June 1, 2008
Elaine Meinel Supkis
The head of the Bank of China, Zhou, is warning the US central bankers that they are causing global inflation. Not speculators. Of course, this news is from Xinhua News and is not being broadcast across the planet. Dead silence in the West. This is because the G7 central bankers are trying to pop all the blame for this banking collapse on home owners in California or Las Vegas, not themselves. To produce more liquidity so they can flood the planet with more Funny Money™, the biggest banking houses are lending money to hedge funds so they can buy up loans from these same banks! This is crazy, of course. And will make the banking collapse worse. But they don't care. They are desperate to move these Alliance-Boots out of the shoe store and into the streets so they can make more and more and more loans. Which we don't need. These loans are only so people can line their pockets. And the Labour Party in England is going bankrupt, too. And UBS is telling its executives to avoid arrest in the US.
Fed's rate cuts "add to inflationary pressure"
The U.S. Federal Reserve's interest rate cuts have helped increase liquidity, but have also led to rising prices in commodities, Zhou Xiaochuan, governor of the People's Bank of China, said on Friday.The central bank governor said this has affected the anti-inflation policies of emerging markets.
Zhou was speaking at a conference following the release of a report by the Commission on Growth and Development, an international organization that focuses on policy consultation in emerging markets, and provides reference for aid programs.
"The U.S. Fed has significantly reduced interest rates on the other hand, global commodity market prices have risen. A lot of developing countries are now suffering from rising inflation," Zhou said.
The Chinese, as I keep on saying, are very angry with the US now. The demands that China raise the value of the yuan have died down in the West only because Japan is demanding the US make the dollar strong. So it is rising against the yen and the carry trade is slowly resuming. All the bankers in the West know that the banking crisis didn't start because a few home owners in Stockton, California couldn't pay their monthly interest payments on their Mini McMansions. They know it started instantaneously with the sudden drop of the dollar against the yen. When the yen strengthened, the entire liquidity cycle in the West was disrupted. Suddenly there was no more 'liquidity'!
Now that the status quo has been partially restored, we are back in the same box we fell out of last summer. The US is again flooding the world with Funny Money™. And when interest rates were artificially dropped below the rate of real inflation, a flood of this useless currency has poured over the planet causing inflation in all countries trading with the US including Japan. Basically, at this international forum, China is blaming the US for global inflation. And this means the US must change or else. Of course, the Fed will say, 'So what?' But this is dumb. The #1 sinkhole for excess US dollars is the FOREX reserves of China's central bank. They are weighing when to take some retaliatory actions.
From the Telegraph News in London:
Perhaps the most intriguing parallel, though, is the crude attempt at self-preservation made by the investment trusts in 1929 and the banks now.In the great crash, investment trusts with vast cross-holdings in each other tried to stem their collapse by buying up their own stock in what the economist JK Galbraith in his book, The Great Crash 1929, described as an act of "fiscal self-immolation". At the time, "support of the stock of one's own company seemed a bold, imaginative and effective course," Galbraith wrote, but ultimately the trusts were just "swindling themselves".
Modern economists have compared the trusts' actions with what the banks are now doing. "They seem to be just papering over the cracks," says Brendan Brown, chief economist at Mitsubishi UFJ Securities.
To free their books of the estimated $1,000bn (£505bn) of sub-prime assets and $340bn of leveraged loans banks have been left carrying since the credit markets shut down last year, lenders are offering to sell these damaged assets cut-price and - crucially - are willing to lend investors the money to buy them. In other words, the banks are providing new debt for the old debt they no longer want.
At first glance, as with the investment trusts, the arrangement seems little more than trickery - recycling a bank's own funds back into its own assets. As one senior industry expert described it: "It is like walking through a hall of mirrors in a fairground. There are far fewer people who really understand it than profess to understand it. Even the central bankers don't know where all the risk is ending up."
Smoke and mirrors. This is certainly true. I remember when Bush Sr. talked about this mirror/smoke business. Then he discovered that people WANT smoke and mirrors, he and his son rode to power on vapid illusions. The problem with this is, when one crashes head first into the mirrors, the shattering glass cuts us up and we bleed to death. Notice how the central bankers 'don't know where all the risk is ending up.' They better contact Mr. Zhou. Indeed, this is why we are in trouble. The central bankers feeding global inflation and global speculative bubbles think that this is all very mysterious. They have no idea their actions have consequences. They even claim they drive their monetary motor buses around the globe and can't see through the windshield! Well, some of us can see.
Perhaps we are dogs that figured out how to roll down the windows and stick our heads out.
The Telegraph:
The incentive for private equity is clear. The debt in the Alliance Boots case, for example, is being sold at 91 per cent of face value and the interest rate is being lowered. The UBS sub-prime sale is even more extreme. Having written the assets down to $15bn, BlackRock is enjoying a 32 per cent discount. If the debt or assets perform, there is a large potential upside.The banks hope to benefit in four ways. The first is through capital relief. UBS may be providing $11.25bn of the $15bn BlackRock is paying for the sub-prime assets, but it does mean the Swiss bank is insured against the first $3.75bn of deterioration in the portfolio. With Alliance Boots, the banks are lending the private equity buyers just 80 per cent of the purchase price of the debt.
Because the banks can argue that this is a genuine transfer of risk, they can reduce the amount of capital the rules require them to set against the assets. UBS says that the move will provide 0.2-0.25 percentage points of capital relief - lifting its tier one ratio, a key measure of financial strength, above the current 10.5 per cent.
So, banks are lending hedge funds money to buy debts that were piled on businesses in order to drive up the value of those stocks? This is yet another snake eating its tail situation. The 'haircuts' these bankers are getting is more like scalping. Skin and all. The main thing here is to preserve the original useless loans and keep them paying some interest! The Allianz-Boots deal struck me as totally silly when hedge funds and bankers put it together in the first place. The amount was ridiculously huge and the thing it was being dumped on was not very strong. It was just in time for a global inflation/recession and is now doubtful that consumers can float this expensive boat. Many businesses fell into this quagmire. This is why increasing liquidity is like pouring more tar into the La Brea Tar Pits while mastodons battle saber tooth tigers.
Cotton-Price Swings Disrupt Farmer Sales, Spark Probe by CFTC
Unusual swings in cotton prices that disrupted farmer sales in March are now the target of an investigation by the U.S. Commodity Futures Trading Commission, two people familiar with the probe said.Results of the investigation may be released as soon as June 3, said the people, who asked not to be identified because the probe hasn't been made public. The Washington-based commission, which also is examining potentially improper trading in oil markets, began the cotton inquiry after seeing unusual gaps between futures and spot prices, the people said.
*snip*
``The market is broken, it's out of whack, and someone has to step in and bring relief,'' William Dunavant Jr., chairman of cotton merchant Dunavant Enterprises Inc., said at the April hearing.The wide gap between spot prices and futures increased costs for cotton traders who use the contracts on ICE to hedge their risk, said Haldenby of Plains Cotton, which represents growers on 3.5 million planted acres in 41 Texas counties.
Suddenly bubbles are popping up in all commodity markets like bubbly champagne on New Year's Eve. The authorities are now trying hard to scare the hell hounds and pirates who are merely taking advantage of endless Funny Money™ being pumped into the banking system via the Fed's new open windows to the Outer Darkness. Everywhere we look, we see some commodity after another suddenly shoot upwards and then just as swiftly, crashing. Some of the more obscure commodity markets in rare metals have seen several cases similar to the cotton, rice, wheat, oil and gold cases that are more famous. The point is, this is an ongoing process of translating the Treasuries picked up at this free window....another $225 billion will be offered this month alone...and trying to turn it into instant profits. The only way this can be done is in the commodity markets.
Labour cash crisis could bankrupt party leaders
Senior officials in the Labour party, including Gordon Brown, could become personally liable for millions of pounds in debt unless new donors can be found within weeks, the Guardian has learned.The party has five weeks to find £7.45m to pay off loans to banks and wealthy donors recruited by Lord Levy, Tony Blair's former chief fundraiser, or become insolvent. A further £6.2m will have to be repaid by Christmas - making £13.65m in all. The sum amounts to two-thirds of the party's annual income from donations.
*snip*
The Co-operative bank, whose £2.61m loan is due to be repaid on June 30, has told the party it wants its money back, even though it is getting 7% interest. The bank has asked the unions to offer loans to Labour so the party can pay its debt, but some are refusing to do this. Paul Kenny, the GMB's general secretary, has told the Co-operative bank it will refuse to help unless the bank withdraws its de-recognition of the union, which represents staff at Co-operative Funeral Services.Three other loans are due to be repaid on June 30 and July 1. They are a £1.54m loan from Unity Trust bank, also at 7%; a £1m loan at 6.75% from Nigel Morris, founder of the Capital One financial group, and £2.3m from Sir David Garrard, a property developer. He had already extended the loan by 15 months from April 2007.
England is dropping interest rates but the guys lending money in the open markets are raising rates just like in the US. New World Order Labour has been a total disaster. The unions are abandoning this sinking ship and Tony Blair is totally working for the New World Order and proof of this is his quixotic missions in the Middle East on behalf of Zionists. No political party should last more than 100 years. The US is a good case in point. Kill off all the parties.
UBS tells unit staff to avoid US visits
The Swiss bank has also made lawyers available to the more than 50 bankers involved, many of whom have left UBS since it decided last November to wind down its cross-border private banking business for US customers.The move follows the recent indictment of one of the unit's former senior executives, Bradley Birkenfeld, who US authorities have accused of helping a billionaire client evade taxes. Mr Birkenfeld has pleaded not guilty and his lawyers have made no public statement on the matter.
And here it is: bankers as outlaws? As I say periodically, arrest them all!
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