Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Fri 10.31.2008
Monday's Radio show -ONE HOUR EARLIER (8am PT; 9am MT; 10am CT; 11am ET) "Fall Back" for Day Light Savings (except in Arizona) set clocks back on Saturday night, November 1
Call this a crisis? Just wait Actually, don't wait, because we've got to stop a bigger economic disaster in the making: 78 million baby-boomers eligible for Social Security and Medicare. By David M. Walker, former U.S. Comptroller General Staring into the abyss always focuses the mind, which can help you avoid falling in. So let's take a look at the potential catastrophe that awaits us once we survive our current crisis. At the dawn of the 21st century the U.S. had $5.7 trillion in total debt. As we approach the end of George W. Bush's presidency only eight years later, that sum has nearly doubled, thanks to war costs, tax cuts, spending increases, expanded entitlement programs, and now a welter of government bailouts and rescues. This year was particularly bad. The federal budget deficit for fiscal 2008 hit $455 billion, up from $162 billion last year. That figure does not include the cost of the Emergency Economic Stabilization Act of 2008, which has an initial price tag in the hundreds of billions of dollars. In fairness, some of that money presumably will come back to the Treasury, since the new rescue-related sums will be used to acquire preferred stock, mortgages, and other assets that someday could be sold at a profit.
Staring into the deficit abyss (video) David Walker, the former U.S. comptroller general, says the government has lost control of the national debt.
David Walker: Nobody is going to Bailout America
US Government Immorality Will Lead to Bankruptcy (David Walker warned us - August 2007)
Fed interest rate cut may end up making matters worse The Federal Open Market Committee’s half-point cut in its Federal Funds target does not address the leverage and credit issues in the banking system. Indeed, by penalizing savers it worsens the economy’s supply/demand imbalance for funding. The cut doesn’t solve short-term problems and worsens long-term inflation worries. The banking crisis was not caused by over-high interest rates. Its two main causes were large and unknown housing-related and other credit losses and an urgent need for banks to reduce their leverage. Those problems are being addressed by huge Fed liquidity doses and plans to directly inject $250bn of new capital into banks via the Troubled Asset Relief Programme. Reducing already low interest rates will have no significant effect in alleviating the causes further.
House of Cards You thought the housing crisis was bad? You ain’t seen nothing yet. The Mess - Nationwide, two million homes sit vacant. Home sales are at a nine-year low. Former Treasury Secretary Larry Summers says that housing finance has not been this bad since the Depression. We still don't know the full extent of the colossal subprime rip-off, but a recent Bank of America study did some guesstimating on the scale of the consequences of the "credit crisis." The meltdown in the U.S. subprime real estate market, the bank said, had led to a global loss of $7.7 trillion dollars in stock market value since October.
Don't Look Now, There's a Huge Wave of Inflation Coming Toward Us The time has come to review how back in 2005-2006 George W. Bush -- now increasingly perceived as another Herbert Hoover -- picked two top appointees who helped steer him towards his fateful 2008 rendezvous with a second Great Crash. One of them, a top level financier, insured that Washington's eventual rescue policies would concentrate on trying to bail-out Wall Street while ignoring the gnawing cancer of its warped ambitions and financial malpractices. The second, a professor, misapplied dogma about how to guard against severe downturns into a disastrous attempt to refight the onset of the 1930s depression -- his academic specialty. He did not understand the very different context of our own era of cyber-spatial financial recklessness and gathering global inflation.
Money for (Almost) Nothing $$ Though it often doesn't seem like it, the world is making progress against financial panic. Capital -- public and private -- is now flowing into the banking system, reducing the risk of runs or a crash. Though we're heading into a recession, how deep the downturn becomes will depend on the policy choices our leaders make. Many of those choices rest with the Federal Reserve, whose Open Market Committee cut its target federal funds rate by 50 basis points again yesterday to 1%. This was neither surprising nor all that meaningful, given that the actual fed funds rate has been trading well below the target rate for much of the last month. The Fed has been flooding the world with dollar liquidity, expanding its balance sheet in record fashion along the way. The nearby chart shows the magnitude of the Fed's monetary intervention.
Global Economic Crisis in Perspective - USA - Inflation nation; Hyperinflation CAN happen here because we're printing money like it's going out of style!
Banks want credit card bailout next Banks already reeling from the mortgage crisis are losing billions more from unpaid credit card bills. So they have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy. The proposal was pitched to federal regulators by the Financial Services Roundtable, which represents more than 100 big banks and other financial companies, and the Consumer Federation of America. The pilot program could involve as many as 50,000 people and would allow lenders to reduce by as much as 40 percent the amount of credit card debt those people owe.
Bank deals sought on unpaid credit-card debt Big banks unite with consumer advocates to seek OK to cut some consumers' liabilities With defaults on credit-card debt spiraling amid a global financial downturn, banks already reeling from the mortgage crisis are losing billions more from unpaid credit-card bills. Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit-card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit-card debts in bankruptcy. The new pilot program, which the banks hope will become permanent, could involve as many as 50,000 people struggling with credit-card debt. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower's financial situation, up to a maximum of 40 percent.
UPCOMING GOLD DEFAULT The gold & silver futures markets are each hurtling down a dangerous path toward possible default. The artificial paper price has created enormous physical demand, and hampered supply production, if not delivery. The gap between the corrupted paper price and the legitimate physical price in actual trading markets has grown sharply, enough to force a breakdown like in any distorted market. When December contracts in gold & silver are demanded to be satisfied via delivery of the metal, we could easily see the COMEX fail in delivery. A default is highly likely. . . . . . .The financial market crises, in numerous arenas, have come in large part because the banking authorities have intentionally provided rescues only for New York investment banks and other big financial firms. Up to a month ago, the USFed had sterilized most injections into the Wall Street centers of the banking system by denying the mainstream bank system via liquidity drains. Drain the national system where households work and live, and provide subsidies for the financial crime syndicate. This is a betrayal of government to the people. Elite gain came at mainstream expense. Attention has gained on the misuse, false promises, and other misdirection of USGovt funds even in the bailout packages. The big banks are ordered not to lend, but to acquire smaller banks.
Gold, Faith and Credit Like many people, I have been looking at the price disparity between the market prices of gold and silver bullion (averaging about $1,000 an ounce for gold and $16.50 an ounce for silver) versus the prices of gold and silver futures (about $730 and $8.90 respectively), and I am thinking to myself that I would love to get a piece of that luscious arbitrage action where I buy the gold and/or silver futures at a low price while simultaneously selling the same gold and/or silver bullion at a higher price, telling the buyers that they must pay in advance and then wait up to a few months for me deliver their gold and silver, pocketing a hell of a lot of money on the buy-sell spread and the interest the money earns until the futures contract matures so that I can take delivery and settle up, and then spend the rest of my life on a wild, hedonistic spree of spending, spending, spending!
Reality Dawning... For Gold Despite the fact that the governments of the G-7 nations have injected some $3.5 trillion into their financial systems to prevent a meltdown of the world's financial system, stock markets are still reeling. With some stocks down by over 60 percent, many investors already have been through a disastrous erosion of wealth. The declines have not occurred in just a few days as they did in 1929. Rather, Government interventions, regulatory changes and bailouts have drawn out the fall in prices over a long enough time period to make it feel like a slow water torture. Nonetheless, the reality is that there has been a dramatic fall in the price of stocks, precipitated by a massive sub-prime induced deleveraging and the opening salvos of a credit crunch that will likely be with us for some time. After years of misplaced optimism, market participants are now coming to grips with some rather unpleasant recessionary prospects. So, despite government rescue measures around the world, markets continue to sputter.
Mortgage Plan May Aid Many and Irk Others As the Treasury Department prepares a $40 billion program to help delinquent homeowners avoid foreclosure, it confronts a difficult challenge: not making the plan too tempting to people like Todd Lawrence. An airline pilot who lives outside Norwich, Conn., Mr. Lawrence has a traditional 30-year mortgage that he has no trouble paying every month. But, thanks to the plunging real estate market, he owes more on his house than it is worth, like millions of other people. If the banks, which frequently lent irresponsibly, and many homeowners, who often borrowed irresponsibly, are getting government assistance, Mr. Lawrence says he believes sober souls like himself are also due a break.
Bush Administration Proposing Plan to Bail Out Delinquent Homeowners The Bush Administration is considering a plan that could keep as many as 3 million homeowners who are behind on their mortgages from losing their houses, The New York Times reported today (Thursday). According to the newspaper report, this program would be the most sweeping and direct government initiative aimed at home-loan borrowers since the financial crisis started last year. As proposed, the federal government would incur half the loss on a home loan if the mortgage company that controls the loan agrees to lower the borrower’s monthly payment for at least five years. On any given loan, the mortgage company would reduce the payment borne by the homeowner by writing off part of the loan balance, reducing the loan’s interest rate or changing other loan terms, sources told The Times.
White House split internally on foreclosure aid The White House on Thursday tried to tamp down a push from inside the administration for a program that would spend taxpayer money on helping homeowners avoid foreclosure. White House press secretary Dana Perino asserted that some within the government were trying to build support for the plan through leaks to the media. "I've seen this happen in Washington before where people float out ideas in the media," she said. "What I can tell you is that we're in the middle of analyzing several different proposals."
U.S. Commercial Paper Soars Most on Record as Fed Becomes Buyer Corporate borrowing in the commercial paper market soared the most on record after the Federal Reserve began buying the debt directly from issuers. U.S. commercial paper outstanding rose by $100.5 billion, or 6.9 percent, to a seasonally adjusted $1.55 trillion for the week ended Oct. 29, the Fed said today in Washington. It was the first gain in seven weeks, reversing a 20 percent decline during the previous six weeks. Financial paper led this week's gain, rising $69.4 billion, or 12.4 percent, to $628.8 billion.
Goldman Sachs ready to hand out £7bn salary and bonus package... after its £6bn bail-out U.S. investment bank Goldman Sachs HQ which has set aside £7bn for bonuses and salaries this year Goldman Sachs is on course to pay its top City bankers multimillion-pound bonuses - despite asking the U.S. government for an emergency bail-out. The struggling Wall Street bank has set aside £7billion for salaries and 2008 year-end bonuses, it emerged yesterday. Each of the firm's 443 partners is on course to pocket an average Christmas bonus of more than £3million. The size of the pay pool comfortably dwarfs the £6.1billion lifeline which the U.S. government is throwing to Goldman as part of its £430billion bail-out. As Washington pours money into the bank, the cash will immediately be channelled to Goldman's already well-heeled employees.
Marc Faber on Ben Bernanke and market interventions. Predicts a 3-6 month rally with a bout of deflation, followed by global inflation.
Hey, Wall Street: Worst Yet to Come With the Dow up another 190 points yesterday, investors are not exactly in capitulation mode. Far from it. So let us take a moment, amidst a veritable August ‘29 of complacency, to spell it out for Wall Street and the punditry: Get REAL, you blithering imbeciles! The bloody tide is about to be unleashed – so stop with the bullish hubris already, okay!? And what, you might ask, do we mean when we speak of “the bloody tide”? Just this: We are all going to wake up one day soon, the largest banks in the world will be history, and the stockmarket will be shutting down for a month. Think of it as Bear Stearns writ large, with taxpayers as the blitzed shareholder. Are you prepared?
Some Banks May Tell U.S. to Keep Bailout Cash Talk about biting the hand that feeds you. The American Bankers Association complained on Thursday that bankers around the country were “extremely upset” about how the Treasury Department was trying to offer them billions of dollars in fresh capital. “These bankers believe they are being asked — in some cases pressured — to participate in a program they did not want and do not need,” wrote Edward L. Yingling, president of the American Bankers Association, in a blistering letter to the Treasury secretary, Henry M. Paulson Jr. Saying he had “deep concerns with the lack of clarity about the program,” Mr. Yingling said the confusion had grown sharply this week over what the government’s purpose was.
Fed's Yellen Says Recent Economic Data "Deeply Worrisome" San Francisco Federal Reserve President Janet Yellen said that although inflation risks have diminished greatly, recent economic data is "deeply worrisome". Speaking at an event hosted by the University of California at Berkley and UCLA, Yellen said that loan rates would be substantially higher without the Federal Reserve's aggressive rate cuts.
U.S. Borrowing Needs to Reach $2 Trillion in 2009, Goldman Says The U.S. government's borrowing needs will almost double to $2 trillion this fiscal year, prompting the Treasury to revive three-year notes and hold more frequent sales of 10- and 30-year debt, according to Goldman Sachs Group Inc. The Treasury should consider holding so-called reopenings of two-year note auctions on a monthly basis because demand for the maturity is strong enough to support sales of $50 billion to $60 billion a month, Goldman said in a note dated Oct. 29. The Treasury could, for example, hold an initial $40 billion sale and a $15 billion reopening two weeks later, it said. The Treasury sold $34 billion in two-year notes this month.
A New Bretton Woods Economies of scale To restore stability to the global financial system (and therefore to trade and the ecosystem) we need a "great transformation" to reverse the most pernicious elements of the failed "globalisation" experiment. Three pillars are vital to any new international architecture. . . . Since Nixon unilaterally dismantled Bretton Woods in 1971 and defaulted on the US government's commitment to meet its obligations in gold; and since the introduction of legislation to liberalise credit creation, financial markets have been liberated from social, political, and environmental constraints. As a result the world was turned upside down. The finance sector no longer acted as servant to the economy, but instead became its master. The tail wagged the dog.
Questions for nations left out of magic circle Moves by the Federal Reserve and International Monetary Fund to make dollars available quickly and without conditions to a select group of emerging markets raise questions about the impact on those left out of the schemes. The initial response was very positive, with a broad-based rally across emerging market stocks and bonds, as investors took the view that more support for emerging markets in general was good for all of them. But there were some signs of differentiation in the currency market between those that now have access to Fed dollars – Brazil, Mexico, South Korea and Singapore – and those that do not.
Pivate Equity Is the Next Shoe to Drop "I've been in a hurry all my life. I've been in a hurry to succeed, and in a hurry to prove myself." -- Henry Kravis The casualty count in the world of finance is about to expand in scope. At the epicenter of the leveraged binge of the last decade were the private equity shops' "deals." These firms funded their "products" to individuals, endowments, hedge funds and to other institutions around the world with the promise of turning waste into gold.
Government and Banking, Who Rules? The events of the last two weeks have presented enormous ‘moral’ hazards for governments and the banking industry. When we call them moral hazards we are not talking about biblical morality, but the principles behind government [Democracy] and banking [Profit and Prudence]. The effective takeover of the major banks, on both sides of the Atlantic, has brought the interests and politics of government into banking, a place ill suited to such governance. You may well say that the government shareholding does not represent such interference. If that is the case then there was no point to the purchase of such a shareholding, except the hope of an eventual profit.
Taming derivatives Can the private sector clean up credit default swaps? It's conventional wisdom that credit default swaps - the $55 trillion in derivatives contracts widely blamed for bringing down AIG - need oversight. But as Washington debates how to regulate what Senator Tom Harkin (D-Iowa) calls "casino capitalism," exchanges like the CME and NYSE are proposing their own free-market solution. Companies that run exchanges are proposing to set up clearinghouses for these contracts. Within a week of each other in October, both the CME Group, partnering with hedge-fund giant Citadel, and the Intercontinental Exchange announced systems for clearing and settling CDS. By the end of the month, three more exchanges laid out competing plans.
Get Ready For 'Stag-Deflation' Back in January, I argued that four major forces would lead to a risk of deflation-- or "stag-deflation," where a recession would be associated with deflationary forces--rather than the inflation that mainstream analysts have worried about. They were: (1) a slack in goods markets, (2) a re-coupling of the rest of the world with the U.S. recession, (3) a slack in labor markets, and (4) a sharp fall in commodity prices following such U.S. and global contraction, which would reduce inflationary forces and lead to deflationary forces in the global economy. How has such argument fared over time? And will the U.S. and global economies soon face sharp deflationary pressures? The answer: Deflation and stag-deflation will, in six months, become the main concern of policy authorities.
Fed Making A Mistake? (video) Discussing whether today's Fed decision continues a flawed strategy, with Bill Fleckenstein Capital and the Fast Money traders.
Gold Heads for Worst Monthly Slump in 25 Years on Dollar, Oil Gold fell for the second day in Asia, extending a monthly drop that may become the worst in more than 25 years, as a stronger dollar and declines in crude oil reduced its appeal as an alternative asset. Gold tumbled by more than 15 percent this month, the largest plunge since February 1983, according to Bloomberg data. Oil has slumped 37 percent while the U.S. dollar index against six major currencies gained 7.3 percent this month.
Paulson's Swindle Revealed The swindle of American taxpayers is proceeding more or less in broad daylight, as the unwitting voters are preoccupied with the national election. Treasury Secretary Hank Paulson agreed to invest $125 billion in the nine largest banks, including $10 billion for Goldman Sachs, his old firm. But, if you look more closely at Paulson's transaction, the taxpayers were taken for a ride--a very expensive ride. They paid $125 billion for bank stock that a private investor could purchase for $62.5 billion. That means half of the public's money was a straight-out gift to Wall Street, for which taxpayers got nothing in return.
Fed Adds $21 Billion to Loans for A.I.G. The American International Group said Thursday that it had been given access to the Federal Reserve’s new commercial paper program, allowing it to reduce its reliance on a costlier emergency loan from the Fed. The company said it would be able to borrow up to $20.9 billion under the new program, raising its maximum available credit from the Fed to $144 billion under three different programs. The credit includes an earlier emergency loan of $85 billion from the Fed that carries a much higher interest rate. A.I.G.’s big borrowings underscore the company’s bewilderingly rapid decline. When it suddenly faced a cash crisis in mid-September, the original estimate of the amount it needed was just $20 billion. A few days later, the Fed stepped forward with its $85 billion credit line. And now, the stunning size of that original bailout has grown by almost 70 percent.
Prudential's Books Hide $500 Million Loss Prudential Financial shares were trading sharply down this afternoon after the insurer held its earnings call to explain the $166 million loss for the third quarter. Prudential's shares had opened at $35.25 in early trading on Thursday, and rose 7% in early trading. Shares then went as low as $26.11 before closing at $28.87, losing 18% for the day. It is not clear what drove the sudden drop, but clearly the market was unsettled by the lack of advice about future earnings, together with a reluctance of management to provide details about any excess capital reserves.
Ron Paul on Eddie Burke Show 10/30/2008
GMAC may become bank, eyes massive debt GMAC LLC, the money-losing auto finance and mortgage provider, on Thursday confirmed it was seeking to become a bank holding company, and said it plans to overhaul and slash its debt load, barely four months after completing a $60 billion refinancing package. The Detroit-based lender said it was in talks with federal regulators about becoming a bank holding company, which would make it easier to participate in U.S. Treasury Secretary Henry Paulson's $250 billion bank recapitalization plan.
Bailout bill might pay billions in legal fees Law firms could get $5.2 billion in legal fees from the U.S. government's bank-bailout bill, according to a survey by BTI Consulting Group. Lawyers would earn the fees over the next seven to 10 years by helping banks buy and sell assets under the Troubled Asset Relief Program, or TARP, as the $700 billion bailout bill is known.
A Real Election Choice On The United Nations When Barack Obama said he'd like to "spread the wealth around," he was widely understood to be talking about redistributing income within the U.S. But there's another arena in which Obama fans are waiting impatiently for the promised wealth-spreading--the United Nations. Officially, under its 1945 charter, the U.N. is a neutral body that takes no sides in U.S. politics. But a recent story in the Washington Post, headlined "At the U.N., Many Hope for an Obama Win," reports the same drumbeat I've been hearing from the U.N.'s New York headquarters. There's little love lost there for John McCain, who replies to the U.N.'s chronic scandals and tyrant-friendly tilt by proposing some competition, via a League of Democracies. Obama, by contrast, promises to give the U.N. a bigger role in U.S. foreign policy and many more American tax dollars than the $5 billion or more per year that currently accounts for roughly one-quarter of the total U.N. budget--already the biggest share by far among the U.N.'s 192 member states.
Marching toward a dark river Since the Obama phenomenon has no precedent in American politics, we must look to folk tales to understand it. How could a man with no record, no experience, no known convictions and no known core beliefs so mesmerize the millions to turn themselves, their children and their country over to a man armed only with neatly pressed pants, a good shoeshine and a seductive voice? We don't even get the salesman's smile. he Pied Piper of Hyde Park is clearly the direct descendant of the Pied Piper of Hamelin. Both share the gift of what a fully credentialed psychology professor calls "a unique ability to identify with children." The early piper lured the children of Hamelin to their deaths in the river when the burghers refused to pay him for ridding their village of rats.
Yeah, sure . . . let the American taxpayers foot the bill for the whole world! What about that old thing we defeated long ago - taxation without representation?. . .
America must lead a rescue of emerging economies The global financial system as it is currently constituted is characterised by a pernicious asymmetry. The financial authorities of the developed countries are in charge and they will do whatever it takes to prevent the system from collapsing. They are, however, less concerned with the fate of countries at the periphery. As a result, the system provides less stability and protection for those countries than for the countries at the centre. This asymmetry – which is enshrined in the veto rights the US enjoys in the International Monetary Fund, explains why the US has been able to run up an ever-increasing current account deficit over the past quarter of a century. The so-called Washington consensus imposed strict market discipline on other countries but the US was exempt from it.
Venture capitalists not upbeat on economy Silicon Valley is in for a long downturn, according to some of the area's top venture capitalists, and the depth of the tough times is still unknown. "There's been a real big change in the world, and I don't quite understand it," said John Doerr, a partner in Kleiner Perkins Caufield & Byers in Menlo Park, one of Silicon Valley's oldest and best-known venture capital firms. Doerr spoke in Palo Alto Wednesday on a panel sponsored by VentureBeat, a venture capital blog. "All the world's global financial assets ... have declined by 40 percent - that's absurd," he said. "There's something going on here other than subprime mortgages."
Intel chief sees growing potential for conflict The risk of international conflict will increase in the next two decades as China, India and Russia become major powers and competition for resources grows, the top U.S. intelligence official said on Thursday. The next 20 years of transition to a new international system will be fraught with risks and challenges with the rise of emerging powers and a historic transfer of wealth and economic power from West to East, U.S. Director of National Intelligence Mike McConnell told an intelligence conference in Nashville, Tennessee. "Strategic rivalries are most likely to revolve around trade, demographics, access to natural resources, investments and technological innovation," McConnell said in a transcript of a speech provided by his office.
A $50 Billion Bailout in Russia Favors the Rich and Connected Companies belonging to two of Russia’s richest men are among the first recipients of a $50 billion bailout program. The project, like so much else here, is opaque in its details but has resulted in some of the nation’s oil windfall being funneled to well-connected Kremlin insiders. Under the plan being put in motion this week, money is channeled through the state development bank Vneshekonombank, known as VEB, whose chairman is Russia’s prime minister, Vladimir V. Putin. The stated goal is to help Russian industrialists refinance loans to Western banks, with aid flowing quickest to those companies at risk of having assets seized as collateral by foreign owners.
Beaten down, American consumers burrow deeper American consumers clobbered by housing, credit and financial fallout Beaten down and watching their wealth shrink, Americans are burrowing ever deeper -- cutting back on spending and spelling more trouble for the sinking economy. One of the biggest problems saddling the country is damage from the housing market's collapse. Mounting foreclosures, falling home prices and soured mortgage investments are taking their toll on both individuals and businesses alike. Federal Reserve Chairman Ben Bernanke, who is scheduled to speak via satellite Friday at a Berkeley, Calif., conference on the mortgage meltdown, is likely to call on government officials and lawmakers to keep working on ways to provide more relief.
Economy Shrinks With Consumers Leading the Way Less than a week before Americans go to the polls to select a president, the government reported on Thursday that the economy contracted from July through September. In a stark indication of widening national distress, consumer spending dipped for the first time in 17 years. Economists said the drop in economic activity — with the gross domestic product shrinking at a 0.3 percent annual rate — presages more bad news in the months ahead. The impacts of a now-global financial crisis are continuing to squeeze companies and impede investment, causing more layoffs and austerity, while prompting Congress to consider a fresh round of spending aimed at stimulating commerce.
Cash-strapped Americans raiding their 401(k)s Despite potential tax and investment problems, more investors have been borrowing from their 401(k) plans or taking hardship withdrawals in recent months, some retirement plan providers say. Many in the field expect more borrowing in 2008, as consumers struggle with tighter credit and potentially higher mortgage payments. “I don’t think it’s a groundswell but it’s enough to be noticed,” said RickMeigs, president of 401khelpcenter.com, which provides information on 401(k)plans. Increased borrowing on 401(k)s could be because of the credit crunch and slumping housing prices. To be sure, the indications are preliminary; it’s too early to say why it’s happening, according to the Hartford Financial ServicesGroup. Borrowing against your retirement nest egg may seem tempting but it presents a host of problems. It could significantly reduce your savings at retirement and create an expensive tax bill if you can’t repay the loan when it’s due.
Suddenly, Exxon Is Challenged Exxon Mobil’s chief, Rex Tillerson, might want to encase the company’s third-quarter earnings release in Lucite — because it’s unlikely to be repeated. While the oil giant raked in a $14.8 billion profit, a new record for a United States corporation, it must now consider buying a rival at home to protect itself from a worsening environment toward Big Oil abroad. The days of $145 a barrel are over, at least for the foreseeable future. With oil now trading at around $65 a barrel, it will become harder to obscure the industry’s biggest challenge: declining reserves and increasingly inhospitable host nations.
Oil falls below $65 on US contraction Oil falls below $65 in Asia on US economic contraction, fears of demand slump Oil prices slipped below $65 a barrel in Asia Friday, extending declines after data showed the U.S. economy contracted in the latest quarter, reinforcing expectations of a prolonged slump in demand. Light, sweet crude for December delivery was down $1.44 to $64.52 a barrel in electronic trading on the New York Mercantile Exchange by midmorning in Singapore. The contract overnight fell $1.54 to settle at $65.96. Oil prices have fallen about 55 percent since peaking above $147 a barrel in mid-July.
US motor industry: The great breakdown Such is the severity of the downturn in the global car industry that US manufacturers are now pushing for their own state bailout. Why stop at the banks? Now governments around the world are pouring taxpayer money in to bail out loss-making financial institutions, it is getting harder to argue against subsidies, loans, guarantees and other forms of government assistance for other industries, too – particularly since the economic pain is now being felt far from Wall Street. Which is why Rick Wagoner, chief executive of General Motors, the largest US carmaker, packed his suitcase for Washington and headed to the capital again this week. He is leading a lobbying push aimed at tapping taxpayers and staving off the bankruptcy of the loss-making company. GM's coffers are being depleted at a rate of $1bn a month, and will run dry by the end of next summer. Little wonder its shares have touched levels not seen since it emerged from the Great Depression.
Arizona car sales: Bad to worse Charting the rise and fall of car and truck sales is a simple way to gauge the health of the economy. When we feel good about our prospects, we buy. When fearful, we hold back. This year, a huge run-up in gas prices was followed by weeks of financial crises. Combined with uncertain job prospects and declining wealth, it created one of the toughest markets in decades. Vehicle sales have dropped so sharply that one analyst wonders how many people are just going to hold on to their vehicles until they fall apart. In September, taxable sales of new and used motor vehicles were down 29.8 percent from a year earlier, the Arizona Department of Revenue reported Thursday.
Auto aid pleas mount; Treasury says no GM talks Six U.S. governors and a group of chief executives on Thursday urged the Bush administration in a letter to aid the embattled auto industry while the White House rebuffed a request for direct support of a merger between GM and Chrysler. An administration official said the focus instead would be on speeding of $25 billion of low-interest loans for factory retooling, a step the industry's allies say does not go far enough to reverse a deepening industry crisis. Meanwhile, auto parts makers worried that a merger would eliminate vehicles that they supply, and a prominent industry consultant said GM could up to 40,000 Chrysler jobs and 16 of its 26 models.
Hope and Fear in Motown Fall in this city has always felt a bit like spring elsewhere. It is traditionally the season of fresh starts for the hometown industry, a time when the auto companies get a jump on the calendar and begin shipping next year’s models to dealers. There were some new bright spots this fall, too — or at least brighter ones. The once-grand Book Cadillac Hotel, long a dilapidated eyesore in the heart of downtown, reopened after a $200 million renovation.
Why Detroit is not Wall Street There is a sense of déjà vu about Detroit. In the summer of 1979, Chrysler, having staked its business on gas-guzzling cars, was in deep trouble and angling for a government bail-out. Today, Chrysler finds itself in the same tough spot, but this time it has been joined by General Motors and Ford. Three decades ago, Chrysler received $1.5bn in loan guarantees. The conditions attached were harsh. Jobs were cut and creditors suffered. With hindsight, the bail-out may have been a mistake and bankruptcy a better option. Today, however, there should be no doubt that a second bail-out would be wrong. Politically, the issue now is even more sensitive because governments around the world have just bailed out the banks. Why should well-heeled bankers be saved when they caused the crisis while blue-collar workers are left to their fate?
Motorola to Cut Jobs and Delay Spinoff Motorola said it would shed 3,000 jobs, or slightly less than 5 percent of its work force, and delay a planned spinoff of its mobile devices unit as it spends 2009 trying to develop smartphones that will excite the public. The slow economy and waning interest in its lineup of cellphones will make the job even harder. Sanjay K. Jha, who took over as chief executive of the mobile devices business in August, warned investors on Thursday that a turnaround was more than a year away.
Sun Microsystems Reports $1.7 Billion Loss and Falling Sales With falling revenue, problematic acquisitions, product slips and a stock that has lost three-quarters of its value in the last year, Sun Microsystems is finding that Wall Street is losing patience. The company, which makes computer servers, reported dismal sales and a large write-off Thursday — but otherwise announced no changes in a strategy that has so far failed to restore the luster that Sun had during the dot-com era. "Sun is a problem child, and the problem child has to change," said Brent Bracelin, a hardware analyst for Pacific Crest Securities.
Who shrank the economy? Food prices dent U.S. growth Inflation ate deeply into U.S. consumer spending in the third quarter, doing more harm to the economy than either slumping car sales or housing, but recent commodity price falls may support growth going forward. This does not mean that the U.S. economy is stronger than it looks. The gross domestic product shrank by 0.3 percent between July and September, according to annualized data released on Thursday, and many economists predict a recession lasting until mid-2009.
The Rothschilds control the gold market, . . . and about everything else of monetary value in the world
Sarkozy pressures banks to increase credit The mandate to increase credit to customers built into the French government's financial bailout plan could be problematic for banks, a noted economist said. Laurence Boone of Barclays Capital said the mandate to increase credit 3-4 percent a year "looks demanding" within the context of a declining economy, The Financial Times reported. "We expect the economy to fall in 2009 by 0.5 per cent. In that context, the 3-4 per cent lending target looks demanding as corporate and consumer demand is likely to fall sharply," he said.
U.S. economy contracts; Japan warns of "harsh storm" The U.S. economy contracted in the third quarter as the financial crisis raged, while Japan and Germany said they would spend billions of dollars to provide a cushion against a deep global recession. The spending measures would complement a series of interest rates cuts, including those from China, Norway and the United States on Wednesday. Japan may cut rates on Friday and the European Central Bank, Britain and Australia are expected to follow next week, coming on the heels of data that showed a rapid deterioration in major economies.
The Great Obama Swindle of 2008 I have become 100% convinced, to a moral certainty, beyond a reasonable doubt, that Barack Obama is not only not a "natural born citizen" as required by the U.S. Constitution to be president, but that he was not even born in the USA, not born in Hawaii, probably in Kenya, never naturalized. If he is elected, he will be the UnConstitutional President from the moment he takes the oath of office, the first president who is not a citizen of the United States. Why I am so sure? . . .
Ruling to come on Obama birth case A Warren County magistrate said he’ll decide tomorrow whether Ohio Secretary of State Jennifer Brunner has to get proof that Barack Obama was born in the United States. David M. Neal, a Turtlecreek Township resident who runs a political Web site, filed suit last week, saying state and federal government leaders have failed to verify that Obama was born in Hawaii, instead of Kenya. The U.S. Constitution requires presidents to be natural-born citizens who are at least 35 years old. Neal says he’s part of a nationwide grass-roots movement that has questioned Obama’s birthplace and qualification to run for president. Neal’s complaint asserts that Obama’s Internet site does not disclose the name of the hospital where Obama was born and that an original long version of the birth certificate should be made available before the election.
Supremes asked to halt Tuesday's vote Constitutional crisis feared over Obama's 'qualifications' The U.S. Supreme Court is being asked to help the nation avoid a constitutional crisis by halting Tuesday's election until Democratic presidential nominee Barack Obama documents his eligibility to run for the top office in the nation. Democratic attorney Philip Berg had filed a lawsuit alleging Obama is ineligible to be president because of possible birth in Kenya, but as WND reported, a federal judge dismissed the complaint claiming Berg lacks standing to bring the action. The 34-page memorandum that accompanied the court order from Judge R. Barclay Surrick concluded ordinary citizens can't sue to ensure that a presidential candidate actually meets the constitutional requirements of the office.
Yes, Barack Obama really is a Manchurian candidate "If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide." – Abraham Lincoln As Election Day rapidly approaches, many Americans are wondering why so many of their countrymen reject a genuine war hero with decades of experience, one whose pro-life, limited-government values pretty much reflect those of Middle America. Instead, these same countrymen are enthralled with a man who not only has no experience or qualifications for the job, but who is, in fact, the most radically left-wing major-party presidential candidate of our lifetime, having been mentored and supported for decades by terrorists (Ayers), communists (Davis), America-hating racists (Wright) and criminals (Rezko). Doesn't make much sense, does it?
OBAMA'S GAMBLE: POSSESSION NINE TENTHS OF THE LAW While the disgraced mainstream media continues to ignore the constitutional crisis regarding Obama's birth certificate, we the people will not be deterred from getting the truth. . . . an individual applying for a hunting license in Virginia must provide a real birth certificate, but an applicant for president of these united States of America doesn't have to prove citizenship? Excellent point and it appears the states of the Union are willing to allow the DNC to defraud their citizens the right to vote for a legally eligible candidate because they fear riots by a certain race of voters. The idiom, possession is nine tenths of the law, is EXACTLY what Obama is gambling on right now. If he can stall until November 4th when vote fraud will "elect him" if he's the choice of the shadow government, Obama figures he's home free.
Jerome Corsi Interview about Obama Kenya Ties Part1
Jerome Corsi Interview about Obama Kenya Ties Part2
Jerome Corsi Interview about Obama Kenya Ties Part3
Obama Speaks Perfect Arabic??? WHO IS HE??
Video Unearthed Democrats in their own words Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Crisis. At a 2004 hearing see Democrat after Democrat covering up and attacking the regulations to protect Fannie Mae and Freddie Mac (their Cash Cows) that are now destroying our economy because the Democrats let them cheat.
Fed cuts interest rates to 1% The US Federal Reserve cut interest rates by half a percentage point to 1 per cent on Wednesday and announced that it would lend $30bn each to central banks in Brazil, Mexico, South Korea and Singapore to lend on to local banks. The dollar loans, structured as currency swaps, are intended to help meet intense demand for dollars in these major emerging markets. The Fed’s rate cut takes US rates down to a level only once equalled before, amid the deflation scare of 2003 to 2004. It aims to offset the sharp recent tightening in credit conditions that threatens to plunge a weakening US economy into a recession.
U.S. Inflationary Interest Rate Cut Bullish for Gold Gold rose nearly 2% yesterday as the Federal Reserve decreased the fed funds rate by 50 basis points to 1.00%. Other central banks internationally are also slashing interest rates and there is increasing speculation that the Bank of England and the ECB may cut interest rates aggressively as early as this week and possibly even today in an effort to prevent international financial contagion causing a sharp global recession. Silver surged 12% yesterday from extremely oversold levels – its largest jump since December 31st 1979. The dollar fell sharply yesterday and increasing speculation that the Federal Reserve may decrease interest rates to 0% will likely put much pressure on the overbought dollar in the coming weeks. Negative real interest rates and further cheap money policies and unprecedented digital money creation will likely be very inflationary in the coming months and have significant implications for the US dollar and the international monetary system.
Chinese Yuan the Worlds New Reserve Currency? Things are getting worse. On Friday morning, futures trading was halted for the first time ever after futures plunged more than 5 percent. The sell-off came after another 500-plus down day on the Dow followed by steep declines in equities markets across Europe and Asia. Japan's benchmark index, the Nikkei, slipped more than 9.5 percent after Toyota and Samsung reported disappointing earnings. The news was equally bad in Europe where shares were battered across the continent on fears of a global recession.
GDP report is expected to show shrinking economy Report due Thursday is expected to show gross domestic product shrank at rate of 0.5 percent A day after the Federal Reserve slashed a key interest rate to a level seen only once before in the last half-century, the government is releasing its first look at how much the economy shrank in the July-September quarter. The report is expected to show that the country's gross domestic product declined by 0.5 percent. Many analysts believe the GDP -- the measure of the value of all the goods and services produced in the United States -- is falling further in the current quarter and will also fall in the first three months of next year. Two consecutive quarters of declining GDP fulfill the classic definition of a recession.
Peter Schiff BLOOMBERG 28 Oct 2008 Part 1 Consumer confidence - not pessimistic enough; unprecedented financing need on horizon for 2009; we're BROKE and printing money.
Peter Schiff BLOOMBERG 28 Oct 2008 Part 2 We've borrowed and spent ourselves into bankruptcy. . . dollar will not hold value
Economy shrinks in third quarter, sign of recession The economy jolted into reverse during the third quarter as consumers cut back on their spending by the biggest amount in 28 years, the strongest signal yet the country has hurtled into recession. The broadest barometer of the nation's economic health, gross domestic product, shrank at a 0.3 percent annual rate in the July-September quarter, the Commerce Department reported Thursday. It marked the worst showing since the economy contracted at a 1.4 percent pace in the third quarter of 2001, when the nation was suffering through its last recession.
Fed's dilemma over zero rate looms closer Yesterday's US interest rate cut, as well as the expectation of further reductions in December, puts the Federal Reserve within sight of the "zero bound" - a fed funds rate of zero. What happens then? If the Fed gets close to zero and believes it needs to ease monetary policy further, it will start to target the risk-free rate at periods of longer than one day - for instance, three-month or even two-year rates. But before doing so it will redouble its efforts to hammer down risk spreads in credit markets in conjunction with further fiscal stimulus. If these efforts are successful, the US central bank may not need to target longer term risk-free rates. The debate about next steps for policy is closely tied to the assessment of the risk of deflation - that falling asset prices and a deep recession could result in falling consumer prices.
T-bill demand rises, interbank lending rates slip T-bill demand ticks higher as Fed lowers rates; interbank loan rates slip again Investors again sought the security of Treasury bills Wednesday, uncertain that the Federal Reserve's interest rate cut will do much to boost the flagging economy anytime soon. The three-month T-bill, considered one of the safest assets around, saw its yield slip to 0.61 percent from 0.74 percent late Tuesday. A drop in yield indicates an uptick in demand. Longer-term Treasurys were mixed after the Fed said it was lowering the fed funds rate half a point to 1 percent, as expected.
Bailout Banks' Bonuses Questioned CNBC's Dylan Ratigan, host of 'Fast Money' and 'Closing Bell,' gives Debra Borchardt the lowdown on banks that are receiving federal aid and how they'll handle bonuses this year.
Wall Street Won't Surrender Bonuses Amid Outcry, Veterans Say Wall Street's chief executives will hunker down and pay bonuses this year in the face of the worst financial crisis since the Great Depression, a taxpayer bailout and mounting political outcry, industry veterans say. Odds that Wall Street will forgo the payouts are "slim to none," said John Gutfreund, 79, president of New York-based Gutfreund & Co. and the former chief executive officer of Salomon Brothers Inc. "They're going to have to be a little bit sensitive because politicians, whether they like it or not, are part of their lives now."
Bailed out firms are doling out dividends A large share of the U.S. federal bailout funds allocated to banks will end up in the hands of the banks' shareholders, much to Sen. Charles Schumer's dismay. "The whole purpose of the program is to increase lending and inject capital into Main Street. If the money is used for dividends, it defeats the purpose of the program," said Schumer, D-N.Y. Schumer is requesting the government suspend dividend payments for banks that participate in the bailout plan, The Washington Post reported Thursday. In the next three years, 52 percent of the bank's bailout allocations could wind up in the hands of shareholders, the Post said.
Billions in Bank Rescue Funds are Fueling Buyout Deals, and not the Increase in Loans That Would Help Ease the Financial Crisis While the U.S. government’s plan to invest $250 billion into U.S. financial institutions has been billed as a strategy that will bolster the health of the banking system and also jump-start lending, the recapitalization plan is likely to have a secondary effect – one that whipsawed U.S. taxpayers likely won’t be very happy to learn about. Those billions are a virtual lock to set off a merger tsunami in which the biggest banks use taxpayer money to get bigger – admittedly removing the smaller, weaker banks from the market, but ultimately also reducing the competition that benefited consumers and kept the explosion in banking fees from being far worse than it already is.
Gold Insurance Against Continuing Financial Meltdown Wow! Are you excited? The entire world is going through a generational and even a once in a hundred year cyclical change right before our eyes and we are witness to these historical events. All of these gold and financial sites for over 10 years have been predicting that this financial meltdown was coming. And don't fool yourself here. The most important element for survival for those who survived the 1930s were those who were out of debt and had assets that were paid for free and clear. And what about those feet of clay?
Dollar: good as gold? Until April 15, 1971, the United States dollar was as good as gold. While ordinary citizens couldn't own gold in 1971, foreign central banks could trade in their dollars and receive gold, at a fixed price of $35 an ounce. Then as the United States "printed" record amount of dollars to pay for the Vietnam War, those central banks redeemed $22 billion worth of gold in the first six months of 1971. President Nixon slammed the gold window shut. The world's currencies then went on a "floating exchange rate" -- with the dollar as the linchpin. And behind the dollar was the "full faith and credit" of the United States.
Gold Dips, Stocks Jump Despite US Recession Data; Gold Mining Supply "in Crisis" as Government Debt Swells Worldwide THE SPOT PRICE of physical gold slipped from a seven-session high for Dollar and Yen investors at the New York opening on Thursday, as world stock markets extended a four-day rally despite confirmation that the US economy has joined the UK in sliding towards recession. After the Federal Reserve slashed US interest rates to 1.0% as expected on Wednesday, Tokyo's Nikkei index today leapt another 10% as the Japanese currency retreated further from its strongest showing this decade.
Gold coins in short supply, command 50% premium 2Popular gold and silver coins such as the one-ounce gold and silver American Eagles produced by United states Mint is not available for sale in the market and those who sell do it at a premium of 50 percent or more on spot price, according to Michael Maroney, Vice President, Monex Deposit Company. "One-ounce and smaller gold and silver coins . . . ten-ounce and hundred-ounce silver bars . . . ten-ounce ingots and 32.15 ounce "kilobars" of gold have virtually disappeared from the marketplace," explains Maroney. "They're in private hands now, and people are holding onto them, unwilling to sell them back into the market."
Mints struggle to meet metals demand Safe-haven investors are on a shopping spree for precious metals, snapping up gold and silver as an antidote to topsy-turvy markets -- if they can find any, that is. Demand for physical gold and silver is gobbling up product at nearly every mint around the globe and in Canada has the Royal Canadian Mint allocating its supply among its distributors, who in turn are limiting the number of coins they sell to dealers, who sell to consumers. "Virtually every mint in the world is sold out of product and as fast as we can produce it, all of us, there is more demand," said David Madge, director of bullion services at the Royal Canadian Mint.
A Bull in a Silver Shop The most interesting news item recently was found on the cover of the Financial Times newspaper, where we learn that a guy named Lahde "made tens of millions of dollars from betting against the financial and property sectors during [the] past two years", and he now wanted to thank "the low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA" who made it all possible for him to find enough suckers. He noted that "These people who were often truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the aristocracy," he says, "only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America."
Question for A.I.G.: Where Did the Cash Go? The American International Group is rapidly running through $123 billion in emergency lending provided by the Federal Reserve, raising questions about how a company claiming to be solvent in September could have developed such a big hole by October. Some analysts say at least part of the shortfall must have been there all along, hidden by irregular accounting. "You don’t just suddenly lose $120 billion overnight," said Donn Vickrey of Gradient Analytics, an independent securities research firm in Scottsdale, Ariz. Mr. Vickrey says he believes A.I.G. must have already accumulated tens of billions of dollars worth of losses by mid-September, when it came close to collapse and received an $85 billion emergency line of credit by the Fed. That loan was later supplemented by a $38 billion lending facility.
Greenspan Slept as Off-Balance-Sheet Toxic Debt Evaded Scrutiny As George Miller welcomed 60 bankers to the chandeliered Charlotte City Club one evening in September, the focus was on more than the recent bankruptcy of Lehman Brothers Holdings Inc. From their 31st-floor perch, members of the American Securitization Forum, which Miller leads, fretted about the future of their $10.7 trillion industry.
Asian shares surge, South Korea soars record 12% Global stock indexes soared Thursday, buoyed by new efforts the world's central banks are taking to battle the slumping global economy. In Asia, major markets posted double-digit percentage gains. Japan's Nikkei index climbed 10% while Hong Kong's Hang Seng index surged 12.8%. In Seoul, the KOSPI shot up a record 12%. U.S. futures, which give an indication of how markets may open when trading begins in New York, were sharply higher. European shares posted more modest gains. In midday trading, Britain's FTSE 100 was up 1.6%. The CAC-40 in France was up about 1.3% and Germany's DAX was 4.3% higher.
U.S. pulls the plug on the world The U.S. administration has prompted a huge surge in the U.S. dollar, which may help refinance its financial sector. The cost is a currency whirlwind that threatens the collapse not just of banks and companies but entire countries. In the past week the financial crisis, which began in banking and spread to stocks, has careered into the currency markets. The U.S. actively decided back in September 2008 to shut down the investment banks that lend to the biggest professional investors. This has caused those investors to sell anything and everything and to settle their trades. The result was a whirlwind of liquidation. Korean won, Turkish lira, Brazilian real, British pounds and commodities from oil and metals, all were sucked into the downdraft. Like a speeding truck heading home, dollar investors left a vacuum in their wake, a vortex of dust, where there had been steadily growing emerging market economies.
Gov't prepares $500 billion loan help plan for 3 million troubled borrowers The government is considering a plan that would help around 3 million homeowners avoid foreclosure, sources briefed on the matter said. A final deal had not been reached as of Wednesday afternoon and negotiations could still fall apart, but government agencies were contemplating using around $50 billion from the recently passed bailout of the financial industry to guarantee about $500 billion in mortgages. The plan could include loan modifications that would lower interest rates for a five-year period, according to two people briefed on the plan, who asked not to be identified because details were still being worked out and the plan was not yet public.
Precious Metals Paradox Demand is up, but prices are...down? Don't be fooled: The market dip is the result of forced liquidations. Gold has legs. So does silver. he best place to find a one-ounce Canadian Maple Leaf, U.S. Golden Eagle, or a 100-ounce gold or silver bar is on eBay, but buyers had better be prepared to pay premiums of $3 to $9 per ounce over the Comex spot market price. Traditional brick-and-mortar dealers are all but sold out. How tight is this investor market? Silver Recycling recently converted part of its Philadelphia refinery from recycling industrial scrap silver to producing 100-ounce silver bars that it retails over the internet. The company is negotiating for lucrative high-volume contracts to supply several leading dealers with silver bars. With this kind of investor demand for gold and silver coins and bars, why have metal prices been falling?
Is Gold Overvalued? In this article, I will make a case that gold’s value is significantly less than its current market price of $735. Not being omniscient, I will not consider every factor that now or in the future may impact upon gold’s price. But I will examine a few factors that, by themselves, suggest that gold is overvalued. If gold is overvalued now, it could become even more overvalued. It could rise in price. I am not providing investment advice about whether or not you should buy or sell. I am merely providing some straightforward analysis that may or may not be of value to those of you who are players or potential players in the gold market.
Gold Shortage As the following links show, there now exists a shortage of physical gold in the real world market place. This shortage is in contradistinction to the falling price of price of paper gold in the Comex world of digital traders. Once some of these paper gold traders start demanding the delivery of their contracts, the fact of the physical gold shortage will become apparent and there will be a rush to acquire gold as a hard asset that can be held in investor's hands. Paper gold may turn out to be fool's gold.
Russia, China call for trade in more currencies Russian and Chinese leaders called on Tuesday for world finance to use a wider range of currencies, and Russian Prime Minister Vladimir Putin suggested bilateral trade in roubles and yuan rather than dollars. "At the moment the world which is based on the dollar is suffering serious problems ... The situation on the global financial markets remains difficult," Putin said at a Russo-Chinese forum in Moscow.
Mad Max Keiser (podcast) .... talks about a $300 Trillion global problem with negative equity and the banks; and massive short squeeze on the dollar; globalism is falling apart; predicts Obama win [caution" European view of American Politics and very strange (unbeliever) views on religion! Interesting to hear what the rest of the world thinks of what's going on here, and there.].
Globalisation and the new nationalism collide We are saved. Amid the rubble of the world’s financial markets, we can catch sight of the foundations of a new international order. The big lesson of the crisis has been learnt: we cannot escape our mutual dependence. Global markets require multilateral rules. Why am I so upbeat? Well, only this week that great internationalist President George W. Bush announced he was summoning world leaders to Washington to “advance common understanding” of the causes of the crash. In the words of the White House, these leaders will frame “a common set of principles for the reform of the regulatory and institutional regimes for the world’s financial sectors”. That is a bit of a mouthful, I know. But, hey, multilateralism is a long word too.
Taxpayers will fund another run on the casino Fannie Mae and Freddie Mac were probably the world’s most heavily supervised financial institutions, subject to a specialist agency, the Office of Federal Housing Enterprise Oversight. The office employed 236 people at the time of its last annual report. OFHEO did not fail because it was understaffed or not well informed about Fannie Mae’s activities, but because it lacked authority. The entire staff earned less in aggregate than Franklin Raines, the aggressive chief executive who masterminded Fannie’s expansion.
Private Banks Vie for Slice of Rescue Pie $$ Treasury Department officials and the banking industry are mulling ways to expand the government's financial rescue plan to include non-publicly-traded banks, potentially opening up the program to thousands of new institutions. Department officials met with representatives from the banking industry Tuesday to discuss expanding the Troubled Asset Relief Program to make mutually held, family-owned and other private banks eligible for federal funds.
Governors Call for Rescue Package for States Governors David A. Paterson of New York and Jon S. Corzine of New Jersey added their voices Wednesday to the growing support for a second federal economic stimulus package, saying state governments would face devastating cutbacks if they did not receive assistance soon. Appearing before separate congressional committees, they said that their states, like many others, had already moved to address budget deficits. Their actions alone would not be enough, they said.
The matter of post-election representation World leaders are to gather in Washington 11 days after the presidential election to try to build a new global financial structure. This raises an interesting question of US representation at the meeting. Should it be confined to an outgoing president with no stake in the outcome beyond his legacy, or should his successor also have a seat at the table – if not in person, then through designated surrogates? It is hard to imagine any of the non-Americans present objecting if Barack Obama dispatched the likes of Paul Volcker, Robert Rubin, Larry Summers or Gene Sperling, all with impeccable credentials, who could end up in his government. John McCain’s economics bench is thinner in quality but, as long as Phil Gramm were not included, it would be equally welcome.
Surplus capital is not for wimps after all Can a bank have too much capital? To the person in the street, the answer is obvious. The function of a bank is to seek out profitable investment and lending opportunities. The more capital it has to hand, the more successful it will be. To a professor of finance, the answer is also obvious. The professor will refer to the Modigliani-Miller theorem, which states that the value of a business is independent of its capital structure. It follows that a bank cannot add value for shareholders by altering the proportions of debt and equity in its balance sheet.
Maid-Turned-Realtor Ran Vegas Mortgage Scam, Prosecutors Say Eve Mazzarella was a Las Vegas success story. The high-school dropout and former housemaid moved to the Nevada city in 2000 from Seattle, got a certificate from the ABC Real Estate School and started selling houses in what would become the hottest market in the country. In 2006, Mazzarella recorded sales of $13.8 million and made the National Association of Realtors' "30 Under 30" list, which names the best young agents in the nation. Mazzarella started her own company, Distinctive Real Estate & Investments Inc., in December 2003. She whipped around town in a Mercedes-Benz sport utility vehicle. She planned to build a three-story office building in Vegas's shabby downtown north of the Strip and preserve a historic house on the site by lifting it onto the roof.
Women Buying Health Policies Pay a Penalty Striking new evidence has emerged of a widespread gap in the cost of health insurance, as women pay much more than men of the same age for individual insurance policies providing identical coverage, according to new data from insurance companies and online brokers. Some insurance executives expressed surprise at the size and prevalence of the disparities, which can make a woman’s insurance cost hundreds of dollars a year more than a man’s. Women’s advocacy groups have raised concerns about the differences, and members of Congress have begun to question the justification for them.
Preventing a global slump must be the priority Give credit where credit is due: Nouriel Roubini of New York University’s Stern School of Business was right. On February 20 2008, I wrote a column entitled "America’s economy risks the mother of all meltdowns", based on his analysis of the 12 steps to disaster. Alas, not only has the US taken those steps, but it has also – with help from others, including the UK – dragged the world behind it. In a more recent note, Professor Roubini predicts a combination of stagnation and deflation*. In doing so he points, with some glee, to the most recent analysis of the global outlook from JPMorgan Chase, once among the most bullish of analysts. Now, under?the rubric "A bad week in hell", JPMorgan states that: "Once again, we have taken an axe to near-term growth forecasts for the developed world and will likely follow up with additional downward revisions for emerging economies in the coming weeks. Already, our forecasts suggest that global gross domestic product will contract at a near 1 per cent annual rate” in the fourth quarter of 2008 and the first quarter of 2009.
Beware the unwinding of the yen carry trade We are used to the concept that when a butterfly flaps its wings in Brazil all manner of unspeakable things happen in New Jersey and Tunbridge Wells. But many have struggled to understand the link between Mrs Watanabe’s mood swings and the price level of exotic currencies, distant equity markets and sundry commodities. What, in short, does a Japanese housewife have to do with the price of tea in China?
An ethics lesson from an unlikely quarter It is easy to imagine corporate social responsibility being the first fad that companies abandon during the downturn. With businesses struggling, how many companies will fret about organic cotton T-shirts or how much workers earn in faraway factories? How many consumers, short of cash and worried about losing their jobs, will bother to ask? The disappearance of corporate responsibility seems a plausible prediction – except that one company last week pledged to continue taking it seriously. And because that company is Wal-Mart, the world’s most powerful retailer, thousands of other companies will be forced to take it seriously, too. Lee Scott, Wal-Mart’s chief executive, told a meeting of 1,000 Chinese suppliers in Beijing: “I firmly believe that a company that cheats on overtime and on the age of its labour, that dumps its scraps and its chemicals in our rivers, that does not pay its taxes or honour its contracts, will ultimately cheat on the quality of its products.”
U.S. Treasury Program Shuns Banks That Need Cash Most The U.S. government's $160 billion handout to banks from Niagara Falls to Beverly Hills is going mostly to lenders that need it least, putting weaker rivals at risk of being shut down or taken over, analysts say. "This has the unintended effect of making the strong stronger and the weak weaker," said Gray Medlin, founder of Carson Medlin Co., a Raleigh, North Carolina, investment bank focused on banking deals. "Banks that are getting bad exams and are under intense pressure from regulators won't be successful in applying."
Could Napoleon have coped in a credit crunch? ....Our desire to see history through the lives of great men blinds us to the real complexity of politics, business and finance, and leads us to find intentionality and design where there are only chance and improvisation. The philosopher, Alasdair MacIntyre, put it acerbically: “When imputed organisational skill and power are deployed and the desired effect follows, all that we have witnessed is the same kind of sequence as that to be observed when a clergyman is fortunate enough to pray for rain just before the unpredicted end of a drought!” He also said: “One key reason why the presidents of large corporations do not, as some radical critics believe, control the US is that they do not even succeed controlling their own corporations.” That was the experience of Chuck Prince, former Citigroup chief, and Stan O’Neal, former head of Merrill Lynch. By describing Napoleon’s Russian campaign through the eyes of individual participants, Tolstoy rejected the notion of history as the lives of great men. Of the battle of Borodino, he wrote: "It was not Napoleon who directed the course of the battle, for none of his orders was carried out and during the battle he did not know what was going on."
The pendulum swings towards regulation Events as well as ideas shape policy choices in democracies. Who would have predicted a year ago that a Republican ad?ministration would demand that Congress make the largest set of investments in public companies in US peacetime history? Would anyone have supposed that President George W. Bush would convene a global effort to renew Bretton Woods through strengthened international financial regulation? It reminds us that in the economic sphere, as in the national security sphere, dramatic events can make the inconceivable become inevitable.
Sarkozy’s attempted EU coup fails – for now Largely unnoticed, there was an attempted coup d’état of sorts in Europe last week. Nicolas Sarkozy, the French president, let it be known that he wants to remain in his role of “president of Europe” for another year. No, he will not prevent the Czechs and the Swedes from assuming the European Union’s rotating six-month presidency during 2009. But since the two countries are not members of the eurozone, Mr Sarkozy wants to remain the de facto president of the eurozone until the end of 2009 when Spain, a eurozone country, takes over from Sweden.
The Twilight of Free-Market Ideology When I heard Alan Greenspan's testimony before Congress last Thursday, I had one immediate thought: This is the beginning of the end for the free-market ideologues. According to press reports of the testimony, Greenspan told Congress that he "had put too much faith in the self-correcting power of free markets." That's no small statement. In fact, it struck me that if 1989 was the year when no reasonable person could still believe in communism (or any of its government-intensive relatives), then 2008 will go down in history as the year in which the free-market zealots saw their "wall" come crumbling down.
Sleepless in Tehran I've always been dubious about Barack Obama's offer to negotiate with Iran — not because I didn’t believe that it was the right strategy, but because I didn’t believe we had enough leverage to succeed. And negotiating in the Middle East without leverage is like playing baseball without a bat. Well, if Obama does win the presidency, my gut tells me that he's going to get a chance to negotiate with the Iranians — with a bat in his hand. Have you seen the reports that Iran's president, Mahmoud Ahmadinejad, is suffering from exhaustion? It's probably because he is not sleeping at night. I know why. Watching oil prices fall from $147 a barrel to $57 is not like counting sheep. It's the kind of thing that gives an Iranian autocrat bad dreams.
Japan Offers Stimulus Package to Spur Its Economy Japan announced a $51 billion fiscal stimulus package on Thursday to help households and businesses, the boldest of several measures that officials took to try to stanch the fallout from the global credit crisis, and prompting shares throughout the region to surge. Hong Kong and Taiwan cut interest rates, after a cut of half a percentage point by in rates by the Federal Reserve a day earlier. And South Korea established a $30 billion currency swap line with the Federal Reserve, a measure expected to ease pressure on local banks needing to refinance foreign debt. President Lee Myung-bak of South Korea also said his government would bring forward budget spending and consider beefing up construction spending.
Emerging economies a priority for Fed funds The Federal Reserve’s decision to lend Mexico, Brazil, South Korea and Singapore $30bn each marks both the spread of the financial crisis to the emerging world and the increased global significance and maturity of these economies. The move is a response to the intense demand for dollars on the part of banks and companies outside the US, which extends beyond the industrialised world to many emerging nations. The Fed is seeking to address these needs and promote global economic stability in partnership with the International Monetary Fund.
US closes Syria embassy for a day The US on Thursday closed its embassy in Syria for a day, amid increased tensions between Washington and Damascus after a US military attack killed a Syrian who was allegedly sending foreign fighters into Iraq. An anti-US demonstration is due to be held in Damascus to protest against Sunday’s US night raid on Bou Kamal, a Syrian village that is a main transit point into Iraq. The attack killed eight people including Abu Ghadiyah, who was alleged to have been supporting the insurgency in Iraq. Damascus has denied that the man was involved in terrorism.
Lights are on, but nobody is home Outside the Democratic party headquarters in Hannibal, Missouri, one of the party workers is leaning against the window having a smoking break. He points to the Republican HQ opposite. “You could aim a howitzer straight at them,” he says. Yes, but there wouldn’t be much point: you would be very unlikely to hit anything. One small mid-western town (population, 17,000) on the Mississippi, chosen at random, provides a vivid illustration of what is happening all over the country. Conventional political wisdom attests to the importance of work on the ground in winning votes. If there is any truth at all in that, then the 2008 election was over weeks ago.
Obama prepares for speedy transition Washington’s best-kept secret is that Barack Obama has the largest and most disciplined presidential transition team anyone can recall. Headed by John Podesta, former chief of staff in Bill Clinton’s White House, it started work well before the financial meltdown hit in September but has been swamped by its implications ever since. Transition insiders, who are under strict orders from the Obama campaign not to talk to the media to avoid giving the impression Mr Obama thinks he has won already, contrast it particularly with Mr Clinton’s transition in 1992, which was based in Little Rock, Arkansas, and turned into an extended symposium on every subject under the sun.
McCain, Palin criticize L.A. Times over Obama video The Times will not post video of a 2003 event attended by Obama and a Palestinian scholar, saying it made a promise to a source. On the campaign trail, the GOP nominees blast the newspaper's stance. John McCain and Sarah Palin, the Republican nominees for president and vice president, sharply criticized the Los Angeles Times today for withholding a video of a 2003 event in which Barack Obama, their Democratic rival, praised a Palestinian scholar. "It must be nice for a candidate to have major news organizations looking after his best interests like that," Palin said in Bowling Green, Ohio. "Maybe some politicians would love to have a pet newspaper of their very own. In this case, we have a newspaper willing to throw aside even the public's right to know in order to protect a candidate that its own editorial board has endorsed."
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Wed 10.29.2008
Another rate cut expected from Fed Fed expected to cut rates again as the central bank battles worst financial crisis in decades The worst financial crisis in 70 years has forced the Federal Reserve to employ all the weapons in its arsenal -- including cutting interest rates to near historic lows -- to try to keep the country from plunging into a deep recession. Fed policymakers are expected to slash a key interest rate by a half-point, pushing the federal funds rate down to 1 percent, as they wrap up a two-day meeting Wednesday.
Wall Street jumps again, but no one is exhaling Wall Street's best day in two weeks _ and one of its best ever _ brought little real reason to celebrate. Even the manic, final-hour of buying that sent the Dow Jones industrials soaring almost 900 points Tuesday was overshadowed by the reality that it could turn on investors in an instant. The extraordinary, lurching volatility that has gripped Wall Street since the financial meltdown began in mid-September meant there were no guarantees the rally would hold, not even for a few days.
Roubini Sees 'Significant Downside Risk' for Equities Nouriel Roubini, the New York University professor who predicted the financial crisis in 2006, talks with Bloomberg's Tom Keene and Ken Prewitt about the risk of "stagdeflation," the global credit crisis and the outlook for stocks. (Source: Bloomberg) Prospects for the U.S. and Global Economy in 2008... Risk of "stagdeflation" for global economies...Outlook for "long and protracted" recession ... Need for "massive" fiscal stimulus in U.S. ... Libor; credit crunch; banking crisis ... "Significant downside risk" for equities 10:50 Fed interest rates; Roubini's predictions ... U.S. consumers; oil prices; earnings ... "Dangerous" conditions in credit markets ... Outlook for "continued" fall in home prices.
'Significant Downside Risk' for Equities P1
'Significant Downside Risk' for Equities P2
White House to banks: Start lending now An impatient White House prodded banks and other financial companies Tuesday to quit hoarding billions of dollars flowing into their vaults from Washington and start making more loans. Wall Street soared nearly 900 points on bargain-hunting and hopes of a hefty interest rate cut by the Federal Reserve. The stock market's amazing climb, with its second-largest point gain ever, was a welcome burst of good news for a nation suffering big job losses and seemingly tumbling into a painful recession.
$7 Trillion and Counting The Bank of England reckons that governments have extended more than $7 trillion in aid to bail out the global financial system. One-third of that comes from the U.S. Governments worldwide have pledged more than $7 trillion in loans, guarantees, capital injections, and other assistance in their coordinated effort to prop up the global financial system, the Bank of England estimates. About one-third of the total has been offered by the U.S. government, according to the Bank's most recent Financial Stability Report, which it published today. As the Daily Telegraph in London notes, the global figure is equal to more than 12 percent of the world's total economic output this year.
Why Gold Price Rise Will Trigger U.S. Dollar Collapse For the last few years, the dollar has been in a bear market due to the horrible fundamentals backing the currency (the huge debt mountain, unfunded liabilities in the tens of trillions, rampant money printing by the central bank, and the huge federal budget deficit). However, in the last three months the US dollar has diverged from its fundamentals and rallied due to investors fears about deflation. Because they see parallels between today's credit crisis and the Great Depression, investors are piling into the dollar and treasuries. Since the results of 1929's housing and credit collapse was an increase in the purchasing power of the dollar (deflation), investors have come to believe that purchasing power of the dollar is also going to rise today. Based on this belief, investors are selling assets in other currencies and buying dollars, which explains why foreign markets and currencies are crashing at the same time right now. These investors are then taking their dollars and plowing them into the "safest" investment, short term treasuries. Investors are willing to accept the near zero interest rates on these short term treasuries because they expect the dollar's purchasing power to rise. Unfortunately for these investors, the purchasing power of the dollar is not going to increase.
Dubai runs out of gold on Diwali rush Dubai: A massive rush at jewellery shops has led to a shortage of gold at some outlets, prompting some shopkeepers to overcharge customers, Gulf News has learnt. Jewellers are seeing a huge rush of buyers as gold prices are currently at a two-year low. Shopkeepers said the rush, a combined result of the Hindu festival of Diwali and lower prices. has resulted in a shortage of gold bars. But they denied any hoarding by outlets. "There is enough gold available in the market and sales are at their peak over the last couple of days with the market falling drastically," jewellers said across the emirate. Gulf News received complaints from readers who encountered jewellers charging more than the market price.
David Walker - former Comptroller General, U.S. - "Washington is asleep!" 56 Trillion Dollar Debt America is Finished
The Four Horsemen of the Economic Apocalypse: Lessons from the Great Depression: Housing Distress, Stock Market Tanking, Commodities Collapsing, and Unemployment Surging. The market on Monday opened sharply lower only to quickly rebound on the early morning new home sales numbers. This was short lived because after you dig through the journalistic rhetoric you will find that this was the lowest September since 1981. It was hard to spin the report. This includes what should be the end of the strong summer selling season yet the data was simply not there. This in light of major price declines which gave home sales a modest monthly boost. At the end of the day, the market was down yet again sending the S & P 500 to 848 or a whopping 45+% drop from its peak only 1 year ago. These are epic numbers. Wicked swings on the up and downside are not good. This is massive volatility spurred by economic uncertainty.
Don't miss this one! --- understand what's going on in this economic shell game American Dollar down the tube America in Turmoils
IMF may need to "print money" as crisis spreads The International Monetary Fund may soon lack the money to bail out an ever growing list of countries crumbling across Eastern Europe, Latin America, Africa, and parts of Asia, raising concerns that it will have to tap taxpayers in Western countries for a capital infusion or resort to the nuclear option of printing its own money. The Fund is already close to committing a quarter of its $200bn (£130bn) reserve chest, with a loans to Iceland ($2bn), Ukraine ($16.5bn), and talks underway with Pakistan ($14.5bn), Hungary ($10bn), as well as Belarus and Serbia. Neil Schering, emerging market strategist at Capital Economics, said the IMF's work in the great arc of countries from the Baltic states to Turkey is only just beginning.
British Leader Calls for Larger I.M.F. Bailout Fund Prime Minister Gordon Brown of Britain called Tuesday for China and the Persian Gulf states to put up more money to help the International Monetary Fund deal with the fallout of the credit crisis. The appeal of Mr. Brown grabbed the spotlight ahead of a meeting on Tuesday with President Nicolas Sarkozy of France, who called the proposal interesting and vowed to work "hand in hand" with the British leader — just as they had on a coordinated rescue plan for European banks. Mr. Sarkozy said he also believed that the fund needed "additional means" to help ailing economies.
Struggling nations depleting IMF's bailout Brown urges China, Gulf to pay more With Iceland, Pakistan, Hungary and Ukraine already clamoring for mountains of cash, the $250 billion set aside by the International Monetary Fund to help struggling nations through the economic crisis is beginning to look puny. China and oil-rich Persian Gulf states should fund the bulk of a major boost in the IMF's bailout pot, Gordon Brown, the British prime minister who has burnished his reputation by taking the lead on the financial meltdown, said Tuesday.
Upping the Stimulus Dosage Insanity is often defined as repeating the same action while expecting a different result. Recent Congressional activity to push through this year’s second economic "stimulus" package certainly indicates that many of our political leaders may have special needs. Responding to the $150 billion stimulus that was passed at the beginning of the year, I made the following observation in my February 15th commentary Upping the Inflation Dosage : "The failure of the stimulus plan to cure the economy will cause the Government, and the Wall Street brain trust, to conclude that it was simply too small. Their next solution will be to administer an even stronger dose."
U.S. Treasury Shuns Banks That Need Cash Most in Buying Spree The U.S. government's $160 billion handout to banks from Niagara Falls to Beverly Hills is going mostly to lenders that need it least, putting weaker rivals at risk of being shut down or taken over, analysts say. "This has the unintended effect of making the strong stronger and the weak weaker," said Gray Medlin, founder of Carson Medlin Co., a Raleigh, North Carolina, investment bank focused on banking deals. "Banks that are getting bad exams and are under intense pressure from regulators won't be successful in applying."
How to Control a Currency Panic The financial crisis has ratcheted up a dangerous notch. The currency markets have gone topsy-turvy. The authorities now have to make some pretty big and delicate moves — something like performing microsurgery in a plane in turbulent skies. The yen has risen by 40 percent against the euro since August, with most of that occurring in October. This month, the Australian dollar has also fallen by 25 percent and the pound by 16 percent against the American dollar. Swings of this scale are alarming when they happen in the stock market . But they are petrifying in currency markets, because they make it virtually impossible to price exports or imports.
What’s going on?
US Treasury Bonds = Junk The Dollar is Dead
Rattled by Housing Slide, Consumers See Worse to Come Consumer confidence fell to its lowest level in at least 40 years, a survey said Tuesday, as falling home prices and steep declines in the stock market took a sharp toll on the faith of Americans in the economy. A widely watched survey by the private Conference Board, which dates back four decades, plunged to its lowest reading on record in October as Americans reported fewer jobs and smaller incomes and curtailed plans for major purchases like cars and appliances.
Congress Skimps on Highways, Caterpillar Sees Gap The morning rush in Philadelphia ran 30 minutes longer than usual earlier this month when a joint in the Interstate 95 roadway came loose, shutting part of the artery and causing traffic to back up at least two miles. The U.S. House's transportation panel will hear from 19 witnesses tomorrow on boosting infrastructure spending after Speaker Nancy Pelosi asked committee chairs to suggest contents for a potential post-election economic stimulus package. While the California Democrat hasn't announced a spending target, a plan last month included $12.8 billion for roads. That wouldn't be enough to plug a $19 billion hole projected in the federal Highway Trust Fund next year.
Stocks Soar on Hopes for Rate Cut A tug of war is in full swing on Wall Street and those pulling for stocks came out way ahead on Tuesday for the first time in a while. After four miserable weeks, a powerful afternoon rally left traders wondering if it was time to buy again. Shares, the bulls argued, have become too cheap to resist, despite signs of deepening trouble in the economy. Many other investors, however, remained unpersuaded. At about 2 p.m., the market exploded into one of its biggest rallies since World War II, with the Dow Jones industrial average closing up 889.35 points, or 10.9 percent, to 9,065.12. In the last 69 years, the Dow has gained that much on only one other day, and that was two weeks ago, on Oct. 13.
GMAC Wants to Become Bank After Getting Access to Fed Program GMAC LLC, the money-losing auto finance and home-loan lender, is seeking to become a bank holding company after gaining access to the Federal Reserve's new program designed to unlock short-term commercial credit markets. The Fed began buying commercial paper from companies this week to reduce interest rates and lure investors back to the market for short-term debt, which seized up last month following the bankruptcy of Lehman Brothers Holdings Inc. Detroit-based GMAC said yesterday it was approved to participate in that program.
CEO Cashes Out as Bank Seeks U.S. Loan The top executive at a midsize bank holding company is retiring with a more than $12 million payday, even as the company is applying for a government investment that could restrict such windfalls. The South Financial Group on Tuesday said Chairman, President and CEO Mack Whittle had left his post, effective Monday. Whittle had earlier said he would leave by the end of the year, and during a conference call to discuss the company financial results last week he made no indication the timing had changed. The unexpectedly sudden departure comes just days after the bank announced it plans to apply for a federal investment through the Troubled Asset Relief Program, or TARP, which contains provisions that void existing compensation agreements in order to prevent "golden parachutes." "The timing is precarious as hell," says Adam Barkstrom, analyst with Sterne Agee.
Still no end in sight House prices in America fall yet again THOSE looking for an end to America's housing bust will have to wait a little longer. Although sales of new homes rose slightly in September, prices are continuing to fall fast. On Tuesday October 28th the S&P/Case-Shiller index of house prices for ten cities showed a record decline of 17.7% in the year to September. The index has now fallen nearly three times as far as it did during the last big dip in 1991. The broader 20-city index has also touched a new low, sinking by 16.6%. Some observers think that house prices could continue to drop until the middle of next year.
Could the Dow reach 7,000? 700? Seven? Financial forecasters are in a race to call the bottom to the bear market. And just as on the way up, when analysts competed for attention with their forecasts of bigger and bigger gains, the financial pundit class now seems compelled to out-gloom the next guy. "To make a crazy forecast today is not crazy," said Owen Lamont, a former professor at Yale who has studied economic forecasting. "It's not crazy to predict the Dow is going to 2,000. That's in the realm of possibility." Indeed, in an era of 1,000-point daily swings in the Dow and 30 percent losses in the stock market, and in stock markets around the globe, prescience is at a premium - and the dividends of a high- profile correct call can be immense.
A sobering look at the UCC: How the world economies 'work' and the power of the world banks.
As Economy Slows, Lenders Begin to Curb Credit Cards First came the mortgage crisis. Now comes the credit card crisis. After years of flooding Americans with credit card offers and sky-high credit lines, lenders are sharply curtailing both, just as an eroding economy squeezes consumers. The pullback is affecting even creditworthy consumers and threatens an already beleaguered banking industry with another wave of unprecedented losses after an era in which it reaped near record gains from the business of easy credit that it helped create
Consumers Feel the Next Crisis: Credit Cards After years of flooding Americans with credit card offers and sky-high credit lines, lenders are sharply curtailing both, just as an eroding economy squeezes consumers. The pullback is affecting even creditworthy consumers and threatens an already beleaguered banking industry with another wave of heavy losses after an era in which it reaped near record gains from the business of easy credit that it helped create.
U.S. Growth Will Be Hurt More by Homes Than Stocks, Study Says Plunging home prices will cut economic growth in the U.S. more than the drop in stock prices this year, economists at the University of Southern California and the University of California, Los Angeles, said. A 10 percent decline in housing wealth results in a $105 billion, or 1.2 percent, reduction in personal spending, according to the three-year study by economists at the USC Lusk Center for Real Estate and the UCLA Ziman Center for Real Estate. Consumer spending accounts for about 70 percent of GDP, so that drop would result in a reduction in real GDP growth of 1 percentage point, the study said.
The Audacity of Hypocrisy REDISTRIBUTION BABY! BOTTOMS’ UP!
US consumers stop spending amid worries over jobs and homes Two sets of appalling data signalled that the worst may be yet to come for the American economy, increasing expectations that the US central bank will slash interest rates today. Statistics published yesterday showed the worst level of consumer confidence since records began in 1967 and the sharpest annual fall in urban house prices on record. Traders banked on at least a half-percentage point interest rate cut today, which would reduce the cost of borrowing to 1 per cent.
Wal-Mart cuts growth plans Wal-Mart Stores Inc. is navigating the global economic slowdown by scaling back its store growth and capital expenditures while focusing on remodeling existing locations and creating smaller outposts. The goal, Chief Financial Officer Tom Schoewe told analysts on its second day of the company's annual meeting with Wall Street analysts, is to continue to increase its cash flow to invest in its business, while delivering returns to shareholders through dividends and share buybacks.
World will struggle to meet oil demand Output from the world’s oilfields is declining faster than previously thought, the first authoritative public study of the biggest fields shows. Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times.
A Detroit Bankruptcy Beats a Bailout Not content with $25 billion in government loans to retool factories for fuel-efficient cars, the auto industry is already back at the trough, this time angling for a taxpayer investment in the firm that would result from a merger of General Motors and Chrysler. You can just imagine the pitch from the populists of the Michigan congressional delegation: If the government is willing to invest $250 billion to bail out pinstriped bankers, then the least it could do is throw an extra $10 billion to rescue the domestic auto industry and the millions of workers and retirees who depend on it.
Automakers seek govt aid beyond bailout and loans Beleaguered U.S. automakers are seeking federal help beyond the money available for them as part of a financial industry bailout and a loan package to fund more fuel-efficient cars, the White House said Tuesday. White House spokeswoman Dana Perino said the auto industry has talked to the Bush administration about funding on a much broader scale than the two programs approved by Congress earlier this fall.
Big Car Retailers Write Off Domestic Brands $$ Two big auto dealership chains delivered more bad news for domestic car makers: Many Detroit auto franchises have become practically worthless. In third-quarter earnings reports Tuesday, Group 1 Automotive Inc. and Sonic Automotive Inc. announced charges of a combined $51 million reflecting declining "franchise value" for stores that sell brands from General Motors Corp., Ford Motor Co., and Chrysler LLC. Franchise value is a measure of the potential profit a company can make from holding the right to sell new vehicles and to provide warranty repairs for a certain make of automobiles.
More Car Dealers Shut Down $$ Auto Sellers Turn Off Lights as Sales Slump, Credit Tightens With credit drying up and new-vehicle sales slumping to a 25-year low, car dealerships from New Jersey to California are going out of business at an accelerating pace, threatening greater economic pain for communities around the country. The National Automobile Dealers Association estimates 700 new-car dealerships will close this year, up from 430 last year, and taking with them an estimated 37,100 jobs. That is a heavy blow to a key piece of the U.S. economy. The country's 20,700 dealerships accounted for $693 billion in sales last year, or 18% of all retail sales, according to NADA. Dealership wages and salaries make up 13% of the nation's retail payroll.
Tight Credit for Farmers Leads to Smaller Crops, Higher Prices and More Hunger Tighter credit for farmers could worsen a global food crisis as smaller crop sizes cause prices to soar. Many farmers have traditionally bought pre-season supplies such as seeds and fertilizer on credit and then paid off the debt with the proceeds from the year’s harvest. But with a growing number of farmers unable to obtain the credit they need, crop yields will suffer. Global wheat production will likely be 4.4% less next year, Dan Basse, president of AgResource Co. in Chicago, told Bloomberg News. Basse believes the world’s corn and soybean crops will also see decline
A Scramble to Shore Up Economies Worldwide Policy makers around the world, unnerved by the relentless sell-off of shares, scrambled to support their economies on Monday. In South Korea, the central bank, at an emergency meeting, slashed its key rate by three-quarters of a percentage point, to 4.25 percent. The bank also announced that it would further shore up local banks by buying their domestic bonds.
Strong Banks Got Stronger in Rescue The Treasury Department's investment in banks is looking more like a vote of confidence than a rescue operation. On Monday, a host of regional banks unveiled some $34 billion in preferred equity investments made from the $700 billion bailout bill approved by Congress earlier this month. Most of the headlines Monday focused on the larger regional banks receiving the bulk of the investments, but a closer look at some of the smaller banks getting help highlights some very strong institutions that didn't need new capital to survive, reassure depositors or expand lending activity.
Banking misery engulfs Japan Until recently Japanese banks had largely avoided agonies of the credit crunch. Now the misery has come to Tokyo The Japanese banking sector, once considered a safe port in the global deleveraging typhoon, has begun to crumble in the face of stock market crashes and the destructive unwinding of the yen carry trade. The extent of the crisis emerged this week when the Nikkei 225 Index of Tokyo shares plunged to its lowest level since 1982, briefly breaking the 7,000-point level in a dip that analysts believe with have dire consequences.
In Japan, a Robust Yen Undermines the Markets Tumbling stock markets and falling currencies are causing global concern, but the Japanese yen is generating high anxiety for rising too much. The yen surged as much as 10 percent against the dollar last week. In the last month, it has gained an astounding 34 percent against the euro. One reason the yen is rising is investors’ flight to quality. Another reason, many economists say, is the sudden end of one of the world’s biggest easy-money schemes, the so-called yen-carry trade.
Iceland Raises Key Rate by 6 Percentage Points REYKJAVIK, Iceland — Iceland’s central bank raised its key interest rate by 6 percentage points, to 18 percent, on Tuesday, two weeks after it had eased policy to soften the impact of the country’s financial crisis. The move, which one economist called extreme, was the latest by authorities to prop up the country’s frozen currency and markets, offering investors a high return for putting money back into the North Atlantic island’s crippled financial system.
Netherlands Gives Aegon a $3.7 Billion Bailout The insurance company Aegon said Tuesday that it had taken an investment of 3 billion euros or $3.7 billion from the Dutch government, acting to shore up its cash position in the face of the continuing financial crisis. The company also said it expected to post a loss of around 350 million euros ($436 million) in the third quarter and canceled dividends and executive bonuses for the rest of the year.
The strike that shattered US-Syria ties Strained relations between Washington and Damascus shifted from bad to worse on Sunday when a United States commando raid on a Syrian border compound near the Iraq border reportedly left eight civilians dead - including one woman. Syrian television has called the attack an "American massacre", but details continue to emerge. The US broke its silence on the incident on Tuesday, claiming that top al-Qaeda operative Abu Ghadiyah was targeted and killed during what is being described in Western media as a pre-emptive strike. The Associated Press, quoting an unnamed US military official, reported that Ghadiyah was about to carry out an attack in Iraq. Ghadiyah, whose real name is Badran Turki Hishan Al Mazidih, is the leader a prolific network that moves foreign al-Qaeda fighters into underground resistance factions in war-torn Iraq.
Solana expresses concern at US air raid in Syria EU’s foreign policy chief Javier Solana has voiced concern at the US air raid against al-Qaeda in Syria on Monday that caused the death of civilians. "I am concerned at the air raid that took place inside Syria which resulted with the death of civilians," he said in a statement. Solana recalled that he was in Syria last week where he discussed with the Syrian authorities "prospects for improved stability and security in the region." "I hope the situation can rapidly return to normality," he added. During his Damascus visit, Solana held talks with Syrian President Bashar al-Assad and Foreign Minister Walid Muallem about the regional situation and the development of closer ties between the European Union and Syria.
Tehran: "Syria raid cannot be repeated in Iran" Iranian military officials have warned against a unilateral strike on Iran in the wake of a US raid against Syria. On Sunday, four US helicopters attacked a civilian building in the Syrian village of Sukkariyah, eight kilometers from the Iraqi border, killing nine civilians and seriously wounding 14 others. Deputy Army Commander Brigadier General Abdul-Rahim Mousavi told reporters on Tuesday that the time has come for the enemy to acknowledge Iran's defense capabilities.
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Did The "Chicago Way" Work for Obama in Hawaii? As I speculated in a recent article, Obama had a dual purpose in leaving his campaign for Hawaii. And whaddaya know? His plane had barely touched down from his trip to Honolulu—ostensibly to visit his ailing granny—when the Republican governor of the Aloha State, Linda Lingle, placed his birth certificate under seal, directed the state’s Department of Health to bar access of the document to the press, and declared that the only people eligible to obtain it were the person born or someone acting on his behalf, a relative, or a legal guardian… So did Obama request the document, the better to resolve the question of his eligibility to be president? With less than a week to go before the election – and with attorney Philip J. Berg’s lawsuit questioning that eligibility on the way to the Supreme Court – we still haven’t seen Obama’s birth certificate!
Obama's birth certificate sealed by Hawaii governor Says Democratic senator must make request to obtain original document HONOLULU, Hawaii – Although the legitimacy of Sen. Barack Obama's birth certificate has become a focus of intense speculation – and even several lawsuits – WND has learned that Hawaii's Gov. Linda Lingle has placed the candidate's birth certificate under seal and instructed the state's Department of Health to make sure no one in the press obtains access to the original document under any circumstances. The governor's office officially declined a request made in writing by WND in Hawaii to obtain a copy of the hospital-generated original birth certificate of Barack Obama.
Obama Bombshell Redistribution of Wealth Audio Uncovered
Obama rips U.S. Constitution Faults Supreme Court for not mandating 'redistribution of wealth' Seven years before Barack Obama's "spread the wealth" comment to Joe the Plumber became a GOP campaign theme, the Democratic presidential candidate said in a radio interview the U.S. has suffered from a fundamentally flawed Constitution that does not mandate or allow for redistribution of wealth. In a newly unearthed tape, Obama is heard telling Chicago's public station WBEZ-FM in 2001 that "redistributive change" is needed, pointing to what he regarded as a failure of the U.S. Supreme Court under Chief Justice Earl Warren in its rulings on civil rights issues in the 1960s.
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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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Mon 10.27.2008
Economic Basics and Today’s Gold Market A viewer was good enough to write and ask me about my claim that there either has to be currency appreciation or depreciation (deflation or inflation in today’s lingo). Can’t we have something like an inflationary depression? That indeed was what several of the people he regards as authorities are predicting. That is a good question because it leads to some very definite conclusions about whether to buy or to sell here in late October 2008. But first, let us step back and establish some basic ground rules.
Gold Drops as Stock Plunge Prompts Investors to Switch to Cash Gold fell in Asia as investors sold the precious metal for cash after equities extended a slump on concern the global economic slowdown is deepening and government measures won't be enough to stimulate growth. Asia's benchmark MSCI Asia Pacific Index fell for a fourth day, by as much as 6.2 percent, even after the Bank of Korea cut borrowing costs by an unprecedented 75 basis points and Japan said it will compile a package of measures to support the country's stock market.
Jim Rogers says gold is still in a bull market - he's BUYING and that people are turning this crisis into a depression because they won't let anyone fail.
Nouriel Roubini: I fear the worst is yet to come When this man predicted a global financial crisis more than a year ago, people laughed. Not any more... As stock markets headed off a cliff again last week, closely followed by currencies, and as meltdown threatened entire countries such as Hungary and Iceland, one voice was in demand above all others to steer us through the gloom: that of Dr Doom. For years Dr Doom toiled in relative obscurity as a New York University economics professor under his alias, Nouriel Roubini. But after making a series of uncannily accurate predictions about the global meltdown, Roubini has become the prophet of his age, jetting around the world dispensing his advice and latest prognostications to politicians and businessmen desperate to know what happens next – and for any answer to the crisis.
The Bet That Blew Up Wall Street Steve Kroft On Credit Default Swaps And Their Central Role In The Unfolding Economic Crisis The world's financial system teetered on the edge again last week, and anyone with more than a passing interest in their shrinking 401(k) knows it's because of a global credit crisis. It began with the collapse of the U.S. housing market and has been magnified worldwide by what Warren Buffet once called "financial weapons of mass destruction."
October Surprise: Preparing for Something Unexpected? At a news conference on October 22, 2008, U.S. Democratic presidential candidate Barak Obama was asked about a comment by his Vice Presidential running mate Joe Biden that Obama could expect to be tested within six months of the new presidential term by a "generated" international crisis that will force him to make unpopular decisions. Obama said the Delaware senator has occasionally engaged in "rhetorical flourishes," but the essential point was that the new President could expect to be challenged no matter who wins.
IMF's Unwelcome Return $$ Until recently, the International Monetary Fund looked analogous to postwar Britain, having lost a loan book but not yet found a role. Loans outstanding were $19 billion on July 31, against $105 billion five years ago. Falling interest income prompted cost cuts this year. Now the likes of Pakistan and Iceland need loans. Like many others, the IMF's fortunes have reversed as easy credit and commodity prices collapse. Until recently, many developing economies could either export surging commodities or borrow cheaply from private sources that rarely demanded austerity programs.
A New Bretton Woods to Restructure the International Financial System? The first thing to say about the calls for a “new Bretton Woods” is that they overreach, in the sense that it is very unlikely that any changes in the structure of the international monetary or financial system will or should, at this point in history, come out of multilateral discussions that are big enough to merit comparison with the first Bretton Woods. Certainly we are not talking about fixing exchange rates, as the 1944 meeting did.
Bretton Woods II Could Mark Shift Away From American Dominance You know that upcoming meeting of the G-7, dubbed "Bretton Woods II"? Well, it turns out it will actually involve some 20 countries and regions, including those with emerging markets. As US News and World Report puts it: "President Bush will meet not just with the traditional Group of Seven (G-7) cluster of industrialized countries but rather with the Group of 20. That larger forum brings in the major emerging-market nations. They include such rising powers and emerging economies as Brazil, India, China, Russia, South Africa, Mexico, and Turkey, among others."
A Study in Collapse The collapse of the capitalist world has begun, or so a Communist would explain. Karl Marx long ago anticipated a so-called "crisis of capitalism," when financial institutions would be convulsed and investors panicked. Such a situation would set the stage for a global Communist revolution. The working class would overthrow the bourgeoisie. The workers of the world would unite under Marxist leadership. The "dictatorship of the proletariat" would be born. Once Communism triumphed everywhere the state would wither away. Life would be better for nearly everyone (except the bourgeoisie). The means of production would be socially owned, instead of privately owned. The redistribution of wealth, the elimination of oppressive institutions and class distinctions would pave the way to a Golden Age. The ownership class would be exterminated or reeducated. Such is the revolution dreamt of by Marx and Engels, carried forward by Lenin and Stalin, and pushed today – amid the crash of 2008.
Uses for $700 billion bailout money are ever shifting First, the $700 billion rescue for the economy was about buying devalued mortgage-backed securities from tottering banks to unclog frozen credit markets. Then it was about using $250 billion of it to buy stakes in banks. The idea was that banks would use the money to start making loans again. But reports surfaced that bankers might instead use the money to buy other banks, pay dividends, give employees a raise and executives a bonus, or just sit on it. Insurance companies now want a piece; maybe automakers, too, even though Congress has approved $25 billion in low-interest loans for them.
Greenspan admits free market has foundered Whatever else you might say about the man, Alan Greenspan took his punishment like a grown-up. Appearing before the House Oversight Committee last week, the former Federal Reserve chairman acknowledged that the anti-regulatory, hyper-free-market ideology that had served him well for 40 years —- a philosophy that he literally learned at Ayn Rand’s knee —- had in some ways been wrong. And not just slightly wrong. The economic crisis has revealed a flaw, he said, "a flaw in the model that I perceived as the critical functioning structure that defines how the world works."
Socialism Takes Foothold after Train-wreck of Wall Street Capitalism The demonized word "socialism" has taken a foothold as the political dialogue increasingly centered on what the government could do to save the economy. It has been vigorously injected into political discussion in the United States since the 700 billion dollar bailout to overcome the train-wreck of Wall Street capitalism initiated by the US Treasury. Now it had taken a political turn as Barack Obama promised massive tax cuts to 95 percent of the people who are facing financial burden with a constrained economy.
The "dirty little secret" of the US bank bailout In an unusually frank article published in Saturday's New York Times, the newspaper's economic columnist, Joe Nocera, reveals what he calls "the dirty little secret of the banking industry"--namely, that "it has no intention of using the [government bailout] money to make new loans." As Nocera explains, the plan announced October 13 by Treasury Secretary Henry Paulson to hand over $250 billion in taxpayer money to the biggest banks, in exchange for non-voting stock, was never really intended to get them to resume lending to businesses and consumers--the ostensible purpose of the bailout. Its essential aim was to engineer a rapid consolidation of the American banking system by subsidizing a wave of takeovers of smaller financial firms by the most powerful banks.
U.S. Treasury to invest $395 million in Beverly Hills-based City National Bank. Treasury will invest $395 million in City National. CEO may use 'fortress balance sheet' to buy rivals. In a harbinger of what may be a flood of similar disclosures, City National Bank in Beverly Hills said Sunday that it would receive a $395-million capital infusion from the U.S. Treasury as part of the government's $250-billion bailout program. The bank said it had no "explicit or implicit understanding" with federal regulators about how it would use the money -- whether to increase lending in the community or acquire a specific bank.
Capitalism won’t die. It will only emerge stronger "We are suffering just now from a bad attack of pessimism. It is common to hear people say that the epoch of enormous economic progress . . . is over; that the rapid improvement in the standard of life is now going to slow down; that a decline in prosperity is more likely than an improvement in the decade ahead. I believe that this is a wildly mistaken interpretation of what is happening to us." So wrote John Maynard Keynes in 1928.
Treasury urged to aid car and insurance sectors The US Treasury is coming under increasing pressure to expand its financial rescue plan beyond banks to include direct assistance to the ailing car and insurance sectors. In recent days, lawmakers and interest groups have stepped up their efforts to persuade the administration of George W. Bush, US president, to divert part of the $700bn authorised by Congress to a range of companies that were not originally expected to be helped. The emergency legislation enacted this month gives the Treasury broad authority to buy any assets that are important for the stability of the US financial system.
How far should the U.S. 'bailouts' go? FORGET CONSERVATISM — President Bush is likely to go down in history using unprecedented government intervention in the economy. The question Americans must ask: Is that bad? Isn't that socialism? Or, rather, given the now-believed worldwide recession, how far should the United States go in emulating European countries in saving its economy? After promising Congress he wouldn't, Treasury Secretary Henry Paulson has reversed himself and followed Europe's lead in giving capital directly to U.S. banks.
Bailout a move for-socialized banking The financial institution ''bailout'' plan Congress approved earlier this month was controversial enough in the form presented to Americans. Lawmakers indicated that they would go along with a $700 billion program most people thought was intended to buy ''toxic mortgages'' from financial institutions. Another $150 billion in ''sweeteners,'' many of them involving outrageous pork barrel projects, was thrown into the package.
Look who pays for the bailout Meet the Henrys (high earners, not rich yet). They make $250,000-plus and get taxed to high heaven. And they're about to get socked again. Bill Kwon is the embodiment of the American dream. His father - who was arrested by North Korean Communists in the early 1950s for championing democracy - brought the family from Seoul to Illinois when he was a baby. Bill worked himself ragged pursuing every opportunity America's heartland offered, never leaving Peoria.
The man who predicted global markets meltdown Here’s a thought provoking article about an M.I.T.trained economist, Krishnamurthy Narayanan, whose GI Global Opportunities Fund has returned 57% in the past year and 19 per cent (compounded) over the past five years. For those of you who remain convinced of the long term invincibility of the U.S. dollar, he sounds a note of caution if not down right alarm. He also has some positive things to say about the Canadian dollar, gold, oil and uranium - hardly mainstream views these days. But his views were hardly mainstream a year ago when he warned about the financial crisis that is currently spreading like wildfire around the globe.
EXPLODING DEBT DYNAMICS Whither the dollar and gold? To answer that long-awaited inquiry – which will take some time to cover in full – let's start by getting a handle on "exploding debt dynamics." Cartoonish as it sounds, it’s a real term that IMF economists use. If, like me, the phrase gives you visions of Wile E. Coyote blowing himself up with a box of ACME brand dynamite, you aren't too far off. The technical meaning refers to the fallout from an ever-expanding debt-to-GDP ratio. Beyond a certain tipping point, a country’s debt burden becomes "explosive" as interest rates shoot higher, hope of payment recedes, and investors stampede for the exits.
Jim Willie - New world currency coming soon backed by gold!
Europe on the brink of currency crisis meltdown The crisis in Hungary recalls the heady days of the UK’s expulsion from the ERM. The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump. Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992. "This is the biggest currency crisis the world has ever seen," said Neil Mellor, a strategist at Bank of New York Mellon. Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The risk is a surge in capital flight from Austria – the country, as it happens, that set off the global banking collapse of May 1931 when Credit-Anstalt went down – and from a string of Club Med countries that rely on foreign funding to cover huge current account deficits.
Germany takes hot seat as Europe falls into the abyss We face extreme danger. Unless there is immediate intervention on every front by all the major powers acting in concert, we risk a disintegration of global finance within days. Nobody will be spared, unless they own gold bars. Investors will learn today whether the Paulson bail-out - fattened to $850bn by Congress - can begin to halt the death spiral in the credit system. So far, the response looks terrible. Germany is now in the hot seat. The collapse of a rescue deal for Hypo Real Estate on Saturday threatens a €400bn (£311bn) bankruptcy that nearly matches the Lehman Brothers debacle for sheer scale.
In Beijing, World Leaders Pledge Broad Reform of Financial System Leaders from Asia and Europe on Saturday called for new rules for and stronger regulation of the global monetary and financial system at the close of a two-day summit in Beijing as China assumed a leadership role in the crisis. Chinese Premier Wen Jiabao said the world's economic problems had become so massive that measures beyond the many multibillion-dollar bailout packages announced might be necessary to avert further damage.
Asia and Europe call for joint action on markets Heads of state from across Asia and Europe called for a coordinated response to the global financial crisis in a two-day conference in Beijing, an event that underlined China's growing role as a diplomatic counterweight to the United States. But the leaders fell short of offering specific solutions to the current economic troubles, which have shown no signs of slowing.
'President Clinton’s actions are partly responsible for the crisis we face' It is frightening to see large chunks of one's wealth disappear overnight. I have lost, regained and re-lost sums of money that are, to me, very substantial. It is worrying, too, not to know just how bad it might get. I find myself looking at my house and thinking, "Gosh. I still have that. The house is still standing." Thank goodness the mortgage is covered by my holdings of cash and bonds. There are some people, of course, who face potential bankruptcy if they lose their jobs and thus their ability to pay their mortgages. All this has happened with amazing speed.
U.S. has plundered world wealth with dollar: China paper The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday. The front-page commentary in the overseas edition of the People's Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies.
More weak data, hedge-fund selling seen this week Have stocks bottomed? It's possible, but economy, hedge-fund selling seen keeping things shaky In a typical recession, stocks start recovering about six months before the economy does. The crisis we're in right now, however, is anything but typical: Lending is frozen, hedge-fund selling is happening on a massive scale, and economic troubles have spread all over the globe.
World’s biggest hedge fund restructures amid turmoil The world’s biggest hedge fund is undertaking a radical restructuring amid a shake-up of the multi-trillion dollar industry which spells the end for thousands of its smaller rivals. Highbridge Capital Management, which is majority owned by JP Morgan Chase and has $25bn under management, is axing 10 per cent of its New York-based staff and plans cuts in Europe and Asia. The volatility in global stock markets has savaged the performance of some of the world’s best-known hedge funds, raising fears of a collapse in the sector, which could cause a fresh crisis in the financial system. Big names including Deephaven, Marshall Wace, Citadel Investment Corp, Lansdowne Partners, Third Point and Harbinger, have in recent weeks sustained losses of as much as 20 per cent in some funds.
Hedge Funds Slam 'Gates' on Their Edgy Investors $$ Some high-profile hedge-fund managers have restricted how much and when investors can withdraw their funds, as the industry struggles to stem a wave of redemptions and poor performance. The restrictions cover hedge-fund assets worth an estimated $21 billion. Centaurus Capital LP, and Polygon Investment Management Ltd. have put "gates" in place, limiting what proportion of assets investors can withdraw on one redemption date. Gottex Fund Management Holdings AG, Wermuth Asset Management GmbH, Auriel Funds PLC and Atlantis Investment Management Ltd. have suspended withdrawals in October until further notice. Atlantis said it did this to ensure all investors were treated fairly.
U.S. Dollar Currency Collapse Within 30 Days It appears that there is a common refrain going around the investment community. It goes something like this: "Gold should be doing better, and, since it isn’t, I am not going to buy it" Investors who believe this are making the mistake of thinking COMEX gold is the same as real physical gold. It is not. COMEX gold is a form of debt. It involves one party promising to produce gold (money) to another at a future date. Like all forms of debt, a COMEX futures contract is only as good as the counterparty behind the contract. Right now, because of low margin requirements, sellers of gold futures only have enough gold to cover 10% of outstanding contracts stored in COMEX warehouses.
Collapse of US Financial System: The Setting up of a “New Dollar”? In this 28th edition of the GEAB, LEAP/E2020 has decided to launch a new global systemic crisis alert. Indeed our researchers anticipate that, before next summer 2009, the US government will default and be prevented to pay back its creditors (holders of US Treasury Bonds, of Fanny May and Freddy Mac shares, etc.). Of course such a bankruptcy will provoke some very negative outcome for all USD-denominated asset holders. According to our team, the period that will then begin should be conducive to the setting up of a « new Dollar » to remedy the problem of default and of induced massive capital drain from the US.
Lindsey Williams - Dollar Collapse, Amero & hyperinflation August 11, 2007
With wreckage piling up, Fed eyes another rate cut With economic wreckage piling up, Fed weighs another hefty rate reduction As the economic wreckage piles dangerously higher, the Federal Reserve is prepared to ratchet down interest rates -- perhaps to their lowest point in more than four years -- with the hope of relieving some of the pain felt by many Americans.
The Whole System is Contracting Down for the Count "The great inter-war slumps were not acts of God or of blind forces. They were the sure and certain result of the concentration of too much economic power in the hands of too few men (who) felt no responsibility to the nation."From the 1945 UK Labour manifesto Let Us Face The Future There are signs that the credit crunch is easing. Interbank lending in dollars has fallen for a ninth straight day. The various indicators of stress in the market–Libor, the TED spread, and the Libor-OIS spread–are all gradually returning to normal, but the damage to the broader economy has been substantial.
Senator Warns of Revolution Senators don't normally use the word "Revolution". As a central part of the government, Senators do not normally wish to stir up any images of major challenges to power or of guillotines. . . . "If it turns out that they are hoarding, you’ll have a revolution on your hands. People will be so livid and furious that their tax money is going to line their pockets instead of doing the right thing. There will be hell to pay."
So When Will Banks Give Loans? "Chase recently received $25 billion in federal funding. What effect will that have on the business side and will it change our strategic lending policy?" It was Oct. 17, just four days after JPMorgan Chase’s chief executive, Jamie Dimon, agreed to take a $25 billion capital injection courtesy of the United States government, when a JPMorgan employee asked that question. It came toward the end of an employee-only conference call that had been largely devoted to meshing certain divisions of JPMorgan with its new acquisition, Washington Mutual. page 2 ... So When Will Banks Give Loans? .......Then, as Mr. Paulson divulged to The Times this week, it turns out that even before the bill passed the House, he told his staff to start drawing up a plan for capital injections. Fearing Congress’s reaction, he didn’t tell the Hill about his change of heart. Now, he’s shifted gears again, and is directing Treasury to use the money to force bank acquisitions. Sneaking in the tax break isn’t exactly confidence-inspiring, either. (And let’s not even get into the less-than-credible, after-the-fact rationalizations for letting Lehman default, which stands as the single worst mistake the government has made in the crisis.)
US public pension funds face big losses Public pension funds in US states are facing their worst year of losses in history, exacerbating existing funding shortfalls and putting pressure on state governments to shore them up. In the nine months to the end of September, the average state pension fund lost 14.8 per cent, according to Northern Trust, a fund company. The loss has grown since, as financial markets slumped further in October. The previous highest loss for state funds was 7.9 per cent for the full year in 2002. California’s Calpers, the US’s biggest pension fund, last week reported a loss of 20 per cent of its assets, or more than $40bn, between July 1 and October 20 this year.
Forecasters Race to Call the Bottom to the Market Financial forecasters are in a race to call the bottom to the bear market. And just as on the way up, when analysts competed for attention with their forecasts of bigger and bigger gains, the financial pundit class now seems compelled to out-gloom the next guy.
A growth industry: Tax collecting Several states are putting more money and personnel into cracking down on tax cheats -- large and small -- to cut into their growing budget deficits. The U.S. financial meltdown is creating brighter job prospects for at least one occupation: tax collector. Several states, including New York, Massachusetts, California and Illinois, are beefing up tax enforcement and collection efforts as they face widening budget deficits. "As their budgets quickly hit the skids and the pressure is on, they're going to be looking to see where those dollars are," said Verenda Smith of the Federation of Tax Administrators, an association of tax agencies from all 50 states.
Is Bankruptcy Your Personal Bailout? Bankruptices on the rise but the choice can have serious consequences With two million people losing their homes to foreclosure this year and unemployment at a five year high, personal bankruptcies are on the rise again as well, up more than 28% over last year. Expectations are that bankruptcies will top 1.1 million for the year. That's according to the American Bankruptcy Institute which reports American families are now going bankrupt at the rate of 22,000 a week, a figure that is trending upward as the nation falls deeper and deeper into a recession.
Bailout won't stop foreclosures - Fort Collins tenants be ready The government's bank bailout is not going to stop foreclosures. Could you come home from class one day to the surprise of all your possessions sitting on the curb? A lot would have to go wrong for this to happen in Colorado. As long as you read your mail, you should not be blind-sided by a foreclosure. Foreclosure is put into motion by a lender when a borrower has stopped paying on a loan. Here, the lender starts the process by sending a "notice to foreclose" to the Larimer County Public Trustee's Office. The Public Trustee sets the sale of the property 110 to 125 days later and mails a notice of the foreclosure and sale date to the occupants of the property.
Banks seize homes over credit card debt LONDON, Oct. 26 -- Banks and credit card companies in England are exploiting a legal loophole to seize homes of customers who cannot pay their credit card bills, experts say. People owing as little as $1,500 on such things as credit cards, car payments and personal loans have been served with charging orders, which enable a creditor to order the sale of a property, The Sunday Times of London reported. The newspaper said the controversial process emerged after Yvette Cooper, chief secretary to the Treasury, called on banks to do more to allow people to keep their homes.
Mortgage industry still mired in troubles Complex rise makes a fix hard Each day from July through September, more than 2,700 Americans lost their homes in foreclosure. That number, up from 1,200 a day a year ago, is a sign that the mortgage industry and government programs have done little to help troubled homeowners.
Spending Stalls and Businesses Slash U.S. Jobs As the financial crisis crimps demand for American goods and services, the workers who produce them are losing their jobs by the tens of thousands. Layoffs have arrived in force, like a wrenching second act in the unfolding crisis. In just the last two weeks, the list of companies announcing their intention to cut workers has read like a Who’s Who of corporate America: Merck, Yahoo, General Electric, Xerox, Pratt & Whitney, Goldman Sachs, Whirlpool, Bank of America, Alcoa, Coca-Cola, the Detroit automakers and nearly all the airlines.
Job Losses Buffet U.S. Early, Compounding the Downturn $$ Jim Vogel has been unemployed since May 2007, when he was laid off from FreightCar America Inc., a builder of rail cars in Johnstown, Pa. The 55-year-old machine operator has sent résumés to manufacturing companies and defense contractors but has gotten little response. Earlier this month, his unemployment benefits ran out. "Everything is tightening up," Mr. Vogel says of his job search. "I'm not even getting any rejection letters."
Secrets of the Bailout CNBC's Dylan Ratigan, host of 'Fast Money' and 'Closing Bell', tells TSC's Debra Borchardt why the lack of transparency in the bailout is a big problem.
Upside Down on Their Homes but on Top of Their Debts Think of them as the walking wounded. They are the homeowners who are upside down on their mortgages -- owing much more than their home is now worth. But they're still on their feet and still sending their payments each month. In this credit crisis, all the attention has been directed toward the critically injured, namely those owners who cannot afford their mortgages and are slipping toward foreclosure. The walking wounded don't rate life-support measures such as interest-rate reductions or a write-off of part of their debt. And we don't hear much about them.
A Hopeless Plan for Homeowners Debra Borchardt examines the latest plan from Fannie Mae designed to help struggling homeowners.
Bankruptcy Fears Rise as Chrysler, GM Seek Federal Aid $$ As talks between General Motors Corp. and long-time rival Chrysler LLC continued over the weekend, a harsh reality has emerged: Without a merger and possibly an assist from the federal government, two of Detroit's Big Three auto makers could run out of cash within a year.
General Motors, Driven to the Brink IN late May, senior executives at General Motors confronted a decision that few thought they would ever face: whether to continue developing the next generation of one of the most successful products in G.M.’s 100-year history — the full-size sport utility vehicle — or to punt the program entirely. It’s rare for an automaker to pull the plug on high-profile initiatives, much less one involving a $2 billion, top-to-bottom overhaul of a high-volume vehicle that once helped it rake in cash.
Scuttled Chrysler parts plant an emblem of uncertainty The construction crews have checked out of the Flamingo Motel, a $35-a-night motor lodge across the state road from a gleaming and still-unfinished auto parts plant that may never hire a single worker. "It's a big, sad story," said Kishor Patel, who owns the Flamingo and has watched guests slip away along with the town's dreams for a bonanza of 1,200 steady jobs making transmissions for Chrysler LLC.
Chrysler to Slash 25 Percent Of Its White-Collar Workers Chrysler told employees yesterday that it would be cutting 25 percent of its white-collar workforce by the end of the year to trim costs and warned of restructuring in the near future. The automaker, the smallest of Detroit's Big Three, will eliminate up to 5,000 employees. Next month, Chrysler will begin offering early retirements and buyouts to about 17,332 salaried employees and an undisclosed number of people who work for other companies under contract with the automaker. Without mentioning specifics, the company said it plans layoffs by the end of December.
Chrysler axes 5,000 white-collar jobs Detroit suffered a further blow yesterday with Chrysler announcing that it would slash one-quarter of its white-collar workforce, or almost 5,000 jobs, as merger talks with General Motors intensified. “These are truly unimaginable times for our industry”, Bob Nardelli, the carmaker’s chief executive, told employees in an e-mail. "Never before have auto industry sales contracted at such a fast rate."
Snipping, Clipping, Scrimping On Paper and Online, Coupons Are Coming Back Talia Holston used to spend about $150 a week to feed herself and her three children. Then she started using coupons, trolling the Internet for the best ones. Now, she spends about $200 a month on groceries. She once walked out of a CVS pharmacy having spent $50 for $200 worth of items. "Sometimes, it really feels like I'm robbing them," the Northwest D.C. resident said. "I sometimes feel bad." That is, until she looks at what stores are charging for food and toiletries these days. "The price of everything seems to be rising," she said. "When you walk out spending half what you would have, that feeling is mind-blowing."
Militarization of the American Homeland: Suppression of "Civil Disturbances" ACLU Demands Information on U.S. Military Domestic Operations On October 2, the American Civil Liberties Union (ACLU) filed a Freedom of Information Act (FOIA) request demanding information from the government on U.S. Northern Command’s (NORTHCOM) deployment of the 3rd Infantry Division’s 1st Combat Brigade Team (BCT) on U.S. soil for "civil unrest" and "crowd control" duties. Last month, Army Times published a piece detailing how the 1st BCT spent "35 of the last 60 months in Iraq." The 1st BCT–also known as the "Raiders"–carried out house-to-house raids and engaged in close-quarters combat in the city of Ramadi to suppress Iraqi resistance to U.S. occupation, according to a report on the World Socialist Website.
S.Korea announces record interest rate cut South Korea's central bank on Monday delivered its biggest ever interest rate cut and promised other measures to calm the panic that has been driving down financial markets and rapidly eroding economic growth.
Syrians Blame U.S. in Deadly Blast on Iraq Border An explosion on Sunday killed nine construction workers and wounded 19 others near the border of Iraq and Syria, the police in Anbar Province said. Local witnesses said they believed the blast was caused by American shelling, but Maj. Gen. Tariq al-Youssef, the provincial police chief in Ramadi, the capital of Anbar, which borders Syria, said that could not be confirmed. The police statement did not indicate on which side of the border the blast had taken place.
U.S. rearming Lebanon BEIRUT: For years, the Lebanese military was ridiculed as the least effective armed group in a country that was full of them. After the army splintered during the 15-year civil war, its arsenal slowly rotted into a museum of obsolete tanks and grounded aircraft. That is starting to change. At the gates of the military base in Karantina, just north of Beirut, groups of soldiers drive in and out all day in new American Humvees and trucks, some of them toting gleaming new U.S. rifles and grenade launchers.
'What's wrong with socialism?' Sometimes those of us who have been around awhile take too much for granted. I tend to assume, for instance, that most Americans understand socialism is an evil, immoral system of economics and government. But, then, occasionally, I'll get a letter from a young American who has been taught throughout his or her life that only the government can spread wealth fairly or that market economics is inherently corrupt. I got one of those this week. And I quickly realized why Barack Obama is on the verge of winning the presidency of the United States. So, I guess it's time to get back to basics with an answer to the fundamental question: "What's wrong with socialism?"
Obama's grandma confirms Kenyan birth 'This has been a real sham he's pulled off for the last 20 months' The Pennsylvania Democrat who has sued Sen. Barack Obama demanding he prove his American citizenship – and therefore qualification to run for president – has confirmed he has a recording of a telephone call from the senator's paternal grandmother confirming his birth in Kenya. The issue of Obama's birthplace, which he states is Honolulu in 1961, has been raised enough times that his campaign website has posted an image purporting to be of his "Certification of Live Birth" from Hawaii. But Philip J. Berg, a former deputy attorney general for Pennsylvania, told the Michael Savage talk radio program tonight that the document is forged and that he has a tape recording he will soon release.
Judge dismisses Obama birth certificate lawsuit Rules voters don't have standing to 'police' constitutional requirements for president A lawsuit filed by Democratic attorney Philip Berg alleging that Sen. Barack Obama is ineligible to be president was dismissed by a federal judge yesterday on grounds that Berg lacks standing to bring the lawsuit. In a 34-page memorandum that accompanied the court order, the Hon. R. Barclay Surrick concludes that ordinary citizens can't sue to ensure that a presidential candidate actually meets the constitutional requirements of the office.
Paulson: Trust McCain with job He has experience and will cut corporate taxes If you still have doubts about Barack Obama's readiness to lead, here are reasons to make Sen. John McCain your choice for president: In one word: trust. His "Straight Talk Express" is more than a slogan. He promised to join Obama in taking public funds; only McCain kept his promise. When Sen. Joe Biden talks of our enemies testing a President Obama's strength, we know past enemies have already tested McCain as a POW. He passed with flying colors. You can trust McCain to do what he believes is right for the country — "I'd rather lose an election than lose a war!" He has the maturity, integrity and proven character that only experience can affirm.
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Roubini Says 'Panic' May Force Market Shutdown Hundreds of hedge funds will fail and policy makers may need to shut financial markets for a week or more as the crisis forces investors to dump assets, New York University Professor Nouriel Roubini said. "We've reached a situation of sheer panic," Roubini, who predicted the financial crisis in 2006, told a conference of hedge-fund managers in London today. "There will be massive dumping of assets" and "hundreds of hedge funds are going to go bust," he said.
Roubini: 'Panic' May Force Market Shutdown P1
Roubini: 'Panic' May Force Market Shutdown P2
Roubini: 'Panic' May Force Market Shutdown P3
Roubini: 'Panic' May Force Market Shutdown P4
Roubini: 'Panic' May Force Market Shutdown P5
US Dollar Death Dance The USDollar rally in the last several weeks has been remarkable. At closer examination, it highly resembles a spurt prior to death. Imagine an old man who just had a heart attack, lost feeling in certain body parts, his mind not working right, plenty of nonsense gibberish coming from his mouth, and now he is dancing hard on some last gasps. The vast liquidation movement is akin to the old man going through an embalming process while dancing atop the tables at the funeral parlor, as bidding proceeds for his cadaver. Are Americans last to realize the financial structure destruction means the USEconomy does not enter a recession, but rather a bizarre unprecedented disintegration? It seems so. The liquidation of speculative positions, the massive de-leveraging, the payouts of defaulted bonds, these events are the opposite of developments toward revival or resuscitation, like business investment!! Liquidation is the exact opposite of investment, and precedes job cuts, not job creation.
Squeezed banks borrow record amount from Fed Banks borrowed in record amounts from the Federal Reserve's emergency lending facility over the past week, while investment banks drew loans at a slightly lower - but still brisk - pace, a fresh sign of the credit stresses bedeviling the country. The Fed's report, released yesterday, showed commercial banks averaged a record $105.8 billion in daily borrowing over the past week. That surpassed the old record - a daily average of $99.7 billion - from the prior week. On Wednesday alone, $107.5 billion was drawn, an all-time high.
Credit crunch upsets 30-year rate swaps The turmoil in financial markets has taken hold of the strategically important trade in long-term interest rate derivatives, pushing rates to levels once thought to be a "mathematical impossibility". Such interest rate "swaps" are the most widely traded over-the-counter derivative and are important for insurers, pension funds and other companies that need to fund liabilities decades in the future. Investors use swaps to lock in interest rates for 30 years or more, trading a floating rate, based on the London interbank offered rate (Libor), for a fixed rate. The latter is typically based on US Treasury yields, plus a premium, called the "swap spread", which reflects the risk of trading with a private counterparty, as opposed to the government.
U.S. vows more help for homeowners With foreclosures mounting, Bush administration officials said Thursday that they were preparing to step up efforts to help struggling homeowners. A senior policy maker told a Senate committee that the administration was working on a plan under which the government would offer to shoulder some of the losses on loans that are modified. The insurance program could cost tens of billions of dollars, according to a person briefed on discussions about the plan, and would be run by the Treasury Department under the $700 billion financial rescue bill Congress passed earlier this month.
West is in talks on credit to aid poorer nations With the financial crisis engulfing developing countries from Latin America to Central Europe, raising the specter of market panic and even social unrest, Western officials are weighing coordinated action to try to stabilize these economies. The International Monetary Fund, which is in negotiations with several countries to provide emergency loans, is also working to arrange a large credit line that would allow other countries desperate for foreign capital to borrow dollars, according to several officials.
Greenspan Concedes to 'Flaw' in His Market Ideology Former Federal Reserve Chairman Alan Greenspan said a "once-in-a-century credit tsunami" has engulfed financial markets and conceded his free-market ideology shunning regulation was flawed. "Yes, I found a flaw," Greenspan said in response to grilling from the House Committee on Oversight and Government Reform. "I was shocked because I'd been going for 40 years or more with very considerable evidence that it was working exceptionally well." Greenspan added he was "partially" wrong for opposing the regulation of derivatives.
Congress rips Greenspan for crisis Ex-Fed chief concedes to 'flawed' faith in markets Angry legislators Thursday officially threw former Federal Reserve Chairman Alan Greenspan off the pedestal that he once occupied as Congress' most respected economic adviser. In four hours of questioning before the House Committee on Oversight and Government Reform, the man once called "Maestro" for his mastery of nuance and ability to smoothly guide the economy through treacherous shoals acknowledged for the first time to making mistakes and misjudgments that contributed to what he called a "once-in-a-century credit tsunami."
Greenspan: 'credit tsunami' to have severe impact Former Federal Reserve Chairman Alan Greenspan told the U.S. Congress in prepared testimony Thursday that the current global financial crisis is a 'once in a century credit tsunami' that policymakers did not anticipate. Greenspan was to be the leadoff witness at a House hearing lawmakers called to question past key financial players about what they felt caused the most grave financial crisis since the 1930s. The witnesses were also expected to be asked how they thought the government would deliver the nation from the economic turmoil.
Marc Faber: US will go bankrupt
Dr. Doom on the Bailout - U.S. should already be a junk bond
Treasury To Invest In More Banks The Treasury Department will announce as soon as today that a group of large regional banks have agreed to accept investments from the government, industry sources said. The new banks would join nine of the largest American banks, including Bank of America and J.P. Morgan Chase, which were forced to accept $125 billion in funding last week.
Treasury Considers Backing Mortgages FDIC Proposal Aims to Help Homeowners The federal government may start guaranteeing home mortgages to persuade lenders to ease the monthly financial burden on struggling homeowners, Federal Deposit Insurance Corp. Chairman Sheila C. Bair said yesterday. The proposal, presented to the Senate Banking Committee, represents the most detailed idea yet on how the $700 billion federal rescue package might directly address the blight of foreclosures sweeping the nation.
Banks Face Another Wild Card $$ This financial crisis has shown that history is an unreliable guide for gauging future losses. Banks relying on historical models were fooled when it came to potential mortgage hits. They similarly miscalculated with structured-debt products. Now, the same may hold true for credit cards. Banks and big card issuers have seen card losses climb and are projecting that things will worsen in 2009.
Some hedge funds argue against proposals to modify U.S. mortgages Washington is pushing measures to help hard-pressed homeowners, but some Wall Street investors are pushing back. Hedge funds are fighting proposals to ease the terms of home mortgages, arguing that such a move would hurt their investments. Two funds recently warned mortgage companies that they might take action if the companies participated in government-backed plans to renegotiate delinquent loans in a way that undercut the funds' interests. The saber-rattling highlights the conflicting interests of various players in the mortgage arena and suggests that tensions are likely to intensify as government intervention in the market widens.
Banks' Unnerving Reserving $$ When a storm threatens, you batten down the hatches -- unless you are a bank, it seems. Despite the darkening outlook for the U.S. economy, few banks have taken extra precautions to protect against sharply higher bad-loan losses. Make no mistake: Banks have been building up some defenses against credit deterioration. In their third-quarter earnings, released over the past two weeks, they added large sums to their loan-loss reserves, the protective buffer on the balance sheet that absorbs credit losses.
Highway To Hell Premiums Soaring for Physical Bullion as Delayed Deliveries and Shortages Intensify Internationally COMEX gold continues to surprise to the downside despite the incredibly strong fundamentals of gold bullion itself with increasing shortages, delayed deliveries and premiums soaring for physical bullion in Asia, Europe, the US and internationally. Premiums have soared on smaller bullion products (from 1 ozt to 5 kilo gold bars) and look set to soon rise on the larger 100 and 400 ozt London Good Delivery gold bars. Large investors and bullion dealers are now looking to take delivery of the December gold contract and there is likely to be a significant number of longs who stand for delivery leading to COMEX warehouses being depleted and the increasingly ridiculous COMEX price then surging in value.
Gold prices plunge on recession fears, dollar gain Gold prices collapsed Wednesday, plunging to a 13-month low as a stronger dollar and growing fears of a global recession spurred investors to yank money out of commodities. A barrage of worrisome corporate earnings has deepened investors' pessimism about the direction of the economy, prompting them to shift funds into less risky assets like government bonds. At the same time, a sharply stronger dollar is feeding selling of commodities bought as a hedge against inflation and weakness in the U.S. currency.
Gold Rush Empties Supplies at Local Precious Metal Stores The global gold and silver shortage has hit local sellers hard in the last few weeks, leaving many without coins or bars of precious metals for the hordes of frenzied buyers preparing for economic Armageddon. "We have one one-ounce Panda," says one Phoenix coin seller, referring to China’s official gold coin. Another store says it has a waiting list for gold products, but doesn’t know when they’ll be available.
WORSENING US$ FUNDAMENTALS How many times have we seen the US stock market go down, non-government bond yields rise, the USDollar rise, and the USTBond yields fall? That has been the norm in the last few weeks. These are death signals, not investment signals. The USEconomy cannot afford liquidation and constricted credit, a well-known fact, seemingly forgotten today. These signals come amidst falling confidence, more bank distress measures, more job loss, more home foreclosures, and lately, trouble with letters of credit at port facilities.
U.S. senators press for action to stem foreclosures Senators prodded government officials involved in the bank-rescue plan to do more to help struggling homeowners avoid foreclosure and expressed impatience on Thursday over the pace of the unfolding program. The lawmakers on the Senate Banking Committee urged the officials, in effect, to make the banks do something for the homeowners in return for the billions that the banks are getting from Washington in infusions of capital meant to thaw the credit spigots and get the economy moving again.
Foreclosures Rose 71% in 3rd Quarter as Prices Fell U.S. foreclosure filings increased 71 percent in the third quarter from a year earlier to the highest on record as home prices fell and stricter mortgage standards made it harder for homeowners to sell or refinance, RealtyTrac said. A total of 765,558 U.S. properties got a default notice, were warned of a pending auction or were foreclosed on in the quarter, the most since records began in January 2005, the Irvine, California-based seller of default data said in a statement today. Filings rose 3 percent from the second quarter and fell 12 percent in September from August as state laws created to keep people in homes slowed the pace of defaults.
Foreclosures pull down values For the first time, homeowners can see exactly how foreclosures are affecting their home values. New data tracks the prices of homes taken back by lenders through foreclosure and then resold. It then compares that median price of the foreclosure resales to the median price of regular resales in a ZIP code. With that, homeowners can look at the overall median price for home sales in their neighborhood and see how much foreclosures are pulling down overall values.
Citadel founder forecasts choppy seas ahead Citadel Investment Group founder Ken Griffin forecast challenges ahead for hedge funds as the government attempts to resolve the financial crisis. "The key change in the next decade is that policymakers around the world have chosen the winners and losers," Griffin said at a Wednesday panel. "The winners are the banking system." By selecting commercial banks to become the centerpiece of the financial industry, the government closed the era of investment banks and hedge funds with highly leveraged balance sheets.
Ready for Downturn 2.0 Silicon Valley – which took the brunt of the dotcom bubble burst in 2000 – is putting the traumatic experiences of then to good effect now as hard times approach. With the benefit of hindsight, venture capitalists and entrepreneur survivors could write the book on what not to do in an unprecedented crisis, so the current meltdown of a different, macro?economic kind has seen them dusting off old memos and dealing out home truths to any start-up that will listen.
Forecast: 2 Years of Deflation, Followed by Raging Inflation I'm calling 1 1/2 to 2 years of deflation, followed by raging inflation. Deflation Now Richard Berner of Morgan Stanley, said: "A global recession is now under way, and risks are still pointed to the downside for commodity prices and earnings." Nouriel Roubini writes: "There is a glut and excess capacity of goods while aggregate demand is falling soon enough we will start to worry about deflation, debt deflation, liquidity traps . . . ."And an oxford professor of economics and expert on U.S. inflation thinks deflation is probably on the way.
Gold May Do Well During the Later Stages of Deflation Most people agree that gold does well during periods of inflation. But what about during periods of deflation? Leading economist Dr. Marc Faber wrote in October 2007 that gold will do well even in a deflation: How would gold perform in a deflationary global recession? Initially gold could come under some pressure as well but once the realization sinks in how messy deflation would be for over-indebted countries and households, its price would likely soar. Therefore, under both scenarios - stagflation or deflationary recession - gold, gold equities and other precious metals should continue to perform better than financial assets.
The personal cost of a global meltdown More than a million homes have been lost to foreclosure in the last two years in the United States. And according to data from Mortgage Bankers Association, banks are now in the process of foreclosing on 1.5 million more. The impact of the mortgage crisis has been obvious in both the worldwide credit crunch and the presidential campaign, where there has been a lot of talk about the plight of overextended homeowners. But the specific personal costs of home loss have been less evident, at least to those not paying them.
AT & T to raise monthly fee for basic service 23% The increase, to $13.50 from $10.94, will start Jan. 1 and will affect about half of the carrier's 6.5 million residential land lines in California. Monthly bills for customers with about half of AT&T's 6.5 million residential land lines in California will be affected by the change, spokesman H. Gordon Diamond said. The rest are part of phone-payment plans unaffected by the increase.
Restaurant industry is starving for customers As the economy worsens, Americans are eating out less, and more at home, to save money. With less foot traffic, businesses are seeing their sales and profits plummet -- and their expenses rise. Joseph and Victoria Hurley are the kind of customers that keep restaurateurs up at night. The Hurleys, parents of two young boys, have restructured their lives. The couple -- she's a marketing consultant and he's a much-traveled computer troubleshooter -- dumped their Jeep Grand Cherokee for a Lexus hybrid SUV that gets twice the mileage. Dinners out at places such as the Cheesecake Factory and the Daily Grill are rare treats instead of a weekly habit. "We're worried about the economy, and we feel like it's more prudent to eat at home rather than go out and blow a lot of money on a meal," Victoria Hurley said. The steady drumbeat of bad economic news "feels like kind of a tidal wave, and the rest of us are trying to bail out with spoons." Tough economic times are giving restaurant owners indigestion.
U.S. job numbers show credit crisis is hurting employment The number of Americans filing first-time claims for unemployment benefits rose last week, a sign the deepening credit crisis is hurting employment. Initial jobless claims increased by 15,000 to a larger-than-forecast 478,000 in the week ended Oct. 18, from a revised 463,000 the prior week, the Labor Department said Thursday in Washington. The number of people staying on benefit rolls was little changed, holding near the highest level in five years. The combination of tight credit and waning demand will cause more companies to retrench by trimming payrolls and investment.
Job losses accelerating, and the worst is ahead Unemployment claims, already well into recession territory, are rising even faster than expected, leading economists to warn Thursday that the worst is yet to come. As the Labor Department released bleak new numbers on the job market, Goldman Sachs, Chrysler and Xerox all announced they were cutting workers by the thousands, adding to the woes of an economy beset by tighter credit and wobbly banks.
Wall Street layoffs could surge past 200,000 Traders and investment bankers might have more to worry about than dwindling bonus pools this year as mass firings on Wall Street are set to hit a record. The fallout from this year's global credit crisis has claimed jobs on all corners of Wall Street, from hedge fund managers to floor traders and beyond. More than 110,000 have lost their jobs so far this year, and some industry experts forecast it could come close to 200,000 before the year is over. Even the financial industry's biggest name isn't immune. Goldman Sachs Group Inc., the world's biggest investment bank, made plans on Thursday to cut 3,200 positions from its staff of 32,000. Barclays Capital is in the midst of purging 3,000 jobs as part of its takeover of Lehman Brothers, and Bank of America Corp.'s acquisition of Merrill Lynch & Co. is sure to add thousands more.
Goodrich Says Boeing's 787 May Be Delayed to 2010 Boeing Co. probably won't deliver its first 787 Dreamliner until 2010 even if the strike by the planemaker's machinists ends this month, supplier Goodrich Corp.'s chief executive officer said today. The Dreamliner had already been delayed three times and was at least 15 months behind schedule when Boeing's 27,000 machinists walked out Sept. 6. The company has said the strike is causing a day-for-day delay to the 787, whose new delivery target was for next year's third quarter. A new round of talks between Boeing and the union starts in Washington today.
Rough road for Chrysler, GM Layoffs, cutbacks, plant closings jolt automakers Chrysler LLC, now in merger talks with General Motors Corp., said it will cut 1,825 jobs as it shuts a Delaware factory a year early and reduces output at an Ohio plant. Meanwhile, GM, the largest U.S. automaker, plans to eliminate more than the 5,000 salaried jobs it has already targeted and said it will stop contributing to some retirement-savings plans.
GM to Halt Savings-Plan Payments Amid Wider Slowdown General Motors Corp., the largest U.S. automaker, is suspending matching payments to employee 401(k) savings plans as it makes more cuts to conserve cash amid slumping sales in the U.S. and Europe. The match of as much as 4 percent of employee contributions will end Nov. 1, spokesman Tom Wilkinson said. The Detroit-based automaker will also end programs that assist with college tuition and child adoptions as of January, he said.
GM Halts Some Benefits, Plans to Trim More Jobs General Motors is suspending a variety of benefit programs for its white-collar workers and slashing additional jobs to cut costs -- a move that comes as employers nationwide begin to re-evaluate the cost of retirement and health-care packages in an effort to ride out the economic downturn. Cash-strapped GM, the largest of the Big Three Detroit automakers, plans to stop matching its nonunion employees' contributions to their 401(k) retirement savings plans beginning Nov. 1, the company said in an e-mail sent to its U.S. executives Wednesday. The company usually matches contributions of up to 4 percent of an employee's salary. On Jan. 1 the company also plans to shelve its scholarship program, as well as financial assistance for tuition and adoption.
Peter Schiff from 2008.10.23 about the dollar and gold (sound clip played on Thursday's show 10.23.2008)
Chinese banks brace for housing aftershock A soft-spoken electronics engineer with an aversion to parties, Liu Shirong does not mind living in a complex where only 50 of 780 apartments are occupied and the swimming pool is eternally empty. "I have peace and quiet at night," he said. Liu may like that tranquility, a rarity in this city of 12 million. But the vacant apartments are a nightmare for the mainly speculative investors who bought them when the complex opened a year ago - and they are part of an emerging problem for Chinese banks.
Worry About Big Asia Default Rises Pointing to the 1997 financial crisis has become an instinctive defense mechanism in Asia. But, "this is not 1997" is starting to wear thin as the risk of corporate defaults in the region rises. Certainly, companies and governments in Asia are in far better shape to survive credit market turmoil than they were a decade ago. Then 17% of rated high-yield borrowers defaulted. This faith has helped keep Asia's domestic bond markets -- where debt is denominated in local currencies -- functioning relatively smoothly, even if the cost of borrowing has increased with the global credit squeeze. But weaknesses are starting to emerge, and a default by a big borrower could spook investors. Trouble has emerged in the junk-bond market. Hong Kong's 3D-Gold Jewellery Holdings, hit by employee fraud, last week failed to pay interest on a $170 million bond.
Derivatives Spook Hong Kong Market $$ Financial derivatives: Thy name is mud. Hong Kong's investors are in a panic over the damage that sophisticated investment products might cause to the companies using them to manage exposure to foreign currency. It's not entirely unwarranted -- pardon the pun -- but it does highlight just how little faith investors have in governance at companies that may have a perfectly reasonable need for these contracts. The panic comes after Hong Kong-listed conglomerate Citic Pacific disclosed a possible $2 billion loss from bad bets on the Australian dollar. The fact that the investments were unauthorized, but placed by senior executives nonetheless, was a surprising disclosure from a company once regarded as a model of good corporate governance.
Corsi probing Obama's Hawaiian birth Unraveling evidence in questions over citizenship WND senior investigative reporter Jerome Corsi, who recently returned from a trip to Kenya with revelations about Democratic presidential candidate Barack Obama's participation in a foreign nation's internal politics, now has been dispatched to Hawaii to uncover the truth of the senator's Hawaiian birth. The issue has been raised multiple times during the 2008 presidential campaign, with a number of court cases already being launched that demand documentation about Obama's birth place. One prominent Pennsylvania Democrat, Philip Berg, has alleged that Obama was born not in Hawaii at all but in Kenya. Corsi plans to be in Hawaii for several days to review the evidence and records in the dispute.
Newspaper shows Obama belonged to socialist party Democrat's campaign denied allegations, but new evidence indicates membership Evidence has emerged that Sen. Barack Obama belonged to a socialist political party that sought to elect members to public office with the aim of moving the Democratic Party far leftward to ultimately form a new political party with a socialist agenda. Several blogs, including Powerline, previously documented that while running for the Illinois state Senate in 1996 as a Democrat, Obama actively sought and received the endorsement of the socialist-oriented New Party, with some blogs claiming Obama was a member of the controversial party.
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Thurs 10.23.2008
'Gold will go even to $2,000 in two years’ Expect short-term hesitancy in the upward movement of the gold price until liquidity returns to the markets, says Frank Holmes, CEO and chief investment officer at U. S. Global Investors and co-author of the new book “The Goldwatcher: Demystifying Gold Investing” (John Wiley & Sons). In this exclusive interview with The Gold Report, he predicts gold will go to $1,000, even $2,000, over the next two years. A growing money supply due to a change in government policies will help lift some juniors out of their misery, too. Holmes advises selective nibbling until conditions improve and names a few companies to consider.
Personal loans out, Gold is God now At a time when most banks have closed or scaled down the personal loans and other non-collateral lending, gold has come to the rescue of a large number of Indians who depend on loans for their business and other needs. And who else other than World Gold Council will be heartened to make this happen. Gold is a traditional and emotional investment in India and WGC is now engaging banks to have gold as collateral for personal loans.
Pay Attention To Indian Silver Buying Spree The massive correction in silver brings back Indian buyers. According to a Reuters story, Indians also shift to silver as the high silver/gold ratio of 80:1 makes the white metal appear cheaper to its competitor gold. Imports have jumped to 250 tons every month since August after a dull first half 2008 when record prices repelled buyers. Silver dramatically undershot my worst case scenario of a low at $14, trading briefly below $9 before it recovered to the current level around $10. The silver miners got knifed accordingly, playing out the bad side of beta with losses of up to 90% this year. But the Indian buying spree and losses in production because base metals mines are closing due to the price slump may be a solid base for the next upleg on fundamentals.
Presidential Change May Spur Attack, Chertoff Says Terrorists may see the change to a new U.S. presidency during the next six months as a prime chance to attack, no matter who wins the White House, Homeland Security Secretary Michael Chertoff said. "Any period of transition creates a greater vulnerability, meaning there's more likelihood of distraction," Chertoff said in an interview yesterday. "You have to be concerned it will create an operational opportunity for terrorists." The risk is the same whether Democrat Barack Obama or Republican John McCain is elected president on Nov. 4, he said. That comment undercuts McCain's argument that the U.S. would be more in danger of an attack if Obama, 47, wins.
Top Iran officials recommend preemptive strike against Israel Senior Tehran officials are recommending a preemptive strike against Israel to prevent an Israeli attack on Iran's nuclear reactors, a senior Islamic Republic official told foreign diplomats two weeks ago in London. The official, Dr. Seyed G. Safavi, said recent threats by Israeli authorities strengthened this position, but that as of yet, a preemptive strike has not been integrated into Iranian policy.
"Nuke strike would make 9/11 insignificant" and other weird warnings Over the last 72 hours there has been a strange melange of cryptic messages leaked from world political leaders about what could be in store for America over the next few months. These predictions of impending doom come from England, France, Australia and the United States. In each case there has been a press releases or news expose’ predicting huge and building threats emerging from faceless enemies in shadowy places. Crisis will lead to unpopular decisions by Barack Obama.
Nuclear incident would make 9/11 'insignificant': nuke commission The world is on the brink of an avalanche in the spread of devastating weaponry, a new global non-proliferation group warned Tuesday, saying that a nuclear incident would dwarf the September 11 attacks. The Middle East, particularly Iran, is a potential tipping point, according to Gareth Evans, co-chair of the newly formed International Commission on Nuclear Non-proliferation and Disarmament. Evans, a former Australia foreign minister, said the world had been "sleepwalking" on the issue of atomic weapons for a decade. "The devastation that could be wreaked by one major nuclear weapons incident alone puts 9/11 and almost everything else (in) to the category of the insignificant," he said, referring to the attacks inflicted on the United States in 2001.
Israel will hit Iran nuke sites, France's Kouchner warns Visiting French Foreign Minister Bernard Kouchner warned that Israel would strike archfoe Iran before it was able to develop nuclear weapons, in comments published on Sunday. "I honestly don't believe (a nuclear weapon) will give any immunity to Iran," Kouchner said in an interview conducted in English with Israel's Haaretz newspaper during a two-day visit to the region. "First, because you will hit them before. And this is the danger. Israel has always said it will not wait for the bomb to be ready. I think that (the Iranians) know. Everyone knows."
Joe Biden warns Barack Obama supporters of war and depression - "Gird your loins" Biden warns of International Crisis within six months of Obama Presidency "Mark my words. It will not be six months before the world tests Barack Obama like they did John Kennedy. The world is looking. We’re about to elect a brilliant 47-year-old senator president of the United States of America. Remember I said it standing here if you don’t remember anything else I said. Watch, we’re gonna have an international crisis, a generated crisis, to test the mettle of this guy." JFK faced down nuclear Armageddon. What type of international crisis is Biden talking about? Barack Obama has said he would send military aircraft into Pakistan and Iran in previous speeches. If he does this it could lead to a world war with Russia. Are they planning a world war?
Ballot debacle predicted for November 4 A "perfect storm" could be building for US election day on November 4 because of a combination of sky-high voter interest, new ballot machines and a shortage of poll staff, the independent Pew group warned yesterday. The Washington-based group set out a long series of problems still facing the US despite reforms aimed at avoiding a repeat of the 2000 and 2004 debacles.
"If you liked Act 1, just wait until Act 2!" . . . . The Fed’s response to the financial crisis has been more of the hair of the dog that bit ya. Virtually everything the Fed is doing is increasing debt, not decreasing it. It seems that the Fed’s theory is to keep the drunk drinking to avoid the inevitable hangover. As we have said many times, the longer you put it off, the worse the hangover will be. And we are due for a whopper, thanks to the bartender, I mean the Fed’s irresponsible actions.
Fears of Mortgage Rate Re-Sets May Fuel LIBOR Manipulation and Mask Deeper Banking System Problems It’s panic time for U.S. legislators, regulators, banks and lenders. More than $24 billion worth of adjustable-rate mortgages (ARMs) are expected to “re-set” to higher interest rates in November – boosting the likelihood of further home foreclosures. And it gets worse. That increase in borrowing costs will spread to other parts of the global debt market, representing an across-the board threat to corporate, institutional and sovereign borrowers. If interest rates remain high and interbank lending remains tight, the credit crisis is not likely to recede.
Fiscal Cat 5 Hurricane Warning You only think the Stock Market has been smashed. Just wait until you see what will come next. If you're playing "Buffett", following his claim (note: there is no penalty for lying on national television about what you're doing in your personal account) that he's buying here, there is a little ugly fact you need to be aware of. That fact is treasury issuance. See, to fund all this crap that Congress, Paulson and Bernanke have in the pipe (you know, the TARP, the newly-minted SIV that Ben announced this morning to buy commercial paper, etc) the treasury issue requirements will be north of three trillion dollars in this fiscal year. Oh, and that's before Obama wins (and he will) and promises another $1 trillion worth of new spending without a nickel's worth of ability to fund it.
CNBC stooges quarrel with Jim Rogers over hyperinflation
Inflationary Holocaust - Jim Rogers - Dollar Collapse - America Bailing Out Wallstreet (Incompetents And Crooks) At The Cost of The People
Bernanke May Seek New Ways to Ease Credit as Fed Rate Nears 1% Federal Reserve officials are likely to bring interest rates down so aggressively over the next few months that they will have to search for fresh tactics to continue easing credit. The Fed's Open Market Committee will probably reduce the benchmark federal funds rate by half a point next week to 1 percent, the lowest since May 2004, according to futures trading. The official rate has never been lower since the Fed made it an explicit target in the late 1980s.
FDIC: New foreclosure prevention plan on tap One of the country's top banking regulators said Thursday that the government is working on a plan to do more to help troubled homeowners. Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., told the Senate Banking Committee that her agency and the Treasury Department are working closely to find ways to prevent avoidable foreclosures. The plan would use the Treasury Secretary's new authority under the Emergency Economic Stabilization Act to provide guarantees to mortgage lenders. "Loan guarantees could be used as an incentive for servicers to modify loans," Bair said. "Specifically the government could establish standards for loan modifications and provide guarantees for loans meeting those standards."
Jobless claims increase as labor market weakens Jobless claims increase more than expected as layoffs rise, labor market deteriorates New claims for jobless benefits increased by more than expected last week as companies cut jobs due to the slow economy, the Labor Department said Thursday. The Labor Department said new applications for unemployment benefits rose 15,000 to a seasonally adjusted 478,000, above analysts' estimates of 470,000. Former Federal Reserve Chairman Alan Greenspan said the job market will likely get worse. "Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment," Greenspan told a House committee Thursday.
US working on plan to help homeowners refinance Bank regulator says US working to help besieged homeowners refinance; Greenspan grilled The federal government is working on a loan-guarantee plan that could help many homeowners escape foreclosure, a banking regulator told Congress Thursday. At the same time former Federal Reserve Chairman Alan Greenspan said the financial crisis will get worse before it gets better. Accused of contributing to the meltdown, but denying that it was his fault, Greenspan told a House panel the crisis left him -- an unabashed free-market advocate -- in a "state of shocked disbelief." Federal regulators told Congress they were making steady headway in confronting the worst financial crisis since the 1930s as committees in both the House and the Senate held hearings on a contagious financial collapse that has infected global markets.
Bush invites world leaders to summit The G-8 (even Russia) plus 12 should make for a head-turning summit President Bush today invited leaders of the world's industrial powers to an economic summit in Washington starting on Nov. 15. The president will officially be a lame duck at that point, yet the economic crisis underway will be foremost on the mind of his successor and the world's other leaders. The invitations for a summit on the global economic crisis have gone out to members of the other G-8 nations and 12 more players: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union.
US to host G20 world summit over crisis Global stock markets plunged on Wednesday as the White House said it would invite world leaders to a global financial summit next month, 11 days after the US presidential election. The S&P 500 fell more than 6 per cent to close at its lowest level in five years, while London’s FTSE 100 lost 4.5 per cent and Japanese stocks dropped 6.8 per cent. The stock-market retreat came as prices for oil and gold fell sharply and European currencies slumped against the dollar and yen as traders bet on interest rates being slashed to offset a looming recession.
Bush's Financial Crisis Summit President Bush plans to host a major economic conference with many of Europe's top leaders in order to address the worldwide financial meltdown. Kimberly Dozier reports from the White House.
Bush invites world leaders to Washington for economic summit President George W. Bush has invited the leaders of 20 nations to come to Washington on Nov. 15 for an international summit meeting on the economy, the White House said Wednesday. The meeting could eventually lead to a far-reaching overhaul of the rules governing global financial markets. The meeting, intended to be the first of several global economic meetings, will come less than two weeks after the U.S. presidential election, and its timing underscores the urgency the Bush administration feels in addressing the financial crisis. The White House said that Bush would "welcome input" from the president-elect, although it is unclear if Bush's successor will attend.
Europe Seeks to Implement New Bretton Woods Fiat Currency System Bretton Woods was effectively an exchange rate mechanism, were gold backed the new kid on the world block, namely the post war US dollar and all other currencies floated around the dollar in a fixed range. If a currency moved too far either way of the range then the respective Central Bank stepped in and delivered the appropriate medicine. However the US dollar was pegged to the price of gold which was fixed at an official rate of $35. All went well until one or two countries, well, mainly France decided that they wanted the gold that backed the dollar reserves they had accumulated by repatriating the dollars back to Uncle Sam.
Getting Ready for "The Turn" in the Dollar Over the years, I have written a number of controversial articles, some which were correct, and some which were off base. Like a player that bats .300 in baseball, in the financial markets, if you can correctly see what’s coming next more then half the time, you are doing reasonably well. I start today’s article on this note because I know that right here, right now, this article and this call are bound to be among the most highly controversial and represent one of the more aggressive calls I have made in some time. Yet, looking at the state of the currency markets, it appears as though a truly major turn is dead ahead. Now, I am writing this article from the point of view of a market technician, and I want to state up front that I have no idea "why" the Dollar will weaken, and why the Euro will bounce back. For whatever reason, I would assert that at the moment, an "inflection point" of epic proportions is now directly ahead.
US Dollar Still the Safe-Haven of Choice – More Gains in Store? Despite dismal fundamentals, the US dollar rally continues to dominate as it remains one of the strongest currencies, second only to the Japanese yen. The Federal Reserve is still struggling to stabilize the markets as banks remain worried about counterparty risk and are avoiding lending. As a result, the Fed said they would raise the interest rate paid on bank reserve balances in an attempt to keep liquidity in the financial system without impacting their monetary policy.
Max Keiser - Special Liquidity Schemes, Gold and the Dollar
Commodities Bull Run Ahead Global crisis aside, commodities will roar again, and soon, says Jim Rogers, CEO of Rogers Holdings. "We have had eight or nine periods of forced liquidation over the past 100 to 150 years wherein everything was liquidated without regard to fundamentals. This is such a period," Rogers told the Web site Commodity Online. A slowdown in China and economic malaise in the United States and Europe have hit commodity prices short term, Roger says, but nothing about the basics of supply and demand have changed.
Dow Gold Ratio Hits 80 Year Extremes, Time to Buy? YOU MIGHT LIKE to know, if you put store by such things, that the US stock market just sank to a 14-year low against gold. With the Dow Jones index dipping below 9,000 last week, the price of gold held near $850 an ounce – at least until last Thursday's AM Gold Fix in London. So the Dow/Gold Ratio – which simply divides the one by the other, thus pricing the Dow Jones Industrial Average in ounces of gold – fell to a little above ten, making the 30 stocks of the DJIA cheaper in Gold Bullion terms than at any time since January 1995. Y'know, like the Tech Stock Bubble and Reflation Rally were merely a dream Alan Greenspan had after eating wild mushrooms and blue cheese right before bedtime.
Gold can plunge to $600 soon September 17, 2007. Ten days after the beginning of the Fed rate cuts (and financial market turmoil) that would eventually bring gold to $1033.90 on March 17 of 2008. That's how long ago it was that gold traded at $720 per ounce. We have now come full circle. The metal is currently showing a 20% loss over one month, and 3.5% on the one year timetable. Our long-stated (and much derided) $732 objective has been achieved, of that there is no doubt. The remaining question now emerging is: has gold seen its lows, or are we at the start of a phase in the mid-to-high $600's?
'Comex paper gold can not manipulate gold price' When will Comex paper gold no longer be able to manipulate the price of gold as they did today and most every day for the last many years? Can the Comex paper gold exchange default? . . . . The Comex will no longer be able to manipulate price as Asia recognizes the dangers inherent in financial institutions and are therefore channelling their business into the cash bullion market. The Asian demand in the cash market then will not be of the kind that runs away from paper supply, but rather one that stands still and takes it. Should there be a shortfall of gold in the bullion market, delivery will be taken out of the COMEX warehouse to make cash bullion deliveries.
Bearish Outlook on the Markets A look at why U.S. investors should brace themselves when foreigners come to their senses, with Peter Schiff, Euro Pacific Capital Inc. and CNBC's Rick Santelli
War between paper gold and bullion gold It is axiomatic that the most leveraged gold market most often (95 percent of the time) sets the price of any cash market. First derivatives (listed futures) commands price. This remains true as long as the COMEX warehouse of gold is NOT meaningfully depleted by long gold contracts by taking delivery from the exchange warehouse. As long as an exchange maintains a warehouse that historically overwhelms historical demand for delivery the first derivative, The COMEX listed gold future, will be the primary cause of price.
Gold May Pay Only in Case of Maximum Despair Gold is for rich guys -- buying physical gold, that is. The metal's highest and best investment use is as insurance policy against a currency collapse. For that purpose, you need a lot of it, stored around the world. Owning 20 or 30 coins is nice but won't protect your standard of living in a world where dollars are dust. Gold isn't even a reliable hedge against inflation. It reached $850 an ounce in January 1980, a price not seen again until January 2008. During those intervening 28 years, gold plunged and reared but lost more than half of its purchasing power. For a 1980 investor to break even after inflation, gold would have to reach $2,200.
The bail-out threat to free markets As the global financial crisis deepens, European leaders are making a virtue of big government and state intervention. This is a dangerous path to take. Corporate bail-outs beyond the banking industry may now be an inevitable consequence of decisions to save the banks and, in the US, to lend billions of dollars to, say, the automotive industry. The siren calls should be resisted. Some European Union leaders affect to believe the crisis has ex?posed the failures of US-style free markets and justifies a return to the state’s historically strong role in setting European economic policy. Their response has struck a popular chord. Italy’s Silvio Berlusconi basks in media adoration for his state-sponsored rescue of Alitalia, the collapsing airline, and promises of help for carmakers. Nicolas Sarkozy, France’s president, advocates creating European sovereign wealth funds to save companies that are vulnerable to takeover by non-European predators.
The Myth that Laissez Faire Is Responsible for Our Financial Crisis The news media are in the process of creating a great new historical myth. This is the myth that our present financial crisis is the result of economic freedom and laissez-faire capitalism. . . . . Beyond all this is the further fact that the actual responsibility for our financial crisis lies precisely with massive government intervention, above all the intervention of the Federal Reserve System in attempting to create capital out of thin air, in the belief that the mere creation of money and its being made available in the loan market is a substitute for capital created by producing and saving. This is a policy it has pursued since its founding, but with exceptional vigor since 2001, in its efforts to overcome the collapse of the stock market bubble whose creation it had previously inspired.
Greenspan Urges Tighter Regulation After 'Breakdown' Former Federal Reserve Chairman Alan Greenspan called for tighter regulation of financial companies, distancing himself from the free-market culture that he helped to create. Firms that bundle loans into securities for sale should be required to keep part of those securities, Greenspan said in prepared testimony to the House Committee on Oversight and Government Reform. Other rules should address fraud and settlement of trades, he said. Greenspan's office released the text ahead of the hearing scheduled for 10 a.m. in Washington.
Struggling to keep up as crisis raced on "I feel like Butch Cassidy and the Sundance Kid. Who are these guys that just keep coming?" — Treasury Secretary Henry Paulson Jr. It was the weekend of Sept. 13, and the moment Treasury Secretary Henry M. Paulson Jr. had feared for months was finally upon him: Lehman Brothers was hurtling toward bankruptcy — fast. Knowing that Lehman had billions of dollars in bad investments on its books, Mr. Paulson had long urged Lehman’s chief executive, Richard S. Fuld Jr., to find a solution for his firm’s problems. "He was asked to aggressively look for a buyer," Mr. Paulson recalled in an interview.
Horse is already out of the barn . . . . Senators Seek to Ensure Bank Injections Boost Lending A group of Democratic senators asked the U.S. Treasury Department on Wednesday to set guidelines saying that banks receiving government capital injections should use the funds to restore their lending activities to levels prior to the credit crunch. The senators said in a letter that Treasury officials should also issue guidelines or best practices that specify the type of lending allowed, encourage loan modifications, and provide more oversight of executive compensation. "Although we are supportive of your efforts to restore stability to the financial system through direct capital injections into financial institutions, we are concerned that if the program is not implemented correctly, its effectiveness will be limited," the letter said.
Recession Will Last At Least Two Years: Roubini The US economy is entering a two-year recession that will be longer and deeper than previously feared, said Nouriel Roubini, a well-known economist and professor at New York University. "I believe we're going to have two years of negative economic growth," Roubini said on CNBC. "The last two recessions lasted only eight months each ... This time around this is going to be three times as long, three times as deep. This is going to be the worst recession the US has experienced since the 1980s."
Roubini on The Unfolding Financial Crisis P1
Roubini on The Unfolding Financial Crisis P2
Hedge Funds' Steep Fall Sends Investors Fleeing The gilded age of hedge funds is losing its luster. The funds, pools of fast money that defined the era of Wall Street hyper-wealth, are in the throes of an unprecedented shakeout. Even some industry stars are falling back to earth. This unregulated, at times volatile corner of finance — which is supposed to make money in bull and bear markets — lost $180 billion during the last three months. Investors, particularly wealthy individuals, are heading for the exits.
How hedge funds manipulate markets!
Five Ways to Fix Our Financial Architecture Some urgent reforms need to be made to the architecture of international financial regulation, but talk of a second Bretton Woods conference is misleading. Neither the International Monetary Fund nor the World Bank is a financial regulator in the sense of being a body that sets the rules for and supervises individual institutions. Those important tasks are carried out by less glamorous entities such as the Basel Committee and the International Organization of Securities Commissions. The real issues relate to the way in which these bodies carry out their jobs.
Credit Default Swaps, Part Two: ICE and Other Exchanges My favorite investment in the CDS market to be is the Intercontinental Exchange (ICE). Founded in the year 2000 in Atlanta, the ICE pioneered the market for WTI Crude [West Texas Intermediate Crude]. Most of this commodity is from smaller wells in Texas and Oklahoma. Plus, the ICE recently has benefited from the surge in sugar and coffee prices [and hence traders were buying/selling these contracts to hedge their volatile positions]. Anyway, the ICE has benefited from providing liquidity in the commodity market - and their purchase of the NYBOT was accretive to earnings from an early stage [from the get-go in fact]. Some analysts have recently downgraded the ICE and reduced earnings estimates by a little.
Markets hold breath as $360bn Lehman swaps unwind The $54trillion credit derivatives market faces a delicate test as $360bn worth of contracts on now-defaulted derivatives on Lehman Brothers are due to be settled on Tuesday. Due to the opacity of the market, which is one of the most complex, least regulated and least understood in the global financial system, it is still not clear how many contracts have to be settled or which institutions will take the ultimate hits once the billions of dollars worth of contracts have been unravelled. The collapse of Lehman Brothers, is expected to trigger credit default swap (CDS) protection pay-outs of about $400bn but because the contracts were sold many times through different counterparties it is not yet known who will be liable.
Banks Face More CDO Writedowns A Vicious CDO Circle - Subprime Losses Trigger Writedowns, Banks Fail as a Result, Triggering Losses on Bank Circuit; Synthetic CDOs Trading at Less Than 10 Cents Per Dollar; Lehman as Well as Icelandic Banks Failed; CDOs Paying Claims on Bond Losses
Job Losses Accelerate, Signaling Deeper Distress Employers are moving to aggressively cut jobs and reduce costs in the face of the nation's economic crisis, preparing for what many fear will be a long and painful recession. The labor market has been weak all year, with a slow drip of workers losing their jobs each month. But the deterioration of the job market is now emerging as a driver of economic distress, according to a wide range of data and anecdotal reports from corporate America.
PBGC (Government Pensions) Lost $1.2 Billion in Investments The government agency that insures private-sector pension plans for millions of Americans lost $1.2 billion in the past 11 months to Aug. 31, including a $3.1 billion loss in stock investments. The Pension Benefit Guaranty Corp. incurred the loss even before the stock market's historic tumble last month, according to preliminary unaudited figures released by the House Education and Labor Committee.
Willie Sutton Goes to Harvard "Because that's where the money is." -- Willie Sutton, when asked in 1934 why he robbed banks Washington is having a Willie Sutton Moment. Such moments occur when government, finding its revenue insufficient for its agenda, glimpses some money it does not control but would like to. Sen. Charles Grassley (R-Iowa) and Rep. Peter Welch (D-Vt.) recently convened a discussion of how colleges and universities should be spending their endowments.
The Trouble With a Homeowner Bailout In the government’s ever-morphing efforts to save the financial system, the moment when the nation’s homeowners get rescued seems, finally, to be getting near. John McCain has called for the Treasury Department to spend $300 billion buying up mortgages, and Barack Obama now favors a version of an idea he opposed during the primaries: a 90-day moratorium on foreclosures. Sheila Bair, the head of the agency that guarantees bank deposits, said last week that it was time for the government to shift its focus away from banks and do more to prevent foreclosures.
U.S. spending forecast points to recession In a season with plenty of chilling numbers, try this one: American households have lost something in the order of $7 trillion of wealth this year alone. That ballpark estimate of the damage done to households implies that personal spending will be cut back even more sharply than is already showing up in data. The debit side of personal balance sheets doesn't look so good either; credit is tougher to get and more expensive and banks are increasingly asking for their money back where they can.
For fallen bankers, sorry may be the hardest, and smartest, word No one expects a fallen Master of the Universe to say sorry. But some academics say that an apology - even for all the litigation risk it might entail - can be the basis of revitalized confidence and trust. With global markets paralyzed by the inability to rely on a counterparty, and as trust and accountability form the heart of debates about effective regulation, a slice of humble pie now might help bankers earn trust in the future.
Regional Banks Post Large Loan Losses This blog noted in May, thanks to comments from Chris Whalen of Institutional Risk Analytics, that the well publicized losses at large banks were soon to be followed by significant writedowns at mid and smaller sized banks. Whalen saw the wheels starting to come off in the June-July timeframe, meaning they would show up in third quarter earnings reports
Public-assistance numbers grow in Colorado The foundering economy has homed in on people unaccustomed to food stamps and unpaid bills. The woman fidgeted just outside the office door, wondering aloud if they could fit her in that day, if she should come back later — or if she even should have come in the first place. She had found the Douglas/Elbert Task Force a little before the nonprofit opened on a Monday morning — only to find more than a dozen adults and a handful of small children already occupying the small waiting area. A few more stood outside in the hallway, waiting for help with rent, with utilities, or with clothing and groceries. "It's embarrassing," said the 48-year-old woman, a laid-off real estate office administrator so mortified by her unemployment that she didn't want her name used. "I have a lovely apartment, nice furniture, thousands of dollars in nice business clothes in my closet. "And here I am."
Wall Street facing heavy job losses Wall Street could face tens of thousands more job losses as a result of the banking crisis and see average pay drop by more than a quarter, a report from the New York Federal Reserve suggested on Wednesday. In a comparison with previous financial sector downturns, the report said the current crisis shared characteristics with market problems in the late eighties and early years of this century. Employment in those periods fell 17 per cent and 12 per cent respectively, while in the early 2000s salaries fell 27 per cent.. There were 460,000 jobs in New York finance in September, according to Moody’s economy.com. A contraction of 12-17 per cent would be equivalent to 55,000 - 78,000 lost jobs.
Merck to cut 7,200 jobs U.S. pharmaceutical giant Merck said Wednesday it would trim its workforce by 7,200 positions by the end of 2011. The 12 percent job reduction was part of a cost reduction plan aimed at saving $3.8 billion to $4.2 billion by the end of 2011, the company said.
Goldman Sachs said to cut 10 percent of work force Goldman Sachs Group Inc. is cutting about 10 percent of its work force amid the ongoing downturn in the credit and lending markets, a person briefed on the plan said Thursday. Goldman Sachs will cut about 3,260 jobs. Goldman's work force, which was at record high levels at the end of the third quarter, will be pared back close to 2006 and 2007 levels. No additional cuts are planned, the person said. The job cuts are a direct result of the current economic environment and significantly lower levels of business activity, the person told the Associated Press.
Chrysler cutting 1,825 jobs with moves at 2 plants Chrysler LLC will cut 1,825 jobs by eliminating one shift at a Toledo Jeep plant and accelerating the closure of its sport utility vehicle factory in Newark, Del., because of the slowing global economy and a shift toward smaller vehicles. About 825 workers at the Toledo North Assembly Plant will be laid off indefinitely as of Dec. 31. The Newark closure also will be effective at the end of the year and affect about 1,000 jobs, the company said Thursday in a news release. The cuts are about 6 percent of Chrysler's U.S. hourly work force of 33,000.
A.I.G. to Suspend Millions in Executive Payouts The beleaguered insurer American International Group has agreed to suspend payments to executives from a $600 million bonus fund as well as $19 million in payments to its former chief executive, the New York attorney general announced on Wednesday. The moves are the latest steps in an effort by the attorney general, Andrew M. Cuomo, to prevent bonuses and other compensation to former executives at A.I.G., which in recent weeks has received tens of billions of dollars in loans from the Federal Reserve.
Latinos Account for Half of U.S. Population Growth Since 2000 Since the turn of the century, Hispanics have accounted for more than half (50.5%) of the overall population growth in the United States -- a significant new demographic milestone for the nation's largest minority group. From April 1, 2000, to July 1, 2007, the Hispanic population grew by 10.2 million to 45.5 million, an increase of 29%. During this same period, the much larger non-Hispanic population of the U.S. grew by 10 million, an increase of just 4%. As of mid-2007, Hispanics made up 15.1% of the total U.S. population but accounted for a majority of the nation's total population growth since 2000. During the 1990s, the Hispanic population also expanded rapidly, but over the course of that decade its growth accounted for less than 40% of the rise in the nation's total population.
Lobster prices tank as diners claw back spending Lobster's price collapse boils down to supply glut, as Maine catches tail end of credit crisis The price of Maine lobster, which accounts for 80 percent of the U.S. catch, is tanking. The primary factor, a drop-off in demand by penny-pinching diners, has been in place since summer. But a secondary problem recently surfaced: the global banking crisis left Canadian processors short on credit, trapping Maine lobstermen and dealers with too much supply. While bargains abound for lobster lovers throughout the Northeast, there's growing angst in New England fishing communities. One small village held a lobster bake on the town pier to unload excess lobsters and help out the local fishing fleet.
MGM Mirage shares plunge on ratings cut MGM Mirage shares plunge on Fitch downgrade linked to financing worries for CityCenter resort Shares of casino operator MGM Mirage Inc. plunged nearly 14 percent Wednesday after Fitch Ratings downgraded the company on worries about financing its $9.2 billion CityCenter megaresort. Shares slid $1.97, or 13.7 percent, to $12.44. Earlier in the session, shares hit a 52-week low of $11.76. The stock is down 85 percent so far this year. Fitch cut its rating on the company's issuer default probability, senior notes and senior credit facility to "BB-" from "BB" and trimmed its rating on senior subordinated notes to "B" from "B+". All ratings are considered non-investment or junk grade.
After the House Is Gone MORE than a million homes have been lost to foreclosure in the last two years. And according to data from Mortgage Bankers Association, banks are now in the process of foreclosing on 1.5 million more. The impact of the mortgage crisis has been obvious in both the worldwide credit crunch and the presidential campaign, where there has been a lot of talk about the plight of overextended homeowners. But the specific personal costs of home loss have been less evident, at least to those not paying them.
So you think this is a free country - Free speech suppressed at Biden event On October 21st Joe Biden was inside the Adams City High School in Commerce City, Colorado talking about "the change we need." Outside the event the only change being made is the attempted eradication of free speech. But not for everyone just for those who do not like the corporate control of Washington. You are still free to support corruption and worship chosen political candidates but don’t you dare challenge the status quo.
WeAreChange Colorado Members Harassed by Police Outside Biden Event
OPEC tests prospect of a cut in Russian oil production As oil prices tumble amid fears of a worldwide recession, OPEC has been testing the prospects of Russia joining in production cuts to help support global prices, something the authorities in Moscow have not been willing to do in former downturns. So far, Russia has again been noncommittal in high-level meetings including an unusual visit by OPEC's secretary general, Abdullah al-Badri, to Moscow on Wednesday. Russia is the largest oil producer not in the Organization of Petroleum Exporting Countries.
OPEC Risks Split on Cuts as Economies Reel, Oil Drops OPEC, founded five decades ago to unify oil producers, risks dividing members as the group plans to cut output and raise prices just as developed nations face their worst recession since 1983. Iran's energy minister, Gholamhossein Nozari, said yesterday OPEC may slash output quotas by 2.5 million barrels a day, or 8.7 percent, an amount about equal to what's pumped from Kuwait. The Algerian minister and OPEC president, Chakib Khelil, said two days earlier the reduction at the group's Oct. 24 meeting in Vienna may be only 1 million barrels.
Copper Plunges Below $4,000 for First Time Since November 2005 Copper tumbled below $4,000 a ton for the first time since November 2005 on deepening concern a global economic slump will damp demand for commodities. Australian, New Zealand and Japanese shares dropped on increasing signs the world's economy has slipped into a recession. BHP Billiton Ltd., the world's biggest mining company, lost 11 percent after metal prices plummeted.
Hyundai Motor Profit Tumbles 38% on Strike, Warranty Provisions Hyundai Motor Co., South Korea's largest automaker, reported a 38 percent drop in third-quarter profit because of falling global demand, strikes and the impact of a weaker won on overseas warranty costs.
Owner said to weigh selling Chrysler in pieces Person briefed on talks says Chrysler could be sold in pieces to other companies Chrysler LLC could be sold in pieces to other companies as its majority shareholder Cerberus Capital Management LP seeks to exit the auto business, according to a person briefed on the discussions. Cerberus, the New York-based private equity firm, has been shopping the beleaguered automaker to General Motors Corp., the combined Nissan Motor Co. and Renault SA and other companies.
Marble for Unknowns tomb just sits The chunk of stone ready to be donated by a Glenwood Springs man is stalled again. Retired Glenwood Springs car dealer John Haines' hope of donating a giant chunk of snow -white marble to the federal government to replace the cracked Tomb of the Unknowns at Arlington National Cemetery is stalled again. Haines' hoped-for donation, which has sat outside the Yule Quarry near Marble since it was cut for the tomb in 2003, didn't even rate a mention in a 34-page Department of the Army report to Congress this week on replacement and repair options for the deteriorating tomb.
Rich-poor divide widens, says OECD The gap between rich and poor has widened in most developed countries over the past two decades as economic growth has benefited the wealthy more than the poor, according to the Organisation for Economic Co-operation and Development. Mid-way through this decade, Mexico and Turkey had the highest inequality in incomes, followed by Portugal and the US. Denmark and Sweden were the most equal societies in terms of income disparity in the 30-nation study.
Citic Pacific Tied to Australian Dollar After Losses Citic Pacific Ltd.'s attempt to manage currency risk means the Chinese steelmaker and property developer has four times more money riding on the Australian dollar than it earned last year.
Asian markets fall after opening Wall Street blues spread to Asian-Pacific markets Thursday as Japan's Nikkei index led the sell-off in early trading. The 225-stock Nikkei, which took a big hit the previous day on the Tokyo Stock Exchange, dropped more than 7 percent before paring some of the losses after opening Thursday as investor sentiments were badly shaken by the Dow's 515-point loss on Wall Street. A strengthening yen added to their woes.
U.S. imposes sanctions on Iran's Export Development Bank In yet another action to step up pressure on Iran to discourage it from pursuing a nuclear weapons program, the United States on Wednesday imposed sanctions on the Export Development Bank of Iran. The punitive action reflects Washington's opposition to the bank's involvement in the controversial nuclear activities of Tehran.
Mexico attacks ‘unethical’ derivatives selling Mexico’s central bank chief has accused investment banks of behaving irresponsibly and unethically in marketing derivative products to companies – warning that the problem extended far beyond Mexico. In recent weeks, many of Mexico’s biggest corporate names have admitted billions of dollars of mark-to-market losses through exchange-rate derivatives, sold by banks as a form of insurance against currency movements. Companies in other emerging economies, such as South Korea and Brazil, have also suffered big losses.
Debt Default Looms for Argentina Argentina to Seize $29 Billion of Funds; Argentina Last Defaulted in 2001; President Fernandez Says Argentine Plan Will Help Retirees and Workers
Brazil gives go-ahead to aid Brazil’s government-controlled banks have been given the green light to help prop up financial institutions owed money from companies that have made bad bets on the country’s currency amid growing concerns about the level of exposure. Sadia, a food processor; Votorantim, an industrial conglomerate; and Aracruz, one of the world’s biggest paper and pulp manufacturers, have admitted to heavy losses on currency derivatives after Brazil’s currency, the real, devalued sharply against the US dollar in the past few months after appreciating steadily for almost four years.
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Wed 10.22.2008
US government throws oil on fire Free-market fundamentalists have been operating in denial mode for more than a year, since the US financial sector imploded in a credit crisis from excessive debt in August 2007, claiming that the economic fundamentals were still basically sound, even within the debt-infested financial sector. As denial was rendered increasingly untenable by unfolding events, champions of market fundamentalism began clamoring for increasingly larger doses of government intervention in failed free markets around the world to restore sound market fundamentals. For the market fundamentalist faithful, this amounts to asking the devil to save god.
Fed Steps in with $600 Billion Plan to Bolster Money Market Funds The U.S. Federal Reserve yesterday (Tuesday) announced a new program that will provide as much as $600 million in emergency funding to money-market funds should the ongoing global financial crisis once again cause the short-term credit markets to freeze out borrowers. The newly created Money Market Investor Funding Facility (MMIFF) will help money market funds meet redemption needs and keep from “breaking the buck” – dropping below the normal $1 in net asset value – as The Reserve Primary Fund did after the collapse of Wall Street investment-banking giant Lehman Brothers Holdings Inc.. Struggling money-market funds that have seen more than $500 billion in redemptions since Lehman’s demise.
'When Inflation Erupts, Gold Will Take Off' . . . . Based solely on global economic indicators, commodities should be in a cyclical bear market with no bottom in sight. But there’s intense pressure on policymakers to fill the deflationary vacuum that’s been created by both Main Street and Wall Street. Main Street’s plummeting housing prices stretched the limits of the financial system, but lawmakers in an election year will find it easier to blame Wall Street than Main Street. . . . . We’re actually experiencing huge deflation—in housing and on Wall Street. It’s not inflationary yet. The Paulson package is a stopgap measure that could lead to inflation. This meltdown is just like 1974 or the Depression of the 1930s, not the 1987 quick crash. It continues to destroy confidence. Another thing that propelled this meltdown to more disastrous proportions was the rule that removed the uptick rule for short-selling. . . . . Over the next two years gold will be well over a $1,000, maybe running up to $2,000. The number-one Asian analyst, Chris Wood, is advocating a 30% gold exposure to institutions. . . . . Whether you have big deflation or big inflation driving the bear market, gold does well. If it’s just a normal cyclical inventory recession or whenever interest rates are above the CPI rate, gold doesn’t do well. Today, the Fed’s funds are below the CPI rate and the printing presses are busy.
Metal keeps drying up as Comex pretends otherwise Today brought a couple more notable comments about the disparity between the price of real gold and silver in hand and the price of gold and silver futures on the New York Commodities Exchange. First from market analyst and mining company consultant Peter Grandich, now writing daily at Agoracom: "There's an old saying: 'Don't fight City Hall.' I have a new one: 'Don't fight the bandits on the Comex.' "There's no rational explanation for the incredible disconnection between gold's physical demand and the paper trading of it on the Comex.
Weak earnings rouse worries about global recession Administration says it will take time for the economy to recover as corporate earnings totter A barrage of poor earnings Wednesday from major corporations revived worries of a global recession and showed the depth of the financial crisis the Bush administration is trying to tackle. Wachovia Corp., which is being bought by Wells Fargo for about $14 billion in stock, said it lost $23.89 billion in the third quarter. It earned $1.62 billion in the same quarter a year ago. Airplane maker Boeing reported its earnings slumped 38 percent as a strike halted production of commercial jets.
Dow futures fall 165 on more recession fears Dow futures fall 165 on fears about corporate earnings and chance of deep recession Wall Street headed for a sharply lower open Wednesday as investors again shifted their focus away from improving credit markets and fixated on worrisome corporate earnings that are raising fears of a deep and painful recession. Ahead of the market's open, Dow Jones industrial average futures fell 165, or 1.82 percent, to 8,870, but came off its lows reached earlier in the morning.
CDO Cuts Show $1 Trillion Corporate-Debt Bets Toxic Investors are taking losses of up to 90 percent in the $1.2 trillion market for collateralized debt obligations tied to corporate credit as the failures of Lehman Brothers Holdings Inc. and Icelandic banks send shockwaves through the global financial system. The losses among banks, insurers and money managers may spark the next round of writedowns on CDOs after $660 billion in subprime-related losses. They may force lenders to post more reserves against losses after governments worldwide announced $3 trillion in financial-industry rescue packages since last month, according to Barclays Capital.
Pay-up time for Lehman swaps This Tuesday will be the first really interesting day in the financial markets since the day last week when US Treasury Secretary Paulson partially nationalized the nine largest US banks. October 21 sees the settlement of the credit default swaps (CDS) issued on Lehman Brothers debt. First the facts. A CDS, or credit default swap, is essentially an insurance against losses if an issuer of debt goes bankrupt and cannot honor its obligations. Those who have sold the protection will then compensate the loss to those who have bought the protection. Estimates say that Lehman debt amounts to some US$150 billion. Other estimates say that Tuesday will see settlement of about $360 billion worth of nominal CDS contracts.
Sounds fishy?
Life preserver for U.S. homeowners under water In the U.S. government's ever-morphing efforts to save the financial system, the moment when the nation's homeowners get rescued seems, finally, to be getting near. John McCain has called for the Treasury Department to spend $300 billion buying up mortgages, and Barack Obama now favors a version of an idea he opposed during the primaries: a 90-day moratorium on foreclosures. Sheila Bair, the head of the agency that guarantees bank deposits, said last week that it was time for the government to shift its focus away from banks and do more to prevent foreclosures.
Gold has been and remains money Inquiry into condition of the gold market - part 1
Inquiry into condition of the gold market - part 2
Inquiry into condition of the gold market - part 3
Which? urges bailed-out banks to pass on rate cuts The consumer group Which? today called on the UK's bailed-out banks to pass on interest rate cuts to consumers. Following the multi-billion pound rescue package for failing UK banks, Which? has written to chancellor Alistair Darling demanding that those banks that received cash injections from British taxpayers pass on base rate changes to their mortgage customers immediately.
U.S. Federal Reserve adds to efforts to aid credit markets Adding to its efforts to unclog the credit markets, the U.S. Federal Reserve said Tuesday that it would provide financing to shore up money market mutual funds, the consumer investments that have traditionally been considered as safe as government-guaranteed bank accounts. Under the program, the Fed will help buy up to $600 billion in short-term debt, including certificates of deposit and commercial paper that expires in three months or less. This type of debt has historically been used by money market funds seeking safe, conservative returns for their clients. But the recent market turmoil caused a prominent fund to fall below $1 a share, an extremely rare occurrence.
Scandal hinders IMF's role in global lending The International Monetary Fund, onetime firefighter for the global economy, is suddenly being called back into action, even as its chief stumbles on his way to the rescue. The fund is nearing agreements to make emergency loans to Iceland and Ukraine, and discussing aid packages with Pakistan and Hungary — moves that would thrust it into the thick of a global crisis after a frustrating period in which it was a bystander.
Pound falls to five-year low as Bank head admits recession is here Sterling was hammered down to a five-year low against the dollar today and the FTSE 100 dropped by almost 200 points after Mervyn King admitted for the first time that the UK is entering a recession. The pound began tumbling last night as the Bank of England governor told business leaders in Leeds that the economy is shrinking and hinted at fresh interest rate cuts.
Idea of sovereign wealth funds divides Europeans With some European corporate gems trading at beaten-down prices because of recent market turbulence, President Nicolas Sarkozy of France on Tuesday suggested that European leaders should set up their own sovereign wealth funds to buy stakes in crucial industries to shield them from potential foreign raiders. The widely differing reactions to the French proposal refocused attention on the fierce tug-of-war under way between those European countries eager to see government take a more active and expansive role in responding to the financial turmoil and its impact on the economy, and those intent on keeping state intervention to an absolute minimum.
A FINANCIAL NEW WORLD ORDER? Bush says reforms must improve, not fetter, the free market; Europeans hint at more robust intervention. When President Bush hosts a world financial summit in the coming weeks, one of the least multilateral American presidents in decades will set in motion what could result in a full reordering of the global financial system. The series of summits that Mr. Bush announced over the weekend at Camp David with European leaders at his side suggests a broad understanding among them: that the current crisis requires the kind of global regulatory reforms that have eluded major powers in the past.
Gliding toward nuclear war? Soaring, cryptography and nuclear weapons Let's face it, nuclear weapons are the elephant in the room that no one likes to talk about. So let's approach the issue from the less threatening perspective of the awesome picture of the glider. The glider looks like it's suspended above the runway, but in reality it's screaming toward the photographer at over 200 kilometers an hour in a maneuver known as a high-speed low pass. The pilot starts about 2,000 feet (609 meters) high and over a kilometer from the runway. He then dives to convert altitude into speed and skims the runway. Next, he does a steep climb to reconvert some of that speed into altitude so he can turn and land.
Shattered illusions of liquidity The substantial reserves of central banks and their acolytes, sovereign wealth funds, are frequently cited in support of the case for a large pool of “unleveraged” liquidity, that is “real” money. These funds, it is reckoned by some, sit ready to support asset values across the globe. In reality, the available pool of money may be more modest than assumed. For example, China has close to $2,000bn in foreign exchange reserves. The reserves arise from dollars received from exports and foreign investment into China that are exchanged into renminbi. The central bank generates renminbi by printing money or borrowing through issuing bonds in the domestic market. The reserves are essentially “leveraged” using domestic “liabilities”.
U.S. banks mine data and pitch to troubled borrowers Brenda Jerez hardly seems like the kind of person lenders would fight over. Three years ago, the New Jersey resident became ill with cancer and ran up $50,000 on her credit cards after she was forced to leave her accounting job. She filed for bankruptcy protection last year.For months after she emerged from insolvency last fall, 6 to 10 new credit card and auto loan offers arrived every week that specifically mentioned her bankruptcy and, despite her poor credit history, dangled a range of seemingly too-good-to-be-true financing options.
Wipeout! Wachovia Posts $23.7 Billion Quarterly Loss Wow. I am going from memory, but I am pretty certain that this is the mother of all quarterly financial services losses. And remember, Wachovia is merely a pretty big US bank, not a global capital markets behemoth like UBS, Deutschebank, or Citi. From the Wall Street Journal: Wachovia Corp. swung to a large third-quarter loss, as the bank posted $18.8 billion in goodwill write-downs and $8.71 billion in other charges and costs related to market disruption, investing and other crisis-related losses.
Hedge Funds Worldwide Post Record Losses in September Hedge funds worldwide posted record monthly losses in September, according to Eurekahedge Pte., as short sale bans and client redemptions amid the credit crisis hurt funds including Citadel Investment Group Inc. The Eurekahedge Hedge Fund Index, which tracks 2,431 funds that invest globally, declined 4.7 percent, preliminary figures from the data provider show. The drop is the biggest one-month loss since it began collecting data in 2000 and the index, down 7.9 percent through September, is set for its worst year on record.
Spectre of recession haunts investors Recession fears returned to haunt financial markets on Tuesday, undermining a recent improvement in investor risk appetite and overshadowing a further decline in interbank lending rates. News that the Chicago Fed’s national activity index had fallen to its lowest level since 1982, along with negative profit outlooks from companies such as Texas Instruments and DuPont, weighed on US and European equities and sent investors fleeing to the relative safety of government bonds. Commodity prices also staged a broad retreat on worries about falling demand, and were further hurt by fresh gains for the dollar as hedge funds continued to liquidate risky positions.
This Bear Market 2008 Could Last 20 Years Yesterday, prices went up on Wall Street... The Dow rose 413 points. There was no follow-up this morning, as investors eyed a mixed bag of 3rd quarter corporate earnings. But, investors are in a pretty good mood, all things considered. After all, Warren Buffett is bullish on stock prices... Warren is putting his money and his mouth in the same place - equities. He says he's sure they will do better over the next 10 years than cash.
The world wakes from the wish-dream of decoupling The US retains the capacity to disrupt the world economy which it has possessed since at least the 1920s. Accordingly, the struggle between the deleveraging of high-income countries and the growth momentum of emerging economies is ending, alas, in a decisive victory for the former. Yet the news is not all bad: inflationary pressures are abating fast. Even so, this hides more bad news. The broken financial system will weaken the transmission from monetary easing to the economy. This will make the coming slowdown last a long time. Even though decisive action has saved the financial system from its recent heart attack, the patient remains enfeebled.
No Simple Answers for Small Business "Joe the Plumber" and other small-business owners want to know which presidential candidate would give them the best deal on taxes. It's a simple question with no simple answers. The definition of "small business" is broad, ranging from two-person enterprises such as the one Samuel J. Wurzelbacher – "Joe the Plumber" – of Holland, Ohio, told Sen. Barack Obama he wants to buy, to a factory with fewer than 500 workers, to a construction company with $33.5 million or less in sales, according to the Small Business Administration.
Euro, Pound Tumble on Bets European Central Banks to Cut Rates The euro fell below $1.28 for the first time since November 2006 and the pound tumbled to a five- year low on speculation European central banks will cut interest rates as the global economy heads for recession. The single European currency also slid to the weakest in more than four years versus the yen as global stocks declined, reducing demand for higher-yielding assets funded by low-cost loans in Japan. The pound declined to a one-week low versus the euro after Bank of England Governor Mervyn King said the U.K. is probably in a recession.
Banking crisis timeline How the credit crunch has led to dramatic, unprecedented events in the City, on Wall Street and around the world
U.S. faces a tricky balancing act Before the current financial crisis, the United States carried enormous trade deficits, and investors from other countries gorged themselves on dollar-denominated assets. Those imbalances were already starting to readjust in the past year as the U.S. economy slowed. A relevant question now is whether the crisis will alter that trend. The answer will have far-reaching effects. If the United States is required to become more of a saver and less of a consumer, businesses around the world will have to find new markets for their products or sell less. But if U.S. consumers continue to spend rather than save, the U.S. economy will still need overseas investors to fill their portfolios with dollars, leaving the old status quo in place.
Regulating The Banks Big Brother Banking on the horizon?
Bank on double standards The world media and governments being consumed with an economic crisis of epic proportions - "The most tumultuous times on record in the global financial markets", according to the BBC - the 25th annual World Food Day on October 16 received little attention or governmental fanfare. There is hardly any disagreement that Wall Street's woes are man-made. Regardless of what terminology one wishes to apply - miscalculations, greed, or wholesale failure in the US capitalist system, rooted in the economic philosophies of Milton Friedman and his ultra laissez-faire approach - the fact is the US economic crisis is not a fleeting phenomenon and no quick fixes are to provide a magic remedy.
The Government Has Given Banks YOUR MONEY, and You Won't Get Anything For It The government has given banks handfuls of YOUR MONEY and you won't get anything for it. . . . So why has the government authorized trillions on our dime? Well, the original version of the bailout would have helped mainly Paulson's old company, Goldman Sachs. And according to one of the leading experts on monetary policy and economics, the government isn't "trying to save the banking system [but just] trying to save banks." Paulson trying to help out his buddies at Goldman Sachs and elsewhere?
Fed offers $540bn to prop up money funds The US Federal Reserve on Tuesday said it would finance up to $540bn in purchases of short-term debt from money market mutual funds to shore up a key pillar of the US financial system. Money market funds have faced severe redemption pressures since the financial crisis deepened last month, forcing them to raise cash by scaling back their short-term lending to banks and selling their holdings of commercial paper. This retreat has contributed both to a freeze in the interbank market and a steep decline in activity in the commercial paper market, which has made it difficult for banks and companies to raise short-term funds.
H.D.S. Greenway: The grand illusion The grand illusion The other day I went to hear my favorite soldier-scholar, Andrew Bacevich, give a talk at Boston University, where he teaches. A retired colonel and Vietnam veteran, Bacevich's new book is called "The Limits of Power: The end of American Exceptionalism." . . . . There is a mythical American narrative, according to Bacevich, that the United States is a nation "providentially set apart in the New World and wanting nothing more than to tend to its own affairs," only grudgingly responding to calls for global leadership "in order to preserve the possibility of freedom." In reality, the United States has sought expansion, first by pushing west until it reached the sea, then through a brief period of direct colonialism, and more recently through a ruthless if indirect imperial policy of control. It worked spectacularly. The United States became a great power replete with material abundance.
Have we paid for the Battle of Waterloo yet? A masterclass in pithy interviews from a previous Bank of England governor Cobbold: The National Debt represents the sums of money which the government have over the years borrowed from the public, mainly in this country and, to some extent, abroad. That is really the amount of expenditure which they have failed over the period to cover by revenue. Day: Have we paid for World War II? Cobbold: No. Day: Have we paid for World War I? Cobbold: No. Day: Have we paid for the Battle of Waterloo? Cobbold: I don't think you can exactly say that.
Financial Times to axe up to 60 jobs The Financial Times is to make up to 60 staff redundant, with the majority of job cuts in commercial departments. FT management has begun consultation with employees about the redundancies, with staff in the editorial library and the managing editor's office at risk of losing their jobs. Other employees who face possible redundancy include staff from advertising sales, finance, IT, conferences and marketing. No journalists will be made redundant, but FT insiders fear the loss of librarians will affect editorial quality. Dan Bogler, the FT managing editor, told journalists that six library staff faced possible redundancy along with two staff from his office.
Workaholism to rule The financial meltdown has called banking salaries into question, but what about the long hours' culture? Two things have always marked out the financial masters of the universe from the rest of us. First, their souped-up salaries, and then their souped-up working hours. We mortals understood that these were connected. The rewards were so high because the hours were so long. No question of flexible or part-time working for them. If they weren't in the office, they were entertaining clients or building team spirit, and were regularly expected to work into the small hours. Perhaps they could snatch a moment in the gym, but this was only to help them maintain their awesome stamina – the stamina to remain effective while working round the clock, and make crucial decisions after only a few hours' sleep.
Boeing Net Falls 38% as Strike Halts Jet Deliveries Boeing Co., the second-largest commercial planemaker and defense contractor, said profit fell 38 percent after a strike by machinists halted aircraft deliveries and that it can't confirm its previous profit predictions. Third-quarter net income decreased to $695 million, or 96 cents a share, from $1.11 billion, or $1.44, a year earlier, trailing analysts' average estimate. Revenue fell 7.4 percent to $15.3 billion, hurt by the walkout that began Sept. 6, the Chicago-based company said in a statement today.
Boeing and Merck add to market gloom Hungary has increased its interest rates by 300 basis points to protect its currency, while the IMF is poised to help Belarus, Ukraine and Pakistan More signs of the recession biting came with news that pharmaceutical group Merck plans to cut more than 7,000 jobs by the end of 2011 to cut costs. Meanwhile Boeing has reported a 38% drop in third quarter net income, mainly due to reduced commercial aircraft deliveries after a strike by assembly workers. A host of other major US companies are due to report today, including McDonald's, Philip Morris and Amazon, and investors are growing increasingly nervous about what picture will be painted by their results.
Indian Brides Replace Traditional Gold Jewelry as Prices Rise Ashima Lahiri will say her wedding vows in December wearing fake earrings, necklaces and bangles that cost a tenth of the price of gold, breaking a millennia-old Indian tradition that brides wear the precious metal.
Oil falls below $70 on US recession fears Oil falls below $70 a barrel as bleak US company forecasts fuel recession concerns Oil prices fell below $70 a barrel Wednesday as investors shrugged off a looming OPEC production cut after company forecasts suggested the U.S. may be headed for a severe economic slowdown that would crimp demand for crude. Light, sweet crude for December delivery dropped $2.63 to $69.55 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe.
OPEC faces tough test as oil price tumbles At the beginning of the year, OPEC producers felt confident that strong economic growth and tight supplies would keep oil prices high. When oil crossed the $100-a-barrel threshold in February, the cartel's president blamed speculators and said there was not much OPEC could do. But now, panic is gripping producers as prices drop. Oil is down by half since July, and the speed of the decline has stunned oil-rich governments that have become dependent on high prices. As the global economy continues to weaken, the Organization of the Petroleum Exporting Countries faces its toughest test in years.
Oil cartel divided over level of cuts Opec is expected on Friday to decide to slash production as the oil cartel faces its biggest test in more than a decade. But newly released data reveal that the cartel’s vastly divergent economic circumstances will make the divided group’s decision of how much to cut even more difficult. PFC Energy, the Washington-based industry consultants, calculated that Opec countries needed next year’s oil prices to be anywhere from $10 to $100 to keep their import expenditures and export revenues in balance. The tiny nation of Qatar needs oil to be only $10 a barrel, while Iran requires $100. Saudi Arabia, Opec’s most powerful member, needs oil to average $50 a barrel.
Investors suffer as US ethanol boom dries up Investors, such as Microsoft’s Bill Gates, are sitting on billions of dollars in losses after buying into the corn-based ethanol industry that George W. Bush embraced as the ans wer to US energy woes. Six of the biggest publicly traded US ethanol producers have lost more than $8.7bn in market value since the peak of the boom in mid-2006 and the beginning of this month, according to an analysis by the Financial Times. The boom followed a 2005 law requiring refiners to mix billions of gallons of the biofuel with petrol.
GM in hunt for Buffett-style capital injection General Motors is seeking a sizeable capital injection from outside investors as a possible alternative to a deal with Chrysler, the carmaker’s smaller Detroit-based rival. Such an investment would be along the lines of Warren Buffett’s recent purchases of minority stakes in General Electric and Goldman Sachs. private investors are searching for ways to deploy capital through minority investments, many such deals, including the capital infusion by TPG into Washington Mutual, have struggled or failed.
Kerkorian sells down his Ford stake In a sharp change of strategy, Kirk Kerkorian, the US billionaire, is selling down his stake in Ford Motor because he sees more value in his core gambling holdings. The move represents a fresh blow for Ford, the most highly leveraged of Detroit’s three loss-making carmakers, which has replaced its chief financial officer and seen two of its most experienced board members resign this month.
Ford Asks Hiroshima To Buy Mazda Stake Ford has asked Hiroshima Bank to buy some of the automaker's shares of Mazda, according to Japanese media reports. Hiroshima is expected to purchase a stake, although the size and price of the stake hasn't been determined, reports the Nikkei newspaper. Kyodo reports Ford will sell up to 5% of Mazda to Hiroshima Bank. It was reported last week that Ford is finalizing plans to sell shares in Mazda to about 20 Japanese firms, and will likely outline the deal by next month. Ford is considering selling some of its 33.4% stake in Mazda as it struggles with weakening sales and the global credit crunch.
European carmakers eligible for rescue funds German and French carmakers, which have asked the European Commission for €40bn ($53bn) in cheap loans, are eligible to tap their governments’ banking rescue plans, according to government officials. Both the German and French finance ministries said on Monday that the financing arms of carmakers could use the state guarantees for new lending of up to €400bn and €320bn respectively. “Car banks can definitely participate in the scheme,” said the German ministry. A French official said: “If you are a bank specialised in providing credit for the purchase of cars you need access to the wholesale markets like any other bank.”
What happens when a Western economy dies If you want to know what happens when a 21st century economy crashes, ask an Argentinean. When their currency, the peso, which had been artificially pegged to the dollar, had to be devalued in 2002, savers lost 70 per cent of the money they had kept in their bank accounts. With the government forced to default on payment of its huge, unmanageable debt and unable to bail out the banks, Argentina went through four presidents in a fortnight. Before this disaster struck, in the prosperous 1990s, you couldn't walk anywhere in Miami without bumping into well-to-do Argentines, preppy pastel sweaters draped over their shoulders, spending their easily earned dollars in the city's swishest malls. But after the crash, proud, well-dressed people who had nostalgically considered themselves members of the first world - Argentina was once one of the world's ten wealthiest nations - were reduced to queuing for soup.
Which country will slither down the slippery slope next? The threat of a worldwide recession leaves many other countries fearing for their future financial and economic strength. Simon Evans, Mark Leftly and Jesse Loncraine assess the health of 16 states on the 'at risk' list No country in the world remains unaffected by the Western banking crisis that has ensued. Even the most conservative, safe and responsible states are suffering a backlash. Iceland, dubbed the biggest hedge fund in Europe as it rode the credit wave upon which we all surfed, is bankrupt. Its banks in crisis, the reverberations have been felt everywhere. Last week the contagion spread further. Financial institutions like the International Monetary Fund and the World Bank, along with domestic governments, have all forced to administer costly monetary sticking plasters to the world's financial institutions.
The spreading global storm The fallout from the financial crisis is affecting economies around the world. By Sean O'Grady
New US leaders need a Japanese 'jolt' As the world prepares for the election and inauguration of a new American administration, policymakers in Japan are thinking about ways their country can extend and reinforce the Japan-US strategic relationship. During the past decade, the government of Japan has undertaken a series of steps to progressively upgrade and stabilize the security relationship. These have included an expanded role for the Self-Defense Forces (SDF) in the fight against terrorism; the acquisition of sea and air assets making it possible for the SDF to conduct operations at a distance from the Japanese islands; increased SDF participation in multilateral security efforts (such as the Proliferation Security Initiative); and the introduction of the hardware and software necessary for integrated launch-phase and descent-phase ballistic missile defense.
Elusive consensus on Iran Multilateral diplomacy on the Iran nuclear issue, led by the "Iran Six", is falling to pieces as a result of sharpening disagreements on how to respond to Tehran's defiance of demands from the United Nations Security Council that it suspend uranium-enrichment activities. More importantly, the division has been caused by the extent to which Iran has been prepared to accept nuclear transparency, and demonstrate the peacefulness of its nuclear program.
China acts to help struggling manufacturing firms China today raised export tax rebates on toys, textiles and more than 3,000 other products as it attempts to mitigate the impact of the global slowdown. The boost for struggling manufacturers came as a toy industry expert warned that almost half of the businesses he works with could close down in the next two years. Textile firms, particularly in the Pearl River delta, have also been suffering for months.
Argentina nationalizes $30 billion in private pensions Argentina's government said Tuesday that it would seek to nationalize nearly $30 billion in private pension funds to protect retirees from falling stock and bond prices as the global financial crisis continues. The measure, confirmed in a speech in Buenos Aires late Tuesday by Cristina Fernández de Kirchner, Argentina's president, was criticized by political opponents and analysts as a move to shore up government coffers to try to head off a fiscal crisis in 2009, when Argentina might be struggling to make billions of dollars in debt payments.
Russia set for sale of the century in reverse The Russian state could wind up owning huge chunks of formerly private companies as a result of the bail-out measures it is implementing. A senior Russian policymaker said on Tuesday, however, that the government had no plans to “nationalise” these forfeited shares, but would seek to sell them as soon as market conditions improved. As a result of Russia’s financial turmoil, many of the country’s oligarchs are in dire financial straits, and $50bn of aid has been made available to finance their external debts – part of a $200bn-plus Kremlin plan for national economic bail-out measures.
'Stunned' white supremacists keep low profile in campaign A tall, extra-hot mocha in his hand and a .380-caliber pistol on his hip, Bill White sat near the window of a Starbucks in Roanoke, Virginia, last month and discussed his political predicament as the leader of one of the nation's more established neo-Nazi groups. "Right now," said White, head of the American National Socialist Workers Party, "we're facing the potential of a half-black candidate financed by Jewish money going up against a white candidate financed by Jewish money, who are both advocating the same policy. So you've got two terrible choices."
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Tues 10.21.2008
Gold Market Update The reason why commodities and stocks have been collapsing is liquidity problems and the consequent threat of deflation, and the collapse has been made far worse as a result of the extreme leveraging that had earlier been employed in the markets, which has resulted in a destructive vicious circle as each downleg triggered a fresh wave of selling as stops and margin calls kicked in. The selling of commodities by commodity index funds has been broad-based and indiscriminate, due to client redemption requests, and this has resulted in heavy collateral damage across the board, with the "baby being thrown out with the bath water" as usual. At the heart of the problem is the banks' extreme reluctance to lend to one another, indicated by the high Libor rate which if should continue would of course result in a credit freeze and a depression. The underlying reason for banks' reluctance to lend to one another is perfectly understandable - they don't know if the banks they are lending to are even going to exist in the future and the difficulty of calculating counterparty risk is exacerbated by the trembling derivatives mountain with its labyrinthine web of liabilities, which has been destabilized by the collapse of Lehman Brothers.
This toxic crisis needs more than one shot What makes this credit crisis so toxic is that it involves numerous feedback loops with the real economy. This is why simple one-shot solutions such as last week’s rescue plans are not going to be as effective as many people think. Let us look at the present dynamic of this crisis in some detail.
First, the housing market. US house prices have fallen by about 20 per cent. To get back to the long-term real price trend, the market would have to fall by another 10 per cent to 15 per cent. This would also bring price-to-rent and price-to-income ratios closer to a long-term equilibrium. But there is no reason to assume that prices will stay on trend – not if there is a credit crunch, a dysfunctional money market and a deep recession with rising unemployment. The property market is more likely to overshoot, which is what it normally does even without those exceptionally bad circumstances. I do not want to produce a numeric estimate, but without a plan to stabilise house prices – which is not all that easy – we should expect substantial overshooting to take place. The same applies to the UK, Spain and Ireland, where prices have also fallen.
Japanese CEO Warns U.S. Headed Towards An Oligopoly, Greenspan Culprit Behind Crisis This clip aired 10/16/08 on Bloomberg. Japanese CEO Ohmae discusses bailout passing will leave the U.S. with 3 banks in control. Oligopoly is the rule of law now. Also a guest mentions Greenspan being the culprit behind the global crisis we are facing now.
The Panic of 2008 "The two companies I saw a week ago not only have real business models, each is selling for less than the cash they have in the bank. At this point, they are worth more dead than alive. That's no risk at all." People who have been following this site know that I have been predicting a depression for years. It's here. Even the dolts in Washington are starting to figure it out. The credit system has ground to a halt. Commerce is on the verge of a complete breakdown. 18 hours after the bank holiday starts, the riots begin. Physical gold and silver are insurance policies against financial chaos. We have financial chaos.
America enters a new Depression Forget the stock market’s woes, the real US economy is seriously ill While economists continue to debate whether America is tipping into a technical recession, the message from across the country is clear: the US economy stinks and is only getting worse. We may not see families winding across the Dust Bowl, as they did in the Great Depression, but the situation for millions of ordinary workers is grimmer by the day. The stock market may be exhibiting epileptic symptoms, lurching from exuberance to despair and back, but the 'real economy' is desperately ill.
Against the Bailout Before He Really Started Hating It Rep. Thaddeus McCotter (R-Mich.) was one of the most outspoken opponents of the bailout, when the bill was making its way through Congress -- and in the immediate aftermath of its passage. Neither time nor changes to the bailout's focus have changed Rep. McCotter's opposition to the plan, as revealed in the accompanying video exclusive. "It remains a collectivist solution," McCotter says of the bailout's new focus -- as of last week -- of injecting capital into banks vs. buying their bad debt. "Paulson is buying healthy shares of healthy banks that do not wish to have the government come in and purchase them," he says. Paulson's plan B is "causing further confusion in the market."
Markets hold breath as $360bn Lehman swaps unwind The $54trillion credit derivatives market faces a delicate test as $360bn worth of contracts on now-defaulted derivatives on Lehman Brothers are due to be settled on Tuesday. Lehman Brothers' complex network of derivatives will be settled on Tuesday October 22 Due to the opacity of the market, which is one of the most complex, least regulated and least understood in the global financial system, it is still not clear how many contracts have to be settled or which institutions will take the ultimate hits once the billions of dollars worth of contracts have been unravelled. The collapse of Lehman Brothers, is expected to trigger credit default swap (CDS) protection pay-outs of about $400bn but because the contracts were sold many times through different counterparties it is not yet known who will be liable.
Ron Paul - Inflation of the money supply will solve nothing
The Importance of Capital Theory As I have read countless analysts, including professional economists, offer "solutions" to the financial crisis, I have become more convinced of the importance of capital theory. You see this with the dichotomy people keep drawing between the financial markets and the "real economy," a distinction that is useful for some purposes but which in this context often reinforces the idea that the stock market is really just a casino.
Banks braced for Lehman Brother's debt insurers' deadline Financiers enjoying a respite from the panic of the past few weeks should brace themselves for further mayhem tomorrow, the deadline for insurers of Lehman Brothers' debt to pay up on billions of dollars of policies. Last week, these borrowings were deemed to be worth only 9.75 cents on the dollar. There are about $400 billion worth of insurance contracts — known as credit default swaps, or CDSs — written on Lehman’s debt, leaving the underwriters on the hook for about $360 billion. Fears are mounting that billions of dollars of insurance will go unpaid and that dozens of financial groups will go under because of Lehman’s demise.
Gobbled up by the derivatives monster Clive Maund at clivemaund.com says, "Payback time for Wall St and Washington will be when foreign investors fail to turn up at the bond auctions to finance the bailout plan, whose US$800+ billion will have to be created out of thin air. So the bonds will have to be monetized, which will mean an immediate spike in inflation, which will cause the rate of corporate bankruptcies to soar as failing companies take down others in a chain reaction because the losses will be highly leveraged by credit default swaps etc. This is the underlying reason why banks won't lend to each other - they can't calculate the counterparty risk. All of this will set off a massive derivatives meltdown that will bring the whole system crashing down."
Paulson Says U.S. Has Sufficient Funds for Bank Plan Treasury Secretary Henry Paulson said the government has set aside enough money to buy stakes in every financial company that qualifies for the crisis program aimed at halting the credit freeze. "Sufficient capital has been allocated so that all qualifying banks can participate," Paulson said in Washington, announcing details on how banks can sign up for the funds. "This program is designed to attract broad participation by healthy institutions and to do so in a way that attracts private capital to them as well."
Economic Essentials: Credit Crunch - The Economic Impact (part 1)
Economic Essentials: Credit Crunch - The Economic Impact (part 2)
A financial new world order? Bush says reforms must improve, not fetter, the free market; Europeans hint at more robust intervention. When President Bush hosts a world financial summit in the coming weeks, one of the least multilateral American presidents in decades will set in motion what could result in a full reordering of the global financial system. The series of summits that Mr. Bush announced over the weekend at Camp David with European leaders at his side suggests a broad understanding among them: that the current crisis requires the kind of global regulatory reforms that have eluded major powers in the past.
Super-Sarko’s plans for the world "Europe wants the summit before the end of the year. Europe wants it. Europe demands it. Europe will get it." So said Nicolas Sarkozy – president of France, and (until January) of the European Union – before jetting off to Washington over the weekend. There he persuaded President George W. Bush to agree to an international summit dedicated, says Mr Sarkozy, to nothing less than "re-founding the capitalist system".
Money market rates fall as big freeze eases Money market rates fell again on Monday in a sign that the programmes of central bank liquidity are thawing the recent freeze in short-term lending. By a number of measures, conditions across the money markets improved. With the banking system now supported by governments and hefty amounts of short-term central bank funding, traders reported renewed lending in both the money and commercial paper markets.
Fannie, Freddie CEOs discuss foreclosures Pair tell mortgage bankers their agencies must do more to stem crisis The new chief executives of Fannie Mae and Freddie Mac are trying do more to stop the home foreclosures hammering the housing market, but said it still might take years for real estate to recover in some cities. "I don't think there is any magic bullet in regards to overbuilt markets" like Miami and parts of California, Nevada and Arizona, said Freddie Mac CEO David Moffett at the Mortgage Bankers Association's annual convention Monday.
After the bailout, regulatory cat fights U.S. finance regulators are tentatively pushing forward with new rules for credit default swaps, a $55 trillion unregulated speculative market. Some say they believe the market should be left unregulated with the addition of transparency to the system. Others say more strident steps should be taken, The New York Times reported Tuesday. Credit default swaps are contracts that guarantee against debt securities going bad. American International Group, which accepted a $123 billion federal bailout last month, held $440 billion in swaps as it went under . . .
Fed to buy commercial paper from mutual funds Fed says it will buy commercial paper from mutual funds in another move to thaw frozen credit The Federal Reserve announced Tuesday that it will start buying commercial paper -- a crucial short-term funding mechanism many companies rely on for day-to-day operations -- from money market mutual funds. It's the latest effort by the central bank to break through a credit clog that has hobbled lending and threatens to plunge the country into a deep and painful recession.
The Problem Was Never Liquidity, But Insolvency ... And We Should Let Insolvent Banks Fail The problem was never really liquidity. Says who? Says Anna Schwartz, co-author of the leading book on the Great Depression, and someone who actually lived through it. The Wall Street Journal ran an interview with Schwartz last weekend: Most people now living have never seen a credit crunch like the one we are currently enduring. Ms. Schwartz, 92 years old [but still sharp as a tack], is one of the exceptions. She's not only old enough to remember the period from 1929 to 1933, she may know more about monetary history and banking than anyone alive. She co-authored, with Milton Friedman, "A Monetary History of the United States" (1963). It's the definitive account of how misguided monetary policy turned the stock-market crash of 1929 into the Great Depression.
Although Bank-to-Bank Loan Rates Fall for the Sixth Straight Day, Only the Strong Will Survive As a result of the U.S. credit crisis – and the near-shutdown of the commercial lending market – investors can expect Corporate American landscape to change in a big way over the next 12 months. Although bank-to-bank loan rates fell for the sixth-straight day yesterday (Monday) – decreasing fears that the corporate-lending market was going to seize up – a new reality has emerged: As the song says, "only the strong will survive."
How LIBOR Threatened to Destroy the Global Banking System The largest financial crisis since the Great Depression has revolved around an interest rate that many U.S. investors are only now hearing about for the very first time: The London Interbank Offered Rate (LIBOR). But if you understand that rate, and study the forces that have been influencing it, chances are very good that you can figure out how we can escape the current banking-sector mess without wrecking the entire world economy.
Fed Adds to Its Efforts to Aid Credit Markets Adding to its efforts to unclog the credit markets, the Federal Reserve said on Tuesday that it will provide financing to shore up money-market mutual funds, the consumer investment funds that have traditionally been considered as safe as bank accounts. Under the program, the Fed will provide an unspecified amount of financing to a new private-sector initiative that will buy several forms of short-term debt, including certificates of deposit and commercial paper that expires in three months or less. This type of debt has historically been used by money-market funds seeking safe, conservative returns for their clients, but the recent turmoil has roiled the market and caused at least one money-market fund to fall below $1 a share, an extremely rare occurrence.
U.S., N.Y. jointly probe crisis root Credit-default swaps in focus Federal prosecutors and New York's attorney general said Monday they had taken the unusual step of joining forces to probe the multitrillion-dollar credit-default swap market, an unregulated area of finance blamed for helping to fuel the credit crisis.
Is the Catharsis Yet to Come? By at least one measure, investors late last week were more fearful than they had ever been before. On Thursday, a main gauge of market anxiety, commonly known as the VIX — its formal name is the Chicago Board Options Exchange Volatility Index — shot up to more than 80 for the first time. That reading, of 81.2, was more than 50 percent higher than its peak during two previous severe downturns on Wall Street: the Asian currency crisis of the late 1990s and the market drop after Sept. 11, 2001.
Economic Meltdown Forecast Analysis by Marc Faber of The Gloom, Bloom & Doom Report, Marc Faber LTD
Economic Meltdown Forecast (part 2)
The 'arb' game is over I'll admit to having warmed up a little to Federal Reserve chairman Ben Bernanke. He speaks clearly and candidly, in stark contrast to the years of his predecessor Alan Greenspan's spin and deception. I certainly have sympathy for the predicament Bernanke finds himself in today, and I'll give the chairman credit this week for comments suggesting that he is rethinking his flawed views with regard to bubbles. Yet this doesn't change the reality that his infamous 2002 "helicopter Ben" speeches played an integral role in fostering terminal credit and asset bubble "blow-off" excesses.
Bernanke Says He Supports New Aid for Economy The chairman of the Federal Reserve, Ben S. Bernanke, said on Monday that he supported a second round of additional spending measures to help stimulate the economy. "With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture is appropriate," Mr. Bernanke told the House Budget Committee. His remarks were his first endorsement of another round of energizing stimulus, which Democrats on Capitol Hill have advocated and Republicans have resisted.
Bush Needs to Send in Reinforcements to the Fed We are now battling a financial crisis that is the economic equivalent of war, and we aren't doing it with an army that anyone would choose. Individuals at Treasury and the Federal Reserve are doing their best in difficult circumstances. But both organizations are woefully undermanned. There is too much work to do and too little manpower to do it. The result is that government rescue plans are progressing too slowly, and market turmoil persists
Monetary despotism The combined recent liquidity injection by Western central banks could exceed US$4 trillion, yet that vast amount has created nothing real, not even one grain of corn. To summarize, continental Europeans a week ago, on October 13, following the British plan for UK bank recapitalization, unveiled a plan requiring $2.55 trillion to recapitalize their banks, at the same time promising unlimited dollar funding in coordinated action with the US Federal Reserve.
U.S. Is Said to Favor New Mergers In a step that could accelerate a shakeout of the nation’s banks, the Treasury Department hopes to spur a new round of mergers by steering some of the money in its $250 billion rescue package to banks that are willing to buy weaker rivals, according to government officials. As the Treasury embarks on its unprecedented recapitalization, it is becoming clear that the government wants not only to stabilize the industry, but also to reshape it. Two senior officials said the selection criteria would include banks that need more capital to finance acquisitions.
Pentagon spending growth outpaces auditors Lack of oversight opens door to fraud, abuse Government reports are not known for plain language, much less candor. But in a report issued in March, Pentagon Inspector General Claude M. Kicklighter summed up what had been growing increasingly evident for years: Defense spending has been growing so rapidly that auditors can no longer keep track.
Bank-to-bank loan rates fall for sixth day As bank-to-bank lending rates slide lower, the credit climate is looking a bit brighter - at least for stronger companies. The fear of a complete shutdown in lending is fading, but there remains a sense that when it comes to getting loans, U.S. businesses are going to be divided into haves and have-nots. As a result, the corporate landscape could look very different a year from now.
How to manage an imperial decline Do empires end with a bang, a whimper, or the sibilant hiss of financial deflation? We may be about to find out. Right now, in the midst of the financial whirlwind, it's been hard in the United States to see much past the moment. Yet the ongoing economic meltdown has raised a range of non-financial issues of great importance for our future. Uncertainty and anxiety about the prospects for global financial markets - given the present liquidity crunch - have left little space for serious consideration of issues of American global power and influence. So let's start with the economic meltdown at hand - but not end there - and try to offer a modest initial assessment of how the crumbling US economy might change America's global stance.
Financial crisis is shifting power to Asia, says HSBC boss Stephen Green THE crisis consuming global markets is part of a fundamental shift of power from the US to emerging economies in China and the Middle East, according to Stephen Green, chairman of HSBC. Speaking at a financial conference in Dubai, the banker also condemned the financial model that has led to the crisis as "bankrupt". The crisis, probably the worst since the 1929 Wall Street crash, will offer several lessons, Mr Green said, but added that the underlying trend of movement from West to East would "not be derailed". "The rebalancing of the global economy towards Asia, home to over half the world's population, and its implications for the Middle East, is the shift that will affect financial markets most profoundly," he said.
Circuit City shaky: Plans to unplug 150 stores Troubled electronics retailer Circuit City Stores Inc. considered its options but withheld comment Monday after a published report that it would close stores to ward off bankruptcy sent its shares down 10 percent on the New York Stock Exchange. Circuit City spokesman Jim Babb said the Richmond-based chain wouldn't address "rumors" as it continues "a comprehensive review of all aspects of our business" in order to accelerate its turnaround plan and boost its financial and operating performance
Public anxiety on economy intensifies Most fret about falling stocks besides mortgage payments, job security With little relief in sight, people are getting more anxious about the slumping economy and how it affects them. The share of people who believe the country is moving in the right direction has plunged in just a few weeks, from 28 percent in September to 15 percent in October, according to an Associated Press-Yahoo News poll of likely voters that was released Monday.
Car dealerships facing tough times U.S. automobile dealers report the credit crunch and consumers' switch to fuel-efficient vehicles are cutting sharply into business. "Most car dealers were down 30 percent last month, and that is a catastrophe," Ray Ciccolo, owner and chief executive officer of Village Automotive Group told USA Today. The National Automobile Dealers Association said out of 20,000 new car dealerships 61 either closed or downgraded to used car lots in September, the newspaper reported Tuesday. About 600 have folded this year . . .
Baby Boomers go bust as retirement savings tank Latest market struggles jeopardize fiscal security The Wall Street calamity that obliterated $2 trillion in retirement savings nationwide has left Bay State baby boomers with shattered careers, retirement plans and hopes. "It’s like a kick in the gut right now," said Deborah Banda, state director for AARP Massachusetts. "Many, many people are hurting." Boomers are especially hard-hit. There are 76 million Americans between the ages of 44 and 62.
Your Personal Bailout Check Isn't in the Mail "I'm not going to open my latest brokerage statement," a woman told me this month when we started talking about the latest financial crisis. "My broker responded, 'good, don't open it.'" Did you adopt this "don't ask, don't tell" attitude as trillions were lost in the latest market rout? That's usually accompanied by the angry riposte: Now that U.S. banks are receiving $250 billion in cash infusions, where's my bailout?
In Hollywood, the Wall St. Plots Will Thicken Just a few months ago, Lifetime Television started adapting the Candace Bushnell novel “Trading Up” into a movie, figuring an aspirational story about the entitled rich and their limousine culture nailed the cultural moment. The setting would be New York, of course — or, as it is described by Ms. Bushnell, a city where “the streets seemed to sparkle with the gold dust filtered down from a billion trades in a boomtown economy.” Time for a rewrite.
Bank robber hires decoys on Craigslist, fools cops In an elaborate robbery scheme that's one part The Thomas Crowne Affair and one part Pineapple Express, a crook robbed an armored truck outside a Bank of America branch in Monroe, Wash., by hiring decoys through Craigslist to deter authorities. It gets better: He then escaped in a creek headed for the Skykomish River in an inner tube, and the cops are still looking for him. "A great amount of money" was taken, Monroe police said, but did not provide a dollar value.
China's growth rates fall below 10pc for first time in five years China's growth rates have fallen to single digits for the first time in five years in a further indication that the country is being hit by the global crisis of economic confidence. Year-on-year growth for the third quarter was 9pc, down from 10.6pc in the first quarter and 10.1pc in the second, and a marked change from the stellar rates that had begun to be regarded as normal in recent years. These rates had also led to hopes that China's growth would keep the world economy moving, despite the credit crunch in the West. Exporting manufacturers, caught by the collapse in consumer confidence in the United States and Europe, and property developers, suffering from a bursting price bubble of their own, all show signs of economic stress.
Russia's next revolution has started - at the bank The first sign of a Russian economic crisis is a line of desperate people, pushing and shoving outside a locked door, on which a scribbled sign has been posted indicating that the cash those outside thought they owned would be unavailable until further notice. In the classic Soviet tradition, a handful of enterprising individuals would go to the back door to see what could be arranged out of the glare of publicity and with a little bribery for those inside. There they were told the truth - their money had gone.
Japan Considers Bigger Role on Economic Stage Just six months ago, five or six “bulge bracket” investment banks stood astride the globe virtually dictating the terms of engagement of international finance — managing deals, pronouncing companies (or countries) investment-worthy or not, and dispensing advice that companies (and countries) ignored at their peril. Now those brash American institutions have been swept away or tamed. And as the global financial order convulses, some Japanese leaders say they believe their country should take a more active role in economic leadership.
October Surprise . . . . This could be a game changer by Thomas Lifson All the filings to date in the court action of Philip Berg are available here
Do our rulers know enough to avoid a 1930s replay? Events are moving with lightning speed as the global credit freeze evolves into something awfully like a classic trade-depression. The commodity and emerging market booms are breaking in unison, leaving no more bubbles left to burst. Almost every corner of the world is now being drawn into the vortex of debt deflation. The freight rates for Capesize vessels used to ship grains, coal, and iron ore have fallen 95pc to $11,600 since May, hence the bankruptcy of Odessa’s Industrial Carriers last week with a fleet of 52 vessels. Cargo deliveries dropped 15.2pc at the US Port of Long Beach last month, From what I " “The crisis is now in full swing across the entire world," said Giulio Tremonti, Italy’s finance minister. "It is hitting the real economy, the productive forces of industry. I's global, it’s total, and it’s everywhere," he said.
Life after the bubble: How Japan lost a decade Is the United States the new Japan? Or more precisely, Japan circa 1990, just as it was staggering into its Lost Decade. As recently as six months ago, the notion that the United States would face a decade or more of Japanese-style economic malaise seemed preposterous. But after the last few weeks of financial turmoil and political ineptitude, you could almost argue that America would be fortunate to end up with a downturn akin to Japan's. That's because in several key ways, Japan was much better equipped to withstand its financial lashing in the 1990s than Americans are today.
Amid Pressing Problems, Threat of Deflation Looms $$ Policy makers navigating the U.S. through the global credit crisis may have a new concern on the horizon for 2009: deflation. The risk of deflation -- generally falling prices across the economy, beyond volatile energy and food costs -- remains slim. But the financial shock and a faltering economy can set the stage for a deflationary environment. Federal Reserve officials view broad-based deflation as unlikely but possible. Federal Reserve Bank of San Francisco President Janet Yellen said in a speech this week that the plunge in oil prices along with slackening demand for labor and goods should "push inflation down to, and possibly even below, rates that I consider consistent with price stability."
Gold Jumps From One-Month Low as Dollar Weakens Before Speech Gold climbed from its lowest level in about a month as a weakening dollar boosted the appeal of the precious metal as an alternative asset. The dollar declined toward the lowest in a week against the yen and slid for the first time in four days versus the euro on concern U.S. Federal Reserve Chairman Ben S. Bernanke will forecast a prolonged downturn for the world's largest economy when he speaks today.
Bernanke gives nod to more government stimulus Bernanke gives nod to more stimulus, warning economic weakness could be last for a while Federal Reserve Chairman Ben Bernanke told Congress Monday a fresh round of government stimulus is a good idea because there's a risk the country's economic weakness could last for some time. Bernanke's remarks before the House Budget Committee marked his first endorsement of another round of energizing stimulus, something that Democrats on Capitol Hill have been pushing. The Bush administration, however, has been cool to the notion.
Turmoil May Make Americans Savers, Worsening 'Nasty' Recession The U.S. may be on its way to becoming a nation of savers, whether Americans like it or not. With home and stock prices declining and credit hard to come by, consumers who have fallen out of the savings habit are being forced to curb borrowing and rein in spending. That is bad news for companies catering to them, which will have to retrench as well. Detroit automakers may need to slash costs and merge as Americans hold onto their cars longer. Shopping malls might be forced to shut as retail traffic trails off. Hotels may have to shelve expansion plans as vacationers become stingier with their dollars.
It's time for a new Bretton Woods In July of 1944 the 44 nations of the free world sat down at a hotel in Bretton Woods, New Hampshire to design a new post-war financial system. The basis of the agreement was simple. The US dollar was tied to gold at an exchange rate of $35 per ounce and all other currencies were tied to the dollar with relatively fixed rates. The system worked until the US tried to wage an expensive war without raising taxes to pay for it. (Why does that sound familiar?) The first sign of stress was when the US dropped silver out of our coinage in 1965 and went to slugs. We fought a long and expensive war in South East Asia without raising taxes to pay for it. Holding the world's reserve currency, the US was in the enviable position of writing checks without the intent or the ability to pay for them. The chickens have come home to roost.
Leaders move toward summit on economy President George W. Bush and European leaders, who have been tussling over whether to revamp the global financial regulatory system, agreed Saturday to take steps toward a series of international meetings to address the economic crisis, the White House said. After a private dinner at the presidential retreat Camp David, Bush, President Nicolas Sarkozy of France and President José Manuel Barroso of the European Commission, issued a joint statement saying they agreed to "reach out to other world leaders" to propose an international summit meeting to be held soon after the U.S. presidential election, with the possibility of more gatherings after that.
Global Summits Planned to Tackle Economic Crisis Bush Seeks Sweeping Oversight Changes President Bush announced plans yesterday to host an emergency summit of leaders from the world's top economies to map out a response to the global financial crisis, urging a renewed effort to secure the basis of "democratic capitalism." The objectives set for the summit are every bit as far-reaching as those of the 1944 landmark meeting in Bretton Woods, N.H., attended by 44 Allied nations to remake the global financial system after the Great Depression. But while that earlier gathering was devoted to coordinating monetary policy and setting up an international currency exchange system, the summit announced yesterday at Camp David would aim to overhaul the regulatory framework for global finance.
Suddenly, Europe looks pretty smart to Americans In recent years, as Wall Street boomed, Americans often dismissed Europe as a place for languorous meals and vacations, not economic innovation. London remained a financial hub, of course, but it was often treated dismissively — as a flashy aberration pumped up by petrodollars from Russia and the Gulf, an exception to the otherwise somnolent Continent.
European banks in no hurry for bailouts Germany and France on Friday gave final approval to their costly bank rescue packages, but many beleaguered European banks were in no hurry to sign up for the government bailouts. Given that a number of major financial competitors already have the benefit of state backing, though, some of the big names of European banking, including ING of the Netherlands and Unicredit of Italy, may not be able to resist pressure from investors to accept government aid, strings and all.
U.S. deficit rises, and consensus is to let it grow Like water rushing over a river's banks, the U.S. government's rapidly mounting expenses are overwhelming the federal budget and increasing an already swollen deficit. The bank bailout, in the latest big outlay, could cost $250 billion in just the next few weeks, and a newly proposed stimulus package would have $150 billion or more flowing from Washington before the next president takes office in January.
Rescue will send gold to surreal price level The volatility in the gold and silver markers has been intensifying in recent months and such action is often a precursor to a large price move.
When investors sweat and tremble, eyes turn to the fear index Fear is running high on Wall Street. Just look at the Fear Index. With all those stomach-churning free falls and sharp reversals in the stock market recently, traders are keeping a nervous eye on an obscure index known as the VIX. The VIX (officially the Chicago Board Options Exchange Volatility Index) measures volatility, the technical term for those wrenching market swings. A rising VIX is usually regarded as a sign that fear, rather than greed, is ruling the market. The higher the VIX goes, the more unhinged the market looks.
The Hedge Fund Apocalypse Billionaire investor Warren Buffett wants his fellow Americans to buy stocks, but the Greenwich, Conn., set couldn't take his advice if they wanted to. As investors scream for their money back, hedge fund managers are as paralyzed as the rest of Wall Street. Hedge fund assets shrank by $210 billion in the third quarter, hit by volatility, higher borrowing costs and $31 billion in redemptions after a wave of investor panic.
Financial Rescues Can Set Off New Problems If there was one thing policymakers could agree on during the recent economic turbulence, it was that interest rates on U.S. home mortgages ought to come down, and fast. But as the government stepped in recently to shore up the nation's banks, those rates went up. Chalk up another case of unintended consequences. Since the beginning of the crisis that has upended financial markets and stunned the world economy, the well-intentioned actions of governments and officials have often created new problems that require nearly equally urgent solutions.
Bernanke's Outlook Hits the Hill No major economic data is coming out this week, but it is sure to be another busy one for economy-watchers anyway. Federal Reserve Chairman Ben S. Bernanke is scheduled to testify before the House Budget Committee on Monday morning, giving his latest views on the economic outlook. It is his last scheduled public appearance before the Fed's policymaking committee meets Oct. 28-29, so Bernanke could signal whether, or how much, the Fed intends to cut the short-term interest rate it targets, currently 1.5 percent. He will probably be asked his view on whether Congress should consider passing another stimulus bill. Bernanke endorsed the first stimulus bill in January but so far has taken no position on another.
A World Awash In Bonds So far, governments around the world have committed more than $3.2 trillion to the cause of bailout out troubled banks, and while there has been some initially grumbling from taxpayers, heads of states have made reassuring noises about being able to raise most of that money initially by selling bonds rather than raising taxes.
3 factors behind the economic train wreck How did the world's financial system get into such a mess? It's tempting to blame specific politicians, decisions and laws (or the lack thereof), and leave it at that. While it's certainly true that a great number of serious, identifiable mistakes have been made, we need to broaden our thinking in order to understand what has happened. The crisis is global in nature and its causes are more general and less country-specific than is commonly reflected in the political discourse of any single nation. Many countries — not just the United States — came to have fundamentally unsound banking systems. If Japan remains an exception, it is only because it already suffered through similar problems in the 1990s.
Mortgage firm arranged stealth campaign Freddie Mac secretly paid a Republican consulting firm $2 million to kill legislation that would have regulated and trimmed the mortgage finance giant and its sister company, Fannie Mae, three years before the government took control to prevent their collapse. In the cross hairs of the campaign carried out by DCI of Washington were Republican senators and a regulatory overhaul bill sponsored by Sen. Chuck Hagel, R-Neb. DCI's chief executive is Doug Goodyear, whom John McCain's campaign later hired to manage the GOP convention in September.
US faces worst recession in 26 years The US economy appears to be plunging into what many experts believe will be its worst recession since 1982. Senior officials at the Treasury and Federal Reserve are confident that the rescue plan for US banks will succeed in preventing a financial system meltdown and ensure there will not be a repeat of the Great Depression. But they know that a sharp economic downturn is already baked in the cake. They do not,however, know how deep or protracted it will be.
Bankrupt Calif. City May Be a Harbinger Economic Decline Saps a Budget Already Stretched by Massive Payroll Costs VALLEJO, Calif. -- When this city of 120,000 declared bankruptcy in May, the extraordinary step appeared to arise from an extraordinary circumstance: Vallejo's payroll largess. Police captains in this blue-collar town north of San Francisco make more than $200,000. The city manager's $338,000 salary is more than that of the vice president or anyone on the Supreme Court.
Job cuts spreading to U.S. manufacturing sector Shock waves fro Shock waves from the global financial crisis are now being felt by workers in almost every corner of the United States as companies lay off an increasing number of employees. While the ax has been falling for months in the financial, home-building and automaking industries, makers of everything from soft drinks to water filtration systems have begun hefty rounds of job cuts in recent weeks as they brace for what some predict could become a long and deep recession.
A Program to Keep the Roof Over Your Head -- but It Will Cost You in the Long Run For homeowners trying to renegotiate their loans under the government's new HOPE for Homeowners program, please read the paperwork carefully -- because once again, you'll be stuck with a costly mortgage deal. HOPE for Homeowners, nicknamed H4H, became law this summer to help keep homeowners from defaulting on their mortgages and going into foreclosure. Lenders who voluntarily allow borrowers to refinance under H4H are required to reduce the size of the mortgage to a maximum of 90 percent of the home's current appraised value. Additionally, they are only allowed to put people in 30-year, fixed-rate loans.
GM Can't Secure Financing for Chrysler General Motors' hopes of buying Chrysler LLC are floundering because the auto maker remains unable to secure the financing necessary for the deal, the Wall Street Journal reports. In recent days GM, its lenders, and Chrysler owner Cerberus Capital , have been pitching investors about the transaction. That pitch touts a combined GM-Chrysler as delivering cost savings of up to $10 billion, an immediate boost in revenue and an increase in cash available to the merged firm, according to the Journal.
Oil Rises a Second Day on Signs OPEC Is Poised to Reduce Output Crude oil rose a second day in New York on signs OPEC is poised to cut production to stem an increase in stockpiles and a 51 percent decline in prices from July's record. Members of the Organization of Petroleum Exporting Countries favor a cut and may pare output in stages to maintain stable prices as global growth slows, group president Chakib Khelil said in a television interview. The Conference Board's index of leading U.S. indicators, due today, probably fell for a third time in September, according to a survey of economists.
OPEC Expected to Call for Production Cuts at Emergency Meeting Friday The Organization for the Petroleum Exporting Countries (OPEC) is looking to stabilize global crude oil prices at $70 to $90 a barrel, which is why the cartel has called an emergency meeting in Vienna on Friday. The cartel had been scheduled to meet OPEC rarely makes such price projections. But in the last few weeks, the cartel has become more vocal about the price range for crude its members consider acceptable – especially after oil prices skidded below the $70-a-barrel level last week. Analysts don’t expect to see a return of the informal price band OPEC traditionally tries to promote, because they believe the cartel is more preoccupied with the steep price drop
Delinquencies Mount for American Express $$ Push Into Credit Cards Proves Costly; Mr. Bell Is Slapped With a Spending Limit Long the darling of the credit-card industry, American Express Co. is looking awfully beaten-up lately. The New York company's stock price is down 55% so far this year, including a 34% slide in October. The percentage of loans deemed uncollectible in a pool on which American Express reports monthly performance data reached 6.7% in September, up from 3.6% a year earlier. Earnings due after the closing bell Monday are expected to show a decline of more than 30% from last year's third quarter, according to Thomson Reuters.
Thomas L. Friedman: The great Iceland meltdown Who knew? Who knew that Iceland was just a hedge fund with glaciers? Who knew? If you're looking for a single example of how the globalization of finance helped get us into this mess and how it will help get us out, you need look no further than British newspapers last week and their front-page articles about the number of British citizens, municipalities and universities - including Cambridge - that are in a tizzy today because they had savings parked in Icelandic banks, through online banking services like Icesave.co.uk.
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U.S. Economy Still on Life Support On Monday October 13th, the Dow took the fifth biggest upward leap (in percentage terms) in its history and, most notably, since the 1930’s. It appeared that Paulson and his fellow G-7 finance ministers had solved the credit crisis. Despite the fact that G-7 taxpayers will be stuck with $3.5 trillion of liabilities to support their governments’ bailout plans, the stock markets nevertheless bustled with euphoria. The next day, reality dawned once again, and all markets closed down. The truth is that these enormous bailouts enacted around the world, most notably in the United States, have done little or nothing to tackle the enormous deleveraging that is driving us into a serious recession and, if badly handled, a depression. Increasingly, politicians and commentators are talking about the need for a massive, new stimulus package, likely to cost trillions more dollars.
A Trillion Dollar Bait and Switch The Bailout and the Smell Test The explanation that has been given for the financial crisis does not match up with the solution that has been devised. Moreover, the windows into the crisis offered by the authorities are opaque rather than transparent. The only clarity we have is that the crisis is resulting in financial concentration and that the bailout constitutes a massive raid by financial crooks on both taxpayers and central bank reserves in the US and Europe.
The $58 Trillion Elephant in the Room The roots of this year’s financial crisis go back to a small team of bankers at J.P. Morgan in New York. Now, their invention - credit derivatives - has helped bring down Wall Street and has left Morgan with its biggest exposure of all. At a time when the reputation of bankers has been shredded, Bill Demchak is a throwback. The day I meet him, the financial world is once again poised on the brink of destruction. The Dow Jones Industrial Average lost 358 points the day before and is already down another 150 this morning. Yet the green-eyed Demchak, in pleated khakis hiked up unfashionably high on his waist, seems preternaturally calm—especially for a man who, unwittingly, has had a hand in bringing Wall Street to its knees.
Wall Street Monsters & Meat (You) The tag team of JPMorgan as the monster and Goldman Sachs as its harlot represent a powerful pair that is more responsible for destroying the entire US financial system than 95% of the American public has any awareness. The colossus of JPMorgan is a monster, a predator, nurtured by pond scum. It has gobbled up Chase Manhattan, Manufacturers Hanover, Chemical Bank, Bank One, and more over the past two decades. Their profound presence in keeping the USTreasury Bond yields down can never be understated. They do so by managing 85% of the credit derivatives on the planet. They distorted usury prices, as in price of borrowed money, thus aggravating the LIBOR (London InterBank Offered Rate) market in a very visible manner. The oblong usury prices have contributed mightily to the destruction of the USEconomy itself, created bubbles, killed jobs, and wrecked savings.
Recession may be deepest since 1970s The U.S. economy is showing disturbing similarities to patterns seen in the painful recessions of the mid-1970s and early 1980s and it may be a year or more before it resumes anything near normal growth. Factories are filling fewer orders, companies are cutting jobs and consumers are tightening budgets so dramatically that economists now think the economy will shrink for three straight quarters -- something that has not happened in 33 years.
Not Enough Money In The World To Fix Things The Real Monster In The Meltdown Closet The myth has quickly taken hold that the global financial crash was caused by bad mortgages. This has allowed rightwing hatemongers to blame the meltdown on the "liberal" programs that encouraged home ownership among a small percentage of lower-income people (a poisonous canard that parts of the mainstream media have actually done a fairly good job of knocking down), while "progressives" of various stripes have denounced banks and other financial institutions for pushing over-easy credit on people who couldn't really afford it.
The financial system established at Bretton Woods Here are some details about the financial architecture established in 1944 by the Bretton Woods Conference, which European leaders now say needs updating. . . . With World War Two drawing to a close and Japan and Europe in ruins, the world's economic elite gathered to build a framework for economic cooperation that would avoid a repetition of the cycle of competitive devaluations that had contributed to the Great Depression of the 1930s.
FDR Ends Gold Standard in 1933 Hoover proclaimed steadfastness of the gold standard; made changes to keep dollar ringing true by raising Fed rate. FDR ended it.
1944 Bretton Woods International Monetary Conference Stabilization of the world's currencies
Nixon Ends Bretton Woods International Monetary System Nixon defends the dollar into gold and other assets; seeks new monetary system to protect the dollar (protectionism).
GOLD VS DOLLAR
EU leaders weigh overhaul of Western financial foundations Shaken by the financial meltdown and plunging markets, leaders of the world's economic powers said Wednesday that they favored an ambitious campaign to revamp the structures that have governed global finance for more than 60 years. Officials from Britain, France and Germany, meeting before a summit meeting here of European Union leaders, said they approved of convening a conference in November or December aimed at revising the system put in place toward the end of the World War II.
Most of G7 in recession, more rate cuts ahead The world's richest nations are in or close to recession and further interest rate cuts are needed to stem off more rot from the worst financial crisis in nearly 80 years, Reuters polls of economists showed on Thursday. Particularly worrying in a quarterly survey of about 250 analysts across the Group of Seven nations is the sharp deterioration in the outlook for the United States, which until very recently was seen only flirting with recession.
G-8 Nations Plan Summit On Global Financial Rules The Group of Eight major industrialized nations announced Wednesday that they will convene a summit to plan changes in the regulation and structure of the world financial industry in hopes of heading off future economic turmoil. The statement, released at the White House, said the meeting would take place in the "near future." French President Nicolas Sarkozy said it should be "preferably in New York, where everything started."
Banks Admit Bailout Won't Work So much for that story. A few days ago, when Hank Paulson called the heads of the nine families to Washington and shoved cash down their throats, he announced that the banks would use this new taxpayer cash to lend. They won't, of course. They'll hoard it like a starving family who has just been given a grocery cart full of food. And after a few days of silence, even the banks are finally admitting that. So it's back to the drawing board for Paulson & Co. Next steps? Find a way to force the banks to write their assets down to nuclear winter levels, so 1) private investors don't have to worry about getting sandbagged and therefore invest more in the banks, and 2) the banks know they won't be forced to take more multi-billion dollar losses. Only then will the banks begin to lend again.
Fed's Kohn Says We Need More Than Government's $250 Billion Stock Purchase Federal Reserve Vice Chairman Donald Kohn said the U.S. government's recent decision to buy $250 billion in financial firm stocks is not enough to shore up the economy - but is a "key building block." He said he hopes private capital investment will follow the government purchase.
Fed Rethinks Stance on Popping Bubbles $$ The Federal Reserve and academics who give it advice are rethinking the proposition that the Fed cannot and should not try to prick financial bubbles. "[O]bviously, the last decade has shown that bursting bubbles can be an extraordinarily dangerous and costly phenomenon for the economy, and there is no doubt that as we emerge from the financial crisis, we will all be looking at that issue and what can be done about it," Fed Chairman Ben Bernanke said this week. The bursting of this decade's housing bubble, which was accompanied by a bubble of cheap credit, has wrought inestimable economic damage.
European Central Bank throws aside fears about inflation The European Central Bank's main task is to keep inflation down. But over the past month, it has thrown caution to the wind in trying to prevent financial system and integrated economy of Europe from falling apart. The ECB has transformed itself into a crisis manager of the sort that its architects could hardly have imagined when the bank took up its work 10 years ago. The bank, charged with managing the euro, was given a single mandate - to keep prices under control.
EU vows to shield economy from financial fallout European Union leaders vowed action on Thursday to underpin growth and jobs threatened by the global financial crisis, but ruled out spending their way out of recession with a Europe-wide stimulus package. Despite the downturn, the EU agreed to stick to a December deadline for adopting ambitious laws to fight climate change.
Trichet Address Global Economic Turmoil
Paulson regrets mistakes on economy Paulson expresses regret for mistakes leading to biggest financial crisis in 7 decades Treasury Secretary Henry Paulson on Thursday expressed regret for the many errors made that led to the biggest financial crisis in seven decades, but he insisted the administration is pursuing the correct course now to end the debacle. "We're not proud of all the mistakes that were made by many different people, different parties, failures of our regulatory system, failures of market discipline that got us here," Paulson said in an interview on Fox Business Network.
Slowing Inflation Opens the Door For Fed to Cut Interest Rates Further $$ With U.S. consumer price inflation receding, the Federal Reserve has additional leeway to reduce interest rates further in the weeks ahead, though Fed officials currently don't see more rate cuts as a clear choice.
Fed to Meet With Credit-Default Industry on Clearinghouse Today The Federal Reserve Bank of New York plans a third meeting today with the credit-default swap industry, as it presses for a central clearinghouse for the $55 trillion market, people with knowledge of the talks said. Fed officials summoned dealers and exchanges to the gathering after meeting twice last week, according to the people, who declined to be named because the discussions are confidential.
Banks Try to Drag Us Back Into the Drowning Pool The trouble with throwing a lifeline to dying banks is they keep trying to pull the rest of us into the drink. Here we have the Treasury Department injecting $250 billion of fresh capital into U.S. banks in exchange for preferred stock, which should present the perfect opportunity for them to sell or write down all their toxic holdings. And how do the banks return the favor? By trying even harder to gut the rules that say they can't lie to investors about the values of their crummy assets.
How the Banks Will Spend Their Loot Paulson wants them to start lending, but some bank chiefs suggest they'll do no such thing. Nine large U.S. banks are preparing to receive $125 billion from the Treasury Department as part of the government's plan to recapitalize the banking sector and reignite lending. Treasury Secretary Henry Paulson has urged the banks to use the capital to start lending again, but the government's equity stakes come with no power to influence how they actually spend it. For weeks, the Feds have tried one measure after another to spur lending, to no avail.
Banks may hoard bailout funds Bailout money meant to provide movement in the U.S. financial system may end up sitting still for a while, various bankers said. "We will have the opportunity to redeploy that (bailout funds)," John Thain, chief executive officer of Merrill Lynch, told The New York Times. "But at least for the next quarter, it's just going to be a cushion," he said. Other bankers privately made similar remarks, the Times reported Friday.
Backlash against bankers FALLOUT from the financial crisis grew in the real economy on Friday with job losses and a backlash against banking chiefs as shares ended a crazy week with a new roller-coaster ride.
Bank bailouts could spur risk-taking Now that U.S. banks have access to $250 billion worth of taxpayer money, they'll lend it wisely, the markets will rejoice and all will be well again. If only. The first banks to participate, nine in total, have been given anywhere from $3 billion to $25 billion each. In exchange, the government gets preferred shares in the financial companies. What the banks haven't been given is many strings attached. . . . Doling out taxpayers' money in this way can result in moral hazard — maybe even on steroids. That means companies, individuals or investors could start taking big risks again because they think the government has their back.
'Armageddon' Prices Fail to Lure Buyers Amid Selling Credit markets have fallen so far that they are providing a "once in a lifetime opportunity,'' and investors are still selling. Prices of loans rated below investment grade declined to a record low 66.1 cents on the dollar, virtually guaranteeing investors get their money back, based on historical recovery rates, according to data compiled by Standard & Poor's. Yields on corporate bonds show investors expect 5.6 percent of the market to go bust, the highest default rate since the Great Depression, according to Christopher Garman, chief executive officer of debt research firm Garman Research LLC in Orinda, California.
As Credit Tightens, Companies Curtail Spending, Expansion Some Indebted Firms at Risk of Default With bank lending windows slammed shut for the past month, countless companies -- from pizza delivery firms and auto retailers to big real estate firms and utilities -- are hunkering down to survive the freeze in credit markets and slowdown in the economy. Hard-pressed to sell bonds or arrange new loans, companies are dipping into credit lines, cutting back on spending, making deals with cash-rich partners or postponing projects.
A better way to revive credit markets The chatter that the American taxpayers will pay $700bn to save the banks is nonsense. I have a straightforward plan that should revive the market in mortgage-related securities (MRS), greatly enhance bank capital and earn several tens of billions of dollars for the US Treasury. The distress in the US credit market reflects that MRS are no longer priced on a rational basis. Rather, a few companies with a desperate need for cash have sold these securities for 25 cents on the dollar; the accounting conventions require that this price is used to value similar securities owned by other banks.
Pentagon Wants $450 Billion Increase Over Next Five Years "We cannot do everything, or function equally well across the spectrum of conflict. Ultimately we must make choices," Gates wrote. The new estimate, which has not been publicly released, would raise the fiscal 2010 budget number announced by the administration this year from $527 billion to $584 billion, not counting operations costs for the ongoing wars. Money to prosecute the ongoing wars is not included in the new estimate, meaning the military would still need significant supplemental appropriations in addition to the increased budget request. Supplemental appropriations have been used to fund procurement and personnel costs that are predictable and therefore should be placed into the regular budget, said Admiral Michael Mullen, the chairman of the Joint Chiefs of Staff.
Washington Continues to Ignore Root of Housing Problem Some say the definition of insanity is trying the same thing over and over again, expecting a different result. By that measure, voters should load up on straitjackets this November and drag everyone in Washington off to the nuthouse. Despite overwhelming evidence that we're in the middle of a debt crisis, regulators insist they're wrestling a liquidity crunch. And all the while, a cancer continues to eat away at the guts of the economy: The housing market. Only when it stabilizes will the financial system and, by extension, the economy -- recover. And yet, despite this widely recognized fact, the recent $700 bailout package contains little support for struggling homeowners. Even the $250 billion being dumped into banks will have only a minor effect on property values.
Inflation Cools as Economic Downturn Deepens Consumer prices held steady as the credit crisis took a toll on the sluggish U.S. economy and dampened inflation. The Labor Department announced yesterday (Thursday) that the Consumer Price Index (CPI) was unchanged in September after declining 0.1% in the prior month. Year-over-year, consumer prices increased 4.9% for the 12 months ended September 2008, down from a 5.4% increase in August. Oil prices made up the bulk of the decline in consumer prices as the cost of crude has dropped by over half from its record high of $147 per barrel in July.
Credit Default Vultures Turn Focus on Main Street Wall Street firms have been getting clobbered for months by credit default swaps - bets that the companies will fail. Indeed, that is a large part of why Bear Stearns, AIG, Lehman and other giant companies failed. Now, the CDS vultures are turning their focus on Main Street. As Markit analyst Paul Davies wrote yesterday: "Credit derivative markets turned their attention away from financial armageddon towards plain old recession on Wednesday morning, pushing up the costs of protection on the main indices for the first time this week."
Hedge-Fund Assets Fell 11% in Quarter on Record Withdrawals Assets managed by hedge funds fell 11 percent in the third quarter as investors pulled a record $31 billion from their accounts, according to data compiled by Hedge Fund Research Inc. The decline reduced industry assets to $1.72 trillion from $1.93 trillion as of June 30, the Chicago-based research firm said today in a statement. Fund returns fell an average of 8.85 percent in the quarter, compared with the 16 percent decline by the MSCI World stock index.
Treasury plan pushes up US mortgage rates US mortgage rates have soared this week in an unexpected reaction to the latest Treasury financial rescue plan, which has prompted investors to buy bank debt and sell bonds backed by home loans. Interest rates on 30-year fixed-rate mortgages, as measured by Bankrate.com, rose to 6.38 per cent on Thursday from 5.87 per cent last week - before the Treasury said on Tuesday that it would take equity stakes in banks and guarantee new bank debt.
Banks borrow record $437.5 billion per day from Fed Financial institutions ran to their lender of last resort for record amounts of cash in the latest week, under extreme pressure from the worst global financial crisis in a generation, Federal Reserve data showed on Thursday. Banks and dealers' overall direct borrowings from the Fed averaged a record $437.53 billion per day in the week ended October 15, topping the previous week's $420.16 billion per day.
Executives saw conditions worsening before crash Top U.S. executives were bracing for a downturn even before the financial markets collapsed late last month, according to a survey conducted in September by the Business Council. Nearly three-quarters of the CEOs surveyed last month saw global conditions eroding over the next two quarters and 91.6 percent said U.S. conditions were worse in September than they had been six months earlier.
U.S. banks brace for slump as economy weakens JPMorgan Chase, Wells Fargo, and State Street have weathered these bad times better than most banks. But things are about to get worse. Sobered by the prospect of a drawn-out erosion in the economy, investors drove down the shares of all three Wednesday even after they reported earnings that beat the low expectations of Wall Street analysts. "If you made it past the credit crisis, you are not making it past the economic carnage," said Meredith Whitney, a banking analyst at Oppenheimer & Company. "And there is more to come."
Banks Hoard Cash as Credit Card Defaults Rise Consumers are increasingly unable to pay off their credit cards, forcing banks to hoard cash to protect against future losses and lend to fewer people, according to reports yesterday from several of the nation's largest banks. These financial disclosures showed a spike in credit card loans going bad, putting further pressure on already-stressed balance sheets.
Banks Are Likely to Hold Tight to Bailout Money As two financial giants, Citigroup and Merrill Lynch, reported fresh multibillion-dollar losses on Thursday, the industry passed a grim milestone: All of the combined profits that major banks earned in recent years have vanished. Since mid-2007, when the credit crisis erupted, the country’s nine largest banks have written down the value of their troubled assets by a combined $323 billion. With a recession looming, the pain is unlikely to end there. The problems that began with home mortgages, analysts say, are migrating to auto, credit card and commercial real estate loans.
Commodities Outlook: Gold and Silver are the Ultimate Currencies
Currency Outlook: Dollar Will Remain Weaker Over Next Few Months
Credit card defaults rising Credit card defaults are rising among U.S. consumers in an already tightening credit environment, various banks said. J.P. Morgan Chase said credit card account defaults rose 45 percent in the third quarter compared with the same period a year ago. The bank predicted 7 percent of their credit card loans would be in default in 2009, The Washington Post reported Thursday. Capital One, also expects credit card defaults to reach 7 percent next year. In September, 6.34 percent of their credit cards accounts went into default, up from 5.96 percent in August. The data points to a national spending habit that has U.S. credit card holders living beyond their means.
Social Security checks grow a bit as stocks shrink Social Security checks are going up $63 a month for the typical retiree _ the largest increase in more than a quarter century but likely to seem puny to the millions who have been watching in horror as Wall Street lays waste to their retirement nest eggs. Every little bit helps, but the boost is coming after a year when people living on fixed incomes have been pounded by surging energy prices and higher food costs - and lately have been seen their lifetime savings shrivel along with the stock market.
U.S. Homebuilder Confidence Index Fell to Record Low in October Confidence among U.S. homebuilders slid in October to the lowest level since record-keeping began in 1985, a sign the crisis in credit markets may deepen the worst housing recession in a generation. The National Association of Home Builders/Wells Fargo index of builder confidence decreased to 14, less than forecast, from 17 in September, the Washington-based association said today. A reading less than 50 means most respondents view conditions as poor.
U.S. October Consumer Sentiment Falls Most on Record Confidence among U.S. consumers fell by the most on record in October, raising the risk that spending will slump as job losses mount and financial markets crash. The Reuters/University of Michigan preliminary index of consumer sentiment fell to 57.5 from 70.3 in September, the biggest decline since records began in 1978. The measure, which averaged 85.6 in 2007, was lower than forecast.
Government may file subprime charges soon "Dramatic results" coming in lender mortgage fraud investigation The top federal prosecutor in Los Angeles indicated Thursday that charges are coming soon from a sweeping investigation of banks and subprime lenders for their role in the U.S. mortgage crisis. "I think we are going to see some fairly dramatic results in the near future," U.S. Attorney Thomas O'Brien told The Associated Press. "Mortgage fraud is an extremely important issue to me and to the people of this district."
Oil Prices Slip Below $70 a Barrel Oil prices dropped below $70 a barrel for the first time in 14 months Thursday, prompting the OPEC cartel to call for an emergency meeting next week to establish some stability in prices that have plummeted recently after rising for months. Oil prices have tumbled by nearly $40 a barrel in just three weeks as indications grow that demand for energy will slow along with weakening economies around the world. As recently as July, oil was trading at a record of $145 a barrel.
Oil is Headed for $150 a Barrel, Gold for $1,500 an Ounce, Merrill Analysts Predict Gold could reach $1,500 an ounce, since the worldwide plans to bail out the global financial industry are certain to fuel inflation, analysts led by Francisco Blanch at Merrill Lynch & Co. Inc. wrote in a research report. The Merrill Lynch analysts also predicted that oil would reach $150 a barrel. In the research note released earlier this week, the analysts said "the unintended consequence of the ongoing financial bailout will be inflationary pressures to the commodity markets."
In-Depth Look: Global Growth & Commodities Lower Oil Prices Cut Costs; Metal Prices Slump; Falling Commodities Signal Slowdown; U.K. Mining Sector Plunges; Further Analysis and Discussion with Michael Pento of Delta Global Advisors
OPEC calls emergency meeting as oil prices fall Oil prices dropped below $70 a barrel for the first time in 14 months Thursday, prompting the OPEC cartel to call for an emergency meeting next week to establish some stability in prices that have plummeted recently after rising for months. Oil prices have tumbled by nearly $40 a barrel in just three weeks as indications grow that demand for energy will slow along with weakening economies around the world. As recently as July, oil was trading at a record of $145 a barrel.
GM, Chrysler Merger Talks Heat Up: Report General Motors and Chrysler LLC are accelerating merger discussions amid strong support from potential lenders that are eager to see a deal done, the Wall Street Journal reports. GM is set to soon report dismal third-quarter earnings and is scrambling to find new sources of funding, the newspaper reports, citing people familiar with the matter. That's spurring the automaker to complete the deal as soon as the end of October.
FDIC Chief Raps Rescue for Helping Banks Over Homeowners $$ Federal Deposit Insurance Corp. Chairman Sheila Bair on Wednesday criticized the federal government for failing to take more aggressive steps to prevent Americans from losing their homes, highlighting a rift between her and other senior U.S. officials over terms of the $700 billion rescue package. The government plan will help stabilize financial markets but it doesn't do enough to address home foreclosures, the root of the crisis, she said . . .
Single-Family Home Starts in U.S. Fall to 26-Year Low Housing starts in the U.S. fell more than forecast in September as construction of single-family homes plunged to the lowest level in 26 years, indicating the three-year real-estate slump is intensifying. Construction of single-family homes dropped 12 percent to a 544,000 annual rate, the Commerce Department said in Washington. Starts on all residential properties, including condominiums, slid to 817,000, below all 74 forecasts in a Bloomberg News survey.
Renters in foreclosed homes get help Sheriffs, state governments move to help renters who are innocent victims of foreclosure Tita Mendoza and her husband moved into their Miami Beach condo in June and have been dutifully paying the $1,800 rent on time every month. And yet, they could be evicted any day now. Last month, the Mendozas were served with court papers notifying them that their landlord was being foreclosed on, meaning the couple could be turned out on the street.
As economy sputters, grad schools overflow More people are applying for graduate school enrollment, now that Wall Street is melting down and the economy is souring. With Wall Street all but disappearing, aspiring investment banker Nick Di Lorenzo has decided to explore other career options. Earlier this month, the New York University Stern School of Business senior took the LSAT, a first step toward a law degree. “The insecurity of not being able to have a job after college drove me to apply to grad school,” said Mr. Di Lorenzo, 21, who now wants to go into corporate securities law and is anxiously awaiting his test scores. Graduate programs typically see an enrollment boost during economic downturns, and New York area schools are no exception. As Wall Street firms shed tens of thousands of jobs, graduate programs at local schools like NYU and Columbia University have seen a flood of applications.
Caribbean nations to sign EU accord Thirteen Caribbean countries will sign a trade agreement with the European Union on Wednesday despite doubts about whether it will help or harm the region. The countries – members of the Caribbean Community, a grouping of mainly English speaking nations, and the Dominican Republic – are signing the pact that has been questioned in the region and by other countries in Africa and the Pacific. It will not be signed by Haiti and Guyana’s president has said he is not comfortable with the terms. Caribbean officials say the trade agreement is compatible with World Trade Organisation regulations, while previous agreements were not. However, President Bharrat Jagdeo of Guyana maintains that the trade pact – the Economic Partnership Agreement – will hurt development and undermine future WTO negotiating positions. He also wants it to be revised every five years.
Dubai Reads from America's Economic Playbook From Bloomberg.com we happily discover that Dubai is a lot more like America than one might think at first glance, as these arrogant blowhard morons also came up with "a surge in borrowing that paid for the world's tallest tower, palm tree-shaped man-made islands and stakes in banks worldwide" as they spent and spent and spent on credit, and now "may need help from Abu Dhabi and the United Arab Emirates government" to bail them out with some quick cash. Just like us! Hahahaha!
Outlook for Asian banks turns bleaker The outlook for the Asian-Pacific banking industry is turning increasingly negative, as banks from South Korea to Australia battle growing financing fears and brace for more bad debts as economies slow. Asian-Pacific lenders have managed to mostly dodge the ravages of the subprime mortgage meltdown, but now they must survive depressed markets and a darkened economic picture.
Chinese Fund May Be Biggest Fool As much as $5.4 billion of China's $200 billion sovereign wealth fund could be frozen due to a U.S. money market account that failed, the Financial Times reports. U.S. regulatory filings show that a China Investment Corporation subsidiary was the biggest institutional investor in Reserve Primary Fund, a $62 billion money market fund that was the oldest such fund in the United States, and which recently closed its doors. Until recently many investors considered money market funds to be as safe as bank accounts.
How China is Beating the United States in the Global Oil Game Iraq recently signed its first oil deal in 35 years with a foreign company. And - quite surprisingly to many observers - the company wasn't one of ours. Not surprisingly, the U.S. news media barely acknowledged the deal - even though the agreement was major news throughout the rest of the world.
Concern grows over cracks in Chinese credit system With signs of cracks appearing across the Chinese credit system, concerns are growing that domestic banks may be ill-equipped to handle a drop in the country's economy. Corporate collapses and loan defaults in China over the past few weeks, together with a tightening interbank lending market, show that Chinese banks are hardly in the clear when it comes to negotiating their way through the global financial turbulence.
----------- Excellent 3 part series on governments. ---------------
America at the crossroad. Do we want security over freedom and opportunity?
The Political Spectrum Explained! (1 of 3)
Capitalism, Fascism, Communism, Socialism, and the Difference? (2 of 3) Explains why the 'difference' is in the ownership and control of the 'capital'
Americanism: Free Enterprise VS Central Planning (3 of 3) State controlled capitalism
The Goldsmiths --Part XXIII As one puts some effort into trying to understand the plutocrats and how they manipulate and control most of the world’s financial markets (certainly in the US, Europe, Africa [South of the Sahara] and parts of Asia), it seems inevitable that some conclusions can be developed on the probable direction of the markets in the future as long as they are subject to the influence and control of the plutocratic masters.
The $55 trillion question Before this - thankfully - last United States presidential debate, Republican candidate Senator John McCain had promised "I'll whip [Barack] Obama's you-know-what". Well, he whipped nothing. He told Americans he was not President George W Bush. And then he presented himself as Joe the Plumber - a new working class heir to vice presidential candidate Sarah Palin's Joe Six-Pack. And then he got "hurting and angry". And then he lost the plot. Independent voters duly took note - and awarded one more debate to Obama. Three to none. Game virtually over. Obama - always cool and calculating, carefully hedging his bets - still refuses to stare America in the face and admit that the real economy will tank, and the resulting mass unemployment will be proportionally as devastating as during the 1930s.
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Thurs 10.16.2008
Fire or Ice: Are We Headed Towards Hyperinflation or Deflation? The most important debate among economists and high-level investment advisors is whether the U.S. economy will heat up or cool down - that is, whether it will go into runaway inflation or deflation. "Hyperinflation" is runaway inflation. This is what Germany experienced in the 1920s's, where people had to literally pay barrels full of German marks to buy a loaf of bread. Deflation is what the U.S. experienced in the Great Depression, where most people had no one had money to spend, hire employees, or do much of anything else.
If we're going into hyperinflation, then investments like gold - which tend to hold their value in inflation - are best. In this case, the government should stop printing money like its Monopoly money.
If instead, we're going into deflation, then cash or treasury bills hold their value the best. Because prices go down in a depression, each dollar is worth much more, and is a good thing to hold onto for investing purposes. In this case, the government should spend more to get things going.
Dow plunges 733 on new disheartening economic data The economy lurched deeper into the doldrums Wednesday and took the stock market down with it, sending the Dow Jones industrials to a staggering 733-point loss and erasing any hopes that the convulsions that have shaken Wall Street for a month were over. The daylong sell-off came as retailers reported the biggest drop in sales in three years and as a Federal Reserve snapshot showed Americans are spending less and manufacturing is slowing around the country.
Market Gets 'Real' With Huge Dive Anyone who was worried that the stock market had taken leave of its senses should have felt greatly relieved after yesterday’s 733-point drop in the Dow Industrials. Added to the plunge from the previous day’s fleeting high at the opening, the Indoos have now given back 1264 points of their ill-gotten, 1900-point gain from Monday's low. Could it be that Wall Street isn’t so crazy after all? Some have attributed the latest bout of selling to scary numbers from the retail sector, others to the mounting specter of recession-or-worse, or even to the prospect of the left-most member of Congress becoming our next President. But we'd like to think investors are focused on the more immediate, and worrisome, matter of what will happen next week when insurance payments on several hundred billion dollars worth of Lehman default swaps come due.
Bank crisis ends as the economic crisis begins The taxpayer rescue of the entire western financial system is more or less complete. Tuesday's sweeping move by US Treasury Secretary Hank Paulson to guarantee financial debt and inject state capital into America's biggest banks brings the US into line with Britain and Europe, where almost $3,000bn has been vouched in the biggest bail-out of all time. If the history of financial crises is any guide, the violent credit shock of 2007-2008 has largely run its course. The sovereign states of the US, Britain, France, Germany, Italy, Spain, and Holland have broad enough shoulders to carry their load of fresh liabilities – even if Iceland does not.
Nouriel RoubiniPeering into the Abyss of a severe recession; avoiding a more severe catastrophe.
EU Pushes for Overhaul of Post-World War II Financial System European Union leaders pressed for an overhaul of the global financial system to prevent a repeat of the credit crunch that sparked the biggest stock-market selloff since the Great Depression. EU leaders called for a global summit as soon as next month to rewrite the 1944 Bretton Woods accord that paved the way for Europe's post-World War II reconstruction and set up the institutions that oversee the world economy today.
The British rescue, and memories of Bretton Woods Why is Britain taking a leading role? As the world's foremost banking centre, Britain has more than most at stake in repairing a system that has so rapidly disintegrated. "We regard ourselves as leaders in global finance and I think government has really sought to protect that, to protect the city as a global leader in finance," said Charles Davis, economist at the Centre for Economics and Business Research Ltd. Much of the motivation stems from the role of the country's financial services sector, which represents a higher-than-average chunk of the country's economic activity.
What is Bretton Woods? The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states.
Setting up a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods established the International Bank for Reconstruction and Development (IBRD) (now one of five institutions in the World Bank Group) and the International Monetary Fund (IMF). These organizations became operational in 1945 after a sufficient number of countries had ratified the agreement.
The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value - plus or minus one percent - in terms of gold and the ability of the IMF to bridge temporary imbalances of payments. In the face of increasing strain, the system collapsed in 1971, following the United States' suspension of convertibility from dollars to gold. This created the unique situation whereby the United States Dollar became the "reserve currency" for the Nations who signed.
European call for 'Bretton Woods II' European leaders yesterday united behind calls for a "Bretton Woods II" summit to redesign the world's financial architecture, with Britain arguing the meeting could also be used to seal a long sought global trade deal. Gordon Brown, Britain's prime minister, said the world should turn the financial crisis into an opportunity and reform global institutions, such as the International Monetary Fund, conceived in 1944 when western leaders met in Bretton Woods, New Hampshire, and mapped out a postwar financial order. George Bush, the US president, is "open to the idea," of a summit, a US official said, although the administration was "focused on the immediate situation at the moment". Officials in Brussels indicated last night that the meeting could take place in New York as early as next month.
Leaders back call for 'Bretton Woods II' summit European leaders yesterday united behind calls for a "Bretton Woods II" summit to redesign the world's financial architecture. Britain argued that the meeting could also be used to seal a long sought global trade deal. Gordon Brown, Britain's prime minister, said the world should turn the financial crisis into an opportunity and reform global institutions, such as the International Monetary Fund, conceived in 1944 when western leaders met in Bretton Woods, New Hampshire, and mapped out a postwar financial order. The idea yesterday gathered support at a European Union summit in Brussels. Nicolas Sarkozy, French president, and Angela Merkel, German chancellor, have already signalled their support for reforms to the international financial system.
Bernanke Foreshadows End to Fed's Hands-Off Approach to Bubbles Federal Reserve Chairman Ben S. Bernanke signaled an end to the Fed's decades-old aversion to interfering with asset-price bubbles as the financial crisis reshapes some of the central bank's most firmly held views on regulation and monetary policy.
In U.S., more signs of deeper downturn Even as governments around the world began to introduce their financial bailout plans Wednesday, more signs emerged that the economic downturn may be deepening, sending jittery markets down sharply in Europe and on Wall Street. The chairman of the U.S. Federal Reserve, Ben Bernanke, warned that the American economy was headed toward an extended period of difficulty, despite worldwide efforts to stabilize the financial markets.
At Moment of Truth, U.S. Forced Big Bankers to Blink $$ For an hour, the nine executives drank coffee and water and listened to the two men paint a dire portrait of the U.S. economy and the unfolding financial crisis. As the meeting neared a close, each banker was handed a term sheet detailing how the government would take stakes valued at a combined $125 billion in their banks, and impose new restrictions on executive pay and dividend policies. The participants, among the nation's best deal makers, were in a peculiar position. They weren't allowed to negotiate.
Paulson still eyeing a January exit U.S. Treasury Secretary Henry Paulson said on Wednesday he would work to ensure a smooth transition to his successor after the November presidential election, throwing cold water on hopes that he might stay on crisis control duty. In an interview on CNBC, Paulson said he was available after the election between Sens. John McCain and Barack Obama to work with "whoever the new treasury secretary is."
'Distasteful' Capital $$ A dangerous if necessary moment for U.S. markets. . . . . this is also a very dangerous moment. The government has taken ownership stakes in the largest banks in the land. This extraordinary intervention is perilous -- not least to the banks themselves -- unless it is limited in scope and time. Mr. Paulson called the capital injection "distasteful" but unavoidable, and we can't disagree. The trick is to ensure that neither he nor his successors develop a taste for politically directed credit.
U.S. Treasury Secretary Paulson Stresses $250 Billion Buy Was No Nationalization U.S. Treasury Secretary said the government's recent $250 billion purchase in shares of U.S. banks was "anything but a nationalization." In an interview with CNBC Wednesday night, he described the government as a "passive" shareholder and emphasized the move was done to boost confidence, not bail out the firms. On Monday, Paulson announced the goverment would be spending billions on shares in the nine largest U.S. financial firms, including JPMorgan and Citigroup. "These are temporary investments to bring confidence to the system," he said.
Feds Give Hundreds of Billions to Banks, But Get Only NON-VOTING Shares in Return Paulson's original bailout plan was so ill-conceived, and the markets reacted so poorly, that he had to copy the European model of buying shares in banks in return for injections of capital. As Kenneth S. Rogoff, a professor of economics at Harvard, said, "The Europeans not only provided a blueprint, but forced our hand".
Bailouts at a glance How do the American and British bank bailout programs compare on some key principles?
Ron Paul responds to Bush Plan to socialize banks.
G8 Leaders to Hold Special Meeting on Financial Crisis The leaders of the G8 industrialized nations said they will meet "in the near future" to discuss the current financial crisis and that they support the actions adopted by the G7 Plan of Action last weekend. The G8 leaders, from Canada, France, Germany, Italy, Japan, Russia, the United Kingdom and the United States of America, as well as the European Commission President, said in a statement Wednesday they will meet with key countries "at an appropriate time in the near future to adopt an agenda for reforms."
US surrenders power to appoint World Bank president The US is to lose its power to appoint the president of the World Bank after the UK's development secretary, Douglas Alexander, brokered a deal to throw open the post to candidates from any country. Backed by European governments and developing countries, Alexander overcame resistance from the US and Japan to secure a reform he described last night as "a significant step forward". Washington has had the right to hand-pick the president of the World Bank since the institution was founded after the second world war, with Europe choosing the managing director of the International Monetary Fund. Alexander said: "The agreement provides the opportunity for candidates to be nominated regardless of nationality. It will ensure that the best-qualified candidate is selected."
Gold in the hands of the public is an enemy of the state "Gold in the hands of the public is an enemy of the state." … Adolf Hitler . . . .We know from published reports in the media, and from the anecdotal input coming our way from everywhere, that it is becoming harder and harder to buy gold and silver in various forms. You can read the latest below. It appears that various governments and bullion banks are intentionally making it harder and harder for individuals to buy physical gold. The US mint is restricting gold coin sales. The German banks are saying they don’t have supply. Scotiabank says they are out. They are not banning people from owning gold, they are just making it very difficult to buy because they say they have nothing for sale. Therefore, prices of gold and silver in the unofficial markets are taking off all over the world. The price of gold in the real world is close to, or over, $1,000 per ounce and silver is $15 to $20 per ounce.
Peter Schiff On Glenn Beck: Depression In Disguise:
Markets Pricing in 42% Chance of 50 bps Fed Cut on Downbeat Data Fed funds futures are back to pricing in a 50 bps rate cut for the Oct. 16 Federal Reserve meeting on a day that saw U.S. advance retail sales fall and producer price inflation rise above expectations. Markets remain fully priced in for a minimum 25bp rate cut, but are now factoring in a 42% chance that the Fed funds rate will be lowered to 1.00% from 1.25%.
World Markets Fall as Investors Weigh Relentless Trouble Stock markets plunged anew on Wednesday, nearly wiping out the record gains of Monday and sending another wave of wealth destruction washing over American households. The government’s rescue of the banks has been widely embraced, but the frenzied selling, which pushed the Dow Jones industrial average down 733 points, underscored how the economy’s troubles are too broad to be fixed by the bailout of the financial system.
How central banks destabilized the world' s economies The crisis that America finds itself in is not political in origin nor can it be laid at the feet of any individual or party. The whole world, including Europe, is experiencing a massive monetary disruption. Moreover, it is not the first time that the world has been shaken by a financial crisis. It happened in 1824 and it happened again after WW I. What is depressing is that though these crises have but one single cause today' s central bankers and legions of economists find themselves utterly clueless, readily taking as a causes those data which are in fact symptoms of a very deep monetary disorder. Monetary disorders are always the product of inflationary policies.
The truth behind the Asian fairy tale Are you sitting comfortably? Far, far away from the woeful mess engulfing the wicked countries of the west lies an upright land with fecund trade surpluses, near-bottomless pools of central bank reserves, well-capitalised banks and a healthy aversion to "money game" speculation. This land of Asia, dear children, shunned the easy profits promised by the peddlers of toxic derivative products and fancy collateralised debt obligations. Its banks eked out a respectable living through the sensible business of lending money, its manufacturers through the old-fashioned practice of making things. This is why Asia has avoided the financial near-collapse that rained down on the casinos of Wall Street and London. This is why, too, Asia will now become the sole motor of global growth.
Peter Schiff On Glenn Beck: Inflation Nation?
Forget the silver bullet The initial reaction of US Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke to the financial crisis was to argue that their proposed US$700 billion Troubled Assets Relief Program (TARP) was better for American families than any other plan, although they did not allude what any other plan might entail.They wanted their proposal to be adopted in a "clean and quick" way before the sky fell. Unfortunately, soon after the passage of a modified plan, the TARP quickly and cleanly intoxicated capital markets in the US, Europe and Asia, wiping out trillion of dollars in share values and retirement savings within the span of five trading days. Had Paulson and Bernanke not forced their controversial TARP but had instead adopted a comprehensive plan the ensuing nightmare in stock and capital markets might have never occurred.
No Credit, No Leverage "What we thought was a wall of liquidity, turned out to be a wall of leverage." – Paul Davies in the FT, quoting "a number of senior bankers..." WANNA KNOW WHY your stock market shares keep on tumbling, right back to what one Fox news anchor just called "the absolute lows" from the end of last week? It's credit – or rather, the lack of it. The US bail-out, European unity, Gordon Brown's sainthood, every new mortgage application...all these things now look incredible – quite literally unbelievable – against the stark backdrop of no credit, no leverage today. But nothing lacks credibility like trying to make fast money in finance right now.
Fed's Kohn Says We Need More Than Government's $250 Billion Stock Purchase Federal Reserve Vice Chairman Donald Kohn said the U.S. government's recent decision to buy $250 billion in financial firm stocks is not enough to shore up the economy - but is a "key building block." He said he hopes private capital investment will follow the government purchase. Speaking to an audience at Georgetown University Wednesday night, Kohn said regulation of the financial system will soon be tightened, adding that the existing regulatory system "didn't pass the test."
JP Morgan and Wells Fargo announce big fall in profits Huge losses on the credit markets sent profits plunging at two of America's leading banks, JP Morgan and Wells Fargo, a day after both were obliged to accept billions of dollars in capital from the US government.
Blatant Banker Manipulation Of Gold Prices One ounce bullion still being sold $200-300 above spot value, proving official spot price is divorced from reality Despite the dramatic fall in gold prices from Friday’s high of around $930 an ounce to today’s current low of $830, sales of actual physical gold continues to trade for anything up to $300 over spot price, proving again that official COMEX gold future numbers are completely divorced from reality and banker manipulation is rife.
Economy sinks deeper into rut Country sank deeper into economic rut during the fall as financial crisis takes its toll The country has sunk deeper into an economic rut, the Federal Reserve reported Wednesday, reflecting mounting damage from the financial and credit crises. The Fed's new snapshot of business conditions around the nation showed economic activity weakened across all of the Fed's 12 regional districts. Consumer spending -- which accounts for more than two-thirds of economic activity -- slumped in most Fed regions. Manufacturing also slowed in most areas.
A Left at Nobel Drive I was actually stunned to learn that the laughable Paul Krugman, another low-wattage PhD economist from Princeton University, won the Nobel Prize, and then I realized I was mostly just childishly jealous, especially about the part where he gets over a million smackeroos, and the news media uses a flattering picture of you, instead of the embarrassing one where I am on the ground getting gut-kicked by those damned nuns! Apparently Princeton University has a penchant for embarrassing itself, too, as Ben Bernanke - current chairman of the Federal Reserve - is another Princeton alumnus, who was actually the erstwhile head of the economics department there, and who demonstrates his intelligence by presiding over, and making worse, the biggest economic calamity to hit the United States and the world in a century (maybe more!), thanks to his own lack of competence and his inability to understand that his predecessor at the Fed since 1987, the execrable Alan Greenspan, was a complete moron, too.
Economic Expectations: "Nobody Knows" How Bad the Economy Will Be
Fed's Beige Book Says U.S. Economy Weak, Credit Tight, Prices Moderate Economic conditions in the U.S have "weakened" across all 12 Federal Reserve Districts, and businesses are more concerned about the economic outlook, according to the Fed's Beige Book released Wednesday. The Beige Book is a summary of economic news over roughly the past six weeks in the 12 Federal Reserve Bank districts. The Federal Open Market Committee and analysts look to the compilation of comments by regional Fed banks to get a non-numerical picture of economic conditions across the country.
Home Prices Seem Far From Bottom The American housing market, where the global economic crisis began, is far from hitting bottom. Home prices across much of the country are likely to fall through late 2009, economists say, and in some markets the trend could last even longer depending on the severity of the anticipated recession. In hard-hit areas like California, Florida and Arizona, the grim calculus is the same: More and more homes are going up for sale, but fewer and fewer people are willing or able to buy them.
A Look at LIBOR Shows Bigger Credit Problems on the Horizon More than a year ago, even before the subprime-mortgage crisis had revved itself up into the full-fledged credit crisis that’s now threatening global growth, we pointed to the London Interbank Offered Rate (LIBOR) and other interbank rates that suggested that the worst was yet to come. LIBOR is the rate at which banks offer to lend funds to other banks, based on current interest rates. In many ways, it is similar to the U.S. Federal Funds rate.
Bernanke says U.S. economy faces big threat Federal Reserve Chairman Ben Bernanke on Wednesday gave a dour assessment of the U.S. economy, emphasizing a "significant threat" from turmoil in credit markets in remarks that suggested more interest-rate cuts could be coming. Bernanke said it will take some time to restore normal credit flows and pledged the U.S. central bank would continue to act aggressively to fight the crisis.
Great Depression colors seniors’ view of crisis Some consider taking all of their money out of the bank and hiding it Marcelle Uptain grew up during the Great Depression, so her response to the recent bank turmoil, the stock market plunge and home foreclosures was simple — take her money out of the bank and hide the cash at home. Her son had to talk her out of it. "I have a little steel box with a key and I was thinking about taking my checking account out and putting it in there," said Uptain, 83, who grew up in Alabama and lives at a senior center here.
Risky business The root of this financial crisis is the tension between wanting to spread risk and not understanding its consequences The current financial crisis, the loss of asset values, the refusal to extend normally-given credit and the great increase in defaults on obligations ranging from individual mortgages to the debts of great investment banks presents, of course, a pressing challenge to the fiscal authorities and central banks to take measures to minimise the consequences. But they also present a challenge to standard economic theory, a challenge all the more important since the development of policies to prevent future financial crises will depend on a deeper understanding of the processes at work.
Economic Main Street Manifesto: 10 Reasons how this Bailout Fails the Middle Class American Worker. The question that most Americans have on their mind about this historical government intervention is whether this program is ultimately going to work. In short, no. In this article I’m going to highlight 10 major reasons why this global intervention is nothing more than stitches on breaking economic flesh from preventing the world from going into the infected abyss. Just like I highlighted why the California housing market will not hit a bottom until May of 2011, I believe that this current intervention is simply window dressing on a dry and stale turkey.
The Financial Crisis: Where Do We Go From Here?
Thomas L. Friedman: Why how matters I have a friend who regularly reminds me that if you jump off the top of an 80-story building, for 79 stories you can actually think you're flying. It's the sudden stop at the end that always gets you.
When I think of the financial-services boom, bubble and bust that America has just gone through, I often think about that image. We thought we were flying. Well, we just met the sudden stop at the end. The laws of gravity, it turns out, still apply. You cannot tell tens of thousands of people that they can have the American dream - a home, for no money down and nothing to pay for two years - without that eventually catching up to you. The Puritan ethic of hard work and saving still matters. I just hate the idea that such an ethic is more alive today in China than in America.
Blankfein's $70 Million Would Survive Paulson's Rules Goldman Sachs Group Inc.'s Lloyd Blankfein, whose $70.3 million paycheck made him Wall Street's most highly compensated chief executive officer last year, could still earn tens of millions annually under the bank-rescue plan run by his former boss, Treasury Secretary Henry Paulson. Executive-pay packages will be restricted for the nine banks receiving a $125 billion infusion of U.S. funds to restart lending, said Paulson, who earned $37.8 million in 2005, his last full year as Goldman's CEO. The investment is part of a $700 billion bailout plan approved by Congress this month.
Switzerland to Inject Capital Into UBS $$ Credit Suisse Plans to Raise Capital The Swiss government said Thursday it will inject six billion Swiss francs ($5.3 billion) of fresh capital into UBS AG in return for a 9% stake, as the Swiss central bank announced plans to shift $60 billion worth of toxic assets off the bank's balance sheet. The Swiss National Bank, the country's central bank, said it will provide a long-term loan to purchase toxic assets worth up to $60 billion from UBS. The SNB will provide long-term financing of up to $54 billion for a special purpose vehicle to hold these assets.
Fears of global recession send markets crashing again Fears of a global recession sent world stockmarkets crashing across Asia and Europe this morning, with the Footsie heading towards its lowest point in over five years. The panic selling that began on Wall Street yesterday evening spread around the globe as investors lost faith that Europe and America's bank rescue packages would stave off an economic downturn. In London the FTSE 100 ploughed downwards by almost 6%, or 240 points, in the first few minutes of trading to 3840.6. This is the lowest point it has hit during the recent crisis, and there was not a single riser on the index of Britain's biggest companies. This followed an 11% plunge on Japan's Nikkei, its worst performance since 1987. There was little sign of optimism in the City this morning, as analysts warned that shares may have much further to fall.
Citadel Hedge Fund Falls 30% on Bond, Stock Losses Citadel Investment Group Inc.'s biggest hedge fund fell as much as 30 percent this year, because of losses on convertible bonds, stocks and corporate bonds, said two people familiar with the Chicago-based firm. Kenneth Griffin, who founded Citadel in 1990, said in a letter to investors this week that returns for the $10 billion Kensington Global Strategies Fund may swing wildly as markets are battered by the global credit crunch.
US hedge fund withdrawals hit $43bn in September Investors pulled at least $43bn from US hedge funds in September as market turmoil led to unprecedented withdrawals, an analysis by a leading research house shows. The data from TrimTabs Investment Research – which was to be sent to clients late on Wednesday – come as hedge funds are working to prevent far bigger redemptions by the end of the year, when many funds give investors a chance to take out money.
Hedge Funds' Derivatives Exposure and Margin Calls Driving Stock Market Crash Leading economist Nouriel Roubini explains in bullet-point form how hedge funds are driving the stock market collapse. Take careful note of how credit default swaps are a key factor in the stock market sell-off, and how another type of derivative - "collateralized fund obligations" - may be the next shoe to drop:
Oct 15: Lehman Brothers Holdings Inc.'s hedge-fund clients may have to pay more collateral on $65 billion of assets frozen when the investment bank went bankrupt a month ago--> "If your bank fails, you still have to pay your mortgage." Moreover, hedge funds are among the net sellers of credit protection in the $54 trillion credit derivatives environment and might be called to perform on their obligations wrt Lehman, WaMu, Kaupthing, etc.
Bank Bonds Rise May Ease Pain of Refinancing $89 Billion Debt A rally in bank bonds spurred by U.S. Treasury Secretary Henry Paulson's rescue plan may ease the way for financial companies to refinance $89 billion of debt maturing through the end of the year. Bonds of Morgan Stanley, Goldman Sachs Group Inc. and Citigroup Inc. soared yesterday, reducing yields to an average of 6.46 percentage points more than Treasuries, after Paulson said the government would invest $250 billion in equity and guarantee new issues for three years. The so-called spread was a record 7.25 percentage points on Oct. 13, according to Merrill Lynch & Co. index data.
Banks Brace for Slump as Economy Weakens JPMorgan Chase, Wells Fargo, and State Street have weathered these bad times better than most banks. But things are about to get worse. Sobered by the prospect of a drawn-out erosion in the economy, investors drove down the shares of all three Wednesday even after they reported earnings that beat the low expectations of Wall Street analysts.
Wilbur Ross talks about the dollar, oil, and growing unemployment
Back in business Even before the worst financial crisis since the 1930s bore down on the US this summer, the country seemed poised for an ideological shift. The administration of President George W. Bush was immensely unpopular. Anti-trade and anti-business sentiment was on the rise and both main political parties, in different ways, were responding. The technocratic market-friendly liberalism espoused by Bill Clinton and the New Democrats was already much less prominent in Barack Obama’s presidential campaign. As the country’s economic difficulties have worsened, the pro-market theme has not so much subsided as disappeared. Mr Obama now is far more likely to talk about the bankruptcy of “trickle-down economics” than the need for competition and incentives.
Fed Offers GE, Citigroup Commercial Paper Subsidies The Federal Reserve may subsidize U.S. companies by buying their short-term debt at rates below those demanded by private investors in the $1.6 trillion commercial-paper market. Fed officials yesterday set the yield they will pay for commercial paper at about 1.1 percentage points less than the average cost for financial companies, weekly central bank data show. Policy makers last week announced emergency plans to buy the securities after the market shrank to a three-year low.
Foreclosures May Blunt Treasury Aid Surging mortgage foreclosures may hurt banks even after the U.S. Treasury bolsters their capital by investing $250 billion, according to Meredith Whitney, an Oppenheimer & Co. analyst. "Credit and earnings power'' are the main issues facing the banking industry, Whitney wrote in a report today. Loan write- offs and other costs may increase more than companies anticipate, while revenue may be disappointing because "asset bases'' have declined.
Credit Card Lenders Credit Card Delinquencies Rise; American Express Earnings Estimates Reduced at Citigroup and Piper Jaffrey; According to Friedman Billings Ramsey, Capital One EPS of $3.97 Could Drop as Low as $2.50
Global stocks, oil drop as global slowdown fears rise Japan's Nikkei share average tumbled almost 10 percent and oil prices dropped to a one-year low on Thursday after downbeat U.S. economic data spread fears of a more protracted and sharp global slowdown than initially expected. Optimism about the stabilization in money markets has been swept aside and widespread selling of global equities has resumed in earnest as the quarterly results season gets underway and reports filter in about sharp losses at hedge funds.
As Consumers Keep Wallets Shut, Economic Outlook Dims Even as the federal government and its counterparts around the world readied an ambitious financial bailout, more signs emerged on Wednesday that the economic downturn had taken a darker turn. Retail sales fell sharply in September as consumers shunned department stores, auto showrooms and shopping malls, ratcheting back spending for a third month. Economic activity slowed, according to a report from the Federal Reserve. And the Fed chairman, Ben S. Bernanke, warned in a speech that a recovery "will not happen right away."
Jobless Claims to Continue Soaring in Week Ending October 11 U.S. initial jobless claims are expected to remain elevated well above the 400k threshold usually considered 'recessionary' for the 13th consecutive week in the period ending Oct. 11, and economists say labour losses are set to continue for many more months. In last week's report, initial claims came in at 478k, while the four-week average was slightly higher at 483k - the highest average since Oct. 20, 2001. Economists said those figures are not only consistent with recession conditions, but are actually worse.
Harley's $35,000 Cruisers Caught in Credit Crunch Advertisements that Harley-Davidson Inc. has been running on the Web since May say to forget the recession and buy a bike. "Screw it," says an ad for the largest U.S. motorcycle maker. "Let's ride."
Best Movies to Watch When the Economy Is Going to Hell Conventional wisdom is that when times are tough, Americans go to the movies. Box office grosses increased during five of the last seven recessions since 1965, according to data from the National Association of Theater Owners. And since it's becoming increasingly evident that we may be in for a long, uncomfortable economic downturn, it's quite possible that movie consumption will increase. But in Silicon Valley, people aren't turning to Fred Astaire's feel-good musicals to distract them from the rotten economy, like Americans did in the 1930s.
Tighter Rules On Car Loans Could Slam GM's Sales $$ GMAC LLC, the big home and auto financing company, this week began restricting new loans to the most credit-worthy buyers after an attempt to raise new funds failed. The move threatens to crimp General Motors Corp.'s U.S. sales, forcing the struggling auto maker to push its potential buyers to other lenders. Like GMAC, GM has struggled to raise $15 billion in cash amid a shutdown in the credit markets. The auto maker hopes to bring in $5 billion through asset sales and secured financing, but that effort has been stalled. Now, as its biggest source of revenue -- U.S. auto sales -- comes under additional pressure, the company is being forced to consider other measures, including exchanging its 49% stake in GMAC for Chrysler LLC.
GM and Ford Choose Different Routes to Return to Profitability Shares of Ford Motor Co. and General Motors Corp. posted gains yesterday (Tuesday) on speculation that consolidation in the U.S. domestic auto industry could be the struggling sector’s saving grace. Over the last three trading sessions, Ford shares are up almost 18%, while GM shares are up over 37% on reports of possible merger talks and asset sales. Both stocks have been hammered year-to-date, with Ford shares having plunged over 63% and GM shares down a staggering 74%. Declining sales have seen the automakers’ stocks touch lows not seen in decades.
GMAC Struggles With Financing GMAC, the financing arm of General Motors, has “limited if any access to funding” for its mortgage and auto lending units, its chief executive, Al de Molina, has told employees. GMAC may trim auto lending in some international markets, Mr. de Molina said in an e-mail message to employees on Tuesday. The company is considering “strategic initiatives” for insurance businesses, he said.
Suit against God tossed over lack of address Judge rules the Almighty wasn't properly served due to unlisted address A judge has thrown out a Nebraska legislator's lawsuit against God, saying the Almighty wasn't properly served, because of his unlisted home address. State Sen. Ernie Chambers filed the lawsuit last year seeking a permanent injunction against God.
E.U. summit to push global regulation (audio) How will the world financial landscape look different after the rescue packages go into effect in the U.S. and Europe? Bill Radke talks to European correspondent Stephen Beard about today's E.U. meeting in Brussels.
Is China Shielded From Derivatives? Conventional wisdom is that China is shielded from the derivatives hurricane battering the rest of the world. For example, an article in the Financial Times says (partly tongue-in-cheek): Asia . . . shunned the easy profits promised by the peddlers of toxic derivative products and fancy collateralised debt obligations. Its banks eked out a respectable living through the sensible business of lending money, its manufacturers through the old-fashioned practice of making things. Is this true? Well, China has in fact allowed currency derivatives, gold futures, and other types of plain vanilla derivatives trades.
Plunging rand driving inflation Higher inflation and more petrol hikes could be in store for South Africans as the rand continues to plunge. Reserve Bank Governor Tito Mboweni gave this warning as the rand dropped to as low as $10.80 to the dollar in overseas trading last night. Plunging world markets are being blamed for the rand's poor performance. Speaking at the University of Pretoria, Mboweni warned that the sharp drop in the rand is likely to result in fuel price hikes in coming months.
Europe's Central Banks Intensify Effort to Jolt Market to Life Europe's central banks are intensifying efforts to jolt credit markets back to life. The European Central Bank yesterday said it will accept lower-rated securities as collateral when lending to banks and offer them as many euros as they want over the next six months. The Swiss central bank said it will conduct currency swaps with the ECB. The Bank of England will unveil plans to revamp its market operations at 11 a.m. in London today.
Run on Russian bank heightens fears Globex on Wednesday banned depositors from withdrawing their money as confidence in the Russian banking system began to show signs of ?evaporating. Globex, a mid-sized retail bank with assets of $4bn (€2.95bn, £2.32bn), is the first Russian bank to experience a run on deposits during the crisis. It lost 13 per cent of its deposits last month, according to Maxim Raskosnov, an analyst at Renaissance capital, and a further 15 per cent this month according to Emilya Alieva, Globex’s vice-president.
Japan's PM says US bank bailout is 'insufficient' Japan's prime minister says US bank bailout is 'insufficient' and leading markets lower Japanese Prime Minister Taro Aso said Thursday the U.S. bank bailout is "insufficient" and is contributing to the renewed plunge in global stock markets. "Since it was insufficient, the market is again falling sharply," Aso told lawmakers at the upper house budget committee in parliament. The committee was wrapping up talks on a supplementary budget aimed to help struggling small- and mid-sized firms amid an economic downturn. Aso made his comments as Japan's key stock index plummeted 10 percent in early Thursday following another dive on Wall Street amid growing fears of a global recession.
Chavez says "Comrade Bush" turns left in crisis Socialist Venezuelan President Hugo Chavez mocked George W. Bush as a "comrade" on Wednesday, saying the U.S. president was a hard-line leftist for his government's intervention of major private banks in the U.S. financial crisis. Chavez, who calls capitalism an evil and ex-Cuban leader Fidel Castro his mentor, ridiculed Bush for his plan for the federal government to take equity in American banks despite the U.S. right-wing's criticism of Venezuelan nationalizations.
Peres: 'Both religions must live together' The clashes between Arabs and Jews in Acre that erupted on Yom Kippur and continued for several days cannot be allowed to spread to other mixed towns, President Shimon Peres said Monday, after he met with Jewish and Arab leaders in the city. "I was pleasantly surprised by the strength and the will to conduct dialogue and make peace," Peres said, following the meeting in Acre City Hall. He congratulated Israel's chief rabbis for coming to Acre on the eve of Succot to try and bridge the gaps between the leaders of the Jewish and Arab communities.
Beware an October surprise from bin Laden Americans are transfixed by the aftermath of the September surprise in financial markets. Could there be a very different surprise coming in October? The public thinks Democrats do better on economic issues, and the financial crisis erased the bounce in the polls that John McCain received from the Republican convention. After the second presidential debate, Mr Obama widened his lead, but dangers remain. Polls show that Republicans do better on the issue of terrorism. Last June, McCain adviser Charlie Black was reprimanded for having the temerity to point out that the intrusion of a terrorist event into the campaign would “certainly be a big advantage” for Mr McCain. Mr Black may have been politically incorrect but an objective analysis suggests he might be right.
ID cards with chip technology go into circulation Next-generation Turkish ID cards featuring chip technology have begun to enter circulation in Bolu. The Interior Ministry says the cards will make life easier for citizens and enable greater efficiency in a wide variety of services. The ministry also notes that they are compact and counterfeit-proof. The new cards, which are about the same size as a credit card, are smaller than Turkey's current ID cards. They feature a Turkish flag in the top left corner and a blue silhouette of the country's shape in the top right corner. The cards meet international standards, and the computer chips they use contain the relevant ID information, including the holder's first and last name, place of birth and blood type. Plans for passports and driver's licenses with embedded computer chips will be put into effect upon successful completion of the national ID card project.
Why Obanomics = Hoovernomics Economic and historical illiterates are trying to promote Obama's brand of corporatism by accusing McCain of following in the steps of Herbert Hoover. Yet the striking thing about Hoover's economic views is that they are not much different from Obama's. Hoover believed in protectionism, so does Obama, Hoover believed that higher taxes were necessary, so does Obama. Hoover believed in greater government intervention in the market place. So does Obama. Hoover believed in protecting real wages no matter what, so does Obama. I am going to do what the political bigots in the Democratic Party and their media lackeys refuse to do — and that is take a look at Hoover's economic record.
Oct 15 - Ben Bernanke speaks at Economic Club of NY
Roubini Sees Worst Recession in 40 Years, Stock Drop Nouriel Roubini, the professor who predicted the financial crisis in 2006, said the U.S. will suffer its worst recession in 40 years, driving the stock market lower after it rallied the most in seven decades yesterday. "There are significant downside risks still to the market and the economy," Roubini, 50, a New York University professor of economics, said in an interview with Bloomberg Television. "We're going to be surprised by the severity of the recession and the severity of the financial losses."
Roubini sees Rally's End and Long Recession:
Undertakers deliver last rites for US capitalism The Cash Room of the US Treasury, with its marbled walls, faux columns and giant chandeliers, was an oddly appropriate place to bury free market capitalism. For a few minutes all was still, apart from the buzz of the camera crews lined up to film the funeral. The podium stood empty, flanked with two giant flags. Behind it an open door revealed six more flags, as if an abundance of stars and stripes would reassure a troubled nation that the partial nationalisation of America's banking system was indeed a truly patriotic act.
Trillion: It's the new billion The federal dollars being tossed in amid the financial crisis have altered the shock value of high numbers. There's an old saying attributed to Everett Dirksen, the Illinois senator who dotted his speeches with colorful rants against government borrowing: A billion here, a billion there, and pretty soon you're talking real money. Not these days, you're not.
Outlook For Gold - 10/15/2008
Here Come the Lawsuits After two years of declines in litigation, corporate lawyers are preparing for a wave of lawsuits from disgruntled investors, suspicious regulators, and predatory rivals. As if bank failures, frozen credit markets, plunging stock prices, and a looming recession weren't enough to keep corporate executives awake at night, there is this: Corporate lawyers are girding for a wave of lawsuits whipped up by the financial crisis, a flood that will reverse a recent slide in the amount of litigation involving companies.
Bailout becomes buy-in as feds move into banking Government moves into banking -- to the tune of $250 billion -- as the bailout becomes a buy-in Big banks started falling in line Tuesday behind a rejiggered bailout plan that will have the government forking over as much as $250 billion in exchange for partial ownership -- putting the world's bastion of capitalism and free markets squarely in the banking business.
Paulson reluctantly agrees to recapitalize Treasury Secretary Henry M. Paulson Jr., economic point man for a conservative Republican administration and former chairman of Wall Street investment powerhouse Goldman Sachs, faced the press in the department's ornate, gilt-edged Cash Room Tuesday to spell out just how he planned to administer the most massive government intervention in the financial markets in the history of the republic. "We regret having to take these actions," a somber Mr. Paulson said.
Joint Statement by Treasury, Federal Reserve and FDIC The following statement was made by Treasury Secretary Henry M. Paulson, Jr, Federal Reserve Chairman Ben Bernanke and FDIC Chairman Sheila C. Bair: Today we are taking decisive actions to protect the U.S. economy, to strengthen public confidence in our financial institutions, and to foster the robust functioning of our credit markets. These steps will ensure that the U.S. financial system performs its vital role of providing credit to households and businesses and protecting savings and investments in a manner that promotes strong economic growth in the U.S. and around the world. The overwhelming majority of banks in the United States are strong and well-capitalized. These actions will bolster public confidence in our system to restore and stabilize liquidity necessary to support economic growth. . . . .
H.R.1424 An Act To provide authority for the Federal Government to purchase and insure certain types of troubled assets for the purposes of providing stability to and preventing disruption in the economy and financial system and protecting taxpayers, to amend the Internal Revenue Code of 1986 to provide incentives for energy production and conservation, to extend certain expiring provisions, to provide individual income tax relief, and for other purposes.
Drama Behind a $250 Billion Banking Deal The chief executives of the nine largest banks in the United States trooped into a gilded conference room at the Treasury Department at 3 p.m. Monday. To their astonishment, they were each handed a one-page document that said they agreed to sell shares to the government, then Treasury Secretary Henry M. Paulson Jr. said they must sign it before they left.
Paulson Plans to Invest in 'Thousands' of U.S. Banks Treasury Secretary Henry Paulson urged banks getting $250 billion of taxpayer funds to channel the money to customers quickly to halt a credit freeze that's threatening to bankrupt companies and hammer the job market. "Leaving businesses and consumers without access to financing is totally unacceptable," Paulson said in Washington. He rolled out the emergency program after a crisis of confidence in the financial system last week spurred the biggest stock sell- off since 1933. Paulson told companies getting the government funds to "deploy" the money in loans.
Paulson at last goes systemic It is much better to be a banker in the US than in the UK. The rescue announced on Tuesday in Washington is significantly more generous than the British equivalent. But it is moot whether US public opinion will be as generous towards the architect of the scheme, Hank Paulson, the US Treasury secretary.
Devil Is in Bailout's Details Government's $250 Billion Cash Injection Sparks Welter of Issues Upending the government's relationship with the financial sector, the Bush administration outlined a plan Tuesday to prop up banks by injecting $250 billion into U.S. financial institutions, including nine of the nation's largest banks, and to guarantee new debt issues and deposit accounts used by businesses. The sweeping steps create a thicket of issues, most pressingly whether the banks will step up lending. The government is making clear it expects banks to lend out the funds it gets from Uncle Sam.
Bush: Banks boost to be 'limited, temporary' The Bush administration's plan to spend up to $250 billion to bolster the U.S. banking industry comes with a built-in exit strategy - assuming the plan works as its designers hope. President Bush described the massive market intervention as "limited and temporary," and Treasury Department officials say they have included a number of features to encourage participating banks to buy out Uncle Sam's stake as quickly as possible.
Federal bank buy-in no economic quick-fix Government's $250 billion move into banking won't lead to quick economic recovery With any luck, the government's quarter-trillion dollar cash infusion in banks will get them lending again, but the radical move won't quickly turn around the tottering economy. The pain will almost certainly drag on as vanishing jobs, shrinking paychecks and nest eggs, and slumping home values continue to force millions of Americans to pull back.
Wall Street Skid Prompts Calls for Interest-Rate Swap Guarantee The executives who devised a way to guarantee private energy deals after Enron Corp.'s collapse will use the same approach to soothe concern that traders can't honor bets in the $400 trillion interest-rate swap market.
Smaller Banks Resist Federal Cash Infusions Community banking executives around the country responded with anger yesterday to the Bush administration's strategy of investing $250 billion in financial firms, saying they don't need the money, resent the intrusion and feel it's unfair to rescue companies from their own mistakes. But regulators said some banks will be pressed to take the taxpayer dollars anyway. Others banks judged too sick to save will be allowed to fail.
Bank rescue plan to test capitalism The government's plan to take stakes in financial institutions could backfire, some analysts say. Proponents say it's an efficient solution. Are we witnessing the erosion of capitalism, or its salvation? That question is swirling around the federal government's latest proposed intervention in the private financial markets since Treasury Secretary Henry M. Paulson announced Friday a plan to take equity stakes in banks as a quick and efficient way to pump them with new capital.
All the Way to the Banks With a $250 billion investment in the nation's banks, Washington has crossed a Rubicon, abandoning any hope for a private-market solution to the credit crisis. This is a new era of state capitalism. Yet capitalists are hailing the move, which comes on the heels of $2.5 trillion in bank cash infusions by European governments, seeing it as the only hope to stop a collapse of the financial system.
Will the Banks Lend? The NYT's lead headline this afternoon was unambiguous: "Treasury Chief Says Banks Must Deploy New Capital". But in 2,300 words of reporting, reaching as far as a run on the Hungarian currency, this is the only mention of any requirement for US banks to start lending:
"The needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it," Mr. Paulson said.
That's it. Paulson's expressing a preference here -- and he's got a strong bully pulpit. But he's not taking a voting stake in the banks, he's not taking any board seats, and ultimately, if the banks' shareholders will be better off hoarding money rather than lending it, that's what the banks' executives are going to do.
Recession fears in focus after bailout bonanza Global recession fears returned to centre stage on Wednesday after trillions of dollars pledged by governments around the world for bank bailouts eased the threat of imminent financial meltdown. In a reminder of the dire state of the world economy, a senior U.S. Federal Reserve official said the world's biggest economy already appeared to be in recession, while Bank of Japan Governor Masaki Shirakawa said global financial markets remained very strained
Americans Embrace Big Government to Help Solve Market Crisis Americans are looking to big government to dig the country out of the financial crisis, a Bloomberg/Los Angeles Times poll shows. A plurality of voters support the $700 billion financial- market rescue bill President George W. Bush signed into law Oct. 4. That is a turnaround from a Bloomberg/Times poll in September, when a solid majority said it wasn't the government's responsibility to bail out private companies.
Fed's 'helicopter economics' may not boost housing The Fed's "helicopter economics" — throwing money out of a helicopter to flood the market with liquidity — worked in the early 2000s, but it won't turn the housing market around this time, says Eugenio J. Alemán, senior economist at Wells Fargo Economics. When the Fed tried that approach to turn around the downturn in the early 2000s, he notes it did boost home prices albeit at the cost of a strong dollar. Alemán says the Fed was hoping it could work the same magic again.
Next victim of turmoil: Americans' salaries It is possible, for the first time in weeks, to imagine that the credit crisis may be about to ease. But one of the big lessons of the last year has been not to underestimate the severity of the economy's problems. Those problems are not just about housing or Wall Street.
Street's Demands May Stir Public Wrath $$ You would have thought the Street's last surviving chieftains would be a contrite bunch by now, eager to reform their industry and help rebuild their country. At least until you heard Goldman Sachs Group Inc.'s Lloyd Blankfein, J.P. Morgan Chase & Co.'s James Dimon, Blackstone Group LP's Stephen Schwarzman, BlackRock Inc.'s Larry Fink and Silver Lake's Glenn Hutchins assemble for a panel session at the New York Stock Exchange last week organized in part by The Wall Street Journal.
Buckle Up -- We Haven't Reached Bottom Yet In the wake of an unprecedented, coordinated effort by governments around the world, the global financial meltdown has been contained, at least for the moment. Amazing what you can accomplish with a mere $2 trillion!. . . . Do not confuse this moment of calm with a stock market bottom or a sign that a serious recession has been avoided. . . . We are in a bear market and will be for some time.
Trichet Calls for Return to the 'Discipline' of Bretton Woods European Central Bank President Jean-Claude Trichet said officials reshaping the world's financial system should try to return to the "discipline" that governed markets in the decades after World War II
10 to 15 Years of Weak Economy A year after making a dour prediction for the U.S. economy, multi-millionaire investor Julian Robertson still sees a recession ahead for the United States and says the poor economy will last as long as 10 to 15 years.
Highest budget deficit ever Red ink hits $454.8 billion in 2008, more than double that of 2007; economists say bailout to weigh on next year. The federal budget deficit soared to $454.8 billion in 2008 as a housing collapse and efforts to combat the economic slowdown pushed the tide of government red ink to the highest level in history. The Bush administration said Tuesday the deficit for the budget year that ended Sept. 30 was more than double the $161.5 billion recorded in 2007.
U.S. deficit rises to $455 billion as economy sinks Government borrows more than $1 trillion as crisis takes its toll on finances The U.S. federal government budget deficit widened to $455 billion in fiscal 2008 as the impact of a slower economy and the extraordinary federal response to the financial crisis took its toll on the public finances. In nominal dollar terms, it was the largest deficit ever, but it was not a record as a proportion of the economy.
THE RAPING OF THE AMERICAN INVESTOR Transferring wealth through the myth of buying and holding an investment The American people have just been severely violated in the name of the 2008 Credit Crisis. In the arena of investing, the concept of “buying and holding” a security has been gold. The idea being that the “market always comes back.” However, the problem is that you have to wait for the market to come back which may take years and you might break even. . . . Is world government political only or is it financial? In the case of a communist take over, it is political first and then financial. However, in the case of a banking or credit crisis, it is economical. No guns, no bullets, and no physical invasion. This time it is not Marx, Lenin, Trotsky, or Mao that have won, it is the banking system that has won. They will take all the spoils, not country by country, but globally!
US Economy Collapsing - Money is DEBT & Debt is Money! understanding fractional reserve banking (excellent!):
Big government ahead We're in the middle of a financial crisis, but most economists say there is a broader economic crisis still to come. The unemployment rate will shoot upward. Companies will go bankrupt. Commercial real estate values will decline. Credit card defaults will rise. The nonprofit sector will be hammered. By the time the recession is in full force, America's Democrats will probably be running the government.
'Smart Money' Stays on the Sides $$ Hedge-Fund Chiefs Like Cohen, Paulson Move to Cash to Ride Out Storm Some hedge-fund titans have yanked most of their money out of the stock market, a bearish sign amid Monday's euphoria and an indication of how the hedge-fund business is changing amid chaos.
The Bull Market Reset . . . . Doug Casey, another famous newsletter writer, likes to point out that the Chinese symbol for “crisis” also means “opportunity”. If ever there was a chance to put that theory to the test, now is it. Here’s where opportunity is going to present itself in the ensuing chapters of our financial de-evolution. . . . However, in that this imaginary cash that is providing the liquidity has essentially the effect of further eroding U.S. dollar purchasing power, the opportunity here is the dollar-negative gold-positive influence of such moves.
Record $65bn pulled out of mutual funds US investors pulled a record $65bn out of mutual funds in the week to last Friday, as their losses mounted from failing stock and bond markets. Two-thirds of the money was drawn from equity funds, which saw outflows of close to $9bn on Friday alone. Equity funds have had outflows of $56bn during October so far – the largest monthly drop since records began almost 20 years ago, according to TrimTabs, which tracks fund flows. Hedge funds also saw big redemptions during September.
How U.S. Missteps Triggered a Spiral of Worldwide Margin Calls and Deepened the Financial Crisis In the mid-80s, I ran a private partnership – call it a hedge fund – from the floor of the Chicago Board of Options Exchange Inc.. I was an independent market maker, meaning I could walk into any trading pit on the floor and trade any options and any stocks. More often than not, one of my principal trading plans was to play the crowd. My approach was to walk into the pit and chat up the crowd. My intention was to gauge whether the other market makers and locals were net long (bullish) or net short (bearish). Most of the locals are independents and not extremely well capitalized. But I was.
Chasing Unicorns: The Cycle Gods Are Still Playing with Us Mere Mortals Single-day rallies of 900 points or more in the Dow Jones Industrials tend to get our attention, in part because they're the unicorn of market action: Often imagined but never seen. Well, we saw a unicorn yesterday. In fact, we've seen a lot of things lately that just a few months ago were the stuff of dreams--or nightmares. No wonder, then, that this reporter is at risk of losing perspective amid all the chaos. But let's try to sober up and reassess where we're at in the economic cycle.
Bullion Shortage and Spot Prices Tell Two Different Gold Stories Having blogged earlier on a physical silver shortage and the drying up of gold bullion purchases, recent events in the precious metals markets justify an update that again arrives at the conclusion that last Friday's silver and gold price plunge on COMEX has pretty little to do with the actual physical investment demand for gold and silver.
Oil Falls a Second Day on Doubts Bailout Plan Will Boost Demand Crude oil fell for a second day in New York on skepticism that a U.S. government plan to invest $250 billion in banks will be enough to bolster economic growth and spur fuel demand. Oil has tracked movements in equity markets this month as the credit crisis deepened.
Retailers cutting back on holiday hiring With bleak sales numbers expected, there'll be fewer jobs and more competition for them. With Christmas fast approaching, Molly Oswaks has checked out stores in the Grove shopping center, boutiques in Larchmont Village and shops along 3rd Street. All across Southern California and the country, the search is on -- not for the perfect gift but for holiday jobs. And the news isn't good with financial uncertainty in the air.
Daimler to cut jobs in U.S. and Canada Daimler, the world's largest maker of heavy vehicles, announced plans on Tuesday to eliminate its Sterling truck brand and shift production from the United States to Mexico, moves that will cut about 3,500 jobs in Canada and the United States.
GE's 'Honey Pot' Properties Turn Sour $$ When the real-estate market was booming, General Electric Co.'s commercial-property business earned the nickname "the honey pot" among insiders because the company could increase earnings simply by selling a building or two. But now, the opposite is true: GE's difficulty selling its office buildings, shopping centers and other commercial property is dragging down its financial results.
GMAC's Lending Limits May Add to GM's U.S. Sales Woes GMAC LLC, the lender once owned by General Motors Corp., may deepen the automaker's 18 percent U.S. sales slide this year by limiting car and truck loans to people with the best credit scores. GMAC said yesterday it's granting financing only to buyers with scores of at least 700, who represent about 58 percent of U.S. consumers.
GM Survival Questioned as SUV's End Chills Ohio Town Gloom is spreading across Moraine, Ohio, as General Motors Corp. prepares to shut a sport-utility vehicle plant two days before Christmas, abandoning a factory in the Dayton suburb of 7,000 that stretches back to making refrigerators in 1921.
GM to hasten factory closings Wis. plant, Grand Rapids affected General Motors Corp. announced Monday that it will close its Grand Rapids stamping plant in December 2009 and accelerate the closing of its Janesville, Wis., assembly plant by more than a year to Dec. 23 of this year. The plant closing announcements come just a little more than a week after the automaker said it would advance the closure of its Moraine, Ohio, assembly plant
U.S. Auto Sales Rate May Skid to Lowest Since 1983 U.S. auto sales this month may fall to their lowest rate in at least 25 years as showroom traffic slows, particularly for General Motors Corp. after its employee pricing deal ended, a Deutsche Bank AG analyst said. . . . Purchases of GM vehicles may drop 50 percent, and Honda Motor Co., Toyota Motor Corp. and Nissan Motor Co. sales probably also will decline, the New York-based analyst said.
A Complex Engine Seizes Up With his retirement account devastated by the plunging stock market, Henry Vicenteno is feeling poor — poor enough to play the Grinch this holiday season. . . . With consumers increasingly worried about a severe economic recession, Mr. Vicenteno is hardly the only person keeping his wallet shut. A growing body of statistical and anecdotal evidence suggests that demand for televisions, computers, cameras and other electronics is falling sharply -
Will Wall Street's woes hit the Yankees? The New York Yankees are counting on corporate titans to pony up as much as $850,000 a year for luxury boxes in the team's new stadium. The Yankees move into their new stadium next year, and over the past year they've been trying to sell New York's corporate titans on the virtues of the new stadium's 47 available luxury suites. Asking price: $600,000 to $850,000 a year - several times what other major league teams charge for their luxury boxes
Fast and loose housing market is history The trillion-dollar question everyone keeps asking about the economy is: When will the housing market come back? The answer should be apparent: It won't. Oh, home sales will slowly rebound and prices will at some point stop falling. But the fast and loose housing market that made the industry billions and fueled the world financial market crash has gone the way of nickel pop and $1 gas.
See where foreclosures are stacking up in O.C. Slow economy pushes distressed properties to record levels. Foreclosures are selling in Orange County, just not fast enough. Demand is strong for foreclosures, as buyers seek deals, brokers say. But a slowing economy and the hangover from loose lending continue to push foreclosures to record levels. As a result, a growing backlog of foreclosures threatens to push home prices further down, some economists and brokers say.
More Homes 'Underwater' in Struggling Economy Unable to Make Mortgage Payments, Phoenix Family Short-Sells Dream Home In the brand new subdivisions in the Phoenix suburb of Ahwtukee, where red-tiled roofs sprung up like wildflowers among the cactus during the housing boom, Melanie Bruce found her dream home. . . .The home has been everything Bruce, daughter Grace and husband Byron had ever wanted. But in just three weeks they'll have to leave. Melanie Bruce, who applied for the home loan herself, is "underwater" on her mortgage, meaning she owes more than her house is worth.
"This is unprecedented," said Mark Zandi, chief economist at Moody's Economy.com. "There's never been a time when so many home owners are underwater." Nearly one in six homes -- roughly 12 million households -- are underwater or "upside down," and it is a growing problem. "All indications are that prices are still falling, and if they fall anywhere close to what the consensus believes they will, we'll have 15, 16 million homeowners underwater by this time next year," said Zandi.
Economy’s shadow felt at Realtor convention The economy was on many people’s minds as real estate industry "survivors" gathered in Long Beach for the California Association of Realtor’s annual convention. A session on technology morphed into an impromptu discussion of how the economic meltdown will affect the housing market, and many agents spoke of the hit their incomes have taken from the three-year-long slump.
Asian stocks fall on global economic fears Asian stock markets on Wednesday were unable to sustain the extraordinary rally they saw the previous day, falling modestly as analysts and investors around the world digested the details of the massive bailout plans in the United States, and as the poor state of the global economy returned to center stage.
Worries mount in Asia over a coming storm BEIJING: Even as hopes rise that Europe and the United States are finally getting to grips with the global credit crisis, worries are mounting in Asia that the region is ill prepared for the financial storm heading its way. "The whole world economy has just hit the wall and is in free fall," said Larry Brainard, chief economist at the London consulting firm Trusted Sources. Apart from steep share price sell-offs, Asia has largely been a bystander during the recent banking convulsions.
In Tajikistan, debt-ridden farmers say they are pawns SHAARTUZ DISTRICT, Tajikistan: Farhod, a farmer in this dusty southwestern spit of land pushed up against the Afghan and Uzbek borders, said that he had committed a subversive and potentially punishable act this growing season. He planted watermelons in addition to the usual cotton.
Such is the precarious position of growers throughout this impoverished republic of seven million that Farhod refused to be photographed or to give his real name. He fears the authorities will destroy his crop, even though they had assured him that he could plant whatever he wanted this year.
US warns on ageing Iraqi oil pipelines Pipelines vital to Iraq’s oil industry are in such poor condition they could rupture at any time, choking off the supply of oil from the region and devastating the country’s economy, according to the US State Department. A previously undisclosed notification to the US Congress, obtained by the Financial Times, says the ageing underwater pipelines, which link storage facilities near Basra to offshore tanker fuelling terminals, are in urgent need of back-up or repair.
Icelanders Sink Under Foreign-Currency Loans as Krona Plunges Karl Karlsson, a Reykjavik taxi driver, has canceled his winter vacation. The money he saved is being eaten up by his car loan payment, which has jumped more than 20 percent since June. Like thousands of Icelanders, Karlsson borrowed in foreign currencies to get a cheaper loan as the benchmark domestic interest rate soared to 15.5 percent this year. With trading in the krona virtually suspended after it plunged against the euro, dollar and yen, debtors now face skyrocketing bills.
Obama, McCain unveil details on how to help the economy On the eve of the final presidential debate, Sens. John McCain and Barack Obama issued a last-minute flurry of proposals meant to show expertise and focus on kitchen table worries and ailing markets. With millions of voters taking a last side-by-side look, the contenders have plenty to hash out – from taxes to foreclosures to staggering federal bailouts – at tonight's debate in Hempstead, N.Y.
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Tues 10.14.2008
Raging bulls Dow jumps 936 points and S&P up 104, in the biggest point gains ever. The Dow, S&P and Nasdaq all gain over 11%. Stocks rallied Monday afternoon, with the Dow rallying 976 points during the session, as investors bet that the worst of the credit crisis is over, following a series of global initiatives announced over the last few days.
Don't Trust This Rally Viewers of Jim Cramer's "Mad Money" TV show probably expected words of optimism after Monday's historic 926-point rally. Instead they received only words of caution. "This stock market still cannot be trusted," Cramer told viewers bluntly. He called the meteoric market rise just a logical response to what had become incredibly oversold conditions.
Don't Be So Sure This Will Work Last night Trichet and other policymakers in Europe basically forced Bernanke's hand, initiating 100% guarantees of interbank lending. This forced Bernanke to follow suit early this morning, lest the US markets and US credit system implode into a smoking hole instantly. This was not a position Bernanke was willing to take on his own, or he would have. But when the rest of the world has done it, you literally have no choice, unless you intend to be turned into an instantaneous credit island - an event that the United States would literally not survive. So the die was cast and Paulson and Bernanke's refusal to endorse this step in the G7 meeting Friday was literally rammed down their throat. Now, however, we have a new problem.
Gambling, economic growth and imagination America's homeowners feel like busted gamblers after a bender in Vegas. They wagered not only the nest egg, but the nest, with the abandon of tulip-bulb traders in 17th century Holland. Americans are hard put to explain how the American dream turned into a chip on the craps table. The focal point of speculation was the asset one usually associates with secure domesticity.
U.S. Treasury Said to Invest in Nine Major U.S. Banks The Bush administration will announce a plan to rescue frozen credit markets that includes spending about half of a total of $250 billion for preferred shares of nine major banks, people briefed on the matter said. The companies are Citigroup Inc., Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Goldman Sachs Group Inc., Morgan Stanley, State Street Corp., and Bank of New York Mellon Corp., the people said. One of the people also said Merrill Lynch & Co. will receive an investment.
Paulson Buys Up The Banks U.S. Treasury Secretary Henry Paulson appeared close to completing a deal on the next stage of the massive package to rescue the financial sector and get the frozen credit markets working again. Paulson called in the heads of six major banks to discuss the plans on the afternoon of Monday, Oct. 13. Soon thereafter, the Wall Street Journal reported that regulators plan to devote $250 billion of the $700 billion recently approved by Congress to buy direct equity stakes in financial institutions in return for preferred shares.
U.S., Europe Plan To Bail Out Banks Paulson Pushes For Purchase Of Bank Stock While Euro-Zone Countries Move To Temporarily Guarantee Bank Refinancing Treasury Secretary Henry Paulson called for coordinated, international steps to deal with the global financial crisis, warning a meeting of the world's financial leaders that isolation and protectionism could deepen problems. "Although we in the United States are taking many extraordinary measures to ease the crisis we are not pursuing policies that would limit the flow of goods, services of capital, as such measures would only intensify the risk of a prolonged crisis," Paulson said Sunday.
Sickness Unto Debt by Ron Paul The Treasury bailout will only exacerbate red ink and inflation. One of the burning questions regarding the recently passed bailout, and the one that almost no one has bothered to answer, is how the government intends to pay for it. Governments have three main methods by which they can raise funds: taxation, printing new money, and debt. As our $10 trillion national debt shows, the federal government has always enjoyed raising money by issuing new debt. Money is gained upfront, while the cost of repaying that debt is pushed onto future generations.
Ron Paul about World Bank (scroll to bottom of page for more about the IMF and the World Bank)
U.S. to debut rescue Treasury expected to announce $250 billion investment and backing of bank debt. The Bush administration will unveil Tuesday sweeping measures to shore up the nation's financial system and restore confidence in it. Using authority granted in the $700 billion bailout bill, the Treasury would invest as much as $250 billion in banks, according to a person briefed on the proposal. The plan also calls for the FDIC to back up senior bank debt for three years - a move that would strengthen banks' financial footing.
U.S. not always averse to nationalization, despite its free-market image If the U.S. government moves ahead with a plan to take ownership stakes in American banks, as seems likely, it would be an exceptional step - but not an unprecedented one. The United States has a culture that celebrates laissez-faire capitalism as the economic ideal, but the practice is sometimes different. Over the past century, the U.S. government has nationalized railways, coal mines and steel mills, and it has even taken a controlling interest in banks when that was deemed to be in the national interest.
America's latest export: empty municipal coffers James Doran reports from New York on how all 50 state treasuries are failing to raise the billions needed just to keep functioning and pay the wages Financial Armageddon, the meltdown, the crisis, or whichever title fits the bill this week, is about to enter another even more damaging phase in America. And it would pay for the rest of the world to take notice because a fair amount of evidence has piled up in recent months to prove the adage about America sneezing and everyone else catching a cold. The housing markets of much of Europe mimicked those in America by slumping after a few years of heady price increases. The credit markets of Europe and Asia seized up, again following America's lead.
Administration plans to revamp rescue plan Treasury will pour up to $250 billion directly into banking sector The Bush administration plans to spend as much as $250 billion of the $700 billion bailout buying stock in private banks, greatly expanding protections for the U.S. financial system out of deep concern for the faltering economy, industry and government officials said Monday night. President Bush planned to announce the details Tuesday morning.
What Treasury is planning As more details emerge in the plan to rescue the U.S. financial system, questions still loom about the ins and outs of the $700 billion enterprise. More light was shed on the Treasury's $700 billion rescue plan Monday, but many questions still remain. In a conference of the Institute of International Bankers, top Treasury official Neel Kashkari outlined the government's multifaceted attempt to revive the U.S. financial system, though few new details were revealed.
The World Is at Severe Risk of a Global Systemic Financial Meltdown and a Severe Global Depression The US and advanced economies' financial system is now headed towards a near-term systemic financial meltdown as day after day stock markets are in free fall, money markets have shut down while their spreads are skyrocketing, and credit spreads are surging through the roof. There is now the beginning of a generalized run on the banking system of these economies; a collapse of the shadow banking system, i.e. those non-banks (broker dealers, non-bank mortgage lenders, SIV and conduits, hedge funds, money market funds, private equity firms) that, like banks, borrow short and liquid, are highly leveraged and lend and invest long and illiquid and are thus at risk of a run on their short-term liabilities; and now a roll-off of the short term liabilities of the corporate sectors that may lead to widespread bankruptcies of solvent but illiquid financial and non-financial firms.
Is there time to avert a Minsky meltdown? The point at which a Minsky moment becomes a Minsky meltdown has arrived. Named after the economist, Hyman Minsky, this is the point where financial instability has become so acute that only an exceptional, immediate and global government attack on the causes of instability is likely to avert a systemic banking failure, in which non-financial companies could rapidly fail too. The Group of Seven leading industrialised nations and the European Union now look like they "get it", but with several hundred billion dollars of debt to be rolled over in the coming weeks, the question is whether they have the time to "do it" too.
The Wall Street Syndrome The American Republic is dead. It has been taken off life support and allowed to expire. So be it. The fact it is the politicians, media shills, economists and corporate whores who have been cheerleaders to the murder for decades is open treason. The Republic is over. The leadership of the deceased American Republic now implements the final phases of the New World Order economic and political plan. The global stock market cheers the end of capitalism wildly.
The Wall Street Coup and the Bailout Scam How the "rescue" plan is not only fraudulent, it is also the wrong medicine for the ailing economy There are strong indications that the fraudulent (and perhaps criminal) bailout may turn the current crisis into a protracted agony of a long bleeding economic depression, notes Ismael Hossein-zadeh. The Wall Street took the US (and the world) hostage and extracted a heavy ransom. But while the enormous ransom was successfully extracted, there are no guarantees that the hostages will be set free from the shackles of trickle down economics. On the contrary, there are strong indications that the fraudulent (and perhaps criminal) bailout may turn the current crisis into a protracted agony of a long bleeding economic depression.
Liquidate the Empire! Liquidate labor, liquidate stocks, liquidate the farmers. So Treasury Secretary Andrew Mellon advised Herbert Hoover in the Great Crash of ‘29. Hoover did. And the nation liquidated him--and the Republicans. In the Crash of 2008, 40 percent of stock value has vanished, almost $9 trillion. Some $5 trillion in real-estate value has disappeared. A recession looms with sweeping layoffs, unemployment compensation surging, and social welfare benefits soaring. America’s first trillion-dollar deficit is at hand. In Fiscal Year 2008 the deficit was $438 billion.
The start of the end? The "defining moment" has arrived in the evolution of the financial crisis, according to Philip Finch, global banks strategist at UBS. He says nationalisation of parts of the banking system in the US and Europe could mark "the start of the end” of the turmoil, even though the economy is worsening. That is because state capital support should remove concerns over the solvency of the financial system, giving counterparties the confidence to resume business.
Market bounce Markets oscillate between bulls and bears but they always keep a place for Tiggers. Like Winnie the Pooh’s friend, bouncing is what markets do best. And what Pooh says of his stuffed friend is also true of the stock market: “He always seems bigger because of his bounces.” The best day ever for European stocks, and the biggest rebound for US markets since the 1929 Great Crash, must be viewed in this context. Markets are good at bouncing, their course is naturally erratic and a move like this does not prove the trend has changed.
Nikkei jumps more than 12 percent Japanese stocks rocketed Tuesday after a series of global financial bailouts and the massive rally on Wall Street, adding more than 10 percent within half an hour of the open. The market, which was closed for a national holiday on Monday, was catching up on the wave of relief that had already swept most other markets in the Asia Pacific region into positive territory on Monday. In Japan, the benchmark Nikkei 225 jumped as much as 12.4 percent early on Tuesday.
Fannie, Freddie to Step Up Mortgage Bond Purchases Fannie Mae and Freddie Mac are ready to start purchasing $40 billion a month of underperforming mortgages and bonds as the U.S. government expands its options to remove troubled assets from the slumping financial markets, according to three people briefed about the plan.
Fannie and Freddie began notifying bond traders last week that each company needs to buy $20 billion a month in mostly subprime, Alt-A and so-called scratch-and-dent mortgage securities that contain a higher portion of underperforming loans, according to the people, who asked not to be identified because the plans are confidential. The purchases would be separate from the U.S. Treasury's $700 billion Troubled Asset Relief Program.
Bullion Shortage and Spot Prices Tell Two Different Gold Stories Having blogged earlier on a physical silver shortage and the drying up of gold bullion purchases, recent events in the precious metals markets justify an update that again arrives at the conclusion that last Friday's silver and gold price plunge on COMEX has pretty little to do with the actual physical investment demand for gold and silver
Market turmoil sparks gold rush to specialist funds Turmoil in the financial markets has created a “flight to safety” mentality among investors, who are pouring cash into low-risk assets such as gold. Financial vehicles called Exchange Traded Funds (ETFs), which allow individuals to buy a stake in a gold bar without holding the metal itself, have received unprecedented flows of new money.
Gold: The Last Carry Trade Today’s commentary concerns the last carry trade left in the markets, i.e. gold. Gold peaked at $1032 in March this year; however, since then it has fallen steadily, trading as low as $734. While this fall has been in line with a rising USD dollar, it has also been orchestrated. Gold has been falling in an environment of rising inflation and rising uncertainty, and I've spoken in the past about gold de-coupling from the USD correlation one day.
U.S. Notes Fall as Government Prepares Plan to Invest in Banks Treasuries fell the most in two weeks as the government prepared to announce a plan to acquire stakes in major banks, giving investors confidence to buy stocks and corporate bonds. Two-year yields approached the highest level this month as Asian stocks gained, following the biggest U.S. stock rally in seven decades.
Inflation Holocaust Building Jim Rogers is not convinced the $700 billion rescue plan will solve the financial crisis. In fact, it will do just the opposite, he says. Speaking on CNBC, Rogers warned that the current rescue plan, which will force government to issue more debt, print money, and flood the markets with liquidity, will wind up feeding inflation after the crisis is over and consequently create worse problems.
The financial crisis will soon abate, but the real crisis will soon begin In the first place, government must cease inflating as soon as possible. It is true that this will, inevitably, bring the inflationary boom abruptly to an end, and commence the inevitable recession or depression. But the longer the government waits for this, the worse the necessary readjustments will have to be. The sooner the depression-readjustment is gotten over with, the better.
Stephen King: Lessons from the Great Depression of the 1930s have not been learnt We are living through financial history of the tragic kind. As of Friday's close, America's stock market had declined in value by well over 40 per cent compared with its peak a year ago. Already, this ranks as the fifth biggest stock market decline since the 1920s, beaten only by the 1929 Wall Street Crash (and the ensuing Depression in the early-1930s), the technology collapse of 2000, the crash that occurred after the Yom Kippur War (and quadrupling of oil prices) in 1973 and, finally, the collapse in 1937/38 when war was breaking out all over Europe.
Bailout Critic: Plan Could Cost $3 Trillion The U.S. government is changing its approach to the financial crisis, and that change seems to be coming straight from the playbook of U.K. Prime Minister Gordon Brown. Last week Brown unveiled an $87 billion plan to inject money into British banks. In return, the British government will receive shares in those banks. Critics like Barry Ritholtz said it's about time the U.S. got onboard, even though he warns it could cost up to $3 trillion.
Retail shakeout: 'Worst is yet to come' Experts warn that the credit freeze combined with slumping sales - and a likely dismal Christmas season - will force out many more retailers in 2009. The credit market freeze has added to an incredibly tough sales year for U.S. retailers, and analysts warn that these challenges are just the beginning of what could be a brutal 2009 for merchants. "The worst is yet to come," said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a retail consulting and investment banking firm.
The Woman Who Could Have Prevented This Financial Mess Was Silenced by Greenspan, Rubin and Summers Brooksley Born, head of the Commodity Futures Trading Commission -- a federal agency that regulates options and futures trading -- was the oracle whose warnings about the dangerous boom in derivatives trading just might have averted the calamitous bust now engulfing the US and global markets. Instead she was met with scorn, condescension and outright anger by former Federal Reserve Chair Alan Greenspan, former Treasury Secretary Robert Rubin and his deputy Lawrence Summers.
World May Be Lucky to Get Worst Recession Since 1983 The world may be heading for its worst recession in a quarter of a century -- if it's lucky. A steep slump looks likely as the credit squeeze crunches economies from the U.S. to Singapore and panic engulfs global financial markets.
Without real leadership, we face disaster A lethal new threat is emerging at the dark heart of the financial system. We must have a unified global response or an already perilous position will become a calamity In the week of the crash in 1929, Wall Street fell by 23 per cent. Last week, it fell by 18 per cent, London and Frankfurt by 21 per cent and Japan's Nikkei by 24 per cent. Every major financial centre's interbank market is frozen. Trust and confidence have collapsed; the global system is paralysed on a scale that now surpasses 1929. There is a combination of a worldwide bank run, seizure of credit markets and collapse of asset values that could plunge the globe into a depression. This is history's joke: the crisis of capitalism long predicted by communists and socialists who are no longer able to take advantage of it.
It takes a long time for a market recovery It has taken Wall Street considerable time to recover from crashes and for investors to regain their confidence and decide it was safe to put their money into stocks again. A look at how the market recovered from its two best-known crashes, and how much it needs to recover from its latest plunge.
Ralph Nader on the Bailout and the Economic Crisis
Financial crisis reshapes world order Developing nations gain the upper hand As shell-shocked central bankers and finance ministers gather in Washington to confront the world's financial meltdown this weekend, that grinding noise in the background is the sound of the global balance of power shifting.
Europe's death by guarantee Through the latest financial crisis, I warned readers that the costs of banking bailouts in Europe would far outstrip those of the United States. . . . the major hurdle that needs to be crossed by Europe at some point in the near future pertains not so much to the health of their banking systems as the viability of their sovereign finances. The idea of a "risk-free" European sovereign appears an oxymoron at the current juncture.
Morgan Stanley pays dearly for salvation The $9 billion cash injection from Mitsubishi UFJ requires a $900 million annual dividend, and the Japanese bank's investment is protected by the U.S. government. On Monday, Morgan Stanley’s shares more than made up ground they had lost in last week’s brutal sell off, on news that the embattled bank had finally raised $9 billion in fresh capital from Mitsubishi UFJ Financial Group. But lost in the euphoria was a painful new fact of life—the high price Morgan Stanley is paying for its salvation. It is now on the hook to pay Mitsubishi $900 million in annual dividends on the preferred shares it owns.
Tingling Fingers Lost in the overwhelming national and Federal economic chaos of the last few weeks, a local fiscal collapse of stunning magnitude is happening. It is happening at the city, county and state level with a direct result upon the entire country's population. Several states are having multibillion dollar deficits. Counties are cutting services at record rates. Cities are filing bankruptcy. Whatever the losses on Wall Street; whatever futile and feeble attempts by government officials to deal with those, the reality is the economic collapse is having its most devastating effect at the local level. Tip O' Neill, President Reagan's nemesis in the House of Representatives in the 1980's once said "All politics is local." He was correct.
Global Auto Market May Collapse in 2009 The global auto market may experience an "outright collapse" in 2009 amid growing concerns around credit availability of credit and general economic stress, an influential industry tracking firm said on Thursday. J.D. Power and Associates forecast U.S. light vehicle sales would fall to 13.2 million units in 2009 after likely settling at 13.6 million units this year, adding that a pronounced recovery is more than 18 months away.
PepsiCo profit misses view; to cut 3,300 jobs PepsiCo Inc reported a quarterly profit that missed Wall Street forecasts and cut its full-year outlook, hurt by an economic slowdown that flattened soft drink demand and a relatively stronger U.S. dollar. PepsiCo also said on Tuesday it would cut 3,300 jobs, or roughly 1.8 percent of its work force, as part of a plan to save more than $1.2 billion over three years.
$200 oil? That's so 2008 Analysts back down from predictions of $200 oil, but few see long-term demand drought As oil prices zoomed toward an unheard of $147 a barrel this summer, it seemed every analyst prediction that oil would approach $200 was a self-fulfilling prophecy, until suddenly it was not. Instead of $200, oil is now $80. Instead of going up, the U.S. has seen the greatest destruction in demand since the oil-shocked 1970s. Drivers have dramatically cut down on driving since November.
Commodity Prices Tumble The global financial panic and the economic slowdown have put at least a temporary end to the commodity bull market of the last seven years, sending prices tumbling for many of the raw ingredients of the world economy. A copper smelter in China. An analyst said that demand for copper in China was strong but that exports were weakening.
GM closing factories in Wisconsin, Michigan 1,200 workers in Wisconsin SUV factory to lose jobs earlier than expected; Michigan plant to cut 1,340 hourly jobs. The U.S. automotive sales slump worked its way to Janesville, Wis., Monday when General Motors Corp. told workers that it would cease operations at a sport utility vehicle factory there in December. The automaker also said Monday that it will close its metal stamping plant near Grand Rapids, Mich., by the end of 2009, costing about 1,340 hourly jobs. Workers at the 2-million-square-foot factory in the suburb of Wyoming, Mich. were notified Monday afternoon.
Saddled With Debt, Some Decide to Torch Vehicles Burdened by debt and driving home from a night of gambling in West Virginia, Sergio Lopez launched a scheme that at the time must have seemed like a good idea. He pulled his Volkswagen Jetta up to a random corner in Silver Spring, doused the interior with gasoline, set it on fire and walked away. He later made a claim to Nationwide Insurance. The car was missing, he said -- someone must have stolen it.
--------------- IMF • World Bank • WTO --------------
About the IMF, WTO and the World Bank sowing seeds of globalization. 'Socialism' for the rich, who get richer and 'capitalism' for the poor, who get poorer.
And now we're supposed to blindly 'trust' the IMF, World Bank, the Federal Reserve, Hank Paulson, Ben Bernanke, and the US government to bail out Wall Street and solve our economic problems?
It's more about globalization than helping main street and the US taxpayers will help foot the bill.
Columbus Day - no new radio show today - We'll be back tomorrow
Thoughts from Ron Paul . . .
On restoring Confidence in the Markets
On Market Intervention
On the End of Capitalism?
On Safety Nets
On Capital and Capitalism
Bush Says U.S., Other Governments Working to Stabilize Markets President George W. Bush said the U.S. and other governments will continue to take "decisive action'' to restore stability to the world's financial systems. "In these times of economic turmoil, we're working with other governments to resolve the troubles of the financial markets,'' Bush said during welcoming ceremonies at the White House for Italian Prime Minister Silvio Berlusconi.
US stocks rally on bank rescue plans Wall Street stocks rallied on Monday, recovering from their worst week since the Depression era as authorities around the world sought to stave off the financial crisis with a fresh round of interventions. Neel Kashkari, who heads the Treasury’s $700bn financial rescue plan, said the Department expected to name asset managers for the programme within days and was working “around the clock” to thaw frozen credit markets.
Paulson, Trichet Hope Markets Will Reward Initiatives Leaders of the world's richest nations are holding their breath in hopes that markets will endorse their latest effort to spend taxpayer cash on saving banks from collapse. European governments will today outline just how they will carry out pledges to guarantee new bank debt and use public funds to keep troubled banks afloat. The U.S. Treasury will flesh out its proposal to buy stakes in financial firms, and Britain may go as far as underwriting stock sales by four lenders.
Max Keiser on the G7 financial crisis meetings Max Keiser, a Paris-based financial analyst, is not hopeful that anything will come out of the meeting."“This weekend unfortunately won’t produce the policies that are needed to rectify the situation," he told RFI. "They can make lending available, but if nobody wants to borrow, they can’t force people to borrow money. The economies are in massive contraction and people are retreating. And just by making these loans available, doesn't mean that people want to borrow money. It’s just too much too late."
US moves to get $700B bank rescue effort started Administration announces moves to get $700 billion financial system rescue program running The Bush administration said Monday it is moving quickly to implement a $700 billion rescue program, including consulting with private law firms on how to buy ownership shares in banks to help thaw frozen lending and get the economy moving again.
World Leaders Offer Unity But No Steps To Ease Crisis Officials from 20 major countries yesterday endorsed a coordinated approach to the financial crisis, but they failed to announce any concrete steps, underscoring the difficulty of crafting a global plan to halt the contagion as it spread to the broader economy.
Bank Stock Purchase Pushed; 'No' to Protectionism Push for US to purchase bank stock; treasury secretary says 'no' to protectionist policies Treasury Secretary Henry Paulson told international leaders on Sunday that isolationism and protectionism could worsen the spreading financial crisis. With a new trading week dawning, U.S. lawmakers urged quick action by the Bush administration on measures to make direct purchases of bank stock to help unlock lending.
The Crisis Goes From Bad to Worse The first step in recovery is admitting you have a problem. The carnage on Wall Street suggests investors have taken that step -- accepting the reality that the economy is in or headed for a recession, possibly a severe one. The next step, which many people are loath to face, is figuring out what to do with their now sharply diminished investment dollars.
Financial crisis reshapes world order Developing nations gain the upper hand As shell-shocked central bankers and finance ministers gather in Washington to confront the world's financial meltdown this weekend, that grinding noise in the background is the sound of the global balance of power shifting.
IMF Says Nations Are Ready to Contain Crisis $$ Commitment, Short on Specifics, Is Aimed at Boosting Confidence National governments around the world have agreed to do what is necessary to prevent another major financial institution from failing, the International Monetary Fund's managing director said, although he didn't specify any measures.
NYU's Roubini Sees Risk of 'Severe Global Depression' (video) Nouriel Roubini, the New York University professor who two years ago predicted the financial crisis, talks about the outlook for the global financial market and the economy. Roubini said world financial officials should orchestrate interest-rate cuts of at least 1.5 percentage points to help avert a depression." Bloomberg.
IMF chief warns of global financial meltdown Finance ministers turn to poor nations at risk of being swept up in turmoil The International Monetary Fund warned Saturday that debt-ridden banks were pushing the global financial system to the brink of meltdown and wealthy nations had so far failed to restore confidence. The IMF's policy setting panel said the economic crisis is so deep and widespread that it will require a willingness to take bold action.
Why Gold Is Dropping When It Shouldn't - and what it all means Why is gold dropping right now when anyone in their sane mind would expect it to rise? The simple answer to this question is, "because Comex-gold isn't gold" - and because it deceptively pretends to be 'the' price-setter for real gold. Gold is gold, paper is paper, and "Comex gold" is nothing but paper masquerading as gold while simultaneously pretending to be the price-setting medium for actual gold in the world. Now, finally, Comex-gold is in the process of being unmasked. The real supply and demand determinants for Comex gold are not actual gold investors but fund managers. Fund managers are inextricably intertwined with the world of contract-based credit instruments.
Economic Outlook: Is It Safe? I keep looking for some positive developments, but the situation appears to be getting worse. When I’m confused, I turn to the wisdom of people who have proven trustworthy in the past. These are their recent views on the market. . . . Paul Volcker, Nouriel Roubini, Dennis Gartman, Jeremy Grantham, Chris Whalen, U.S. Mint, . . .
Just How Dismal Will the Data Be? Economic data seem an afterthought given the Wall Street rout. The question this week is not whether the numbers will be good or bad but whether they will be bad or horrendous. September retail sales data are due Wednesday, and based on reports from major chains so far, expect sharp declines. The Federal Reserve will release its "beige book," a compilation of anecdotal data, that day, and it also should show broad weakness and lack of credit availability. Industrial production, out Thursday, and housing starts, on Friday, don't offer much more hope.
Paulson in a State of Panic Bloomberg sums up the disorientation of the Treasury in two articles: “Paulson Indicates Need to Purchase Bank Equity `Soon as We Can'” and “Fannie, Freddie to Buy $40 Billion a Month of Troubled Assets”. In "Paulson/Bernanke: A Conspiracy of Dunces", I wrote that the dynamic duo has shown no consistency in their rescue methodology and sent the markets into panic with the Lehman failure and doomsday predictions related to the $700B package. Thank God they are now looking to the British for inspiration. Trouble remains in that neither the Treasury nor the Brits are giving details on bank equity purchases and the associated punishments.
Exploring the worst-case scenario The global economy is drawing closer to a dangerous downward spiral and time may be running out for world leaders to find a way to stop it before it inflicts lasting damage. Economists are beginning to warn of a depression-like cycle where an inability to obtain credit stalls growth, triggering more defaults and still tighter lending terms. Governments have unveiled one unprecedented move after another in the past three weeks to boost confidence and get banks back in business, yet so far nothing has been able to arrest the fall.
Greed lurks in markets but fear retains control After one of the worst weeks for equities in history, shell-shocked investors are wondering whether it is time to buy badly beaten down stocks or brace themselves for more declines. Their dilemma will have echoes in Milan this morning as the heads of the world’s largest bourses meet for the annual meeting of the World Federation of Exchanges. With last week’s wild market swings, there has been speculation that authorities might be tempted to close down some or part of stock markets altogether in the interests of stability.
Crisis on the world stage - nations respond The world's leading nations stepped up their efforts Sunday to stem the fallout from the worst global financial crisis in decades. After days of singular responses, officials the world over were scrambling to get out ahead of growing expectations for more aggressive and coordinated action to prop up banks. Stock markets have plummeted in recent days as anxiety over the credit crisis - which began in the implosion of U.S. housing prices - has spread worldwide.
Investor Soros says regulators were 'behind the curve' Outspoken billionaire investor George Soros on Sunday criticized U.S. and European officials for taking too long to effectively address the financial crisis. Treasury Secretary Henry Paulson was "very slow" to react because his "market fundamentalist beliefs" made him reluctant to take the necessary steps to respond to the credit crunch, Soros said.
Action will count more than G7 words Asked whether the communiqué issued by the Group of Seven leading industrialised nations on Friday would be enough to arrest the crisis gripping the world financial system, a G7 policymaker told the FT, “Enough will be done”. By that he meant that the communiqué on its own would not be enough.
Global creditors end U.S. spending spree The crash unfolding on Wall Street is not just the fall of once-mighty banks and corporations that took on too much debt, but the collapse of an American economy and lifestyle that for decades has been purchased with credit cards. The nation's creditors - many of them foreign countries such as China and Brazil with ample economic needs of their own - reached a point this summer at which they were no longer willing to extend new loans in light of burgeoning default rates.
At the heart of the U.S. economic meltdown, desperation To understand just how grim things have gotten in this northern Indiana town, consider a new law passed last month by the City Council that limits residents to one garage sale a month. It seems the perpetual garage sales - which for scores of people in this town are a sole source of income, and for others the only source of clothing - were annoying some residents. The restrictions will make the financial pinch that much tighter.
World Bank to protect vulnerable countries The World Bank has agreed to protect poor and vulnerable countries in the current financial turmoil The World Bank agreed Sunday to help developing countries strengthen their economies, bolster their financial systems and protect the poor against the financial turmoil in international markets. Robert Zoellick, the bank's president, said the contagion affecting the global economy "has been a manmade catastrophe and responses to overcome it lie in all our hands."
Plan pushed for government to buy bank stocks Paulson warns that isolationism could worsen the spreading financial crisis Treasury Secretary Henry Paulson told international leaders on Sunday that isolationism and protectionism could worsen the spreading financial crisis. With a new trading week dawning, U.S. lawmakers urged quick action by the Bush administration on measures to make direct purchases of bank stock to help unlock lending.
Commodity Rout Far From Ended as Recession Approaches The record 39 percent decline in commodities since July 3 is nowhere near finished, if history is any guide. The Reuters/Jefferies CRB Index of 19 commodities from coffee to silver would have to drop another 37 percent to reach the trough of the 2001 recession and 35 percent for the 1998 slide, when crude bottomed at $10.35 a barrel. The measure is 28 percent above its lowest during the economic contraction that ended in November 1982. Copper, after its biggest weekly loss in two decades last week, is still triple 2001 levels.
Uncle Sam the Shareholder Friday, October 10, 2008 may go down in history as the day that free-market ideology (at least as it's practiced by the current powers-that-be) officially died. Treasury Secretary Henry Paulson announced late Friday that the $700 billion bailout plan will now include injections of capital directly into troubled financial institutions, an idea he flatly rejected when he was selling the Treasury's plan to Congress just weeks ago. "Some said we should just stick capital in the banks, take preferred stock in the banks. That’s what you do when you have failure," Paulson told the Senate Banking Committee on Sept. 23. “This is about success.” So, does this mean we have failure? Well, yes.
Thomas L. Friedman: The post-binge world ....At their core, markets are propelled by fear and greed. They're just the balance at any given moment of those two impulses. Over the long run, you cannot spin the market. You cannot sweet talk it into going up or beg it not to go down. It's going to do whatever it's going to do - whichever way greed and fear tug it. And the market always bats last and it always bats a thousand
Moment of truth Last month, when the U.S. Treasury Department allowed Lehman Brothers to fail, I wrote that Treasury Secretary Henry Paulson was playing financial Russian roulette. Sure enough, there was a bullet in that chamber: Lehman's failure caused the world financial crisis, already severe, to get much, much worse.
How Will the Markets Respond? Wall Street May Be Jittery After No Specific Response Comes From G 7 As leaders of the world's biggest economies dole out assurances, without offering much in the way of specifics, that they will take any necessary action to restore confidence in global markets, Wall Street appears to be facing further turbulence coming off one of its worst week ever.
Funds Turn To Treasury Guaranty Money-Market Managers Seek to Boost Confidence Fifteen of the largest money-market mutual fund companies, which together account for three-quarters of the market, said this week that they would take up the Treasury Department on its offer of a temporary guaranty in an attempt to regain their status as one of the safest places to park cash.
Gobbled Up by the Giant Derivatives Monster "Payback time for Wall St and Washington will be when foreign investors fail to turn up at the bond auctions to finance the bailout plan, whose $800+ billion will have to be created out of thin air. So the bonds will have to be monetized, which will mean an immediate spike in inflation, which will cause the rate of corporate bankruptcies to soar as failing companies take down others in a chain reaction because the losses will be highly leveraged by credit default swaps etc. This is the underlying reason why banks won't lend to each other - they can't calculate the counterparty risk. All of this will set off a massive derivatives meltdown that will bring the whole system crashing down."
Roubini argues for further rate cuts Nouriel Roubini, the professor who predicted the financial crisis two years ago,believes world financial officials should orchestrate interest rate cuts of at least 1.5 percentage points to help avert a depression. A temporary guarantee of all bank deposits, unlimited liquidity for solvent financial institutions and fiscal stimulus measures were also needed, the New York University professor of economics said in a commentary to Roubini Global Economics subscribers on Friday.
Congress may propose a second stimulus plan Tax rebate, food stamp money, extended jobless benefits are on the table After consulting with Barack Obama, Democratic leaders are likely to call Congress back to work after the election in hopes of passing legislation that would include extended jobless benefits, money for food stamps and possibly a tax rebate, officials said Saturday.
GM Would Need Cash to Acquire Chrysler Analysts say GM would need cash to acquire Chrysler, it may take too long to see cost savings For General Motors Corp. to acquire Chrysler LLC and all of its warts, GM would have to get desperately needed cash as part of the deal. Lots of it, according to industry analysts. With both automakers struggling to survive amid slumping sales, a slowing global economy and an unprecedented credit crunch, it's unclear whether Chrysler's majority owner, Cerberus Capital Management LP, would be willing to pay up, or whether the federal government might even get involved to save one or both struggling automakers.
Morgan Stanley Pulls Mitsubishi Miracle Out of Hat Hand it to John Mack and Morgan Stanley, who somehow managed to persuade Mitsubishi to go forward with its $9 billion investment on terms that are extraordinarily favorable to Morgan Stanley. Mitsubishi made some minor adjustments to the original deal, but the key term--the conversion price of the preferred stock--remains very generous to Morgan Stanley shareholders.
As Larger Banks Crumble, Local Firms See Rush Joann Gaskins panicked. After absorbing a steady drumbeat of bad news about bank runs, bank collapses and bankruptcies, she arrived at a Manassas branch of faltering Wachovia Bank minutes before it opened Sept. 17, demanded her savings in cash and walked out the door. For eight days, she toted a metal box stuffed with $19,000 in a five-inch stack of $100 and $50 bills back and forth from work to home, while she tried to figure out what to do with it.
Debt is whittling away U.S. economic power At the turn of the 20th century, toward the end of a brutal and surprisingly difficult victory in the Second Boer War, the people of Britain began to contemplate the possibility that theirs was a nation in decline. They worried that London's big financial sector was draining resources from the industrial economy and wondered whether Britain's schools were inadequate.
World economy will slow sharply The world economy will slow sharply this year and next, with the United States likely sliding into recession reflecting mounting damage from the most dangerous financial jolt in more than a half-century. The International Monetary Fund, in a World Economic Outlook released Wednesday, slashed growth projections for the global economy and predicted the United States -- the epicenter of the financial meltdown -- will continue to lose traction.
Economic signs pointing down Consumers, housing, factories all dropping further in September The U.S. recession has been nearly forgotten in all the anxiety about the financial meltdown in the past few weeks. For those who care about the fundamentals, however, the coming week will feature a lot of data about the economy, much of it rather depressing. Most of the data should confirm that the economy weakened further in September.
US price deflation on the way Fed minutes released on October 7 disclosed that as recently as Sept 16, Fed officials thought risks to growth and inflation were roughly equally balanced. And Federal Reserve Chairman Ben Bernanke acknowledged on the same day that though the inflation outlook had improved somewhat, it remained uncertain. The market may have taken these views as representative of central banks round the world, particularly given the ECB decision of October 2 not to reduce rates. Following these releases, the Dow Jones index fell by about 6.5 percent as the market thought the internationally co-ordinated interest rate cut it had been expecting had become less likely. This and the knock-on effects on world markets then helped to force central banks to make the cut the market had expected, but on October 8.
The next sub-prime mortgage crisis The American economy is braced for a new wave of mortgage defaults A fresh wave of mortgage problems is threatening to engulf the US economy: option adjustable-rate mortgages, or option ARMs. Option ARMs, which make up 25 per cent of the US mortgage market, offer a low initial rate which re-sets to a higher market rate after a fixed period of time, usually five years. They are popular with low-income buyers who can put off their payments until salary increases come through or the rising housing market (remember?) pushes up the value of their property.
Ailing U.S. economy brings fears of a crime wave It is the question on the minds of New Yorkers, once they stop pondering the fate of their retirement funds: If the city's economy sinks to depths not seen in decades, will crime return with a vengeance? Expert opinions differ, but the question is hardly illogical. The last time stocks on Wall Street fell hard, in 1987, crime was exploding, and the city saw historic highs in murders in the following years.
Sovereign wealth funds seek safety Don't expect Middle Eastern sovereign wealth funds to jump on the government bailout bandwagon. As stock markets around the world have cratered, some of the world's largest wealth funds have been hoarding cash, much like the hedge funds and big institutional investment funds that have been running for cover in recent weeks.
Euro-zone leaders agree to market rescue plan Paris summit approves inter-bank loan guarantees, recapitalizations and buying up stocks Leaders of the 15 euro-zone countries agreed Sunday to an action plan that will guarantee loans between banks through 2009 and allow governments to buy stock in distressed financial companies. The loan guarantees, which a joint statement outlining the plan said could be direct or indirect, would cover new bank senior debt issuance up to five years. The plan also includes provisions for euro-zone governments to buy stock in needy companies, to issue qualifying capital to financial institutions through preferred shares and other instruments.
Moody’s warns on Dubai vulnerability Dubai’s debt has soared to about 100 per cent of gross domestic product and continues to grow, leaving it vulnerable to an economic slowdown, according to Moody’s. In a report obtained by the Financial Times, the ratings agency says Dubai would lack the financial muscle to cover its debt in the event of a systemic shock, such as a real estate collapse or an adverse geopolitical event, making it reliant on Abu Dhabi to bail it out.
UAE moves to shore up confidence The United Arab Emirates intervened on Sunday to shore up increasingly fragile confidence in the oil-rich Arab Gulf’s business hub and prevent contagion from the US spreading to one of the world’s fastest growing regions. The government said it would guarantee all bank deposits and savings in the UAE’s national banks, as well as all interbank lending, and inject as much liquidity into the system as necessary.
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Fri 10.10.2008
G7 pledges united crisis response but rifts emerge Finance ministers from the Group of Seven (G7) leading economies say they will use all available tools to get credit markets moving again and to ensure banks have ready access to cash. After a meeting in Washington the ministers from the US, Canada, Britain, Germany, France, Italy and Japan also promised to ensure deposit protection programs are strong enough so people can be confident their money will be safe. US Treasury Secretary Henry Paulson says it is vital governments work together to combat the financial crisis.
FDIC Seizes Two More Banks Two banks -- Meridian Bank in Eldred, IL and Main Street Bank of Northville, MI -- failed on Friday night, the Federal Deposit Insurance Corp. said, underscoring just how much the credit crunch is hurting financial institutions.
Ron Paul - on bailout, G7, and possible end of monetary system
Investors Need Companies to Go Bankrupt (video) Jimmy Rogers on CNBC Friday, 10/10/2008 Markets do not trust the governments' plans to keep struggling banks alive and investors will only calm down when the companies with bad assets are allowed to go bankrupt, legendary investor Jim Rogers, CEO of Rogers Holdings, told CNBC Friday.
Returning to the Gold Standard - Sean Brodrick
Gold Prices May Spike (video) Within the gold complex, there is a disparity between the paper market and the physical market, notes Jurg Kiener, CEO of Swiss Asia Capital. He tells CNBC's Maura Fogarty & Rebecca Meehan that if the paper market collapses, gold prices may double very quickly.
Dow plunges 679 for 6th triple-digit loss in a row A runaway train of a sell-off turned the anniversary of the stock market peak into one of the darkest days in Wall Street history Thursday, driving the Dow Jones industrials down a breathtaking 679 points and deepening a financial crisis that has defied all efforts to stop it.
Fear Trumps Greed as Market Woes Paralyze Economies U.S. and European stock markets fell yesterday, even after the Federal Reserve lowered its benchmark interest rate in concert with central banks in Europe, Canada and China. Investors are in the grip of a panic that psychologists and historians say isn't necessarily rational and may intensify. They aren't buying stocks, and more importantly, suddenly afraid they won't be repaid, they aren't making loans by buying bonds. Banks have also tightened credit.
The End Of American Capitalism? The worst financial crisis since the Great Depression is claiming another casualty: American-style capitalism. Since the 1930s, U.S. banks were the flagships of American economic might, and emulation by other nations of the fiercely free-market financial system in the United States was expected and encouraged. But the market turmoil that is draining the nation's wealth and has upended Wall Street now threatens to put the banks at the heart of the U.S. financial system at least partly in the hands of the government.
Economists Expect Crisis to Deepen $$ The U.S. economy has sunk into a recession and government action is critical to stem the damage, according to economists in the latest Wall Street Journal forecasting survey. "We're in the middle of a very dark tunnel," said Brian Fabbri of BNP Paribas, referring to the worsening credit crunch. "Each day we see another crack in the system."Those cracks are quickly adding up. On average, the 52 economists surveyed now expect U.S. gross domestic product to contract in the third and fourth quarters of this year, as well as the first quarter of 2009.
Market in Cascading Crash - October 9, 2008 Disagreement among the media 'experts' and yesterday's run on equity markets. . . . market to go under 8,000.
Afternoon Fright Stocks again tumble in the last hour. Brace yourself for Friday. A deep slide in stocks is disturbing enough. But a sudden free fall is truly frightening. Right before 3 p.m. today, the Dow Jones industrial average was down around 200 points. Then, as if a door in the floor had just swung open, the Dow plummeted. The blue-chip index more than tripled its losses in the last hour of trading. "This cascading waterfall sell-off is ugly," said Barry Ritholtz on the Big Picture. The Dow closed down 678.91 points, or 7.3 percent. The Dow is now down nearly 40 percent from a year ago. The Standard & Poor's 500 index ended down 7.62 percent. It was the seventh consecutive decline in stocks; the Dow is under 9,000 for the first time in five years.
Relax! It's Only Bankruptcy Putting a Foundation Under the Financial System In William Saroyan's Depression-era drama "The Time of Your Life," there is a laconic character called "The Arab" who keeps muttering the play's signature line: "No foundation. All the way down the line." The global economy feels that way this week. No foundation, no liquidity, no safe haven, no exit . . . all the way down the line.
Libor Holds Central Banks Hostage as Credit Freezes Danilo Coronacion oversees 15 percent of global coconut oil production at CIIF Oil Mills Group in the Philippines. These days, he spends a lot of time worrying about events half a world away in London. The name of his pain? Libor.
Bush to Address Nation Friday About Economic Crisis President Bush, who has said little publicly during this week's prolonged market dive, will make a statement about the crisis tomorrow morning in the Rose Garden, the White House said late today. Press secretary Dana M. Perino said Bush will "assure the American people that they should be confident that economic officials are aggressively taking every action to stabilize our financial system."
Swaggers turn to shudders a year after market high Just a year ago, investors were swaggering as the stock market surged to an all-time high. Now, almost everyone on Wall Street and Main Street seems to be shuddering amid a frightening reversal of fortune that has erased $8.3 trillion in shareholder wealth in the past 366 days. "We aren't dealing with a fundamental economic issue any longer," said James Paulsen, chief investment strategist for Wells Capital Management. "We are dealing with fear. And that doesn't respond to economic medicine."
The world is at severe risk of a global systemic financial meltdown and a severe global depression Roubini -- The US and advanced economies’ financial system is now headed towards a near-term systemic financial meltdown as day after day stock markets are in free fall, money markets have shut down while their spreads are skyrocketing, and credit spreads are surging through the roof. There is now the beginning of a generalized run on the banking system of these economies; a collapse of the shadow banking system, i.e. those non-banks (broker dealers, non-bank mortgage lenders, SIV and conduits, hedge funds, money market funds, private equity firms) that, like banks, borrow short and liquid, are highly leveraged and lend and invest long and illiquid and are thus at risk of a run on their short-term liabilities; and now a roll-off of the short term liabilities of the corporate sectors that may lead to widespread bankruptcies of solvent but illiquid financial and non-financial firms.
Apocalypse Now: Do The Markets Have A Chance To Recover There were several pieces of bad news today, but three stand out. This news may have been the primary cause of the market sell-off which took the Dow down 679 points, or 7.3%, to 8,579. The market was above 14,000 less than a year ago. Every investor and most working men and women have the same questions. What will it take to get the economy back in order? Is the die cast for an awful and prolonged period of financial despair. The most alarming information came from The Wall Street Journal, In its latest forecast survey from 52 economists, the paper found that the experts expect the GDP to contract in the third and fourth quarters of this year and the first quarter of next.
Investor Confidence Dashed as Bailout Fails to Quickly Loosen Credit Fear and foreboding took hold on Wall Street yesterday, as the stock market again plunged and investors became convinced that the nation is on the verge of a deep and prolonged recession. The rout continued in Japan, where stocks plummeted in early trading. The government took steps toward an extraordinary public investment in U.S. banks and General Motors stock fell to its lowest price since 1950 on fears it will not be able to weather the downturn. Share prices fell across every industry and for each of the 30 stocks in the Dow Jones industrial average, which was down 679 points, or 7.3 percent, to 8579.19.
Risk Fears Threaten Economy, Says Fed $$ Investor aversion to risk threatens to deepen the nation's credit crunch and slow the economy, the president of the Federal Reserve Bank of Boston said Thursday. Eric Rosengren said a "liquidity lock" in key credit markets "compounds problems created by a traditional credit crunch" by impeding even short-term financing for the most creditworthy firms. "If it were to persist, this unwillingness to take credit risk, or to lend money other than overnight, could constrain creditworthy borrowers from undertaking worthwhile projects -- and thus have implications for economic growth," Mr. Rosengren said in a speech Thursday at the University of Wisconsin-Madison.
Which Gold Miners Will Do Best? William Fleckenstein -- I've had a bit of an epiphany. Perhaps I've been slow to understand this but, in essence, this seems to be where we are: The Federal Reserve is willing to print money to buy Treasurys that will be issued, and it's willing to exchange Treasurys for potentially any piece of trashy paper.
Banks borrow record amount from Fed's emergency program Banks borrowed in record amounts from the Federal Reserve's emergency lending facility over the past week, while investment banks drew loans at a brisk -- though slightly lower -- pace, fresh proof of the credit problems gripping the country.
Fed Loans to Banks Almost Double to $98 Billion The Federal Reserve's direct loans to commercial banks almost doubled to a record $98.1 billion yesterday from a week before as the credit freeze sent money- market rates soaring.
Is National City Next? National banks are scrambling to widen their deposit base--many investors and executives view this as the best way to avoid future financial catastrophes. National City is the latest bank to be targeted by its larger peers, according to published reports. While representatives from the bank declined to comment on rumor and speculation, National City told Forbes.com that it has a firm capital base and is solid despite the turmoil in the financial market.
Crash and Recover? Dylan Ratigan hosted CNBC's "Fast Money" Thursday night. He started the show with a discussion of the stock market crash today. He mentioned that over the last 10 days the Dow has gone from 11,000 to below 9000. Ratigan says there's a total crisis of confidence in the U.S. financial system. He says the debate now is when U.S. banks will be able to start lending in a rational way. Joe Terranova says the U.S. government needs to step in and be a buyer of futures. Tim Seymour says the plunge protection team is already buying futures. Jon Najarian says he would love to trade against the government and he hopes they do it. "I don't think it's a good idea because they can't manage anything," he said. Frequent guest Zachary Karabell, a chief economist with Fred Alger Management, said this is a run on the equity markets.
The current financial crisis is only the beginning Yes, Virginia, the banking crisis will one day end, but what comes after promises to be even more arduous. With the solvency of the Western banking system seriously in question, there is a temptation to hope that if only the latest bold, last-ditch rescue plan will work, we can go back to the good old days of 2006. One could argue that the banking crisis is just the cold sweat, not the flu that follows it.
No Depression This Time, Uncle Sam Has Got Our Back Global markets have not been reassured by the coordinated interest rate cuts of several central banks or by recent congressional action, but they should be. Our bet is that financial markets will return to normal in short order and that the U.S. economy will squeak by with a moderate recession. Recapitalizing the banks and working out mortgages will take time, but the financial system will not collapse -- the government won't let it.
We're all socialists now, comrade A quarter of a century ago, in the era of the Labour manifesto that was dubbed (by a member of the Labour shadow cabinet) "the longest suicide note in history", when one wanted to depict the absurdity of the view of the world advanced by Tony Benn and Michael Foot one simply had to say: "They want to nationalise the banks!" People fell about laughing. Today, it is all considerably less funny. We are all socialists now.
U.S. Treasury May Buy Stakes in Banks Within Weeks The government is planning to buy stakes in a wide range of banks within weeks as the credit freeze increasingly threatens to tip the U.S. economy into a deep recession.
Gold prices keep rising as stocks collapse Gold prices shot up in aftermarket trading Thursday after stocks plunged again, sending investors scrambling for safe places to put their money. Silver also rose. Gold for December delivery jumped $32.30 to $918.80 in electronic trading on the New York Mercantile Exchange, after earlier closing $20 lower at $886.50. Investors bought up gold, a traditional safe-haven asset, after fears of a deepening financial crisis sent U.S. stocks tumbling in a late-session swoon. The Dow Jones industrial average fell 679 points.
US under pressure to rush out cash injection The US was on Thursday under pressure to rush out a bank recapitalisation plan to reassure the markets after yesterday’s dramatic late plunge in stock prices. US officials were hoping to have some time to finish the plan but analysts said they could be forced to act immediately. On Thursday, the White House confirmed reports in the FT and other media that the Treasury is “actively considering” injecting public funds into banks in return for equity stakes.
IMF opens doors to emergency loans The International Monetary Fund has "opened the firehouse doors" to "hundreds of billions of dollars" of e mergency cash to help countries battle the financial crisis. The cash will be available to both rich and poor countries, according to IMF Managing Director Dominique Strauss-Khan. It will fuel speculation that a number of countries, including Iceland, some Baltic states and Turkey, could have to resort to an IMF loan in order to survive the crisis. An IMF insider said: "This basically amounts to an announcement that the firehouse doors are open. Lots of money is available, almost immediately."
Views from across the Pond . . . Alistair Darling's declaration is welcome but no miracle cure for economic woes So, did the Darling Declaration and a day of coordinated rate cuts by central banks do the trick?
New AIG loan renews concerns over insurer's health Concerns about the health of American International Group Inc. were renewed Thursday, a day after the insurance giant said it would receive an additional $37.8 billion loan from the Federal Reserve.
New attempt to set up swaps initiative The New York Federal Reserve will on Friday hold its second meeting this week with three groups vying to set up a central clearing counterparty for the credit default swaps market in an attempt to breathe fresh life into the initiative.
The danger of ignoring reality Thirty billion dollars to keep Bear Stearns from collapsing. Another $85 billion for AIG. Hundreds of billions, here and there, lent to banks. All told, the U.S. Federal Reserve has pumped $800 billion into the financial system, Ben Bernanke, its chairman, estimated Tuesday. That figure doesn't include the untold sum that the Fed now plans to spend buying short-term debt so that companies can continue to pay for their daily operations. And it doesn't include any of the money the Treasury Department is laying out, like the $700 billion bailout fund or the $200 billion that could be spent propping up Fannie Mae and Freddie Mac.
Congress Charges Commission Faced with an imminent financial meltdown and a looming depression, one might have expected Congress, inspired with a rush of patriotism, to have stepped vigorously to the plate to pass Paulson's rescue package without delay. Instead, Congress delayed, causing increased market panic before eventually doing the deed. But, in doing so, they had the nerve to demand their own 'commission' of over $100 billion dollars of 'pork barrel' add-ons, or over 15 percent of the total package. These extras will simply be added to the tab charged to the American taxpayer!
Banks Are Running Out of Options As Treasury Secretary Henry Paulson formulates a plan that could essentially nationalize a large swath of the U.S. banking industry, shareholders have become inevitably spooked. But some experts say there are few other palatable options to shore up the financial sector. The government already has the right to receive warrants for equity stakes in companies that participate in its plan to purchase $700 billion worth of illiquid mortgage holdings.
Rate Cuts: A Band-Aid or a Cure? The federal government has pulled out all the stops to stanch the bloodletting on Wall Street of late, but a growing chorus is saying the Federal Reserve needs to go back to a staple in its playbook: a good, old-fashioned rate cut.
Big Promblems with Blind Man's Bluff . . . . The bailout plan has a striking resemblance to Blind Man’s Bluff, except the game will take a very long time to end while registering an uncertain cost because the Treasury will be running around blind, not knowing what kind of debt they are buying, how to manage it, or how much this junk is worth. Paulson and company has no way to identify the true nature of the banks’ debt. Therefore, they won’t be able to fully assess or manage risk. The banks aren’t even able to do this, yet the Treasury will succeed? Most likely the next Treasury Secretary will be running around for many years blindly throwing taxpayer money at the financial system. And as they dig themselves deeper and deeper into this black hole, they will use more scare tactics to secure even more money from taxpayers.
Crisis marks out a new geopolitical order Blame greedy bankers. Blame Alan Greenspan’s careless stewardship of the US Federal Reserve. Blame feckless homeowners who took out loans they could never expect to repay. Blame politicians and regulators everywhere for closing their eyes to the approaching tempest.
Stock market plunging into pit of despair Could it be just a year ago that jubilant investors were celebrating record highs in the stock market? It almost seems inconceivable now as both Wall Street and Main Street stare into a seemingly bottomless pit of despair that has swallowed up $8.3 trillion in shareholder wealth during the past 366 days.
Mutual Fund Withdrawals a Record as Investors Flee Investors pulled a record $52.1 billion from U.S.-managed stock and bond mutual funds in the past week, seeking the safety of government-insured bank deposits as the financial crisis worsened. Shareholders took $43.3 billion from stock funds and $8.8 billion from bond funds in the week ended Oct. 8, according to data compiled by TrimTabs Investment Research in Sausalito, California. The exodus followed $72.3 billion of outflows in September, the most in a single month.
Lehman: One Big Derivatives Mess Enron may look tame compared with this: a fight over billions of dollars posted as collateral, then used in a tangled web of deals In 2003, legendary investor Warren E. Buffett called derivatives "weapons of mass destruction." Buffett predicted that the complex financial instruments would morph, mutate, and multiply "until some event makes their toxicity clear." The failure of Lehman Brothers may have been the disaster he imagined.
Problem loans nearly triple in US The percentage of large syndicated US loans rated as problematic has nearly tripled in the last year, highlighting the damage done by the lax underwriting standards of the private equity boom, a report by US regulators showed on Wednesday.
A master plan for China to bail out America The financial rescue plan passed by the US Congress is viewed as flawed but necessary to head off panic in financial markets and loss of confidence in the economy. It seems a holding operation, a Plan C or D that might need augmentation via a Plan A.
A vital component of a Plan A is likely to be additional money. For one thing, there is suspicion that the amount of toxic assets is considerably greater than the rescue plan provides for. For another, more money may be required to address the problem in the housing market by providing relief to subprime and marginal borrowers. And finally, further fiscal stimulus could become necessary if recessionary forces take hold.
Galbraith's 'The Great Crash 1929' is still essential reading today The late John Kenneth Galbraith attributed the longevity of his book The Great Crash 1929 – published in 1955 and never since out of print – to the tendency of history to threaten a repeat. "Each time it has been about to pass from bookstores," he wrote in a later foreword, "another speculative episode – another bubble or the ensuing misfortune – has stirred interest in the history of this, the great modern case of boom and collapse, which led on to an unforgiving depression." So here we are again. The financial crisis that has engulfed credit markets over the past year has finally crashed into the public consciousness, and the question of whether the US is headed for a second Great Depression is now a staple of bar-room debate.
GM shares tumble 31 percent to 58-year low Shares of GM tumble to 58-year low on credit warning, fears of global drop in auto sales Shares of General Motors Corp. lost nearly one-third of their value Thursday, plunging to their lowest level in more than 58 years after Standard & Poor's said the automaker's credit could fall further into junk status due to the "rapidly weakening state" of the global automotive market. GM shares plummeted $2.15, or 31.1 percent, to close at $4.76 after falling as low as $4.65.
GM Staggers Under Losses The end of America's love affair with SUVs hit General Motors hard. Even aside from huge one-time costs, the company lost over $6 billion General Motors lost a staggering $15.5 billion in the second quarter as the company struggled to come to grips with a weak economy and a head-spinning change in consumer tastes. GM said on Aug. 1 that $9.1 billion of the losses came from one-time charges and writedowns. But the one-timers stemmed from restructuring moves taken because GM's business is out of step with the car market. Take those away, and GM still lost $6.3 billion.
BlackRock, Pimco Submit Bids for Treasury Bailout BlackRock Inc. and Pacific Investment Management Co. submitted proposals to manage troubled mortgage- backed securities in the biggest portion of the U.S. Treasury's $700 billion financial-rescue program, people familiar with the matter said.
Bailout role elevates U.S. official For months, as Treasury Secretary Henry Paulson Jr. traveled to Capitol Hill to testify about the unfolding financial crisis, he has been shadowed by a man with a shaved head and intense eyes who many assumed was a Secret Service agent. But much of the political and financial world was surprised to learn this week that the man was Neel Kashkari, 35, a former Goldman Sachs investment banker whom Paulson has tapped to oversee the $700 billion bailout effort as interim assistant secretary for financial stability.
Garrison Keillor: One bomb after another We Americans are a stalwart and stouthearted people, and never more so than in hard times. People weep in the dark and arise in the morning and go to work. The waves crash on your nest egg and a chunk is swept away and you put your salami sandwich in the brown bag and get on the bus. In Philly, a woman earns $10.30 per hour to care for a man brought down by cystic fibrosis. She bathes and dresses him in the morning, brings him meals, puts him to bed at night. It's hard work lifting him and she has suffered a painful hernia that, because she can't afford health insurance, she can't get fixed, but she still goes to work because he'd be helpless without her.
Cutting rates in concert is impressive, but insufficient Persuading seven governments to act together is no mean feat. That happened early Wednesday morning as six central banks, including those of the United States, the euro zone and Britain, cut interest rates by one-half percentage point, while a seventh - Japan - supported the move, although its rates were already too low to cut. The unprecedented joint action by central banks is symbolic. But putting on a well-organized cavalry display doesn't win battles and, while welcome, the rate cuts are likely to be of limited use.
Global crisis erupted because many underestimated damage Imagine what Republicans would have said a few months ago had someone proposed that the government should lend money to companies that could not get credit in the free market. Imagine what Democrats would have said if it turned out that those loans were to be made at low interest rates, with no equity for the government and with no controls on how the money was spent.
What it would take to trigger stock market timeout As harrowing as the stock market's plunges have been in recent days, they still haven't been enough to trigger the "circuit breaker" mechanisms that result in an automatic timeout in trading. The Big Board implemented the automatic halts after the stock market crashed in the late 1980s to force traders to take a break from frenzied selling.
NYSE Fourth-Quarter 2008 Circuit-Breaker Levels Circuit-breaker points represent the thresholds at which trading is halted marketwide for single-day declines in the Dow Jones Industrial Average (DJIA). Circuit-breaker levels are set quarterly as 10, 20 and 30-percent of the DJIA average closing values of the previous month, rounded to the nearest 50 points. In fourth-quarter 2008, the 10, 20 and 30-percent decline levels, respectively, in the DJIA will be as follows:
Level 1 Halt - A 1,100-point drop in the DJIA before 2 p.m. will halt trading for one hour; for 30 minutes if between 2 p.m. and 2:30 p.m.; and have no effect if at 2:30 p.m. or later unless there is a level 2 halt.
Level 2 Halt - A 2,200-point drop in the DJIA before 1:00 p.m. will halt trading for two hours; for one hour if between 1:00 p.m. and 2:00 p.m.; and for the remainder of the day if at 2:00 p.m. or later.
Level 3 Halt - A 3,350-point drop will halt trading for the remainder of the day regardless of when the decline occurs.
Dubai's Heavy Debt Load Stirs Concern $$ The global credit crisis is forcing a new look at this Mideast boomtown's mounting international debt load and its ability to fund its ambitious growth strategy. Dubai, one of seven emirates that make up the United Arab Emirates, has been spending heavily on roads, a subway system and other infrastructure projects to keep up with the city-state's explosive growth. The government, through state-owned and state-controlled real-estate developers, has embarked on a series of ambitious property projects aimed at turning Dubai into a tourism and business destination.
Asian markets plummet after Dow falls under 8,600 Asian markets followed the overnight rout on Wall Street, with the Nikkei 225 plummeting nearly 10 percent to 8,243 half an hour into trading. In Australia, the Standard & Poor's/Australian Stock Exchange 200 index dropped another 7.6 percent to 3,993, while in South Korea the Kospi shed 5 percent.
Singapore Ends Currency Gain Policy as Economy in Recession Singapore said it would end a policy that favors gains in its currency to help exporters, after cutting its economic-growth forecast for the third time this year as the economy slid into a recession. The Monetary Authority of Singapore, which manages the nation's dollar against a basket of currencies, said today it's shifting to a "zero-percent appreciation" stance.
Iceland is all but officially bankrupt Iceland was on the verge of doing exactly that on Thursday as the government shut down the stock market and seized control of its last major independent bank. That brought trading in the country's currency to a halt, with foreign banks no longer willing to take Icelandic krona, even at fire-sale rates.
North Korea Prepares to Fire More Missiles, Restart Nuke Facility North Korea appears to be powering up its nuclear weapons program again as it tested missiles in apparent personnel training and announced plans to reopen its plutonium plant. American satellite images confirm reports of short-range missile testing recently, which the Pentagon speculated could also be intended to “send a message” to the U.S. and the International Atomic Energy Agency. Washington does not know the motivation behind the tests, though generally considers such behavior a pressure tactic to force Pyongyang's removal from U.S. terror lists.
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With the election fast approaching, and American Jews still polling strong support for Obama, Ben Shapiro cut a YouTube video entitled "The Jewish Case Against Barack Obama."
TRAILER:
Part I discusses Obama's advisors.
Part II covers his friends.
Part III touches his running mate and his own statements, and concludes.
Which is the Better Bet: Gold or Cash? (video) Invest in gold as it may hit $2,000 a troy ounce in the next 6 months, advises Donald Luskin, CIO of Trend Macrolytics. But Graeme Maxton, chief economist, Asia at The Insight Bureau disagrees, preferring cash instead. They make their case to CNBC's Amanda Drury.
Treasury Finally Sees Light: A New-And-Improved Bailout Plan The Treasury finally seems to have seen the light on its crappy trash-asset bailout plan and may now actually inject capital into banks instead. This is a far better idea, one that we and others have been shouting down a rainbarrel about for weeks. Under the original plan, unless the government vastly overpaid for the trash assets it bought, the banks still would have been undercapitalized--and, thus, unable to start lending. Having the government take an equity stake, on the other hand, not only gives taxpayers much more potential upside, it strengthens the banks' capital ratios.
U.S. May Take Ownership Stake in Banks Treasury Dept. Would Hope to Spur Lending Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system, according to government officials.
White House considers ownership stakes in banks White House considers taking ownership stakes in private banks to deal with credit crisis The Bush administration is considering taking ownership stakes in certain U.S. banks as an option for dealing with a severe global credit crisis. An administration official, who spoke on condition of anonymity because no decision has been made, said the $700 billion rescue package passed by Congress last week allows the Treasury Department to inject fresh capital into financial institutions and get ownership shares in return.
Political Blame and the Myth of Government-Sponsored Salvation Treasury Secretary Henry Paulson suddenly comes to mind. He is the man who would be Wall Street’s savior, sitting atop a huge pile of government money with which to buy up the “toxic debt” of the financial system. We ought to think it unlikely that anyone should deceive himself so thoroughly as to imagine that he is the market’s “savior.” It is a fundamental axiom that the government cannot save the market because the government does not possess adequate knowledge. The market works precisely because economic knowledge is decentralized and the market allows this decentralized knowledge to become effective. When market actors commit errors, only the market can correct the errors. Only by allowing the market to function can the real solution appear.
Debate as U.S. ban on short-selling ends: Did it make any difference? At the stroke of midnight on Wednesday, the short-sellers will return to Wall Street. The question is, what will they do when they get there? Nearly three weeks ago, regulators abruptly banned short sales of financial stocks to protect companies that had come under siege in the stock market. Short-sellers, critics said, had contributed to the declines by betting against the companies' shares.
Meltdown's far-reaching consequences This is more than a global financial meltdown: Other major nations around the world this week are following President Bush's lead in effectively dismantling the very structures of free-market capitalism.
Hank Paulson warns of more bank failures More banks will fail in the weeks ahead despite dramatic moves by policymakers across the world to tackle the financial crisis, the US Treasury Secretary admitted last night.
Credit freeze: It's still on Investors mull emergency rate cut. Bond prices turn lower after Treasury announces plan to sell more debt. Credit markets remained choked after an emergency rate-cutting effort by six central banks offered some much-needed relief but was viewed as just one step toward fixing a massive problem. "It was probably necessary but not sufficient to break the logjam,". . .
Fed can't save stocks Wall Street ends a volatile session with losses as investors welcome emergency rate cut but remain wary. U.S. stocks tumbled Wednesday at the end of a volatile session in which investors considered the Federal Reserve's emergency interest rate cut but remained wary about the economic outlook.
Time ripe togo for overkill and forget about underkill There is no longer any middle ground. An ever-deepening crisis spells one of two things – the distinct possibility of a wrenching downturn in the global economy or an opportunity for healing and recovery. The ball is in the court of the authorities. Wednesday’s rare co-ordinated easing by the world’s leading central banks was an important step in the right direction. The risk is it may not have been enough.
Switching to cash may feel safe, but risks remain It's a question we've all asked in our darker moments of late: Why not just put all of our investments in cash, 100 percent, just for a little while, until things calm down? Some people already seem to be acting on that instinct. In the first six days of October (through Monday), investors pulled $19 billion out of mutual funds that invest in United States stocks, matching the outflows for the entire month of September, according to TrimTabs Investment Research.
IMF sees greatest shock since 1930s The financial crisis will drive down global economic growth to its lowest since 2002 with a big risk it will drop even further, the International Monetary Fund has warned. Though Olivier Blanchard, the fund’s chief economist, said that the chance of another Great Depression was “nearly nil”, the IMF said that the US and European economies were mainly already in or close to recession.
Barney Frank Had Affair with Fannie Mae Exec This should be investigated and if any special treatment was 'dished out', Barney Frank should be arrested.
Subprime Devastation Retraces Path of S&L Crisis in U.S. States The $700 billion bailout of Wall Street's subprime-tainted securities harkens back to the real- estate bets that sparked the savings and loan crisis in the 1980s. The geography's the same, too.
Paulson Says U.S. to Use All 'Authorities' in Crisis Treasury Secretary Henry Paulson said he's considering plans to pump capital into U.S. financial institutions and pledged to use everything under his power to stem the worst credit crisis since the Great Depression.
Credit crisis finally hits the real economy in US Optimists who believed the effects of the credit crunch might be confined to Wall Street were facing up to reality yesterday, with a slew of new figures from the real US economy.
Sowing the Seeds of Inflation (video) The coordinated global rate cuts are sowing the seeds for further inflation and commodity price increases. . . credit booms create create credit busts, leading to sky high commodity and gold prices.
Time Is Up Congress - And America This is not good. But the worst news is not in the stock market. It is in fact in some of the other indicators in the market which were indicating potential capital flight, along with still-extreme levels of stress. I must caution everyone - if you are not prepared for six months to two years of unemployment, you need to be. If you are dependent on credit to survive (that is, if you couldn't make it without your credit cards) you need to fix that now.
US stocks slide despite rate cuts Wall Street stocks on Wednesday extended their worst five-day run of losses since 1987 after the co-ordinated global interest rate cut failed to calm nerves during a highly volatile session.
Global gamble: the fightback begins... It was the longest day in the battle to rescue the world's stricken economy from the financial crisis which had left banks teetering. The world's central banks and governments appear to be running out of ammo in the face of a financial crisis that has been intensifying by the hour.
Some state unemployment funds drying up The demand for unemployment benefits across the country has put a strain on state unemployment funds, with such funds in at least 10 states facing insolvency in 2009, according to a policy group. . . . California, Michigan, Missouri, New York, Ohio, South Carolina, Wisconsin, Indiana, Kentucky and Arkansas have less than six months' worth of unemployment trust fund reserves, putting the funds at high risk of insolvency.
AIG Gets Billions More To Borrow What, more? American International Group has blown through the $85.0 billion it borrowed from the United States government last month and is getting an additional $37.8 billion line of credit from the Federal Reserve as it seeks to shrink itself into profitability.
Taking Hard New Look at a Greenspan Legacy “Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient.” — Alan Greenspan, former Federal Reserve chairman, 2004
George Soros, the prominent financier, avoids using the financial contracts known as derivatives “because we don’t really understand how they work.” Felix G. Rohatyn, the investment banker who saved New York from financial catastrophe in the 1970s, described derivatives as potential “hydrogen bombs.”
Four Mutual Fund Giants Join Guaranty Plan As the deadline for enrollment neared on Wednesday, four of the nation’s best-known mutual fund companies said they had joined the new federal program aimed at restoring confidence in the nation’s money market funds. Fidelity Investments, Vanguard, T. Rowe Price and Oppenheimer Funds all have decided to participate in the ad hoc guaranty plan, which was announced by the Treasury Department on Sept. 19 as part of the federal rescue package aimed at stabilizing the hard-hit credit markets.
Paulson Says Global Markets Remain Strained Global financial markets remain severely strained, underscoring the need for quick action to implement the government's $700 billion rescue program, Treasury Secretary Henry Paulson said Wednesday. Paulson did not rule out using part of the rescue fund to take ownership stakes in troubled banks. The British government announced Wednesday an $87.5 billion plan to partly nationalize major banks in a bid to shore up that country's financial sector.
Auto Asphyxiation Investors continue to flee from the Detroit automakers on worries over their solvency. Shares of Ford Motor and General Motors tanked in early morning trading on Wednesday before recovering slightly. Ford fell 8.9%, or 26 cents, to $2.66, while GM was down 8.6%, or 65 cents, to close at $6.91. Earlier in the day, GM fell to its lowest share price since 1952, according to the Center for Research in Security Prices at the University of Chicago.
Housing Pain Gauge: Nearly 1 in 6 Owners 'Under Water' $$ More Defaults and Foreclosures Are Likely as Borrowers With Greater Debt Than Value in Their Homes Are Put in a Tight Spot The relentless slide in home prices has left nearly one in six U.S. homeowners owing more on a mortgage than the home is worth, raising the possibility of a rise in defaults -- the very misfortune that touched off the credit crisis last year.
Beware the Red Dot: What Happens Now? I pledge allegiance to Goldman Sachs, and to the conspiracy for which it stands, one racket under Paulson, Communist and indivisible, with eviction and poverty for all. The battle of the bailout is over. We lost. Despite the unprecedented opposition, despite everything we did, I doubt that many of my readers and listeners thought we could win. Now we need to analyze what happened, what it means and, most important, where it could take us.
FEMA sources confirm coming martial law FEMA sources have told Madsen today that the Bush administration is putting final touches on a plan that would initiate martial law in the event of continuing economic collapse causing massive social unrest, bank closures resulting in violence against financial institutions and another fraudulent presidential election that would result in rioting in major cities and campuses around the country
'RESCUE' REWARDS HOUSING HUSTLERS IF you thought the trillion- dollar-plus "financial-rescue plan" signed into law Friday had been stripped of the radical group ACORN, think again: The Chicago-based Association of Community Organizations for Reform Now's fingerprints are still all over the law. ACORN's participation in "fixing" a crisis it helped create is flabbergasting.
It is time for comprehensive rescues of financial systems As John Maynard Keynes is alleged to have said: “When the facts change, I change my mind. What do you do, sir?” I have changed my mind, as the panic has grown. Investors and lenders have moved from trusting anybody to trusting nobody. The fear driving today’s breakdown in financial markets is as exaggerated as the greed that drove the opposite behaviour a little while ago. But unjustified panic also causes devastation. It must be halted, not next week, but right now.
Opec members seek emergency meeting Almost half the members of the Opec oil cartel are considering an emergency meeting in Vienna next month as oil prices dropped to their lowest level in nearly a year. Almost half the members of cartel have in the past few days called on the group to act to halt the slide before their next official meeting scheduled to take place in Algeria in late December.
Wood as a power source may be making comeback The push for more power from renewable fuels has renewed interest in one of the oldest energy sources: wood. While airwaves have been permeated by advertisements for solar and wind power, last year wood generated more net electricity in the U.S. than those two up-and-comers combined. New wood-burning electricity plants are again being proposed from Massachusetts to New Mexico as the nation finds itself in a third energy shock.
NYC NATIONAL DEBT CLOCK RUNS OUT OF DIGITS In a sign of the times, the legendary National Debt Clock in New York City has run out of digits to record the growing debt. The Times Square-area ticker needs two additional digits to track a national debt 100 times larger than the current $10.2 trillion.
Who is going to bail out the euro? Europe must pull together if it is to avoid further financial disaster Better late than never. A half-point cut in global interest rates may not halt the slide into a debt deflation, but at least we can hope to avoid the errors of the Great Depression. The slump – remember – had little to do with the 1929 crash. What turned the mild recession of 1930 into the sweeping devastation of the early 1930s was an entirely avoidable collapse of the banking system in both the US and Europe.
World Markets Defy Coordinated Effort By Central Banks Fear among investors gathered momentum in Asia on Wednesday, as stocks in Japan fell 9.4 percent, the steepest one-day plunge since the 1987 stock market crash, and the value of South Korea's troubled currency skidded to a 10-year low.
China Cuts Rate to Protect Economy That's Now 'Big Enchilada' Wednesday may go down as the day the economic balance of power shifted in Asia. In a move weighted with symbolism, China reduced its interest rate within minutes of cuts by the U.S. Federal Reserve and five other central banks, while Japan, the world's second-biggest economy, stayed on the sidelines.
Iceland Gives Up On Currency Iceland plunged further into financial crisis on Wednesday as it scrapped plans to nationalize a major bank, instead placing it into receivership, and abandoned attempts to put a floor under its falling currency by fixing the exchange rate.
Iceland: dancing on the brink of bankruptcy For years, Iceland had enjoyed an economic climate more favourable than its weather. But the country was leaving itself bitterly exposed. The days grow ever darker in Reykjavik. Gone is the almost eternal daylight, which washes across Iceland's capital in the height of summer. A darkening gloom arrives earlier each day now. An icy wind blows in from the east. Darkness will be a constant presence here soon as winter sets in.
Shares tumble in black day for Asia markets A grim warning from the International Monetary Fund sent shudders through Asian equity markets on Wednesday. Japanese shares dropped 9.4 per cent – their biggest one-day fall since 1987 – in a grey day for Asian equities as fears deepened that more financial institutions would fail after the IMF said the global banking sector may need $675bn of fresh capital.
Indonesia may halt stock trading all week Trading on the Jakarta Stock Exchange was canceled Thursday and may remain suspended through the week as officials try to quell a stampede of selling that has sent the country's main stock index skidding more than 20 percent this week.
Britain Announces Huge Bank Bailout Britain on Wednesday announced a rescue package for its beleaguered banks, which the prime minister described as more extensive than America’s bailout plan and which could leave the country’s top lenders partly owned by the government.
Mexico Unveils Emergency Spending to Combat Crisis President Felipe Calderon on Wednesday unveiled plans for $4.4 billion in emergency spending on roads, schools, hospitals and an oil refinery next year to help Mexico combat the world financial crisis.
A Black Hole in Russian Banks Nationalizing banks isn’t an option for the Russian government. It already owns the country’s largest financial institutions, and a string of smaller ones. But the global liquidity freeze has hit the country’s banks hard, and their problems have been amplified over the summer by capital flight from foreign investors who fear the Kremlin’s unpredictability. Russian exchanges have lost more than two-thirds of their value since their highs in May.
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Wed 10.08.2008
Fed, central banks cut rates to aid world economy Fed, other central banks announce rate cuts to revive world economy, settle markets In a rare coordinated move, the Federal Reserve and other major central banks from around the world slashed interest rates Wednesday to prevent a mushrooming financial crisis from becoming a global economic meltdown. Markets retreated, though, on worries that the move was too little, too late. The Fed reduced its key rate from 2 percent to 1.5 percent. In Europe, which also has been hard hit by the financial crisis, the Bank of England cut its rate by half a point to 4.5 percent and the European Central Bank sliced its rate by half a point to 3.75 percent.
Central banks, governments try to contain crisis Rate cuts help markets while European governments try to contain spreading financial crisis European governments sought to contain the deepening world financial crisis on Wednesday, with Britain stepping in to help its hard-pressed banks and Russia shutting down its biggest stock market for two days. But the greatest relief to markets came from a coordinated rate cut from leading world central banks. After the central banks -- including the U.S. Federal Reserve, the European Central Bank and the Bank of England -- stepped in and cut their official rates by half a point, markets recovered some of their earlier lows.
Max Keiser: Global Rate Cuts
HYPERINFLATION SPECIAL REPORT Inflationary Recession Is in Place Banking Solvency Crisis Has Opened First Phase of Monetary Inflation Hyperinflationary Depression Remains Likely As Early As 2010 The U.S. economy is in an intensifying inflationary recession that eventually will evolve into a hyperinflationary great depression. Hyperinflation could be experienced as early as 2010, if not before, and likely no more than a decade down the road. The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, and gross mismanagement.
IMF: World economy to slow sharply, led by US IMF predicts world economy will stall sharply in 2008, with US slipping into recession The world economy will slow sharply this year and next, with the United States likely sliding into recession reflecting mounting damage from the most dangerous financial jolt in more than a half-century. The International Monetary Fund, in a World Economic Outlook released Wednesday, slashed growth projections for the global economy and predicted the United States -- the epicenter of the financial meltdown -- will continue to lose traction.
Roubini: Rate Cuts Reduce Crash Risk, But Dow 7,000 Likely 'Sometime Next Year' Today's global rate cuts have reduced the risk of a market crash, but won't resolve the underlying crisis, says NYU economist Nouriel Roubini of RGE Monitor. But the financial market crisis has unfolded even quicker than Roubini expected (which is saying something), and the economist now thinks the Dow and S&P will suffer 50% declines from last October's peak vs. 40% previously. In other words, the Dow is going to 7,000, but over the course of months vs. days if Roubini is right, as -- unfortunately for bulls -- he mostly has been for the past two years.
Roubini on Recapitalizing Banks
No Quick Fix: Roubini Forecasts Worsening Economy, 2-Year Recession The dramatic meltdown of the financial markets has shifted focus from the real economy, which our guest, RGE Monitor chairman Nouriel Roubini, says is where the downturn is truly being felt. The $700 billion bailout and today's global rate cuts may have helped avert a complete financial collapse, the NYU Stern School economist notes. But the recession -- which he says began in Q1 of this year -- is deepening and will last into early 2010.
Physical Gold Demand Bids Up Prices of Common $10 and $20 Coins The so-called "Bailout" to benefit Wall Street that was signed into law late last week has done nothing to stabilize the global financial markets. In fact, financial markets are declining around the world. Last week, when the government of Ireland announced that it would guarantee all account balances in the nation's banks, German Chancellor Merkel initially attacked the action. The next day, Merkel announced that the German government would guarantee all accounts in its banks. Greece has also announced a guarantee of all accounts in that nation's banks.
Gold coins in demand Unprecedented demand for gold coins and other transportable forms of precious metals has translated into production and delivery delays of those coins destined for investors unsettled by volatile markets. An array of gold and silver coins from various mints -- including the U.S. Mint and the Royal Canadian Mint -- have been temporarily removed from the offerings at Kitco Inc., a precious metals dealer that does a roaring trade online and out of its Montreal office.
Central banks all but stop lending bullion Central banks have all but stopped lending gold to commercial and investment banks and other participants in the precious metals market, in a move that on Tuesday sent the cost of borrowing bullion for one-month to more than twenty times its usual level. The one-month gold lease rate rocketed to 2.649 per cent, its highest level since May 2001 and significantly above its five-year average of 0.12 per cent, according to data from the London Bullion Market Association. Gold lease rates for two, three and six months and for a year also jumped to levels not seen in the last seven year.
Russian banks must regain investors' confidence Nationalising banks isn't an option for the Russian government. It already owns the country's largest institutions, plus a string of smaller ones. But the global liquidity freeze has hit the country's banks hard, amplified over the summer by capital flight from foreign investors who fear the Kremlin's unpredictability. Russian bourses have lost more than two-thirds of their value since their highs in May.
Bye, Bye, Miss American Pie . . .
Impending Economic Collapse in the U.S. and Death of Democracy... Impending Economic Collapse in the U.S. and Death of Politicians worship money and power. Every politician worth his salt secretly aspires to be a dictator, although they dare not admit this as it is not exactly politically correct. The ultimate goal of the consummate politician is to have absolute power, and be able to boss everyone else about, to have unlimited access to public funds for the purposes of profligate personal consumption and more importantly self aggrandizement, as well as to bribe and reward supporters, and to kill or otherwise neutralize anyone who disagrees or creates any opposition. The reasons that General Pinochet, the former dictator of Chile, has become such a pariah are a combination of envy and hypocrisy. General Pinochet lived the politician's dream - he cleaned up Chile with an iron fist, and those who opposed him at times found themselves on a short one-way flight over the Pacific, which did not involve the expenditure of much fuel as Chile has a 5000 km long coastline.
Remember 1929 – what seemed to be the end was only the beginning The dismemberment of Dick Fuld, Lehman Brothers’ former chief executive, before a Congressional committee on Monday was a compelling, albeit brutal, event. . . . . Replace 1929 with 2008 and the story, I’m afraid, is eerily familiar: a speculative orgy, crescendo, climax and crash. As this plays out, important people – business and political leaders – rely on “the power of incantation” to keep the rest of us calm. Their efforts are doomed to fail. “Cause and effect run from the economy to the stock market, never the reverse. In 1929, the economy was headed for trouble,” wrote Galbraith.
Economic Mood Darkens, and Declines Deepen U.S. stocks plummeted in another dismal day of trading yesterday after Federal Reserve efforts to stabilize the market failed to offset concerns that the economy had weakened further, placing new stresses on major banks and consumers. The sell-off was broadly felt. On the New York Stock Exchange the proportion of stocks whose prices fell outnumbered gainers by more than 7 to 1.
U.S. Economy Rapidly Sinking Into Economic Depression This is the crisis that will change the course of history. Even before ivory-tower theorists have gotten around to officially calling it a "recession," the U.S. economy is already sinking rapidly into depression. And even as the government has vowed to embark on a $700 billion spending spree to avert financial panic, over $1 trillion in wealth has been wiped out in just five days of stock and bond market declines.
FDIC Plan Would Shore Up Fund Big Increase in Bank Premiums Proposed The Federal Deposit Insurance Corp. yesterday proposed to recoup the cost of recent bank failures and prepare for additional failures by more than doubling the insurance premiums that banks must pay. The plan would raise about $10 billion a year in additional revenue for the FDIC, which has spent $11 billion this year to clean up the largest crop of bank failures since the early 1990s. Banks would pay the higher rates beginning next year, pending final approval of the plan after a comment period.
Asian stocks plunge on unabated credit market woes Asian stock markets plunge on unabated credit market woes, fears of global recession Asian stock markets plunged Wednesday as recent steps by the world's major economies to fortify credit markets failed to stem escalating fears that the spreading financial crisis could spawn a global recession. After a miserable day on Wall Street when the Dow Jones industrials lost more than 500 points, investors in Asia responded by dumping stocks in a broad regional sell-off.
Gold Rises on Speculation Central Banks Will Cut Interest Rates Gold rose for the second straight day on speculation that central banks will cut borrowing costs to ease a credit crunch, boosting demand for the metal as an alternative asset. Silver also gained.
Real Price Of Gold Soars Gold in "Real" terms is soaring. "Real" in this case means how much an ounce of gold will buy. Let's compare gold to a commodities, to silver and to the stock market, starting with a basket of commodities as measured by $CRB commodities index.
Gold Crisis and Inflation Hedge Expected to Outperform Crude Oil Over the last 7-8 years, gold has consistently underperformed oil. Gold bulls are worried – after all, why invest in gold, when oil delivers a better performance, and so are apparently copper, uranium, and a number of agricultural commodities. The answer is simple – during the early stage of this commodity bull market (2000-2006), the fundamentals of oil were much better than gold. However, the relative fundamentals will reverse in later stages, when gold will dramatically outperform oil. This is simply the nature of the current commodity bull market.
Mint Widens Freeze on Gold Coin Sales $$ Citing extraordinary demand, the U.S. Mint has broadened its freeze on sales of gold bullion coins, as individual investors who are priced out of the futures markets have been piling up their holdings of the metal as a hedge against market uncertainty. "Due to the extreme fluctuating market conditions for 2008, as well as current market conditions, gold and silver demand is unprecedented and the demand for platinum is unusually high," the Mint said . . .
The Financial Crisis: Where Do We Go from Here? A debate at the Council on Foreign Relations So here we are, dealing with one of -- perhaps the most serious financial crisis that anybody here has had to witness in their lifetime. And fortunately we have an extraordinary panel to discuss this. You all know who they are, but I'm going to just start by asking Professor Roubini the following question: How did we get to where we are today, and what does he think the implications are for the real economy, the Main Street economy, we get from the consequences of the crisis on Wall Street? NOURIEL ROUBINI: Yes. Certainly I agree, this is the worst financial crisis in the United States since the Great Depression. Of course, the degree of economic contraction is not going to be as severe as the Great Depression, but I think that, from a financial point of view, we have not seen anything like this.
Government spending spree If you want to know the Real, Real Reason (RRR) why we are being subjected to a US$700 billion bailout of the economy, which is just the beginning, it is because the despicable Alan Greenspan, during his foul 18-years as chairman of the loathsome Federal Reserve, created all the money and credit that financed the stock market boom, the bond market boom, the housing boom and (worst of all) the growth-in-government boom. And now, all those things are bid up waaaAAAaaaayyyyy past their real values, and buyers are scarce while sellers are many. So the owners of those depreciating assets suddenly realize that they either have to hold on to them and go bust, or find some moron with a lot of money to buy them. Oops!
Fed assumes powerful new role in financial crisis Fed takes powerful new role in financial crisis, going beyond bank regulation and money policy Dusting off Depression-era emergency powers, the Federal Reserve is extending its reach over the economy as never before, pushing the limits of its authority, if not exceeding them. Now the nation's central bank is even becoming a source of loans for companies other than banks. Radical steps by the Fed under chairman Ben Bernanke -- all in the name of seeking to halt the panic sweeping financial markets -- are turning it into a financial colossus. They're also putting the government deeper in debt and taxpayers further at risk if the various moves fail.
For the New Contagion, the Same Old Prescriptions Against a backdrop of an unfolding meltdown in global financial markets and the near-certainty of a U.S. recession, the two candidates for president used the occasion of a much-anticipated town hall meeting last night to repeat all the talking points they were making long before the recent bank failures, the free fall of stock prices and the federal government's expensive rescue efforts.
U.S. Stocks Drop; S&P 500, Dow Post Worst Retreats Since 1937 U.S. stocks fell, sending the Standard & Poor's 500 Index below 1,000 for the first time since 2003, on speculation banks and real-estate companies are running short of money as the credit crisis worsens.
Stocks Plunge Despite Fed Effort To Loosen Credit World Leaders Continue in Triage Mode The world's leading economic policymakers yesterday took major actions to try to stabilize financial markets -- and suggested that more measures were on the way. Hours after the Federal Reserve unveiled a program in which it could ultimately buy up to $1.3 trillion in private debt, Chairman Ben S. Bernanke signaled that the central bank may soon cut interest rates.
Bernanke Fails to Quell Turmoil as Investors Seek Rate Cuts Federal Reserve Chairman Ben S. Bernanke's message of readiness to cut interest rates failed to assuage investors clamoring for immediate action to support jobs and growth. Bernanke said in a speech yesterday that an intensifying credit crunch means officials must "consider" lowering borrowing costs. Three hours later, U.S. stock indexes closed at their lowest levels in five years and headed for their worst annual declines since 1937
Chairman Ben S. Bernanke At the National Association for Business Economics 50th Annual Meeting, Washington, D.C. October 7, 2008 - Current Economic and Financial Conditions Good afternoon. I am pleased to have once again the opportunity to address the National Association for Business Economics. My remarks today will focus on recent developments in the financial sector and the economy and on the challenges we face.
Bernanke Signals Fed May Cut Rates as Crisis Deepens Federal Reserve Chairman Ben S. Bernanke signaled policy makers are ready to lower interest rates as the credit freeze poses an escalating danger to the economy. The world financial system is under "extraordinary stress" and history shows that severe instability "can take a heavy toll on the broader economy if left unchecked," Bernanke said in a speech in Washington. "The Federal Reserve will need to consider whether the current stance of policy remains appropriate."
Fed Will Lend Directly to Corporations $$ Fed to Lend Directly to Companies for First Time Since Great Depression, Hints at a Rate Cut; Stocks Fall as Dow Hits 5-Year Low The Federal Reserve said it will bypass ailing banks and lend directly to American corporations for the first time since the Great Depression, and it hinted strongly at further interest-rate cuts -- a cocktail of unconventional and conventional remedies for an economy whose prognosis is deteriorating rapidly.
Thursday is D-Day Forget the stock market gyrations. Forget Bernanke and Paulson's ineffective, unconstitutional schemes. Thursday's auction for Lehman's credit default swaps (CDS) is much more important. Why? Well, if banks are reassured by the CDS auction, it could do more to free up frozen capital than all of the Fed and Treasury's ill-conceived plans put together.
Central banks try new methods amid market mayhem Central banks across Asia stepped up to offer more support to commercial banks on Wednesday, to try to ease painful pressure on funding costs from a vicious global credit squeeze. Just a day after it slashed interest rates by the most in 16 years, Australia's central bank expanded the types of collateral it would take for loans to banks and greatly lengthened the period for which it would lend.
Translating the financial crisis Deciphering financial crisis lingo, from CDOs to MBS A number of financial terms have become a part of the daily conversation as the worst financial crisis in decades has deepened, affecting companies, industries and ordinary people. A slowdown that began in the real estate market has led to bank failures, plunging stock prices and an economy that may be hurtling toward a deep recession. The glossary below list short definitions for these terms.
Treasuries Decline as Fed Agrees to Purchase Commercial Paper Treasuries fell, snapping the longest rally in a month, after the Federal Reserve announced a plan to buy commercial paper in an effort to thaw short-term lending markets, sapping demand for the haven of government debt. Two-year notes fell for the first time in five days as the Fed invoked emergency powers to support the financing needs of corporations.
With Bubbles Popping Worldwide, No Wonder the Economy's Gone Flat Up to now, it's been a financial crisis. This is a meltdown -- an uncontrolled and largely uncontrollable financial chain reaction that threatens serious harm to the broader economy. The immediate problem is that the institutions that have most of the world's free cash -- banks, money-market funds, hedge funds, pension funds and major corporations -- are hoarding it and won't do the normal thing of lending to one another.
George Bush to summon leaders to emergency finance summit George Bush is expected to summon Gordon Brown and other European leaders to an emergency summit to discuss the economic crisis. The prospect of a high-level global meeting came as the US central bank launched a new bid to unfreeze credit markets by effectively lending billions of dollars to US companies.
IMF Says World Economy Heading for 'Major Downturn' The global economy is headed for a recession next year, as U.S. gross domestic product grinds close to a halt, the International Monetary Fund said in reports ahead of a Group of Seven meeting this week. "The global economy is entering a major downturn," the fund said . . . "Many advanced economies are now close to recession, while emerging economies are also slowing rapidly."
Funds' Flight From Commercial Paper Forced Fed Move The Federal Reserve's decision today to buy U.S. commercial paper came after money-market mutual funds fled the market, cutting off a vital source of short-term corporate financing and pushing the economy toward a recession.
Fed Considers Plan to Buy Companies’ Unsecured Debt The Federal Reserve announced a radical new plan on Tuesday to jump-start the engine of the financial system. The Fed said in a statement that it would begin to buy large amounts of short-term debt in an effort to stimulate the credit markets, which have all but dried up.
Budget deficit hits record $438 billion, CBO says The federal budget deficit hit a new record in the just-completed 2008 budget year under the latest estimates from the Congressional Budget Office. The record $438 billion shortfall for the budget year that ended last week is up from $162 billion posted last year. The previous record of $413 billion was posted in 2004.
Bailout: Congress Does Something But Not the Right Thing The bailout failed the first time it was brought to the House. Undaunted, the Senate pressed on by attaching the bailout as an amendment to another House passed bill that was pending in the Senate. The new bailout version had new taxes, so according to the Constitution it should not have originated in the Senate.
Big Insurer’s Spending Habits Disclosed A day after Richard S. Fuld Jr. was compelled to explain the millions of dollars he made at Lehman Brothers, two former executives of the American International Group took their turns in government witness chairs on Tuesday, answering critical questions from lawmakers about business and pay practices and outsize spending that continued even after the company received an $85 billion lifeline from the government.
Short-sale ban on financial stocks set to expire Federal ban on short selling hundreds of financial stocks set to expire Wednesday night A three-week-old ban against betting that financial companies' shares would fall expires Wednesday night, a move some large-scale investors say could actually help limit the punishment many of those stocks have endured in recent days. Some market experts say the unprecedented ban on short selling initiated by regulators -- an effort to bolster investor confidence amid the worst financial crisis since the stock market crash of 1929 -- did more harm than good at a time of historic market volatility.
Unfolding Worldwide Turmoil Could Reverse Years of Prosperity What went wrong? Last week, the nation's political leaders said the financial system would collapse unless they passed a $700 billion rescue package for Wall Street. On Monday, the first day of trading after the plan passed, the financial system continued to melt down anyway. Here's why: The plan developed by Treasury Secretary Henry M. Paulson Jr. to buy troubled U.S. mortgage assets might not start for another month. And, despite its huge price tag, it already seems paltry compared with the scale of the rapidly evolving global crisis.
Bankers Might Need 50 Years to Regain Credibility Discredited and vilified. Those are the words that can begin to describe the people most Americans would term "bankers." Rarely has a broadly defined category of occupation sunk so far, so fast. Not too long ago, careers in finance beckoned the ambitious and avaricious. In New York, in particular, the only lives worth living seemed to be led by those who worked on Wall Street and whose compensation was determined in widely reported, year-end, life-altering bonuses.
Hedge funds losses balloon in September Hedge funds' losses ballooned last month when the average portfolio tumbled 4.68 percent, marking the industry's worst monthly performance, according to new data released on Tuesday. The average hedge fund has now lost 9.41 percent this year, data released by Chicago-based performance tracking group Hedge Fund Research showed.
Housing Pain Gauge: Nearly 1 in 6 Owners 'Under Water' $$ More Defaults and Foreclosures Are Likely as Borrowers With Greater Debt Than Value in Their Homes Are Put in a Tight Spot The relentless slide in home prices has left nearly one in six U.S. homeowners owing more on a mortgage than the home is worth, raising the possibility of a rise in defaults -- the very misfortune that touched off the credit crisis last year.
Consumer Credit Drops for First Time in 10 Years $$ The rate of borrowing by Americans declined for the first time in 10 years during August, a sign of building stress on household finances. Consumer credit outstanding decreased $7.9 billion in August to $2.577 trillion, according to a Tuesday report from the U.S. Federal Reserve. That follows a $5.2 billion consumer credit increase in July, which is an upward revision from a previously estimated $4.6 billion increase.
Retirement Savings Lose $2 Trillion in 15 Months The stock market's prolonged tumble has wiped out about $2 trillion in Americans' retirement savings in the past 15 months, a blow that could force workers to stay on the job longer than planned, rein in spending and possibly further stall an economy reliant on consumer dollars, Congress's top budget analyst said yesterday.
With Bonds in Trouble, States Seek Federal Help California and other states scrambled on Tuesday to cope with bills coming due as they pressed Washington for assistance because the municipal bond markets remain largely closed to them. In Washington, White House officials said they were talking with state officials and reviewing the issue of aid. But despite the urgency of the problem, thorny legal issues have emerged.
Forget Logic; Fear Appears to Have Edge The technical term for it is “negative feedback loop.” The rest of us just call it a panic. How else to explain yet another plunge in the stock market Tuesday that sent the Standard & Poor’s 500-stock index to its lowest level in five years — particularly in the absence of another nasty surprise?
Retirees flee stocks to save shrinking nest eggs This time around John Abel was ready for the stock market crash. "Back in 2000 before the dot-com bubble burst I listened to my financial adviser and lost $80,000," said the 65-year-old retiree in his home in the western Chicago suburb of Saint Charles. "That destroyed my remaining faith in the markets." In February, 2008, after falling stock markets wiped out virtually all their recent gains, Abel and his wife Carol decided to move their money into long-term corporate bonds.
Falling behind: More Americans see utilities cut off The rate of customers losing power and heat for nonpayment has shot up across the country. The number of Americans whose electricity or natural gas has been shut off for nonpayment of their bills is up sharply in many parts of the country as people struggle with higher prices and a shaky economy. Shut-offs are running 17% higher than last year among customers of New York state's major utilities and 22% higher in Michigan. They are up in dozens of other states, including California, Pennsylvania and Florida, according to an Associated Press check of regulators and energy companies.
GM's Europe Unit to Suspend Production on Sales Drop General Motors Corp.'s European unit plans to reduce production by about 40,000 vehicles by the end of the year as credit-market turmoil causes a drop in car sales. The Adam Opel brand's factory in Eisenach, Germany will start a three-week production halt next week, while the plant in Bochum, Germany, is completing a two-week closure, Andreas Kroemer, a spokesman for the Ruesselsheim, Germany-based division, said today in a telephone interview. "The financial crisis is impacting demand," Kroemer said. "We don't want to stockpile."
With Credit Drying Up, Car Buyers Bring Cash The few consumers who are buying new cars are being forced into bigger down payments or all-cash deals in the latest sign of how the credit crisis is battering an already weak auto market. The average down payment on financed car purchases has jumped nearly $1,000, about 20 percent, since July, and all-cash transactions are at their highest point in three years, according to data from the research firm J. D. Power & Associates. Tighter credit was a crucial factor in the stunning 26.6-percent drop in September vehicle sales in the United States.
A Nightmare for Sales of Dream Cars Robert Bassam, used-car magnate, isn't driving his $415,000 Lamborghini these days, or his Porsche, and he has even warehoused his usual get-around-town car, a BMW 750. Instead, he's puttering along in a four-cylinder Hyundai Accent hatchback. It's more politically correct, he says. And economically correct: He doesn't feel like riding in luxury when the economy is tanking.
After Bailout, AIG Execs Head to California Resort Rescued by Taxpayers, $440,000 for Retreat Including "Pedicures, Manicures" Less than a week after the federal government committed $85 billion to bail out AIG, executives of the giant AIG insurance company headed for a week-long retreat at a luxury resort and spa, the St. Regis Resort in Monarch Beach, California, Congressional investigators revealed today. "Rooms at this resort can cost over $1,000 a night," Congressman Henry Waxman (D-CA) said this morning as his committee continued its investigation of Wall Street and its CEOs. AIG documents obtained by Waxman's investigators show the company paid more than $440,000 for the retreat, including nearly $200,000 for rooms, $150,000 for meals and $23,000 in spa charges. "They're getting their pedicures and their manicures and the American people are paying for that," said Cong. Elijah Cummings (D-MD).
Welcoming Terror on Campus As the fountainhead of global Islamic terrorism, Egypt’s Muslim Brotherhood has long had a public-relations problem. For years the Brotherhood has struggled to veil its reputation as a violent and reactionary religious movement without moderating the substance of its politics, which continue to include support for terror attacks and the institution of hard-line Sharia law. At the University of California at Irvine (UCI), the Brotherhood has now found an audience receptive to its efforts.
Too much sweet talk isn't healthy for elderly Professionals call it "elderspeak," the sweetly belittling form of address that has always rankled older people: the doctor who talks to their children rather than to them about their health; the store clerk who assumes that an older person does not know how to work a computer, or needs to be addressed slowly or in a loud voice. Then there are those who address any elderly person as "dear." "People think they're being nice," said Elvira Nagle, 83, of Dublin, California, "but when I hear it, it raises my hackles."
FBI Warns of Suicide Attacks in U.S. Federal officials notified law enforcement agencies Monday of a potential al-Qaida terrorist attack in which public buildings are targeted by suicide bombers. According to NBC News, the analysis by the FBI and the Department of Homeland Security describes a scenario where a dozen attackers each carrying 20 kilograms of explosives storm a building, "seal off escape and access points, and occupy it long enough to set and detonate their explosive packages."
The US military's fallout shelter Some people may think one consequence of the ongoing United States financial crisis would be increased pressure for cuts in military spending. But that is unlikely to happen. While the crisis will increase fiscal pressure to reduce military spending, as it is the largest pot of discretionary funding in the federal budget, other countervailing political factors will ensure that there likely will be no significant reduction.
More US ears in Israel At a cost of US$89 million to the American taxpayers, the US Senate, with no hesitation, passed a bill that was attached by Republican Senator Joe Kyle, to the federal defense budget to deploy another sophisticated long-range radar system to Israel. What was the rush that the US military amid the country's financial and economic crisis had to speed up the deployment of a most powerful and therefore expensive system, called AN/TPY-2 forward-based X-band, a year earlier than it was scheduled previously? The X-band system, deployed to Israel on September 26, was originally scheduled for delivery in 2009 for joint training exercises, according to the US European Command mission (EUCOM).
US cool to Israeli strike on Iran Israeli Prime Minister Ehud Olmert will travel to Moscow this week for talks that will focus largely on Iran's nuclear program at a time when there seem to be growing signs that the US is unenthusiastic about the idea of an Israeli military strike on Iran's nuclear facilities. Since President George W Bush's visit to Israel in May to mark the 60th anniversary of the Jewish state, there have been reports that Washington is sticking to its policy of sanctions on Iran and that, for now, Israel does not have a green light to strike at its nuclear sites.
Iceland, in a Precarious Position, Takes Drastic Steps to Right Itself The government of Iceland took extraordinary measures on Tuesday to stave off “national bankruptcy,” as the credit crisis tightened its grip on this remote island nation in the North Atlantic. Iceland’s banks had propelled years of significant growth, lending so freely that their assets ballooned to many times the size of the country’s economy. But now the boom has turned to a bust.
Two Countries Plan Rescues as European Leaders Continue to Talk As European leaders continued to clash over measures to ease the financial crisis, Britain and Spain moved to mount separate rescues of their own financial industries. The initiatives came as signs of European economic weakness deepened, and as Iceland, whose troubles are mounting from the global credit crisis, warned that it was working to avoid tumbling into all-out bankruptcy.
China rebuffs United States over Taiwan arms deal China has abruptly canceled a series of military and diplomatic contacts with the United States to protest a planned multibillion-dollar U.S. arms sale to Taiwan, American officials said. Beijing has notified the United States that it would not go forward with several senior-level visits and other cooperative military-to-military plans, said Major Stewart Upton, a Defense Department spokesman, on Monday.
North Korea fires missiles into sea North Korea has fired two short-range missiles into the Yellow Sea, a news report said on Wednesday, in a move likely aimed at dialing up tension as global powers try to have it abide by a nuclear disarmament deal. The North fired the missiles into the Yellow Sea on Tuesday as a part of routine military training, South Korea's Yonhap news agency cited an unidentified government official as saying.
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On a lighter note . . . . it doesn't cost anything to laugh :-)
With all the turmoil in the market today and the collapse of Lehman Bros and Acquisition of Merrill Lynch by Bank of America this might be some good advice. For all of you with any money left, be aware of the next expected mergers so that you can get in on the ground floor of these possible mergers and acquisitions:
1. Hale Business Systems, Mary Kay Cosmetics, Fuller Brush, and W R. Grace Co. will merge and become: Hale, Mary, Fuller, Grace
2. Polygram Records, Warner Bros., and Zesta Crackers join forces and become: Poly, Warner Cracker
3. 3M will merge with Goodyear to become: MMMGood
4. Zippo Manufacturing, Audi Motors, Dofasco, and Dakota Mining will merge into: ZipAudiDoDa
5. FedEx is expected to join its competitor, UPS, and become: FedUP
6. Fairchild Electronics and Honeywell Computers will be renamed: Fairwell Honeychild
7. Grey Poupon and Docker Pants are expected to become: PouponPants
8. Knotts Berry Farm and the National Organization of Women will become: Knott NOW!
9. Victoria's Secret and Smith &Wesson will merge under the new name: TittyTittyBangBang
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Tues 10.07.2008
U.S. stocks sharply lower as investors look to Fed for rate cut U.S. stocks on Tuesday declined for a fifth session straight, extending a sharp sell-off that has the major indexes trading at or near four-year lows, as investors found little relief in the Federal Reserve's latest steps to ease frozen credit markets.
Bernanke: Crisis could prolong economic pain Bernanke: US may be facing prolonged period of economic pain; door opens wider to rate cut Federal Reserve Chairman Ben Bernanke warned Tuesday that the financial crisis has not only darkened the country's current economic performance but also could prolong the pain. The Fed chief's more gloomy assessment appeared to open the door wider to an interest rate cut on or before Oct. 28-29, the central bank's next meeting, to brace the wobbly economy. Bernanke said the Fed will "need to consider" whether its current stance of holding rates steady "remains appropriate" given the fallout from the worst financial crisis in decades.
The End of America "Trends which cannot continue, don't."- Attributed to Warren Buffett and others The most obvious trend which cannot continue today is the maintenance of prosperity in America by means of ever-increasing debt and monetary inflation. The America we grew up in, the America we are used to – in terms of not only prosperity but also world dominance, freedom and human rights at home, respect around the world, and in other ways – that America is already gone, and we are living in the vapors and shadows of its corpse.
IMF predicts $1.4 trillion in losses from crisis The International Monetary Fund on Tuesday increased its estimate of global losses from the financial meltdown to $1.4 trillion and warned that the world's economic downturn "Declared losses on U.S. loans and securitized assets are likely to increase further to about $1.4 trillion," the IMF said, increasing the loss estimate from $945 billion in April and slightly up from $1.3 trillion it cited last month.
Business loan bailout Federal Reserve to buy loans crucial to business to unfreeze markets. The Federal Reserve announced a new program to help the battered market for short-term business loans - taking its closest step yet to lending directly to businesses. The program addresses commercial paper, a form of short-term funding that is crucial to many businesses operations.
Fed to buy massive amounts of short-term debt Fed in bold move to thaw credit markets says it will buy massive amounts of short-term debt The Federal Reserve announced Tuesday a radical plan to buy massive amounts of short-term debt in a dramatic effort to break through a credit clog that is imperiling the economy. The Federal Reserve, invoking Depression-era emergency powers, will buy commercial paper, a short-term financing mechanism that many companies rely on to finance their day-to-day operations, such as purchasing supplies or making payrolls.
Russia and Brazil crumble as commodity prices crash The entire complex of commodities and emerging market stocks, bonds, and currencies is now in free-fall as the economic crisis spreads like brushfire, threatening to draw every corner of the globe into the vortex of recession. Oil, grains, and industrial metals all crumbled as the week began despite the passage of the Paulson bail-out plan in Washington and dramatic moves by European governments to shore up their banking systems, compounding the steepest commodity crash in over half a century. The big exception yesterday was gold, which surged $34 to $864 an ounce on safe-haven buying as the markets came face to face with the unsettling reality that the euro is no healthier than the dollar, and perhaps sicker.
Rescue plan disappointment contributes to sell-off US works to launch financial bailout, even as concerns contribute to global sell-off The government's $700 billion rescue, aimed at rebuilding economic confidence, appeared to sound a global alarm instead on Monday, triggering a fearful international sell-off as the U.S. began work on a plan that investors feared would be too little and too late to stave off a worldwide recession.
U.S. Implements Bailout as Global Markets Plunge U.S. officials began putting the newly approved financial bailout plan into effect this morning, even as global stock markets plummeted on new concerns about the health of the European banking system and the likelihood of a global recession.
Is This The End of 'Americanized Finance'? Now that the global debt crisis has shattered many of the more respected and venerable institutions on Wall Street--and has caused more damage and dislocation to the wholesale financing industry than anything experienced in 75 years--the question is, "What next?"
Don't Trust the Brain Trust The ghost of FDR is everywhere, haunting both Washington and New York. The terrible trouble is that the minds in power have confused an economic wrecker with an angel of mercy. They are following his confusions and prescriptions day to day in an attempted repeat of the longest economic calamity in modern American history. . . . On the other hand, if you want to see how to handle a crisis, consider the Panic of 1819. Never heard of it? That's because it came and went, and that's because the government did nothing about it.
The next crisis: The economy The banking system's meltdown will run its course soon enough. Then we'll have to face the reality of the coming severe recession. It was just a year ago, in my Oct. 1, 2007, column, that I wrote, "We are headed to recession, though it's not possible to pinpoint the 'when.'" To me, it was plain to see that a long-lasting credit spree could end only in pain and tears. It should be obvious to everyone that the "when" is now. My expectation has been that with passage of the financial-rescue legislation, a relief rally will be followed by the market's heading lower once again, and potentially violently.
Economists getting gloomier about outlook Rising unemployment, consumer spending drop spell deeper trouble ahead Forecasting the economy’s next move has never been easy. But as an association of business economists and forecasters gathers here for its 50th annual meeting, the group faces the most difficult challenge in its history. Amid the worst credit panic since the Great Depression, the rulebook for giving guidance to their companies and clients is pretty much out the window.
U.S. shift toward more regulation doesn't mean end to free-market preference Is this the end of American hypercapitalism? For nearly a generation, the United States has driven its growth by deregulating markets, reducing tax rates and promoting trade. Across wide swaths of the economy - from airlines to banks and from energy to telecommunications - Washington stood aside, believing that less regulation would produce broad prosperity, even at the cost of greater income inequality.
The Credit Card Congress $$ The pols try to banish risk assessment. The House voted mostly along party lines late last month to pass something called the Credit Cardholders' Bill of Rights. Given the current financial turmoil, the last thing Congress should do is undercut access to credit and increase its price. This bill would do both.
Fed takes steps to bolster liquidity The Federal Reserve on Monday announced a series of steps to bolster liquidity in the credit and commercial paper markets, amid mounting pressure for more action following passage of the $700bn financial bailout last week. The Fed said it would increase the size of its key TAF lending facility to commercial banks, pay interest on excess reserves to smooth liquidity operations, and allow money market funds to borrow via banks to fund their holdings of commercial paper.
FHA Will Take on Subprime Loans Shunned by Lenders The Federal Housing Administration has grown so large that by the end of the year it will guarantee mortgages for three in 10 U.S. borrowers, many of whom have bad credit or loans that required no verification of income
Paulson Talking to Bernanke, Working on TARP Program Treasury Secretary Henry Paulson consulted with Federal Reserve Chairman Ben S. Bernanke as stocks slid worldwide and met with his team to set up the $700 billion program to shore up the financial system. Paulson also spoke with New York Fed President Timothy Geithner and reached out to Wall Street executives
Fed’s first foray into unsecured loans The Federal Reserve is working with the US Treasury on plans for a dramatic move into unsecured lending in the hope that this extreme step could help bring credit markets back to life. As well as unsecured lending to banks, this could lead to the Fed directly purchasing commercial paper or funding a special purpose vehicle set up to do this. Any unsecured lending would be a radical departure for the Fed. Central banks the world over almost never make unsecured loans, and the Fed has never done so in its history.
Investors Say No Thanks to Commercial Paper And those who do buy the short-term debt are getting better prices. Forty-five percent of large U.S. companies say they are finding fewer buyers for their commercial paper, according to new research from Greenwich Associates. And more than 70 percent of the 291 companies surveyed say their cost of issuing the short-term debt is increasing, including 22 percent that report it is up "significantly."
Overnight interbank lending rates rise Further travails for banks in Europe reversed the recent easing in overnight lending rates on Monday, while the US Federal Reserve dramatically increased its efforts to alleviate stress in the money markets. The Fed announced that it would pay interest on excess reserves of cash held by banks at 75 basis points below the current Fed funds rate of 2 per cent. The move is seen as encouraging banks to place money at the Fed and not in lower-yielding Treasury bills.
Non-banks join banks in scramble for deposits More competition could mean higher CD rates - and higher risk The battle for your bank deposits is heating up. Non-traditional lenders and existing players are bidding up rates they offer on CDs, jumbo CDs and other investments to pull in the most coveted asset of all: safe, cheap deposits. Specialty finance companies, in particular, are jumping in to support their balance sheets with them.
Fed Sets Floor Below Rate Target, Engineering 'Stealth' Cut The Federal Reserve may have cut borrowing costs today without actually saying so. The central bank used authority granted under last week's financial-rescue legislation to effectively set a floor under its main interest rate that's lower than the 2 percent target set by policy makers last month. The Fed may now pay interest on bank reserves while it floods financial markets with liquidity, pushing down the overnight lending rate by about 0.75 percentage point to 1.25 percent.
Fed to hold CDS clearance talks Banks are hoarding cash in expectation of pay-outs on up to $400bn of defaulted credit derivatives linked to Lehman Brothers and other institutions, according to analysts and dealers. This added pressure on the frozen financial system comes as authorities prepare to meet participants in the so-far unregulated $54,000bn credit derivatives market to speed up plans for the creation of a central clearing house. The Federal Reserve will meet dealers, investors and exchange executives in New York on Tuesday
VIX Surges to All-Time High as Credit Fears Spread An index regarded as Wall Street's fear gauge surged to a record high on Monday in a sign investors expect more stock market turmoil as they scramble for options to insure their stock portfolios. The Chicago Board Options Exchange Volatility Index, or VIX, jumped almost 25 percent to a record high of 56.32, before slightly paring gains to trade at 53.24. "This is absolutely amazing. The elevated VIX is reflecting that people are unsure about every financial relationship they have ever known not only in the U.S. but worldwide
Markets routed in global sell-off Stock prices collapsed around the world on Monday amid growing fears that the credit crisis would trigger a global recession. The wave of selling swept through markets despite a scramble by governments to tackle the crisis, leading to rampant speculation that co-ordinated emergency rate cuts by the Federal Reserve and other central banks might be in the offing.
Cramer Thinks Dow Drops Further "I don’t think the downside’s over," Cramer said during Monday’s Stop Trading!. As bad as the market is right now, and the Dow was down about 550 points with less than a half hour in the trading day, growing problems in Europe, massive hedge-fund selling and the resultant overwhelming lack of confidence on Wall Street could sink the Dow and other major indices even further.
Fuld says Lehman victim of short sellers The short sellers did it, Richard Fuld, the former chief executive of Lehman Brothers, said in testimony to a Congressional committee on Monday. In an extraordinary public autopsy into the biggest bankruptcy in US history, Mr Fuld declared that he felt “horrible” about what had happened to the venerable investment bank. He insisted, however, that Lehman was brought down by a crisis of confidence in the marketplace combined with a plague of naked short selling.
Fed Boosts Cash Auctions to $900 Billion, May Do More The Federal Reserve will double its auctions of cash to banks to as much as $900 billion and is considering further steps to unfreeze short-term lending markets as the credit crunch deepens. "The Federal Reserve stands ready to take additional measures as necessary to foster liquid money-market conditions," the central bank said in a statement released in Washington today.
Fed to loan up to $900 billion to banks The Federal Reserve will provide as much as $900 billion in cash loans to squeezed banks in an urgent effort Monday to break through a dangerous credit clog that threatens the economy and has unhinged financial markets around the globe.
Sovereign funds investing big in U.S. companies - but government doesn’t know where GAO report found that while several agencies track fund holdings, they don’t know exactly where the money is going Sovereign wealth funds have invested a good chunk of their assets in U.S. companies, spending more than $43 billion from January 2007 through June 2008. But many of those investments are not disclosed and indeed are only loosely tracked by U.S. agencies, according to a study published today by the Government Accountability Office.
New Panic is proof of big league crisis Monday’s fresh outburst of panic on global markets was final proof that as financial crises go, we are now in the big league. Comparisons with the dotcom bubble or even the Asian crisis of 1997 are inadequate. We must think of 1987 or 1929. With hindsight, 1987 was more contained than today. The brief, savage fall in world equities seemed the prelude to a downturn in the real economy. But the real world sailed on, and other asset classes were largely unscathed. Compared to 1929, there are two main differences today.
America and the New Financial World $$ Politicians can make the adjustment more or less painful. Soon enough, America's financial crisis will wind down -- maybe in a month, maybe in a year. Yet regardless of when, this crisis marks the beginning of a new era for the U.S. For more than six decades, from the end of World War II in 1945 until now, the U.S. was the hub of global capital and capitalism. In the years to come, it will remain a vital center, but not the center.
September consumer sales drop sharply: MasterCard U.S. shoppers worried by shrinking bank and retirement accounts tamped down spending across the board in September as the country's financial crisis worsened, MasterCard Advisors said in a report on Tuesday. Not one spending category posted positive gains over last year, according to the report by SpendingPulse, the retail data service of MasterCard Advisors.
Big Discounts Fail to Lure Shoppers $$ Retailers Tried Promotions in September But Worried Consumers Curbed Spending As the financial crisis spread last month, some U.S. retailers hit the panic button, offering more generous discounts than they did at this time last year. But the promotions did little to convince cautious shoppers to open their wallets. When they report September sales this week, many retail chains are expected to show big drops in sales at stores open at least year, a key measure of retail performance, according to analysts polled by Thomson Reuters.
Mall Vacancies Grow as Retailers Pack Up Shop $$ Shopping Venues See Uninhabited Rate Reach 8%, But Not All Is Bad in Commercial Sector as Apartment Rents Rise Vacancy rates at U.S. malls and shopping centers continued their steep rise in the third quarter as slumping sales forced retailers to close stores. Malls are seeing their highest vacancy rate since 2001, according to data released by real-estate-research firm Reis Inc. For shopping centers, the rate is the highest since 1994.
Kraft to cut 400 jobs, most at division HQs Kraft Foods Inc. on Monday said it's cutting 400 jobs in its North American operations, primarily at its divisional headquarters. Northfield-based Kraft, maker food items such as Oreo cookies and Oscar Mayer meats, has about 46,000 North American employees, so the job reduction comprises less than 1 percent of that workforce.
Mars, Wrigley close $23 billion deal, combine to create world's largest candy maker Mars Inc. has closed a $23 billion deal to purchase chewing-gum giant Wm. Wrigley Jr. Co., the companies said Monday, making the combined business the world's largest candy maker. The deal brings together household names: Wrigley, a landmark in Chicago where the company began in 1891, and Mars, the privately held maker of Snickers and Skittles and M&Ms - the candy-coated chocolates that are the world's best-selling chocolate candy brand.
Toyota Drops Most in Seven Years, Slipping Behind VW Toyota Motor Corp. had the biggest intraday drop in seven years in Tokyo, losing its spot as the world's largest automaker by value to Volkswagen AG amid rising concerns that global growth is slowing following the collapse of the U.S. mortgage market.
Private-jet use, sales nose dive with economy More fuel-efficient planes expected to hold value When the stock markets tank, people park their planes. That's been the rule in the private-jet world, analysts say, and the latest market contraction is no exception. General aviation traffic, composed mostly of corporate and private jets, was down 14 percent through August compared with 2007 levels at the six largest airports in the Chicago area, FAA data show. Air taxi flights were down 6 percent.
Mrs. Fields Chap. 11 Plan Is Fully Baked Recipe for survival includes three-year senior term credit facility and issuance of its first publicly traded stock. Mrs. Fields' Original Cookies said the U.S. Bankruptcy Court confirmed its Chapter 11 reorganization plan, providing it with a $10 million, three-year senior term credit facility from certain note holders. It will issue its first publicly traded stock as part of the plan. In the reorganization, the cookie maker will use the credit line, in conjunction with cash flow from normal operations, to support the company's ongoing operations and working-capital needs.
EBay Trims Its Work Force And Makes Acquisitions The Internet company eBay is both tightening its belt and expanding its reach in preparation for the coming economic storm. On Monday, eBay announced it would lay off 10 percent of its 16,000 workers, including 1,000 permanent employees, and pay $1.35 billion to acquire the Web payment firm Bill Me Later and the Danish classified advertising companies Den Bla Avis and BilBasen.
Kashkari to be tapped to head bailout An official says the administration has decided to pick a key Treasury Department official to be the interim head of its $700 billion rescue effort for financial institutions.
Bank of America Reaches Countrywide Settlement Bank of America agreed to rework the mortgage terms of up to 400,000 distressed borrowers nationwide starting Dec. 1 in order to settle lawsuits and investigations pending against one of its subsidiaries in several states.
Dollar Puts A Dent In Oil With the the dollar strengthening and the global economy slowing as Europe follows the U.S. into the abyss of the credit crisis, the price of oil is sliding. On Monday light, sweet crude for November delivery fell $6.07 to settle at $87.81 a barrel on the New York Mercantile Exchange, down from Friday’s close at $93.88 a barrel.
Oil Prices Fall Below $90 a Barrel Oil prices fell below $90 a barrel on Monday for the first time since February because of the economic slowdown, even though production in the Gulf of Mexico had not fully recovered from hurricane destruction three weeks ago.
Everything's changed now -- for the worse This downturn could be longer and deeper than I anticipated. With the $700 billion rescue plan a danger in itself, consider rebalancing your portfolio for harder times. It's time to rethink everything. Well, maybe not everything. Buy low, sell high is still a good idea. A penny saved is more than ever a penny earned. A fool and his money are still soon parted, although they may well be reunited in a government bailout.
'Prophets of doom' say crisis warnings unheeded The so-called "doomsday" economists long derided by the mainstream say the current financial maelstrom was inevitable, but debate is still raging on how the US economy will emerge from the crisis. The analysts who had sounded warnings about economic imbalances for at least the past two years argue that their forecasts are now coming true, and that things could get worse, despite reassurances from mainstream economists.
Travel industry shaken by economic downturn The travel industry has been hit hard by the economic slowdown, particularly in the last few weeks. Airlines reported sharp declines in passenger traffic for September. Hotel occupancy rates are down, and corporate travel managers are demanding new concessions on previously negotiated deals. Cancellations are starting to rise even at four- and five-star hotels, which previously seemed immune to the economy's travails.
World markets plunge as fears spread Asian and European stock markets plunged Monday as government bank bailouts in the U.S. and Europe failed to alleviate fears that the global financial crisis would depress world economic growth.
Credit crunch hitting Saudi Arabia Saudi money growth rate highlights liquidity crunch impacting Gulf Arab states The Gulf Arab nations' vast oil wealth has not fully insulated them from the global financial crisis as new data shows bank lending to the Saudi Arabian private sector recorded its lowest monthly rise in at least a year and growth in the country's money supply fanned inflation fears.
Europe Crisis Response Is 'Meaningless' Guarantee, Little Else European finance ministers failed to agree on steps to shore up the banking system hours after their countries' leaders pledged do whatever was needed to restore confidence as the continent's stocks fell the most since 1987. There appeared to be little support for suggestions from France and Italy that Europe create a U.S.-style bank rescue fund at yesterday's monthly meeting of euro-area finance ministers in Luxembourg.
Europe's Financial Abyss $$ The precipitous deterioration of global economic and financial conditions in the last few weeks has come as a shock to most, but the shock seems to have hit Europe's policy makers the hardest. Five European banks had to be rescued by their respective governments in the space of a few days and many more came under heavy pressure, their share prices tumbling, as systemic concerns quickly spread from the U.S. to Europe and tremors were felt as far as Asia.
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Worst-case scenario is approaching rapidly The credit crisis, which has been building slowly for the past year, is now moving so fast that governments around the world are finding it impossible to keep pace. On Saturday Angela Merkel, the German leader, criticised last week’s decision by the Irish to guarantee all deposits in their leading banks without consulting other European countries. The Irish Government said that the move was forced on it by the threat of a run on one of its banks. Only a day later Ms Merkel was forced to take almost the same action in almost the same circumstances.
It's a Worldwide Crash Some of it is pure economic ignorance. Fed Chairman Ben Bernanke studied the Depression, or so they say, and knew more about how to stop it than anyone. Actually, he knew less than anyone, and he and his merry band of governors and presidents presided over the deflationary destruction of Western finance with a bias toward -- are you ready? --inflation. Yes, that's still their bias. We were able to jump-start the economy in 2003 with rates as low as 1%. But our rates are twice that now even though we are in a deflationary spiral, not an inflationary one. We should be printing money left and right here but Bernanke is Hoover and we all know it now.
NYSE Fourth-Quarter 2008 Circuit-Breaker Levels Circuit-breaker points represent the thresholds at which trading is halted marketwide for single-day declines in the Dow Jones Industrial Average (DJIA). Circuit-breaker levels are set quarterly as 10, 20 and 30-percent of the DJIA average closing values of the previous month, rounded to the nearest 50 points. In fourth-quarter 2008, the 10, 20 and 30-percent decline levels, respectively, in the DJIA will be as follows:
Level 1 Halt - A 1,100-point drop in the DJIA before 2 p.m. will halt trading for one hour; for 30 minutes if between 2 p.m. and 2:30 p.m.; and have no effect if at 2:30 p.m. or later unless there is a level 2 halt.
Level 2 Halt - A 2,200-point drop in the DJIA before 1:00 p.m. will halt trading for two hours; for one hour if between 1:00 p.m. and 2:00 p.m.; and for the remainder of the day if at 2:00 p.m. or later.
Level 3 Halt - A 3,350-point drop will halt trading for the remainder of the day regardless of when the decline occurs.
Silver and Gold Prices Will Go Much Higher The House finally passed the bailout bill, but only after the Senate had larded it with nearly $200 billion in tax breaks for the "friends of Congress". In the end, the banks got what they wanted, a gigantic grave to shovel all their corpses into, and the assured silence of the cops (read: Yankee Government). Relax. Government by the banks, of the banks, and for the banks shall not perish from the earth. The corruption is complete, the constitution dead, but, gee-whillikers, we won't have to face an awful deflationary depression. Nope, we'll face a hyperinflationary depression instead.
Gold vs. World Gold is hot and demand is rising. Given the financial crisis, more than ever all kinds of people are eager to own a little gold, and not only paper contracts but physical as well. Recently, a representative of Credit Suisse said he was surprised over the surging demand for physical delivery of gold. Similar comments were elicited from the Dutch Bank. Meanwhile, silver coin and bar dealers here in Holland are running on empty and are being forced to tell eager customers willing to pay premiums to spot that there is simply nothing in stock.
The Price of Gold is Low – But It Won’t Stay There Forever! The stock market crashed a record-setting 777 points on Monday - and global markets took a tough tumble as well. But where does this leave the precious metals? Bryon King explains: "Yes, the prices of gold and silver rose on Monday. But gold mining shares declined along with all the other stocks. What was that all about? In my view, it was panic selling. In the wake of the failed bailout story out of Washington, D.C., big shareholders dumped everything over the side. Even the good stuff went into Davy Jones's locker.
Gold, silver to jump on US rate cut The charter of the Federal Reserve allows its chairman to make rate cuts of up to 0.5 per cent at his discretion in between official meetings to set rates. Expect such a cut as soon as tomorrow morning. The paralysis of the banking system is reaching boiling point with inter-bank rates soaring and the true cost of borrowing prohibitive for corporates. This will cause a chain reaction of financial and business failures if it is not quickly dealt with and Fed chairman Ben Bernanke has no illusions about what is at stake.
Hyperinflation Catalyst For $2,000 Gold 40-year market veteran and fund manager Robin Griffiths of Cazenove Capital Management predicts that the overprinting of dollars as a result of the Wall Street bailout will act as a catalyst for gold prices to rocket to $2,000 an ounce, as demand for precious metals outstrips supply amidst rumors of market manipulation.
Bailout Creating a Financial Black Hole to Suck Us All In A dish of Bailout with a side of pork, shareholders vaporized by Derivatives Death-Star, We all await the financial markets implosion, No problems solved by the bailout, Stay prepared for a full shutdown of the financial system with some cash on hand, Credit default swaps unregulated point in the chain
What Does Paulson Do Now? With the House of Representatives' Oct. 3 passage of the Treasury's $700 billion plan to stabilize the financial markets by buying up troubled mortgage-related assets, you could almost hear the sigh of relief spreading throughout Washington and Wall Street. After two weeks of nearly nonstop negotiations in which the bill repeatedly appeared to flounder, it was quickly passed on to President George W. Bush, who signed it into law within hours. Now comes the hard part: getting the Mother of All Buyout Funds up and running.
Treasury and Fed pledge rapid response to crisis Treasury and Fed pledge to move with substantial force to implement $700 billion rescue plan The president's top economic advisers are pledging to work with their counterparts around the world to restore confidence and stability to financial markets roiled by tight credit and worries about a global economic slowdown . The President's Working Group on Financial Markets said in a statement Monday it planned to quickly implement the expanded authorities granted to federal regulators by the $700 billion rescue package passed on Friday. The working group was formed after the 1987 stock market crash.
Paulson Moves On to Nuts and Bolts of Rescue Secretary Begins With Search to Tap Expertise of Leading Wall Street Firms With the political battle over the Bush administration's $700 billion financial rescue package at an end and the real work of rescuing the financial markets just beginning, all eyes are turning to Treasury Secretary Henry M. Paulson Jr.
Paulson: Ready to use bailout tools US Treasury Secretary Henry Paulson says the US$700 billion financial rescue package protects Americans' jobs and savings and that the government is ready to begin buying up soured assets from banks.
That Sound You Hear is the Government’s Printing Presses Running Overtime After some of the most tumultuous trading in history - not to mention the most pathetic political posturing we’ve ever seen - my e-mail box has overflowed with questions, comments and suggestions. This week, I want to answer one of the most frequently asked questions that I’ve received: "Where does all the bailout money come from?"
Credit doors are closing A crucial source of financing for companies and banks is making some ominous grinding sounds. The market for commercial paper, which is high-quality, short-term debt, shrank by a record $95 billion last week, to $1.6 trillion, according to the U.S. Federal Reserve. That's down from nearly $2 trillion before the credit crunch.
Financial and Corporate System is in Cardiac Arrest: The Risk of the Mother of All Bank Runs It is now clear that the US financial system - and now even the system of financing of the corporate sector - is now in cardiac arrest and at a risk of a systemic financial meltdown.
LIBOR bid only, no offer.
Commercial paper market shut down, little trading and no issuance.
Corporations have no access to long or short term credit markets -- hence they face massive rollover problems.
Brokers are increasingly not dealing with each other.
Even the inter-bank market is ceasing up.
This cannot continue for more than a few days. This is the economic equivalent to cardiac arrest.
SARS Response Offers Lessons for Credit Panic This is what a panic looks like. Banks have practically stopped lending to one another. Risky assets are so toxic that the 10-year bonds of U.S. financial institutions are currently pricing in almost a 70 percent chance of default, a rate that is an order of magnitude higher than anything that has happened in the past 40 years. Investors are flooding to the exits, and taking whatever prices they can get if the reward is liquid cash.
Paulson to name adviser to oversee U.S. bailout Treasury Secretary Henry Paulson is expected to name Neel Kashkari to oversee the $700 billion program to buy distressed assets from financial institutions, The Wall Street Journal reported on Sunday. Kashkari, a Treasury assistant secretary for international affairs and a former Goldman Sachs banker, is expected to be named interim head of Treasury's new Office of Financial Stability as early as Monday. . .
Fear and loathing in Congress over bailout The thing that surprised me most, after the $700 billion bailout bill finally passed, was that Barney Frank never cracked a smile. It was Friday afternoon, minutes after the resounding 263-171 vote - reversing the stunning rejection of the bill Monday - and the Democratic leadership of the House of Representatives was holding a self-congratulatory news conference.
Fed under pressure to do more on credit crunch The Federal Reserve and US Treasury were on Sunday night under increasing pressure to follow passage of the $700bn financial rescue plan with further measures to shock the ailing credit markets back to life. Among the options available to policymakers are additional liquidity operations and an emergency rate cut – possibly in co-ordination with other central banks. A combination of the two is also possible.
Henry Paulson's ploy may not stop credit crunch spreading Right. That’s that done, then. Now what? Events of the past week have brought home the reason why Henry Paulson’s $700 billion bailout, or whatever meaningless figure you wish to conjure, is essential, if perhaps not enough. Step back seven days, and the argument was that public money was being pledged to banks to bail out bankers whose excesses had made that pledge necessary.
On the Seventh Day, They Worked, Amid Finance Crisis From Wall Street to Washington, the U.S. credit crisis has claimed the leisurely weekend along with Lehman Brothers Holdings Inc. and Washington Mutual Inc. "The news cycle is ruining everyone's weekend," Chris Rupkey, chief financial economist for Bank of Tokyo-Mitsubishi UFJ in New York, said in an e-mail. In addition to working more at the office, he's tethered to his BlackBerry on Saturdays and Sundays "waiting for the next shoe to drop."
With bailout passed, Treasury now must figure out how to make it work It will be one of the world's largest asset management firms, with an impressive $700 billion war chest. Nothing short of the global economy depends on its success. And the U.S. Treasury Department has barely a month to get it up and running.
Guess what Americans want to do to Congress? 59 percent of voters say they'd cast 'em all out, start over If given the choice, a new poll reveals, 59 percent of Americans would sweep Capitol Hill clean of the current batch of senators and representatives to elect an entirely new Congress. Only 17 percent of those polled said they would be willing to keep the current Legislature.
In a Weak Climate, the Dollar Has Surprising Muscle Stock markets are swooning, credit markets remain frozen, and some foreign officials are predicting that the United States will lose its status as a financial superpower. And yet the dollar — the most visible symbol of America’s financial might — is surging.
Depression Deepening We definitely live in interesting times, huh? I believe future historians will allocate Monday, September 29, 2008 as the start of the second Great Depression. That is not to say we may yet see exciting corrections and even occasionally a stronger US dollar. Still, the ultimate trend is down, down, down.
Buffett: Here Is My Plan for the Economy Amid dire warnings of 'disaster' if Congress doesn't approve the $700 billion bailout of Wall Street, folksy billionaire Warren Buffett offered up his own plan. He wants the government and private investors to go in together on the toxic-debt purchases. Instead of buying the debts outright, Treasury would lend investors 80 percent of the cost of buying up the distressed assets.
Steve Forbes: Ease Mark-to-Market Rules Famed business magazine publisher Steve Forbes says there's a relatively simple way to help solve the financial mess on Wall Street - ease mark-to-market accounting rules. "Short-term assets should not be given arbitrary values unless there are actual losses. The mark-to-market mania of regulators and accountants is utterly destructive.
Global Nervous Breakdown? Ancient thinkers from Thucydides to Cicero insisted money was the real source of military power and national influence. We have been reminded of that classical wisdom these last three weeks. In a manner not seen since the Great Depression, Wall Street went into panic mode from too many bad debts.
With No Plan B, House Reluctantly Passes Politically Risky Measure Henry M. Paulson Jr. was in his corner office in the Treasury Department on Monday afternoon, too nervous to turn on his television, when his chief of staff poked his head into the Treasury secretary's office to tell him the stunning news playing out on Capitol Hill: The House had just defeated the Wall Street rescue plan that Paulson had helped craft.
Will the bailout work? World holds its breath Bush says 'effective' efforts will 'take time to implement' After two weeks of anguishing debate, Congress has passed and President Bush signed a massive plan to save the financial industry and the economy at large from an unthinkable free fall. Now, the world holds its breath, seeing if it will work.
Now Wall Street may shun $700bn bail-out Fears are mounting that many Wall Street banks and financial firms will refuse to participate in the US government's $700bn bail-out package, leaving global markets and world economies in a perilous state for months to come. 'There is a growing feeling that banks ... might instead decide to tough it out,' said Thomas Caldwell, chairman and CEO of Caldwell Financial, a $1bn-plus fund manager.
Rescue Package May Not Fully Thaw Credit Markets As hopes rise for congressional passage today of a massive rescue plan for the U.S. financial system, many financial experts are already wondering: What is being left out and what will have to be done next? The rescue package may be missing measures intended to offset shrinking bank balance sheets, free up capital for non-financial companies squeezed by the credit crisis, or prevent the possible collapse of a $58 trillion unregulated market in loan insurance policies -- known as credit default swaps -- written by a variety of firms, say financial experts.
Bair Turns Once-Obscure FDIC Into Power in Crisis When Sheila Bair took over as head of the U.S. Federal Deposit Insurance Corp. in 2006, the agency was probably better known for the "FDIC" logo on the doors of the nation's banks than for anything it did.
Battered financial industry faces more oversight Financial industry will face closer government scrutiny in wake of $700 billion bailout With the passage of the $700 billion rescue package, the financial industry will face greater congressional scrutiny in coming weeks and months. Further-reaching regulation is almost certain. Previously obscure corners of the industry now subject to few rules, such as complex derivatives and hedge funds, could face federal supervision for the first time.
Bank on this: bank failures will rise in next year Financial crisis likely to yield biggest banking shakeout since savings-and-loan meltdown Here's a safe bet for uncertain times: A lot of banks won't survive the next year of upheaval despite the U.S. government's $700 billion plan to restore order to the financial industry.
Credit crunch puts squeeze on businesses Job cuts, defaults on debt could grow if companies can't borrow The credit crunch hit 2640 Merchant Dr. in Baltimore in September when Drew Greenblatt asked his bank for a $175,000 increase in the line of credit for his thriving company, Marlin Steel Wire Products. The bank said it wouldn't give him the money unless he put an equal sum into a certificate of deposit. In other words, the bank wasn't willing to let one more dime out of its sight.
Oil falls below $92 as financial turmoil spreads Oil prices fell below $92 a barrel on Monday in Asia on fears a U.S.-led financial crisis is spreading across the globe, exacerbating an economic slowdown that will cut crude demand.
New Jersey Offers a Preview of Possible Economic Woes to Come After several tumultuous weeks on Wall Street, New York City seems increasingly likely to fall into recession, many economists and analysts say. To get a sense of what that might look like, one need only cross the Hudson River. New Jersey’s economy has already slipped into reverse. Its biggest employers have stopped hiring, and some have started firing. Its unemployment rate is rising fast, and the values of its houses are falling even faster.
Sinking feeling as fall in US jobs spreads JPMorgan economists have compared the US labour market with a boat sailing through rough seas over the past few months. The July data showed it "was taking on more water, but has not yet capsized". By August, the boat had indeed capsized, and in September, according to figures released at the end of last week, there were "159,000 men and women overboard".
Credit markets to D.C.: Bailout not enough Banks still reluctant to make many loans; demand strong for T-bills at 0.5% The credit markets finally got a bailout bill, but the stranglehold hasn’t let up — a troubling sign that lenders and investors believe the package will only be a baby step in the long road to economic recovery.
Credit market to price $500bn in bad deals The credit derivatives markets will today set the price tag for settling up to $500bn of contracts related to Fannie Mae and Freddie Mac, the US mortgage lenders whose seizure by the US government had the unexpected knock-on effect of triggering defaults on derivatives deals.
Foreign funds, once decried, helping U.S. in crisis Help for troubled American financial companies came earlier this year from an unlikely source - the same sovereign wealth funds (SWFs) that many have decried as a threat to U.S. economic independence. Recently, however, the funding has dried up.
New law extends legal mandate for intervention The US authorities intend to use new powers contained in the $700bn bail-out legislation signed into law on Friday to prevent the disorderly failure of any more systemically important financial institutions. As well as creating a large-scale asset purchase programme, the new law provides what had been a missing framework for dealing with failing financial institutions that supplements the existing regime for banks.
The Bank Heist Wells Fargo grabs Wachovia away from Citi in $15 billion deal. What does Wells Fargo want? Wachovia, as it turns out. In a stunning turnabout, Wells Fargo has agreed to acquire Wachovia for $7 per share in stock, or about $15 billion. The announcement comes just four days after Citigroup agreed to buy the retail-banking business of Wachovia for $1 per share in a deal orchestrated by government regulators.
Credit Swaps Show Fear, Not Reality, Executives Say National Rural Utilities Cooperative Finance Corp. and Hartford Financial Services Group Inc. say widening credit default swaps show a disconnect between the health of their balance sheets and investor behavior.
Data on Job Losses, U.S. Factory Orders Paint Bleak Picture U.S. factory orders sank by the largest amount in nearly two years in August and the number of workers filing new claims for unemployment benefits increased to a seven-year high last week, ominous signs that the economy is in sharp decline.
Depression offers lessons for financial crisis Current calamity not as grim, but shares similarities to collapse of 1930s They are the stories we heard from our grandparents, the pictures we studied in history books — bread lines stretching around street corners, shantytowns sheltering the unemployed, small-town banks with darkened windows.
You Can't Legislate Confidence Turning points throughout history, be they economic, social or military in nature, are more easily detected when viewed in hindsight. That's not very helpful to those who find themselves living in the moment when history itself is being made.
Nervous Days as Consumers Tighten Belts Cowed by the financial crisis, American consumers are pulling back on their spending, all but guaranteeing that the economic situation will get worse before it gets better. Fed May See Companies, States as Next Crisis Fronts Federal Reserve Chairman Ben S. Bernanke may find the next fronts of the financial crisis to be just as chilling as last month's downfall of Wall Street titans: its spread to corporate America and state and local governments.
Is the Rescue Plan Socialism? The Far Left Says, 'No Way, Comrade' $$ Throwing a Lifeline to Banks, Corporations Is a Far Cry From the Revolution They Crave If conservative Republicans are right and the $700 billion financial-sector rescue plan signals America's slide into socialism, you'd think Seth Dellinger would be celebrating. But Mr. Dellinger, a Socialist Workers Party candidate for Congress, says that what might smell like communism to free-market purists looks like just another capitalist shell game to him.
America, home of the free-market economy? Hardly Bush and Paulson are communists. That's the word on the street, anyway. While the US President and his Treasury Secretary lay out a trillion-dollar guide rope for the country's financial industry, even the Europeans baulked on the weekend at creating a common pool of taxpayer money to prop up failing banks. For many, the irony of the US abandoning free-market principles to rush to the aid of Wall Street has been delicious.
Down the Road to Serfdom Threatening an imminent economic collapse, Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke have bamboozled Congress into enacting the most brazen confiscatory scheme ever concocted by government. The scheme would have American taxpayers fork over $700 billion of their cash to help recapitalize some of the country's biggest banks – the same banks that recently larded their bigwigs with $62 billion in bonuses.
Financial Dictatorship Comes to America This article points out the shocking increases in government power that the government has conferred upon itself in this Act. I believe that the American public has every right to rise up in anger against what this Act does and retire from office every legislator who voted "Yes" to its passage. None of them has upheld his oath to support and defend the Constitution. There is absolutely nothing in Article 1, Section 8 of the U.S. Constitution that empowers the Congress to do what this Act authorizes, nor is this Act a law made as a necessary or proper adjunct in order to support those powers that the Constitution does delegate to Congress.
WORLD GOVERNMENT IS NOT COMING, IT'S HERE! Understanding World Events and the Credit Crisis For many of us, reading history does not provide us with the flavor of life, the uncertainties of the moment and the fears of facing the truth of the situation. The events over the past six weeks and more specifically from August, 2007 have provided us with a myriad of events which leave even the most astute observer speechless. Over the past fourteen years, I have written extensively about a global currency, global tax, global stock exchange, global central bank, and world government. I have stated on many occasions that world government is not coming, it is here. In order to bring in world government, it will have to be through crisis—continuing, constant crises. The solution will be world government, total integration of all the countries of the world.
Foreclosed Houses Unloaded at Auction Buyers Snap Up Homes at Bargain Prices Trisha Bayles, who has been saving for years to buy her first home, got flustered when bidding started on the house she wanted in Laurel. "This guy in front of me said it was going for $210,000 and next thing I know the auctioneer is in the aisle saying: 'You want it for $200,000?' " Bayles said.
Dollar deals decline Buck won't buy what it used to in better times A buck will still buy you a bottle of shampoo, two rolls of paper towels or four containers of generic breath mints at some dollar stores. It even buys a bit of excitement in the hunt for a deal. But it won't buy motor oil. Or a multipack of Tic Tacs. Or many other items that were once a steal for a single dollar.
The money's still there, but Wall Street won't be the same Just before midnight almost two weeks ago, as a financial whirlwind tore through Wall Street, someone filched a 75-pound bronze bust of Harry Poulakakos from the vestibule of his landmark saloon on Hanover Square in Manhattan.
Who Shot Motorola? Its cell-phone sales have plunged along with its share price. Chris Galvin, the deposed C.E.O. whose grandfather founded Motorola 80 years ago, looks back in anguish at the fall of the once-iconic company. Since getting thrown out of the C.E.O. job at Motorola five years ago, Chris Galvin has lingered in purgatory. He wants out.
Debt clock can't keep up (video) CNN's Don Lemon visits the National Debt Clock, which has run out of spaces to display $10 trillion in red ink. Dirst family will add another digit. The clock is ticking.
Top insurer forces employees to study Buddhist teachings Managers' retreat requires chanting 'om' in dark room A former Prudential Insurance manager is preparing legal action against the company, claiming she was fired after blowing the whistle on mandatory Eastern religious exercises that included chanting the Hindu mantra "om" in darkened rooms. Prudential Insurance Co.'s southern California real estate division also required managers to read a Buddhist book, charges the Christian ex-employee, whose name has been withheld pending formal action.
G-7 may consider coordinated rate cuts Finance leaders from the world's wealthy nations may need to offer more than just words this week as they struggle to prevent a global recession. Speculation is growing that Group of 7 countries may consider coordinated interest rate cuts to dull the pain of the credit crunch. A meeting in Washington scheduled for Friday, on the eve of the International Monetary Fund's autumn meeting, would provide a perfect opportunity for discussions.
Stricken Iceland sends out financial SOS Economy is in turmoil as currency collapses and inflation soars Iceland was seeking the financial help of the US and Scandinavian countries last night as politicians and businessmen scrambled to save the country’s economy. Officials were locked in meetings for most of the weekend, with the Government hoping to come to some sort of resolution before stock markets open this morning. The country’s banking problems led to the nationalisation last week of Glitnir, one of its largest lenders, as depositors pulled out their funds.
China Could Be Dragged Down by Wall Street Crash Few questions confound economists more: What might tip China into the meltdown that so many have feared for so many years? Possibilities include overheating, social instability, corruption, pollution, debt crises, war over Taiwan and a post- Olympics growth swoon. It's a perfectly rational expectation. No rapidly industrializing nation has ever avoided some kind of crisis, least of all upstarts in Asia.
Asian markets lower in wake of bank rescues Asian stock markets fell sharply in early trading Monday on growing fears about the health of banks around the world and the prospects for a downturn in Asian exports as economies weaken in the United States and Europe.
SE Asian memo to Wall St Seared into Southeast Asia's collective memory is the iconic image of the 1997-98 Asian financial crisis, where International Monetary Fund (IMF) chief Michel Camdessus towered with crossed arms over a bent-down Indonesian President Suharto as he signed a sovereignty-eroding bailout agreement for his distressed economy.
Russia's warships head for exercise with Venezuelan navy Russia displayed its military strength in the Mediterranean yesterday after warships heading to Venezuela passed through the Strait of Gibraltar in the second deployment of Russian naval vessels in the waterway since the Cold War.
GOP Wants Audit of Obama Funds $$ Democratic Campaign Says It Takes Every Available Step to Root Out Improper Donations Republican Party officials said they will file a complaint with the Federal Election Commission Monday asking for an audit of Barack Obama's campaign contributions. In announcing the move Sunday, they said they were concerned that the Democratic presidential candidate may be accepting donations from foreign nationals, and may also be taking a large number of donations that exceed federal limits for individuals.
Congress OKs historic bailout bill Congress enacts historic legislation providing bailout for troubled financial industry With the economy on the brink and elections looming, Congress approved an unprecedented $700 billion government bailout of the battered financial industry on Friday and sent it to President Bush for his certain signature. The final vote, 263-171 in the House, capped two weeks of tumult in Congress and on Wall Street, punctuated by daily warnings that the country confronted the gravest economic crisis since the Great Depression if lawmakers failed to act.
Stocks rise but come off highs as House OKs bill The House approval of the government's $700 billion financial rescue plan Friday gave stocks a brief lift, but overall failed to set off much euphoria in financial markets that are facing the reality of a prolonged economic downturn. The Dow Jones industrial average was up only marginally in volatile trading after having been up more than 300. While lawmakers voted on the plan, the Dow was up more than 300 points, but "you're probably seeing a little buy the rumor, sell the news mentality," said Ryan Larson, senior equity trader at Voyageur Asset Management, a subsidiary of RBC Dain Rauscher. Plus, he added, there's a feeling that this plan "isn't a quick fix."
Bailout Bill Sent Back to House After Senate Passage The U.S. Senate passed a $700 billion financial-market rescue package loaded with inducements for the House of Representatives to approve the measure following its rejection of an earlier version. The legislation, approved last night on a 74-25 vote, authorizes the government to buy troubled assets from financial institutions rocked by record home foreclosures. It contains two provisions favored by House Republicans: One raises the limit on federal bank-deposit insurance; the other reiterates the authority of securities regulators to suspend asset-valuing rules that corporate executives blame for fueling the crisis.
Rep Brad Sherman on Martial Law threat to House of Representatives. This video explains more about reported threat, by Rep. Brad Sherman, to House of Representatives. Bill 8 Sec 6A (every bill before congress has to be put in daylight but process gets blocked when Martial Law, in the House of Representatives, is declared). If bill passes, money will flood to CEOs who know dollar is being devalued through inflation. Coercive tactics to strongarm all those opposed.
Defazio on Paulson: We should not be ROLLED by a wall street exec masquerading as Treasury Secretary Congressman Defzio illustrates how the current bailout proposal is ill-conceived and contains unnecessary power grab provisions that benefit the very perpetrators of the financial crisis.
A shift in tone in calls to House members on bailout Many of the voters in the United States who initially opposed the $700 billion economic bailout plan changed their mind after stock markets dived when the House of Representatives rejected the bill, prompting some representatives to reconsider their stance ahead of the crucial vote Friday.
Crisis spreads; bailout focus on House Shockwaves from the global credit crisis spread on Thursday, rattling industries around the world and raising the stakes for the U.S. Congress to finish up a $700 billion bank bailout. U.S. economic data amplified warnings that a recession is near, and European Central Bank President Jean-Claude Trichet said Europe's economy was weakening, opening the door for the first interest rate cut there in five years. Business leaders from hoteliers to automakers and in sectors as far-flung as farming and mining warned that a crisis that began with risky lending to the overheated U.S. housing market was on the cusp of a dangerous new phase.
House scrambles to shore up bail-out US House leaders were on Thursday night engaged in a frenzied round of meetings and vote-counting to secure sufficient backing for the $700bn US financial bail-out and end the political uncertainty hanging over the rescue bill as early as Friday. Following a wide-margin 74-25 vote in the Senate on Wednesday night to approve a revised version of the legislation, the prospects for passage in the House appeared to improving, but aides cautioned that the outcome remained uncertain.
House leaders optimistic for bailout bill U.S. House Democratic leaders expressed optimism on Thursday that a revised $700 billion financial industry rescue bill passed by the Senate will clear the House of Representatives, which rejected the bailout earlier in the week and rocked financial markets worldwide. "We're not going to take a bill to the floor that doesn't have the votes. I'm optimistic that we will take a bill to the floor," House Speaker Nancy Pelosi, a California Democrat told reporters. House Democrats huddled in a closed-door meeting late in the day to review strategy.
Financial-Rescue Bill Gains Support in U.S. House U.S. lawmakers who helped defeat a financial-market rescue package this week are reconsidering their votes amid signs the crisis on Wall Street is spreading. At least eight lawmakers, including Republican Zach Wamp of Tennessee and Democrat Emanuel Cleaver of Missouri, now say they would support the measure. Four others say they may switch their ballots before the House votes again, at about 12:30 p.m. tomorrow, on the measure, which failed by a dozen votes Sept. 29. The legislation allows the government to buy troubled assets from financial institutions rocked by record home foreclosures.
Main number: 202 225 -3121 - ask for your elected officials in D.C.
Bill gives Paulson unprecedented power Bailout critics fear 'financial dictator' In all of American history, it is likely that no government official besides a wartime president has ever been given as much power over taxpayer money as Treasury Secretary Henry M. Paulson Jr. would receive under the $700 billion financial rescue plan. If the House passes the bill Friday, the Treasury secretary will acquire broad authority to buy and then dispose of hundreds of billions of dollars in mortgages and mortgage-backed securities at his sole discretion. "They're appointing a financial dictator," said Ryan Ellis, tax policy director at Americans for Tax Reform. "Congress is giving a member of the executive branch virtually unlimited power for the entire economy."
Ron Paul Blasts “Secret Government” Running Economy 9/18/2008 Congressman warns middle class in danger of being wiped out, says Congress is oblivious and Fed has no clue. Congressman Ron Paul has issued a stinging address concerning the financial crisis in which he outlines how the current economic problems, created via malinvestment and shift to a debt based economy, are now being mismanaged by private interests in secret.
Artificially Created Credit by the Federal Reserve System Got Us into This Crisis By United States Congressman Ron Paul The financial meltdown the economists of the Austrian School predicted has arrived. We are in this crisis because of an excess of artificially created credit at the hands of the Federal Reserve System. The solution being proposed? More artificial credit by the Federal Reserve. No liquidation of bad debt and malinvestment is to be allowed. By doing more of the same, we will only continue and intensify the distortions in our economy - all the capital misallocation, all the malinvestment - and prevent the market's attempt to re-establish rational pricing of houses and other assets.
The Mother Of All Bank Runs? It's plain that the current financial crisis is worsening in spite of--or perhaps because of--the Treasury rescue plan. The strains in financial markets are becoming more, rather than less, severe in spite of the nuclear option of a $700 billion package: Interbank spreads are widening and are at a level never seen before; credit spreads are widening to new peaks; short-term Treasury yields are going back to near-zero levels as there is flight to safety; credit default swap (CDS) spreads for financial institutions are rising to extreme levels as the ban on shorting of financial stock has moved the pressures on financial firms to the CDS market; and stock markets around the world have reacted very negatively to this rescue package.
Chinese regulator calls US lending 'ridiculous' U.S. lending standards before the global credit crisis were "ridiculous," and the world can learn from China's more cautious system as it considers financial reforms, the top Chinese bank regulator said Saturday. Beijing curbed mortgage lending in 2003 and 2006 to keep debt manageable amid a real estate boom, while American regulators responded to a similar situation by letting credit grow, said Liu Mingkang, chairman of the Chinese Banking Regulatory Commission. "When U.S. regulators were reducing the down payment to zero, or they created so-called `reverse mortgages,' we thought that was ridiculous," Liu said at the World Economic Forum in this eastern Chinese city. He said debt in the United States and elsewhere rose to "dangerous and indefensible" levels.
Greenspan predicts rebound Says investors key to recovery Former Federal Reserve Chairman Alan Greenspan said financial markets and the economy will recover "sooner rather than later" from the worst turmoil in seven decades. "Trust will eventually reemerge as investors dip hesitantly back into the marketplace," Mr. Greenspan said Thursday in a speech at Georgetown University's law school. "From that point, history tells us, financial and economic revival sets in. I suspect it will be sooner rather than later." Mr. Greenspan urged lawmakers last week to back "extensive" measures to tackle the worst financial crisis since the 1930s and head off a recession.
Save the fat cats In the early 1990s, when I was a foreign correspondent looking for my next overseas posting with The New York Times, I sought Japan. At the time, Tokyo was an awe-inspiring economic titan, arguably the most important capital outside the United States. Then Japanese politicians, acting with the same sublime ineptitude that America's House of Representatives displayed this week, ignored a growing banking crisis and dithered on a bailout.
Time to bail, saving the villains Bankers, like politicians and lawyers, are immune from the kinder, gentler impulses that quicken conscience in the rest of us. But sometimes a banker, even on Wall Street, can be thought of too harshly. (Lawyers, not so much. Politicians, never.) We're coming off a roaring credit drunk, and the worst of the hangover lies still ahead. With the price of houses soaring by 15 percent a year, we thought we would live happily ever after in the Land of Oz.
Wave of House converts jump aboard bailout bill A wave of House converts jumped aboard the $700 billion financial industry bailout Thursday on the eve of a make-or-break second vote, as lawmakers responded to an awakening among voters to the pain ahead of them if stability isn't restored to the tottering economy. Black lawmakers said personal calls from Democratic presidential nominee Barack Obama helped switch them from "no" to "yes." Republicans and Democrats alike said appeals from credit-starved small businessmen and the Senate's addition of $110 billion in tax breaks had persuaded them to drop their opposition.
Wanted: Secretary of the Treasury The House of Representatives on Friday faces another vote on the $700 billion financial-rescue bill, which the Senate approved overwhelmingly Wednesday night. If the plan were to pass, it would authorize broader power to the Secretary of the Treasury, who will then be in charge of hundreds of billions of dollars to purchase toxic debt for the newly created Troubled Asset Relief Program (TARP). But 2008 is an election year, and the cast of players on Capitol Hill will soon change. The next president's administration will inherit the current financial crisis.
Commodities Head for Biggest Weekly Decline in Over 50 Years Copper, corn and silver are leading commodities toward the biggest weekly drop in more than 50 years on concern that demand will weaken as global economic growth slows, and as the dollar reached a one-year high against the euro. Commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have fallen 9.9 percent this week, the largest drop since at least 1956.
Fed Opens Bag of Tricks A rate cut may be the icing on a bailout. But would it have an impact? Even as they were pressing Congress to pass a bailout plan, Federal Reserve and Treasury officials have been searching to see what other weapons they may have left to battle the credit crisis. The arsenal may include another cut in interest rates, the Wall Street Journal reports. Even considering a rate cut is a "turnaround" for the central bank, the paper notes, because the Fed in recent months has been warning about a rise in inflation, even as it remains focused on threats to economic growth
Truth, lies and ticker tape To bankers and politicians who insist that the world will come to an end if the US Congress does not approve the proposed US$700 billion bailout package, I wish to say: "It is not the end of the world. It is just the end of you." Sadly, it won't be. America's financier caste will live to fleece another day. There are no atheists in the trenches, and no free-marketeers in Congress after a nearly 10% fall in stock prices. A chorus of erstwhile conservative voices led by the likes of Newt Gingrich, the Republican firebrand of the 1990s, now argues that the proposed $700 billion bailout package is flawed, but it is better to enact it than to do nothing. This simply is not true. In the event of bank failures, the government will not "do nothing".
Emergency Economic Stabilization Cliff Notes: The Housing and Economic Bailout Bill of 2008 Explained. You may recall that in the distant past (Monday) the House of Representatives voted in a decent margin to say no to the housing bailout bill. So after a 777 point market smack down, economic fear mongering, and polling politicians found out that Americans don’t like the sound of the word "bailout."
Economic Depressions: Their Cause and Cure We live in a world of euphemism. Undertakers have become "morticians," press agents are now "public relations counsellors" and janitors have all been transformed into "superintendents." In every walk of life, plain facts have been wrapped in cloudy camouflage. No less has this been true of economics. In the old days, we used to suffer nearly periodic economic crises, the sudden onset of which was called a "panic," and the lingering trough period after the panic was called "depression." The most famous depression in modern times, of course, was the one that began in a typical financial panic in 1929 and lasted until the advent of World War II. After the disaster of 1929, economists and politicians resolved that this must never happen again.
A Mountain, Overlooked How Risk Models Failed Wall St. and Washington Crooked mortgage brokers, greedy investment bankers, oblivious rating agencies and gullible investors have all been faulted in the financial crisis, and there is bipartisan agreement that regulators were asleep at the switch. It's all well and good to call for substantial new oversight. But if regulators were oblivious to the danger, the question is why.
Rescue Package May Not Fully Thaw Credit Markets As hopes rise for congressional passage today of a massive rescue plan for the U.S. financial system, many financial experts are already wondering: What is being left out and what will have to be done next? The rescue package may be missing measures intended to offset shrinking bank balance sheets, free up capital for non-financial companies squeezed by the credit crisis, or prevent the possible collapse of a $58 trillion unregulated market in loan insurance policies -- known as credit default swaps -- written by a variety of firms, say financial experts.
Breakdown Approaches Climax The banking system breakdown is very far along, but still early. Remember USFed Chairman Bernanke stated over a year ago that the mortgage problem was contained. Try not to laugh. The bond crisis is absolute, broad, deep, and all-inclusive, enough to kill the USTreasurys after it kills the US banking system.
Investors pull out of US commercial paper The amount invested in the US commercial paper market fell by $95bn during the past week, increasing concerns about the availability of money for banks and companies from this vital source of short-term funding. Data released by the US Federal Reserve showed the amount invested had its biggest weekly drop since the central bank began tracking the sector in 2001.
Evangelicals see moral decline in Wall St. woes Conservative U.S. Christians say the culture has gone to hell and it has taken the economy and Wall Street down with it. It is a view which outsiders may find puzzling but has wide resonance in the U.S. heartland: the notion that moral decay and a lost sense of responsibility has brought on the worst banking and credit crisis since the Great Depression.
Rate cut seen at intersection of Wall & Main It's not just about Wall Street any more. A recent rush of weak data suggests the U.S. economy has entered a recession and that the Federal Reserve will vote to slash interest rates this month. Antipathy toward Wall Street helped sink a $700 billion bank bailout bill in the U.S. House of Representatives on Monday, but since then it has become clear that Main Street is suffering amid a growing tide of joblessness and a factory slowdown.
Corporate America caught in global credit undertow U.S. companies are finding it harder and costlier to raise funds for daily operations in the latest sign that the global credit crunch is fast spreading beyond the banking sector. The credit freeze threatens to spur more job losses and shut down more businesses even as U.S. lawmakers wrestle over a $700 billion financial rescue plan. It could send the U.S. economy into a tailspin, investors and analysts say.
The Banking System is Detonating Before Our Eyes The financial system is blowing up. Don't listen to the experts; just look at the numbers. Last week, according to Reuters, "U.S. banks borrowed a record amount from the Federal Reserve nearly $188 billion a day on average, showing the central bank went to extremes to keep the banking system afloat amid the biggest financial crisis since the Great Depression." The Fed opened the various "auction facilities" to create the appearance that insolvent banks were thriving businesses, but they are not. They're dead; their liabilities exceed their assets.
The Other Bailout America has been on a socialist bender, and the bills are getting large. Got a problem? Look to Washington to arrange a handout, or a safety net; if that scheme goes sour, expect a bailout. . . . What's largely escaped notice, however, is the extent to which America in its foreign policy is increasingly in the business of subsidizing, guaranteeing and, in some instances, bailing out an array of thugocracies that make the bankers of Wall Street look like cookie-vending girl scouts.
Wachovia faced a 'silent' bank run Fearing a loss of funding over the weekend, the FDIC forced the sale. On Friday, with its stock plunging 27 percent, Wachovia experienced a "silent run" on deposits, but the bigger worry for regulators was that other banks wouldn't provide the Charlotte bank with necessary short-term funding when it opened for business Monday, sources familiar with the situation told the Observer. With Wachovia already looking for a merger partner, the Federal Deposit Insurance Corp., in consultation with other regulators, required the bank to reach a sale to Citigroup on Monday morning. The FDIC, for the first time, used legislative authority created in 1991 to help it deal with a "very large complex bank failure" on short notice.
Wells Fargo acquiring Wachovia for $15.1B The deal wipes out Wachovia's previous plans to sell its banking operations to Citigroup Inc., a plan that had been backed by the Federal Deposit Insurance Corp. In an abrupt change of course, Wachovia Corp. said Friday it agreed to be acquired by Wells Fargo & Co. in a $15.1 billion all-stock deal, wiping out Wachovia's previous plan to sell its banking operations to rival suitor Citigroup Inc. A key difference is that the Wachovia deal will be done without government assistance, while the Citigroup deal would have been done with the help of the Federal Deposit Insurance Corp.
Citigroup itself a troubled rescuer It's expected to lose billions this quarter. The New York-based bank is also in the midst of laying off thousands and selling units. The bank that some are branding as Wachovia Corp.'s rescuer is on shaky ground itself. For the past year, New York-based Citigroup Inc. has been the epitome of the brutal fallout from subprime mortgages, racking up more than $40 billion in writedowns and other losses. It is already in the midst of cutting thousands of jobs and selling off some units, and it is about to announce its fourth straight quarterly loss in the billions of dollars. To pay for the Wachovia deal, it will have to raise $10 billion on the market and slash its payout to shareholders for the second time in a year. . . . "Citi," Gordon said, "needs Wachovia to survive."
The short - but eventful - life of Ike Are your Insurance annuities Safe'?????? In its brief lifespan of only 13 days, Hurricane Ike wreaked great deal of havoc. Affecting several countries including Cuba, Haiti, and the United States, Ike is blamed for approximately 114 deaths (74 in Haiti alone), and damages that are still being tallied, with estimates topping $10 billion. Many shoreline communities of Galveston, Texas were wiped from the map by the winds, storm surge and the walls of debris pushed along by Ike - though Galveston was spared the level of disaster it suffered in 1900
Oil, Gold, Corn Fall on Slower Economic Growth, Strong Dollar Crude oil, gold and corn led commodities lower on concern that consumption will drop because of slower economic growth and as the dollar reached a one-year high against the euro. Energy, metals and grains have tumbled this week as a jump in borrowing costs and reports showing a worsening economy spurred skepticism that the U.S. government's $700 billion bank bailout plan will stimulate growth.
Decline in oil prices holds the prospect of wide relief For the past year, rising oil prices have taken a toll on the global economy, driving up gasoline and food prices, punishing airlines and automakers and ripping a large hole in people's pockets. But lately, nearly lost amid the chaos in the markets, oil prices have been dropping sharply from their triple-digit peak in July. If that trend continues, billions of dollars and euros could be put back into consumers' pockets, providing some support for an economy that needs all it can get.
Oil Heads for Biggest Weekly Drop Since 2004 on Slowing Demand Crude oil fell for a third day in New York and is poised for the biggest weekly drop since 2004 on signs the U.S. is slipping into a recession, reducing fuel demand in the world's largest energy user. Oil has declined 13 percent this week as higher borrowing costs and reports showing a worsening economy spurred skepticism that the U.S. government's $700 billion bank-bailout plan will stimulate growth.
U.S. economic worries drive down stocks, oil A new batch of weak U.S. data drove fears of slower global growth, driving stocks around the world and oil sharply lower on Thursday, even as the U.S. Congress worked toward passing a revised bill to rescue the ailing financial sector. U.S. and euro zone government debt rose in a renewed safe-haven rally as reports on jobless claims and factory activity led economists to say the United States was in recession. Central banks in Europe favour gold as crisis unfolds London: Sales of gold by European central banks are likely to be lower than expected over the next year as the global banking crisis boosts bullion's appeal as a "safe" reserve asset. And banks elsewhere in the world, most notably in Asia and the Middle East, may even become buyers of gold in an attempt to diversify their reserves away from the dollar, analysts say.
Hedge funds prey on rivals Hedge funds are embracing trading strategies designed to profit from the unwinding of large positions by their competitors, market participants say. The increasingly cannibalistic activity stems from the wave of redemptions hitting hedge funds. Because so many firms hold similar positions, forced selling by one in response to redemptions can have ripple effects, forcing other funds to sell. More nimble hedge funds have sought to profit from the dynamic by taking short positions in securities known to be widely held by rivals.
Millions are trapped in hedge funds lockdown An increasing number of hedge funds are telling customers they cannot have their money back as rising withdrawals and exposure to Lehman Brothers hit the industry. In the past week, Amber Capital, the $3.2 billion New York fund, Guy Wyser-Pratte's $500 million activist fund, a $400 million fund run by London's Cheyne Capital, and a slew of smaller funds have blocked redemptions temporarily.
Looking Down Yes, the September jobs report is bad, but it only gets uglier from here on. The financial crisis has put the world "on the edge of the abyss," the prime minister of France says. If that is the case, then the U.S. is in the very front of the pack, looking down from the lip. Today's employment report is just the latest sign of the impact that the credit crunch is having on all kinds of American businesses. Employers cut 159,000 jobs in September, the deepest loss since March 2003. So far this year, 760,000 jobs have been lost, the Labor Department says.
Jobs Report Underlines Economic Decline The government is out with more bad economic news this morning: The job market began to deteriorate even before the financial crisis reached a more serious stage two weeks ago. Employers cut 159,000 jobs in September, more than twice as many as in August or July, the Labor Department reported. It was the biggest monthly decline since 2003, when the economy was still losing jobs in the wake of the 2001 recession.
Goldman, Morgan Rewrite Playbooks Survival Prompts Drastic Changes for Rival Titans Having come face-to-face with their own mortality, Wall Street rivals Goldman Sachs Group Inc. and Morgan Stanley are doing things they wouldn't have imagined just months ago. They have diluted existing shareholders, pushed for rules that are an anathema to many free-market champions and rewritten their corporate charters to become commercial banks -- a business they had regarded as beneath their pedigrees.
Ambitions grow overseas to succeed Wall Street as global finance capital Shanghai and Dubai are among those that see themselves taking the No. 1 spot away from Wall Street. Looking down from his building's 87th floor at the glittering signs of multinational banks along the river here, Fan Dizhao declared confidently that Wall Street's reign as the world's No. 1 financial hub is coming to an end. The United States is grappling with its worst economic crisis since the Great Depression, but these are go-go days in China. . . . Fan, an investment manager at Guotai Asset Management Co., which oversees funds valued at around $5.1 billion, said that despite the country's inexperience in the financial sector, China had a rare trump card: mountains of cash. "It is inevitable," he said, "that we will take the U.S.' place as the world leader."
IMF Says U.S. Faces 'Sharp Downturn' as Market Crisis The U.S. may fall into a recession as the financial rout deepens, the International Monetary Fund said in its most pessimistic outlook for the world's largest economy since the credit crisis began last year. "The financial turmoil that began in the summer of 2007 has mutated into a full-blown crisis," the fund said in a section of its semiannual World Economic Outlook released in Washington today. There is "a substantial likelihood of a sharp downturn in the United States," the fund said.
Mergers and Acquisitions 'Frozen' Amid Credit Market Turmoil The pace of mergers and acquisitions declined 28 percent this year as the credit crisis checked companies' ability to fund deals, and the U.S. and European economies teetered on the brink of recession.
Economy forcing more car dealers to close The financial crisis that has stung homeowners and depressed credit markets has spared no mercy for car dealerships, dozens of which have closed statewide this year, with many more expected to follow. . . . The National Automobile Dealers Association estimates that by the end of the year, as many as 600 dealerships might close or consolidate.
Payrolls expected to drop 110,000 in September Unemployment rate seen holding at 6.1%, with hourly earnings up 0.3% U.S. employers probably eliminated 110,000 net jobs in September, the steepest loss since early 2003, economists said as the market looked ahead to the government's nonfarm payroll report due Friday morning. Such a decline would represent the nation's ninth consecutive month of job losses, totaling more than 600,000.
Stocks decline on unemployment, factory reports Stocks fall on unemployment claims, factory orders data as investors fear protracted downturn Pessimism about a protracted economic downturn washed over the financial markets Thursday, sending stocks plunging and further tightening the credit markets. Reports on declining factory orders and a seven-year high in jobless claims stoked fears that the government's financial rescue plan won't ward off a recession, and the Dow Jones industrials skidded nearly 350 points.
Credit Crisis Spreads a Pall Over Silicon Valley Since the credit crisis began gripping the financial world, Silicon Valley has watched from the sidelines, secure in the faith that it was insulated from the coming storm. That faith is now being seriously undermined. High-tech entrepreneurs, investors and executives now believe the question is when, not if, the financial chaos will hurt the country’s cradle of innovation. From San Francisco to San Jose, the effects are already palpable.
Credit crunch puts California governments in a corner State and municipal payrolls may be unmet and services cut if debt markets don't loosen up soon, leaders warn. With credit markets all but paralyzed and state and local governments unable to borrow money, California officials joined calls Thursday for quick approval of a financial bailout plan working its way through Congress. The warnings were stark, including suggestions that operating funds to pay state workers, teachers or even healthcare workers could dry up in the weeks ahead.
Credit crisis gives world farm sector a jolt Wall Street woes have washed down Main Street and on Thursday plowed their way through farm country, leaving big companies that buy and sell to farmers with plummeting share prices and shaken outlooks. Sinking commodities prices for grains, cotton and livestock, along with doubts about a government rescue package for the U.S. banking system and growing recession fears, brought the credit crisis home to roost in agribusiness shares.
Fed Loans to Banks, Dealers, AIG Soar to $410 Billion Commercial banks and bond dealers borrowed $348.2 billion from the Federal Reserve as of yesterday, an increase of 60 percent from the prior week amid a worsening credit freeze. Loans to commercial banks through the traditional discount window rose about $10 billion to $49.5 billion as of yesterday, the Fed said in a weekly report today. The total surpassed the previous record after the 2001 terrorist attacks.
Wachovia Limits Colleges' Access to $9.3 Billion Fund Wachovia Corp. curbed access to a $9.3 billion investment fund used by more than 900 colleges to pay salaries, maintenance and other expenses and said it plans to sell the portfolio by the end of the year. Colleges can redeem only 34 percent of their investments in the short-term Commonfund because of the "liquidity squeeze," said Laura Fay, a spokeswoman for Charlotte, North Carolina- based Wachovia, in an interview.
Credit freeze puts businesses on thin ice Firms small and large face drastic cutbacks as banks decline to lend the money that keeps the wheels of commerce turning. Janet Hildreth is gearing up for Black Friday at her San Francisco flooring company. Orders have plunged so precipitously that she is laying off half of her 40-person staff at the end of this week -- the first such cuts in the 36-year history of Tree Lovers Floors Inc. Hildreth had intended to get through the rough patch by using her $250,000 home equity line of credit to help meet payroll. But her bank, Pasadena-based IndyMac, was seized in July by federal regulators. The institution recently froze her credit line, Hildreth says, even though she has excellent credit and more than $400,000 in equity in her home.
Factories, jobs market paint bleak picture U.S. factory orders tumbled in August and the number of workers seeking jobless benefits rose in the latest week to a seven-year high as trauma in financial markets threatened to accelerate a deep downturn in the world's largest economy.
Toyota Falls to Three-Year Low After New Loan Program Toyota Motor Corp., the world's second-largest carmaker, fell to a three-year low after it offered no-interest loans on 11 models in the U.S., the first time the company has used free financing across so many models. Starting this week through Nov. 3 customers with "good credit" can take the loans lasting between 36 months and 60 months, spokesman Xavier Dominicis said.
More sellers are growing desperate as homebuying stalls locally The owner of a town house in Factoria put his place on the market a year ago, dropped the price repeatedly and accepted two seemingly solid offers that fell through at the last minute. Less than two weeks from foreclosure, he got a third offer that he hopes will hold up. A couple living high in the Bellevue hills are by no means desperate, but they've dropped their price by more than $200,000 and still haven't seen an offer they like.
Mortgage lifeline is thrown to homeowners Federal program set up to prevent foreclosures The government kicked off a program yesterday that aims to prevent foreclosures by letting an estimated 400,000 troubled homeowners swap their mortgages for more affordable loans. Lenders, rather than borrowers, will decide whether to participate in the program, which requires them to take a loss on the initial loan. The $300 billion, three-year program is designed to help borrowers who owe more on their loans than their homes are worth.
Home prices are forecast to slide for 2 more years Homeowners already coping with an uncertain credit market and falling real estate values got more discouraging news yesterday when PMI Mortgage Insurance Co. said home prices in San Diego County are likely to continue dropping for another two years. The firm said it considered 17 of the largest 50 metro areas in the United States to be at high risk of price declines, with San Diego County's risk at nearly 96 percent. Projected price drops are largely the result of spikes in foreclosures and rising unemployment.
Greenspan Says Markets to Recover as Investors Return Former Federal Reserve Chairman Alan Greenspan said financial markets and the economy will recover "sooner rather than later" from the worst turmoil in seven decades. "Trust will eventually reemerge as investors dip hesitantly back into the marketplace," Greenspan said today in a speech at Georgetown University's law school in Washington. "From that point, history tells us, financial and economic revival sets in. I suspect it will be sooner rather than later." Greenspan urged lawmakers last week to back "extensive" measures to tackle the worst financial crisis since the 1930s and head off a recession.
Financial Crisis: So much for tirades against American greed Ambrose Evans-Pritchard says it is ironic that European banks have turned out to be deeper in debt than their US counterparts. It took a weekend to shatter the complacency of German finance minister Peer Steinbrück. Last Thursday he told us that the financial crisis was an "American problem", the fruit of Anglo-Saxon greed and inept regulation that would cost the United States its "superpower status". Pleas from US Treasury Secretary Hank Paulson for a joint US-European rescue plan to halt the downward spiral were rebuffed as unnecessary.
U.S. Rules Out Compromise on North Korea Nuclear Inspections The U.S. said North Korea must submit to international inspections of its nuclear sites, as envoy Christopher Hill continued talks in Pyongyang today aimed at salvaging the disarmament process. Six-party negotiations have been deadlocked since mid- August due to a dispute over how to check the extent of North Korea's nuclear weapons program. Agreement on a verification protocol is an "irreducible component of the six-party process moving forward," State Department spokesman Sean McCormack told reporters in Washington yesterday.
China tangled up in red, white and blue China is keenly following the Democratic and Republican tickets in the United States presidential elections - the Chinese Communist Party (CCP) even sent Ma Hui, director for the Americas at the CCP Central Committee's International Department - to observe the Democratic National Convention at the invitation of the National Democratic Institute, marking the first time that the CCP has participated in an American political party convention.
Palestinians accept Olmert peace offer Palestinian leader Mahmoud Abbas on Wednesday said that the recent peace offer made by Israeli Prime Minister Ehud Olmert is enough to get a final status agreement signed, but recognized that the outgoing Israeli leader does not have the ability to implement the proposal. "We could have peace in two days" if Olmert's offer could be implemented, Abbas told a group of Muslim clerics at the tail end of the Islamic holy month of Ramadan. . . . Olmert offered to make up the difference by giving the Palestinians 5.5 percent of sovereign Israeli land. The proposed deal also included a full withdrawal from the Golan Heights.
Ex-U.S. weapons hunter: Iran 2-5 years from atomic bomb Iran is two years to five years away from being able to produce a nuclear weapon, the former head of the U.S. weapons-hunting team in Iraq said Wednesday. But David Kay said the U.S. should not consider bombing Iranian nuclear facilities unless the weapon was about to be transferred to a terrorist group.
Egypt to host 'Annapolis 2' peace summit in November An international summit is to be held in Egypt in November, with representatives from Israel, the Palestinian Authority and the members of the Quartet - the United States, Russia, the European Union and the United Nations. According to a senior official in Jerusalem, the Israeli and PA participants will brief the Quartet over progress made in the ongoing peace talks. The gathering is said to be the result of a compromise between the U.S., Israel and the Palestinians.
Palin and Biden clash over economy In one of the most anticipated vice-presidential debates in US political history, Sarah Palin and Joe Biden met for the first time on Thursday night, focusing on pushing the policies of their senior running-mates. . . . It therefore covered both domestic and foreign policy topics. It generated huge public interest after Ms Palin, a virtual unknown on the national stage before John McCain selected her a month ago as his Republican running-mate, blundered in a number of pre-debate interviews.
Biden, Palin Clash Over Taxes, Iraq in Their Debate Vice presidential candidates Sarah Palin and Joe Biden squabbled over tax policy, the war in Iraq and the role of diplomacy while focusing most of their first and only debate on the candidates at the top of the tickets. Biden, Democrat Barack Obama's running mate, blamed the lagging economy on President George W. Bush and criticized Republican John McCain's plan to extend Bush's tax cuts for the wealthy. "The economic policies of the last eight years have been the worst economic policies we've ever had," Biden said. Palin defended McCain, saying her experience as governor of Alaska showed that cutting taxes can spur the economy. She criticized Biden and Obama for backing tax increases and outlining billions in new spending, saying it's a "backwards way of trying to grow our economy."
Biden: Bush Mideast policy is failure Palin: Mideast will top our agenda The U.S. vice presidential candidates were both effusive in their support for Israel during their debate in St. Louis on Thursday, but Democratic Senator Joe Biden slammed the current administration for "abject failure" and said that his rival was offering nothing different. Republican Governor Sarah Palin, however, vowed that the Mideast would be "top of the agenda" with John McCain as president. Biden described himself as Israel's best friend in the U.S. Senate, warning that forcing Israel into a diplomatic process had backfired for President George W. Bush. . . . In the Middle East, Biden said, "the only thing on the march is Iran." Palin stressed that "a two-state solution is the solution," and that the Mideast peace process "will be top of the agenda in a McCain-Palin administration." Referring to Iran's threats to wipe Israel off the face of the earth and echoing comments by her running-mate, the governor said: "We have got to assure them [Israel] we will never allow a second Holocaust."
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Thurs 10.02.2008
Adding Sweeteners, Senate Passes Bailout Plan The Senate strongly endorsed the $700 billion economic bailout plan Wednesday, leaving backers optimistic that the easy approval, coupled with an array of popular additions, would lead to House acceptance by Friday and end the legislative uncertainty that has rocked the markets. In stark contrast to the House rejection of the plan on Monday, a bipartisan coalition of senators — including both presidential candidates — showed no hesitation in backing a proposal that had drawn public scorn, though the outpouring eased somewhat after a market plunge followed the House defeat. The Senate margin was 74 to 25 in favor of the White House initiative to buy troubled securities in an effort to avoid an economic catastrophe.
EMERGENCY ECONOMIC STABILIZATION ACT OF 2008 (HR 1424) Purpose: In the nature of a substitute. IN THE SENATE OF THE UNITED STATES—110th Cong., 2d Sess. H. R. 1424 To amend section 712 of the Employee Retirement Income Security Act of 1974, section 2705 of the Public Health Service Act, section 9812 of the Internal Revenue Code of 1986 to require equity in the provision of mental health and substance-related disorder benefits under group health plans, to prohibit discrimination on the basis of genetic information with respect to health insurance and employment, and for other purposes.
The Bailout is Approved So Now It’s Time to Buy Gold Investors are sure getting their share of information overload. In just two months, the economic landscape in America has markedly changed. It will change in the rest of the world, too. And not for the better, despite the pleasantly surprising news that the U.S. House of Representatives actually rejected the $700 billion bailout - the Treasury's latest harebrained idea. Maybe it demonstrates there is a limit to how much the American people will tolerate, at least from the greedy capitalists on Wall Street. After all, it is not like the plan was defeated because the public has grown tired of government interventions and schemes. It just did not like bailing out the brokers.
Americans on the Bailout: We're Pissed! It's pretty obvious to anyone paying attention a majority of Americans oppose the bailout plan passed last night by the Senate and heading toward the House. As discussed here and here, many Americans seem to understand the "real" economy -- i.e., Main Street -- will suffer if the plan fails, but they still oppose it and view it as a bailout for Wall Street "fat cats." "I've lost my money because of these idiots, now they want me to subsidize their losses too???," Yahoo! Finance user "hoser48" wrote yesterday. "They can go to hell with the common man, we will all live together as equals then. A bailout is not the answer." Clearly that sentiment isn't universal, and Monday's 778 Dow dive did change many people's view. But it's also true the mood in the country is ugly, and it didn't happen overnight.
SENATORS AGAINST THE BAILOUT: Bernie Sanders (I-VT)
The TRUTH About The Bailout You have heard that its all "American Gambles" You have been told repeatedly by George Bush and Henry Paulson that this bill is about a "rescue" of Main Street, not Wall Street. You have been lied to repeatedly. The bill The Senate intends to try to ramrod down your throat is neither about Main Street or really even about Wall Street. You are going to get VERY angry. Sit down before you read further. ""Hundreds of billions of dollars are going to bail out FOREIGN INVESTORS. They know it, they demanded it, and the bill has been carefully written to make sure that can happen." - Brad Sherman , D-California" That's right folks. You are going to have $700 billion - about 25% of the total federal budget - put on your personal credit card (via taxes forever) in order to bail out foreign investors.
Bailout marks Karl Marx's comeback Marx’s Proposal Number Five seems to be the leading motivation for those backing the Wall Street bailout In his Communist Manifesto, published in 1848, Karl Marx proposed 10 measures to be implemented after the proletariat takes power, with the aim of centralizing all instruments of production in the hands of the state. Proposal Number Five was to bring about the “centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.” If he were to rise from the dead today, Marx might be delighted to discover that most economists and financial commentators, including many who claim to favour the free market, agree with him. Indeed, analysts at the Heritage and Cato Institute, and commentators in The Wall Street Journal and on this very page, have made declarations in favour of the massive “injection of liquidities” engineered by central banks in recent months, the government takeover of giant financial institutions, as well as the still stalled US$700-billion bailout package. Some of the same voices were calling for similar interventions following the burst of the dot-com bubble in 2001. “Whatever happened to the modern followers of my free-market opponents?” Marx would likely wonder.
Senate Leaders Move Ahead With Bailout Package, Despite Voter Calls and Outrage Online Widespread anger and opposition to the Senate's imminent approval of the Bush Administration's bailout proposal continued to spread online and overwhelm congressional offices in a flood of e-mails, faxes and phone calls on Wednesday. Despite the online backlash, Senate leaders plan to approve a 400-plus page bill that adds several unrelated provisions to gain support for the legislation in the House. Voters and advocacy groups are using online petition tools, protest sites like I'm Mad as Hell, and social networking applications such as Linked In, to urge citizens to call members of Congress, and to gather names to show representatives the breadth and depth of their disapproval. "The Great Bailout steals money from U.S. taxpayers to bail out people around the world who freely chose to gamble on the financial industry," wrote David Martin, a trader and entrepreneur, in a note to Republican presidential candidate John McCain.
Senate Passes Bailout Bill The Senate accomplished what the House on Monday could not by passing, 74-25, a $700 billion Wall Street rescue plan Wednesday night. The package that won overwhelming support among Members in both parties will now be sent to the House for another vote Friday. The vote echoed Senate rhetoric throughout the day, and the strong support on the floor vindicated Majority Leader Harry Reid's (D-Nev.) surprise Tuesday night decision to bring it up and add a tax-extenders package to it. Forty Democrats and 34 Republicans voted for it, while 10 Democrats and 15 Republicans opposed it. Several Senators facing strong re-election challenges – such as Sen. Norm Coleman (R-Minn.) and Sen. Gordon Smith (R-Ore.) – voted for it. The only endangered Democratic incumbent, Sen. Mary Landrieu (La.), voted against the bill. Most of the “nay” votes came from the more conservative and liberal wings.
Bailout Bill Sent Back to House After Senate Passage The U.S. Senate passed a $700 billion financial-market rescue package loaded with inducements for the House of Representatives to approve the measure, following the House's rejection of an earlier version. The legislation, approved last night on a 74-25 vote, authorizes the government to buy troubled assets from financial institutions rocked by record home foreclosures. It contains two provisions favored by House Republicans: One raises the limit on federal bank-deposit insurance; the other reiterates the authority of securities regulators to suspend asset-valuing rules that corporate executives blame for fueling the crisis.
House girds for second try on financial rescue House girds for second chance with bigger, sweeter $700 billion rescue after Senate passes it Now for the big do-over. House members get another chance to vote on a bill that many would like to avoid: a massive financial rescue plan that has infuriated millions of voters but is described by President Bush and congressional leaders as vital to keeping the economy from sliding into a deep recession. This time, it comes back to the House loaded with billions of dollars worth of tax cuts and other sweeteners. They are meant to attract at least a dozen House members who voted against the measure Monday, when it failed, 228-205, triggering a record drop in the stock market.
Main number: 202 225 -3121 - ask for your elected officials in D.C.
Rescue package still faces House hurdles Senators hoping revisions to bill can win enough support to ensure passage By adding in $100 billion in tax breaks and other "sweeteners" to a the stalled financial rescue package, Senate leaders are looking to the House, hoping to win over the 12 votes needed to reverse But no matter how it's altered, the package still faces substantial hurdles when the House takes it up again, probably Friday. Despite the shock of Monday’s stock market plunge after the bill failed, House opposition reflects deep political fault lines that, for more than a year, have undercut effective measures to alleviate the housing recession and credit crisis that led to Wall Street's meltdown.
Who Needs Congress? Other Pathways Out of the Financial Crisis Betting on the sagacity of Congress is risky, to say the least. So let's assume the worst and imagine that the $700 billion bailout doesn't pass anytime soon. What happens then? Is it true that "this sucker could go down," as President Bush put it last week? Or are there other pathways out of the financial crisis? Imagining financial life without the $700 billion rescue is a useful exercise because it helps clarify the baseline issues in this crisis. We are beginning a painful process of deleveraging our debt-addicted economy, but that's in many ways beneficial. Martin Wolf noted in the Financial Times that U.S. household indebtedness jumped from 50 percent of gross domestic product in 1980 to 100 percent in 2007, while financial sector debt increased from 21 percent of GDP to 116 percent over the same period. We have all been participants in this one, I'm afraid, and the appropriate, if painful, cure is to save a bit more and consume a bit less.
Senate Passes Energy Tax Breaks as Part of Markets Rescue The U.S. Senate approved tax cuts valued at more than $100 billion, including a host of alternative energy credits and dozens of breaks for businesses and individuals, as part of its $700 billion bank rescue bill. The legislation, which the House likely will act on tomorrow, passed the Senate on a 74-25 vote. It would give the Treasury Department authority to buy troubled assets, chiefly mortgage- backed securities that are burdening financial institutions. The Senate added the tax provisions to woo Republican votes in the House, where an earlier version of the bailout plan failed by 12 votes on Monday. The tax package would spare 24 million American households from a scheduled alternative minimum tax increase this year, renew credits for business research, and extend $17 billion in energy incentives.
Crisis Puts Tax Moves Into Play A long-stalled tax bill offering incentives for the use of renewable energy and providing tax breaks to millions of families and businesses gained momentum on Wednesday, when it was strapped onto emergency legislation to shore up the nation’s financial system. By a vote of 74 to 25, the Senate passed the legislation, including the tax breaks, on Wednesday night. The tax provisions may make the bill more attractive to some Republicans in the House, which rejected a bailout bill in a stunning vote on Monday. The Senate version of the bailout package was amended, at the last minute, to include a wide range of tax breaks, as well as financial aid for certain rural schools and a measure requiring health insurance companies to provide more generous coverage to many people with mental illnesses.
Bailout a Done Deal, So What Happens Now? Now that the government has been terrified into rubber-stamping the bailout, what happens now? In our opinion, here's the most likely scenario:
Hank Paulson & Co. survey the banking industry and decide who will stay and who will go. JP Morgan (JPM), Citi (C), Wells Fargo (WFC), and Bank of America (BAC) will stay. Goldman (GS) will probably stay. Morgan Stanley (MS) might stay. Everyone else in trouble could go. The government doesn't need to save all banks. It just needs to save some.
Within a month or two, Paulson buys $250 billion of crap assets. He pays more than market value, but not an egregious amount more (because the public will be watching these early rounds). Over the next six months, he buys $700 billion of assets...and then he--or his successor--asks Congress for more money.
Fed Considers Rate Cut as Recession Fears Mount $$ Federal Reserve officials are weighing further interest-rate cuts, even if Congress passes a $700 billion rescue plan, in the face of a deteriorating economic outlook and severely strained financial conditions. The Fed's willingness to consider additional cuts marks a turnaround from the past few months, when soaring food and energy prices turned its attention to inflation risks. At a regular September meeting, after oil prices had receded, officials still declined to move the central bank's federal-funds target rate from 2%.
$1 Quadrillion of Unregulated Debt At Core of Coming Derivatives Crisis Despite all the blather and swearing-on-the-Bible pronunciamentos from establishment “pundits,” our house-of-cards financial system is not fundamentally sound. Expect such indices as the Dow to tumble even much lower when the Pandora’s box of derivatives is fully opened. Believe it or not, the Dow is still not far from its all-time peaks, with a lot further to fall. The depression is still in its early stages. We are looking at $1 quadrillion of unregulated debt, with much of it at risk. (And we used to think $1 trillion was a lot.) These are literally inconceivable sums. Counting one dollar per second, it would take 32 million years to count to one quadrillion.
Inflation in stereo The inflation in consumer prices that is going to destroy the United States, as a result of the government deficit-spending, financial bubbles and the Federal Reserve creating excess money and credit to pay for it, all will be felt in different ways, such as what John Hartleb at outrageousaudio.com describes as "All of the companies that we deal with are imposing many different rules and price increases across the board", such as having to order in bigger quantities to get the manufacturer to pay for shipping charges, "and the prices on product have risen 12% or more across the board." Also, inflation is felt in "a big retraction in 'Warranty Coverage'", such as the manufacturers now actually voiding the warranty because the returned defective device seems to have been "abused" by the customer.
Recapitalise the banking system By George Soros The emergency legislation currently before Congress was ill-conceived – or more accurately, not conceived at all. As Congress tried to improve what Treasury originally requested, an amalgam plan has emerged that consists of Treasury’s original Troubled Asset Relief Programme (Tarp) and a quite different capital infusion programme in which the government invests and stabilises weakened banks and profits from the economy’s eventual improvement. The capital infusion approach will cost tax payers less in future years, and may even make money for them. Two weeks ago the Treasury did not have a plan ready – that is why it had to ask for total discretion in spending the money. But the general idea was to bring relief to the banking system by relieving banks of their toxic securities and parking them in a government-owned fund so that they would not be dumped on the market at distressed prices. With the value of their investments stabilised, banks would then be able to raise equity capital.
Central Banks Starting to Buy Gold? old rose yesterday despite continuing dollar strength and falling oil prices ( gold closed at $880.80 up $6.80 while s ilver closed at $12.71 up 53 cents ). Once again in after hours trading there was determined selli ng which pushed the price as low as $862/oz in Asia prior to rallying in early European trade to over $870 /oz. There appear to be good support in the $850/oz to 860/oz region but given the unprecedented nature of the volatility in global financial markets anything is possible in the short term and leveraged trading is not advisable . Interbank pressures remain elevated with a further rise in three month rates led by dollar Libor rising 4.15% and premiums for European bank bonds are now at record levels. Thus, financial and systemic risk remains elevated which will support gold. But w ith gold up significantly in the last 3 weeks it may need to consolidate between $850 and $910 prior to rechallenging $1,000/oz in the coming weeks.
CHINA'S DOLLAR MILLSTONE Gold, manipulation and domination All over the world, trade in gold had been the favored device for evading national foreign exchange controls from the end of World War II to 1971. In 1946, the Bretton Woods regime adopted in 1944 became operational, thereby forbidding the importation of gold for private speculative purposes in signatory nations. Britain was a signatory but Portugal was not. Thus a gold-smuggling operation between the Portugal colony of Macau and the British territory of Hong Kong flourished until 1974, two years after the United States took the dollar off gold, in effect abolishing the Bretton Woods system of fixed exchange rates, when Hong Kong abolished a law that requires a special license to import gold for re-export. Tiny Macau became one of the world's biggest importers and re-exporters of gold during this period.
Creating a great depression Financial downturns are unpleasant, but they do not need to turn into the Great Depression, which historians now agree was the product primarily of a number of egregious policy mistakes. For almost 80 years, we have thus felt safe from a recurrence of the "Great Depression" phenomenon, primarily on the basis of "we have learned from those mistakes - nobody would today be so stupid." Sadly, recent events suggest that this optimism may have been misplaced and that politicians, never the most economically intelligent of mankind, may be working towards the considerable feat of constructing a Great Depression - Mark II. The bull market before 1929 was sold for a generation as unprecedented in size, representing an apogee of speculation that had never been seen before and would never be seen again. We now know that to be rubbish. Radio Corporation of America, the Google or Microsoft of the period, never sold for more than 28 times earnings, a generous valuation to be sure but nothing compared with the stratospheric prices reached by the more fashionable dot-coms in 1999-2000.
Obama: Hoover’s true heir Hoover's rush to 'do something' soon proved extremely dangerous to the U.S. and world economies The United States Congress appears determined to let Treasury Secretary Paulson do some speculative trading in mortgage-backed securities with $700-billion of borrowed money. Reasonable people have reasonable arguments for and against this idea. But unreasonable people prefer unreasonable arguments, like saying we’re in for another Great Depression unless the United States "does something" right away.
Heads I Win, Tails You Lose: Why the Senate Bailout Bill Will Fail Taxpayers My sister lives in a landmark building in Coral Gables, Fla. There was a fire in one apartment in the building. After that fire was brought under control, the fire department - for some unknown reason - dropped a hose in the burned apartment, and left the water running … for hours. That inane maneuver destroyed many apartments, crippled the building’s infrastructure and resulted in the building being temporarily condemned. The entire building was closed down for many months. Every person who lived there had to relocate. My sister, fortunately, had the wherewithal to take up temporary residence in the world-famous Biltmore Hotel. But others weren’t so lucky.
Burning Down The House: What Caused Our Economic Crisis?
The fatal banker’s fall Bankers have never been popular, but Washington’s rejection of the $700bn bail-out for banks on Monday recalled the odium that attached to them in the Great Depression. Americans rightly wonder why their taxes should be used to rescue bankers from their folly. In the 1930s, bankers were called “banksters” – to rhyme with “gangsters” – as a result of 1920s swindles such as the sale to small investors of Peruvian bonds that became worthless. It is odd, as well as infuriating, that investment bankers managed to take the public for such an expensive ride again. Only 10 years ago, the author Ron Chernow declared the “death of the banker”, arguing that Wall Street’s grip on the financial system was ebbing.
The Case of the Disappearing Banking Industry During the crash of '29, Winston Churchill, who just happened to be in New York at the time reported: "A gentleman cast himself down 15 storeys and was dashed to pieces." This past weekend a London banker "haunted by the pressures of dealing with the credit crunch," according to the Daily Mail, was the first reported victim of the credit crisis. He "died in the path of a 100mph express train at the Taplow railway station," said the paper. Churchill had a way with words: "The United States invariably does the right thing, after having exhausted every other alternative," he said. And yesterday, the stock market thought Churchill was right. Congress was running out of time…and alternatives. Investors figured the fix would be in soon. The party line is that the world needs a bailout. Everyone says so. And now the Senate, in its magisterial wisdom, has vowed to get back on the case until it comes up with something.
Libor Rises a Fourth Day as Banks Hoard Cash After Bill Passed The cost of borrowing in dollars in London for three months rose for a fourth day, signaling that banks haven't started to lend after the U.S. Senate approved a $700 billion plan to rescue beleaguered financial institutions. The London interbank offered rate, or Libor, that banks charge each other for such loans climbed 6 basis points to 4.21 percent today, the highest since Jan. 11, the British Bankers' Association said. The corresponding rate for euros advanced 3 basis points to a record 5.32 percent. The Libor-OIS spread, a gauge of cash scarcity among banks, widened to a record.
Fed May Lose $6 Billion on Bear's Assets, Bank of America Says The U.S. Federal Reserve may lose as much as $6 billion on a portfolio of mortgage-backed assets it took over from Bear Stearns Cos., according to Bank of America Corp. analysts. The Fed will today announce its quarterly estimate of the fair value of Maiden Lane LLC's $30 billion of holdings that JPMorgan Chase & Co. considered too risky when it acquired Bear Stearns in March, Bank of America analysts Jeffrey Rosenberg and Hans Mikkelsen wrote in a client note. The central bank valued the assets at $29 billion as of June 30, according to the report.
Danger - Ben and Henry at work The US House of Representatives' 228 to 205 rejection of the financial bailout plan put forward by US Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke may usher the end of inflationary policies and a readiness to address more orderly financial and economic adjustment. But for now one thing is for sure. The bailout is dead. Long live the bailout! After so much hype about the absolute need for the bailout and with so much political capital on the line, there may be little choice but to pass some form of a financial rescue, albeit drastically modified and reduced in size. Financial markets around the world had expected the bill to pass and its rejection may now fuel more financial turmoil than might have been previously expected, something that US politicians may not be able to stomach. So where did Paulson and Bernanke go wrong and where might we go from here?
Deposit Plan Will Cost Banks More When banks were flush, most of them paid nothing for a golden government guarantee. Bank failures were so rare that, for a decade, the Federal Deposit Insurance Corporation waived most of the premiums it normally would have collected to insure bank deposits. But now the government plans to raise the amount of deposit insurance that consumers have, leaving the F.D.I.C. — and potentially taxpayers — in a bind. After forgoing premiums from 1996 to 2006, the agency must now turn to struggling banks and ask them to pay more, putting more pressure on the industry. If a large number of banks fail, the F.D.I.C. may have to turn to the Treasury for more money, forcing taxpayers to foot the bill. "It’s unfortunate that we didn’t have more time to build up the fund in the good times,” said Sheila C. Bair, the F.D.I.C. chairwoman, in an interview Wednesday. “It is what is, and we are dealing with the situation."
"A tourniquet for a hemorrhaging economy" There will be many parties watching with bated breath to see whether the Senate will pass its huge combo bailout-energy-tax bill on Wednesday night. Among them are some you might not connect directly with Wall Street: Ford, GM, Toyota ... On Wednesday, the auto industry reported horrible monthly sales numbers for September. Ford and Toyota both reported sales declines of more than 30 percent, measured against last year -- making September's performance the worst of 2008. Most Americans are familiar with some of the reasons for this dismal performance: high gas prices, fuel inefficient cars, a slumping economy. In recent months a new wild card has joined the deck -- the credit squeeze. It has become dramatically more difficult for would-be car buyers to get financing. The New York Times reported on Wednesday that in 2007 "early 83 percent of applications for auto loans in the United States were approved ... but so far this year, the approval rate has plunged to 63 percent." And even if loans do get offered, the interest rates are steep.
Another shoe to drop Bad credit-card debt could be next shot to economy Credit-card debt is on the brink of imploding and will be the next storm to hit the fragile finance industry, an investment research firm predicted this week. According to Innovest StrategicValue Advisors, banks will charge off $18.6 billion in delinquent credit-card accounts in the first quarter of 2009 and $96 billion in all of 2009, more than double the research firm's forecast for all of this year. Innovest projects that amount would be high enough to damage some of the biggest card issuers. Credit-card charge-offs are "defying gravity" when compared with the problems in the mortgage market, according to Gregory Larkin, senior banking analyst for Innovest. But that will change as they catch up with mortgage charge-offs, which have spiked eightfold since the third quarter of 2007.
Republicans cannot spend their way out of crisis Hank Paulson’s bail-out of the financial industry will cost taxpayers $700bn. Some believe that the bail-out signals an abandonment of the Reagan Republican goal of limited government. That debate is under way. Those who think Republicans have ditched their limited-government aspirations point to the Bush administration’s reflexive “throw money at it” response to every crisis. In 2001 the first response to September 11 was not to attack al-Qaeda, but to pass a $20bn domestic spending programme. The response to Hurricane Katrina was $85bn in public spending. The collapse of AIG, the insurance giant, cost $85bn; Freddie Mac and Fannie Mae a further $42bn. And now we have the pièce de résistance – the opening bid of $700bn for the financial bail-out of Wall Street. Got a problem? We throw money at it.
Home mortgage-swap program starts 3-year effort to help borrowers who owe more than their houses are worth The government kicked off a program Wednesday that aims to prevent foreclosures by letting an estimated 400,000 troubled homeowners swap their mortgages for more affordable loans. Lenders, rather than borrowers, will decide whether to participate in the program, which requires them to take a loss on the initial loan. The $300-billion, three-year program is designed to help borrowers who owe more on their loans than their homes are worth. To qualify, borrowers must be spending more than 31% of their income on mortgage payments. Loans made this year are excluded, except for those completed on Jan. 1. Borrowers must have made six months of payments on their loans.
8 in 10 fear hit from financial crisis Most fear financial crisis will affect them directly, yet 45 percent nix bailout Not just Wall Street is running scared. The consequences of the financial meltdown now are sinking in with ordinary Americans, who worry whether their jobs, home values, children's futures and retirement plans are at risk, according to a poll out Wednesday. Eight in 10 fear the crisis will affect them directly, according to an AP-GfK poll. Yet 45 percent of all adults still opposed the proposed government bailout. Some 38 percent were in favor of the $700 billion financial-market rescue plan and 16 percent were not sure in the poll, which was conducted Sept. 27-30. "I'm really mixed on it," said David Couch, 49, a lawyer in Little Rock, Ark. "I think probably we need it to stabilize the markets but I really think there needs to be a lot of provisions attached to it so that it won't happen again and the people who were responsible won't profit from it," said Couch.
Revolver may misfire when frozen Revolving loans could boomerang on banks Revolvers: What’s the next shoe to drop in the credit crunch? Revolving loans may be coming untied. Banks have extended some $6 trillion of corporate loans worldwide that haven't yet been drawn, according to Citigroup analysts in London. Banks only have to hold minimum reserves against undrawn revolving loans and back-up lines of credit for commercial paper programmes. A widespread and sudden drawdown of these loans could give banks fresh capital problems. Many company treasurers are probably already nervous about their ability to tap debt markets, and even about the health of banks that have promised them loans. They may be tempted to tap revolvers and get the cash while they can - especially if something happens to alarm them, like the failure of the latest incarnation of the US bailout plan.
Money Market Funds Fall from Grace Money market funds are not being viewed by investors as the safe havens they used to be. The Investment Company Institute's most recent statistics said total money market fund assets decreased by $15.65 billion to $3.398 trillion for the week ending Sept. 24. This comes even as the Federal Deposit Insurance Corp. has offered an insurance program to the mutual fund companies to cover money market funds. The plan, which is light on details, would offer a money market insurance plan for a fee. Money market funds are not covered by the FDIC in the event of a bank failure. For years, the product has been seen as a safe place to put cash and earn a bit more interest than a savings account at a bank.
Private sector cuts 8,000 jobs in September U.S. private employers cut a surprisingly low 8,000 jobs in September, a report by a private employment service said on Wednesday, although the data did not include the financial chaos of the past two weeks. ADP Employer Services also said it revised the number of jobs lost in August to 37,000 from the originally reported loss of 33,000. The ADP report was expected to show 60,000 private-sector jobs were lost in September, according to the median of estimates from 29 economists surveyed by Reuters.
Welcome to Hedge Fund Nation How we're all about to become Wall Street investors The Wall Street bailout is alive again. In an effort to make the $700 billion bailout palatable, the architects of the law have larded it up with all sorts of goodies, such as increasing the levels of deposit insurance, sparing some taxpayers the ravages of the Alternative Minimum Tax, and extending tax breaks for alternative energy. Henry Paulson's three-page sprig has sprouted into a 451-page Christmas tree. What's most interesting about the Emergency Economic Stabilization Act of 2008 is just how much it reads like a prospectus for a hedge fund. In the past, hedge funds—secretive pools of capital—were open only to qualified (read: rich) investors. But with the stroke of a pen, President Bush will soon make all American citizens investors in the world's biggest fund—and a democratic one, at that. Taxpayers won't just be the investors. We'll own the management company too. Best of all? For at least a few months, we'll have the former CEO of Goldman, Sachs run our investment for a very small fee. Call it the "Universal Hedge Fund."
Fallout spreads across nation The credit crisis that exploded last month left a blast crater in an already sinking economy, and some of the victims emerged to tell their tales Wednesday. Thousands of finance jobs were lost from the New York epicenter, where Wall Street firms folded en masse, to the West Coast, where two major banks were closed. Sales at Ford, Chrysler and other automakers plummeted by a third as customers and dealers reported being unable to get loans — threatening the already teetering finances of Detroit's Big Three.
Headed for a Sudden Stop iTulip has since 1999 warned that in a protracted financial crisis the US, a net debtor, is vulnerable to withdrawal of foreign capital and capital flight, producing inflation and a severe economic contraction known in the economics literature as a Sudden Stop. We called our theory Ka-Poom Theory. It defines two distinct crisis periods. One, a six to 12 month period of disinflation that typically proceeds a sharp inflationary period of repatriation of capital by foreign investors and capital flight by residents. Repatriation and flight both cause and result from currency depreciation in a rapid, self-reinforcing process.
36 Hours of Alarm and Action as Crisis Spiraled "Panic can cause a prudent person to do rational things that can contribute to the failure of an institution." — William A. Ackman of the hedge fund Pershing Square Capital Management. It was early on Wednesday, Sept. 17, when executives at Pershing Square, Bill Ackman's hedge fund, began getting nervous calls and e-mail messages from investors. Mr. Ackman, 42, has been a top Wall Street player for 15 years, making his clients — and himself — billions of dollars. But now, Mr. Ackman and his colleagues were taken aback by what they were hearing. His big investors were worried about all of the Pershing assets held by Goldman Sachs, the blue-chip investment bank, whose stock had come under siege. Never mind that Goldman kept Pershing’s assets in a segregated account, and that the money was safe. And never mind that Mr. Ackman believed Goldman was the world’s best-run investment bank and would come through the credit crisis unscathed.
False Values, False Economy, and the Devil to Pay Our wretched economy of false valuations cannot continue much longer. It is the domestic counterpart of President Bush’s past friendship with Vladimir Putin. It is the fantasy world of an everlasting bull market and “successful” government bailouts. The political leadership in America has demonstrated that it doesn’t understand economics. They cannot solve the present crisis unless they go back to school and consult the wisdom they have so long neglected. They have built their post- Cold War world on a false boom, on false “partnerships” with enemies. They have permitted a policy of credit expansion without end. “Credit expansion,” wrote the Austrian economist Ludwig von Mises, “is the governments’ foremost tool in their struggle against the market economy. In their hands it is the magic wand designed to conjure away the scarcity of capital goods … and to make everybody prosperous.” But everyone cannot be prosperous. The boom created by credit expansion cannot last
Vladimir Putin blames America for world economic crisis Vladimir Putin, the Russian Prime Minister, said yesterday that the irresponsibility of America’s financial system was to blame for the global economic crisis, in what marks the latest episode in increasingly hostile relations between the two superpowers. Russia has been one of the biggest victims of this summer’s global banking crisis. Since May, the RTS, Moscow’s main index of shares, has lost 50 per cent of its value and in September the Kremlin was forced to pump $60 billion into its financial system as credit markets froze. Mr Putin said: “Everything happening now in the economic and financial sphere began in the United States. This is not the irresponsibility of specific individuals but the irresponsibility of the system that claims leadership.”
Latin America Economic Boom Threatened as Credit Freeze Deepens Latin America's fastest economic expansion in 30 years may be coming to an end as the global credit crunch stunts investment and squeezes demand for the region's commodities. "We're in a serious economic crisis," Colombian Vice President Francisco Santos said in an interview in his Bogota office. "Financing is going to get scarcer and scarcer, and that means that investment is going to be difficult to attract."
Wall St crisis gives bin Laden the last laugh The Wall Street bail-out puts US commitments in Afghanistan and Iraq in doubt Whenever the wind stops howling over the mountains of Tora Bora, a deep, rich chuckle can presumably be heard echoing down the valleys. If he is still alive, nobody will be enjoying the present plight of America more than Osama bin Laden. The anarchic carnage in the American financial and political system brings in sight a humiliating withdrawal and defeat in Afghanistan and Iraq. It even raises the possibility of the final collapse of the evil empire which Osama forecast. The US occupation of Iraq is costing $1bn every three days. The total spent so far is $800bn. This year's Senate appropriation for Iraq is $188bn.
America’s chance to kick its Asian addiction Did America hang itself with Asian rope? I put this to a Chinese official last week and, quick as a flash, he responded: “No. It drowned itself in Asian liquidity.” Asia’s part in America’s financial downfall has been two-fold. First, shiploads of cheap goods from China and other low-cost producers helped keep a lid on US prices. That lulled the Fed, with its tight focus on the consumer price index, into thinking it could have it both ways: high growth with low inflation.
Brussels calls for EU-wide response to financial crisis Days ahead of a meeting of the European members of the G8 for talks on the current financial turmoil, European Commission President Jose Manuel Barroso urged European governments to increase their co-operation to counter the crisis, and called for international oversight of financial markets. The challenge Europe is currently facing is not only "to inject liquidity into the markets," Mr Barroso told a news conference in Brussels on Wednesday (1 October). "We also need to inject credibility into the markets – in terms of European and of global governance of the financial system," he said. And in order to restore confidence in the markets, a joint European action is "particularly important," the commission president added. Specifically, the president called for "a further strengthening of the supervision structures at the European level."
In defence of Anglo-Saxon capitalism Those who never liked 'Anglo-Saxon' capitalism are feeling smug. Marxists, fans of 'Rhineland' capitalism and those who simply cannot stand American power are crowing. "The US will lose its status as the superpower of the world financial system," says Peer Steinbruck, Germany's finance minister. "Self-regulation is finished. Laissez-faire is finished. The idea of an all powerful market which is always right is finished," says France's president, Nicolas Sarkozy. The British academic (and sometime fan of Margaret Thatcher) John Gray proclaims that "in a change as far-reaching in its implications as the fall of the Soviet Union, an entire model of the government and the economy has collapsed." All this hyperbolic froth and windy rhetoric conceals a real danger for the European economy.
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