Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Fri 01.30.2009
Federal Reserve sets stage for Weimar-style Hyperinflation The Federal Reserve has bluntly refused a request by a major US financial news service to disclose the recipients of more than $2 trillion of emergency loans from US taxpayers and to reveal the assets the central bank is accepting as collateral. Their lawyers resorted to the bizarre argument that they did so to protect ‘trade secrets.’ Is the secret that the US financial system is de facto bankrupt? The latest Fed move is further indication of the degree of panic and lack of clear strategy within the highest ranks of the US financial institutions. Unprecedented Federal Reserve expansion of the Monetary Base in recent weeks sets the stage for a future Weimar-style hyperinflation perhaps before 2010.
Are we in a Depression? I was in Vancouver at the first of the week. Joe Martin had me on a panel at his January Gold show. I got a lot of questions while I was there about the state of the economy that is obviously on the minds of many. And then Ken Gerbino did a piece on Tuesday listing the reasons there would not be a depression. I have a world of respect for Ken; he's a friend and a very astute guy. In this case, he happens to be dead wrong. Readers should understand first of all, there is no definition for either recession or depression; they are variations of the same thing. So someone could rightly argue that the Great Depression wasn't really a Great Depression but more of a Great Recession on Crack. There is no line in the sand as it were. In 1932 we were the world's greatest creditor nation. Today we are the world's greatest debtor nation. Anyone who can read has known since 2001 when Treasury Secretary Paul O'Neil released his study on the state of US finances that we are essentially bankrupt as a nation. At that time we were some $43 trillion in debt. It's more like $100 trillion and growing daily now.
'Buy American' hotly debated Business groups opposed The first of what might be many trade disputes during the Obama presidency erupted on his first full day in the White House. On Jan. 21, the House Appropriations Committee voted 55-0 for an amendment increasing the "Buy American" mandate for infrastructure projects funded by the $819 billion stimulus bill. The amendment, introduced by Rep. Peter J. Visclosky, an Indiana Democrat who chairs the Congressional Steel Caucus, would require the use of American-made iron and steel for infrastructure projects funded by the stimulus bill. Sen. Byron L. Dorgan, North Dakota Democrat, has introduced an even more restrictive "Buy American" mandate in the Senate. "If we are going to expend such a massive sum of money, it must be spent on American products and workers," said Mr. Visclosky, who noted that the U.S. steel industry is operating at 44 percent of capacity.
US-EU trade war looms as Barack Obama bill urges 'Buy American' The prospect of a trade war between the US and Europe is looming after "Buy American" provisions were added to President Barack Obama's $820 billion stimulus package. The EU trade commissioner vowed to fight back after the bill passed in the House of Representatives late on Wednesday included a ban on most purchases of foreign steel and iron used in infrastructure projects. The Senate's version of the legislation, which will be debated early next week, goes even further, requiring that any projects related to the stimulus use only American-made equipment and goods. The inclusion of protectionist measures has quickly raised hackles in Europe. Catherine Ashton, the EU trade commissioner, said: "We are looking at the situation. The one thing we can be absolutely certain about, is if a bill is passed which prohibits the sale or purchase of European goods on American territory, that is something we will not stand idly by and ignore."
US-China currency war eclipses Davos, and threatens the world Turning a corner in the labyrinthine corridors of the Davos nerve-centre, I ran smack into Chinese premier Wen Jiabao - followed by a regiment of retainers and senior offices in full regalia. They have not quite adapted to the "sport" dress code of capitalism in Alpine retreat. Jeroen van der Weer - a Davos stalwart - wears horrendous corduroy trousers (pink sometimes) with a 1950s-era Tyrolean woolly. I dread to think how they react to Swiss prices if they venture into the restaurants. Mr Jiabao smiled at me benignly, but he is not in a good mood. Indeed, he is fuming over the remarks by US Treasury Secretary Tim Geithner that China was "manipulating" its currency to gain market share. Reports were circulating this afternoon in Davos that Mr Jiabao erupted into a tirade after lunch at the mere mention of Mr Geithner's name.
Max Keiser : Tim Geithner's currency war with China Max Keiser gives his take on Timothy Geithner's ruffling feathers of China about the currency war.
Russian prime minister Vladimir Putin calls for end of dollar stranglehold Russian prime minister Vladimir Putin has called for concerted action to break the stranglehold of the US dollar and create a new global structure of regional powers. "The one reserve currency has become a danger to the world economy: that is now obvious to everybody," he said in a speech at the World Economic Forum. It is the first time that a Russian leader has set foot in the sanctum sanctorum of global capitalism at Davos. Mr Putin said the leading powers should ensure an "irreversible" move towards a system of multiple reserve currencies, questioning the "reliability" of the US dollar as a safe store of value. "The pride of Wall Street investment banks don't exist any more," he said.
Be afraid: US protectionist stance echoes 1930s disaster The US Congress has been busily adding knee-jerk, selfish provisions to Barack Obama's giant fiscal stimulus package to favour American iron and steel companies. This is the sort of shortsighted protectionism that led the world down its disastrous path in the 1930s. No wonder the European Commission is worried. We all should be. Restrictions on trade such as the raising of tariffs and other barriers to imports are held to be responsible for making the depression of the 1930s worse. The worse the depression got, the more the peoples of the world suffered. In some countries extremist politicians became more popular. We are already seeing a wave of social unrest across Europe including Thursday's big strike in France.
Stimulus Package: There Is No Free Lunch As the House passes its version of the $819 billion dollar "stimulus package" and the Senate readies their nearly $900 billion dollar response, investors are going to have their hands full deciding exactly how to navigate the ramifications. Let me start by saying that I am optimistic for America, the global economy, and our investment approach. Dynamic markets always provide opportunity that can be exploited by savvy traders. Government investment in renewable energy programs, infrastructure repair and expansion, and health care initiatives will certainly benefit some growth companies that operate in these sectors. It is my job to uncover these opportunities for investment returns. However, I would be less than honest if I didn't voice concerns over the power we are giving the federal government over what I would consider to be the "private sector economy." My mother used to tell me "there is no such thing as a free lunch" and that is certainly true in politics and economics.
An $800 Billion Mistake As a conservative economist, I might be expected to oppose a stimulus plan. In fact, on this page in October, I declared my support for a stimulus. But the fiscal package now before Congress needs to be thoroughly revised. In its current form, it does too little to raise national spending and employment. It would be better for the Senate to delay legislation for a month, or even two, if that's what it takes to produce a much better bill. We cannot afford an $800 billion mistake. Start with the tax side. The plan is to give a tax cut of $500 a year for two years to each employed person. That's not a good way to increase consumer spending. Experience shows that the money from such temporary, lump-sum tax cuts is largely saved or used to pay down debt. Only about 15 percent of last year's tax rebates led to additional spending.
Gerald Celente Global Economic Meltdown Pt 1/2 We're going into the collapse of '09; commercial real estate collapse is next.
Gerald Celente Global Economic Meltdown Pt 2/2
White House shows tilt to $1 trillion 'bad bank' Crucial lenders would be helped The Obama administration is leaning toward setting up a "bad bank" that would buy toxic loan assets from large troubled banks such as Citigroup in a major new program that would be run by the Federal Deposit Insurance Corp. and is likely to cost at least $1 trillion. The program could be announced as early as Monday as part of a comprehensive plan to address burgeoning housing foreclosures and credit problems, said banking and federal officials familiar with the administration's deliberations. Senate Banking, Housing and Urban Affairs Committee Chairman Christopher J. Dodd, Connecticut Democrat, told reporters Thursday that the "bad bank" would be part of a "combination of ideas" to deal with the twin crises in the banking and housing markets, adding that he "wouldn't be surprised" if the Obama administration initially funded it out of the $700 billion Wall Street bailout program.
Does any Know Where the Economy is Going? The U.S. economy has been in a recession for more than a year now. The current administration is now debating an additional stimulus package to help turn the economy around. Lead by followers of John Maynard Keynes, the father of deficit spending, the U.S. government is bent on spending its way out of the recession. Do these programs have a chance to help the economy recover and start a new long-term economic expansion? This is the first of a three part series on the prospects for the economy. Without a road map, the current leaders of our economy are following the theory without any guideposts or road maps based on historical experience. They are taking a significant risk. First, we will look at the mess we are in. Then their answer followed by two other possible outcomes.
Economic Signs Turn From Grim To Worse Another Wave of Evidence Of a Deepening Recession On the eve of what is expected to be the clearest evidence yet of the nation's deepening recession, bad news rolled in from across the economy and the world. Sales of new homes in December plummeted, corporations announced plans to cut another 13,000 U.S. jobs, unemployment claims jumped and a troubled icon of U.S. manufacturing, Ford Motor Co., yesterday announced a massive loss. Early this morning in Japan, the government there announced that factory output had fallen by 9.6 percent and joblessness in the world's second-largest economy jumped to 4.4 percent, the largest increase in 41 years.
Economy likely shrank at fastest clip since '82 Economy's fourth-quarter performance probably worst in quarter-century; outlook remains dim The country tumbled deeper into recession and probably logged its worst economic performance in a quarter-century during the final three months of last year as battered consumers and businesses throttled back spending. The U.S. economy is deteriorating at an alarming clip as the housing, credit and financial crises -- the worst since the 1930s -- feed on each other in a vicious cycle that has proven difficult for Washington policymakers to break.
Opec pledges to push oil above $50 Opec members need an oil price above $50 a barrel to make exports worthwhile, the head of the cartel said today, adding that more production cuts were possible this year. "We are not happy with $40 even $50 a barrel," Abdalla Salem El-Badri, Opec Secretary-General, told a panel discussing energy security at the World Economic Forum in Davos. Even $50 did not guarantee a "decent income for our countries", he said, adding: "I hope that the price will pick up ... a $50 price will not permit us to invest." Asked about further cuts by the cartel, he said: "If we still have some downward problems [on prices], Opec will not hesitate to take some quantity out of the market.
The Real Long-Run Value of Gold, Part I "Gold must hit $2,200 an ounce to match its real peak of Jan. 1980. Or so almost everyone thinks..." WHAT'S IN A NUMBER...? Ignoring the day-to-day noise, more than a handful of gold dealers and analysts reckon gold will hit $2,200 an ounce before this bull market is done. Why? Because that's the peak of 1980 revisited and re-priced in today's US dollars. Simple, right? Too simple by half, in fact. First, betwixt spreadsheet and napkin, there's often a slip. Several targets you'll find out here on the net put the old 1980 top nearer $2,000 in today's money. One Gold Coin dealer puts the figure way up at $2,400 an ounce.
Silver investigation: Stakes are enormous If the US regulator's current investigation into the silver futures market is looking at allegations of ongoing price manipulation it is the first of its kind - according to a former CFTC director of enforcement. Previous Commodity Futures Trading Commission (CFTC) investigations have been into market manipulations that have already taken place. The potential for the current silver investigation to halt an ongoing manipulation could have significant implications for the price of silver.
How realistic is a North American currency? Uniting U.S., Canada, Mexico money could result from crisis "World, hold on. Instead of messing with our future, open up inside." -- Bob Sinclair Thomas Jefferson once said: "When you reach the end of your rope, tie a knot in it and hang on." As the global financial system pushes on a string, investors are desperately trying to hold tight. The New World Order is upon us, full of hope, promise and a fair amount of fear. In our recent discussion regarding the direction of our country, we noted the risks of catering to conventional wisdom and the implications for the U.S. dollar. See MarketWatch column on New World Order. The Minyanville mantra is to provide financial news you need to know before you know you need it. That's a fine line to walk, as foresight often flies in the face of mainstream acceptance.
A Response to My Critics by Peter Schiff, Euro Pacific Capital My popularity on television and the internet has led a very small money manager to use his popular financial blog to promote his fledgling business by attacking the recent poor performance of my long-term investment strategy. The post is causing quite a stir and compels me to provide some badly needed context. To achieve his ends, this individual has distorted much of what I have been saying and writing, and has twisted the facts to support his own preconceived conclusion. In essence, his piece is nothing more than an overt advertisement (and a highly deceptive one at that) to use my popularity to advance his career. In so doing he has given my critics, particularly some who have been embarrassed by their roles in the "Peter Schiff was Right" video, their moments of retribution. In addition, some members of the press who have never been among my greatest fans are seizing the opportunity to discredit me as well. The crux of the blogger's arguments are that my beliefs in "decoupling, hyperinflation, and that the dollar is going to zero" have been completely discredited by the events of 2008, and that the resulting investment losses suffered by my clients last year confirms the fatal flaws in my approach.
Chinese Premier Blames Recession on U.S. Actions - $$ Beijing Rethinks Some of Its American Investments Chinese Premier Wen Jiabao squarely blamed the U.S.-led financial system for the world's deepening economic slump, in the most public indication yet of discord between the U.S. government and its largest creditor. Leaders in China, the world's third-largest economy, have been surprised and upset over how much the problems of the U.S. financial sector have hurt China's holdings. In response, Beijing is re-examining its U.S. investments, say people familiar with the government's thinking. Mr. Wen, the first Chinese premier to visit the annual global gathering of economic and political leaders in Davos, Switzerland, delivered a strongly worded indictment of the causes of the crisis, clearly aimed largely at the United States though he didn't name it. Mr. Wen blamed an "excessive expansion of financial institutions in blind pursuit of profit," a failure of government supervision of the financial sector, and an "unsustainable model of development, characterized by prolonged low savings and high consumption."
New bank bailout could cost up to $2 trillion Government officials seeking to revamp the financial bailout have discussed spending another $1 trillion to $2 trillion to help restore banks to health, the Wall Street Journal said, citing people familiar with the matter. The paper said the Barack Obama administration could announce its plans within days but has not yet determined the final shape of its new proposal, and the exact details could change. The administration is also seeking more effective ways to pump money into banks, and is considering buying common shares in the banks, according to the paper.
Don't forget those toxic assets Until banks get the bad stuff off their balance sheets, they stand no chance of returning to normal lending. It is hard to ignore the reality that the banking crisis is experiencing another significant flare-up. Headlines are becoming scary again, with questions now raised about the future of institutions (see Bank of America) that had been somewhat shielded from the brunt of the initial storm that broke out last September. At the core of the latest disturbing twist of events is the fact that banks, while in the midst of a severe recession, continue to be weighed down by an enormous amount of toxic assets on their balance sheets that policymakers somehow never got around to address.
William Seidman on 'bad banks' William Seidman, the former chairman of the Resolution Trust Corp., discusses his opinion of the "bad bank" remedy for the financial crisis. Seidman joins Reuters' Carrie Lee and Dan Burns.
Cost of shoring up U.S. banks may be in trillions The cost of restoring confidence in U.S. financial firms may reach $4 trillion if President Barack Obama moves ahead with a "bad bank" that buys up souring assets. The figure far exceeds even the most pessimistic estimates of how great the loan losses might be because there is so much uncertainty about default rates, which means the government may need to take on a bigger chunk of bank debt to ease concerns. Goldman Sachs economists said ideally the public sector would step in to remove the hardest-to-value assets, which would alleviate nagging worries about future losses and hopefully help get lending going again.
The real cost of TARP Kristen Roberts, Reuters Economics Specialist Editor joins Carrie Lee to discuss how the government's Troubled Asset Relief Program might ultimately cost taxpayers less than some might expect.
Americans receiving jobless benefits hits record Labor Department says number of Americans receiving unemployment benefits at all-time record The number of people receiving unemployment benefits has reached an all-time record, the government said Thursday, and more layoffs are spreading throughout the economy. The Labor Department reported that the number of Americans continuing to claim unemployment insurance for the week ending Jan. 17 was a seasonally adjusted 4.78 million, the highest on records dating back to 1967. That's an increase of 159,000 from the previous week and worse than economists' expectations of 4.65 million. As a proportion of the work force, the tally of unemployment benefit recipients is the highest since August 1983, a department analyst said.
Kodak posts 4Q loss, plans up to 4,500 job cuts Eastman Kodak loses $137 million in 4th-quarter, plans to cut up to 4,500 jobs Eastman Kodak Co. said Thursday it is cutting 3,500 to 4,500 jobs, or 14 percent to 18 percent of its work force, as it posted a $137 million fourth-quarter loss on plunging sales of both digital and film-based photography products. The photography products pioneer said its loss in the October-December period amounted to 51 cents a share. That compares with a year-ago profit of $215 million, or 75 cents a share.
Economic stimulus? Feds want your medical records Electronic database to include lawsuit, mental health, abortion, sexual details A little-discussed provision in President Obama's economic stimulus plan would demand that every American submit to a government program for electronic medical records without a choice to opt out, and it has privacy advocates more than a little alarmed. Patients might be alarmed, too, privacy advocates said, if they realized information such as documentation on abortions, mental health problems, impotence, being labeled as a non-compliant patient, lawsuits against doctors and sexual problems could be shared electronically with, perhaps, millions of people.
Senate Passes Health Insurance Bill for Children Immigrant Clause Opens Rift The Senate overwhelmingly approved legislation yesterday to provide health insurance to 11 million low-income children, a bill that would for the first time open the program to legal immigrant children and pregnant women. The State Children's Health Insurance Program, which is aimed at families earning too much money to qualify for Medicaid but not enough to afford private insurance, currently covers close to 7 million youngsters at a cost of $25 billion.
Jobless claims jump to record, durable orders slide The number of Americans claiming jobless benefits hit a record high in mid-January, while orders for long-lasting factory goods fell for a fifth month in December, according to data on Thursday that showed the economy in steep decline. Piling on the gloom for an economy mired in recession for more than a year, sales of newly built single-family homes slumped to their lowest levels since records started in 1963. The batch of bleak data cast doubt on whether the economy would begin to recover in the second half of the year, since stability in the housing market, the root of the worst financial crisis in more than 70 years, may be a prerequisite.
Ford reports $5.9 billion loss The U.S. automaker says that, despite increasing losses, it doesn't expect to have to ask the government for an emergency loan. Ford Motor reported that its ongoing losses soared in the fourth quarter, but the company reiterated it still does not need the federal bailout already received by its two U.S. rivals. Ford reported a net loss of $5.9 billion, or $2.46 a share, up from a loss of $2.8 billion in the same quarter a year ago. For the full year, Ford lost $14.6 billion, and the company has now lost nearly $30 billion over the past three years.
Eddie Bauer cutting jobs in Bellevue Struggling retailer Eddie Bauer said today it has eliminated 193 jobs, including 71 at its downtown Bellevue headquarters. The layoffs also include Eddie Bauer's information technology operations in the Chicago area, a distribution center in Columbus, Ohio, and a call center in New Brunswick, Canada. Together, they represent a 15 percent reduction in the company's non-store staff. Eddie Bauer now employs about 390 people at its headquarters. President and Chief Executive Officer Neil Fiske said the layoffs are part of a previously announced plan to cut up to $15 million from the company's operating cost structure this year. Eddie Bauer cut as much as $50 million last year. Calling the fourth-quarter retail environment "brutal," Eddie Bauer also announced recently that it will reduce the size of its board from 10 to seven members and freeze salaries.
LA man upset over job kills wife, 5 kids, himself A man who fatally shot his wife, five young children and himself Tuesday had earlier faxed a note to a TV station claiming the couple had just been fired from their hospital jobs and together planned the killings as a final escape for the whole family. "Why leave the children to a stranger?" Ervin Lupoe wrote, according to KABC-TV. The station called police after receiving the fax, and a police dispatch center also received a call from a man who stated, "'I just returned home and my whole family's been shot." Officers rushed to the home in Wilmington, a small community between the ports of Los Angeles and Long Beach, about 8:30 a.m., apparently within minutes of the killings. Officers could still smell the gunshot residue in the air.
Starbucks cutting 6,700 jobs, closing 300 cafes The Seattle-based coffee company is closing stores again and slashing significantly more jobs than expected to stem eroding profits. It's business as usual at a Starbucks in Ballard. But business overall is down for the coffee giant, which announced layoffs and store closures. All that penny-pinching advice about cutting back on your $3-a-day latte habit finally got through to the caffeine-addicted masses, who have pulled back so dramatically that they sent Starbucks into a tailspin. The Seattle-based coffee company is closing stores again and slashing significantly more jobs than expected to stem eroding profits. Starbucks surprised workers and Wall Street on Wednesday with plans to close 300 more stores, eliminating 6,000 store positions by fall. The firm will lay off 700 more workers in the next couple of weeks, including 350 people or about 11 percent of its Seattle headquarters.
NYC: 23,000 city jobs in danger of being cut More spending cuts loom on the horizon for New York City, which could see a $4 billion deficit in the new budget that starts July 1. New York City dwellers will have to cope with billions of dollars more in spending cuts and thousands of city workers could lose their jobs, under a plan the mayor is due to unveil Friday, according to a source familiar with the proposal. More than 23,000 city workers might lose their jobs through layoffs or attrition unless Mayor Michael Bloomberg convinces the state and U.S. governments and the city's approximately 300,000 workers to let him curb benefits, from Medicaid to pensions, said the source, who requested anonymity.
Florida beans and corn destroyed, potatoes delayed BELLE GLADE, Fla. - Cold weather damaged most of Belle Glade's winter green beans and sweet corn. As growers assessed damage from a series of freezes that struck south Florida growing regions during the overnight hours of Jan. 20-23, buyers should expect far fewer south Florida beans and corn. "All of our beans were wiped out," said Bryan Biederman, assistant sales manager for Pioneer Growers Co-op, one of the region's largest growers of beans and corn. "Any corn we had planted for the month of March has been wiped out. It was truly a setback for our winter program."
Global Worries Over U.S. Stimulus Spending DAVOS, Switzerland - Even as Congress looks for ways to expand President Obama's $819 billion stimulus package, the rest of the world is wondering how Washington will pay for it all. Few people attending the World Economic Forum question the need to kick-start America's economy, the world's largest, with a package that could reach $1 trillion over two years. But the long-term fallout from increased borrowing by the United Stated government, and its potential to drive up inflation and interest rates around the world, seems to getting more attention here than in Washington. "The U.S. needs to show some proof they have a plan to get out of the fiscal problem," said Ernesto Zedillo, the former Mexican president who helped steer his country through a financial crisis in 1994. "We, as developing countries, need to know we won't be crowded out of the capital markets, which is already happening." Mr. Zedillo said that Washington, unlike most other countries, had the option of simply printing more money, because the dollar was a reserve currency for the rest of the world. Over the long run, that could force long-term interest rates higher and drive down the value of the dollar, undermining the benefits that come with its special status.
Grim Japan and U.S. figures show world crisis deepening Japan sank deeper into recession with industrial output tumbling and inflation slipping to almost zero, while key U.S. data later on Friday were also expected to mirror the worsening global financial crisis. Japan's industrial production fell a record 9.6 percent in December, while annual core inflation slowed to a mere 0.2 percent. Rising unemployment, slowing household spending and no improvement in the industrial outlook added to fears that Japan was flirting with deflation and would post a horror GDP figure in February if exports do not bail it out.
Davos . . . .
by Ambrose Evans-Pritchard WEF 2009:I will never come back to Davos Damn, we are all sitting here in open-mouthed astonishment. Turkish premier Tayyip Erdogan has just stormed off the rostrum after calling Israel's president Shimon Peres a "killer" to his face. Mr Peres in turn has been thundering and fulminating at the top of his voice for 25 minutes -- while the UN Secretary-General Ban Ki-moon sat in embarrased silence next to him, mostly looking at his shoes. The incensed leaders then walked out passed packed ranks of trembling Davos enthusiasts - all believers in civilized comity, and all horrified by this display of raw and visceral feeling - into a hall where a light-hearted Strauss Waltz being played with shocking insouciance. If we journalists missed our deadlines - and leaving a big gap in our newspapers tomorrow - you must forgive us, because we none could concentrate on anything as this extraordinary spectacle of Mid-East passion unfolded before our eyes. Mr Peres -- winner of the 1994 Nobel Peace prize -- had reason to be angry. The Turkish leader called today for the Obama administration to list Israel as a terrorist state for alleged atrocities against civilians in Gaza.
Turkish Prime Minister walks off stage over Gaza Turkish Prime Minister Recep Tayyip Erdogan had enough of Israeli President Peres' lies and walked off the stage in Davos saying he will never come back. Peres basically tried to say that there had been no siege and there has been no starvation in Gaza during the massacre. When does he give back that Nobel prize? If only others had the integrity of Erdogan.
Protectionist fear grips world forum Threatens trade, leaders say DAVOS, Switzerland | Business and political leaders attending the annual World Economic Forum expressed fears Thursday that growing protectionist pressures could undermine international trade - one of the few fully functioning pillars of the global economy. "Everybody here is talking about protectionism. There's not a prime minister present not talking about protectionism," said Peter Sutherland, chairman of BP and Goldman Sachs International. Those fears were aggravated by Wednesday's addition of a "Buy American" steel provision to an $819 billion economic stimulus package to help the U.S. economy navigate out of recession. The European Union was quick to put Washington on notice. "We are looking at this very carefully. If European goods are to be excluded from the U.S., we would not stand idly by," Peter Power, spokesman for EU Trade Commissioner Catherine Ashton, told The Washington Times.
Leaders of Turkey and Israel clash at Davos panel DAVOS, Switzerland: Prime Minister Recep Tayyip Erdogan of Turkey walked off the stage after an angry exchange with the Israeli president, Shimon Peres, during a panel discussion on Gaza at the World Economic Forum on Thursday, and vowed never to return to the annual gathering. Erdogan apparently became incensed after he was prevented by the moderator from responding to remarks by Peres on the recent Israeli attack. The panel was running late and Peres was to have had the last word, participants said. Panel discussions at Davos are strictly restricted to one hour, but Erdogan insisted on responding to Peres. Red faced, and with one hand grasping the arm of the moderator, David Ignatius of the Washington Post, Erdogan turned to the Israeli president. "Peres, you are older than me," he said. "Your voice comes out in a very high tone. And the high tone of your voice has to do with a guilty conscience. My voice, however, will not come out in the same tone."
At Davos, an upside-down world Business leaders are arguing for more regulation, while politicians are appealing for a hands-off approach. At last year's gathering of the world's elite at this Alpine ski resort, the tone was one of unbridled optimism. CEOs, government leaders and heads of NGOs had the luxury to discuss the rapid growth in new technologies, innovation in the financial industry (oops), and ways to combat hunger, disease and global warming. This year's World Economic Forum conjures a radically different zeitgeist. At first glance, some things about Davos haven't changed. Attendance is still strong, with at least 2,500 movers and shakers wandering the halls and standing-room-only crowds at many of the events -- although one session on how business could help make the world better was sparsely attended.
Rupert Murdock warns that government may not work
Davos 2009: Sour CEO survey More than fourteen hundred business leaders are here in Davos - and unsurprisingly - their mood is more than a little subdued, according to a survey. Consultants PwC, have been asking why in a new poll released in Davos this week. Only one in five expect growth this year, while only a third are very confidant their business will grow in the next three years.
Russia's S7 cancels Boeing 787 order Russia's S7 has become the first airline to cancel a major contract for Boeing Co's 787 Dreamliner, as the country's airlines face their worst-ever financial crisis. The order for 15 787s, due to be delivered in 2014, was worth about $2.4 billion at list prices. The cancellation is a blow for Boeing, whose new, lightweight jetliner has not yet left the ground and is about two years behind schedule. S7, the main domestic rival to Russia's flag carrier Aeroflot , will seek to lease the planes instead, the company said on Thursday.
Davos 2009: Pakistan PM interview Prime Minister Yousaf Raza Gilani discusses terrorism, plus relations with India and the new Obama administration. Pakistan faces the world's most intractable problems every day. Instability at home, instability on its borders and instability in its economy. Last year it went through a political revolution after Benazir Bhutto was assassinated and army chief Pervez Musharraf stood down as head of state. Now a new government headed by Prime Minister Yousaf Raza Gilani has to face these problems.
Davos 2009: Economies too fragile Steps need to be taken to make market economies more resilient, said European Central Bank President Jean-Claude Trichet The financial crisis has shown that market economies are too fragile and steps need to be taken to make them more resilient, said European Central Bank President Jean-Claude Trichet in an interview on the 'Davos Today' programme. He added that all options for solving the crisis should be explored and that vested interests should not be allowed to get in the way Trichet said that while granting the European Central Bank responsibility for banking supervision was one option being explored, the Bank's governing council had not reached a position on the idea.
Davos 2009: Soros on bank rescues (George Soros voiced concerns about the details of current bank rescue plans in an interview on the 'Davos Today' TV programme. The model of placing 'toxic assets' in a 'bad bank' in order to get banks lending again requires more thought, said George Soros, who believes that changes to the approach will be needed if banks are to gain the confidence to lend again. Soros also reiterated his belief that the credit crunch has proved that unregulated financial markets are unstable describing the system as 'broken'.
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Nation's economic mood darkens Americans appear unwilling to spend our way out of recession This is one recession Americans aren't going to spend their way out of. The Conference Board said Tuesday its Consumer Confidence Index edged down to 37.7 this month, a record low, from a revised 38.6 in December. It stood at about 87 just a year ago. Americans are battered by headlines about massive job cuts, including thousands at Home Depot, Corning, General Motors and Caterpillar in just the past two days, and are still watching the values of their homes and retirement funds dwindle. "Virtually, there is no confidence out there," said Bernard Baumohl, chief global economist at The Economic Outlook Group LLC. "Household anxiety has reached a point that we can count them out to get us out of the recession."
Economic pain to be 'worst for 60 years' The world economy will this year suffer its worst performance for more than 60 years with a serious risk that 50m people will lose their jobs, international organisations warned on Wednesday. The warnings came as the Federal Reserve expressed fresh concern about deflation, noting that the US economy had "weakened further" since its last policy meeting in December. The US central bank made no immediate move to purchase Treasury securities - disappointing some in the markets - and signalled that its preference is to expand targeted credit operations instead. The Fed said it would "assess whether expansions of or modifications to lending facilities would serve to further support credit markets".
Fed Adopts Policy to Modify Mortgages, Stem Home Foreclosures The Federal Reserve will ease terms on residential mortgages acquired in the rescues of Bear Stearns Cos. and American International Group Inc., seeking to stem foreclosures. The Fed policy is targeting borrowers who are 60 days or more overdue on loan payments and covers modifications of interest rates and payment plans. The program uses the Fed’s authority in the $700 billion Troubled Asset Relief Program and was released today by the House Financial Services Committee.
Roubini: A Severe Global Economic Contraction Nowhere to hide!
NYU's Roubini: "Nowhere to Hide" from Global Slowdown Nouriel Roubini of NYU’s Stern School of Business is making fresh headlines, as he's forecasting an even more dire outlook for the global economy. In an interview yesterday with Bloomberg News in Zurich, Roubini said: The U.S. will lose 6 million jobs with unemployment reaching at least 9 percent.
The U.S. economy will expand 1 percent at most in 2010.
Economic growth in China will slow to less than 5 percent.
He reiterated his statements that the biggest U.S. banks are insolvent, and that losses could reach $3.6 trillion, far exceeding his original estimates. Is Roubini -- nicknamed "Dr. Doom" for his pessimistic yet accurate forecasts in recent years -- off the mark? We ask colleague and fellow NYU economist Lawrence White. One message from White is clear. Acknowledge losses swiftly or we risk a Japan-like drawn-out recession with no near-term recovery in sight. Yesterday, White and Henry Blodget also discussed:. . .
House OKs $819B stimulus bill with GOP opposition Democratic-controlled House OKs $819 billion stimulus bill with GOP in unanimous opposition In a swift victory for President Barack Obama, the Democratic-controlled House approved a historically huge $819 billion stimulus bill Wednesday night with spending increases and tax cuts at the heart of the young administration's plan to revive a badly ailing economy. The vote was 244-188, with Republicans unanimous in opposition despite Obama's frequent pleas for bipartisan support. "This recovery plan will save or create more than three million new jobs over the next few years," the president said in a written statement released moments after the House voted. Still later, he welcomed congressional leaders of both parties to the White House for drinks as he continued to lobby for the legislation.
Obama's Stimulus: Good For Government, Bad For the Economy
US stimulus bill forced through by Democrats The House of Representatives on Wednesday night approved its version of the proposed US fiscal stimulus with overwhelming Democratic support but, in an early setback for Barack Obama, not a single Republican backed the $825bn plan. The president has spent much of his first week in office reaching out to Republicans in a bid to forge a bipartisan consensus behind the stimulus but the House vote indicated that opposition is hardening. The White House welcomed the 244-188 vote as an "important first step" towards final legislation, which Mr Obama wants to sign into law by mid-February, but the president also made clear he was open to changes as debate shifts to the Senate. "I hope that we can continue to strengthen this plan before it gets to my desk," Mr Obama said in a statement. "But what we can't do is drag our feet or allow the same partisan differences to get in our way."
Today's Commodity Prices Forecast Tomorrow's Inflation I know this is a hard one to believe, being that we are obviously in the middle of a deflationary period, but savvy institutional players are already starting to position themselves for inflationary times ahead. Inflation! Have I lost my mind? Actually, no... Let me explain what I mean. Former central banker Volcker (who is on Obama’s economic team) is prepping the world for deficits of $2 to $3 trillion dollars as the U.S. goes into one of the biggest spending sprees that (believe it or not) will make George Bush’s spending look like child’s play. The financial world is listening. They’ve seen the leading indicators of the economy in the beginning stages of perking up. They’ve seen stocks stabilize and they’ve seen the down draft in commodities halt.
Treasury Weighs Hard Choices To Save Banks Any Path Carries Risk of Failure President Obama's top advisers are in the final stages of debating several perilous options to right the financial system, all of which are likely to prove unpopular and in some cases carry a significant risk of failure, according to sources in contact with the officials. The rapid deterioration of the economy has accentuated these hard choices. The health of many banks is getting worse, not better, as the downturn makes it difficult for all kinds of consumers and businesses to pay back money they borrowed from these financial firms. Conservative estimates put bank losses yet to be declared at $1 trillion.
Edmund Phelps Says U.S. Needed 'More Coherent' Stimulus Edmund Phelps, a professor at Columbia University and winner of the 2006 Nobel Prize in economics, talks with Bloomberg's Francine Lacqua and Erik Schatzker about the U.S. government's plans to stimulate the economy and ease the credit crisis. Phelps, speaking at the World Economic Forum meeting in Davos, Switzerland, also discusses measures to remove toxic assets from banks' balance sheets and the outlook for U.S. housing.
FDIC May Run ‘Bad Bank’ in Plan to Purge Toxic Assets The Federal Deposit Insurance Corp. may manage the so-called bad bank that the Obama administration is likely to set up as it tries to break the back of the credit crisis, two people familiar with the matter said. U.S. stocks gained, extending a global rally, on optimism the bad-bank plan will help shore up the economy. The Standard & Poor’s 500 Stock Index rose 1.9 percent to 861.63 as of 9:54 a.m. in New York. Bank of America Corp., down 54 percent this year before today, rose 87 cents, or 13 percent, to $7.37. Citigroup Inc., which had fallen 47 percent this year, climbed 18 percent. FDIC Chairman Sheila Bair is pushing to run the operation, which would buy the toxic assets clogging banks’ balance sheets, one of the people said. Bair is arguing that her agency has expertise and could help finance the effort by issuing bonds guaranteed by the FDIC, a second person said. President Barack Obama’s team may announce the outlines of its financial-rescue plan as early as next week, an administration official said.
Soros urges U.S. to create "good bank" as aggregator DAVOS, Switzerland (Reuters) - The United States needs to recapitalize its banks but should consider the creation of a "good bank" when considering how to deal with the toxic assets, hedge fund manager George Soros said on Wednesday. Speaking to Reuters Television at the World Economic Forum in Davos, Soros said the planned U.S. fiscal stimulus and proposals for creating a "bad bank" to pool banks' bad loans and assets may help ease the economic crisis stateside. But he said these were "only palliatives." "They need a thorough reorganization of the mortgage system and you have replenish the equity of the banks," Soros told Reuters. "That now would require an injection of about a trillion and half dollars -- much more than if they had done it previously under the TARP (the $700 billion Troubled Asset Relief Program agreed by Congress last year)."
Currencies and the Bad Bank Plan . . . . . . Bad Bank Plan - There is no question that equities are still leading currencies for the time being and over the next few weeks, the Obama Administration could announce a plan to create an “aggregator bank” that would soak up the bad debt sitting on bank balance sheets. This would free up capital for the banks which would hopefully encourage lending and restore investor confidence. If Obama announces a bad bank plan, it could squeeze shorts in financial stocks and take the entire index higher. Since currencies are still moving in lockstep with equities, a rebound in stocks could help reduce risk aversion and take some of the steam out of dollar rally.
Focus on question of Fed Treasury buys, FOMC comment Wed
Record $40 billion 2-year note auction looms
U.S. Treasury debt prices rebounded on Tuesday, after a week of steep losses made bond investors consider at what point the Federal Reserve might step in to support the market by buying longer-dated Treasuries. Treasury bonds have been losing ground due to the prospect of a huge wave of U.S. government debt issuance, which has increasingly started to weigh on bond prices and push yields higher. However, with the Federal Reserve starting a two-day policy meeting on Tuesday, the market began to anticipate whether the central bank might use the opportunity to shed some light on whether or when it might start buying longer dated Treasuries. Chairman Ben Bernanke signaled in December that the central bank is considering doing so.
Central banks were not the big buyers of synthetic triple AAA … Ricardo Caballero argues that the current crisis stems from (flawed) efforts to construct safe assets out of risky assets in order to meet a surge in investor demand for safe assets. He is on to something. There was a surge in demand for safe assets that pushed yields on Treasuries (and Bunds, OATS and Gilts) down at the peak of the boom. And investment banks – with help from the rating agencies — did respond by constructing new kinds of products that combined higher yields than Treasuries (or Agencies) and the appearance of safety. Caballero thinks the banks constructed these securities to meet demand from central banks and sovereign funds.
Will the FOMC Raise Rates? Will they or won't they? That's the question du jour, at least with respect to today's FOMC announcement. There's obviously nothing they can do on rates, so the big issue is whether the Fed takes the leap and announces a program to buy longer-dated Treasuries. Such an outcome would hardly be unprecedented; the BOJ, for example, has purchased JGBs in the secondary market for more than a decade via its rinban program. For the Fed, it would seem to be more a matter of "when", rather than "if", they pursue such a policy; after all, buying government duration is part of the "Bernanke QE playbook" that he's been following to a tee so far.
Fed signals low rates will continue Conceding that the economy is still spiraling downward on most fronts, the Federal Reserve signaled on Wednesday that it would expand its use of unconventional measures to directly prop up lending for mortgages, consumer loans and businesses. "The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability," the Fed said Wednesday in its statement. The Fed has already been buying mortgage-backed securities and said in its statement that it would expand its intervention as needed. The committee also served notice that it would purchase longer-term Treasury bonds, a move that would drive down long-term interest rates of all types.
Dollar Gains as Fed Runs Out of Room to Cut Rates The Federal Reserve has officially run out of room to cut interest rates. For the first time since August 2007, they left interest rates unchanged at a target range of 0 to 0.25 percent. The dollar rallied because the Fed did the minimum of what was needed to pacify the market, which was to say that they could purchase Treasuries but are not going to do so right now.
Fed to Try Additional Unusual Methods It Could Buy Up Long-Term Bonds The Federal Reserve yesterday indicated that it will pursue further unconventional steps to try to stimulate the economy, as it left the interest rate it controls essentially at zero. With its main tool for managing the economy spent, the Fed has been finding new ones -- and shows every indication of continuing the practice as it tries to grapple with a rapidly deteriorating economy. The Federal Open Market Committee said it stands ready to buy up more mortgage-backed securities, could start buying long-term government bonds, and may take further steps to make loans more widely available. Those measures would push down the interest rates on loans that consumers take out to buy homes or cars or that businesses take out to buy new equipment.
Morgan Joseph: Fixing Financials: Nationalizing banks is not a good idea
Banks boosted as Geithner talks of a clean-up Beaten-down US bank stocks surged on Wednesday as new Treasury secretary, Tim Geithner, played down talk of nationalisation, fuelling hopes for a comprehensive clean-up of toxic assets on terms palatable to investors. Mr Geithner told reporters: "We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system." The Treasury secretary said the Obama administration was "looking at a range of options" for dealing with toxic assets clogging up bank balance sheets. He said: "We hope to be in a position relatively soon to lay out what we believe is a viable programme."
Geithner: hope to unveil recovery plan soon Treasury Secretary Timothy Geithner said on Wednesday the Obama administration was working on a plan to repair the battered financial system and boost recovery that should be ready fairly soon. "We are looking at a range of options," Geithner said as he started a meeting with department officials charged with oversight of the Troubled Asset Relief Program (TARP), adding: "We hope to make decisions and be in a position relatively soon" to make them public.
Billions more needed for financial rescue Next financial rescue, including asset purchases, could cost hundreds of billions more The Obama administration is developing proposals to help rescue the banking system that could cost taxpayers hundreds of billions of dollars beyond the $700 billion bailout Congress already has approved. Details are still being worked out. But the administration is looking to spend hundreds of billions more to address the foreclosure crisis, help banks get out from under weighty bad assets and expand liquidity programs. Looming above these is a proposal to set up a federal bank -- dubbed a "bad bank" -- that would buy troubled assets clogging financial institutions' balance sheets. This would free the institutions to lend money and would entice wary investors back into the market, proponents say.
Bob Dole: 'Somebody Has to Pay Someday' for Bailouts Bob Dole told CNSNews.com that 'somebody has to pay some day' for the massive spending President-elect Obama has planned and the enormous deficit and debt he has inherited. He also said the U.S. cannot spend its way out of a recession.
Schiff Still Has One Thing Right Our colleague Mish Shedlock did quite a hatchet job on hyperinflationist Peter Schiff the other day - much of it deserved, if the evidence that Mish presented is to be believed. The two have never seen eye to eye, since Mish, like us, is an unreconstructed deflationist. But his indictments against Schiff have less to do with the Inflation vs. Hyperinflation argument than with allegations that Schiff's actual performance as an investment advisor has not been so stellar as one might have inferred from his high-profile exposure as a doomsdayer. Mish says that while Schiff has been essentially correct about doomsday, his actual investment portfolio got the details completely wrong, especially in its short-dollar orientation. (The same could probably be said of another world-class self-promoter, Jimmy Rogers.)
Dow considers first dividend cut since 1912 Dow Chemical on Tuesday said it was considering breaking one of the longest streaks in US corporate history of consistent dividends by making its first cut to pay-outs to investors since 1912. In a reversal of its pledge not to cut its $1.6bn-a-year dividend, Dow said it was prepared to consider reducing the pay-out to help pay for the $15bn takeover of US rival Rohm & Haas. The news came as it emerged that Saudi Aramco, the kingdom's national oil group, was one of the companies talking to Dow about a joint venture for its plastics business. The venture has been in disarray since last year when Kuwait's state-controlled oil company pulled out at the last minute, leaving Dow without a key funding source for the Rohm & Haas deal. Dow declined to comment on the plastics joint venture and Saudi Aramco could not be reached.
Real estate agents say home-price tide has turned, sellers are capitulating How low can they go? More than a year after housing prices began to consistently fall in the Chicago area, it's still the unanswered question on the minds of home buyers, sellers, real estate agents and economists, as one report after another confirm a residential real estate market in dire shape. There's no magic answer, but the general consensus is that the declines aren't over yet. On Tuesday, a key index showed that Chicago-area home values in November posted the biggest one-month decline on record. The latest drop in the S&P/Case-Shiller Home Price index has all but wiped out the local market's gains and returned prices to May 2004 levels.
S&P Case/Shiller Index Drops 18.2% in November Interview with Index Co-Creator Karl Case, Also Economics Professor at Wellesley College
Toll on 401(k) Savings Adds Years More of Toil Millions of Americans lost more than a quarter of their 401(k) retirement savings in 2008 because of the stock market's collapse, a setback that could force them to work longer or severely curtail their spending as they grow older. In an analysis of their participants' accounts, Fidelity Investments, Vanguard and T. Rowe Price -- three of the nation's largest 401(k) plan providers -- also found that some employees were further eroding their savings by taking hardship withdrawals to pay for current financial needs. Many Americans have seen their wealth evaporate with the drop in home values, the rise in the cost of living and the stagnation of wages. Now, as they tap into nest eggs to pay bills, they face leaner retirements as well. Particularly vulnerable are baby boomers who expected to retire in the next few years.
SOUTH FLORIDA Experts share grim outlook on economy Rising unemployment will make 2009 a painful year for tens of thousands of South Florida families. And the pain could continue into 2010 or even 2011. As bad as 2008 was for the region's economy, our troubles won't be ending anytime soon. The earliest economists foresee a recovery is the middle of this year, and most think that's optimistic. The end of 2009 or the first half of 2010 is more likely. But the start of a recovery won't mean an instant shift from cloudy skies to sunshine. Economists worry that this recession could resemble an ''L'' more than a ''U.'' In other words, when the economy stops declining, it could start moving sideways rather than sharply upward.
Government to examine ways to unblock car finance The government and car makers said on Wednesday they were urgently trying to find ways to work around a rule that stops car financing companies getting direct access to credit from the Bank of England. The move came as the two sides discussed the government's 2.3 billion pound package of loan guarantees, designed to rekindle demand as the financial crisis hammers sales in one of Britain's key manufacturing sectors. Also on Wednesday, Toyota joined the growing list of auto firms seeking ways to cut costs at its British plants, and the Italian government sat down with manufacturers to discuss possible rescue measures.
New York City fears return to 1970s While many U.S. cities worry that their economies are deteriorating to the level of the 1930s Great Depression, New York City fears reliving a more recent decade that features strongly in city lore. The 1970s were a low point in city history as a fiscal crisis almost pushed it into bankruptcy, crime rates soared, and homeless people crowded sidewalks as public services crumbled. Almost a million people fled New York's Mean Streets during the decade for the safer, more stable suburbs, a population decline that took more than 20 years to reverse. When discussing the current crisis, Mayor Michael Bloomberg, now seeking a third term, promises that he will not allow the city to return to the darkness of those days, although he stresses that it faces "giant financial problems."
Senate GOP Leader Warns of ‘Looming Entitlement Crisis’ – $495K Per Household Americans face a ‘looming entitlement crisis’ in which every American household already shares nearly $500,000 in debt, Senate Minority Leader Mitch McConnell (R-Ky.) said Friday at the National Press Club. McConnell, who became the most powerful Republican in Washington with the departure of former President Bush on Tuesday, called on Democrats to use their expanded powers to address the entitlements problem. “The expansion of entitlement spending is a looming crisis that has been overlooked for too long,” said McConnell. “With control of the White House and big majorities in Congress, Democrats now owe it to the American people to put their power to work on this vital issue.”
Market Outlook: Seeing Continued Deflation as We Face a "Government Bubble"
SCHIP Expansion Amounts to ‘Socialized Medicine’ Senate Republicans Say Senate Republicans say expansion of the State Children’s Health Insurance Program (SCHIP) amounts to an attempt by congressional Democrats to socialize the nation’s health-care system. “One could certainly conclude that,” Sen. Jon Kyl (R-Ariz.), said in response to questions from CNSNews.com. “This is yet one more way to get people off of private coverage and onto government coverage so that little by little you eventually end up with a majority of people on government coverage.” SCHIP, or the State Children’s Health Insurance Program, is a joint federal-state program designed to provide healthcare coverage to children whose parents cannot afford private coverage.
Paul McCulley: Housing, Fed, and Bonds
Fed moves to help distressed homeowners Federal Reserve moves ahead on plan to provide foreclosure relief With foreclosures spiking, the Federal Reserve is taking steps to try to keep some distressed borrowers in their homes. Under the program, the Fed has a number of options to provide relief, including lowering the amount the homeowner owes on the mortgage, reducing the interest rate or lengthening the term of the loan. It's unclear how many homeowners would benefit. However, the relief plan would apply to the billions of dollars of mortgage assets the Fed is holding on its books because of last year's bailouts of Bear Stearns and insurer American International Group. In general, a borrower must be at least 60 days delinquent to qualify for help, although the Fed has leeway to make some exceptions. A 2008 law that set up the $700 billion bailout fund instructed the Fed to take such foreclosure relief action.
IBM layoffs now 4,200 -- may go higher IBM won't disclose plan, but union fears as many as 16,000 may lose their jobs IBM's not-so-secret layoffs may have reached 4,200 today, according to Alliance@IBM, which believes that thousands of other employees will be losing their jobs as well before the cuts end. IBM isn't discussing its job actions and that has made the union the primary source of information about the layoffs. The union's Web site has been so busy with traffic that its server was knocked offline this afternoon from the load, according to Lee Conrad, a former IBM employee who is now the national coordinator of Alliance@IBM.
Banks, credit unions scramble in wake of Heartland breach Several have begun reporting fraud associated with exposed cards In the first real indication of the scope of the recently disclosed data breach at Heartland Payment Systems Inc., banks and credit unions from Washington to Maine have begun to reissue thousands of credit and debit cards over the past few days. Several have also begun disclosing fraud associated with payment cards that were reported to them by Visa and MasterCard as having been exposed in the breach. A Pennsylvania law firm today filed the first class-action lawsuit related to the breach. Chimicles & Tikellis LLP in Haverford, Pa., filed the lawsuit on behalf of Alicia Cooper, a resident of Woodbury, Minn., and others who might have been affected by the breach.
Corporate Aviation: Don't Come fly with the CEOs
Boeing Plans to Cut 10,000 Jobs as Demand Slows Boeing Co. said it plans to cut 10,000 jobs, or about 6 percent of its workforce, after a strike, program delays and a global recession contributed to a fourth- quarter loss. The job reductions, disclosed on a conference call today, include 4,500 that were previously announced in the commercial- plane half of Boeing's business. Earlier the Chicago-based company reported a net loss of $56 million, or 8 cents a share, compared with profit of $1.03 billion, or $1.36, a year earlier. Boeing faces a potential increase in canceled or deferred orders this year as airlines cope with a drop in travel demand and tight credit. It also must carry development costs on the delayed 787 Dreamliner, which is now due to reach the first customer in early 2010, about two years later than planned.
Obama says tough decisions soon on Iraq, Afghan wars The United States must make tough decisions soon about the wars in Iraq and Afghanistan, President Barack Obama said on Wednesday after receiving his first briefing from the heads of the U.S. armed forces. Obama, who is weighing accelerating the withdrawal of troops from Iraq and boosting U.S. forces in Afghanistan, was speaking after a nearly two-hour meeting with Defense Secretary Robert Gates and the Joint Chiefs of Staff at the Pentagon. "We are going to have some difficult decisions that we are going to have to make, surrounding Iraq and Afghanistan most immediately," the president said.
Israeli warplane bombs Gaza tunnels as US envoy George Mitchell warns over ceasefire Israel has resumed its bombing of part of the Gaza Strip known to contain smuggling tunnels to Egypt. The strikes, which threaten to derail the fragile ceasefire, come after Israel said a rocket was fired from Gaza towards the town of Ofakim, falling in an unpopulated area. The rocket attack was claimed by the Al-Aqsa Martyrs Brigades, an offshoot of moderate Palestinian president Mahmud Abbas's Fatah faction. An Israeli army spokesman confirmed a warplane had bombed the tunnels.
Hamas undermines the ceasefire:
Egypt attacks Iran and allies in Arab world CAIRO (Reuters) - Egypt aired its grievances against Iran, the Palestinian Islamist movement Hamas and the Lebanese Shi'ite group Hezbollah, saying they worked together in the fighting over Gaza to provoke conflict in the Middle East. "(They tried) to turn the region to confrontation in the interest of Iran, which is trying to use its cards to escape Western pressure ... on the nuclear file," Foreign Minister Ahmed Aboul Gheit said in an interview with Orbit satellite channel broadcast Wednesday. Aboul Gheit also said that Egypt undermined Qatar's attempts to arrange a formal Arab summit on Gaza earlier this month, arguing that it would have damaged "joint Arab action." "Egypt made the summit fail... This summit, if it had taken place as an Arab summit with a proper quorum, would have damaged joint Arab action. We can see what others do not see," he said.
U.S. envoy tries to shore up Gaza ceasefire JERUSALEM (Reuters) - President Barack Obama's Middle East envoy called on Wednesday for a Gaza ceasefire to be strengthened and extended, and promised after talks in Israel and Egypt that Washington would pursue Middle East peace vigorously. A surge of violence has threatened the fragile separate truces that Israel and the Gaza Strip's Hamas rulers put into effect on January 18 after a 22-day Israeli offensive. Israeli aircraft bombed smuggling tunnels under the Gaza-Egypt border in a response to the killing on Tuesday of an Israeli soldier on patrol along Israel's frontier with the coastal enclave.
Iran: American apology in order Perhaps this is what happens when the United States attempts to open a dialog with Iran: Mahmoud Ahmadinejad demands an apology. The vituperative Iranian president, delivering his first public address since President Barack Obama's inauguration last week and Obama's own overture to the Muslim world this week, suggested today that the "change'' which Obama promised in his campaign means that the new American leader must apologize for U.S. "crimes" against Iran, including American support for the 1953 coup in Tehran and the backing of Iraq during the war between Iraq and Iran. "We welcome change, if it's fundamental and in the right direction," Ahmadinejad said today in a televised speech. "Real change is change in the tone of talks with people, to enter from the door of respect, and not to pursue expansion and imperialism."
Obama Tells Muslim World that America is a Nation of ‘Muslims, Jews, Christians’ -- and Infidels? In his interview with al-Arabiya on Tuesday, President Obama said he intended to send a message that America is willing to forge a new partnership with the Arab world. “(W)hat I want to communicate is the fact that in all my travels throughout the Muslim world, what I've come to understand is that regardless of your faith -- and America is a country of Muslims, Jews, Christians, non-believers -- regardless of your faith, people all have certain common hopes and common dreams,” Obama told Hisham Melhem, the Washington Bureau Chief for al-Arabiya. But mentioning “non-believers” to a Muslim audience was dicey, according to some experts on Arabic and Arab culture, given the fact that to some Muslims and nations, “non-believer” is synonymous with “infidel.”
Obama Al-Arabiya Full Interview
Davos . . . .
Davos '09 and the Failure of Leadership The crisis the world is suffering through now is a failure of leadership. The leaders of the world are in Davos. If the world is watching what happens here this week, it will be to hear solutions and see responsibility and accountability. I'd say that's not off to a great start, at least on the latter. This morning, I started my Davos week with talk of trust. The Edelman Trust Barometer presentation revealed plummeting trust in financial, government, and journalistic institutions: 62% of adults in 20 countries trust companies less than they did a year ago. Trust in government is even lower. Nonetheless, the first trend I spot here: the rise of government. News reports have been saying that this will be a dialed-down Davos, but I don't see that; it's the same Davos with the same pastries and parties. The change I do sense is less of a presence and apparent swagger from business and more from government. "Power has shifted from Wall Street to Pennsylvania Avenue," said a speaker at the Edelman event.
FT's Barber Says Obama Advisers `Right' to Miss Davos
Economists Sound Off at Davos Reporting from the World Economic Forum in Davos, CNBC interviewed a number of prominent economists and business leaders about the global financial crisis and what can be done. Robert J. Shiller, a professor of economics and finance at Yale, said there might be a much-needed silver lining to the dark clouds hanging over Switzerland. "I am hopeful that we will respond to this crisis," he said. "This is creative destruction, and something creative will come out of it." Mr. Shiller added that first and foremost, the stimulus package currently being debated in Congress needs to restore confidence in the economy. On the other hand, Nouriel Roubini, an economist at N.Y.U., stayed true to his nickname of Dr. Doom. "For now the only light at the end of the tunnel is the incoming train wreck," he said, predicting that the crisis would worsen in coming months.
Confidence evaporates, currency row brews at Davos Delegates in Davos were united in the view that an economic upturn is some way off. Lars Thunnel, head of the International Finance Corporation, the private arm of the World Bank, said he expected economic malaise sparked by the credit crisis to linger. Stephen Roach, Morgan Stanley's Asia chairman, agreed the next three years would be tough. "The concept of a vigorous 'V'-shaped recovery is for business cycles of the past but not for this post-bubble, post-crisis business cycle. It is going to be a long slog in 2010, in 2011," he told Reuters. That grim scenario has left sovereign fund Dubai International Capital wary of making big long-term investments even though it sees asset prices at reasonable levels.
SOROS AT DAVOS 2009
Gloom Deepens Among Executives, Economists at Davos Gloom is deepening among business leaders and economists, casting a pall over this year’s World Economic Forum in Davos, Switzerland. “The crisis is getting worse,” Rupert Murdoch, chief executive officer of News Corp., said at a press conference to kick off the five-day event today. “It’s going to take very drastic action to turn that around, if it can be turned around, quickly. I believe it will take quite a long time.” Concerns over the economic outlook are virulent as executives from JPMorgan Chase & Co.’s Jamie Dimon to Stephen Green of HSBC Holdings Plc join more than 2,500 counterparts, academics and policy makers in the ski resort for five days of soul-searching and deal-making.
AIG's Frenkel Says 2009 `Will Be A Bad Year' Worldwide
Russia and China blame capitalists for crisis DAVOS, Switzerland: The leaders of the former bastions of the Communist bloc took the stage here on Wednesday to rebuke their capitalist brothers for dragging the world into crisis but also to assure them that, working together, they can rapidly restore the global economy to health. In the official opening address of the World Economic Forum, Prime Minister Vladimir Putin of Russia spoke of a financial "perfect storm" that has decimated the old system, rendering it obsolete. "A year ago, American delegates speaking from this rostrum emphasized the U.S. economy's fundamental stability and its cloudless prospects," he said, speaking through a translator. "Today, investment banks, the pride of Wall Street, have virtually ceased to exist."
Wen and Putin lecture western leaders The leaders of China and Russia on Wednesday turned the tables on their western counterparts who have dictated the world's economic agenda, lecturing them for policy failures they said had led to the global financial crisis. Wen Jiabao, the Chinese premier, and Vladimir Putin, Russia's prime minister, used the World Economic Forum in Davos to argue that the two rising powers must play a bigger role in a new economic order. Mr Putin mocked American delegates who had talked at last year's Davos gathering about the US economy's "fundamental stability and its cloudless prospects", saying that "investment banks, the pride of Wall Street, have virtually ceased to exist".
Putin's View: 'We're All in the Same Boat' Making his first appearance as Russian leader before the annual gathering of business and political leaders in Davos, Switzerland, Prime Minister Vladimir V. Putin struck a conciliatory tone toward the West. He explicitly wished the new administration of President Obama well, and urged cooperation on energy security, the economy and even disarmament. Mr. Putin used a 30-minute speech before a packed auditorium on Wednesday to paint Russia as a reliable partner in energy, trade and politics amid the widening global economic crisis. "We can't afford being isolationist or economically selfish," Mr. Putin said. Describing the world financial crisis as a "perfect storm," he added: "We are all in the same boat."
Putin Says Global Economy Needs `Common Standards'
Putin Turns Down Michael Dell's Aid Offer at Davos Perhaps Vladimir V. Putin is more of a Mac man. After a speech Wednesday at the World Economic Forum in Davos, Mr. Putin, Russia's prime minister, took some questions from Davos attendees. Michael Dell, the founder and chief executive of Dell, posed the first query. He asked how technology companies could help Russia make the best use of its talent and technology. Mr. Putin appeared less than impressed with the question. "You see, the trick is that we don't need any help," Mr. Putin said, according to a video of the event on YouTube. "We are not invalids. We do not have limited capacity." Reports from the event suggest that the audience was taken aback by Mr. Putin's aggressive remarks. The version of the event on YouTube, however, seems to put things in a less caustic light. (The reports also have Mr. Putin saying Russia does not have "limited mental capacity" rather than just "limited capacity" in an infrastructure sense, as the translation seems to imply.)
Trichet says system fragile as confidence melts DAVOS, Switzerland (Reuters) - Confidence among the world's top bosses meeting in Davos has evaporated and European Central Bank chief Jean-Claude Trichet said on Wednesday a too fragile financial system needed reform. But a brewing currency row between the United States and China cast doubt on the political will to act in concert. Chinese Premier Wen Jiabao and Russian Prime Minister Vladimir Putin will both address business and political leaders in the Alpine ski resort later on Wednesday, to offer their remedies for the worst economic crisis in 80 years. Business chiefs and policymakers here for the four-day World Economic Forum said there was no easy solution to the credit crisis that has torpedoed global growth and major government programmes are needed.
Trichet Says Next Important Rate Meeting Is in March
White House plan puts bull's-eye on talk shows Posted agenda issues warning about new 'obligation' review The White House is promising new reviews of the "obligations" to the government by broadcasters who "occupy the nation's spectrum" just as the president has targeted conservative talk radio icon Rush Limbaugh for a public attack, raising concerns over the possible restoration of the "Fairness Doctrine," a policy that failed as unneeded and unconstitutional two decades ago. Paul Ibrahim of NorthStarWriters.com http://www.northstarwriters.com/pi150.htm cited Obama's warning to congressional Republicans that "you can't just listen to Rush Limbaugh and get things done" in suggesting the president has become the "driving force" behind a new "systematic" plan to "intimidate and demonize Obama's opponents." That such a campaign was launched only days after Obama's inauguration is "tremendously perturbing," he wrote. "Welcome to the politics of hope 'n' change. Obama's startling attempt to hang Limbaugh's scalp on the wall is a warning that the new ruler does not want unity – he demands it," Ibrahim wrote.
Limbaugh Slams Obama Says New Prez Is Not A 'Unifier' Conservative radio king Rush Limbaugh shot back at President Obama this afternoon - saying the new commander-in-chief is "not a unifier and not bipartisan" and is "more frightened of me" than he should be of Republican leaders. "I think [Obama] wants me to fail," Limbaugh said on his show, rebutting Obamas' comments Friday that GOP lawmakers should not be listening to the right-wing talk show host. Obama had warned Republicans on Capitol Hill Friday that they need to quit listening to Limbaugh if they want to get along with Democrats and the new administration.
Rush Limbaugh on Hannity - part 1
Rush Limbaugh on Hannity - Part 2 The Future of Conservatism
Gold Is the Only Long Term Bull Market One of our themes over the years has been that monetary factors are driving the major trends in the financial markets. To put it another way, we have tended to downplay the effects on market prices of non-monetary drivers such as the expansion of the internet, the industrialisation of China, and "Peak Oil". For example, in the 8th August 2007 Interim Update we wrote: As explained in the past, when it comes to the "commodity supercycle" we are definitely sceptics. We concur with the view that commodity prices in general and metal prices in particular are in long-term upward trends, but we do not think these trends are being driven by the strong growth of "Chindia" or the global spread of capitalism or the industrialisation of Asia or the movement of billions of people to the ranks of the "middle class" or any of the other catchphrases routinely used to neatly explain the price action. In our opinion, these explanations rank alongside slogans such as "new economy" and "technology-driven productivity miracle" that were used to legitimise the price action of tech stocks during the boom of the late-1990s.
Economic Stimulus or Economic Boomerang? We are all familiar with how a boomerang works. It is a weapon of great power when used properly. However, when thrown carelessly it can turn on you. Instead of hitting its target it comes back to harm you. In this regard, the economic stimulus package is like a boomerang. If implemented properly, it may be a powerful weapon in fighting the current financial crisis. If implemented carelessly, it will make a victim of us.
Ron Paul on "CNN's Money" with Poppy Harlow 01-27-2009
World economy leads to currency instability and strong gold The fast deteriorating world economy is putting pressure on currencies. Fast rising unemployment is going to cause social strife, and gold is reacting accordingly. World unemployment rising fast US unemployment is publicly stated to be 7%. But those numbers are understated. If you add the people who stopped looking, and the part timers who want full time, that number roughly doubles. ShadowStats.com talks about that. 14% unemployment is over 1 in 8 people. You can basically apply that rate to the US and Europe as well. Now, we estimate the US will see a minimum of 3 million more jobs lost in 09, probably a lot more, maybe 4 to 5 million. If we take the number of people working in the US (roughly 130 million) 3 million more lost jobs will increase unemployment by roughly 2 to 3%. That would bring official US unemployment to 10%, and the unofficial rate to about 20% by the end of 09. That is depression level unemployment.
Fed in uncharted waters, eyes new tools Fed in uncharted waters, eyes tools to battle recession, expected to hold rates at record low With the country reeling from a recession, Federal Reserve policymakers are weighing what other tools they can use to brace the economy. Fed Chairman Ben Bernanke and his colleagues wrap up a two-day meeting Wednesday, where they are all but certain to leave a key interest rate at a record low to provide relief. "They will hold rates down for a good long time and do everything they can to turn the economy around," said Bill Cheney, chief economist at John Hancock Financial Services. At the same time, the Fed could unveil new actions -- or provide more clues as to its thinking -- to deal with a stubborn trio of crises -- housing, credit and financial.
Fed Shift Leaves Experts Blind, Complicates Central Bank’s Job Investors will have a tougher time assessing Federal Reserve policy when officials today replace interest rates with emergency credit programs as their main tool for steering the economy. Without rates as their main policy gauge, Chairman Ben S. Bernanke and the Federal Open Market Committee also will find it more difficult to anticipate the impact of their statements on financial markets during the worst credit crisis in seven decades.
FDIC May Run 'Bad Bank' in Obama Plan to Remove Toxic Assets The Federal Deposit Insurance Corp. may manage the so-called bad bank that the Obama administration is likely to set up as it tries to break the back of the credit crisis, two people familiar with the matter said. FDIC Chairman Sheila Bair is pushing to run the operation, which would buy the toxic assets clogging banks’ balance sheets, one of the people said. Bair is arguing that her agency has expertise and could help finance the effort by issuing bonds guaranteed by the FDIC, a second person said. President Barack Obama’s team may announce the outlines of its financial-rescue plan as early as next week, an administration official said.
Someone owes you $X, and doesn't have the funds to pay you.
The central bank monetizes $X amount of new government borrowing to build roads and bridges we don't need, and to pay for wars that destroy personnel and infrastructure.
Since new money has been created, the financial experts declare that the central bank has "prevented deflation" and thereby "saved the economy".
You are still broke. You have to shut down your factory, liquidate its assets (to the benefit of those who are subsidized), lay off all your workers, and stop producing goods.
This isn't a "solution"; it's a scheme to take wealth away from producers, and to give it to politically-connected spenders.
Any asset that is an inflation hedge isn't fungible, but it will produce bogus "capital gains" against a deflating currency, so that you will be forced by way of taxation to give up some of your savings when you convert back to currency. Drip, drip, drip...there it goes...away.
Any asset that is productive will have a hard time finding customers, unless that customer is a bank or the government. Any asset that is fungible is subject to inflation, and any asset backed by the "full faith and credit" of the US government comes with a premium price tag despite loss of purchasing power to inflation.
Ron Paul on "Morning Joe" 01-27-2009
Senate Panel Adds $70 Billion Tax Relief to Stimulus The U.S. Senate’s tax-writing committee added $70 billion in relief from the alternative- minimum tax to an $825 billion economic stimulus proposal. The provision benefiting more than 30 million households, primarily with incomes between $100,000 and $500,000 annually, was approved by voice vote today as an amendment to $272 billion in tax cuts the Senate Finance Committee already had planned for the broader stimulus plan. Inclusion of the alternative-minimum tax relief would swell the stimulus plan’s tax cuts to $342 billion. The tax relief is anchored to President Barack Obama’s campaign promise to give workers a reduction of up to $1,000 by reducing Social Security payroll taxes. The Obama administration urged exclusion of the AMT provision when the House drafted its stimulus bill, House Ways and Means Committee Charles Rangel said last week.
Stimulus for Who? This week the House is expected to pass an $825 billion economic stimulus package. In reality, this bill is just an escalation of a government-created economic mess. As before, a sense of urgency and impending doom is being used to extract mountains of money from Congress with minimal debate. So much for change. This is déjà vu. We are again being promised that its passage will help employment, help homeowners, help the environment, etc. These promises are worthless. This time around especially, Congress should know better than to pass anything of this magnitude without first reading the fine print. There a many red flags that I have found in this bill. At least $4 billion is allocated to expanding the police state and the war on drugs through Byrne grants, which even the Bush administration opposed, and the COPS program, both of which are corrupt and largely ineffective programs. To help Big Brother keep a better eye on us and our children, $20 billion would go towards health information technology, which would create a national system of electronic medical records without adequate privacy protection. These records would instead be subject to the misnamed federal “medical privacy” rule, which allows government and state-favored special interests to see medical records at will. An additional $250 million is allocated for states to nationalize individual student data, expanding Federal control of education and eroding privacy.
Patching Up The World With Golden Glue It was in the Wall Street Journal, in their "Best of WSJ.Com's Money Blogs" where I got the news that "As any private banker will tell you, the wealthy have become gold bugs. They are buying futures, gold bars, just about anything made from the shiny stuff." Personally, this was surprising, since I didn't know how or why bankers would know what the wealthy are doing, especially as concerns gold, but maybe this is because my relationships with my bankers are always frosty for one reason or another, usually centered around my failure to maintain a minimum balance in my checking account and then getting loud and angry when they hit me with a service fee as a result.
Jim Rogers at the Asian Financial Forum pt 1/2 Jan 19-20, 2009 Politicians made same mistakes in the past and we're headed for another depression
Jim Rogers at the Asian Financial Forum pt 2/2 Jan 19-20, 2009
Has Gold Appreciated Too Much to Be Inflation Protection? . . . . . It’s no secret that the Fed has been flooding the markets with cash. And eventually all of that cash is going to cause inflation to creep up. The question is whether the price of gold has appreciated too much to be the inflation protection it needs to be? . . . . . Or, it could be that all of this inflation-speak is nothing more than a smoke screen for the fact that the United States and China haven’t been playing nicely. And the rush to gold has been in response to the world’s two largest economies slap-fighting over Yuan rates.
China and the U.S. Play Chicken: Currency Manipulation "China is manipulating its currency," proclaims incoming Treasury Secretary Geithner. Talking about "manipulation" is helpful only if one's intent is to impress a local and insult a foreign audience. More productive may be plain talk - the U.S. and China could issue a joint statement along the lines of: "China and the U.S. agree that both will act in their respective self-interest in setting exchange rate policy." Many factors including supply and demand for a currency ultimately determine exchange rates. The U.S. is doing its share to try to manipulate the dollar, albeit with mixed results. Amongst others, last summer, the Treasury decided to make the guarantee for the housing agencies Fannie and Freddie more explicit. With the Chinese and other foreigners being the main buyers of U.S. debt in recent years, there was a threat that these buyers would abstain. Foreign investment in the U.S. had fallen off a cliff in the second quarter of 2008; the absence of foreign buying could have caused a panic in the dollar.
IMF chief turns up heat on China over yuan The head of the International Monetary Fund turned up the heat on China over its exchange rate policies yesterday, arguing that it was clear that the Chinese yuan was "significantly undervalued". Dominique Strauss-Kahn, the IMF’s managing director, said that it was in Beijing’s clear interest to allow the yuan to strengthen on foreign exchanges and insisted that the fund had been straightforward on the issue and had repeatedly spelled out this assessment. Mr Strauss-Kahn’s intervention stepped up pressure on China over its currency only days after Tim Geithner, who was last night confirmed as President Obama’s Treasury Secretary by the US Senate, sent a tremor through markets as he signalled a potential shift to a harder line from Washington over the yuan.
Deflation Risk Dipping As Stagflation Risk Rises Raise your hand. Did you purchase the 30 Year US Treasury Bond at the 27-year high of $142.66, in December 2008? Because you’re not just making a single bet you can ride senior sovereign debt into the mouth of deflation. You’re making an additional bet that the private banking system can detonate and collapse while at the same time Washington can continue to service its debt, as tax revenues virtually disappear. Or perhaps you’re making a third bet, that the US is so exceptional future purchasers of US Treasuries will be happy to know that all new auctions will be monetized. Regardless of your thinking, I see US Treasuries as having too many ways to lose, and only a few ways to win.
Bankers braced for bitter pill of regulation at Davos Two years ago anyone uttering the words "state" and "regulation" in the same sentence would have been sneered at in high-powered banking circles gathered by the ski slopes of Davos. Now, more than 18 months into the biggest financial upheaval in the last eighty years, those bank executives that still have jobs are preparing to swallow large doses of regulatory medicine to help cure a crisis they are accused of causing. With bank lending still frozen, the world sliding into recession and more than 300,000 financial jobs already gone, policymakers are replacing bankers in the driving seat at this year's World Economic Forum (WEF) to discuss short- and long-term solutions to the sector's woes.
Davos Annual Meeting 2009 - Klaus Schwab Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, shares more details about the Annual Meeting 2009 in Davos which runs from 28 January until 1 February in the alpine resort of Davos. Creating a voice of global solidarity is the top challenge of the conference. [US cabinet members are officially 'absent']
Ben Verwaayen and Klaus Schwab Mission statement - Committed to improving state of the world and what the Davos Economic Forum is doing to accomplish this end in this agenda setting forum.
Davos 2009: with global crisis in mind Some 2,500 guests from 96 countries are gathering at the World Economic Forum in Davos. It has already been called one of the most significant Davos forums in the event's 40 year history.
Davos Annual Meeting 2009 - Alexander Izosimov Alexander Izosimov, Chief Executive Officer, AO VimpelCom, explains his outlook for the global economy over the coming five years. Alexander Izosimov is a participant in the Annual Meeting in Davos which runs from 28 January to 1 February 2009. Talks about regulatory backlash and availability of access cash and consumer credit which will incur a painful adjustment.
Geithner takes a pay cut Newly installed US Treasury Secretary Timothy Geithner, one of the least wealthy men to head the department in recent years, took more than a 50% pay cut, according to his federal financial disclosure form. Mr Geithner, confirmed by the Senate yesterday, earned $411,200 in 2008 and the first two weeks this year as president of the Federal Reserve Bank of New York. As the country's 75th Treasury secretary, Geithner makes an annual salary of $191,300, the Treasury's Web site says. One consolation may be a $US434,668 severance payment from the New York Fed that Geithner listed as an asset on his disclosure form, released today in Washington. The value of Geithner's holdings ranged between $770,000 and $1.8 million.
Twenty-five people at the heart of the meltdown ... The worst economic turmoil since the Great Depression is not a natural phenomenon but a man-made disaster in which we all played a part. In the second part of a week-long series looking behind the slump, Guardian City editor Julia Finch picks out the individuals who have led us into the current crisis:
Alan Greenspan, chairman of US Federal Reserve 1987- 2006
Mervyn King, governor of the Bank of England
Bill Clinton, former US president
Gordon Brown, prime minister
George W Bush, former US president
Senator Phil Gramm
Abby Cohen, Goldman Sachs chief US strategist
Kathleen Corbet, former CEO, Standard & Poor's
"Hank" Greenberg, AIG insurance group
Andy Hornby, former HBOS boss
Sir Fred Goodwin, former RBS boss
Steve Crawshaw, former B&B boss
Adam Applegarth, former Northern Rock boss
Dick Fuld, Lehman Brothers chief executive
Ralph Cioffi Bear Sterns banker
Matthew Tannin Bear Sterns banker
Lewis Ranieri "godfather" of mortgage finance
Joseph Cassano, AIG Financial Products
Chuck Prince, former Citi boss
Angelo Mozilo, Countrywide Financial
Stan O'Neal, former boss of Merrill Lynch
Jimmy Cayne, former Bear Stearns boss
Christopher Dodd, chairman, Senate banking committee
Geir Haarde, Icelandic prime minister
The American Public
John Tiner, FSA chief executive, 2003-07
Money For Nothing Why Ben Bernanke Dreams of Throwing Money Out of Helicopters People who want to find out what Federal Reserve Board Chairman Ben Bernanke has in mind for the economy need to read some history. Bernanke declares himself a “Great Depression buff,” and as a professor at Princeton, he published an entire book devoted to the subject. The work in question, Essays on the Great Depression, published by Princeton University Press in 2000, offers vital clues to his thinking. From his interpretation of this prior disaster, he draws a key conclusion: policymakers must at all costs prevent deflation. Unfortunately for the economy, Austrian business cycle theory http://mises.org/story/672 gives us strong reason to reject both Bernanke’s historical analysis and his policy recommendations.
Traders 'gamble' with taxpayers' money, say MPs Hedge funds were accused today of gambling against the taxpayer when they bet that the share prices of British banks will fall. A powerful cross-party committee of MPs also told the UK's embattled hedge fund managers that they were "snubbing the public" by refusing to sign up to a basic set of standards for best-practice behaviour. In a showdown appearance before the Treasury Select Committee, four leading hedge fund managers were forced to defend allegations that they were profiting from the country's economic misery. They also fought off calls for greater scrutiny from regulators. Just a day after it emerged that Paulson & Co, a renowned American hedge fund, had made an estimated £270 million in profits from betting against Royal Bank of Scotland, which is majority state-owned, some of the industry's best-known players were thrown onto the back foot over the controversial practice of short-selling.
Obama Appoints Top Notch CFR, Bilderberg Members In a flurry of diplomatic activity in his first week in office, U.S. President Barack Obama on Thursday named special envoys for the Middle East and the Afghanistan-Pakistan region. Newly confirmed Secretary of State Hillary Clinton said Obama had chosen George Mitchell, a former senator and seasoned international trouble-shooter, as an envoy who will try to jump-start moribund Arab-Israeli peace talks.
Ron Paul on Obama's Foreign Policy 1-25-09 Dr. Paul discusses President Obama's interventionist foreign policy in the Middle East.
SEC 'lacks funds to detect large-scale frauds' America's financial regulator lacks the resources to detect frauds such as the $50 billion Ponzi scheme allegedly perpetrated by Bernard Madoff, according to a senior official of the US Securities and Exchange Commission (SEC). In draft testimony prepared for the Senate Banking Committee, Linda Thomsen, the SEC's director of enforcement, said that the regulator used virtually all of its resources to "pursue fires". She said: "Additional resources would give us the capacity to pursue smoke before it becomes a fire." The SEC has been criticised for failing to uncover Mr Madoff's alleged financial fraud despite numerous warnings from whistle-blowers over ten years and several investigations into the fund manager's brokerage business.
Citigroup cancels $50 million jet deal Responding to rising outrage over reports that it was going to take delivery of a $50 million, 12-passenger jet, Citigroup said this morning that it is canceling the jet order, period, end of story. "We have no intent to take delivery of any new aircraft," was the statement from Michael Hanretta, a Citigroup spokesman. This is, to put it politely, a full, 180-degree reversal. The company said Monday it would take delivery of the Dassault jet because it was actually reducing the size of its air fleet and the new jet would ultimately add efficiency to Air Citigroup. Citigroup would also have to pay millions of dollars in penalties if it didn't accept the jet, the company said. What's more, in an attempt (unsuccessful) to appease critics, Citigroup said it wasn't using any of $45 billion it received from the federal financial bailout for the jet.
Corning cutting jobs as profits dive New York-based glass and ceramics maker Corning Inc. is cutting 3,500 jobs, including more than 500 in Corning, N.Y., after its fourth-quarter profits fell 65%. Corning Inc. said Tuesday it is cutting 3,500 jobs, or 13% of its payroll, as demand slumps for glass used in flat-screen televisions and computers. The specialty glass and ceramics maker, the world's largest maker of liquid crystal display glass, announced the cutbacks as its fourth-quarter profit plunged 65% to $249 million, or 16 cents a share, from $717 million, or 45 cents a share, a year earlier. Excluding one-time items, its profit of 13 cents a share came in well below Wall Street's forecast of 20 cents a share. Sales fell 31% to $1.1 billion from $1.6 billion, below $1.2 billion in sales forecast by analysts polled by Thomson Reuters. The company also cautioned that per-share profits before one-time items will likely be canceled out in the first quarter. Sales will fall below fourth-quarter levels as projected LCD glass volumes slump 20% to 25%, it said.
Home prices plunge record 18.2 percent in November Home prices plunged a record 18.2 percent in November from a year earlier as the country's housing market remains in the throes of a deep recession, according to an index from Standard & Poor's. Prices in 20 metropolitan areas tracked by S&P fell 2.2 percent from October as housing continues to suffer from a huge supply of unsold homes, tighter lending standards and record foreclosures. The drop in prices on a month-over-month basis was slightly steeper than expectations, based on a Reuters survey of economists. However, the annual rate of decline for the Standard & Poor's/Case-Shiller composite index for 20 cities was not as steep as economists had expected. S&P said its composite index of 10 metropolitan areas also fell 2.2 percent in November from October for a 19.1 percent year-over-year drop, matching the previous month's record decline. Prices in 11 metro areas fell at record rates from a year earlier. Prices in 14 cities fell more than 10 percent from November 2007.
Resistance to Housing Foreclosures Spreads Across the Land Community-based movements to halt the flood of foreclosures have been building across the country. And they're not the usual suspects. . . . . "The small home-owners of the United States are organizing," Steele concluded, "tardily perhaps, but none the less surely." It wasn't just homeowners -- three months earlier the governor of Iowa had called out the National Guard after farmers stormed a courthouse and threatened to hang the judge if he didn't stop issuing foreclosures. They left him in a ditch, bruised but alive. By the end of the 1930s, farmers' and home-owners' struggles had pushed the legislatures of no fewer than twenty-seven states to pass moratoriums on foreclosures. The crowds appear to be gathering again -- far more quietly this time but hardly tentatively. Community-based movements to halt the flood of foreclosures have been building across the country.
Consumer confidence falls again to record low Consumer confidence fell to a record low in January as a downtrodden housing sector and worsening job prospects kept the country in a somber mood. The Conference Board, an industry group, said its sentiment index fell to 37.7 from a revised 38.6 in December, confounding forecasts for a small uptick. "Consumers remain quite pessimistic about the state of the economy," said Lynn Franco, director of The Conference Board Research Center. "Until we begin to see considerable improvements in the expectations index, we can't say the worst of times are behind us."
FedEx plane crashes in Texas Two crew members were taken to a hospital after a FedEx cargo plane crashed on landing Tuesday morning at the Lubbock, Texas, airport, officials said. The injuries appeared to be minor, said James Loomis, director of Lubbock Preston Smith International Airport. There was a small fire on the plane, the Federal Aviation Administration and FedEx spokeswoman Sandra Munoz said. Munoz said she was not sure about the extent of the damage.
Paterson denies Kennedy leaks in Senate fiasco Gov. David Paterson denies any role in the leak to the press about unproven allegations that Caroline Kennedy had problems with taxes, payment of a nanny, and in her marriage. Gov. David Paterson on Monday tried to distance himself from critical remarks about Caroline Kennedy that were leaked to the media by a person close to Mr. Paterson after Ms. Kennedy abruptly withdrew her name from consideration as a possible U.S. Senate appointee. Mr. Paterson's statements came as newspapers around the state were sharply critical of his handling of the Senate appointment and publicly questioned his ability to lead the state during a daunting fiscal crisis. Mr. Paterson denies any role in the leak to The Associated Press and some other news organizations about unproven allegations that Ms. Kennedy had problems with taxes, payment of a nanny, and in her marriage.
Congress Seeks To Authorize & Legalize FEMA Camp Facilities A new bill has been introduced in the U.S. House of Representatives called the National Emergency Centers Act or HR 645. http://www.govtrack.us/congress/billtext.xpd?bill=h111-645 This bill if passed into law will direct the Secretary of Homeland Security to establish national emergency centers otherwise known as FEMA camp facilities on military installations. This is an incredibly disturbing piece of legislation considering that the powers that be have already set in motion an agenda to setup a nationwide marital law apparatus through U.S. Northern Command and the Department of Homeland Security. Apparently, the fusion centers, militarized police, surveillance cameras and a domestic military command is not enough. Even though we already know that detention facilities are already in place, they now want to legalize the construction of FEMA camps on military installations using the ever popular excuse that the facilities are for the purposes of a national emergency. With the phony debt based economy getting worse and worse by the day, the possibility of civil unrest is becoming a greater threat to the establishment. One need only look at Iceland, Greece and other nations for what might happen in the United States next. With this in mind, it appears as if these so called national emergency centers will be used in a national emergency but only if the national emergency requires large groups of people to be rounded up and detained. If that isn’t the case, than why have these national emergency facilities built in military installations?
Apocalypse in 2012? Date spawns theories, film Just as "Y2K" and its batch of predictions about the year 2000 have become a distant memory, here comes "Twenty-twelve." Fueled by a crop of books, Web sites with countdown clocks, and claims about ancient timekeepers, interest is growing in what some see as the dawn of a new era, and others as an expiration date for Earth: December 21, 2012. The date marks the end of a 5,126-year cycle on the Long Count calendar developed by the Maya, the ancient civilization known for its advanced understanding of astronomy and for the great cities it left behind in Mexico and Central America. (Some scholars believe the cycle ends a bit later -- on December 23, 2012.)
Obama to step up battle in Afghanistan, aides say President Barack Obama is planning to refocus U.S. efforts in Afghanistan to concentrate military might on the battle against Al Qaeda and the Taliban, with less emphasis on reconstruction and governance, senior administration officials said Tuesday. Obama is also considering whether to maintain a close relationship with Hamid Karzai, the Afghan president, who has come to be viewed by some members of the new Obama administration as a possible impediment to American goals in Afghanistan, the officials said. On both fronts, the new approach represents a departure from the course taken by the Bush administration, which maintained a close relationship with Karzai and embraced an ambitious agenda that included the promotion of democracy.
Pakistan’s Crackdown on Militants Leaves Imams Preaching Jihad A dozen Pakistani policemen stood watch last week outside a Lahore mosque known to be a stronghold of the Lashkar-e-Taiba guerrilla group -- while the imam inside preached jihad to thousands of worshippers. The squad’s presence was part of Pakistan’s vow to curb Lashkar, which India blames for the Nov. 26-29 Mumbai terrorist attack that killed 164 people, and it showed how limited that effort has been. As the officers heard Saifullah Khalid’s sermon blaring over loudspeakers, he demanded more attacks on India. "Muslims under the leadership of Lashkar-e-Taiba and Jamaat ud-Dawa will conquer all South Asia!" Khalid roared. "Nobody can stop us from fighting India!"
Guatemala's Perfect Heist Guatemala's private banks got a stimulus package from Banco de Guatemala in November and December last year, just like some handpicked US banks did in the Bush administration. Not the same amount of money, but with the same goal, to increase liquidity in the system and subsequently the private banks would then give loans to businesses and people to keep the economy going. The same "bla, bla, bla" theory that was on the news channels of the US for months.
Japan plans stimulus for ailing companies HONG KONG: Japan on Tuesday outlined a plan to inject state funds into ailing companies in exchange for stakes in them, a move that echoed the partial nationalization of troubled financial firms in the United States and some European countries. The announcement, by the Ministry of Economy, Trade and Industry, is the latest in a string of efforts by the Japanese authorities to aid companies - in this case especially small and medium-sized businesses - that are struggling to keep up operations as demand dwindles. It comes amid a global debate about the potential pitfalls of nationalization.
U.K. announces £2.3 billion financing plan for carmakers LONDON: The British business secretary Peter Mandelson said Tuesday that the government would offer carmakers loan guarantees underwriting £2.3 billion of financing aimed at helping the industry cope with recession and new environmental rules. Automakers will be eligible to tap £1.3 billion, or $1.8 billion, of European Investment Bank funding and another £1 billion of Treasury guarantees on loans "This industry is not a lame duck and this is no bailout," Mandelson told lawmakers in Parliament. He said the motor industry had been "at the front line of the downturn, with output falling further and faster than any other sector. We need to counter this to prevent an irreversible loss of jobs and skills."
Obama tells Muslims, 'Americans are not your enemy' PARIS: In one of his first interviews since taking office, President Barack Obama struck a conciliatory tone toward the Islamic world, saying he wanted to persuade Muslims that "the Americans are not your enemy" and adding that "the moment is ripe for both sides" to negotiate in the Middle East. His remarks, recorded in Washington on Monday night, signaled a shift - in style and manner at least - from the Bush administration, offering a dialogue with Iran and what he depicted as a new readiness to listen rather than dictate. Obama spoke as his special Middle East envoy, George Mitchell, arrived in Egypt to meet with President Hosni Mubarak at the start of an eight-day tour whose itinerary includes Israel, Jordan, Saudi Arabia, France and Britain.
Hamas tried to hijack ambulances during Gaza war PALESTINIAN civilians living in Gaza during the three-week war with Israel have spoken of the challenge of being caught between Hamas and Israeli soldiers as the radical Islamic movement that controls the Gaza strip attempted to hijack ambulances. Mohammed Shriteh, 30, is an ambulance driver registered with and trained by the Palestinian Red Crescent Society. His first day of work in the al-Quds neighbourhood was January 1, the sixth day of the war. "Mostly the war was not as fast or as chaotic as I expected," Mr Shriteh told the Herald. "We would co-ordinate with the Israelis before we pick up patients, because they have all our names, and our IDs, so they would not shoot at us." Mr Shriteh said the more immediate threat was from Hamas, who would lure the ambulances into the heart of a battle to transport fighters to safety.
'Uranium For Iran Nuke In 2009' Iran will have enough enriched uranium to make a single nuclear weapon later this year, the prestigious International Institute for Strategic Studies (IISS) predicts. During 2009, Iran will probably reach the point at which it has produced the amount of low-enriched uranium needed to make a nuclear bomb."But being able to enrich uranium is not the same as having a nuclear weapon." However, the survey reports doubts over US Intelligence estimates that Iran halted its work on nuclear weapons six years ago. This points to Tehran's continued development of long-range ballistic missiles able to reach targets in Israel and beyond. The IISS recommends a mixture of carrot and stick as the best international response.
On Restoring Confidence in the Markets Congressman Ron Paul gives us his thoughts on restoring confidence in the markets moments after the President's address this morning. Oct 10, 2008
On Capital and Capitalism Can we solve our economic problems with never ending "liquidity injections"? If you have more debt and inflation than actual capital, do you really have capitalism?
On Market Intervention
On Safety Nets
On the End of Capitalism?
History . . . from Davos meeting last year
Davos Annual Meeting 2008 - Understanding Iran's Ambitions Unease and uncertainty continue to surround Iran's policy-making and its strategic objectives with respect to the Middle East and the West. How should the international community engage Iran in the context of energy security, nuclear non-proliferation and regional stability?
'Next rally of Gold will be at $930-950 levels' Prices of gold and silver rocketed on last Friday and this has invited a short to medium term bull run for the precious metals. Safe haven buying of yellow metal spurred the price of white metal too. Gold remained star performer last week after three incessant minor weekly losses. On Friday gold kissed 900 USD/oz levels but didn’t manage to close above the psychological barrier but closed well above the strong previous resistance levels of 892 USD/oz. Gold may touch the levels of 932 USD/oz this week.
Gold Positioning Breakout to New Highs on Weakening U.S. Dollar Gold is now in position to break out to new dollar highs and embark on a very powerful run. It is not its action on Friday which gives rise to this positive view, although that was certainly impressive enough, but the extremely bearish action in the dollar last week, which suggests that it is on the verge of a breakdown and savage decline. On the 1-year chart for gold in dollars we can see how the sharp rally on Friday broke it above the resistance at the December highs and above an inner downtrend line. We were earlier inclined to the view that gold would probably drop down to form a symmetrical Right Shoulder to complement the Left Shoulder of the large Head-and-Shoulders bottom shown on the chart, but Friday's breakout has negated that scenario.
'Gold and Silver will perform better than equities' Last week the broad market slide lower on heavy volume as the DOW tries to hold the 8000 level. If this support level is broken then we could see another leg lower with the DOW sliding down to the 6500 level. The reason I am mentioning this is because gold surged higher on Friday with big volume as traders start to anticipate this drop as well as the drop in the USD which is currently at a short term resistance level. If the market starts to drop, then holding gold stocks may not be the best safe haven. When the market sells off it tends to pull all stocks with it, by holding GLD fund or physical gold, SLV fund or physical silver, and the USO fund or physical crude oil, you could have better returns on your investment trading the commodity rather than going long stocks in a bear market.
Gold Jumps as Government Spending Boosts Inflation-Hedge Demand Gold rose to the highest closing price in almost five months in New York on speculation that government spending will spur inflation, boosting demand for the precious metal as a hedge. Silver also gained. Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, rose 4.7 percent last week to a record 832.6 metric tons. In 2008, the metal advanced for the eighth straight year as U.S. equity and commodity indexes lost more than 30 percent. "Massive injections of liquidity into the global banking system will serve to drive gold prices higher," said Dennis Gartman, an economist and the editor of the Gartman Letter in Suffolk, Virginia.
The Greater Depression - Doug Casey Jan 3rd part 1 Casey see this as the worst crisis in the last 200 years
The Greater Depression - Doug Casey Jan 3rd part 2 Talk about gold in relation to dollars, putting gold price in tens of thousands of dollars per ounce
One of Two Scenarios for Gold and Stocks is Developing It appears that one of two scenarios is developing. Scenario A, "the meltdown scenario" means that we are in the thick of things now. This would actually be preferable to Scenario B, "the reflation scenario", which would result in an even greater meltdown after a significant "tradable bounce". Rarely does one day of trading reveal much, but Friday's trading was spectacular. It appeared that scenario A was in effect as gold moved sharply higher at the opening and the other commodities (keep your eye on silver and oil and its relationship to gold) moved lower with the overall market. But silver and oil scored extremely impressive reversal rallies with oil's gains actually outpacing gold's by day's end.
Gold Consolidates Strong Gains Above $900 Gold has consolidated on the strong gains seen last week of 6.43% rise in the week (silver +6.6%). Gold fell initially in Asia to $890/oz before rising sharply in early trading in Europe to over $907/oz. Much of the technical damage done in recent weeks has been overcome and gold is again looking bullish from a technical and fundamental viewpoint. But gold needs a daily or better a weekly close above the recent October high of $925/oz if it is to again surpass last year's record high of over $1,000/oz.
Geithner Wins OK For Treasury Despite Tax Woes Timothy Geithner won confirmation as U.S. Treasury secretary on Monday as the U.S. Senate set aside misgivings about his past income tax problems in light of his experience battling the financial crisis. Geithner, 47, was expected to be sworn in quickly to help lead President Barack Obama's efforts to stabilize a worsening economy. The Senate approved his nomination on a 60-34 vote. With the U.S. economy in full-blown crisis, Geithner's experience in dealing with the past year's rapid-fire rescues of key financial firms trumped the taint from his late payment of $34,000 in self-employment taxes when he worked at the International Monetary Fund earlier this decade. The new Treasury chief is expected to soon unveil reforms to the United States' $700 billion financial bailout program to provide more support for housing and credit markets, and possibly a new effort to absorb troubled assets from banks.
Bernanke's Gamble on the Dollar There are several things of interest this week. The first and foremost is the Fed's FOMC two day meeting with their announcement on Wednesday at 2:15. It is important despite the fact that rates are effectively at zero, and the Fed has declared for 'quantitative easing.' How does the Fed intend to implement this quantitative easing? Another way to ask this is to say, "What is the next bubble?" Quantitative easing implies market distortion, and traders will be keen to understand where and how that distortion will play, because they are still geared for supercharged returns in an environment where fewer and fewer opportunities exist.
Obama plan draws cries over largess Stimulus package includes contraceptives, Mall sod From $400 million for NASA climate-change research to $650 million for digital TV converter-box coupons, the unprecedented spending in President Obama's economic stimulus is provoking questions about whether it can create jobs and jolt the country out of recession. The $825 billion bill, which is headed for likely House passage Wednesday, is increasingly being scrutinized by Republicans and economists because it doles out billions of taxpayer dollars for everything from the 2010 census to university research to contraceptives at family-planning clinics - areas far removed from the meltdown in finance, housing and automotive industries. "This bill is not all stimulus," said David M. Walker, the former head of the U.S. Government Accountability Office and president of the fiscal issues advocacy group Peter G. Peterson Association.
Hyperinflation Germany 1923
Restoring Sound Money in America There is a determined grassroots movement in the United States seeking the restoration of sound money. There are many different groups comprising this movement, but all share the same aim. It is to restore gold and silver to its rightful role as the money of the United States, as mandated by the Constitution. I have written about this movement before. In "The Quest for Sound Money in New Hampshire" in May 2005 I discussed the bill, called the "New Hampshire Sound Money Bill", that was drafted by Constitutional scholar and lawyer, Dr. Edwin Vieira. It was presented to the New Hampshire legislature, but sadly, remains pending in committee. If enacted, the bill will enable people to use gold and silver in their transactions with the state of New Hampshire.
Fed May Gain More Financial Oversight Some Worry Plan Would Give Bank Too Much Power Congress is moving to create strong new oversight of the financial sector that would likely give the Federal Reserve authority to examine the workings of a wide range of companies in an attempt to address one of the key failures that led to the financial crisis. But the initiative, which could be finalized in the House by spring, is raising concerns about whether it would muddy the Fed's traditional mission and concentrate too much power in a single federal body.
Forecast of a grim economic year 39 percent of business analysts surveyed see more job cuts ahead in bleak year for workers. It's shaping up to be another lousy year for workers, with more companies expecting to cut payrolls in the months ahead. That's part of the latest outlook from forecasters in a survey to be released today by the National Association for Business Economics. Its conclusions: the U.S. faces its worst business conditions since the report's inception in 1982. The report said 39 percent of forecasters predicted job reductions through attrition or "significant layoffs" over the next six months, up from 32 percent in October's survey. About 45 percent in the current survey anticipated no change in hiring plans.
Obama to Direct More From Bailout Fund to Consumers President Barack Obama's administration will direct more of the second half of a $700 billion financial rescue plan to open up credit for consumers and businesses and stem home foreclosures, his spokesman said. The president will use the second $350 billion outlay from the Troubled Asset Relief Program "far differently" than the Bush administration did, White House press secretary Robert Gibbs said.
Obama Mystique Raises Clout to Mythic Proportions President Barack Obama is walking, talking, and acting like a conservative. There’s daily footage of him as the devoted husband and doting dad. He speaks reverentially about the founders of the nation and the need to serve the country and each other. He wears his faith on his sleeve, even inviting famed Pastor Rick Warren to the inauguration to ask for God’s blessing. But the conservative symbols and imagery stand in stark contrast to the left-of-center agenda emerging from his administration: executive orders that weaken America’s national security and safety, taxpayer funding of abortions, three-quarters of a billion dollars in pork included in the bailout bill, etc. We’ve seen presidential liberalism in action before. But what’s different this time around is that Obama is in a better position to move the country to far-left regions than were any of his predecessors.
Bernanke Risks ‘Very Unstable’ Market as He Weighs Buying Bonds Federal Reserve Chairman Ben S. Bernanke and his colleagues may try once again to cure the aftermath of a bubble in one kind of asset by overheating the market for another. Fed policy makers meeting tomorrow and the day after are exploring the purchase of longer-dated Treasury securities in an effort to push up their price and bring down their yield. Behind the potential move: a desire to reduce long-term borrowing costs at a time when the Fed can’t lower short-term interest rates any further because they are effectively at zero.
Geithner Debt Sales to Benefit From Paulson Failures Former Treasury Secretary Henry Paulson’s inability to restore confidence in the financial system is creating unprecedented demand for U.S. debt as his successor prepares to sell the most bonds in history. Timothy Geithner, who may be confirmed as head of the Treasury today, will have the benefit of near record-low yields as he presides over auctions of as much as $150 billion of notes and bonds the next three weeks. Goldman Sachs Group Inc., one of the 17 primary dealers that are required to bid at the auctions, said last week the U.S. will likely borrow a record $2.5 trillion this fiscal year ending Sept. 30, almost triple the $892 billion in notes and bonds sold in fiscal 2008.
Hank Paulson Rhetoric
Obama Announces "New Rules" To Address Crisis As part of his rescue plan, Obama Signals Tough Restrictions on Banks in Rescue Package. President Barack Obama signaled that he would toughen restrictions on and oversight of banks as part of a fresh plan to aid the battered industry. Obama blasted the banks yesterday over reports that they’ve spent money renovating offices after receiving billions of dollars from the government and vowed they would be held accountable for any aid they receive in the future. The tough talk seemed designed to build support for a rescue plan that aides say Obama will roll out soon by reassuring lawmakers and voters that the administration will keep close tabs on money it hands out. Pressure for a plan is building after the Standard & Poor’s 500 Index fell for the third straight week, in part because of concerns about the health of the banks.
Obama Signals Tough Restrictions on Banks in Rescue Package President Barack Obama signaled that he would toughen restrictions on and oversight of banks as part of a fresh plan to aid the battered industry. Obama blasted the banks yesterday over reports that they’ve spent money renovating offices after receiving billions of dollars from the government and vowed they would be held accountable for any aid they receive in the future.
Rules no longer apply on the Hill There's a perverse logic to having the stealth release of that painful deficit projection and giddy rollout of big-ticket projects occur even before MPs regroup for this week's budget. Parliament, you see, has become a realm where radical change is the new normal. Traditional protocol and processes no longer apply. The past 72 hours have featured an unprecedented cross-Canada blitz of ministerial announcements as the federal government acclimatizes the taxpayer to deficit financing and releases its procurement list piecemeal, the better to get a bigger bang for every borrowed buck.
Thain Defends BofA Deal, Will Pay Back Office Costs Former Merrill Lynch CEO John Thain said the acquisition of the brokerage giant by Bank of America was the right thing to do but blames Merrill Lynch's huge losses on the administration of his predecessor, Stanley O'Neal, according to a memo Thain sent to Merrill Lynch employees after his ouster last week. Thain also says he'll reimburse Bank of America for the $1.2 million renovation of his office last year, which sparked controversy last week after it was reported by CNBC.
Dividends being cut at fastest pace in 50 years Dividends being cut at fastest pace in 50 years; Pfizer slashes its dividend in half Dividends are being cut at the fastest pace in at least 50 years, and many of the reductions are coming from U.S. companies investors have been relying on to provide income during the recession. Already this year, seven companies in the Standard & Poor's 500 index have decreased their dividends, removing some $12 billion from shareholders' pockets in the coming months. On Monday, Pfizer became the latest blue-chip company to do so.
Is Money Supply a Relative Absolute? There has been some chatter over an intriguing blog entry from friend Cassandra over the weekend Inflation v. Deflation with regard to the Fed's monetization of debt. The principle assertion seems to be that if the Fed is merely replacing existing credit dollar for dollar as it is written off, then the result is not inflationary.
If the original wholesale money market borrowing and lending was not inflationary, then why should its substitute be inflationary? Indeed, the real question is whether the expansion of the Fed's balance sheet is keeping pace with the contraction of money market credit more generally. If not, then the consequence may be deflationary.
Implicit in this of course are two conditions. The first, that the level of wholesale borrowing and lending and not been and would have continued not to be inflationary, and secondly, that the expansion of the Fed's balance sheet is equivalent dollar for dollar.
Layoffs Spread to More Sectors of the Economy Furloughs, wage reductions, hiring freezes and shorter hours simply did not do enough. A year into this recession, companies across the board are resorting to mass job cuts. Home Depot, Caterpillar, Sprint Nextel and at least eight other companies announced on Monday they would cut more than 75,000 jobs in the United States and around the world — a gloomy start to the workweek for employees anxious about holding their own as the economy sinks. Caterpillar, the maker of heavy equipment, is slashing its payrolls by 16 percent. Texas Instruments said late in the day that it would eliminate 3,400 jobs, or 12 percent of its work force.
Tens of thousands more layoffs are announced Economic forecasters see gloomy outlook as tens of thousands more layoffs are announced It's already been a lousy year for workers less than a month into 2009 and there's no relief in sight. Tens of thousands of fresh layoffs were announced Monday and more companies are expected to cut payrolls in the months ahead. A new survey by the National Association for Business Economics depicts the worst business conditions in the U.S. since the report's inception in 1982. Thirty-nine percent of NABE's forecasters predicted job reductions through attrition or "significant" layoffs over the next six months, up from 32 percent in the previous survey in October. Around 45 percent in the current survey anticipated no change in hiring plans, while roughly 17 percent thought hiring would increase.
A Town In Crisis The Winter of our Hardship 60 Minutes (1.25.2009) The town of Wilmington, Ohio has been devastated by the economic crisis and, as Scott Pelley reports, DHL, the town's largest employer, is shutting its domestic operation.
Big Companies Around Globe Lay Off Tens of Thousands Workers around the world, and particularly in Europe and the United States, faced another round of job cuts on Monday that swept across several industries. In the United States, several corporations said Monday morning that they would cut a total of 45,000 jobs, slashing costs to survive a recession that has taken a toll on new orders, profits and companies’ outlooks for growth. The cuts announced Monday included 20,000 jobs at the heavy-equipment manufacturer Caterpillar; 8,000 at the wireless provider Sprint Nextel, 7,000 at Home Depot and 8,000 from the expected merger of the pharmaceutical makers Pfizer and Wyeth.
Companies in U.S. to Slash More Jobs, Business Economists Say More U.S. companies project they'll pare staff in the next six months as pessimism mounts the economy will contract this year, according to a survey by the National The poll's net employment reading fell to a minus 22 this month, the lowest level since 2001, from minus 15 in the previous survey in October, the report showed today. More than three- fourths of the participants forecast the economy will shrink this year, twice as many as in the last survey.
62,000 Jobs Are Cut by U.S. and Foreign Companies Employers have tried to nip and tuck their labor costs by reducing overtime, shortening the workweek and freezing wages, but now, they are reaching for the saw. On Monday alone, companies across the employment spectrum announced more than 65,000 job cuts in the United States and around the world, a stark sign that businesses are enduring a painful, protracted downturn. Monday's toll included 20,000 cuts at Caterpillar, the world's largest maker of construction and mining machinery; 8,000 jobs at the wireless provider Sprint Nextel; 7,000 workers at Home Depot, and 8,000 from the expected merger of the pharmaceutical makers Pfizer and Wyeth. The beleaguered automaker General Motors announced that it would cut shifts at plants in Michigan and Ohio, where the downturn has hit hardest, eliminating some 2,000 jobs.
Obama’s Order Is Likely to Tighten Auto Standards President Obama directed federal regulators on Monday to move swiftly on an application by California and 13 other states to set strict limits on greenhouse gases from cars and trucks. He also ordered the Transportation Department to begin drawing up rules imposing higher fuel-economy standards on cars and light trucks. The directives make good on an Obama campaign pledge and signal a sharp reversal of Bush administration policy. Moving quickly on tailpipe emissions and on mileage rules are emphatic actions Mr. Obama could take to quickly put his stamp on environmental policy. Mr. Obama announced the actions in the East Room of the White House, saying that his orders were intended “to insure that the fuel-efficient cars of tomorrow are built right here in America.”
Timing of Stricter Standards Worries Automakers Automakers said Monday that they were working toward President Obama's goal of reducing fuel consumption, but rapid installation of stricter emissions standards could force them to drastically cut production of larger, more profitable vehicles in a time of severe financial duress. Mr. Obama ordered the government on Monday to reconsider whether California and other states could regulate vehicle emissions and help control greenhouse gas emissions, a reversal of a position taken by the Bush administration. The announcement came as General Motors and Chrysler are borrowing billions of dollars from the government to avoid bankruptcy, and as Toyota prepares to report its first operating loss in 70 years. Shortly after the president spoke, G.M. said it would cut 2,000 jobs at plants in Michigan and Ohio because of slow sales.
Detroit Calls Emissions Proposals Too Strict Automakers said Monday that they were working toward President Obama’s goal of reducing fuel consumption, but rapid imposition of stricter emissions standards could force them to drastically cut production of larger, more profitable vehicles, adding to their financial duress. Mr. Obama directed the Environmental Protection Agency to reconsider the Bush administration's past rejection of a California application to regulate auto pollution. Mr. Obama ordered the government on Monday to reconsider whether California and other states could regulate vehicle emissions to help control greenhouse gas emissions, a reversal of a position taken by the Bush administration. The announcement came as General Motors and Chrysler are borrowing billions of dollars from the government to avoid bankruptcy, and as Toyotaprepares to report its first operating loss in 70 years. Shortly after the president spoke, General Motors said it would cut 2,000 jobs at plants in Michigan and Ohio because of slow sales.
Auto Supplier Industry May Ask for Bailout Money The auto supplier industry's top executives are meeting this morning to discuss approaching the Obama administration for a piece of the $700 billion financial rescue plan. More than a dozen chief executives and chief financial officers are finalizing how much they will seek in federal assistance, said Glenn R. Stevens, a vice president of the Original Equipment Suppliers Association. Last month, the Bush administration granted General Motors and Chrysler $17.4 billion in loans from the rescue plan.
Retail sales forecast to fall in 2009 Retail sales likely to fall 0.5 pct in 2009, after modest rise in 2008; confidence still low The nation's retailers had a rough 2008, but this year will likely be even scarier, according to a sales forecast released Tuesday from the world's largest retail trade organization. Retailers are expected to record a 0.5 percent drop in revenue in 2009, the first annual decline in three decades and perhaps much longer, according to a National Retail Federation forecast released Tuesday. That's well below the modest 1.4 percent gain they recorded for 2008. Massive layoffs, slumping home prices and tight credit are keeping shoppers tightfisted.
Fannie to Tap U.S. for as Much as $16 Billion in Aid Fannie Mae, the largest source of home-loan money in the U.S., said it will need to tap as much as $16 billion in emergency funds from the U.S. Treasury Department to stay afloat as deterioration in the housing market persists. Fannie's planned request, announced today, follows Freddie Mac, which said Jan. 23 that it will need as much as $35 billion more in federal aid. Unprecedented mortgage losses drove the net worth of both companies below zero last quarter, they said in separate securities filings.
House Prices Dropped in 70% of U.S. States in 2008 Home prices fell in 34 U.S. states in 2008 as it became harder to get a mortgage and foreclosures hammered property values, First American CoreLogic said. Prices for single-family detached houses fell a record 10.6 percent nationally, the biggest annual decline in data that goes back to 1976, Santa Ana, California-based First American said today in its year-end report. "The geographic breadth of the decline expanded in 2008," Mark Fleming, First American's chief economist, said in an interview. Even markets with few foreclosures "are being drawn in by fundamental economic conditions."
***** Time to Prepare for the Collapse Take the time to prepare for the coming financial woes. The financial stability of our country is in peril. Unemployment continues to rise. The housing market continues to fall. Banks are failing at an unprecedented rate. The stock markets are unstable, as is our dollar. Folks, the new regime in Washington is not going to fix this problem! No matter how many bailouts they want us to pay for, we are only applying a band-aid to a gapping wound in the financial jugular vein of this country! It will not stop the bleeding. We have got to start facing the facts and preparing for the total collapse of our financial system as we know it. Start downsizing now! Get your pantries stocked with food, water, essential vitamins and medicines. Making these preparations now may not only save your life, but will ensure that your quality of life is not reduced in the face of economic disaster.
NRA: Untold stories of Gun Confiscation after Katrina What happened to the 2nd amendment?? The video you will see on this web site is horrifying. The crimes committed against law-abiding gun owners are beyond comprehension. The arrogance of anti-gun politicians and government officials and their hate of freedom will churn your stomach. The law is the law, the Constitution is the Constitution. If ONE local mayor or police chief can decide what the Second Amendment means, it opens the door to tyranny—where ANY mayor or police chief can say what the Second Amendment means.
Homeland Security Checkpoint - Unconstitutional Homeland Security checkpoints are being set up more frequently all across USA. Here is what you should do, should you run into one of these unconstitutional checkpoints. Know your rights, and stick by them.
Suspicionless Checkpoints: A growing threat to individual liberty Ever since SCOTUS first opened Pandora's box in the late 1970's by carving out a 4th Amendment loophole for immigration checkpoints, the use of suspicionless checkpoints across the country has continued to proliferate at an alarming rate. Today, it's not uncommon to find enforcement agencies across the country utilizing roadblocks of one form or another to control local communities and create new revenue streams for politicians and bureaucrats. While roadblocks are conducted under a number of different guises, they all share a common set of traits. Specifically, they:
Operate with no individualized reasonable suspicion of wrongdoing
Seek to control and intimidate local communities as opposed to serve and protect them
Raise revenue for expanding government programs through fines, citations & arrest
The U.S. Census Bureau's American Community Survey (i.e. Interrogation) After being delayed several years due to budget shortfalls, one of the largest invasions of our privacy is now in full swing, compliments of the U.S. Census Bureau and a cadre of Department of Commerce corporate partners. In the past, the American people only had to put up with this unconstitutional nonsense once every ten years. A time frame frequent enough to be annoying but not frequent enough to evoke formal resistance. With the advent of the misnomered American Community Survey however, circumstance have changed dramatically. U.S. Census bureaucrats have somehow misinterpreted clear constitutional guidance regarding a simple head count once every 10 years for representation purposes as a mandate to invade America's privacy on a recurring monthly basis. Below you will find a discussion of this unconstitutional program along with links to commentaries, news articles, corporate involvement, and government documentation that highlight this newest invasion of our homes and privacy along with general information regarding the decennial census. 250,000 homes are now being targeted every month by the Census Bureau and its corporate lackeys to comply, under threat of prosecution, with a survey demanding answers to over 70 privacy invading questions. Questions, that as Congressman Ron Paul and others have pointed out, are none of the government's business.
Roadblock Revelations Exposing The Police State One Checkpoint At A Time Welcome to the blog page for Checkpoint USA. Here you will find general information and discussions regarding the growing threats to our right to privacy & travel.
Calif farmers idle crops, veggie prices may rise Consumers may pay more for spring lettuce and summer melons in grocery stores across the country now that California farmers have started abandoning their fields in response to a crippling drought. California's sweeping Central Valley grows most of the country's fruits and vegetables in normal years, but this winter thousands of acres are turning to dust as the state hurtles into the worst drought in nearly two decades. Federal officials' recent announcement that the water supply they pump through the nation's largest farm state would drop further was enough to move John "Dusty" Giacone to forego growing vegetables so he can save his share to drip-irrigate 1,000 acres of almond trees. "Taking water from a farmer is like taking a pipe from a plumber," said Giacone, a fourth-generation farmer in the tiny community of Mendota. "How do you conduct business?"
Federal departments fall short on civil liberties The departments of Defense, State, and Health and Human Services have not met legal requirements meant to protect Americans' civil liberties, and a board that's supposed to enforce the mandates has been dormant since 2007, according to federal records. All three departments have failed to comply with a 2007 law directing them to appoint civil liberties protection officers and report regularly to Congress on the safeguards they use to make sure their programs don't undermine the public's rights and privacy, a USA TODAY review of congressional filings shows.
'German Banks Are on the Edge of the Abyss' The German government is desperately trying to find a way to save the country's ailing banking sector. Can a so-called "bad bank" solve the problem by taking over toxic assets? German commentators aren't convinced, but they are certain that something needs to be done. Several government rescue packages later, the troubled German banking sector is still showing no sign of recovering from the financial crisis. The discussion over what to do with the hundreds of billions of euros worth of toxic securities the banks still have on their balance sheets has received fresh impetus in Germany after it became clear that the Special Fund for Financial Market Stabilization -- known as Soffin after its German acronym -- is not succeeding in its intended aim of helping out troubled banks and jump-starting financial markets. Günther Merl, the head of the agency that manages Soffin, announced Wednesday that he was resigning -- the second person to quit the agency's steering committee within the last three months. Insiders say that Merl was frustrated at having his authority usurped by government and Finance Ministry officials.
Is Switzerland the next Iceland? Gigantic Swiss Banks Hold Steady -- For Now The Swiss economy is dwarfed by the size of its leading banks, and there are growing worries about their health. The government says everything is fine, but some disagree. They exist also in Zürich: "Masters of the Universe." You can recognize these money-moguls from their swanky rides -- their Porsches, their Audis, their BMWs. And yet recently these chariots of high finance have been spotted being sold to auto dealers at fire-sale prices -- a sure sign that the bank crisis has arrived here too. "First and foremost it is the financial center of Switzerland that will bleed," prophecies Beat Bernet, bank expert at the University of St. Gallen. By now people are even contemplating the unthinkable: the collapse of Europe's leading bank, the largest money manager in the world, UBS.
Credit crunch claims Icelandic Government after 'Household Revolution' The global economic crisis claimed its first government yesterday when Iceland’s ruling coalition collapsed amid a cacophony of popular protest. The Government of Geir Haarde, the Prime Minister, resigned en masse after days of mounting anger over the country’s financial meltdown. The protests, which began peacefully after the nationalisation and overnight bankruptcy of Iceland’s three main banks, turned violent last week with the nation experiencing its worst riots in 60 years. At their height 32,000 people — more than 10 per cent of Iceland’s population — took to the streets of Reykjavik banging pots and pans in what came to be known as the “Household Revolution”.
Iceland's ruling coalition collapses A NATIONAL unity government is on the cards for Iceland following the collapse of its ruling coalition yesterday, the first government to fall victim to the global financial crisis. Three months after Iceland’s debt-laden banks imploded, sparking economic chaos and mass street demonstrations, prime minister Geir Haarde handed in his resignation and that of his government after just 18 months yesterday. “I will have a meeting with the opposition leaders to discuss the possibility of a national unity government,” said Mr Haarde. On Friday he called a snap election for May and announced he would not stand for office after doctors discovered a cancerous tumour in his oesophagus.
Max Keiser: Predicted the collapse of Iceland in April, 2007. Watch for the scene in the Blue Lagoon in which Max predicts a global Depression to be caused when all these debts driven by low interest rates burst.
Iceland - Banking Crisis and collapse Today ,Minister of Business Affairs ,Bjorgvin G. Sigurdsson,resigned . Today there was also a protest ,against the violence last week in Reykjavik. He also dismissed the head of the country's financial supervisory authority Saturday night before he left office, and requested the resignations of the entire board of the agency. It was in support of the Police force in Reykjavik. At the protest yesterday,there was lots of hugs and flowers,and some of the protesters where offering free hugs to the public.
Riot in Iceland - 21 January 2009 People protested again today in Reykjavik. First at the government house - where the prime minister had problems driving away. Police had to assist him ,and eggs and other stuff where thrown at his car. Then the protesters continued protesting at the parliament building. Parliement work was suspended today ,after the protest yesterday . Protesters made fires around in front of the parliament. Police had trouble putting the fires out. They are still downtown protesting.
U.S. bankers avoid glitz of Davos, image a concern It used to be a prized invitation for Wall Street CEOs and top government officials. But for the U.S. banking elite, a ticket to this year's World Economic Forum in Davos risks becoming as toxic as the mess left over from the subprime mortgage crisis. Up until a few weeks ago, the guest list for the January 28-February 1 annual gathering of the world's leading business and political figures in the Swiss ski village was going to include top executives from the biggest U.S. banks and the leading economics and finance names of the new administration of U.S. President Barack Obama. But now that list is shrinking fast. Citigroup Chief Executive Vikram Pandit decided not to go. Obama's top economic adviser Larry Summers, Treasury Secretary-designate Timothy Geithner, who is facing a confirmation vote Monday, as well as Federal Deposit Insurance Corp Chairman Sheila Bair have pulled out.
Davos Annual Meeting 2009 - Stephen S. Roach Stephen S. Roach, Chariman, Morgan Stanley, Asia, explains his outlook for the global economy over the coming five years and his participation in the Annual Meeting in Davos which runs from 28 January to 1 February 2009. Roach blames ALL OF US for the economic mess.
Davos Annual Meeting 2009 - Duncan Niederauer Duncan Niederauer, Chief Executive Officer, NYSE Euronext, shares his view on the key elements of the future shape of financial governance and his participation in the Annual Meeting in Davos which runs from 28 January to 1 February 2009.
Bad news: we're back to 1931. Good news: it's not 1933 yet Barack Obama inherits an economy already contracting at an annual rate of 6%, much like the mid-Depression year of 1931 (-6.4%) This may beat Germany (-7%) Japan (-12% and Korea (-22%) over the fourth quarter. But that merely underlines the dangers ahead as the collapse of global trade chokes the mini-boom in US exports, setting off another stage of the crisis. The US is losing 500,000 jobs a month. Brazil lost 650,000 in December. Beijing says 10m Chinese have lost their jobs since the crunch began. Japan's exports fell 35pc last month, year-on-year. The central bank is printing money furiously, buying bonds to prevent a relapse into deflation. So yes, it is like early 1931. Citigroup and Bank of America have more or less disintegrated. JP Morgan's health is failing fast. General Motors and Chrysler survive only on life-support from the US taxpayer.
GOLD - VOLATILITY 2009 Already into 2009 we are experiencing trend-threatening moves in various markets. Should we believe that the markets are directionless? Can we rely on the charts to give us direction? What of the fundamentals of markets are they reliable guides? Most important of all, are investors capable of responding to the directions given by fundamental and technical indicators? Are these ridiculous questions? They would have been a couple of years ago, but now need to be considered carefully.
Gold inches down after rally, hovers below $900 Gold inched down to hover below $900, pausing from a rally late last week, when it rose 5 percent on strong investment demand. -- By 0042 GMT, spot gold was down close to 1 percent at $889.65 an ounce against New York's notional close of $898.10. -- On Friday, the precious metal reached record highs in both sterling and euro terms, signaling bullion's strength against not only the U.S. dollar but currencies across the board. -- COMEX gold futures slipped in Asia to $890.50 compared to $895.80, its settlement on Friday on the COMEX division of the New York Mercantile Exchange.
Gold Will Shine in 2009 (Part II) Get ready for the "economic pipes" to be unclogged and for a tidal wave of inflation to head our way! I assure you that Obama's economic advisors will be the "drain-o" that gets the pipes unclogged. When this happens, the Fed knows that it will have to "mop up" this excessive liquidity in the financial system. However, here's what I predict will happen: The Fed, while it wants to be a forecaster of the economy really just ends up becoming a "responder" after the fact to what's going on in the economy. Therefore, between the time that the Fed starts to see the inflationary signs in the economy and starts the process of draining the excess liquidity from the economy, it will be too late. The hyper inflationary effects will already be in play. They will be "late to the ball game" yet again. When all of this starts to happen (and possibly a bit beforehand), savvy gold investors will sense it coming and will buy up gold ahead of time…positioning themselves like a surfer that gets out ahead of the coming wave that will propel him forward.
Peter Schiff 1/23/09 - CNBC Gold Rally on concerns of a banking collapse
Coconuts and Gold The GGG performance for December was +22.1%, The S&P 500: +1.6%. Gold is currently $853. A survey of government bond dealers and other market analysts report that in 2009 a U.S. government deficit of $2 trillion is expected. This number is beyond anything ever seen before. One would think that the stock market would collapse on this dismal economic news. When one thinks about it, all the money that will be borrowed or printed and then spent by the government will generally end up in the hands of corporations. Bailout money given to people is spent on Budweisers, Marlboros, Big Macs, toothpaste, etc. Bailout money sent to Wall Street and banks eventually is lent to someone and then spent on something. Therefore a $2 trillion borrowing binge by the government as well as the creation of even more money by the Federal Reserve which could total another trillion dollars means increased revenues and profits for corporations. This eventually will be bullish for stocks. However, it is also the road to economic ruin.
U.S. Mint Actions Discourage Gold Ownership Over the past several months, the United States Mint has announced a series of actions and policy changes that make it more difficult for the average individual to buy gold. There have always been plausible or semi-plausible explanations, but the consequence of each action has been to limit or discourage gold ownership.
GOING LONG Finding Elusive Gold in This Market At this writing, gold is still 15% off its peak, at least in U.S. dollars. Yet at the same time, the metal is cruising at or near all-time highs against a host of other currencies, including the Swiss franc, British pound, Canadian dollar, Australian dollar, and Indian rupee. That currency disparity means buyers around the world are prepared to pay much more for gold, relative to their own currencies, than is reflected in the New York spot market, which prices gold in dollars.
Is America Broke Part 3 A Solution for the Financial Crisis This is the third and final paper in the Is America Broke series. In the first two articles, several of the contributing factors to today's financial crisis were discussed. Several important questions were asked: Why is the most advanced economy in the world buckling at the knees, acting like a punch weary fighter? How did the largest creditor nation on earth become the largest debtor nation? Are soaring debt levels consummate with wealth creation or a diminishing standard of living?
The World Won't Buy Unlimited U.S. Debt $$ We're asking others to sacrifice for our 'stimulus.' Barack Obama has spoken often of sacrifice. And as recently as a week ago, he said that to stave off the deepening recession Americans should be prepared to face "trillion dollar deficits for years to come." But apart from a stirring call for volunteerism in his inaugural address, the only specific sacrifices the president has outlined thus far include lower taxes, millions of federally funded jobs, expanded corporate bailouts, and direct stimulus checks to consumers. Could this be described as sacrificial? What he might have said was that the nations funding the majority of America's public debt -- most notably the Chinese, Japanese and the Saudis -- need to be prepared to sacrifice. They have to fund America's annual trillion-dollar deficits for the foreseeable future. These creditor nations, who already own trillions of dollars of U.S. government debt, are the only entities capable of underwriting the spending that Mr. Obama envisions and that U.S. citizens demand.
Peter Schiff: Oh, he saw it coming 'Dr. Doom' became a star by predicting last year's market meltdown. And now his 2009 forecast is even scarier. A couple of years ago, when Peter Schiff first began appearing regularly on TV to warn of an impending real estate collapse that would crash the U.S. economy and stock market, he was surprised and disappointed to find that he was rarely, if ever, approached by strangers in restaurants. "I'd walk down the streets of New York and figure, 'Gee, you know, I'm on CNBC, CNN,'" says the brash 45-year-old president of brokerage Euro Pacific Capital. "But nobody ever recognized me."
SILVER AND THE CHINESE Bloomberg put out some interesting news regarding the silver market stating that refined silver output in China has peaked and it could stop growing because less will be produced as a result of halting of mine expansions, higher costs for production and lower prices received for the metal itself. . . . . In July China revoked the export rebates on silver to control use of limited natural resources. This will force China to rely on imports to fill the needs for the precious metal. "China has the world's biggest potential for silver consumption,'' said Li Xiaoni, vice president of China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters.
Real Silver Availability Much has been written about the actual amount of physical silver that exists in world above ground inventories. Due to decades of industrial consumption depleting world inventories, there is remarkably little silver remaining. I have estimated perhaps one billion ounces of silver bullion equivalent exists at anywhere near current prices, and my estimates are much higher than most published estimates. Considering that the cumulative world mine production through the ages has been roughly 40 billion ounces, that means only 2.5% of that total production remains in bullion equivalent form. That's shocking. This is one of the key reasons for buying silver, namely, there isn't much left.
Geithner Warning on Yuan May Renew U.S.-China Tension Timothy Geithner’s warning that President Barack Obama believes China is “manipulating” its currency may trigger renewed tensions between two of the world’s three biggest economies. Geithner, Obama’s nominee for Treasury secretary, also told senators the administration will press China to “adopt a more aggressive stimulus package” to boost its domestic economy. The remarks on manipulation were a shift from President George W. Bush’s team, which stopped short of using the term in criticizing China’s exchange-rate management.
Geithner blows up the world Geithner's comment today that President Obama believes that China is 'manipulating the yuan' takes us straight into Great Depression territory. With Paul Volcker at his side, I had hoped that Obama would be perspicacious enough not to touch the third rail of global economics, namely protectionism. Nothing, absolutely nothing that Obama might have done could be worse than this. If the US looks at the global jobs market as a zero-sum game in which the US has to claw back manufacturing jobs which China has taken away, we are back to beggar-thy-neighbor and the 1930s.
Ron Paul "Tim Geithner Was A Part Of The Problem" 1/21/2009
US says China ‘manipulating’ the renminbi Tim Geithner, President Barack Obama’s choice for Treasury secretary, on Thursday accused China of “manipulating” its currency and pledged “aggressive” diplomatic action to drive Beijing into action. The comment – a politically loaded term likely to raise tensions with Beijing – marked the Obama administration’s first public intervention in what will be one of its most critical international economic relationships. The US has long felt that China has artificially depressed the value of its currency to boost exports – to the detriment of US business – but the Bush administration always stopped short of formally declaring China a currency manipulator. In a written response to questions from senators, Mr Geithner, whose nomination was supported on Thursday by a clear majority of the Senate’s finance committee, said: “President Obama – backed by the conclusions of a broad range of economists – believes that China is manipulating its currency.” Mr Obama would “use aggressively all the diplomatic avenues open to him to seek change in China’s currency practices”, he said.
IMF in discord over renminbi The International Monetary Fund is caught in a stand-off between members over whether to label China’s currency as “fundamentally misaligned”, a politically explosive move that could stoke global tension over economic imbalances. The issue is so controversial the IMF’s executive board has not discussed the Chinese economy since 2006, in spite of rules saying it should regularly assess member economies. The decision touches directly on one of the most divisive issues among governments worldwide: the extent to which huge current account deficits and surpluses and artificially managed exchange rates have contributed to the financial crisis. Washington has long pressed Beijing to let the renminbi rise.
Euro, Pound Fall on Speculation Economic Woes Will Be Prolonged The euro declined for a third day versus the dollar on speculation business sentiment in Germany slumped as credit losses spread through Europe, fueling expectations the European Central Bank will lower interest rates. The British pound approached a 23-year low versus the greenback on speculation the Bank of England will cut interest rates to zero. The yen advanced toward a seven-year high versus the euro before U.S. data that may show home sales fell and the world's largest economy contracted the most since 1982, spurring demand for Japan's currency as a haven.
US Treasury Department Official Allegedly Aided and Abetted Banking Fraud (Again) Darrell Dochow earns $230,000 per year at Treasury in banking regulation. He reportedly gave Indymac some suggestions on cooking their books, and then allowed the exception to the rules to accomplish it. It appears to have been a blatant and obvious accounting fraud. Mr. Dochow is also the official who presided over the Lincoln Savings and Loan scandal. Having looked into Charles Keating's eyes and seeing him a good man, he reportedly overrode the protests and findings of fraud from the banking experts. After his S&L debacle he was apparently demoted, but brought back into a position of importance under the Bush Administration. All the details on this have not yet been made public.
Merrill Lynch Execs Paid Themselves $15 Billion on $21.5 Billion in Losses in 2008 No wonder John Thain was sacked. On the surface it appears that he and his management were 'hiding' or at best unaware of enormous losses that were only revealed after they were purchased by the Bank of America, and the recipient of enormous amounts of government funds. And to make matters worse, they continued to pay themselves huge salaries and bonuses for the year despite those losses. It will be interesting to see if there is any meaningful investigation of this. We doubt it very much. The Democratic leadership have shown themselves to be a lot of noise and little meaningful action so far, and almost all the Republicans are outrageous hypocrites. Such is the state of the deep capture of the government.
It's A Depression! This past weekend, visiting our local Chapters book store, we were struck with the large display up front of books telling us about the new depression, how we got there and how to survive it, books about the Great Depression and a host of others. Bemused by the entire display, we decided to purchase I.O.U.S.A. One Nation. Under Stress. In Debt (Addison Wiggin and Kate Incontrera, John Wiley & Sons, 2008). I.O.U.S.A. is also the name of a documentary film that was recently shown both in Canada and the USA and was nominated for the Grand Jury Prize at the 2008 Sundance Film Festival. The book comes from the folks who bring us The Daily Reckoning. It should come as no surprise that there are those out there who believe we are headed into another Great Depression. It is also no surprise that there is an even larger body that are in denial of the collapse that has taken place and there are those still issuing rosy forecasts of a short painful downturn followed by a quick robust rebound.
Big Inflation Coming Late 2008's stock panic has certainly had a complex and multifaceted impact on popular psychology. Mindsets and outlooks that were scoffed at as recently as 6 months ago have suddenly become fashionable. One of the more intriguing is the meteoric rise to prominence of the deflation thesis. The growing legions of deflationists see an unstoppable depression-like deflationary spiral approaching like a freight train. They cite some convincing data. The stock markets have been cut in half in just a year. In the past 6 months, some key commodities prices fell farther and faster than they did in the entire Great Depression. House prices are down by double digits across the nation, with no bottom in sight. And credit is a lot harder to come by today than in any other time in modern memory.
Max Keiser : THE ORACLE January 23 2009 pt 1 of 2 Good banks, bad banks, British sterling on the run; Citigroup and BofA. Gordon Browne blames US for global economic problems. . . . People love capitalism on the way up; hate it on the way down. SPAM sales in US are up! . . . Hormel added 2nd shift in pork process plant.
Max Keiser : THE ORACLE January 23 2009 pt 2 of 2 Empty shelves of big box retailers suggest pre-glasnost and post-capitalism economy; explanation of contango (oil futures are high).
Bailout aid doesn't stop banks from trying to shape U.S. policy The financial giant Bank of America says it is no longer lobbying the U.S. government about its unfolding bailout. After receiving $45 billion in bailout money, lobbying was just too unseemly. "We are very sensitive to the fact that we have taxpayer money," said Shirley Norton, a spokeswoman for the company. Citigroup, recipient of another $45 billion, made the opposite call. While trying to keep a low profile, the company is still fielding an army of Washington lobbyists working on a host of issues, including the bailout. In the fourth quarter, it spent $1.77 million on lobbying fees, according to its lobbyists' filings.
Nationalization gets a new, serious look Only five days into the Obama presidency, members of the new administration and Democratic leaders in Congress are already dancing around one of the most politically delicate questions about the financial bailout: Is the president prepared to nationalize a huge swath of the nation's banking system? Privately, most members of the Obama economic team concede that the rapid deterioration of the country's biggest banks, notably Bank of America and Citigroup, is bound to require far larger investments of taxpayer money, atop the more than $300 billion of taxpayer money already poured into those two financial institutions and hundreds of others.
White House Pushing Stimulus Package President Barack Obama and his top advisers sought over the weekend to broaden the appeal of his proposed $825 billion economic-stimulus package and to defend the way they are pushing it through Congress. But some senior Republicans said Sunday that as the stimulus plan stands, they would oppose it. The new administration has begun a campaign to build momentum behind the economic-stimulus plan and propel it to passage by mid-February. The White House released a report Saturday revealing details about the package, which would pay for a variety of projects, like laying 3,000 miles of transmission lines for a national electric grid, securing 90 major ports and guaranteeing health insurance for 8.5 million Americans in danger of losing coverage.
Obama faces pressure for faster action The rapidly unraveling U.S. economy is piling pressure on President Barack Obama to try bolder recession-fighting tactics even before all his economic advisers have found their desks. The headlines in the first 72 hours of Obama's term included up to 5,000 job cuts at Microsoft, a gloomy economic outlook from General Electric and the steepest Inauguration Day stock market drop on record. His choice for Treasury secretary, Timothy Geithner, is still awaiting Senate confirmation after the embarrassing disclosure that he had failed to pay certain taxes.
Smaller Stimulus Leaves Room For Restructuring As all recovery hopes are now pinned on the efficacy of Washingtons next stimulus package, President Obama has opened the bidding at $825 billion. Most Republicans see this number as too big, and many Democrats see it as too small. If the question is one purely of impact, then under these circumstances, the Democrats are probably correct. Measured against the underlying problem, the erosion of some $20 trillion from American household wealth in just two years and the waste of some $3 trillion (including long tail medical liabilities) on a fruitless war in Iraq, populists and democrats will label Obamas planed expenditure as relatively small. They will argue that to affect a noticeable change in Americas $14 trillion economy, a much larger stimulus is needed. However, this would be the sort of change that would paralyze the economy for years, perhaps decades.
U.S. Bank and Trust? Only five days into the Obama presidency, members of the new administration and Democratic leaders in Congress are already dancing around one of the most politically delicate questions about the financial bailout: Is the president prepared to nationalize a huge swath of the nation's banking system? Privately, most members of the Obama economic team concede that the rapid deterioration of the country's biggest banks, notably Bank of America and Citigroup, is bound to require far larger investments of taxpayer money, atop the more than $300 billion of taxpayer money already poured into those two financial institutions and hundreds of others.
BofA had role in Merrill bonuses Bank of America played a role in Merrill Lynch’s controversial decision to pay $4bn in bonuses in December just as mounting losses were threatening to derail BofA’s takeover of the Wall Street firm, according to people close to the situation. BofA has said that the payment of $4bn in compensation in a fourth quarter in which Merrill racked up $15bn in losses was sanctioned by John Thain, Merrill’s chief executive. Ken Lewis, BofA’s embattled chief executive, ousted Mr Thain on Thursday after news of the bonus payments appeared in the Financial Times. BofA told the FT last week that Mr Thain had made the decision to pay bonuses in December instead of January and it had been “informed” of the move. The bank said Merrill was an independent company until the deal closed on January 1.
Canceling the Debts of Greedy Pigs Bloomberg.com reported that "The Federal Reserve, engaging in what Chairman Ben S. Bernanke this week termed 'credit easing,' bought $23.4 billion of Fannie Mae, Freddie Mac and Ginnie Mae mortgage bonds under a program aimed at lowering home-loan rates" which goes along with another Bloomberg news item that said this same Federal Reserve Chairman Ben S. Bernanke and Vice Chairman Donald Kohn "urged a new effort to address the toxic assets held by financial companies", by which he obviously means "create the money to buy them." This shameful behavior fits perfectly with the Wall Street Journal, editorializing about President Bush, that "While the Fed is most to blame, the Administration encouraged the credit excesses. It populated the Fed Board of Governors with Mr. Greenspan's protégés, notably Ben Bernanke and Donald Kohn, who helped to create the mania and even now deny all responsibility."
Liquidation risk grows as finance dries up US companies face a greater risk of liquidation because sources of finance to let them reorganise under the country’s bankruptcy code are drying up in the global financial crisis. In the US, companies on the verge of insolvency can restructure themselves under a Chapter 11 bankruptcy protection process, sometimes taking years. But the credit crunch has severely limited the availability of so-called ‘debtor in possession’ financing that is vital to give them this second chance. With previous big providers of DIP financing, such as GE Capital, shying away from the market, companies may have to rely on their existing lenders, says Standard & Poor’s, the rating agency.
Can Fiscal Stimulus Revive the US Economy? Most economists and various commentators are in agreement. They hold that the US government must sharply increase its spending in order to arrest the economic crisis that could turn into a prolonged slump. According to the Congressional Budget Office (CBO), in the absence of a stimulus plan, the unemployment rate could jump to above 9% by early 2010. Some other experts are of the view that without the stimulus plan the unemployment rate could easily surpass the 10% mark.
Fed focus turns to credit easing at policy meeting With interest rates already near zero, the Federal Reserve this week will seek to flesh out new unconventional ways to free-up lending, but action may need to await details on how President Barack Obama will tackle the financial crisis. The Fed, which will issue a policy statement around 2:15 p.m. EST on Wednesday at the end of a two-day meeting, is searching for ways to end a deepening year-long recession and restore confidence to businesses and consumers shocked by the financial havoc wrought by a housing market collapse.
At Davos, crisis thins the guest list GENEVA: The Masters of the Universe no longer sit atop the magic mountain. Not long ago, at the annual gathering of the World Economic Forum in Davos, Switzerland, Richard Fuld Jr. of Lehman Brothers held forth on the state of the global economy before mesmerized journalists and cowering subordinates while other Wall Street stars mingled after-hours with the likes of Claudia Schiffer, the German supermodel. As business, government and nonprofit leaders trek up the peak made famous by Thomas Mann's novel, but now better known for the gabfest that begins Tuesday, star power no longer is in. Politicians, not corporate titans, are poised to be the big draw this year, echoing the broader power shift away from the free market as one government after another tries to prop up its sinking economy.
Jim Rogers UK will go bankrupt pt 1/2
Jim Rogers UK will go bankrupt pt 2/2
Mood of sobriety and self-recrimination at Davos In recent years, Goldman Sachs has been renowned for hosting one of the hottest parties during the World Economic Forum’s glittering annual meeting in Davos. No longer. This year, in a nod to the new mood of sobriety and self-recrimination, the US broker has quietly cancelled its party and sharply reduced its delegation to the event, which starts on Wednesday. It is far from alone. John Thain was due to host a high-profile breakfast meeting on Friday in Davos – until he was unceremoniously ousted from his post at Merrill Lynch on Thursday, in the latest casualty of the financial crisis. Lehman Brothers, which used to send a formidable delegation to the snowy resort, has also disappeared. Vikram Pandit, the embattled chief executive of Citigroup, has withdrawn this year. So has Howard Stringer, the CEO of Sony, the media and electronics group.
Economy in Crisis: Three Bears and a Missing Goldilocks 2006 and 2007 were framed by financial pundits as a time when we could truly have the Goldilocks economy. Growth wouldn't be too fast or too slow, but just right. The Fed had both hands on the wheel and was goosing things just enough to keep the ship headed in the right direction. Of course all the while the same pundits chose to ignore raging inflation at the consumer level as energy and food prices headed for the stratosphere. While the fall of energy prices has been spectacular, however, the drop in food prices has been virtually nonexistent. As in the story of Goldilocks, there were some bears who weren't too happy about Goldilocks and her plans for their porridge.
Pelosi open to more money for banks House Speaker Nancy Pelosi, California Democrat, says she is open to additional government rescue money for banks and financial institutions, but she is demanding that taxpayers get an ownership stake in return. She did not name a dollar figure in a television interview broadcast Sunday, and she did not use the term "nationalization" when referring to additional rescue dollars. She said that if the government puts more money into struggling banks, then an ownership stake would be sought.
Wall Street can be a stern taskmaster to presidents Not that Barack Obama needed a wake-up call on Inauguration Day, but the stock market provided one anyway. On the day Mr. Obama assumed the presidency, the Dow Jones Industrial Average delivered its worst Inauguration Day performance in its 113-year history, tumbling 332 points (more than 4 percent) and falling through the 8,000 level. And that wasn't the worst of the news. Mr. Obama entered the White House inheriting a banking crisis that was again quickly reaching a boiling point, on a day that already-beaten bank stocks tumbled further, as Citigroup slumped 20 percent, JPMorgan Chase lost 21 percent and Bank of America plunged 29 percent.
Democrats: Stimulus plan no quick fix for economy The White House warned Sunday that the country could face a long and painful financial recovery, even with major government intervention to stimulate the economy and save financial institutions. "We're off and running, but it's going to get worse before it gets better," said Vice President Joe Biden, taking the lead on a theme echoed by other Democratic officials on the Sunday talk shows. At the end of the Obama administration's first week, the party in power at both ends of Pennsylvania Avenue sought to lower expectations for a quick fix despite legislation expected to pass by next month that would pump billions of dollars into the economy. Democrats also opened the door for even more government aid to struggling banks beyond the $700 billion bailout already in the pipeline.
Biden, Summers Sound Economic Warnings, Push Stimulus White House officials warned Americans that economic prospects are darkening as they sought to ensure rapid Congressional approval of President Barack Obama's $825 billion stimulus package. Vice President Joe Biden told the CBS program "Face the Nation" that "it's worse, quite frankly, than everyone thought it was." Larry Summers, Obama's top economic adviser, said the economy faces "very difficult" months, speaking today on NBC's "Meet the Press."
Obama faces Republican rancor as economy reels President Barack Obama entered his first full week in office Monday battling to win over Republicans hostile to his signature plan to haul the US economy out of a paralyzing recession. Obama's 825-billion-dollar stimulus bill, which is set for debate in Congress this week, has become a litmus test of the new Democratic president's pledge to drain Washington of partisan rancor. Before heading to Capitol Hill to lobby for the bill in person Tuesday, Obama was Monday hoping to add a crucial name to his cabinet with the Senate expected to confirm his pick for Treasury secretary, Timothy Geithner.
Obama aide won't rule out more money for bailouts President Barack Obama's top economic adviser would not rule out on Sunday that more money may be needed to stabilize the U.S. financial system as a deep recession increases banks' losses. Lawrence Summers, head of the National Economic Council, also said there was no question that tax cuts passed under former President George W. Bush needed to be repealed, though he would not be pinned down on exactly when.
Slump Probably Deepened as Credit Froze: U.S. Economy Preview The worst credit crisis since the Great Depression sent the U.S. economy into a tailspin at the end of 2008 as consumers and businesses retrenched, reports this week may show. Gross domestic product contracted at a 5.5 percent annual rate from October through December, the biggest drop since 1982, according to the median estimate in a Bloomberg News survey ahead of Commerce Department figures due Jan. 30. President Barack Obama and Congress are working to pass an economic stimulus plan worth $825 billion by mid-February to stem what may be the worst recession in the postwar era. Federal Reserve policy makers, under Chairman Ben S. Bernanke, also meet this week amid growing expectations they'll unveil more tools to unclog lending after having cut interest rates to as low as zero.
New York City to Get $3.4 Billion U.S. Stimulus, Schumer Said A federal stimulus package including $125 billion to help states and cities pay for schools and Medicaid would send almost $3.4 billion to New York City, U.S. Senator Charles Schumer and U.S. Representative Charles Rangel said. New York's Independent Budget Office estimates that the city's deficit will sink to $7 billion by fiscal year 2010, or June 30, 2011. Schumer and Rangel said that although the stimulus package will help alleviate the city's budget crunch, the funding won't eliminate the tough choices city and state officials are going to have to make. The economic stimulus package would give New York City $1.8 billion for Medicaid and $1.6 billion for education, Schumer's office said in a news release. "The stimulus package is going to be a shot in the arm for New York City," Schumer said at a City Hall news conference, where he and Rangel were hosted by Mayor Michael Bloomberg.
The Other US Border Fence What most Americans don't realize is that construction of a legal fence to prevent US taxpayers from escaping from the IRS's controlled pastures is progressing on schedule. Congress has been expanding and strengthening this fence for decades, and the Heart Heroes Earning and Assistance Relief Act was only the latest nail in the soon to be tightly sealed coffin. The US is the only country besides Libya that taxes the world wide income of it's non-resident citizens, and the HEART act has made expatriation much more difficult, and much more expensive.
Oil Cartel Keeps Cuts on Track After months of gradually closing the oil spigot, members of the OPEC cartel have managed to stop the slide in oil prices - at least for now. Showing an unusual degree of discipline, members of the Organization of the Petroleum Exporting Countries have slashed their output by more than three million barrels a day in recent months as they sought to put a floor under oil prices, which have fallen by $100 a barrel since last summer. That is about 75 percent of the production cuts pledged by members of the cartel since September. The cuts have been led by Saudi Arabia, the world's top exporter, which has trimmed its production to eight million barrels a day this month, down from nearly 10 million barrels over the summer.
Housing stocks: No bottom yet If you think the sector has gone as low as it can, think again, says housing guru Ivy Zelman. With another dismal read Thursday on new home construction, it looks like 2009 will be a rough year for homebuilders. But recent rallies in housing stocks suggest that investors think otherwise. Don't bet on it, says housing analyst Ivy Zelman. Housing permits and starts both tumbled to record lows in December, according to a Commerce Department report on Thursday. With foreclosures surging and a glut of homes on the market, Zelman believes the overall pain will continue well into 2010 - and that the market won't bounce back until 2012.
Who Needs Economists When We Have the Home Builders? I mean really! As you know, plenty of very highly paid Street economists at many a major brokerage or banking firm got it dead wrong over the last few years. Not just a little bit off, but dead wrong! "No one ever could have seen this coming." How many times have you heard that one over the last few months? C'mon, anyone who is even a semi-serious student of credit and economic cycles saw "this coming" a mile away. In fact, personally over the last few years I have been relying in part on the homebuilders of this world to tell me exactly what was to come ahead, and they have obliged significantly. Thanks guys (and gals). And sure enough they have been dead right. Not close, but dead right.
Mystery Prison Buses in the Desert On a recent visit to Tucson, Arizona, where I was invited to give a presentation on monetary reform, I was disturbed by a story of strange goings on in the desert. A little over a year ago, it seems, a new industrial facility sprang up on the edge of town. It was in a remote industrial zone and appeared to be a bus depot. The new enterprise was surrounded by an imposing security fence and bore no outward signs identifying its services. However, it soon became apparent that the compound was in the business of outfitting a fleet of prison buses. Thirty or so secondhand city buses were being reconfigured with prison bars in the windows and a coat of fresh paint bearing the "Wackenhut G4S" logo on the side.
World Agenda: riots in Iceland, Latvia and Bulgaria are a sign of things to come Our third global political column explores the start of an age of rebellion over the financial crisis - beginning in Iceland Icelanders all but stormed their Parliament last night. It was the first session of the chamber after what might appear to be an unusually long Christmas break. Ordinary islanders were determined to vent their fury at the way that the political class had allowed the country to slip towards bankruptcy. The building was splattered with paint and yoghurt, the crowd yelled and banged pans, fired rockets at the windows and lit a bonfire in front of the main door. Riot police moved in. Now in the grand sweep of the current crisis, a riot on a piece of volcanic rock in the north Atlantic may not seem to add up to much. But it is a sign of things to come: a new age of rebellion. The financial meltdown has become part of the real economy and is now beginning to shape real politics. More and more citizens on the edge of the global crisis are taking to the streets. Bulgaria has been gripped this month by its worst riots since 1997 when street power helped to topple a Socialist government. Now Socialists are at the helm again and are having to fend off popular protests about government incompetence and corruption.
40 Al-Qaeda Terrorists Dead After Exposure to the Plague Seven years after they transformed George W. Bush's presidency, al-Qaeda terrorists are pushing to the top of his successor's priority list. The very day Barack Obama was sworn in as President, warning Americans "our nation is at war against a far-reaching network of violence and hatred," there were reports an al-Qaeda affiliate recently abandoned a training camp in Algeria after 40 terrorists died from being exposed to the plague during a biological weapons test. The report, which first surfaced in the British tabloid newspaper The Sun, claims members of al-Qaeda in the Land of the Maghreb (AQLIM) hurriedly abandoned their cave hideouts in Tizi Ouzou province, 150 kilometres east of the Algerian capital Algiers, after being exposed to plague bacteria. The newspaper said they apparently became infected while experimenting with biological weapons.
Wall Street Unspun [Part 1] Andrew Schiff (Peter's Brother and VP of Europac) 1/21/09 - good history of who did what and the results, from depression era to the 1970's when Nixon took up off gold standard and we had high inflation, and beyond - related to situation today.
Where We Are Headed: Stock Market, Gold, Silver January 20th, 2009 probably one of the biggest days of this year, marked by several key new appointments. We have inaugurated our 44th president, Barack Hussein Obama, elected into office with the hopes that he will bring with him, a magic wand and resolve two decades of excess liquidity and derivative growth. A hope that will, undoubtedly, be shattered very quickly. Obama will simply continuing doing what actually start this problem and that is, print more money (or the new politically correct term, quantitative easing). The only ideal “solution” at this point, is for current government to successfully create another bubble somewhere. This band aid, patch up, job would simply prolong the inevitable but it would be a “solution” nonetheless and we could all get back to our shopping malls and baseball games. For if a bubble is not created, there will literally be no way of repaying all the fiscal stimulus packages popping up all over the globe. It is not the principle that is of concerned, for I do not believe that will EVER be repaid, but going forward, even interests payments will be of concern. If these packages do not move the economy, you can mark my words, there will be dozens of countries defaulting. America is very quickly moving up the ranks in the list of candidates.
Gold "Shines as Inflation-Hedge" as US and UK Left with No Choice "But Default & Devaluation" The PRICE of WHOLESALE GOLD BULLION clung onto Tuesday's sharp 4% gains early in London today, adding to the "Obama Bounce" for Euro and UK investors while world stock markets fell for the ninth session in thirteen during 2009 so far. "Gold experienced massive fund buying when New York markets opened" yesterday, notes Walter de Wet, senior commodities analyst for Standard Bank in Johannesburg. "It rose $25 in less than 30 minutes. Stop-losses [for bearish Gold Futures traders] were triggered at $860, and gold eventually reached $866.50. "At these levels, good physical selling set in, but was easily absorbed by the market. In New York, buying slowed down with Mr. Obama's inauguration."
Ron Paul on the House Floor 1-21-09 Default & liquidation of the currency; government bailouts will produce another depression. Bretton Woods 1971 has ended!
Holding "Gold in Lieu of Cash" Recommended as Banking Stocks Bounce; Physical Bullion Demand Jumps THE PRICE OF GOLD dropped $10 per ounce to $845 early in London on Thursday, while world stock markets continued to recover from Tuesday's sharp sell-off. Gold Bullion held flat for Eurozone buyers, however, as the single currency ticked low against the Dollar. Government bond prices rose. Crude oil retreated from a one-week high of $45 per barrel. "Gold has been well supported below $850 (the 200-day moving average)," says a technical note from Mitsui, the international gold dealers, today "but it has not been able to break the resistance at $865." "The rebound in stock markets may be negative for gold," adds Peter Fertig at Dresdner Kleinwort in Hainburg, Germany speaking to Bloomberg. "The fear of bank nationalization had been supportive for gold over the past few days."
Gold bounces back as manipulation plan is exposed When I last wrote on gold, the metal's very promising year-end rally was attracting attention, especially because the world's banking problems, and the response of governments, had created an outstanding macro case for gold. Paradoxically, the only party-pooper was the section of Bill Murphy's radical gold bug service, LeMetropoleCafe.com, that follows Indian gold offtake. It was complaining that the world's largest consumer was not buying. Gold promptly broke down some $80. But after the low on Jan. 15, (at which point LeMetropoleCafe's India section was moved to ask, "Is India back?") gold, and the gold shares, rebounded. Comex gold closed on Wednesday at $850.10, up $42.4, or 5.2%. The Australian gold service The Privateer's magisterial $US 5X3 point-and-figure chart has not only reversed its Jan. 5 downturn but has broken through a major downtrend. See the chart: http://www.the-privateer.com/chart/gold-pf.html Needless to say, the credit crisis continues, generating even more ugly headlines recently.
Is Gold and the Balance of Power Shifting from the West to the East? Here is an interesting set of charts, and a unique conclusion to match, from Moneyweek. As we recall, the folks at GATA have been showing this sort of market analysis for some time now, to a cooler reception than a Madoff whistleblower at the Chris Cox retirement party. We'd be open to hearing of other serious interpretations of this phenomenon. But be forewarned; to say it is just nonsense is, well, nonsense. It is a statistically valid hypothesis, albeit an unexplained and a bit odd, at least for the moment. Can a money machine really exist in free and efficient markets? Economic theory says it cannot, that it must be due to some flaw or inefficiency, or an artificial scheme such as the regular returns from the Madoff Fund. We might agree with the surmise that it involves the steady selling of leased gold from the West into the gold markets, but that could only be confirmed by an audit, and an admission from some large central bank that they have been obligating increasingly large amounts of their inventory into the public markets in a previously undisclosed manner.
Gold, Precious Metals Climb as Investors Seek to Store Value Gold rose, along with silver, platinum and palladium as investors sought a store of value amid tumbling New York and European equity markets. The Standard & Poor's 500 Index fell as much as 3.4 percent. Initial claims for unemployment benefits matched a 26-year high in the U.S. last week, while housing starts slumped to a record in December, raising concerns the recession is deepening. Some investors buy precious metals during turbulent times to protect value amid instability in equity and other markets.
Ron Paul discusses Geitner nomination - Bloomberg TV 1/21/09
Geithner Says China Is Manipulating Its Currency Timothy F. Geithner, who took a big step toward confirmation as Treasury secretary on Thursday, told senators that the Obama administration believes China is "manipulating" its currency, suggesting a more confrontational trade stance toward that country than under the Bush administration. Mr. Geithner's comment, made in writing to the Senate Finance Committee hours before it voted 18 to 5 to recommend that the full Senate confirm him, is certain to anger the Chinese government and raise fears that it could sell off some of its huge reserves of dollars. But it remained unclear whether Mr. Geithner was signaling that the new administration would make a legal finding that China is engaging in currency manipulation this spring, when it is required by a 20-year-old law to report to Congress on such issues.
Longer-Term Treasuries Fall on Concern Foreign Demand May Ease Longer-term Treasuries fell, pushing 30-year bond yields to a seven-week high, as Treasury Secretary- nominee Timothy Geithner's charge China is "manipulating" its currency fueled concern foreign demand for U.S. debt may ease. Yields on 30- and 10-year U.S. securities rose for a fourth day. The Treasury Department said that next week it will sell $78 billion in two- and five-year notes and 20-year Treasury Inflation Protected Securities, or TIPS. "There's concern on the China front," said Kevin Flanagan, a Purchase, New York-based fixed-income strategist for Morgan Stanley's individual-investor clients. "Do they fire back and stop buying Treasuries, especially given the huge amount of supply we're going to need to underwrite over the next few years?"
Financial Firms Need $1 Trillion More in Equity Financial companies must receive another $1 trillion of equity capital before stocks can stage a sustained recovery, said Amit Rajpal, an asset manager at London- based hedge fund firm Marshall Wace LLP. Governments will have to provide the money by buying common shares to restore confidence and encourage private investors to step back in, said Hong Kong-based Rajpal, who manages the Marshall Wace Global Financials Fund.
CODE RED:Economy in Collapse - Drastic Actions Will Be Taken President Barack Obama will use his poll shattering popularity to swiftly enact policies that will prove to be among the most costly and potentially destructive in America's history, predicts Trends Research Institute Director Gerald Celente. "We are forecasting dramatic measures will soon be taken by the Obama Administration that will worsen the credit crisis and severely damage the nation's economic system," says Celente. According to The Trends Research Institute Director, the new President who swept into the White House on a tidal wave of unprecedented enthusiasm and the blessings of a strong majority, will have free reign to take whatever actions he deems necessary. "Whatever Obama wants, Obama gets. Desperate, scared and not knowing what to do to survive the economic storm, people are seeking a messiah to save them, and Obama is their man," said Celente. "When fear rules, reason and logic are ruled out." (According to an AP poll, 71 percent of Americans believe the economy will improve during the first year of the Obama presidency.)
Mervyn King paves way to start Bank print presses The Bank of England's Governor paved the way last night to unleash the weapon of “printing money” in a last-ditch drive to combat the rapidly deepening recession. Mervyn King braced Britain for a further sharp slump and a “difficult year for all of us”, and laid the groundwork for the Bank to turn to “unconventional measures” as interest rates fall towards zero. The Governor made clear that the Bank is preparing to turn soon to so-called “quantitative easing” measures - pumping money into the economy by buying bonds from banks, firms and the Treasury - after interest rate cuts to a record low of 1.5 per cent left it short of ammunition. While he warned that such drastic action may be needed to limit the recession, Mr King said that the Bank was still weighing up when it should resort to it. “I stress that we are not there yet,” he said.
Jim Rogers sees Renminbi replacing US Dollar as world reserve currency Legendary global investor Jim Rogers said the Renminbi may possibly replace the US dollar as the international reserve currency 15 years from now. Addressing the Asian Financial Forum in Hong Kong, an event that brought together about a thousand participants from around the globe, Rogers said he found Asia to be the place where "the world is changing" as he toured the world in 1990 through 1992. "This is going to be the new centre of the world, not just the financial but the political world," he said. The only currency that could replace the US dollar "this year" would be the euro, while the only conceivable currency that can replace the dollar as the reserve currency "15 years from now" is renminbi. Rogers said he believed China will rise despite possible setbacks.
JPMorgan chief says worst of the crisis still to come The chief executive of US bank JPMorgan Chase, Jamie Dimon, told the Financial Times on Thursday that the worst of the economic crisis still lay ahead as hard-hit consumers default on their loans. "The worst of the economic situation is not yet behind us. It looks as if it will continue to deteriorate for most of 2009," he told the business daily. "In terms of our sector, we expect consumer loans and credit cards to continue to get worse."
Banks of America Investors who have been pining for a chance to buy into the beleaguered banking sector may have a bit longer to wait. Just this past Friday holders of Bank of America's stock were greeted with the reporting of the company's first quarterly loss ($1.79 billion) since 1991. To make matters worse, the company cut its quarterly dividend from $.32 to $.01. The loss prompted a new rescue package totaling $138 billion, which comes on the heels of the recent round of government injected capital of $25 billion last year. That level of distress has forced the shares of the largest U.S. bank by assets down 74% in the last 6 months. But it's not just BofA that has been suffering lately; the Financial Select Sector SPDR has nearly 2/3 of its value in that same time period.
You Have To See What Merrill's John Thain Spent On His Office...Wow! In Charlie Gasparino's Daily Beast column, Charlie reveals how Merrill Lynch’s CEO, (now owned by Bank of America, spent over $1 million to redecorate his office last year. Are you kidding me? In early 2008, just as Merrill's CEO John Thain was preparing to cut expenses, eliminate thousands of jobs and exit businesses to save the dying Merrill Lynch, Thain was also spending embarrassing money on the redesign of his office. John Thain spent $1.22 million of Merrill's money to refurbish his office.
These Are the Folks We Rescue? John Thain is out of a job. But what a job. And what an office. And what a deal. He leaves with millions in bonuses he snuck in before his merger with Bank of America (BAC: 6.28, -0.32, -4.85%). Just the tip of a staggering financial iceberg that was the Merrill Lynch titanic sold to Bank of America. We're told John Thain's meeting with B-of-A's Ken Lewis was brief.
Thain Resigns Amid Losses at Bank of America John A. Thain, the former chief executive of Merrill Lynch, resigned from Bank of America on Thursday after the bank suffered unexpected losses stemming from its acquisition of the giant brokerage. Mr. Thain tendered his resignation Thursday morning after a 15-minute meeting with Kenneth D. Lewis, the chief executive of Bank of America. "Ken Lewis flew to New York today to talk to John" after requesting a meeting, a spokesman for Bank of America, Robert Stickler, said. "They mutually agreed that his situation was not working and he resigned." The relationship between the two men soured over the last month as Mr. Lewis grew increasingly frustrated, believing that Mr. Thain did not have a good grasp of the firm's operations, according to an individual who is aware of the tensions between the two men but who does not have authorization to speak publicly. Mr. Thain had been put in charge of the bank's trading, investment banking and brokerage operations after Bank of America acquired Merrill Lynch in January.
Sweden's Fix for Banks: Nationalize Them The Swedes have a simple message to the Americans: Bite the bullet and nationalize. Officials in Washington are trying to figure out how to shore up American banks that once ruled the financial world but now seem to weaken by the day, despite receiving hundreds of billions of dollars in government aid. With Sweden's banks effectively bankrupt in the early 1990s, a center-right government pulled off a rapid recovery that led to taxpayers making money in the long run. Former government officials in Sweden, many of whom come from the market-oriented end of the political spectrum, say the only way to solve the crisis in the United States is for the government to be prepared to temporarily take full ownership of the banks.
Smaller Banks' Losses Expected to Bring Mergers The government may view Bank of America and Citigroup as too big to fail, and dozens of other banks may soon find they have to get bigger. Capital One Financial, Fifth Third Bancorp, KeyCorp, Huntington Bancshares and SunTrust Banks announced sharp fourth-quarter losses on Thursday, the start of a trickle of red ink at the nation's small and midsize lenders that could result in a flood of mergers in an industry that is already consolidating. Most of these banks were never big players in credit cards, subprime mortgages or credit-default swaps. But they were major lenders to commercial real estate developers, home builders and small corporations. As the recession tightens, losses have started to surge.
'Bad bank' could cost trillions Timothy Geithner, President Obama's pick to head the Treasury Department, said Wednesday that the administration is considering setting up a "bad bank" to purchase toxic loans from troubled banks in a new program that could cost taxpayers $3 trillion to $4 trillion. Mr. Geithner raised the prospect of a "bad bank" at a Senate Finance Committee hearing during which he was questioned about his nonpayment of past taxes and his role in overseeing the recent bailouts of failing Wall Street firms. His nomination appears headed to approval despite the questions.
Steve Forbes - The USD Dollar / Global Economy
Big Slide in 401(k)s Spurs Calls for Change The stock-market rout has ignited a crisis of confidence for millions of Americans who manage their own retirement savings through 401(k) plans. After watching her account drop 44% last year, Kristine Gardner, a 35-year-old information-technology project manager in Longview, Wash., feels no sense of security. "There's just no guarantee that when you're ready to retire you're going to have the money," she says. "You either put it in a money market which pays 1%, which isn't enough to retire, or you expose yourself to huge market risk and you can lose half your retirement in one year." Many retirement experts have come to a similar conclusion: The 401(k) system, which has turned countless amateurs like Ms. Gardner into their own pension-fund managers, has serious shortcomings.
Smaller Stimulus Leaves Room for Restructuring As all recovery hopes are now pinned on the efficacy of Washington's next stimulus package, President Obama has opened the bidding at $825 billion. Most Republicans see this number as too big, and many Democrats see it as too small. If the question is one purely of impact, then under these circumstances, the Democrats are probably correct. Measured against the erosion of some $20 trillion from American household wealth in just two years and the waste of some $3 trillion (including long tail medical liabilities) on a fruitless war in Iraq, populists and democrats will label Obama's planned expenditure as relatively small. They will argue that to affect a noticeable change in America's $14 trillion economy, a much larger stimulus is needed. However, this would be the sort of change that would paralyze the economy for years, perhaps decades.
Crisis Solved: Give Money to Healthy Banks, Let FDIC's Bair Handle the Dying Why should taxpayers have to keep bailing out banks that aren't lending and are black holes? Why can't Congress just force these banks to write down their bad debt then recapitalize them? Why doesn't the government create a bank that does not have toxic assets and will fill the void of much needed loans to businesses who need them? "Lack of political courage [and] ignorance of finance" in Congress are the answers to these and related questions, according to Chris Whalen, managing director and co-founder of Institutional Risk Analytics. "Our friends in Washington who've been receiving a lot of money from Wall Street don't want to put these people out of work."
Hyperinflation, Collapsing Dollar, Depression 2.0 (Forbes Dec 20, 2008) Inflation rates will be higher than in the 1970s
Contemplating the Demise of Bank of America, Citi and JPMorgan The collapse in the share prices of our country’s three largest money center banks over the last week has been truly stunning and is assuredly a crisis of confidence. What started out as a growing unease that the losses of the past year would continue into late 2009 and early 2010 for Bank of America, J.P. Morgan and Citigroup has now snowballed into utter fear that these banks, along with their European peers, could potentially face nationalization as government regulators strive to save a financial system that is still on the brink of cataclysmic failure.
Geithner apologizes for not paying taxes Treasury Secretary-designate Timothy Geithner told the Senate he was sorry his past transgressions were now an issue at a time of deepening economic crisis. Treasury Secretary-designate Timothy Geithner said Wednesday he was careless in failing to pay $34,000 in Social Security and Medicare taxes earlier this decade but declared "I have paid what I owed." He apologized to Congress. Mr. Geithner told the Senate Finance Committee he was sorry that his past transgressions were now an issue in his confirmation at a time of deepening economic distress. He urged Congress to act quickly and forcibly to deal with the crisis. A top administration priority is to foster economic recovery and "get credit flowing again," Mr. Geithner testified. As to his failure to pay payroll taxes from 2001 to 2004 while he worked for the International Monetary Fund, Mr. Geithner said: "These were careless mistakes. They were avoidable mistakes."
Capital One Reports $1.42 Billion Loss on Charges Capital One Financial Corp., the Mclean, Virginia-based credit-card company, had a $1.42 billion loss in the fourth quarter on impaired-goodwill charges from its auto lender and a $1 billion boost to reserves for soured loans. The loss was $3.74 a share, compared with net income of $226.6 million, or 60 cents a share, a year earlier, the company said today in a statement. The loss from continuing operations was $3.67 a share, missing the 29-cent average profit estimate of 20 analysts surveyed by Bloomberg. Capital One booked an $810.9 million non-cash impairment on its auto-finance unit and said it expected $8.6 billion in loan defaults in 2009. Capital One slumped 45 percent in the past year in New York trading as late payments and defaults rose. Consumers are struggling to repay debt of all kinds as unemployment climbed to 7.2 percent in December, the highest level in almost 16 years, according to the Labor Department.
Another Real Estate Crisis is About to Hit For a picture of the US real estate crisis, imagine New Orleans wrecked by Hurricane Katrina, and before the waters even begin to recede, a second Katrina hits. The 1,120,000 lost US retail jobs in 2008 are a signal that the second stage of the real estate bust is about to hit the economy. This time it will be commercial real estate--shopping malls, strip malls, warehouses, and office buildings. As businesses close and rents decline, the ability to service the mortgages on the over-built commercial real estate disappears. The over-building was helped along by the irresponsibly low interest rates, but the main impetus came from the slide of the US saving rate to zero and the rise in household indebtedness. The shrinkage of savings and the increase in debt raised consumer spending to 72% of GDP. The proliferation of malls and the warehouses that service them reflect the rise in consumer spending as a share of GDP.
Housing Starts, Permits in U.S. Slump to Record Low U.S. builders broke ground in December on the fewest houses since record-keeping began as sales and credit dried up, signaling the real-estate slump will keep hurting economic growth. Housing starts fell 16 percent last month to an annual rate of 550,000 that was less than forecast and the lowest since the government started compiling statistics in 1959, the Commerce Department said today in Washington. Building permits, an indicator of future projects, were also at a record low. Builders, whose shares have lost 76 percent of their value over the last three years, are slashing prices to compete with a record number of foreclosed homes coming onto the market. Barack Obama's advisers say the president will use up to $100 billion in financial-rescue funds to ease the mortgage crisis.
December home sales in California fall 38% from a year earlier The median price dropped to $249,000 last month from $402,000. California home sales rose sharply last month, but the median price plummeted 38% from a year ago as bargain hunters scooped up foreclosure properties, MDA DataQuick reported. The state's median home price dropped to $249,000 last month from $402,000 in December 2007, DataQuick said. The median price is the point at which half the homes sold for more and half sold for less. The La Jolla tracking service said 37,836 houses and condos were sold in California last month, up 18% from November and 48% from December 2007.
New homes get smaller Say goodbye to McMansions, Americans are buying 'right-sized' homes These days, a bigger home isn't always a better one: Recent research suggests that homes being built today are getting smaller. The average size of homes started in the third quarter of 2008 was 2,438 square feet, down from 2,629 square feet in the second quarter, according to the U.S. Census Bureau. Similarly, the median size of homes started in the third quarter was 2,090, down from 2,291. The statistics confirm what the housing industry has suspected for a while. "We've been hearing for a long time 'Why is the home size not declining?'" said Gopal Ahluwalia, vice president of economic research for the National Association of Home Builders. He spoke about the trend at the International Builders' Show, held in Las Vegas this week. Anecdotally, he had heard smaller homes were being built as housing prices tumbled and the economy began to weaken. Still, "we never had data to back it up," he said.
UNEMPLOYMENT: How Do We Measure A Shortage Of Work? According to the U. S. Department of Labor (DOL), employers cut 524,000 jobs in December, 2008. The seasonally adjusted unemployment rate increased to 7.2%. That's bad news for a struggling economy. Unemployed people have fewer spending options. They tend to buy only what they absolutely need. Food tops the list. Rent or mortgage payments come next. Then utility bills, emergency medical expenses, and money for transportation - most likely in the form of car or truck payments and fuel. Purchases of clothing, a new car, electronics, toys, and so on can be deferred. Savings erode all too quickly. Personal confidence ebbs. Family life is strained. But December's unemployment numbers do not tell the whole story. It would appear the unemployment rate could exceed 10% before the end of 2009.
Here Comes the Socialism 2009-2010 will rank with 1913-14, 1933-36, 1964-65, and 1981-82 as years that will permanently change our government, politics and lives. Just as the stars were aligned for Wilson, Roosevelt, Johnson and Reagan, they are aligned for Obama. Simply put, we enter his administration as free-enterprise, market-dominated, laissez-faire America. We will shortly become like Germany, France, the United Kingdom, or Sweden - a socialist democracy in which the government dominates the economy, determines private-sector priorities and offers a vastly expanded range of services to many more people at much higher taxes.
Ron Paul Blasts Secret Government Running Economy 9/18/2008 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. Whats more he says he is not sure the Federal Reserve has any idea what to do next and that the Congress is totally oblivious to the whole sorry state of affairs - a cocktail of elements he warns puts the middle class of America in serious jeopardy.
Microsoft to slash 5,000 jobs, misses on 2Q profit Microsoft to slash 5,000 jobs, reports lower-than-expected profit and sales for 2nd quarter Microsoft Corp. said Thursday it is cutting 5,000 jobs over the next 18 months, a sign of how badly even the biggest and richest companies are being stung by the recession. The layoffs appear to be a first for Microsoft, which was founded in 1975, aside from relatively limited staff cuts the software company made after acquiring companies. The company announced the cuts as it reported an 11 percent drop in second-quarter profit, which fell short of Wall Street's expectations. Microsoft shares plunged 7 percent in morning trading. Microsoft said it was being hurt by deteriorating global economic conditions and lower revenue from software for PCs. The holiday quarter of 2008 was the worst the PC market had seen in several years.
Jobless claims surge, housing starts tumble The number of workers lining up for jobless benefits surged last week, while new housing starts and permits hit record lows in December, pointing at an acceleration in the economy's downward spiral. First time applications for state unemployment insurance benefits increased to a seasonally adjusted 589,000 in the week ended January 17 from a revised 527,000 the prior week, the Labor Department said on Thursday. It was the highest level of initial claims since a matching reading in the week of December 20 and beat analysts' forecasts for a rise to 540,000 new claims versus a previously reported count of 524,000 the week before. The last time claims were higher was in 1982, when they notched a weekly rise of 612,000.
Sony forecasts first annual net loss in 14 years Sony forecasts first annual net loss in 14 years as CEO vows to turn around company Sony Chief Executive Howard Stringer acknowledged Thursday he had not gone far enough with cost cuts and efforts to combine entertainment with electronics as his company projected its first annual loss in 14 years. "More has to be done and more can get done," Stringer said at a hastily called news conference at Sony's Tokyo headquarters. "We have a long way to go." Sony Corp. said it will offer early retirement to employees at its prized TV division, seeking to trim personnel costs there by 30 percent. It is also slashing jobs at its movies, music and game businesses. Sony did not give a head count target for the reductions. It said it is cutting 1,000 temporary workers when it closes one of two TV plants in Japan.
Oil Hits $45 on Positive News From U.S. Companies Vienna, Austria (AP) - Positive news from U.S. companies and economic optimism spurred by the U.S presidential inauguration boosted prices Thursday, with crude trading around $45 a barrel. Growing expectations of rising demand from China and India also supported markets. Light, sweet crude for March delivery jumped $1.45 to $45 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange after trading as high as $45.03.
On Plane to Texas, Critiques of the Speech On the plane, no longer Air Force One but now Special Air Mission 28000, they talked about the speech. George W. Bush, the former president, was heading home to Texas with his inner circle, having just left the west front of the Capitol, where his successor first thanked him for his service and then proceeded to trash it. The Bush team had worked assiduously to make the transition smooth for incoming President Obama and stayed out of the way as he used the post-election period to take leadership of the economy even before being sworn in. And now, as far as some of them were concerned, the new president had used his inaugural lectern to give the back of the hand to a predecessor who had been nothing but gracious to him.
Hillary Clinton: 'It's going to be hard' Secretary of State Hillary Clinton arrived at the State Department this morning, and President Barack Obama and Vice President Joe Biden will follow at Foggy Bottom this afternoon -- as a sign of the importance the new administration will place on diplomacy. Clinton, speaking of the "potential and possibility'' of American foreign policy, drew a warm welcome from a diplomatic bureaucracy that has played second fiddle to military policy for much of the Bush administration's two terms. There are three legs to the stool of American foreign policy, Clinton said: Military power, diplomacy and development -- and two of those reside at the State Department and the U.S. Agency for International Development. At State, where career diplomats complain that U.S. military policy has overridden diplomacy for eight years, Clinton's words of encouragement were met with repeated applause this morning.
Gordon Brown brings Britain to the edge of bankruptcy Iain Martin says the Prime Minister hasn't 'saved the world' and now faces disgrace in the history books When will the Gordon Brown nightmare end? Photo: Jane Mingay They don't know what they're doing, do they? With every step taken by the Government as it tries frantically to prop up the British banking system, this central truth becomes ever more obvious. Yesterday marked a new low for all involved, even by the standards of this crisis. Britons woke to news of the enormity of the fresh horrors in store. Despite all the sophistry and outdated boom-era terminology from experts, I think a far greater number of people than is imagined grasp at root what is happening here. The country stands on the precipice. We are at risk of utter humiliation, of London becoming a Reykjavik on Thames and Britain going under. Thanks to the arrogance, hubristic strutting and serial incompetence of the Government and a group of bankers, the possibility of national bankruptcy is not unrealistic.
Evelyn De Rothschild Warning Masses - Too Late (Holding Bonds, Oil, Gold) CNBC Dec 18, 2008 E.D. Rothschild talks about the future of stocks and bailout of banks and corporations
Chinese Translation Cuts Out Parts of Obama Speech The official Chinese translation of President Barack Obama's inauguration speech was missing his references to communism and dissent, while a live broadcast on state television Wednesday quickly cut away to the anchor when the topic was mentioned. The comments by the newly installed U.S. president veered into politically sensitive territory for China's ruling Communist Party, which maintains a tight grip over the Internet and the entirely state-run media. Beijing tolerates little dissent and frequently decries foreign interference in its internal affairs. At one point, Obama said earlier generations "faced down communism and fascism not just with missiles and tanks, but with sturdy alliances and enduring convictions." He later addressed "those who cling to power through corruption and deceit and the silencing of dissent -- know that you are on the wrong side of history." The Chinese translation of the speech, credited to the Web site of the official China Daily newspaper, was missing the word "communism" in the first sentence. The paragraph with the sentence on dissent had been removed entirely.
Russia Strikes, and Wins—Again! Last fall, Russia brokered a deal with Germany that darkened the Kremlin’s shadow over Georgia. Last week, a similar deal was done over Ukraine. Last August, when Russia invaded the tiny nation of Georgia, Trumpet editor in chief Gerald Flurry wrote, “Russia’s attack on Georgia … marks the beginning of a dangerous new era in history” (emphasis mine throughout). Dr. George Friedman from Stratfor said this about it: “The war in Georgia … is Russia’s public return to great-power status.” Securing Georgia within the Russian sphere of influence could be considered stage one of Putin’s plan to shore up its periphery, and return Russia to "great-power status." And it was largely successful, thanks in no small part to the complicity of Germany! If you haven’t already, I urge you to read "Russia’s Attack Signals Dangerous New Era."
Obama tempers hopes for economy Gloomy reports worsen outlook President Obama's campaign slogan, "Yes we can," is becoming more like "Yes we can, but it will take awhile" when it comes to the economy. A rash of gloomy economic reports Thursday demonstrated why his administration has been working to dampen expectations for a quick economic recovery. Microsoft Corp. announced 5,000 layoffs -- the first mass layoffs in its history -- and the government last week recorded the highest one-week tally of new unemployment claims in 26 years. Housing starts, meanwhile, fell nearly 16 percent in December to an annual rate of 550,000 units, the lowest number since the Commerce Department started tracking the statistic 50 years ago. Mr. Obama and his aides want the public to understand that the grim picture is not going to brighten any time soon. They have said repeatedly that they expect 2009 to be a tough year, even as they call for quick action on an $800 billion economic stimulus bill. That legislation, they say, would create or restore 3 million jobs, exceeding the 2.6 million jobs that were lost last year.
Obama and the Muslims: An Inauguration of a New Era? On Inauguration day, Muslims and citizens worldwide optimistically and anxiously began purging the sordid memory of the disastrous and obtuse arrogance of the Bush administration. Even Obama, the "chosen one," cannot completely cleanse the collective stain of the "Bush Era" that squandered global good will with two failed wars, a belligerent rhetoric of "clash of civilizations," unyielding support for Israel's occupation of Gaza and the West Bank, and the shameful, morally indefensible legacies of Guantánamo Bay and Abu Ghraib. To quell the simmering discontent and unrest between the United States and Muslims, Obama - the appointed Superman of the 21st-century, globalized, multicultural world - can flex his powers and demonstrate heroism by embracing diplomacy, renouncing hypocritical and selfish policy initiatives, and spearheading a dialogue fueled by respect and mutual understanding.
Obama’s Decision to Close Gitmo Called ‘Dangerous and Irresponsible’ President Barack Obama on Thursday is expected to issue an executive order that would close the Guantanamo Bay detention center with one year. He campaigned on the promise to do so, something that cheered those who say the prison at the U.S. Naval base violates the human rights of America's terrorist enemies. The Obama administration already has suspended trials for terrorist suspects at Guantanamo for 120 days pending a review of the military tribunals. According to the Associated Press, a draft of the executive order to close Gitmo reads as follows: "In view of the significant concerns raised by these detentions, both within the United States and internationally, prompt and appropriate disposition of the individuals currently detained at Guantanamo and closure of the facility would further the national security and foreign policy interests of the United States and the interests of justice."
Iran Says Obama Must Seek 'New' Mideast Foreign Policy Iran said Wednesday it is "ready for new approaches" from President Barack Obama as Islamic countries cautiously welcomed his promise of mutual respect between the U.S. and Muslims. Despite the reception, it remained clear that Iran and postwar Gaza will pose early tests of Obama's inauguration speech offer to the Muslim world to "extend a hand if you are willing to unclench your fist." Obama, who called the leaders of Israel, the Palestinian Authority, Egypt and Jordan Wednesday to voice his commitment to Arab-Israeli peace, said while campaigning that he would seek dialogue with Iran to defuse the years long confrontation over Tehran's nuclear ambitions and support of militant groups around the Middle East.
The Credit Card Crunch Credit card companies are reducing the risk of defaults by taking drastic steps, even if they hurt good customers in the process. Randall Pinkston reports.
Obama Calls for Tighter Credit Card Restrictions . . . . on deceptive practices of credit card companies from campaign June, 2008.
Changing Credit Card Terms (CBS - Oct 14, 2008) Financial contributor Vera Gibbons shares tips with Harry Smith for monitoring the terms of your credit card in the changing financial climate.
Democracy vs. Republic: Most aren't taught the difference... In this excerpt from a seminar by Martin Red Beckman, the difference between a Democracy and a Constitutional Republic is examined. Most of us are not taught this difference in school, nor is the type of government envisioned by the founders practiced in the USA. The rest of the seminar examines more closely the power of the people OVER the government, and how you can exercise that power in More.. the Constitutional Republic.
The Collapse of Capitalism and the Safety Net of Gold For Ponzi schemes to succeed, they must expand faster than the request for redemptions. If they do not, they will collapse. This is what happened to Bernard L Madoff Investment Services, the largest Ponzi scheme in history. The same is about to happen to capitalism. Although capitalism is not a Ponzi scheme, credit-based economies, sic capitalism, and Ponzi schemes share the same fatal flaw. Both must constantly expand or they are in danger of collapse. Today, because capitalist economies are no longer expanding, but contracting, their continued contraction will lead to collapse.
Gold Declines as Stronger Dollar Outlook Cuts Investment Appeal Gold retreated in Asia as the dollar resumed its climb against the euro, diminishing interest in the metal as an alternative investment. Bullion declined as the dollar gained for the third day in four against the euro. The European currency may fall 15 percent against the dollar by mid-year as European banks restrict lending and sovereign bond spreads widen due to the deepening global economic slowdown, according to BNP Paribas SA. "Gold's inverse relationship with the dollar is still pretty strong," Jiang Zhiwei, an analyst at BOC International, said in a report. "That and risk aversion is what's been driving the market in the past few months."
Obama’s Inaugural: Hubris Will Bring Him Down President Barack Obama’s inaugural speech was supposed to be one of the great inaugural addresses of all time. It was supposed to encourage us, to inspire us. Instead, it deflated us. Obama’s inaugural address deflated us because it perfectly crystallized the quandary America now finds itself in: we wanted our faith renewed through a "transformational moment" -- but now we’ve got a faithless man for president. Obama has no faith in God’s stake in the American destiny; instead, God merely "calls on us to shape an uncertain destiny." Despite his protestations to the contrary, Obama has no faith in Americans; instead, he wishes to change our hearts of stone for hearts of flesh: “we can no longer afford indifference to suffering outside our borders; nor can we consume the world’s resources without regard to effect.” Obama has only one deep and abiding faith: faith in himself. He mentioned humility three times during his inaugural address. The gentleman doth protest too much. This inauguration, in Obama’s view, was about his personal elevation; his accession to the White House was "a moment that will define a generation," a moment when the nation "set aside childish things." Most evocatively, Obama cited his inauguration as a moment when all cynics were thrust aside because "the ground has shifted beneath them." The imagery of Moses (Obama) facing down Korah (Rush Limbaugh and the political right) and the ground swallowing up Korah is unmistakable.
Wall Street Snubs Obama Euphoria was almost universal yesterday…except on Wall Street. "Dad, don't pick on Obama," said Maria, calling from California. "I watched the inauguration yesterday. It was moving. Really moving. They seem like such nice people…and they really want to do what's right. At least, that's the way it seems to me…" We watched the TV news. The British press focused on the race issue. Blacks interviewed by the BBC spoke of the 'historic moment'…of the dreams of Martin Luther King finally realized…of a new era of race relations. There were hoorahs and tears… We were never fond of racism, so we weren't especially tearful upon reading the obituaries for it. Besides, we're a little suspicious of the coroner's report. We'd like to see the toe tag, just to be sure. Still, everyone wants Obama to succeed. His mother and grandmother, looking down from heaven. His relatives in Kenya. His party. His country. The entire world. Even we hardened cynics here at The Daily Reckoning wish him well. But we weren't born yesterday.
Ron Paul : "Bailouts Are A Contagious Disease"1/21/2009 Obama is Bush on steroids!
Three-quarters of stimulus to go in 18 months Obama administration wants to spend 75 percent of stimulus over 18 months Facing Republican resistance to a massive economic stimulus plan, the Obama administration on Wednesday said $3 of every $4 in the package should be spent within 18 months to have maximum impact on jobs and taxpayers. Peter Orszag, the director of the White House Office of Management and Budget, said Wednesday that if House or Senate versions of the bill do not spend the money as quickly, the White House will work with lawmakers to achieve the 75 percent goal. Congress is working on a stimulus bill of at least $825 billion.
Geithner Pledges Prolonged Effort to Stabilize Banking System Timothy Geithner, President Barack Obama’s nominee for Treasury secretary, pledged an expanded and prolonged government role in everything from stabilizing banks to ensuring credit for small businesses. Geithner, who today may take a step toward confirmation with a Senate Finance Committee vote, told lawmakers yesterday “we’re at the beginning of this process of repairing the system, not close to the end.” He committed to “much more substantial action” on a “very dramatic scale.”
Obama’s Inaugural: Hubris Will Bring Him Down President Barack Obama’s inaugural speech was supposed to be one of the great inaugural addresses of all time. It was supposed to encourage us, to inspire us. Instead, it deflated us. Obama’s inaugural address deflated us because it perfectly crystallized the quandary America now finds itself in: we wanted our faith renewed through a “transformational moment” -- but now we’ve got a faithless man for president. Obama has no faith in God’s stake in the American destiny; instead, God merely “calls on us to shape an uncertain destiny.” Despite his protestations to the contrary, Obama has no faith in Americans; instead, he wishes to change our hearts of stone for hearts of flesh: “we can no longer afford indifference to suffering outside our borders; nor can we consume the world’s resources without regard to effect.”
Gold Surges on Inauguration Day; Concerns Regarding Derivatives, ETFs Yesterday was an historic day for the world with the inauguration of the 44th President of the United States of America. Gold rallied by more than 2% despite continuing dollar strength and oil's collapsing 7% to just over $34 per barrel (Light Sweet Crude Oil Future - Combined - FEB09: -7.6%) . While the dollar is up on hopes that President Obama can turn around the ailing US and indeed the global economy, stock markets internationally are under pressure again with increasing concerns regarding the international banking and financial system.
Hyperinflation Will begin In China And It Will Destroy The Dollar The conventional wisdom on China is dead wrong. Specifically, there is a widespread belief, as expressed by Goldman Sachs, that "China will keep the yuan trading within a narrow range in 2009 due concerns about exporters." Worse still, others are even predicting that China will devalue its currency! The sheer wishful thinking is astounding! The idea that "China will keep the dollar peg to help its exporters" ranks all the way up there with "Housing prices always go up" and "You can spend your way to prosperity".
Taxpayers could spend trillions on 'bad bank' Timothy Geithner, President Obama's pick to head the Treasury Department, said Wednesday that the administration is considering setting up a "bad bank" to purchase toxic loans from troubled banks in a new program that could cost taxpayers $3 trillion to $4 trillion. Mr. Geithner raised the prospect of a "bad bank" at a Senate Finance Committee hearing during which he was questioned about his nonpayment of past taxes and his role in overseeing the recent bailouts of failing Wall Street firms. His nomination appears headed to approval despite the questions.
US banks 'insolvent' as losses top $US3.6tn US financial losses from the credit crisis may reach $US3.6 trillion ($5.5 trillion), suggesting the banking system is "effectively insolvent," said New York University Professor Nouriel Roubini, who predicted last year's economic crisis. "I've found that credit losses could peak at a level of $US3.6 trillion for US institutions, half of them by banks and broker dealers,'' Roubini said at a conference in Dubai today. "If that's true, it means the US banking system is effectively insolvent because it starts with a capital of $US1.4 trillion. This is a systemic banking crisis.'' Losses and writedowns at financial companies worldwide have risen to more than $US1 trillion since the US subprime mortgage market collapsed in 2007, according to data compiled by Bloomberg.
The Obama Stimulus Plan Won't Work President Barack Obama and his economic team will soon attempt to convince Congress that spending upwards of $1 trillion tax dollars (more or less) will shorten the recession. A good part of the spending will be on public works and infrastructure projects that aim to create (or save) many millions of jobs. Some of the spending will be in the form of grants to state governments to prevent cutbacks in education and medical services. And a smaller (and laudable) part of the program provides tax relief to some individuals and corporations. Although some economists supported the bank and auto bailouts and although many more support a major federal stimulus package, this economist holds that both measures are counter-productive. Both are likely to prolong the economic slump and not shorten it.
A very flawed monetary order Surely, at some point in time, some group of wise men somewhere will finally get together and realize that, during an era of excessive speculation, a monetary order where half the world's money floats freely and a good portion of the rest is rigidly fixed to the U.S. dollar is not an optimal system. News comes today that the British pound, a high flier not more than six months ago, has hit a seven-and-a-half year low against the greenback as the U.K. government ratchets up its government rescue plans for the nation's banking system.
Obamanomics Will Fail the American People Obamanomics, the economic program of the Obama administration, will fail to help the U.S. economy. Instead it will undermine the economy. It will fail to help the American people as a whole, although it will benefit some. It will succeed in augmenting the government. The depression is causing and threatening to cause many failures of banks, companies, whole states like California, localities, pension funds, federal home loan banks, and so on. Unemployment is rising. The Obama administration, following the Bush administration and the roadmap laid down by the New Deal and the Employment Act of 1946, will try to stop these failures and the unemployment using government action. This will fail. The system is too large for the government to bail out without destroying any semblance of free markets. Even if the system were not so large, government action would still fail, as will be explained in some detail.
The Obama Economic Miracle "In capitalism of the 21st century, there is room for the state.."-Tony Blair January 8, 2009 Paris Meeting on the Financial Crisis Now that America has been exposed to the generality known as the Obama Economic Stimulus Plan by our media, the President plans to provide a deliberately vague road map to nowhere that only William Jefferson Clinton's defense attorney could appreciate. President Obama has engaged in the same "creature in the closet" approach which is designed to scare people like a child is spooked just like Hank Paulson used to terrify the politicians of DC during his famous "Reichstag Fire" speech to them on September 16th and 17th of 2008.
Recession or depression? Too early to tell Many differences between now and 1930s but some similarities, too By every measure - lost jobs, plunging stock prices, scarce credit and a profound loss of confidence in the banking system - the economy is in awful shape.The nation's 11th recession of the postwar era began in December 2007 and easily could become the longest since the Great Depression, although most foreacasters expect a weak recovery to begin in the second half of this year. But what are the odds that we're the early stages of what will eventually become a depression rather than just a recession?
Jim Rogers on a Chinese TV 19 January 2009 Discusses the biggest challenges to China.
House panel passes economic rescue plan A House of Representatives panel on Wednesday backed a $358 billion package of new government spending, the first key test for a massive Democratic plan aimed at boosting the ailing U.S. economy. The House Appropriations Committee voted 35-22 to approve the spending, part of an $825 billion package President Barack Obama has sought to help the economy, which has been in a recession since December, 2007.
The True Scope of the Housing Bust Any sober-minded investor who wants to face reality, no matter how grim, needs to hear this expert tell why the current housing mess is so much more substantial than the real estate pain experienced even during the Depression. For example, get this: Pinto says that if current price/default trends hold, then by the end of this year we as a nation will have a loan-to-value ratio of nearly 110%! That would be a first in history.
De-Leveraging Is Not Deflation "Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term 'inflation' to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages." -- Ludwig von Mises It's true that just about every asset class is coming down in price right now. This, however, is not deflation -- as I have said so many times recently, much to many readers' unqualified chagrin. To the contrary, these declines are the products of de-leveraging -- not deflation -- and the distinction is nearly incalculably important, although the subtlety seems to elude even the most astute these days.
Economists predict continuing economic gloom for U.S. during next 4 years Government seemingly only hope to ignite pistons to drive growth Transfixed by the daily spectacle of dismal economic news and wild Wall Street swings, few Americans have looked up to see what a wide array of economists say lies beyond the immediate crisis. And with good reason: The picture isn't pretty. The sleek racing machine that was the U.S. economy is unlikely to return anytime soon despite the huge repair efforts under way. Instead, it probably will continue to sputter and threaten to stall for years to come. The prospects are so gloomy, according to a recent study, that Americans may be slightly worse off in four years than they are now.
Where is the safe haven? As the US$1.19 trillion forecast 2009 US budget deficit combines with the forthcoming $825 billion (and counting) stimulus package, observers seem convinced that for some mystical reason US Treasuries are a "safe haven" - endlessly attractive to Asian and Middle Eastern central banks and therefore able to yield considerably less than the expected rate of inflation over their life. But what if this irrational investment preference ceases to hold? US government bonds have not always been the world's safest investments, to say the least. The phrase "not worth a Continental" encapsulates the inflationary finance that was used to win the Revolutionary War, while US state bonds were notorious in the 19th century City of London after Pennsylvania defaulted in 1841. Even during the Civil War, there were moments when the Confederate credit appeared more solid than Union credit - after all, absent the threat of military invasion, the Confederacy was a stable agrarian economy with several reliable cash crops.
Peter Schiff on CNBC Market's Down Day Jan. 20 2009 pt 1/2
Peter Schiff on CNBC Market's Down Day Jan. 20 2009 pt 2/2 Peter talks about temporary fall off in gold, and temporary strength of dollar.
Generally free-ish with respect to financial regulation and credit.
Overleveraged housing markets after a bubble.
Banks that felt they could hedge risks and enhance returns through structured finance and derivatives.
Aggressive approaches to bail out financial institutions.
There's probably more, but now I want to highlight one difference: the US Dollar is the global reserve currency and the British Pound is not. Thus Britain, as it tries to reflate, runs up against borrowing constraints faster than the US does. Those limits aren't showing up in their interest rates yet, but it is showing up in the currency, which has been falling rapidly of late. With the creation of so much liquidity out of thin air, the surprise is not that the British Pound is weak, but that the US Dollar is strong, and still regarded as a safe haven. Then again, what are the alternatives?
U.S. $3 billion loan part of Chrysler-Fiat deal Chrysler LLC's deal with Fiat SpA depends on the U.S. automaker receiving an additional $3 billion emergency loan from the U.S. government, the company's product development chief said on Wednesday. "I think that is part of the deal," Frank Klegon said when asked if the automaker needed the additional $3 billion for the Fiat deal to be completed. "That is part of the process. The expectation is that that is an important part of it."
GM dethroned; Toyota tops world sales Toyota Motor Corp. sold more cars and trucks worldwide than any other automaker last year, seizing the crown General Motors Corp. held for 77 years. But with its overall sales having fallen for the first time in 10 years, and the entire industry in a slump, there's little for the Japanese company to celebrate. GM said Wednesday it sold 8,355,947 cars and trucks around the world in 2008, falling about 616,000 vehicles short of the 8.972 million Toyota announced Tuesday. GM said the shortfall was mainly caused by the economic downturns in the U.S. and Europe that slashed vehicle demand in those major markets, where Toyota doesn't have as large of a presence.
Pay freezes spread during brutal recession More employers freezing pay because of recession -- even the White House What do Tropicana Casino and Resort, Avis and the White House now have in common? They're all freezing the pay of some of their workers. It's part of a growing trend by employers facing the fallout -- economic and political -- from a brutal recession. For companies, pay freezes are a key cost-cutting tool for surviving hard times. For President Barack Obama, who ordered a pay freeze for White House employees earning over $100,000 a year, the move on his first full day in office sent a message to a nervous country: We're in this together. "During this period of economic emergency," Obama said, "families are tightening their belts, and so should Washington."
American, United hit by declining demand he major U.S. airlines have grounded aircraft and eliminated flights, but those moves might not be enough in the face of a recession that is choking demand for air travel. Their struggles, however, could be working to the benefit of consumers. American Airlines and United Airlines said Wednesday they lost more money in the fourth quarter. United parent UAL Corp. lost $1.3 billion, hurt by a wrong bet on the direction of oil prices. The company plans to cut 1,000 more jobs.
EBay's income dropped 31% as traffic declined The weak economy took its toll on eBay as the auctioneer reported its first revenue decline in a decade. EBay reported net income in the fourth quarter declined 31 percent to $367 million, or 29 cents a share, from the year-ago quarter. Even as the most-visited retail site on the Web with 84.5 million visitors, eBay's traffic in December was about 4 percent lower than the year before. Overall holiday spending online was down about three percent from last year, according to market researcher ComScore. During the year, eBay made considerable changes aimed at reducing the company's dependence on its auction business, where growth has slowed in favor of fixed-price sales. The company, based in San Jose, California, said revenue fell 7 percent to $2.04 billion, its first drop in sales in 10 years.
Disney sends buyout offers to 600 parks execs Walt Disney Co said on Wednesday it sent voluntary buyout offers to 600 executives at its domestic theme parks to cut costs amid an economic meltdown that has depressed attendance and prompted the company to deeply discount Walt Disney World stays. Disney said if the buyout offer, which expires February 6, does not produce enough reductions, the company will consider layoffs. A company spokeswoman declined to say what amount of savings or head count reductions Disney was trying to achieve, or what the cost of the terminations would be. The buyout offers come about six weeks after Disney said its hotel bookings had started to rebound as a result of the discounts. The move appears to be part of "significant" costs savings the company promised investors late last year.
Intel to shut sites and cut up to 6,000 jobs Intel Corp (INTC.O) said on Wednesday it would close manufacturing plants in Malaysia and the Philippines, as well as its only remaining factory in Silicon Valley, cutting as many as 6,000 jobs. The announcement comes a day after the world's largest maker of microprocessors used in personal computers slashed prices on a number of its chips and a week after it reported a decline in fourth-quarter revenue. Intel said it would close two assembly test facilities in Penang, Malaysia, and one in Cavite, Philippines.
Strong Profit, but Ericsson Plans 5,000 Job Cuts Ericsson, the Swedish maker of wireless networking gear, posted an unexpectedly strong profit Wednesday but said it would cut as many as 5,000 jobs in anticipation of a slowdown. The Ericsson chief executive, Carl-Henric Svanberg, said on Wednesday in an interview that the company would speed up restructuring efforts despite having largely escaped the fallout from the recession so far. He spoke after Ericsson posted a sixth consecutive year of revenue growth in 2008, paced by worldwide growth in mobile communications. Ericsson will lay off workers, reduce the number of consultants and other temporary staff, and consolidate research and development activities. About 1,000 of the 5,000 job cuts will affect Swedish employees, primarily in Stockholm. The company declined to say where the rest would be cut.
Jim Rogers: UK's future bleak US investment guru Jim Rogers, who earlier in the week said sterling is finished, has told Sky News the financial system is a disaster and the future looks bleak because the UK does not have much to sell any more.
Obama Sworn In Again, Using the Right Words In golf, they call it a mulligan. A do-over. There's no formal name for what President Obama and Chief Justice John G. Roberts Jr. did last night. After flubbing his one role on Inauguration Day -- administering the oath of office to Obama -- Roberts traveled to the White House to re-administer the oath. Just to make sure. "We decided it was so much fun . . .," Obama joked while sitting on a couch in the Map Room. Obama stood and walked over to make small talk with pool reporters as Roberts donned his black robe. "Are you ready to take the oath?" Roberts asked. "I am, and we're going to do it very slowly," Obama replied. After a flawless recitation that included no Bible and took 25 seconds, Roberts smiled and said, "Congratulations, again."
Obama and the other ceasefire In his inaugural speech as the 44th president of the United States, Barack Hussain Obama offered an olive branch toward the Muslim world by promising "a new way forward, based on mutual interest and mutual respect". At the same time, Obama confirmed that America is still embroiled in a "war on terror" by stating, "Our nation is at war, against a far-reaching network of violence and hatred." With conflicts still raging in Iraq and Afghanistan, and the entire Middle East riveted by the seismic impact of the 22-day war in smoldering Gaza, Obama's message of peace was exquisitely timed. After eight years of "clashing civilizations" that defined the George W Bush administration, whose green light to Israel's offensive on Gaza must surely count as its final blunder, the world's expectation of meaningful change in US foreign policy are quite high. These hopes were bolstered by Obama's inaugural promise to set aside "worn-out dogmas" and to begin a new era of global cooperation to tackle the burning issues that confront the world today.
Obama's Agenda: the Middle East, Economy and Ethics President Obama launched immediately into the grim reality of his new job today, placing calls to the leaders of Middle Eastern countries and conducting his first presidential meetings on the economy and Iraq this afternoon. He later signed a series of executive orders and directives to implement new ethics rules for his administration in keeping with a campaign promise to bring greater transparency to the White House. And he declared "a new era of openness" in government.
On Palestinian question, tough choices for Obama JERUSALEM: With the rule of Hamas in Gaza apparently unchallenged and its popularity growing in the West Bank, the new Obama administration faces an immediate policy choice: support a Palestinian unity government, as Egypt and the Palestinian president, Mahmoud Abbas, want, or continue to isolate Hamas and concentrate on building up the West Bank as a political alternative to radical Islam. The issue is urgent because of the international effort to rebuild a bombed-out Gaza while trying to avoid letting Hamas take credit for the reconstruction, as Hezbollah did in southern Lebanon after the 2006 war. But the choice is more fundamental. It goes to the heart of what President Barack Obama can accomplish in the Israeli-Palestinian peace process when the Palestinian side remains violently divided against itself. In a series of calls to Middle Eastern leaders on Wednesday, President Barack Obama did not tip his hand, simply calling for a role for the Palestinian Authority in Gaza's reconstruction.
Pakistan's shift alarms the US KARACHI - Ongoing tension between India and Pakistan in the wake of the terror attack on the Indian city of Mumbai last November in which 179 people died at the hands of gunmen linked to Pakistan has clouded Islamabad's role in the United States-led "war on terror". Mindful of this, US Central Command commander General David Petraeus paid a one-day visit to Pakistan on Tuesday. In meetings with senior officials, including army chief General Ashfaq Parvez Kiani, Petraeus said that the US and the international community would continue to support Pakistan, but it needed "to put its house in order" on the issue of militants.
China can't stop India's missile system India considers its emerging anti-missile system an absolute necessity. As each day passes, the signs of instability in Pakistan become more troubling and the drum beat grows louder from Pakistan's Swat Valley, where a militant culture is taking root which is neither tolerant nor passive in nature. Beijing cannot be happy about India's anti-missile plans and what this might mean for China's long-term strategic interests in the region. More than anything else, it is the uncertainty of the outcome that is causing it such discomfort. The US seems determined to surround China with US-built anti-missile systems. Using North Korea as a valid excuse at first, the US anti-missile footprint could soon extend from Japan - including Japanese cruisers stationed offshore - and South Korea to Taiwan and India.
John Stossel 20/20 : Politically Incorrect Guide To Politics - Pt 1 of 6
John Stossel 20/20 : Politically Incorrect Guide To Politics - Pt 2 of 6
John Stossel 20/20 : Politically Incorrect Guide To Politics - Pt 3 of 6
John Stossel 20/20 : Politically Incorrect Guide To Politics - Pt 4 of 6
John Stossel 20/20 : Politically Incorrect Guide To Politics - Pt 5 of 6
John Stossel 20/20 : Politically Incorrect Guide To Politics - Pt 6 of 6
President Barack Obama 2009 Inauguration and Address President Barack Obama took the oath of office as the 44th president of the United States and delivered an inaugural address focusing on the themes of sacrifice and renewal on January 20, 2009.
Rejecting Bush Era, Reclaiming Older Values Barack Obama’s Inaugural Address on Tuesday was a stark repudiation of the era of George W. Bush and the ideological certainties that surrounded it, wrapped in his pledge to drive the United States into “a new age” by reclaiming the values of an older one. It was a delicate task, with Mr. Bush and Dick Cheney sitting feet from him as Mr. Obama, only minutes into his term as president, described the false turns and the roads not taken. To read his words literally, Mr. Obama blamed no one other than the country itself, critiquing “our collective failure to make hard choices” and a willingness to suspend national ideals “for expedience’s sake” — a clear reference to the cascade of decisions ranging from interrogation policies to wiretapping to the invasion of Iraq.
Obama’s Inaugural Address Interactive video and transcript of President Barack Obama's inaugural remarks on Jan. 20, 2009.
'The Fierce Urgency of Now' I doubt that we will ever see two days in a row in modern times that link the two African-American orators of our day like Monday and Tuesday of this week. How will these days affect the US markets? Of course no one knows. What is clear to those celebrating the holiday this Monday was that King went to the mountaintop and saw the other side. His message was a message of hope in the midst of endless despair. And for many, by noontime Tuesday, they will have "reached the promise land." You have seen a political campaign this year like none other. The issues changed along the trial, and by October, the economy was center stage. But well beyond the financial issues, the voters cast ballots for the ideologies of "change" and "hope." And yet the majority of reporting today on our financial markets, our banking systems, and world economy attempts to paint a dismal scene.
Obama: We must change with the world President Barack Obama signalled a decisive break with the Bush years on Tuesday, vowing a “new era of responsibility” in which he would rebuild the economy and restore America’s standing in the world. Moments after taking the oath of office to become the 44th US president, Mr Obama declared the country “ready to lead again” and set out policies on issues ranging from the economy to climate change and the struggle against Islamist extremism. “The world has changed, and we must change with it,” he told an exuberant crowd of hundreds of thousands gathered in Washington’s National Mall to mark the inauguration of the country’s first African-American president. “Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America.”
Obama speaks of 'crisis' facing US President Barack Obama says he is taking the helm of a nation that is "in the midst of crisis." He said in his inaugural address that the challenges "will not be met easily or in a short span of time". But he said, "they will be met." Describing the challenges ahead, he said: "That we are in the midst of crisis is now well understood. Our nation is at war, against a far-reaching network of violence and hatred. "Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age.
Obama’s Open and Shut Approach to Access According to President-elect Barack Obama’s latest radio address, this will be “the most open and accessible inauguration in history.” I guess he forgot to tell his inauguration committee. They have “struck deals with three television networks to the tune of more than $5 million,” according to the Jan. 17 Washington Post. So much for open government. Obama hasn’t even taken the oath of office and he’s blocking media outlets that don’t pay. He even shut out C-Span – almost unheard of in Washington. Instead, his inauguration is raking in cash and limiting access to ordinary Americans to help pay for the festivities.
Obama to Meet War Council on First Full Day The new commander in chief's promise to end the war in Iraq - and his hope for a turnaround in Afghanistan - will be on the agenda Wednesday when he meets with top commanders and national security aides. Two senior officials said Obama was summoning his defense secretary, Robert Gates, and the chairman of the Joint Chiefs of Staff, Adm. Mike Mullen, to the White House, along with Gen. David Petraeus, who has responsibility for both wars as Central Command chief.
Obama Becomes Banker-in-Chief in Credit Market Freeze The U.S. economy has little chance of recovering from what may prove to be its worst recession since World War II unless President Barack Obama shows he can get banks to lend money again. Since the Bush administration and Congress last year approved the $700 billion Troubled Asset Relief Program that injected capital into Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co., individuals and companies aren’t getting any of it as fourth-quarter lending by the biggest banks by assets plummeted. The asset-backed market, which is supposed to enable banks to keep lending by transforming loans into tradable securities, remains frozen, leaving would-be lenders unable to package and sell mortgages, credit-card debt and auto loans.
New U.S. President Looks in Vain for Head of U.S. Treasury President Barack Obama is inheriting the worst recession in decades and it's possible that in his first few days -- and potentially weeks -- he won't have a Treasury secretary to guide fiscal policy. Obama's Treasury Secretary-designate Timothy Geithner, who is still officially the president of the New York Federal Reserve, last week admitted that he didn't pay Social Security and Medicare taxes from 2001 to 2004 when he worked for the International Monetary Fund. In addition, he employed an immigrant housekeeper who, though she was legally in the U.S., continued to work for Geithner during a three-month period when her papers were expired.
Rahm Emanuel (Chief of Staff) at the Inaugration. . . . setting the tone for the Obama administration?
Profile: Rahm Emanuel, Barack Obama's new enforcer Barack Obama may be on course to be one of the most loved presidents in US history, but as his 18th Century predecessor John Adams once observed, it is on fear, not love, that most successful governments are founded. With that in mind, President-elect Obama had a shortlist of one when it came to choosing his White House Chief of Staff; Rahm Emanuel, a politician so ferocious that even his own mother calls him by his nickname of "Rahmbo". If the Democratic Congressman accepts the job as Mr Obama's enforcer, Mr Emanuel, universally characterised as a foul-mouthed attack dog who can end the career of anyone who stands in his way, will serve as a perfect counterpoint to the sugar-coated Mr Obama. Mr Emanuel, 48, who served as an aide to President Clinton, has proved in the past that he bows to no-one when it comes to getting the job done, as Tony Blair discovered when he visited the White House at the height of the Monica Lewinsky scandal in 1998. As he prepared for a public appearance with the president, Mr Blair was warned by Mr Emanuel: "This is important. Don't **** it up."
Stock market delivers worst Presidential inauguration performance ever. What does it mean? The US stock market gave President Obama a less than enthusiastic welcome on his inauguration day, with the DJIA declining 4% to close under 8000. What does this bode for the future? Is there any meaningful correlation between inauguration day stock market performance and the stock market over a President’s term? We reviewed the DJIA for each Presidents' first day going back to 1929 to see what today’s stock market reaction might foretell. A presidential inauguration is hardly market news. There’s no timing surprise, as if the market doesn’t know when the swearing it ceremony is scheduled to take place, and presidents rarely say anything new during inauguration speeches to warrant a major change in market sentiment. But the market’s reaction today cannot be quickly dismissed as coincidental, either, caused by newly developing troubles in the financial system. Let’s put today in historical perspective. Herbert C. Hoover 4/4/29 Franklin D. Roosevelt 4/5/33 Franklin D. Roosevelt 1/7/37 Franklin D. Roosevelt 1/20/41
Strong Gold, Strong Dollar "Because the Dollar Index (DX) is an outmoded and artificial measure of dollar strength, containing nothing to account for the Chinese renminbi for example, it may not be a true reflection of the progress of this inflation." (see: The Fed Is Monetizing Debt and Inflating the Money Supply) A number of people have remarked about the strong dollar and strong upmove in gold today. It does seem counterintuitive. The euro is weak because of the solvency situtations in Ireland and Spain. This is taking the euro down and the dollar higher. At the same time there is a flight to safety occurring into gold, but not into commodities in general. It is not a flight from inflation, it is a flight from risk to relative safety. At least for today. But by the way, keep an eye on the Treasuries, particularly the longer end of the curve, as we have previously advised.
Schmidt's Gold Thoughts The 1930s was the birth of Keynesianism. Economists needed a simple answer as to why they had been so wrong. Since then, the U.S., and much of the rest of the world, has endured 70 years of economic concepts that have generated a continuous lack of success in economic matters. Most professions would seriously review their methodology when faced with as many repeated failures. Not so for the economics community. They just keep coming with more of the same failed policies.
Where is the safe haven? As the US$1.19 trillion forecast 2009 US budget deficit combines with the forthcoming $825 billion (and counting) stimulus package, observers seem convinced that for some mystical reason US Treasuries are a "safe haven" - endlessly attractive to Asian and Middle Eastern central banks and therefore able to yield considerably less than the expected rate of inflation over their life. But what if this irrational investment preference ceases to hold? US government bonds have not always been the world's safest investments, to say the least. The phrase "not worth a Continental" encapsulates the inflationary finance that was used to win the Revolutionary War, while US state bonds were notorious in the 19th century City of London after Pennsylvania defaulted in 1841. Even during the Civil War, there were moments when the Confederate credit appeared more solid than Union credit - after all, absent the threat of military invasion, the Confederacy was a stable agrarian economy with several reliable cash crops.
Jim Rogers: 'Sell any sterling you might have. It's finished'Investment guru issues grim warning as sharp fall in inflation hits pound Fresh concerns about the British economy and fears for the stability of the UK's financial system pushed sterling to new record lows against the dollar, euro and yen yesterday. One of the world's leading investors voiced the markets' concerns. Jim Rogers, of the Singapore-based Rogers Holdings and co-founder of the Quantum fund with George Soros, told Bloomberg Television: "I would urge you to sell any sterling you might have. It's finished. I hate to say it, but I would not put any money in the UK." Mr Rogers added that the pound will fall below its record low of $1.0520 reached in February 1985. Given near parity with the euro, it raises the intriguing possibility that the pound/dollar/euro exchange rate could yield a "triple parity"
Jim Rogers: The slide in sterling has turned "disorderly
Jim Rogers: Don't own sterling
Treasuries Are the Key In 2009 In 2008, the market that was the trigger for other markets was the currency market. The bottom in the dollar led to a peak in commodities and helped spur massive deleveraging and selling of various holdings. For certain, the increasing strength of the Yen also caused great damage to the global economy and global capital markets. There were only a handful of places to hide, free of volatility and immediate risk. Either you owned government bonds, the dollar or the yen. Gold advanced in 2008, though with extreme volatility compared to other safe-havens. We believe that 2009 will be similar to 2008 in that a particular market will affect all other markets. As we showed in the Market Outlook, Treasuries are very likely to be the key market and that also includes foreign government bonds (of the largest nations). There is a reason its simple. In a deflationary environment money moves to the safety of government bonds. Governments increase their size to help the economy fight deflation, which cripples the private sector. A recovery ensues after money exits government bonds for more productive purposes.
'Time to Sell' Treasuries, Biggest Korean Fund Says A rally that sent U.S. Treasuries to their best year since 1995 is coming to an end, South Korea’s National Pension Service, the country’s biggest investor, said. U.S. government efforts to combat the recession will prompt the Federal Reserve to raise interest rates this year, said Kim Heeseok, who oversees $160 billion as head of global investments for the service in Seoul. The decline would snap a surge that sent the securities up 14 percent last year, according to Merrill Lynch & Co.’s U.S. Treasury Master index, as investors sought the relative safety of debt. "It’s time to sell U.S. Treasuries," said Kim, who took over as head of investments at the start of the year. "The stimulus plan may cause inflation. The U.S. will raise the benchmark interest rate."
The Fed is Monetizing Debt and Inflating the Money Supply Here are the latest figures on the growth of the various money supply measures. The charts indicate that the growth in the money supply is due to a significant monetization of debt by the Fed in expanding its balance sheet and deficit spending by the Treasury, rather than organic growth from credit expansion from commercial sources and economic activity. The negative GDP figures confirm this. You could imagine this as a tug of war if you wish. On one side is the deflationary force of bad debt and falling aggregate demand. On the other is the Treasury, the Fed, and the Congress, using the triple threat of deficit spending, monetization of debt, and stimulus programs. The limits of the power of the Feds are the value of the dollar and the acceptability of Treasury debt. There is no lack of debt that can be monetized. To think otherwise is fantasy. But there are limitations about how much the dollar can bear, which is why the banks and moneyed interests have shoved their way to the front of the line, and are gorging themselves now with a little help from their friends in the Treasury and the Fed. When the time comes they intend to throw the public agenda under the bus. Its an old script, many times performed with minor enhancements.
Preventing the Greatest Heist in History There’s currently an idea to fix the financial system that’s getting quite a bit of traction: an RTC-type program whereby the government would buy $1 trillion of troubled assets from struggling U.S. banks, with the goal of restoring them to health so they can begin lending again, leading to an economic recovery. The problem with this idea (let’s call it “New RTC”) is that either the government will pay market prices for the toxic assets – in which case, it will simply accelerate the collapse of our financial system – or pay above-market prices, in which case taxpayers will likely suffer big losses. There is another option, however, which involves debt holders taking a share of the losses. If steps are not taken to ensure that this happens, the greatest heist in history will have occurred: at least $1 trillion will be transferred from taxpayers to debt holders of failed financial institutions. This must not be allowed to happen.
Bloodbath of the banks Royal Bank of Scotland announced the biggest loss in British corporate history yesterday. The news triggered fears the bank would be nationalised and caused a bloodbath in shares across the sector, overshadowing the Government's latest financial bailout. RBS stunned the market by predicting a loss of up to £28bn for 2008, writing off as much as £8bn of toxic assets and £20bn from the value of acquisitions, including the disastrous takeover of the Dutch bank ABN Amro in 2007. The scale of the losses raised fears that RBS would be fully nationalised and that other banks, such as Barclays, could find themselves controlled by the state.
RBS Will Be Guinea Pig for 'Creeping Nationalization' Royal Bank of Scotland Group Plc, facing the biggest loss in British history, promised to make 6 billion pounds ($8.7 billion) available to U.K. borrowers as the lender took another step toward full government control. In exchange for government guarantees on losses from toxic debt, the bank will have to sign a binding agreement with the Treasury on how much it will lend and on what terms. Auditors will move in to check the bank is following the government directive. "We’ll be one of the first guinea pigs," RBS Chief Executive Officer Stephen Hester told reporters on a conference call yesterday. The Edinburgh-based company is in talks with the Treasury about terms of the agreement. Loans will only be made "on commercial terms and to creditworthy people," he said.
Loan defaults, deflation and bonds There seems to be a lot of confusion about how loan defaults affect the money supply, so we'll quickly cover some old ground. When a bank makes a loan by creating new currency, the money supply grows by the amount of the loan. If the bank's customer (the borrower) subsequently defaults, the money supply is not immediately affected because the money that was loaned remains within the economy (the borrower spent the money, so the money is now held by other people). However, when the borrower defaults the lending bank is forced to write off its investment and the resulting capital loss could mean that the bank in question will be less able or willing to make new loans. In other words, widespread defaulting on bank loans will not cause the total money supply to fall, but it can lead to slower money-supply growth in the future.
Notable Bankruptcies of 2008: Final Tally 231 bankruptcies falls far short of the 289 “major” bankruptcies in 2000 and 383 in 2001 (the dotcom bust). However, I would not be surprised to see 2009 challenge the 383 mark from 2001. In fact, if we believe the predictions of my colleague Edward Altman, we should not be surprised to see the number of “major” bankruptcies exceed 400 (see NYU’s Altman Sees 2009 Default Rate Doubling). Obviously default is not the same thing as bankruptcy; however, they trend together.
Obama's national health records system will be costly, daunting But an electronic health records system could save the nation $300B a year President-elect Barack Obama has said that a national electronic health records system will be a priority in his first term, not just for streamlining workflow at hospitals and physician offices but to cut costs and improve the quality of health care. And while he has pledged to invest $10 billion a year over the next five years on the effort, the price tag for such a system could be closer to $100 billion over the next 10 years, according to experts. They also note that sticking to his five-year timetable could prove to be daunting. Money for the e-health records (EHR) system would come out of the $825 billion economic stimulus package Obama hopes to push through Congress. "The magnitude of what we're going to need to do on the Obama scale is just incredible to think about, when you consider linking all these medical records across all these different towns, cities, states," said Dr. Charles O. Frazier, a vice president of clinical innovation at Riverside Health System in Newport News, Va. "We have enough of a problem with that in our own health system."
Fresh Bank Worries Batter Stocks; Dow Falls Below 8,000 Stock markets had one of their worst Inauguration Day losses in more than a century, skidding more than 4 percent. Financial companies plunged more than 15 percent, their biggest one-day drop in nearly two decades, as investors worried that the troubles facing the country’s biggest banks might be larger and deeper than anyone had thought. Even after record corporate write-downs and a $700 billion bailout to shore up the financial system, banks are still reporting huge losses, lining up for new government lifelines and cutting their profit outlooks.
As Bank Crisis Deepens, Obama Has No Quick Fix Even before they have settled into their new jobs, President Obama’s economic team faces an acute crisis in the nation’s banking system that has no easy answers and that they are not yet prepared to address. The president’s advisers watched most banking shares fall sharply on Tuesday, reinforcing what Obama officials have known for weeks: that their most urgent financial problem is an immense new wave of losses at banks and other lending institutions that threatens to further cripple their ability to resume normal lending. But when Timothy F. Geithner, the president’s nominee to be the Treasury secretary, appears before the Senate Finance Committee on Wednesday for his confirmation hearing, he is not expected to have a detailed plan ready.
Biblical debt jubilee may be the only answer Once again, Britain leads the world in the macabre speciality of saving banks. The Treasury's £200bn plan to soak up toxic debt will be followed within days by a US variant from the Obama team. Germany cannot be far behind. As one bail-out succeeds another at ever more inflated price tags, rescue fatigue is becoming palpable. People are bewildered, fearing that good money is being thrown after bad. The doubts are understandable but there are tentative signs of a thaw in the global credit system. Libor lending rates in the US, Britain and Europe have fallen sharply. US mortgage rates have dropped from 6.5pc to 4.88pc since October. Companies can issue bonds again. "It is easy to conclude that none of the Government's policies are working," said Professor Peter Spencer from York University. "We must not lose sight of the fact that they have prevented the collapse of the monetary system." This is not does mean that recovery is imminent. Nothing can prevent a long purge as years of credit leverage give way to debt deflation.
Flocks Of ETFs Ready To Fly, Crash In 2009 ETF providers kicked off 2009 in high gear, introducing three new ETFs in as many weeks. The first ETF to track the world's largest Islamic country debuted on the NYSE Tuesday. Market Vectors Indonesia Index includes 25 companies based in Southeast Asia's largest economy, according to Van Eck Global, the ETF's provider. It carries an expense ratio of 0.71%. Just after unleashing an arsenal of 14 wildly popular triple-leveraged ETFs, Direxion Shares on Jan. 8 launched two more to cover the midcap space.
Is the Economy Going to Get Worse?"The Market Could Tank Very Soon" After the Inauguration of President Barack Obama Exactly the Opposite of What You've Been Told Most Americans have been told by the Bush administration and the talking heads that things will get worse for a couple of months, but then the economy will start to turn around and improve in the second half of 2009 after Bushco and Obamaco's bailout and stimulus programs kick in. In fact, the smart money is saying that the exact opposite will happen. Specifically, Marc Faber, Robert McHugh, Societe Generale, Mish and others are saying that the stock market is now in a bear market bounce, buoyed by the hope of the general population that Obama will turn things around. But that at some point after the inauguration, people will realize that Obama's plan won't stop the crisis, and that things are going to get worse. At that point, they say, the market will really tank.
The United Ponzi States of America If you thought Madoff’s Ponzi scheme was bad, don’t look now, but you’re in one. Anyone can work a simple swindle. But you need to be a special kind of con man to bilk billions from otherwise intelligent people. Bernard L. Madoff was one such man. Charles Ponzi was another. But the biggest fraud and scam master of all goes by the name of Uncle Sam. Just what does a person have to do to make his name synonymous with fraud? Charles Ponzi, the father of the “Ponzi scheme,” knows. Unfortunately, so does Uncle Sam. And taxpayers across America are about to find out. In 1903, a destitute Charles Ponzi stumbled upon a way to make some quick cash by taking advantage of the postal system. When the postal service sent letters overseas, it was common for senders to include an international reply coupon. This coupon could be exchanged for postage back to the country from which the letter was sent. Charles found out that due to exchange rates, you could purchase postal reply coupons cheaply in some foreign countries, then send them back to the United States to swap them out for American stamps of higher value. Then you could sell the stamps.
Brokers land in the rough Morgan Stanley and Bank of America are upping the ante to create the largest brokerages in the nation, even as individual investors head for the exits. Last week, Morgan Stanley agreed to buy half of Smith Barney and form the nation's second-largest brokerage, a behemoth with more than 20,000 employees. Meanwhile, Bank of America is working feverishly on its absorption of Merrill Lynch to form what will rank as the nation's largest brokerage, with $2.5 trillion of client assets. Too bad about the timing. “People aren't buying cars nowadays, much less securities,” says Allen Gutterman, president of a small Manhattan recruiting company who closed his own brokerage account and is using his cash to build a business. At this point, the last person he wants to hear from is a stockbroker pitching the latest investment idea. "This is about self-preservation," he says.
UK cannot take Iceland's soft option The British government faces an excruciating choice. It cannot let Royal Bank of Scotland and its fellow mega-banks go to the wall. Yet it risks being swamped by the massive foreign debts of these lenders if it takes on their dollar, euro and yen exposure by opting for full nationalisation. Britain has foreign reserves of under $61bn dollars (£43.7bn), less than Malaysia or Thailand. The foreign liabilities of the UK banks are $4.4 trillion – or twice annual GDP – according to the Bank of England. The mismatch is perilous. It is why sterling has crashed 10 cents from $1.49 to $1.39 against the dollar in two days. The markets have given their verdict on Gordon Brown's latest effort to "save the world". Credit default swaps (CDS) measuring risk on British debt have reached an all-time high of 125, just below Portugal. The yield spread on 10-year Gilts over German Bunds has doubled to 53 since last week.
Clear Channel Plans to Trim 1,850 Jobs The parent company of Clear Channel Communications, struggling in the advertising downturn, announced on Tuesday that it was eliminating 1,850 positions, or about 9 percent of its staff. The dismissals were effective immediately. The company, CC Media Holdings, which owns billboards and radio stations under the Clear Channel name, had been hit hard recently. In the third quarter, its revenue from radio broadcasting fell 7 percent. Outdoor advertising had a milder decline — because of the popularity of digital billboards, it fell just 1 percent. "Everyone in our investor group, on the board and in the executive leadership team remains bullish about the long-term growth prospects for Clear Channel," Mark P. Mays, Clear Channel’s chief executive, wrote in a memorandum to employees. "Clear Channel Communications has more resources than any of our peers. The tools are here. The support is here."
Warner Brothers to Cut 800 Jobs Warner Brothers said it would eliminate 800 jobs, or about 10 percent of its global work force, as it struggled with declining DVD sales and a poor outlook for scripted television programming. While not unexpected — Warner had been quietly preparing Hollywood to expect cuts — the layoffs rattled the movie capital because the studio is regarded as one of the industry’s healthiest. With a parade of hits like "The Dark Knight," "Sex and the City," "Get Smart" and "Four Christmases," Warner recorded global ticket sales of $1.77 billion in 2008, up 25 percent from a year earlier.
Fiat Acquires 35% Stake in Chrysler DETROIT — The Italian automaker, Fiat, agreed on Tuesday to take a 35 percent stake in the struggling American auto company Chrysler, which was forced last month to seek a federal bailout amid fears it might not survive. The deal, announced by Fiat at its headquarters in Turin, Italy, and by Chrysler in Auburn Hills, Mich., means Chrysler will have significant foreign ownership again after only 18 months as an independent company. Cerberus Capital Management bought Chrysler in 2007, after it was put up for sale by Daimler of Germany. The two companies operated as DaimlerChrysler for nine years.
Syria Calls for German Involvement in Middle East Peace Process Is Syria about to break its alliance with Iran for a new alliance with Germany? Syrian President Bashar Assad is widely considered a lapdog of Iran’s ayatollahs. After all, his country has waged war against Israel, offered nuclear assistance to Iran and supported both Hezbollah and Hamas politically. Despite this résumé, however, recent news indicates that Assad just might be willing to distance himself from Iran in return for a larger role in Middle East “peace” negotiations. “We would like to contribute to stabilizing the region. But we must be included and not isolated, as has been the case until now,” said Assad in an interview with German newsmagazine Der Spiegel. “We are willing to engage in any form of cooperation that is also helpful when it comes to America’s relations with other countries.”
Henry Kissinger: The world must forge a new order or retreat to chaos Not since JFK has there been such a reservoir of expectations As the new US administration prepares to take office amid grave financial and international crises, it may seem counterintuitive to argue that the very unsettled nature of the international system generates a unique opportunity for creative diplomacy. That opportunity involves a seeming contradiction. On one level, the financial collapse represents a major blow to the standing of the United States. While American political judgments have often proved controversial, the American prescription for a world financial order has generally been unchallenged. Now disillusionment with the United States' management of it is widespread.
Henry Kissinger and the New World Order A compilation movie about Henry Kissinger and his New World Order plans.
Henry Kissinger New World Order again
China Sees Threat in U.S. Arms Sales BEIJING — The Chinese government announced Tuesday that the nation faces important threats in the form of independence movements related to Taiwan, Tibet and the western desert region of Xinjiang, and that American arms sales to Taiwan continue to jeopardize stability in Asia. The announcement came in a white paper on national defense released Tuesday by the State Council, the Chinese equivalent of a cabinet. The paper said that "China’s security situation has improved steadily," but that "being in a stage of economic and social transition, China is encountering many new circumstances and new issues in maintaining social stability."
Ruble Hits 11-year Low As Russia Accelerates Devaluation The Russian ruble fell yesterday (Monday) to levels not seen since the 1998 banking crisis, as the nation’s central bank devalued the currency for the sixth time in seven days. The devaluation is seen as a sign of further deterioration in the Russian economy and comes despite government efforts to orchestrate an orderly retreat. A drop in the price of oil, the war in Georgia, and a gas-export dispute with the Ukraine have put a huge dent in the Russian economy, which now teeters on the verge of recession. The devaluations reflect the new reality of low prices and falling demand for oil and other exportable commodities.
Sovereign Credit of Spain and Greece Downgraded ... Who's Next? Standard & Poors stripped Spain of its AAA sovereign credit rating today. Greece got downgraded on January 14th. Ireland is on the watch list and - given its severe financial problems - might be next. Portugal is also on S&P's watch list. America may not be far behind either, although it might be exerting severe political pressure on the rating agencies to maintain the status quo.
Republican Senator Blocks Clinton's Confirmation The confirmation of Hillary Rodham Clinton to be secretary of state will be held up for at least a day due to the objection of a single senator. Sen. John Cornyn, R-Texas, is blocking a unanimous vote on Clinton for Tuesday because he is not satisfied with Clinton's responses to concerns over foreign donations to her husband Bill Clinton's foundation, his office said. Cornyn's spokesman Kevin Mclaughlin said the senator is not trying to block her confirmation, but is seeking more debate on the donation issue. Jim Manley, spokesman for Senate Majority Harry Reid, D-Nev., said that if a voice vote is blocked there will be a roll call vote Wednesday. He predicted that "she will receive overwhelming bipartisan support at that time."
Flight 1549 passengers to get $5K for lost bags Passengers on the flight, which made an emergency landing in the Hudson last week, were given $5,000 for their lost bags, and news surfaced the plane had engine woes two days earlier. U.S Airways has sent $5,000 checks to each of the 150 passengers on Flight 1549 to compensate them for lost luggage and other belongings. In a letter sent to passengers, an airline executive said she was "truly sorry." The letter also explained that passenger belongings left behind in the plane could be stuck with investigators for months. The airline also said it would reimburse passengers for their ticket costs. The letters came the same day as reports surfaced that the jet had experienced an engine compressor failure two days before the crash. National Transportation Safety Board spokesman Peter Knudson said the board's examination of the Airbus 320's maintenance records show "there was an entry in the aircraft's maintenance log that indicates a compressor stall occurred on Jan. 13." The compressor, or fan, draws air into the engine.
President Franklin Roosevelt 1933 Inauguration Newsreel footage of President Franklin Delano Roosevelt's first inauguration on January 20, 1933.
President Truman 1949 Inauguration Newsreel footage of President Truman's first inaugural address on January 20, 1949.
President Eisenhower 1953 Inaugural Address President Eisenhower delivered his first inaugural address on January 20, 1953.
President Kennedy 1961 Inaugural Address President Kennedy delivered his inaugural address on January 20, 1961.
President Johnson 1965 Inaugural Address President Johnson delivered his inaugural address on January 20, 1965.
President Nixon 1969 Inaugural Address President Richard Nixon delivered his first inaugural address on January 20, 1969.
Gerald Ford 1974 Inauguration Vice President Gerald Ford was sworn in as the 38th President of the United States after the resignation of President Nixon.
President Jimmy Carter 1977 Inaugural Address President Carter notes that the nation must be strong at home in order to be strong abroad, and he emphasizes assisting freedom and human rights causes all over the world. Carter strives to rebuild Americans' confidence in the government as well as equality for all Americans.
President Reagan 1981 Inaugural Address President Reagan delivered his first inaugural address on January 20, 1981.
President George H. W. Bush 1989 Inaugural Address President George H. W. Bush delivered his inaugural address on January 20, 1989.
President Clinton 1993 Inaugural Address President Clinton delivered his first inaugural address on January 20, 1993.
President George W. Bush 2001 Inaugural Address President Bush gave his first inaugural speech on January 20, 2001.
Silverlight tapped to stream Obama's inauguration It will be used Tuesday on the Inaugural Committee's Web site Microsoft's Silverlight technology has been chosen to stream President-elect Barack Obama's swearing-in ceremony live on the Presidential Inaugural Committee's Web site, Microsoft said Friday. Obama and Vice President-elect Joe Biden are due to be sworn in and deliver inauguration speeches at noon on Tuesday in Washington, D.C. Both events will be streamed live on the Inaugural Committee site using Silverlight, a cross-browser technology for delivering live and on-demand video over the Web. Obama was elected Nov. 4 as the first African-American U.S. president, giving Tuesday's inauguration particular historical significance.
For new first lady, hints of agenda and tone She celebrated her 45th birthday in a vintage train car, amid balloons and crepe-paper streamers, and cheering crowds serenaded her by name. She danced in front of the Lincoln Memorial to Stevie Wonder's "Higher Ground" with her husband and daughters clapping by her side. She assembled care packages for soldiers in Iraq and Afghanistan, and, in this long, whirlwind weekend, marveled that she would soon be the public face of America's first family. On Inauguration Day, Michelle Obama will become the first African-American to assume the role of first lady, a woman with the power to influence the nation's sense of identity, its fashion trends, its charitable causes and its perceptions of black women and their families. Already, the outlines of her style and public agenda have begun to emerge.
Obama, Keynes, and Pragmatism On several occasions of late, I have read or heard the phrase, "We are all Keynesians now," an erudite way of expressing the idea that the free market is dead. And that the fate of the global economy now relies almost entirely on pragmatic measures yet to be taken by governments, most notably that of the United States. Given that the word "pragmatic" is often used to describe President Obama, it appears that the man of the hour has arrived just in the nick of time. Not to be a spoilsport, but there is much wrong with this latest entry in the thick and well-worn journal labeled "Popular Delusions." First and foremost, the idea that the world's largest debtor nation should be stood up as role model is laughable. That is like hiring the town's serial bankrupt to run the bank. Putting aside the irony, the inherent conflict of interest destroys any U.S. credibility as an honest broker in the current scenario. Secondly, while the incoming team has done a superior job of spinning pragmatism into the Obama brand, it is another thing altogether to actually demonstrate the quality when the shoe leather hits the fast-moving pavement.
Bank Bailout Bait & Switch - CBSNews (01-09-2009) Banks knew from the beginning. Hank Paulson is hand picking the winners and losers.
Got money? Buy Gold & wait! Even as investors across the globe are pitching for gold what is reining in gold prices in India. If you analyze last weeks trends, gold, after being in the grip of bears for the most part of the week, recovered during the weekend. On Friday, it gained three per cent to close at $847.2 an ounce but during late fixing, it slipped to $833.75, indicating the continuing volatility. So, gold is not soaring as expected. The reasons is the global meltdown impact. In reality, people have stopped buying the yellow metal from spot markets because of the shortage of liquidity.
Gold Is A Beach Ball Being Held Under Water Perhaps the best analogy to explain the fundamental condition of gold is that it's like a beach ball being held under water, where at some point it will escape the clutches of its oppressor, springing it into the light of day for all to see its true worth. Even a child could understand such a condition when explained in terms of a beach ball. When it comes to the day-to-day trials and tribulations of gold however, it's not that simple unfortunately, because although gold is the oldest form of true money on the planet, it's also a political metal caught up in the biggest fiat currency / Ponzi scheme in the history of mankind. It's the Ponzi scheme that even though Bernie Madoff has now made it fashionable to expose them, you will not hear talked about in the mainstream media. This is because ‘ The Creature From Jekyll Island ' is still in control all these years later, given it's feeling its oats these days for sure. That is to say, the Fed, and it's counterparts around the world, are finally staring at the same end game dynamics as Madoff was seeing just a few weeks ago now, but because their game is much larger and complex, it's going to be with us for a little while longer yet.
'Next big rally in Gold & Crude Oil will begin soon' While gold was extremely popular the past few years, I think it’s safe to say crude oil is unbeatable for popularity, as it’s a resource which almost everyone uses on a daily basis and it affects all of us in the wallet when oil prices rise as fuel, shipping costs and petroleum products start to cost more and more. This is the first time I have REALLY noticed everyone is following the price of oil. When kids start talking about it, then you know its being watched like a hawk from all types of individuals and traders. When crude oil peaked at $147.90 back in July, people were starting to panic. The increase on fuel alone was really taking a toll on commuters and shipping costs went through the roof, which hurt almost every business in some way. That being said, oil is now back down at support and looking ready for a bounce.
Stop the Government Bailouts! Tell Washington Enough is Enough! Patrick O’Brien starts a grassroots effort to Stop the Intervention
Why allocate more for Gold in 2009? In times of turmoil in 2008, Gold and Government bonds emerged as clear winners. In dollar terms, gold prices increased for eighth consecutive year with gains of 5% in 2008. . . . . Going forward, gold prices are expected to continue its upward journey. The macro economic and supply demand factors are supportive of higher prices. The uncertainty that surrounds the global economy would continue to underpin gold’s role as a safe haven. There is an increasing likelihood that global deflationary scenario would change to an inflationary one as central banks globally pump in money created out of thin air; leading to a rally in gold prices.
Gold Drops in London on Slumping Oil Prices, Stronger Dollar Gold fell in London as crude oil slumped and the dollar gained against the euro, reducing the metal’s appeal as an inflation hedge and alternative investment. Oil declined today on forecasts faltering global economic growth will drive down fuel demand, while the dollar rose as much as 1.2 percent against the euro. Bullion, which typically moves in the opposite direction to the U.S. currency, climbed 3.1 percent on Jan. 16, the biggest gain in more than a month. Gold is “still moving with oil and the dollar and it depends on what’s going on in these markets,” Wolfgang Wrzesniok- Rossbach, head of marketing and sales at Hanau, Germany-based Heraeus Metallhandels GmbH, said by phone. Trading volume will be low today because of the Martin Luther King Day holiday in the U.S., he said.
Gold will emerge winner in this Tug of War A Federal Reserve balance sheet that has grown from 900 billion to well over 2 trillion since last fall may be on its way to 10 trillion according to some observers. There is no denying it's been pedal to the floor in money-printing efforts to restore the credit markets back to health. What also needs to be restored is profits for the banking industry. It is that industry, after all, that the Fed really answers to. It is also an industry that knows how to profit from inflation. Throughout history bankers and the ruling classes have profited from inflation, as a transfer of wealth occurs at the expense of the vast majority of the population.
Ron Paul: Bailouts NOT constitutional on Glen Beck
Buffett says US in 'economic Pearl Harbor' Buffett says in NBC interview that US is in 'economic Pearl Harbor' Billionaire investor Warren Buffett says the U.S. is engaged in an "economic Pearl Harbor." In an interview that aired Sunday on "Dateline NBC," the chairman and CEO of Berkshire Hathaway Inc. said the nation's economic situation is not as bad at World War II or the Great Depression, but it's still pretty severe. Buffett said Americans are in a cycle of fear, "which leads to people not wanting to spend and not wanting to make investments, and that leads to more fear. We'll break out of it. It takes time." Buffett's interview centered on President-elect Barack Obama and the tough task he faces in fixing the U.S. economy.
4Q earnings could indicate economy's direction Wall Street looks to week's big earnings to help answer questions about economy's direction As hundreds of fourth-quarter earnings reports stream in this week, Wall Street's reaction will turn on companies' answers to one question: When will the recession end? "Not soon" is what the market heard last week. Big banks posted ugly numbers and told investors they were still struggling with rickety balance sheets. That revived fears that the economic recovery that some analysts have forecast for the second half of the year won't materialize.
The End of Banking as We Know It THE concept of the financial supermarket — the all-things-to-all-people, intergalactic, behemoth banking institution — bit the dust last week. The first death notice came on Tuesday, when Citigroup, Exhibit A for the failure of the soup-to-nuts business model, said it was dismantling. Just over a decade after the deal-maker Sanford I. Weill tried to meld insurance, investment banking, mortgage lending, credit cards and stock brokerage services, the dissolution began. Citigroup, it turned out, was too big to manage, too unwieldy to succeed and too gigantic to sell to one buyer. A few days later, Bank of America, another serial acquirer of troubled institutions —Merrill Lynch and Countrywide Financial most recently — fessed up that its deals now need taxpayer backing. The United States government invested an additional $20 billion in Bank of America (after $25 billion last fall) and agreed to guarantee more than $100 billion of imperiled assets.
Banks: Nationalize, Cleanse and Get It Over With Washington is doing what Washington does best. Resurrecting old ideas and dressing them up as a new solution. The latest is the “aggregator bank”. Some sort of financially engineered solution to the ongoing problem with our banking system. It’s just new lipstick on the old TARP pig. The concept is the same one they have tried to sell since the beginning. Buy the bad assets from the banks and do something, anything with them. No plan except to get them out of the banks. Logically, some sane minds outside the Beltway have said from the outset, “Yes, but what price do you intend to pay for these assets?” The newest proposals try a bit different spin but still ignore the essential question. Do the banks, their managements and their shareholders get a sweetheart deal or do we buy these at market and probably tank the banks?
Ron Paul - Danger of hyperinflation 1/16/09 Dollar financial system established in 1971, has already ended, and if we're not careful, we'll get what Germany got (hyperinflation) that ushered in the Nazi regime. First, hyperinflation, then world war.
Citigroup Splits Up After Fifth Straight Quarterly Loss Citigroup Inc. Friday succumbed to the reality of its dwindling capital base and plunging stock price, announcing it is splitting into two separate companies in what amounts to a death knell for the "financial supermarket" model. Chief Executive Officer Vikram Pandit’s move will wipe out the legacy of former chief Sanford "Sandy" Weill, by creating "Citicorp" to house the New York-based company’s global bank, and "Citi Holdings" for its "non-core" and toxic assets backed by the U.S. government. "The financial supermarket was buried today," Bill Smith, founder Smith Asset Management Inc. in New York, told MSNBC. Smith, whose company owns shares of Citi, is one of many critics that have repeatedly called for a breakup.
Economic experts renew calls for Mediterranean Union bank (TUNIS) - Financial experts from Europe and north Africa renewed calls for a new regional bank for the Mediterranean Union, according to a report released Sunday after week-long talks on economic integration. Participants from Germany, France, Algeria, Morocco and Tunisia who attended the talks in Tunis called for the creation of a "regional bank dedicated to Euro-Mediterranean partnership" on a number of mainly environmental projects. They also urged countries on both sides of the Mediterranean Sea to speed up the integration process. Previous calls for a regional bank have been rejected by the World Bank and European Investment Bank on cost grounds.
Roubini: "synchronized global recession"
European Shares Lower After British Bank Bailout European stock markets declined Monday with banks in free fall as investors fretted over a second British government bailout of the sector in just over three months. Royal Bank of Scotland shares fell 60 percent after it announced significant losses. Europe’s early gains were erased as the markets feared for the future of the region’s banks and the possibility that much of the sector may have to be nationalized or receive further government help to stave off collapse. Germany’s DAX closed down 1.15 percent while France’s CAC-40 declined 0.9 percent. Most attention was on the FTSE 100 index of leading British shares, which fell 0.9 percent, after the British government said it would be creating a program to insure bank loans in the hope that the banks will start lending again.
Gorbachev Looks Forward to New U.S. Policy Under Obama Former Soviet head of state says world needs 'strong' America to face down economic crisis, but hopes for change in Russia policies from new administration. Former Soviet leader Mikhail Gorbachev said Thursday that the overwhelming election of Barack Obama shows that Americans want change, and he called on the incoming president to extend his promised changes to U.S. relations with Russia and Iran. "The entire world felt that America wanted change and was expecting change," Gorbachev, 77, said in an interview with The Associated Press. He noted that some in Russia have called Obama the American Gorbachev because of his promises to bring change to his country. Obama's detractors in Russia say his policies will lead to the collapse of the U.S., pointing to the collapse of the Soviet Union in 1991 following Gorbachev's reforms.
Irish bank shares plunge in value The government is pressing ahead with nationalising Anglo Irish Shares in Ireland's three remaining publicly-listed banks have plunged following the nationalisation of Anglo Irish Bank. In afternoon trade, Allied Irish shares were down 62%, Bank of Ireland fell 49% and mortgage and insurance specialist Irish Life & Permanent dropped 41%. Investors are worried about all three firms' exposure to Ireland's slumping property and construction markets. Parliament will start debating the bill to nationalise Anglo Irish on Tuesday. Analysts said shares in Allied Irish and Bank of Ireland were being hit particularly hard because of growing investor fears that the banks' existing shares will be heavily diluted when both banks formally accept billions in government investment this spring.
RBS Plummets Amid Concern Bank May Be Nationalized Royal Bank of Scotland Group Plc slumped by the most in two decades in London trading on concern the government may have to take full control of the bank after forecasting the biggest loss ever reported by a U.K. company. The stock dropped 67 percent, the most since September 1988, to 11.6 pence, paring the Edinburgh-based lender’s market value to 4.6 billion pounds ($6.7 billion). “Nationalization at zero value is implicit in the price,” said Derek Chambers, an analyst at Standard & Poor’s Equity Research Ltd. who has a “hold” rating on the stock. The stock price “is an option on the vague chance that it doesn’t get nationalized.”
No respite for Europe’s banks There was no respite for Europe’s troubled banks on Monday as the prospect of horrific fourth-quarter results across the sector was writ large by Royal Bank of Scotland posting the largest loss in UK corporate history. German financial shares, heavily sold last week, were hammered again as investors reeled on the RBS news and from weekend press reports suggesting that the 20 largest German banks had written down just a quarter of the €300bn of toxic assets on their balance sheets.
Irish, British Banks Head Towards Zero On Nationalization Concerns Equity prices in the three remaining Publicly Traded Irish Banks Collapse after Anglo Irish Bank was nationalized. Nationalization Concerns Sink RBS. Bloomberg is reporting RBS Plummets Amid Concern Bank May Be Nationalized. My position is Darling is saying one thing and doing another. When does Obama follow suit? No respite for Europe’s banks. . . The Financial Times is reporting No respite for Europe’s banks. If you get the idea that the global banking system is insolvent, you have the right idea.
Marc Faber: New UK bailout and banking situation; 2nd half of 2009 will be worse 01.19.09 - P1
Marc Faber 01.19.09 P2 UK Banking intervention will prolong the agony. People who created the liquidity problem are in charge of the bailout. Faber owns physical gold.
Should We Force Banks to Lend? Why save banks if they will not lend? That has become a significant political issue on both sides of the Atlantic as governments confront the reality that preventing the financial system from collapsing is not the same as repairing it. In Britain, that led the government of Prime Minister Gordon Brown to announce a new round of bailouts, with a twist. “In return to access to any government support, there will have to be an increase in lending, and that will be legally binding,” Mr. Brown told a news conference today. In the United States, aides to President-elect Barack Obama sounded a similar theme. “The focus isn’t going to be on the needs of banks,” Mr. Obama’s chief economic adviser, Lawrence H. Summers, said. “It’s going to be on the needs of the economy for credit.” There is little doubt that many in the public are fed up with wealthy bankers who get large salaries and bonuses from banks that would have failed had the government not stepped in.
Nadel’s 32% Returns in Doubt as Manager Disappears Brad Lerner was pleased when a November statement showed his $500,000 investment in a fund run by Arthur Nadel had gained 8.5 percent for the year as the Standard & Poor’s 500 Index fell 39 percent. Lerner, an internist from Sarasota, Florida, never got a December statement. Instead, one of Nadel’s partners came to him last week with the news that the fund manager couldn’t be found. Lerner, 55, and others whose money was invested by Nadel’s Scoop Management Inc. in Sarasota may have lost as much as $350 million, law enforcement officials say. “Hindsight is 20-20,” Lerner, who had most of his life savings in the Viking IRA fund, said in a Jan. 17 interview. “But I guess it was too good to be true.”
Niall Ferguson - Mary Poppins & Financial History . . . why bankers underestimated the liquidity crisis Excerpt from Niall Ferguson speaking about his book and TV series "The Ascent of Money" at the London School of Economics and Political Science. Broadcast on BBC Parliament, 14 December 2008
It's Just Time - The decline and fall of the US, the global financial system, or capitalism? Martin Armstrong (former Chairman of Princeton Economics Internatinoal, Ltd) predicts collapse by March, 2009. "The object of this treatise is to demonstrate that there is substance behind the old adage that "history repeats." . . . . "
Murkiness in the NYMEX Pits As the Banks Hoard Oil "Morgan Stanley hired an oil tanker to store crude oil in the Gulf of Mexico, joining Citigroup Inc. and Royal Dutch Shell Plc in trying to profit from the contango, two shipbrokers said in reports earlier today." There is a sharp contango in the near months in the NYMEX oil pit, and it will get sharper as the attempts to suppress the price near term, most likely to punish Russia, Venezuela and Iran, falter. Then it will flatten as market adjusts prices to normalcy. Let's see if Bloomberg gives us a more coherent update. But its funny that Citigroup, Morgan Stanley, and probably other banks are buying oil now to store in tankers and deliver later when the paper chase falters. Nice use of the bailout money. Why lend when you can speculate on market inefficiency which you help to create?
Goldman Sees ‘Swift, Violent’ Oil Rally Later in Year Goldman Sachs Group Inc. commodity analyst Jeffrey Currie said he expects a “swift and violent rebound” in energy prices in the second half of the year. Oil prices may have reached their lowest point already, after falling to $32.40 in mid-December, and are expected to rise to $65 by the end of this year, the analyst said. There is scope for a “new bull market” in oil, Currie said. World oil demand is likely to fall by about 1.6 million barrels a day this year, the Goldman analyst said today at a conference in London. That’s bigger than the reduction expected by the International Energy Agency, which last week forecast a decrease of about 500,000 barrels a day, or 0.6 percent, this year.
Oil falls below $35 ahead of busy earnings week Oil falls below $35 as investors brace for dismal US corporate results Oil prices fell to below $35 a barrel Monday as investors eyed a slew of U.S. corporate earnings this week for signs of weakening consumer demand amid the worst recession in decades. Light, sweet crude for February delivery was down $1.88 to $34.63 a barrel by mid-afternoon in Europe in electronic trading on the New York Mercantile Exchange.
Fiat nearing a deal for stake in Chrysler The Italian carmaker Fiat is nearing a deal to take a large stake in Chrysler, the most financially troubled of the Detroit automakers, and begin selling small cars in the United States through Chrysler, a person with knowledge of the talks said Monday. The deal could give Fiat control of 35 percent of Chrysler by later this year and possibly raise its stake in the American company to as much as 55 percent, said the person, who spoke on condition of anonymity because the discussions were private.
Banks Foreclose on Builders With Perfect Records TEMPE, Ariz. — Dave Brown, one of this city’s best-known home builders, had kept his head above water through the housing downturn, not missing a single interest payment on his loans. So he was confounded a few months back when one of his banks, spooked by the decline in his company’s revenue, suddenly demanded millions of dollars in additional collateral to continue carrying loans on his projects. He was unable to come up with the money, and in October, JPMorgan Chase foreclosed on five of his developments. Shortly thereafter, Brown Family Communities, 33 years in the business, decided to shut its doors.
Bailout Crimes 1/2 Lew Rockwell interviewed by Brian Wilson on WSPD. More from Lew Rockwell: He is President of the Ludwig von Mises Institute. He wrote Speaking of Liberty. He wrote The Left, the Right and the State (forthcoming). He has an archive of LewRockwell.com articles.
Bailout Crimes 2/2
Southern California Foreclosures Push Sales Higher Southern California home sales rose 51 percent in December as a surge in foreclosures pushed prices of single-family houses and condominiums down from a year earlier, MDA DataQuick said. A total of 19,926 new and existing houses and condos sold last month in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties, up from 13,240 a year earlier, the San Diego-based research company said today in a statement. The median home price in the region fell 35 percent to $278,000. “The markets that were part of the frenzy, that’s what’s in trouble now,” MDA DataQuick analyst John Karevoll said in an interview. Foreclosures, which often sell at steep discounts, lured buyers as President-Elect Barack Obama worked on plans to revive the housing market using the second half of the $700 billion Troubled-Asset Relief Program. Lenders including Bank of America Corp., and financial institutions such as Goldman Sachs Group Inc. benefited from the government’s initial distribution of bailout money as their mortgage-related assets plunged in value.
How Should Obama Reform Health Care? As the nation eagerly awaits the swearing in of the next president, a lingering concern is how President Obama will fix our beleaguered health care system. In The New Yorker this week, the writer and physician Dr. Atul Gawande offers practical advice and a history lesson for getting it done. Dr. Gawande begins with the story of Starla Darling, a pregnant woman who feared losing health care coverage before the birth of her baby. Her story, “When a Job Disappears, So Does the Health Care,” was chronicled in The Times last year by my colleague Robert Pear. While many reformers say the current medical system should be scrapped, Dr. Gawande makes the case that a better solution is to build on what we have.
The Secret Animal Rights Agenda Of America’s Next Regulatory Czar Barack Obama’s pick for “regulatory czar,” Harvard Law School Professor Cass Sunstein, may be the incoming president’s most popular appointment so far. Judging from his resume -- best-selling author, “pre-eminent legal scholar of our time,” and an endorsement from The Wall Street Journal -- we can almost understand why. Almost. Because as we’re telling the media today, there’s one troubling portion of the new Office of Information and Regulatory Affairs (OIRA) Administrator’s C.V. that has seems to have flown under everyone’s radar: Cass Sunstein is a radical animal rights activist. Don’t believe us? Sunstein has made no secret of his devotion to the cause of establishing legal “rights” for livestock, wildlife, and pets. "[T]here should be extensive regulation of the use of animals in entertainment, scientific experiments, and agriculture," Sunstein wrote in a 2002 working paper while at the University of Chicago Law school.
Civil Liberties Under Obama 1/2 Lew Rockwell interviews Judge Andrew Napolitano, Fox News Senior Judicial Analyst and co-host of "Brian & the Judge" radio show More from Judge Napolitano: He wrote A Nation of Sheep. He wrote The Constitution in Exile. He wrote Constitutional Chaos: What Happens When the Government Breaks Its Own Laws. Articles on LewRockwell.com: o Franklin Delano Bush o How Congress Has Assaulted Our Freedoms in the Patriot Act o Civil Liberties in Wartime o Do You Solemnly Swear To Ignore the Constitution?
Civil Liberties Under Obama 2/2 Government ha power to incarcerate after acquittal!
Bush Commutes Prison Sentences of Ramos, Compean In his final acts of clemency, President George W. Bush on Monday commuted the prison sentences of two former U.S. Border Patrol agents whose convictions for shooting a Mexican drug dealer ignited fierce debate about illegal immigration. Bush's decision to commute the sentences of Ignacio Ramos and Jose Compean, who tried to cover up the shooting, was welcomed by both Republican and Democratic members of Congress. They had long argued that the agents were merely doing their jobs, defending the American border against criminals. They also maintained that the more than 10-year prison sentences the pair was given were too harsh. Rancor over their convictions, sentencing and firings has simmered ever since the shooting occurred in 2005.
The Passing of the Mainstream Media People who write commentary do a good deal of research. Well, unfortunately, that is not always true. Would that it were. To write with authority, however, they/we must. It is important, even vital, that their/our facts are , indeed, facts and that they are as accurate as is possible and that attribution is given to those deserving of it… A number of years ago, when I switched over from the broadcast media to the Internet as a base for my commentaries, the first thing I noticed was that in order to find out what was REALLY happening in America I had to go to off shore news outlets. Our homegrown news media is SO biased in favor of the left that anything that has any attachment to the right, and may bode well for America, is, somehow, ignored. They just don’t tell you about it. It’s called omission… among other things.
It’s No Mirage, the Cardinals Actually Won Just as everyone prepares to be amazed at the inauguration of the nation’s first black president, the sports world steps up to stretch fans’ amazement muscles anew. You thought Barack Obama’s winning an election was a cultural whiplash moment? How about the Arizona Cardinals in the Super Bowl? No, that was not a Sunday afternoon mirage. You did not dream it. The Cardinals actually won the N.F.C. championship game, sending red confetti raining down on the sport. If you slept through the mostly dreadful history of the Cardinals — and that would be most of us — here are the Cliff Notes: They won an N.F.L. championship in 1947 while in Chicago, bounced around the country before finding a home in the desert Southwest, continued to win a pitiful number of games and last made the playoffs in 1998. Their most televised moment in recent history was a rant by the former coach Dennis Green, screaming “We are who we thought they were,” after (surprise!) a collapse and loss to the Bears.
Pilot Lands an Inaugural Invitation DANVILLE, Calif. (AP) -- US Airways pilot Chesley B. "Sully" Sullenberger and his family are going to the presidential inauguration, the mayor of his California hometown said Sunday. Mayor Newell Arnerich said the town of Danville is also planning a welcome home for the pilot who landed his crippled aircraft safely in the Hudson River last Thursday. An aide to President-elect Barack Obama said Sunday evening that all five members of the Flight 1549 crew have been invited to the inauguration Tuesday. The aide spoke on condition of anonymity because details were still being worked out.
What your computer's drive will look like in 5 years Hard disk drives may soon be replaced by solid-state disk (SSD) drives As solid-state disk (SSD) technology closes in on hard disk drive (HDD) capacity and price, experts say it may not be long before spinning disks are a thing of the past and a computer's storage resides in flash memory on the motherboard. By making the drive part of a system's core architecture -- instead of a peripheral device -- data I/O performance could initially double, quadruple or more, according to Jim McGregor, chief technology strategist at market research firm In-Stat. "Instead of using a SATA interface, let's break that and instead of making it look like a disk drive, let's make it look like part of the memory hierarchy," McGregor said. "Obviously, if you break down that interface, you get more performance."
While waiting for USA inauguration, Who's in charge in Europe? Tomorrow, the guard changes in Washington, D.C., USA. Europe has been relatively quiet. It does not appear that Javier Solana will be present at the inauguration. His itinerary shows he has a busy day, instead, in Brussels. It is clear to me that his present low profile is being maintained; but that his powers are far from diminished. The European "chain of command" is shown in this Western European Union article. For the benefit of the "uninitiated" Javier Solana controls the Western European Union as its Secretary General. SG/HR which you will read in numerous "chain of command" paragraphs is Javier Solana's position with the European Union. With the changing of the guard, we have an already friendly to Javier Solana Washington, even friendlier. Solana has already expressed high hopes about working mutually with the Obama administration, as has Mikhail Gorbachev. Joe Biden reportedly once said he wished he could vote for Javier Solana as President of the United States. Joe Biden, come tomorrow, is Vice President of the United States. President-Elect Obama once served under Joe Biden's Chairmanship of the Senate Foreign Relations Committee. Hillary Clinton is Secretary of State-Designee. Javier Solana has held meetings with her in the past two years in Washington, D.C. It was her husband, Bill Clinton, as President of the United States who boosted Solana to the all-powerful NATO headship on November 30, 1995. It looks to me like it is a heady time coming up for Javier Solana who given his Middle East roles and anti-Piracy patrol is likely to become much higher profile in the days to come.
Javier Solana - 16 Jan 09 - Part 1 As leaders from Hamas and Israel work towards a ceasefire agreement to end the fighting in Gaza, Sir David talks to the Secretary-General of the EU Council, Javier Solana, about how and when an agreement could be reached.
Lessons from history:
DeMint Explains Opposition to Bailout Sen. Jim DeMint (R-S.C.) speaks on the Senate floor about why he opposes the bailout bill being pushed though Congress and who is really to blame for the financial fallout on Wall Street (Oct. 1, 2008).
Niall Ferguson and other guests - Discussing the British Empire looks at effect of decaying old empires and plantation politics on the bloody 20th century and the single most importance of economics (globalized marketplace world) BBC Radio 2006 (1 of 4)
Niall Ferguson - BBC Radio 2006 (2 of 4)
Niall Ferguson - BBC Radio 2006 (3 of 4)
Niall Ferguson - BBC Radio 2006 (4 of 4)
Lincoln Prelude to the Presidency coming February 9th on WMFE TV (PBS) To commemorate Abraham Lincoln's 200th birthday in 2009, a new documentary immerses viewers in a critical, but often overlooked, time in the stateman's life. LINCOLN: PRELUDE TO THE PRESIDENCY pieces together a critical 23-year period (1837-1860) through interviews with noted historians, researchers and experts, and re-enactments filmed at historic sites in central Illinois. Prominent scholars Doris Kearns Goodwin and Orville Vernon Burton (The Age of Lincoln) describe how Lincoln's formative experiences as a young lawyer on Illinois' Eighth Judicial Circuit informed his views on the issues he would eventually face as president, including several cases involving slavery. http://www.wmfe.org
PTG - closed today for MLK Day New radio show tomorrow.
Barack Obama speech at Lincoln Memorial 1/18/09 Celebration of American Renewal
Livestation invites you to join live, interactive coverage of the inauguration of Barack Obama Our partner channels have lined up special inauguration coverage http://www.livestation.com/inauguration which you can flick between in your Livestation player http://www.livestation.com/downloads to sample the different perspectives being offered.
Inauguration Crowd Will Test Cellphone Networks The cellphone industry has a plea for the throngs descending on the nation’s capital for the presidential inauguration: go easy on the mobile communications. The largest cellphone carriers, fearful that a communicative citizenry will overwhelm their networks, have taken the unusual step of asking people to limit their phone calls and to delay sending photos. The carriers are also spending millions of dollars to temporarily and substantially upgrade their networks in Washington. Dropped calls, lost photos or delayed text messages are always a risk during spikes from sporting events and concerts. People often feel compelled to share these events with others, and that takes bandwidth.
For Obama, Rare Chance for Bold Start on Big Task President-elect Barack Obama is well on his way to finding the silver lining in the economic storm he is inheriting. The two-year, $825 billion economic recovery plan taking shape in Congress includes billions of dollars for renewable energy and a national electricity grid to distribute it, lower taxes for all Americans but the affluent, computerized medical records and modernized schools. These are all down payments on Mr. Obama’s ambitious campaign promises, affording him an opportunity few new presidents have had. Not since Franklin D. Roosevelt at the depths of the Great Depression has a president entered office with a bipartisan green light to spend and cut taxes so much.
Inauguration Day, 2009: A Day of Mourning For the victims of future wars, and for our old republic When Thomas Jefferson was inaugurated, he sought to dismantle the evolving Federalist tradition of pomp and circumstance. In a ceremonial sense, royalism seemed to have been restored, or so it seemed to him. As this blogger put it, "Dressed in simple attire, Jefferson walked over to the Capitol with a phalanx of riflemen, friends, and fellow citizens from his home state of Virginia." In these last days of the American Empire, such austere republicanism would be considered impossibly quaint. Having long ago morphed into Jefferson's worst nightmare, the closer we get to the end, the more glamorous our inaugurals become. The poorer we are, the more millions we'll throw at a ceremony that is really the crowning of a monarch – and not just any old king, but an emperor bestriding the globe. Appearances must be kept up. Like a bankrupt living on a palatial estate – one step away from foreclosure – we bask in imperial splendor even as the repo man comes knocking at the door. At a time such as ours, the spectacle of jeweled and gowned courtiers feasting on inaugural canapés is beyond tacky.
Ron Paul 1/16/2009 "I'm Afraid The Endpoint Will Be The Destruction Of The Dollar" NO restoration of confidence and nobody knows where the money is or what it will do. . . something very sinister is going on. . .
Gold, platinum rise on weak dollar SINGAPORE : Despite profit taking by investors, Gold rose to a one-week high during early Asian trade Monday as dollar weakened against the euro amid stock markets recovery. At 9.30 a.m in Singapore, gold rose as high as $845.55 an ounce, its highest level since Jan. 12, before slipping to $837.60.
2009: Year of Gold! One thing is clear. Gold will be the ultimate winner in 2009, an year, according to pundits that will spell doom for several economies. Eve as the world is fighting recession, gold industry is witnessing a flurry of activities with several mines resuming held-up projects and seeking to open fresh mines. A lot of investments have been pumped into gold mining sector in past couple of months, anticipating a major gold rush in the coming days. So, year 2009 may belong to gold. And, this high expectation is bound to make some impact on the yellow metal’s prices.
Pastor Lindsey Williams Details "Economic Calamity" Ahead This is a summary by "Tom" of a recent interview of Williams by Gianni Hayes After two hours of interview I had four legal pages of notes. I am going to relate as best I can the highlights of that interview. Some of you will get duplications because some of you are on more than one of my mailing lists. Please understand. I consider this matter to be extremely important! This will be rough, since it will be stream of consciousness, right off of my note pad. But it is the message that is important and not the delivery.
Gold $2000 by year end ? Real estate, stock market, and the economy are NOT reflating as the government hopes, with all the stimulus to the banking system. When the T-Bill Bubble bursts, the money will flood into gold, silver and energy. Bob Chapman's review on Jan 17, 2009
Gloom is boom for gold, may cross $1,000/ounce Gold is the only commodity which thrived on the meltdown. In fact, the global economic crisis has come as a godsend for gold and the yellow metal is making use of the blessing in disguise to the maximum. Following the boom caused by the meltdown impact gold prices may shoot up to over $1,000 per ounce in 2009.
Gold emerges lone saviour for investors! If you have any doubt about gold’s omnipotent role in ensuring a safe haven for all investors, just read a new research report which says that turnover in gold rose by 58 per cent last year to a record $20.2 trillion. As you know the yellow metal has been a safe haven for investors for centuries and whenever a crisis arrived, gold always emerged as the lone saviour for people. This time also when recession hit almost all nations, gold recorded increased trading.
Obama Advisers Say They Will Aim TARP Funds at Widening Credit Top advisers to President-elect Barack Obama signaled they will emphasize getting credit to consumers and businesses rather than helping banks as the new administration deploys the second half of the $700 billion rescue fund. “The focus isn’t going to be on the needs of banks; it’s going to be on the needs of the economy for credit,” Lawrence Summers, the president-elect’s top economic adviser, said on CBS’s “Face the Nation” program yesterday. Obama’s team will manage the Troubled Asset Relief Program “in a much different way,” David Axelrod, Obama’s chief political adviser, said on ABC’s “This Week” program.
'Fear is driving the global Gold market' David Mason discusses market fears, a weakening U.S. dollar and "the most important factor" that will drive gold ahead of the commodities pack in 1Q09. . . . I'm of the opinion that fear and the relationship with the U.S. dollar is, quite frankly, probably driving no more than 40% of the gold market. Fear will drive it, and a weakening in the U.S. dollar, which some people are betting will happen—those are only two components. Now the most important factor is just straight supply-demand imbalance.
Dismal bank earnings presage more trouble ahead Despite bailout, banks facing more trouble ahead recession, unemployment gather steam The hemorrhaging among the nation's biggest banks was supposed to have subsided after the government doled out $350 billion in federal bailout money last fall. That hasn't happened. Instead, both Bank of America Corp. and Citigroup Inc. have had to turn to the government for more cash as losses related to toxic assets, souring consumer loans and the sinking economy blow holes in already flimsy financial balance sheets.
Peter Schiff: Stimulate Economy By Cutting Government (1/16/2009 Wall Street Journal Interview 1.16.2009)
Bailout Is a Windfall to Banks, if Not to Borrowers At the Palm Beach Ritz-Carlton last November, John C. Hope III, the chairman of Whitney National Bank in New Orleans, stood before a ballroom full of Wall Street analysts and explained how his bank intended to use its $300 million in federal bailout money. “Make more loans?” Mr. Hope said. “We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.” As the incoming Obama administration decides how to fix the economy, the troubles of the banking system have become particularly vexing.
Obama Bank Rescue May Make New Effort to Resolve Toxic Assets President-elect Barack Obama is likely to back a financial-rescue effort that channels capital to banks and deals with troubled assets clogging balance sheets, according to people familiar with the matter. Obama’s team will also use part of the $350 billion remaining from the Troubled Asset Relief Program to help stem foreclosures and assist municipalities that are having trouble borrowing, the people said. The Federal Reserve and Federal Deposit Insurance Corp. are advocating a government-backed “bad” or “aggregator” bank to acquire hundreds of billions of dollars of troubled securities now held by lenders.
Boisterous and strong economies now imperiled Two of the world's most open and successful economies face tough times as the global downturn marks the end of one era and opens a new period of peril and possibility for both. Singapore and Ireland have staked their fortunes on being small, export-oriented, investor-friendly dynamos. Singapore was one of the original Asian Tiger economies, and the label passed to the Atlantic nation in the 1990s, as 15 years of 5 percent average growth earned Ireland its "Celtic Tiger" reputation.
Peter Schiff 1/17/09 - Financial Sense News Hour [Part 1]
Peter Schiff 1/17/09 - Financial Sense News Hour [Part 2]
Madoff’s ‘Street-Smart’ Aide DiPascali Was Investors’ Go-To Guy Frank DiPascali Jr. joined Bernard Madoff’s firm a year after graduating from a Catholic high school in Queens, New York. Over a 33-year career, he rose through the ranks, eventually calling himself chief financial officer. For investors like Tim Murray of Minnesota, DiPascali was a “street-smart New Yorker” who fielded calls about the millions of dollars he entrusted to the firm. “To a Madoff customer with a discretionary account, he is the guy,” said Murray, 57, a real-estate developer. “There is nobody else.” Now, U.S. prosecutors and regulators are probing whether DiPascali, 52, played a role in an alleged $50 billion Ponzi scheme that led to Madoff’s arrest on Dec. 11, people familiar with the matter said. Victims include banks, hedge funds, charities and wealthy investors such as director Steven Spielberg and philanthropist Carl Shapiro. Madoff, who hasn’t responded to the charge, is under house arrest at his New York apartment.
Washington goes beyond Tarp to save Citigroup and Bank of America In one of the most dramatic days on Wall Street, the US Government threw a lifeline yesterday to Citigroup and Bank of America, which could leave American taxpayers on the hook for up to $373 billion. The rescue came as Citigroup split itself in two while Merrill Lynch, which was taken over by Bank of America, reported a $15.3 billion loss for the fourth quarter. BoA made its first quarterly loss for 17 years. Citigroup announced its fifth consecutive quarterly loss and hinted that the departure of Robert Rubin, the former US Treasury Secretary, who resigned as a director last week, would not be the last from the board.
Paulson defends financial bailout program Treasury Secretary Henry Paulson on Friday defended his handling of the $700 billion financial rescue program, saying it has made real progress toward achieving financial stability. Paulson said the Bush administration made the correct calls on major decisions in operating the program, even though he and other officials sometimes had to operate with imperfect information that was frequently changing. His remarks came hours after the government reached an agreement to provide billions of dollars in additional support to Bank of America Corp., and a day after Congress turned back an effort to block release of the second half of the bailout pot. Paulson also indicated the administration had explored the possibility of establishing a new government-backed bank that would be used to remove bad loans and other toxic assets from commercial banks' balance sheets.
One Idea for Bank Crisis: Quarantine the Bad Assets U.S. Officials Look To Solution Used By Sweden in '91 A housing bubble bursting, banks faltering toward failure, a nation plunging into recession. The year was 1991, and the Swedish government responded with a dramatic plan: Unpaid loans and other troubled assets would be dumped into new state-owned banks, scrubbing the banking industry of problems in the hope of sparking a lending revival. U.S. government officials now are considering a similar plan to address the simmering financial crisis, part of a broader discussion about ways to revamp a federal rescue effort that has helped curb panic but failed to slow bank losses or increase lending.
Max Keiser on THE ORACLE BBC Jan16 2009 pt 1/2 ....... bankers are more dangerous than standing armies - Thomas Jefferson Interview with Ullrich Fichtner from Der Spiegel magazine (Germany could bail out both Brittan and France), Kerry Quinlan and Nigel Eccles of http://HubDub.com talking on Obama, in part 2. . . . astute observation "...... America got drunk and now the government has to keep the party going..."
Max Keiser on THE ORACLE BBC Jan16 2009 pt 2/2 Talk about Obama's inauguration and how he is being hailed as 'president of the world"; Obama is exceedingly popular in the UK. Talk of hyperinflation in Zimbawbe and how it's coming to the UK and US.
States are putting the bite on Internet sales Shopping online can be a way to find bargains while steering clear of crowds - and sales taxes. But those tax breaks are starting to erode. With the recession pummeling states' budgets, their governments increasingly want to fill the gaps by collecting taxes on Internet sales, which are growing even as the economy shudders. And that is sparking conflict with companies that do business online only and have enjoyed being able to offer sales-tax-free shopping. One of the most aggressive states, New York, is being sued by Amazon.com Inc. over a new requirement that online companies must collect taxes on shipments to New York residents, even if the companies are located elsewhere. New York's governor also wants to tax "Taxman" covers and other songs downloaded from Internet services like iTunes.
Necessity drives automaking changes LANSING, Mich. | Jim Woodard retired as an executive from General Motors Corp. in March 2008 after more than 39 years, much of it spent in labor relations as a liaison with the company and its hourly union workers. Watching at the production facilities in Lansing where he worked his entire career, Mr. Woodard, 58, saw car models evolve over the decades. He looked on as union contracts were negotiated. He winced as, in recent times, losses mounted and factories closed. Mr. Woodard acknowledges that GM's strategy over the years sometimes has been poor, but he thinks the company finally turned it around and now deserves a chance to return to profitability.
Today's Outrage: Bank of America's Secret Backroom Bailout (see video) In mid-December, the WSJ tells us, Bank of America (BAC) went to Hank Paulson and threatened that if he didn't give the firm another TARP bailout, they'd abandon the Merrill Lynch deal and cripple the financial system. Paulson then apparently spent more money he didn't have, promising that he would rescue BAC yet again. (This a month or so after an annoyed Ken Lewis said he didn't want or need the original TARP infusion). There is only one word to describe this: Outrageous. Aaron and I discuss what happened in the accompanying piece with Joe Nocera, Business Columnist for the New York Times. Talking about the nation’s banking system, Nocera sums it up nicely: They're "not on our side."
Treasuries' True Risk “A ship is safe in harbor, but that's not what ships are for.” -- William Shedd The majority of analysts today believe Treasury prices will fall when the appetite for risk returns. That is certainly one way to justify the fact that the price of Treasuries hovers at historical -- and dangerous -- highs. But there is another more volatile, yet less scrutinized potential outcome to this tale: Treasury prices may succumb, not because an appetite for risk drives capital to other asset-classes, but because Treasuries -- the yields of which are commonly referred to as the "risk-free rate of return" -- are finally exposed as, perhaps, the riskiest assets around.
How the Treasury Bubble Will Burst and Why The deflationary credit contraction, or as some call a Kondratieff Winter, is intensifying. For the time being the worldwide financial and monetary systems have taken a step back from complete oblivion. The usual measurements such as the TED spread, three-month LIBOR and the two year swap spread have shown improvement. This improvement should not be mistaken for a miraculous healing because the fiat currency fractional reserve banking system is terminal. Eventually it will be replaced by a commodity currency with 100% reserves and no counter-party risk.
Bank of America Shocker: How Much More Will Taxpayers Take? (see video) How dumb do they think we are? That was my first reaction on reading The Wall Street Journal's account of how Hank Paulson and Ben Bernanke urged Bank of America CEO Ken Lewis to not abandon Merrill Lynch when faced with mounting losses related to the deal, but instead take $138 billion in bailout funds: "Bernanke and Paulson also urged Mr. Lewis to finish the deal and not invoke a material-adverse change clause, saying it was in his interest to finish the deal," says The WSJ story. "If they walked away, it would reflect poorly on the bank and suggest it hadn't done its due diligence and wasn't following through on its commitments." (Lewis didn't refuted this account today, saying: "The U.S. government was 'firmly of the view' that canceling or delaying the transaction might result in 'serious systemic harm,'" the Journal subsequently reported.)
Ron Paul & Benjmain Franklin: Two Peas, Same Pod
Summers Says TARP Will Focus on Consumers Rather Than Banks Barack Obama will focus more on helping consumers, local governments and businesses than banks as his administration deploys the second half of the $700 billion rescue fund, said Lawrence Summers, the president- elect’s top economic adviser. “The focus isn’t going to be on the needs of banks; it’s going to be on the needs of the economy for credit,” Summers said on CBS’s “Face the Nation” program. Obama’s team will manage the Troubled Asset Relief Program “in a very different way,” he said. Summers’ remarks indicate banks and their executives face tougher scrutiny in seeking money from the bailout after the Obama administration takes office Jan. 20. The TARP may be redirected to address “housing to prevent foreclosures,”
Chrysler Financial gets $1.5B loan from bailout Chrysler's finance arm gets $1.5B gov't loan, quickly announces 0 percent offer for car buyers The Treasury Department said Friday it will provide a $1.5 billion loan to Chrysler LLC's financing arm, and the automaker announced it will immediately use the money to offer zero-percent financing on several models and expand lending to car buyers with less than ideal credit. The Treasury said the new aid is in addition to the $17.4 billion in loans earmarked for Chrysler and General Motors Corp. last month in an effort to buy time for the two companies to reorganize and ultimately return the domestic auto industry to profitability.
For Businesses Big and Small, It's Lights Out Instead of Restructuring, More Are Quick to Liquidate With the economy in the tank, companies are doing all they can to stay afloat. For many, though, even the most desperate measures have not been enough. Former giants in American business have recently tilted into extinction. Circuit City announced Friday it would follow Linens 'n Things and Sharper Image into liquidation and sell its assets. Over the next two years, analysts say, countless other businesses will simply fade away. "This is now an unprecedented time as far as how bad things have gotten," said Scott Peltz, managing director of RSM McGladrey, a consulting firm that helps turn around troubled companies.
Deflation concerns grow as consumer prices shrink As deflation concerns grow, consumer prices shrink, some wonder: could the Fed have done more? Consumer prices tumbled yet again in December, and inflation last year logged its smallest advance since the early 1950s, fanning new fears that the country may face a dangerous bout of deflation. Worries about out-of-control price increases -- which had gripped the Federal Reserve and the country just seven months ago are now a distant memory. Some wonder in hindsight: Should the Fed have kept cutting interest rates all last year to help the recession-shocked country, rather than stopping in the summer and early fall out of concerns that lower rates would spur inflation?
The Federal Reserve holds a monopoly on the issuance of currency in the USA.
If all money created is debt and counts as principal, where does the money come from to pay interest on this debt?
Prior the the Emergency Economic Stabilization Act/TARP Act of September 2008, commercial banks were required to hold 10% of deposits as reserves.
The reason for the credit spread blowups of October/November 2008 was because in the same TARP Act the Fed was allowed to pay interest on deposits without publicly stating the interest rate
As a result of various acts of Congress in 2008, the Federal Reserve now has the authority to buy all sorts of assets (commercial paper, corporate bonds, mortgage loans, etc.)
Much of the Fed's activity is not made public
There is debate over the constitutionality
Peter Schiff: "Obama Is Going To Help Destroy The Country" CNN interview from Jan 10, 2009 on Obama's plan
Silver and the Minimum Wage My mission statement is, "To teach and empower people to understand the benefits of an Honest Monetary System." Although the words gold and/or silver are not even mentioned in my mission statement, they are both very important components in an honest money system - they instill trust. And the lack of trust is the core issue of today's economic problems. Our banking institutions and well established investment firms do not trust each other, and the system is grinding down. This has even affected the "Big Three" automakers, who are experiencing problems in this economy. . . but it wasn't always that way.
Global economy to shrink; deflation greatest threat, says UN The deepening global recession means that the world economy as a whole could shrink next year and will battle to avoid destructive Thirties-style deflation, the United Nations said yesterday. The UN alert over what threatens to be the worst year for the global economy since the Second World War came as fears of deflation were stoked when US producer price inflation slid into negative territory, registering an annual fall of 1.5 per cent last month. In a bleak assessment of world prospects, the UN said that the global economy was now deteriorating at such a pace that its main projections in yesterday’s grim report were already out of date.
Dick Fuld, the man who brought the world to its knees Dick Fuld ran Lehman Brothers as if he were at war. He drove the bank hard and ignored the signs of collapse. Andrew Gowers, former editor of the Financial Times, who was working at the heart of the bank as it brought the global economy to the brink of disaster, reveals the inside story The temperature in the room seemed to drop several degrees as the boss’s voice came on the speaker phone. “I don’t think we’re going bust this afternoon,” he said, “but I can’t be 100% sure about that. A lot of strange things are happening . . .” The four of us gathered in Lehman Brothers’ offices at Canary Wharf looked at each other, our eyes widening. We had just spent the day bashing the phones in a frantic effort to reassure journalists, investors, bankers, anyone who would listen. That was our job as members of Lehman’s communications team. The bank was fine, we kept saying. It was brimming with cash. Sure, the share price had dropped 48% in New York, but that was a panic reaction to another investment bank’s collapse and nothing to do with us. What’s more, the US authorities had indicated they would not allow another institution to fail.
Cost of Borrowing Zooms Up for Corporations Like consumers and homeowners, America’s corporations binged on easy credit when times were flush, racking up huge debts. Now the bills are due, and paying them back will not be easy, or cheap. This year alone, more than $700 billion in corporate loans will come due, according to Standard & Poor’s. That is the size of the federal bailout of the financial sector. Many companies were counting on being able to borrow more money to meet those obligations and kick their debt further down the road. But with the credit markets still tight, corporations are being forced to pay much higher interest rates than they did a few years ago, putting more strain on balance sheets already hammered by falling profits and a grinding recession.
PETER SCHIFF Politicians Want To Continue Bubble Building 1/3 Bloomberg interview from Dec 1008 - Peter Schiff discusses how the Federal Reserve is devaluing the dollar and how the government and the politicians are doing the wrong thing increasing government, driving manufacturing out of the country through a lack of capitalism.
PETER SCHIFF Politicians Want To Continue Bubble Building 2/3
PETER SCHIFF Politicians Want To Continue Bubble Building 3/3
More Joining American Military as Jobs Dwindle [WWII didn't get us out of the depression; it took care of the unemployment problems] As the number of jobs across the nation dwindles, more Americans are joining the military, lured by a steady paycheck, benefits and training. The last fiscal year was a banner one for the military, with all active-duty and reserve forces meeting or exceeding their recruitment goals for the first time since 2004, the year that violence in Iraq intensified drastically, Pentagon officials said. And the trend seems to be accelerating. The Army exceeded its targets each month for October, November and December — the first quarter of the new fiscal year — bringing in 21,443 new soldiers on active duty and in the reserves. December figures were released last week.
How Bin Laden Bankrupted America The five ways For a man who spent years living in caves, Osama bin Laden sure knows his Sun Tzu and the basics of jujitsu. Sun Tzu's famous dictum was "know yourself" and "know your enemy." Jujitsu is based upon using your enemy's strength against him, e.g., like Jack in "Jack and the Beanstalk," who used the giant's own size and anger to get him to crash from his own weight. Bin Laden understood that the way to beat America was to turn its power back upon itself. His early stated aim was to bankrupt America. He knew his own weaknesses, and he profoundly understood America's, how its pride and fears could trigger irrational, self-destructive reactions.
Credit Where Credit is Due by Peter Schiff In a recent speech before the London School of Economics, Fed Chairman Ben Bernanke offered a perverse economic theory in his quest to gather support for never-ending Wall Street bailouts; "This disparate treatment, unappealing as it is, appears unavoidable. Our economic system is critically dependent on the free flow of credit, and the consequences for the broader economy of financial instability are thus powerful and quickly felt." In other words, credit is the lifeblood of our economy, and the continued operation of credit providers is an issue of national security. In truth, not all economies run on credit. But over the last decade, the United States became a bubble economy that needed unlimited credit to keep from collapsing. In a legitimate economy, it is not credit that fuels spending and investment, but simply income and savings. It's too bad our Fed chairman does not understand the difference.
Hedge Funds, Unhinged LAST summer, Kenneth C. Griffin and his wife, Anne, hedge fund managers both, were so rich that they did something most wealthy couples don’t do until much later in life. Still in their 30s, they hired a Ph.D. student in economics to help dole out their money to charities. Fast-forward six months, and Mr. Griffin, who built the Citadel Investment Group into one of the largest hedge funds in the world, has seen the value of his funds plunge by roughly $10 billion — one of the biggest amounts lost in the hedge fund carnage last year. He was down 55 percent while the average fund was down 18 percent. For Mr. Griffin, it is a failing as personal as they come. Sitting back in his chair, gazing uneasily at the skyline here, he points to a new patch of gray hair when asked about the toll of his losses.
Deepening bank crisis puts NYC in peril Stumbling Citi, BofA, J.P. Morgan add to job cuts; estimated losses through 2010 will rise The foundations of New York's banking industry were rocked last week as the financial crisis entered a nasty new phase, threatening to spread more pain throughout the city's already beleaguered economy. Citigroup's staggering $8.2 billion fourth-quarter loss and its planned breakup, plus news of Bank of America's $20 billion federal bailout, signaled that the crisis is nowhere near an end. Even stalwart J.P. Morgan Chase posted what it called “very disappointing” fourth-quarter results—including a $2.4 billion loss in its investment bank division, and profits that were 76% below year-earlier levels. “It's the kind of news that underscores why we said before that 'chances are things could get even worse,' “ says Doug Turetsky, chief of staff of the Independent Budget Office, which just two weeks ago predicted that the city would lose 243,000 jobs through 2010. “This makes things a little bit worse than where we were with that forecast.”
Gerald Celente Forecasts Top Trends for 2009 1-17-09 pt 1/4 Fall of the commercial real estate sector (more highly leveraged than retail sector) and luxury retail is down 35%. The whole thing is going down. . . depression era fall-offs. . . . people are one job away from loosing everything and there will be a tax revolt by the 'too small to saves" over increased licensing fees, road tolls, user fees among the 130 new 'taxes' proposed for households. Global economic system is collapsing and nobody know what to do . . . you can't print you way into prosperity.
Gerald Celente Forecasts Top Trends for 2009 1-17-09 pt 2/4 Arizona state troops being trained for riots.
Gerald Celente Forecasts for Top Trends 2009 1-17-09 pt 3/4 Use it up; make it do; wear it out . . . quality will count and fortunes will be made.
Gerald Celente Forecasts for 2009 Top Trends 1-17-09 pt 4/4 High Income Earners; not yet rich - emphasis on education and talk of a college crash, useless degrees. giant egos of today's kids who have been told how great and wonderful they are. Save your money. Trend it toward distance learning of things that relate and make the economy work. What's bad for Wall Street is good for Main Street. There will be a revival of Main Street and work, shop and buy in the local areas, and that will be good because it's what made this country great. We need a productive capacity again but fear global unrest and a major depression.
Calif. tax refunds to be delayed starting Feb. 1 California's controller says he will begin a 30-day delay on tax refunds and other payments starting Feb. 1 because the state is running out of money. Controller John Chiang said Friday he must delay $3.7 billion in payments next month because lawmakers have failed to address California's growing deficit. With a $41.6 billion shortfall over the next year-and-a-half, the state is on the brink of issuing IOUs.
History links King holiday, Obama inauguration Martin Luther King's flame has always burned brightest in Atlanta, but in a real sense, the torch is being passed to Washington, D.C., with his birthday and holiday taking on dual meaning for many Americans because it falls on the eve of Barack Obama's inauguration. While Georgia's capital has traditionally been the place for the most high-profile observance that day, this year it will share the spotlight with the nation's capital. But the shift from King's hometown does nothing to dimish the excitement of the moment, said William Jelani Cobb, an American history professor at Atlanta's Spelman College. "That we would have a celebration of King's birth and the inauguration of the first black president on consecutive days is almost too much to ask for," Cobb said. "(Barack) Obama's election represents the fulfillment of the most well-known of King's dreams, that people would be judged by the content of their character."
Obama: The face of Brazil's carnival RIO DE JANEIRO, Brazil—Barack Obama is the new face of America, and his likeness will be represented in force during this year's bawdy Carnival bacchanalia. Plastic replicas of the U.S. president-elect's face are the top-selling masks this year, said Olga Gibert Valles, owner of one of Rio's oldest Carnival costume producers. That means come Feb. 22, when Carnival begins, thousands of half-naked "Obamas" will take to the streets during the countless freewheeling parades throughout the city. About half of Brazil's 190 million people are black and many were elated by Obama's election. The incoming U.S. president is so beloved, at least eight Brazilian politicians changed their names to "Barack Obama" on the ballot of local elections in October.
U.S. Support of Israeli War Against Gaza May Trigger Depression Famed trend forecaster Gerald Calente is warning that America's unconditional support of the brutal Israeli war on Gaza could lead to an oil embargo against the U.S. which would tip the U.S. into full-scale depression and induce panic food and fuel buying. So if you were on the fence about whether or not the U.S. should continue to support the war against Gaza, your own economic self-interest should convince you that it is not. Note: The U.S. will likely slide into a depression even if we stop supporting the war crimes in Gaza, but an oil embargo could accelerate the beginning of the depression.
Juarez vigilante group claims it will kill one criminal every 24 hours A group calling itself the Comando Ciudadano por Juárez, or the Juárez Citizens Command, is claiming it will kill a criminal every 24 hours to bring order to the violent crime-plagued city. The announcement of the supposed group was the first known case of possible organized vigilantism in Juárez as police and the military have been apparently unable to stop a plague of killings and other crimes. "Better the death of a bad person than that they continue to contaminating our region," the news release stated in Spanish. The supposed group issued a news release via e-mail stating it is nonpartisan and funded by businessmen fed up with crime.
British Banks, After Bailout, in Line for More LONDON — To stabilize a teetering economy, the government bails out several of the nation’s largest banks in hopes that credit will flow again. When that does not work, officials return with yet more taxpayer money and, this time, new initiatives to goad banks into lending. Sound familiar? That is what is happening in Britain, where Prime Minister Gordon Brown plans to unveil a second bank bailout on Monday to stoke lending after an earlier £37 billion, or $54.5 billion, program using taxpayer funds to take stakes in troubled banks failed to get credit flowing in the broader economy. “We have recapitalized the banks, we have injected money into the economy,” Mr. Brown said in Egypt on Sunday, where he was attending talks on Gaza. “At the same time, we know that the essential problem that has been holding back banks internationally is the resumption of lending,” Brown said, Bloomberg News reported.
Max Keiser - Jan 15, 2009 radio interview with Texas oilman, Zapata George. - Prices on energy just don't make any sense! . . . plus more on the grand global Ponzi scheme; Europe, US and dollar. Ireland real estate is down 80%. December 2009 was a record high consumption of oil. Contango in oil futures. Someone is willing to pay a LOT of MONEY down the road. Why? Oil prices remain artificially outside the oil market. Financial WAR going on. It's Bernanke's "pick-a-price" on the Comex for price of gold. . . . blatant price manipulation and a return to feudalism after free market failure where the powerful will take back the gold at the price they want to pay.
Max Keiser on the oil price manipulation in wall street
Russia and Ukraine Reach Deal on Gas MOSCOW — The prime ministers of Russia and Ukraine agreed Sunday to resolve their gas dispute, with an understanding that prices would be pegged to the price of oil, but with a discount for 2009 that means Ukraine could pay little more than it did last year. The deal, expected to be signed Monday, came after a din of criticism from officials in Europe, where more than 20 countries have been affected since a Jan. 6 cutoff of natural gas and at least 12 people have frozen to death in a dispute that is ostensibly over prices and transit fees, but that is also deeply entwined in post-Soviet politics. If the agreement holds — and previous deals have not — the gas dispute would essentially end where it started in terms of prices, in what would be a baffling result considering the hardship caused by the embargo. It was unclear after the announcement when gas would start flowing back to Europe.
Hamas Agrees to One-Week Cease-Fire in Gaza Conflict JERUSALEM - Israeli troops and tanks began to leave Gaza on Sunday as a fragile cease-fire opened the way for intensified international efforts to build a more durable peace. Small skirmishes broke out but Gaza was largely quiet after Israel, then Hamas, announced unilateral cease-fires, ending a devastating 22-day battle in which more than 1,300 Palestinians and 13 Israelis died. European and Arab leaders met in Egypt, where they pledged support for rebuilding Gaza, and called for an end to arms smuggling, as Israel has demanded, and the opening of Gaza’s borders, as demanded by Hamas, the Islamic militant movement that rules Gaza.
Israel War To Ignite Terror Israel War to Ignite Terror, Threaten Global Economy and possibly Spark World War III, Trends Institute (Gerald Celente) Warns Israel's invasion of Gaza sets up the United States and any other nation supporting Israel as terror targets, predicts Gerald Celente. The Trends Research Institute Director also warns that should Israel continue the invasion, or take the war beyond Gaza, the world risks both a 1973-style oil shock and global conflict.
Max Keiser on Gaza and the Financial Holocaust pt 1/2
Max Keiser on Gaza and the Financial Holocaust pt 2/2
Patriot Trading Group: CLOSED on Mon, Jan 19, 2009 - MLK Day No new radio show until Tuesday but new headlines will be posted on Monday.
New gold coin pricing system in US Following the rapid shift in gold bullion prices, the US Mint has announced the launch of a new pricing system for gold coins. The new system creates a new method of pricing of collector coins using a formula. Effective from January 12, the new pricing structure is intended to prevent suspensions of gold coins and is more flexible and transparent than its predecessor. US Mint explained that metal prices will by reviewed on a weekly basis and prices of gold coins adjusted on Thursday mornings whenever necessary.
Obama Pledges Entitlement Reform President-Elect Says He'll Reshape Social Security, Medicare Programs President-elect Barack Obama pledged yesterday to shape a new Social Security and Medicare "bargain" with the American people, saying that the nation's long-term economic recovery cannot be attained unless the government finally gets control over its most costly entitlement programs. That discussion will begin next month, Obama said, when he convenes a "fiscal responsibility summit" before delivering his first budget to Congress. He said his administration will begin confronting the issues of entitlement reform and long-term budget deficits soon after it jump-starts job growth and the stock market.
Global Economic Demand Collapse, Bonds Next Anyone following the economic news in recent months has to be stunned at the declining economic activity. Japan had a 16% drop in machine orders for November. US car sales down 30 to 40%. Even world car leader Toyota has sales down 20 to 30%. Worldwide car sales are way down too, anywhere from 10 to 20% depending on which area. US retail sales are down 2 plus percent, but depending on what stats you look at, autos -30% plus, that 2% number is far worse than it looks. The EU region is seeing marked declines in orders and exports. Japan had a stunning 15 to 17 % drop in exports from the previous year. China had over 100,000 factories close by end of 08. The list is endless. Of course all this collapsing demand is hitting commodities and energy. Gold has fared better overall, but is torn between central bank inflation efforts and deflation in general in every major economy. Even China is said to see possible flat growth in 09, something that they consider akin to Armageddon, as they need 15 million new jobs each year just to stay even with population growth.
Treasuries Tumble as Stocks Rise on Bailout of Bank of America Ten-year Treasuries fell the most in almost two months as stocks gained on government efforts to bail out banks, reducing the haven appeal of U.S. debt. U.S. securities dropped as European government bonds fell amid advances by global equities after the U.S. agreed to a $138 billion bailout of Bank of America Corp. The cost of living fell in December as the recession deepened. “The sell-off in general is happening because risky assets are higher on optimism that some of this is going to work, whether it’s the stimulus or that there are banks that are too big to fail, and therefore there will be credit flowing through the system,” said Ira Jersey, an interest-rate strategist in New York at Credit Suisse Group, one of 17 primary dealers that trade with the Federal Reserve.
Roubini Pt. 1
Roubini Pt. 2
Roubini Pt. 3
Australians also join gold rush At the time of crisis, bank on gold that is the advice Australian stock brokers are giving their clients now. So, equity investors are likely to head for gold now in Australia. According to Joseph Palmer and Sons, gold has performed well in the current financial markets slowdown, while other investments have suffered. The firm expects gold to stay up until the world comes out of the credit crunch and it suggested that investors consider buying physical gold rather than stocks.
Gold revaluation - Clutching at golden straws Some gold analysts are coming up with theoretical moves which could have a huge impact on the gold price, but will the suggested scenarios ever happen? Gold analysis and theorising is a hazardous exercise with the metal price seldom seeming to follow what would appear to many to be the logical path to new heights - and on the occasions it does surge dramatically, it then tends to come crashing down again, burning the fingers of many. This is not to say that gold is not a good investment as has been shown by its overall performance against markets in general over the past year, and is not to say it will not regain its upward trajectory before too long, but some of the admittedly well thought out, and perhaps economically logical, theories put out by gold proponents, which would lead to a huge gold price increase, are still, in our view, unlikely to come about
Social Mood Will Define The Economic Future Boomers have known only inflationary or reflationary conditions for most, if not all of their conscious lives. Here is the pattern: Want, work, borrow, spend, enjoy, and worry about the bills tomorrow, as if tomorrow would never come. Now tomorrow is dawning, the bills are due, and boomers are now entering end of life with a need to consume what they perceived would be a treasure chest of accumulated wealth that would allow them to sustain their inflationary lifestyles to life's end. However, that wealth has now vanished in a giant deflationary two-step of collapsing home prices and a collapsing stock market. Note that those are symptoms of deflation not proof of it.
Dow May Fall to 6,000 Should Low Break, Acampora Says A decline in U.S. stock indexes below the 2008 lows from November may trigger a rout that pushes benchmark averages to levels not seen since the mid-1990s, according to two leading technical analysts. “Hopefully we don’t make new lows, because if we do, all bets are off,” said Ralph Acampora, who retired from Knight Capital Group Inc. in October 2007 after four decades on Wall Street. Should the Dow Jones Industrial Average fall below the 7,552.29 it touched on Nov. 20, it might tumble to 6,000, Acampora said. That’s 27 percent below yesterday’s close of 8,212.49 and a level last reached in October 1996.
U.S. ‘Bad Bank’ Plan Gets Momentum to Revive Lending Renewed questions about U.S. banks’ viability are pushing regulators toward a new plan that would remove toxic assets from bank balance sheets, in what may become the biggest effort yet to unfreeze lending. President-elect Barack Obama’s advisers see an increasingly grave banking crisis and are considering proposals far more sweeping than any steps that have been taken so far, according to people who’ve discussed the outlook with them. “They need to do something dramatic,” said Harvard University Professor Kenneth Rogoff, a former chief economist at the International Monetary Fund, and member of the Group of Thirty counselors on financial matters, a panel that includes Treasury Secretary-designate Timothy Geithner and Lawrence Summers, incoming director of the National Economic Council.
Is Citigroup's Collapse a Sign of the Banking Times? Banking is a commodity business. Banking deals with information…I am holding $100.00 of yours in something called a transaction account…I am holding your IOU for $1,000,000.00. Whereas, historically, these sums had to do with a physical quantity…something like gold…now all banking is basically conducted in 0’s and 1’s. Banking is just information and the movement of information. Banking is a commodity business.
Nationalize Citigroup and Bank of America Both Citigroup (C) and Bank of America (BAC) were down more than 20% in early trading Thursday, and I imagine that Hank Paulson and Tim Geithner are starting work on yet another weekend deal of some description, since at this rate it seems that neither institution is capable of surviving in its present form much longer. They should embrace the inevitable and just nationalize the two banks. Any deal will be necessarily complicated by the fact that Paulson dragged his heels when it came to requesting the second tranche of TARP funds, even after he blew through the first $350 billion in no time. As a result, it's far from clear what money Treasury can use to shore up two of America's most systemically-important financial institutions.
The Coming Collapse of the Middle Class (long, but well worth the time spent) Distinguished law scholar Elizabeth Warren teaches contract law, bankruptcy, and commercial law at Harvard Law School. She is an outspoken critic of America's credit economy, which she has linked to the continuing rise in bankruptcy among the middle-class.
Bernanke Hints Banks, Economy In Much Worse Shape Than Previously Admitted At the Stamp Lecture, London School of Economics, London, England, Bernanke Urges ‘Strong Measures’ to Stabilize Banks Federal Reserve Chairman Ben S. Bernanke warned that a fiscal stimulus won’t be enough to spur an economic recovery and that the government may need to buy or guarantee banks’ tainted assets to revive growth. “Fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system,” Bernanke said in a speech today at the London School of Economics. "More capital injections and guarantees may become necessary to ensure stability and the normalization of credit markets."
How to Steal Billions in Plain View: Bernanke's Robber Banks The Federal Reserve is living up to its purpose, which is to enrich bankers at the expense of everyone else. Ben Bernanke, who chairs the Federal Reserve Board, is to be congratulated for his open call for the banks under his tutelage to receive billions more of our tribute. Let us understand the matter clearly. We have exited a significant boom period. During the boom, the bankers made large and very large profits. The managements took home very large pay and bonuses. The stockholders (including officers and managers of the banks) had, for a time, very large wealth in the stocks they held. The bondholders of the banks had, for a time, very secure debts.
Trillions More: Govt. Will Keep Spending Until Economy Reflates (see video) Barack Obama's stimulus package has now grown to $825 billion, news that comes as no surprise to John Mauldin, president of Millennium Wave Advisors. "We are in uncharted waters. But the captains of the boats are all Keynesians," Mauldin says, meaning they believe government spending is key to fighting the downturn. "They will keep spending until the economy reflates." Mauldin, who has been notably bearish on the economy and stocks in his popular Thoughts from the Frontline e-letter, does not believe the government will be successful in turning the economy anytime soon; "this recession is going to be the longest in anyone's memory," he writes. "It is going to seem like it is never going to end."
Depression or Recovery? Both We are getting a daily diet of doom and gloom. Crashing markets, key economic sectors imploding, mounting foreclosures, continuing bank failures and trillions in retirement savings wiped out. Is this the end of the world (or at least capitalism) as we know it? Are we in a full-blown depression and destined to revisit the 25% unemployment and food lines of the Great Depression? Yes and no. Yes, we’ve had a Modern Depression every bit as powerful as that of the 1930s and no, this will not go on for 10+ years. Although the headlines will continue to question our survival, the outcome has already been decided. Most of the damage has been done. Indeed, the eye of the storm has passed and 2009 will be a much better year than everyone expects.
Ron Paul: Bernanke Deliberately Destroying Dollar Congressman schools Fed chairman again during House Financial Services Committee meeting, warns "history is against you"
The Unavoidable Face Of Hyperinflation CIGA Erik shows in chart form the face of unavoidable hyperinflation - a currency event. It is horrifying what the Fed and Treasury injected in percentage terms. A true measure of comparison can be seen in the 3 months of 2008 when the Fed accomplished more than in the 7 years from 1929 to 1937. This is beyond all reason, having its own new and terrible consequences well in excess of the consequences of the 1929 and 1932 breaks. Markets have been run now for years by algorithms, manipulators and seeded interests that are like summer thunderstorms. They are loud and scary, but quite short term and in the end quite meaningless and non-productive. The dollar cannot and will not remain strong, nor can a planetary Weimar experience now be avoided.
Exclusive Interview with Jim Rogers: Inflation Is Coming In this DailyMarkets.com exclusive, I spoke by phone with legendary investor Jim Rogers who made his fortune with the Quantum Fund, a hedge fund he co-founded with George Soros in 1970. Over the next 10 years, Quantum gained 4200% while the S&P 500 index rose about 47%. He is also the author of the best-selling books “Hot Commodities”, “Investment Biker” and “Adventure Capitalist”. Rogers, who created the Rogers International Commodities Index (RICI) in 1998, is one of the most closely watched investors. If you are fed up with the Fed, you are not alone. Recently, Rogers said that Paulson and Bernanke should resign for keeping “zombie banks” alive as they should be allowed to fail. His uncanny accuracy in predicting the recent commodity bull run as well as the financial crisis has made the media, as well as private and institutional investors, sit up and listen to what he has to say about the markets.
Debt burden tests global investments Bond sales risk failure President-elect Barack Obama will be testing the limits of the global markets' ability to absorb U.S. government debt by piling an $800 billion stimulus plan on top of more than $1 trillion in new obligations already scheduled this year. Wall Street analysts worry that China, Japan and other nations that readily helped finance U.S. debt in the past won't have the willingness or wherewithal to buy what will amount to three to four times the previous yearly record of Treasury-issued debt of $455 billion. Some analysts predict a calamity such as the failure of a U.S. bond auction, which could drive interest rates sharply higher just as the economy is struggling to recover.
Congress warned about debt U.S. advised to gain control The United States will "look like a banana republic" unless it gains control over its budget deficit and federal debt, economist Allen Sinai warned Congress on Thursday. "The deficit and debt prospects under almost any scenario are daunting," Mr. Sinai, chief global economist for Decision Economics Inc., told the Senate Budget Committee. "This territory is uncharted, with no real historical analogue to this kind of financial situation for a major global economic power." Asked by committee Chairman Kent Conrad, North Dakota Democrat, whether the U.S. government's creditworthiness is at risk, Mr. Sinai replied, "Unequivocally yes."
Insuring U.S. Government Debt: A Terrific Paradox A few days ago, Felix Salmon had a provocative post at portfolio.com, where he notes that the price of credit default swaps (CDS) on U.S. Treasury bonds is rising. Somebody is writing an insurance policy on U.S. government debt, and the price of insuring that debt is going up. And I love insurance, because of its nearly identical properties to options. At first glance, the price rise makes perfect sense. As something becomes riskier, the price of insurance also rises. And with all that borrowing, and with the extreme slowing of the economy, I think it’s fair to say that U.S. debt is indeed riskier than it was before. [I’m talking about repayment risk, as opposed to interest rate risk.]
Citigroup Reports $8.3 Billion Loss, Splits Into Two Citigroup Inc. posted an $8.29 billion loss, twice as much as analysts estimated, and said it will split in two under Chief Executive Officer Vikram Pandit’s plan to rebuild a capital base eroded by the credit crisis. Citigroup rose 9 percent in New York trading after tumbling 43 percent this year through yesterday. Pandit will undo the legacy of former CEO Sanford “Sandy” Weill by creating Citicorp to house the New York-based company’s global bank, and Citi Holdings, for “non-core” assets, including those guaranteed by the U.S. government.
Bank of America Posts Quarterly Loss After Bailout Bank of America Corp., the largest U.S. bank by assets, posted its first loss since 1991 and cut the dividend to a penny after receiving emergency government funds to support the acquisition of Merrill Lynch & Co. The fourth-quarter loss of $1.79 billion, or 48 cents a share, compared with net income of $268 million, or 5 cents, a year earlier, the Charlotte, North Carolina-based company said in a statement today. Results didn't include a $15.3 billion loss at Merrill, acquired this month.
Peter Schiff thinks about running for Senate Peter Schiff says there is a chance he will run for a US Senate position in 2010, as the website http://schiff2010.com organizes to support him. Peter gives some positive encouragement to the group and talks about Ron Paul.
House Democrats propose $825 billion stimulus bill House Democrats unveiled an $825 billion economic recovery bill Thursday, unprecedented in its scale and reach, that would provide an enormous infusion of public spending in hopes of kick-starting the sagging economy. The legislation - two-thirds spending and one-third tax cuts - would provide help for the poor and unemployed and hand out huge grants for local schools and state governments, among its many provisions. President-elect Barack Obama said it would fulfill his promise of creating or preserving more than 3 million jobs. But Republicans calculated that would equal as much as $275,000 per job.
U.S. Senate releases 2nd half of bailout fund President-elect Barack Obama's economic agenda advanced rapidly in Congress on Thursday as the Senate voted to release the second half of the financial industry bailout fund and House Democrats unveiled an $825 billion fiscal recovery plan aimed at putting millions of unemployed Americans back to work. The Senate action, by a vote of 52 to 42, spares Obama a messy legislative fight just as he takes office and gives him a $350 billion war chest to further stabilize the financial sector. The vote came amid renewed distress in the banking industry, including further deterioration of Citigroup and a pitch for more government aid by the Bank of America.
Senate gives Obama use of bailout Deal appeases both parties The Senate on Thursday turned back a bid to cut off the second $350 billion phase of the unpopular Wall Street bailout, after President-elect Barack Obama fulfilled Democrats' desire to use funds to aid homeowners facing foreclosure and met Republican demands to restrict its use. Mr. Obama, who dodged an embarrassing political setback, said he was "gratified" by the 52-42 Senate vote, which ensures his Treasury Department will be able to spend the remaining bailout funds within days of taking office even as rumblings of instability in the banking industry are resurfacing. The Treasury may have to arrange yet another $15 billion bailout of Bank of America even before he takes office.
Financial Crisis Will Cost Western Banks a Share of Future China Profits In mid November, Bank of American Corp. (BAC) ponied up more than $7 billion to nearly double its already existing investment in the state-owned China Construction Bank Corp., a move that gave the biggest U.S. bank a 19% stake in China’s second-largest lender. Less than two months later, however, BofA sold $2.8 billion of its shares in the Beijing-based China Construction Bank, a jarring about face made necessary by the U.S. bank’s need to raise cash. And Bank of America isn’t the only Western lender making such a move.
Dow May Fall to 6,000 Should Low Break A decline in U.S. stock indexes below the 2008 lows from November may trigger a rout that pushes benchmark averages to levels not seen since the mid-1990s, according to two leading technical analysts. “Hopefully we don’t make new lows, because if we do, all bets are off,” said Ralph Acampora, who retired from Knight Capital Group Inc. in October 2007 after four decades on Wall Street. Should the Dow Jones Industrial Average fall below the 7,552.29 it touched on Nov. 20, it might tumble to 6,000, Acampora said. That’s 27 percent below yesterday’s close of 8,212.49 and a level last reached in October 1996.
Marc Faber on the Bailout - Jan 12, 2009 Bloomberg
Treasuries Fall on Speculation Obama to Borrow Record Amounts Treasuries fell, with benchmark 10- year notes snapping a six-day rally, on speculation President- elect Barack Obama will increase borrowing to record levels to pay for his economic-rescue package. Notes also dropped as gains in Asian stocks cut demand for the relative safety of government debt. House Democrats unveiled an $825 billion stimulus plan yesterday that includes tax cuts and federal spending. The proposal would add to the projected $1.2 trillion deficit this year.
Capitalism at the crossroads It is truism that the world economy now stands at the crossroads, with a system that brought much prosperity to most parts of the world in the past two decades, namely the combination of laissez faire capitalism and globalization, being blamed for a bulk of the world's ills. Socialists and communists are churning out volume after volume of indictments on the capitalist system, essentially using the first opportunity in two decades to vent all of their pent-up frustrations at being marginalized into obscure think-tanks and regular professorial salaries.
Ron Paul: "Obama Unlikely To Bring Change To Foreign Policy" (1/2)1/10/2009
Ron Paul: "Obama Unlikely To Bring Change To Foreign Policy" (2/2)
Bank of America Reported Near Deal on U.S. Aid The government is near a deal to give Bank of America a $20 billion capital injection and potentially absorb about $100 billion in losses on toxic assets, people involved in the transaction said Thursday. The bank had been pressing the government to help it soak up $15 billion to $20 billion of write-offs so that it could offset a groundswell of its own consumer loan losses and complete its acquisition of Merrill Lynch, the giant brokerage firm, according to people briefed on the talks. In exchange for the new support, the bank will cut its quarterly dividend to a penny from 32 cents, and accept new restrictions on compensation.
Circuit City to liquidate remaining US stores Circuit City and liquidators to sell off merchandise in remaining 567 US stores Circuit City Stores Inc., the nation's second-biggest consumer electronics retailer, reached an agreement with liquidators on Friday to sell the merchandise in its 567 U.S. stores after failing to find a buyer or a refinancing deal. The company, which employs more than 30,000 employees, said in court papers it has appointed Great American Group LLC, Hudson Capital Partners LLC, SB Capital Group LLC and Tiger Capital Group LLC as liquidators.
G.M. Lowers 2009 Outlook for All U.S. Auto Sales General Motors said on Thursday that it now expected that automakers would sell just 10.5 million vehicles in the United States this year, a number it had labeled its worst-case possibility in the restructuring plan submitted to Congress last month. As a result, G.M., which received a $4 billion loan from the federal government last month and is set to get an additional $5.4 billion on Friday, said it must accelerate its restructuring to be profitable in a weaker market.
Nearly 40K job cuts announced as weakness persist This is the point in the recession where one round of job cuts leads to another. Employers announced a total of nearly 40,000 job cuts Friday, almost all of them related to problems in other parts of the economy. Circuit City Stores Inc. said it is liquidating, closing all its U.S. stores and cutting 30,000 jobs after being hobbled, in part, by declining consumer spending. Rental car company Hertz Global Holdings Inc. is eliminating 4,000 jobs worldwide as families and business travelers forgo trips. Insurer WellPoint Inc. is cutting about 1,500 jobs, with rising unemployment leading to fewer people with health insurance. For the moment, every economic action seems to precipitate a negative reaction. Consumers made nervous by job cuts, tumbling home prices and swooning stocks aren't spending. That's hurt retailers and manufacturers, who have closed stores, cutting their employees' jobs or hours, which has made workers more nervous, so they spend less. And the spiral continues. Even falling gas prices will have hurt some workers. Petroleum company ConocoPhillips said Friday it will cut about 1,300 jobs, or 4 percent of its work force.
Saks eliminates 1,100 jobs Luxury retailer announces steps to cut costs by as much as $60 million in 2009 after dismal holiday sales. Luxury retailer Saks Inc. said Thursday that is eliminating 1,100 jobs and taking other steps to cut costs by about $50 million to $60 million in 2009 as the retail environment continues to deteriorate. Saks said the eliminated jobs are in both corporate support and store positions and amount to about 9 percent of the company's total work force. The latest job cuts follow the retailer's announcement in November that it was discontinuing its Club Libby Lu business, which employed about 1,700 associates.
Barnes & Noble cuts nearly 100 corporate jobs Barnes & Noble said most of the job cuts were due to the company's reduction in store openings and consolidation of functions within its retail and online operations. Barnes & Noble Inc. said Wednesday that it has eliminated nearly 100 positions in its corporate headquarters as the bookseller attempts to reduce overhead costs due to the sharp downturn in retail sales. Barnes & Noble said most of the job cuts were due to the company's reduction in store openings and consolidation of functions within its retail and online operations. As a result, the company expects to book an aftertax charge of $2.5 million, or 4 cents per share, in the fourth quarter of fiscal 2008.
WellPoint says it is eliminating 1,500 jobs, or 3.5 percent of staff, to reduce costs Health insurer WellPoint Inc. said Friday it will cut about 1,500 jobs to reduce costs as it copes with the U.S. recession. The Indianapolis-based insurer will eliminate about 3.5 percent of its staff, which currently totals more than 42,000. More than 900 open positions and 600 associate jobs are being eliminated. Rising unemployment is affecting health insurers because their employer customers have fewer workers to cover.
Random House gives details on restructuring The publisher outlines the scope of its reorganization with “minor” personnel cuts. The Doubleday and Broadway book imprints live on, despite the breakup of the Doubleday Broadway Publishing Group last month. And with jobs being eliminated, the people remaining will be doing more work. Six weeks after troubled Random House Inc. announced a reorganization that folded two divisions into the remaining three, the heads of the Knopf Doubleday Group and the Crown Publishing Group released details of their new structures. The Random House Publishing Group is expected to announce details of its restructuring later in the week.
Obama no smarter than Khrushchev or Mao, says top U.S. economist U.S. Economist Peter Schiff-- who predicted the housing bubble and financial crisis years ago-- says that the Bush & Obama bailouts/stimulus will make the economic crisis much worse.
US foreclosure filings up 81 percent in 2008 Foreclosure filings soared 81 percent last year as mortgage crisis proves worse than expected More than 2.3 million American homeowners faced foreclosure proceedings last year, an 81 percent increase from 2007, with the worst yet to come as consumers grapple with layoffs, shrinking investment portfolios and falling home prices. Nationwide, more than 860,000 properties were actually repossessed by lenders, more than double the 2007 level, according to RealtyTrac, a foreclosure listing firm based in Irvine, Calif., which compiled the figures. Moody's Economy.com, a research firm, predicts the number of homes lost to foreclosure is likely to rise by another 18 percent this year before tapering off slightly through 2011.
Freddie Eviction Plans Continue During Moratorium Freddie Mac continues to pursue legal action to evict tenants living in foreclosed properties, drawing fire from legal aid groups who say the moves violate the spirit of a moratorium the company agreed to in November. While Freddie and Fannie Mae have suspended sales of foreclosed properties and aren't locking people out of their homes, the mortgage-finance companies continue to initiate court cases against homeowners and pursue existing cases, according to Brad German at Freddie and Brian Faith at Fannie. Freddie is also still filing eviction proceedings against renters, while Fannie says it has suspended all action against tenants living in repossessed homes.
Feds put Madoff victims on hot seat The Securities Investor Protection Corp. is seeking data on clients’ withdrawals from as far back as they can remember, that could lay groundwork for clawbacks. Investors clobbered by Bernard Madoff’s admitted Ponzi scheme have something new to feel queasy about—forms sent out last month by the Securities Investor Protection Corp. The forms ask victims to reveal, under penalty of perjury, how much cash they’ve withdrawn from their Madoff accounts for as far back as they can remember. “Madoff’s records are reputed to be in disarray, so these clients’ sworn statements might be the best evidence out there,” said Howard Elisofon, a partner at Herrick Feinstein, who is representing several jilted Madoff investors. “By filling out the form, they may very well be providing a road map (for the Trustee) to assert a clawback.”
David Walker "Very Concerned Future of America Time For Washington To Wake; We Can't Continue To Borrow From Foreign Lenders" October 8, 2008. C-SPAN live at the National Press Club (Washington, D.C.), David M. Walker [former Comptroller General of the United States] talks in a panel of the Committee for a Responsible Federal Budget (part of the New America Foundation).
No taxation without inflation While reading a short essay by Donald H Grove, I was pleasantly surprised to learn of Michele Bachmann (R-Minn) who "is a member of the US House Financial Services Committee helping to hold the line against chairman Barney Frank", which automatically makes her one of my favorite people, although she would be a bigger favorite of mine if she were a hot foxy lady known for "viciously attacking chairman Barney Frank while dressed in a scanty cheerleader outfit." Anyway, it turns out that she explained to the Washington Times, "someone has to pay for [the stimulus package] whether it's today's taxpayers or their children and grandchildren. There comes a time when government simply cannot provide enough government jobs to bolster the economy. There comes a time when the taxpayers' burden to pay for all of the projects is too heavy to carry."
Pilot's life had prepared him for 'miracle' flight Chesley Sullenberger spent practically his whole life preparing for the five-minute crucible that was US Airways Flight 1549. He got his pilot's license at 14, flew fighter jets in the Air Force, investigated air disasters, mastered glider flying and even studied the psychology of how cockpit crews behave in a crisis. When the ultimate test came on a descent over the Hudson River, he spoke into the intercom only once and gave perhaps the most terrifying instruction a pilot can give - "Brace for impact" - with remarkable calm. And as the 150 passengers of Flight 1549 marveled at their hero pilot's skill and cool head, they learned what friends and relatives of Sullenberger say they have known all along. "This is someone who has not just spent his life flying airplanes, but has actually dug very deeply into what makes these things work, and I think he proved it," said Robert Bea, a civil engineer who has known Sullenberger for a year. "He is, how should I call it, a humble man," he added. "But he is damned smart."
Crash in the Hudson - photo gallery Well done US Air!!!!!!!!!!!!!!!!!! From Mark in Houston who works for Continental Airlines... "My Hats off to the US Airways crew... At 1600 feet, they obviously decided to make for the Hudson.. One hell of a decision. Make note, they landed in one of the most heavily populated places on earth, and no one on the ground was injured." God definitely put the right man behind the stick! This is nothing short of miraculous! Chesley B. "Sully" Sullenberger, III is a captain for a major U.S. airline with over 40 years of flying experience. A former U.S. Air Force (USAF) fighter pilot, he has served as an instructor and Air Line Pilots Association (ALPA) safety chairman, accident investigator and national technical committee member. He has participated in several USAF and National Transportation Safety Board (NTSB) accident investigations. His ALPA safety work led to the development of a Federal Aviation Administration (FAA) Advisory Circular. Working with National Aeronautics and Space Administration (NASA) scientists, he coauthored a paper on error inducing contexts in aviation. He was instrumental in the development and implementation of the Crew Resource Management (CRM) course used at his airline and has taught the course to hundreds of his colleagues. Sully is a graduate of the U.S. Air Force Academy (B.S.), Purdue University (M.S.) and the University of Northern Colorado (M.A.). He was a speaker on two panels at the High Reliability Organizations (HRO) 2007 International Conference in Deauville, France May 29-31, 2007. He has just been named a Visiting Scholar at the University of California, Berkeley
Mexico, Pakistan face 'rapid and sudden' collapse: Pentagon Report tries to forecast 25 years into the future A new Pentagon report that tries to predict the type of challenges the U.S. military will face over the next 25 years warns that Mexico and Pakistan could face a "rapid and sudden" collapse. "The Mexican possibility may seem less likely, but the government, its politicians, police and judicial infrastructure are all under sustained assault and pressure by criminal gangs and drug cartels," the assessment of worldwide security threats says. "How that international conflict turns out over the next several years will have a major impact on the stability of the Mexican state." "Any descent by Mexico into chaos would demand an American response based on the serious implications for homeland security alone," it adds. However, a similar scenario in Pakistan would be catastrophic.
Mexican Economy: Does What Happens in Mexico, Stay in Mexico? What is that giant sucking sound I hear? It is a nice little news tidbit on Mexico and its potential threat to the United States. Huh? Isn’t Mexico our friendly neighbor to the south that provides the U.S. with goods and services both legal and illicit? In November, the Joint Force Command (JFC) released the Joint Operating Environment (JOE) report, (pdf file) which details the threats that the U.S. faces from various nations. By its own admission, this report is highly speculative and meant to be a discussion starter rather than a forecast. In the report, the JFC identified potential weak and failing states. Number one on the list is Pakistan (no surprise). Any guesses as to number two - that’s right, Mexico! Mexico is in the middle of a war with drug cartels and all branches of the government are under attack. The JOE suggests that an escalation in violence could lead to the sudden and rapid collapse of Mexico. I must emphasize that the report is highly speculative and admits the likelihood of a Mexican collapse to be remote.
Europe: ECB Considering Centralizing Supervision of Banks The European Central Bank may grab more power. The European Central Bank (ecb) wants supervisory power over international banks. ecb President Jean-Claude Trichet has said the bank is considering taking on a bigger regulatory role. “One currency, one interest rate policy, but a fragmented national supervision of the banking sector—last year’s economic troubles revealed an important flaw in the eurozone,” reported Dutch business paper Handelsblad. “There is no central supervision of banks which operate internationally. … How unworkable this situation can be was revealed by the collapse of the Belgian-Dutch bank Fortis, which fell apart amid confusion and miscommunication between the supervisory authorities”.
Israel to 'lock down' West Bank JERUSALEM: The Israeli army said it will lock down the occupied West Bank on Friday as Hamas called for a day of "wrath" against the deadly offensive on Gaza. The West Bank will be closed off for 48 hours from midnight Thursday (2200 GMT), the army said in a statement. The announcement came after the Islamist movement Hamas called on Palestinians to observe a "day of wrath" on Friday by staging anti-Israeli protests after the weekly Muslim prayers.
Baltic Protests Erupt as EU’s Worst Economies Shake The Baltic countries of Latvia, Lithuania and Estonia are facing unrest and street protests over government austerity measures that may make political leaders casualties of the worst economic collapse in the European Union. Protesters hurled stones and broke windows at the Parliament building during an anti-government demonstration in the capital of Vilnius today, leading to 11 arrests. It followed a larger riot on Jan. 13 in Riga, Latvia’s biggest city, in which 106 people were detained. Lithuanian Prime Minister Andrius Kubilius held an emergency Cabinet meeting as police pushed protesters back with rubber bullets and tear gas.
Riots in Riga Coming soon to a town square near you. Does there remain any doubt that the preparations for martial law are for real? As soon as Americans realize they’ve been shafted by TARP and there’s no legal recourse, they will move to the streets pitchforks and hand. It’s a tried and true formula, don’t believe me then read the French Revolution. Hundreds of demonstrators have clashed with riot police in Latvia’s capital, Riga, after an anti-government protest. Police used mace and truncheons to disperse rioters who smashed shop windows and overturned a police van after failing to storm parliament. The violence followed a peaceful rally in which some 10,000 people accused the government of economic mismanagement and demanded new elections.
Anti-government rioting hits Riga Hundreds of demonstrators have clashed with riot police in Latvia's capital, Riga, after an anti-government protest. Police used mace and truncheons to disperse rioters who smashed shop windows and overturned a police van after failing to storm parliament. The violence followed a peaceful rally in which some 10,000 people accused the government of economic mismanagement and demanded new elections. Latvia's economy is expected to contract by at least 5% this year.
Asian debt and equity offers prove hard to refuse The start of the year has seen a flurry of deals in Asian debt and equity markets, and bankers expect similar bursts of activity throughout 2009 as sellers price their offerings attractively to tap pockets of demand. In less than two weeks, two major investors, including Bank of America and Royal Bank of Scotland, managed to sell $5.7 billion worth of shares in two Chinese banks at discounts ranging from 7 percent to 12 percent on the last traded share price. More such sales are expected as strapped investors look to raise cash, but much will depend on volatile stock markets.
Israel, U.S. eye Gaza border deal Israel's foreign minister flies to Washington on Friday to cement U.S. guarantees on stopping the flow of arms to Hamas, a core Israeli condition for ending its 20-day-old offensive in the Gaza Strip. Tzipi Livni's mission followed a proposal by the besieged Palestinian Islamist faction for a year-long, renewable truce under which the Jewish state would withdraw its troops within a week and all Gaza border crossings would open immediately. Israel did not immediately address those terms, which were relayed through Egyptian mediators as bloodshed crested on Thursday with Israeli forces pushing into the city of Gaza and killing a senior official in the Hamas administration.
Caroline not ready for U.S. Senate Ms. Kennedy lacks the experience to represent New York during this critical period of economic uncertainty. Caroline Kennedy no longer appears to be the obvious choice to succeed Hillary Clinton as the junior senator from New York. That’s a very good thing, since she lacks the experience needed to join the Senate, especially at a critical time for New York and the nation. The next senator must be able to play a major role in shaping Congressional efforts to deal with the economic crisis. She or he must have a strong voice on where the federal bailout money is spent; be able to influence the stimulus package; be knowledgeable about the state’s need to shepherd infrastructure spending; and be able to defend the city’s crucial financial industry from those who want to punish it for the transgressions of the past.
President George W. Bush Farewell Speech - Part 1 Most Americans returned to normal life after 9/11, he will say -- 'I never did.'
President George W. Bush Farewell Speech - Part 2
In Farewell Address, Bush Says He Kept America Safe President Bush defended his two terms in office during a farewell address from the White House on Thursday evening and conceded that he “experienced setbacks” over a tumultuous eight years. But he argued that he kept the country safe following Sept. 11, 2001. “There is legitimate debate about many of these decisions, but there can be little debate about the results,” Mr. Bush said. “America has gone more than seven years without another terrorist attack on our soil.”
The Ascent of Money (47:44 minutes; Dec 2, 2008) Excellent video! Download to your desktop, iPhone or iPod.
....... The Ascent of Money is an attempt to provide context for this crisis. It was written in anticipation of the crisis. I hope that, for those of you baffled or at least somewhat disconcerted by what is happening, it will offer some illumination. It is a lay person's guide to the international financial system, written on the assumption that you can't really understand something until you know where it came from. There's only one equation in the whole book, and it's there to be ridiculed. ....
My argument is that you can't really understand what happened in the global economy in the last ten years if you don't understand Chimerica.
It seemed like the perfect marriage: One partner did the saving and the other partner did the spending. You may know couples like that. The Chinese saved; the Americans spent. For the Chinese, this was advantageous. They had an export market that they could rely upon. From the United States' point of view, this was a line of credit at remarkably low interest rates. When ten-year Treasuries were trading at 3.5 percent, the United States was able to borrow at historically low rates, despite the fact that its borrowings kept going up and up and up.
Call it the "age of leverage." We have lived through an age of leverage in which the ratio of debt to GDP in the United States, including all forms of debt, public and private, has risen from about 150 percent to 355 percent. You can't understand the consumption boom of the last six or seven years, and you certainly can't understand the great leveraging of the last decade or so, if you don't understand Chimerica. It was only possible because of what Ben Bernanke called "the Asian savings glut."
So the big question is whether the financial crisis that began in August of last year threatens Chimerica. If it disrupts the relationship between the United States and the great capital exporting economies-in particular, China-then we have a very serious problem indeed. But I'm not entirely sure that it will. Let me tell you why. . . . read more online
Niall Ferguson - guest speaker, on The Ascent of Money (see 61 min video) Ferguson's book is important for context of crisis. Investment bankers refused to listen to Ferguson in 2006 regarding the impending liquidity crisis. Does the symbiotic relationship between China and America--"Chimerica" as Niall Ferguson calls it--give reason to hope that America's present economic situation will turn out to be not a crash, but a correction?
Niall Ferguson: "Chimerica" "Chimerica is a fantasy country that I dreamt up a couple of years ago. It's the economy you get when you add together China plus America. Chimerica has been, in many ways, the key to the way in which the world economy has worked in the past ten years," says Niall Ferguson.
Niall Ferguson: The Global Financial Crisis For the United States to contend with a financial crisis on this scale is fiscally possible, says Ferguson. The situation is actually much worse for Europe and for the petro-powers.
Niall Ferguson: Decline of the US? Does the U.S. recession mean the end of end of America as a superpower? Ferguson thinks not.
Conversations With History: The Ascent of Money Conversations host Harry Kreisler welcomes Harvard historian Niall Ferguson for a discussion of his new book, "The Ascent of Money: A Financial History of the World." Drawing on insights from the biological sciences, Ferguson describes the rise and evolution of finance focusing on insurance, banks, and the bond market. Using the examples of housing and the U.S. China economic relationship, Ferguson demonstrates the way history can inform our understanding of the current financial crisis. He also reflects on the implications of the financial crisis for American global hegemony.
Hands up all those who have heard President Obama utter the word "Gold" repeatedly.
How about a few times? Hmmm. Still no hands.
That's because he may only need to mention the word "Gold" one time.
I submit that the incoming President of the United States may be wearing a mask. A mask he will take off very soon.
Revealing the real new President of The United States of America: President Gold.
Some analysts have noted the uncanny similarities between the current financial crisis and the crisis of 1929.
Some have noted the uncanny similarities between President Roosevelt and President Obama. Infrastructure spending. Tax cuts. A "new deal".
Here's a quotation from President Obama: "There's a new book out about FDR's first 100 days and what you see in FDR that I hope my team can emulate, is not always getting it right, but projecting a sense of confidence, and a willingness to try things. And experiment in order to get people working again."
FDR. President Franklin Delano Roosevelt. Inaugurated on March 4, 1933. About 3.5 years after the October stock market crash of 1929. Keep that time period in mind as you read this. There is always a lagtime between the stock market's actions and the economy's actions. And the actions of the President of the United States.
The highlight of President Roosevelt's first 100 days in office? On April 5, 1933, one month after taking office, he announced his blockbuster:
Executive Order 6102. Claiming authority from the "War Time Powers Act" of 1917, President Roosevelt put total control of the American gold market into the hands of the US Treasury. American citizens were ordered to sell their gold. All of it.
The US Treasury bought all that was sold. At aprox $20 per ounce. The central bank and the commercial banks of America began the process of handing all gold to the treasury. The hand-over was completed by Dec 31, 1933. Over a period of about 9 months, American citizens transferred their gold to the US Treasury. . . . .
Hill support erodes for bailout funding Obama faces GOP resistance President-elect Barack Obama scrambled Wednesday to shore up congressional support to spend the second $350 billion under the Wall Street taxpayer bailout plan, amid mounting signs that Republicans who backed the original plan in October will overwhelmingly oppose it this time around. Lawrence H. Summers, Mr. Obama's chief economic adviser, and designated White House Chief of Staff Rahm Emanuel briefed Senate Republicans on the bailout plan, a day after Mr. Obama himself lobbied for support from his former Senate Democratic colleagues.
Hoyer Says Stimulus Won’t Be Rushed Through Congress House Majority Leader Steny Hoyer (D-Md.) told CNSNews.com on Wednesday that Democrats will not rush the economic stimulus bill through Congress, but intend to have it passed by the middle of next month. Republican lawmakers, however, told CNSNews.com that they remain dubious of Hoyer’s claim and say they are concerned the Democratic leadership will in fact try to ram through the bill--which could cost as much as $1 trillion--without appropriate deliberation.
Ron Paul: "We Need To Understand How We Got In This Mess" 1-13-2009
Gold Spot to Futures Price Gap Portends for Price Boom Most consider the New York market 'spot' price for an accurate indication of the true price. However, investors now buying buy physical or 'fabricated' gold, are paying a premium of between $20 and $30 per ounce. When these gaps existed in the past, major increases in the price of gold were imminent. For much of the 20th Century, gold continuously defied global government efforts to restrain its price. The premium currently in place may be evidence of the latest round of such policies. In 1934, President Roosevelt devalued the U.S. dollar by some 75 percent by raising the official price of gold from $20 to $35 an ounce. This opened the door to the first great wave of inflation of the 20th Century. Following World War II, national governments, particularly the American Treasury, held the vast bulk of the free world's gold. The official $35 price was maintained, almost by official dictate. However, in the 1960's, a 'free' market gradually developed that traded gold at a premium to the official $35 price. In response, the London Gold Pool, a central bankers' gentlemen's agreement led by the Bank of England and the New York Fed, was established to hold the so-called 'free' market price of gold "to more appropriate levels" … to "avoid unnecessary and disturbing fluctuations in price" which could erode "public confidence in the existing international monetary structure." The agreement lasted until 1968. Thereafter, the price of gold was set solely by the free market.
Gold Falls to Five-Week Low as Dollar Advances; Silver Drops Gold prices fell to a five-week low as gains by the dollar eroded the appeal of the precious metal as an alternative investment. Silver also dropped. The dollar climbed for the fourth consecutive session against a weighted basket of six major currencies. Some investors hoarded cash on concern that the economy's slump is accelerating. Sales at U.S. retailers fell more than twice as much as forecast in December amid escalating job losses and a credit crunch. "The fact that the recession is deepening is making people very jittery," said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. "Money is flowing back to the dollar. Gold is looking pretty vulnerable. People haven't been buying metals for safety."
The "Truth" About the Gold Market Today Just what is the link between retail gold coin prices and the apparent manipulation of gold futures & options...? YOU MAY HAVE SEEN some rather wild commentary of late concerning gold and silver prices. I can't vouch for the silver market - small, tight and still dependent on fast-falling industrial demand though it is. But as regards Gold Bullion , this sensational "analysis" mistakes the key basics of how the gold market actually works. First it confused a surge in gold-coin prices for a surge in the price of gold itself. Then it confused dealing in physical and paper Gold Futures , by ignoring the world's very largest, deepest and most heavily traded gold market. How so? By the start of 2008, Gold Prices the world over had been steadily climbing for more than six years. A growing handful of people were already invested, with the very earliest gold buyers tripling their money and more since the turn of the decade.
Debt burden tests global investments Bond sales risk failure President-elect Barack Obama will be testing the limits of the global markets' ability to absorb U.S. government debt by piling an $800 billion stimulus plan on top of more than $1 trillion in new obligations already scheduled this year. Wall Street analysts worry that China, Japan and other nations that readily helped finance U.S. debt in the past won't have the willingness or wherewithal to buy what will amount to three to four times the previous yearly record of Treasury-issued debt of $455 billion. Some analysts predict a calamity such as the failure of a U.S. bond auction, which could drive interest rates sharply higher just as the economy is struggling to recover.
Fed wants focus on banks Bernanke: Recovery depends on credit Federal Reserve Chairman Ben S. Bernanke said Tuesday that increasingly unpopular rescues of banks should remain the focus of the Treasury's $700 billion bailout program because banks are still fragile and weighed down by souring loans. In a speech only a day after President-elect Barack Obama highlighted how he would use the program to help consumers, delinquent homeowners, small businesses and even stressed state and local governments, Mr. Bernanke acknowledged that bailing out banks has become unpopular in Congress, but he said that nurturing the financial system back to health must remain the Treasury's top priority.
Last Nail in the Coffin for the U.S. Economy The government has just released one of the most shocking federal budget reports of all time. Even if you overlook the gaping holes in their economic assumptions, it's obvious the federal deficit is going to deliver a punch below the belt of the economy. And once you unveil the shaky assumptions, it's equally obvious the deficit could be the last nail in its coffin. First, Look at the Government's Own Shocking Numbers! The Congressional Budget Office (CBO) estimates that …The 2009 federal deficit will be $1.186 trillion! Even after adjusting for inflation, that's more than the combined cost of the Vietnam War ($698 billion) and the Korean War ($454 billion) … 4.6 times more than the entire S&L bailout of the 1980s … and 5.5 times larger than the Louisiana Purchase:
Stimulating The U.S. Economy All the Way to Rock Bottom With attention turning to the next big economic stimulus package, questions are still swirling about our economic troubles. How did we get here? How do we get out? As usual, Washington has all the wrong answers. According to many politicians, we got here by not spending enough, not consuming enough, and not regulating enough. Now government, like some mythical white knight, is going to ride in to save the day by blanketing the economy with dollars, hiring an army of new bureaucrats, creating make-work jobs, and sending everyone some form of a bailout check. The debate seems to focus on whether this will cost enough to save the economy, or if this is just a "down payment" with much more government spending to come. Talk like that would be comical, if the results weren't going to be so tragic.
Stimulus Plan to Cost $850 Billion, Emanuel Says he U.S. economic stimulus package being negotiated in Congress will cost $850 billion and will include about $300 billion in tax cuts, said President-elect Barack Obama's incoming chief of staff. Chief of Staff Rahm Emanuel spoke with reporters today at the Capitol in Washington, where lawmakers are rushing to work out details of the two-year plan. Obama and lawmakers had previously been discussing a package of about $775 billion. Earlier today, Democratic Senator Charles Schumer of New York said the price tag might rise to as much $850 billion. House Speaker Nancy Pelosi cautioned the size may still shrink, saying, "We're working on the numbers right now."
Morgan Stanley-Citi Venture May See Challenge From 'Breakaways' Morgan Stanley's joint venture with Citigroup Inc.'s Smith Barney will create the biggest group of financial advisers at a time when some investors and brokers are seeking independence from Wall Street titans. The venture, which New York-based Morgan Stanley will control with a 51 percent stake, would employ 20,390 brokers in more than 1,000 branches. The new entity would surpass the 16,000-strong "thundering herd" of brokers at Merrill Lynch & Co., which was acquired by Bank of America Corp. on Jan. 2.
U.S. Economy: Retail Sales Decline for a Sixth Month Sales at U.S. retailers fell more than twice as much as forecast in December as job losses and the lack of credit led Americans to cut back on everything from car purchases to eating out. The 2.7 percent slump marked the sixth straight month of declines, the longest string since comparable records began in 1992, the Commerce Department said today in Washington. Labor Department data showed the global collapse in commodities caused prices of goods imported by the U.S. to fall for a fifth month.
Peter Schiff: "Auto Makers Should Go Bankrupt"
The Fed’s Bubble Trouble Will Cause Rates to Spike and Spawn Hyperinflation A few weeks ago, when the U.S. Federal Reserve announced a strategy designed to bring down long-term interest and home mortgage rates through unlimited Treasury bond purchases, government debt staged a spectacular rally. To the unschooled market observer, the spike may be difficult to understand. After all, why would the value of U.S. Treasury bonds rise while their underlying credit quality is deteriorating faster than Bernie Madoff’s social schedule? The move is actually a perfect illustration of the tried and true Wall Street strategy of "buy the rumor and sell the fact."
US foreclosure filings up 81 percent in 2008 Foreclosure filings soared 81 percent last year as mortgage crisis proves worse than expected More than 2.3 million American homeowners faced foreclosure proceedings last year, an 81 percent increase from 2007, with the worst yet to come as consumers grapple with layoffs, shrinking investment portfolios and falling home prices. Nationwide, more than 860,000 properties were actually repossessed by lenders, more than double the 2007 level, according to RealtyTrac, a foreclosure listing firm based in Irvine, Calif., which compiled the figures. Moody's Economy.com, a research firm, predicts the number of homes lost to foreclosure is likely to rise by another 18 percent this year before tapering off slightly through 2011.
Swindlers Find Growing Market in Foreclosures As home values across the country continue to plummet, the authorities say a new breed of swindler is preying on the tens of thousands of homeowners desperate to avoid foreclosure. Until recently, defrauders tried to bilk homeowners out of the equity in their homes. Now, with that equity often dried up, they are presenting themselves as “foreclosure rescue companies” that charge upfront fees to modify loans but often do nothing to stave off foreclosure.
Stocks tumble as worries grow about banks Stocks slide after downbeat retail sales report, worries about banking sector; Dow falls 250 Volatility is reasserting itself in the stock market. A darkening outlook for companies from banks to retailers to energy producers pummeled Wall Street Wednesday, sending the Dow Jones industrials down nearly 250 points, or 2.94 percent, and giving the other major indexes a loss of more than 3 percent. The plunge leaves the Dow and the broader Standard & Poor's 500 index down more than 9 percent in six sessions. The S&P 500, the gauge tracked by professional investors, has now given up half its gains since it closed at an 11-year low on Nov. 20.
Oil Slump Forces Rich Arab Countries to Run Deficits Tumbling oil prices are forcing many of the richest Persian Gulf states to record budget deficits and limit a critical source of foreign investment for poorer Arab countries. Central bank governors and finance ministers from the 22- member Arab League gathered in Kuwait City today for a week of meetings on the global financial crisis and Gulf efforts to create a single currency. The conference opened with a minute of silence for the more than 900 Palestinians killed in a 2 1/2-week Israeli offensive in the Gaza Strip.
Obama climate czar has socialist ties Group sees 'global governance' as solution Until last week, Carol M. Browner, President-elect Barack Obama's pick as global warming czar, was listed as one of 14 leaders of a socialist group's Commission for a Sustainable World Society, which calls for "global governance" and says rich countries must shrink their economies to address climate change. By Thursday, Mrs. Browner's name and biography had been removed from Socialist International's Web page, though a photo of her speaking June 30 to the group's congress in Greece was still available. Socialist International, an umbrella group for many of the world's social democratic political parties such as Britain's Labor Party, says it supports socialism and is harshly critical of U.S. policies.
Bin Laden message: Stop 'aggression' against Gaza Al Qaeda leader Osama bin Laden has apparently released a new audio message calling for a jihad, or holy war, against Israel for its Gaza campaign. The 22-minute message contains "an invitation" from bin Laden to take part in "jihad to stop the aggression against Gaza." The audio message was posted on a radical Islamist Web site that has posted other statements from bin Laden in the past. CNN could not independently confirm the authenticity of the message, but the speaker's voice was similar to other recordings that bin Laden has made.
U.S. military report warns 'sudden collapse' of Mexico is possible Mexico is one of two countries that "bear consideration for a rapid and sudden collapse," according to a report by the U.S. Joint Forces Command on worldwide security threats. The command's "Joint Operating Environment (JOE 2008)" report, which contains projections of global threats and potential next wars, puts Pakistan on the same level as Mexico. "In terms of worse-case scenarios for the Joint Force and indeed the world, two large and important states bear consideration for a rapid and sudden collapse: Pakistan and Mexico.
2,000 fresh troops sent to Juárez as violence continues The Mexican army has sent an estimated 2,000 troops to Juárez as part of a rotation even as the death toll surpassed 35 so far this year. Two men were killed Tuesday evening, shot multiple times in separate attacks in which nearly 70 rounds were fired. About 5 p.m., Hector Ramiro Guardado Pereira, 34, was slain in colonia Infonavit Tecnologico, said Chihuahua state police. Investigators counted 40 casings of three calibers. About 10 minutes later, Agapito Aguirre Leyva, 36, was shot in the 1500 block of Acuario, where 29 casings of three calibers were found, police said.
Joint Forces report warns Mexico could destabilize (see video report) Mexico is one of two countries that "bear consideration for a rapid and sudden collapse," according to a report by the U.S. Joint Forces Command on worldwide security threats. The command's "Joint Operating Environment (JOE 2008)" report, which contains projections of global threats and potential next wars, puts Pakistan on the same level as Mexico. "In terms of worse-case scenarios for the Joint Force and indeed the world, two large and important states bear consideration for a rapid and sudden collapse: Pakistan and Mexico. "The Mexican possibility may seem less likely, but the government, its politicians, police and judicial infrastructure are all under sustained assault and pressure by criminal gangs and drug cartels. How that internal conflict turns out over the next several years will have a major impact on the stability of the Mexican state. Any descent by Mexico into chaos would demand an American response based on the serious implications for homeland security alone."
Jim Rogers Says Bankruptcy Would Be Good for GM Dec. 12 - Jim Rogers, chairman of Rogers Holdings, talks with B Betty Liu about the benefits of bankruptcy for General Motors Corp. Rogers, speaking from Rocky Mount, North Carolina, also discusses the viability of the U.S. auto industry and investment strategy for Treasuries
The Last Time the Feds Devalued the Dollar to Save the Banks We dipped once again into the Federal Reserve Bulletin Publication from June, 1934 to take a closer look at the growth of the monetary base, and found an interesting graphic that shows the accounting for the January 1934 devaluation of the dollar and the subsequent result on Bank Reserves in the Federal Reserve System. As you will recall, the Gold Act, or more properly Executive Order 6102 of April 5, 1933, required Americans to surrender their gold coinage and certificates to the Federal Reserve Banks by May 1, 1933. There were no prosecutions for non-compliance except one benchmark case which was brought voluntarily by a person who wished to challenge the act in court. After a substantial portion of the gold was turned in by US citizens and taken from their bank based safe deposit boxes, the government officially devalued the dollar from 20.67 to 35.00 per ounce in the Gold Reserve Act of January 31, 1934.
Economy starts '09 on weaker footing; outlook dim Federal Reserve: economy starts new year on weaker footing as Americans retrench, outlook dim The U.S. economy started the new year on weaker footing as recession-shocked Americans retrenched further, forcing retailers to ring up fewer sales and factories to cut back production. The Federal Reserve's new snapshot of business conditions nationwide, released Wednesday, suggested the country's economic picture has darkened over the last two months. The outlook appears equally dim. "Overall economic activity continued to weaken across almost all of the Federal Reserve's districts," the report concluded. To help brace the economy, Fed Chairman Ben Bernanke and his colleagues have signaled that they will leave a key interest rate at record-low levels for some time.
For Big US Banks, Trouble Is Just Getting Started Troubles at some of banking's biggest names in early 2009 are merely setting the tone for what is likely to be another disastrous year for the industry. As the future of Citigroup has come into question and analysts express concern over Bank of America and HSBC, the worst could well be yet to come for an industry still smarting over a bruising 2008. The $700 billion Troubled Asset Relief Program, which banks can access to bolster their capital positions, will help ease some of the damage as will Federal Reserve moves to ease monetary policy. The liquidation moves of 2008 have lagging effects that should take root in the coming months. But banks will fail, and at numbers large enough to cause alarm.
Tax Errors and Bailout Gaffes: Is Tim Geithner the Right Man to Run Treasury? A funny thing happened on the way to Timothy Geithner's confirmation hearings: Turns out Barack Obama's pick for Treasury Secretary, the man who would oversee the IRS, owed back taxes and had a housekeeper whose working papers expired. Geithner's "nanny gate" issues are seen as relatively minor, a technicality. The same cannot be said of his failure to pay self-employment taxes while employed at the IMF, which reportedly tells its U.S. employees emphatically that they need to cover Social Security and Medicare levies themselves.
Geithner Hearing Delayed - Scheduled for Jan. 21 President-elect Barack Obama offered strong support for Timothy F. Geithner at brief news conference with Vice President-elect Joseph R. Biden Jr. and Senator Lindsey Graham. Mr. Geithner failed to pay more than $34,000 in federal taxes over several years early this decade, and also faces questions about the employment papers of a former household employee, suddenly complicating what had seemed to be an easy confirmation process in the Senate.
Obama: Geithner situation an 'embarrassment' Obama says Geithner tax situation an 'embarrassment' but still expects treasury confirmation President-elect Barack Obama called disclosures about Treasury choice Timothy Geithner's tax problems an embarrassment Wednesday but said Geithner's "innocent mistake" shouldn't keep him from confirmation as the new administration's top official in urgent efforts to revive the economy. The revelations that Geithner had failed to pay $34,000 in taxes several years ago derailed Senate Democrats' plans to speed him to confirmation by Inauguration Day, but senators in both parties said the information was unlikely to torpedo his chances in the end. Obama had hoped for approval by Tuesday, but senators now have scheduled Geithner's confirmation hearing for next Wednesday, with Senate debate and a vote sometime after that.
TAKE A LAUGH BREAK! This is too funny . . . NBR | Fiscalis | PBS PBS Airdate: January 9, 2009 Nightly Business Report created this fiscal stimulus commercial. It is a wry look at the government's plan to get American consumers spending again. The side effect may be side-splitting laughter.
Stocks tumble on disappointing retail sales Wall Street tumbles on downbeat retail sales report, continuing worries about banking sector Volatility is clearly reasserting itself in the stock market. A darkening outlook for companies from banks to retailers to energy producers pummeled Wall Street Wednesday, sending the Dow Jones industrials down nearly 250 points, or 2.94 percent, and giving the other major indexes a loss of 3 percent. The plunge leaves the Dow and the broader Standard & Poor's 500 index down more than 9 percent in six sessions. The S&P 500, the gauge tracked by professional investors, has now given up half its gains since it closed at an 11-year low on Nov. 20.
Retail sales plunge more than expected 2.7 percent in December, record sixth straight decline Retail sales plunged far more than expected in December, ending a dismal holiday season with a record sixth straight monthly decline, and there's no relief in sight as consumer demand remains weak. The Commerce Department reported Wednesday that retail sales dropped 2.7 percent last month, more than double the 1.2 percent decline that Wall Street expected. The December plunge in sales, which followed a November drop revised downward to 2.1 percent, confirmed private sector reports that retailers had suffered their worst holiday shopping season since at least 1969.
Citigroup Stock Falls Below Critical $5 Level Shares of Citigroup are taking another run below $5, a critical point that could trigger mutual funds and pension plans to dump the company. Most institutional investors-pension funds, endowments and the like-are prohibited from owning stock worth less than $5. Citi stock is a staple of many such funds and could be battered even further should they decide to jettison the stock if it remains below that crucial level.
JPMorgan chief says 2009 will be bleak The US financial and economic crisis will worsen this year as hard-hit consumers default on credit cards and other loans, Jamie Dimon, chief executive of JPMorgan Chase, has predicted in an interview with the Financial Times. Mr Dimon, whose bank will report fourth-quarter results on Thursday, gave his bleak assessment as shares on both sides of the Atlantic tumbled on rising fears that banks would need more capital and a larger-than-expected fall in US retail sales. "The worst of the economic situation is not yet behind us. It looks as if it will continue to deteriorate for most of 2009,” said Mr Dimon. “In terms of our sector, we expect consumer loans and credit cards to continue to get worse."
$150bn taken out of hedge funds Investors pulled close to a net $150bn from hedge funds last month in spite of moves by dozens of funds to halt or suspend redemptions. The record December figure, equivalent to about 10 per cent of industry assets, extends the run of outflows to four consecutive months and has increased the total net outflow for 2008 to $200bn. The size of the once lucrative industry has almost halved in the past year, to $1,000bn under management, according to data from TrimTabs Investment Research and Barclay Hedge. Conrad Gann, chief operating officer of TrimTabs, said he foresaw more redemptions in the first quarter of 2009.
Apple’s Chief Taking a Medical Leave Saying his health-related issues were "more complex" than he originally thought, Steven P. Jobs, Apple’s chief executive, announced Wednesday that he would take a medical leave of absence from the company until the end of June. In a letter to Apple employees released after markets closed, Mr. Jobs said that curiosity over his personal health "continues to be a distraction not only for me and my family, but everyone else at Apple as well." Mr. Jobs said he had asked Tim Cook, Apple’s longtime chief operating officer, to take on responsibility for Apple’s day-to-day operations. "As C.E.O., I plan to remain involved in major strategic decisions while I am out," Mr. Jobs added. "Our board of directors fully supports this plan."
Apple's Steve Jobs Takes Medical Leave; Shares Plunge Apple Inc. Chief Executive Officer Steve Jobs, who said this month that he is being treated for a nutritional ailment, will take a medical leave of absence through the end of June. The shares fell 6.4 percent. Chief Operating Officer Tim Cook, who filled in during Jobs's 2004 medical leave, has taken over Apple's day-to-day operations, the Cupertino, California-based company said today in a statement. Jobs said he will remain involved in major strategic decisions. "During the past week I have learned that my health- related issues are more complex than I originally thought," Jobs said in the statement. "In order to take myself out of the limelight and focus on my health, and to allow everyone at Apple to focus on delivering extraordinary products, I have decided to take a medical leave of absence."
Motorola Cuts 4,000 More Jobs as Phone Sales Slump Motorola Inc., the second-biggest U.S. seller of mobile phones, is cutting 4,000 more jobs as consumers stave off purchases amid the economic recession. About three-fourths of the cuts will come from its mobile devices unit, Schaumburg, Illinois-based Motorola said today in a statement. The reduction follows 3,000 cuts disclosed in October as the declining phone business leached profitability.
Nortel files for Chapter 11 bankruptcy protection Struggling Canadian networking company plans extensive business, financial restructuring Financially struggling Nortel Networks today filed for Chapter 11 in U.S. bankruptcy court. The financially ailing Canadian company is seeking creditor protection in the U.S., Canada and EMEA (Europe, the Middle East and Africa), it said in a statement. Nortel gave "full consideration to the alternatives" to bankruptcy, but given the current economic downturn decided that bankruptcy is in the company's best interest long term. The telecommunications equipment vendor will undertake "a comprehensive business and financial restructuring," and expects to emerge from the bankruptcy process "more focused, financially sound and competitive."
Microsoft expected to announce layoffs In past downturns, Microsoft has been able to manage to trim around the edges and avoid large, widespread layoffs. But, as Steve Ballmer made clear in an interview with me last week, this is no ordinary downturn. "The fact of the matter is, this is not a downturn, this is a bit of a reset," he said. "Those are quite different and we're trying to really suss through what we think that means for us." For some weeks now, the company has been considering whether it would need to cut a significant number of jobs, with some analysts predicting layoffs of anywhere from 10 percent to 17 percent of Microsoft's 95,000 employee workforce, though I am hearing the number could be significantly less than those figures. The Wall Street Journal reported on Wednesday that cuts could come as early as next week; the company is scheduled to deliver its earnings report on Thursday.
Google lays off 100 recruiters Google, having reduced its hiring rate, is also reducing its hiring staff. The company said on its corporate blog that it's cutting about 100 jobs. "Given the state of the economy, we recognized that we needed fewer people focused on hiring," said Laszlo Bock, Google's vice president of people operations, in the blog posting. "Our first step to address this was to wind down almost all our contracts with external contractors and vendors providing recruiting services for Google. However, after much consideration, we have with great regret decided that we need to go further and reduce the overall size of our recruiting organization by approximately 100 positions."
A glitch in Uncle Sam's YouTube embrace? Earlier this week, Congress announced what were billed as Senate and House "hubs" as part of a move to improve lines of (two-way) communication between government and the people. It's hard to sit through the cavalcade of phony welcomes as the leadership performs the equivalent of a company commercial for the video-hosting service. Watching these pathetic twits appear on a video is exquisitely painful. I still can't decide who gave the worst performance, but between Nancy Pelosi, Harry Reid, Mitch McConnell and John Boehner, the competition was intense. (Acting lessons only go so far, folks.) Still, here's a tip of the hat to the hired help in Washington for embracing technology, even in a small way. Besides, since we're on the eve of a changing of the guard, who am I to rail against a step to facilitate the "conversation" between the elected and the electorate?
Online News Highly Trusted (as per Ken Rutkowski, on 14-01-2009) http://www.kenradio.com * Will Online Video Save the News Industry? Online news sites are now second only to recommendations from friends as the primary trusted source of information in the UK, and are “highly trusted”* sources of information by 40% of people in 16 countries surveyed including the US. A new by survey TNS found that online news is highly trusted by 40% of those in the UK - second only to word-of-mouth recommendations, which were highly trusted by 45% of respondents. 76% of those surveyed worldwide say that they had ‘looked up the news’ when asked what they had done online in the last month, further emphasizing the growing importance of online news sites.
Ban on private jets lifted from bailout program Bank executives will get to fly their company jets after all. Financial institutions that get assistance through the $700-billion Troubled Asset Relief Program had faced a provision that recipients of the money would be prohibited from owning or leasing private aircraft.
Kansas makes sure jet provision does not fly Bank executives will get to fly their company jets after all. House legislation placing restrictions on financial institutions that get assistance through the $700 billion Troubled Asset Relief Program had included a provision that recipients of the money would be prohibited from owning or leasing private aircraft. But Kansas is one of the nation's centers of aircraft manufacturing, and Kansas lawmakers complained that the provision could reduce aircraft orders, cost jobs, and damage the industry's image.
Madoff Goes to the Courthouse: Why Isn't He Already in the Big House? (see video clip) The judge rejected a bid to put Madoff in jail, CNBC reports. "He remains out on bail pending his trial after a judge denied the government's effort to have the bail revoked." Bernie Madoff went to court Wednesday afternoon as prosecutors sought to have the disgraced money manager sent to jail for having violated a court order when he mailed nearly $1 million in valuables to family and friends. Prosecutors say Madoff also had plans to transfer $200 million to $300 million of investors' money to family and friends.
Keynesian Economics Is Wrong Bigger Gov't Is Not Stimulus CATO Institute's Dan Mitchell discusses the failures of Keynesianism.
Oil prices sink with US inventories bulging Oil prices fall as energy demand wanes and US inventories grow Oil prices fell Wednesday with a government report showing that crude inventories continued to grow, suggesting that demand for oil and gasoline will not rebound anytime soon. Light, sweet crude for February delivery fell 50 cents to settle at $37.28 a barrel on the New York Mercantile Exchange after trading as high as $39.45. Prices have fallen from as high as $50.47 just last week with evidence growing that a weakened global economy has eaten away at energy demand.
House Approves SCHIP Expansion Bill That Bush Vetoed Twice House Votes to Expand Health Care for Children The House voted Wednesday to expand government-sponsored health care to 4 million more children of working families, making a down payment on President-elect Barack Obama's promise to provide universal health care to all Americans who want it. After the bill's passage, Obama said he hoped the Senate acts with the "same sense of urgency so that it can be one of the first measures I sign into law when I am president." "In this moment of crisis, ensuring that every child in America has access to affordable health care is not just good economic policy, but a moral obligation we hold as parents and citizens," Obama said.
US businesses concerned about ICANN changes Some Internet-based businesses in the U.S. would support the splitting of the domain-name governance system instead of allowing an agreement between the Internet Corporation for Assigned Names and Numbers (ICANN) and the U.S. government to end later this year, the leader of a U.S. trade association said Wednesday. When a ten-year-old agreement between ICANN and the U.S. Department of Commerce expires in September, the organization will be vulnerable to outside takeover by other governments, said Steve DelBianco, executive director of NetChoice, a trade group of online companies.
The Origin of the Fed - Murray N. Rothbard
Murray Rothbard Speech (1/3) This is the famous speech by Murray Rothbard. His exuberance is palpable as he explains the meaning of it all for the place of liberty in the history of civilization. A brilliant scholar and passionate defender of Liberty, Professor Murray Rothbard (1926-1995) was dean of the Austrian School of economics, holder of the S.J. Hall Chair at the University of Nevada, Las Vegas, and Academic Vice President of the Ludwig von Mises Institute. "Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote!" ~Benjamin Franklin
Murray Rothbard Speech (2/3)
Murray Rothbard Speech (3/3)
The Mandrake Mechanism 1 G. Edward Griffin Who creates the money to pay the interest? (same as video clip below) One of the most perplexing questions associated with this process is "Where does the money come from to pay the interest?" If you borrow $10,000 from a bank at 9%, you owe $10,900. But the bank only manufactures $10,000 for the loan. It would seem, therefore, that there is no way that you -- and all others with similar loans -- can possibly pay off your indebtedness. The amount of money put into circulation just isn't enough to cover the total debt, including interest. This has led some to the conclusion that it is necessary for you to borrow the $900 for interest, and that, in turn, leads to still more interest. The assumption is that, the more we borrow, the more we have to borrow, and that debt based on fiat money is a never ending spiral leading inexorably to more and more debt.
The Mandrake Mechanism 2 Understanding the Illusion That's really all one needs to know about the operation of the banking cartel under the protection of the Federal Reserve. But it would be a shame to stop here without taking a look at the actual cogs, mirrors, and pulleys that make the magical mechanism work. It is a truly fascinating engine of mystery and deception. Then we shall move in closer and examine each component in detail.
The Mandrake Mechanism 3 THE DISCOUNT WINDOW The Discount Window is merely bankers' language for the loan window. When banks run short of money, the Federal Reserve stands ready as the "bankers' bank" to lend it. There are many reasons for them to need loans. Since they hold "reserves" of only about one or two per cent of their deposits in vault cash and eight or nine per cent in securities, their operating margin is extremely thin. It is common for them to experience temporary negative balances caused by unusual customer demand for cash or unusually large clusters of checks all clearing through other banks at the same time. Sometimes they make bad loans and, when these former "assets" are removed from their books, their "reserves" are also decreased and may, in fact, become negative. Finally, there is the profit motive. When banks borrow from the Federal Reserve at one interest rate and lend it out at a higher rate, there is an obvious advantage. But that is merely the beginning.
The Mandrake Mechanism 4 THE OPEN MARKET OPERATION The most important method used by the Federal Reserve for the creation of fiat money is the purchase and sale of securities on the open market. But, before jumping into this, a word of warning. Don't expect what follows to make any sense. Just be prepared to know that this is how they do it. The trick lies in the use of words and phrases which have technical meanings quite different from what they imply to the average citizen. So keep your eye on the words. They are not meant to explain but to deceive. In spite of first appearances, the process is not complicated. It is just absurd.
The Mandrake Mechanism 5 Banking & Federal Reserve Quotes "The entire taxing and monetary systems are hereby placed under the U.C.C. (Uniform Commercial Code)" -- The Federal Tax Lien Act of 1966
"The few who understand the system, will either be so interested from it's profits or so dependent on it's favors, that there will be no opposition from that class." -- Rothschild Brothers of London, 1863
"Give me control of a nation's money and I care not who makes it's laws" -- Mayer Amschel Bauer Rothschild
"Most Americans have no real understanding of the operation of the international money lenders. The accounts of the Federal Reserve System have never been audited. It operates outside the control of Congress and manipulates the credit of the United States" -- Sen. Barry Goldwater (Rep. AR) . . .
The Mandrake Mechanism 6 Banking & Federal Reserve Quotes "[Every circulating FRN] represents a one dollar debt to the Federal Reserve system." Money Facts, House Banking and Currency Committee
"...the increase in the assets of the Federal Reserve banks from 143 million dollars in 1913 to 45 billion dollars in 1949 went directly to the private stockholders of the [federal reserve] banks." --Eustace Mullins
"As soon as Mr. Roosevelt took office, the Federal Reserve began to buy government securities at the rate of ten million dollars a week for 10 weeks, and created one hundred million dollars in new [checkbook] currency, which alleviated the critical famine of money and credit, and the factories started hiring people again." -- Eustace Mullins
"Should government refrain from regulation (taxation), the worthlessness of the money becomes apparent and the fraud can no longer be concealed." -- John Maynard Keynes, "Consequences of Peace."
"By this means government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft."--John Maynard Keynes (the father of 'Keynesian Economics' which our nation now endures) in his book "THE ECONOMIC CONSEQUENCES OF THE PEACE" (1920).
"These 12 corporations together cover the whole country and monopolize and use for private gain every dollar of the public currency..." -- Mr. Crozier of Cincinnati, before Senate Banking and Currency Committee - 1913
"A great industrial nation is controlled by it's system of credit. Our system of credit is concentrated in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the world--no longer a government of free opinion, no longer a government by conviction and vote of the majority, but a government by the opinion and duress of small groups of dominant men." --President Woodrow Wilson
"The Federal Reserve Banks are not federal instrumentalities..." -- Lewis vs. United States 9th Circuit 1992
"The Federal Reserve banks, while not part of the government,..." -- United States budget for 1991 and 1992 part 7, page 10
"The Federal Reserve bank buys government bonds without one penny..." Congressman Wright Patman, Congressional Record, Sept 30, 1941
"The Federal Reserve system pays the U.S. Treasury 020.60 per thousand notes --a little over 2 cents each-- without regard to the face value of the note. Federal Reserve Notes, incidently, are the only type of currency now produced for circulation. They are printed exclusively by the Treasury's Bureau of Engraving and Printing, and the $20.60 per thousand price reflects the Bureau's full cost of production. Federal Reserve Notes are printed in 01, 02, 05, 10, 20, 50, and 100 dollar denominations only; notes of 500, 1000, 5000, and 10,000 denominations were last printed in 1945." --Donald J. Winn, Assistant to the Board of Governors of the Federal Reserve system
"Neither paper currency nor deposits have value as commodities, intrinsically, a 'dollar' bill is just a piece of paper. Deposits are merely book entries." -- Modern Money Mechanics Workbook, Federal Reserve Bank of Chicago, 1975
"This [Federal Reserve Act] establishes the most gigantic trust on earth. When the President [Wilson} signs this bill, the invisible government of the monetary power will be legalized....the worst legislative crime of the ages is perpetrated by this banking and currency bill." --Charles A. Lindbergh, Sr. , 1913
"From now on, depressions will be scientifically created." -- Congressman Charles A. Lindbergh Sr., 1913
"The [Federal Reserve Act] as it stands seems to me to open the way to a vast inflation of the currency... I do not like to think that any law can be passed that will make it possible to submerge the gold standard in a flood of irredeemable paper currency." -- Henry Cabot Lodge Sr., 1913
"When you or I write a check there must be sufficient funds in out account to cover the check, but when the Federal Reserve writes a check there is no bank deposit on which that check is drawn. When the Federal Reserve writes a check, it is creating money." -- Putting it simply, Boston Federal Reserve Bank . . . read more at YouTube.
All Signs Point to Explosive Rise in Price of Gold Sheldon Inwentash: . . . . My view was the opposite. I thought, gold's been around and it's a brand. Now what has happened is that the price of gold has been grinding up. It's three times the price it was in '02, but there's less gold around, ostensibly because the rise in all the other commodities caused the margins of these big mining companies to shrink. People used to say you could mine gold for $150 or $200 or $250. Now for many companies it's $500-$600, all in. It's a very, very difficult business. So even though we've seen a rise in the nominal price of gold, we're seeing less gold produced. But what's happened here is the bubble's burst, the fat lady's sung, the reality's setting in and everything is pointing to a massive risk of deflation. Deflation is much more dangerous than inflation because it's hard to get out of that hole, especially if you have debt, and it's a very, very negative scenario.
Satyam scandal puts Gold in selling pressure Volatile stock market in the wake of India's biggest accounting scandal involved IT company Satyam Computer Services led to steady declines in gold futures in the Indian commodity exchanges. As the markets closed on Tuesday, gold futures at MCX slipped after a higher opening on sustained selling. Analysts said gold futures also fell thanks to the recovery in rupee. Open interest for Feb gold on MCX was at 13,941 lots, up from 13,808 a day earlier. Volume on Monday was 71.33 kgs. "Gold is in selling pressure thanks to the Satyam scandal," said Anil Mishra, a gold futures analyst in Mumbai.
The lull in gold price, a great buying opportunity Good news everyone. Gold has reached a one-month low. In fact, February gold futures on Comex fell the most in six weeks. They tumbled four percent on the day, down US$34. This is very good news. It means you will have a chance to buy gold at lower prices before it goes up higher later this year. Much higher, in fact, according to the 2009 forecast made by Diggers and Drillers editor Al Robinson.
Canadian Mint unveils collectors' Gold coins The Royal Canadian Mint has launched its first collector coins for 2009, including Cn$100, CN$200 and CN$300 face value gold issues. A 2009 CN$300 gold coin features the Yukon coat of arms, officially granted by Queen Elizabeth II in 1956 and celebrates the province’s role in one of the world’s greatest gold rushes. Just 1,000 of the coins have been minted, priced at CN$1,659.95. A new 22-c $200 gold coin has been minted in the historical commerce series, commemorating the opening of Canada’s first commercial coal mine in Port Morien, Cape Breton, in 1720.
Bernanke Says Stimulus Alone Won’t End Crunch The chairman of the Federal Reserve, Ben S. Bernanke, said Tuesday in London that a fiscal stimulus package being discussed by the incoming administration would help revive the economy but would not be enough to lead to a lasting recovery. “The incoming administration and the Congress are currently discussing a substantial fiscal package that, if enacted, could provide a significant boost to economic activity,” Mr. Bernanke said.
Three Ideas That Should Scare The Hell Out Of You Things are looking pretty bleak. There is bad news in housing, the stock market, commercial real estate, jobs, and wages . Unfortunately, no matter how bad things are, someone always comes along to propose a "solution" that is guaranteed to make the situation much worse. Please consider the following ideas. 1. Anatole Kaletsky is proposing to Punish savers and make them spend money. 2. Obama Says 'If Paul Krugman Has a Good Idea … Then We're Going to Do It' 3. Time Magazine is making The Case for Bigger Government.
Obama Says He Will Accept Ideas From Krugman
Basic Economics There are so many complications, economics wise, and there shouldn't be, because as Ludwig von Mises once said, defining economics, "People Act." It's just that simple! Examples are everywhere. Toyota is closing it's plants for 11 days, and how many employees does this affect? Let's say 2,000, at $200 a day, for 11 days. The loss in payroll to workers is a total of $4,400,000. Toyota will save $4,400,000, and the laid off workers will buy $4,400,000 less food, cars, gasoline, or whatever they won't buy, because they have fewer dollars to use. Multiply this by millions of permanent layoffs, bankruptcies, shut downs, going out of businesses, chains closing for good, autos down the tubes, housing starts virtually zero, and sales almost the same. and what do you get? The Toyota effect, multiplied many times over. 2.5 Million jobs were lost in 2008.
Stimulating Our Way to Rock Bottom With attention turning to the next big economic stimulus package, questions are still swirling about our economic troubles. How did we get here? How do we get out? As usual, Washington has all the wrong answers. According to many politicians, we got here by not spending enough, not consuming enough, and not regulating enough. Now government, like some mythical white knight, is going to ride in to save the day by blanketing the economy with dollars, hiring an army of new bureaucrats, creating make-work jobs, and sending everyone some form of a bailout check. The debate seems to focus on whether this will cost enough to save the economy, or if this is just a "down payment" with much more government spending to come. Talk like that would be comical, if the results weren't going to be so tragic.
Serious Instances of Inflation Since World War II Presented here is a summary of the major instances of inflation post World War II. Although each country had its particular set of conditions and triggers for their painful experience of monetary inflation, the most common thread seems to be unpayable debts due to war or civil and societal dislocation. Particularly strong labor union movements or protectionist policies against offshoring and imports do not appear to be common factors. An expanded list with additional countries including the pre WWII era can be found at Wikipedia. http://en.wikipedia.org/wiki/Hyperinflation Inflation is the common condition of a fiat monetary system. Less probable outcomes are hyperinflation and deflation, with a serious inflation and disinflation nearer the norm.
Gold Trades Little Changed, Rising Crude Oil Provides Support Gold traded little changed in Asia as rising crude oil prices and a pause in the dollar's rally added to the appeal of the precious metal as an alternative investment. Platinum advanced. Bullion, down 3.2 percent this week, edged higher after Saudi Arabia said it will extend its oil production cuts. Gold fell to a one-month low of $814.66 an ounce yesterday as the dollar neared a five-week high against the euro. "Gold has crashed through key support around the $830-$835 area, and is now on track to test support towards the $750-$800 area," Michael Jansen, an analyst at JPMorgan Securities Ltd. in London, said in a report. The recent slide was "largely a function of the stronger U.S. dollar as well as a markedly weaker crude oil market."
Oil Rises a Second Day as OPEC Signals Deeper Production Cuts Crude oil rose for a second day in New York after OPEC leaders signaled their intention to make deeper supply cuts to bolster prices. OPEC is willing to reduce crude production again to "preserve the price of oil," Venezuelan President Hugo Chavez said yesterday in Caracas. Saudi Arabia Oil Minister Ali al-Naimi said the kingdom's February output will be "lower than the target" set at the group's Dec. 17 meeting.
Wall Street's Rigged Casino Last year was certainly a turbulent one for investors. Not only did good assets and companies sell off with bad, but the very integrity of the U.S. markets was brought into question. Financial firms spend millions of dollars convincing the average citizen that investing in stocks is necessary and prudent, yet the playing field is far from level. Fraud, naked shorting and other forms of manipulation are now endemic to the American markets. As Overstock's lawyer, John O'Quinn points out, "You have more chance to be treated fairly in a casino in Vegas." How can you invest if you can't trust the system?
Massive forces cloud market outlook Huge losses caused by the housing/credit bubble, and the gigantic stimulus packages they triggered, have created a very complex, confusing financial landscape. As longtime readers know, I usually have pretty big opinions on a host of subjects. (That is not to say I always get it right -- I don't.) But given the exceptionally complex financial landscape, I find it hard right now to have a strong opinion about what the stock market road map for 2009 may look like. There are massive forces working against each other. On the one hand, we have enormous fiscal and monetary stimuli. On the other hand, we have the undertow of the collapsed housing/credit bubble, which resulted in the near vaporization of the financial system last year.
Gold & The New Era The Financial Times They Are A'changin' Change is never easy and extreme change is the most difficult of all Twelve years ago, the esteemed Financial Times in an editorial announced The Death of Gold; and, in 2004, another contributor to FT noted, the end of gold as an investment has come a little closer. Recently, however, on January 5, 2009 the Financial Times published David Hale's There Is Only One Alternative To The Dollar. Long-time subscribers to FT may be surprised to find that alternative to be gold-or, then again, they may not be surprised at all. Prevailing and commonly-held beliefs do not have to be right. They merely have to prevail and to be common; and in the 1990s, the prevailing and common belief was that gold as an investment was dead. But as in the Bible where Jesus and Lazarus arose from the dead, so, too, in this new millennium, has gold.
Bernanke: More needed for recovery Federal Reserve Chairman Ben Bernanke said fiscal stimulus is unlikely to be enough for lasting recovery without other action. On the heels of that - markets turned in mixed results.
Bernanke: More bank bailouts needed The Fed chairman endorses Obama's proposed economic stimulus plan, but says more help for banks is needed to fix the economy. Federal Reserve Chairman Ben Bernanke said Tuesday that President-elect Barack Obama's proposed fiscal stimulus package could help the economy, but he added that additional bailouts of financial institutions may also be needed to bring about a sustained economic recovery. Bernanke, speaking in London, said that the nearly $800 billion plan being discussed by the incoming Obama administration and the newly elected Congress "could provide a significant boost to economic activity." He did not comment on or endorse any specifics of the nearly $800 billion.
Bernanke calls for banking clean-up Ben Bernanke called for fresh efforts to clean up the US banking system on Tuesday, warning that fiscal stimulus measures alone would not be enough to overcome the economic crisis. Speaking in London, the Federal Reserve chairman said he would like the Obama administration to combine capital injections with a plan to cut troubled assets from bank balance sheets - the idea behind the original version of Treasury secretary Hank Paulson's troubled asset relief program (Tarp). "More capital injections and guarantees may become necessary to ensure stability and the normalisation of credit markets," he said. US Treasury bond prices fell slightly in the wake of Mr Bernanke's comments.
Banks see tough 2009 Despite massive cash infusions, troubled banks remain ... troubled. The banking industry has received billions in federal aid. But despite that cash infusion, the companies are expected to report terrible earnings and warn of more tough times to come.
Treasury: $10B more to B of A Bank of America gets $10 billion in TARP funds that were originally meant for Merrill Lynch. Treasury invests an additional $4.8 billion in other banks. The Treasury Department said Tuesday it recently invested $14.8 billion in another 43 banks, $10 billion of which went to Bank of America, the nation's largest bank. Under the $700 billion Troubled Asset Relief Program, Treasury has allocated $250 billion for capital investments in banks. Treasury lends funds to banks in exchange for preferred shares, warrants, and high-paying dividends. The aim: to encourage strapped-for-cash financial institutions to lend more money and provide much-needed liquidity in the financial markets.
U.S. deficit soars to $485.2 billion The budget gap in first three months of the fiscal year surpasses the level recorded for all of '08. The federal budget deficit expanded by $83.6 billion in December, the Treasury Department reported Tuesday, bringing the total deficit for the first three months of the 2009 fiscal year to $485.2 billion. By comparison, the budget deficit for all of fiscal year 2008 was $455 billion. In fiscal 2007, it was $161 billion.
IRS says it will help financially distressed taxpayers Massive losses in the financial markets. Seemingly never-ending layoffs. Plummeting home values. Taxpayers walloped by financial hardships may find some reprieve and possibly a silver lining when it's time to pay taxes in April. The Internal Revenue Service rang in the tax filing season Tuesday by calling attention to the new tax credits and emphasizing the agency's willingness to work with financially distressed taxpayers. "What we're doing today is saying we recognize the economic realities out there and we're available to work with people," said IRS Commissioner Douglas Shulman.
The 2009 mortgage market Reuters Mortgage Market Correspondent Lynn Adler is joined by the Mortgage Bankers Association's CEO John Courson and Chief Economist Jay Brinkmann. The experts discuss their projections for mortgage rates and refinancing activity in 2009, as well as prospects for recovery in the housing market this year.
Geithner, Choice for Treasury, Questioned on His Tax Returns Timothy F. Geithner, President-elect Barack Obama's choice to be Treasury secretary, failed to pay tens of thousands of dollars in federal taxes and also faces questions about the immigration status of a former household employee, according to the committee and the Obama transition. After the underpayments were detected, he paid back taxes and interest totalling $43,200. The underpayments, according to people familiar with them, involve Mr. Geithner's income earlier in this decade when he was a senior official at the International Monetary Fund before taking his latest job, as president of the Federal Reserve Bank of New York, in November 2003.
Tax, housekeeper issues trip up Geithner President-elect Barack Obama's pick for U.S. Treasury Secretary came under fire Tuesday on Capitol Hill for employing a housekeeper with expired immigration papers and for failing to pay his full taxes. The Obama team moved quickly to defend Timothy Geithner from the attacks, saying his years of distinguished public service should not be tarnished by a few "honest mistakes" he quickly corrected. "He made a common mistake on his taxes, and was unaware that his part-time housekeeper's work authorization expired for the last three months of her employment," Robert Gibbs, the incoming White House press secretary, said in a written statement. "We hope that the Senate will confirm him with strong bipartisan support so that he can begin the important work of the country.
State Pensions' $865 Billion Loss Affects New Workers State governments from Rhode Island to California have run up estimated pension-fund losses of $865.1 billion, forcing some to cut benefits for new hires. Assets for 109 state funds declined 37 percent to $1.46 trillion over the 14 months ended Dec. 16, according to the Center for Retirement Research at Boston College. The Standard & Poor's 500 Index of stocks fell 41 percent in the period. "Not a whole lot of people get too excited about pension funds," Philadelphia Mayor Michael Nutter said in an interview. "But if you have to pay those costs, they do grab your attention." After Philadelphia's fund lost $650 million in the first nine months of last year, Nutter joined the mayors of Atlanta and Phoenix in writing a letter to Treasury Secretary Henry Paulson seeking financial help for U.S. cities. Their November letter cited investment deficits and rising pension costs.
India's Enron Puts Auditors Back Under Scrutiny The accounting scandal that imperils Satyam Computer Services Ltd., embroiled in India's biggest corporate fraud investigation, is raising concerns about oversight of international companies that trade in the U.S. Seven years after the implosion of Enron Corp. led to the dissolution of accounting firm Arthur Andersen, the Satyam case has put PricewaterhouseCoopers LLP and the U.S. regulator that oversees auditors in the spotlight. Hyderabad-based Satyam's former chairman, Ramalinga Raju, was arrested last week after saying that he falsified accounts that went undetected for years. Satyam, the nation's fourth-largest software exporter, is one of 14 Indian companies with a combined value of $63 billion that trade on U.S. exchanges, according to Bloomberg data.
Citigroup, Morgan Stanley merge brokerages Citigroup Inc. and Morgan Stanley agreed Tuesday to combine their brokerages in a deal that shows how much Citigroup wants to slim down and build up cash. Morgan Stanley is paying Citigroup $2.7 billion for a 51 percent stake in the joint venture. Citigroup will have a 49 percent stake. Citigroup's retail brokerage, Smith Barney, was once the crown jewel in its wealth management business. The new unit, to be called Morgan Stanley Smith Barney, will have more than 20,000 advisors, $1.7 trillion in client assets; and serve 6.8 million households around the world, the companies said.
Citigroup Said to Consider Plan to Split in Two Citigroup, struggling to manage the fallout from the global financial crisis, is moving to dismantle large parts of its troubled financial empire with a plan to split itself in two, a move that would undo the landmark merger that created the company a decade ago. Under pressure from regulators to raise capital and clarify its strategy after it accepted two taxpayer lifelines, Citigroup plans to sever various corporate and investment banking businesses from worrisome consumer finance operations and other businesses that it no longer considers central, people with knowledge of the plan said Tuesday.
Morgan Stanley Pays $2.7 Billion to Citi in Venture Morgan Stanley bought control of the Smith Barney broker unit of Citigroup Inc. for $2.7 billion, two weeks after Bank of America Corp. purchased securities firm Merrill Lynch & Co., widening the shakeout on Wall Street from the worst credit panic in seven decades. Morgan Stanley, led by Chief Executive Officer John Mack, will own 51 percent of a newly formed brokerage joint venture named Morgan Stanley Smith Barney and receives an option to acquire the rest after five years, the companies said in a statement today. Morgan Stanley Co-President James Gorman, 50, will oversee the venture as chairman.
Citi May Sell CitiFinancial After Smith Barney Deal Citigroup Inc. may sell its CitiFinancial consumer-lending unit and rein in trading with the bank's own capital after agreeing to cede control of its Smith Barney retail brokerage, people familiar with the plan said. Chief Executive Officer Vikram Pandit, 51, may announce the plan by next week, said the people, who declined to be identified because the plan isn't final. The New York-based bank's remaining units will include branch banking, advising on mergers, underwriting securities, processing payments, corporate lending and handling trades for clients, the people said. Spokesman Stephen Cohen declined to comment. Citifinancial makes home-equity loans, auto loans and personal "debt- consolidation" loans that can be used to pay off other credit cards and other bills. The business has more than 2,000 branches in the U.S.
Layoffs at Cessna Expand by 2,000 WICHITA, Kan. (AP) - The Cessna Aircraft Company told workers on Monday that it would lay off an additional 2,000 employees, saying the job cuts were necessary to ensure its long-term stability and success. The announcement was made in an e-mail message to employees from Jim Walters, Cessna's senior vice president for human resources. The reductions will extend throughout the plant in Wichita and will affect all pay categories, the message said. Cessna is a unit of Textron. "These actions are regrettable, but necessary to ensure our long-term stability and success," Mr. Walters told employees.
Winfield Rubbermaid plant to cut 75 jobs WINFIELD, KS - Newell Rubbermaid Inc. plans to cut 75 jobs from its manufacturing facility in the south-central Kansas town of Winfield as it copes with the global economic downturn. Employees learned of the layoffs Monday, and the Atlanta-based company announced them publicly Tuesday. About 500 people will continue to work at the plant after the layoffs, making coolers, outdoor storage sheds and plastic storage shelving. Rubbermaid blamed the layoffs on a decline in consumer spending combined with the seasonality of many of the products produced at the plant.
Kan. gov outlines budget plans; GOP critical TOPEKA, Kan. - Democratic Gov. Kathleen Sebelius proposed a grab-bag of targeted cuts and other initiatives Tuesday to close a looming budget deficit but faced immediate resistance from the Republican-controlled Legislature. Her plan would reduce higher education spending by nearly $100 million and slash aid to cities and counties by as much as $151 million. She's pushing changes designed to generate administrative savings and to divert fees and other dollars normally dedicated to specific uses to general government programs. Enacting those proposals would allow the state to avoid cuts in aid to public schools, though it would break promises to continue increasing education funding. Sebelius also didn't propose raising any taxes. Sebelius and legislators must eliminate a $186 million deficit before the current fiscal year ends June 30. If they didn't address the problem, the gap between anticipated spending and existing spending commitments could grow to more than $1 billion by the end of fiscal 2010.
Live Free Or Die: Capitalism At Risk The Federal Reserve (Fed) has gone beyond playing with fire, and may have indeed set the house on fire. It's one thing to push interest rates to near zero to stimulate the economy; it's another to "monetize the debt" by printing money to buy government debt. In recent weeks, the Fed has broken outside even those boundaries and become actively engaged in managing the private sector beyond the core banking system. Worse still, the steps taken may be difficult to reverse and as such may shape the U.S. economy for a long time. These steps are taken with the best of intentions, to "save" the economy. The only trouble is that we may be on a slippery slope to destroying capitalism on the way. In "doing whatever it takes" to get the economy back on its feet, the Fed risks destroying the foundation of why the U.S. has been able to establish itself as the world's leading economic force. Actively participating in credit allocation within the private sector, the Federal Reserve (Fed) jeopardizes the capitalist foundation the U.S. economy is built on. As a result of these actions, the U.S. may be on its way to becoming a modern incarnation of a planned economy.
Does Capitalism Need Adjustment? One of the worst things that has happened during this economic crisis is that capitalism itself has been attacked without mercy - even by some who generally support the free market. Calls for more regulations, more bailouts, more Fed action, more stimulus packages, more recovery programs, and more government intervention in general can be heard from every quarter. Not that capitalism hasn't always had its share of critics - even among those who usually espouse some degree of it, like evangelicals. In his recent book, How to Be Evangelical without Being Conservative (Zondervan, 2008), Roger Olson advocates "a highly graduated income tax combined with redistribution of wealth to the poor through education, job training, direct aid to children, subsidized day care for children of poor working mothers and fathers, and other forms of welfare." He rejects Robert Nozick's belief in "small government that interferes as little as possible in the economy" for John Rawls's "limited but active government."
OECD warns over growth in China, Germany and Russia as downturn goes global China, Germany and Russia are showing the fastest pace of deterioration among large economies as the entire global system succumbs to a "deep slowdown", according to the Organisation for Economic Co-operation and Development. The warning came as China's Banking Commission said it would prove "exceptionally difficult" to meet the country's 8pc growth target for 2009, the level seen as crucial to prevent unemployment from rising and setting off civic unrest. "The downside risk to the Chinese economy is even worse than expected," said the chief regulator, Liu Mingkang. The OECD's gauge of "Leading Indicators" - which gives warning of trend changes a few months in advance - shows an abrupt rupture in Asia and among commodity producers, with the most damage surfacing in countries with an export surplus that depend on sending goods abroad. The index for Russia has seen the sharpest slide, falling 4.3 in November, China fell 3.1 and Germany was down 2.0, the worst performer in the G5 bloc for the third month in a row.
Executive At UBS Is Deemed A Fugitive A senior executive at the Swiss bank UBS was declared a fugitive on Tuesday, two months after being indicted by a federal judge in connection with a widening investigation of UBS's offshore private banking services. The executive, Raoul Weil, 49, a Swiss citizen, oversaw UBS's lucrative cross-border private banking operations from 2002 to 2007. His whereabouts are unknown. The development is a blow to UBS and is likely to complicate its position before federal prosecutors, who are conducting a criminal investigation into whether the bank deliberately allowed up to 20,000 wealthy American clients to hide $20 billion in secret offshore accounts, thereby evading $300 million a year in income taxes.
Sharp Drop In Oil Price Helps Shrink Trade Deficit Skidding oil prices helped push the United States trade deficit to its lowest point in five years in November as the country imported fewer goods amid a sharp economic slowdown. The gap between the value of imports and exports narrowed to $40.4 billion in November, from $56.7 billion a month earlier, the Commerce Department reported on Tuesday. That represented a 28.7 percent decline in one month. The trade deficit shrank as American consumers clipped their demand for foreign-made consumer goods, and tumbling energy prices slashed the value of imported oil and gas. Petroleum imports dropped 36.5 percent, to $23.6 billion.
Mr President What Was Your Biggest Mistake?
Dim auto sales may lead Ford to join bailout GM, Chrysler eye more funds Following a disastrous year in the auto business, worsening sales projections for 2009 suggest that Ford Motor Co. may have to join the government's auto bailout list that already includes General Motors Corp. and Chrysler. Moreover, GM and Chrysler may have to seek more federal funds this year on top of the $17.4 billion that Congress and the Bush administration already agreed to provide. Ford Chairman William Clay Ford Jr. told reporters Sunday that Ford would not need government aid unless "the world implodes as we know it."
US bankruptcy code bill rattles MBS market Last week's reintroduction in the US Senate of a bill aimed at amending the bankruptcy code to allow the modification of mortgage contracts - and its backing by Citigroup - has sent tremors through the market for mortgage-backed securities. The ABX index, which tracks the value of securities linked to subprime mortgages, fell sharply, with the value of triple A rated securities backed by subprime mortgages falling up to 6.5 points. Much of this decline is attributed to the increased chances of so-called bankruptcy cramdown bills passing. Politicians such as Senator Dick Durbin have been proposing such changes for years, but now measures aimed at reducing foreclosures have more support, not least from President-elect Barack Obama. "The bill's passage would be a clear negative for mortgage-backed securities and asset-backed securities holders," said analysts at Barclays Capital. "We fear a massive sell-off that would worsen valuations, threatening further balance sheet write-downs [for financial institutions]."
Slowest house sales in 30 years reported The rate at which houses are sold has fallen to its lowest in at least 30 years, according to figures from the Royal Institution of Chartered Surveyors, which has conducted monthly surveys since 1978. Rics said the average number of house sales per surveyor's office fell to 10.1 in the three months to December from the previous low of 10.6 during the three months to November. Housing turnover in London has become stuck at an even slower rate, with the average number of sales per surveyor staying at seven during the three months to December. A key forward-looking indicator, known as the "stocks to sales" ratio, fell to its lowest since December 1992, when the country was mired in recession.
Former Guantanamo inmates return to terrorism: Pentagon The US says 18 former detainees at the military prison in Guantanamo Bay have returned to terrorism since their release, and another 43 are believed to have done so. There is speculation that Barack Obama will issue an order to close Guantanamo Bay soon after taking office next week. But Pentagon spokesman Geoff Morrell has been trying to highlight some of the challenges of quickly shutting the detention camp. "There clearly are people who are being held at Guantanamo who are still bent on doing harm to America, Americans, and our allies," he said. "So there will have to be some solution for the likes of them.
Olmert says he made Rice change vote In an unusually public rebuke, Prime Minister Ehud Olmert of Israel said Monday that Secretary of State Condoleezza Rice had been forced to abstain from a United Nations resolution on Gaza that she helped draft, after Olmert placed a phone call to President George W. Bush. "I said, 'Get me President Bush on the phone,' " Olmert said in a speech in the southern Israeli city of Ashkelon, according to The Associated Press. "They said he was in the middle of giving a speech in Philadelphia. I said I didn't care: 'I need to talk to him now,' " Olmert continued. "He got off the podium and spoke to me." Israel opposed the resolution, which called for a halt to the fighting in Gaza, because the government said it did not provide for Israel's security. It passed 14 to 0, with the United States abstaining.
Clinton: Use "Smart Power" In Diplomacy At Confirmation Hearing, Secretary Of State-Nominee Calls For "Smart Power" In Middle East Hillary Rodham Clinton said Tuesday that she intends to revitalize the mission of diplomacy in American foreign policy, calling for a "smart power" strategy in the Middle East and implicitly criticizing the Bush administration for having downgraded the role of arms control. At a daylong confirmation hearing before the Senate Foreign Relations Committee, President-elect Barack Obama's choice for secretary of state sailed smoothly through an array of non-contentious questions until two Republican committee members pressed her to take additional steps to ensure that former President Bill Clinton's global fundraising work does not pose even an appearance of conflict with her role as the chief U.S. diplomat.
Clinton says U.S. must not 'give up' on Mideast peace Secretary of State-designate Hillary Rodham Clinton signaled on Tuesday that the United States would try to increase its diplomatic contacts with Iran and Syria, and she declared that the vision of Israelis and Palestinians co-existing in peace and prosperity must not be abandoned. Despite the "seemingly intractable problems" in the Middle East, "we cannot give up on peace," Senator Clinton said before the Senate Foreign Relations Committee, which is considering whether to confirm her selection as President-elect Barack Obama's top diplomat. Clinton said America must recognize Israel's right to defend itself from Hamas rockets but cannot ignore the suffering of Palestinians citizens, as well as Israelis. "Real security for Israel, normal and positive relations with its neighbors" as well as genuine security for Palestinians must continue to be America's ideal, she said.
Russia accused of playing 'trick' as gas turned off again Russia has been accused of trying to 'trick' the European Union after gas supplies delivered through Ukraine were turned off again. At 07.00 GMT on Tuesday, Gazprom announced that normal service had been resumed of supplies to Ukraine. But within three hours EU officials announced that "little or no" gas was getting through. Both Russia and Ukraine then blamed each other for a failure to reopen pipelines and the uneasy EU-brokered truce disintegrated as both sides traded accusations. Russia's state gas monopoly Gazprom claimed Ukraine was stealing gas meant for Europe and taking orders from the United States in the crisis. Ukraine accused Russia of sending the gas on an impossible journey though incompatible pipelines and of using the crisis to try to wrest control of Ukraine's vast pipeline network. EU sources told The Daily Telegraph that the crisis is expected to escalate on Wednesday as European patience runs out with Russia. Russia has "done everything it can to damage the Ukraine's credibility as a transit country", said the source.
Treasury mulls bad bank for toxic debt THE Government is considering creating a "bad bank" to house the billions of pounds of toxic assets owned by Britain's major lenders. The Treasury is understood to have asked the investment bank Credit Suisse to draw up a detailed plan for the logistics of creating a bad bank, in a bid to restore confidence in the sector and to kick-start lending to consumers and businesses. A bad bank has been floated as a potential measure to help solve the financial crisis by analysts but it has risen up the political agenda in recent weeks as banks' balance sheets look increasingly dire. Lloyds TSB, HBOS, Royal Bank of Scotland (RBS) and HSBC will report results for 2008 in the next few weeks. The City expects that combined they will announce write-offs which wipe out the Government's £37bn cash injection in October.
German gov't agrees on massive economic boost Germany's governing coalition hammered out on Monday the country's biggest economic stimulus package in its postwar history, aimed at heading off a painful recession in the world's number one exporter. The package, worth 50 billion euros (US$67 billion) over two years, is a second, more powerful shot in the arm for Europe's biggest economy after Chancellor Angela Merkel's first effort last year proved too small. Finalized in late-night talks in Berlin between Merkel's CDU conservatives and the center-left SPD, it includes 17-18 billion euros in infrastructure investments and tax cuts for firms and individuals.
Ron Paul: Israel Created Hamas! January 09, 2009 C-SPAN
Israel and Palestine: A Statist War In light of recent events in Israel and Palestine, it seems appropriate to put forth a suggestion on how this seemingly never-ending conflict could be solved. To end the ongoing violence in the region, many pro-Palestinians are calling for the complete abolition of the Israeli state. This is actually not a bad idea, but it only addresses part of the problem. The real solution is to abolish both the Israeli and Palestinian states - for as long as these governments exist, there can be no peace and freedom in the region.
Smart card functions to be expanded TAIPEI, Taiwan -- Fast-expanding electronic shopping is heading into a new era with vastly added functions for stored-value cards after the Legislative Yuan passed a bill yesterday to allow the establishment of new card-issuing companies. The rules in the statute for the administration of electronic cards or certificates also liberalize the usages of the cards for electronic payment. They allow financial transactions across the business lines and expand the usages for nation-wide markets. The stored-value EasyCards with electronic ticketing services for the public transport service networks in the Greater Taipei area can be expanded into an electronic wallet for shopping at the convenience stores.
Business Update: China woes China's slowdown has seen 10 million migrant workers lose their jobs in the past few months, fanning fears of social unrest.
Gold Falls Through "Major Support" as Zero-Yielding Dollar & Yen Rise; Physical Trading Leaps on "Safe Haven" Bid THE PRICE OF GOLD sank ahead of the US opening on Monday, dropping $20 in 20 minutes of London trade to bounce off $825 an ounce. World stock markets also fell, while crude oil tumbled 5% to $38.85 per barrel. Government bond prices dropped. The zero-yielding US Dollar and Japanese Yen both rose yet again on the currency markets. "Gold opened [Monday] at the 100-day moving average and is steadily ticking lower," says a technical note from Mitsui, the precious metals dealer, spying "major support at $830.
Gold falls to one-month low on dollar, tumbling oil Gold futures fell 4% Monday to end at the lowest level in one month, pacing sharp losses in crude oil and other commodities, with a stronger U.S. dollar also reducing the metal's investment appeal. Gold for February delivery finished down $34 at $821 an ounce on the Comex division of the New York Mercantile Exchange, the lowest closing level since Dec. 12. It dropped to $817.10 earlier. The metal ended last week's trading down for the first week in five, falling 2.8%. Monday's losses in gold paced sharp declines in other commodities and global equities. Crude oil tumbled more than 7% to below $38 a barrel on demand worries, while global stocks markets moved broadly lower. Falling crude prices tend to put downward pressure on gold prices as weaker crude reduces gold's appeal as a hedge against inflation. Also moving gold lower, the U.S. dollar rose against the euro on expectations that the European Central Bank will cut its key interest rate later this week.
Bill Murphy founder GATA, GOLD and SILVER predictions PART ONE (interview 01/09/2009)
Bill Murphy founder GATA, GOLD and SILVER predictions PART TWO (interview 01/09/2009) ". . . the case to own gold and silver is off the charts"
Euro Falls Toward One-Month Low on ECB Outlook, Spain’s Rating The euro traded near a one-month low versus the dollar as traders raised bets the European Central Bank will reduce interest rates, decreasing the appeal of the region’s assets to overseas investors. The 16-nation currency was also close to the weakest in a month against the yen after Standard & Poor’s said it may cut Spain’s top AAA long-term sovereign rating. The New Zealand dollar declined for a second day after S&P said it may lower the Southern Hemisphere country’s foreign-currency credit rating because of its current-account deficit.
Gold Falls as Crude Oil Tumbles, Dollar Gains; Silver Declines Gold prices fell the most in six weeks as the dollar’s climb and slumping energy costs reduced demand for the precious metal as a hedge against inflation. Silver also declined. Crude-oil prices dropped as much as 7.9 percent, while the dollar gained as much as 0.7 percent against a weighted basket of six major currencies. Gold’s gains last year were the smallest since 2004 as oil declined 54 percent and the dollar advanced for the first time since 2005.
Jim Puplava and John Loeffler on FINANCIAL SENSE : visionary predictions 2009 part1/3 - Got gold ?
Jim Puplava and John Loeffler on FINANCIAL SENSE : visionary predictions 2009 (part 2/3) - Got gold ?
Jim Puplava and John Loeffler on FINANCIAL SENSE : visionary predictions 2009 (part 3/3) - Got gold ?
Open The Mint To Gold! Could a Private Firm Force the Government to Do It? How to rebuild the shattered credit system People ask: “Isn’t the Mint already open to gold, producing Gold Eagles and Buffaloes?” Opening the Mint to gold has a technical meaning, namely, opening it to the free and unlimited coinage of gold on private account. The Gold Eagles and Buffaloes are produced on Treasury account in limited quantities and sold at a premium as souvenir coins. It is a ploy to show that gold coins would just not circulate as money. Well, they would if there was no premium and the market was saturated.
Capitalism Freezes in Worldwide Winter of Discontent As capitalism staggers through its first globalized economic crisis, the costs won’t be measured only in dollars and cents. From newly rich Russia to eternally impoverished sub- Saharan Africa, social strains are threatening the established political order, putting some countries’ very survival at risk. In the past month, Nigerian rebels threatened renewed warfare against foreign oil producers, Russia sent riot police from Moscow to quell an anti-tax protest in Siberia and China’s communist leadership warned of social agitation as the 20th anniversary of the Tiananmen Square massacre looms.
Death of the Dollar The current issue of the One-handed Economist features some very bearish patterns in the U.S. dollar. This is the moment of truth for the establishment. They are about to be destroyed, and they do not have a clue. For almost 4 months, they have been arguing that the U.S. economy is in a financial crisis of a “deflationary” nature. They cited the very minor and normal commodity declines of this past summer as evidence. They wildly exaggerated the real estate decline by shifting from one indicator to another, always picking the indicator which happened to be down that month. Here is the actual median home price (U.S.) as reported by the Census Bureau.
Calm Before The Next Financial Storm? This particular week has that same unsettling quietness that preceded the collapse in October last year, and to be fair I flagged it up with my article ‘Dow at 7,000, FTSE to 3,300? at the end of September, see: http://arabianmoney.net/2008/09/29/dow-to-fall-to-7000-ftse-to-3300/ Yes we have had stocks rally by 20 per cent since the collapse of last autumn but where are the next lot of buyers going to come from? Anybody who wanted to buy on the dip will now have done so. The next move is therefore down.
U.S. Economy : The Philosopher's Stone
The Greatest Ponzi Scheme Of All Time! Never before in the financial history of the US has the reasons to own gold and silver bullion been as obvious as they are today. Only a fool, a paid flunky or some poor soul believing what a paid flunky says can believe gold to be a “barbarous relic” with no useful purpose. Those who have taken the time to educate themselves understand that the financial system of the world came very close to total collapse back in September. In this article I would like to share my thoughts on the subprime housing market in conjunction with the derivative sector. My aim is to reveal what I believe to be the main reason for the demise of the world’s financial system and the main beneficiaries of the bailout packages.
The bond bubble is an accident waiting to happen The bond vigilantes slumber. As the greatest sovereign bond bubble of all time rolls into 2009, investors are clinging to an implausible assumption that China and Japan will provide enough capital to keep the happy game going for ever. They are betting too that debt deflation will overwhelm the effects of near-zero interest rates across the G10 and nullify a £2,000bn fiscal blast in the US, China, Japan, Britain, and Europe. Above all, they are betting that the Federal Reserve chief Ben Bernanke will fail to print enough banknotes to inflate the US money supply, despite his avowed intent to do so.
How Subprime Borrowing Fueled the Credit Crisis Once upon a time, generous-minded social engineering resulted in the Community Reinvestment Act, which forced banks to lend to disadvantaged borrowers who otherwise couldn’t get mortgages to buy homes. But because these potential borrowers were financially disadvantaged, they also represented a bigger credit risk. Banks didn’t like being told to make mortgages to high-risk borrowers because they wouldn’t be able sell these loans off to anyone else. Fannie Mae and Freddie Mac were mandated to insure these higher-risk loans so that with a de facto government guarantee these "subprime" mortgages could be repackaged and sold, removing them from the inventory of the originating bank.
Gerald Celente the 2009 Collapse
U.S. regulators press Citigroup to replace chairman U.S. government banking regulators are pressing Citigroup to shake up its board and replace its chairman, Winfried Bischoff, in an effort to restore confidence in the beleaguered financial giant. Richard Parsons, chairman of Time Warner and a Citigroup director, has emerged as the leading candidate to succeed Bischoff as Citigroup's chairman, people briefed on the situation said Sunday night. While the timing was uncertain, the change could come as early as this week.
Citi inches toward deal but shares off on fear of Q4 loss Citigroup Inc inched closer to selling a stake in its Smith Barney retail brokerage to Morgan Stanley, but its shares fell on concerns about the bank's balance sheet and its fourth-quarter results. Citigroup shares closed down $1.15, or 17 percent, to $5.60 on the New York Stock Exchange, bringing the company's market value down to $30.5 billion. The shares hit their lowest level since November 24, a day after the company received a $20 billion capital infusion from the U.S. government. JPMorgan Chase & Co and Bank of America Corp shares also dropped on concerns about their credit problems.
Commercial Mortgages: The $400 Billion Ticking Time Bomb The sub-prime mess could pale in comparison to the calamity that rising commercial mortgage delinquencies are threatening. Since the S&L crisis, commercial banks have increased their holdings of commercial mortgages at an accelerating rate. The Commercial Mortgage Security Association (CMSA) estimates that in 1991 commercial banks held $410 billion in mortgages and by 2006 banks held $1.28 trillion.
The World Economy Calls in Sick It's Monday morning. The world economy is calling in sick. A Bloomberg report confirms last week's news: the U.S. economy lost more jobs last year than at any time since the end of WWII. The jobless rate is now at a 16-year high. The Dow fell 143 points on Friday. Oil stayed at $40. Gold didn't budge much from $855. And the dollar rose - to $1.34 to the euro. "Economists see longest recession since WWII," is a headline at Reuters. Economists are always the last to know what is going on. If they see a long recession coming, maybe the recession is already over? But, no…this time, we think even the economists have it right. "This is worse than the S&L crisis," said our old friend Jim Rogers a year ago. "This is the first time - this is the worst credit bubble we've ever had in American history. No - never in American history have people been able to buy a house with no money down, never. That's never happened anytime in the world. So, we have the worst credit bubble. It's going to take a long time to work its way out. You don't cure a bubble in five or six months… It takes five or six years." The world economy is clearly ailing. But what's really wrong with it?
Obama Asks for ‘Immediate’ Access to Second Half of Bailout Obama Team Promises Changes in Use of Bailout Seeking to reassure wary lawmakers, President-elect Barack Obama's top economic adviser told congressional leaders Monday that Obama intends to broaden the goals of the remaining $350 billion financial bailout and impose tougher restrictions and oversight on how the money is spent. Larry Summers, Obama's choice for National Economic Council director, told House and Senate leaders in a letter from the transition team that the need to tap the second half of the $700 billion fund is "imminent and urgent."
Obama's 'culture clash' with Congress Barack Obama walked the halls of the Capitol as a senator for nearly four years, and in his earliest decisions following election assembled a coterie of key advisers with deep roots in Congress. And so it came as a surprise that Obama's first real workweek in Washington as president-elect was marked by collisions with those former colleagues, including some who had helped him win the White House. In naming a CIA director and in shaping his massive economic stimulus plan, Obama managed to rankle some lawmakers from his own party by stepping crosswise of their procedures, prerogatives and personal feelings.
Burris approved for Obama's old Senate seat Roland Burris on Monday won his bid to fill the seat in the U.S. Senate vacated by President-elect Barack Obama, overcoming objections from Democratic leaders who now stand ready to enjoy their biggest majority since 1981. Barring unanticipated roadblocks from Senate Republicans, Burris, appointed to the seat by embattled Illinois Gov. Rod Blagojevich in December, could be sworn in within days, giving Democrats 58 of the Senate's 100 seats. The decision by Senate officials to swear in Burris was a major about-face by the Democratic leadership, which initially vowed that the appointment would not stand because Blagojevich has been charged with having earlier tried to sell the seat.
Gross Bets on Washington After Housing Collapse Wager The collapse of the U.S. housing market helped Bill Gross outperform 99 percent of his fund- manager peers over the past five years. Now he’s betting on securities that may benefit from rescue efforts in Washington. The 64-year-old co-chief investment officer at Pacific Investment Management Co. is urging investors to anticipate which assets will benefit as the government struggles to boost the economy. Last week he recommended municipal bonds, inflation- protected Treasuries and debt the U.S. government plans to buy. In the past six months, Gross bought senior bank debt, agency mortgage securities and preferred shares in financial companies, all before the government did the same.
DEPRESSION AHEAD Bob Chapman's weekly commentary on GoldSeek Radio 01/09/2009.
Government Panic Could Herald Dollar Panic (on Monday's radio show; originally posted Jan 8th. from europac.org web site) One of the few things more troubling for an economy than government intervention is government intervention driven by panic. Time and again, history has shown that when governments rush to engineer solutions to pressing problems, unintended difficulties arise. In the current crisis, there is growing evidence that Washington is in a state of increasing panic. Despite its massive cash injections, market manipulations and 'rescue' plans, the recession is clearly deepening and spreading. With little to show thus far, politicians don't know if they should redouble past efforts, break ground on new initiatives, or both. However all agree, unfortunately, that the consequences of doing too little far outweigh the consequences of doing too much.
Gov't Spending Necessary to Fight 'Depression' in U.S., Says Chicago Prof Posner Richard Posner, an influential law professor at the University of Chicago, believes the United States has entered a depression. The conservative lecturer believes Keynesian-style stimulus would be a better solution to the economics crisis than tax cuts. Posner acknowledged that "depression" is an ambiguous term, but in the Becker-Posner Blog, a daily commentary he writes with Nobel Laureate Gary Becker, he argued that the current environment fits his own definition: "There is no widely agreed definition of the word, but I would define it as a steep reduction in output that causes or threatens to cause deflation and creates widespread public anxiety and a sense of crisis."
Bush Admits, ‘I Chucked Aside My Free Market Principles’ President Bush on Monday defended his economic record, noting that he’s taken “extraordinary measures” to deal with the frozen credit markets. He said the main question for the president is not when the problem started, but what action was taken once the problem was recognized: “And I readily concede that I chucked aside some of my free market principles when I was told by chief economic advisers that the situation we were facing could be worse than the Great Depression,” Bush said at a White House news conference.
Why So Little Self-Recrimination Among Economists? Why is it that economics is a Teflon discipline, seemingly unable to admit or recognize its errors? Economic policies in the US and most advanced economies are to a significant degree devised by economists. They also serve as policy advocates, and are regularly quoted in the business and political media and contribute regularly to op-ed pages. We have just witnessed them make a massive failure in diagnosis. Despite the fact that there was rampant evidence of trouble on various fronts – a housing bubble in many countries (the Economist had a major story on it in June 2005 and as readers well know, prices rose at an accelerating pace), rising levels of consumer debt, stagnant average worker wages, lack of corporate investment, a gaping US trade deficit, insanely low spreads for risky credits – the authorities took the "everything is for the best in this best of all possible worlds" posture until the wheels started coming off. And even when they did, the vast majority were constitutionally unable to call its trajectory.
Bankruptcy financing seen more costly as wave hits There are likely to be a slew of bankruptcies this year, but the process will be more challenging and costly than ever as a drought in bankruptcy loans has changed the rules of the game. Companies like VeraSun, Tronox and LyondellBasell's ACCEIN.UL Lyondell Chemical Co have said the credit crunch sent them scouring markets for months to locate debtor-in-possession, or DIP, financing that would allow them to keep operating during bankruptcy. While some lenders expect the market to recover by the middle of next year, restructuring experts say the financing markets have been exceedingly difficult to navigate.
The Crash of 1929
The Crash of 1929 (not the same as above YouTube video) American Experience - PBS (watch the entire program in 8 segments; you may also download these videos)
Perth Mint rations gold as rush erupts over financial crisis PERTH Mint, Australia's biggest wholesaler of gold coins and bars, has rationed its sales with the global financial crisis sparking a new gold rush. Worried investors are seeking a safe home for their money and ploughing billions of dollars into the precious metal in a bid to preserve their wealth. Demand has now reached such unprecedented levels that the Perth Mint has been forced to ration its sales. Perth Mint's bullion sales rose 194 per cent in the December quarter compared with the corresponding period in 2007, while silver bullion sales were up 140 per cent. The mint has suspended sales of all gold bars and all bullion coins - except its 1oz "Kangaroo" gold bullion coin.
Hedge fund billionaire sued for investing in Madoff scheme Ezra Merkin, the fallen hedge fund billionaire with links to Bernard Madoff, faces fresh lawsuits seeking as much as $100m that investors claim he squandered on the $50bn Ponzi scheme. Merkin, 55, was forced to close his $1.5bn Gabriel Capital hedge fund last month after disclosing massive losses from investing in Madoff's business. New York University (NYU) is already suing Merkin over $24m of losses from his Ariel fund. The university claims its investment was placed with Madoff without permission. "Until 12 December 2008, we had no knowledge that NYU's funds were instead being managed by Bernard Madoff," said an affidavit from NYU filed in New York state supreme court.
Scenes from an empty Restaurant: Recession turns places into ghost towns Credit crisis hits hotel and restaurant industry hard A professor at NYU, recently commented that due to deteriorating economic conditions, January of 2009, may turn out to be the worst January in the history of the hotel industry. My recent excursion to a hotel in downtown Phoenix seemed to confirm this bleak prognosis with a first-hand view of the impacts due to the credit market collapse and current economic contraction. (see photos at end of article)
Catholic Bishops Sued for Not Using Federal Funds to Give Abortions to Human Trafficking Victims ACLU Claims Catholic Bishops Misusing Grant Money A new lawsuit claims Catholic bishops are wrongly imposing their beliefs on victims of human trafficking by not letting federal grant money be used for emergency contraception, condoms or abortions. The American Civil Liberties Union filed the complaint Monday in federal court in Boston against the U.S. Department of Health and Human Services.
US car workers protest at wage cuts demanded for bail-out Disgruntled car workers staged a noisy protest outside the Detroit motor show to ram home the message that they will not accept swingeing cuts in wages and benefits demanded by the US government. Under the terms of a $17bn (£11.2bn) federal bail-out package, General Motors and Chrysler are required to reduce employees' earnings to the level of their Japanese rivals – closing a gap estimated at $10 an hour. Ford, which has not taken bail-out funds, also wants reductions to keep itself on a level playing field with its rivals. Crucial talks, initially between GM and the United Auto Workers' union, begin this week. In sub-zero temperatures, the mood on a snowy pavement outside Detroit's Cobo convention centre was defiant. Some blamed Wall Street's excesses for the credit crunch, which has frozen car loans to consumers, leaving showrooms bereft of customers.
Oil falls below $38 as investors look to US earnings for clues on crude demand Falling crude demand in the world's largest consuming nation drove oil prices below $38 a barrel Monday as the U.S. enters a corporate earnings season expected to be fraught with bad news. Economic worries outweighed factors that would normally boost the market -- Mideast tensions, signs that OPEC was implementing large-scale production cuts, the ongoing Gazprom-Ukraine gas dispute and a winter likely to feature the coldest weather in a decade. "It's amazing what the market's ignoring," said Phil Flynn, an analyst at Alaron Trading Corp. "That really tells you the story of how bearish this is." Light, sweet crude for February delivery fell 7 percent, or $2.91, to 37.92 a barrel on the New York Mercantile Exchange.
Stocks tumble as oil falls on economic worries Stocks tumble ahead of corporate earnings reports; energy stocks slide as oil falls 8 pct So much for the Santa Claus rally. A run-up at the end of the 2008 that had some investors hoping the worst was over is crumbling on fear that corporate profit reports arriving this week will signal a recovery in the economy is further off than Wall Street had hoped. The Dow Jones industrial average fell for the fourth session Monday as oil prices tumbled and as worries about the financial sector grew. So far this year, the Dow is down 3.5 percent. Stocks are still up sharply from late November but investors are quick to look for even subtle shifts in the market after the terrible run for stocks last year.
Financier Madoff stays in penthouse, avoids jail Judge say money manager Madoff can remain free on bail in penthouse with more restrictions A judge allowed disgraced investor Bernard Madoff to remain free on bail Monday, rejecting an attempt by prosecutors to send him to jail for mailing more than $1 million in jewelry to family and friends over the holidays. The decision means Madoff will avoid having to leave the comfort of his $7 million penthouse and await trial in a cramped jail cell with nothing but bunkbeds, a sink and toilet. Madoff will remain under house arrest and under the constant watch of security guards.
Saudi set to cut Feb output below OPEC target-sources Top exporter Saudi Arabia plans to cut oil output by up to 300,000 barrels per day below its agreed OPEC target -- a proactive step to prop up a collapsing market, industry sources said on Sunday. OPEC's most influential member has lowered supply this month to 8 million bpd, meeting its target under OPEC's pact to reduce overall production by a record amount from Jan. 1. But strict Saudi discipline has failed to boost oil prices -- which at close to $40 are far from the $75 a barrel named by Saudi King Abdullah as a fair price. So Riyadh is prepared, from February, to go beyond what is required by OPEC, the sources said. "We've been told Saudi Arabia will cut to about 7.7 million in February," said a senior oil executive. "They want to prevent a huge stock build up and a further decline in the oil price."
Israelis United on War as Censure Rises Abroad To Israel’s critics abroad, the picture could not be clearer: Israel’s war in Gaza is a wildly disproportionate response to the rockets of Hamas, causing untold human suffering and bombing an already isolated and impoverished population into the Stone Age, and it must be stopped. Yet here in Israel very few, at least among the Jewish population, see it that way. Since Israeli warplanes opened the assault on Gaza 17 days ago, about 900 Palestinians have been reported killed, many of them civilians. Red Cross workers were denied access to scores of dead and wounded Gazans, and a civilian crowd near a United Nations school was hit, with at least 40 people killed.
Not sure who's worse - academia or the government. They all talk too much, and do too little, but this is a good history lesson:
The Mortgage Meltdown, The Economy, and Public Policy (Part 1) Welcome and Opening Remarks Stuart Gabriel, UCLA John Quigley, UC Berkeley
The Policy Maker's Perspective on the Financial Meltdown and the Economy Janet Yellen, Federal Reserve Bank of San Francisco Stuart Gabriel, UCLA, Moderator
The Future of the Housing Finance System Nancy Wallace, UC Berkeley, Moderator Panelists: Brad Blackwell, Wells Fargo Bank John Krainer, Federal Reserve Bank of San Francisco Paul Leonard, Center for Responsible Lending Paul Jablansky, 400 Capital Management LLC
The Mortgage Meltdown, The Economy, and Public Policy (Part 2) Are Government Agencies Up To The Task? Anthony Downs, Brookings Institution, Moderator Panelists: Robert Van Order, University of Michigan Susan Wachter, University of Pennsylvania John Weicher, Hudson Institute Susan Woodward, Sand Hill Econometrics
The Mortgage Meltdown, The Economy, and Public Policy (Part 3) Stuart Gabriel, UCLA Michael Schill, UCLA John Quigley, UC Berkeley
Panel 1: The Crisis in Finance Markets Karl E. Case, Wellesley College, Moderator "Why are the Cycles in Homes and Consumer Durables So Similar?" Edward Leamer, UCLA "Policies To Deal With the Implosion in the Mortgage Market" Robert Shiller, Yale University Discussants: Brad DeLong, UC Berkeley Robert Hall, Stanford University James Wilcox, UC Berkeley
The Mortgage Meltdown, The Economy, and Public Policy (Part 4) A California Policy Perspective on the Financial Crisis Darrell Steinberg, President Pro Tem.-elect, California State Senate Larry Rosenthal, UC Berkeley, Moderator
Panel 2: Demography and Geography of Foreclosures Robert Edelstein, UC Berkeley, Moderator "House Prices, Interest Rates, and the Mortgage Market Meltdown " Chris Mayer, Columbia University "Subprime Mortgages, Foreclosures, and Urban Neighborhoods" Paul Willen, Federal Reserve Bank of Boston Discussants: Mark Garmaise, UCLA Walter Torous, UCLA Alexei Tchistyi, UC Berkeley
The Mortgage Meltdown, The Economy, and Public Policy (Part 5) Panel 3: The Regulatory Frontier Michael Schill, UCLA, Moderator "Three Mortgage Innovations for Enhancing the American Mortgage Market and Promoting Financial Stability" Diana Hancock and Wayne Passmore, Federal Reserve Board of Governors "Regulating the Investment Banks and GSEs After the Subprime Crisis" Dwight Jaffee, UC Berkeley Discussants: Richard Green, USC Richard Roll, UCLA Lawrence White, NYU
Which will shine more: Gold or Silver? Last week gold and silver remained in a trading range moving sideways, while crude oil had a large pullback on very heavy volume. Intermediate Trend of Gold – Weekly Outlook Gold found support back in October and has since had a nice rally higher. Currently gold is trading at a resistance level, which is the downward trend line. Gold hit its head and has now started to move lower. The Stochastic indicator is indicating we are at a short term top. This is not a good time for longs to be entering or adding new positions of this metal. Waiting for a pullback and reversal would provide a much lower risk trade as well as more profit potential.
Obama promises to overhaul Tarp Barack Obama expressed disappointment on Sunday with the Bush administration's handling of the first $350bn tranche of the financial sector bail out and pledged greater support for struggling homeowners once he takes charge of it. His promise to overhaul the Troubled Asset Relief Programme (Tarp) came a day after the president-elect again expanded the goals of his proposed fiscal stimulus, which he now says could create or save up to 4m jobs over the next two years.
Obama weighs decision about bailout funds President-elect Barack Obama vowed to restructure a financial rescue plan to save more U.S. families from home foreclosures, as he considered on Sunday whether to seek additional funds from a $700 billion bailout program. Obama's aides have been in discussions with the White House over whether President George W. Bush should ask Congress for permission to use the remaining $350 billion of the funds, which are aimed at stabilizing the financial system.
Probe widened on US banking violation A US investigation into potential sanctions violations has expanded to involve nine European banks. Authorities suspect that some of the money transferred through the American banking system might have been used to finance Iran's nuclear and missile programmes. Investigators have found an e-mail indicating that Iranian interests were trying to buy tungsten, which is used for making long-range missiles, said Robert Morgenthau, the Manhattan district attorney, who has been conducting the joint investigation with US federal prosecutors. "There was an order for 30,000 metric tonnes of tungsten that would take care of every refrigerator in the Middle East and then some," Mr Morgenthau told the Financial Times on Sunday. "It was not being purchased, we think, for domestic consumption . . . Tungsten was not used for making refrigerators but for long-range missiles. That is our supposition."
Bernanke to Discuss Fed's Rate Cuts The rapidly progressing debate in Congress over a giant stimulus bill isn't the only economic action this week. Federal Reserve Chairman Ben S. Bernanke will give his first public explanation of the Fed's most recent rate cuts and other moves in a speech Tuesday on the policy response to the crisis. On Wednesday, December retail sales data will be released, indicating how disastrous the Christmas buying season was; look for a 1.2 percent drop. Also Wednesday, the Fed will release its "beige book" compilation of anecdotal economic information, which is likely to show broad-based misery. Thursday and Friday, the producer price index and consumer price index will be released, showing how much inflation has fallen.
Metal demand may be slow, but hope runs high for gold BY NOW the global financial crisis has hopefully taught investors that just like property prices, metal prices do not always go up. But it is also important to note that not all metal prices move in tandem. Even among base metals during the boom, nickel, copper, zinc and aluminium each reached their peaks at separate times, often a year or so apart.
Banks want the old bailout back The financial industry is pushing for a plan to clean up toxic assets, but Congress appears to have other priorities. Two months after Treasury Secretary Henry Paulson pulled the plug on his plan to buy troubled mortgage assets, the financial industry is pushing the government to reconsider. Since the Troubled Asset Relief Program, or TARP, took effect in October, Treasury has spent $267 billion buying preferred stock in financial institutions and auto companies, the agency said Thursday. Paulson has said the capital infusions have stabilized the financial sector.
Quick tapping of unspent $350 billion in works Senate could vote this week on letting Obama tap unspent $350 billion from financial bailout Senate Democrats prepared Sunday to answer a request for the remaining $350 billion in financial industry bailout funds as the Bush administration and President-elect Obama undertook a tag-team effort to obtain the money from reluctant lawmakers. A vote in Congress is likely as early as this week, several senators predicted after receiving a rare Sunday briefing from top Obama economic adviser Larry Summers on the Wall Street bailout, as well as on Obama's separate $800 billion-or-so economic recovery plan.
The Fed's Bubble Trouble A few weeks ago when the Fed announced a strategy designed to bring down long-term interest and home mortgage rates through unlimited Treasury bond purchases, government debt staged a spectacular rally. To the unschooled market observer, the spike may be difficult to understand. After all, why would the value of Treasury bonds rise while their underlying credit quality is deteriorating faster than Bernie Madoff's social schedule? The move is actually a perfect illustration of the tried and true Wall Street strategy of "buy the rumor and sell the fact". If it is well known that the Fed will be a big purchaser of Treasuries, those buying now will be positioned to unload their holdings when the buying spree begins. If the Fed pays higher prices in the future, traders can earn riskless speculative profits. If the traders lever up their positions, as many are likely doing, even small profits can turn unto huge windfalls.
In praise of an explicit number for inflation Many central banks throughout the world have adopted an explicit, numerical objective for inflation, commonly referred to as an inflation target. The US Federal Reserve is currently not one of them, but it is discussing this possibility. In the current circumstances with the economy in freefall, is it crazy for the Fed to move in this direction? Is an increased commitment to stabilising inflation the right thing to do when we are in the throes of a financial crisis and the economy is doing so poorly?
Credit card giant 'out of money' CREDIT-CARD companies are notorious for pushing customers to increase their credit limits but at least one has bucked the trend because of the financial crisis. GE Money, which is behind cards such as the Coles Group Card, the Myer Visa Card, GE Money Mastercard and interest-free store cards for furniture retailers including Super A-Mart, has made a ''strategic decision'' to limit some customers' spending potential. Financial expert Noel Whittaker said the response to the credit crunch shows how much the finance giant is suffering. ''Basically what this means is that GE doesn't have the money to keep lending to people and so they have to restrict what their customers can spend,'' Mr Whittaker said. ''You could say they're being responsible by capping people's debt but that won't be why they're doing it. They'll be doing it because they've run out of money.''
Credit Card bust pt 1/3
Credit Card bust pt 2/3
Credit Card bust pt 3/3
Is Government Spending Too Easy an Answer? WHEN the Obama administration finally unveils its proposal to get the economy on the road to recovery, the centerpiece is likely to be a huge increase in government spending. But there are ample reasons to doubt whether this is what the economy needs. Arguably, the seeds of the spending proposal can be found in the classic textbook by Paul A. Samuelson, "Economics." First published in 1948, the book and others like it dominated college courses in introductory economics for the next half-century. It is a fair bet that much of the Obama team started learning how the economy works through Mr. Samuelson's eyes. . . . . Written in the shadow of the Great Depression and World War II, Mr. Samuelson's text brought the insights of John Maynard Keynes to the masses.
Citi moves closer to brokerage deal Citigroup Inc. was getting closer to a deal on Sunday to join its Smith Barney retail brokerage business into a joint venture with Morgan Stanley, in a move that could see it get about $2.5 - $3 billion cash, a source familiar with the situation said. Citi would also gain $5 billion-$6 billion in tangible common equity as a result of revaluing the unit as part of the bigger venture rather than as a stand-alone business, the source said. The new business would have a combined estimated value of $16 billion to $20 billion, the source said.
Sen. Levin seeks details on Citigroup pact with Treasury Sen. Carl Levin said on Sunday he plans to subpoena the Treasury Department to see its agreement with Citigroup and determine what commitments the financial institution made in exchange for government aid. Citigroup received a $25 billion injection from the U.S. government in October as part of the $700 billion financial bailout that was aimed at thawing the credit markets, but concerns have emerged about how the money has been used. Levin, who heads a Senate subcommittee on investigations, said he wanted to see whether the agreement included any commitments to help borrowers stay in their homes despite having trouble paying their mortgages.
Where Did The Bailout Billions Go? Congressional Oversight Committees Can't Even Get Straight Answers When They Try To Follow The Money As President-elect Obama continues urging Congress to spend hundreds of billions to put Americans back to work, he's also and promising strict oversight of where the money goes. Just months ago, the government spent hundreds of billions to rescue financial institutions. What's become of that money? That's what a congressional oversight committee's trying to find out. . . . Elizabeth Warren's Congressional Oversight Panel asked the Treasury Department 45 questions. But says Treasury "did not provide complete answers" and "failed to address a number of questions at all." Therefore, more than three months into the bailout, the panel "still does not know what the banks are doing with taxpayer money."
Lack Of Oversight On Bailout The oversight panel monitoring $187 billion loaned to banks is having a hard time getting answers from the Treasury Department. Sharyl Attkisson reports.
Hedge Funds and Funds of Funds: Biting the Hand That Feeds You This WSJ article about hedge funds of funds contained the following juicy quote from a hedge fund manager, a sentiment widely held but seldom expressed in public: "Funds of funds are, in general, a highly overrated bunch, many of them attracting people who can't manage money themselves," says Jonathan Trugman, who runs a small New York stockpicking hedge fund, Pendulum Capital Management, that made money in 2008. "You have to be selective about which funds of funds you do business with, because much of it is allocated more by marketers and back-slappers than by true analysts." True enough, I confess, and Trugman deserves credit for his courage. But I have to laugh, because I am certain that, west of the Hudson River where the rest of the country earns a living, plenty of company CEOs express a similar sentiment, only it goes something like this: Hedge funds are, in general, a highly overrated bunch, many of them attracting people who can't run companies themselves [but who love to tell others how to] . . .
Where Was Your Money in 2008? 2008 is now in the rear-view mirror, with virtually every investor shouting "Good riddance!" and praying for a better year to come. Forget about making money, just keeping your head above water was an accomplishment over the past twelve months. . . . . Every asset was mired firmly in the red in 2008, right? Actually, no. The single exception was gold, which was up 5.5%. A modest gain in most times, but a phenomenal performance for a year where everything else tanked.
For The Record 2008, 1929 and 1873 Bubbles The establishment promised that nothing could go wrong. "The truth is that Fed governors, together with their crack staff of Ph.D economists and market analysts, are as close to an economic dream team as we are ever likely to see." -Gregory Mankiw "So Congress tried to make sure it would never happen again by creating a system of regulations and guarantees that provided a safety net for the financial system." -Paul Krugman But it did!
Keynesian Economics Works - Sometimes! Howard Ruff Washington has plunged full bore into Keynesian economics, based on the principle that government can increase spending to alleviate economic downturns, while ignoring the fact that Keynes said that we should decrease government spending to cool the economy. The government is creating money and spending it or giving it away at a rate unprecedented in my long lifetime. But the problem is that the end result is not anticipated. Let me tell you what I think will happen in 2009: First, we will continue to plunge into a major deflation period which will be characterized as a "recession," and later in the year as a "depression." Deflation and inflation are always monetary phenomena. Second, deflation will evolve into a run-away-hyper-inflationary depression because of what government will do to try to prevent deflation, which is synonymous with depression and has overtones of the 1930s.
American consumers crushed by job losses Retail sales data to show a sixth consecutive month of declines With almost 2.6 million job losses last year, American consumers, once seen as unflappable, pulled back. On Wednesday, the government is scheduled to report retail sales for December, and economists expect a record sixth consecutive month of declines. While falling gas prices have relieved consumers to some extent, job losses are pinning down confidence to near-record lows, which translates to weak spending, wrote analysts with CIBC World Markets. "With the U.S. economy in the throes of its first consumer-led recession since the early 1990s, the 2008 holiday sales season has surely been a dud," according to CIBC. "With so many economic indicators pointing to a horrible fourth quarter no one expects this report to bring anything but bad news. The only real debate is how horrible it will be."
U.S. Payrolls Hemorrhage Is Likely to Persist After 2008 Drop The hemorrhaging of the U.S. job market looks likely to persist into the new year after employers slashed payrolls in 2008 by the most since 1945, increasing pressure on President-elect Barack Obama to stanch the decline. The nation lost 524,000 jobs in December, bringing the total drop for last year to 2.589 million, just shy of the 2.75 million decline at the end of World War II, the Labor Department reported yesterday in Washington. The unemployment rate climbed to 7.2 percent, the highest level in almost 16 years.
Consumer credit drops record $7.9 billion Credit-card debt falls at fastest pace in nearly five years U.S. households paid down a record $7.9 billion in consumer debt in November, the third month in the past four in which they paid off more debt than they took on, the Federal Reserve reported Thursday. Consumer debt fell $7.9 billion to a seasonally adjusted $2.57 trillion in November, a 3.7% annualized decline. It's the largest percentage decline in nearly 11 years and is the largest decline ever in dollar terms.
UNEMPLOYMENT Insurance Emergency New York, North Carolina, Michigan and Ohio!!!
U.S. bank earnings may be "frightful" Government efforts to prop up U.S. banks and savings institutions have only partly cushioned the blow from what may have been the industry's worst three-month period since 1990. "Credit trends are going to be bad," said Gary Townsend, co-founder of Hill-Townsend Capital in Chevy Chase, Maryland. "No one is immune. If you are a bank, and have loans, you will suffer your share." Rising credit losses, poor economic conditions including a surge in unemployment, tighter lending margins and the cost of luring deposits are likely to dampen results at most of the nation's biggest lenders for the just-ended quarter.
Bernard L. Madoff: International Financial Terrorist When is a terrorist a terrorist? We seem to use the term so loosely that we have forgotten in this world maze of conflicts that the word 'terrorism' has a very specific connotation and that the concept of a "War on Terror" is of itself an oxymoron. So what do I mean when I identify someone as a 'terrorist'? Over a thirty year career under Presidents Nixon, Ford, Carter, Reagan, Bush Sr. as the principal hostage negotiator [ over five hundred hostages saved], senior counter-terrorist expert and the creator of the USA policy of 'no-negotiations with terrorists', I have a very clear set of criteria for declaring someone as a 'terrorist' and quite frankly Bernard L. Madoff the Ponzi Swindler of the 21 st century fits those psychological and economic criteria for judging him in the criminal court system as an "International Financial Terrorist'.
Did Speculation Fuel Oil Price Swings? 60 Minutes: Speculation Affected Oil Price Swings More Than Supply And Demand About the only economic break most Americans have gotten in the last six months has been the drastic drop in the price of oil, which has fallen even more precipitously than it rose. In a year's time, a commodity that was theoretically priced according to supply and demand doubled from $69 a barrel to nearly $150, and then, in a period of just three months, crashed along with the stock market.
The Price Of Oil 60 Minutes: Steve Kroft explains how it was financial speculation, and not supply and demand, that caused the historic spike in oil prices last year.
Zimbabwe introduces $50 billion note Zimbabwe's central bank will introduce a $50 billion note -- enough to buy just two loaves of bread -- as a way of fighting cash shortages amid spiraling inflation. The country's acting finance minister, Patrick Chinamasa, made the announcement in a government gazette released Saturday. Although Chinamasa did not give the date on which the $50 billion and new $20 billion notes would come into circulation, an official at the Reserve Bank of Zimbabwe said the notes would be distributed to all banks by the end of Monday. Zimbabwe is grappling with hyperinflation now officially estimated at 231 million percent, and its currency is fast losing its value. As of Friday, one U.S. dollar was trading at around ZW$25 billion.
Israel shocked at cardinal's comments Israel said Saturday it was shocked and distressed by a senior Vatican cardinal's likening of Gaza under Israel's military offensive to a concentration camp. A spokesman for Israel's Foreign Ministry said the cardinal, whose remarks appeared in an interview Wednesday, adopted the kind of language that Hamas and other Islamic groups have used to demonize Israel and equate it with Nazi Germany. "It was shocking to hear the same kind of terminology from such a high-ranking member of the church," Foreign Ministry spokesman Yigal Palmor said Saturday.
Israel says Gaza war nearing end Israel indicated for the first time on Sunday that an end is in sight to its war on Hamas, amid some of the heaviest clashes of an offensive that has killed nearly 900 people in the Gaza Strip. Infantry units backed by tanks pushed deeper into Gaza's main city, sparking some of the fiercest battles yet of the 16-day-old war Israel launched on the Islamists in response to rocket fire from their stronghold. But Israeli officials suggested the Jewish state is nearing the end of its deadliest ever offensive in the Palestinian enclave, despite having last week waved off a UN Security Council resolution calling for a halt to the fighting.
Gazans told to brace for war escalation Israel dropped bombs and leaflets on Gaza on Saturday, pounding suspected rocket sites and tunnels used by Hamas militants and warning of a wider offensive despite frantic diplomacy to end the bloodshed. A Palestinian man reacts after hearing news that his mother had been killed in Israeli shelling ... Egypt hosted talks aimed at defusing the crisis, but war had the momentum on a bloody day on which more than 30 Palestinians, many of them noncombatants, were killed, according to Gaza medics. Hamas fighters launched 15 rockets at southern Israel, injuring three Israelis in the city of Ashkelon, the Israeli military said.
Israeli offensive presses into Gaza City In the heaviest fighting since the invasion began, troops and tanks hit the capital from three directions. Gaza City is shaken by shelling and helicopter missile fire. Israeli troops and tanks thrust into the Gaza Strip's densely populated capital from three directions Sunday, drawing Hamas fighters into fierce combat in an offensive expanded by a fresh deployment of army reservists. High-rise apartments shook and smaller, targeted buildings crumbled in Gaza City under the force of Israeli artillery shelling and missiles fired from helicopters. Plumes of black smoke rose as Hamas fighters answered with mortars, automatic rifles and grenades.
The Real Goal of the Israeli Invasion? Re-settling Gaza Israel's "Operation Cast Lead" is reported to have overwhelming support among the Israeli public, but few are as enthusiastic as the former residents of the Israeli settlements in Gaza. As tens of thousands of Israeli troops descend on Gaza in an apocalyptic frenzy, scores of determined settlers are prepared to enter in their wake. The Gaza settlements were dismantled in August 2005 as part of former Israeli Prime Minister Ariel Sharon's disengagement plan. In a single stroke, the Israeli army removed 8,000 people from the Gush Katif settlement bloc in the southwest corner of the Gaza Strip near the Egyptian border and from four smaller settlements in northern and central Gaza.
Army to look into racist remark by prince Prince Harry's use of the word 'Paki' about an Asian colleague is to be looked at by his commanding officer in line with 'normal Army procedures', the Ministry of Defence said yesterday. The young royal was caught on film three years ago referring to a comrade as 'our little Paki friend' and has come under fire from politicians and race relations groups for his remarks.
Bush Rejected Israeli Plea To Raid Iran N.Y. Times Reports President Refused Support For Direct Attack On Nuclear Complex; Opted For Covert Action President George W. Bush rejected a plea from Israel last year to help it raid Iran's main nuclear complex, opting instead to authorize a new U.S. covert action aimed at sabotaging Iran's suspected nuclear weapons program, The New York Times reported. Israel's request was for specialized bunker-busting bombs that it wanted for an attack that tentatively involved flying over Iraq to reach Iran's major nuclear complex at Natanz, where the country's only known uranium enrichment plant is located, the Times reported Saturday in its online edition. The White House deflected requests for the bombs and flyover but said it would improve intelligence-sharing with Israel on covert U.S. efforts to sabotage Iran's nuclear program.
Egypt summons Israeli ambassador over Gaza op Ambassador Shlomo Cohen called to Egyptian Foreign Ministry following reports suggesting Israel may expand military op in Strip as means to pressure Cairo to crack down on arms smuggling tunnels The Egyptian Foreign Ministry summoned the Israeli ambassador in Cairo to demand that Israel comply with the UN Security Council Resolution 1860 on the Gaza offensive. Ambassador Shlomo Cohen was also questioned on information published by the Israeli press suggesting Israel intended to expand the operation, in order to pressure Egypt to increase its crackdown on smuggling tunnels linking its territory to the Palestinian territory, said Foreign Ministry Spokesman Hossam Zaki.
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Text of Obama Speech on the Economy Here is the prepared text for a speech given by President-elect Barack Obama on Thursday at George Mason University in Fairfax, Va., as released by his transition office. Throughout America's history, there have been some years that simply rolled into the next without much notice or fanfare. Then there are the years that come along once in a generation—the kind that mark a clean break from a troubled past, and set a new course for our nation. This is one of those years.
President-elect Obama Economic Recovery Plan Speech Highlights
Obama to Warn of Costs of Inaction on the Economy Making an unusually direct appeal to a public facing a crush of negative economic news in remarks prepared for delivery on Thursday, President-elect Barack Obama will call for quick action by Congress to pass sweeping economic stimulus measures, saying that without them “this recession could linger for years.” Mr. Obama is scheduled to give what his transition team has billed as a major speech at George Mason University in northern Virginia starting at 11 a.m. Eastern time.
Obama Warns of Dire Consequences Without Stimulus President-elect Barack Obama said Thursday that the nation's recession could "linger for years" unless Congress acts to pump unprecedented sums from Washington into the U.S. economy, making his highest-profile case yet on an issue certain to define his early presidency. "I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible," Obama said in a speech set to be delivered at George Mason University in Fairfax, Va., outside Washington. Excerpts from his prepared text were released in advance by his transition team. "A bad situation could become dramatically worse," he added, painting a dire picture -- including double-digit unemployment and $1 trillion in lost economic activity -- that recalled the days of the Great Depression in the 1930s.
Crisis and plan to fix it 'unprecedented' President-elect turns up the heat on his plan for massive spending and tax cuts to try to revive stagnant economy. President-elect Barack Obama took his campaign for an economic rescue plan to the public Thursday, calling on Congress to pass a bill in the next few weeks, warning that a failure to do so would have devastating long-term consequences for the nation. Obama spoke before an expected crowd of 500 elected officials and students at George Mason University in Virginia. "For every day we wait or point fingers or drag our feet, more Americans will lose their jobs," Obama said in a speech on the economy. "I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible. If nothing is done, this recession could linger for years."
Obama: Let's act on economy or else President-elect Barack Obama is due to make a major speech on the economy today at George Mason University in Northern Virginia just outside Washington, D.C. It is essentially a call for support of what is expected to be a huge economic stimulus package he hopes to get enacted in the first few months of his presidency. He warns that if an economic stimulus isn't passed quickly enough, it may come too late to stave off a dramatic decline not of just the economy but the nation too. Peter Schiff on Obama's Plan - Jan 8 2009
Oversight panel wants better answers from Treasury Oversight panel demands better answers from Treasury on use of bailout money Less than a month after its first report, a congressional panel overseeing the Treasury Department's $700 billion financial bailout is demanding more answers. The panel's first report, released Dec. 10, included questions about how banks are spending taxpayer money, how the money will combat the rising tide of home foreclosures and Treasury's overall strategy for the rescue. But Treasury's Dec. 30 response "did not provide complete answers to several of the questions and failed to address a number of the questions at all," said the panel's second report, released Friday.
Is the Honeymoon Over? Obama's Big Stimulus Plan Gets Big Pushback Is the honeymoon already over for Barack Obama? It certainly looks that way today after the President-elect's call for bold government action yesterday received a strong rebuke from both sides of the aisle and all points on the political spectrum. "I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible," Obama said. "If nothing is done, this recession could linger for years."
The Obama Gap Paul Krugman thinks Obama is no doing enough! “I don’t believe it’s too late to change course, but it will be if we don’t take dramatic action as soon as possible. If nothing is done, this recession could linger for years.” So declared President-elect Barack Obama on Thursday, explaining why the nation needs an extremely aggressive government response to the economic downturn. He’s right. This is the most dangerous economic crisis since the Great Depression, and it could all too easily turn into a prolonged slump. But Mr. Obama’s prescription doesn’t live up to his diagnosis. The economic plan he’s offering isn’t as strong as his language about the economic threat. In fact, it falls well short of what’s needed. Bear in mind just how big the U.S. economy is. Given sufficient demand for its output, America would produce more than $30 trillion worth of goods and services over the next two years. But with both consumer spending and business investment plunging, a huge gap is opening up between what the American economy can produce and what it’s able to sell.
Obie Drinks the Kool Aid, What Would Shakespeare Say? I like Obie, but he has drunk the Kool Aid. We are doomed. He’s listening to the advice of those very same world renowned egonomists who never saw the current mess coming. How could those who never saw it coming in the first place, and didn’t recognize it after it had already begun have any clue how to get us out of this mess? It makes no sense. But Obie is obviously listening to them. So we are doomed. . . . . Doomed, I say.
Dick Armey and Ron Paul Discuss Obama Stimulus Plans Armey says Obama's plan is a fiscal form of child abuse . . .
Questions loom over use of Treasury bailout money Congressional auditors questioning how bailout money has been used; urge more accountability The head of a congressional panel overseeing the $700 billion bailout program said Friday that lawmakers need to "take a very hard look" at how banks have used the money. "I'm shocked that we have to ask these questions," said Harvard law professor Elizabeth Warren, "but what I will say is that I'm not giving up on this. The best news is that these questions have gotten a lot of attention and a lot of people are demanding answers and when a lot of people demand answers, things start to change." Warren appeared on a nationally broadcast television show Friday as the Congressional Oversight Panel she heads released a report featuring questions about how banks are spending taxpayer money, how the money will combat the rising tide of home foreclosures and Treasury's overall strategy for the rescue.
Federal Reserve sets stage for Weimar-style Hyperinflation he Federal Reserve has bluntly refused a request by a major US financial news service to disclose the recipients of more than $2 trillion of emergency loans from US taxpayers and to reveal the assets the central bank is accepting as collateral. Their lawyers resorted to the bizarre argument that they did so to protect 'trade secrets.' Is the secret that the US financial system is de facto bankrupt? The latest Fed move is further indication of the degree of panic and lack of clear strategy within the highest ranks of the US financial institutions. Unprecedented Federal Reserve expansion of the Monetary Base in recent weeks sets the stage for a future Weimar-style hyperinflation perhaps before 2010.
5 New Forces to Drive Gold Higher Gold naysayers habitually point to the relatively weak performance of gold relative to the broader market over the last 5 years. Given the market today, that argument is increasingly wrong, and the naysayers are soon to either admit their mistake, or pretend that they were never naysayers at all. That’s because during the last 3 months, five major new forces have emerged to compound the previous strong drivers of the gold price up to now. These new forces are as follows:
China has stopped buying U.S. debt.
Future discoveries of gold deposits will diminish dramatically.
Existing by-product gold production will fall sharply
Gold is becoming mainstream
Gold is the best performing asset class of the decade
Recession fears turn Gold into volatile territory Precious metals price action was somewhat subdued overnight, with gold falling and rising around the $845 area while silver broke to under the $11 level. Only marginal dips were seen in the US dollar and crude oil markets, thus little giving little impetus to players to take the metals substantially lower or higher. Perhaps the New York session will have more to offer as US news become available during the day. European (and Asian) stocks fell on profit concerns, following yesterday's 245-point rout in the Dow (the worst such drop since Dec. 1st of last year).
Merrill Lynch says rich turning to gold bars for safety Merrill Lynch has revealed that some of its richest clients are so alarmed by the state of the financial system and signs of political instability around the world that they are now insisting on the purchase of gold bars, shunning derivatives or "paper" proxies. Gary Dugan, the chief investment officer for the US bank, said there has been a remarkable change in sentiment. "People are genuinely worried about what the world is going to look like in 2009. It is amazing how many clients want physical gold, not ETFs," he said, referring to exchange trade funds listed in London, New York, and other bourses. "They are so worried they want a portable asset in their house. I never thought I would be getting calls from clients saying they want a box of krugerrands," he said. Merrill predicted that gold would soon blast through its all time-high of $1,030 an ounce, and would hit $1,150 by June.
'Seismic Readjustment' for Dollar Likely in 2009, Harrison Says (see video) Part of the reason Todd Harrison, CEO of Minyanville.com, expects more wild swings and the potential for S&P 600 in 2009 is a view the drama of late 2008 did not resolve the credit crunch and its broader ramifications. "Despite lower equities and massive government intervention, the equilibrium between equity, credit, commodities and currencies remains elusive," Harrison writes in his "10 Themes for 2009" piece. Critically, the credit markets have thawed a bit but they're still a long way from being unfrozen, he says. This isn't a U.S. only issue, either: Germany has struggled with debt offerings this week while the Bank of England slashed rates today to their lowest level since the central bank's formation in 1694. As a result, Harrison forecasts "seismic readjustments" this year in various asset classes, most notably the dollar.
China tries settling trade with yuan instead of dollar Yuan-settlement test to start CHINA'S central bank said yesterday that it plans to implement a pilot program that would settle overseas trade with the Chinese currency instead of the US dollar. The People's Bank of China will expand financial cooperation with overseas economies and "properly deal with the global financial crisis," the central bank said. "We'll actively join international efforts to tackle the global financial crisis while safeguarding national interests," the central bank said. It pledged to implement a pilot program that the State Council announced last month. China will allow the yuan to be used for settlement between Guangdong Province and the Yangtze River Delta, China's two economic powerhouses, and the special administrative regions of Hong Kong and Macau, according to the central ban
Ron Paul: U.S. spends $1 trillion to maintain empire
Tax cut effect on Social Security weighed Cutting payroll taxes to quickly put money into the pockets of low- to middle-income workers -- an option being considered for Congress' economic recovery package -- could weaken the already-stressed Social Security safety net financed by the weekly taxes on salaries. "The payroll tax is an easy method to distribute tax cuts and it's well targeted at low-income people. But on the other side, the payroll tax is a dedicated tax, with most of it going to Social Security, and any tax cut diminishes the money that goes into that system, leaving it weaker than it already is," said Maya MacGuiness, president of the Committee for a Responsible Budget.
Nationwide Inquiry on Bids for Municipal Bonds The federal investigation that prompted Gov. Bill Richardson of New Mexico to withdraw his nomination as commerce secretary offers a rare glimpse into a long-simmering investigation of possible bid-rigging, tax evasion and other wrongdoing throughout the municipal bond business. Three federal agencies and a loose consortium of state attorneys general have for several years been gathering evidence of what appears to be collusion among the banks and other companies that have helped state and local governments take approximately $400 billion worth of municipal notes and bonds to market each year.
Citi reaches deal with lawmakers on home loans Citigroup reaches agreement with key senators on mortgage bankruptcy compromise Democratic lawmakers have reached a deal with Citigroup Inc. on a plan to let bankruptcy judges alter home loans in an effort to prevent foreclosures and said they expected other lenders to follow. The lawmakers said Thursday they aim to attach the plan to President-elect Barack Obama's economic stimulus legislation. The compromise between New York-based Citigroup and Sens. Richard Durbin of Illinois, Charles Schumer and Christopher Dodd of Connecticut, would be limited to loans made before the bill is signed. Obama has said he backs the concept. Schumer said he received calls Thursday from several banks -- which he did not name -- indicating their interest in supporting the idea. "Citigroup's action has broken the dam," the senior senator from New York said in a news conference on Capitol Hill.
Gold Rises as Dollar's Decline Boosts Demand; Platinum Climbs Gold rose the most in a week as the dollar dropped, boosting demand for the precious metal as an alternative investment. Platinum also gained. The dollar fell as much as 1.3 percent against a weighted basket of six major currencies. Gold and other precious metals generally move in the opposite direction of the U.S. currency. Last year, gold rose the least since 2004 as the dollar advanced for the first time since 2005. "The gold-dollar relationship is the key," said Marty McNeill, a trader at R.F. Lafferty Inc. in New York. "Eventually, the dollar is going lower, and it's lifting pressure off gold."
'Dollar is dead. Gold is king' Stop trading and start insuring. It is never too late, just less useful. Play your index fund manipulations if you wish. Play your gold bank quarterly earnings statement games if that makes you happy. Listen to the paid anti gold for lobbyists as you seek to be more wrong than right. Do all of the above if you will, but at the end of the day (which is coming sooner than you think), the dollar is dead and Gold is king. Weimar is coming and will not be escaped. Weimar can be a bad or even worse than the historical experience. This is no longer about investment or trading, this is about survival financially, physically and spiritually. Our retirees are in the cross hairs of time and misplaced trust. Your retirement programs from self directed to corporate will be assimilated into government run programs. The Democrats will cut benefits that you had feared the Republicans would. You are going to be culled from the gene poll in four years.
Peter Schiff on the Bond Bubble - BNN Canada Jan 7 2009 Last remaining buyer will be the Fed who will have to print money to buy the treasury's dollar denominated bonds which will devalue the dollar.
Bond scare as German auction fails and British debt hits danger level Fitch Ratings has warned that Britain's public debt will explode to almost 70pc of GDP by the end of next year, vaulting past Germany to become one of the most heavily-indebted states in the industrial world. "In terms of debt dynamics, the UK is by far the worst of the `AAA' club of countries. The underlying fiscal picture is terrible," said Brian Coulton, head of sovereign rates at the credit agency. Mr Coulton said it would become increasingly hard for states to raise enough funds in the global bond markets to cover bank bail-outs and big budget deficits at the same time. Britain's bank rescue alone will cost 7pc of GDP. The danger became all too real yesterday when even Germany failed to sell a full batch of government bonds at its annual `Sylvester Auction', which kicks off the debt season. Investors took up just two thirds of a €6bn (£5.6bn) sale of 10-year Bunds, leading to consternation in the markets. Bund price dropped sharply as the yield jumped 34 basis points to 3.29pc, with copy-cat moves by bonds across the eurozone. "It's very poor," said Marc Ostwald from Monument Secuirites. "In 20 years covering Bund auctions I can't remember the Bundesbank ever being left with a third of the bonds."
Investors shun auction of German Bunds Fears that governments may not be able to fund their vast borrowings over the next few years without a rise in interest rates were fuelled yesterday as a major auction of German government bonds failed. The German authorities only managed to sell two thirds of the €6bn (£5.4bn) of 10-year maturity securities that they offered to the market. "I would call this a failed auction," said David Keeble, head of fixed-income strategy in London at Crédit Agricole. "There was no doubt that this was a very poor start of the auction season." The news triggered a steep fall in the prices of German government bonds, or Bunds, and a corresponding jump in their long-term yields.
Budget office forecasts long recession Pegs '09 deficit at $1.2 trillion Even by Washington standards, the deterioration in the federal government's budget situation since September has been breathtaking. The Congressional Budget Office projected Wednesday that the budget deficit for the current fiscal year would total $1.2 trillion. CBO's forecast does not include President-elect Barack Obama's two-year economic-stimulus bill, which is expected to cost $800 billion or more. The CBO report also predicted "a marked contraction in the U.S. economy" in 2009. The gross domestic product (GDP) is expected to fall by 2.2 percent this year, steeper than in any year since 1946, when America was demobilizing from World War II.
Illinois House Impeaches Gov. Rod Blagojevich The Illinois House voted overwhelmingly Friday to impeach Gov. Rod Blagojevich, an unprecedented action that sets up a Senate trial on whether he should be thrown out for allegedly trying to sell President-elect Barack Obama's vacant Senate seat. Impeachment required just 60 votes. The final result was 114-1.
Analyst warns of more trouble brewing for banks Oppenheimer & Co. analyst Meredith Whitney says the federal efforts to bailout banks will not be enough to float the companies through the year. Oppenheimer & Co. analyst Meredith Whitney warned Wednesday that the federal government’s $700 billion Troubled Asset Relief Program will not be enough to keep banks from needing additional capital this year. The report echoes ideas laid out in Ms. Whitney’s past reports, which purport that credit-rating downgrades on mortgage-related securities are leading to further stresses on companies’ capital. To date, more than $5 trillion in mortgage-related securities have been downgraded, but Ms. Whitney said more downgrades lie ahead. “There is an undeniable correlation between downgrades and increased capital demands by the banks. What continues to confound us is why we are the only ones talking about it,” she wrote in the note. “As fundamentals continue to devolve, more voids will be created in banks’ core capital positions.”
Treasury sees more big bank bailouts The Treasury has quietly opened the door to more bailouts of major banks like Citigroup that the department deems too big to fail, exposing taxpayers to potentially large losses on the banks' souring loan portfolios. In a little-noticed move on Friday while many people were still on holiday vacations, the Treasury issued regulatory "guidelines" saying it would take the same steps to prevent the failure of other major institutions, as it did with Citigroup in December. At that time, it provided the New York bank with a second large cash investment of $20 billion out of its bank bailout fund, and said it would share losses on $306 billion of the bank's gigantic portfolio of toxic loans.
1/5/09 Ron Paul on Madoff, SEC, and individual responsibility
Prosecutors: Madoff was ready to send out $173M Prosecutors say Bernard Madoff was ready to send out $173 million before his arrest Prosecutors said Thursday that investigators found 100 signed checks worth $173 million in Bernard Madoff's office desk that he was ready to send out to his closest family and friends at the time of his arrest last month in what is alleged to be largest financial fraud in history. The detail was provided in a court filing Thursday as prosecutors argued that Madoff should have his bail revoked and be sent to jail. They said the checks were further evidence that he wants to keep his assets away from burned investors in a more than $50 billion fraud.
Madoff Investors Paid Fees to Funds for Profits That Vanished Madoff's missing $50 billion went to pay hedge fund fees for funneling the money Investors wondering what happened to the $50 billion that disappeared in Bernard Madoff’s alleged Ponzi scheme need look no further than the fees charged by the hedge funds that marketed his money-making prowess. Many investors left their savings in the Madoff-run funds, content in the belief that their nest eggs were doubling every seven years. Firms that sold the feeder funds, including Fairfield Greenwich Group, Tremont Group Holdings Inc. and Bank Medici AG, were paid fees every year.
Marc Rich Is One Victim Unlikely to Go to Court Many investors who have lost money as clients of the financier Bernard L. Madoff have done what anyone might be expected to do in that situation: seek recourse through the courts. But one victim, Marc Rich, would seem unlikely to go that route because of his own legal issues. Mr. Rich is the commodities trader who fled to Switzerland in 1983 to escape prosecution on charges of financial crimes and later received a pardon from President Bill Clinton on the last night of his administration in 2001.
Citigroup to support mortgage relief plan Senate leaders will announce Thursday an agreement with Citigroup in which the financial giant will throw its support behind legislation that allows homeowners in bankruptcy to modify the terms of their mortgages. The provision has been long sought by Democrats as a means to give homeowners who are "underwater"--who owe more money on their homes than they are worth--the means to strike a more favorable deal with banks. But giving bankruptcy judges the power to "cram down" mortgages has been strongly opposed by congressional Republicans and mortgage lenders, who say that it would make providing loans riskier and, because of that, reduce the amount of credit available to buyers.
U.S. Economy: Payrolls Post Biggest Annual Decline Since 1945 The U.S. lost more jobs in 2008 than in any year since 1945 as employers fired another 524,000 people in December, indicating a free-fall in the economy just days before President-elect Barack Obama takes office. "Consumers are now going to get more and more scared at the prospect of losing their job,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts. Obama’s proposed fiscal stimulus “needs to be big, needs to be bold, needs to be swift. If they can do something quickly we can limit the hemorrhage by mid-year."
World markets down as US unemployment rises US unemployment increase stokes market fears of prolonged recession European and U.S. stock markets fell Friday as investors fretted over the outlook for the U.S. economy following an unexpectedly large increase in the unemployment rate. An early relief rally following the news that payrolls in the world's largest economy declined by a less than anticipated 524,000 in December soon dissipated as investors focused on the rise in the unemployment rate, to 7.2 percent from 6.8 percent in the previous month. Analysts had expected unemployment to hit 7 percent in December. Investors were also spooked by the news that for all of 2008, the U.S. economy lost 2.6 million jobs -- the most since 1945 when nearly 2.8 million jobs were lost. But the number of jobs in the U.S. has more than tripled since then.
Congressional Panel Blasts U.S. for Failing to Aid Homeowners The panel set up by Congress to oversee the U.S. Treasury’s $700 billion financial markets rescue criticized the Bush administration for failing to stem mortgage foreclosures while bailing out banks. The Congressional Oversight Panel, headed by Harvard Law Professor Elizabeth Warren, also said a lack of transparency about the fund “erodes the very confidence” the program is supposed to restore. The group reiterated criticisms of Treasury Secretary Henry Paulson’s shifting strategy for the Troubled Asset Relief Program.
Pressured by I.R.S., UBS Is Closing Secret Accounts Under pressure from federal authorities, the Swiss bank UBS is closing the hidden offshore accounts of its well-heeled American clients, potentially allowing their secrets to spill into the open. In a step that would have once been unthinkable in the rarefied world of Swiss banking, UBS will shut about 19,000 accounts that prosecutors suspect have gone undeclared to the Internal Revenue Service. UBS will transfer the assets to other banks or other divisions within UBS, or will mail checks directly to the account holders, creating paper trails for federal prosecutors who are examining whether UBS clients used such accounts to evade taxes.
MAX KEISER MATT STEVENSON speaks to the one man who predicted the meltdown. Maybe you haven't heard of Max Keiser yet, but he's been predicting the events that are unfolding for a number of years now - the world economic crisis triggered by sub-prime debt, the collapse of the Icelandic economy and much more. The former stockbroker turned radical activist, broadcaster and film-maker has learned from his days on the front line. After experiencing two financial crashes first hand, he wasn't hanging around for it to happen again. Now living in Paris having fled his home town of New York after Bush's election, he was clear that the world was about to face "the mother of all financial crises" and that the US wasn't the place to be when it hit. He's spent his time since exposing just how this "financial holocaust" was going to unfold and has now been picked up by the BBC, although perhaps a little too late. As the head of BBC World News said, "if Max had been on our screens a year ago, the current global financial crisis would not have been a surprise. It might not even have happened."
The Oracle SHOWING TIMES 0930 GMT on Friday 9th January (that's 1:30pm PT) Repeated: Friday at 1430, 1830 and 2130 GMT. Saturday at 0430 GMT.
BBC will broadcast Max Keiser through Livestation (free sign-up and live media player) once shows are available.
The Oracle with Max Keiser - Episode One - part 1
The Oracle with Max Keiser - Episode One - part 2
The Oracle with Max Keiser - Episode One - part 3
Max Keiser Financial Anarchist (decentralization of power)
The misery that America finds itself in British Prime Minister David Lloyd George, smirked in 1915 that it was Britain's political and financial stability which would always enable it to raise "the last million". It was a nice play on words, notes James MacDonald in his excellent book A Free Nation Deep in Debt, sparring off the "last million men" promised by Lord Kitchener, London's secretary of state for war. Endless money forms the sinews of war, as Cicero spotted 2,000 years ago. Next to cash, endless bodies are just a second-rate worry. The hero of imperial legend, however – and butcher of those fuzzy-wuzzies unlucky enough to stumble in front of the Maxim guns he commanded – Kitchener had already set the model for raising millions both of money and men. Because the man who invented concentration camps during the Boer War of 1899-1902...starving thousands of woman, children and the old to death...also lent his stern face and jabbing finger to the world's first ever "He wants YOU!" recruitment poster.
Consumer borrowing falls by $7.94B in November Consumer borrowing plunges by $7.94 billion in November, record amount in dollar terms Consumers cut back on their borrowing by a record amount in dollar terms in November, another sign of trouble for the rapidly weakening economy. The Federal Reserve reported Thursday that borrowing on credit cards, and for such things as auto loans, dropped at an annual rate of $7.94 billion in November, the biggest decline in 65 years of record keeping. That also was much larger than the $500 million decline economists expected, and left total consumer credit outstanding at $2.57 trillion. The drop represented a decline of 3.7 percent from October, which was the biggest fall in percentage terms since a 4.3 percent plunge in January 1998.
More Pain for US Borrowers as China Hangs on to Cash China has bought more than $1 trillion of American debt, but as the global downturn has intensified, Beijing is starting to keep more of its money at home, a move that could have painful effects for American borrowers. The declining Chinese appetite for United States debt, apparent in a series of hints from Chinese policy makers over the last two weeks, with official statistics due for release in the next few days, comes at an inconvenient time. On Tuesday, President-elect Barack Obama predicted the possibility of trillion-dollar deficits “for years to come,” even after an $800 billion stimulus package. Normally, China would be the most avid taker of the debt required to pay for those deficits, mainly short-term Treasurys, which are government i.o.u.’s. In the last five years, China has spent as much as one-seventh of its entire economic output buying foreign debt, mostly American. In September, it surpassed Japan as the largest overseas holder of Treasurys.
Stimulus Must Focus On Financial Institutions (see video) A government stimulus must ensure that financial institutions are recapitalized and remain "healthy," said Frederic Mishkin, former Federal Reserve Board governor and Columbia University economics professor. "If you don’t get the private sector running properly, no matter how much the government spends, it’s not going to do the trick," he told CNBC's "Squawk Box." "If things are done with half measures that could then leave us in a more vulnerable position where another shoe could drop," he said. Tax cuts and rebates are not as effective as spending on infrastructure to boost the economy, said Mishkin. "Tax cuts by themselves just don't have enough bang for their buck," he said. "It makes a lot of sense to spend on infrastructure, particularly if the infrastructure really is needed it can have very high payoffs in terms of high investment returns."
Chrysler's federal loan deals bar strikes GM's $13.4B federal loan bars strikes; AP source says Chrysler's $4B loan has similar terms Provisions of General Motors' and Chrysler's $17.4 billion in federal loans automatically places them in default if union workers go on strike. A General Motors Corp. filing this week with the Securities and Exchange Commission detailed the provision as part of its $13.4 billion in federal loans. A person briefed on Chrysler LLC's $4 billion loan, who didn't want to be identified because the company is in talks with the United Auto Workers union about concessions, confirmed Thursday that the Chrysler deal also has a similar provision.
BOE Cuts Rate to Lowest Since Bank's Creation in 1694 The Bank of England cut the benchmark interest rate to the lowest since the central bank was founded in 1694 as policy makers tried to prevent the credit squeeze from deepening Britain's recession. The bank rate was reduced a half-point to 1.5 percent, bringing policy makers closer to the point at which they will run out of options to fight the financial crisis with conventional tools. The pound rose against the euro and the dollar because some investors had bet on a larger reduction.
China Risks the Madoff Treatment From Treasuries Beijing bookstores would be wise to stock up on Johann Wolfgang von Goethe. His work will help Chinese officials understand the "Faustian bargain" in which they are engaged with the U.S. The reference here is to a compromise of principles for fleeting gains. In literature, Goethe's Faust is a mythic German alchemist who made a deal with the devil. And that, in a nutshell, is where China, the biggest foreign holder of U.S. debt, finds itself as America re-inflates its economy. Treasury Secretary Henry Paulson isn't the devil, yet on his watch the U.S. has morphed into a huge debt-issuing machine. The Congressional Budget Office says the U.S. deficit will more than double this year to at least $1.18 trillion, the biggest since World War II.
Andrew Mellon vs. Bailout Nation 2008 was the year when the United States led the charge of bailout nations, lending and literally guaranteeing trillions of dollars of private liabilities in an effort to avoid the advent of another Great Depression. Nothing, with the possible exception of George Bush's IQ was the subject of greater debate. To begin with, the rescue plan itself was controversial even amongst its implementers: Congress voted against it, then a week later voted for it; Treasury Secretary Paulson designated it "TARP" (short for "Troubled Asset Relief Program"), then a month later did a 180°, refusing to buy subprime mortgages and asserting his right to change his mind because the facts themselves had changed. But the broader question reached beyond politics and into the realm of the dismal science itself. Was it necessary and productive to mutate 21st century American-style capitalism into a thinly disguised knock-off of the New Deal? Peter Schiff on "Russia Today" Jan 07 2009 pt 1/2 In this video Peter explains why U.S. politicians didn't want to listen to him, why the rest of the world will stop lending America money, the coming collapse of the dollar and all its implications at home (bread lines, black markets n' all), and that America isn't in trouble because of the bursting of the housing bubble-- but because it became inflated in the first place. He also discusses Obama's 700+ billion stimulus plan and why Obama isn't real change, just more of what America has had for the past 8 years.
Peter Schiff on "Russia Today" Jan 07 2009 pt 2/2
Oil Rises First Time in Four Days on Concern Drop Was Excessive Crude oil rose for the first time in four days on speculation prices had fallen too far, too fast in response to the global recession. Oil is paring a 15 percent drop from Jan. 5 as traders who bet prices would fall are buying back contracts to lock in their profits on so-called short sales. Prices declined this week as reports showed U.S. unemployment rose amid the global economic contraction. Crude's slump was limited on concerns that fighting between Israel and Hamas in the Gaza Strip may disrupt supplies. "We're retracing that lower settlement that we had from yesterday," said Jonathan Kornafel, a director for Asia at options trader Hudson Capital Energy. "There is a good $5 to $10 still in the market right now for geopolitical premiums."
Banks Pare Fed Loans After Increase for Year-End Cash Banks pared borrowing from the Federal Reserve during the past week, reducing their dependence on the central bank after stocking up on cash at the end of 2008, the Fed's consolidated balance sheet showed today. Discount window lending to commercial banks fell to $83.7 billion as of yesterday, from $93.8 billion the previous Wednesday, the central bank said in a release in Washington. Primary dealers reduced their borrowings from the Fed to $34.3 billion yesterday from $37.4 billion Dec. 31.
Hedge Funds Lost Record 18.3% on Misjudged Markets Hedge funds lost 18.3 percent in 2008, their worst year on record, as managers misjudged the severity of the biggest financial crisis since the Great Depression. A gain of 0.42 percent in December lessened the average loss for the full year, according to Hedge Fund Research Inc.'s HFRI Fund Weighted Composite Index. The decline was the largest since the Chicago-based firm began tracking data in 1990. "Hedge funds failed to appreciate the magnitude, breadth and duration of the declines we saw across most markets," said Michael Rosen, principal at Angeles Investment Advisors LLC in Santa Monica, California, which advises clients on investments.
Copper Drops for Second Day on Signs U.S. Recession May Worsen Copper prices fell for a second day on signs that the U.S. recession is deepening, heightening concern that demand for industrial metals will weaken. The number of Americans receiving jobless benefits surged 101,000 to 4.6 million last month, the highest since 1982, the Labor Department said today. Copper has plunged 65 percent from a record in May as rising unemployment, a declining housing market and slumping manufacturing worsened a yearlong U.S. recession. The metal weakened "as the market returns its focus to demand-side woes amid a deteriorating macro-economic environment," analysts at Barclays Capital in London said today in a report.
London Boom Time Bill Comes Due as Bankers Buy Coffee on Credit Jane Casulli has been selling coffee and sandwiches in London’s financial district for 10 years and survived the dot-com bust. She says this meltdown is different. Sales at her cafe, a two-minute walk from the local offices of Swiss investment bank UBS AG, plunged 50 percent in the last two months of 2008, and some regulars are requesting monthly tabs to cover their morning lattes. "Customers are now asking how much things cost and bringing sandwiches from home,” she says. “People aren’t leaving their offices. Every day looks like a Sunday."
Bank of Korea Cuts Rate to Record as Recession Looms The Bank of Korea cut its benchmark interest rate by a half-point to a record low, saying the economy is deteriorating faster than expected as domestic demand and exports falter. Stocks fell. The bank's board lowered the seven-day repurchase rate to 2.5 percent in Seoul today, the fifth reduction since early October. "It'll be a very bad year," Governor Lee Seong Tae told reporters, adding the economy almost certainly had a large contraction in the fourth quarter.
Toyota's Output Cuts May Herald Need to Shut Plants Toyota Motor Corp.'s 11-day closure of all its domestic factories over the next two months may herald a permanent shutdown to reduce overcapacity. With car demand in Japan set to fall to a 31-year low in 2009 and the yen's gains over the last year eroding the competitiveness of exports, Toyota may have to shutter a factory in its home country, according to Credit Suisse Group AG.
Holiday Sales Were Dismal, New Retail Data Confirms After weeks of hoping for a Christmas miracle, the nation’s retail chains confirmed Thursday that they suffered one of the worst holiday shopping seasons in decades. Most stores reported sales declines and many lowered their earnings guidance, including Wal-Mart, the world’s largest retailer. Sales in November and December are closely watched because they account for 25 to 40 percent of many retailers’ annual sales, according to the National Retail Federation, an industry group. And typically, those sales are robust. But this past Christmas was anything but typical.
The Emperor Has No Clothes: Peter The Peasant Exposes King Henry - Peter Schiff vs Henry Paulson. Turn off your TV and do some research.
Prosecutors: Madoff was ready to send out $173M Prosecutors say Bernard Madoff was ready to send out $173 million before his arrest Prosecutors said Thursday that investigators found 100 signed checks worth $173 million in Bernard Madoff's office desk that he was ready to send out to his closest family and friends at the time of his arrest last month. The detail was provided in a court filing Thursday as prosecutors argued that Madoff should have his bail revoked and be sent to jail. They said the checks were further evidence that he wants to keep his assets away from burned investors. In the filing, Assistant U.S. Attorney Marc Litt said Madoff cannot be trusted because he had long engaged in a "scheme that required the defendant to lie routinely to thousands of people and a scheme which has caused extraordinary damage to individuals, families, and institutions all over the world."
Madoff investigation launched in UK An investigation was launched today into the British activities of alleged multi-billion-pound fraudster Bernard Madoff. Officials will focus on investors who lost huge sums when Madoff's financial business collapsed, the Serious Fraud Office said. Prosecutors in the United States said a bogus business run by the former Nasdaq stock market chairman lost at least £33bn. Investigators are approaching former employees as they work to trace those hit in Britain, the Serious Fraud Office (SFO) said. They appealed for investors or other financiers involved with Madoff's operations in the City of London and elsewhere to come forward.
Autoworkers union begins talks on concessions Autoworkers union begins discussing concessions needed so GM, Chrysler can keep gov't loans United Auto Workers union bargaining officials are arriving in Detroit this week to begin discussing wage and benefit concessions they must make so General Motors Corp. and Chrysler LLC can keep their federal loans. Under the terms of the $17.4 billion granted to GM and Chrysler last month, the companies have until Feb. 17 to hammer out amendments to their current contracts that would bring labor costs in line with those of employees at foreign auto companies' plants in the U.S. Those concessions must be approved by union members and submitted as part of GM and Chrysler's restructuring plans by March 31. That's when the government can call in the loans if the requirements haven't been met.
Porn industry seeks federal bailout Another major American industry is asking for assistance as the global financial crisis continues: Hustler publisher Larry Flynt and Girls Gone Wild CEO Joe Francis said Wednesday they will request that Congress allocate $5 billion for a bailout of the adult entertainment industry. “The take here is that everyone and their mother want to be bailed out from the banks to the big three,” said Owen Moogan, spokesman for Larry Flynt. “The porn industry has been hurt by the downturn like everyone else and they are going to ask for the $5 billion. Is it the most serious thing in the world? Is it going to make the lives of Americans better if it happens? It is not for them to determine.” Francis said in a statement that “the US government should actively support the adult industry's survival and growth, just as it feels the need to support any other industry cherished by the American people."
Walgreen Cuts About 1,000 Jobs to Reduce Costs Walgreen said it plans to cut about 1,000 nonstore jobs as it works on reducing costs and improving its drugstore operations. The company said it is offering early retirement and severance programs to employees in corporate and field management jobs. About 1,000 positions, or about 9 percent of the jobs in those areas, will be cut through voluntary and involuntary programs during fiscal 2009.
Online, Sarah Palin Has Unkind Words for the Press Sarah Palin, still smarting over coverage of her vice presidential run, calls the media's reporting on her family "very scary" and says there may be "a class issue" that explains the more sympathetic treatment of Caroline Kennedy. The Alaska governor also took a swipe at Katie Couric over the CBS interview in which Palin stumbled badly, saying: "Katie, you're not the center of everyone's universe." Palin did her venting Monday with John Ziegler, a conservative radio talk show host turned filmmaker, who posted excerpts online to promote the sale of a forthcoming DVD titled "Media Malpractice: How Obama Got Elected." "I think this woman was assassinated by the media," he said yesterday.
Sarah Palin talks to John Ziegler about the shameful MSM bias
Bank of England Cuts Rate to New Low The Bank of England on Thursday cut its benchmark interest rate by half of a percentage point to try to bolster the deteriorating economy amid calls for more government action. Britain’s central bank reduced the rate to 1.5 percent, the lowest level since the creation of the central bank in 1694, and economists expect Britain to follow the United States in reducing the rate to close to zero by the second quarter of this year. It is the Bank of England’s fourth rate cut since October, and the European Central Bank is also expected cut its rate of 2.5 percent next week. “It’s a reasonable reduction but it’s not the end of the rate cut cycle yet,” said Ross Walker, an economist at Royal Bank of Scotland in London. “The economy will get worse before it gets better. Shelved or postponed investment spending and unemployment will be the defining characteristics for this year.”
In Europe, Mounting Signs of a Rapid Slowdown More than a year after the United States entered a recession, Europe is now catching up quickly as the pain of job losses and shrinking orders spreads. Data released Wednesday showed that the monthly unemployment rate in Germany rose in December for the first time in three years — by 18,000, to 7.6 percent. Throughout most of 2008, German strength ensured that unemployment held steady at the European level despite sharp rises in Spain and Ireland, two countries hit hard by the housing crisis. But it appears that Germany, too, is suffering.
Rockets Fired From Lebanon Into Israel Rockets fired from Lebanon landed in northern Israel on Thursday, raising concerns they could represent a broadening of the conflict, but both governments played down their significance. International efforts to end the 13-day war in the Gaza Strip continued with the arrival of Israeli negotiators in Cairo. Egyptian officials said the Israeli officials were meeting with the head of Egyptian military intelligence, Omar Suleiman, to explore a proposal devised by Egypt and France as what officials in Paris called a road map to a cease-fire. There was no immediate word on the outcome of the talks.
Israel Attacked From Lebanon; Fears of Second Front in War (Update: - A Hezbollah minister in Lebanon's Cabinet is denying any involvement by the militant group in the firing of rockets from Lebanon into Israel. At least three rockets were fired, and Israel responded with a few artillery shells into Lebanon.) Jerusalem (AP) - Lebanese militants fired barrages of rockets into northern Israel early Thursday, striking a nursing home and threatening to open a second front for the Jewish state as it pushed forward with its offensive in the Gaza Strip.
Gaza Conflict Spreads to Europe; Jews Attacked Paris (AP) - Signs are mounting that the conflict in Gaza is starting to spill over into violence in Europe's towns and cities, with assaults against Jews and arson attacks on Jewish congregations reported in France, Sweden and Britain. Assailants rammed a burning car into the gates of a synagogue in Toulouse, in southwest France, on Monday night. A Jewish congregation in Helsingborg, in southern Sweden, also was attacked Monday night by someone who "broke a window and threw in something that was burning," said police spokesman Leif Nilsson. Neighbors alerted rescue services before the fire took hold
Yushchenko May Use Gas War to Push Ukraine Westward Ukrainian President Viktor Yushchenko may be calculating that his "No" to Russian Prime Minister Vladimir Putin in their dispute over natural gas will make the West more likely to say "Yes" to him. Yushchenko's rejection of Russia's demand that his country pay more for Russian gas reinforces his message that Ukraine's future lies in closer ties with the European Union, which meets today to look for ways to resolve the dispute, rather than with Russia, its neighbor and fellow former Soviet republic.
Gaza war gives ammunition to Gold price rise! Will the Gaza war help boost gold prices? It seems so. Even as the war is raging in Gaza Strip, concerns over an oil crisis and uncertainty over equity markets forced people to turn to gold as the best investment option. Traditionally, in times of uncertainty and volatility in currency, gold has always been a safe haven. According to reports from across the globe, investors, who are seeking an alternative route to investment other than the stock market, are now picking up gold as the best option. HSBC’s this week’s forecast also helped the demand go up. HSBC upped 2009 and 2010 gold forecasts on haven buying. Even though the yellow metal heavily fluctuated this week, experts said the direction in which it is moving is mostly up.
Henry Kissinger: Need for a New World Order Interview clip with Charlie Rose April 02, 2007 (7:29 minutes)
Charlie Rose - An hour with Henry Kissinger An hour on US foreign policy with former Secretary of State Henry Kissinger. Iraq and China are among the topics discussed. August 26, 2007 (56:44 minutes)
New Kissinger NWO : New World Order & Obama Worship we ran a shorter version of this clip on Wednesday, Jan 7th. This is expanded version.
New world order will emerge in 2009, with U.S. plunging Every so often in the history of international affairs, a great transnational turbulence shakes the foundations of the world and brings many of its older structures tumbling to the ground, as we witnessed in 1919, 1945 and 1989. In the confusion and babble that follow, it's difficult to see through the dust and recognize the shape of the altered strategic landscape. Peering through the wreckage of the past year's financial crisis, it seems clear that every nation was a loser in 2008. The world's developed economies have taken a heavy beating, whether measured by their collapsing industrial production, tumbling exports, surging unemployment, frozen credit markets or the near- paralysis of maritime trade. Yet we also hear cries of distress across the globe. Vladimir Putin's proud Russia is reeling toward internal collapse. China is sending factory workers home to the countryside. The International Monetary Fund is trying to rescue Iceland and Ukraine from economic oblivion. Brazil's currency is plummeting against the U.S. dollar. And the brief honeymoon for commodity-exporting African countries is over.
Chorus call for New World Order The return of the Trilateral undead In economic and financial desperation, leaders around the globe are openly calling for the creation of a "New World Order," including prominent "old guard" members of the Trilateral Commission. Is the baby about to be born? It's not accidental that so many of the original members of the Trilateral Commission, all of whom are now well into their 80's, have returned to dance in the limelight once again. TC Members like Henry Kissinger, Zbigniew Brzezinski, Paul Volker and Brent Scowcroft, for instance. On January 5, 2009, Henry Kissinger was interviewed by CNBC on the floor of the New York Stock Exchange. His voice still raspy and spoken with a thick accent, he responded to a question about President-elect Obama's first actions as President: "he can give new impetus to American foreign policy ... I think that his task will be to develop an overall strategy for America in this period, when really a 'new world order' can be created. It's a great opportunity. It isn't such a crisis."
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Thurs 01.08.2009
Flight to safety in 09, USD, Gold, Euro, Yen The USD remains stronger than one might think into the beginning of 2009. Between the latest Mid East tensions and general flight to safety it rallied again to 83 on the USDX when it looked like it might crack into the 70's again, the low being 70ish last year, before the USD rallied after April of 08, which caught the commodity and metals complex. It's hard to say the USD rally last year alone caused the commodity and metals bubble to break, or did the pending world economic slowdown, which caused the speculators to bail out - and/or did the pending economic slowdown then force financial deleveraging on all fronts which flooded money back into the USD as people liquidated?
Will Gold be beaten down like other commodities? “Behold the madness which the hedge funds and index funds have wrought!” That is really all one needs to know to explain today’s price action across the entire gamut of commodities, gold included. I warned yesterday that the dipsticks that run these pestilential institutions will spin on a dime and do the exact opposite of what they did the day before whenever their little black boxes tell them to. The “strategy” of these ninnies consists of throwing money en masse into whatever markets their algorithms tell them to or withdrawing it all at once should the same computer command them to do so the very next day. This is what passes for trading nowadays.
Gold shows signs of recovery Gold prices showed signs of recovery in afternoon Asian trade Thursday as continued worries about Mid East conflict and financial market instability helped spur buying on dips. In Asian trade, spot gold stood at $845 per ounce, up 0.3% from New York's notional close of $842.20. On Wednesday, gold dropped nearly 3%.
A Golden Way Out of the Monetary Fiasco The government-controlled monetary regime - the most destructive force set into motion by state interventionism - has finally been blown to pieces. This is the message conveyed by the monetary fiasco in global capital markets, typically referred to as the international credit crisis. However, politicians and central bankers the world over are taking great efforts to hide this truth and its full consequences from the public's attention by taking recourse to even more far-reaching market interventionism. Central banks provide commercial banks with any amount of base money needed to prevent them from defaulting on their payment obligations. The Federal Reserve, for instance, keeps expanding the monetary base at the highest rate seen since 1919
Gold, Guns, and Groceries I have written several essays on the subject of secession. The larger issue is the causes and results of national dissolutions. In our lifetimes, we have witnessed the destruction and devolution of the Soviet Union spinning off 15 nations dropping off the red corpus of the USSR. The Pakistanis have no notional control over the entire northwestern portion of their country bordering war-torn Afghanistan and it is arguable whether these united States have control of their southern border with Mexico which is brimming with all the components of an irregular warfare scenario.
Obama Doubles Down Barack Obama did not actually predict trillion-dollar deficits indefinitely; more precisely, he said, "unless we take decisive action, even after our economy pulls out of its slide, trillion-dollar deficits will be a reality for years to come" (emphasis added). At the same time, the highly competent Congressional Budget Office projected a $1.2 trillion deficit for fiscal 2009 (year ending 10/31/09). I was initially surprised by Obama's forthrightness on the deficit question, but on reflection there are three good reasons for him to do it:
He wants to lower expectations by making the case that we have a serious deficit problem before taking office.
He wants to signal that he is aware of the deficit issue, to try to defuse the attacks he is going to get from fiscal conservatives regarding his stimulus plan.
He wants to use the current crisis - and the political opportunity it gives him, as a new and generally popular president with significant majorities in both houses - to tackle the long-term retirement savings problem.
Obama to inherit 'broken government' It's bad enough President-elect Barack Obama will assume office amid the worst economic crisis since the Great Depression and two wars. But the non-partisan Center for Public Government reminds us in its aptly named "Broken Government" report that Obama will also take up the reins of a seriously buggy Executive Branch (not that Congress functions much better.
White House Chief Performance Officer On January 7, 2009, President-elect Obama announced a new position in the White House, Chief Performance Officer, and his intention to nominate Nancy Killefer to fill the new role.
Government Panic Could Herald Dollar Panic One of the few things more troubling for an economy than government intervention is government intervention driven by panic. Time and again, history has shown that when governments rush to engineer solutions to pressing problems, unintended difficulties arise. In the current crisis, there is growing evidence that Washington is in a state of increasing panic. Despite its massive cash injections, market manipulations and rescue plans, the recession is clearly deepening and spreading. With little to show thus far, politicians don't know if they should redouble past efforts, break ground on new initiatives, or both. However all agree, unfortunately, that the consequences of doing too little far outweigh the consequences of doing too much.
U.S. Dollar Dead Bounce Ends, Treasury Bond Bubble Begins to Dissipate The marquee line best describing the past two to three months has been that the Dollar Death Dance has been fueled by failure of US banks & corporations, along with sponsored assaults against speculative hedge funds. The climate has changed from liquidation and bankruptcies, obviously steered and exploited by the Powerz, toward more legitimate attempts to have a recovery initiative take root across the landscape, It is fast approaching a wasteland. The most vivid signal of market manipulation, intended to benefit the USGovt borrowing costs, and designed to promote the totally false notion of a Flight to Safety, has been the USTreasury bubble.
Buy Gold get off the dollar
Roubini Joins Faber and Rogers in Saying Bubble in Treasuries Will Likely Burst In "Will U.S. Treasuries Be the Next Asset Bubble to Burst?", Nouriel Roubini writes: • In 2009, any signs of a less than dire economic outcome as deflation may burst the bubble in Treasuries.*** • This bubble is motivated by fear rather than greed. Investors are seeking to protect themselves against deflation and declining stock markets by blindly acquiring "risk-free" government bonds [Financial Times - "FT"] • Institutional investors also contributed to the bond bubble. Pension funds, insurers and others have sold off toxic securitized triple-A rated bonds and replaced them with Treasuries. Government bonds are attractive for diversification purposes since they have held up while just about everything else in their investment portfolios has collapsed (FT)
The Fate of Paper Money "Paper money eventually returns to its intrinsic value - zero." (Voltaire, 1694-1778) The first well-documented widespread use of paper money was in China during the Tang (618-907 A.D.) dynasty around 800 A.D.[1] Paper money spread to the city of Tabriz, Persia in 1294 and to parts of India and Japan between 1319 to 1331. However, its use was very short-lived in these regions. In Persia, the merchants refused to recognize the new money, thus bringing trade to a standstill. By 1455, after over 600 years, the Chinese abandoned paper money due to numerous problems of over issuance and hyperinflation. An in-depth description of China's first experience with money can be found here.
US deficit set for postwar record The US budget deficit will hit nearly $1,200bn this fiscal year even without the cost of Barack Obama's planned fiscal stimulus, Congress's budget watchdog warned on Wednesday. The warning came as the president-elect said that the stimulus would be "on the high end of our estimates" - implying close to $775bn over two years - but "will not be as high as some economists have recommended, because of the constraints and concerns we have about the existing deficit". The estimate, published by the Congressional Budget Office, threw into stark relief the dilemma facing the president-elect, highlighting the urgent need for stimulus and the fraught state of public finances.
Marc Faber on the Economy, Gold, WWIII Another good interview with Dr. Marc Faber, this one over at Bloomberg where he's been a regular for many years (recent appearances at the likes of CNBC are somewhat unusual as he tends to go against conventional wisdom, something that abounds at CNBC). There's lots of good stuff in this one - the outlook for the global economy, oil, gold, base metals, natural resource stocks, World War III having already started... On the subject of alternatives to the government solutions for the current problems, he was asked how he expected the populace to stand for the government doing nothing?
How to Stimulate the Economy
No relief in sight. That's the prognosis from the December Fed meeting, revealed just yesterday, showing we're in for a longer and nastier recession than first feared. The bleak economic outlook appeared to take even some Fed officials by surprise. "Policy makers at the Federal Reserve appeared almost stunned by an economy that was sinking faster than they had expected on almost every front in December, so much so that they even toyed with the idea of not announcing an official target for overnight interest rates," the New York Times writes. The minutes show Fed officials "expect a deep contraction in the first half of the year and slow growth in the second half that won't make up for the losses," the Wall Street Journal writes, amounting to more job losses and further deflationary pressures.
Markets sell off, Dow down 245 Recession reality hit Wall Street Wednesday with poor corporate earnings and unemployment reports that may signal worse to come, prompting sell-offs that erased gains made this year. The Nasdaq dropped below 1,600 and two of the three major indexes fell more than 3 percent. But all three came off their lows in late trading. At the close, the Dow Jones Industrial Average plunged 245.16, or 2.72 percent, to 8769.94, its worst day since Dec. 9. The tech-heavy Nasdaq fell 53.32, or 3.23 percent, to 1599.06, the worst one-day drop since Dec. 11. The broader Standard & Poor's 500 dived 28.04, or 3 percent, to 906.66 for its worst day since Dec. 1.
$1.2 Trillion Deficit Forecast as Obama Weighs Options Changes in Social Security and Medicare will be central to efforts to bring federal spending in line, President-elect Barack Obama said on Wednesday, as the Congressional Budget Office projected a $1.2 trillion budget deficit for the fiscal year. "We expect that discussion around entitlements will be a part, a central part" of efforts to curb federal spending, Mr. Obama said at a news conference. By February, he said, "we will have more to say about how we're going to approach entitlement spending." Alluding to the projected deficit, which was accompanied by grim unemployment predictions, Mr. Obama said: "And we know that our recovery and reinvestment plan will necessarily add more. My own economic and budget team projects that, unless we take decisive action, even after our economy pulls out of its slide, trillion-dollar deficits will be a reality for years to come."
Fed Expects Weak Economy, Fears 'Prolonged Retraction' The economy is set to remain weak well into this year, and could even be at risk of entering a "prolonged contraction," leaders of the Federal Reserve concluded last month, as they agreed to take aggressive new steps to contain the recession. The central bank's policymaking committee was grappling at its Dec. 16 meeting with an abrupt deterioration of the economy, and even the risk of a dangerous cycle of falling prices, according to minutes released yesterday. Those minutes shed light on the committee's decision to take unprecedented steps, including cutting the interest rate the Fed controls effectively to zero; technically, the committee set a target range for the federal funds rate between zero and 0.25 percent.
Democrats Will Revise Obama Stimulus Democrats on the Senate Finance Committee will make some "tweaks" to President-elect Barack Obama's fiscal stimulus plan to add items sought by lawmakers such as a "stronger energy component," said the tax-writing panel's chairman. There is "strong support" among Senate Democrats for additional tax breaks to spur energy production, said Senator Max Baucus of Montana, who held a closed-door meeting today in Washington with Democrats on his committee. He said lawmakers may make a "slight shift" in the portion dedicated to tax cuts.
Paulson Recommends Nixing Freddie and Fannie Treasury Secretary Henry M. Paulson Jr. today called for abolishing Fannie Mae and Freddie Mac and replacing them with highly-regulated utilities that would play a more narrow role in supporting the U.S. housing finance system. In what the Treasury Department billed as his last speech as secretary, Paulson addressed the future of Fannie and Freddie, which together own or stand behind about half the nation's home loans. Under Paulson's planning, the two companies were seized by the government in September as the nation's economic crisis entered a critical phase. Paulson said today the two companies should be replaced by private entities that would purchase and bundle mortgages that, in exchange for a fee, would carry U.S. backing in the case of default.
Recap: Paulson Speech
Stock Losses Leave Pensions Underfunded by $400 Billion The collapse of the stock market last year left corporate pension plans at the largest companies underfunded by $409 billion, reversing a $60 billion pension surplus at the end of 2007, according to a study released today. Shoring up the plans could cause further pain for workers, businesses and the struggling economy at a time when they can least afford it, pension specialists said. "The chaos that has been observed in the world's financial markets over the last 12 months has had a major adverse impact on pension plan funding and will negatively impact corporate earnings," the Mercer consulting firm reported today. "Moreover, the trend in recent months has been one of alarming deterioration," Mercer said.
Why lenders might forgive your debt There was a time when lenders didn't want to work with you if you couldn't pay. Now they want to avoid foreclosure, lawsuits or repossession almost as much as you do. People who overdosed on debt in recent years learned the paradox of easy credit: While lenders were willing to let you borrow copious amounts, they weren't particularly interested in helping you work out a solution if you fell behind on repayment. Lenders often found it easier and cheaper to write off delinquent accounts as bad debt than work with you on a repayment plan. After all, they could get a tax break on the loss and then get on with the profitable business of extending credit to the next guy. Lately, however, lender perspectives have changed. Soaring default rates, a weakening economy and the credit crunch have rewritten the rules.
Oil Prices Could be Ready to Rally if History is Any Indication Last year’s 54% drop in oil prices may have set the table for a rally similar to the one experienced in 1999, when prices doubled after a similar decline. The so-called “forward curve of futures contracts” traded on the New York Mercantile Exchange suggests prices will rise 28% this year, according to Bloomberg News. The current curve looks almost the same as it did 10 years ago, when Russia’s default drove oil prices to drop as low as $10.82 a barrel in late December 1998 - a decline of nearly 40% from where they began that year. At that time, the Organization of Petroleum Exporting Countries (OPEC) responded by cutting output by 1.71 million barrels per day (bpd), an amount equal to 7% of the group’s total supply, setting the stage for a 1999 rally in which prices more than doubled.
Fake inflation numbers masked crisis Distortions in the way inflation is calculated contributed to today's financial mess and the 2000-02 tech crash. Unless the problem is fixed, you can count on another crisis ahead. How do we make sure we don't replay the current financial crisis five years from now? So far, all the plans, revised plans and re-revised plans that have come out of Washington have focused on saving the banks, Wall Street, the financial system, the U.S. economy and the global economy from a devastating meltdown. That's certainly important. But unless we address the root causes of this crisis, we're going to find ourselves back in trouble way sooner than we'd like. It took us only five years to go from the bottom of the 2000-02 technology crash and bear market to the top of the real-estate and financial-leverage boom market in 2007. Without essential reforms, I'm afraid we'll be looking at a crisis much like the current one in another five years or so.
U.S. debt is losing its appeal in China China has bought more than $1 trillion in American debt, but as the global downturn has intensified, Beijing is starting to keep more of its money at home - a shift that could pose some challenges to the U.S. government in the near future but eventually may even produce salutary effects on the world economy. At first glance, the declining Chinese appetite for U.S. debt - apparent in a series of hints from Chinese policy makers over the past two weeks, with official statistics due for release in the next few days - comes at an inopportune time. On Tuesday, the U.S. president-elect, Barack Obama, said Americans should get used to the prospect of "trillion-dollar deficits for years to come" as he seeks to finance an $800 billion economic stimulus package.
Ron Paul -Why Do We Run A World Empire? Congressman Paul appeared on CNN's American Morning today to discuss the follies of trillion-dollar deficits and Keynesian economics.
Alcoa to Slash 15,200 Jobs, Output Alcoa, the world's third-largest aluminum producer, said Tuesday it would cut 13,500 jobs, or 13 percent of its workforce, and slash spending and output to cope with the global economic slowdown. The Pittsburgh-based company also said 1,700 contractors would be cut as part of a broad-based plan to reduce costs that includes the planned sale of four business units and a worldwide salary and hiring freeze. Alcoa said the moves are expected to save the company about $450 million annually, before taxes. As a result of its actions, the company expects to record fourth-quarter charges of between $900 million and $950 million. Alcoa plans to report quarterly results on Monday.
Manufacturing Collapse Reminiscent of Great Depression's Beginning Well, here's the chart I think everyone really needs to see (below). The JPMorgan Global Manufacturing PMI hit 33.2 in December, a series record. More to the point, you can get a comparison between what is happening now and the 2001 "recession lite" with only a swift glance, and of course, the 2009 long recession is only just getting started. Arguably, what we can see here is that the current collapse in industrial activity is starting to get near the US historic one in terms of proportions, but we still aren't quite there yet.
Chamber of Commerce Urges Large Stimulus Package Forecasting unemployment rates as high as 9 percent this year, U.S. Chamber of Commerce president and chief executive Thomas J. Donohue today called on state and federal governments to fully fund programs for the jobless and pass a "significant" economic stimulus package. While the U.S. Chamber, which represents 3 million businesses and engages one of the best-funded lobbying forces on Capitol Hill, typically advocates for less government spending and regulation, the extraordinary economic stress in the United States -- which he likened to a heart attack -- demands extraordinary measures, he said. "What we are talking about is a defibrillator," Donohue said. "We are trying to shock the economy."
Democrats open way to seat Illinois pick for Senate Seeking a way out of a deepening political and legal predicament, the Senate Democratic leadership reversed course on Wednesday and opened the way for Roland Burris to be seated as a United States senator from Illinois. After a private meeting with Burris, Senator Harry Reid of Nevada, the majority leader, and Senator Richard Durbin of Illinois, the No. 2 Democrat, outlined conditions that would allow Burris to take the seat vacated by President-elect Barack Obama.
House to vote on fair pay bills Takes up rights for women The House will likely vote this week on two pay-discrimination bills that were passed by the last Congress but stopped in the Senate by Republican-led filibusters. The first measure, the Lilly Ledbetter Fair Pay Act, would overturn a May 2007 Supreme Court decision that made it more difficult for employees to challenge pay discrimination in the workplace. The bill, named after an employee who worked at a Goodyear tire plant in Alabama, would extend the statute of limitations for claims filed by employees regarding pay discrimination.
Marc Faber - outlook for 2009 (1/2)
Marc Faber - outlook for 2009 (2/2)
Recession creates a load of problems for truckers Cuts at firms are pushing more haulers into the ranks of independent owner-operators, spurring bidding wars for fewer jobs. In early December, trucker Joe Rini learned that his own personal recession had just gotten worse. One of his best clients called about a load of building materials that needed to travel to the Pacific Northwest, Northern California and Colorado -- normally a $4,400 job. Rini offered to do it for $3,400. But before Rini's truck had arrived to pick up the load, the Cleveland-area customer of more than four years called back. Another trucker had offered to do the job for $400 less. Would Rini match it? The answer, which was hard to spit out, was no. "I didn't want to bid that low in the first place," said Rini, speaking from the road as he completed a trip from Ohio to California and Arizona and back to Ohio. "I start down that slope and I'm out of business."
U.S. Shopping Mall Vacancies Reach 10-Year High as Stores Fail Vacancies at U.S. malls and shopping centers approached 10-year highs in the fourth quarter, and are set to rise further as declining retail sales put more stores out of business, research firm Reis Inc. said. Regional mall vacancies rose to 7.1 percent last quarter from 6.6 percent in the third quarter. It was the highest vacancy rate since Reis began tracking regional malls in 2000, as well as the largest quarter-to-quarter jump in vacancies, according to New York-based Reis.
Denver Aims to Ride Out the Recession Randy Nichols mounted the podium before a full house at the Rocky Mountain Commercial Real Estate Expo in November with a wry smile and the air of a defendant mounting the dock to plead insanity. "I'm here," said Mr. Nichols, the president of the Nichols Partnership, a commercial real estate developer, "to talk to you about why we would be stupid enough to build 500 housing units" during a national economic downturn. He was talking about the Spire - a 42-story condominium and retail development going up across the street from the Colorado Convention Center, where the Expo was unfolding. His quip brought ripples of laughter and a wave of applause from hundreds of real estate professionals who had paid to hear the annual fall forecast for Denver's commercial real estate market.
Housing slump not over yet The Orlando area's housing market will remain relatively weak through 2009 but will still be in better shape than Florida's as a whole and should continue outperforming the state's other metro areas, one of the state's leading private economists said Tuesday. "Orlando has held up the best" because the four-county metropolitan area "had less speculative building than the statewide average," said Henry "Hank" Fishkind, president of Fishkind & Associates in Orlando and author of the 2009 Fund Real Estate Forecast, prepared for Orlando-based Attorney's Title Insurance Fund.
Is Chrysler a lost cause? Even after bailout loan and perhaps more help on the way, Chrysler could be facing death knell Even by the standards of battered automakers, Chrysler is in dire shape. Its sales in December were down a stunning 53 percent, far worse than Ford or General Motors, and analysts say it probably won't survive the year as an independent company -- despite $4 billion in government loans and the possibility of more. Things were so bad last year that a single Toyota model, the Camry/Solara midsize car, outsold the entire fleet of Chrysler LLC's passenger cars.
Russia stops all gas supply to Europe via Ukraine Russia stops natural gas deliveries to Europe via Ukraine; Countries struggle amid cold snap Russia cut off all gas supplies to Europe through Ukraine on Wednesday, playing hardball in a weeklong standoff that has left more than a dozen countries struggling to cope with dwindling energy supplies in the depths of winter. The U.S. put the blame squarely on Russia, accusing Moscow of using its energy resources to threaten its neighbors. But Prime Minister Vladimir Putin endorsed the move, even as factories shut down in eastern Europe, schools closed and tens of thousands of people scrambled to find other ways of keeping warm. Insisting that Ukraine was responsible for the crisis, Putin appeared determined to force Kiev to back down and accept increased prices for natural gas. The two sides were to meet Thursday in the first face-to-face talks since negotiations broke down on New Year's Eve.
Gas feud met with chill in Europe Russia's gas price row with Ukraine escalated Tuesday, disrupting deliveries to Europe as the continent is experiencing a bitterly cold winter. Alexander Medvedev knows he needs to soothe his best customer. The No. 2 at the Russian energy giant Gazprom arrived in Berlin on Tuesday to meet with German Economy Minister Michael Glos and a representative from the Czech presidency of the European Union. Whether Mr. Glos extended a warm welcome to Mr. Medvedev is unknown -- but Berlin certainly didn't. It was 5 degrees Fahrenheit in the German capital, and across most of Europe, temperatures were similarly grim, with snow and ice shutting down highways and delaying air travel.
Satyam Chief Admits Huge Fraud Satyam Computer Services, a leading Indian outsourcing company that serves more than a third of the Fortune 500 companies, significantly inflated its earnings and assets for years, the chairman and co-founder said Wednesday, roiling Indian stock markets and throwing the industry into turmoil. The chairman, Ramalinga Raju, resigned after revealing that he had systematically falsified accounts as the company expanded from a handful of employees into a back-office giant with a work force of 53,000 and operations in 66 countries. Mr. Raju said Wednesday that 50.4 billion rupees, or $1.04 billion, of the 53.6 billion rupees in cash and bank loans the company listed as assets for its second quarter, which ended in September, were nonexistent.
Satyam: What the 'Indian Madoff' means to investors A few weeks after the Rs 50 billion Madoff scandal rocked the global financial markets, an Indian Madoff has emerged in the form of B Ramalinga Raju, Chief of India’s fourth largest IT firm, Satyam Computer Services who has fooled his Board of Directors, share-holders and regulators by inflating his Balance Sheet with non-existent Rs 5040 crore! As of now it is not yet clear why Ramalinga Raju resorted to this game plan as he says he has not gained a rupee or dollar out of this results manipulation. According to Ramalinga Raju, the Director Board was not aware of these developments and Securities and Exchange Board of India (SEBI) was also in the dark about such manipulations in what is termed as the country’s biggest corporate governance scandal.
Baghdad Upgrades Relations With Iran As the U.S. leaves, Iran steps in. Iraqi Prime Minister Nouri al-Maliki made his fourth visit to Iran this week, where he met with Iranian President Mahmoud Ahmadinejad and other top leaders. During the visit, the leaders of both countries pledged closer cooperation, and Maliki promised that Iraq would not be used as a base for an attack on Iran. Maliki even agreed with Iran’s position on Gaza, saying “the responsibility of Islamic and other countries of the world is not merely aiding Palestinians, but they also must prepare the ground to put the criminal [Israel] in his place.” Maliki has copied Ahmadinejad’s anti-Israel stance, calling the Jewish state a “murderous regime, which continues its painful aggression against peaceful, unarmed civilians.” “We believe Iran is Iraq’s great neighbor and also its best and most important partner in all fields of cooperation, and we hope the relations would reach the satisfactory level and volume,” said Maliki.
Hamas says no to permanent ceasefire Despite mounting international pressure for an end to hostilities between Israel and Palestinian factions in the Gaza Strip, Hamas declared on Wednesday that it would not accept any permanent cease-fire with Israel. According to the deputy head of Hamas's political bureau, Moussa Abu Marzouk, the group would not talk about a permanent cease-fire so long as Israel continued its "occupation," and would instead continue the "resistance." He said that Hamas stood by its demand for Israel to immediately halt its offensive, to withdraw from the Gaza Strip and to open all of the border crossings.
Al Qaeda Blames Obama for Israeli Offensive in Gaza An intelligence monitoring center reports that Al-Qaida's No. 2 leader is blaming Barack Obama and Egypt's president for the Israeli offensive in Gaza.The SITE Monitoring Service says the audio statement purportedly made by Ayman al-Zawahiri was posted on militant Web sites Tuesday. It is al-Zawahiri's first comment on the crisis since the war began Dec. 27.
Al-Qaida: Attack Western targets to avenge Gaza Al-Qaida is calling on its operatives to attack Western and Israeli interests around the world in order to avenge the deaths of Palestinians in the Gaza Strip. Ayman A-Zawahiri, considered the number two man in the international terror organization after Osama Bin Laden, called on Muslims around the globe to hit "Zionist and Crusader" targets in every location and by all available means. Israel's operation in Gaza is part of a Western attack on Islam, he said in an audio message posted on the Internet. More than 600 Palestinians, including civilians, have been killed in the Israeli military offensive in the Gaza Strip. The operation began on December 28 and aims to weed out terrorists in Gaza and end the firing of rockets from Gaza onto Israeli homes. A-Zawahiri accused United States president-elect Barack Obama of supporting the offensive.
New US Congress expected to consider resolution backing Operation Cast Lead The 111th Congress convened for the first time on Tuesday, with strong Democratic majorities in both houses that will soon be complimented by a Democrat-controlled White House for the first time in 16 years. The spiraling economic crisis is set to dominate the new Congress's first weeks, as the leadership works to ready a $775 billion stimulus bill for US President-elect Barack Obama's signature after he takes office. Several US House leaders are also expected to sponsor a nonbinding resolution backing Israel in its battle with Hamas as one of their first pieces of business.
Gaza conflict suits Iran, says former intelligence chief ran has reason to be satisfied with the conflict in Gaza as it draws attention away from the country's nuclear program, Brig.-Gen. (res) Yossi Kuperwasser, former head of the Research and Assessment Division of Military Intelligence, told diplomats and foreign correspondents in Jerusalem on Wednesday. Speaking at the Jerusalem Center for Public Affairs (JCPA), Kuperwasser said he holds Iran to blame for the Gaza situation. "The Iranians are clearly behind this operation because they supplied Hamas with money and weapons that enabled Hamas to be where they are," he said. Even though it is not as well trained as Hizbullah was in 2006, observed Kuperwasser, Hamas has a "well organized infrastructure" and "is not an easy target" because hundreds of Hamas gunmen were trained in Iran. "We are facing an enemy that we have to treat with care and caution."
Lame Duck Watch from MSNBC Bush White House spending every dime before they leave office!
Obama: $1 trillion deficits 'for years' An expensive economic recovery plan will add to the short-term federal shortfall. But experts warn the bigger problem by far is the long-term picture. President-elect Barack Obama is inheriting the worst economy in decades and says he'll need to "invest an extraordinary amount of money" to get it back on track. Indeed, Obama's first act in office will be to push through what is expected to be an $800 billion economic recovery plan. The stimulus package, combined with the $7.2 trillion the government has invested or loaned in the past year to combat the financial crisis, will add greatly to the federal budget deficit.
Gold Declines as Strengthening Dollar Reduces Investment Demand Gold dropped as the dollar strengthened to a three-week high against the euro, reducing the appeal of the precious metal as an alternative investment. Bullion fell as the dollar gained for a fourth day before a European Union report forecast to show declining producer prices, boosting the case for the European Central Bank to cut interest rates. Gold has fallen 2.8 percent this month, while the dollar has risen 4 percent. "The dollar's strength put pressure on bullion and other commodities," said Hiroaki Hama, an analyst at Mizuho Corporate Bank Ltd. in Tokyo.
End the fed & bring back the gold standard! Clip from the documentary Money, Banking & the Federal Reserve
Banks trying to cope with rise in bad loans 2.31% of loans nationwide non-current, highest level since 1993 First National Bank of Brookfield, like many banks nationally, was being hurt by bad loans. Now it can do something about a big chunk of its bad debt. On Friday the $268.7 million-asset bank took control of a foreclosed 35-acre commercial real estate parcel in Naperville that accounted for half of its $29 million in real estate loans at least 90 days past due. Brookfield will try to sell the land at 95th Street and Illinois Highway 59 to recoup a significant amount of the $15 million loan gone bad.
[Unverifiable rumor from a commercial investment banker in California, has it that the figure the banks don't want you to know about is closer to 23%, and actually higher because 20% of homes have no mortgage owing, so the 23% figure adjusted to 80% of actual outstanding loans is about 29% currently in default in the US.]
Fed predicts economy will get worse In the minutes from its last meeting, the central bank said it expects GDP to decline in 2009 and unemployment to rise into 2010. The U.S. economy is likely to deteriorate further this year and unemployment will rise into 2010, according to the latest forecasts from the staff of the Federal Reserve. This bleak forecast was presented to Fed policymakers when they met last month and lowered interest rates to near zero. Low interest rates are one key tool the central bank uses to try to spur economic activity. According to the minutes from that meeting, the central bank is now predicting that gross domestic product, the broadest measure of economic activity, will fall in 2009.
Chicago real estate executive kills himself, police say A Chicago commercial real estate broker committed suicide in a Kane County wildlife preserve, police said Monday. A maintenance worker discovered the body of Steven L. Good, 52, of Highland Park, Monday morning behind the wheel of his Jaguar parked in a lot at the Max McGraw Wildlife Preserve in East Dundee, said Kane County Sheriff's Department spokesman Lt. Pat Gengler. Good had suffered a single gunshot wound to the head. Gengler said police recovered a weapon inside the car but he would not identify it. There was no note, Gengler said. Investigators are not sure how long Good's body had been at the preserve or why he was in Kane County, Gengler said.
Billionaire kills himself after losses on VW Adolf Merckle, the German billionaire whose speculation in volatile Volkswagen shares had pushed his sprawling business empire to the edge of ruin, has committed suicide, his family said Tuesday. Merckle, 74, was found dead on railroad tracks near his villa in the southern German hamlet of Blaubeuren on Monday evening. The German authorities in the nearby city of Ulm confirmed the death, saying there was no sign that anyone else was involved. The family said in a statement: "The distress to his firms caused by the financial crisis and the related uncertainties of recent weeks, along with the helplessness of no longer being able to handle the situation, broke the passionate family businessman, and he ended his life."
Ron Paul on dollar bubble and nationalization Lew Rockwell Show 12-23-08 1 of 2
Ron Paul - Lew Rockwell Show 12-23-08 2 of 2
The $8 trillion bailout Many details of Obama's rescue plan remain uncertain. But it's likely to cost at least $700 billion - and that would push Uncle Sam's bailouts near $8 trillion. Sitting down? It's time to tally up the federal government's bailout tab. There was $29 billion for Bear Stearns, $345 billion for Citigroup. The Federal Reserve put up $600 billion to guarantee money market deposits and has aggressively driven down interest rates to essentially zero. The list goes on and on. All told, Congress, the Treasury Department, the Federal Reserve and other agencies have taken dozens of steps to prop up the economy. Total price tag so far: $7.2 trillion in investment and loans. That puts a lot of taxpayer money at risk. Now comes President-elect Barack Obama's economic stimulus plan, some details of which were made public on Monday. The tally is getting awfully close to $8 trillion.
New papers filed in Madoff case Prosecutors: At least 16 watches, diamond necklace among items sent by disgraced financier Disgraced financier Bernard Madoff and his wife sent at least 16 watches, a jade necklace and a diamond bracelet to family and relatives, proving he will continue to dissipate what little is left from his $50 billion fraud, a prosecutor told a judge in arguing that Madoff be jailed. Assistant U.S. Attorney Marc Litt said in a letter released Wednesday that Madoff violated a court order barring him from dissipating, concealing or disposing of any assets when he and his wife sent the items to close relatives and two friends.
No instant gratification in U.S. stimulus plan Even if U.S. lawmakers give President-elect Barack Obama every penny he wants for a massive spending and tax-cut program, it could be another year before the full benefits filter through to the paralyzed economy. Details of the stimulus plan are still sketchy, but Obama and his advisers have suggested it will amount to about $775 billion, spread over two years, with the biggest chunk reserved for tax cuts. The idea is to provide a mix of short- and long-term spending and ease the tax burden on consumers and businesses to spur job growth. Obama has said that signing a big stimulus package would be his first priority when he takes office on January 20, but it will most likely take a few more weeks for Congress to agree on the fine points.
Henry Kissinger on CNBC calling for a New World Order 1-5-09
Willem Buiter warns of massive dollar collapse Americans must prepare themselves for a massive collapse in the dollar as investors around the world dump their US assets, a former Bank of England policymaker has warned. The long-held assumption that US assets - particularly government bonds - are a safe haven will soon be overturned as investors lose their patience with the world's biggest economy, according to Willem Buiter. Professor Buiter, a former Monetary Policy Committee member who is now at the London School of Economics, said this increasing disenchantment would result in an exodus of foreign cash from the US.
Beware: JP Morgan rebalancing commodities indices this week The major commodity indices rebalance their respective asset weightings once a year (or occasionally more) - and with that comes a mass dose of buying and selling. . . . In financial terms, we expect the rebalancing to have the greatest impact in gold, COMEX copper, crude oil, gold, and live cattle. We estimate that the rebalancing of the two indices is expected to result in $877 million of selling in gold, $699 million of buying in COMEX copper, $528 million of selling in live cattle, and $523 million of buying in crude oil.
Monetarism enters bankruptcy The invasive dominance of monetarism in macroeconomics has been total ever since central bankers, led by Alan Greenspan, who from 1987 to 2006 was chairman of the Board of Governors of US Federal Reserve - the head of the global central banking snake by virtue of dollar hegemony - embraced the counterfactual conclusion of Milton Friedman that monetarist measures by the central bank can perpetuate the boom phase of the business cycle indefinitely, banishing the bust phase from finance capitalism altogether. Going beyond Friedman, Greenspan asserted that a good central bank could perform a monetary miracle simply by adding liquidity to maintain a booming financial market by easing at the slightest hint of market correction. This ignored the fundamental law of finance that if liquidity is exploited to manipulated excess debt as phantom equity on a global scale, liquidity can act as a flammable agent to turn a simple localized credit crunch into a systemic fire storm.
David Walker "Very Concerned Future of America Time For Washington To Wake. We Can't Continue To Borrow From Foreign Lenders"
Fed considers setting inflation target The Federal Reserve is eyeing establishing a de facto inflation target, minutes of its groundbreaking December policy meeting revealed on Tuesday. The idea would be to shore up the public expectations of positive inflation and so make it less likely that a deflationary dynamic could take hold as the US recession deepens. Policymakers discussed the possibility of offering a "more explicit indication of their views on what longer-run rate of inflation would best promote their goals of maximum employment and price stability". They reasoned that the "added clarity in that regard might help forestall the development of expectations that inflation would decline below desired levels".
Consumer bankruptcies surge 33% in 2008 More than 1 million sought protection last year and filings are expected to rise in 2009. U.S. consumer bankruptcy filings jumped nearly 33% in 2008 amid a recession that's expected to keep filings rising into the new year. Overall consumer filings reached 1.06 million last year, up from 801,840 in 2007, according to data collected by the National Bankruptcy Research Center and published by the American Bankruptcy Institute, a research group based here. The recession that began in December 2007 has stretched many consumers who are turning to bankruptcy protection amid job losses, mortgage foreclosures and heavy personal debt.
70 years of conventional wisdom since the Great Depression has been wrong: The Fed can't head off depressions with easy money. Thus, GD1 may have been un-preventable. GD2 may be unpreventable.
The only way to avoid GD2 (now) is frantic government spending (fiscal stimulus).
The government is about to blow it. Republican posturing suggests Obama will be forced to cut back and/or delay his spending plans in the name of "prudence" and "conservatism."
We'd add another possible lesson: There is NO WAY to prevent depressions other than regulating the economy enough to limit booms like the one we've had over the past couple of decades. This is A LOT easier said than done, because, for obvious reasons, everyone loves booms.
The Greater Depression - Doug Casey - part 1
The Greater Depression - Doug Casey - part 2
Card-Check Bill Would Empower Federal Government to Dictate Labor Agreements A provision in the controversial Employee Free Choice Act (EFCA) would allow federal arbitrators to dictate the terms of labor contracts - contracts that would be binding on both businesses and employees for two years. The bill, which is heavily favored by labor unions and congressional Democrats, says that if a majority of workers wish to unionize, the employer must enter into collective bargaining with them within 10 days of their decision. "Not later than 10 days after receiving a written request for collective bargaining," the bills states, "the parties shall meet and commence to bargain collectively."
Obama Pushes States to Cover More Unemployed - $$ President-elect Barack Obama plans to offer states $7 billion as incentive to permanently change their unemployment-insurance laws to cover part-time workers and prevent other laid-off workers from falling through cracks in the coverage. The proposal, which is set to be included in the president-elect's two-year economic-stimulus plan, will seek to use short-term aid to cash-strapped states to force long-term changes that the Obama team believes are overdue, Obama aides said Tuesday. But the proposal, along with others to subsidize health insurance for the laid-off and expand Medicaid to out-of-work Americans, are sparking bipartisan concern over the potential, long-term impact on a federal budget deficit that is expected to hit $1 trillion this year, even before the stimulus plan.
Oil Trades Near $48 as U.S. Recession Deepens, Inventories Rise Crude oil traded little changed after falling yesterday on signs the economy in the U.S., the world's biggest energy consumer, contracted further in November and December, pushing oil inventories higher. U.S. crude oil stockpiles probably rose for a second week in the week ended Jan. 2, according to a Bloomberg News survey before an Energy Department report today. Orders placed with U.S. factories in November fell twice as much as forecast, signaling businesses are cutting back on investments, according to data from the Commerce Department. "We've seen over the last few months that the market has been really focused on demand," said Gerard Burg, an energy economist at National Australia Bank Ltd. in Melbourne. "Anytime we get negative economic news out of the U.S. it puts a damper on the crude market."
Oil above $49 as investors eye Gaza conflict, OPEC Oil above $49 as Gaza conflict keeps tensions high, investors hope OPEC to implement cuts Oil prices neared $50 a barrel Tuesday amid signs OPEC is implementing its announced production cuts and as Israel's ground offensive in Gaza kept tensions high in the oil-rich Middle East. The gas dispute between Ukraine and Russia also caused gas prices to jump. Light, sweet crude for February delivery rose $1.07 to $49.88 a barrel in electronic trading on the New York Mercantile Exchange by mid-afternoon in Europe. The contract rose overnight $2.47 to settle at $48.81. Israeli forces edged closer to Gaza's major population centers and attacked new sites in the eleventh day of fighting with Hamas. The offensive has killed at least 500 people, about 25 percent of whom were civilians, a U.N. official said Monday.
2009 The Train Wreck Change is a constant whether perceived or not; but only when we see it do we believe it has occurred. Then, it is too late. The phrase, speculative bubble, is used to describe the financial tumescence that characterizes the often manic unfounded rise of asset values. The phrase, however, is inadequate for it fails to convey the destructive aftermath that follows; for such purposes, train wreck, is a better description. In 2009, the largest train wreck in economic history is about to occur. Unfounded manic speculation, e.g. the 2002-2007 real estate bubble, is not new. Similar manic speculation occurred in internet stocks in the 1990s, radio stocks in the 1920s, as it did in railroad stocks in the 19th century and in tulip bulbs in the 17th century. Manic speculation is as human as the markets.
Roubini & Jim O'Neill - Global Recession & Recovery Roubini says global recession to last through 2009; China in November slashed interest rates and announced $ 384 billion stimulus package; ECB forecast eurozone GDP pf -1.0% to 0.0% in 2009; IFO institute sees German economy shrinking 2.2% in 2009
Bond Bubble Bursting? They've done it now. The Fed has revealed the level of panic they are in behind the scenes by cutting rates to zero and promising unbounded quantitative easing. Here, it should be noted that based on remarks from the Fed Policy Statement Tuesday, quantitative easing is now set to go beyond the bailout style monetiziations of financials that have primarily characterized re-inflation efforts under the gaze of Bernanke and Paulson so far to include just about anybody who needs 'social assistance', which apparently includes all degrees of bad investors / speculators these days. Make a bad investment. No worries if you're an American apparently as 'the check is in the mail'.
$20 trillion - gone From a speech delivered overnight in Singapore by the Berkeley economist Brad DeLong: * $80 trillion of global financial assets a year and a half ago. * $60 trillion of global financial assets today In assessing where all this value has gone - and how it might eventually be returned - DeLong takes his audience through a couple of hundred years of history, by way of Peel, Marx, Hoover, Hayek and, er, Martin Wolf, who, like DeLong, is not a particular fan of the Austrian school:
Fed Policy Makers Saw 'Substantial' Risks to Economy Federal Reserve policy makers saw "substantial" risks to the slumping economy last month as they cut the benchmark interest rate to a record low and pledged to expand emergency loans if necessary. Central bank officials believed "the economic outlook would remain weak for a time and the downside risks to economic activity would be substantial," according to the minutes of the Dec. 15-16 Federal Open Market Committee meeting released today in Washington. The FOMC discussed setting an inflation target to discourage expectations that price increases will slow "below desired levels."
Jim Rogers America is Collapsing pt 1/5
Jim Rogers America is Collapsing pt 2/5
Jim Rogers America is Collapsing pt 3/5
Jim Rogers America is Collapsing pt 4/5
Jim Rogers America is Collapsing pt 5/5
Fed warms to move that could cut deflation risk Support is building within the Federal Reserve for a move to establish a de facto inflation target in order to shore up inflation expectations and reduce the risk of deflation. A growing number of Fed officials, including longtime sceptics, are coming round to the idea that an explicit numerical inflation objective could be a valuable bulwark against a shift towards expectations of price declines. Stating an inflation objective would take the US central bank closer to central banks such as the Bank of England and the European Central Bank that have formal targets. Minutes from the December Fed policy meeting, released on Tuesday, say officials discussed providing "a more explicit indication of their views on what longer-run inflation rate would best promote their goals".
FOMC saw specter of depression, deflation Minutes show members grappling with fresh approach to monetary policy Members of the Federal Open Market Committee at their mid-December meeting saw increasing risks of depression and deflation as they grappled with employing new tools to stabilize an economy that was rapidly weakening, according to truncated minutes of the meeting released on Tuesday. Some participants at the meeting saw "the distinct possibility of a prolonged contraction, although that was not judged to be the most likely outcome," the minutes said. Inflationary pressures were likely to dissipate, and "some members saw significant risks that inflation could decline and persist for a time at uncomfortably low levels."
Factory Orders in the U.S. Tumble More Than Forecast Orders placed with U.S. factories in November fell twice as much as forecast, signaling businesses are cutting back on investments as the recession deepens. Demand fell 4.6 percent after a revised 6 percent decrease in October that was larger than previously estimated, the Commerce Department said today in Washington. The back-to-back decline was the biggest since records began in 1992. Companies are likely to pare spending further as access to credit dries up and global demand slows. President-elect Barack Obama has proposed a two-year economic stimulus package, costing as much as $850 billion, with an emphasis on infrastructure projects that may give manufacturing a boost.
Empty offices are on the rise Vacancy rates in office buildings exceed 10 percent in virtually every major city in the country and are rising rapidly, a sign of economic distress that could lead to yet another wave of problems for troubled lenders. With job cuts rampant and businesses retrenching, more empty space is expected from New York to Chicago to Los Angeles in the coming year. Rental income would then decline, and property values would slide further. The Urban Land Institute predicts 2009 will be the worst year for the commercial real estate market "since the wrenching 1991-1992 industry depression."
Employment fears rattle U.S. stocks Fresh worries about escalating unemployment, sparked by aluminum producer Alcoa's decision to slash jobs, sent stocks sharply lower on Wednesday. Alcoa said late Tuesday that it would reduce its global work force by about 13,500, or 13 percent, by the end of the year and lower total output by more than 18 percent annually. The announcement was a harsh reminder that the economy both domestically and abroad remains in rough shape. Alcoa's news also underscored growing anxiety over the Labor Department's upcoming report Friday on the December job market. Moreover, investors got a disappointing harbinger Wednesday in the form of the ADP National Employment Report, an unofficial gauge that the market has been increasingly monitoring as U.S. job losses mount. The report said private sector employment fell by 693,000 in December, worse than expected.
Factory orders drop more than expected in November; record fourth straight month of decline Orders to factories fell for a record fourth straight month in November, and analysts believe manufacturing will continue to suffer in coming months as the country slogs through a recession entering its second year. The Commerce Department said Tuesday that orders declined by 4.6 percent in November, nearly double the 2.5 percent drop economists expected. Orders have been falling since August, including a 6 percent plunge in October, the biggest setback in eight years.
Pending sales of existing homes fell to record low, sinking 4 percent in Nov. from Oct. Pending U.S. home sales fell to the lowest level on record in November, as the plummeting stock market and faltering economy caused buyers to delay their purchases, the National Association of Realtors said Tuesday. The index, which tracks signed contracts to purchase existing homes, fell 4 percent to 82.3 from a downwardly revised October reading of 85.7 in October. That was far worse than the reading of 88 that economists expected, according to Thomson Reuters.
Did You Know 200,000 Vets Are Sleeping on the Streets? Roy Lee Brantley shivers in the cold December morning as he waits in line for food outside the Ark of Refuge mission, which sits amid warehouses and artists lofts a stone's throw from the skyscrapers of downtown San Francisco. Brantley's beard is long, white and unkempt. The African-American man's skin wrinkled beyond his 62 years. He lives in squalor in a dingy residential hotel room with the bathroom down the hall. In some ways, his current situation marks an improvement. "I've slept in parks," he says, "and on the sidewalk. Now at least I have a room."
Marc Faber - Economy in `Vicious Circle on Downside' 2008-12-26
Democrats bring up bill to let judges adjust mortgages President-elect Obama was sponsor in 2008, said it is priority for 2009 A Democratic plan to change bankruptcy law so judges could adjust the terms of mortgages is officially back. Sen. Richard Durbin, D-Ill., in the Senate and Rep. Brad Miller, D-N.C., in the House on Tuesday re-introduced complementary legislation designed to reduce foreclosures by giving judges the authority to eliminate some mortgage debt. Bankruptcy law currently permits modifications to mortgage loans on second homes and family farms. This measure would allow bankruptcy judges to also modify primary mortgages. The provision would also give borrowers more time to for repayments, which would make their mortgages more affordable. Judges would also be permitted to replace variable interest rates with a more affordable rate.
EU calls for immediate solution as supplies of Russian gas are cut All gas supplies to Europe via Ukraine were shut down Wednesday as the pricing dispute between Russia and Ukraine escalated. The European Union called for an immediate solution to the crisis and said the two countries had agreed in principle to have observers monitor the pipelines amid a war of words. The cutoff showed the first signs of hitting the European economy as the Hungarian unit of the Japanese automaker Suzuki said it was halting production because of restrictions on industrial users of gas. The Hungarian news agency MTI quoted a spokeswoman as saying Suzuki hoped to restart production Monday.
Looming Collapse of Russia, China and more … I hope you’ve had a great start to your New Year! At the same time, however, I trust you are not counting on the latest holiday rally in the stock market — or the most recent incarnation of the Obama rescue package — to transform 2009 into a positive year for the economy. The reasons: In addition to the massive wealth destruction I told you about two weeks ago and the continuing debt collapse I’ve been warning you about for many months now, the overseas engines of global growth are also collapsing. This does not negate my long-term view that certain overseas economies offer great future opportunities. But it does represent a major short-term threat to U.S. investors, U.S. companies and the U.S. economy as a whole.
China SWF says cash is king China's sovereign wealth fund, in an unusually blunt description of its current focus, said on Monday that cash is king and big investments are just about off the table, according to Chinese media reports. Zhang Hongli, executive vice president of the China Investment Corp, said the $200 billion (138 billion pound) fund would be prudent in making decisions and slow the pace of its asset investments as global financial markets remained turbulent and the world economy fell into recession. "From September of last year, CIC already adjusted its investment plans for the start of this year," Zhang said according to the Caijing magazine website, which cited a report by the official Xinhua news agency. "Now, cash is king and we will try as far as possible not to make investments," he was reported as saying.
Sarkozy’s Middle East diplomacy ruffles a few feathers - in Europe If you were to give Nicolas Sarkozy the benefit of the doubt, you would say that one reason for his current diplomatic foray into the Middle East is his deeply held belief that the European Union needs strong, energetic, high-profile leadership to make its influence count in the world. If you were to take a more sceptical view, you would say that Sarkozy enjoyed running France’s six-month EU presidency so much that, when it came to an end on December 31, he simply couldn’t bring himself to move out of the spotlight. For the Czech Republic, which took over the EU presidency a week ago, the temptation to cough politely and say to Sarkozy, “Excuse me, pal, it’s our turn now”, must be strong. After all, Sarkozy’s trip to the Middle East is likely to be interpreted in many parts of the world as a signal that the Czechs are not to be taken too seriously when it comes to negotiating and speaking on the EU’s behalf.
Republicans Address Stimulus Plan - Bloomberg Jan 6, 2009 Live! From Washington D.C. - News Conference Held by Senate Minority Leader Mitch McConnell (R) of Kentucky; Featuring Comments from House Minority Leader John Boehner (R) of Ohio and Rep. Eric Cantor (R) of Virginia
Gaza ceasefire plan gains support A ceasefire plan by Egypt emerged on Tuesday night as the most favoured option for bringing an early end to the bloodshed in Gaza after a day in which at least 33 Palestinians died in the shelling of three United Nations-run schools. The initiative, announced by President Hosni Mubarak at a press conference with Nicolas Sarkozy, the French president, called for a ceasefire for an initial limited period to allow humanitarian aid into the territory. It immediately won the support of the US, with Condoleezza Rice, secretary of state, telling the UN security council: "We need urgently to conclude a ceasefire that can endure and that can bring real security. In this regard we are pleased by and wish to commend the statement of the president of Egypt and to follow up on that initiative."
Get out now! By Andrew Bary The bubble in Treasuries looks ready to pop, sending prices on government debt sharply lower. But just about every other corner of the bond market beckons. THE BIGGEST INVESTMENT BUBBLE TODAY may involve one of the safest asset classes: U.S. Treasuries. Yields have plunged to some of the lowest levels since the 1940s as investors, fearful of a sustained global economic downturn and potential deflation, have rushed to purchase government-issued debt.
U.S. Treasuries Are the Biggest Bubble of All There is no doubt that the current environment is a deflationary credit contraction in contrast to an inflationary credit expansion. The inflationary credit expansion lasted for at least 60 years and perhaps even as long as 100-600 years. Change is here and change is now. The zenith was reached and a few years ago the deflationary credit contraction began. 2008 was simply the aroma of the appetizers being prepared. Soon we will get our first course of at least a nine course meal. Oh, the anticipation. Those who fail to adapt will see entire fortunes of staggering amounts vaporized. For example, former billionaires Bjorgflur Gudmundsson and Luis Portillio whose net worth in March were $1.1B and $1.2B respectively have current net worths of nothing and $15M respectively. Riches have become extremely slippery.
Bonds in 2009: A Tough Call by John Browne The second half of 2008 will be remembered as the era in which justifiably panicked investors fled the global equity markets and flooded into the bond markets, particularly the U.S. Treasury market. As I write this, the migration largely continues. For those investors and market observers who put a high premium on rationality it seems perverse that so many are accepting the historically low returns offered in the U.S. Treasury market, particularly in the short end, where yields are near zero. At some intra-day prices, yields have even turned negative.
U.S. governors seek $1 trillion federal assistance By Jon Hurdle Governors of five U.S. states urged the federal government to provide $1 trillion in aid to the country's 50 states to help pay for education, welfare and infrastructure as states struggle with steep budget deficits amid a deepening recession. The governors of New York, New Jersey, Massachusetts, Ohio and Wisconsin -- all Democrats -- said the initiative for the two-year aid package was backed by other governors and follows a meeting in December where governors called on President-elect Barack Obama to help them maintain services in the face of slumping revenues.
44 States Face Huge Budget Shortfalls The Center on Budget and Policy Priorities is reporting States Face A Great Fiscal Crisis. At least 44 states faced or are facing shortfalls in their budgets for this and/or next year, and severe fiscal problems are highly likely to continue into the following year as well. Combined budget gaps for the remainder of this fiscal year and state fiscal years 2010 and 2011 are estimated to total more than $350 billion.
Could Gold Be 2009's 'Trade of the Year?' Phew, I think we’re all breathing a collective sigh of relief - 2008 is officially over! Don’t get me wrong, I wish the markets would go up forever and we all could be rich and never have to worry about a thing. Realistically, that just isn’t going to happen. Those of us prepared for what is ahead, however, realize its times like these when genuine opportunity is created. In that spirit, I’d like to reveal the ‘Trade of Year.’ It’s not too often a trade like this comes along, as it’s only created by a truly chaotic market. This trade will capitalize on a small market sector, which is completely out of whack. To top it off, the rare blend of limited downside and unlimited upside will have any investor or trader salivating. In a few moments you’ll see why this truly is the ‘Trade of the Year.’
Banks' 'Catatonic Fear' Means Consumers Don’t Get TARP Relief By James Sterngold As the new owner of $172.5 billion of preferred shares and warrants in 208 U.S. financial institutions, the Treasury Department hasn’t succeeded in thawing frozen credit markets, leaving taxpayers propping up an industry that won’t lend to them. While inter-bank lending rates have fallen since Congress approved the $700 billion Troubled Asset Relief Program on Oct. 3, most bank lending to consumers remains tight and interest rates high. The average credit-card rate was 14.33 percent on Dec. 16, according to IndexCreditCards.com in Cleveland, almost unchanged from 14.41 percent in October 2007.
Dollar Rises to Three-Week High Against Euro on U.S. Stimulus By Ye Xie and Anchalee Worrachate The dollar rose to a three-week high against the euro and advanced versus the yen on speculation President-elect Barack Obama’s fiscal stimulus will help the U.S. economy recover from recession. The greenback also gained versus the Swiss franc and the Danish krone as a transition official said Obama’s package will include hundreds of billions of dollars of tax breaks. The pound appreciated against the euro, dimming the possibility it will slide to parity, on bets the U.K. government will guarantee asset-backed securities to revive bank lending.
Peter Schiff January 2 2009 Bloomberg - Money and Politics
Every Empire Tries It by Larry L. Beane II Every empire tries it: the debasement of the currency in a dishonest and desperate bid to get something for nothing in order to pay for the spiraling costs of empire. Today, we call it Keynesian Economics, and it is still carried out by modern imperators and their senatorial lackeys who use currency debasement as a "hidden tax" to fleece the plebs to pay for imperial expansion and to take care of their friends and patrons. Of course, every empire thinks it will avoid the fates of every other previous empire: "This time, it will be different, it can't happen here." But the reality is that honest money just works better all the way around, for everyone. It is a fact of history and mathematics that no one, not even a mighty imperial government convinced of its own omnipotence, can actually get something for nothing nor create wealth out of thin air. There is no philosopher's stone, and there is no free lunch.
NY Fed begins purchasing mortgage securities Stephen Bernard Federal Reserve Bank of NY begins buying mortgage-backed securities to spur housing market The Federal Reserve Bank of New York said Monday it has begun purchasing mortgage-backed securities in an effort to bolster the battered housing market. The program, initially announced Nov. 25, allows the Fed to spend $500 billion to buy mortgage-backed securities guaranteed by mortgage giants Fannie Mae and Freddie Mac and another $100 billion to directly purchase mortgages held by Fannie, Freddie and the Federal Home Loan Banks. The program is aimed at driving down the price of mortgages and making home loans more available. The New York Fed is overseeing the program for the Federal Reserve. The New York Fed is working with four investment managers -- BlackRock Inc., Goldman Sachs Asset Management, PIMCO and Wellington Management Co. -- to purchase the securities.
Fed Officials Back 'Big Stimulus' to Fight Recession By Scott Lanman and Vivien Lou Chen Federal Reserve officials, after taking the historic step of cutting the benchmark interest rate to as low as zero, are calling for greater government spending to help revive the U.S. economy. San Francisco Fed President Janet Yellen said yesterday at an economics conference in San Francisco that "it’s worth pulling out all the stops" with an economic recovery package. Charles Evans, president of the Chicago Fed, told the same gathering he believes a "big stimulus is appropriate."
Citigroup's Derivatives Reduce Bailout to a Non-Event Responding to a rhetorical “What does a bank do?” question at a Town Hall meeting last November, Citigroup (C) CEO Vikram Pandit explained that “a bank takes deposits and puts them to work by investing and making loans.” But the phenomenal exposure to derivatives on Citigroup’s books has nothing whatsoever to do with either taking deposits or making loans. As of June 30, 2008, the notional value of Citigroup’s derivative contracts exceeded a whopping $37 trillion; the ultimate fate of those contracts far outweighs the positives detailed in the Town Hall presentation.
Congress Is Ready to Push Ahead on Economic Plan The 111th Congress convenes Tuesday, and Democratic leaders intend to quickly put their expanded majorities to work on the economic recovery package promised by President-elect Barack Obama as well as some measures that stalled in the 110th. But the pace on the stimulus bill won’t be quite as fast as once expected. Congressional leaders pulled back on Sunday from their push to have the giant economic bill on Mr. Obama’s desk by the Inauguration Day.
Quick passage of stimulus bill will not be easy for new Congress The 111th U.S. Congress convenes Tuesday, and Democratic leaders intend to quickly put their expanded majorities to work on the economic recovery package promised by President-elect Barack Obama as well as some measures that stalled in the 110th. But the pace on the stimulus bill won't be quite as fast as once expected. Congressional leaders pulled back on Sunday from their push to have the giant economic bill on Obama's desk by the Inauguration Day.
Engines of Recovery Flame Out as Economy Seeks Obama-Fed Rescue By Rich Miller The engines that have lifted the U.S. economy out of every recession since World War II will be of little help this time around. Inventory rebuilding, household spending, home construction and payroll growth -- the forces that powered, to a greater or lesser extent, each recovery since 1945 -- may remain missing for much of 2009. A glut of unsold properties may keep housing depressed, while shriveled savings will discourage consumers. Companies may be reluctant to restock and rehire while their profits are squeezed. "There are no obvious drivers of growth from the private sector," says Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York.
Obama: My Tax Relief Plan Is Not a Political Ploy
Public Works Don't by Jim Davies A financial report I encountered says that "President-elect Barack Obama, who takes office Jan. 20, has said his first priority will be to pass an economic stimulus plan that will invest in public works and create or save 3 million jobs." I don't doubt that it's accurate, and so am horrified. One thing he and his admirers have glossed over is that almost the entire infrastructure of the United States is already a vast, long-running "public works program." If there is a road so full of potholes that the cost of repairing damage to vehicles that use it exceeds the estimated cost of repairing the road (and they now admit there are plenty), that fact is a stunning indictment of the public works program that put the road down in the first place and failed to maintain it ever since. Government has had 100% control of that infrastructure, ever since the market was almost totally excluded from road ownership" some time early in the19th Century.
U.S. commercial property in a downward spiral Vacancy rates in office buildings exceed 10 percent in virtually every major city across the United States and are rising rapidly, a sign of economic distress that could lead to yet another wave of problems for the beleaguered financial sector. With job cuts rampant and businesses retrenching, more empty space is expected from New York to Chicago to Los Angeles in the coming year. Rental income would then decline and property values would slide further. The Urban Land Institute predicts 2009 will be the worst year for the U.S. commercial real estate market "since the wrenching 1991-1992 industry depression."
"Damn the Torpedoes, Full Speed Ahead!" by Tony Allison Destination: Japan or Zimbabwe? The famous quotation above comes from the Battle of Mobile Bay in 1864 during the Civil War. Union Admiral David Farragut needed to capture Mobile Bay and Fort Morgan, but was facing a bay strewn with mines (called "torpedo fields" back then) that had already taken down the USS Tecumseh with all 94 men going down with the ship. Coming under fire from both the Confederate fleet and Fort Morgan, Farragut had to decide between retreat or taking on the minefield. Farragut issued his now historic order, eluded the minefield and emerged victorious.
Gerald Celente America like Zimbabwe Total Collapse pt 1/2
Gerald Celente America like Zimbabwe Total Collapse pt 2/2
Obama Is Bush III by Kevin R. C. Gutzman The 2003 invasion of Iraq was sold to the public at the time as being justified in part by Iraqi dictator Saddam Hussein's possession of weapons of mass destruction and his harboring of al Qaeda terrorists. In the wake of the Bush Administration's 2003 invasion of Iraq, word leaked out that several prominent figures around Bush long had wanted to invade Iraq; for them, 9/11 was the perfect cover, and the WMD and al Qaeda arguments mere window dressing. By the time the world knew the justifications were false, Iraq had been conquered and Saddam had been removed. President-elect Barack Obama now says that he is going to reverse the current course of the US economy. This contraction, largely the result of the popping of the Fed-induced housing bubble, would come to a natural end in a matter of months anyway. That's how the market works: if there is a government-induced binge, the fever breaks and the patient can return to health.
Debunking the Gold Bears Main Argument by Boris Sobolev Gold bears tirelessly repeat that deflationary periods are characterized by heightened demand for cash. For the United States, this means a strong US dollar. Since the USD and gold are inversely correlated, the bears conclude that the gold bull market is over given that we have entered into a severe deflationary period. This may seem like a strong argument but it does not withstand a more detailed analysis. Although the inverse relationship between the US dollar and gold is true most of the time, there have been extended periods when both gold and USD appreciated in value. We only have to go back a few years to see a positive relationship between the two. Believe it or not, even in 2008, gold gained 5.8%, while the US Dollar Index gained 7.5%.
Strategic Reality 101 by J. R. Nyquist The year 2009 will mark the end of failed policies and false assumptions. In all probability, there will be new policies based on new false assumptions. Washington will be forced to rethink the country's priorities: New assessments will appear as Barack Obama enters office; American troops will be pulled out of Iraq; the U.S. Congress will allow the nation's nuclear arsenal to sink into disrepair; government programs will be cut as the economic crisis worsens; millions will be thrown out of work; bankruptcies will occur on all sides. Some will say that capitalism has failed and socialism is the only alternative. In South America, Asia and Africa a new anti-American bloc will rise against capitalism.
US will emerge as undisputed top dog in 2009 Interest rates near zero across the G10 bloc will prevent a replay of the Great Depression, but they will not pull us quickly out of the doldrums, writes Ambrose Evans-Pritchard. Central banks will do whatever it takes to combat debt deflation. Even Frankfurt will join the rush to print money, buying every form of debt from mortgages to corporate bonds. The Fed will follow the Bank of Japan in propping up stock markets. Puritans will grumble, but the surprise will be how it long takes for this stimulus to gain traction. We will learn the term "pushing on a string". Western societies will feel the first shivers of raw fear as people twig that the authorities are not in control. Iceland's winter will set an awful example. Job losses will reach 1m a month in the US at the point of peak pain. Economists know this is a late-cycle effect - darkest before dawn - but the public will see it otherwise. This will be the phase that shakes society. The geopolitical landscape will look different. Cohesive states with a rule of law and old democracies - the Anglosphere, Holland, France, Scandies - will muddle through. They will start to enjoy a political premium in investor psychology, despite horrendous debts. Obama's America will shine. The country will reemerge as undisputed top dog, the only one with real demographic, scientific, and strategic depth. As first into the crisis, it will be the first to hit bottom. Those expecting the dollar to collapse will have to wait.
Obama pushes Congress on recovery plan By Brian Knowlton, Peter Baker and Carl Hulse President-elect Barack Obama met Monday with congressional leaders and his economic team as he worked to advance an economic recovery program that advisers say will include $300 billion in tax cuts meant partly to win over skeptics who said the plan focused too heavily on government spending. "The people's business can't wait," Obama said after meeting with the House speaker, Nancy Pelosi, who in turn vowed to work with the new administration with "great civility, great fiscal discipline." Obama, adding a note of urgency, said that he was expecting a "sobering" jobs report this week.
Obama & congress to talk stimulus
Obama plunges into econ talks, predicts approval Obama plunges into econ crisis talks at Capitol; big tax cuts could win approval by Feb. President-elect Barack Obama plunged into rare pre-inaugural crisis talks with congressional leaders Monday, declaring the national economy was "bad and getting worse" and embracing tax cuts now expected to reach $300 billion. He predicted lawmakers would approve a mammoth revitalization package within two weeks of his taking office. If the two-year plan is enacted, workers would see larger paychecks almost immediately because taxes withheld by the government would drop. The break would be retroactive to Jan. 1, and couples receiving a $1,000 tax cut would begin receiving an extra $40 in twice-monthly paychecks as the government tries to spark more consumer spending.
A setback for Obama's plans By Jim Lobe Israel's massive week-long aerial assault on Gaza and subsequent ground invasion are likely to complicate president-elect Barack Obama's hopes of aggressively pursuing Israeli-Palestinian peace negotiations, and risk inflicting greater damage to Washington's standing in the Arab world, according to most analysts in Washington. Indeed, if the current campaign goes on much longer, Obama could face a major international crisis - comparable to Israel's failed 2006 war against Lebanon's Hezbollah - just as he takes office on January 20. "With this assault, the fallout has already started to spread considerably beyond the constituency of people who are Palestinians," noted Helena Cobban, a veteran Middle East analyst who cited popular protests in Egypt, Jordan and elsewhere in the Arab world on her blog, justworldnews.org.
Obama is losing a battle he doesn't know he's in The president-elect's silence on the Gaza crisis is undermining his reputation in the Middle East Barack Obama's chances of making a fresh start in US relations with the Muslim world, and the Middle East in particular, appear to diminish with each new wave of Israeli attacks on Palestinian targets in Gaza. That seems hardly fair, given the president-elect does not take office until January 20. But foreign wars don't wait for Washington inaugurations. Obama has remained wholly silent during the Gaza crisis. His aides say he is following established protocol that the US has only one president at a time. Hillary Clinton, his designated secretary of state, and Joe Biden, the vice-president-elect and foreign policy expert, have also been uncharacteristically taciturn on the subject.
Keynes offers us the best way to think about the financial crisis By Martin Wolf We are all Keynesians now. When Barack Obama takes office he will propose a gigantic fiscal stimulus package. Such packages are being offered by many other governments. Even Germany is being dragged, kicking and screaming, into this race. The ghost of John Maynard Keynes, the father of macroeconomics, has returned to haunt us. With it has come that of his most interesting disciple, Hyman Minsky. We all now know of the "Minsky moment" - the point at which a financial mania turns into panic. Like all prophets, Keynes offered ambiguous lessons to his followers. Few still believe in the fiscal fine-tuning that his disciples propounded in the decades after the second world war. But nobody believes in the monetary targeting proposed by his celebrated intellectual adversary, Milton Friedman, either. Now, 62 years after Keynes' death, in another era of financial crisis and threatened economic slump, it is easier for us to understand what remains relevant in his teaching.
Follow the money - Bernie Madoff
Bernie Madoff 'mailing valuable jewellery to family' from house arrest Bernard Madoff, the Wall Street fund manager accused of a $50billion (£34m) fraud, should be jailed immediately for mailing "very valuable" jewellery to his relatives while under house arrest, US prosecutors have argued. Mr Madoff will remain on bail while a judge considers whether he has violated the terms of an asset-freeze order by sending away five items worth an estimated $1million. As the former investor appeared in court, Democrat and Republican representatives on the capital markets committee grilled regulators from the Securities and Exchange Commission (SEC), investors and other witnesses in an attempt to get to the bottom of how the alleged fraud was allowed to continue for more than a decade. The committee chairman, Paul Kanjorski, a Democrat, said SEC investigators should have spotted Bernard Madoff's alleged fraud earlier given the "red flags" raised with the authorities.
Judge urged to put Madoff in jail By Joanna Chung and Alan Rappeport in New York and Andrew Ward in Washington US prosecutors asked a federal judge on Monday to jail Bernard Madoff pending his trial, saying he violated a court order by transferring more than $1m of valuables from his Manhattan apartment. Mr Madoff and his wife made four or five transfers of jewellery, watches and cufflinks to third parties including his brother and son, a court was told by Marc Litt, an assistant US attorney.
UNINTENDED CONSEQUENCES 20th CENTURY & BEYOND by James Quinn "The law of unintended consequences is what happens when a simple system tries to regulate a complex system. The political system is simple. It operates with limited information (rational ignorance), short time horizons, low feedback, and poor and misaligned incentives. Society in contrast is a complex, evolving, high-feedback, incentive-driven system. When a simple system tries to regulate a complex system you often get unintended consequences." Andrew Gelman
Andrew Gelman is dead on. He states that the political system is simple. I'd go a step further and say that lifetime politicians and entrenched government bureaucrats are simple. They show no indication of knowledge or expertise in American history or rational financial theory. The President, Congress, Federal Reserve, and Treasury try mightily to direct our economy. It is an impossible task. With a GDP of $14 trillion, there are thousands of inputs and outputs that feed the system. Their hubris leads them to believe that they are in control and can manipulate the gears of capitalism in a way that will produce their desired outcomes. If a desired outcome occurs, it is simply due to dumb luck. The more likely result of their manipulations of our complex system is a set of bigger problems that never occurred to them.
Exposing the Federal Reserve G. Edward Griffin We'll start way back in history to give some kind of historical perspective to this; we'll go back to the first century BC and the tiny kingdom of Phrygia. There was a philosopher by the name of Epictetus and it was Epictetus who said: "Appearances are of four kinds: things either are as they appear to be; or they neither are nor appear to be; or they are but do not appear to be; or they are not and yet appear to be." When I read that statement for the first time, I had a big chuckle over it and I thought for sure that if Epictetus were alive today he would probably be a Harvard professor of money and banking; it sounds like so many explanations that I have read about various aspects of the Federal Reserve System. What he did was he took a fairly simple concept but by the time that he was through explaining it, we didn't have any idea what he was talking about. All Epictetus said was that appearances can sometimes be deceiving. That's all he said but by the time he was through explaining the four different ways in which they can be deceiving, we were left back at the switch somewhere.
Ignoring the Oracles: You Are With the Free Markets, or Against Them It's hard to tell what's more striking about Raghuram Rajan's 2005 presentation at the Kansas City Fed's Jackson Hole symposium - the way many of the dangers he laid out came to pass, or the way he was attacked, and then discounted. Mr. Rajan came to the conference, dedicated to soon-to-retire Fed Chairman Alan Greenspan, with strong bona fides as a pro market advocate. He and University Chicago colleague Luigi Zingales wrote a 2003 book, "Saving Capitalism from the Capitalists," that argued at length that free-market capitalism is the best way to organize an economy, and that free financial markets - through their ability to direct funds to where the economy needs them most - are crucial to the system's success. But when he suggested at Jackson Hole that markets could get it badly wrong sometimes, and that central banks should consider responding to that, he was lambasted as nostalgic for the old days of highly regulated banking.
The Ponzi Scheme in Every Hedge Fund By Ari J. Officer Bernard Madoff's $50 billion Ponzi scheme continues to rock the financial world. But most hedge funds actually engage in similar - albeit legal - practices in the short run. In the past, these practices helped inflate their gains as well as hedge-fund managers' salaries and bonuses, but recently they helped bring about the failure of many major hedge funds. At the heart of the difference is the distinction between realized and unrealized gains. Gains are realized when assets are liquidated to cash. For instance, if you buy a stock for $100 and it is currently trading at $200, you have made $100 in unrealized gains. If you sell it at $200, you have made $100 in realized gains. Most hedge funds do not regularly liquidate their entire portfolio, so they report unrealized gains to their investors and to the public.
Savers facing accounts with no interest By Edmund Conway and Myra Butterwort Millions of savers are braced for zero per cent accounts within days as the Bank of England is poised to cut interest rates to the lowest level in its 315-year history. Experts have warned the return on savings could plumb new depths with the Bank expected to take unprecedented steps to regain control over the economy. They widely believe the Bank will reduce borrowing costs to below their 2 per cent level - and possibly all the way down to 1 per cent - in its first meeting of the year next week. More than 7 million people have saving accounts which already pay interest of 1 per cent or less. If a cut is passed on in full by banks, these accounts will dive towards negative territory for the first time on record. Many elderly people who rely on the income from savings have found themselves struggling in recent months as returns fall.
Why did Richardson withdraw?
Panetta Is Surprise Pick to Run the CIA - $$ By Siobhan Gorman In a surprise move, President-elect Barack Obama picked Leon Panetta, a former congressman and chief of staff to President Bill Clinton, to be the next director of the Central Intelligence Agency, according to Democratic officials. The unusual pick shows that Mr. Obama is seeking a government veteran with managerial and political savvy to run the agency responsible for some of the most controversial U.S. antiterrorism programs -- some of which Messrs. Obama and Panetta have openly opposed.
Whitman starts race for California governor By Matthew Garrahanin Meg Whitman fired the starting gun on the race to succeed Arnold Schwarzenegger as California governor on Monday when the former chief executive of eBay abruptly resigned from the boards of three companies. Ms Whitman, who continues to own a 2 per cent stake in eBay, the internet auction site, worked on John McCain's presidential campaign and has privately expressed interest in running for California governor in 2010 as the Republican candidate. Her resignation on Monday from the boards of eBay, Procter & Gamble and DreamWorks Animation is the clearest signal yet that she is considering a run for the post.
U.S. Auto Sales Fell 36% in December By Kendra Marr Declines Expected To Continue in '09 The auto industry capped off 2008 with its worst sales in 16 years as Americans continued to steer clear of dealerships in December, according to sales figures released yesterday. Industry-wide, automakers sold 896,124 new cars, minivans and trucks in December, a drop of 36percent compared with December 2007, according to preliminary data released yesterday by the industry research firm Autodata. Sales at General Motors, Toyota, Ford, Chrysler and Honda -- the U.S. auto market's five largest manufacturers -- all fell sharply in a month when recession fears grew and domestic automakers sought help from Congress to avoid financial collapse. GM said sales were down 31 percent. Ford's sales plummeted 32 percent, Toyota's fell 37 percent, and Chrysler's sales dropped 53 percent. Honda's sales slid about 35 percent in December.
Home ownership goals created house of cards By Emmet Pierce Lender guidelines were 'obliterated' in buying frenzy Government long has promoted home ownership as a means of strengthening communities and building the wealth of its citizens, but the recent housing market collapse has some analysts wondering whether consumers have gotten too much of a good thing. While federal policies helped tens of thousands of U.S. consumers achieve home ownership during the housing boom, they also opened the door to the widespread use of risky loans, a national credit crunch and a wave of foreclosures. "Public policy has been used to promote home ownership since the wake of the Great Depression," said Mark Zandi, chief economist at Moody's Economy.com. "These efforts were overdone this decade during the housing boom and bubble." In 2005, the year the San Diego County real estate boom peaked, the home ownership rate in the county was 58.2 percent, according to the U.S. Census Bureau's American Community Survey. By 2007, the rate in the county had fallen to 55.9 percent. That marked a loss of nearly 22,000 owner-occupied residences.
[Some of you guys may not appreciate this next story, but your wives surely will!]
After 250 years, Waterford Wedgwood falls into administration Waterford Wedgwood, the 250-year-old maker of luxury glassware and china, fell in administration today, putting 2,700 jobs in the UK and Ireland at risk. The loss-making company, whose brands include Waterford crystal, Wedgwood and Royal Doulton fine bone china, Rosenthal porcelain and Spring premium cookware, ran out of time in its attempt to raise fresh capital. Politicians on both sides of the Irish Sea warned that the collapse of the company had severe implications for communities where china and glass have been manufactured for generations. The mayor of Waterford said it would be a "national disaster" for Ireland if production at the crystal factory ceased.
Japanese Asset Bubble: Lessons from the Economic Asset Bubble of Japan, The Heisei Boom. What parallels exist between the Japanese asset bubble and our current financial environment? It is hard to believe that we have learned so little from previous asset bubbles. Many of our policymakers have turned a blind eye to the Great Depression, euphorically thinking that somehow all variables of risk had been eliminated from the system. It would be one thing to acknowledge our current predicament and at least try something different from the past to combat the current financial demons we are facing. Instead, we are using policy moves from the past that had little impact in resolving financial problems.
Asia needs to fully wake up to the scale of the West's economic crisis By Ambrose Evans-Pritchard Asia is not going to rescue the world economy. The news from Japan, China, and the Pacific tigers has moved from awful to calamitous since the global industrial system snapped in October. A raw reality is being laid bare. The mercantilist export model of the East is proving dangerously geared to the debt-driven excesses of the West. As we go down, they go down too. Some are going down even harder. Japan's industrial output contracted by 16.2pc in November, year-on-year. "For an economy which lives from the prowess of its industrial exports, this is simply earthquake," said Edward Hugh from Japan Economy Watch. Japanese exports fell 26.7pc. Real wages fell by 3.1pc, the seventh monthly fall. Taken together, the figures are worse than anything during Japan's "Lost Decade". They have a ring of 1931.
In China, Bush nostalgia By Kent Ewing HONG KONG - Bush-bashing - that thriving international industry which over the past eight years has crossed borders, cultures, races and the economic divide - will lose most of its sporting appeal when US President George W Bush hands over to his successor, Barack Obama, on January 20. There will no doubt follow another global wave of celebration and surge of hope as America's first African-American president, who has promised to restore the country's tattered image abroad at the same time that he fixes the economic mess he has inherited from the Bush team, takes the helm in a much-anticipated inaugural address.
Israel vows no let-up over Gaza Israeli Defence Minister Ehud Barak says Palestinian militant group Hamas has suffered a "hard blow", but insists the offensive in Gaza will continue. "We still haven't reached our objectives," Mr Barak told Israeli MPs. Israel said its forces had carried out ground, air and sea attacks across Gaza. Palestinian sources said a family of seven was among those killed. A top Hamas leader in the Gaza Strip, Mahmoud Zahhar, said the Islamists were heading for "victory" against Israel. Intense diplomatic efforts are under way to try to secure a ceasefire in Gaza, with separate missions to the Middle East being led by the French president, and a high-level EU team. But Israeli Foreign Minister Tzipi Livni, after meeting EU diplomats, rejected calls for an immediate truce.
Gaza conflict: Mid-East reaction BBC reporters look at reaction in the Arab world to events in Gaza, where, after a week of airstrikes, Israeli ground forces are battling Hamas militants. JIM MUIR, BEIRUT, LEBANON MAGDI ABDELHADI, CAIRO, EGYPT LINA SINJAB, DAMASCUS, SYRIA
Israel's self-defeating Gaza offensive By Gideon Rachman By sending ground troops into the Gaza Strip, Israel has crossed a line that brings it perilously close to strategic failure. Just as with the Lebanon war of 2006, an air bombardment has failed to stop rocket fire into Israel - and has been followed by a ground invasion. The Israeli government says it has learnt the lessons of its stalemated war with Hizbollah, the Lebanese militia. Gaza is more hospitable terrain than southern Lebanon; Hamas is militarily weaker than Hizbollah; Israel is better prepared and is using new tactics. Maybe so. But what are Israel's strategic needs? The first is the protection of Israeli citizens; the second is the re-establishment of Israel's deterrent power; the third is the preservation of international support; and the fourth some prospect of durable peace. Each one of these objectives is now in peril.
Israel must prepare to turn its military might from Gaza to Iran By Amir Oren Brig. Gen. Sami Turjeman is commander of the 36th Division in the Golan Heights, and is one of the most outstanding officers of his rank in the Israel Defense Forces. He is expected to be promoted this year to the rank of major general. Turjeman was head of the operations division at the General Staff during the tempestuous years of 2006 and 2007 - when the IDF embarked simultaneously on operations in both Lebanon and in the Gaza Strip, in the wake of the abduction of Gilad Shalit, and then attacked the North Korean nuclear reactor in Syria.
Attacks on Gaza doomed, expert believes By Ferry Biedermann in Beirut Israel's attempt to force the Palestinian group Hamas to comply with a ceasefire on its terms through its offensive against the Gaza Strip is doomed to fail, an international expert on the region predicts. The attacks on Gaza would leave Hamas in place, said Alastair Crooke. "It is nothing tangible that you can knock down, it is not a building," he explained. Israel was also repeating some of the mistakes it made during the 2006 war against Hizbollah, Mr Crooke argued in an interview with the Financial Times. The country's leadership was divided on the course of action and had no clear view of the endgame, he said.
For Israel, a chance to attack in Bush's final days By Scott Shane In recent days, as European Union and UN officials have called urgently for a cease-fire in the Gaza Strip, the Bush administration has squarely blamed the rocket attacks of the Palestinian militant group Hamas for Israel's assault, maintaining to the end its eight-year record of stalwart support for Israel. President George W. Bush said in his weekly radio address over the weekend that the United States did not want a "one-way cease-fire" that allowed Hamas to keep up its rocket fire, and Vice President Dick Cheney echoed the point, declaring that only a "sustainable, durable" peace would be acceptable.
Bringing the Arab-Israeli War Home by Michael Scheuer If America were blessed with a noninterventionist foreign policy, we could all thank Israeli Prime Minister Ehud Olmert for giving President-elect Barack Obama a thoroughgoing lesson in the absolute irrelevancy of Israel and Palestine to the national interests of the United States. More than a week into Israel's invasion of Gaza, America is still alive and kicking and none of our citizens are dead, which is the way it should be, as this is their religious war and not ours. If stubborn noninterventionism were our creed – as the Founders intended – the Gaza war could continue for two more days or two more months and we could simply shrug and mutter "Who cares?" America could simply go on its way, rebuilding its economy and marveling over the madness of two religions fighting to the death over a barren sandpit at the eastern end of the Mediterranean. Unfortunately, America today is run by a political and media elite that is addicted to intervention. This would be bad enough if these men and women had the brains to intervene and produce a result that benefits U.S. interests, but they are not.
Mideast, Russia issues send oil above $47 Dirk Lammers Oil climbs as market rallies on Israel-Gaza fighting and Russia-Ukraine gas dispute Israel's ground offensive in Gaza and a dispute between Ukraine and Russia over gas imports pushed oil prices above $47 a barrel Monday, but some analysts say there's more than just unrest in the Middle East behind the rally. Light, sweet crude for February delivery rose 92 cents to $47.26 a barrel on the New York Mercantile Exchange, after jumping $1.74 on Friday to settle at $46.34.
EU tries to defuse Ukraine-Russia gas dispute The European Union on Monday scheduled talks with Russia to press for a speedy resolution of a dispute with Ukraine that has reduced gas supplies to eastern and southern Europe. The Russian gas monopoly Gazprom cut off gas supplies to Ukraine on Jan. 1 in a dispute over debts and pricing that shows no sign of ending, worrying European consumers that depend on Russia for a quarter of their natural gas.
Online video viewing jumps 34 percent Americans appear to be getting more comfortable watching videos online--and Google is the clear winner. Internet users in the U.S. watched 12.7 billion online videos in November, an increase of 34 percent versus a year ago, according to numbers released Monday by market researcher ComScore. Thanks to YouTube, Google Sites retained the crown as the top U.S. video property with nearly 5.1 billion videos viewed--or about 40 percent of all videos viewed online--with the video-sharing site accounting for more than 98 percent of Google's traffic. Fox Interactive Media was a distant second with 439 million videos watched (or 3.5 percent), followed by Viacom Digital with 325 million videos watched (2.6 percent).
This is too funny!! . . . . Uncle Jay Explains: Year-end! 12-22-08
Obama Plan Includes $300 Billion in Tax Cuts By PETER BAKER and CARL HULSE resident-elect Barack Obama plans to include about $300 billion in tax cuts for workers and businesses in his economic recovery program, advisers said Sunday, as his team seeks to win over Congressional skeptics worried that he was too focused on government spending. The legislation Mr. Obama is developing with Congressional Democrats will devote about 40 percent of the cost to tax cuts, including his centerpiece campaign promise to provide credits up to $500 for most workers, costing roughly $150 billion. The package will also include more than $100 billion in tax incentives for businesses to create jobs and invest in equipment or factories. The overall economic package, of $675 billion to $775 billion, is taking shape as Mr. Obama arrived in Washington and planned to begin trying to build support in Congress and among the broader public for his approach to stimulating the economy.
Gold: King of commodities in 2008 Gold was the ‘king’ of commodities in 2008 if you are not very particular about gender bias or it was queen of commodities if you are a feminist. Whatever may be the gender, gold was the only commodity that investors put trust on at a time when trust was almost at its ebb. India is the largest consumer of gold but in the last month of 2008, but even its gold imports got a beating, albeit temporarily. Gold imports recorded a fall as high as 81 per cent partly because of price and partly because of poor demand.
'Silver prices will follow Gold in 2009' Where are silver prices headed? Will silver prices follow gold in these days of economic meltdown? Yes, silver prices are all set to follow gold prices mainly due to investment demand and ratio play, says a 2009 silver forecast report from Mumbai-based Commtrendz Risk Management Services. According to the report, unlike gold, silver also serves as an industrial metal and hence gets consumed unlike gold. The recent slowdown in global economy has seen silver prices being battered more unlike gold. However it has a strong positive correlation over lager time frame to big brother gold, which can be said as the only reason why it has not fallen like other industrial metals.
John Rubino - Gold & Silver in 2009
Gaza War: Expect a Spike in Oil, Gold Strangely, economic commentators have missed the most obvious impact of the tragic Gaza War on the global economy: Oil prices are going to rise, and will go sharply higher if the war widens into a regional conflict. So too will precious metal prices. Perhaps this perception will change now that a serious ground offensive has started. Higher oil prices will be the death knell for the recent modest rally in global stock markets and the impact of higher energy costs on a weakened world economy would be nasty. This is back to 1973 and the oil embargo years, and the horrendous stock market slump of 1974.
Gold Gains as Mounting Tension in Middle East May Boost Demand By Jae Hur Gold advanced for the first time in three days on speculation that escalating geopolitical tensions in the Middle East and higher crude oil will boost the appeal of the precious metal as a haven and a hedge against inflation. Oil gained as much as 5.1 percent after thousands of Israeli troops crossed into the Gaza Strip, escalating a conflict in the Middle East, the largest oil producing region. Troops crossed the border on Jan. 3 in a bid to capture bases Hamas militants have used to launch rocket attacks on the country.
Gold, silver edge up on Mid East tensions Gold and silver prices surged Monday in Asia along with oil as Middle East tensions entered a new phase boosting the appeal of the precious metals as a haven and a hedge against inflation. Bullion advanced for the first time in three days and gained as much as 5.1% after thousands of Israeli troops crossed into the Gaza Strip escalating the conflict in the the largest oil producing region. Gold for immediate delivery added as much as 1.1% to $884.65 an ounce and traded at $880.65 in Tokyo. Gold advanced 5.8% last year, a record eighth annual advance.
Dollar Rally Fizzling as Fed Triggers Risk Appetite By Bo Nielsen and Ye Xie The dollar, yen and Swiss franc may weaken this year against 2008’s biggest losers in the currency markets as the global economy starts to recover, the largest foreign-exchange strategists and investors say. The winners will be the Brazilian real, Indonesian rupiah and Polish zloty as investors return to higher-yielding assets, according to Bloomberg News surveys. The dollar may strengthen versus the euro and Japanese yen, while dropping against the British pound. "Our strategy for 2009 is to gradually increase risk," said Maxime Tessier, who manages $151 billion as head of foreign exchange in Montreal at Caisse de Depot et Placement du Quebec, Canada’s largest pension-fund manager. "A year from now, I definitely want to be on the short side on the dollar. We’ll see capital flows out of the U.S. again."
False Diagnosis of Deflation Jim Willie, CB One of the most bothersome questions from 2005 to 2007 used to be whether the Untied States would ultimately submit to inflation or deflation. This is actually the wrong question. Many analysts in my view are incorrect in their conclusion that the US suffers from a powerful deflation episode, since they endorse the wrong definition, confuse effect with cause (as usual), do not properly monitor the money flow, and then draw improper conclusions from prices. They suffer from a type of Keynesian Tunnel Vision. They are confused, and fail to adapt certain key measures after the financial sector highjacked the entire national system in the last two decades. If the tail controls the dog, then the movement of the tail must be properly monitored in the data. They add to the murky waters emanating from USFed marble-laden offices, and from USGovt agencies marred by clownish ineptitude. A divorce has occurred by the paper price of gold from the pure physical price. That is your loud unmistakable late signal of a system in a very important transition, where past indicators MUST be adjusted, so as to adapt to a new bizarre corrupt system. If deflation has won, the gold price would be closer to $500/oz than $800/oz, and surely would be to the 1995 price levels, like the housing sector. The iron rule of paper is in the process of yielding to a new power. It will be dictated by foreigners, and will involve a new monetary system linked to gold & silver just like before 1971 when the fatal schism occurred.
Fed, ECB prepare to tackle deflation head-on By Ros Krasny and Alister Bull Officials from the Federal Reserve and the European Central Bank on Sunday vowed to fight the damaging effects of deflation as the global economy suffers a deep and lengthy recession. In just a few months, central bankers' concerns have flipped from fighting inflation to staving off possible deflation -- a condition in which falling prices cause consumers and businesses to delay purchases, resulting in an even steeper economic downturn.
Max Keiser Jan 4th, 2009 - how to rob the public; SEC scam kill bill parody; says Peter Schiff in 2008 was dead wrong! . . . a revolution is brewing and would explode fast if it was revealed to the public that the shadow banking system's purpose is to rob the population ; Peter Schiff's decoupling theory proven false ; the deflation versus inflation debate with Eric Janszen, Rick Ackerman, Jim Willie CB, Mike Shedlock ; Max Keiser talks to Stacy Herbert about the securities and exchange commission corruption by Bernie Madoff and of gold price manipulation by the Commodity Futures Trading Commission that ends with a Kill Bill volume 2 parody, recorded on January 3rd 2009
False Deflation Diagnosis and Gold Bullish Crossover Signal INFLATION OR DEFLATION ? Most one-word answers are replete with ignorance, usually revealing big blind spots. The simple answer is that the overall US Economy, complete with its cancerous Financial System, is enduring both inflation and deflation simultaneously. Inflation is defined as the growth of the monetary base (money supply) beyond the growth of the economy itself. Why smart people cannot grasp this is beyond me. Many smart analysts often forget it, or unlearned it. They insist on the official distraction definition of rising prices, which is NOT inflation. Instead, fast rising prices is a typical symptom of inflation, one of its effects, but not during a credit collapse like now. If focus is given to various classes, then the contrast of rising and falling prices is more clearly seen. Until late 2006 and early 2007, residential property was rising in price. . . . My conclusion is that the US Fed and the Federal Reserve Banks themselves are orchestrating a collapse of sorts for the US Economy.
More money, less Gold to push gold price to $2000 Is more money chasing less and less gold every day? Yes, it is true. And that should be one reason why gold prices could zoom to a record $2000 levels in 2009! According to a 2009 forecast from Mumbai-based Commtrendz Risk Management Services, all over the world broad money supplies in developed nations generally have an average growth rate of around 7% annually, while world gold supplies have hardly gone up by 1-2% over years.
Returning to a Gold Standard Is a Bad Idea Inflation is coming... A return to the gold standard would be disastrous Given the enormity of the recent crisis, there have been calls for radical solutions. The hard money crowd, for example, has called for the return of the gold standard. However, a return to the gold standard would be disastrous. It would be a prelude to a global downturn of unprecedented proportions and doom future generations to heightened economic volatility.
Oil Rises a Third Day; Gaza Attacks Threaten Mideast Stability By Christian Schmollinger and Gavin Evans Crude oil rose for a third day in New York after Israeli troops entered the Gaza Strip, escalating the 10-day-old conflict and threatening stability in the Middle East, the largest oil-producing region. Oil gained as much as 5 percent after thousands of Israeli troops crossed the border on Jan. 3 to capture bases Hamas militants have used to launch rocket attacks on the country. Arab nations and the international community must do more to support Gaza's population, Tehran-based Press TV reported Iran's Foreign Minister Manouchehr Mottaki as saying yesterday.
Gold May Rise for Fifth Week as Investors Seek Store of Value By Pham-Duy Nguyen Gold may rise for the fifth straight week on speculation that the recession will deepen in 2009 and global political tensions will heighten, boosting the appeal of the precious metal as a store of value. Sixteen of 24 traders, investors and analysts surveyed from Mumbai to Chicago from Dec. 30 through Jan. 2 advised buying gold, which rose almost 1 percent last week to $879.50 an ounce in New York. Four said to sell, and four were neutral.
Job Watch 1/3/2009 Simon Constable of Dow Jones Newswires and MarketBeat Blogger David Gaffen discuss the forthcoming payroll report, plus a slew of other economic data.
The End of the Financial World as We Know It AMERICANS enter the New Year in a strange new role: financial lunatics. We've been viewed by the wider world with mistrust and suspicion on other matters, but on the subject of money even our harshest critics have been inclined to believe that we knew what we were doing. They watched our investment bankers and emulated them: for a long time now half the planet's college graduates seemed to want nothing more out of life than a job on Wall Street. This is one reason the collapse of our financial system has inspired not merely a national but a global crisis of confidence. Good God, the world seems to be saying, if they don't know what they are doing with money, who does?
The Biggest Casualty of 2008 By James West There is a commodity not traded on any exchange, not measurable in dollars, immune to the effects of supply and demand, once present in many global markets, but now all but extinct. With the closing of 2008, the commodity with the grimmest prospects of recovery is trust. From the laughable devaluation of the U.S. dollar through hyper-printing to the destruction of all the post-1933 regulations designed to thwart unregulated and over-leveraged gambling and lending, even school children are expressing their absence of trust in the adult world. While mainstream media occupies itself with causes and solutions that are short-sighted and just plain wrong, we've got to focus on this profound tragedy and develop a game plan for its restoration.
Roubini and Jim O'Neill - Talking up global deflation, recession, recovery, and so the deflation/inflation debate continues. Roubini says global recession to last through 2009; China in November slashed interest rates and announced $ 384 billion stimulus package; ECB forecast eurozone GDP pf -1.0% to 0.0% in 2009; IFO institute sees German economy shrinking 2.2% in 2009.
As Vacant Office Space Grows, So Does Lenders' Crisis By CHARLES V. BAGLI Vacancy rates in office buildings exceed 10 percent in virtually every major city in the country and are rising rapidly, a sign of economic distress that could lead to yet another wave of problems for troubled lenders. With job cuts rampant and businesses retrenching, more empty space is expected from New York to Chicago to Los Angeles in the coming year. Rental income would then decline and property values would slide further. The Urban Land Institute predicts 2009 will be the worst year for the commercial real estate market "since the wrenching 1991-1992 industry depression." Banks and other financial companies have not had the problems with commercial properties in this recession that they have had with residential properties. But many building owners, while struggling with more vacancies and less rental income, will need to refinance commercial mortgages this year.
Treasurys tumble as stocks open 2009 with rally Treasurys fall as Wall Street opens 2009 with rally; investors ignore weak manufacturing data Treasury prices fell sharply in light trading Friday as investors looked past a weak manufacturing report and shifted money to stocks as a rally unfolded on Wall Street. Investors shrugged off the Institute for Supply Management's report that its manufacturing activity index slid to the lowest level in 28 years in December. The trade group of purchasing executives said the index fell to 32.4 in December from 36.2 in November. Economists polled by Thomson Reuters had expected a reading of 35.5. A figure below 50 indicates contraction.
Inflation Deflation Switch Turns Entire Investment World Upside Down for 2009 The Fed, the Treasury and all major governments on the planet are throwing the kitchen sink at this debt crisis. But their efforts are being overwhelmed by a monumental sea change — the shift from rising prices to falling prices, from booming asset values to crashing asset values, from wealth creation to wealth destruction , from inflation to deflation. For my entire lifetime, and probably yours as well, we have been living with inflation — sometimes tame, sometimes rampant — but consistently eroding the purchasing power of our dollar. Inflation pervaded every money decision we made or thought about making, every retirement plan or business model. Inflation was factored into our leases, our employment contracts, our budgets, our investment programs. Now, all of that is changing; and it's doing so dramatically! Suddenly, the polar opposite of inflation is taking hold in America: Deflation! Suddenly, prices are plummeting — not just for real estate, but also for automobiles, appliances, clothing and gasoline.
Insolvent Financial System Signals Much Higher Gold Price Many people are very confused these days. They should be. Slowly the nation is coming to grips with a harsh reality that a garden variety recession has not dug its roots inside the body economic of the United States. This is much worse. This is an economic and financial system horribly plagued by insolvency, with vicious cycles causing severe momentum in the damage, where the entire system is facing potential ruin in a disintegration sequence during a virtually unstoppable liquidation process. The broken credit clutch cannot disengage. This is not a deflation episode as portrayed, but rather a broad powerful liquidation phase. As a veteran contact put it, " Cyclical change is easy to understand. What people don't get is that fact that we have systemic change and a paradigm shift of epic proportion. All these idiotic analysts try to find the future in the rear view mirror. Good luck."
Ten Major Threats Facing the U.S. Dollar in 2009 1) Foreign central banks selling US assets 2) The worsening US Trade deficit 3) Treasuries 4) Gold 5) China and the yuan 6) Never ending bailouts 7) US budget deficits and (lack of) Tax revenues 8) The "flight to quality" 9) A loss of confidence 10) The dollar's former self
Fed's Evans Backs U.S. Fiscal Stimulus, Sees 'Sobering' Debt Vivien Lou Chen Federal Reserve Bank of Chicago President Charles Evans supported plans for large U.S. fiscal stimulus while saying such policy is "sobering" because of "significant stress" confronting the federal balance sheet. "By historical standards, our current fiscal debt is not unusually large," Evans said yesterday in a speech in San Francisco. "But our expected future obligations are enormous." President-elect Barack Obama is working on a stimulus package of tax cuts and spending on roads, bridges and other infrastructure to create or save 3 million jobs. His advisers and congressional Democrats say the plan may total $850 billion, while economists and a group of Democratic governors led by New Jersey's Jon Corzine have called for a $1 trillion outlay.
In Arizona, a $103,000 Shack 1/2/2009 As WSJ's Michael Phillips reports, a shack in Arizona with a $103,000 mortgage helps explain the economic mess we're in.
A Bailout for All Our Bad Decisions? By S.C. Gov. Mark Sanford I am worried for our country -- not so much because of the tumult in the financial markets but because of the federal government's response and its implications. It seems that each new crisis is met with a new answer from the government. After Hurricane Katrina, the federal government assumed roles traditionally handled by state and local governments. After the Sept. 11, 2001, attacks, the government federalized 25,000 workers through the Transportation Security Administration. The example of security-focused countries such as Israel, which elects to have that function handled by the private sector, did not matter. Now, our federal government is likely to commit three-quarters of a trillion dollars -- more than last year's Pentagon budget -- to a bailout based on what happened in the credit markets last week. An ever-expanding scope of federal commitment and power is not what made this country great. Expanded power in one place comes at a cost in other places. American cornerstones such as individual initiative and an entrepreneurial spirit -- born in free and open societies with private property rights and the rule of law -- have never fit particularly well within the context of an ever-growing federal government.
Fed has abandoned monetary policy, critic says The Federal Reserve has embarked on a campaign of unsupervised industrial policy to end the country's financial crisis, a move that could undermine its independence, a former top U.S. official said on Saturday. John Taylor, who was under secretary of treasury for international affairs from 2001 to 2005, said the explosive growth of the Fed's balance sheet since September was "unbelievable." "This doesn't really seem like quantitative easing in the sense of finding a growth rate in the money supply," he told a panel discussion during the annual meeting of the American Economics Association. "What you are looking at now is really being determined by other considerations. How much should we buy of mortgage-backed securities? How much should we loan to foreign central banks? This is really more like an industrial policy," he said. The Fed's balance sheet has more than doubled in size to over $1.2 trillion in recent months as it has tried to shield the U.S. economy from the worst financial crisis since the Great Depression by supporting key credit markets.
Max Keiser - Japanese Economy is Collapsing
Credit Card Companies Willing to Deal Over Debt Hard times are usually good times for debt collectors, who make their money morning and night with the incessant ring of a phone. But in this recession, perhaps the deepest in decades, the unthinkable is happening: collectors, who usually do the squeezing, are getting squeezed a bit themselves. After helping to foster the explosive growth of consumer debt in recent years, credit card companies are realizing that some hard-pressed Americans will not be able to pay their bills as the economy deteriorates.
Happy New Year? Not for credit card companies By Juan Lagorio Credit card companies have little to celebrate as many analysts brace for 2009 to be one of the worst years on record for consumer credit. Losses for the industry could top $70 billion, but it is hard to predict how bad the pain will be. U.S. consumers have never before been so deeply in debt. There was nearly $1 trillion of credit and charge card debt outstanding as of October, up more than 25 percent since 2003, according to the U.S. Federal Reserve. That is in addition to $10.54 trillion in mortgage debt. Unemployment, already at 15-year highs, is expected to rise to its highest levels since the early 1980s, when credit cards were not nearly as widespread. In short, there's more debt than ever and fewer people are able to pay it.
Steel Industry, in Slump, Looks to Federal Stimulus The steel industry, having entered the recession in the best of health, is emerging as a leading indicator of what lies ahead. As steel production goes - and it is now in collapse - so will go the national economy. That maxim once applied to Detroit's Big Three car companies, when they dominated American manufacturing. Now they are losing ground in good times and bad, and steel has replaced autos as the industry to watch for an early sign that a severe recession is beginning to lift.
Recession is squeezing the life out of money-strapped hospitals Facilities across the nation are closing or eliminating services as patient visits drop, insurers and patients pay slowly and credit remains tight. Gainesville's first community hospital has been on life support ever since Shands HealthCare system in northern Florida bought it a dozen years ago. Now, because of the recession, the plug is being pulled on money-losing Shands AGH. This fall, its nonprofit parent company will shut the 80-year-old, 220-bed hospital and shift staff and patients to a newer, bigger hospital nearby in an effort to save $65 million over three years across the eight-hospital system.
Max Keiser World in Deep Recession
Richardson withdraws Cabinet post Cites ongoing corruption investigation Stephen Dinan (Contact) President-elect Barack Obama said Sunday that he would withdraw Gov. Bill Richardson's nomination to be commerce secretary, with Mr. Richardson citing an ongoing corruption investigation in New Mexico. In statements released by the presidential transition team, the New Mexico governor said he has not done anything wrong but that the investigation by federal prosecutors "would have forced an untenable delay in the confirmation process" and he asked Mr. Obama to withdraw the nomination. "Governor Richardson is an outstanding public servant and would have brought to the job of commerce secretary and our economic team great insights accumulated through an extraordinary career in federal and state office," the president-elect said.
Gateway to China U.S. traders approach market through Hong Kong David M. Dickson and Carrie Sheffield HONG KONG - A constantly expanding free-trade agreement between Hong Kong and mainland China has increased Hong Kong's role as a major springboard for hundreds of American companies into the Chinese market. U.S. companies with regional headquarters in Hong Kong have increased by nearly 60 percent since 1996, reaching nearly 300 firms by June 2007. American companies that have established regional offices have increased from 226 in 1996 to 593 in mid-2007. Nearly 400 other U.S. companies had opened local offices in Hong Kong by 2007. Altogether, the American presence in Hong Kong grew from 414 firms in 1996 to 1,285 in 2007. "Hong Kong is ... attractive because of its British legal system and a very strong rule of law," said Marc Miles, a global economist who edited the 2004-06 editions of Heritage Foundation's "Index of Economic Freedom," which ranked Hong Kong the freest economy in the world. Hong Kong led Heritage's 2008 rankings as well.
Obama Moves to Counter China With Pentagon-NASA Link By Demian McLean President-elect Barack Obama will probably tear down long-standing barriers between the U.S.'s civilian and military space programs to speed up a mission to the moon amid the prospect of a new space race with China. Obama's transition team is considering a collaboration between the Defense Department and the National Aeronautics and Space Administration because military rockets may be cheaper and ready sooner than the space agency's planned launch vehicle, which isn't slated to fly until 2015, according to people who've discussed the idea with the Obama team.
Egypt Condemns Israeli Attacks on Gaza, Calls for Immediate End By Mahmoud Kassem Egypt, the Arab world's most populous nation, condemned the ground invasion of Gaza by Israel and called for an immediate end to the violence that has killed more than 450 Palestinians and wounded 2,285. The office of President Hosni Mubarak said in a statement today that the United Nations Security Council and the so-called Middle East Quartet -- the EU, U.S., Russia and the UN -- should take measures "to confront the humanitarian consequence of this aggression on the Palestinian people in Gaza."
Can the IDF break Hamas' fighting motivation? DEBKAfile Special Analysis Most military pundits agree that the Israel's Gaza operation is nothing like the 2006 Lebanon War. In the broader sense this is true. The differences are undeniable. The Israeli Defense Forces which invaded Gaza Saturday night, Jan. 4, is not the same army as it was then. It is well-trained, its various arms are well-integrated, it is fighting according to a prepared script after practicing urban warfare at a mock Palestinian village in the Negev. The high command, under its post-Lebanon War chief of staff, Lt. Gen. Gaby Ashkenazi, shares a unity of purpose, and so do the three politicians running the campaign - prime minister Ehud Olmert, defense minister Ehud Barak and foreign minister Tzipi Livni.
Arabs Divided, Egypt Under Fire Over Gaza By Patrick Goodenough Israel's ongoing offensive against Hamas in the Gaza Strip is exposing deep divisions in the Arab world and between Arab governments and Iran, Hamas' chief sponsor. In the firing line is Egypt, a country that borders Gaza; is a key ally of Hamas' rival, Palestinian Authority (P.A.) chairman Mahmoud Abbas' Fatah faction; and has long played an important - if not exactly neutral - mediation role between Israel and the Palestinians. President Hosni Mubarak's government has been strongly condemned this week for refusing to open border crossings with Gaza - apart from allowing a small number of wounded Palestinians to leave and limited aid to enter.
Day 8 of Gaza campaign: Bush clears way for Israeli ground operation, updates ObamaDEBKAfile Exclusive Report DEBKAfile's Washington source report that in a telephone conversation with prime minister Ehud Olmert, US president George W. Bush okayed Israeli air, sea and ground operations against Hamas in the Gaza Strip. He promised the US would veto a resolution condemning Israel at the UN Security Council meeting next Monday. Early Saturday morning, Jan. 3, Day 8 of Israel's Gaza operation, US and British media described the Israeli invasion as hours away. In his weekly radio address - brought forward by a day, the US president spoke with exceptional firmness: "Another one-way ceasefire that leads to rocket attacks on Israel is not acceptable," he said. "This recent outburst of violence was instigated by Hamas - a Palestinian terrorist group supported by Iran and Syria that calls for Israel's destruction."
Israeli Troops Enter Gaza Vowing 'Lengthy Operation' Against 'Many, Many' Hamas TargetsIsraeli Ground Forces Enter Gaza in Escalation Gaza City, Gaza Strip - Israeli tanks and infantry rolled into Gaza after nightfall Saturday, launching a ground offensive in a widening war against Hamas that the Israeli defense minister said "will not be easy and will not be short." The ground operation was preceded by several hours of heavy artillery fire after dark, igniting flames in the night sky. Machine gun fire rattled as bright tracer rounds flashed through the darkness and the crash of hundreds of shells sent up streaks of fire.
Israeli troops amass outside Gaza City Casualties swell with close-quarter combat imminent Joshua Mitnick TEL AVIV | Israeli ground forces took up positions on the outskirts of Gaza City and other towns in northern Gaza while Hamas snipers shot back and both sides braced for close-quarter combat with dramatic increases in soldier and civilian casualties. As a result of the fighting, Gaza City and its main medical center, Shiffa Hospital, were without electricity. More than one of every three residents were without water and sewage was running in the streets, according to Gisha, an Israeli human rights group. Gaza officials put the Palestinian death toll at 50 since the Israeli ground incursion began Saturday night and more than 500 since Dec. 27, when the Israeli air assault began.
What's the true target in Gaza invasion? By Ethan Bronner EREZ CROSSING, on the Israel-Gaza border: As Israeli tanks and troops poured into Gaza, the next phase in its fierce attempt to end rocket attacks, a question hung over the operation: Can the rockets really be stopped for any length of time while Hamas remains in power in Gaza? And if the answer is determined to be no, then is the real aim of the operation to remove Hamas entirely, no matter the cost? After her visit to Paris on Thursday to explain to the French authorities why she thought this was not the time for a quick cease-fire, Foreign Minister Tzipi Livni of Israel said, "There is no doubt that as long as Hamas controls Gaza, it is a problem for Israel, a problem for the Palestinians and a problem for the entire region."
Israeli Forces Bisect Gaza Strip - Jan 4, 2009 Thousands of Soldiers Surround Largest City; Death Toll Rises To 500; U.N. Head Calls For End To Operation
Israel Seeks Heavier Blow to Hamas Armed Wing in Gaza Gwen Ackerman and Saud Abu Ramadan Israel said its nine-day offensive in the Gaza Strip hasn't yet done enough damage to the military wing of Hamas, as its soldiers clashed with gunmen from the Islamic group that controls the Palestinian territory. "The political wing of Hamas has absorbed a serious blow, but the military wing has not been hit as hard as we would like," Cabinet Secretary Oved Yehezkel told reporters today. "The goal is to deal a serious blow to the terrorist infrastructure of the Hamas." Israel suffered its first combat death when a soldier was killed by Hamas gunfire today, the army said. Four other Israelis have died since the operation began on Dec. 27. Yehezkel said "hundreds" of Hamas gunmen have been killed.
Peter Schiff 12/31/08 - Wall Street Unspun [Part 1] New Years Ed
Peter Schiff 12/31/08 - Wall Street Unspun [Part 2] New Years Ed
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