December 5, 2007
Elaine Meinel Supkis
Globalization, far from stopping, is increasing. The force desiring this comes from Asia which is expanding markets rapidly. Sometimes, it seems the main function of the President of China is to write contracts and make contacts for Chinese industries. So China is now asking to become part of the NASDAQ. And Senator Dodd wants to question Paulson about Robin Hood's barn. HAHAHA. And we must visit Black Rock, the organization that is promising to save the Florida Teachers Pension Fund. All these things are tied together, of course, and thus, very hard to fix with small repairs to the fabric of finance.
Nasdaq opens office in Beijing to lure more Chinese firms
The Nasdaq Stock Market opened a representative office in Beijing Monday in a fresh move to tap the bourse's fastest growing market outside the United States.The office will serve the growing number of Chinese firms listed or seeking to list on Nasdaq and deepen its dialogue with China's bourses and regulatory bodies, Nasdaq said in a statement.
Xu Guangxun, Nasdaq's chief representative in China, told a press conference in Beijing that Nasdaq had plans to list on the Shanghai Stock Exchange, China's biggest bourse.
The US loves to use the stock ticker as a way of gaging the health of our own economy. I have raged for years about how our native economy has been running in the red and how the stock market is part of the problem, not a solution. One of the tragic problems of our stupid Federal Reserve is their constant care to keep the US stock markets moving upwards even if this means destroying our fundamental banking systems. In the past, I have pointed out that many of the entities on the DOW or NASDAQ are not reflections of US economic health but rather, represent companies that are mostly outside of the US. So if they hire more people, they are hiring non-Americans, for example. They are boosting the GNP of other nations, not the US. They are funneling profits into the coffers of other nations, not the US.
On top of this, the energy sector is embedded within these stock statistics so when things go off the cliff due to high energy costs, the DOW can still rise because everyone is bidding up energy stocks! The false feeling of well-being is dangerous because it hides the true nature of what is going on. In the present case, the rise of companies that represent forces that are tearing apart our economy is not a good thing at all. This is why relying on stock movements to decide what sort of monetary solutions should be applied, is dangerous.
Now we see China aggressively moving into our stock market system. They, like the oil Arabs, have figured out, if they extend themselves into all our systems, we will be unable to uproot this or change it and thus, embracing us, we can't move or escape their control. Any government that allows this should be considered a treasonous entity and thus, impeached.
Senator Dodd Asks Paulson About Goldman Subprime Role
U.S. Senate Banking Committee Chairman Christopher Dodd called on Treasury Secretary Henry Paulson to answer questions about Goldman Sachs Group Inc.'s role in the collapse of the subprime mortgage market.Dodd, a Democratic presidential candidate, said in a statement today that he was ``deeply concerned'' by questions about New York-based Goldman Sachs that were raised in a column by Ben Stein in the New York Times on Dec. 2.
That schizoid editorial by Stein is bearing fruit! Even though Stein thought there was no danger except behind and around Robin Hood's barn, he suddenly noticed that this barn is on fire and Goldman Sachs is responsible! It utterly astonished me and I am happy that Dodd figured out the obvious: Goldman Sachs runs our Treasury and is looting it! Quick, someone close the barn doors before the Old Grey Mare escapes!
Of course, Dodd could call in all the guys running our country into the ground. This includes all of Congress as well as our ruler in the White House. Then we can have a mega-hearing about the mess everyone has made over the last 35 years! I will happily supply all the charts and graphs as well as timelines so everyone can contemplate the treasonous mess made by a bunch of craven traitors. Arrest everyone.
Florida Investment Chief Quits; Fund Rescue Approved
Coleman Stipanovich, the head of an agency managing a troubled $14 billion Florida investment pool for local governments, quit as officials approved a plan by BlackRock Inc. to salvage the fund.BlackRock, which worked through the weekend on a proposal to save the pool whose assets tumbled 48 percent last month amid withdrawals, will take over management from the State Board of Administration while an outside firm is sought, officials led by Governor Charlie Crist decided.
Time to visit Black Rock. At first, I thought someone wicked would this way come, of course, the witches and wizards who made this mess and sold it all to pension fund managers will now save the same from the same mess these same wizards and witches created in the first place. Whew. Talk about insane! Florida is hoping there is some way of recouping these losses. But of course, the tools used by these same people seem to work only for themselves. This is because they are mostly leeches seeking 20% cuts from the money flow. In ancient times, back when I was a youth, in that fabled time of fairy tales, US savers saved money by depositing them in banks directly or by directly investing in the US stock markets.
The stock system seemed best because is made more money over time but one had to be careful not to buy stocks in companies going under. This is where the SEC stepped in, regulating and investigating corporations selling stocks to pension funds. This system has utterly broken down now and so of course, we are going into a financial meltdown. Everyone is hoping there is some trick to escaping this but the tricks only enrich the fund handlers who have control of the system and use tax havens to operate as well as escaping detection by the SEC.
So I can easily predict that Black Rock will increase their profits and stuff even bigger bonuses in their Xmas stockings while the teachers get small retirement checks and eat dog food.
BlackRock is one of the world’s largest publicly traded investment management firms. As of September 30, 2007, assets under management were $1.3 trillion. The firm manages assets on behalf of institutions and individuals worldwide through a variety of equity, fixed income, cash management and alternative investment products. In addition, a growing number of institutional investors use BlackRock Solutions investment system, risk management and financial advisory services. Headquartered in New York City, the firm has approximately 5,100 employees in 19 countries and a major presence in key global markets, including the U.S., Europe, Asia, Australia and the Middle East
All these organizations 'manage risk' but I assume this means going out at night with Miz Risky and getting plastered and then driving around in the dark with the headlights off, tossing beer bottles out the window. As the global financial situation deteriorates, the need to investigate these guys grows. I should tell Senator Dodd about all this. Maybe then, he can return all his election contributions which came from these same people. Hope springs ever eternal as the Florida funds gropes for some saving rope so they can be hauled out of this pit they fell into after trusting Goldman Sachs and the other 5 giant financial organizations.
Black Rock's Forward-Looking StatementsThis press release, and other statements that BlackRock may make, may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to BlackRock’s future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “potential,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” or similar expressions.
BlackRock cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and BlackRock assumes no duty to and does not undertake to update forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.
HAHAHA. Seems the bets they are hedging the most here were written by lawyers covering their asset asses! All the conditional verbs such as 'will' will become 'won't'. 'Comfortable' can suddenly and with no warning, turn into 'painful.' And 'pipeline' can suddenly become a clogged toilet that is overflowing all over us. With this paragraph, they can deny responsibility for any errors of judgement or outright lies. After all, they are NOT as good as their word. Their words are vapid things, designed for effect. One cannot 'assume' anything with these guys. Florida's saviors are a slippery lot.
CDO Sales May Tumble 65% in 2008 on Subprime Slide
Issuance of collateralized debt obligations will tumble 65 percent next year, with ``little or no'' sales of CDOs made up of structured-finance securities such as subprime-mortgage bonds, JPMorgan Chase & Co. says.About $163 billion of new CDOs will be sold, down from an estimated $469 billion this year, according to a report yesterday from New York-based JPMorgan analysts led by Christopher Flanagan.
CDOs, until recently the fastest-growing part of the debt market, helped fuel record profits for securities firms and banks, only to lead to unprecedented Wall Street writedowns in the past two quarters. Many mortgage-linked securities, which originally carried investment-grade ratings, were downgraded amid surging homeowner foreclosures.
Again, I must point out that surging homeowner foreclosures began before the recession. Indeed, statistically speaking, we are technically not in a recession yet. Even as we slide into one, this is not yet defined. Yet the rise of foreclosures happened at the SAME TIME as record stock rises, record deal making was roaring along! The financial squeeze people found themselves in is due to inflation, not layoffs or a restriction of business.
People have to spend more money commuting from their new exurban homes. These houses were made bigger than ever, I see them all over the place here in NY, huge houses built with no idea about the cost of heating these monsters. Mansions are very expensive to heat! I had one once upon a time. In 1984, it cost me $2,000 a year to heat in New Jersey which isn't as cold as upstate NY. Today, it would cost $5000 a winter to heat! Americans went on a mega-gas-guzzling buying spree and so many, many millions of drivers are stuck in traffic jams in their SUVs and pick up trucks, losing money every minute. And so they are going bankrupt. The buyers using the teaser rate mortgages are the worst off. They were well over their heads to begin with and then when Bush's saber rattling around Iran Kitty caused world oil prices to nearly double, all these people who spent utterly inappropriate sums of money on houses they bid up against each other are now going bankrupt.
In less than two years! This is unheard of. In past recessions, people didn't lose houses they bought the year before! And certainly, not the middle class. The people who went bankrupt were mostly in cities that lost industry to Asia and Mexico via free trade. The abandonment of many US metropolitan areas due to off shoring continues and the bankruptcy rates there continue to climb but the mass of defaults this time around are in the hot spots where everything was going great guns, not in depressed rust belt inner city cores. It hot vacation/retirement spots favored by retiring baby boomers, the prices shot up and now the bankruptcies are shooting up.
This isn't due to a drop in retirees desiring to move to Florida or Arizona. This isn't due to people not wanting to live in southern California. This is due to over-indebtedness. People cannot afford housing at this cost and the buyers can't hang on even while holding their present jobs. Fixing this is impossible if the price of housing is too high. It has to drop. Increasing debt won't change this harsh fact.
Fed May Couple Rate Cut With New Measures to Increase Credit
Federal Reserve officials, who are forecast to lower their main interest rate next week, are signaling that they are looking for additional ways to increase credit to companies and consumers.The Fed may lower the discount rate -- what it charges banks for short-term direct loans -- by a quarter-point more than the benchmark rate after Vice Chairman Donald Kohn and San Francisco Fed President Janet Yellen publicly expressed frustration that previous rate cuts haven't encouraged banks to lend to one another.
Such a move would narrow the gap between the two rates -- normally 1 percentage point -- to a quarter-point. Economists said that may spur lending by easing the stigma of borrowing at the discount rate, letting firms claim they are taking advantage of a better deal.
``The Fed has to re-liquefy the markets to reduce the risk of a financial accident,'' said Lou Crandall, who used to work at the New York Fed and is now chief economist at Wrightson ICAP LLC, a Jersey City, New Jersey-based research firm that focuses on government debt.
When our entire economic system staggers under a mountain of debts on every possible level, what does the Fed do? It tries desperately to increase this! The markets froze up because the season changed. Summer is gone, fall is finished and we are in a very cold winter. It is snowing outside my window and people struggle to pay their energy bills. Bush has reduced the money available for home heating for people on fixed incomes, for example. Everyone is going deeper and deeper into debt in order to pay for energy. This means less money for other things and of course, people abandoning expensive properties they bought in the summer.
Once upon a time there was an ant and a grasshopper. The ant was working day after day, carrying food to its hole it laboriously dug in the earth. The grasshopper played his hind leg fiddle. 'Winter is coming,' observed the ant.
'Fiddle-dee-dee!' said the US grasshopper. 'I see no snow, all is well and it will be summer forever!'
The thrifty Chinese ant picked up the grasshopper's body after the first freeze and stowed it away in the larder to be eaten during January.
Right now, we are ruled by grasshoppers who deny winter and then, when it comes, try to turn back the calendar. Right now, they are trying to devise various schemes for reactivating the money flow. Alas, one of these is to create inflation. But the world is now hammering on us to not do this. The inflation is obviously here because everyone else's FOREX reserves where they park excess US dollars are now bursting at the seams and the Fed is frantically creating many billions more as we saw this fall. Now they must find LENDERS to pick up the tab and infuse the banks with fresh funds by paying off loans. The number of people pouring money into the banking system, paying off loans, is dropping. And dropping interest rates won't bring them all back!
Of course, alongside this cheap money is usurious rates by credit card companies and of course, the Alt-A loans that reset at a higher rate. These exist because collectively, we are over our heads in debts. But to keep this system going and the M3 growing, the US MUST have MORE debts! It is the present system's dynamics. It is the result of 35 years of living in the red and never, in the black.
Rock could be nationalised by February
Downing Street has opened talks with the Conservatives over the nationalisation bill, hoping that with bi-partisan support it could be rushed through both houses of parliament in a single day.The Treasury refused to comment on the bill, which it has instructed parliamentary draftsmen to write so that it is there as a fallback option should attempts to sell Northern Rock fail. It has also sought external advice from lawyers on the draft.
*snip*
The speed of the negotiations is hastening because Northern Rock's finances are deteriorating. Two weeks ago, it was losing £200m a day in deposits. Separately, politicians yesterday grilled Northern Rock's auditors, PricewaterhouseCoopers, which charged £1.8m in fees.
The fundamentals for Britain are much worse than the US. Britain is way over its head in debts. It has been ringing up debts since WWI. Britain stayed above water because the US has kept it there. Riding on the back of the American empire, the British could imagine they still ruled the planet. Thinking this way, they ignored fundamentals and concentrated on tricky finances to gain wealth and power. Britain is a major financial center. And utterly snowed under in debt. Worse than Japan. Just last summer, Britain was celebrating its new-found power. Today, as winter blows, the collapse is sudden, unexpected and dire. The speed at which housing collapsed is far faster than the US.
Like in the US, the government is being asked to foot the bill. The problem, like the US, is Britain's government can't afford to do this. And even more than the US, Britain created this mess by allowing the Queen's territories to operate as tax havens which has reduced revenues. And the very entities who are collapsing are these same tax cheats! Northern Rock is NOT a British bank, they are PIRATES. They operate off shore and did so because they wanted to do screwy things. If they can't function anymore, the British government should raid their headquarters and use the pitiful remnants of the once-mighty British Navy and invade Jersey and seize all the banks and financial houses there. Then Parliament can open hearings about the entire subject of tax havens run by the British themselves!
These hearings can run alongside the future Dodd hearings about Goldman Sachs. HAHAHA. Right! I will show up and testify at these hearings. If they want, I can run the raids on these islands. We have sophisticated ways of coordinating these things. It has to be planned in private and no financiers should be let in on these raids or they will run off to China or Russia or Paraguay.
Is Britain's economy heading for the perfect storm?
The signs couldn't be much bleaker. The switchback in sentiment since the credit crisis began in the summer has been violent. The Nationwide Consumer Confidence Index recorded its largest drop yesterday, and joins the GfK/NOP survey earlier this week in suggesting that a wave of pessimism not seen for years is washing over the economy.House prices have begun to fall, albeit slightly; commercial property is seemingly on the brink of collapse on a par with that seen in the early 1990s. The buy-to-let market is vulnerable. The Bank of England has, unprecedentedly, voiced concerns about the grim prospects for real estate. And the Financial Services Authority has warned of the "very real prospect" of the global credit crunch getting much worse. It is that bad.
Why is there a global credit crunch? I covered the Xinhua story the other day where China openly talked about reducing available credit so the bubble there doesn't get too big. In the West, all the top bankers and politicians want to INCREASE debts! In China, they are REDUCING it. And for good reason: they are applying classic economics here. Restraining speculative bubbles is one of the jobs of central banks. They are not in the business of boosting stocks or ballooning asset values. Indeed, these things are destructive and should be nipped at the bud, not encouraged. So we are going into a global recession due to China obeying older banking rules? HAHAHA. What a marvel.
And of course, the global credit crunch is attached to oil prices. Everyone has to scrape together dollars to send to the energy producing nations. The previous 3 years of high oil costs could be covered by increasing debt and inflating the dollar which is used to buy energy. But now, the oil pumpers have figured out how to raise oil prices so they can keep up with inflation. No longer is Russia frantically pumping energy into global markets, dropping profits. Putin has stopped this, step by step ever since his 2000 coup. And the US has assisted him in this by fighting with first, the Iraqi people and then menacing Iran. If the global bankers want 'liquidity' it is right in the Middle East in Iran!
Money is still pouring into Iran! Iran is still selling oil but less and less. Since Iran can't bank with anyone, all this money from the West STAYS in Iran. And the oil is restricted so the price of oil is rising. It fell rapidly for several days but has bounced right back and is again, rising to $100 a barrel. This is due to the news that the Fed is definitely going to drop interest rates in order to increase US spending and debts. The medicine we definitely do NOT need.
Britain's fall is so great today because only a few years ago, Britain was an oil exporter, now they are oil importers! But instead of trimming their sails, Britain decided to go on a house buying binge even as the finances went deeper and deeper into the red. Now all systems are in the red and Britain won't face the reality that they are no longer part of OPEC via proxy but are now being hammered by OPEC. And OPEC is buying up the good parts of the British economic system. Maybe Queen Elizabeth II will begin wearing a burka.
Subprime Rate Five-Year Fix Eyed by U.S. Regulators
Federal regulators and U.S. lenders are focusing on five years as the duration of an interest-rate freeze on subprime mortgages, said a person familiar with negotiations aimed at fending off a jump in foreclosures.Such an agreement would satisfy the shortest fix sought by the Federal Deposit Insurance Corp. That period is longer than the minimum, two- to three-year modifications suggested by Fannie Mae, the largest source of finance for American home loans. The Treasury Department's Office of Thrift Supervision advocated between three and five years.
The US and Britain will both try to solve this dual mess the same way: handing out cheap money. Note how the solution here is to take today's grasshopper problem and move it forwards several years! So instead of taking all the frozen grasshopper bodies out of these nests, the US will freeze teaser rates and let them party for three more years...THEN they get thrown out! Hahaha. Pass the champagne!
Of course, this simply moves a mess forwards into the future! Meanwhile, instead of high interest payments feeding the banking system, super-low ones will eke in and the liquidity problem will grow. Especially if the Dragon of China closes its own lending window. On our fingers as we scream for more money. And since our solutions make the dollar weaker and our interest rates are approaching Japanese levels, the carry trade financial window slams shut, too. Quite accidentally, of course.
Fannie Mae Cutting Dividend 30 Percent
Fannie Mae has joined rival mortgage financer Freddie Mac in cutting its dividend and selling billions of dollars worth of special stock to raise capital to cushion against mounting losses from high-risk home loans.Fannie Mae said Tuesday it is slicing its dividend 30 percent, to 35 cents a share, starting in the first quarter of next year, and issuing $7 billion in preferred stock this month. The action follows similar moves recently by Freddie Mac, Fannie Mae's smaller government-sponsored competitor in the $11 trillion home-mortgage market.
Already, it is obvious that the two organizations launched by the government in the past to boost home buying when rising oil prices killed the housing markets is failing again. So we will get a new organization with a new name? Funny MacMoney funds? Evidently, Freddie Mac, like the hell hounds and pirates, chopped up mortgages and put them together in the ridiculous fund system that is now collapsing. As it falls apart, all the financial institutions struggle to discharge these bad debts and find it nearly impossible because the new system ties everything, the good, the bad and the ugly Alt-As all together and they are all going down together.
More than 30 percent of borrowers with subprime adjustable rate mortgages are behind on their payments before their loans reset higher and 775,000 homes with $143 billion of mortgage debt will go into foreclosure over the next two years, according to estimates from analysts at Credit Suisse Group.
Unheard of! In the Great Depression, people went bankrupt at this rate only after stocks fell. Except in Florida which had a housing boom identical to the one our entire nation just had! Back then, people recognized that housing speculation can get out of hand and moves were made to regulate and prevent this. All the lessons from the housing collapse of the mid-1920s was forgotten or eliminated so now we got the same thing again and it is having the same dire effect: liquidity in banks begins to fail.
As farm prices for food fell, farms began to go bankrupt but this was after England and Germany fell apart and ceased buying so many US imports of food. Right now, we see food imports being hammered by high energy costs. Like in the 1980's and 1970's when high energy costs cut farm profits and the US farming community shrank, so it will be yet again. High prices for grains are making US farmers richer but this is temporary. If oil keeps climbing while other nations begin cutting back on food imports, we will see a reduction here, too. And if China, a big food importing nation, cuts back, this is bad new for us, most definitely.
Right now, China doesn't want food riots so it won't happen so fast. But the important thing here is, the flow of goods and services as well as funds on this planet have changed direction. At first, only a few things felt this but now it is painfully obvious that the new flow which is towards oil pumping nations, is now beginning to hammer the manufacturing and banking nations. Only if a nation has a trade surplus with the oil pumping nations, can they evade this collapse. China, for example, has been working hard to expand its markets in the Middle East, Mexico, Peru and Venezuela, for example. The US runs a trade deficit with both Mexico and Canada for both energy AND manufactured goods! This puts us in a very bad fix. And is why our 'liquidity' crisis is hitting us so hard now.
Britain has begun to fall down the back of the Hubbert Oil Peak and like the US, refuses to admit this. Both are bleeding money due to this. Both have sold off their industrial base and allowed market shares to erode as aggressive Asian companies took over. The new system being set up today is one whereby the US and Britain are doomed to lose power, glory and money. This is the true 'credit crunch'.
The failure of the desperate US/EU/UK attempt at controlling OPEC via invading Iraq and seizing the oil there has turned into a banking crisis. The original plan was to use Iraqi oil to trump Putin's Russia which was relentlessly raising the price of energy flowing to Europe. Now, this is in ruins and the second plan to further weaken OPEC by attacking Iran and then Venezuela, is floundering on the rocks of reality. Events are moving very rapidly and this is due to both the banking crisis and the chaos in monetary markets.
The nostrums have made the disease much worse. For the one thing the US could not afford was to take on both more debt and raise the trade deficit even more. We did both while creating this housing bubble. This is a triple whammy hard to recover from because frankly, we are going bankrupt. And bin Laden's plan is to bankrupt the West. Even if he is not the one running things, he does understand historical forces and has used small pin pricks to lure the West into traps of our own making. The collapse of US economic power is the centerpiece of his strategy. His hopes are, we shall make all the wrong economic choices as well as military choices. So far, he has been right on the money.
Wal-Mart Upgrades Seiyu Stake To 95% In Turnaround Quest
TOKYO (Dow Jones)-- Wal-Mart Stores Inc. said Wednesday it will pay Y93.3 billion to lift its stake in struggling supermarket operator Seiyu Ltd. (8268) to over 95% as the U.S. retailer seeks the flexibility it says it needs to turn its unprofitable Japanese unit around.
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Govt Pension Fund Incurs July-September Loss Amid Subprime MessTOKYO (Kyodo)--The Government Pension Investment Fund said Wednesday it incurred a loss of 1.63 trillion yen before subtraction of fee payments and other expenses in the July-September quarter due partly to stock price falls in the wake of the U.S. subprime loan crisis.
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Samsung, of South Korea, was completely chased out of Japan this month. Now, they must chase out any entity connected with Walmart. At least the Chinese want to do business with us. And the subprime mess: note how Japan is blaming its stock market fall to all this. Even the Bank of Japan can't create liquidity if all systems begin to lose money. This is why the artificial attempts at creating liquidity are doomed. People don't need more debt, they need more PROFITS. For three years, thanks to the speculative bubbles, everyone had fantastic profits. But when the rising price of energy began to eat into profits at every level, profits fell. And since the movement of labor-intensive enterprises have now all left the higher-cost nations for China and Asia, this is now slowing down since there isn't much left. So the fabulous rise in profits will now cease or reverse.
Suzuki Motor will try to win over 50% market share 'forever' in India
Suzuki Motor Corp. will try to keep "forever" the current share of more than 50 percent in the Indian automobile market, Suzuki Chairman Osamu Suzuki said Wednesday."We entered the market 25 years ago. I will not accept the share to slip below 50 percent," Suzuki told reporters in Tokyo. "We will try to maintain the 50 percent share forever."
Note these words. Once into a market, the Japanese have no intention of leaving or losing shares. The US hasn't figured this out yet. The focus on market share is a Japanese religion. The US businesses tend to concede markets too easily. As Japan aggressively moved into US auto sales for many years, the US shrugged this off until Japan has finally reached parity with US makers here in the US itself. While in Japan, the US presence is less than 5%.
U.S. Productivity Increases More Than Forecast
Worker productivity in the U.S. accelerated more than forecast in the third quarter, causing labor costs to drop by the most in four years.Productivity, a measure of employee efficiency, rose at an annual rate of 6.3 percent, the most since 2003 and up from a 2.2 percent pace in the second quarter, the Labor Department said today in Washington. Labor expenses dropped at a 2 percent pace, also the most since 2003.
Stocks are shooting straight up right now due to this tidbit of news! Isn't life good? But what this news really means is, wages are DROPPING. And this is the devil in the works: deflation is raging at the same time inflation in energy is raging. And we know what this means. It is not good news at all. Labor costs here is dropping due to the end of union power to strike and the threat of outsourcing. No one can raise their wages even as rising energy costs eat up pay checks. And how, pray tell, is the US going to continue to spend money on manufactured goods?
Ah, yes, via low rate loans! Somehow. Only the workers are already up to their eyeballs in loans. And can't even pay teaser rates anymore.
I've been thinking for a while now that Britain was going to be the first domino to go. Originally I thought it would be the US, but Britain really is in worse shape than we are and its smaller economy has less inertia, so it will be quicker to fall. When it goes, it will take most of the world with it, I think, especially because of its importance in world finance.
One thing I think we be different than the Great Depression is that food prices aren't going to drop, at least not till the population starts dying off. A perfect storm of top soil erosion & salination, world-wide droughts, biofuel production, and expensive hydrocarbons is going to push food prices higher, even in a depression. There will be starvation in the third world, and maybe in places like India & China.
Posted by: shargash | December 05, 2007 at 11:38 AM
The Chinese government will not allow mass starvation, they are only too aware of the danger of revolt by rural workers, unhappy with the increasing inequality, local corruption, ethnic tensions, helath care deficiencies and so on. Food will become the focus of coordinated political, economic and diplomatic action, just like we see now with energy, trade or Taiwan. China can afford higher priced food. What China cannot afford ( and this is, I believe, the source of its strength ) is to become complacent.
Posted by: B.A. | December 05, 2007 at 12:11 PM
FWIW Re: Bin Laden. I study astrology in depth. BL has a mentality accorded by Lilly Strength at least a standard deviation higher than anyone else in my astro files. I know personally one person 2 deviations below BL in Lilly Strength of the planet Mercury and she is the most brilliant and productive person I have met particularly at objectifying her intentions into the world. Wm. Lilly was the British astrologer who correctly predicted the great London Fire in the 1600’s.
Posted by: medon | December 05, 2007 at 12:27 PM
BA,
I agree that China won't allow mass starvation. I do think they are at risk for hunger, and their attempts to deal with that will be one of the reasons food prices won't be going down as the global economy tanks. It is the poorer nations of the world that will be in the worst difficulties (when has it ever been different?).
Posted by: shargash | December 05, 2007 at 01:05 PM
At first, there was a farm goods glut and prices fell in 1929-1931. Then we had the Great Dust Bowl. In the Great Depression, people starved in China and Mao took off as a potential leader.
Posted by: Elaine Supkis | December 05, 2007 at 02:27 PM
Some fundamental differences in the food situation between the 1930's depression and the present situation.
Important is that the world population in 1930 was two billion, and is now 6.5 billion. Also, the world is far more urbanized now than in the 1930's, and all of those people need to eat.
In addition to many more mouths to feed, more and more of what was the 3rd world is acquiring wealth and wants to live the 1st world lifestyle, bidding up the price of oil and food, just as world oil reserves start decreasing. Even if massive deflation occurs, there seems to be a cap on how low oil prices can fall. People need to eat, and the only way the world knows how to feed that many people is with oil-based agriculture. (Yes, anyone who can see with clarity is producing or learning to produce their own food, or buying locally grown, but at present that is a small % of USA population. It will take crisis and time before enough food can be produced locally to feed all local people, in urban areas anyway. Such systems just don't exist at present.)
In the depression farmers dumped food because the selling price was below the cost of production. It seems fairly likely this time there will be food shortages, not surpluses. Few US families live on farms any longer - the average California backyard is about six feet by ten feet.
From yesterday's Guardian, UK:
Riots and hunger feared as demand for grain sends food costs soaring
Posted by: stvwlf | December 05, 2007 at 04:34 PM
Here is a very interesting article by William Engdahl, about the doomsday seed vault in the arctic financed by the elites:
http://www.globalresearch.ca/index.php?context=va&aid=7529
It made the hairs stand at the back of my neck, reading it...
Posted by: Neuro Artist | December 05, 2007 at 05:03 PM
Elaine has missed the key to the puzzle. There's nothing to worry about. The American economy will be saved by insourcing!
HAHAHA!
Posted by: Frank | December 05, 2007 at 05:48 PM
So if you have money in a brokerage/savings acct, where should you invest for times like these? The rich guys invest in hedge funds, but what about the rest of us? US dollar CDs, gold, TIPS, Euro, Swiss Franc? Please help make sense of something practical to do to safeguard one's family with all this bad news!! Thanks!
Posted by: jj | December 05, 2007 at 06:03 PM
With the G7 banking system collapsing?
Well, knowing how to hunt helps. And karate lessons. A brace of good trained dogs. Maybe a war horse, too. If things go bad, archery helps [all these skills or things I have and use].
Keeping out of 'trouble' is good, too. This means, not being 150% in debt.
I can't tell what will happen with currencies next. Lord knows! Anything can happen. Remember: governments control money. They can lurch in any direction they wish. This includes making backroom deals that benefit them, not us little people.
Posted by: Elaine Supkis | December 05, 2007 at 10:25 PM
JJ,
All elaine's advices are good, but I'll offer another more achievable one: Migrate to China, if you don't mind the crowd, that is.
Posted by: Not Student | December 05, 2007 at 11:06 PM
If you are trying to save your hard earned dollars, then good luck to you. As Elaine pointed out, we live in a system that is designed to fleece us of anything we save and perhaps even more.
Any investment advice is useless unless it comes from the ruling elites right after one of their "meetings", and they don't want you to make any money.
I invest what little I have in things that I think the ruling elites will not want, like photo albums of my sons, scrapbooks, portraits of my wife and daughter, wool rugs and ramskins to sleep on, firewood, spam, water, and a heavy axe or two.
They can steal my truck if they want to. Damn thing costs too much anyway.
Posted by: DeVaul | December 06, 2007 at 12:09 AM
I don't think China wants you to emigrate there since they have plenty of people, but they might let you migrate there if you were a bird, carribou, or some other form of edible food. But somehow if you settle there, don't swim in the Yangtze river, especially above the Three Gorges dam because you can't float high enough. If you must, keeping your head above the water would be paramount. And fgs, don't drink the river's water.
Posted by: Teddy | December 06, 2007 at 10:15 AM
I fear that this interest rate cut might actually work. It might encourage people to spend over Christmas, and in the short run stabilise house prices. Who knows? In a wave of misplaced euphoria, house prices might take off again and record another year of double-digit growth. Perhaps in the spring, the Bank of England might supplement this interest-rate cut with another one. Maybe by late summer, interest rates will be down to 4%.
However, lurking in the background, is personal sector indebtedness. If the Bank of England interest-rate cut proves to be successful, debt ratios will rise further. Sooner or later, the private sector has to stop consuming and begin to repair its balance sheets. My fear is that private sector indebtedness will deteriorate further in the next year, and when the day of reckoning finally arrives, the UK will face a calamitous banking crisis. This crisis will come about because of rising personal sector defaults.
If the Bank of England had held rates steady today, consumption would slow down, and with it economic growth would decelerate. In the worst-case scenario, the UK might have entered a recession during the first half of next year. However, personal sector debt levels would begin to fall, banks would begin to reduce their exposure, and eventually the situation will improve. Times would have been difficult, to be sure, but delaying the process of adjustment will only make matters worse.
In summary, today's decision to cut rates is a disaster. It was cowardly, self-interested, and ultimately it will bring more problems than it will solve. A shameful day for the Bank of England.
Alice
UK Housing Bubble .
Posted by: Alice Cook | December 06, 2007 at 11:31 AM
On a whim I put "Coleman Stipanovich" into google because I wanted to know what kind of idiot loses so much taxpayer money investing in such worthless trash.
Surprise, surprise, it turns out he's the brother of a Florida Republican lobbyist, was supported for his current post by Jeb Bush, and was deputy director of this SAME DAMN FUND when it lost hundreds of millions of taxpayer money buying Enron and continuing to buy Enron until it was a penny stock. Yo, ho, ho, you earned a promotion.
And oh yeah, he has a bachelor of science in criminology and a master's in criminal justice. Is there a better word when the word irony no longer suffices?
http://www.sptimes.com/2002/04/10/Business/Pension_board_weighs_.shtml
http://query.nytimes.com/gst/fullpage.html?res=9C02E0D6143AF934A15752C0A9649C8B63&sec=&spon=&pagewanted=2
Posted by: Rhodomontade | December 09, 2007 at 05:02 PM
Trying to make sense of a gold investment:
Frank, as for investment, and, mind you, not being an investor myself until lately and studying the issues hard, this is what I've found:
US Stocks are worse than the US dollar, if not most other currencies right now; dollars are *probably* worse than gold in the long run for sure, but in the short run it's anyone's guess. I would suggest for those who aren't a savvy investor, gold being your surest bet in these times.
Gold isn't an investment per se. It's just a hedge against a devaluing currency. Gold has its power in that it doesn't inflate or deflate (that's one of the reasons why the Fed. Reserve hates it and all controlling Gov. do too) Analogously, like two ships passing in the night, you travelling on the ship called "currency" while passing by the other ship called "gold", you might assume that the other ship changes positions (gold inflating or deflating). No, it's currency that changes in value relative to the static of gold's purchasing power.
It could be said that gold has static purchasing power. But to get ahead of the other folks in a fiat based currency, you need to invest in fiat based businesses. This is why the Federal Reserve wants and gets, even though you think it's just the way things work. (Do I get a shout out from those from the land of "economic slavery"?)
30 years ago an ounce of gold could buy an expensive suit. Five years ago, an ounce of gold could buy an expenisve suit, but today it can buy a really expensive one. Lately people are losing faith in the US dollar because of its loss of status (hegamony) and the amount in circulation (M3). Gold's value and the dollar are somewhat inversely proportional. The exact inverse relationship can never be known or predicted because man being man changes it sometimes to his wishes and whims.
As I said, gold itself isn't technically an investment. But the alternative right now is knowing a great deal about investing in other strong foreign currencies or other strong foreign businesses, stocks or bonds. I have no clue what they might be. I am not going to even try to guess.
With a $20,000 investment in gold, and a devaluing dollar, it might buy the same in 5 years, even though that investment might be worth $500,000 because of hyperinflation. But with gold your purchasing power will almost stay the same. You see, somewhere in the world there is a currency that will exchange with you what gold can buy with their currency. Gold is always wanted by someone, somewhere on some continent who will give you his currency for your gold.
Gold is a commodity and thusly ebbs and flows with demand. So it's not entirely a sure thing. That's in the short run. In the long run it will prove to be a good investment. If you invested today in gold, with a small amount, and the dollar shot up for a while, which makes gold appear to have less value, could you stick with it or would you run and complain that you did the wrong thing? As people need to sell gold as the dollar loses value, can you stick to your investment when it gyrates in value too much? These need to be answered before you invest.
I think Gold is the only real answer for poeple with modest incomes today and little know how.
There are several avenues to take when buying gold. Really look hard into your options because some are better than others, and there's no guarantee that in cases of a severe emergency will you come out ahead.
The great thing about gold is that it can be transformed into any currency with similar buying buying power. So if you bought gold shares, and wanted to convert them at your bank to any currency because of the US dollar's inconsistency then that could be accomplished. Of course the question is will people accept it here in the states? I wouldn't know, but if we get to the point of hyperinflation, you can bet your sweet ass that businesses will learn quick enough what other currencies look like.
Good luck, and buyer beware. This is advice for those who consider this just research and nothing absolutely correct. And if you care not to take advice from an inexperienced investor, then go hire Goldman Sachs. ;->
Posted by: ron | December 12, 2007 at 01:22 PM