Gold & Mortgage Failure Avalanche An avalanche comes in 2008. Its wreckage will hit both the USEconomy and banking world. The greatest deception in the bank sector this year has been the misrepresentation of the mortgage debacle as a subprime problem. That is akin to calling an iceberg only a problem for what one can see, when 90% of its mass lies below water. Ice is lighter than water. Most mortgage bonds are like acidic stones weighing down bank and investor balance sheets. Wall Street and the USGovt con artists, using tools are fraud and distortion, prefer the public and investment community to think of the 'Subprime Problem' as the source of distress.
U.S. Nov. PPI up 3.2% -- largest change since 1973 Wholesale prices rose 3.2% in November, the largest change since August 1973, as the change in energy goods prices hit a new record high, the Labor Department reported Thursday. Wholesale energy prices rose 14.1% in November, beating the prior record change of 13.4% in January 1990. Gasoline price growth also hit a new record -- reaching 34.8% -- up from the prior record of 28.8% in April 1999. Meanwhile, the core producer price index, which excludes food and energy costs, rose 0.4%. Economists had expected November's producer price index to grow 1.8% and for the core to grow 0.2%. In October, the PPI had grown 0.1%, while core prices had no growth.
Banks raise loss estimates Some of the nation's largest banks on Wednesday warned of higher losses in the fourth quarter as the turmoil in the credit and mortgage markets continues to weigh on the financials sector. Bank of America Chief Executive Ken Lewis said the firm would have to write down a larger amount of its investment in some debt securities than previously planned. "Based on conditions today, we expect those write-downs will be larger than have already been reported -- although obviously we won't know our final numbers until we close the fourth quarter," Lewis said in remarks prepared for delivery at a Goldman Sachs conference. The company had previously expected to report a write-down of $3 billion.
Liquidity Won't Help Insolvency The Federal Reserve today announced a new scheme to inject more liquidity into the money markets. It cobbled together a partnership arrangement, as the Canadian, UK and European central banks also agreed to participate in the scheme.The process of 'injecting liquidity' is a euphemistic way of saying 'creating money out of thin air.' The Federal Reserve doesn’t need a printing press to do this. They simply create a book entry on its balance sheet, and presto, $40 billion (or whatever amount they deem appropriate) of new ‘money’ is created, which the Fed then lends to those bankers coming to it hat in hand. Creating money this way is a barbaric process because it further debases the dollar, but is hailed by the banking insiders and their apologists as a brilliant maneuver to fight the worsening liquidity crunch.
Great Depression drives Bernanke's rescue The co-ordinated move by five central banks to shore up confidence in the world’s frozen money markets is not the first piece of international co-operation to fend off a financial crisis. There have been several combined efforts in the currency markets, such as the 1985 Plaza accord when five governments agreed to push the dollar lower to reduce America’s current account deficit and lift the world’s largest economy out of the recession of the early 1980s. It is, however, one of the biggest joint efforts so far, and the first major intervention of its kind since the September 11 terrorist attacks in 2001. The simultaneous initiative was designed to have maximum impact, to be greater than its parts, which are in fact quite different local initiatives.
Credit crisis worsens as Alan Greenspan says the Fed is powerless Fallout from the sub-prime mortgage crisis wreaked further havoc yesterday as Bank of America, Wachovia and PNC all said that investment write-downs would be worse than forecast as the credit crunch worsened. Bank of America, which said last month that it may need to write down the value of its mortgage bond portfolio by about $3 billion (£1.4 billion) this quarter, conceded that the losses would probably be considerably higher. Wachovia, separately, doubled its provision for fourth-quarter loan losses to about $1 billion, while PNC, in Pennsylvania, said that it would take a $110 million fourth-quarter charge, most of it relating to residential mortgages. Meanwhile, shares in Sallie Mae fell by 13 per cent, the most in 14 years, after America’s largest student lender cut its profit forecast for 2008 by 17 per cent.
U.A.E. Will Only Revalue Together With Gulf Neighbors The United Arab Emirates will only revalue the dirham against the dollar or drop its peg to the U.S. currency should other Gulf Cooperation Council members agree to do the same, the country's central bank governor said. ``Even a one-step revaluation has to be done with Gulf'' countries including Saudi Arabia, Bahrain, Oman and Qatar, Sultan bin Nasser al-Suwaidi told reporters in Dubai today. The falling dollar will trigger a ``review'' of the U.A.E.'s dollar peg, al-Suwaidi said in a Nov. 15 interview, signaling the federation may end its 30-year link to the U.S. currency. Kuwait, another GCC member, in May abandoned the dinar's peg to the dollar in favor of a basket of currencies.
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