July 23, 2008
Elaine Meinel Supkis
Bush just said he will sign the 'Save the Banks' bill which basically nationalizes mortgage debts so the taxpayers have to pay everyone back if homeowners default. Lovely. The entire mortgage/banking/Wall Street/pirate cove/derivatives monster markets must be somehow saved by the huge entity we call 'The United States Government' which happens to also be going bankrupt! How this is all possible is the real story: it is impossible. But so long as our trade and world dominion rivals keep this going, it will keep on going. This is why I advise watching the Chinese very closely. For they are the ones who can pull the plug on all this.
Commodities Fall to 7-Week Low as Investors Shun Energy, Metals
(Bloomberg) -- Commodities dropped to the lowest in seven weeks as a stronger dollar and rising equity markets eroded the appeal of oil, gold and corn as alternative investments.The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials fell for a second day, touching 1,527.441, the lowest since June 5. Corn was the biggest loser, dropping as much as 5 percent, and crude oil extended its slide from a record this month, while gold dropped to a two-week low.
The dollar rose to a four-week high against yen and rose against the euro as investors increased bets the Federal Reserve will raise interest rates in September. The Dow Jones Industrial Average added 3.6 percent last week, while the UBS Bloomberg index plunged 7.3 percent, the biggest slide since March. Some investors buy commodities as a hedge against inflation.
Now quick: name the two countries that hate high commodity prices the most. The two countries that export virtually no commodities at all at any price. The two biggest manufacturing countries on earth. By now, we all know who these entities are. Just for the fun of it, which two countries on earth have the world's biggest FOREX reserves? Or how about this: which two countries export the most manufactured goods to the United States? Then there is this question: which two countries also hold the biggest US government as well as non-government bonds and debts?
The answers to these questions are very easy: China and Japan. Online, many commentators pretending to be wise will talk and talk about China doing this and China doing that. But seldom does anyone talk about both China and Japan doing the same things at the same times and having the same results. Until people wrap their brains around this obvious riddle, we will be unable to defeat the Sphinx. She yawns and wonders why everyone is so stupid. Of course, she gets to eat these clueless people. So she is content.
So....both the frantic Federal Reserve and the Treasury have moved heaven and earth even to the point of tying up all the gnomes and not allowing anymore naked short selling....sort of...ah...a tiny bit....as the government moves against the pirates and tries to pretend we want to stop wild speculation, the simple act of getting Japan to stop giving these guys free loans has finally had an effect. Japan's exporters want the 0.5% lending for themselves but NOT for others who are bidding up the value of raw materials! I read every week in Japanese news complaints about the hike in manufacturing costs. They can't rip the pay of the workers any further. They have to stop the commodity inflation. China is in the same boat.
The US exports...hold onto your hankies, everyone: RAW MATERIALS. Yes, we import oil and want cheaper oil but the others? Wheat, rice, corn, minerals, wood, you name it: we are heavy exporters. Our trade deficit narrowed the more commodity prices rose! If we imported less oil, we would have balanced our trade deficits!
Instead, we are so deep in hock to these two Asian rivals, we have to help THEM, not ourselves. Both import a great deal of oil. Both need cheaper oil, badly. But this also makes US exports to them, cheaper. They then add value via labor and ship it all back and we have to pay via IOU.
The banking rescue at this end has to NEVER lose sight of all this! Yet NO ONE TALKS ABOUT THIS. The connections here are ridiculously strong and equally obvious. Yet, ignored. The helpless US populace thinks that now, inflation will vanish under a rock as we resume the past status quo. THIS IS IMPOSSIBLE! Just like the Goddess of Inflation, aka, Medusa, suddenly flashed into view and turned our economy to stone, she will crawl back under the rocks and continue to grow in power. If we resume turning inflation into red ink rather than paying at the pump, we will simply be signing our collective death warrant. We are being turned into slaves.
The net is laughing at the fool that AIPAC put in power. He told the truth and this is supposed to be astonishing. Of course, he had to ask everyone to stop the cameras, first. HAHAHA.
Drunks? How about drug addicts? The entire US imperial ethos is utterly insane. Going into debt to Communist China in order to dominate the Middle East will go down in history as the stupidest thing any empire ever did. When Spain tried to take out Holland in the 1600s, this bankrupted Spain. Yet Spain refused to stop until the devastation was total. Every expansion of this war made things worse. Such as attacking Queen Elizabeth at her home base.
Today, Congress is voting to fix everything with the ruinous Housing Bill. This was demanded by China and Japan. If we didn't do this, they will destroy what is left of our economy by refusing to buy more debts. Japan might try continuing this but China would make this impossible. The US faced bankruptcy this morning and has decided to obey the real rulers.
But here's the punchline - apparently, last night, The US House and Senate reached at least a "soft" agreement on the Housing Bailout Bill, aka HR 3221.THIS BILL MUST NOT PASS.
Click here for the Petition To STOP THE BAILOUTS!
Alas, it is too late. No petition from mere US citizens will stop Congress from obeying the Real Rulers who happen to be anyone with lots of money or who run the media. End of story. Everyone sighs with relief because the drunkard, Bush, has announced this hour, he is signing this bill that tacks on unknown obligations to the US government which will be funded by China and Japan as they continue to buy our collective asses.
Fannie And Freddie's Bailout Cost
It's going to be a mind-popping $25 billion over fiscal 2009 and 2010, according to the Congressional Budget Office (CBO), which released its estimate of the rescue plan Tuesday morning. Let's put that in perspective: $25 billion for two financial institutions compared with $125 billion for the entire S&L industry in 1989-1991? Ouch.But, this being Washington, there's a catch. CBO Director Peter Orszag told reporters Tuesday that the plan could also cost nothing--or as much as $100 billion.
In a letter to House Budget Committee Chairman John Spratt, Orszag said there's "a significant chance--probably better than 50%--that the proposed new Treasury authority would not be used before it expired at the end of December 2009." But Orszag also said there's perhaps a 5% chance that the rescue could cost as much as $100 million.
No one knows how much this will end up costing us. But again and again, these articles leave out vital information: the US trade, budget and war deficits and spendings. Leaving this out is not accidental, it is deliberate. By refusing to see the greater picture, everyone can pretend there is some way out that doesn't involve enslavement. One thing is certain: CBO director Orszag is a lying idiot. There is no way in HELL that this bill will cost 'nothing.' Unless the US is blown up. The worse thing here is, he knows this! He is lying in order to keep everyone sitting at home, inert.
People are not going to 'lose houses' here. People might have to move but we move all the time. If I listed the number of places I have lived in during the last 50 years, it would have at least 20 addresses. And I am not all that abnormal! The longest I lived anywhere was 10 years in a tent. No, this bill is designed to make certain that mortgages with double or more interest rate values over the life of the loan are paid off in full! PERIOD. Empty or full house, this has to be paid. The average American can't afford the loans we took out to buy cars, go on vacation, get face lifts, ect. It is gone. All that is left are the houses we pledged as collateral for all this misspending. This represents our trade deficits which ran at over $5 trillion this last 20 years.
Now we pay the piper and the piper plays the 5 note scale [inside music joke here].
Roubini: More Than $1 Trillion Needed to Solve Housing Crisis
Treasury Secretary Hank Paulson has been putting on a full-court press in the last 24 hours, making the case for his plan to shore-up Fannie Mae and Freddie Mac."I would rather not be in the position of asking for extraordinary authorities to support the GSEs," Paulson said in a speech Tuesday in NYC. "But I am playing the hand that I have been dealt. There is a need to support efforts that strengthen Fannie and Freddie's ability to continue to play their important role in financing mortgages and in our capital markets more broadly."
The timing of Paulson's speech -- and various and sundry media appearances -- is not coincidental. This week, Congress is expected to vote on housing legislation that includes Paulson's plan, which a GAO report said is likely to cost the government $25 billion.
*snip*
Roubini's main concern stems from a view that the "housing recession is not bottoming by any standards," in contrast to hopeful comments from Paulson on Fox News and Barron's last weekend.The economist believes U.S. home prices will ultimately fall 30% from their peak -- vs. 18% to date according to the S&P Case-Shiller Index -- "before bottoming out some point in 2010."
Housing prices can't go up if wages go down and inflation eats up worker's pay.
U.S. Expansion May Be First Without Income Recovery
Bloomberg) -- For six years, Tom Stechmiller's 2 percent annual pay raises didn't keep up with increases in the cost of living. Now, with prices rising faster and the economy slowing, his wages have been frozen.``I'm terrified,'' said the 47-year-old father of two, an embalmer for Service Corp. International from the Chicago suburb of Berwyn, Illinois. ``This isn't the American dream.''
The current U.S. economic expansion is the first in 60 years that may end before many Americans have recovered from the last slowdown. Annual family incomes adjusted for inflation have grown just 0.8 percent since the end of 2001 even as the economy expanded an average 2.7 percent a year, leaving households little cushion to absorb higher food and fuel prices.
The corrupt Congress is sparing over who shall regulate things. This is a desperate knives in the dark struggle for power. Which ever agencies and committees get to 'regulate' things gets more bribes! How simple is that? So this will be one bloody battle. Similar to our elections where parties vie for who gets the cream of the bribery crops.
So who should be overseeing the $1.2 trillion hedge fund industry? Apparently no one is now. But the U.S. Senate Judiciary Committee has two ideas.Either the nation needs new legislation to tackle allegations of widespread trading abuses by the hedge funds, or law enforcement officials should simply be encouraged to do the right thing with laws they already have at their disposal?
Already a turf war is brewing. The Judiciary Committee is clashing with colleagues on the U.S. Senate Banking Committee, who claim that hedge funds, research analysts and other corners of Wall Street are their exclusive jurisdiction.
Still, that didn't stop the Judiciary Committee from holding a hearing Wednesday to consider evidence about possible market manipulation in the $1.2 trillion asset hedge fund industry.
Some older bankers are worried and want interest rates to go up before all the savers are totally destroyed by inflation and bank collapses.
Plosser Says Fed Should Raise Rates Sooner, Not Later
(Bloomberg) -- Federal Reserve Bank of Philadelphia Charles Plosser said the central bank should raise interest rates ``sooner rather than later'' to lower inflation and prevent price expectations from getting out of control.``We will need to reverse course -- the exact timing depends on how the economy evolves, but I anticipate the reversal will need to be started sooner rather than later,'' Plosser, who argued against cutting interest rates in two Fed decisions this year, said in a speech today in King of Prussia, Pennsylvania. ``It will likely need to begin before either the labor market or the financial markets have completely turned around.''
Plosser joins Minneapolis Fed President Gary Stern, who also votes on rate decisions this year, in making the case for raising borrowing costs, a move Fed Chairman Ben S. Bernanke avoided discussing in congressional testimony last week. Record oil prices and rising food costs this year have increased investor expectations for the Fed to raise the benchmark interest rate.
Killing off speculation in commodities will dampen inflation temporarily. But as working wages fall we have...hold on to your underwear: DEPRESSIONS. Eh. Everyone is focused on preventing inflation the wrong way. If protecting savers is the key then suppressing loan making is the solution. Because inflation is due to too much debt being made. And who is the one doing this debt making?
The Federal Government! They are the ones overspending! So we have to focus on stopping our overspending, not increasing it. If the Fed had to go to the American people for loans, the rates charged would have to be much higher than 2%. This is because to get money, one has to offer a good return. If the money is being extended by trade rivals who don't care about the interest rate but only about the TRADE SURPLUSES THEY RUN, then of course, they don't care if the rate is 1%, even. If Congress passes a law saying, 'NO government debts can be owned by foreigners or offshore bankers' then either Congress balances the budget really fast or gives enough a rate hike so that it attracts AMERICANS into buying our collective debts!
Sending it overseas is now treason and is destroying our future.
William Poole: First of all, they had too little capital to withstand adverse circumstances. And the adverse circumstances were the severe downturn in housing, the decline in house prices, and the rising default rate on mortgages. I don’t know of anyone who early enough was saying that there would be a major national decline in house prices, so I can’t hold them to that standard, but I can hold them to a standard of holding adequate capital to be able to withstand unforeseen circumstances. That’s what capital is for.FP: In 2003, you called for the government to eliminate its implied guarantee for Freddie Mac and Fannie Mae. Do you feel that Alan Greenspan, the Federal Reserve chairman at the time, didn’t listen to you?
WP: No. I never had any inkling that he disagreed with what I was saying. Greenspan was pretty much out in front also, saying we should try to scale back these companies and the implied guarantee—make them fully private companies so they’d be subject to market discipline. If Greenspan thought that I was way off base, he would have talked to me about it or had a staff member talk to me about it. That, I can attest, did not happen.
A good interview. Do watch. Again: he sees the obvious but won't take everything the next step and discuss how this weakens America.
GM, Ford `On the Verge of Bankruptcy,' Altman Says
(Bloomberg) -- General Motors Corp. and Ford Motor Co., the two biggest U.S. automakers, have about a 46 percent chance of default within five years, according to Edward Altman, a finance professor at New York University's Stern School of Business.``Both are in very serious shape and the markets reflect that,'' Altman, the creator of the Z-score mathematical formula that measures bankruptcy risk, said in an interview with Bloomberg Television. The model shows that these companies are ``on the verge of bankruptcy,'' he said.
The Z-scores for GM and Ford give both a bond rating equivalent to a CCC ranking, though GM is in slightly worse condition than Ford, Altman said. GM reported a $38.7 billion loss in 2007, the biggest in its 100-year history, and hasn't posted a profit since 2004. The scores are based on the companies' finances at the end of the first quarter.
Kiss our industrial assets goodbye. Oh, we can work for the Germans and Japanese! Isn't that JUST DAMN CUTE? HAHAHAHA. Tell me again, about the 'Good War' and how we won it against both nations. Then we can talk about how Reagan won the Cold War....HAHAHA. Nixon in China time!
Bank of America profit tumbles 41%
(CNNMoney.com) -- Bank of America proved its dexterity yet again on Monday by reporting better-than-expected results even as it juggled credit issues and its high-profile acquisition of the troubled mortgage lender Countrywide Financial.The Charlotte, N.C.-based bank said it earned $3.41 billion, or 72 cents a share during the second quarter. That was down 41% from $5.76 billion, or $1.28, a year earlier, but better than the 53 cent per share profit Wall Street was expecting.
Declining profits=depressions. As the Fed and Fed kill the commodity markets, we now go into price deflation across the board. Wall Street imagines this means we will party and have fun. HAHAHA. Yeah, right.
German June Producer Prices Increase Most in 26 Years
(Bloomberg) -- German producer prices rose at the fastest pace in 26 years in June, adding to pressure on the European Central Bank to keep interest rates high even as economic growth slows.Prices for goods from newsprint to plastics increased 6.7 percent from a year earlier, the most since March 1982, after rising an annual 6 percent in May, the Federal Statistics Office in Wiesbaden said today. Economists expected a 6.5 percent gain, the median of 25 estimates in a Bloomberg News survey shows.
Germany hates inflation. They will enforce depression if it makes their beer go flat.
Icelandic CDS costs surge again
The cost of insuring Icelandic bank debt against default climbed to near-record levels on Monday, as traders again targeted the embattled island economy.Credit default swaps, contracts between two parties to insure debt against default, hit 1,000 basis points on the major Icelandic banks Glitnir and Kaupthing.
Iceland was hot stuff and now is in the deflationary spiral coupled with rising risk costs. Deadly combo. They all thought they could be rich like the other island pirates. This proved to be a bad choice. Not that this is stopping the US from trying the same tricks.
Foreign Selling May Signal Market Weakness Ahead
TOKYO (Nikkei)--Overseas investors have been selling more than they have been buying in recent weeks on the Tokyo stock market, as renewed fears of a global economic slowdown have prompted them to pull their funds from risk assets. A continuation of the trend could signal a bearish outlook for Japanese stocks, as foreigners account for more than 60% of transactions.
******************************************************Tuna Innards Cause Stir At Restaurants Amid Fish Shortages
TOKYO (Nikkei)--Restaurants specializing in tuna innards, which have not been regarded as cooking ingredients until recently, are gaining popularity as spiraling costs of crude oil and surging global demand for the fish have pushed up the prices of its familiar parts, such as "akami" and "toro."
Japan is squeezing its own entrails out trying to keep up this deadly export market roaring. The market is better for them than for us but they are dropping behind China more and more. And now along comes India with a super-super cheap car. This will hammer Japan in Asia.
Here is Kunstler's latest banking rant:
The comprehensive bankruptcy of the United States, at every level, in all corners, atop each hill and mole-hill, and down not a few rat-holes, is preceding like some kind of hideous multi-media, inter-dimensional cosmic grand opera as produced and directed by the Devil. Every week, some bizarre new subplot is introduced by the stage managers, each turn and twist geared to produce maximum pain and carnage in the US economy, as if to foreclose any possibility of redemption on the way down. Well, the absence of hope is, after all, the essential nature of Hell (setting aside, for the moment, J.P. Sartre's quaint notion that Hell is other people).
HAHAHA. A good rant. Go for it, Kunstler. We all adore you.
The slosh of money was forced into financials and investment banks. They all need the cover of high share prices to look solvent. Although the preening morons in Congress think they slew the dragon of high oil prices, they just thwarted investment into alternative energy. KUnstler said it well, the diabolicals are destroying every chance we have.
Posted by: calvino | July 23, 2008 at 04:22 PM
1 trillion dollar losses. Sounds like a lot but it is only 1 % of world GDP for one year. It will be absorbed and the world will move on.
Good consequences
1. fund managers who caused this will loose their powers. Hang em high I say.
2. China , Japan etc will not allow the US economy to collapse
but they will demand austerity from the US .You should be
thankful for a global economy. The pain to come
for your citizens will be sort lived .You will trade your
way out of it. Ive never seen so many US cars on our Austalian
roads as now.
3. The USA will end up #4 in the economic pecking order but is
that so bad. You will still be able to project your economic and political power abroad and as long as it is directed at facsists and islamists as in iraq and afghanistan you will get plenty of international support
Posted by: paul | July 23, 2008 at 10:48 PM