October 8, 2008
Srini's bubbles in Tokyo
October 8, 2008
Elaine Meinel Supkis
The entire G7 complex and all the tiny countries attached to the EU/UK/US system has collectively decided to drop interest rates lower in tandem. They hope this will trigger wild lending and wilder spending. Like the last two times this was done. The Bilderberger people have a very poor learning curve, it seems. The Derivatives Beast must either be resolved tomorrow or it will finally put all the gnome bankers out of their joint misery by eating all paper wealth on earth. In one gulp. But the true cause of all this is the Floating Currency. It is a total, roaring failure. There is only one solution: return to the gold standard.
Protect the Bubbles by Srini in Tokyo, Japan:
Fed, ECB, Central Banks Cut Rates in Coordinated Move
(Bloomberg) -- The Federal Reserve, European Central Bank and four other central banks lowered interest rates in an unprecedented coordinated effort to ease the economic effects of the worst financial crisis since the Great Depression.The Fed, ECB, Bank of England, Bank of Canada and Sweden's Riksbank each cut their benchmark rates by half a percentage point. The Bank of Japan, which didn't participate in the move, said it supported the action. Switzerland also took part. Separately, China's central bank lowered its key one-year lending rate by 0.27 percentage point.
Today's decision follows a global meltdown that sent U.S. stock indexes heading for their biggest annual decline since 1937; Japan's benchmark today had the worst drop in two decades. Policy makers are also aiming to unfreeze credit markets after the premium on the three-month London interbank offered rate over the Fed's main rate doubled in two weeks to a record.
``Central banks of the world have finally woken up to the gravity of the current situation,'' Charles Diebel, head of European rates strategy at Nomura International Plc in London, wrote in a note. ``It is not potentially not the last we will see of central bank activity particularly in Europe as the macro situation is still weakening dramatically.''
We are drowning in red ink. The central bankers want more red ink. We see the end of this clearly. There is no way, pouring on more red ink will fix what is wrong here! The world goes through this dual cycle all the time: easy credit cycles which are fun and hard savings cycles which are nasty. Instead of buying and buying, people are forced to save and save some more. It is always much more fun to buy than to save. And savings give rise to fear.
During all downturns, everyone talks about 'fear'. This is the agony of the savers as they struggle to protect their savings from being devoured by the borrowers declaring bankruptcy all over the place. Let me be very clear here: in the 'savings' cycle of world economics, this isn't a time when more and more people save money. These are times when the only people WITH money are the savers! And any system that kills savings to the point that it is less than 5% of financial markets is in trouble during these downturns.
The US has decided to be at a 0% savings rate, indeed, a NEGATIVE savings rate. So when the credit party ended, instead of having a bunch of savers now in charge of banking, there are not nearly enough of them to have any effect at all. So there is going to not be a 'saver's regime' in our future. Debtors overwhelm savers. And debtors want more debt. The only way this can be engineered is to have super-low interest rates.
Now, what do the beleaguered savers do when interest rates go super-low? They flee the banks! We see this very clearly today: the US mint has run out of silver and gold stocks with which they can mint real money coins. The face value of these coins has nothing to do with their price. Once upon a time, it was one and the same. Before the US ditched the gold standard under Nixon. Now, a $50 gold coin is worth hundreds of dollars more than the face value. This is an accurate reflection of the true buying power of the denominated currency values.
This month, gold ceased its fall to the cellar. As all the banks rush to make credit ridiculously cheap, the value of gold is climbing most ominously. In the case of the G7 doing this suicide plunge, it is now time to say for certain, any savings left MUST flow into gold because there is no way ANYONE can earn ANY interest on savings in BANKS in this climate.
This doesn't make gold a 'money.' It is still a 'commodity'. Only when some central bank which represents a great trading/industrial power declares its currency value to be guided by the value of gold, not relative value with other floating currencies, will gold cease being a commodity and become a currency. And with the total failure of the floating currency system created by the US and Europe when the US couldn't pay for the Vietnam War, we don't have to wait long for this new era to dawn. It is nearly upon us.
But ONLY after the dark night of depression destroys the current global fiat currency regime. Launching this too early will mean the new ruling currency [we all know which one that will be!] would be swamped by a flood of funny money seeking to be turned into gold. Only after all this red ink produced during the heyday of the floating currency is destroyed, can a new gold standard be launched!
About gold: the US mint can't get gold anymore nor can it raid Fort Knox for all that gold has been 'swapped' and this is a sign that the End is near as far as the fictions of the floating currency is concerned. Millions of people make easy money playing the odds games against the relative value of all currencies against each other. They will cease having this luxury in the future. All of them must be destroyed as currency markets collapse along with the banking crisis. Already, many of the hedge funds and investment banks are rapidly going under. We are halfway there. And when the Derivatives Beast's mess is put to the test tomorrow, I expect hysteria coupled with, at my end, happiness. For the utter destruction of the credit default swap markets will be a GOOD THING that will SAVE the SAVERS! In the end, it will kill the last illusions of cheap debts.
But first, all the central banks must exhaust themselves by trying to force the real interest rate to 0% a la Japan.
Culture of Life News, October 8, 2007: Treasury Sec Paulson Celebrates Weak Dollar
Treasury Secretary, Goldman Sachs Paulson, celebrates weakening the dollar so we can export to countries that have stronger currencies such as..ahem...Europe and Canada. The game of weakening a currency for trade and industrial advantage goes up yet another notch. The EU is celebrating greater wealth when they travel abroad but at home, costs are rising faster than incomes due to this very same thing and of course, there is the real estate bubble that always runs alongside rising currency values. Also, IBM claims their patent on outsourcing is an oversight which they wish to eliminate, hahaha. And Japan announces they will most certainly not change anything no matter what so they continue with .5% interest rates while making their FOREX reserves grow again.
*snip*
I read a lot of economic news and history. And there is this huge, gaping black hole in most economic narratives: they leave out the Nixon wage/price controls. I remember that period because my boss at that time filed for a pay raise for me but I couldn't get it because it was denied! Talk about pissing me off. The oil crisis ended when the Saudis began to sell oil again and OPEC began cheating each other on allotments and this drove the price of oil downwards. But due to the fact that the US was the final destination of most trade and finance, even a slight hike in energy costs affected inflation. So the US devalued the dollar right smack dab when the oil crisis, the oil boycott and the end of the Vietnam war and thus, the constriction of the military/industrial complex happening all at once.
This utterly derailed the US economy.
Just a reminder that unlike many other people, I actually sort of figured things out last year. People say that economic advisors who touted things like the 'miracle of Iceland' should be forgiven because they did it when everyone was doing it, this is wrong. A true economics advisor has to look beyond six weeks or six months. True, wealth is created fast, doing stupid things when everyone is doing the same. But in the LONG run and I hope everyone wants to live a long, long time, it is very foolish.
The short-term view of economics is exactly why we are falling off a cliff at every level. The refusal to look the long term while playing with long-term debts is foolish, for example. A 90 year old woman shouldn't get a 30 year mortgage, for example. Insuring houses in cities that get totally wiped out every dozen years is foolish, too. Running a global empire on the unsteady base of a floating currency is also very stupid. There is an old rule of thumb: if something is too good to believe, it is fake. If Iceland offers 8% interest on foreign money flowing in, we should expect default. Sometimes, indeed, nearly always, small profits mean long-term economic health.
The very stocks that shot up in each bubble stock market were the ones taking on the most debt. I know of solid, good stocks that didn't shoot up this last 4 years. But paid and still pay good dividends. Like Pfizer, for example. Hanging on to steady things is good in the long run.
Dow's Damage: 13% in Five Days
Including Monday's nearly 370-point drop and a 348-point slide last Thursday, the Dow has now shed nearly 13% in the past five trading days, the largest drop since September 2001. The 1403.55-point decline was the Dow's biggest five-day drop ever, and that doesn't include a 778-point drop on Sept. 29. The Dow is now down 33% from its record high reached almost exactly one year ago.The damage was even worse for the broad Standard & Poor's 500-stock index, which closed Tuesday below the psychologically important 1000 level for the first time since Sept. 30, 2003. The S&P fell 60.66 points Tuesday, or 5.7%, to 996.23. Its 14.6% five-day decline is the biggest since the five days that included the October 1987 stock-market crash and the index stands 21% lower than it was just one month ago.
Despite the declines, traders described the selloff as remarkably orderly and largely free of panicky jettisoning of big positions. Many say that in recent days, the market has been under pressure from small investors who are throwing in the towel after getting quarterly brokerage and mutual-fund statements showing big declines.
*snip*
The Fed added a potentially potent weapon to its arsenal against the credit crunch Tuesday morning. The central bank said it would for the first time purchase unsecured and asset-backed commercial paper from issuers in an effort to ease the logjam in that important market.The move was praised in the credit markets. "This was the medicine we needed," said T.J. Marta, fixed-income strategist at RBC Capital Markets in New York. "Short-term funding has been completely blocked. This is a direct and precise attempt and likely it will be successful in removing that block."
The hope is that stocks will soar today on the expectation that the G7 flood of easy credit based on diminishing savings will fix the economic black hole we are in. The harsh truth is, this won't happen. The fix is fatal. The energy of a system MUST be based on a POSITIVE flow, not negative flow. As I have said, in despair in the past, 'Why bother having any interest rates at all on anything?' when talking about the Japanese rates that are 2% below the government's estimation of inflation in Japan.
Faux interest rates only make things worse. Instead of protecting the most important element of the banking system, the SAVERS, the governments wish to protect the weakest part, the part that is negative, not positive: the borrowers! When Volcker made rates go up and up and up, he was doing this to save the savers. He correctly understood that industry, housing and banking would NEVER be fixed unless he first saved the savers! This ruthless plan finally got savers to stop buying gold and buying securities.
Since 2000, the main buyers of securities in the US has been our dire trade rivals: Japan, China and OPEC. All of whom took trade profits and temporarily parked them in US securities issued by our government which began an epic series of over-budget spending sprees that added over $4.5 trillion in debt to our nation's tax base. This is now being totally exceeded. Doubling, perhaps. And there isn't enough trade surplus to enable our rivals to suck down all this future debt. This is one huge black hole in the banking system.
Which is why it continues to collapse!
Venture Funding May Fall This Year for First Time Since 2003
(Bloomberg) -- Venture capital investments will probably fall this year for the first time since 2003 as the financial crisis cripples the markets for acquisitions and initial public offerings.U.S. startup funding may drop in the third quarter, said Tracy Lefteroff, a managing partner at PricewaterhouseCoopers LLP, which does consulting work for venture capital firms. In July, Lefteroff said investments in 2008 would be ``on par'' with the $30.7 billion invested last year.
Iceland's Krona Quoted Almost 50 Percent Below Peg
(Bloomberg) -- Iceland's krona was priced at almost 50 percent below the peg against the euro set by the central bank yesterday to stabilize the currency as regulators said they took control of Glitnir Bank hf, the country's No. 3 lender.Nordea Bank AB, the biggest Scandinavian lender, said the price suggested by bid/ask spreads in pre-market trading was 255 per euro, compared with the 131 per euro level established by the central bank yesterday. There had been no buying of the krona to support the peg by the central bank, Nordea said.
These ventures were mostly engineered on the basis of getting cheap Japanese carry trade loans, passing them through New Zealand or Iceland or other proto-pirate islands as well as outright pirate coves like the Cayman Islands. This brought in a flood of red ink that was used to dump into various businesses. This, in turn, wrecked the ability of any business to survive any economic downturn, no matter how slight. Seeing this flood back in 2002, central banks should have shut it down by ATTACKING THE BANK OF JAPAN. Instead, to my great fury, we did the exact opposite.
We encouraged the Bank of Japan to play this game. This is why there was a flood of propaganda about how Japan was in a depression and had dropping prices when inflation was taking off in Japan. So Japan was allowed to flood the world with credit. This meant the US could have tons of easy credit debts and 'grow' while claiming, 'The money supply isn't growing so fast.' But the INTERNATIONAL money supply shot up! And since we are the world's biggest consumer of nearly everything, this meant our own system was flooded with easy money that I called 'funny money'.
Shipping Lines Sail Uncertain Seas
Global Weakness Sends Rates Tumbling With New Vessels On the Way; Some May Become Cruise Ships Last year, the basic price of shipping a large container of goods from Asia to Europe, the world's busiest route, was $2,800. This week, with demand plunging amid a worsening economy, that price was an unprofitable $700.
Talk about a plunge in value! All things plunge in value as contractions set in. The flood of funny money vanishes into thin air. The US destroyed its own merchant marine over the course of the entire length of the fiat currency regime. My ex-husband was in shipping. He had a front seat to this total collapse of our systems. When pirate coves discovered they could make money off of fees from shipping, few G7 shipping companies flew their national flags and instead, flew small island or African micro-nation flags. Bit by bit, the concept of a national shipping industry collapsed. Today, the US has virtually NO merchant marine at all. And all ships that carry cars from Japan to the US are owned by Asians. Not one is American. When we ship our own exports overseas, Asian and European ships carry this, not US ships.
No nation that claims global power can run without their own merchant marine. Not since the earliest days of shipping with the Phoenicians 8,000 years ago, has this been possible. The loss of our own merchant marine was a warning sign that our empire was in deep trouble.
Denninger, one of the very, very best analysts around these dark days:
Academia, including most particularly Bernanke, posits that one must "increase liquidity" into a seizure in the markets such as we have now, lest we have a Depression.The failure of this so-called economic "theory" is that it fails to recognize the root cause of the problem and therefore misses the forest for the trees. It is akin to trying to put out a forest fire by peeing on it and has precisely the same end result.
In point of fact we are now running out of names for Bernanke's "liquidity facilities"; TAF/PDCF/TSLF/TARP/ABCPMMMF and now this new SPV (does it have a name yet?)
The truth is that this crisis occurred under Greenspan and Bernanke's watch precisely because these two "gentlemen", along with our Treasury Secretary Paulson and other government officials, presided over the granting of credit to people who could not pay it back.
The false premise these folks all proceed from is that credit is equivalent to money.
*snip*
Borrowing short-term (to lower the coupon required) for long-term requirements is fundamentally unsound. When you do so you place the very life of the entity that does so at risk.
Nothing to add here but to say, read Denninger. He should be in charge of the Federal Reserve. Add that to my list of wishes. At the very least, someone should put him in charge of something in the Treasury. Secretary of Treasury, for example. Keep those horrible gnomes out of the Treasury!
A very, very good summary of the Derivatives Beast. I suggest everyone read this one in full:
CNN: The $55 trillion question
AT FIRST GLANCE, credit default swaps don't look all that scary. A CDS is just a contract: The "buyer" plunks down something that resembles a premium, and the "seller" agrees to make a specific payment if a particular event, such as a bond default, occurs. Used soberly, CDS offer concrete benefits: If you're holding bonds and you're worried that the issuer won't be able to pay, buying CDS should cover your loss. "CDS serve a very useful function of allowing financial markets to efficiently transfer credit risk," argues Sunil Hirani, the CEO of Creditex, one of a handful of marketplaces that trade the contracts.Because they're contracts rather than securities or insurance, CDS are easy to create: Often deals are done in a one-minute phone conversation or an instant message. Many technical aspects of CDS, such as the typical five-year term, have been standardized by the International Swaps and Derivatives Association (ISDA). That only accelerates the process. You strike your deal, fill out some forms, and you've got yourself a $5 million - or a $100 million - contract.
And as long as someone is willing to take the other side of the proposition, a CDS can cover just about anything, making it the Wall Street equivalent of those notorious Lloyds of London policies covering Liberace's hands and other esoterica. It has even become possible to purchase a CDS that would pay out if the U.S. government defaults. (Trust us when we say that if the government goes under, trying to collect will be the least of your worries.)
You can guess how Wall Street cowboys responded to the opportunity to make deals that (1) can be struck in a minute, (2) require little or no cash upfront, and (3) can cover anything. Yee-haw! You can almost picture Slim Pickens in Dr. Strangelove climbing onto the H-bomb before it's released from the B-52. And indeed, the volume of CDS has exploded with nuclear force, nearly doubling every year since 2001 to reach a recent peak of $62 trillion at the end of 2007, before receding to $54.6 trillion as of June 30, according to ISDA.
I know for a fact that the BIS, the Federal Reserve and everyone in the Bilderberger group and so on...they ALL knew that the Derivatives Beast was growing far too fast. They ALL knew that it exceeded the value of all the globe's GDP last year. They did absolutely nothing except one thing: they decided to put a 'true value' on all the aspects of this CDS monster. They launched MarkIt, a place where these credit defaults could be swapped out in the open and thus, be able to have a real value.
And quickly discovered, this value was really $0. This meant the bottom lines of all those investment banks and hedge funds were not $66 trillion but $0. This faux money was the basis for these guys to borrow and lend. Now, they have nothing and are totally relying on governments to be the banks. And to lend money on faux interest rates which all the central bankers are now setting at 0%. And this is the dreadful 0%-0%-0% system I keep complaining about.
This kills savers. Totally and completely. Savers will flock to gold as a last lifeline. But the cruel truth is, the governments control gold markets. Including simply not releasing gold. All the central bankers who lied and said gold was no longer needed in currency markets have all ceased selling gold in the open markets!
Gold has basically ceased to circulate! They are all hoarding gold now! And this should make the price of gold climb a lot faster than it has. But it is still below the $1,200 peak it reached last November when everyone suddenly figured that the banking system was collapsing.
Today, it is over $919 and climbing. It has risen today, in just a few hours, by almost $40. I suspect the last savers on earth are all bailing out of the banks. There are no more banks offering interest rates higher than the rate of inflation. And the attempt at evading the goddess of Depression means the G7 will embrace the goddess of Inflation! And she is faster than thought and loves infinity and in particular, the number ZERO. She adds these zeros until money buys NOTHING.
Bankers Might Need 50 Years to Regain Credibility: Joe Mysak
The last few weeks have gone by in a blur. And yet it was just the sitzkrieg, the phony war. The real bloodshed will occur in the weeks and months ahead. Nobody knows what the real outcome of this disaster will be, although it's very likely that the financial industry will be crushed.Now the scene shifts to Washington.
This isn't a temporary shift, either, as the U.S. Treasury attempts to pick up the pieces of the financial system. No, I have a feeling that no matter who wins the presidency, we are going to see newly empowered regulators go on the rampage. The taxpayers will demand nothing less.
*snip*
Swaptions! Interest-rate swaps and derivatives! From coast to coast, these things are eating issuers alive. I'm not sure I'm angrier at the bankers who so aggressively pitched the things, the politicians who bought into them because they could get campaign contributions from the brokers who set them up, or the bond-rating companies that rarely delved into the risky nature of these products in their regular analyses.The full effect of the financial crisis is still murky. We do know that state and local tax revenue is declining, and that the business environment is turning sour. A bumper crop of municipal-bond defaults seems likely.
Another decent story about the Derivatives Beast. Finally, 10 years too late, a few people have figured out what was obvious from day one. The trick is to figure this all out BEFORE it reaches gargantuan sizes.
Elaine,
I think the common person is just now starting to come around and realize that things are not well in the economy and financial industry. I am a software engineer and at my work, and I had one person come and ask me if he should start buying gold bullion and I had another ask me about how credit default swaps work. These are buy-and-hold 401K-er types.
The public is waking up and they WILL NOT BE HAPPY when their savings vanishes due to a collapsed stock market and a worthless currency! I suppose our founding fathers were wise in noting that a revolution every now and then is healthy for a Free country. And the way things are progressing, we'll have one soon enough.
Posted by: hIGHcastle | October 08, 2008 at 10:30 AM
You are copying my linguistics website and making the font big enough to actually read now?
I'm always about four years behind on this economics stuff, but at least I can come here to get a peek in the window. So the goofy stock market (Vegas with classy attitude) will go up a little today, and get hit with D-Day tomorrow? It all makes me dizzy. Thank heaven I have so little to lose.
This might novelty be of interest to some folks here. Google's own "Wayback Machine"!
"In honor of our 10th birthday, we've brought back our oldest available index. Take a look back at Google in January 2001."
http://tinyurl.com/44spcg
ELAINE HERE:
Blues, I have an EZ Large Print edition here at http://elainemeinelsupkis.typepad.com/ezmoneymatters
Posted by: blues | October 08, 2008 at 10:33 AM
Another kindred spirit: Herman Daly (Professor Daly was Senior Economist at the World Bank before leaving to teach Ecological Economics at University of Maryland's School for Public Policy):
Posted by: RobG | October 08, 2008 at 10:44 AM
A wee bit off topic but can anyone explain why they went to congress with the "rescue" package in the first place? The Fed has been rescuing away anyway. I know that the Fed really doesn't have the reserves but this has not stopped them in earlier and soon to come endeavors. Did they think that the facade of the American public being on board would assure foreign investors? Any enlightenment would be appreciated.
Posted by: Grok | October 08, 2008 at 10:54 AM
blues, FYI if you are using Firefox all you need to do to increase font size on any website is Ctrl +, or to decrease Ctrl -, no need to do anything to a website.
Posted by: carli | October 08, 2008 at 10:56 AM
Elaine, the real trick is to arrest and prosecute all the parties who clearly premeditated this whole system of irresponsible lending, oversight and ratings. From top to bottom.
Without accountability in a system, no matter who is running it, there can be no confidence. And the people who have been tasked to clean up this mess by Jr., have made it crystal clear that they never had any intention of being accountable. The 'fear' we see in the financial markets is a NO CONFIDENCE VOTE in the people running the show. The only reason the 'market' is still alive is because the majority are still at this time trying to figure out what to do as the are massacred everyday, and so we see the rush to gold, but they are too late.
Posted by: carli | October 08, 2008 at 11:17 AM
Bernanke, Paulson, G7, Bush & Congress are insane as they handout super duper dosages of Viagra to Wall Street and themselves in an attempt to restart the old pecker that refuses to rise to the occasion. These flacid attempts of surgically inserting a pump may artificially make it go up but hey it still can't do anything. All these old men must accept it just ain't gonna work no matter what.
"To argue with a person who has renounced the use of reason is like administering medicine to the dead." Thomas Paine
Posted by: rockpaperscizzors | October 08, 2008 at 11:18 AM
Yeah, carli, I have Firefox, and sometimes I do the Ctrl > + thing. I would bet that Elaine is screwing around with the site again. I have the impression that she just cannot resist this impulse. She's one of those who have to mess with everything.
Can't just let things roll down the river and over the dam. No, she has to play with it first. She's like a little kid, at heart.
Posted by: blues | October 08, 2008 at 11:21 AM
rockpaperscizzors, correction, FAKE VIAGRA! It's funny money, they have run out of Reserves so its like playing with your imaginary friend, or the story, The Emperor's New Clothes.
Somewhere down the line, the gnomes will wake up and realize that they are the only ones talking and playing, and that the party moved on without them.
Posted by: carli | October 08, 2008 at 11:26 AM
blues, that's what's really great about her, she has all that clarity and genius in her head while remaining a child at heart. It's what separates the good ones from the bad, brother.
Posted by: carli | October 08, 2008 at 11:33 AM
I have a EZ read web page. The 'big' code got pasted by accident here.
And yes, I screw around a lot. Especially with my Dewalt battery pack screw guns. Heh.
The rescue package was a test of the corrupt Congress. Would they legalize an obvious coup? In the end, they sort of legalized it. So Paulson went off and did as he pleased. ARREST HIM. He is destroying our Constitution.
Not that the Supreme Court hasn't already shredded it with Bush's eager help.
Posted by: Elaine Meinel Supkis | October 08, 2008 at 11:34 AM
Elaine, do you believe there will be an election if the ratings of Obama continue to rise as they have been since the markets started collapsing? Or will they just use the old Diebold hijack technique? That would be too telling...
Posted by: carli | October 08, 2008 at 11:41 AM
Speaking of gold, we don't have to wait for the government to come to their senses in returning to gold based currencies. I say the hell with them.
GoldMoney and others are essentially offering an alternative currency that is available today. They, and others, offer a "payment system" that modernizes gold's oldest, most valuable feature: its use as money. GoldMoney offers "goldgrams" which are direct electronic payments that go to the gold repository of the seller.
It is still a primitive system as there are not that many recipients set up to deal in these gold transactions but the list is growing. I have read that PayPal is accepting some forms of "goldgrams" but I have not explored that yet.
If one chooses to use this alternative currency, you will still need a "catch basin" checking account to handle most transactions but it can be kept relatively low, and a larger "GoldMoney" account may be used to fund it as needed.
I made the decision a couple months ago to dump the dollar, euro, et al. I believe others will do the same and this new alternative currency will evolve to displace much of the need for "national fiat currencies."
Posted by: DrKrbyLuv | October 08, 2008 at 11:45 AM
Here's a dumb question, why can't the US government seize the gold held in the underground NYT vaults? Why borrow via treasuries sold and held by our foreign competitors? Seize the day, seize the GOLD.
Welcome to the World's Largest Gold Vault
Just a Few Blocks From the Bustle of Wall Street Sits $200 Billion in Gold
...Just a few blocks away from all the turmoil and panic of the stock market sits the world's largest stockpile of gold. Deep under the streets of Manhattan sits more gold than "James Bond" villain Goldfinger could ever imagine.
http://abcnews.go.com/Business/story?id=5835433&page=1
Posted by: rockpaperscizzors | October 08, 2008 at 12:06 PM
Nearly $200 billion worth of gold rests on bedrock five stories underground, 30 feet below the city's subway system, inside the Federal Reserve Bank of New York's vault.
There are roughly 540,000 gold bars belonging to 48 foreign central banks and 12 international organizations such as The International Monetary Fund or The Bank for International Settlement. The United States has about 5 percent of its gold stored there.
Fed officials were very tight-lipped about who owns what gold. Accounts are just identified by number, not name.
This vault contains about 25 percent of the world's gold reserves. That's more gold that the entire annual economy of the United Arab Emirates -- home to Dubai and Abu Dhabi.
The majority of gold came to the Fed after World War II as countries sought a safe place to keep their wealth.
Posted by: rockpaperscizzors | October 08, 2008 at 12:10 PM
To test the corrupt congress! Well they passed with flying colors didn't they? Thanks Elaine.
Posted by: Grok | October 08, 2008 at 12:41 PM
The gold vault has France and England's gold as well as some royal tidbits from all over Old Europe. And China's gold, held for the Nationalists.
And a ton of investing banker gnomes.
Posted by: Elaine Meinel Supkis | October 08, 2008 at 01:26 PM
Gold. Gah. Posted too fast.
Posted by: Elaine Meinel Supkis | October 08, 2008 at 01:27 PM
hIGHcastle,
Add to them a collapsed consumer market and a collapsed labor market, a la Zimbabwe (as Denninger astutely predicts).
It appears that the seeds of those terrible things are all NOW embeded into our so-called "greatest economy on Earth" no matter who gets to sit in the Oval Office come Jan 20th, 2009.
Posted by: Ed-M | October 08, 2008 at 02:08 PM
Once upon a time there were hundreds of national labour markets. French workers worked in France for French companies, Americans in America, etc.etc. Skilled labour was quite illiquid. Now there is one labour market, it is worldwide, and as you all know, in every market supply and demand will work out. So the quantity of labour demanded falls in high priced markets as the demand for labour is moved to low price markets. It is what killed the merchant marine. Cheaper to avoid the Jones act and domicile your ships in Bangla Desh or Nigeria or Botswana and use cheaper labour. Now it is cheaper to source your research in Beijing and your phone support in Dacca than in Sioux City or Redmond.
The old theory of trade involved factors of production that were immobile: land, climate, labour. The only things that moved in the old theory of trade were gold, and end products. Gold because currencies were calculated with respect to a fixed ounce of it. Oh well, the markets were good to me today, tomorrow they may suck for me.
Posted by: CK | October 08, 2008 at 02:37 PM
As I see it, the foreign gold that's sequestered in NYT vaults prevents foreign countries including China from total annihilation of our economic systems. We got their Gold. How else could Paulson/Bernake slapstick show get the world onboard on the recent rate cut? The government could easily prevent gold shipments out of the country. In fact, we can confiscate it as payment for our military protection of those countries. China's gonads are caught in the wheels due to their stupidity of keeping gold in our vaults. The show ain't over kids.....more to come
Posted by: rockpaperscizzors | October 08, 2008 at 04:17 PM
Folks, it is time to stop wasting time watching the country get destroyed and take action to replace debt based money with constitutionally created money.
The only problem is that you will get executed trying to do this. So never mind.
Go back to reading the news, watching TV and trying to save your debt notes from attack you stupid peasant.
http://www.wakeupfromyourslumber.com/node/8545
"Final Thoughts
The American economy has been sucked dry by the Federal Reserve System. Americans think they own property but the truth is the entire United States has been mortgaged to the bankers. The Rothschilds and Rockefellers become richer while the peoples of the world become poorer. The International Monetary Fund and the World Bank are also designed to loan money to developing nations with the understanding that they will never be able to repay so with every loan made to a country, it becomes their death knell. The entire world has been plunged into a debt economy which means 6 billion people are in debt to about 250 men. But keep in mind that all their wealth is phony because it is created money without any gold backing.
I really laugh when Wall Street bows down to Alan Greenspan who is nothing more than a boot licker of the International Banking element who takes his orders by phone too. So many people rejoice when the Federal Reserve has a policy meeting and no interest rate increase happens. The truth is that we should never have a Federal Reserve to begin with. They print money, loan it into circulation, and the American people are strapped with more debt."
Posted by: GK | October 08, 2008 at 04:44 PM
Nice posts hehe, maybe we have to look past gold and go barter?
Posted by: Dutch | October 08, 2008 at 10:15 PM
@Dutch: If you have something that I could use and I have something you could use. We could sit down have a cuppa, and come to a trade that leaves both of us better off. It's what I do every day. Some form of money just makes the trading a bit more convenient. Gold makes superb money, but there is less and less of it per capita every day. Too many capits however have nothing to offer that is of value to anyone.
They know it too. The wonderousness of democracy is that the non productive can use their numbers to intrude on any peaceful mutually advantageous barter and attach their parasitical taxes, fees, and other thefts to the productive.
Posted by: CK | October 09, 2008 at 10:05 AM
The gold from China is NOT the communist gold. It is TAIWAN gold put there when Mao chased the Nationalists out.
Taiwan got military toys via this gold. This week!
Posted by: Elaine Meinel Supkis | October 09, 2008 at 11:02 AM
I was interested to find your blog. 20 years ago I had a book published on different economic concepts to point the way to a sustainable world economy. Someone who liked the book recently contacted me to suggest that I update and re-publish it as a blog. She set up the blog, and the book is now complete on the blog in a series of postings. Here is the link:
http://www.economicsforaroundearth.com
With all good wishes,
Charles Pierce
Posted by: Charles Pierce | October 09, 2008 at 11:27 AM