Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Mon 11.24.2008
Hyper-Inflation To Push Gold To Double Aaron Smith, MD of Superfund Singapore predicts gold to easily double next year. Jim Rogers, Robin Griffiths and Jurg Kiener hold the same view as global central banks' insistence on printing their way out of economic turmoil is setting the stage for a hyperinflationary holocaust, a knock-on effect of which will be gold's acceleration towards $2,000, as demand for precious metals outstrips supply.
Gold Pressure Near Breaking Point The demand pressure slowly yet consistently building over the last year has created some remarkable pressure to the upside on the price of gold. With recent announcements by Iran that their foreign reserve holdings are being converted to gold, and the record purchase of $3.5 billion by unidentified Saudi Arabians over a two week period, it seems remarkable that gold continues range-bound trading in the low 700’s. Recent coverage of the gold market by mainstream financial stations such as CNBC and Fox News indicate that the discrepancy between the COMEX spot price and the average price for gold bars and coins (US$900+ on Ebay, for example) is starting to make even the most stalwart feeble-minded news anchors see what two plus two equals.
Is Gold Regaining Its Luster? On Thursday’s CNBC's Fast Money show, guest investor Peter Schiff was on with his current market predictions. Two years ago, Schiff was dead on when he said that we were in a huge credit bubble which would be followed by a financial crisis and a “major, major recession.” Hello! Very few listened to him then, and although nobody's right all of the time, I thought that it might behoove me to listen to him now. So, what are his current recommendations? He says to get out of the dollar 'cause it's going to “fall like a stone”, buy the dips in commodities, and start investing in international equities. He also predicted gold is going to go through the roof in the next couple of years, possibly hitting the $2000 an ounce mark. Yikes!
Opportunities Abound in Gold and International Assets Holy smokes, this has been quite a week. I think Wednesday and Thursday took a couple of years off my life expectancy (and my net worth). Friday was the polar opposite, but the most exciting development was in the price of gold and silver - not only that gold hit $800 and silver soared 8%, but that they broke through pronounced resistance levels. Gold started showing its contrarian intentions on Thursday, a day that oil fell below $50 and commodity stock were pulverized. Friday saw companies like AngloGold Ashanti (AU) stun investors with a 43% upside move. Goldfields (GFI) moved up 37% and Sandridge Energy (SD) moved up a whopping 36%. This is all in one session.
In Deflation, Gold Will Rise! What deflation really does to an economy! Deflation is a particularly pernicious economic condition. It is far worse than inflation. Prices decline in deflation. The impact of this is that a person with cash sees the buying power of that cash increase, whereas the owner of assets with declining values sees the cash value of those assets decline. This is the superficial picture. As bankers and business owners are well aware, it takes a long time to establish and grow a business, but something a little as a shortage of immediate cash [it could be a relatively small amount of working capital] or its availability, is all it takes to destroy all that hard work. It’s terrific business for a bank to take over such a business, if the business can’t raise cash [and the banks can control that availability] then continue to do business and get it for a throw away price.
Gold is Experiencing Record Demand: So Why Have Prices Fallen? Having spawned the worst market for stocks since the Great Depression, the global financial crisis is forcing investors to re-examine a number of long-held beliefs. Gold bugs, for instance, have been left to wonder just how gold prices could backpedal in the face of all-time-record demand. Gold demand did increase – in fact, by a record 45% from the second quarter to the third. Retail demand was the primary catalyst, spiking 121% to 232 tons. And because of it, bullion dealers reported shortages in bars and coins, according to the World Gold Council, a gold-mining-industry association.
China and Iran Switch to Gold - Will U.S. Investors? Gold rallied sharply Thursday, and is rallying again at the time of this writing on Friday -- it's now broken above the significant resistance range of 740-750, and is currently testing the $800 level. While the technical outlook on the daily chart still looks a bit bearish for gold, some major fundamental news of late suggests the bull market may be ready to resume. Consider:
Iran recently switched to gold reserves.
China is massively increasing its gold reserves.
Perth mint, one of the most prominent gold mints in Australia, has suspended orders.
Prominent investment strategist John Embry has warned that December delivery contracts of gold may fail -- this would expose gold scarcity and send prices upwards.
Silver's Extremes: When Is the Right Time to Get In? I don’t think silver watchers need to be reminded of what has happened to the metal in the last 8 months. The only answer they are looking for is to when we will see a bottom to this carnage. As I look at my 14 member silver stock index, it has dropped from a high of 8.69 on the 3rd March 2008 to a new low of 1.31 as of last Thursday. That is a drop of 85% - cataclysmic by any standard of investing. Subscribers who followed my lead and exited all silver stocks positions on 31st March were spared this unnecessary suffering.
Bernanke: I underestimated housing problem Tells magazine that he was wrong in forecasting subprime mortgage issues Federal Reserve Chairman Ben Bernanke acknowledges he was wrong in believing that there would be limited fallout to financial markets from risky mortgages that soured after the housing market's collapse. "I and others were mistaken early on in saying that the subprime crisis would be contained," Bernanke said in an article in the Dec. 1 issue of The New Yorker magazine. "The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict," he said in the piece titled "Anatomy of a Meltdown."
Roubini predicts further 20-25% drop in stocks
The Austrians Were Right Madame Speaker, many Americans are hoping the new administration will solve the economic problems we face. That’s not likely to happen, because the economic advisors to the new President have no more understanding of how to get us out of this mess than previous administrations and Congresses understood how the crisis was brought about in the first place. Except for a rare few, Members of Congress are unaware of Austrian Free Market economics. For the last 80 years, the legislative, judiciary and executive branches of our government have been totally influenced by Keynesian economics. If they had had any understanding of the Austrian economic explanation of the business cycle, they would have never permitted the dangerous bubbles that always lead to painful corrections.
The Dirty Secret of the Financial Crisis: Our Banking System's Broken No more free money from Washington. No more masters of the universe. No more business as usual. Time for a banking holiday. Henry Paulson's $700 billion plan to save the world is dead or dying, but the bailout was not killed by his arrogance or his grossly misleading claims about what the public's money would buy. The plan collapsed because it didn't work. The Treasury secretary has launched a PR offensive to revive his falling influence. Too late. The Democrats should be equally embarrassed. In September their leaders in Congress rushed to embrace the Paulson solution, no hard questions asked. They now claim they were duped. Paulson's squad at Treasury pumped $250 billion into the largest banks, buying their stock at inflated prices on the assumption it would persuade investors to step forward with their capital too. Instead, savvy financial players realized Paulson was spitting into a high wind, trying to save a system with stout talk.
Finance…the American Way Jim Sinclair of jsmineset.com had a link to the essay "Before Saving the US" at ChinaStakes.com, written by a guy named Xiang Songzuo, which starts out, "The nature of the current global financial crisis is the biggest debt crisis in America's history", which is certainly not news. Then the article gets right in our American faces and keeps hammering at us: "Statistics show that America's internal and external debt exceeds $60 trillion, over 400% of the country's annual GDP of a bit over $14 trillion. Of that total, family debt (including mortgages), financial and non-financial firms' debt, and municipal and national debt come to about $15 trillion, $17 trillion, $22 trillion, $3.5 trillion, and $11 trillion, respectively, though it is hard to tell how these debts have been split up among foreign governments, financial firms, companies, and individuals." Naturally, as a proud American, I take the aggressive approach and sneer, saying, "So? Tell us something that we don't know! Hahaha!"
Recession’s Grip Forces U.S. to Flood World With More Dollars The world needs more dollars. The United States is preparing to provide them. In an all-out assault on capitalism’s worst crisis since the Great Depression, the U.S. is taking on the role of both lender and borrower of last resort for the global economy. The Federal Reserve, which has already pumped out hundreds of billions of dollars, might formally adopt a policy of flooding the world financial system with even more money. The Treasury, on course to borrow some $1.5 trillion this fiscal year, may tap global capital markets for even more to finance a fiscal stimulus package of as much as $700 billion and provide additional bailout money for banks.
Ron Paul on possibility of the dollar no longer being the reserve currency of the world
Bring back the link between gold and the dollar The events of September 2008 – the nationalisation of Fannie Mae, Freddie Mac and AIG; the disappearance of the investment banking industry in the US; and the Bush administration’s $700bn bailout to save what is left of Anglo-American capitalism – demonstrate that the 37-year experiment with fiat money and floating exchange rates has failed catastrophically. When Richard Nixon destroyed the Bretton Woods International Monetary System in 1971 by closing the “gold window” at the Treasury, he severed the last link between dollars and gold. What followed was a spiralling proliferation of increasingly spurious credit instruments denominated in a debased currency. The most glaring and lethal example of this madness has been the growth of the unregulated derivatives market, which has ballooned in size to $600,000bn, the equivalent of almost $100,000 per person on Earth.
The Truth About Bailouts As the Federal bailout bonanza prepares to spread beyond the mortgage and financial sectors to fill Detroit's depleted coffers, few economic or policy analysts have spared a thought for the destitution of the U.S. government itself. Put simply, our government doesn't have enough spare cash to bailout a lemonade stand let alone a bloated and failing industry that is losing tens of billions of dollars per month. Washington can only offer funds that it has borrowed from abroad or printed. Unfortunately, the nation is in the grips of a delusion that money derived from these sources has the power to heal. But history has clearly shown that borrowed or printed money only has the power to destroy. The argument that energizes the pro-Detroit camp is that the government should extend the same courtesy to the rank and file auto workers that it lavished upon the fat cats of Wall Street. While two wrongs certainly do not make a right, the fact remains that the Wall Street firms are still floundering despite the bailouts. What's worse, the money spent was either printed or borrowed from abroad. Both options are destructive to America.
FDIC OKs backing for bank debt, deposits FDIC approves program to guarantee banks' debt, deposits as part of financial rescue The FDIC will guarantee up to $1.4 trillion in U.S. banks' debt for more than three years as part of the government's financial rescue plan. The directors of the Federal Deposit Insurance Corp. voted Friday to approve the plan, which is meant to break the crippling logjam in bank-to-bank lending. The FDIC will provide temporary insurance for loans between banks -- except for those for 30 days or less -- guaranteeing the new debt in the event of payment default by the borrowing bank. The FDIC also will guarantee deposits in non-interest-bearing "transaction" accounts by removing the current $250,000 insurance limit on them through the end of next year. That could add as much as $500 billion to FDIC-backed deposits.
The New Deal Didn’t Always Work, Either MANY people are looking back to the Great Depression and the New Deal for answers to our problems. But while we can learn important lessons from this period, they’re not always the ones taught in school. The traditional story is that President Franklin D. Roosevelt rescued capitalism by resorting to extensive government intervention; the truth is that Roosevelt changed course from year to year, trying a mix of policies, some good and some bad. It’s worth sorting through this grab bag now, to evaluate whether any of these policies might be helpful.
10/28/08 Peter Schiff predicts doomed economy under Obama
Worst bear market since 1930s dashes hopes As this week dawned, many in international markets thought that they might have a respite until Christmas. With stocks having fallen so fast, there were even hopes of what traders call a “bear market rally” before markets had the chance to take stock once more in the new year. By the end of the week, the S&P 500 of US stocks, the world’s most widely followed index, had crashed to its lowest in 11 years. Its fall since the peak in October last year is now more than 50 per cent and during the week it overtook the total percentage falls it suffered after the dotcom bust of 2000 and the oil crisis of 1973. It is now, without question, the worst bear market since the 1930s. Meanwhile, the cost of insuring against credit defaults for a range of companies in both Europe and North America shot to new highs, unseen even since the credit crisis began in July of last year.
Three banks in California, Georgia fail Regulators close down two California thrifts and Community Bank of Loganville, Ga., raising the toll in the financial crisis to 22 banks. Three more banks - two in California and one in Georgia - failed Friday, bringing to 22 the number of institutions forced to close in the wake of the financial crisis. The Federal Deposit Insurance Corp. said the banking operations of Downey Savings and Loan Association of Newport Beach, Calif., and PFF Bank & Trust of Downey, Calif., were acquired by U.S. Bank of Minneapolis.
Regulators grease bank sales Treasury Department issues new type of charter to increase the number of borrowers available to bail out failed banks. Federal regulators on Friday issued their first approval of a new kind of bank charter intended to increase the "pool of potential buyers" of failed banks. The Treasury Department's Office of the Comptroller of the Currency said the new charter is intended for private investors interested in bidding on troubled banks that have been taken over by the Federal Deposit Insurance Corp. Under the new mechanism, regulators grant preliminary approval of a national bank charter to an investor group, which is then able to bid on failed banks. Regulators must then grant final approval if the FDIC approves the bid, the OCC said.
Two California thrifts shut down Failures of Downey Savings and PFF Bank & Trust raise financial crisis bank toll to 22. Federal regulators have shut down two big thrifts based in California, saying they fell victim to the acute distress in the housing market in that state. The failures Friday of Downey Savings and Loan Association, based in Newport Beach, and PFF Bank & Trust of Pomona brought the number of U.S. bank failures this year to 22.
Citigroup Gets Government Guarantees on $306 Billion of Assets Citigroup Inc. will have more than $300 billion of troubled mortgages and other assets guaranteed by the U.S. government under a federal plan to stabilize the lender after its stock fell 60 percent last week. Citigroup also will get a $20 billion cash infusion from the Treasury Department, adding to the $25 billion the bank received last month under the Troubled Asset Relief Program. In return for the cash and guarantees, the government will get $27 billion of preferred shares paying an 8 percent dividend.
Government unveils plan to rescue Citigroup Government unveils plan to rescue Citigroup, including taking $20 billion stake in the firm The government unveiled a bold plan Sunday to rescue troubled Citigroup, including taking a $20 billion stake in the firm as well as guaranteeing hundreds of billions of dollars in risky assets. The action, announced jointly by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp., is aimed at shoring up a huge financial institution whose collapse would wreak havoc on the already crippled financial system and the U.S. economy. The sweeping plan is geared to stemming a crisis of confidence in the company, whose stocks has been hammered in the past week on worries about its financial health.
U.S. Agrees to Rescue Struggling Citigroup $$ Plan Injects $20 Billion in Fresh Capital, Guarantees $306 Billion in Toxic Assets The federal government agreed Sunday night to rescue Citigroup Inc. by helping to absorb potentially hundreds of billions of dollars in losses on toxic assets on its balance sheet and injecting fresh capital into the troubled financial giant. The agreement marks a new phase in government efforts to stabilize U.S. banks and securities firms. After injecting nearly $300 billion of capital into financial institutions, federal officials now appear to be willing to help shoulder bad assets, on a targeted basis, from specific institutions.
U.S. Treasury says to put money into Citigroup The U.S. Treasury Department announced late on Sunday it was investing $20 billion in struggling Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) as one of a series of actions to help the beleaguered bank and it will take preferred shares in it. In a late-night announcement after a weekend of talks about what to do to help Citigroup, Treasury also said it and the Federal Deposit Insurance Corp. will provide protection against losses in a pool of about $306-billion worth of loans and securities on Citigroup's balance sheet. Treasury said the U.S. Federal Reserve stood ready to backstop any additional risk in the asset pool through an offer of a non-recourse loan.
Bailed-Out Citigroup Paid Bill Clinton $700,000--For Words, Just Words The struggling financial giant Citigroup, which recently received $25 billion in federal bailout dollars, paid former President Bill Clinton a total of $700,000 for four speeches he delivered on the company’s behalf between 2004 and 2007, according to U.S. Senate financial disclosure statements filed by Sen. Hillary Clinton (D.-N.Y.) Sen. Clinton’s latest financial disclosure form, filed on June 28, 2008, reported the former president’s honoraria for 2007. Senate financial disclosures forms for 2008 will not be filed until next year. Citigroup’s stock has plummeted nearly 40 percent this week.
White House says unaware of any Citigroup rescue talks White House spokeswoman Dana Perino said on Sunday she knew of no talks going on between banking giant Citigroup and the federal government for financial aid. Speaking to reporters traveling with President George W. Bush, who is returning to Washington after attending the Asia-Pacific summit in Peru, Perino declined to comment on whether the president supported a federal rescue package for Citigroup.
FDIC Helps Banks Sell Bonds With Stronger Guarantee The U.S. Federal Deposit Insurance Corp. strengthened the guarantee on bank bonds today, clearing the way for financial institutions to access markets with the “full faith and credit” of the U.S. government. The FDIC will provide the guarantee on senior unsecured bank debt, ensuring creditors get a timely payment of principal and interest in the event of a default. Banks had said bond investors would reject the debt because the original guarantee wasn’t strong enough to put the bonds on par with other government or government-backed securities. The FDIC excluded from the program any loans with maturities of less than 30 days.
Marc Faber: Strong rebound in next 3 months - P1
Marc Faber: Strong rebound in next 3 months - P2
Awaiting Reaction to 3rd Try at Bailout Will the third time be the charm? Regulators produced two sweeping plans to bail out banks in the last couple of months. And both times, stocks bounced up but dropped quickly because investors remained skeptical. The latest plan under discussion, which emerged Sunday night, involves the government’s backstopping a portfolio of assets for Citigroup, the financial conglomerate whose stock lost more than half of its value last week. Shares in other banks, like JPMorgan Chase and Bank of America, also lost significant ground.
GM Said to Seek Cut in Debt, New Union Rules to Win U.S. Aid General Motors Corp., in danger of running out of cash this year, will seek to negotiate a cut in debt levels and new union work rules to help boost its chances of winning federal loans, people familiar with the plan said. The largest U.S. automaker also may ask to delay a $7 billion payment to a union retiree health fund, drop more brands and rework an accord with GMAC LLC to prove it can survive and repay the government, said the people, who asked not to be named because the details haven’t been presented to Congress.
Fed Has More Ammunition After Firing Rate-Cut Bullets $$ The Federal Reserve is at an inflection point. The Fed already has pushed its main lever for influencing economic activity -- short-term interest rates -- about as far as it can, yet more help is needed as conditions continue to deteriorate. At 1%, the central bank's target for the federal-funds rate -- an overnight bank-lending rate -- has been reduced from 5.25% over little more than a year. This means Fed officials are likely to bless the fiscal-stimulus plan taking shape among President-elect Barack Obama's advisers. Yet the Fed itself isn't out of ammunition, either, with officials considering new lending facilities, more action on the federal-funds rate and purchases of long-term debt such as Treasury bonds or Fannie Mae and Freddie Mac debt to bolster markets and the economy.
Bush Believes G-20 Will Set Principles for 21st Century Financial System In what will likely be the final major initiative of his administration, President Bush announced a framework by the nation’s 20 leading economies to ease the global financial crisis. “One of the key achievements was to establish certain principles and take certain actions for adapting our financial systems to the realities of the 21st Century,” Bush said in an address regarding the Summit on Financial Markets and the World Economy.
Rubinomics Recalculated It is testament to former Treasury Secretary Robert E. Rubin’s star power among many Democrats that as President-elect Barack Obama fills out his economic team, a virtual Rubin constellation is taking shape. The president-elect’s choices for his top economic advisers — Timothy F. Geithner as Treasury secretary, Lawrence H. Summers as senior White House economics adviser and Peter R. Orszag as budget director — are past protégés of Mr. Rubin, who held two of those jobs under President Bill Clinton. Even the headhunters for Mr. Obama have Rubin ties: Michael Froman, Mr. Rubin’s chief of staff in the Treasury Department who followed him to Citigroup, and James P. Rubin, Mr. Rubin’s son.
Global crisis can be overcome in 18 months Pacific Rim powers say financial crisis can be overcome in 18 months, but provide few details Pacific Rim nations assured the world Sunday that the global financial crisis can be quelled in 18 months, but provided few details of how they expect that to happen -- or how their governments can help. The 21 economies, which represent more than half of the world's productive power, also pledged during a two-day summit not to erect new protectionist barriers for the next year, and to jump-start stalled World Trade Organization talks. The main accomplishment of the Asia-Pacific Economic Cooperation forum was a widening of support for the Washington Declaration made last weekend by major economies that pledged to maintain free trade despite pressures to protect domestic industries.
US seeks 300 billion dollars from Gulf states The United States has asked four oil-rich Gulf states for close to 300 billion dollars to help it curb the global financial meltdown, Kuwait's daily Al-Seyassah reported Thursday. Quoting "highly informed" sources, the daily said Washington has asked Saudi Arabia for 120 billion dollars, the United Arab Emirates for 70 billion dollars, Qatar for 60 billion dollars and was seeking 40 billion dollars from Kuwait.
3-Oil firms to store crude on ships as oil tanks Oil companies plan to store millions of barrels of crude at sea as they wait for demand to pick up and prices to rise. So far oil companies have booked ships capable of holding up to 10 million barrels, brokers have said, more than the daily output of top exporter Saudi Arabia. On Thursday U.S. oil trader Koch and Royal Dutch Shell were the latest to confirm bookings of additional Very Large Crude Carriers, brokers said.
Treasury Traders Paid to Borrow as Fed Examines Repos Owners of Treasuries may soon get paid to borrow as the U.S. tries to break a logjam in the $7 trillion-a-day repurchase market. Treasuries are in such high demand that investors are lending cash for next to nothing to obtain the securities as collateral through so-called repos, which dealers use to finance their holdings. The problem is many parties involved in repos aren’t delivering the bonds because there is no penalty for not doing so, causing “fails” to exceed $5 trillion, according to the Federal Reserve Bank of New York. Now, an industry group is trying to fix the mess, which New York Fed Executive Vice President William Dudley said could cause the U.S. borrowing rates to rise if not rectified. The Treasury Market Practices Group wants to impose a “penalty” on failed trades, a move that may result in borrowers who put their Treasuries up as collateral for loans effectively receiving 2 percent interest.
Obama Will Get Stimulus Bill First Day, Democrats Say Congress will send President-elect Barack Obama an economic stimulus package the day he takes office Jan. 20, two Democratic lawmakers said today. Senator Charles Schumer of New York said on ABC’s “This Week” program that the package will be between $500 billion and $700 billion. House Majority Leader Steny Hoyer, of Maryland, said on “Fox News Sunday” that he believed the Inauguration Day goal would be met, but he declined to put a price tag on the bill. "I think Congress will work with the president elect starting now and will have a major stimulus package on his desk by Inauguration Day," Schumer said. "I think it has to be deep. My view it has to be between five and $700 billion."
Consumer-Spending Report Is a Glimpse of Pain to Come $$ Economic output for the year's final quarter is likely to be starkly weak, dragged down by the biggest decline of consumer spending in at least a quarter-century. The extent of the damage won't be clear until late January, when the government releases fourth-quarter gross domestic product. But Wednesday's report on consumer spending in October -- the first month of the quarter -- will offer some insight, and it won't be pretty. Personal outlays, which include total consumer spending plus interest and transfer payments, are expected to fall as much as 1%, the most since a 1.2% drop in September 2001 in the aftermath of the terrorist attacks in New York and Washington.
Big Three’s Troubles May Touch Financial Sector To the long list of troubles plaguing the financial industry, add three big ones — make that Big Three ones. The foundering Detroit automakers owe more than $100 billion to their bankers and bondholders, and Wall Street is starting to wonder how much of that will be paid back. With Congress balking at a rescue for the auto industry, and Chrysler and General Motors warning that they could face bankruptcy without one, investors are worrying about financial companies’ exposure to the Big Three, as well as to automotive suppliers and dealers.
President Bush: 'Economic turmoil' Not so long ago, Bush said, fundamentals of the economy seemed strong. President Bush has gone to Peru. But Bush, making his last scheduled trip abroad as president, has not gotten away from the economic crisis that has beset his nation and many others near the close of his presidency. "Thanks for letting me come by,'' Bush said today in Lima, in that characteristically familiar way the retiring president has of greeting fellow world leaders. But there was nothing casual about the president's remarks to the assembled leaders of 20 other nations at the Asia Pacific Economic Cooperation summit. The annual summit for Pacific-rim nations convenes at a time when even the fastest growing economies in the world, such as China's, are suffering from a global slowdown in business.
Obama expands stimulus plan Barack Obama signaled this morning that he will push for a bigger economic stimulus package than he previously discussed, pledging to create 2.5 million jobs in the effort to combat what he called a "crisis of historic proportions." Obama said he would offer a two-year stimulus proposal instead of the expected one-year one, calling it "a plan big enough to meet the challenges we face." "These aren't just steps to pull ourselves out of this immediate crisis," Obama said in his weekly radio address, "these are the long-term investments in our economic future that have been ignored for far too long."
Obama already in bully pulpit "It is time to act. As the next president of the United States, I will." That's how President-elect Barack Obama ends his weekly address today, a short speech in which he says that he has asked his economic team to draft a plan that would create 2.5 million jobs by the start of 2011 in an effort to give lift to an economy that has stalled. This address indicates a subtle shift in Obama's strategy. Until now, his team has stuck with the "we only have one president at a time" theme. But in this address, made with Obama sitting in front of a presidential backdrop that has much more of an Oval Office feel than the setting he used earlier this week, Obama says he's pleased Congress acted to pass the extension to unemployment insurance.
America in Free Fall Congress might adjourn without acting on the deepening economic crisis, leaving Obama to inherit the catastrophe. Free fall. The U.S. has lost private sector jobs for 10 straight months. One quarter of all businesses in the U.S. plan to cut payroll over the next year. Retail sales fell in October by the largest monthly drop on record. Auto sales have collapsed, driving the auto companies towards the precipice. Unemployment is up to 6.1 percent, with most analysts predicting it will soar past 8 percent over the next year. (That translates into unemployment among young minority men at rates of 50 percent or more). States are now facing $100 billion in deficits in operating budgets for the next fiscal year. Twelve million homes are "under water," worth less than their mortgages. The U.S. has joined Germany and Japan in what is becoming a global recession.
Falling prices raise worries about deflation Sustained trend could create headwind for growth, problem for markets After years of punishing increases in the cost of energy, consumers are rejoicing these days at the sharp drop in prices at the pump. Not only that, but prices are dropping for clothing, transportation and housing, according to the government's latest report on consumer prices. With money tight, the price declines are a welcome relief. But be careful what you wish for. If price declines continue and become more widespread, there’s a risk the downward trend could feed on itself in a spiral that can take on a ruinous momentum. It’s called deflation. And some economists are warning the threat is increasing.
The World is Coming to an End And it might even have a happy ending I don’t have to tell you how awful things are. People all over the world are frightened. Many are panicking. Most are confused and don’t know where to turn for guidance or help with their money and their future. Since January 1, 2008, stockholders of U.S. corporations have suffered about $8 trillion in losses, as their holdings declined in value from $20 trillion to $12 trillion. Homeowners will soon see their equity down by as much as $8 trillion, and those losses are likely to increase. The currency markets have been in turmoil as the carry trades unwind viciously and in a most terrifying manner. Hedge funds ( that turned out to not even understand the meaning of the word “hedging”) are going out of business and liquidating like there is no tomorrow. They cannot survive with returns they have—some in excess of minus 50%. That’s a very huge ouch.
North Korea vows to go ahead with border closure North Korea on Monday said that it would go ahead with its threat to effectively close its land border with the South, including expelling South Korean managers from an industrial site just inside its border, from December 1. The reclusive state first warned nearly two weeks ago it would end traffic across the heavily armed border with its wealthy neighbor but this is the first time it has given details of the action it would take.
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