their legs cut out from under them.
• Washington Mutual... their grave is being dug at this very moment.
“All in the last 3 weeks... “ “And if Washington Mutual fails, it'll need billions from the FDIC to cover depositors.” Ian L. Cooper, Gold World, 9-20-2008
And as I stated before all of this has centered around greed, greed, and more greed
“I'm ruler…of all that I see. But I don't see enough. That's the trouble with me.” “If I could see high, how much greater I'd be! “I'd be ruler of all I could see!” Dr. Seuss
So ole' Yertle commanded all the other turtles in the pond to stand on one another's back with Yrtle on top.
“Turtles! More turtles!” He bellowed and brayed. And the turtles ‘way down in the pond were afraid. They trembled. They shook. But they came. They obeyed.” Dr. Seuss
And what is happening to the majority of these poor ol' turtles who seem caught squarely in this massive financial mousetrap?
"It's all hands on deck," says Richard Yamarone, director of economic research at Argus Research. "Any and every entity, Treasury, the Fed and all central banks around the world are being summoned to right the potentially sinking ship. It's in everyone's interest that the financial, banking system is kept afloat." Usatoday.com
And all these castles made of sand with the first drop of a gentle ocean surf and returning tide begin to fade away back into the sea.
“Came a groan from that plain little turtle named Mack.” “Your majesty, please… I don't like to complain, but down here below, we are feeling great pain.” “That plain little turtle below in the stack. That plain little turtle whose name was just Mack, decided he'd taken enough. And he had. And that plain little lad got a little bit mad. And that plain little Mack did a plain little thing. He burped!” “And his burp shook the throne of the king (banking industry).” Dr. Seuss
And what is becoming the final outcome of many of these financial and banking institutions who watch as their kingdoms grind in the dust?
They become “…king of the Mud.” Dr. Seuss
“Stock markets around the globe plummeted again Wednesday after the U.S. government's surprise US$85-billion bailout of the world's largest insurer reignited fears of further fallout that could deepen what is being called the worst financial crisis since the Great Depression.” “As investors bailed out of stocks on Wednesday, they put money into safe havens including cash, gold and treasuries. Gold, considered a secure investment in times of turmoil, recorded its biggest one-day gain to date, surging more than US$90 an ounce.” "Everybody is worried that the financial system is grinding to a halt," Hugh Johnson, a stock market strategist and chairman of Albany, N.Y.-based Johnson Illington Advisors, told the National Post. "The worry is that another shoe is going to drop from this centipede.”
"The question is how worried should people be," he added. "Nobody has a good answer to that question." “Morgan Stanley and Goldman Sachs Co., the only two Wall Street investment banks still standing now that the Lehman, Merrill and Bear Stearns Cos. names are disappearing, saw their stocks get hammered on Wednesday amid fears they would be the next victims to fall because of their exposure to risky mortgage portfolios.” “Saddled with a portfolio of bad home loans, Washington Mutual Inc., the largest savings and loan company in the United States , is being forced to shed assets or put the entire company on the auction block.” financialpost.com
And even the humble insurance company and humble money market fund seem to be caught in this horrendous web.
“A firestorm raged anew in world markets Wednesday after a huge US bailout of insurer AIG failed to quell anxiety about the health of the global financial system and sparked fresh political controversy.” “Fears mounted that the US Federal Reserve's 85-billion-dollar (60-billion-euro) loan to rescue American International Group might not be sufficient to shore up wobbly financial markets.” “…markets quickly reversed course as investors stampeded into gold, oil and safe short-term US Treasury bills.” “Around the world, nervous traders flocked to gold and …” newsyahoo.com
Well, our money is at least safe in the old tried and true and trusted money market account?
“Friday the Federal Reserve and Treasury announced separate but complementary moves to shore up what was turning into a exodus from the $3.4 trillion pool of money market funds.” usatoday.com
Oh come on now! The conservative time honored mutual money market fund is at risk? Isn't this the place we have for years been told to park our cash in times of financial uncertainty?
``I have never seen anything remotely like this. The money market was typically the one thing that always worked,'' said Luca Jellinek, head of interest-rate strategy in London at Royal Bank of Scotland Group Plc. ``It's the cardiovascular system of the financial body. When this happens, it's like a heart attack.'' Bloomberg.com
And now the pied piper is coming to collect its children.
“In their bold response to the deepening financial trauma, the Federal Reserve and U.S. Treasury Department appear to have tossed aside the playbook that guided official thinking on the economy for three decades. As a wounded financial system teeters on the edge of the abyss, the economic consequences of allowing major financial institutions to take their market lumps became apparent.” usatoday.com
Don't forget to email.
By David Vaughn Gold Letter, Inc. David4054@charter.net
QUOTE
BUSH CRIME CARTEL FOOLS THE WORLD'S LEGISLATORS AND BANKERS !
..........BUSH IS ATTEMPTING TO SUSPEND THE UNITED STATES CONSTITUTION AND THE MEDIA ON CNN HASN'T THE GUTS TO TELL YOU! ............
.......More To Be Found In The Cloak's Archives .... Join Below:
BUSH ATTEMPTS TO EXTEND HIS PRESIDENCY WITH FINANCIAL SHOCK & AWE!
THE FEDERAL RESERVE ARTIFICIALLY CREATED FINANCIAL CRISIS ON SEPT. 11, 2008.
Attack On Wall Street Orchestrated By The Same Criminal-Gang Who Attacked The World Trade Center On Sept. 11, 2001! There Is No Financial Problem Merely A Manufactured Crisis!
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QUOTE
The PRE-PLANNED Financial/Economic 911 of 2008
T. Anthony Michael – September 24, 2008
WHAT: A pre-planned collapse of the US (and global) financial and economic systems.
WHO: The same characters who perpetrated the original 911.
WHERE: New York City & DC, of course. Plus a sideshow in Washington state.
WHEN: The days surrounding September 11, naturally.
HOW: Instead of painted drones, missiles with fins and fake airplanes, they used the much more stealthy short seller.
WHY: To remake the economic/financial order of the world.
WHY Really: Think about it! And then ask yourself, “Cui bono?”
The 911 blueprint worked so magically for the world controllers that they were compelled to use virtually the same playbook. “If it ain’t broke, don’t fix it.”
So, what’s the real deal here?
By analogy, let’s take a quick look at the 911 timeline and stack it up against the new 2008 Financial “911”, as it began to unfold earlier this year.
The Bear Stearns collapse that began in March, 2008 is analogous to the 1st World Trade Center bombing in 1993. Just a warm up. This was preceded by a little failure back in January featuring Countrywide – the largest US mortgage lender.
The nationalization of Fannie Mae and Freddie Mac marks the beginning of the new 911. Both in the DC area, they were the first to come down this time. Just as they struck at the heart of the military complex, this time they went for the jugular of the national real estate market. Remember – this is a financial 911.
Next came this year’s version of the twin towers, building 7 and other assorted NYC landmarks in the form of Lehman Brothers, AIG, Merrill Lynch, as well as Morgan Stanley and Goldman Sachs in their “new & improved” form. Basically took out the whole of American investment brokerage, heh?!
And, of course, we still have Washington Mutual out there in the boonies just like the one that “crashed” in a PA farm field.
The 700 trillion dollar Bailout Plan is just like the Patriot Act, isn’t it? Only this time it’s maybe a 1 or 2 page document that confers absolute authority on the Executive Branch to do just about anything they want with the taxpayer’s money. And they want it rubber stamped now. Not tomorrow. NOW!!! Without discussion, or unnecessary congressional debate. Talk about Shock & Awe being used against the American people, and their elected representatives!?!
Now we know we can expect further gyrations, panics and precipitous declines in the market and elsewhere, just as we had anthrax attacks in the Capital, beltway snipers in Maryland in October of ’02, the 3/11/04 train bombings in Madrid, and the 7/7/05 bombings in London. Not to mention the 50 or so other synthetic terror events staged throughout the world to enforce compliance and create distraction.
The sudden and dramatic downfall of NY Gov Eliot Spitzer can also now be seen in its proper light. Having left the reservation one too many times, he simply could not be trusted to go with the flow. He had their numbers, their signatures, their addresses – the whole ball of wax, as well as his own reputation to burnish. The elimination of John O’Neil, Head of Security at the WTC, is quite similar, except that John O. – a great patriot – died on 911 having just been given the job.
To date, the most obvious and glaring example of this manipulated takedown is the case of a NY Senator. His letter to the FDIC contained confidential information that triggered the IndyMac bank collapse in July. California AG Jerry Brown was called to review the entire affair after the OTS Director explicitly blamed the letter for causing a run on the bank (3rd largest bank failure in US history). This episode is eerily reminiscent of Larry Silverstein’s order to, “Pull it.” just prior to the expertly controlled demolition of Building # 7on 911.
Just as 911 was perpetrated as a cover for: inaugurating the War on Terror, overtly advancing the NWO regime globally (in contrast to this previously covert operation), imposing a police state (Homeland Security) in the US (by gutting the US Constitution), UK and elsewhere, dominating and securing oil/gas reserves in the Middle East and Cacaucus (to include running energy pipelines through Afghanistan and stealing Irag’s oil wealth via military invasion), jump starting the Afghan opium trade, etc., the ECO/FIN 911 of ’08 is a cover for many of these same agenda items. However, there is one little item that is particularly high on the current agenda. And that concerns the derivatives market, which in its totality approximates somewhere between 500 trillion and 1 quadrillion dollars of instruments as of 2008. In fact, the sub prime mortgage defaults are just a tip of the tip of the iceberg when compared to the real megilla – DERIVATIVES. This is what they’re really worried about, and having to cover for. Except this is a quadrillion dollar megilla that can’t be covered without unraveling the entire capitalistic system, and its fascist corpocracy and kleptocratic oligarchy.
And then there is the teenie, weenie matter concerning the Federal Reserve, and its collection agency – the IRS. The man standing behind this curtain has a lot at stake, especially in the form of mountains of evidence that will indict, and convict, the entire system. Lots of evidence was destroyed during and after 911, as will happen after many of these Wall Street firms are taken over, nationalized, liquidated, merged and disappeared. The veil, however, has already been lifted. Does anyone see a pattern here?!
The real lesson to be gleaned from this analysis is that events of such enormity and consequence are rarely spontaneous and unchoreographed. Especially when they happen just weeks from an era defining presidential election. They have obviously been planning this one for a long time, and it has been fastidiously engineered to have a very definite effect and desired outcome – a permanent planetary plantation (PPP).
The execution, thus far, has been flawless. Even for those of us who stood there on the 1st 911, and knew it was a fraud while the buildings were coming down, this one is exceedingly more difficult to penetrate. However, penetrate we will, until every last conspirator is sitting before the TRUTH AND RECONCILIATION COMMISSION spillin’ the beans. The ultimate and lasting effect of these inquiries will be a New World Order of our making, not theirs. The only remaining, $64,000 question will undoubtedly be, “What do we do with them when we head them off at the pass?”
For the uninitiated, it may take quite a lot to wrap your mind around this extremely complex and convoluted plot, but, please, just be patient. As this drama plays out, the true intentions of the primary perpetrators will become manifest as they unwittingly reveal themselves by their handiwork. As Eliot Spitzer, no - Eliot Ness, nee – Sherlock Holmes once alluded to – a fingerprint inadvertently left as evidence is impossible to erase.
You see, the short sellers, unlike the “airplanes”, are still with us. Each one had a target to take down which they did with amazing speed and dexterity. And the myriad transactions that converged to topple their prey are all preserved somewhere, in some huge database, with multiple backups to serve as confirmation of trades of staggering amounts. AHHH! Nothing like computers, especially when they’re not confiscated and shipped off to China for permanent disposal.
May all financial wizards and economic soothsayers, henceforth, be inspired to stare into their crystal ball and divine the upcoming financial and economic events of global proportions with the keenest of acumen and sleuthing. As we shine the LIGHT of our collective awareness on these rapidly unfolding schemes, we will serve as beacons of revelation, and hope to the world.
Remember – we now know the script. We know the major players involved. We are able to watch the crimes being committed in real time. Each of us has now been thusly notified, and empowered, to serve as a vector of dissemination of this vital and critical information. So -----> LET’S GET BUSY ! ! !
T. Anthony Michael 9/22/08
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"In fact, they (Credit Default Swap Profits) can be so large that one might well wonder if the whole subprime fiasco was not set up just to allow speculators to profit wildly on its collapse..." --- Ben Stein Mon/Sept 22/2008
JPMorgan Chase has acquired the banking operations of Washington Mutual which was seized by US regulators on Thursday night in the biggest bank failure in US history.
On Friday morning JPMorgan said it had sold $10bn in common stock to finance its acquisition - 25 per cent more than had been expected. Shares in JPMorgan were off about 3.4 per cent at $41.98 in the first half hour of New York trade; WaMu shares had lost nearly all their value.
Under the deal, which was brokered by government, JPMorgan will pay $1.9bn to the banking regulator, and acquire all insured and uninsured deposits, assets and some of the liabilities of WaMu’s banking operations, including its troubled mortgage portfolio.
JPMorgan will not acquire claims by equity, subordinated and senior debt holders, said the Federal Deposit Insurance Corporation, which facilitated the transaction.
The intervention by regulators follows months of intensifying pressure on WaMu, the latest to be brought down by the mortgage crisis.
Shares in WaMu, which specialised in providing home mortgages, credit cards and other retail lending products, have lost nearly all their value in recent months.
An outflow of deposits began on September 15 2008, totalling $16.7bn, making WaMu “unsafe and unsound” to transact business, according to the Office of Thrift Supervision, WaMu’s main regulator, which closed the bank on Thursday night.
Sheila Bair, chairman of the FDIC, said: ”For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks.”
”For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning.”
The FDIC’s deposit insurance fund, which has been under growing strain amid the increasing number of bank failures this year, will not suffer any losses as a result of the transaction, the regulator said.
The FDIC held the bidding process on Wednesday that resulted in the acquisition by JPMorgan Chase, which has long coveted WaMu’s branch network on the West Coast and the south-east US.
WaMu had assets of $307bn and total deposits of $188bn and its failure far surpasses that of $40bn Continental Illinois National Bank & Trust Company, which closed in 1984 during the savings and loan crisis.
The acquisition by JPMorgan creates the largest US depository institution, with over $900bn of customer deposits.
But the deal is a rare setback for TPG, the private equity firm that led a group that bought a minority stake in WaMu in April, with a $7bn capital infusion.
WaMu’s share price on Thursday fell 57 cents to $1.69. At Thursday’s price, WaMu’s market value had fallen to about $2.9bn – or about 15 per cent of its tangible book equity of $18.8bn – as of the second quarter of 2008.
The WaMu sale comes at a time when Congress is deciding the fate of the Treasury’s proposed $700bn rescue plan for the financial sector.
JPMorgan said it would take a $31bn writedown in line with the bank’s estimate of remaining credit losses related to the impaired loans.
It said it would acquire $31bn of net assets from WaMu that will cover that write down, but JPMorgan also plans to raise $8bn of common equity capital on Friday in what the bank called an ”offensive capital raise.”
”This deal makes excellent strategic sense for our company and our shareholders,” said Jamie Dimon, chief executive of JPMorgan, during a conference call.
”Increasing our regional banking presence not only strengthens our retail business, but also benefits other business lines across our firm, including our commercial banking, business banking, credit card, and asset management groups.”
”We had about 75 people at JPMorgan involved in looking at the data and in conversations with the company,” said Mr Dimon. ”This was probably one of the most thorough things we have ever done.”
BEIJING, Sept 25 (Reuters) - Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis, the South China Morning Post reported on Thursday.
The Hong Kong newspaper cited unidentified industry sources as saying the instruction from the China Banking Regulatory Commission (CBRC) applied to interbank lending of all currencies to U.S. banks but not to banks from other countries.
"The decree appears to be Beijing's first attempt to erect defences against the deepening U.S. financial meltdown after the mainland's major lenders reported billions of U.S. dollars in exposure to the credit crisis," the SCMP said.
A spokesman for the CBRC had no immediate comment. (Reporting by Alan Wheatley and Langi Chiang; editing by Ken Wills)
It had to happen sooner or later and China had to be first because they hold so many "dollars" in their national reserves. Folks, this is the clearest sign yet that the financial plug is being pulled on the United States.
Through its rampant deficit spending, our government has ruined this nation. They have run up over nine trillion dollars in national debt.
Through its politically-correct mandates to lend to minorities without checking their credit, verifying their employment or other normal credit vetting, the government caused the sub-prime mortgage crisis.
Governments around the world know our government is bankrupt. They know our government has little chance of paying off its debt. Now one such government, China, has told its banks to halt lending to U.S. banks. This will cause other countries to do the same.
With lending cut off, the United States will succumb.
QUOTE
Money Markets In Absolute Turmoil Wednesday; Described by experts as being "seized up"
As I warned yesterday, the markets are not safe and today's turmoil in the Money Markets proves me right.
Banks are not lending to each other and in the rare case that they do, the rates they are charging are exorbitant. Credit is almost completely unavailable now.
If this persists, and it is likely to do just that, the economy will simply stop as businesses are unable to fund payrolls, fund raw materials for manufacturing, fund inventory re-stocking.
We are so close to absolute financial collapse that I cannot tell you strongly enough: GET OUT NOW.
QUOTE
FDIC May Need $150 Billion Bailout as More Banks Fail
Sept. 25 (Bloomberg) -- Deborah Horn tugs on the handle of the glass-paned entrance of the IndyMac Bancorp Inc. branch in Manhattan Beach, California. The door won't budge. The weekend is approaching, and Horn, 44, the sole breadwinner in a family of three, needs cash.
A small notice taped to the window on this Friday afternoon in mid-July tells her why she's been locked out. IndyMac has failed, the single-spaced, letter-sized paper says; the bank is now in the hands of the Federal Deposit Insurance Corp.
``The Receiver is now taking possession of the Bank,'' the sign says.
``I'm physically shaking,'' says Horn, an academic tutor, as she peers into the bank. Inside, an FDIC examiner is talking to six stone-faced IndyMac employees. ``I don't know when I'm going to be able to get my money,'' Horn says. ``I'm a single mom. This is the money I live on.''
Don't worry about Horn. She'll be all right, as will most of Pasadena, California-based IndyMac's 200,000-plus customers.
That's because the FDIC, created in 1934, insures all accounts up to $100,000 at its member banks, and it has never failed to honor a claim. The people to worry about are U.S. taxpayers.
The IndyMac debacle is taking a large bite out of FDIC reserves, and if scores of other banks fail in the year ahead, the fund will be depleted. Taxpayers will have to step in.
Worst Wave
Americans had gotten used to the idea that bank failures were as rare as a category five hurricane. No banks went bust in 2005 or 2006. Seven collapsed in 2007 as the credit crisis began to exact a toll. So far in 2008, 12 more, with total assets of $42 billion, have fallen -- that's the worst wave of bank failures since 1992.
IndyMac, which had $32 billion in assets when it went into receivership, is the most expensive bank failure the FDIC has ever covered. And that record may not stand for long.
By the end of 2009, about 100 U.S. banks with collective assets of more than $800 billion will fail, predicts Christopher Whalen, managing director of Institutional Risk Analytics, a Torrance, California-based firm that sells its analysis of FDIC data to investors.
``It's not going to be Armageddon,'' says Mark Vaughan, a financial economist at the Federal Reserve Bank of Richmond, Virginia and a senior lecturer in economics at Washington University in St. Louis. ``But it's going to be bad.''
FDIC's Secret List
The FDIC knows which banks are at risk; it has a watch list with 117 institutions. The agency won't disclose their names because doing so could cause depositors to panic and pull out all of their funds.
It won't take many more failures before the FDIC itself runs out of money. The agency had $45.2 billion in its coffers as of June 30, far short of the $200 billion Whalen says it will need to pay claims by the end of next year. The U.S. Treasury will almost certainly come to the rescue by lending money to the FDIC.
Regardless of who wins control of the White House and Congress in November, no politician is likely to vote in favor of leaving federally insured depositors out in the cold.
A taxpayer bailout of the FDIC would come on the heels of intervention by the U.S. Treasury Department and Federal Reserve to save investment bank Bear Stearns Cos., mortgage giants Fannie Mae and Freddie Mac and the world's largest insurer, American International Group Inc.
Uninsured Deposits
Emergency federal lending to the FDIC could swell the cost of government rescues of failed financial institutions to more than $400 billion -- not including the $700 billion general Wall Street bailout now under discussion in Congress. Under federal statute, the FDIC must pay back any loans from the Treasury.
That number would be even higher if the government were on the hook for uninsured deposits -- which amount to $2.6 trillion, 37 percent of the total of $7 trillion held in the U.S. branches of all FDIC member banks.
The subprime crisis -- which started in the suburbs of California and Florida and migrated through the alchemy of securitization to Wall Street investment banks -- has come almost full circle, spreading its toxins to the very lenders who first extended those teaser-rate, no-document mortgages to homeowners.
In 2006, IndyMac was the largest provider of mortgages that didn't require borrowers to provide proof of their incomes. And as of mid-September, investors were worried that Washington Mutual Inc., the biggest thrift in the U.S., would be the next bank to go belly up.
A federal takeover of Washington Mutual, which has assets of $310 billion, could cost taxpayers $24 billion more, according to Richard Bove, an analyst at Miami-based Ladenburg Thalmann & Co.
Slower To Hit
The reckoning that has run through Wall Street, claiming investment banks Lehman Brothers Holdings Inc. and Bear Stearns among its victims, has been slower to hit Main Street. In mid- 2007, Wall Street firms began disclosing losses on their packages of securitized home loans.
From August 2007 to September 2008, banks worldwide wrote down more than $500 billion. Regional banks, by contrast, have waited to write off their bad mortgages, hoping the housing market would improve and defaults would level off. Instead, they've risen.
FDIC-insured banks charged off $26.4 billion of bad loans in the second quarter of 2008, the most since 1991.
U.S. lenders, in their embrace of subprime lending, committed the same analytical fallacy as their Wall Street counterparts. When it came to assessing risk, they relied on the recent past to predict the near future.
Living in the Past
They were blinded by years of rising home prices and low mortgage default rates.
The FDIC fell into the same trap. As recently as March, an internal FDIC memo estimated the cost to cover bank collapses in 2008 would be just $1 billion, dropping to $450 million in 2009. It wasn't even close.
The IndyMac failure alone, which happened four months after that memo was circulated, will cost the FDIC $8.9 billion -- and the bill for all 12 collapses will be about $11 billion, the FDIC says.
FDIC Chairman Sheila Bair says the agency's forecast was based on models using data from the past 20 years, which included long periods with few bank failures.
``Given the change in economic conditions, we need to weight the more recent data more heavily,'' Bair says. ``You also need a good dose of common sense.''
Bair says depositors shouldn't fret about their banks. ``We do have a handful with some significant challenges,'' she says. ``Overall, banks are quite safe and sound.''
Bair is duty bound to say that, says Joseph Mason, an economist who worked for the Treasury from 1995 to 1998. Part of the FDIC's job is to reassure the public and prevent runs on banks. Mason says Bair's rhetoric masks the agency's inability to grasp the scope of the coming crisis.
`Ignoring the Problem'
``The FDIC and the banking regulators are ignoring the problems, hoping they'll go away,'' he says. ``They won't.''
The quake that shook markets in September may make the FDIC's task more complicated and expensive. With investment banks in eclipse, deposit-taking institutions will now play a larger role in financing the economy.
Earlier this month, Bank of America Corp. agreed to buy Merrill Lynch & Co. for $50 billion, and Wachovia Corp. and Morgan Stanley were in talks about a potential merger.
'Would Be Miraculous'
From 2002 to 2007, U.S. lenders made a total of $2.5 trillion in subprime mortgages, according to the newsletter Inside Mortgage Finance. ``Given the magnitude of the bad loans still on bank balance sheets, it would be miraculous for the FDIC to squeak by with losses of less than $200 billion,'' Whalen says.
On Sept. 18, in yet another stunning turn of events, Paulson proposed a plan that would cost the government, if not necessarily the FDIC, hundreds of billions of dollars more.
The Treasury secretary says the government will purchase toxic mortgage debt from banks in an effort to cleanse the financial system. In an unprecedented move, the Treasury also pledged $50 billion to insure nonbank money market funds.
Bair says Paulson's plan won't reduce the number of banks on the FDIC's watch list.
One reason the rolling financial crisis is hitting regional banks later than it walloped Wall Street is because the very system that is meant to protect depositors -- federal insurance -- has also served to prop up weak lenders. So has the ready supply of credit extended to banks by another government-chartered group, the Federal Home Loan Banks.
Because all deposits up to $100,000 are insured, most savers can be agnostic about where they put their money. They don't have to know -- or care -- whether a bank is making sound or foolish loans.
Unlike buyers of stocks or bonds, people who put their money in banks rarely do research about the soundness of the institution. That makes it easy for banks -- both prudent and reckless ones -- to raise cash.
Brokered Deposits Loophole
Banks have taken the FDIC's protection and run with it, thanks to the phenomenon of brokered deposits -- and a giant loophole in federal regulations.
As of June 30, Whalen says banks held $644 billion from brokers who offer customers a way to gain FDIC insurance for multiple accounts.
Promontory Interfinancial Network LLC, an Arlington, Virginia-based company founded in 2002 by former federal officials --including some from the FDIC itself -- has figured out how to help wealthy clients insure as much as $50 million each by putting their money into separate accounts at 500 different banks.
While the law does limit insurance to $100,000 per account, it places no ceiling on the number of different banks where an individual can hold accounts -- a loophole Congress failed to close even after the savings and loan debacle of 1984-1992.
Missing Discipline
Bair says brokered deposits can provide quick cash but also create potential danger.
``It is quite easy to get brokered deposits, and there's not a lot of market discipline with the brokered deposits,'' she says. ``When there's excessive reliance on them, particularly to fuel rapid growth on the balance sheet, that's definitely a high-risk factor.''
The other big source of money for banks is the FHLB, an under-the-radar network of 12 regional banks created by Congress in 1932 to help lenders finance mortgages. Lenders had borrowed a total of $840.6 billion from the FHLB system as of June 30, up 38 percent from $608 billion in the same period a year earlier.
Treasury Secretary Henry Paulson, in a little-noticed action on Sept. 7, the day after he announced the bailout of Fannie and Freddie, extended a secured credit line to the FHLB to provide an emergency source of funding if needed.
FHLB Advances
Vaughan says credit from the FHLB is keeping some sick banks afloat and postponing the inevitable.
`What's going to happen,'' he says, ``is that weak banks will use FHLB advances to avoid discipline from funding markets. In some cases, that will keep their doors open longer than they otherwise would, all-the-while offloading more and more potential losses onto the FDIC and taxpayers.''
Normally, the FDIC is no more than four initials customers see when they walk into their banks. In recent years, the agency hasn't had to close many banks, as it collected small amounts of insurance premium payments.
President Franklin D. Roosevelt signed the law creating the FDIC in the middle of the Depression. As part of the New Deal, Congress created a system of federal insurance to end bank runs by reassuring the public that depositing money in banks was safe. All banks paid the same rate for insurance.
Wave of Failures
The FDIC shares regulatory authority with other agencies. The Office of Thrift Supervision oversees federally chartered savings and loans, the Comptroller of the Currency monitors national banks, and state banking regulators review state- chartered banks.
The FDIC is the only one of these agencies that insures deposits.
By and large, the government's insurance system worked until the 1980s, when thrifts went on a commercial real estate lending binge, triggering a wave of failures and consolidation that lasted from 1984 to 1992.
In 1991, Congress changed the way FDIC premiums were assessed, requiring banks to pay rates based on how well capitalized they were for the risks they faced. As bank failures subsided to less than a dozen a year by 1995, the FDIC's reserves began to swell.
As a result, the agency cut to zero the premiums it charged to the 90 percent of the banks deemed safest. That free ride continued for 10 years.
`No Good Way'
In 2006, Congress increased insurance payments for most banks, averaging $5-$7 per $10,000 of deposits.
The insurance premiums imposed by the FDIC on the riskiest banks -- running as high as $43 per $10,000 -- are still far below the rates private insurers would charge, says Sherrill Shaffer, former chief economist of the Federal Reserve Bank of New York.
At the same time, charging struggling banks a fair price for insurance premiums may drive them into insolvency, he says.
``That can be destabilizing,'' says Shaffer, who's now a professor of banking at the University of Wyoming in Laramie. ``There's really no good way around that. It's an issue that policy makers and analysts have wrestled with for decades.''
Bair says the FDIC is gearing up for the coming wave of bank failures. She says she's developing a plan to raise insurance premiums.
The agency's Division of Resolutions and Receiverships has boosted authorized staffing levels by 48 percent, to 331, this year. It has hired 178 new financial specialists and called up 65 retirees for temporary service under a special program.
Bair vs. Enron
Bair, 54, an attorney who graduated from the University of Kansas School of Law, has challenged financial institutions as a regulator for more than a decade. President George W. Bush nominated her as chairman, and she was sworn in on June 26, 2006.
She replaced Donald Powell, a former Texas banker. In 1992, as a member of the Commodity Futures Trading Commission, Bair cast the lone vote against Enron Corp.'s effort to exempt certain energy contracts from the agency's anti-fraud and anti- market manipulation enforcement powers.
Nine years later, Enron blew up in one of the biggest financial scandals in U.S. history.
As assistant secretary of the Treasury for financial institutions in 2002, Bair criticized abusive subprime mortgage brokers.
``Lenders have made loans with little or no regard for a borrower's ability to repay and have engaged in multiple refinance transactions that result in little or no benefit to a borrower,'' she told the Pittsburgh Community Reinvestment Group on March 18, 2002.
`Rock and Brock'
Bair has published two children's books. One of them, ``Rock, Brock, and the Savings Shock'' (Albert Whitman, 2006) is a tale of two twins -- Rock the Saver and Brock the Spender
To contact the reporter on this story: David Evans in Los Angeles at davidevans@bloomberg.net
Last Updated: September 25, 2008 19:54 EDT
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“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” -Thomas Jefferson 1802[/SIZE][/SIZE]
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Asia Needs Deal to Prevent Panic Selling of U.S. Debt, Yu Says
Sept. 25 (Bloomberg) -- Japan, China and other holders of U.S. government debt must quickly reach an agreement to prevent panic sales leading to a global financial collapse, said Yu Yongding, a former adviser to the Chinese central bank.
``We are in the same boat, we must cooperate,'' Yu said in an interview in Beijing on Sept. 23. ``If there's no selling in a panicked way, then China willingly can continue to provide our financial support by continuing to hold U.S. assets.''
An agreement is needed so that no nation rushes to sell, ``causing a collapse,'' Yu said. Japan is the biggest owner of U.S. Treasury bills, holding $593 billion, and China is second with $519 billion. Asian countries together hold half of the $2.67 trillion total held by foreign nations.
China, Japan, South Korea and others should meet soon to seal a deal, said Yu, a former academic member of the central bank's monetary policy committee. The talks should involve finance ministers, central bank governors and even national leaders, he said.
``Whether some kind of agreement between them to continue to hold Treasury bills is viable, I'm not sure,'' said James McCormack, head of sovereign ratings at Fitch Ratings Ltd in Hong Kong. ``It would be unusual. If it became apparent that sovereigns in Asia were selling Treasuries the market would take that quite badly, it's something to be avoided.''
The global credit crisis, triggered by a housing slump in the U.S., has saddled financial companies with more than $520 billion in writedowns and losses, collapsing Bear Stearns Cos. and Lehman Brothers Holdings Inc. in the process. Insurer American International Group Inc. and mortgage giants Fannie Mae and Freddie Mac also were rescued by the government.
`Grave Threats'
U.S. Treasury Secretary Henry Paulson is urging Congress to pass a $700 billion plan to remove devalued assets from the banking system. Federal Reserve Chairman Ben S. Bernanke said Sept. 24 that the U.S. is facing ``grave threats'' to its financial stability.
China's huge holdings of U.S. debt means it must bear a large proportion of the ``burden of sorting things out'' in the U.S., Yu said. China is not in a hurry to dump its U.S. holdings and communication between the two nations every ``couple of days'' is keeping Chinese leaders informed and helping to avoid a potential panic, he added.
``China is very worried about the safety of its assets,'' he said. ``If you want China to keep calm, you must ensure China that its assets are safe.''
Currency Manipulator
Yu said China is helping the U.S. ``in a very big way'' and added that it should get something in return. The U.S. should avoid labeling it an unfair trader and a currency manipulator and not politicize other issues, he said.
``It is not fair that we are doing this in good faith and are prepared to bear serious consequences and you are still labeling China this and that, accusing China of this and that,'' he said. ``China knows what to do. We don't need your intervention.''
The U.S. financial crisis had taught China a lesson and that was: ``Why are we piling up these IOUs if they may default?'' China's economic expansion strategy, which emphasizes export growth that has led to trade surpluses and the accumulation of $1.81 trillion in foreign-exchange reserves, is the main problem, said Yu.
``Our export-growth strategy has run its natural course,'' he said. ``We should change course.''
China should stop intervening in the foreign currency markets and thus allow rapid appreciation of the yuan, he said. While this would cause pain for exporters, China could ease the transition by using its strong fiscal position to aid those who lose their jobs. It also should stimulate domestic demand to offset lower income from overseas sales.
Without yuan appreciation, China will continue to accumulate foreign reserves, which means further accumulating ``IOUs from the U.S.,'' said Yu. ``This is paper and it may default and it will not increase China's national welfare.''
If China doesn't allow the yuan to appreciate and continues to promote export-led growth it will lead to confrontation with the U.S. and Europe, Yu said.
To contact the reporters on this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net
PARIS (AP) — French President Nicolas Sarkozy said Thursday the world came within "a whisker of catastrophe" during the recent financial crisis and that those responsible for the crisis must be identified and held accountable.
In his first major public address since the start of the crisis, Sarkozy also criticized "abuses and scandals" involving executive pay, and pledged to intervene to halt these practices unless executives come up with their own solution.
"Self-regulation as a way of solving all problems is finished. Laissez-faire is finished. The all-powerful market that always knows best is finished," Sarkozy said.
"The world came within a whisker of catastrophe. We can't run the risk of it happening again," Sarkozy, a conservative, said in an address in the southern Mediterranean port city of Toulon.
Sarkozy warned that the ongoing crisis "will have consequences in the coming months on growth, on unemployment and on spending power."
"The crisis is not finished ... its consequences will be lasting," Sarkozy said.
The president said the crisis made it necessary to accelerate his labor and fiscal reforms, to improve France's competitiveness and help small businesses. He said the ranks of the country's huge corps of civil servants would be shaved by 30,600 next year, not replaced as they retire.
Speaking a day before the French government presents its 2009 budget to Parliament, Sarkozy promised not to impose an "austerity plan" that would, according to him, "deepen the recession."
France's economy shrank by 0.3 percent in the second quarter, but French government ministers including Prime Minister Francois Fillon and Finance Minister Christine Lagarde have denied the country was in recession, saying it was only a slowdown.
In a wide-ranging speech that touched on both the global economy and France's domestic economy, the president said, "We must identify those responsible for this disaster and they must be punished, at least financially."
Saying there had been "too many abuses and scandals" involving executive pay, Sarkozy warned business leaders that "either they agree on acceptable practices, or the government will regulate it before the end of the year."
The president said executives' pay "should be indexed to the real economic performance" of their companies.
Executive pay has emerged as a hot button issue in the crisis, with the U.S. Congress forcing the administration to accept limits on Wall Street pay packages as part of its proposed $700 billion bailout of the American banking system.
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American Dollar Total Collapse worth less than toilet paper
Those of you who have been following my former radio show and now, this blog, know that I have a very good track record of telling you what's coming in the markets and when.
Tonight, as I write, it is Friday, September 26 at 7:05 PM and I regret to tell you that Monday all hell is going to break loose.
The reason President Bush, Treasury Secretary Paulson and Federal Reserve Chairman Ben Bernanke pushed so hard for Congress to act this week was because they knew that the last hour of trading last Friday was a "quadruple witching hour." During that hour, contracts for stock index futures, stock index options, stock options and single stock futures (SSF) all expire.
Quadruple witching hours occur only four times a year, on the third Friday of March, June, September and December.
Bush, Paulson and Bernanke knew that if a solution was not found by close of business today, they could not hold off the rest of the world any longer. The markets would start plummeting in Asia on Sunday night (East coast time) because with all the options and futures having now expired, the market is free to "correct" itself.
Congress has now failed to act, the quadruple witching hour has taken place and there is no bailout.
If Congress does not get a Bill passed by Sunday night, we should expect all hell to break loose when Asian markets open and the "correction" hits. Look for a severe, fast, downward spiral.
I'm talking about worldwide economic calamity beginning Sunday in Asia and spiraling out of control within a week or so. Two weeks tops.
If I am right (and I hope I am not) the world will see a financial catastrophe that will make "the great depression" look like a walk in the park.
Here's what you need to do this weekend
If you haven't taken my advice and gotten out of the markets already, you're too late. The only thing you can try to do now is prepare for the fallout of the worldwide economic collapse.
Go out and get yourself canned foods; enough to feed your family for a month or two. In addition to canned foods, go out and buy 50lb bags of rice and oatmeal. You can use the rice as a bed for the canned foods for lunch and dinner and the oatmeal for breakfast. You may want to grab some honey and / or brown sugar to put on the oatmeal. You should also have dry milk powder to be able to mix with water to make milk.
If you do not yet have a gravity-fed water filter, go get one.
If you do not yet own guns to protect yourself and your family, try to buy one over the weekend. If you already own guns, get ammunition.
The reason you'll need the weapons is because civil unrest is likely to begin very quickly.
With economic collapse, supermarkets will run out of food fast. Roving bands of savage beasts will quickly realize they're hungry and come for your food. If you cannot protect yourself, they will kill you to get it.
The police will be totally overwhelmed rather quickly, so 911 won't be any help for you.
The cities will become nightmares within days and once the cities are emptied of food, the savages will have to come to the suburbs to get more. Rest assured, they will come.
Get together with your neighbors to form neighborhood defense teams. Get Family Radio Service walkie-talkies or CB radios and have them on a set channel for your neighborhood. If trouble comes, EVERYONE in the neighborhood must respond and use all deliberate force to restore order.
“After 9/11, George Bush decided to put some hair on his sunken chest and fight a nice big war. The oil people and the Neocons whispered into his hairy ears that he could invade Iraq, save Precious Israel from an enemy and get all kinds of oil for the both of them. George is a nasty piece of work and as crooked as they come so he jammed an Imperial War Decree through a terrified Congress with ease. Now, with other friends of his, the crooked slimeball bankers, in danger of imminent meltdown due to their thievery, George has tried to jam another Imperial Decree through Congress. This one would give him huge amounts of money, unsupervised as to use, and make the docile American people eat the bill. This time a thoroughly discredited Bush has failed in his efforts on behalf of his friends and the American public has become aroused and infuriated to the point where another terrified Congress is refusing to heed the thoroughly discredited Bush. What will eventually happen, no one knows, but we now see that the Bush/Rove Might Republican Machine has run out of gas by the side of the highway and its crew of rodents are fleeing into the nearby woods for protection.
And may I give you several pieces of what I consider sound advice? First, if you have any extra money in one of the bigger banks, take it out and put it in a shoe box in your closet. If these banks start to collapse suddenly, which they are very likely to do, even the Government can’t supply them and their branches with enough paper to cover deposits. The second thought is to take some extra money, assuming you have any, and buy gold with it. Get this from a reputable coin dealer and buy older European gold coins like British Sovereigns and Half Sovereigns, French or Swiss francs. Keep away from weird gold from small countries…very hard to sell if you need to….and never, never buy gold and let some big company help you out by insisting they will store it in their “safe vaults.” Hah! And off to Aruba with them for sun and fun and their loot into Lichtenstein banks. Keep the money where you can get at it. Banks can no longer be trusted as we have found out the hard way.”
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Wed 9.17 SPECIAL PROGRAM Steve and Guest Host Hawk join for an emergency broadcast, topics: Banking Issues and The Escalating Tensions Between Russia and the US Listen http://www.stevequayle.com/qf_september_17_2008.mp3
One of the questions that has come up in connection with this week's scramble to pass a $700 billion bailout package for the beleaguered financial sector is: Why the rush? Why not take some time to fully explore the risks, discuss the financial, economic and political ramifications, and figure out ways to minimize the cost to taxpayers?
Although those in charge have attributed their sense of urgency to fears of an imminent seize-up in financial markets, it is conceivable that policymakers could have applied a few more of the band-aids they have been using prior to now so that the issues and prospective outcomes could be examined more fully in the harsh light of day.
Unless, of course, there is more to it than what our leaders are admitting to. In "Brad Setser: Extraordinary Times," the London Banker blog suggests the pressure for a rapid-fire solution stems from the precarious financial position of the rescuer-in-chief: the Federal Reserve.
Brad Setser has a fascinating insight to offer in his newest post, Extraordinary Times:
In the last two weeks — if I am reading the Federal Reserves’ balance sheet data correctly — the Fed has:
Increased “other loans” to the financial system by around $230 billion (from $23.56b to $262.34b);
Increased its “other assets” by about $80b (from $98.67b to $183.89b);
Increased the securities it lends out to dealers by $60b (from $117.3b to $190.5b);
That works out to the provision of something like $370b of credit to the financial system in a two week period. And that is just what I saw on a cursory glance.
The most that the IMF ever lent out to cash strapped emerging economies in a year?
$30b, in the four quarters through September 1998 (i.e. the peak of the 97-98 crisis).
The most the IMF ever lend out over two years?
$40b, in the eight quarters through June 2003 (this covered crises in Argentina, Brazil, Uruguay and Turkey)
This is a very real crisis. The Fed’s balance tells a story of extraordinary stress. I never would have expected to see the Fed lent out these kinds of sums over such a short-period.
My response:
Excellent and timely, Brad. I’ve been speculating all week that the pressure being used on the Congress to pass the Paulson Plan is the threat of Fed illiquidity. As of two weeks ago, the Fed had lent out more than $600 billion of its $800 billion balance sheet Treasuries against crap MBS collateral.
The Paulson Plan would have allowed the banks to unwind the repos putting the Treasuries back in the Fed, get cash for the crap MBS, and get more Treasuries from the issues financing the $700+ billion funding of the Plan. As a bonus, the Paulson mark-to-maturity price becomes the implicit Level 3 price for capitalisation of all the firms and banks in the system, giving them some breathing room to stay in business. Everyone wins except the poor American taxpayer.
The Fed is very close to being illiquid. That is the fear factor we are seeing at work, and the reason no one will discuss why the bailout is needed - only emphasise the urgency.
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We Are Under Martial Law! As Declared By The Speaker Last Night! Rep Burgess
We've heard that before, huh? But this time it is real.
“The US stock market could suffer a devastating crash with shares losing a third of their value this week…” “…a meltdown of 1929 proportions…” “Officials close to Paulson are privately painting a far bleaker portrait of the fragility of the global economy than that advanced by President George W Bush…” “…the message from government officials is that “the economy is dropping into the john.”
“…We could see falls of 3,000 or 4,000 points on the Dow…” “That could happen in just a couple of days.” “We're looking at catastrophe, huge, amazing catastrophe.” “It's going to be really, really nasty.” “This has the potential to make 1929 look like a walk in the park.” telegraph.co.uk/finance
Below is an email I received this last week from a reader.
“Mike M. – “You see I am the person you were talking about. I have lived in a 1200 square foot home for 31 years and I served in the military for 4. I drive a truck for a living, 31years and still going. I live below my means and try to always watch what I spend money for. In the end these people and every single government figure will be held accountable. I wish to God I could put each one of them in the electric chair and just pull the level down for full power. I would personally laugh as each one of them…fried. You say damn this man is crazy; no I am not crazy I just believe in vengeance and fairness. I am sick and tired of a crooked government and a crooked system.”
And what is the average sentiment of our congressional leaders at this moment?
“For the most part, it seemed lawmakers were afraid to vote for the bill, yet afraid to vote against it.” usatoday.com, 9-25-2008
We witnessed a few years ago Enron, WorldCom, and other CEOs with failed companies. But those fellows were small potatoes to AIG, Meryl Lynch, Lehman Brothers. These large banking and insurance institutions understood the measure of the risk they were taking on these past 5 years. Or are we to understand that these Ivy League whores are just stupid?
“Lehman Brothers Chief Executive Richard Fuld…took the blame for the company's staggering second-quarter loss…” "This is my responsibility…" aol.co.nz, 6-17-2008
And how was Lehman Brother's CEO rewarded for his admitted responsibility?
“…Fuld (Lehman Brothers CEO), a 30-year veteran of the once-venerable Wall Street investment bank that filed for bankruptcy protection…was awarded $22 million…” forbes.com, 9-15-8
And a few years back?
“In the 40 years that Richard S. Fuld, Jr., 60, has been with Lehman Brothers, he has seen the Firm undergo many changes…” “…Fuld's leadership abilities stand out.” "Real leaders earn the right to lead," Fuld said…” “…Fuld was named to Barron's "World's Most Respected CEOs" list in 2006…” harbus.org, 10-16-2006
And what can we say about the largest US bank failure?
“Washington Mutual collapses in biggest bank failure in U.S. history” haaretz.com/hasen, 9-26-2008
Were there any internal warnings within Washington Mutual sending out red flags a few years ago?
“… Washington Mutual was careless, analysts say. The company failed to integrate a number of rapid acquisitions fully and didn't build sufficient room into its financial plan to weather an expected drop-off in mortgage lending…” “…that's meltdown time ." marketwatch.com/news/story/failure-heed-rate-warnings, 6-24-2004
But, hopefully, the CEOs were being prepared financially so that they personally would not experience Washington Mutual's coming failure! Thank the good Lord as this seems to be the case!
“Washington Mutual, the largest U.S. savings and loan, reduced Killinger's ( Washington Mutual CEO) total compensation…$5.25 million from $14.2 million in 2006.” “Killinger's salary remained the same at $1 million last year to maintain the tax deductibility of his full salary…” in.reuters.com/article/governmentFilingsNews
Let's hear now about the new CEO who has replaced outgoing Killinger and how much this new dude will make at Washington Mutual as the new CEO.
“Golden parachute for Washington Mutual CEO” “ Washington Mutual's new CEO Alan Fishman -- who had been on the job a measly 17 days -- was paid nearly $20 million in the last month .” “That includes a $7.5 million bonus when he was hired Sept. 8. And it includes a mind-blowing $11.6 million cash severance now that the company has gone under. That's on top of his base salary -- a cool $1 million a year. Plus, he was eligible for annual bonuses worth up to 365 percent of his base pay.” “ All this while the company was posting billions in losses. (Yesterday, it became the biggest bank failure in U.S. history…) “ Read over all that again -- and explain to me why something doesn't need to be done about CEO compensation .” dallasmorningviewsblog.dallasnews.com, 9-26-2008
Why isn't the general public and lawmakers automatically jumping and demanding President George Bush's 700 billion recovery plan? For over 20 years the American public has been trained to always look for that magic silver bullet. Folks, there are no more silver bullets.
“How did things go so badly? The simple answer: greedy, fat cat investment bankers who used these complicated derivatives no one could understand to leverage themselves, make tons of money at the expense of the typical mortgage holder, and who will never experience any down side from their profligacy.” economist.com, 9-23-2008
These “Masters of the Universe” that created this chaos will ultimately down the road profit in some way off of the very mess they created. It always works that way.” “Despite steep decl
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The extremely low percentage point drop in the DOW reveals Bush's Hoax on the America people. Had there been a real and true emergency the DOW would have dropped at least 30 percentage points rather less than 8 percentage points. Someone somewhere ensured that not all of Congress was fooled by Bush this time as they were on 9/11/01.
Bush's Financial 9/11 Hoax could not fool all of Congress today.
GLOBAL ECONOMIC COLLAPSE SEPT-OCT 2008?
of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, entitled
