Tag Archives: economic crash

The Financial Crisis Revisited: The Bad Economic Slide is About to Begin Again

 

 

 

Are you ready for another perilous slide into banking and real estate hell?  Well there’s an ever growing concern about America’s banking industry again and once again the real estate sector both commercial and residential is about to voyage to the bottom of the toilet.  We’ve had a brief but welcomed respite from failing banks and sharply devaluing real estate but the road ahead is not looking good.  We’ve had a terror-free summer in terms of our banks failing but more and more Americans are wake up to the possibility that we have a committed Marxist in the White House in President Barak Husain Obama. 

As conditions deteriorate in the financial world again, perhaps spurred on by insane government spending, the transition to a socialist or communist economy, and the realization that our government has become our enemy: our political crisis means that there will be nobody home to deal with the next economic crisis.  Clearly the Obama administration is thrilled each and every time something fails because the ensuing crisis becomes an excuse to clamp down on the reins of power even harder.  It would seem that Obama doesn’t care about a finical crisis rearing its ugly head again because the worse such a crisis becomes…. the more dependant we become on the government.  If more banks fail and real estate tanks again Obama will blame it on Bush and create more massive and costly government intervention that won’t solve our problems but will make his hold on power unbreakable.

It’s much harder now to infer the state of the economy from the performance of the stock market because the crazy government intervention in the free market has distorted market reality beyond reason.  This much government interference in the economy means that the stock market is about as predictive of economic conditions as a weather forecaster trying to tell you what it’ll be like outside three months from today.  Nevertheless, I find it fascinating that the finance and mortgage giants like Fannie Mae are leading the current negative trend in today’s stock market news.

I guess the more things change the more they stay the same.

Consider this story from Bloomberg (and look for the economic crisis part II that most analysts say will be coming our way in the fall!)

 

Banks Lead Decline in U.S. Stocks on Concern Over More Losses

 

By Lynn Thomasson

the Standard & Poor’s 500 Index since June, as concern banks will post more losses overshadowed manufacturing and housing data that topped estimates.

Wells Fargo & Co., the San Francisco-based bank that received $25 billion in government bailout funds, slid the most in two weeks. Bank of America Corp., American Express Co. and Citigroup Inc. declined more than 3 percent to lead the Dow Jones Industrial Average lower. American International Group Inc. tumbled 16 percent and MetLife Inc. plummeted 5.5 percent after analysts said the insurers’ shares have risen too far, too fast. Europe’s benchmark index retreated 1.8 percent.

The S&P 500 lost 1.8 percent to 1,002.32 at 2:07 p.m. in New York, its steepest intraday decline since Aug. 17. The Dow industrials fell 157.12 points, or 1.7 percent, to 9,339.16.

“The future for the banks is not as muddy as it was two quarters ago, but it’s still not clear,” said Don Wordell, the Orlando, Florida-based manager of the RidgeWorth Mid-Cap Value Equity Fund that has outperformed 94 percent of rivals in the past five years. “The market can’t sustain these huge moves.”

Financial companies have led the S&P 500’s 48 percent rally since March 9, gaining 126 percent. September is historically the worst month for U.S. stocks, with the benchmark index losing 1.3 percent on average since 1928, according to data compiled by Bloomberg.

Economy

U.S. stocks fell even after the Institute for Supply Management said manufacturing expanded in August for the first time in 19 months and the National Association of Realtors said contracts to buy pending homes increased more than forecast in July. The gauge of factories climbed to 52.9 in August, the ISM said today, topping the average economist estimate of 50.5.

Valuations for U.S. stocks look “marginally stretched” compared with other developed markets, Credit Suisse Group AG said in a research report. Strategist Andrew Garthwaite cut his recommended allocation of American equities and predicted they will underperform when the Institute for Supply Management’s manufacturing index is above 50 and rising.

The surge in the S&P 500 made the index valued at about 19 times the profits of its companies as of the end of last week, the most expensive level since June 2004.

The benchmark index for U.S. stock options headed for its highest close since July 10. The VIX, as the Chicago Board Options Exchange Volatility Index is known, increased 9.7 percent to 28.54. The gauge, which measures the cost of using options as insurance against declines in the S&P 500, reached a record of 80.86 in November. The index is sill above the average over its 19-year history of 20.

Wells Fargo Slides

Wells Fargo dropped 3.2 percent to $26.65. Trading in the options market showed speculators were betting Wells Fargo shares will extend their decline. Trading of bearish Wells Fargo put options, which give the right to sell the stock, climbed to 162,000 contracts, triple the four-week average. More than four puts traded for each call option, which give the right to buy.

The most-active contracts were October $24 puts, which rose 67 percent to $1.25 and accounted for a quarter of today’s put trading. The shares haven’t closed below $24, or 13 percent less than yesterday’s closing price, since July 24.

AIG fell the most in the S&P 500, sliding 16 percent to $38.23. The insurer bailed out by the U.S. government was cut to “underperform” from “market perform” at Sanford C. Bernstein & Co., which said the government may reduce its support for the firm once AIG is no longer deemed a risk to the financial system. AIG surged 245 percent last month.

‘Dose of Reality’

Fannie Mae and Freddie Mac, the mortgage-finance companies under federal control, both tumbled more than 13 percent.

“Given the run that we’ve seen, where people could clearly care less about the fundamentals of the companies that were bid up, any dose of reality has to have a very chilling effect,” said Brad Golding, the New York-based managing director at Christofferson Robb & Co., which oversees $1.5 billion. “The financials have run so far, so much that they’ve gotten to levels that cannot be sustained in a choppy economy.”

MetLife dropped 5.5 percent to $35.68. The biggest U.S. life insurer was downgraded at Raymond James Financial Inc., after the company tripled in six months of New York trading.

Bank of America lost 4.5 percent to $16.80. American Express declined 3.8 percent to $32.54. Citigroup slumped 6.2 percent to $4.69.

Paul Tudor Jones’s Tudor Investment Corp., Clarium Capital Management LLC and Horseman Capital Management Ltd. are among funds betting that Goldman Sachs Group Inc. and Morgan Stanley got it wrong in declaring the start of an economic recovery. The firms oversee a combined $15 billion in so-called macro funds, which seek to profit from economic trends by trading stocks, bonds, currencies and commodities.

 

It’s a False ‘Recovery’: Look for more Economic Woes in the Fall and Winter

 

 

 

It astonishes me to hear the media people talking up the idea that somehow the recession is over and we’re safe and sound once again. 

Don’t you believe it. 

The Economic Fundamentals remain distressed, as in the article below, by the Financial Times.  This doesn’t even take into account the likelihood of a massive oil shock that will occur when the Israel/ Iran war kicks off which is likely to be in the fall or winter at the latest. 

I’m also astonished by the degree that one must work these days to get access to competent journalism instead of the ideological pabulum that passes for news today.  It’s the truth that sets you free not the propaganda!  The Bible maintains that the last days will be characterized by deception and the wonton disregard of the truth; and by that standard we’re defiantly in the latter days.  If you believe our economic woes have been fixed by Obama and the Socialist Democrats without dealing with the Fed flooding the world with our currency then I’ve got a bridge in Brooklyn to sell you.

The Government is out of control and getting worse and when the next round of economic disasters hit, given the surly mood of the country, we could see a cultural unraveling not experienced since the American Civil War.  They say a word to the wise is sufficient:  Take all precautions to protect your family and your economic viability because the economic disaster is about to get a lot more intense shortly.  Don’t Be Deceived!  Do your best to prepare now: shed all debts and don’t buy anything you don’t really need.  At some point there’s going to be a loss of confidence in the dollar and that’s where America gets its wings clipped in earnest. 

 

 

 

 

http://www.telegraph.co.uk/finance/markets/6018076/RBS-uber-bear-issues-fresh-alert-on-global-stock-markets.html

 

RBS uber-bear issues fresh alert on global stock markets

Three-month slide could hit record lows, Royal Bank of Scotland chief credit strategist Bob Janjuah predicts.

 

By Ambrose Evans-Pritchard, International Business Editor
Published: 8:26PM BST 12 Aug 2009

Comments 34 | Comment on this article

Britain’s Uber-bear is growling again. After predicting a torrid “relief rally” over the early summer, Bob Janjuah at Royal Bank of Scotland is advising clients to take profits in global equity and commodity markets and prepare for another storm as winter nears.

“We are now in the middle of a parabolic spike up,” he said in his latest confidential note to clients.

 

“I expect this risk rally to continue into – and maybe through – a large part of August. What happens after that? The next ugly leg of the bear market begins as we get into the July through September ‘tipping zone’, driven by the failure of the data to validate the V (shaped recovery) that is now fully priced into markets.”

The key indicators to watch are business spending on equipment (Capex), incomes, jobs, and profits. Only a “surge higher” in these gauges can justify current asset prices. Results that are merely “less bad” will not suffice.

He expects global stock markets to test their March lows, and probably worse. The slide could last three months. “A move to new lows is highly likely,” he said.

Mr Janjuah, RBS’s chief credit strategist, has a loyal following in the City. He was one of the very few analysts to speak out early about the dangerous excesses of the credit bubble. He then made waves in the summer of 2008 by issuing a global crash alert, giving warning that a “very nasty period is soon to be upon us” as – indeed it was. Lehman Brothers and AIG imploded weeks later.

This time he expects the S&P 500 index of US equities to reach the “mid 500s”, almost halving from current levels near 1000. Such a fall would take London’s FTSE 100 to around 2,500. The iTraxx Crossover index measuring spreads on low-grade European debt will double to 1250.

Mr Janjuah advises investors to seek safety in 10-year German bonds in late August or early September.

While media headlines have played up the short-term bounce of corporate earnings, Mr Janjuah said this is a statistical illusion. Profits were in reality down 20pc in the second quarter from the year before. They cannot rise much as the West slowly purges debt and adjusts to record over-capacity. “Investors are again being sucked back into the game where ‘markets make opinions’, where ‘excess liquidity’ is the driving investment rationale.

“The last two Augusts proved to be pivotal turning points: August 2007 being the proverbial ‘head-fake’ when everyone wanted to believe that policy-makers had seen off the credit disaster at the pass, and August 2008 being the calm before the utter collapse of Sept/Oct/Nov… 3rd time lucky anyone?”

The elephant in the room is the spiralling public debt as private losses are shifted on to the taxpayer, especially in Britain and America. “Ask yourself this: who bails out Government after they have bailed out everyone?”

Mr Janjuah said governments might put off the day of reckoning into the middle of next year if they resort to another shot of stimulus, but that would store yet further problems. “If what I fear plays out then I will have to concede that the lunatics who ran the asylum pretty much into the ground last year are back in control.”

Over at Morgan Stanley, equity guru Teun Draaisma thinks we are through the worst. “We were on course for a Great Depression in February, but Armageddon was avoided. Governments did not repeat the policy errors of the 1930s.”

“We have seen the lows of this crisis. This is a genuine rebound rally, and it has been short by historical standards so far,” he said.

Mr Draaisma, who called the top of the bull market almost to the day in mid-2007, has crunched the worldwide data on 19 major stock market crashes over the last century. They show that the typical rebound rally (as opposed to bear trap rallies, when markets later plunge to new lows) lasts 17 months and stocks rise 71pc. The 1993 rally in the US was 170pc over 13 months. Finland’s rally in 1994 was 295pc. Hong Kong rallied 159pc in 2000. This rebound is only five months old. The key indexes have risen 49pc in the US and 42pc in Europe. Mr Draaisma advises clients to stay in the stocks for now, but stick to telecom companies, utilities, and oil.

Yet he too expects a nasty correction once this rally falters. The usual trigger at this stage of the cycle is when central bankers start to make hawkish noises, typically a couple of months before the first turn of the screw (normally a rate rise, but in this case an end to “quantitative easing”. “As long as policy-makers are talking about how fragile the recovery is, equities are unlikely to go down much.”

This moment can be hard to judge. There has already been rumbling from some governors at the US Federal Reserve and from the European Central Bank’s Jean-Claude Trichet. Markets are pricing in rates rises by early next year.

The pattern after major financial bust-ups is that the rebound rally gives way to another fall of 25pc or so, lasting a year, followed by five years of hard slog as stocks bounce up and down in a trading range, going nowhere. Mr Draaisma suggests taking a close look at the chart of Japan’s Nikkei index from 1991 to 1999. Gains were zero.

We are in uncharted waters, however. Monetary and fiscal stimulus has been unprecedented. Russell Napier at Hong Kong brokers CLSA says a powerful bull market is already taking shape as the American giant reawakens. Perma-bears will be left behind. He said: “It is dangerous to be in cash.”

When the finest minds in the business disagree so starkly, the rest of us can only shake our heads in confusion.

 

Economic Unrest in France: Economic Distress Driving Massive Protests

 

Far be it for me to observe that the French are always protesting something; but when French unemployment reaches two million souls the protests take on an ever growing intensity. The Unions are blaming French President Nicolas Sarkozy and his policies for the outrageous unemployment figures and the protests are occurring across the length and breadth of France. As usual the Unions have a list of demands that reflect little in the way of global economic reality and much in the way of a failed reliance on the omnipotence of the state.  A recent poll showed that three out of four French citizens support the strikers as Unemployment heads toward double digests. 

Europe has seen far more civil unrest because of economic conditions than the United States has to this point.  If Mr. Obama doesn’t fix the credit issues and get the banks functioning normally it won’t be long before we catch up to our European friends, as deteriorating conditions in the US Jobs market drives Americans to the streets as well.  You can see the beginnings of it in the growing American “Tea Party’s” and in the popularity of men like Glen Beck. The underlying assumption in France seems to be that the Government can fix this thing which I find to be a problematic assessment at best.  You can make an excellent argument that the United States , and the corruption of our professional politicians, created this mess and it’s become abundantly clear they have no idea how to stop it.  They borrow more; they print more; they castigate corporate executives who they should be thanking while they pretend it was Wall Street rather than Congress that failed us. 

I doubt that European Politicians are of substantially superior moral fiber than our own crop of miscreants who now inhabit Capitol Hill: but with the heat that Europe is getting from its people one wonders how long they’ll be able to hold out against protectionist measures.  Europe is annoyed, to put it mildly, and they want the government to wave a magic wand at the global financial crisis and make it go away. Protests and civil unrest is rising and people are taking to the streets.  As the crisis continues the risk of violence and property destruction increases as well.  This sort of thing has a habit of advancing opportunistic leaders who would never have been listened too in “normal” times but who now have a shot at the brass ring.

Here’s a report from the BBC:

http://news.bbc.co.uk/2/hi/europe/7951949.stm

 

New nationwide strike hits France

Hundreds of thousands of French workers have begun protests across the country during a nationwide strike.

Schools are closed and public transport is being disrupted, with demonstrations organised in about 200 towns.

Unions are opposing President Nicolas Sarkozy’s economic policies. Unemployment has reached two million and is expected to rise further.

Organisers predict the protest will be bigger than one in January, when more than a million people took part.

Union members marched towards Nation in Paris behind a banner that read: “United against the crisis, defend employment, spending power and public services.”

Police said there were about 85,000 people at the rally, according to the AFP news agency.

“They have a profound sense of social injustice, and that, I think, is something that neither the government nor the employers have understood,” said Jean-Claude Mailly, head of the large Force Ouvriere union.

Marches are also being held in Marseille, Lyon, Grenoble and many other towns and cities.

It is the second time in two months that major demonstrations have been held, following a similar display in January.

Beleaguered industries

The strikes began on Wednesday evening with staff on transport networks.

FRENCH UNIONS vs GOVERNMENT Union demands

  Increase minimum wage

  Reverse 50% cap on income tax

  Suspend public sector job cuts

  Measures to protect employment Government stimulus plan

  11bn euros to help businesses improve cashflows

  11bn euros of direct state investment

  4bn euros of investment by state-owned firms in modernisation

  2.65bn euros of tax breaks, and increases in family welfare and short-term unemployment benefits

The national rail operator, SNCF, cancelled 40% of high-speed trains and half of regional services.

A third of flights out of Paris’s Orly airport have been cancelled, while a tenth of France’s electricity output has been shut down with workers on strike.

However, buses and the Metro rail system in Paris were running normally, thanks to a new law enforcing a minimum transport service during strikes,.

But with many schools and public buildings shut for the day, the number of workers travelling into the capital was reduced.

Private-sector firms were also expecting a depleted workforce, with staff from the beleaguered car industry, oil and retail sectors taking part in the strike.

Rising unemployment

The unions say the 26bn euro ($35bn; £24.5bn) stimulus package for France’s struggling economy, unveiled by President Nicolas Sarkozy in December, does not go far enough.

A further 2.4bn euros ($3.2bn; £2.3bn) of measures, including tax breaks and social benefits, presented by President Sarkozy after January’s strike has failed to placate them.

They want him to increase the minimum wage and scrap his plans to cut public-sector jobs.

Recent polls show three-quarters of French people support the strikers.

Many commuters on Thursday said they backed the action, but hoped it would be short-lived.

“Fundamentally I agree, but too much is too much,” one was quoted as saying. “There are strikes in the transport sector too often and we have to put up with them.”

President Sarkozy said on Wednesday that he “understands the concerns of the French people” but has ruled out plans for further measures.

Unemployment is likely to shoot up to 10% in the next 12 months with a further 350,000 lay-offs expected by the end of this year.

Many people are angry that big companies like the oil giant Total is making staff redundant while simultaneously announcing record profits, the BBC’s Emma Jane Kirby in Paris says.

 

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USA Trying to Save a System the World is Rejecting: Capitalism’s Last Days

While the United States of America struggles valiantly to restore our economic engine the rest of the world looks for a way to jettison the hated US Dollar in favor of a new world reserve currency.  The crisis has become a crisis of faith in capitalism itself and no nation on earth personifies the kind of unbridled capitalism that the world is rejecting so much as the United States.  Stories of American Wall Street firms taking billions from the government and giving themselves huge bonus’s and golden parachutes while the crisis deepen across the globe is a study of evil the world can’t ignore.  The Flood of Dollars unleashed by the Federal Reserve is destroying the confidence in the Dollar and in America itself and the world is looking for a life raft as the American Ship of State sinks.  Our system is seen as fundamentally immoral and as we furiously print more dollars and try to borrow more from other nations the world is seeing through our denial and foolhardiness and is forming a plan.  It’s still very much under the radar but the number of nations getting on the “dump American Currency” wagon is growing like the number of governments facing civil unrest and the protestors at labor rallies in Paris.

It was one thing to have French President Sarkozy call for a new reserve currency and it was something of a shock to see China agree in principle.  It was one thing for the Russians and some of the third world call for a new reserve currency and a new banking, investment and trade apparatus that would be global in scope and free of American domination but when Australia calls for a new reserve currency it’s time to worry. The first story below is from a newspaper in Sydney Australia and like the others that follow is uncut.  Read carefully what the new Australian PM is saying about our current financial system and what he envisions taking its place.  This is quite serious folks because the momentum for the world to pull the rug out from under the dollar is growing each day and if it happens it’ll take the USA a generation or more to climb out of the hole we’ve dug for ourselves and our great grandchildren. Everything the government is doing right now will magnify the damage if the world dumps its dollars.

The United States of America is not mentioned in Biblical End Times Prophesy and as you read the stories below about Putin’s view of the crisis, the deepening threat of civil unrest in Russia, Europe, and Iceland you’re looking perhaps at the reason why.  The United States of America is facing an economic holocaust that will make the Great Depression look like a Folk Dance and our corrupt efforts at a Stimulus Bill (A pork laden Christmas Tree) has no chance of reversing the slide.  The only think that might save us now is massive business tax cuts, combined with the low interest rates that might just put us back on track but we have one big impediment to that happening.  The Democrats have built a party on class warfare pitting worker against management, to such a degree, that they’re unable to take the only action that might save us all and the future of capitalism in the bargain.  Perhaps we’re not mentioned in End Times Prophesy because we tore ourselves apart by our class warfare, greed, and reliance on central banking to such a degree that we were rendered irrelevant in the last days.  The next few years will tell the story. 

Consider carefully the following stories and consider for yourself the significance of what Australia is saying in the backdrop of Davos and of Sarkozy’s and Putin’s remarks and ask yourself if the hundreds of millions of pork payments to democrat constituent groups makes the world’s point that were “too corrupt to continue.”  We came up with the “too big to fail” mantra and we’ve come to this point but what happens if the world decides the USA is “too corrupt to continue?” 

The end times seems to be a faceoff between power centers like Russia, the Arabs of the Middle East, China and the Kings of the East and Israel.  American leadership is absent in scripture and a careful consideration of the world economic thinking tells a very plausible story why that might be so. America must fall and Europe must rise; it’s not as unthinkable as once it was.

 

(From The  Sydney Morning Herald)

Time for a new world order: PM

Phillip Coorey Chief Political Correspondent
January 31, 2009

 

KEVIN RUDD has denounced the unfettered capitalism of the past three decades and called for a new era of “social capitalism” in which government intervention and regulation feature heavily.

In an essay to be published next week, the Prime Minister is scathing of the neo-liberals who began refashioning the market system in the 1970s, and ultimately brought about the global financial crisis.

“The time has come, off the back of the current crisis, to proclaim that the great neo-liberal experiment of the past 30 years has failed, that the emperor has no clothes,” he writes of those who placed their faith in the corrective powers of the market.

“Neo-liberalism and the free-market fundamentalism it has produced has been revealed as little more than personal greed dressed up as an economic philosophy. And, ironically, it now falls to social democracy to prevent liberal capitalism from cannibalising itself.”

Mr Rudd writes in The Monthly that just as Franklin Roosevelt rebuilt US capitalism after the Great Depression, modern-day “social democrats” such as himself and the US President, Barack Obama, must do the same again. But he argues that “minor tweakings of long-established orthodoxies will not do” and advocates a new system that reaches beyond the 70-year-old interventionist principles of John Maynard Keynes.

“A system of open markets, unambiguously regulated by an activist state, and one in which the state intervenes to reduce the greater inequalities that competitive markets will inevitably generate,” he writes.

He urges “a new contract for the future that eschews the extremism of both the left and right”.

He mocks neo-liberals “who now find themselves tied in ideological knots in being forced to rely on the state they fundamentally despise to save financial markets from collapse”.

He advocates tighter regulation and policing of global finances, and identifies the immediate challenge as restoring global growth by 3 per cent of gross domestic product, the amount it is expected to fall in 2009. Next week, as Parliament resumes, his Government will chip in with a second economic stimulus package.

Mr Rudd commits to keeping budgets in surplus “over the cycle”, meaning deficits should be temporary. In a further sign the Government is not contemplating additional tax cuts, which would deliver a permanent hit to revenue, he stresses that stimulus measures have to be paid for when the economy recovers.

Mr Rudd singles out Thatcherism as a culprit, as well as the former Howard government. His essay implicitly attacks the Opposition Leader, Malcolm Turnbull, who this week urged the free market be allowed to dictate commercial property values as he slammed a Government measure to prop them up.

Mr Rudd’s essay follows the blast Mr Obama gave Wall Street bankers yesterday for awarding themselves $28 billion in bonuses last year at the same time as they were being bailed out by taxpayers.

In a message to Mr Obama and the US Congress, Mr Rudd counselled against erecting trade barriers. “Soft or hard, protectionism is a sure-fire way of turning recession into depression as it exacerbates the collapse in global demand.”

The message was reinforced in Davos yesterday when the Trade Minister, Simon Crean, described the “buy American” provisions of the new Obama stimulus package as “very worrying”. “On the face of it, it looks like it contravenes commitments made to the World Trade Organisation,” he said.

with Paola Totaro

This story was found at: http://www.smh.com.au/articles/2009/01/30/1232818725574.html

 

(From the BBC)

Putin urges reserve currency move

Russian Prime Minister Vladimir Putin has told the Davos economic forum it is dangerous for the world to over-rely on the dollar as its reserve currency.

He called for a range of reserve currencies and said he envisaged the emergence of several strong regional currencies in the future.

He advised against isolationism and state economic control as ways out of a “perfect storm” in the world economy.

And he warned against military spending as a way to boost economic growth.

Mr Putin, who became prime minister last year after two presidential terms which saw rapid economic growth in Russia, was addressing the World Economic Forum on its first full day of business.

“Excessive dependence on what is essentially the only reserve currency is dangerous for the world economy, therefore it would be expedient to encourage an objective process for the emergence of several strong regional currencies in the future,” he said.

Countries issuing such currencies should, he argued, show more policy openness.

The US dollar continues to dominate official foreign exchange reserves, accounting for 63.9% in 2007 compared with 25.5% for the euro and 4.7% for sterling.

Mr Putin said some protectionism might be inevitable amid a global crisis but he urged against “isolationism and unrestrained economic selfishness”.

He said that Russia opposed spending more money on defence as a way to boost economic growth, as this only aggravated the problem.

Russia’s prime minister also called for a return to “balanced” world energy prices and a new international legal framework for energy security.

He wished US President Barack Obama’s new team “success”, hoping for constructive co-operation between Washington and Moscow.

Story from BBC NEWS:  http://news.bbc.co.uk/2/hi/business/davos/7857005.stm

 

 

(From the BBC)

 

Crisis may ‘spark social unrest’

Europe faces the risk of more social unrest unless measures are taken to quickly tackle the global economic crisis, France’s finance minister says.

Christine Lagarde said trust in the financial system needed to be restored.

Leaders needed to send a clear, understandable signal to ordinary people about how governments were intending to act, she added.

She said that action should be taken by the G20 summit taking place in London in April.

“We’re facing two major risks: one is social unrest and the second is protectionism,” she told the World Economic Forum in Davos.

“We need to restore confidence in the systems and confidence at large,” she added.

On Saturday, hundreds of people demonstrated in Geneva and Davos to protest against the World Economic Forum.

Carrying banners reading “you are the crisis” and throwing snowballs at security guards, the demonstrators said those at the forum were not qualified to fix the world’s problems.

Governments in France, Russia and Iceland have faced angry protests from citizens upset by their handling of the economic crisis.

French rail and air services were disrupted on Thursday as huge crowds took to the streets.

Iceland’s coalition government collapsed on Monday under the strain of the financial crisis.

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/davos/7862679.stm

Published: 2009/01/31 16:39:36 GMT

© BBC MMIX

 

 

Something from Ron Paul just for fun

The World’s Reserve Currency

by Ron Paul

The financial press reported last week that the euro, the new currency created only five years ago and used by most European nations, has supplanted the U.S. dollar as the most widely used form of cash internationally. There are now more Euros in circulation worldwide than dollars.

This alone is not necessarily troubling, as the dollar remains the world’s most important reserve currency. About 65% of foreign central bank exchange reserves are still held in dollars, versus only about 25% in euros. And the European Central Bank faces the same inflationary pressures that our own Federal Reserve Bank Governors face, including a growing entitlement burden that threatens economic ruin as both societies age. European politicians want to spend money just as badly as American politicians, and undoubtedly will clamor to inflate – and thus devalue – the euro to fund their creaky social welfare systems.

Still, the rise of the Euro internationally is another sign that the U.S. dollar is not what it used to be. There is increasing pressure on nations to buy and sell oil in Euros, and anecdotal evidence suggests that drug dealers and money launderers now prefer Euros to dollars. Historically, the underground cash economy has always sought the most stable and valuable paper currency to conduct business.

More importantly, our greatest benefactors for the last twenty years – Asian central banks – have lost their appetite for holding U.S. dollars. China, Japan, and Asia in general have been happy to hold U.S. debt instruments in recent decades, but they will not prop up our spending habits forever. Foreign central banks understand that American leaders do not have the discipline to maintain a stable currency. When the rest of the world finally abandons the dollar as the global reserve currency, both Congress and American consumers will find borrowing money a more expensive proposition.

Remember, America can maintain a large trade deficit only if foreign banks continue to hold large numbers of dollars as their reserve currency. Our entire consumption economy is based on the willingness of foreigners to hold U.S. debt. We face a reordering of the entire world economy if the federal government cannot print, borrow, and spend money at a rate that satisfies its endless appetite for deficit spending.

At some point Americans must realize that Congress, and the Federal Reserve system that permits the creation of new money by fiat, are the real culprits in the erosion of your personal savings and buying power. Congress relentlessly spends more than the Treasury collects in taxes each year, which means the U.S. government must either borrow or print money to operate – both of which cause the value of the dollar to drop. When we borrow a billion dollars every day simply to run the government, and when the Federal Reserve increases the money supply by trillions of dollars in just 15 years, we hardly can expect our dollars to increase in value.

January 2, 2007

Dr. Ron Paul is a Republican member of Congress from Texas.

Click this link for the final nail in our coffin:  http://www.glennbeck.com/content/articles/article/198/20816/

Click the picture of glenn in front of a chart.  Its an amazing vidio

The Great Depression II: We’re in a Downward Spiral with No End in Site

The condition of the United States Economy is a global disaster that will have ramifications economically and geopolitically for decades to come.  For all intents and purposes we’re now in the seminal event of our lifetimes and it promises to be every bit as bad as the Great Depression of the 1930’s.  Too many key aspects of the economy are out of control or hanging by a thread.  44 of 50 state governments are getting clobbered by the massive fall off in revenues as the sickening cycle of deflation continues. Everyone, both corporate and individuals are hording cash and to cutting spending to the bone.  The production of Goods and Services is freezing up just like the credit markets did in the recent past. Many TV analyses will tell you that we have a major crisis in confidence but I would contend that we’ve long passed the problems of poor market psychology into a profound crisis of faith in everything from the dollar, to the banks, to the local Target store. We’re only going to rebound when we have some kind of economic spiritual epiphany and that may take a decade or more as it did in Japan. 

To put it in plain English:

·       The government has no idea how to stop the spiral and is indeed making it worse with ill-advised meddling that gets changed every other week as someone in Treasury has a new bright idea and thus institutionalizes “uncertainty”. The Government started out wanting to buy toxic assets from banks but switched within a few weeks to injecting liquidity.  Now the government wants to go back to some version of dealing with toxic assets while doubling or tripling the bailout to try and help “Main Street”.

·       Europe is in worse trouble than we are with their loans to emerging market countries that are now in the toilet much deeper than we are.  This is going to be like Europe’s subprime crisis and its effects will surely resonate in the USA just as our subprime mess resonated in Europe.  This is another shoe that will drop at any time; when it does, its going to increase our trouble by several orders of magnitude.

·       Oil Prices have fallen and there’s a report out today that Merrill Lynch thinks it could drop to an astonishing $25 a barrel from $147 a barrel JUST THIS LAST JULY.  Lots of people take this as good news but the fact is that economic production across the planet has virtually stopped.  It’s as frozen as the credit market was until just recently and with oil, the economic lifeblood of the global economy in absolute free fall; it means that the global economic heart has stopped.  The world had an economic heart attack and we just haven’t realized we’re dead yet. Demand is gone because production is gone because no one is spending on anything they don’t absolutely need.  Did I mention the probability of war in the Middle East between Iran and Israel before the summer? So is unemployment going up? Consider this story from Reuters about unemployment this morning:

·       WASHINGTON (Reuters) – Employers axed payrolls by a shocking 533,000 in November for the weakest performance in 34 years, government data on Friday showed, as the recession inflicted a mounting toll on the U.S. labor market.

·       The Labor Department said the unemployment rate rose to 6.7 percent last month in the highest reading since 1993, compared with 6.5 percent in October, after widespread losses across the country’s major industry sectors.

·       November’s job losses were the steepest since December 1974, when 602,000 jobs were shed, and were much worse than forecast by analysts polled by Reuters who had predicted a reduction of 340,000 jobs.

·       In addition, October’s job losses were revised to show a cut of 320,000, previously reported as a 240,000 loss, while September’s losses were revised to a loss of 403,000 from down 284,00.

·       The length of the workweek slipped to 33.5 hours, the shortest since records began in 1964, a Labor Department official said.

In November alone we lost 602,000 jobs and now have a 6.7% unemployment rate with the potential of the big three automakers either getting a bailout or adding millions to the unemployment statistics.  When?  Reports indicate that General Motors doesn’t have the cash to finish out this month, December of 2008, and without a bailout the December numbers will make the November numbers look like a folk dance. The November 2008 unemployment numbers were the worst in 34 years. These numbers don’t reflect an estimated 422,000 people who simply dropped out of the workforce in November as indicated in a Associated Press article.  Here’s some analysis from that AP article that puts things into perspective rather well:

·       Workers with jobs saw modest wage gains. Average hourly earnings rose to $18.30 in November, a 0.4 percent increase from the previous month. Over the year, wages have grown 3.7 percent, but paychecks haven’t stretched that far because of high prices for energy, food and other items.

·       Worn-out consumers battered by the job losses, shrinking nest eggs and tanking home values have retrenched, throwing the economy into a tailspin. As the unemployment rate continues to move higher, consumers will burrow further, dragging the economy down even more, a vicious cycle that Washington policymakers are trying to break.

·       At 12 months and counting, the recession is longer than the 10-month average length of recessions since World War II. The record for the longest recession in the postwar period is 16 months, which was reached in the 1973-75 and 1981-82 downturns. The current recession might end up matching that or setting a record in terms of duration, analysts say.

·       The 1981-82 recessions was the worst in terms of unemployment since the Great Depression. The jobless rate rose as high as 10.8 percent in late 1982, just as the recession ended, before inching down.

·        Given the current woes, the jobless rate could rise as high as 8.5 percent by the end of next year, some analysts predict. Projections, however, have to be taken with a grain of salt because of all the uncertainties plaguing the economy. Still, the unemployment rate often peaks after a recession has ended. That’s because companies are reluctant to ramp up hiring until they feel certain the recovery has staying power.

The Last bit of cheerful economic news comes from the Peoples Republic of California where the Governor is going to try and pay state vendors with “Warrants” (AKA IOU’s) for the second time since the great depression. Since California is the Eighth largest economy in the world, all by itself, and since you can’t deposit a “warrant” in a bank and you can’t use it to make payroll: what do you think will happen to the work force of the vendor companies?  Unemployment?  You betcha.  The Eighth largest economy in the world, the State of California can’t pay its bills, not unlike the big three automakers, and Lord knows how many of our banks. 

I don’t see how we can avoid double digit unemployment of 12-15% by the summer.  If it goes that high look for major social disruptions in the fabric of our society as a likely consequence.  That’s going to feed the fire and people will borough in even more than before.  Once the riots begin no one will be filled with confidence about their economic future and the crisis of faith will worsen.

It took a while in 1929 for the full effects of the stock market crash to become the Great Depression.  Really it was a matter of years.  Things are vastly accelerated in our times so we won’t have to wait years.  18 months should pretty much tell the story and if the recent economic news is any indication:  WE’RE IN BIG TROUBLE AMERICA! 

Morals, Market Meltdown, and the Pope: Secular Markets Can’t Function without Faith

 

The Founding Fathers knew that the kind of democracy they proposed for the United States would last only as long as the people were Christian because all the rights they gave us could only be balanced by a just and moral society in which responsibilities were as sacred as rights.  In a society that teaches the fallacy of absolute truth and that truth at best is social created is it any wonder that no one has any faith in government or Wall Street anymore?  How do we know that they’re telling us the truth?  Given that our entire economy is based on the “faith” that a dollar bill has value, that a bank is strong, that the government is not corrupt, when truth becomes elusive, even illusionary than faith becomes impossible.  Once you lose faith that a dollar has value, or that a bank is strong, or that a government is honest, all sense of morality leaves the equation and we’re left with a society in which self interest and personal security become the pervading behavior.  Ethics in a rigged game is seen as fool hardy and there’s no need to be fair in what’s degenerated to a free-for-all competition for survival recourses. 

               For years the Progressives in education and politics have railed about the imposition of Christian values on the people and how fundamentally exploitive that’s been.  Now that the Progressives have managed to impose their values on our society we begin to see that a truly free society is not a “values free zone” as progressives imagine but one in which there are rules.  When you throw out the rules you don’t get more freedom you get anarchy and no society at all.  Progressives wanted to use our tax dollars to be seen to help the poor with housing and so they created Fannie Mae and Freddie Mac to do just that.  These two quasi government organizations created a market for loans made to people who by any standard containing logic and reason should never have gotten a mortgage.  Nevertheless, such people were given mortgages and all these years later we have the subprime meltdown that is probably going to take the whole country down the dumper with it.  You ignore the truth that someone can’t pay and you’re amazed when, low and behold, they can’t pay the mortgage!  You ignore the truth that people have the right to private property and free will and then impose a bizarre equality of outcome, irrespective of personal conduct or initiative, that gives everyone houses, education and healthcare paid for by other taxpayers, in the name of fairness and social justice!  Progressives have imposed their will and their ethic of absolutely no ethics on our society and now no one knows where to park their money and everyone is terrified.  Equality at last!  We can all be equally terrified as the economy tanks, banks go bust, congress argues, and jobs are lost.

               Bloomberg had a fascinating piece concerning Pope Benedict the 16th that hit home to this fundamental business truth?  Or is it just a bit of ‘”absolute truth”? It took the leader of the Roman Catholic Church to diagnose what economists, financiers, and Wall Street CEO’s lost track of in our brave new world of moral relativism:  You can’t have an economy where there is no faith.  You can’t have faith unless you know the truth.  You can’t know the truth if you pound your feet in the sand and insist that there’s no such thing as truth!  When the truth of things become so obscure that you can’t figure out a safe place to put your money your economy is dead.  Did Warren Buffet come up with this?  Nope.  Did Henry Paulson or Mr. Ben Bernanke come up with this basic key to the economy and indeed life?  Nope.  Did Barak the Beneficent proclaim this fundamental economic/life principle from the rooftops of Chicago and boldly proclaim it from the bully pulpit of the presidency elect?  Nope.  Who had the wisdom to see this basic truth and quietly state it in more than enough time; that if we had heeded his words we wouldn’t be such terrified twits today? 

               The Pope.  The Christian, Catholic, Wears Funny Robes, Carries a Great Stick, Pope in Rome.

               What’s up with that?

 

               Consider this small article in Bloomberg today:

 

 


Pope Had `Prophecy’ of Market Collapse in 1985, Tremonti Says

By Flavia Krause-Jackson and Lorenzo Totaro

Nov. 20 (Bloomberg) — Pope Benedict XVI was the first to predict the crisis in the global financial system, a “prophecy” dating to a paper he wrote when he was a cardinal, Italian Finance Minister Giulio Tremonti said.

“The prediction that an undisciplined economy would collapse by its own rules can be found” in an article written by Cardinal Joseph Ratzinger, who became pope in April 2005, Tremonti said yesterday at Milan’s Cattolica University.

German-born Ratzinger in 1985 presented a paper entitled “Market Economy and Ethics” at a Rome event dedicated to the Church and the economy. The future pope said a decline in ethics “can actually cause the laws of the market to collapse.”

Pope Benedict in an Oct. 7 speech reflected on crashing markets and concluded that “money vanishes, it is nothing” and warned that “the only solid reality is the word of God.”

The Vatican’s official newspaper, l’Osservatore Romano, on the same day criticized the free-market model for having “grown too much and badly in the past two decades.”

The National Intelligence Council Sees American Leadership Waning: Just Like the Bible

 

 

            Apparently it’s not only the Bible that sees no meaningful American influence and leadership during the last days; but a place called the National Intelligence Council as well. They prepared a report for the new President Elect called Global Trends 2025 that sees the USA going down the toilet at record speed.  It’s not just Wall Street and the Economy that’s falling apart, which is not to undermine their importance to the loss of American prestige and leadership, it’s the competition by nations like India and especially China. Apparently the National Intelligence Council works for the Director of National Intelligence and it commissions various papers and studies on the issues of the day, and the trends of tomorrow, and some of its work is not classified such as Global Trends 2025.  Here is how Reuters talked about it today:

WASHINGTON, Nov 20 (Reuters) – U.S. economic and political clout will decline over the next two decades and the world will be more dangerous, with food and water scarce and advanced weapons plentiful, U.S. spy agencies projected on Thursday.

The National Intelligence Council analysis “Global Trends 2025” also said the current financial crisis on Wall Street is just the first phase of a global economic reordering.

The U.S. dollar’s role as the world’s major currency would weaken to become a “first among equals,” the report said.

The outlook is intended to inform U.S. President-elect Barack Obama of factors that will influence global events. It is based on a year-long global survey of experts and trends by U.S. intelligence analysts.

China and India, following a “state capitalism” economic model, were likely to join the United States atop a multipolar world and compete for influence, the report said.

Russia’s potential was less certain, depending on its energy wealth and internal investment. But Iran, Turkey and Indonesia were also seen gaining power.

“Strategic rivalries are most likely to revolve around trade, investments and technological innovation and acquisition, but we cannot rule out a 19th century-like scenario of arms races, territorial expansion and military rivalries,” the report said

A reordering of the world financial system was happening faster than the report’s authors envisioned, Fingar said. Last weekend’s Group of 20 summit of advanced and major developing countries in Washington showed work had begun, he said.

A shift away from an oil-based energy system will be underway or complete by 2025. Better renewable technologies such as solar and wind power offer the best opportunity for a quick and low-cost transition, the report said.

Here’s the web site of the National Intelligence Council if you would like to peruse the report for yourself:  http://www.dni.gov/nic/NIC_home.html

Here also is the first page on the website and I doubt if Hal Lindsey could have written it better except that, from a biblical prospective, the Europeans will rise as well as the “kings of the east” and Russia will end up with a dictator whom the Bible refers to as “Gog”. 

Global Trends 2025: A Transformed World” is the fourth unclassified report prepared by the National Intelligence Council (NIC) in recent years that takes a long-term view of the future. It offers a fresh look at how key global trends might develop over the next 15 years to influence world events. Our report is not meant to be an exercise in prediction or crystal ball-gazing. Mindful that there are many possible “futures,” we offer a range of possibilities and potential discontinuities, as a way of opening our minds to developments we might otherwise miss.

Some of our preliminary assessments are highlighted below:

  • The whole international system—as constructed following WWII—will be revolutionized. Not only will new players—Brazil, Russia, India and China— have a seat at the international high table, they will bring new stakes and rules of the game.
  • The unprecedented transfer of wealth roughly from West to East now under way will continue for the foreseeable future.
  • Unprecedented economic growth, coupled with 1.5 billion more people, will put pressure on resources—particularly energy, food, and water—raising the specter of scarcities emerging as demand outstrips supply.
  • The potential for conflict will increase owing partly to political turbulence in parts of the greater Middle East.

We can all feel that we’ve lost our way here in America but how odd to be reading a think tank report on it that confirms our fears and some measure of the biblical account of the geopolitics of the end times.  I suspect that documents like this will abound in coming days.  We may not be able to get America back, especially with a socialist president and congress as well as the “activists” judges but we don’t have to be blind to what’s happening.  Tomorrow, next week, next month, we can all feel the approaching storms so we need, to paraphrase our President Elect, to cling to our God and each other as the America we knew morphs into heaven knows what. We need to keep the best of what we were, Christianity and traditional values alive because we have a long way to fall if this report is correct.

     The main criticism I have of the report is that its not going to take 15 years; not by a long shot.  Things go much faster in our times than the think tank academics have comprehended and I have the feeling that a better time frame for this report is 5 years, not 15.  Five years at best would be my guess.