Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Mon 04.27.2009
How Does $9000 Gold Sound? In recent days the Canadian and Swedish central banks have joined the majority of other G10 central banks by indicating that they too may engage in quantitative easing now that the interest rates have been reduced to 25 and 50 basis points respectively. The ECB is wrestling with ways to extend its own form of quantitative easing and an announcement is likely at its next meeting on May 7th.
Gold Up Sharply as the Bear Market Rally Falters Gold finished the week up 5.1 per cent at $913 while silver jumped 8.4 per cent to $12.90 as precious metals became a safe haven from the faltering six-week old bear market rally. This left gold prices at their highest levels in three weeks but fell short of a third break of the $1,000 barrier. However, the precious metals clearly established their position as the place to be as the bear market rally breaks down.
The capital well is running dry and some economies will wither The world is running out of capital. We cannot take it for granted that the global bond markets will prove deep enough to fund the $6 trillion or so needed for the Obama fiscal package, US-European bank bail-outs, and ballooning deficits almost everywhere. Unless this capital is forthcoming, a clutch of countries will prove unable to roll over their debts at a bearable cost. Those that cannot print money to tide them through, either because they no longer have a national currency (Ireland, Club Med), or because they borrowed abroad (East Europe), run the biggest risk of default.
Americans Rally Nationwide to End the Fed “End the Fed” rallies were staged across the nation in more than two dozen cities April 25. Attendees protested in front of every one of the dozen Federal Reserve Bank branches and expressed support of Ron Paul’s H.R. 833, which would abolish the Fed, and H.R. 1207, which would provide an independent audit of the quasi-private central bank. Peter Schiff keynoted the rally in New York City, noting of the current economic bust: “The Federal Reserve was behind all of it and we’re not going to get to the root of our economic problems unless we get to the root cause, which is the Federal Reserve and the phony monetary system we now have.”
End The Fed Rally NYC 1/2 - Who is the CRAZY Guy?!!!
China turns IMF gold sales into a wet noodle There may be some misunderstanding about the increase in Chinese gold reserves. The bulk of that gold has come from purchases of their own domestic production, not open-market purchases, so the impact on the price is indirect. But because China is the largest gold producer in the world and it is retaining the bulk of its production for reserve diversification, the impact is significant.
Gold, Silver - Important Alert! The Gold Direction Indicator is flashing another buy signal. This indicates that the pull-back that started late February is probably finished. A new rally is about to start. Some of the monetary inflation that the Obama team is injecting into the system is starting to turn into price inflation. The stock market rally which had drawn attention and money away from the gold market is running out of steam.
Buy Silver.... Now “by 2010 … banks will have enormous raw materials for … inflation.” Dr. Feldstein is one of the economists (there are many) 1 concerned that the Fed will follow form and not be able to handle the expanded money supply once money multiplier (velocity) turns up. As I pointed out on Monday’s Morning Note, the St Louis fed multiplier has fallen 40%, the same decline as during the Depression. Now most believe, including Dr. Feldstein, that the global economic recession will run “somewhere into 2010.” In the meantime there is more than a hint of disinflation in the global “air.” In Spain it is outright deflation with 35% unemployment in the under 25 age group.
Unintended Consequences by Peter Schiff With much fanfare this week, Congress and the Administration began a series of actions designed to protect over-leveraged consumers from the high fees imposed by credit card lenders. As with most other initiatives devised by government, this policy will create a host of unintended consequences that will undermine the benefit the program hopes to create. Anyone who carries a credit card knows that billing practices have become much more aggressive, punitive, and seemingly arbitrary over recent years. Sadly, these fees have become one of the only means the companies can use to compensate for the increasing defaults on their unsecured loans.
Fed Scandal Puts The Us Dollar Under Virtual Attack.... ...on the forex market, and if the front page article in yesterday’s Wall Street Journal regarding the Bank of America’s President, Mr. Lewis, the former Treasury Sec’y, Mr. Paulson, and Dr. Bernanke is even half way toward the truth the dollarwill be under even further material selling. If what Mr. Lewis has accused Dr. Bernanke of…. being directly complicit in withholding information from the BofA’s shareholders and from the American taxpayers regarding the Bank’s problems with assimilating Merrill Lynch… is even tangentially correct, Dr. Bernanke is economic and political “toast.”
Dollar Wins Heads-or-Tails Toss on Growth or Weakening Economy Former Federal Reserve Chairman Alan Greenspan said five years ago that predicting currencies is no better than tossing a coin. A growing number of traders are betting that heads or tails, the dollar wins. Investors bullish on the U.S. economy say the dollar will strengthen as America recovers first from the global economic recession. Those who expect the longest contraction since the early 1980s to continue say the currency should appreciate as the haven from turmoil in world markets. Foreign investors bought a net $22 billion of U.S. financial assets in February, the Treasury Department said April 15.
The Fed Needs A TARP Bailout The Federal Reserve has released fresh information on what assets it took on via the bailout of Bear Stearns and AIG. Not surprisingly, it's a bunch of toxic sludge -- $74 billion worth -- and it's already taken about $9.6 billion worth of losses. The upshot. The Fed may need a bailout:
Summers Says U.S. Economy to Decline ‘For Some Time’ The U.S. economy will continue to contract “for some time to come,” said Lawrence Summers, director of the White House National Economic Council. “I expect the economy will continue to decline,” with “sharp declines in employment for quite some time this year,” Summers said today on “Fox News Sunday.”
End The Fed Rally NYC 2/2 Peter Schiff Speaks to Angry Crowd!
Bear, AIG Dumped $74 Billion in Subprime, CDOs on Fed The Federal Reserve took on more than $74 billion in subprime mortgages, depreciating commercial leases and other assets after Bear Stearns Cos. and American International Group Inc. collapsed. In its biggest disclosure of the securities accepted to stabilize capital markets, the Fed said yesterday it had unrealized losses of $9.6 billion on the assets as of Dec. 31. The bonds, swaps and notes were taken in from Bear Stearns, once the fifth-biggest Wall Street firm by capitalization, and AIG, which had been the world’s largest insurer.
Gold and China's Global Currency Threat to the U.S. Dollar . . . . The bulk of international trade transactions have nothing to do with the U.S. except through the use of the $ to denominate their trade. Approximately 75% of global trade is denominated in the U.S. $ in this way. But the volatility of the U.S. $ has distorted and damaged, this aspect of global trade. Thus has been created an ideal environment for gold to rise as its importance in the changing global monetary system grows again.
China's Bubble Will Burst. And Painfully One more bubble, please. After the bubbles in technology, housing, and commodities, we saw the mother of all bubbles: the one in global liquidity. The world economy seemed to require bubbles for its continued functioning. I get the distinct feeling that investors’ prayers are now being answered: There's a new bubble now - or an old one is being re-inflated, depending on your perspective even as I type this. I’d like to call it the Troubled China Revival Program (TCRP).
China Is Not Another Ascendant Superpower, It's Just Another Nation with Structural Problems Correspondent Cheryl A. recently sent in two articles on China's ascendency with stake out the extremes in the thesis. The first is The great shift in global power just hit high gear, sparked by a financial crash: As an emboldened China sees, the American dollar is gravely wounded. And the days of US political supremacy are numbered.
China Won't Be Saving Grace for Commodities . . . . I think Wall Street's thinking that China is going to be the saving grace for commodities is inaccurate. I also think Freeport-McMoRan’s management has blatantly said that they don’t think that copper prices have bottomed out, but they still think that North America has more downward pressure, and they said they don’t think that China is going to be the saving grace.
Chinese Diversification Strategy In a series of maneuvers, Chinese officials have revealed their strategy implementation in a very broad set of steps. Beijing leaders plan to establish the yuan currency as a global reserve currency. The process will be made more complete after issuance of a large volume of Chinese Govt debt securities, soon in coming. The number of policy actions is impressive. While the USGovt is busy stepping backwards with FASB rules enabling false bank accounting, gearing up Treasury programs to direct colossal elite welfare / confiscation to failed banks responsible for the crisis, covering up Wall Street fraud and regulatory lapses and debt rating agency collusion, and ordering pork like the $9 billion high speed train from Disneyland to Las Vegas, the Chinese are making important meaningful critical strides. Within a year, the Chinese will have established the yuan currency as a legitimate alternative to the USDollar for global trade, and later to some extent for global banking. The Chinese Govt has ordered monetary policy changes that have boosted their money supply by 25.5% over the last twelve months, with a giant stimulus program and relaxed bank credit rules.
World looks to U.S. to spark recovery Leaders cite tentative signs of stabilization in American economy While much of the world blames the United States for triggering the global financial crisis and recession, most nations also are looking to America to start pulling the rest of the world out of the slump. A parade of foreign financial leaders in town for this weekend's spring meetings of the International Monetary Fund and World Bank denounced the financial excesses on Wall Street that have cost millions of jobs and caused trillions of dollars in lost output from Detroit to New Delhi. Yet they also hailed some tentative signs of stabilization in the U.S. economy after a winter of free fall that led the world economy into its worst downturn in modern times.
Barack Obama’s financial disaster will be much worse than you probably think. That’s because there is another even bigger financial disaster lurking ahead and that will start to come into play in a few short years.
There are alternatives to the Obama-style socialist health-care reforms. The Obama reform that will compound our financial crisis and create a health-care crisis
You can find better thinking and analysis on our major public policy questions in a free publication than you can in many of the expensive periodicals and newspapers you may be subscribing to.
I.M.F. Planning to Sell Bonds to Finance New Loans Hoping to raise money quickly for a new $500 billion emergency loan program, the International Monetary Fund is in the advanced stages of a plan to sell bonds for the first time in its history, officials for the group said Saturday. The bonds’ buyers are expected to be the governments of fast-growing emerging economic powers like China, Russia, Brazil and India. Though the fund has been authorized for decades to raise cash by selling bonds, officials have never done so because they wanted to avoid what amounts to short-term borrowing.
Warning over UK derivatives backlash London’s status as a leading financial centre risks being damaged if policymakers regulate over-the-counter derivatives without distinguishing between products that contributed to the financial crisis and those that did not, a report commissioned by the City of London Corporation says Monday. The report, prepared by consultancy Bourse Consult, will urge regulators not to “throw the baby out with the bathwater” amid recent calls for OTC – or privately negotiated – derivatives markets to be subjected to greater clearing and regulatory scrutiny.
Finance Chiefs Back a Bolder IMF, Bigger Role for Emerging Nations Global financial chiefs agreed yesterday to reshape the International Monetary Fund, moving to broaden its mission and accelerate plans to give developing giants including China, Brazil and India more say within the institution. The IMF, which in recent years had become largely an advisory body to nations in crisis, will now be charged with aggressive monitoring of the global economy. Underscoring that role, Treasury Secretary Timothy F. Geithner said yesterday that Washington had consented to a rigorous IMF review of the U.S. financial system for the first time since the fund was created at the end of World War II.
Bank CEO Blackmailed By The Federal Reserve And Treasury Department?
Back To The Future Recession - Or The Fed At A Crossroads... . . . .So what happens is, if we increase the supply of money and velocity stays the same, and if GDP does not grow, that means we'll have inflation, because this equation always balances. But if you reduce velocity (which is happening today) and if you don't increase the supply of money, you are going to see deflation. We are watching, for reasons we'll get into in a minute, the velocity of money slow. People are getting nervous, they are not borrowing as much, either because they can't or the animal spirits that Keynes talked about are not quite there.
There Goes More Taxpayer Money Into Wall Street Pockets (GS, JPM, MS) You can stop feeling bad for Wall Street now. Despite, Andrew Cuomo, Glenn Beck, Maxine Waters and the many other vessels of populist outrage, salaries for brokers, bankers and traders are climbing again. In fact, the New York Times points out, Goldman Sachs’ recent earnings report showed the financial giant set aside $4.7 billion for compensation in the first quarter.
Profits mask coming storm Contrary to surface appearances such as the recent stock market rally and "glowing" first quarter profitability statements from certain Wall Street banks, multipronged risks for renewed, considerable turmoil in the US financial sector are mounting. The recent six-week rally on Wall Street, led mostly by banking and other financial shares, isn't based on any concrete turnaround in the deeply worrying fundamentals of the financial sector.
FORECLOSURE ACTIVITY INCREASES 9 PERCENT IN FIRST QUARTER RealtyTrac®, the leading online marketplace for foreclosure properties, today released its U.S. Foreclosure Market Report™ for Q1 2009, which shows that foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 803,489 properties in the first quarter, a 9 percent increase from the previous quarter and an increase of nearly 24 percent from Q1 2008. One in every 159 U.S. housing units received a foreclosure filing during the quarter.
U.S. Housing Market Heading for a Bigger Crash, Another $4 Trillion of Asset Price Deflation Due to the lifting of the foreclosure moratorium at the end of March, the downward slide in housing is gaining speed. The moratorium was initiated in January to give Obama's anti-foreclosure program---which is a combination of mortgage modifications and refinancing---a chance to succeed. The goal of the plan was to keep up to 9 million struggling homeowners in their homes, but it's clear now that the program will fall well-short of its objective.
Chrysler Reaches Labor Accord With UAW, Ratification With CAW Chrysler LLC, racing against an April 30 deadline to cut labor costs or face bankruptcy, reached a tentative contract agreement with its biggest U.S. union and won ratification of a new accord with Canadian workers. Members of the United Auto Workers must still vote on their proposed money-saving contract, according to a statement today from the Detroit-based union.
GM to announce brand changes, restructuring moves GM to hold news conference Monday to announce brand changes, restructuring moves General Motors Corp. will announce details of its massive restructuring plan on Monday, including the demise of its storied Pontiac brand, more factory closures and bigger job cuts as it fights to avoid bankruptcy protection. The struggling automaker must make the announcement in advance of a planned offer to its bondholders to swap debt for company stock. GM owes $28 billion to large and small bondholders, and under Securities and Exchange Commission rules, it must disclose its operational plans before making an exchange offer.
GM Pushes the Throttle in China - $$ Affiliate's Plan to Expand Into Cars Is Seen as a Key to Growth in Asia General Motors Corp. is intensifying its focus on China as it edges closer to a bankruptcy filing in the U.S. and other international units sputter. The auto maker, until recently the world's biggest by output, has remained a relative powerhouse in China thanks to a pair of partnerships: a joint venture with Shanghai Automotive Industry Corp. and a minority interest in microminivan maker Liuzhou Wuling Motors Co.
Time For A Gas Tax (Starting In 2012) We hold this truth to be self-evident: When the global economy recovers, fossil-fuel prices are going to skyrocket again. Why? Three billion new capitalists consuming the same, largely finite resource stream. If there's an intelligent argument why oil will stay at $40 into the hereafter when production is relatively steady and consumption is rising, we'll be happy to evaluate it. But we haven't heard it yet.
Hill battle on war spending looms Critics fault bill's priorities President Obama's $83.4 billion war-spending bill is headed for an unexpectedly tough time on Capitol Hill, where Republicans are scrutinizing the funding priorities and rank-and-file Democrats want to include performance benchmarks for the Afghanistan mission. Despite bipartisan support for Mr. Obama's war policy in Iraq and Afghanistan, Republicans are taking a stand against the more than $81 million requested to shut down the prison camp at U.S. Naval Base Guantanamo Bay, Cuba.
Nouriel Roubini Obama Plan Too Little Too Late
Iceland takes a Left turn Turning Page, Iceland Elects New Leaders - $$ A coalition of left-leaning parties won elections in Iceland on Saturday, decisively beating conservatives who have dominated the island's politics for two decades and are widely blamed for the meltdown in its banking system last fall. The Social Democratic Alliance will hold 20 seats in the 63-seat parliament, and its coalition partner the Left-Green Movement will hold 14, giving the two parties an outright majority, according to results as of Sunday afternoon from state broadcaster RUV.
Democrats Agree to Fast Track for Health Care Revamp Democrats reached a tentative agreement to use a parliamentary procedure that would prevent Senate Republicans from blocking President Barack Obama’s proposed overhaul of the nation’s health care system, congressional aides said. The agreement calls for the same procedure, known as reconciliation, to be used to try to pass Obama’s proposal to cut federal subsidies to private providers of student loans, the aides said today.
Swine flu triggers alerts worldwide Governments and health authorities worldwide went on the alert over the weekend for a possible influenza pandemic as the death toll from a new strain of swine flu in Mexico reached 81. Janet Napolitano, homeland security secretary, on Sunday declared a “public health emergency” in the US as about 20 people there were confirmed to have been infected, though none is seriously ill. The World Health Organisation in Geneva had earlier made a similar announcement.
U.S. Declares Public Health Emergency Over Swine Flu American health officials on Sunday declared a public health emergency over increasing cases of swine flu, saying that they had confirmed 20 cases of the disease in the United States and expected to see more as investigators track down the path of the outbreak. “We are seeing more cases of swine flu,” Dr. Richard Besser, acting director of the Centers for Disease Control, said in a news conference in Washington. “We expect to see more cases of swine flu. As we continue to look for cases, I expect we’re going to find them.”
Mexico Peso Falls on Concern Swine Flu to Deepen Economic Slump Mexico's peso sank to its lowest in almost three weeks on concern an outbreak of the deadly swine flu will deepen an economic slowdown. The peso fell 1.7 percent to 13.5718 per U.S. dollar at 8:10 a.m. in Tokyo, compared to 13.3405 on April 24. The decline was the biggest among the 16 most-traded currencies against the dollar. Trading volumes in the Mexican peso usually picks up at about 7 a.m. New York time.
Pork Industry Moves to Quell Flu Fears - $$ The U.S. pork industry shifted into rapid-response mode following the news of an outbreak of swine flu in humans, trying to quell disease fears and protect an already weak pork market. Although there appears to be no evidence yet tying the flu to human contact with pigs, Russia banned meat imports from Mexico, several U.S. states and nine Latin American nations. In a news release Sunday, the National Pork Producers Council said, "Pork is safe to eat." The producers council, citing the Centers for Disease Control, said "preliminary investigations have determined that none of the people infected with the hybrid flu had contact with hogs."
Swine Flu Could Become More Dangerous The swine flu virus that has killed more than 80 people in Mexico may mutate into a "more dangerous" strain, the World Health Organisation has warned. Skip related content "It's quite possible for this virus to evolve... when viruses evolve, clearly they can become more dangerous to people," said Keiji Fukuda, of the global health watchdog. Mr Fukuda also called for international vigilance as health experts wait to see whether the virus will turn into a worldwide pandemic.
Could Food Shortages Bring Down Civilization? One of the toughest things for people to do is to anticipate sudden change. Typically we project the future by extrapolating from trends in the past. Much of the time this approach works well. But sometimes it fails spectacularly, and people are simply blindsided by events such as today's economic crisis. For most of us, the idea that civilization itself could disintegrate probably seems preposterous. Who would not find it hard to think seriously about such a complete departure from what we expect of ordinary life? What evidence could make us heed a warning so dire - and how would we go about responding to it?
How Long Will Our World Last? (Yes, We Are Screwed) Most people get worried about how much energy reserves we have left, but as this graphic shows, that's the least of our problems. The real problem is the materials we use to make things. Energy could be harnessed from eternal sources, like the sun, the wind, or the seas. But there is only a limited amount of elements in planet Earth and - what's worst - bringing them from other planets will prove impractical with our current technology (and the technology that will be available in the next century).
Americans Who Reject Marxist Socialism Are Castigated as 'Right-wing Extremists' It could not be nearer to what you suspect. Under his new regime, President Barack Obama’s Department of Homeland Security sent an intimidating message to law enforcement agencies nationwide calculated to silence any American who does not agree with the president’s social notions and political agenda. It is obvious that Rev. Jeremiah Wright is the driving force behind Obama’s paranoia. What the future president took away from Rev. Wright’s sermons contributes to Obama’s outlook and resultant policies, both at home and abroad. We have become a weakened country. Our enemies see a president who is ready to cozy up to any unscrupulous dictator who wants to inflict harm against our country, while Obama calls it a meaningful dialogue.
Obama Positioning For Backdoor Gun Control By Chuck Baldwin On his recent trip to Central America, President Barack Obama did more than cozy up to Marxist dictators; he also signed onto an international treaty that could, in effect, be used as backdoor gun control. It appears that Obama wants to use international treaties to do what congressional legislation is not able to do: further restrict the right of the American people to keep and bear arms.
There's No Place Like (Someone Else's) Home - $$ To Help Sell Houses, Temps Are Moved In; Hanging Baby Photos OCEANSIDE, Calif. -- The fragrance of sage-scented candles and sounds of jazz fill the air of a 2,600-square-foot house a block from the beach. Tiger-striped chairs flank tables crafted from exotic woods. Photos of a chubby baby hang on the walls. Whoever occupies 211 Windward Way, they seem to live the good life. Too good to be true, in fact. The house is owned by a builder, who hasn't been able to sell it for more than a year. And while someone really does live here, it's as part of an elaborate bit of stagecraft aimed at moving Southern California's echoing inventory of luxury vacant homes.
Swiss Ask U.S. to Drop Demand for Names of UBS Customers A tax-evasion case involving the Swiss bank UBS and 52,000 of its wealthy American clients is turning into a diplomatic chess game. The president of Switzerland, Hans-Rudolf Merz, has asked Timothy F. Geithner, the Treasury secretary, to drop a lawsuit led by the Justice Department seeking to force UBS to turn over the clients’ names, Daniel Haener, a Swiss government official in New York, said on Sunday. Under Swiss bank secrecy laws, disclosing clients’ names is a criminal offense that can carry prison terms and large fines.
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