Discussion of Housing Bubble, US Dollar, Debt, Trade Deficit, Oil, Gold, Consumer Spending, Central Banks, Inflation, Outsourcing and the Bleak Future of the US economy
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Saturday, September 27, 2008
New Open Forum
Last open forum getting full - starting a new one here. Please feel free to post up your thoughts, interesting/informative links, use for discussion topics, etc.
Wow - but all I can say is: par for the course - this corrupt system will stop at nothing to save itself while throwing all of us little guys under the bus.
Would Citibank have crumbled had this $138B not been paid? Were they too big to fail also?
Based on the info provided, the answers to both questions look to be a certain YES!
I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.
I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.
I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transaction is 100% safe.
This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.
Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.
FYI: Goldman Sachs Private Wealth Group - discussion on the TARP impact on the dollar.... 8AM today PST. Enjoy -rip
The PWM Investment Strategy Group invites PWM clients to join a discussion on: "Impact of the US Treasury Proposals on the Budget and Dollar" Hosted by: Sharmin Mossavar-Rahmani Chief Investment Officer; Private Wealth Management Speakers and Topics Include: Impact on the US Budget Alec Phillips, Economist, Washington, Goldman Sachs Global Investment Research Impact on the US Dollar Jens Nordvig, Economist, Global Markets, Bonds & Currencies, Goldman Sachs Global Investment Research Thursday, September 25th, 2008 At 11:00am EDT Webcast: http://www.investorcalendar.com/IC/CEPage.asp?ID=134624 Dial-In Details: Toll-Free: (877) 502-9273 Local: (913) 981-5582 Passcode: 4661689 Please reference “Goldman Sachs ISG Conference Call” Replay Details (available for one month): Toll-Free: (888) 203-1112 Local: (719) 457-0820 Passcode: 4661689
Anecdotal evidence. My partner is into cars and his salesguy called and is begging him to take a mercedes SL65 2008 list price $200k for ------ $108 k. Is that a hoot. He tlod him to get lost as his portfolio is down 45%.
Justin, the regulator whose comment became the story about China's halting lending to US banks has disavowed the comment, saying it's a false rumor.
Read through to the end of this Bloomberg article.
Ellen
China's Banks Limit Interest-Rate Swaps With Overseas (Update1) By Belinda Cao
Sept. 25 (Bloomberg) -- Chinese banks said they've cut approvals for traders to enter into interest-rate swap agreements with international finance companies to avoid losses as credit markets collapse.
China Citic Bank Corp. introduced tighter limits for swaps with overseas banks after the failure of Lehman Brothers Holdings Inc., according to Guan Jiaying, the bank's interest-rate swap analyst in Beijing. Traders are favoring domestic counterparties for the contracts, which involve swapping fixed for floating rates, said Ye Yuzhang at Industrial Bank Co. in Shanghai.
``It takes longer for us now to get an internal approval to renew an IRS line with foreign banks if the current one expires due to our tighter risk controls,'' Ye said. ``If the prices offered aren't so different, we prefer to make such deals with domestic banks.''
Chinese lenders have increased swap trading in the past two years to hedge risks related to interest rate movements as the central bank raised borrowing costs to battle decade-high inflation. Last week, the People's Bank of China cut the one-year lending rate for the first time in six years after the economy slowed for a fourth quarter.
The nominal amount of interest-rate swap contracts traded between banks in China declined 25 percent to 3.75 billion yuan ($549.4 million) last week, from 5 billion yuan a week earlier, according to data compiled by the National Interbank Funding Center in Shanghai. Weekly volume touched 20 billion yuan earlier this year, according to Citic Bank's Guan.
Stricter Standards
The one-year interest rate swap, which is based on the 7-day repurchase rate, slid 1.3 basis points to 3 percent as of 2:02 p.m. today, according to rates compiled by Bloomberg. Swaps are derivative contracts used to guard against or profit from interest-rate fluctuations.
China's inflation rate exceeded 5 percent for 12 consecutive months through July before slowing to 4.9 percent last month. The central bank cut its one-year lending rate by 0.27 percentage point to 7.2 percent on Sept. 15.
China's four biggest banks, including Industrial and Commercial Bank of China, China Construction Bank Corp., Bank of China and the Agricultural Bank of China, all set stricter standards for approving credit lines for swaps to international counterparts, especially U.S. banks, according to people at the banks' treasury departments who declined to be named.
Swap Trading Shrinks
``Domestic banks have definitely become more cautious in dealing with foreign institutions after Lehman's bankruptcy,'' said Fan Xiulan, a Beijing-based fixed-income analyst with BOC International Holdings, the investment banking arm of Bank of China Ltd. ``Swaps trading shrank obviously recently.''
Citibank (China) Co. and JP Morgan Chase (China) Co. are the only two U.S. banks licensed for interest-rate swap transactions in China, according to a list of 62 financial companies posted by the National Interbank Funding Center. It includes 41 local firms. HSBC Holdings Plc, Deutsche Bank AG and Standard Chartered Plc are among the most active international lenders in the market, Industrial Bank's Ye said.
China's banking regulator denied a media report that it had banned the nation's lenders from offering credit to U.S. financial institutions. The South China Morning Post, citing people it didn't identify, reported today that the regulator ordered Chinese banks to halt inter-bank lending in all currencies to U.S. banks to avoid possible losses during the financial crisis.
I'm pissed - I had a long detailed reply for Ramanand and lost it due to a blogger error. Damn this thing!
Moving on, did anyone have the opportunity to get in on the GS call today? Any key points to pass on? I really would have liked to get in on it, but as a small fry, I had to earn a living instead.
Tarun,
Sounds like the Vegas housing market: 1/2 off but very few takers.
Justin, I'll take a look at the links tonight -thanks
Ramanand, I really don't have the time to get into the details that I had previously typed up/lost - but let me just say it's all related to ownership of the world's reserve currency - which we are about to lose.
As long as foreigners continued to purchase our fiat debt/currency as a safe-haven (we used to suck up 80% of the worlds savings which would get recycled and used to generate more credit/debt through our fractional reserve banking system), we were OK, and Americans would not think twice to buy (with easy credit and the wealth effect brought about by our booming housing market)a thing or a service that would provide them w/immediate gratification - but times are a changing...
Bottom line: As long as people had a product or service people were willing to spend fiat money on, free enterprise and private ownership worked.
Problem now is: Foreigners are starting to distrust the Dollar, credit is getting tighter, Americans are swamped in debt and the party is over... Necessities will be all we care about in the not too distant future.
Anyone up for a trip down the rabbit hole? Here are a few snippets from this article on seekingalpha.com:
"I happened to come across several articles written by New York Post business writer, John Crudelle and a number of others. They believe fervently in an organization known as the “PPT”, or “Plunge Protection Team”, which was allegedly created by Presidential order, in 1987, after the 22% one day market crash that year. Mr. Crudelle, along with some private economists, and Congressman Ron Paul, apparently, all believe in this conspiracy. These folks are not fools, so it is worth giving serious consideration to whether or not it really exists...
After reading some of the articles, I began thinking about the $700 billion bailout. I took the time to recalculate the Federal Reserve balance sheets, and suddenly realized that it has accepted almost exactly $700 billion worth of toxic mortgage paper, in return for ostensible loans that many of the big banks cannot possibly repay...
Let’s indulge ourselves, for a moment, and assume that PPT does exist. If so, the $700 billion bailout is not only for insolvent banks...
It appears to be a bailout of the Federal Reserve, itself. The Fed, of course, according to PPT theory, acts as the PPT’s private slush fund...
Money is taken out to pump up stock prices, and then taken back in so that prices will fall. The PPT players profit on the movements of the market, induced by this activity...
According to PPT theory, the Fed has been used as a slush fund to support stock manipulation for over 21 years now...
Will recapitalization of the Federal Reserve allow it to create a series of false rallies to allow people-in-the-know to dump equities into a temporarily rising stock market?
I don’t know the answer to these questions. But, the arguments made by people who believe in the so-called “PPT” are interesting. If true, it would serve to explain a lot of the irrational market action we all observed over the past years."
The PPT supposedly consists of Goldman Sachs (GS), Morgan Stanley (MS), Bank of America (BAC) and JP Morgan Chase (JPM), and of course the Fed slush fund used to manipulate markets.
Let us look at the Fed. The Fed is a private entity that was established by and paid for by the mega banks. It is an appendage of the financial institutions, although it has been given powers by the Treasury to regulate the money supply. It is busy printing money.
The Fed wants this bailout for one simple reason and that is to cover the collateralized debt obligations, but more than that, the credit default swaps. The Bank for International Settlements came out and stated that the total figure of such non-capitalized and over leveraged debt that has been sold down the line amounts to $1000 trillion!!!!!!
The total GDP of all countries combined, all the economies together amounts to $60 trillion.
The idea that a single dollar can be infinitely magnified in order to sell debt instruments for the purpose of building wealth, has gone under water. It cannot be done.
Bernanke and Paulson are totally frightened that this $1000 trillion will cause significant bankruptcies, which is necessary, world wide. This will grind any opportunity of any remaining possibility to loosen credit, and which will eventally evaporate on their watch. And Bush's watch drowning McCain.
Also, this bailout plan is to keep the courts out of the picture. By allowing the banks to fall into bankruptcy court, the amount of debt by the bank in question would be publicly unraveled revealing the true value of their over-valued debt burden. And, it would expose the true amount of their assets, which have been over inflated. Bernanke and Paulson don't want such public exposure. This would collapse the financial system. In addition, judges would then re-figure some mortgage loan debt in the process. Bada Bing and The Paulie are very afraid of all of this going public.
You all know that Lehman has really been bailed out by the Fed? The Fed, as a third party, gave Lehman through Citigroup $138 billion, which actually covered Citi's exposure to Lehman's toxic debt of which Citi held. BadaBing!
This is my opinion on how to fix the problem. And I hope YOU all called your congressional representatives and told them what you thought.
The Treasury should take that $700 billion and float it through the economy. By giving it to the very CEOs, directors and such, who brought us this meltdown only after they made billions in fees, contracts, bonuses, commissions, and more, a dime to horde it for themselves, is obscene!
If congress wants to do anything, they could subside public transportation allowing workers to cheaply community by bus or train giving those folks more money in their pockets because they won't need to use their cars.
Put money into the most desperate of all infrastructure projects, such as roads, bridges, locks and dams, ports, school buildings, public hospital, police and fire departments, and such.
By doing this, the $700 billions circulates through the economy without directly putting into the bank accounts of individuals.
Such actions would stabilize the economy more than what Paulson, Bush, BadaBing, and McCain have in mind.
Check out this Youtube:
http://www.youtube.com/watch?v=h4NcE5lp0z8
also- Google on Youtube Sarah Palin's Witchcraft Pastor! Amazing and creepy stuff.
Thanks Randy, keep up the good work. This blog doesn't have the traffic as other well known blogs but you represent Main Street (vs. Wall Street). I always check in a few times a week to see what's up. The videos are great.
I have the feeling that all this back and forth arguing over the bailout is being done on purpose. Seems to me like the perfect play from here is to continue to stall, have the market do the final BIG CRASH next week, and then push for the bailout without question from citizens.
Chase Bank seems to be the conduit for the Fed to funnel money into bailout banks. WaMu has gone down, but bought by Chase, as was the same with Lehman, via CIti.
China is getting worried. They are going to reduce their investment into Treasuries. I have been saying this for 6 months. It is finally here.
YOu may want to check out larouchepac.com. Probably the only honest politician in US (maybe thats why he was put in jail). He's been forecasting this scenario for quite some time
McCain Camp insiders say Palin "clueless" Capitol Hill sources are telling me that senior McCain people are more than concerned about Palin. The campaign has held a mock debate and a mock press conference; both are being described as "disastrous." One senior McCain aide was quoted as saying, "What are we going to do?" The McCain people want to move this first debate to some later, undetermined date, possibly never. People on the inside are saying the Alaska Governor is "clueless."
watch the video. she really is clueless. reminds me of Miss South Carolina and she could be our next VP.
$700 billion (plus previous bailouts) divided by barely 400 million americans means (if I have my zeros right) $1,750 for every man, woman and child - plus interest. I say we open our borders and let them all in - we'll take all the help we can get!
I always wondered where all that money came from in Aspen, Palm Beach and all the other "playgrounds of the rich" - now I know. What a bunch of pirates!
Sarah Palin cannot answer a darn question with any sense! Couric gave her easy questions to answer and she showed complete stupidity with her answers. Couric could have answered them better for her.
Her nomination shows McCain is totally inept, incompetent and out-of-his-league as a presidential choice.
The GOPers have made a total mistake by letting him go forward. They should dump the fool and pick someone else. McCain should just fake an illness and step aside. He is a dangerous fool.
Suspend his campaign? What a McCon-job that was. The Great White Hope rode in on his trusty steed but it crashed into a wall throwing the Great White Hope to the ground. McCain is seriously wounded. If he looks weak and unsteady in any way tonight, then he is finished. And that is in spite of the racial divide between the voters.
I can’t help but compare our country’s situation to the maiden voyage of the Titanic. Everyone has seen the movie, so can relate to the story. The captain (Alan Greenspan) has been handed the greatest ship (United States) ever made. It is unsinkable. The initial voyage across the Atlantic Ocean has drawn the rich elite ruling class (financers & bankers) onboard. But, the lower decks are filled with lowly peasants (Working Class) who are sneered at by those in the upper decks. A maiden voyage should always be taken slowly. A prudent captain would not take undue risks. Our captain (Alan Greenspan) wants to make his mark on history. He declares full steam ahead (reducing interest rates to 1%). Midway through the voyage, the captain is handed a telegram warning of icebergs (potential financial catastrophe) ahead. If he slows down the ship, he will not set the speed record. He ignores the warning and steams on to his rendezvous (eternal disgrace) with history.
In the middle of the night, the lookouts (Ron Paul, among others) scream iceberg!!! But, it is too late. The great ship (United States) has struck an enormous iceberg (banking crisis). At first, it seemed like everything is OK. There are no visible problems. But, below the waterline the great ship (United States) is taking on water (massive mortgage write downs). The engine room (Federal Reserve printing presses) works frantically to stem the damage. The captain believes that the compartmentalization of the ship will save it. The expert on the design of the ship (Nouriel Roubini) explains that the ship will surely sink. The captain orders the band (Hank Paulson) on deck to distract the masses from their imminent fate. The owners of the ship (U.S. government) never thought it could sink, so they didn’t provide nearly enough lifeboats.
To avoid mass panic, the crew (government bureaucrats) has locked the lowly peasants (Working Class) below deck. They will surely go down with the ship. But, here is where our story starts to deviate. The band (Hank Paulson) decides that the women and children (Middle Class) should not be saved first. The ruling elite (financers and bankers) are piling into the boats to escape their fate. The captain (Alan Greenspan) does not go down with the ship. In a cowardly act, he leaped onto the 1st lifeboat to be launched. So, this is where we stand today. The great ship (United States) is sinking. Should we let the band (Hank Paulson) dictate those who get onto the lifeboats first? If we do, we will all face the fate of Jack as he slowly freezes to death in the icy Atlantic.
Even though he's(WaMu CEO) only been on the job for less than three weeks, he's bailing out with parachute worth close to $20 million, according to an executive compensation analysis conducted for the New York Times by James F. Reda Associates.
That's right, $20 million for 17 days on the job ... and his company failed. http://www.foxnews.com/story/0,2933,428641,00.html
We are on the same page with the Titanic analogy. Two weeks ago, in my Letter to John McCain Supporters, on my blog, I made a humorous comparison using the Titanic example.
You are so correct. The rich class got the lifeboats, but those in steerage went down with the ship.
If we don't allow companies like WAMU to pay $20m for 17 days work ($100,000 per hour assuming long stressful days), how are they supposed to attract the CEO's that are smart enough to solve these problems?
Jerry,
Sorry, that post is gone. I pulled a Jim Cramer and buried a short term prediction that proved wrong. But to my credit, I said that I was going to do that in the post.
Feel free to post your comment below my previous post.
The American dollar (or any fiat currency) only has strength/value because it functions. This is called usage demand. Americans are forced by law to use the dollar. But the rest of the world is not. So ask yourself this. Is the dollar still functioning for the rest of the world? Does it still buy them what they need and want? Does it still function as a store of value for those that hold it? This is the key to whether or not the dollar keeps its world reserve currency status. And it is also the key to some consequences that Congress is not considering. Consequences of biblical proportions that will make a recession or even a depression seem like a walk in the park.
FOFOA--I wish I could remember what I had a written!!! My mind is not the storehouse of my thoughts as it once had been. It is more like a storehouse of breezes! Anyway, I think one point I had made was a question that addressed the value of our currency. India is likely to go on the gold standard. They now hold over twice the amount of gold than the United States. We could be in trouble if that happens.
Oh yes. I am REMEMBERING NOW! It was about your prediction and the idea of prediction.
I copied a few lines from my current post on my blog that had to do with predicting. Here it is:
If I knew, I would be a rich guy, too. I’d be on Letterman, Oprah, Leno and Larry King. O’Reilly would be begging me to go on his show, but I would refuse and call him a jerk on the phone. I’d be on a big-time world tour, with Bono, and Krugman and Roubini, giving out advice and selling my book and Internet newsletter. I’d have a cottage by the lake, and a loft in the city. I’d be sitting pretty during the Great Unwinding. There would be groupies wanting me to analyze their investment portfolios. You know the shtick.
Roubini seems now to be saying that the recession will last 18 months as opposed to his previous prediction of 5 years. So, FOFOA, don't feel bad. Don't need delete such postings. If Roubini can change his prediction from 60 months to 18 (a 70% change.), then you can do so, too. It just shows that the course of change most often is altered by many unknown factors. Roubini even inferred that some sort of bailout/buyout was not so bad.
I disagree with him, and I believe many of you folks out there do, too.
Justin is right in saying who does this Fishman guy think he is? If he was so good, then why is he jumping on the lifeboat with a bag full of million dollar bills? These guys are criminals!
We got small business owners making a go of it by managing their business with a keen sense of skills, grit and know-how. Not with billions, but with small amounts of daily operating capital. But this Fishman loses the game, yet walks away with the trophy. This is wrong. When will congress wake up to it.
The American people are livid and calling their representatives in droves. This is a bigger scream than the war!
There is a difference between short term and long term predictions. You probably know that people like Peter Schiff do not make short term predictions. And people like Jim Cramer make them all the time. Peter is usually right and Jim is usually wrong. I am personally trying to look at current events through a very specific lens. That lens focuses me on the final and unavoidable consequences of our current system. I'm not really "geared" to look at the short term, but as things progress, the final consequences get closer and closer, and ultimately long term BECOMES short term.
I would never delete a long term observation. But I have a choice on short term observations. I can leave them up and let my focus become diluted by a bunch of short term garbage, I can just not post something that I think might be imminent, or I can indulge my occasional short term thought with a caveat. So I don't really feel bad, I just want to give myself the freedom to post my thoughts as they come.
Thank you for your comment. I'm sorry you had to post it on Randy's blog! I almost feel like I'm trespassing. ;)
Concerning Roubini, Hmmmm..... I wonder why the sudden change of heart? Makes me wonder what's going on there with him. He also thinks the bail out is needed. I don't trust this guy any farther than I could throw him(I'm just a small guy).
I tend to value Peter Schiff's opinion as much as anyone(of reputation). Though I do strongly disagree with his take on the rest of the world having a somewhat smooth ride away from the $. I think the whole world is getting ready to groan something terrible such as never before seen. Economic/Monetary factors will obviously be at the head of this groan. Even if I put my Biblical view away I still see a lot of geopolitical chaos ensuing. Even a brief study of history reveals such a thing as a surety, in my opinion. The fact is that we are seeing a lot of notable wars and hearing a lot of rumors of could be notable wars. There is a whole host of nasty weapons at the disposal of mankind these days. All of the economic/monetary chaos mixed with the geopolitical chaos(Of course those are all linked together) makes for a ripe environment to unleash such weapons.
But my opinions are not based on worldly wisdom alone. Most of you on here know that my opinion on the future is based from a Biblical standpoint. It's been that way for well over a decade now. Seeing how things are unfolding now only strengthens the Biblical based opinion that I have.
American-style capitalism has evolved into a bizarre marriage of financial gimmickry and governmental coddling. Very few companies produce much of anything, other than derivatives and press releases. This situation would not be so bad if the derivatives possessed a bit of value and the press releases possessed a bit of truth. Instead, the U.S. economy lurches from greed to deception to disaster, and back to greed, without ever eliminating all the flaws and the felons that cause all the problems.
Rest of that here> http://www.howestreet.com/articles/index.php?article_id=5184
"Credit-default swap sellers demanded 35 percentage points upfront and 5 percentage points a year to protect Wachovia bonds from default for five years, according to broker Phoenix Partners Group. That means it would cost $3.5 million initially and $500,000 a year to protect $10 million in Wachovia bonds, compared with $670,000 a year and no upfront payment just yesterday."
Karl Denninger says "McDonalds has a lower risk of default, as expressed in the Credit-Default Swap market, than the United States Federal Government.
Think folks.
Think long and hard.
This is what the threat to blow $700 billion has done to America. We now have a higher risk of default on our national debt than a company that sells hamburgers has on their private debt." Link
But because this stuff is not understood by many, it is ignored.
In that case the financial class will have won another battle in its long war against the producing class. It will be again as was said about the maneuvers of the Second Bank of the United States two centuries ago: “The bank was saved; only the people were ruined.”
Injecting throughout the world financial system their bogus and unregulated financial instruments, like collateralized debt obligations and credit-default swaps, the big New York financial houses have taken the world economy hostage. The president and Congress should strive to save the hostages, not the kidnappers.
But the president and Congress have participated eagerly with the kidnappers in the total corruption of the financial system.
44 comments:
Hmmmmm
http://www.elliottwave.com/features/default.aspx?cat=mw
Justin,
Wow - but all I can say is: par for the course - this corrupt system will stop at nothing to save itself while throwing all of us little guys under the bus.
Would Citibank have crumbled had this $138B not been paid? Were they too big to fail also?
Based on the info provided, the answers to both questions look to be a certain YES!
The children of propaganda.
Most Americans Still Say Home-Buying Is Best Investment
http://news.yahoo.com/s/rasmussen/20080924/pl_rasmussen/homeowners20080924
"It's just a natural cycle. That's what they've been telling me via the MSM for years now."
Have you seen this email that's going around?
Dear American:
I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.
I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.
I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transaction is 100% safe.
This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.
Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.
Yours Faithfully Minister of Treasury Paulson
FYI: Goldman Sachs Private Wealth Group - discussion on the TARP impact on the dollar.... 8AM today PST. Enjoy -rip
The PWM Investment Strategy Group invites PWM clients to join a discussion on:
"Impact of the US Treasury Proposals
on the Budget and Dollar"
Hosted by:
Sharmin Mossavar-Rahmani
Chief Investment Officer; Private Wealth Management
Speakers and Topics Include:
Impact on the US Budget
Alec Phillips, Economist, Washington,
Goldman Sachs Global Investment Research
Impact on the US Dollar
Jens Nordvig, Economist, Global Markets, Bonds & Currencies,
Goldman Sachs Global Investment Research
Thursday, September 25th, 2008
At 11:00am EDT
Webcast:
http://www.investorcalendar.com/IC/CEPage.asp?ID=134624
Dial-In Details:
Toll-Free: (877) 502-9273
Local: (913) 981-5582
Passcode: 4661689
Please reference “Goldman Sachs ISG Conference Call”
Replay Details (available for one month):
Toll-Free: (888) 203-1112
Local: (719) 457-0820
Passcode: 4661689
Anecdotal evidence. My partner is into cars and his salesguy called and is begging him to take a mercedes SL65 2008 list price $200k for ------ $108 k. Is that a hoot. He tlod him to get lost as his portfolio is down 45%.
Run Forrest Run
http://www.reuters.com/article/marketsNews/idUSPEK16693720080925
Ron Paul takes Bernanke to task.
http://www.youtube.com/watch?v=dv6rQ0U01Yc
Hi...can someone ponder over this and reply:
How can free enterprise & private ownership co-exist with government issued fiat money?
Justin, the regulator whose comment became the story about China's halting lending to US banks has disavowed the comment, saying it's a false rumor.
Read through to the end of this Bloomberg article.
Ellen
China's Banks Limit Interest-Rate Swaps With Overseas (Update1)
By Belinda Cao
Sept. 25 (Bloomberg) -- Chinese banks said they've cut approvals for traders to enter into interest-rate swap agreements with international finance companies to avoid losses as credit markets collapse.
China Citic Bank Corp. introduced tighter limits for swaps with overseas banks after the failure of Lehman Brothers Holdings Inc., according to Guan Jiaying, the bank's interest-rate swap analyst in Beijing. Traders are favoring domestic counterparties for the contracts, which involve swapping fixed for floating rates, said Ye Yuzhang at Industrial Bank Co. in Shanghai.
``It takes longer for us now to get an internal approval to renew an IRS line with foreign banks if the current one expires due to our tighter risk controls,'' Ye said. ``If the prices offered aren't so different, we prefer to make such deals with domestic banks.''
Chinese lenders have increased swap trading in the past two years to hedge risks related to interest rate movements as the central bank raised borrowing costs to battle decade-high inflation. Last week, the People's Bank of China cut the one-year lending rate for the first time in six years after the economy slowed for a fourth quarter.
The nominal amount of interest-rate swap contracts traded between banks in China declined 25 percent to 3.75 billion yuan ($549.4 million) last week, from 5 billion yuan a week earlier, according to data compiled by the National Interbank Funding Center in Shanghai. Weekly volume touched 20 billion yuan earlier this year, according to Citic Bank's Guan.
Stricter Standards
The one-year interest rate swap, which is based on the 7-day repurchase rate, slid 1.3 basis points to 3 percent as of 2:02 p.m. today, according to rates compiled by Bloomberg. Swaps are derivative contracts used to guard against or profit from interest-rate fluctuations.
China's inflation rate exceeded 5 percent for 12 consecutive months through July before slowing to 4.9 percent last month. The central bank cut its one-year lending rate by 0.27 percentage point to 7.2 percent on Sept. 15.
China's four biggest banks, including Industrial and Commercial Bank of China, China Construction Bank Corp., Bank of China and the Agricultural Bank of China, all set stricter standards for approving credit lines for swaps to international counterparts, especially U.S. banks, according to people at the banks' treasury departments who declined to be named.
Swap Trading Shrinks
``Domestic banks have definitely become more cautious in dealing with foreign institutions after Lehman's bankruptcy,'' said Fan Xiulan, a Beijing-based fixed-income analyst with BOC International Holdings, the investment banking arm of Bank of China Ltd. ``Swaps trading shrank obviously recently.''
Citibank (China) Co. and JP Morgan Chase (China) Co. are the only two U.S. banks licensed for interest-rate swap transactions in China, according to a list of 62 financial companies posted by the National Interbank Funding Center. It includes 41 local firms. HSBC Holdings Plc, Deutsche Bank AG and Standard Chartered Plc are among the most active international lenders in the market, Industrial Bank's Ye said.
China's banking regulator denied a media report that it had banned the nation's lenders from offering credit to U.S. financial institutions. The South China Morning Post, citing people it didn't identify, reported today that the regulator ordered Chinese banks to halt inter-bank lending in all currencies to U.S. banks to avoid possible losses during the financial crisis.
Da dum da dum....Here's comes(unofficially) more of that inflation tax that we already knew was coming.
http://www.bloomberg.com/apps/news?pid=20601087&sid=atrFxuL1keJ4&refer=home
For the sake of some humor.
http://www.jibjab.com/originals/time_for_some_campaignin
http://www.jibjab.com/originals/big_box_mart
That's freegin AWESOME Fofoa. RFLMAO I got tears in my eyes.... Thanks for sharing
Wamu down for the count?
Paulson bailout not far behind?
I'm pissed - I had a long detailed reply for Ramanand and lost it due to a blogger error. Damn this thing!
Moving on, did anyone have the opportunity to get in on the GS call today? Any key points to pass on? I really would have liked to get in on it, but as a small fry, I had to earn a living instead.
Tarun,
Sounds like the Vegas housing market: 1/2 off but very few takers.
Justin, I'll take a look at the links tonight -thanks
Ramanand, I really don't have the time to get into the details that I had previously typed up/lost - but let me just say it's all related to ownership of the world's reserve currency - which we are about to lose.
As long as foreigners continued to purchase our fiat debt/currency as a safe-haven (we used to suck up 80% of the worlds savings which would get recycled and used to generate more credit/debt through our fractional reserve banking system), we were OK, and Americans would not think twice to buy (with easy credit and the wealth effect brought about by our booming housing market)a thing or a service that would provide them w/immediate gratification - but times are a changing...
Bottom line: As long as people had a product or service people were willing to spend fiat money on, free enterprise and private ownership worked.
Problem now is: Foreigners are starting to distrust the Dollar, credit is getting tighter, Americans are swamped in debt and the party is over... Necessities will be all we care about in the not too distant future.
Urge you to read these links:
Dollar: Faltering Foundation of US Economic Strength
American Wake Up Call
Regards
Anyone up for a trip down the rabbit hole? Here are a few snippets from this article on seekingalpha.com:
"I happened to come across several articles written by New York Post business writer, John Crudelle and a number of others. They believe fervently in an organization known as the “PPT”, or “Plunge Protection Team”, which was allegedly created by Presidential order, in 1987, after the 22% one day market crash that year. Mr. Crudelle, along with some private economists, and Congressman Ron Paul, apparently, all believe in this conspiracy. These folks are not fools, so it is worth giving serious consideration to whether or not it really exists...
After reading some of the articles, I began thinking about the $700 billion bailout. I took the time to recalculate the Federal Reserve balance sheets, and suddenly realized that it has accepted almost exactly $700 billion worth of toxic mortgage paper, in return for ostensible loans that many of the big banks cannot possibly repay...
Let’s indulge ourselves, for a moment, and assume that PPT does exist. If so, the $700 billion bailout is not only for insolvent banks...
It appears to be a bailout of the Federal Reserve, itself. The Fed, of course, according to PPT theory, acts as the PPT’s private slush fund...
Money is taken out to pump up stock prices, and then taken back in so that prices will fall. The PPT players profit on the movements of the market, induced by this activity...
According to PPT theory, the Fed has been used as a slush fund to support stock manipulation for over 21 years now...
Will recapitalization of the Federal Reserve allow it to create a series of false rallies to allow people-in-the-know to dump equities into a temporarily rising stock market?
I don’t know the answer to these questions. But, the arguments made by people who believe in the so-called “PPT” are interesting. If true, it would serve to explain a lot of the irrational market action we all observed over the past years."
The PPT supposedly consists of Goldman Sachs (GS), Morgan Stanley (MS), Bank of America (BAC) and JP Morgan Chase (JPM), and of course the Fed slush fund used to manipulate markets.
Fofoa,
WOW.....incredible isn't it. The depths of monetary sorcery.
Justin,
The sick thing is that if this is true, then they honestly believe they are doing us all a favor. And that's how they keep a straight face.
Let us look at the Fed. The Fed is a private entity that was established by and paid for by the mega banks. It is an appendage of the financial institutions, although it has been given powers by the Treasury to regulate the money supply. It is busy printing money.
The Fed wants this bailout for one simple reason and that is to cover the collateralized debt obligations, but more than that, the credit default swaps. The Bank for International Settlements came out and stated that the total figure of such non-capitalized and over leveraged debt that has been sold down the line amounts to $1000 trillion!!!!!!
The total GDP of all countries combined, all the economies together amounts to $60 trillion.
The idea that a single dollar can be infinitely magnified in order to sell debt instruments for the purpose of building wealth, has gone under water. It cannot be done.
Bernanke and Paulson are totally frightened that this $1000 trillion will cause significant bankruptcies, which is necessary, world wide. This will grind any opportunity of any remaining possibility to loosen credit, and which will eventally evaporate on their watch. And Bush's watch drowning McCain.
Also, this bailout plan is to keep the courts out of the picture. By allowing the banks to fall into bankruptcy court, the amount of debt by the bank in question would be publicly unraveled revealing the true value of their over-valued debt burden. And, it would expose the true amount of their assets, which have been over inflated. Bernanke and Paulson don't want such public exposure. This would collapse the financial system. In addition, judges would then re-figure some mortgage loan debt in the process. Bada Bing and The Paulie are very afraid of all of this going public.
You all know that Lehman has really been bailed out by the Fed? The Fed, as a third party, gave Lehman through Citigroup $138 billion, which actually covered Citi's exposure to Lehman's toxic debt of which Citi held. BadaBing!
This is my opinion on how to fix the problem. And I hope YOU all called your congressional representatives and told them what you thought.
The Treasury should take that $700 billion and float it through the economy. By giving it to the very CEOs, directors and such, who brought us this meltdown only after they made billions in fees, contracts, bonuses, commissions, and more, a dime to horde it for themselves, is obscene!
If congress wants to do anything, they could subside public transportation allowing workers to cheaply community by bus or train giving those folks more money in their pockets because they won't need to use their cars.
Put money into the most desperate of all infrastructure projects, such as roads, bridges, locks and dams, ports, school buildings, public hospital, police and fire departments, and such.
By doing this, the $700 billions circulates through the economy without directly putting into the bank accounts of individuals.
Such actions would stabilize the economy more than what Paulson, Bush, BadaBing, and McCain have in mind.
Check out this Youtube:
http://www.youtube.com/watch?v=h4NcE5lp0z8
also- Google on Youtube Sarah Palin's Witchcraft Pastor! Amazing and creepy stuff.
http://eye-on-washington.blogspot.com
Thanks Randy, keep up the good work. This blog doesn't have the traffic as other well known blogs but you represent Main Street (vs. Wall Street). I always check in a few times a week to see what's up. The videos are great.
I have the feeling that all this back and forth arguing over the bailout is being done on purpose. Seems to me like the perfect play from here is to continue to stall, have the market do the final BIG CRASH next week, and then push for the bailout without question from citizens.
Chase Bank seems to be the conduit for the Fed to funnel money into bailout banks. WaMu has gone down, but bought by Chase, as was the same with Lehman, via CIti.
China is getting worried. They are going to reduce their investment into Treasuries. I have been saying this for 6 months. It is finally here.
I would have loved to had been a fly on the wall.
http://news.yahoo.com/s/ap/20080926/ap_on_bi_ge/financial_meltdown
Nick from Australia.
YOu may want to check out larouchepac.com. Probably the only honest politician in US (maybe thats why he was put in jail). He's been forecasting this scenario for quite some time
GOD bless/help!!!
Hey all,
Here is a link you may all appreciate.
http://nocashfortrash.org/
Now We Know Why
The McCain Campaign Is Hiding Palin
http://www.wegoted.com/
McCain Camp insiders say Palin "clueless"
Capitol Hill sources are telling me that senior McCain people
are more than concerned about Palin. The campaign has held
a mock debate and a mock press conference; both are being described as "disastrous." One senior McCain aide was quoted as saying, "What are we going to do?" The McCain people want to move this first debate to some later, undetermined date, possibly never. People on the inside are saying the Alaska Governor is "clueless."
watch the video. she really is clueless. reminds me of Miss South Carolina and she could be our next VP.
$700 billion (plus previous bailouts) divided by barely 400 million americans means (if I have my zeros right) $1,750 for every man, woman and child - plus interest. I say we open our borders and let them all in - we'll take all the help we can get!
I always wondered where all that money came from in Aspen, Palm Beach and all the other "playgrounds of the rich" - now I know. What a bunch of pirates!
Sarah Palin cannot answer a darn question with any sense! Couric gave her easy questions to answer and she showed complete stupidity with her answers. Couric could have answered them better for her.
Her nomination shows McCain is totally inept, incompetent and out-of-his-league as a presidential choice.
The GOPers have made a total mistake by letting him go forward. They should dump the fool and pick someone else. McCain should just fake an illness and step aside. He is a dangerous fool.
Suspend his campaign? What a McCon-job that was. The Great White Hope rode in on his trusty steed but it crashed into a wall throwing the Great White Hope to the ground. McCain is seriously wounded. If he looks weak and unsteady in any way tonight, then he is finished. And that is in spite of the racial divide between the voters.
Icebergs Ahead
I can’t help but compare our country’s situation to the maiden voyage of the Titanic. Everyone has seen the movie, so can relate to the story. The captain (Alan Greenspan) has been handed the greatest ship (United States) ever made. It is unsinkable. The initial voyage across the Atlantic Ocean has drawn the rich elite ruling class (financers & bankers) onboard. But, the lower decks are filled with lowly peasants (Working Class) who are sneered at by those in the upper decks. A maiden voyage should always be taken slowly. A prudent captain would not take undue risks. Our captain (Alan Greenspan) wants to make his mark on history. He declares full steam ahead (reducing interest rates to 1%). Midway through the voyage, the captain is handed a telegram warning of icebergs (potential financial catastrophe) ahead. If he slows down the ship, he will not set the speed record. He ignores the warning and steams on to his rendezvous (eternal disgrace) with history.
In the middle of the night, the lookouts (Ron Paul, among others) scream iceberg!!! But, it is too late. The great ship (United States) has struck an enormous iceberg (banking crisis). At first, it seemed like everything is OK. There are no visible problems. But, below the waterline the great ship (United States) is taking on water (massive mortgage write downs). The engine room (Federal Reserve printing presses) works frantically to stem the damage. The captain believes that the compartmentalization of the ship will save it. The expert on the design of the ship (Nouriel Roubini) explains that the ship will surely sink. The captain orders the band (Hank Paulson) on deck to distract the masses from their imminent fate. The owners of the ship (U.S. government) never thought it could sink, so they didn’t provide nearly enough lifeboats.
To avoid mass panic, the crew (government bureaucrats) has locked the lowly peasants (Working Class) below deck. They will surely go down with the ship. But, here is where our story starts to deviate. The band (Hank Paulson) decides that the women and children (Middle Class) should not be saved first. The ruling elite (financers and bankers) are piling into the boats to escape their fate. The captain (Alan Greenspan) does not go down with the ship. In a cowardly act, he leaped onto the 1st lifeboat to be launched. So, this is where we stand today. The great ship (United States) is sinking. Should we let the band (Hank Paulson) dictate those who get onto the lifeboats first? If we do, we will all face the fate of Jack as he slowly freezes to death in the icy Atlantic.
http://www.lewrockwell.com/orig9/quinn9.html
LOL, wow
Even though he's(WaMu CEO) only been on the job for less than three weeks, he's bailing out with parachute worth close to $20 million, according to an executive compensation analysis conducted for the New York Times by James F. Reda Associates.
That's right, $20 million for 17 days on the job ... and his company failed.
http://www.foxnews.com/story/0,2933,428641,00.html
Justin,
We are on the same page with the Titanic analogy. Two weeks ago, in my Letter to John McCain Supporters, on my blog, I made a humorous comparison using the Titanic example.
You are so correct. The rich class got the lifeboats, but those in steerage went down with the ship.
FOFOA--your publish your comment link is in error
Those were James Quinn's words. But yes I hear you both.
Justin,
If we don't allow companies like WAMU to pay $20m for 17 days work ($100,000 per hour assuming long stressful days), how are they supposed to attract the CEO's that are smart enough to solve these problems?
Jerry,
Sorry, that post is gone. I pulled a Jim Cramer and buried a short term prediction that proved wrong. But to my credit, I said that I was going to do that in the post.
Feel free to post your comment below my previous post.
FOFOA
The American dollar (or any fiat currency) only has strength/value because it functions. This is called usage demand. Americans are forced by law to use the dollar. But the rest of the world is not. So ask yourself this. Is the dollar still functioning for the rest of the world? Does it still buy them what they need and want? Does it still function as a store of value for those that hold it? This is the key to whether or not the dollar keeps its world reserve currency status. And it is also the key to some consequences that Congress is not considering. Consequences of biblical proportions that will make a recession or even a depression seem like a walk in the park.
FOFOA--I wish I could remember what I had a written!!! My mind is not the storehouse of my thoughts as it once had been. It is more like a storehouse of breezes! Anyway, I think one point I had made was a question that addressed the value of our currency. India is likely to go on the gold standard. They now hold over twice the amount of gold than the United States. We could be in trouble if that happens.
Oh yes. I am REMEMBERING NOW! It was about your prediction and the idea of prediction.
I copied a few lines from my current post on my blog that had to do with predicting. Here it is:
If I knew, I would be a rich guy, too. I’d be on Letterman, Oprah, Leno and Larry King. O’Reilly would be begging me to go on his show, but I would refuse and call him a jerk on the phone. I’d be on a big-time world tour, with Bono, and Krugman and Roubini, giving out advice and selling my book and Internet newsletter. I’d have a cottage by the lake, and a loft in the city. I’d be sitting pretty during the Great Unwinding. There would be groupies wanting me to analyze their investment portfolios. You know the shtick.
Roubini seems now to be saying that the recession will last 18 months as opposed to his previous prediction of 5 years. So, FOFOA, don't feel bad. Don't need delete such postings. If Roubini can change his prediction from 60 months to 18 (a 70% change.), then you can do so, too. It just shows that the course of change most often is altered by many unknown factors. Roubini even inferred that some sort of bailout/buyout was not so bad.
I disagree with him, and I believe many of you folks out there do, too.
Justin is right in saying who does this Fishman guy think he is? If he was so good, then why is he jumping on the lifeboat with a bag full of million dollar bills? These guys are criminals!
We got small business owners making a go of it by managing their business with a keen sense of skills, grit and know-how. Not with billions, but with small amounts of daily operating capital. But this Fishman loses the game, yet walks away with the trophy. This is wrong. When will congress wake up to it.
The American people are livid and calling their representatives in droves. This is a bigger scream than the war!
Jerry,
There is a difference between short term and long term predictions. You probably know that people like Peter Schiff do not make short term predictions. And people like Jim Cramer make them all the time. Peter is usually right and Jim is usually wrong. I am personally trying to look at current events through a very specific lens. That lens focuses me on the final and unavoidable consequences of our current system. I'm not really "geared" to look at the short term, but as things progress, the final consequences get closer and closer, and ultimately long term BECOMES short term.
I would never delete a long term observation. But I have a choice on short term observations. I can leave them up and let my focus become diluted by a bunch of short term garbage, I can just not post something that I think might be imminent, or I can indulge my occasional short term thought with a caveat. So I don't really feel bad, I just want to give myself the freedom to post my thoughts as they come.
Thank you for your comment. I'm sorry you had to post it on Randy's blog! I almost feel like I'm trespassing. ;)
FOFOA
Concerning Roubini, Hmmmm..... I wonder why the sudden change of heart? Makes me wonder what's going on there with him. He also thinks the bail out is needed. I don't trust this guy any farther than I could throw him(I'm just a small guy).
I tend to value Peter Schiff's opinion as much as anyone(of reputation). Though I do strongly disagree with his take on the rest of the world having a somewhat smooth ride away from the $. I think the whole world is getting ready to groan something terrible such as never before seen. Economic/Monetary factors will obviously be at the head of this groan. Even if I put my Biblical view away I still see a lot of geopolitical chaos ensuing. Even a brief study of history reveals such a thing as a surety, in my opinion. The fact is that we are seeing a lot of notable wars and hearing a lot of rumors of could be notable wars. There is a whole host of nasty weapons at the disposal of mankind these days. All of the economic/monetary chaos mixed with the geopolitical chaos(Of course those are all linked together) makes for a ripe environment to unleash such weapons.
But my opinions are not based on worldly wisdom alone. Most of you on here know that my opinion on the future is based from a Biblical standpoint. It's been that way for well over a decade now. Seeing how things are unfolding now only strengthens the Biblical based opinion that I have.
One thing is for certain. Time will tell.
A really good piece from Nyquist. He builds it around Ludwig von Mises.
http://www.financialsense.com/stormwatch/geo/pastanalysis/2008/0926.html
American-style capitalism has evolved into a bizarre marriage of financial gimmickry and governmental coddling. Very few companies produce much of anything, other than derivatives and press releases. This situation would not be so bad if the derivatives possessed a bit of value and the press releases possessed a bit of truth. Instead, the U.S. economy lurches from greed to deception to disaster, and back to greed, without ever eliminating all the flaws and the felons that cause all the problems.
Rest of that here>
http://www.howestreet.com/articles/index.php?article_id=5184
Everyone seems to be focused on the Dow while the real damage is happening elsewhere. Credit Default Swaps.
Mish says "Credit Market is Closed"
"Credit-default swap sellers demanded 35 percentage points upfront and 5 percentage points a year to protect Wachovia bonds from default for five years, according to broker Phoenix Partners Group. That means it would cost $3.5 million initially and $500,000 a year to protect $10 million in Wachovia bonds, compared with $670,000 a year and no upfront payment just yesterday."
Karl Denninger says "McDonalds has a lower risk of default, as expressed in the Credit-Default Swap market, than the United States Federal Government.
Think folks.
Think long and hard.
This is what the threat to blow $700 billion has done to America. We now have a higher risk of default on our national debt than a company that sells hamburgers has on their private debt." Link
But because this stuff is not understood by many, it is ignored.
Here is another good read.
In that case the financial class will have won another battle in its long war against the producing class. It will be again as was said about the maneuvers of the Second Bank of the United States two centuries ago: “The bank was saved; only the people were ruined.”
Injecting throughout the world financial system their bogus and unregulated financial instruments, like collateralized debt obligations and credit-default swaps, the big New York financial houses have taken the world economy hostage. The president and Congress should strive to save the hostages, not the kidnappers.
But the president and Congress have participated eagerly with the kidnappers in the total corruption of the financial system.
http://www.theday.com/re.aspx?re=e9bbdf59-9773-4a21-b738-34efa1d76cc8
Very fine......
Save America! by Karl Denninger (Video)
No surprise here. Looks like the bailout is a done deal.
http://news.yahoo.com/s/ap/20080928/ap_on_bi_ge/financial_meltdown
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