Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Tues 10.28.2008
Spending the Economy into Oblivion by Ron Paul With news this week that Congress is poised to consider a new stimulus package, I am forced to again ask a question that seems silly in Washington: How will we pay for this? While a few Members of Congress have raised the issue, it certainly was not the primary concern of the House Budget Committee when they interviewed Ben Bernanke on Monday. And, when they did direct this question to the Chairman of the Federal Reserve, his answer was the standard rhetoric about how Congress needed to make tough choices. Needless to say, not many specifics were discussed. One of the most liberal members of the House, Barney Frank, has at least volunteered something of a suggestion: "We can let Iraq take care of itself." This, of course, goes in the right direction, but hardly far enough.
Fed Begins Buying Short-Term Debt Program Aims to Revive Market for Commercial Paper The Federal Reserve yesterday began buying short-term debt from banks and companies as a way to make it easier for corporate America to borrow cash to cover day-to-day operations. General Electric, the biggest U.S. issuer of commercial paper, said it availed itself of the Federal Reserve's new short-term funding facility. American Express also has said it would register to borrow from the Fed.
Treasury clears way for bailout to begin Treasury announces record bailout starting with initial $125 billion headed to banks The government has cleared the way to ship out $125 billion this week to the country's largest banks, beginning the biggest government bailout in history. "The money will go out the door for those institutions early this week," predicts Assistant Treasury Secretary David Nason, one of the chief architects of the rescue plan. Not only is the money ready to be sent to nine major financial institutions, including Bank of America, Citigroup Inc. and JPMorgan Chase, but the government is reaching preliminary agreements with a group of more than a dozen major regional banks, who will share a part of an additional $125 billion the government hopes to pump into the banking system.
Gold "Remains Safe Haven" Amid World Currency & Stock-Market Crash; Price Dented by Forced Selling, Failing Hedge Funds THE SPOT PRICE OF GOLD BULLION sank and then bounced hard vs. the Dollar early Monday, whipping violently against all major currencies as world stock markets added to this year's 40% losses to date. "While [the crucial Indian festival of] Diwali is just one day away in India," notes precious-metals dealer Mitsui in London today, "it is important to note that physical demand is strong globally, and this may help to support the Gold market at these levels.
How to Bankrupt a Nation How would you bankrupt yourself? You’d want to get yourself into a position where you could not pay off your debts. You’d run up big credit card bills. You’d borrow heavily. You’d mortgage and re-mortgage your house. You’d splurge on your spending. The money would go – to clothes, restaurants, and hairdressers. While you were on your spending spree, you might run down your savings and assets. You might travel to Las Vegas and drop a few thousands at the tables. Or you might make bad investments. Buy a stock for $190 and hold it until it is worth a few pennies. Your income from your job is a big asset. It would help the cause if you lost your job.
If Obama Wins, Economy's Doomed Peter Schiff, president of Euro Pacific Capital,?says a big-government Obama administration would lead to a collapse on par with the Great Depression.
G-7 countries worried about Japanese currency The world's leading industrial countries are worried about the recent sharp rise in the value of the Japanese currency. The financial ministers and central bank presidents of the Group of Seven major industrial countries issued a joint statement late Sunday in which they expressed their concern about the recent volatility of the yen. The yen rose to a 13-year high against the dollar in trading Friday, raising concerns in Japan that it could harm its exports of cars and other products because they will now cost more in U.S. markets. The statement by the G-7 finance officials was released in Washington, Tokyo and other G-7 capitals.
Central Banks Slashing Rates As Investors Flee Global Pullback Could Affect Currency Markets Central banks around the world are moving to further slash interest rates as they seek to contain the damage from the bursting of the biggest credit bubble in history. The Federal Reserve is poised to cut its benchmark rate for the second time in two weeks at a pivotal meeting in Washington on Wednesday, and the European Central Bank yesterday suggested that it would do the same next week. South Korea announced a dramatic rate cut yesterday, by three-fourths of a percentage point.
Little relief in credit as market awaits rate cut The still-cinched credit markets are anticipating a half-point interest rate cut from the Federal Reserve this week, but investors are worried it won't be enough to quickly revive the economy. The Fed has been slashing rates and taking unprecedented action to get market participants back in the lending mood, including launching a facility Monday to buy the short-term corporate debt known as commercial paper. The moves have helped ease lending rates at the margins.
Capitalism is superior to Socialism Capitalism and free enterprise is an economic system that allows individuals to set their own goals for success and is the best system for producing wealth and promoting prosperity. It has often been described as the "primary engine of growth". Winston Churchill defined Socialism as "a philosophy of failure, the creed of ignorance, and the gospel of envy; its inherent virtue is the equal sharing of misery." So it is evident that Norman Thomas, a U.S. Socialist Party presidential candidate in the 1940s, was correct when he said "The American people will never knowingly adopt socialism. But under the name of 'liberalism', they will adopt every fragment of the socialist program, until one day, America will be a socialist nation, without knowing how it happened." Socialists believe that your life must be guided from birth to death by the government.
Lessons From the 1929 Market Crash Analysts say investors had better beware false rallies like the one that occurred after the market crash nearly 80 years ago.
Wall Street marks grim anniversary of 1929 crash Anniversary of 1929 crash highlights contrasts -- and parallels -- with current crisis Wall Street's struggle to recover from this month's devastating drop is coinciding with the anniversary of another dark period for the stock market -- the crash of 1929. The dramatic selling of Oct. 28-29 of that year sparked widespread panic and helped trigger the Great Depression largely because the government, wary of meddling in the economy, failed to take many of the steps that the Treasury and Federal Reserve are now using to try to prop up the hammered financial system.
Wall Street drops to 5-yr lows on economic fear Stocks closed at their lowest levels in 5-1/2 years on Monday, extending a global sell-off as worry about the severity of a global recession and the bleak outlook for profits gripped investors. Trading was volatile and volume was light, with stocks falling sharply in the last half hour of trading. With just four days left in October, the S&P 500 is on track for its worst month ever in the post-World War Two period. Hedge funds and mutual funds have been dumping stocks to raise cash to meet redemptions from their clients, traders noted, exacerbating the late-day selling.
China isn't interested in new global monetary system Just as it was never realistic to think China could single-handedly save the world economy, it is probably wise to tone down any expectations that Beijing somehow holds the key to a new international financial order. Prime Minister Wen Jiabao promised after talks among 43 Asian and European Union countries that China would actively participate in a Nov. 15 summit meeting that the U.S. president, George W. Bush, is convening to rake over the global credit crisis.
Latin American finance officials call for reform of international system Finance ministers and central bank chiefs from Latin America called for reforms to the international financial system on Monday in an extraordinary meeting in Brazil's capital about the financial global crisis. Foreign ministers, finance ministers, and central bank presidents from Argentina, Chile and Venezuela and others attended the meeting to discuss a crisis which is threatening to severely hurt regional and global economic growth.
Borrow and spend Gordon Brown, the UK prime minister, has conceded that his long love affair with Prudence is over. The romance was embodied by fiscal rules whose spirit was never respected. Alistair Darling, the chancellor, seems set to scrap the rules entirely, while Mr Brown implied on Monday that ignoring them was an act of patriotism. Prudence, it seems, was a good-time girl. In grimmer days, Mr Brown finds her clingy embrace unendurable.
Silver Market Update If we define a bearmarket as the price making a series of lower intermediate lows beneath falling long-term moving averages, then silver is in a bearmarket against the dollar and against the Euro and most other currencies. It is worth recalling, however, that by this definition both gold and silver lapsed into bearmarkets in the mid-1970's, which turned out to be severe corrections in the middle of a major bullmarket, as in the late 70's they picked up again and accelerated into spectacular parabolic blowoff tops.
Hang On: Hedge Funds Aren't Done Selling The newspapers blame the weakening economy and somber earnings forecasts for the sharp selloffs we've been experiencing. Declining earnings and recession fears play into the declines, to be sure, but the real story -- which does not get the headlines it truly deserves -- is the mass liquidation that is occurring within the highly leveraged hedge fund community.
A Shock To The System? In a moment, I’d like to describe a new development in silver that should prove quite bullish to the price, but first I’d like to review some continuing facts that are significant in their own right. It would appear that the confluence of many factors point to sharply higher silver prices dead ahead. Yes, I know the price has recently collapsed. Ironically, it is that very price smash that is the basis for the coming price launch higher.
Evil Wall Street Exports Boomed With 'Fools' Born to Buy Debt Tom Bosh lowered the telephone receiver into its cradle, making a decision on the way down. "We're not buying any more," he told his traders at Bank of New York Co. "Nothing." It was May 2007, and Bosh, who managed $25 billion from the bank's 13th-floor trading room above Times Square, had just hung up on Ralph Cioffi at Bear Stearns Cos. a dozen blocks away. Bosh had invested $50 million in notes from an issuer Cioffi controlled, and he was ready to pull the plug.
US regional banks eye deals with Tarp cash American regional banks accepted more than $30bn of fresh capital from the US Treasury on Monday in a move that is likely to spur a consolidation of the US banking sector. Fifteen regional banks and savings institutions, including SunTrust, Capital One and KeyCorp, have tapped the Treasury’s Troubled Asset Relief Programme (Tarp) so far. Further infusions are expected as banks obtain the necessary board and regulatory approvals. While the intent of the programme was to revive lending in locked credit markets, the capital is also providing a catalyst for consolidation.
Futures Lose Clarity, Put Fed in Dark on Reaction to Rate Move Federal Reserve Chairman Ben S. Bernanke and his colleagues usually sit down for their interest- rate meetings with a clear idea of what investors think they'll do. Not this time. One key indicator, futures contracts, no longer provides an accurate signal of where the Fed will set its benchmark interest-rate target. The problem: Traders look at the rates banks charge each other for overnight loans when figuring out their bets on what the Fed will do, and for the last six weeks the Fed has failed to get those overnight rates to line up with its target.
80 Years History of Brutal Gold Stock Corrections The severity and the speed of the crash which occurred in the precious metals stocks caught us and practically everyone by complete surprise. The meltdown surpassed everybody’s expectations and has no historical precedents. However, when looking at the past 80-year history, there are a number of bear markets that carry some similar characteristics to the crash of 2008. The following six bear markets saw very significant corrections in mining stock
Foreclosures Open Door To Disorder Vermin, Crooks Exploit Housing Market Crisis Among the many harsh lessons for mortgage lenders in the housing bust is this one about evictions: Selling a house is far easier than taking it back. Clever opportunists and struggling families have figured this out, too, and the result is a rapidly evolving free-for-all coursing through the Washington region's worst foreclosure-racked suburbs. Defaulting homeowners are taking advantage of banking chaos to live mortgage-free for six months or longer, dragging out the eviction process, according to lenders and real estate agents. Unscrupulous landlords are collecting rent but withholding mortgage payments, leaving a rude surprise for their tenants when repossession comes. And banks are so eager to avoid the hassle of eviction that they are paying occupants $5,000 or more simply to hand over the keys and move out without a fight.
Goldman faces hardship of life as just another bank A few months ago the prospect of Goldman Sachs approaching Citigroup to discuss a merger would have been unthinkable — Goldman appeared to be the one Wall Street firm immune to a credit crunch that had saddled Citigroup with tens of billions of dollars of losses.
OUTRAGEOUS! . . . who do those people think they are? Broken Securities Industry Still Has $20 Billion to Pay Bonuses Five straight quarters of losses and a 70 percent slide in its stock this year haven't stopped Merrill Lynch & Co. from allocating about $6.7 billion to pay bonuses. Goldman Sachs Group Inc. and Morgan Stanley, both still on track for profitable years, have set aside about $13 billion for bonuses after three quarters, down 28 percent from a year ago. Even some employees at Lehman Brothers Holdings Inc., which declared the biggest bankruptcy in U.S. history last month, will get the same bonus they received a year ago.
Scope of $700 billion bailout bill continues to widen The Treasury may back risky mortgages and include other industries in its financial rescue effort. The US government's $700 billion financial rescue effort is only a few weeks old – but it's already morphed into something far broader and more ambitious than its designers originally intended. The speed and severity of the nation's economic problems simply may have forced it to change. First, the Treasury added direct investment in banks to its plan to buy up troubled mortgage-based assets. Second, it now seems primed to partially guarantee some home mortgages in an effort to stem a rush of foreclosures sweeping through US neighborhoods.
Companies start competing for bailout money The bailout is now the hottest lobbying game in town. Insurers, automakers and American subsidiaries of foreign banks all want the Treasury Department to cut them a piece of the largest government rescue in U.S. history. The betting is that many with their hands out will be successful, especially with financial markets in a stomach-churning dive and predictions the economy is about to tumble into a deep recession. These groups argue that the credit squeeze is so severe and the risks to the economy so dire that their industries need financial support as well. The Treasury is considering requests from a variety of industries, but has not decided whether to expand the program, officials said Saturday.
Recession pushes healthcare into shade "I'm a healthcare voter!" says a campaign run by the Service Employees International Union, the labour body that has more than 1m doctors, nurses, nursing and home care workers among its members. With the housing market in severe trouble and a recession all but certain, the economy has of late pushed health policy down the list of voters’ concerns. At the end of last year, according to polling by the Kaiser Family Foundation, a non-partisan health policy institute, healthcare was the most important issue for 21 per cent of registered voters, almost neck-and-neck with the economy. Today the economy has taken a 62 per cent share, and healthcare is the main priority for only 12 per cent.
Gun Sales Thriving In Uncertain Times Americans have cut back on buying cars, furniture and clothes in a tough economy, but there's one consumer item that's still enjoying healthy sales: guns. Purchases of firearms and ammunition have risen 8 to 10 percent this year, according to state and federal data. Several variables drive sales, but many dealers, buyers and experts attribute the increase in part to concerns about the economy and fears that if Sen. Barack Obama of Illinois wins the presidency, he will join with fellow Democrats in Congress to enact new gun controls. Obama has said that he believes in an individual right to bear arms but that he also supports "common-sense safety measures."
A case of balance as credit card rules change Over the past 40 years, credit cards have become fixtures in the American wallet. But the worldwide financial crisis and increased regulatory pressure in Washington are starting to reshape the lending system in ways that are making plastic harder to get and more costly to use. The changes will affect American consumers differently, as they carry nearly a trillion dollars of credit card debt, according to Federal Reserve estimates.
Boeing, union agree on 4-year deal Boeing Co. and the union representing its machinists Monday announced agreement in Seattle on a four-year contract that could end a 52-day strike. Negotiators for Boeing and the International Association of Machinists met through the weekend and came to terms on a deal for the union's 27,000 Boeing workers, The Seattle Times said Monday. The machinists are to vote on the contract this week. In a statement, the union said the deal "will provide job security" and limit how much work "outside vendors can perform in the workplace."
Oil slides toward $62 as recession worry dominates Oil fell for a third day on Tuesday, dropping almost $1 to near a 17-month low as the unrelenting dive in Asian share markets underscored fears of a global recession that is already cutting into fuel demand. The U.S. dollar's rise to another 2- year high early on Tuesday also weighed on oil prices, while traders set aside OPEC's decision last week to slash output by about 5 percent until they saw how quickly those cuts might take effect.
Avis cuts 700 jobs and records $1 billion loss Car rental company Avis Budget Group Inc cut 700 jobs in the third-quarter and recorded a loss, before taxes, of more than $1 billion after writing down the value of certain assets, it said on Monday. The company, which has been hit hard by slowing travel amid a weakening economy, also said 2008 revenue and profit would be "significantly lower" than previous estimates due to a drop in vehicle rentals.
GM speeds hat in hand to Treasury Is General Motors too big to fail? Rick Wagoner would sure like us to think so. Wagoner, the chief executive of the ailing automotive giant, spent most of Friday down in Washington, pressing his case for a government rescue. Yes, GM wants our tax dollars too. Banks are getting billions. Insurance companies are getting billions. Why not GM? The answer to that question depends on a few crucial points that few people seem willing to talk about, at least publicly: jobs, wages and the United Auto Workers.
White House explores aid for merger between GM and Chrysler The Bush administration is examining a range of options for providing emergency financial help to spur a merger between General Motors and Chrysler, according to government officials. People familiar with the discussions said the administration wanted to provide financial assistance to the deeply troubled Big Three Detroit automakers, possibly by using the Treasury Department's wide-ranging authority under the $700 billion bailout program that Congress approved this month.
European automakers schedule cutbacks German and French carmakers have said they would shut down plants temporarily in reaction to the economic slowdown. BMW said it would halt production at a Leipzig, Germany, plant for four days, the EU Observer reported Monday. Daimler, makers of Mercedes brand, said it would cut production for as long as five weeks, the report said. In France, Renault and Peugeot-Citroen also announced production cuts.
Business leaders in Europe have a bleak view of 2009 European business leaders issued a bleak outlook Monday predicting economic growth in the European Union will slow to 0.4 percent in 2009 - and to only half that in its 15 euro-zone nations. BusinessEurope, which represents 20 million small, medium and large companies across Europe, urged the European Central Bank to be ready to make "further interest rate cuts" to ease the pain of an accelerating economic slowdown marked by hefty drops in investment spending and employment.
In Europe, crisis revives old memories "I haven't forgotten history," says Gert Heinz, a tax adviser in Munich. "If you depend on paper money you can lose everything. We've learned that the hard way after two world wars." So when Chancellor Angela Merkel went on television recently to tell Germans that their bank accounts were safe, Heinz, who at 68 still remembers the rows of canned food that his mother hoarded in the attic, decided he would rather be safe than sorry. He converted another chunk of his savings into gold and stocked up on a six-month supply of rice, sugar, flour and a special brand of milk powder that lasts for half a century.
Chavez Ambitions in Venezuela May Fade With Oil Price The same tumbling oil prices that led OPEC to slash output last week threaten to send Venezuela's economy into a tailspin, and put an end to President Hugo Chavez's ambitions to expand his socialist revolution at home and abroad. To cope with plummeting oil revenue, the source of half the government's spending, Chavez may have to cut domestic handouts and foreign aid. The first items likely to go will be arms purchases from Russia, oil subsidies for Cuba, and job-creating local projects such as bridges and subways, economists say.
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