Elaine Meinel Supkis
We just went through a very disconnected monetary moment when the world's biggest banks (except for China, the biggest one of all) had to pump nearly $400 billion in just three sessions to keep the world banking system from collapsing. I notice no stories talked about the collective FOREX reserves of Europe so I thought it is time for lots and lots of interesting numbers. Also, the traders who brought upon us this disaster are getting big fat bonuses even as they lose money. Figures. And more equity funds struggle to exist. And an army of stupid commentators say stupid things which is really a marvel to me.
European Union euro zone countries (in millions $):
Austria.....13,702.17 ---Gold: 5,936
Belgium.....13 billion----Gold: 4,745
Finland.......7,225-------Gold: 1,022
France.......98,701------Gold: 55,608
Germany..114,554------Gold: 713,000
Greece........3,045-------Gold: 2,373
Ireland.........852--------Gold: 125
Italy..........80,787------ Gold: 51,278
Luxembourg..258--------Gold: 48
Netherlands..23,337-----Gold: 13,363
Portugal........9,825------Gold: 7,976
Spain.........17,354-------Gold: 6,300
Total for EU..........$396,343 millions (About $400 billion)
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For comparison, here are the stats for the other nations:
USA...........67,123-------Gold: 11,041
Russia.......405,839------Gold: 8,441
Japan.......923,718-------Gold: 16,373
China.....1,300,000(?)
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Here are the IMF estimations of inflation and GDP growth rates:
Saudi Arabia:...... 2007........2008
Real GDP ..............4.8.........4.0
Consumer Prices.....2.8.........2.0
Japan:................ 2007.......2008
Real GDP...............2.3.........1.9
Consumer Prices.....0.3.........0.8
China:.................2007.......2008
Real GDP .............10.0..........9.5
Consumer Prices.....2.2..........2.3
US:.....................2007.......2008
Real GDP ..............2.2.........2.8
Consumer Prices....1.9.........2.5
Germany:............2007......2008
Real GDP...............1.8........1.9
Consumer Prices.....2.0.......1.6
Russia:.................2007 .....2008
Real GDP................6.4.......5.9
Consumer Prices.....8.1.......7.5
France:.................2007 .....2008
Real GDP................2.0........2.4
Consumer Prices.....1.7........1.8
United Kingdom:.....2007....2008
Real GDP.................2.9 ......2.7
Consumer Prices......2.3 ......2.0
We have to take these estimations of inflation with a gigantic grain of salt the size of Mobey Dick. I really wish they broke down inflation figures to show the true nature of rising costs for necessities but instead, they do the opposite. At no time in my life have we had 1-2% inflation. On top of all this, the US and Europe are both very bitterly demanding China raise the price of their export stuff that is flowing to the West. Obviously, they want more inflation. Which is yet another lie these countries indulge in. They want the Chinese to price themselves out of the manufacturing realm so the industrial powers can then remove their factories in China and go to India or Malaysia or anywhere else. They just have to defund and defang China!
What I find very funny is, China's GDP rate is 5X higher than their inflation rate. The US is a pitiful 0.3% higher. China is 8% higher. They also very optimistically show the US having a higher GDP next year and China's rate slagging off slightly. And do note they have Japan shrinking badly next year, worse than anyone. Oh, boo hoo. How terrible that is...except this is their plan! This is what they want because this is making their industrialists ridiculously powerful. Note the inflation rate will be below 1% so they can continue the carry trade if they can re-smash the yen which has annoyed them to hell by getting stronger than the dollar.
Remember the deluge of take overs and buy-backs? I begged the governments of the West to please strangle the bankers and equity funds doing this garbage. We were told, 'The stock market will go up and up!' and, 'Private funds and banks will revitalize our businesses and make them work better!' This was, as per usual. total bunkum. Lies. Childish fantasies. Fatal falsehoods. Here is what is going to utterly destroy our banking system......
Coventree Inc., the Canadian finance company that went public in November, failed to sell asset-backed commercial paper to replace maturing debt because of the credit crunch caused by U.S. subprime mortgage losses.The shares tumbled 35 percent after the company extended maturities on C$250 million ($238 million) of commercial paper and sought emergency funding for another C$700 million of debt. Toronto-based Coventree's units have about C$16 billion of asset- backed commercial paper outstanding.
Oh, oh. Naughty little children playing banker have stolen mommy's purse and daddy's pension and burned it in the oven after running it through the Cusinart. All these deals require rolling over the debts. We are sitting on a volcano filled with debt roll-overs that will not roll over at all. They will keel over dead. Trillions of dollars are going to die this way. Far more than the housing mess. The need for this money is so gross, the US, Europe, Japan and a handful of other nations not named 'China' had to squander half of their FOREX reserves to pour enough liquid into the banking system to keep these ridiculous loans coming. All those 'Look at that $22 billion dollar deal!' dealsare now turning into 'Look at empty bank vault!' moments in history.
Goldman Sachs is to inject $2bn to bail out its Global Equity Opportunities hedge fund after the investment bank's computer models failed to predict last week's market turbulence – leading to losses of about $1.5bn, or more than 30 per cent of its value.Goldman has also raised $1bn for the $3.6bn Global Equity Opportunities fund from a group of other investors, including Hank Greenberg, former chairman of American International Group, hedge fund Perry Capital and Eli Broad, the US billionaire.
Oh, that Bank of Europe/Federal Reserve money came via Western Union just in the nick of time, didn't it? Just three days ago, even billionaire Eli Broad was about to jump from his zillion dollar Manhattan pied a terre. And as usual, these clowns blame their computers. 'But Mommy!' they wail, 'I didn't eliminate our bank account, the computer did it!' And the computer Hal says, 'I'm sorry, Dave. I have to terminate you.'
Kohlberg Kravis Roberts & Co., the private-equity firm that plans to raise $1.25 billion in an initial public offering, said the recent jump in borrowing costs for leveraged buyouts may hurt its funds' performance.The cost to issue high-risk, high-yield debt has ``recently increased significantly'' and the New York-based firm may need to rely on investment banks to fund transactions, KKR said in a filing with the U.S. Securities and Exchange Commission today. Blackstone Group LP, manager of the world's largest private-equity fund, also cited ``more challenging financing'' when it announced earnings today.
Oh, oh. Isn't it pathetic, happened to all these silly billionaires? I thought they were rich! But they are NOT RICH AT ALL! Like Donald Trump's toupee, they are fake. They need to keep churning billions and billions in loans at sub-inflation interest rates to stay afloat. Most of these guys will have the same fate as that Chinese manufacturer that used lead paint. As the Skull and Bones like to chant: The Hangman Is Death.
I read all sorts of silly, childish analysis today. Huffing that there is no banking crisis. How the down market is a great opportunity to buy, buy...god's rotted, guys, BUUUUUUYYYYY. One writer huffed that hedge funds made money two years ago when interest rates were at 2% so why kick them when they are losing 20% value in two months? HAHAHA. I hope he gets a job selling three legged race horses to a French boucherie. Here is a typical example:
After all, Global Alpha does not look to the uninformed but calmer eye like much of a zeta. It's down around 15% this year -- no great shakes -- but (perspective, perspective) it was up more than 30% two years ago.Could it be getting haunted and hounded by redemption requests? Sure. Could it be down 20% today? Well, potentially. But for you to treat it as a true disaster rather than disaster-scene rumor, you need to see firmer reasoning and sourcing.
Hint to this idiot: most of the money in these stupid, horrible, hellish hedge funds are actually LOANS. If they go down, the holder of these loans hears from the banker who screams, 'Pay back or else' which is why we had a banking crisis this last five days.
Yet another too stupid to breathe commentator at Street.com:
Look, I know the market rebounded in part because of the liquidity that was added. And, like I said, the housing component of this market is pretty big and bad. But for business media analysis to rise above alarmist nonsense, there needs to be just a touch more frame of reference. Like, well, the fact that this "reeling" market conjuring up the ghost of the Great Depression, um, ended up having a good week last week. One in a string of good weeks in a good year.
Should investors worry and be cautious? Without a doubt. But for God's sake, man, a little bit of perspective.
This baby needs to read my own news service. I have linked to or manufactured a huge number of graphs clearly showing the very close interconnection between this unfolding crash and the Great Depression. The parallels are terrible and clear as day. How can anyone miss them at this point? Just because the world's bankers all slit their wrists (except for CHINA) to pour the last of their lifeblood into the markets to keep these many deals floating even as they are all slipping under the waves...this is insanity! We just went through the scariest bank crisis I have ever seen...I am less than 80 years old, after all, and these children working for the mainstream media are all playing pirate, waving their wooden swords and then will troop into the house to eat mom's dinner...only she has been replaced by the Wicked Witch and her dragon, China.
The Manila Times
BEIJING: China had its second-largest trade surplus on record in July, official data showed Friday, likely adding to international pressure for the yuan to be allowed to rise faster so as to trim the balance. Last month's $24.4-billion trade surplus, published by customs authorities, was up 66.7 percent from the same month a year ago but down slightly from June's record $26.9 billion. "The figures will only further increase international pressure...
I went off to the Federal Reserve to see if they had any good charts and got this one:
The negative numbers are in red. The right hand side of the chart, if it is in red means things are going well. The left hand side, if it is in the red, means things are going bad. I colored in red the years that the 'stronger demand for loans' dropped. We can see clearly, except for a slight glitch in the second quarter of 2000, fewer people wanted loans. Indeed, I cut off this chart at 2000 even though it runs back to 1992 because that was the last 'good' year. The negative numbers begin in 2000 with the .com collapse and the Asian Currency Crisis pay-down. It goes -22% BEFORE 9/11. This was when Enron was trying to destroy the economy of California in order to raise energy rates. Before 9/11, it was now -52.70. I remember how bad it was. Bush was very unpopular. Interest rates were at 6%. After 9/11, the numbers are worse and worse. -70% is the really bad quarter which was from Sept-Dec, 2001.
It wasn't until the 3rd quarter of 2003 with the 1% interest rates that banks began to loosen their loan standards. It wasn't until 2004 that loans began to flow and the standards began to drop. The second quarter of 2005 was the top of this cycle. Loans were easy and everyone was rushing to get some. I have cartoons and stories from back then that show I called the crest correctly without these statistics. Now it is confirmed. I remember back then, everyone in the media were making fun of anyone who called the crest correctly. Every month after June, 2005, they held up all sorts of goofy 'facts' to refute the puncturing of the bubble. But rates were rising now, relentlessly...back to 6%. The Federal Reserve balked at the threshold of 6% and held rates below that for now but we saw on Thursday night, this is all a fiction.
The real rate is now over 6%. To keep it artifically lower has cost Europe and America $400 billion which is now being squandered on Wall Street as they resume acting as if this isn't a crisis from hell. The charts show that we are in a recession already. As far as the deeper economic significators are concerned. See how last spring, standards tighten to nearly as great an extent as the three months after 9/11? Wow.
U.S. banks continued to tighten their standards for approving mortgage loans in the spring and early summer months, the Federal Reserve said Monday.In particular, banks were making it harder for borrowers to get subprime and nontraditional mortgages. But even the borrowers with the best credit were facing tougher standards at some banks.
All told, at least a third of the banks tightened standards for mortgages, about the same percentage that tightened in the April survey. A year ago, banks were loosening credit standards for mortgages.
This is the sharpest increase in 15 years. This isn't in the chart I just published. But when it goes there, it will be a very nasty set of numbers indeed. Whenever I look at these sorts of stories, I like to see the raw numbers. And they reveal clearly the truth that the pretense we are not in a serious retraction of business and loaning money, and we can be absolutely certain, the recession/possible depression has already begun. I heard that roll-on/roll-off traffic for trains and trucks has declined significantly. This is yet another harbinger. The psychotic need to pump up the stock market was a fool's errand indeed if all the deeper economic forces run against it.
To goose stock market numbers, they were all chatting today that the biggest retailers had boffo sales. This is supposed to be good news. But of course, it is bad news. Only the biggest retailers can slash prices like mad. If the RO/RO numbers are bad, this means they are not restocking. And when everything sprirals into a depression, prices fall. And we see this, too. Crowing about killing inflation is silly if it kills wages and then commerce collapses!
Credit markets are telling central banks what to do, and it isn't what Ben S. Bernanke or Jean- Claude Trichet had in mind.Days after reaffirming their interest-rate stance against inflation, central bankers may be forced to do an about-face. Traders are paring bets on imminent rate increases in Europe and Japan, and some even speculate the Federal Reserve may execute an emergency cut.
Behind the changed outlook is concern that the steps central banks have already taken -- pumping cash into markets over three days to avert a credit collapse -- won't be enough to keep global growth from stalling. In the days before, Fed Chairman Bernanke, 53, and European Central Bank President Trichet, 64, were saying inflation, not financial instability, was the biggest risk.
As far as I can see, growth has already stopped. But the tool of cheap money is a dangerous weapon if it isn't attached to something solvent. The US runs ALL OUR SYSTEMS in the red. We are so accustomed to this, we don't even notice it anymore. But this is still highly dangerous. We can't do it if we have nothing to trade and everyone shuts down trade or refuses to accept dollars as payment. We are on the cusp of a major currency collapse. Fools who think a weak dollar is fun should review the collapse of the peso back 20 years ago. Or review the Great Asian Currency Crisis. The yen is rising against the dollar. The Japanese were gloating over how it would be 136 to the dollar by September but it is, instead, rapidly migrating towards 100 to the dollar. If it goes to 85 to the dollar, Japan's export industry will collapse.
Right now, some Congress people are pushing for us to boycott the Chinese Olympics to protest Gitmo...er....Chinese abuse of prisoners. This is pissing off China. Everything is pissing off China. And we need money from them...heh. I hope our Congress critters go to Cuba and free the political prisoners we are torturing there.
Prime brokerage, hedge fund, derivative workers can expect 15% increases. Senior executives can expect 5% to 10% increases.Merrill Lynch & Co. (MER :73.53, -0.59, -0.8% ) , Lehman Brothers Holdings Inc. (LEH :57.30, -1.62, -2.7%), Bear Stearns Cos. (BSC :109.60, -0.60, -0.5% ) , Goldman Sachs Group Inc. (GS :177.50, -3.00, -1.7% ) and Morgan Stanley (MS :59.64, -0.39, -0.6% ) have set aside more than 45% of revenue for compensation and benefits, the report said.
These parasites who can't control their damn computers which run amock causing world financial collapses are eating up nearly half of all their funds to reward themselves? For what, pray tell? If they still have any investors/fools wanting to part with their money, they can have each other and bon jour, ami.
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You have the most clarity and critical thinking of any business blog I have come across. I throughly enjoy reading your perspective (backed by facts). You make the pros look like twits.
This invisible war (to most of the sleeping world) has been wagging since 1990, and I dare say it will be over within the next 4-6 years. The EU has just made its biggest mistake thus far (infusion of billions into a black hole); Mommy has to protect her raging infant Empire, to no effect. There is no turning back.
The ascendancy of the Asian Empire/Century is upon us.
Posted by: Carlos | August 14, 2007 at 01:24 AM
Thank you, Carlos. I am not very popular and the bigger economic bloggers refuse to quote me or refer to my blog at all even though I have argued with all of them for literally years.
They want to imagine they have the inside dope as to what is going on. I read everyone, all over the place, I can 'speed read' 100 pages in little time at all. Even with a fast computer connection, I end up raising five pages at once and scan them all on my screen simultaneously and I select only 10% or less for inclusion in my stories.
One HAS to do this to keep up with the debt and beadth of events.
Posted by: Elaine Meinel Supkis | August 14, 2007 at 08:29 AM
The media, as we know, is complicit.
Recall the puts on the DAX pre-9/11 - - - never any follow-up as to who, what when, etc.
My guess is that the big boys know exactly what's going on - more or less - and they are SCRAMBLING to figure out their next move.
They have to rationalize this mess - very Western mode of thinking, eh?
Their frigging computer models couldn't all be WRONG, now could they? (garbage in, of course, ...)
But, as you always say, this generation of Wall Street whiz kids has no institutional memory of when bad things happen to rich people.
you are on fire, girl!! Great columns on this topic!!
Posted by: D. F. Facti | August 14, 2007 at 08:38 AM
Thanks, Facti. Do look at my latest opus: the Japanese have withdrawn their emergency funds just 48 hours after putting them in! 'No emergency...FOR US...' they said.
Gads.
Posted by: Elaine Meinel Supkis | August 14, 2007 at 10:26 AM