October 25, 2008
Well, with the Treasury and the Fed pumping money like mad, handing out loans like there is no tomorrow, why bother with any banking traditions? Why not have 0% interest like Japan? This sort of wacky thinking is contagious. Japan pioneered the 'endless zeros' and got away with it. So now, all nations that can do this are tempted to do this.
The Fed lowered its federal funds rate, the benchmark overnight lending rate at which banks lend to one another, by a half-percentage point to 1.5% in an emergency announcement Oct. 8.
Many investors believe the central bank will cut rates by at least another half-percentage point following the end of a two-day meeting on Oct. 29. In fact, the fed funds futures on the Chicago Board of Trade are now pricing in a 26% chance that the Fed will cut rates by three-quarters of a percentage point to 0.75% by that meeting.
The US has nothing to invest. Japan, China and Russia all have RESERVES they can put up as the basis for internal lending. But not the US. I often joke that the Federal Reserve is neither federal nor has reserves. When the Japanese carry trade created all those dollars for us [aka: liquidity] we didn't 'grow' our own reserves to the same degree. Not even slightly.
WSJ: The decision came after concerns that banks left off any group list would appear too weak for government assistance, spooking investors and depositors and potentially making troubled banks' situations more dire. Treasury officials were expected to announce investments in about 22 different banks Friday at 11 a.m.
They shifted gears after PNC Financial Services Group Inc. announced Treasury was investing $7.7 billion in its bank as part of the deal to acquire National City Corp. National City was denied government assistance and was forced into a sale.
One reason for regulators' rush to arrange the National City deal by Friday morning was the planned 11 a.m. announcement. Regulators worried that National City's absence from that list would spark a panic among customers and shareholders.
Among the banks that were going to be included on this morning's list were Capital One Financial Corp. and SunTrust Banks Inc., according to people familiar with the matter.
Again: the banks are hoarding gold! Oh my! And that is what is responsible for the banking collapse. We see this today: who has the biggest money hoards on earth? The banks? Or perhaps we should look at several major, central banks: Japan and China both are sitting on $3 trillion, just by themselves!
International Chamber Sees in Exchange of Goods a Remedy for Present Economic Crisis. HOARDING OF GOLD DECRIED Resolution Adopted In Paris Calls for Cheap Credit and More Liberal Circulation of Capital. Decry Hoarding of Gold. Cites Causes of Crisis. Gold hoarding by central banks is partly responsible for the present critical economic conditions throughout the world, it is set forth in a resolution passed by the council of the International Chamber of Commerce, which has been meeting in Paris.
In 1932, after a lot of meetings and rescue operations, everyone thought the firestorm of asset and equity destruction which was caused by bankrupt nations defaulting on massive loans, was done.
A large reduction in money hoarding and rapid slowing down of bank failures in recent weeks were shown in figures made public today by Secretary Mills.
Again, the business about bankers and savers 'hoarding' wealth rather than lending it! When banks can't offer any decent return on savings, why hand it over? So the government simply used the power of the sword to force savers into lending. The US has no savers now, not to the extent that they can even begin to cover the capital costs of borrowers who are going rapidly bankrupt.
The text of President Roosevelt's executive order on gold "hoarding issued today was as follows:
Forbidding the Hoarding of Gold Coin, Gold Bullion and Gold Certificates By virtue of the authority vested in me by Section 5(b) of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, entitled An Act to provide relief in the existing national emergency in banking, and for other purposes~',
in which amendatory Act Congress declared that a serious emergency exists, I, Franklin D. Roosevelt, President of the United States of America, do declare that said national emergency still continues to exist and pursuant to said section to do hereby prohibit the hoarding gold coin, gold bullion, and gold certificates within the continental United States by individuals, partnerships, associations and corporations and hereby prescribe the following regulations for carrying out the purposes of the order:
Section 1. For the purpose of this regulation, the term 'hoarding" means the withdrawal and withholding of gold coin, gold bullion, and gold certificates from the recognized and customary channels of trade. The term "person" means any individual, partnership, association or corporation.
Section 2. All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion, and gold certificates now owned by them or coming into their ownership on or before April 28, 1933, except the following:
People hardly remember that flotilla of SIVs that vanished under the waves last year. Everyone was told, this was all under control, $400 billion was no big deal. I noted that this is not only equal to the war misspending by the US, it was also half the size of Japan's huge FOREX reserves.
The Plunge Protection Team holds more meetings. They are desperate to find some Hail Mary play to save their financial houses from destruction as the SIVs now go off the cliff. Meanwhile, China is strengthening their Asian trade complex and are working towards creating an Asia-centric economic system.
There are supposedly around $400 billion SIVs swimming about the planet, most of which are drowning. $400 billion, to put things in perspective, is what we spent on killing Iraqis and stealing oil in Iraq for about 3 years.
I remember when Bush fired the Treasury Secretary when he warned this war would cost us $200 billion. This sum is big, by the way. Just as the Iraq war is bankrupting the US government, so will this global SIV fund mess. As each one sinks beneath the waves, the others take on more water. It certainly was a cool trick for all the financial houses to create these funds.
We forget why. When the stock market suddenly collapsed in 1987 and a number of banks went down along with a host of savings & loans, the US had to bail out a huge number of rich financial houses and some of the more outrageous financiers went to prison (fraud, of course) and to fix this, the Federal Reserve decided to allow a new form of financing that involved creating out-of-the-bank entities which we now call 'hedge funds'.
They were supposed to go bankrupt in bad times but NOT pull down the huge houses because they would be seperate entities. This solution has a huge flaw: because they can go bankrupt with no effect on the big entities spawning these hedge funds, they became very reckless and spawned a host of these creatures, every week, more and more were created.
A lot of thought went into creating as many variations on various fund types as possible. On top of this, since they believed their risks were hardly visible, they could float BBB funds that carried high risks but even higher interest rates. Soon, everyone rushed out and poured a lot of money into these BBB funds hoping to get super-rich, super-fast.
(Bloomberg) -- The International Monetary Fund is considering an emergency program to prevent a collapse of emerging markets by almost doubling borrowing limits for members and waiving its standard demands for economic austerity measures. The fund is discussing plans to offer so-called hard- currency loans of three to six months, two IMF officials informed of the matter said. Separately, the Washington-based agency agreed today to lend Iceland $2.1 billion in accordance with existing rules after the island nation's banking system collapsed, threatening a prolonged economic contraction.
For years and years, the US and its IMF buddies told poor nations to bite the bullet. Now that we are up against the wall, we want puff balls, not bullets. So Iceland, a nation with a very, very high standard of living, doesn't have to do 'austerity'.
More proof that the housing bubble was global. And the energetic financial games by many small nations has had a very toxic outcome. All these nations worked hard at one main thing: to grab US jobs via the outsourcing and offshoring mania. The US government not only didn't protect any of our own industrial base, it stood aside or actively assisted corporations in looting our nation by having us consume products which were imported or done overseas while the jobs and the tax base flowed overseas.
The Irish thought their Celtic Tiger economy had put an end to generations of emigration. It is not back yet, but the fact that people are talking about it again is a sign of how bad things have got. Ireland is the first country in western Europe to officially fall into recession, defined as two consecutive quarters of negative economic growth.
Places like Drogheda, a commuter town near Dublin, have been particularly hit. During the unprecedented boom years, the population here grew by a third. Now, it is an unemployment black-spot - ringed by new developments with empty, unsold houses.
with lightning speed as foreigners pull funds from the country and the debt markets start to price a serious risk of sovereign default. Russia's financial crisis is escalating with lightning speed as foreigners pull funds from the country and the debt markets start to price a serious risk of sovereign default.
The cost of insuring Russian bonds against bankruptcy rocketed to extreme levels yesterday. Spreads on credit default swaps (CDS) reached 1,123, higher than Iceland's debt before it sought a rescue from the International Monetary Fund. Moves by Hungary, Ukraine and Belarus to seek emergency loans from the IMF have now set off a dangerous chain reaction across Eastern Europe.
Romania had to raise overnight interest rates to 9% on Wednesday to stem capital flight, recalling the wild episodes of Europe's ERM crisis in 1992. The CDS spreads on Ukraine's debt have topped 2,800, signalling total revulsion by investors.
Rating agency Standard & Poor's issued a downgrade alert on Russian bonds yesterday, warning that a series of state rescue packages worth $200bn (£124bn) could start to erode the credit-worthiness of the state. S&P said Russia's budget was likely to slip into deficit in 2009 as result of the dramatic slide in oil and metal prices this autumn, and cautioned that "the ongoing concentration of the financial system in state hands" had become a political risk.
Russian companies must roll over $47bn of foreign loans over the next two months, and a further $150bn or so next year, a task that has become close to impossible as investors flee Eastern Europe.
Russia has a huge FOREX reserve. Note how everyone is leery about Russia defaulting due to dropping oil/gas contracts but Russia is not running in the red? Eh? No nation is running deeper in the red, longer in the red, than the US. The only reason we are allowed this boon is NOT because the dollar is the world's premier trade resolution currency! It is because we are allowing everyone to destroy our native industries and markets.
The yen is rising because it has a huge FOREX base behind it. England, like the US, has virtually no reserves so the pound is falling. The US dollar is not going downwards only because of the peculiar position of the dollar and only the dollar: the US is the world's main trade destination. Until this changes, the dollar must be 'strong' so they can profit from this one-way trade.
The pound has slumped to a five-year low against the dollar, and is close to having its worst week since sterling was ejected from the European Exchange Rate Mechanism in 1992. Sterling fell as far as $1.62 during yesterday's trading.
Foreign exchange, gilts and equity markets all reacted strongly to the Prime Minister and the Governor of the Bank of England admitting that Britain is likely to enter its first recession in 16 years.
The turmoil in currency markets was reflected on world stock markets, as the FTSE 100 in London and the Dow Jones Industrial Average in New York plunged once again as company after company warned that the outlook for profits was deteriorating.
The workers are the fundamental basis of all economies. Period. Not banks, not corporations. Workers must be able to buy for an economy to 'grow'. When workers can't buy, we get bad depressions or recessions. Working wages have not kept up with inflation.
Thousands of workers at the manufacturing firm JCB have voted to accept a pay cut of £50 a week to prevent the loss of 350 jobs, it was announced today. The GMB union said around 2,500 of its members at seven JCB plants in England and Wales had agreed to work a four-day week for the next 13 weeks to help the company weather the economic downturn.
Despite recording pre-tax profits of £187m last year, the company has been badly hit by the downturn in property and construction. In July this year, it warned of a "rapid decline" in demand.
In the last week, as the value of stock portfolios has plunged, executives and fund managers who had bought shares on margin — that is, using borrowed money — have been forced to sell millions of dollars worth of stock to settle those loans with banks.
Professional investors say that the margin calls probably added to the pressure on stock prices last week, when the average stock plunged nearly 18 percent.
Some analysts and investors are concerned about a situation in which margin calls occur in larger numbers, causing an even bigger wave of selling, even though most analysts say that stock prices are already historically low.
One smart thing that came out of the Great Depression were the rules concerning playing speculative games with loans. Namely, you can't do it! Margin calls, thanks to Greenspan and the host of right wing Ayn Randistas, are now eating away at everything.
Just like the SIVs and CDS markets, the host creatures are dying. The hedge funds will die just like their grandpas, the Trust Funds of the Roaring Twenties died off, one by one, during the Great Depression. Again, our ancestors made these stupid things illegal. And the Ayn Randistas legalized and enabled it all over again.
(Reuters) - Citadel Investment Group, one of the world's biggest hedge funds, said on Friday it has $8 billion in available credit and sought to quell rumors it was liquidating some portfolios after its two main funds had lost 35 percent since January.
Reacting to persistent market talk it had asked the U.S. government for a cash injection and that financial regulators were coming to inspect its accounts, Chicago-based Citadel held an unusual and hastily arranged conference call.
My, how this god has fallen! He now admits to being 'partially wrong'? HAHAHA. How about totally, absolutely wrong from top to bottom, beginning to end? Until these clowns finally admit they were bonkers, we will continue to suffer. And Trust Funds/Hedge Funds will not function well no matter how 'transparent' they are. They could be stark naked and still be coyote ugly broads.
Former Treasury Secretary John Snow agreed that risk had been under-priced on a global basis. He said risks in mortgage markets were masked in part by accounting irregularities at Fannie Mae and Freddie Mac.
"A critical lack of transparency in secondary markets left policy-makers and regulators unable to discern the true nature and extent of the systemic risk that continued to build," he told the panel.
Greenspan urged that securitizers be required to retain "a meaningful part" of securities they issued. He said that regulatory reform will be necessary in the areas of fraud, settlement, and securitization to reestablishfinancial stability.
He also conceded he was "partially wrong" about his belief that certain derivatives, such as credit default swaps, did not need to be regulated.
The Treasury Department has hired two big accounting firms to help keep tabs on the government's financial-industry rescue program, and once again certain basic elements of the deals are shrouded in secrecy.
PricewaterhouseCoopers LLP will provide internal controls for the government's $700 billion bailout fund. Ernst & Young will provide general accounting and consulting. The Treasury Department said the first phase of the three-year contracts will be worth $191,469.27 and $492.006.95, respectively.
That sort of specific detail is lacking in the agreements themselves. The Pricewaterhouse Coopers contract released by the Treasury Department on Tuesday has blacked-out text in the area covering the firm's bid, and also conceals the name of the PricewaterhouseCoopers partner who signed the deal. Another section listing the names of the
PricewaterhouseCoopers employees designated to work on the contract also is blacked out. *snip* A spokesman for Bank of New York Mellon said he did not know why the compensation information was redacted, and referred our question to the Treasury Department.
The gnome has not idea why all important information about how much money the same gnomes who destroyed our financial system will be getting? HAHAHA. Always good for a laugh! Will Paulson tell us why this is all so tip-top secret? HAHAHA. Again. I notice that all the pious calls from these same clowns for less secrecy falls to the cellar the minute we ask for any information! So much for nakedness.
Yup: here it is in a nutshell. Our corporations have screwed up the entire planetary financial systems. They control many governments via bribery, etc. They write the rules, damn it! And they want massive spending on things like wars, etc. And bail outs, of course, when they screw up everything! But THEY DON'T WANT TO PAY TAXES.
AS THE effects of the financial crisis ripple out into the wider economy, businesses are struggling. With access to credit all but choked off and global demand falling, firms are keen for any help they can get.
America's big companies have a friend in John McCain, who says he will cut the top federal corporate-tax rate from 35% to 25%. Once state and local taxes are added, the combined rate amounts to an average 40% of profits, the second highest in rich countries. Over the past decade, corporate-tax rates have fallen considerably, especially in the countries of the European Union.