Our economic system: is this the end of the world’s economic Pyramid Scheme? Fractional banking, pyramid scheme economics, fraud and collusion in the world's banking and mortgage industry, together with consumer financial illiteracy are the driving force behind a financial tsunami which may end banking as we know it. Money Market Rates Tumble; Central Banks Inject Funds The cost to borrow in euros through the end of the year plunged after the European Central Bank added an unprecedented $500 billion to the banking system as part of a global effort to ease credit-market gridlock. The amount banks charge each other for two-week loans in euros dropped a record 50 basis points to 4.45 percent, the European Banking Federation said today. The rate had soared 83 basis points in the past two weeks as banks anticipated a squeeze on credit through year-end.
$45 trillion gap seen in US benefits The government is promising $45 trillion more than it can deliver on Social Security, Medicare and other benefit programs. That is the gap between the promises the government has made in benefits and the projected revenue stream for these programs over the next 75 years, the Bush administration estimated Monday. The $45.1 trillion shortfall has increased by nearly $1 trillion in just one year, according to the administration's "Financial Report of the United States Government" for 2006. And, it's up 67.8 percent in just the past four years. In 2003, the shortfall between promised benefits and revenue sources over a 75-year period was put at $26.9 trillion. Bush says US economy is safe and sound President Bush on Monday tried to reassure an edgy public that the economy is "pretty good" despite the dreary mix of a failing housing market, a national credit crunch and surging energy costs. "There's definitely some storm clouds and concerns, but the underpinning is good," Bush said at a Rotary Club meeting, an informal setting chosen to show the president engaged with local communities. "We'll work our way through this period." The nation is in a sour mood this holiday season, with consumer confidence hovering near a two-year low. As a wide-open field of candidates vies to replace Bush in the White House, the economy has zoomed to the forefront of public priorities, often ahead of Iraq. Fed to crack down on lenders The Federal Reserve on Tuesday will propose a much stricter set of rules for mortgage lenders as part of the central bank's effort to avert abusive lending. The proposed rules are expected to crack down on lax practices in a number of ways. Among them, the rules are likely to: Prohibit giving people unaffordable loans. One reason for the spike in foreclosures among those with subprime adjustable-rate mortgages (ARMs) was that lenders measured borrowers' ability to repay the loan based on the low introductory loan rate, but not on the higher rate that the loan would reset to. The Fed may propose that lenders base affordability on a borrowers' ability to repay a loan at the reset rate.
Fed Will Limit Penalties on Prepayment of Subprime Mortgages The Federal Reserve will make it tougher for lenders to impose fees for early repayment of subprime home loans, according to consumer advocates and a regulator. The change will probably be one of several proposals from the central bank's Board of Governors when officials convene in Washington today to respond to the collapse in the market for subprime mortgages. Chairman Ben S. Bernanke is under fire from lawmakers, including Senate Banking Committee Chairman Christopher Dodd, who say the Fed didn't do enough to enforce lending rules and was too slow to write new regulations as subprime borrowing surged between 2004 and 2006. Record foreclosures are deepening the housing slump and threatening the six-year economic expansion.
Housing Starts in U.S. Probably Fell to 14-Year Low in November Builders in the U.S. broke ground in November on the fewest homes since 1993, reflecting concern loan restrictions would deepen the slump in sales, economists said before a report today. Work began on 1.176 million houses at an annual pace, down 4.3 percent from October, according to the median estimate of 70 economists surveyed by Bloomberg News. Permits, an indicator of future construction, fell to a 1.15 million rate from 1.17 million, the survey said. Some buyers may be having trouble finding financing after a surge in delinquencies and foreclosures reduced access to subprime mortgages. A near-record number of properties on the market and the prospect that prices will keep falling have set the stage for additional weakening in demand and construction.
Wall St. Extends Losses on Economic Worries Wall Street extended last week's losses Monday as investors remained concerned about flagging growth and rising prices, and were skeptical that a special Federal Reserve credit auction will be a solution. The Dow Jones industrial average fell nearly 175 points and all the major indexes lost at least 1 percent. The Fed offered $20 billion in 28-day credit through an auction Monday. The central bank will not release the results until Wednesday, but the aim of the auction is to encourage commercial banks to borrow from the Fed. That, in turn, is designed to boost banks' lending to businesses and consumers and keep the economy humming.
Wheat breaks through $10 a bushel US wheat futures have risen more than 3%, passing the $10-a-bushel mark for the first time. The current benchmark Chicago Board of Trade WH8 contract for delivery in March hit a record high at $10.09. World wheat stocks are expected to fall to a 30-year low next year, partly hit by droughts in Australia. Wheat prices have nearly doubled since the start of the year, fanning fears about food price inflation at a time when the global economy may be slowing.
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