Wednesday Note – After Dubai

This week we turn our attention to the fallout from the debts of Dubai Inc that roiled global markets last week. Today’s note is excerpted from two pieces of analysis available in full to RGE clients: “Dubious Dubai: Castles in the Air, Heads in the Sand?” and “Rerisking after Dubai: The End of ‘Quasi-Sovereigns?’

Last week, state-owned Dubai World requested a six month standstill on its debts, calling into question the emirate’s ability and more importantly willingness to service the debt of its state-owned enterprises. While the debt in question, including a US$3.5 billion bond issued by a property development subsidiary, was not sovereign-guaranteed, investors had treated it as such, relying on the fact that the size of Dubai World and the profile of the underlying projects would imply a government rescue. Uncertainty was heightened by illiquidity and poor price action from the holiday period while the lack of information and communication at the time of the request added to concerns about the complete scale of Dubai’s implicit and explicit obligations—with on and off balance sheet debts by some estimates as high as $200 billion, or over 400% of GDP. Despite capital support that makes an outright default of Dubai World’s debt unlikely, the ongoing restructuring implies that the creditors will take a share of the pain for the most distressed assets in the holding company’s portfolio. The Dubai property development model in particular needs to be reassessed in a lower-leverage world.

At the heart of the saga is a clarification that investors shouldn’t assume implicit government support. Credit ratings for Dubai-owned companies now reflect this lesson, based on a fundamental credit outlook, not an implicit government backstop. Dubai World’s request for a standstill follows months of the emirate reassuring creditors and issuing over US$15 billion in sovereign debt. The debt standstill suggests the emirate had run out of options for a preemptive comprehensive bail-out from the well-resourced region. Apparently, things had to get worse before they got better. Or rather the severity of the situation had to be impressed on bond holders. Although the risk from Dubai is not systemically important on a global level, it is significant on a UAE and GCC level, underscoring the central bank’s response to support domestic financial institutions. Beyond the UAE, the reassessment of government support could draw further attention to other countries where state support is murkier, with obligors pricing in the real likelihood of support.

Although Dubai World’s financing issues are not a surprise and are relatively small given global credit losses, they are a reminder that the vulnerabilities and imbalances that contributed to the credit crunch have not disappeared. Coming when investors already are concerned about the strength and duration of the economic recovery, and the cost of the fiscal policies that led back to growth, Dubai World’s default risk may be only one of the risks that market actors were underpricing. In particular, attention has returned to sovereign credit risk, particularly in the eurozone and its periphery, where weaker countries, like Greece and the more indebted of the Central and Eastern European countries, are under pressure.

Most markets—beyond the most exposed local markets—have shrugged off the news this week as the size of exposures became clear and hopes of support from Abu Dhabi rose. Globally some of the liquidity conditions that supported risk appetite, including core central bank policy accommodation, show no signs of being removed. UAE banks, which are already challenged by losses on mortgages as well as exposure to quasi-private companies that are undergoing restructuring, can access a new facility if needed, though the terms of this liquidity facility (beyond the price 50 basis points above the local interbank rate) remain unknown. EU banks’ exposure to the UAE, and even the exposure of UK banks, seems manageable but adds to pre-existing vulnerabilities including Eastern European exposure.

Lessons for the global economy and financial markets are mixed. Firstly, the Dubai debacle reminded investors that all is not yet well in the global financial system. Although exposures to Dubai World were relatively diffuse and containable, despite some concentrations in UK and UAE banks, they are a reminder of the remaining losses stemming from the credit boom, some of which have been obscured by the removal of mark-to-market accounting. Finally, the episode underscores the fact that despite a liquidity glut, some countries and companies will find it difficult to access credit. Not all countries have even the prospect of even partial support from a richer neighbor.

0 Responses to "Wednesday Note – After Dubai"

  1. Guest   December 2, 2009 at 8:31 am

    Me first!

  2. FEDup   December 2, 2009 at 9:15 am

    And NR’s conclusion should have been: if real estate values continue to drop (which is a near certainty), there stands a greater than 50% chance that there will be many more Dubai Worlds, triggering a massive default and severe consequences to ALL investors and lenders as governments will NOT be able to bail them all out!

  3. Guest   December 2, 2009 at 9:30 am

    In the thread just ended it was asserted that it’s “empty” to question the motives and pals of richard heinberg or to question his crapola. As it’s sad to see people misled into acting against their own interests, I offer this to keep good people with good intentions from following or becoming eco-fascists – and I suggest everyone on this board should read what is on offer at this site carefully so as to avoid falling into traps being set for you: the intro:”For most compassionate and humane people today, the ecological crisis is a source of major concern. Not only do many ecological activists struggle to eliminate toxic wastes, to preserve tropical rainforests and old-growth redwoods, and to roll back the destruction of the biosphere, but many ordinary people in all walks of life are intensely concerned about the nature of the planet that their children will grow up to inhabit. In Europe as in the United States, most ecological activists think of themselves as socially progressive. That is, they also support demands of oppressed peoples for social justice and believe that the needs of human beings living in poverty, illness, warfare, and famine also require our most serious attention.For many such people, it may come as a surprise to learn that the history of ecological politics has not always been inherently and necessarily progressive and benign. In fact, ecological ideas have a history of being distorted and placed in the service of highly regressive ends–even of fascism itself. As Peter Staudenmaier shows in the first essay in this pamphlet, important tendencies in German “ecologism,” which has long roots in nineteenth-century nature mysticism, fed into the rise of Nazism in the twentieth century. During the Third Reich, Staudenmaier goes on to show, Nazi “ecologists” even made organic farming, vegetarianism, nature worship, and related themes into key elements not only in their ideology but in their governmental policies. Moreover, Nazi “ecological” ideology was used to justify the destruction of European Jewry. Yet some of the themes that Nazi ideologists articulated bear an uncomfortably close resemblance to themes familiar to ecologically concerned people today.As social ecologists, it is not our intention to deprecate the all-important efforts that environmentalists and ecologists are making to rescue the biosphere from destruction. Quite to the contrary: It is our deepest concern to preserve the integrity of serious ecological movements from ugly reactionary tendencies that seek to exploit the widespread popular concern about ecological problems for regressive agendas. But we find that the “ecological scene” of our time–with its growing mysticism and antihumanism–poses serious problems about the direction in which the ecology movement will go.In most Western nations in the late twentieth century, expressions of racism and anti-immigrant sentiments are not only increasingly voiced but increasingly tolerated. Equally disconcertingly, fascist ideologists and political groups are experiencing a resurgence as well. Updating their ideology and speaking the new language of ecology, these movements are once again invoking ecological themes to serve social reaction. In ways that sometimes approximate beliefs of progressive-minded ecologists, these reactionary and outright fascist ecologists emphasize the supremacy of the “Earth” over people; evoke “feelings” and intuition at the expense of reason; and uphold a crude sociobiologistic and even Malthusian biologism. Tenets of “New Age” eco-ideology that seem benign to most people in England and the United States–specifically, its mystical and antirational strains–are being intertwined with ecofascism in Germany today. Janet Biehl’s essay explores this hijacking of ecology for racist, nationalistic, and fascist ends.Taken together, these essays examine aspects of German fascism, past and present, in order to draw lessons from them for ecology movements both in Germany and elsewhere. Despite its singularities, the German experience offers a clear warning against the misuse of ecology, in a world that seems ever more willing to tolerate movements and ideologies once regarded as despicable and obsolete. Political ecology thinkers have yet to fully examine the political implications of these ideas in the English-speaking world as well as in Germany.What prevents ecological politics from yielding reaction or fascism with an ecological patina is an ecology movement that maintains a broad social emphasis, one that places the ecological crisis in a social context. As social ecologists, we see the roots of the present ecological crisis in an irrational society–not in the biological makeup of human beings, nor in a particular religion, nor in reason, science, or technology. On the contrary, we uphold the importance of reason, science, and technology in creating both a progressive ecological movement and an ecological society. It is a specific set of social relations–above all, the competitive market economy–that is presently destroying the biosphere. Mysticism and biologism, at the very least, deflect public attention away from such social causes. In presenting these essays, we are trying to preserve the all-important progressive and emancipatory implications of ecological politics. More than ever, an ecological commitment requires people today to avoid repeating the errors of the past, lest the ecology movement become absorbed in the mystical and antihumanistic trends that abound today.”Know the hidden history or you will repeat it.And you can’t afford to repeat it.Stop being misled; go read and learn.

    • Guest   December 2, 2009 at 11:08 am

      Here is where you can discover the real but hidden richard heinberg and the lamentable depths of his true creepiness. Read it and weep, former fans of his. Prove to yourself he is no friend to humanity. If these revelations won’t stop you following his mislead to fascism, nothing will.

    • Wild Bill   December 2, 2009 at 3:17 pm

      As a trained ecologist I have observed the atitudes of members of the ecological movement for five decades. I must admit, some of them come across with the same fascist mentality as can be found in some foundamentalist religions.The reasons appear to be the same. They can’t handle the fear and uncertainty caused by the threats they are beseiged with so they freak out and join a group that is attracted to the strong central authority they mistakenly believe will offer them security.Many years ago, I argued with an elderly colleague. He said that a polluted environment comes from polluted values. I scoffed and replied that his statement was a gross over- simplification.Five decasdes later, I am convinced he was absolutely right!

    • Guest   December 3, 2009 at 2:38 am

      So, anyone who is concerned about the ecosystem is an eco-fascist? Give me a break!I don’t support Heinberg for the same reason I don’t support ANY one-size-fits all plan, and that’s that diversity is what makes life go. That stated, it is clear from our homogenized world that we now live in that we’ve screwed ourselves (by such homogenization).Not really sure what YOUR objective is… maybe you’re being paid? How the heck would I know?Again, before blasting me you should note that I don’t support any grand plan, not even ones that ask you to sign up and do battle against “eco-fascists.”I’ll have to admit, you’re kind of entertaining. Thanks!

      • Guest   December 3, 2009 at 6:08 am

        What do you mean by “homogenized” world? Please answer.

        • Guest   December 3, 2009 at 7:48 am

          Same as the standard english dictionary would have it:homogenized

          • Guest   December 3, 2009 at 11:54 am

            Thanks for that, but the definition alone does not tell me how you are applying the word to our world. Are you saying we are diverse elements blended into a uniform mixture? What does that mean? Are you saying we are small particles reduced to a uniform size and distributed evenly? What does that mean? I’m not understanding you – can you please clarify? Not only is it not, to me, “clear from our homogenized world that we now live in that we’ve screwed ourselves (by such homogenization)”, I do not even know what you mean by this.I’m disappointed that you brought strawman arguments, btw. This issue is serious. It isn’t honest and thoughtful discussion for you to insinuate that I said ‘anyone who is concerned about the ecosystem is an eco-fascist’: what I posted supports the very opposite of what you suggest – please re-read the first 2 paragraphs. Nor did I suggest any such ridiculous thing as people ‘signing up to some grand plan to do battle against eco-fascists’. Give yourself a break – from the strawman tedium. You seem to feel you’ve been attacked by someone because they are trying to give you armor to defend yourself and your goal with. I find that quite odd. It’s very odd that people don’t want to know if they’ve been swallowing lies from wolves in sheeps clothing, odd that they do not seek out such information about the dark history interwoven into their movement. To discover a danger proven from past observable experience, to discover that element is still alive in their movement today – you’d think people would want to be aware, would welcome being made aware of what hadn’t yet crossed their radars.Entertaining you, am I? Well aren’t you just precious!Which one of us is the more deadly serious about the issue? Which one of us is so deeply concerned about this planet’s prospects they are looking out for today’s misleaders, knowing we haven’t time to keep going down wrong paths, for more wandering away from the real problems and solutions, more squandering of time and efforts on misleads? Which of us is on the lookout for traps that will prevent us from getting back our chance to have a future?We are supposed to learn from history. If you would actually read what I gave you on heinberg, you could see why his path leads to repression and tyranny. If you read it you’d begin to see how important it is to know the history of fascists’ abuse of good people’s motives, values, and ideals to manipulate them. People aren’t bad – they are just easily tricked by the least scrupulous. I will continue to think it is a good thing to inform people of the ‘hidden’ history of fascism, so they can protect themselves from it. Fascism is not compatible with sustainability. People concerned about the health and viability of their planet have a true need to be fully awake to the history of deceit.Your turn. Again, please say how you are meaning to apply the word homogenous to our world?

          • Guest   December 4, 2009 at 6:04 am

            I think you know very well, but to continue to play (until I get bored with this)…Everything that we are doing is counter to nature. We are concentrating risks. We are making things uniform (for the corporate/capitalist/consumerist society).We are, in effect, a CAFO.You can fire away with “straw man,” “PEABRAIN” etc all you like, if that boosts your ego then who am I to upset your happiness?

          • Guest   December 4, 2009 at 6:04 am

            Guest 7:48, if you will not explain, I shall have to conclude that you meant homogenized world as in intermarriage of different ethnicities – “the mixing and blending of the “races” “.Maybe you already knew that heinberg is right in sync with the nazi-loving eugenicists and that’s precisely why you want us all to follow his path? Maybe you wish yourself the power to repress, tyranize, or get rid of “inferiors”? Maybe you are heinberg?

          • Guest   December 4, 2009 at 6:13 am

            We were obviously typing at the same time. What does CAFO mean?If you don’t want me to point out your strawman arguments, don’t use them.

  4. JGU   December 2, 2009 at 9:49 am

    Is the good professor hibernating these days?

  5. Guest   December 2, 2009 at 9:55 am“Perception management has been so intense that few realize they could be living a life beyond their fondest dreams while working half their current hours and all while lowering the pressure on resources and the environment. Under a system of full and equal rights, all would have rights to a piece of land (a home). That home could, through a communications superhighway, communicate with any other phone or computer in the world and all could be educated to whatever level they wished at almost no cost.Three-dimensional orchard permaculture would permit neighbors sharing fresh vegetables and fruits from the garden each day and delivered from warmer climes during the winter. The local mall would carry groceries and small consumer items. At half the price, moderately-priced to expensive items would be ordered over the Internet.Laws and constitutions discussed and voted on over that same communications superhighway would be participatory-direct democracy. Each person would be electronically identified, eye and thumbprint scans, etc, so there can be no cheating. Privacy aside, a society with full and equal rights would have almost no crime and big brother would have been done away with anyway.Many jobs, recording, accounting, and communicating, can be handled from home and, if we share instead of monopolize, those employed hours will drop by half or more.As monopolies structured within property rights law as related to nature’s resources and technologies are eliminated, everybody has a human right to land for a home, health care, a secure retirement, a social right to educate oneself as far as one wanted to go, the social right to know of and discuss laws to be passed, the social right to vote on those laws, and on and on.Keeping economic activity as local as possible, each federated region of the world, each country, each region of a country, each community, and each entrepreneur has rights to finance capital.Just as inequality has been structured into past constitutions and law, virtually everything required for an efficient, equal, and honest community can be put into constitutions or law as a social right or a human right.The right to believe, balanced by a right not to believe, requires a constitutional separation of church and state. All true costs are labor costs plus the rental value paid for nature’s resources which went into producing that product or service.This is Green Economics with impressive reduced pressures on resources and the environment.How was the opportunity for a secure quality life for all forsaken for the monopoly system we have today? Picture a fertile valley 5,000 years ago with fruits, nuts, vegetables grains, and thatch for homes in abundance.If the meaner members of society laid claim to that land as theirs, and if they made a deal with subordinates to provide for them if they became guards, they will have established exclusive title and proceeded to live well by charging each a share of what they harvested from “their” land.That is the establishment of aristocratic law which is our law today, as applied to nature’s resources and technologies, denying others their rightful share of what nature offers to all for free.We and other unequal societies have lived within inequality structured in custom and law for so many centuries, and because each are always taught that theirs is the best of all possible social structures, we think it is normal. Our research documents that such customs and laws are unequal, unjust, and inefficient to the extreme.That inequality structured in law siphons away so much money that those fortunate few can neither consume nor safely invest it all and soon the surplus has to be exported. But those unearned profits pull in more unearned profits.Earnings on unearned wealth is still unearned wealth and world trade is even more unequal than internal trade.When these “investors” have virtually no where else to go with their money, they expand the casino aspect of stock and commodity markets and essentially just gamble between themselves (the hedge fund-derivatives markets). Because that is how maximum profits are made, virtually all of this is done with high leverage.Those high leverages (the debt structure) collapse when those bubble values collapse. And that is where we are today. Instead of pouring that freshly printed money at the real economy and restructuring to an honest economy as these final pages demonstrate can easily be done, the very people who created this house of cards have control of the Fed-Treasury and are pouring the newly created money at themselves.Compare the simplicity of restructuring to full and equal rights for all, as we lay out, the impossibility of putting together the monopolized world that once was with excess power and unearned wealth still in place.Any person’s excessive rights are other people’s lack of rights. The world now understands this and they will not accept those excessive rights and thefts of their wealth any longer.The monopoly system established centuries ago, exclusive title to nature’s resources and technologies, denying others their rightful share of what nature offers to all for free, is —hopefully—coming to an end.Preventing this from happening is what wars and struggles of all kinds have been about as powerbrokers protect their unearned and excessive wealth and power gained through unequal property rights and they still are today.Again we must point out that the customs, belief systems, and unequal property rights of cultures seldom permit a radical structural change as addressed in this theoretical model. However, it has happened, it can happen again, and perhaps President Barack Obama will lead us in that direction.Past revolutions were carried out by too few people compared to the power of the empires still firmly controlling the world. Historic power centers did not dare let the world’s citizenry see a society with substantially more rights and freedoms.Much of the history of the past 60 years has been the suppression of just such potentially freer people. This is why we focused on the importance of a large enough share of the world breaking free. Only when their numbers are large enough, through federating alliances, will a countervailing power be in place that can challenge current powerbrokers and demonstrate to the world a truly free, peaceful, and productive social structure.Though no one can predict the outcome, the worldwide populist revolt that has been ongoing for centuries is picking up speed and power. With the dispossessed of one region in full contact with those of other regions, this time around the revolution hopefully will be uncontainable.After all, if imperialism cannot militarily contain 26 million Iraqis, how can they contain three to five billion people worldwide allied together to gain their freedom?To those battling hard for their freedom we must add the rapidly expanding legions within the imperial centers who recognize this is, and always has been, an empire. People are good and they will not tolerate their government terrorizing the rest of the world, stealing their wealth, and wasting over half of it in the process.A major study has calculated that many more countries of the world will be developed by 2035. China will be ahead of America, India will not be far behind, Turkey will equal Britain and many other countries will have done equally as well.China, India, Japan, Russia, and every other country that is developmentally advanced is much better off trading technology and training to South America and Africa for access to resources than they are currently trading with America and Europe for dollars and Euros.
    That process of decoupling will be slow and steady but it will happen.What they were analyzing is the massive efficiency of technology even as the major imperial centers still try to prevent the development of the periphery of empire.Having lost their monopoly on technology, they simply cannot prevent development of other nations no matter how hard they try. It is either deal with the rest of the world equally and fairly or it will be World War III.Since all sincerely want peace, we have addressed the possibilities, and the outline, of a peaceful velvet revolution. We are aware that the world is unlikely to fully break free from the strangle hold of imperial capitalism’s unequal property rights. The more people who learn about the true causes of poverty and war, the more possible it becomes.Other societies have other methods of monopolizing power, wealth and rights, many lacking the economic engine effect of imperial capitalism. Those systems will be just as difficult to reform as those of the West.So it will be a long struggle. Some societies may try socialist or communitarian economic structures. For those economies to be efficient, five rules must be followed:1) Society must collect all resource rents and utilize those funds plus the profits from a socially-owned banking system to operate governments, federal, state, and local, and to build and maintain infrastructure.2) A socially-owned and operated banking system must create money to build infrastructures and, in the initial stages of development, crucial industry. Required reserves must be managed (raised or lowered) to maintain the proper level of buying power.3) The costs of health care and retirements should be covered by profits of a socially-owned banking system or resource rents.4) Inventors must be well paid and all patents placed in the public domain.5) Control must be regional and local. Each federated region, each state, each community, and each entrepreneur will have a constitutional right to finance capital. Think of it like your dinner table, none are required to pay rent to sit there and all get their share.All this thesis does is, through applying the philosophy of full and equal rights across the full economic spectrum, eliminate monopolization of the bounty nature offers for free, and all receive their share.Those five points are easiest to understand as Henry George’s inclusive property rights, his mighty economic engine. By fully applying his philosophies, each citizen of this world can have a quality life. Employers, employees, creditors, and consumers —everyone within the social structure —are protected.Once such a revolution in economic thought has become universal law, the world will have the tools to address global warming, resource depletion, the massive waste of resources and labor, and other problems related to the limitations of our small planet.This is not a prediction of what will happen or even of what can be easily established. It is only a guideline pointing out it can be done if the world’s powerbrokers would set aside their quest for personal wealth and power and develop visions of a fully developed humanity. Our survival depends upon it.Perception management within imperial capitalism creates a mental prison within which prisoners (the impoverished, including those on the periphery of empire), guards (all true believers which include many of the dispossessed), maintenance workers (labor), managers (monopolizers, corporate media), etc, are, to some extent, continually trading places.Because belief systems imposed upon all societies protect power and wealth, they will not — until the system collapses and they and their children are cold and hungry — join together to gain their freedom and full rights. The failings of all those belief systems are their laws not being structured to efficiently and equally distribute the wealth processed from natural resources that nature offers to us all for free.Those failures are corrected through society collecting the rental values on nature’s resources and technologies or those values remain with the citizenry when first produced. Those funds will provide health care, retirement, insurance, build social infrastructure, and operate governments and all while reducing employment outside the home by half. It is all possible, let’s do it.

  6. PeteCA   December 2, 2009 at 10:43 am

    In 2010 the world will be playing a game of chicken … to see who’s the first to initiate a major loan default that ripples throughout the entire financial system. While at the same time, all the hedge funds and the prop trading desks at the banks continue to try to make big bucks with derivatives.Don’t you just love being at the high-stakes table in the casino? Better wear a tux.PeteCA

    • Guest   December 2, 2009 at 11:02 am

      USA will be front line runner.

    • Bob   December 2, 2009 at 3:52 pm

      I’m putting my money on the Greeks for the first to default.

      • Michelle   December 2, 2009 at 5:37 pm

        Bob,Did you ever buy GGP? Just curious, almost half of the company is projected to emerge out of bk in a couple of weeks.

      • Pecos Banker   December 3, 2009 at 12:54 pm

        Greeks and derivatives seem to go together.

  7. Softwarengineer   December 2, 2009 at 10:44 am

    Bankers Getting On Trains Commuting to Work NowDuring their morning commutes, they do their morning exercises of nodding their heads “NO”….

  8. Guest   December 2, 2009 at 11:02 am

    Bob Chapman Rumor and Predictions…1. 2010 commercial lending will be 75% collateralized, 50% in cash.2. $400 to $800 billion second stimulus plan.3. FDIC is $162.2 billion in the hole.4. 2,500 banks could be closed in 2010 and FDIC terminated.5. Repeat – No more insured deposits after 12/31/2009.6. Major banks are told to hold/store new (red) currency-dollars.7. Predict three old dollars to be traded for one new dollar 1/1/2010.Stock-Markets / Credit Crisis 2009 Nov 29, 2009 – 07:31 PMBy: Bob_ChapmanThe following information may be the most important we have ever published.One of our Intel sources, highly placed in banking circles, tells us that on 1/1/10all banks that have received TARP funds have been informed by theFederal Reserve that they must further restrict any commercial lending.Loans have to be 75% collateralized, 50% of which has to be in cash,which is a compensating balance.The Fed has to do one of two things: They either have to pull $1.5trillion out of the system by June, which would collapse the economy, orface hyperinflation. This is why the Fed has instructed banks to informthem when and how much of the TARP funds they can return. At best theycan expect $300 to $400 billion plus the $200 billion the Fed alreadyhas in hand.We believe the Fed will opt for letting the system run intohyperinflation. All signs tell us they cannot risk allowing the undertowof deflation to take over the economy. The system cannot stand such awithdrawal of funds. They also must depend on assistance from Congressin supplying a second stimulus plan. That would probably be $400 to $800billion. A lack of such funding would send the economy and the stockmarket into a tailspin. Even with such funding the economy cannot expectany growth to speak of and at best a sideways movement for perhaps a year.We have been told that the FDIC not only is $8.2 billion in the hole,but they have secretly borrowed an additional $80 billion from theTreasury. We have also been told that the FDIC is lying about the banksin trouble. The number in eminent danger are not 552, but a massive2,035. The cost of bailing these banks out would be $800 billion to $1trillion. That means 2,500 could be closed in 2010. Now get this, theFDIC is going to be collapsed before the end of 2010, which means nomore deposit insurance. This follows the 9/18/09 end of governmentguarantees on money market funds. Both will force deposits into USgovernment bonds and agency bonds in an attempt to save the system.This will strip small and medium-sized banks and force them intoshutting down or being absorbed. This means you have to get your moneyout of banks, especially CDs. We repeat get your cash values out of lifeinsurance policies and annuities. They are invested 80% in stocks and20% in bonds. Keep only enough money in banks for three months ofoperating expenses, six months for businesses.Major and semi-major banks are being told to obtain secure storage fornew currency-dollars. They expect official devaluation by the end of theyear.We do not know what the exchange rate will be, but as we have statedpreviously we expect three old dollars to be traded for one new dollar.The alternative is gold and silver coins and shares. For those withsubstantial sums that do not want to be in gold and silver relatedassets completely you can use Canadian and Swiss Treasuries. If you needbrokers for these investments we can supply them.The Fed also expects a meltdown in the bond market, especially inmunicipals. Public services will be cut drastically leading to increasedcrime and social problems, not to mention the psychological trauma thatour country will experience. Already 50% of homes in hard hit urbanareas are under water, nationwide more than 25%. That means you have tobe out of bonds as well, especially municipals.<snip>

    • Anonymous   December 3, 2009 at 8:45 am

      Hello Bob how are you? It has been a long time. Who is your source inside ? How is San Diego? What happened inside your Media venture?

    • Pecos Banker   December 3, 2009 at 1:02 pm

      An Intel source, highly placed in banking circles…With a source like that, you just have to believe what follows! Curious minds just want to know…

  9. Guest   December 2, 2009 at 11:16 am

    John Williams – HYPERINFLATION SPECIAL REPORT (UPDATE 2010)- Commentary Number 263 -December 2, 2009Economy and Financial System Face Eventual Great CollapseGovernment and Fed Actions Have Narrowed Timing forHyperinflationary Great Depression to Next Five YearsHigh Risk of Ultimate Dollar Crisis Unfolding in Year Ahead

    • Pecos Banker   December 3, 2009 at 1:06 pm

      How about *you* telling us why we are going to have a hyperinflationary great depression in the next five years, guest, so we can see why *you* feel this article, for which you do not provide a link, is convincing?

      • Wolf in the Wilds   December 3, 2009 at 8:31 pm

        Pecos,It is not difficult to see that outcome as long as you believe the Fed will continue to print money. I have done the analysis a few times already. Explore the Fed balance sheet and the Treasury funding requirement, together with Commercial Real Estate deliquency, prime mortgage deliquency + foreclosure, bank accounting fraud, and debt servicing in the US. You end up with 2 possible outcomes: deflationary depression, or the worse outcome, hyperinflationary depression.The numbers are all readily available and extensive research has been done on each of the category. Add the continually increasing unemployment and you have a ticking time bomb. 2010 will be a landmark year.

  10. GM   December 2, 2009 at 12:41 pm

    I have a strong vision of a slow slow revolution upon us in this ‘united states’.This revolution is not about one state vs another. not about the east vs west. not about the north vs south.It is a revolution about stakes and shares. the haves and the have-nots. terrorism within.who gets to decide how freely future generations’ debts get spent today? who decides to print it to begin with?how will we fund medicare and social security? will MD’s settle for a 40k salary?congressional leaders must eventually better guard themselves as they may fall victims to unhappy Americans.How are sociologists and economists not sounding the alarm?Have we become so oblivious or maybe we just don’t care?

    • Guest   December 2, 2009 at 1:13 pm

      Jobless and homeless and not able to provide, it will be the laborer against the capitalist, strikes and marches, the voice of Washington will try to pacify the revolution but it won’t be able to. The policy of the wealthy ones will/has produced great sorrow for the nation. The reckoning will come.

      • Guest   December 3, 2009 at 2:43 am

        The “nation” has always been about supporting the wealthy, it’s a class-based system.I will accept the failure of a failing nation. I don’t want to accept anything from any revolution that is comparable to the Bolshevik revolution. Changing the hands of the same faulty levers changes nothing.

    • kommiefugitive   December 3, 2009 at 1:33 pm

      This statement shows that you know nothing about Bolshevik revolution…. I mean, you may know what’s in the history books (the equivalent of, say ..2008 economic crisis was provoked by millions of families who acquired housing beyond their means, while poor bankers were forced by the US Congress to grant them loans..), but you don’t understand what really happened then.As somebody just mentioned somewhere above, he who doesn’t learn the hidden history is bound to repeat it…

      • Guest   December 4, 2009 at 6:06 am

        And just because YOU say so? Give me a break!Centralized power will ALWAYS result in collapse, it’s self-feeding!

  11. blindman   December 2, 2009 at 6:21 pm song is cut off after 2nd verse, sadly )When My Mornin’ Comes AroundIris Dement , album “The Way I Should”..When my mornin’ comes around, no one else will be thereso I won’t have to worry about what I’m supposed to sayI alone will know that I climbed that great big mountainand that’s all that will matter when my mornin’ comes aroundWhen my mornin’ comes around, I will look back on this valleyat these sidewalks and alleys where I lingered so longthis place where I now live, it will burn to ash and cinderlike some ghost I won’t rememberWhen my mornin’ comes aroundWhen my mornin’ comes around, from a new cup I’ll be drinkingand for once I won’t be thinking that there’s something wrong with meand I’ll wake up and find that my faults have been forgivenand that’s when I’ll start livingWhen my mornin’ comes around ………………………..this relates to this…..

    • AE   December 2, 2009 at 9:13 pm

      More on the issue of the market’s underpricing of sovereign credit risk in the weaker Eurozone countries: there are indeed parallels between Abu Dhabi’s support of Dubai and the Eurozone’s support of Greece. In 1Q09 investors were actually worried about a sovereign credit default in the Eurozone and spreads grew rapidly, but pulled back as risk appetite ensued. The speculation by many of Abu Dhabi leaving Dubai out in the dust has likely been the driving force behind the 30 bp increase in spreads among 10 year Greek government bonds from the previous pullback.This is a highly unlikely scenario, though, because a sovereign credit crisis in Greece would damage prospects for the EU as a whole. For example, it might cause a sudden widening in spreads and hinder fellow member countries’ ability to obtain financing and would also eliminate the prospect of the euro to replace the dollar as the main reserve currency in the future/The case of Dubai provides a strong wakeup call to the investors that have been losing sight of the underlying credit issues worldwide. It’s illustrated that there is significant uncertainty in the willingness/ability of governments to bail out; and as investors become more conscious about credit risk and become more and more skeptical of implicit guarantees and bailout assumptions, this will help reduce the risk of near-term asset price bubbles.It is also important to note that as lines between eurozone members and other members of the CEE have been blurred, fundamentals will be the main drivers going forward.

    • Guest   December 3, 2009 at 3:09 am

      Maybe someday we cross paths? I’m somewhat of a Dement fan: did you know that John Prine’s label produced some (all?) of her albums? Love this duet:, and one of my favorites:Our TownWhile I’m on a roll… check out PO’ Girl if you haven’t already- Home to You is excellent; here’s one cut (live):Drive All Night

      • blindman   December 4, 2009 at 7:06 am

        g,inevitably. probably did and didn’trealize it.

    • Guest   December 3, 2009 at 4:35 am

      Great interview, thanks for sharing! Felt, however, that Null tended to talk too much vs. his guest.I’ve never listened to Gary Null before (been accused of being a follower- everyone accuses me of everything, LOL!)One person who I think is a really good interviewer is “KMO” from C-Realm.Lots of way-out-there stuff, but lots more down-to-earth stuff, a big variety. And, this isn’t a commercial operation. Donation driven only.

  12. blindman   December 2, 2009 at 8:22 pm

    Wednesday December 2, 2009 1:00pmPublic AffairsWednesday December 2, 2009 2:00pmReel World,Freq Kenneth?,CCCP, Haskins. and clinton before congress. live.saying what they say to put us to sleep.( induction tofurtherance of the war trance ).congress loves that, “intellectual” sleep withpillows of money.comfy cozy and well paying. the desire we follow the narrative to the ongoing nightmare….the collective cognitive imperative, the trance.war trance. the meaning of america, its globalfunctional value they say..induction, trance, archaic authorization..surge good, withdrawal bad. the language of theaddict. addicted to destruction of the nurturingessence of humanity, this is what rejecting peaceinvolves as peace is antithetic to the nature of the trance. peace is death of the surge of war, inconsistent with training narrative. ( proper reading of history ) very bad for us.peace is actually destruction, never allow itto enter your life as, the narrative goes, you will be destroyed.protect yourself from peace and love at all costs.send your children to fight in war and know theelites will approve and provide godly archaic authorization. follow the correct narrative, always, and the comfort of adolescent pre-consciousness will keep you safe, warm and “innocent”, like the nazi faithful, as long as the narrative is kept from the light of day. official narratives are the basis of hell on earth, so it seems.orthink for yourself and lets see what happens. question everything and everyone but mainly yourown ideas of who and what you / we are.the truth may leave you speechless, may be circularbut it will not be fleeting and will not render youpredicated or dependent on those who would commandyou to violate your own inner voice and silence,your peace or your self.embracing peace severs the connection to the archaicauthorization and renders one free albeit consciouslyaware and disconnected from the trance, in this sensealone and witness to the former ghost of oneself…or something like that…very dangerous and bad for authority, freedom in peace.

    • Guest   December 3, 2009 at 3:10 am

      No gods, no masters, no rulers…

  13. Guest   December 3, 2009 at 4:50 am

    This raises an interesting question…China Says Dollar, Not Yuan, Needs Global AttentionHow much Yuan is floating around vs. USD?Think about it, is China’s economy really all That powerful? No, it’s just that it’s one of the last ones that is actually growing. But we know, this is just the fading light of the US-led “global economy.”

    • Guest   December 3, 2009 at 1:42 pm

      why does china need foreign aid ?Foreign aid to the People’s Republic of China takes the form of both bilateral and multilateral official development assistance and official aid to individual recipients.In 2001 it received US$1.4 billion in such disbursements, or about US$1.10 per capita. This total was down from the 1999 figures of US$2.4 billion and US$1.90 per capita. In 2003 China received US$1.3 billion in such disbursements, or about US$1 per capita.Some of this aid comes to the People’s Republic of China (PRC) in the form of socioeconomic development assistance through the United Nations (UN) system. The PRC received US$112 million in such UN assistance annually in 2001 and 2002, the largest portion coming from the UN Development Programme (UNDP).===============wiki sourcecbc 2005the Canadian International Development Agency says aid to China is necessary because, despite its progress, it still contains 20 per cent of the world’s poor and “some of the earth’s most severe environmental problems.”Inequality between rural and urban areas, particularly in western China where women and ethnic minorities are “disproportionately affected,” means “targeted measures are needed to address these imbalances.”The last shipment of UN food aid to China, wheat donated by Canada, reached the country in April.China is now being encouraged to become a food donor.”We need China’s help and resources to apply the crucial lessons learned here to other countries still struggling with hunger,” James Morris, executive director of the UN’s World Food Program, said in a release announcing the final shipment to China.

  14. ChrisL   December 3, 2009 at 5:54 am

    Porter Stansberry talks about a run on the dollar that he thinks will happen within the next 18 months.His argument is based on the Greenspan-Guidoti rule, ie that a country should maintain hard currency reserves equal to at least 100% of their short-term foreign debt maturities. He estimates that currently the US’ hard currency reserves are about $500 billion, and the short term foreign debt about $880 billion.So the situation is already more than critical, and with the $3.5 trillion of funding that’s comming in the next 12 months and the quasi certainty of further high speed money printing by the FED, Porter Stansbery’s predicament seems justified.Jesse, over at café Americain, weighs in :“What Porter Stansberry says is valid, with the important exception that the US still owns the world’s reserve currency. Otherwise it would be well on its way to a hyperinflationary climax.This is why we do not expect the default to be like the Lehman Brothers over-weekend implosion, nor as dramatic as the crisis in Dubai, or more historically the failure of the post-Soviet Russia. The US is too big to fail.The dollar will devalue to unexpected lows, not with a bang but a whimper.”It’s true that a run on the world’s main reserve currency has never happened before in modern history. But does that mean it can’t happen this time ?What happens to the other major fiat currencies (Euro, Yen) if the dollar collapses ?What happens to the global economy ? Is there a country that’s “safe” on this planet ?What does Prof.Roubini think ? Is there really a risk of a hyperinflationary death spiral within the next 18 months ?I’ve been holding cash (mixed currencies) and Gold for the last twelve months. I’m starting to think that if cash is eventually going to become worthless, I should consider buying a portfolio of diversified tangible assets, including equities of firms with large tangible assets (eg railway company, real estate, farmland, etc…).Whatever their price right now.Maybe the equity bubble isn’t fueled by optimism of a strong economic recovery, but by fear of an impending dollar collapse.So the paradox is that one might be ultra bearish about the prospects for the US and world economy, but still consider that it might be time to start moving some cash into equities.This whole thing is becoming so fucked up.

    • Jason B   December 3, 2009 at 7:14 am

      Good thought to switch to tangible assets. If you do invest in equities, remember that generally you are the beneficiary of the equity, and not the owner (unless you hold the stock certificates). The owner is Cede & Co DTC, a unit of the Federal Reserve BankDTC is 35.1% owned by the New York Stock Exchange on behalf of the Exchange’s members. It is operated by a separate management and has an independent board of directors. It is a limited purpose trust company and is a unit of the Federal Reserve.” -New York Stock Exchange, Inc. you dont physically have posession of something, you don’t own it. This goes for stocks, gold, etc. When/if TSHTF, I belive that with naked short selling and gold ETF, etc, we will find that there are more paper claims than actual value.

    • JLarkin   December 3, 2009 at 11:10 am

      I disagree. You are leaving out the incredible credit/wealth destruction ($10 trillion?) that is offsetting the “printing” by the Fed. You have to look at credit + money, not just money. Credit is gone, but debt is still there for everybody and it has to be paid back. I don’t believe the Fed can “print” away the debt, not in the timeframe that the debt becomes due. Dollars will be needed to pay off dollar denominated debts, and that will support the dollar.

  15. FEDup   December 3, 2009 at 7:10 am

    Headline: Comcast Gains Majority Stake in NBC UniversalI mention this as another example of the injustices of the current system: In most states that I am aware of,Comcast was the ONLY provider of CABLE TV, telephone and internet thus enjoying a monopoly of the cable communication business with the blessings of our politicians in Washington. I have watched my bill climb every year by 5-6% allowing this CABLE monopoly to amass so much money that it has become the largest cable television company in record time. This is fine for a company to succeed when there is valid competition, but in this case, the monopoly has been facilitated by our own leaders and the profits have been garnered on the backs of the American people. It’s not right!

    • Guest   December 3, 2009 at 7:53 am

      I solved this problem a long time ago- I killed my TV! Why pay to be programmed?

    • Guest   December 3, 2009 at 12:02 pm

      I knew we had jumped the shark a couple of years ago – when I read that Comcast became the first company to sign an agreement to pay their founder his CEO salary for the first 5 years AFTER HIS DEATH.

  16. MM CA   December 3, 2009 at 8:01 am

    NO Jobs! Remember too that December is always a lower month in layoffs and claims for various reasons. More partime enter the workforce to help out during the holiday season, Employers are not interested in major layoffs around the holiday (bad for morale). Wait until end of january when all those holiday jobs dissappear and companies realize they need to keep cutting because demand still continues to fall… Remeber this holiday season as it may be the last one where “things still seem normal”The Labor Department says first-time claims for unemployment insurance dropped by 5,000 to a seasonally adjusted 457,000, the lowest total since the week of Sept. 6, 2008.24 States Borrow Money To Pay Unemployment Benefits15 states have collectively borrowed more than $15 billion and another 9 states are in the red over unemployment benefits. Please consider Jobless claims put state in debt.North Carolina’s high unemployment rate has stuck the state with $1.4 billion in debt – money that officials don’t know how they’ll pay back.It gets worse. The debt is still rising. The problem is that with about 500,000 people out of work, the state has more unemployment claims than it can pay. So it has been borrowing from the federal government since February, sometimes as much as $20 million a day.The tally will rise to at least $2billion by the end of the year, said David Clegg, deputy chairman and chief operating officer of the N.C. Employment Security Commission. Next year, depending on the economy, could add another $2 billion to the tab, he said.For purposes of comparison, the state budget for the current fiscal year is $19 billion.Let’s do the math. The state budget is $19 billion. Potentially $4 billion will be borrowed to pay unemployment benefits. In other words the state is borrowing an amount equal to 21% of its total budget just to pay unemployment benefits. Wow.Only five states have borrowed more than North Carolina. Altogether, seven states have borrowed more than $1 billion each – more than $15 billion collectively – to shore up their unemployment insurance systems, according to the U.S. Department of Labor. A total of 24 states plus the Virgin Islands have borrowed money from the federal government.Many states “are in pretty dire straits right now,” said Ingrid Evans, unemployment insurance director at the National Association of State Workforce Agencies.The best hope for North Carolina, said Clegg, is for Congress to forgive a portion of the debt, if not all of it.Another solution would be to raise the tax on employers that funds jobless benefits. Indiana, which owes about as much as North Carolina, recently took that move, but North Carolina officials worry it would increase financial pressure on businesses when they can least afford it.”I would love to hear some U.S. Department of Labor official explain how they expect the states to pay billions of dollars from an employee base which is, at best, 20 percent smaller than it was before the recession started,” Clegg said.I guess Clegg did not hear Obama’s plan to create or save 3.5 million jobs. Then again, the economy has lost about 9 million jobs. Of course the economy needs 100,000 jobs per month just to keep up with demographics (birth rate and immigration).Moreover the jobs Obama claims to create comes at a very steep price. Please see Obama creates 640,329 jobs at a cost of $323,739.83 per job for details.Finally, it is beyond preposterous to take credit for “jobs saved” when there is no way to measure it, or to take credit for jobs created when many of them were temporary (like all the road projects everywhere).No definite planThe National Association of State Workforce Agencies, which represents state departments such as the ESC, has made sure that members of Congress on both sides of the aisle are aware of the states’ plight, Evans said. But with the states not due to make any debt payments for more than a year, no proposals for dealing with the issue have surfaced. Indeed, the association itself hasn’t yet formulated its position.Right now North Carolina doesn’t have a definite plan for paying off the debt. What’s most important today, state officials say, is that the state is continuing to pay unemployment benefits.The only source of money for the unemployment insurance fund now – other than loans from the federal government – is the unemployment insurance tax that employers pay. Companies typically pay the tax on a quarterly basis, and the rate depends on how many workers the companies have laid off and how much those workers received in unemployment benefits.The tax is capped at 5.7 percent of taxable payroll; the average rate currently paid by companies is 1.6 percent.Increasing the tax rate on employers would be up to the General Assembly. But it would take a sizable increase to make a difference, and any attempt to do so likely would be resisted by the business sector.No EscapeI sense a huge tax increase coming. Add that tax increase to concerns over cap-and-trade, rising taxes on the wealthy (many are small business owners), concerns over health care costs, etc, and small businesses have lots of reasons not to hire.Increased taxes aside, business have little reason to expand given rampant overcapacity in retail stores, restaurants, strip malls, office space, etc. Neither housing, commercial real estate, nor autos will provide the same boost as coming out of the last recession.Couple that with over 9 million people working part-time whose hours will be lengthened before new hiring begins and you can see what a mess this is.Table A-5 Part Time Statusclick on chart for sharper imageThe chart shows there are 9.28 million people are working part time but want a full time job. A year ago the number was 6.8 million.Note the trend in part-time work. It is inching up. In a recovery it should be headed down quickly. The reason is employers increase the hours of part-time workers before they start hiring full-time workers.The key take-away from this series are the millions of workers whose hours will rise before companies start hiring more workers.Unemployment will be structurally high for a decade.Mike “Mish” Shedlock

  17. MM CA   December 3, 2009 at 8:06 am

    No amount of Govt interevention is going to fix this problem nationwide. Housing vlaues are down and going down even more and it will be 20 years or more if they ever get back to 2007 Top. The numbers dont lie, and the problem is Gigantic…. Americans are headed for many years of misery…A new report shows 69.5 percent of homeowners in Las Vegas are underwater on their mortgages. That compares with about 23 percent of homeowners nationwide. A Henderson neighborhood is shown here.By Steve Green (contact)Monday, Nov. 30, 2009 | 8:30 a.m.Sun Topics■Real Estate in Crisis■Sun business and economy coverageHomeowners in the Las Vegas area continue to be punished by dropping prices, with the number underwater in their mortgages surpassing 319,000 or 69.5 percent.That’s according to First American CoreLogic, which last week issued negative equity numbers for home mortgages and home equity lines of credit.The company, based in Santa Ana, Calif., found that in September, nearly 10.7 million, or 23 percent, of residential properties nationwide with mortgages were in negative equity.First American said that negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgage than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.In the Las Vegas-Paradise statistical area, 319,873 residential properties with a mortgage were in negative equity as of September, First American said.First American said negative equity was concentrated in four states where housing markets boomed during the mid 2000s — Nevada (a 65 percent rate), Arizona (48 percent), Florida (45 percent) and California (35 percent) — and in Michigan, 37 percent, hard-hit by the recession.Among these top five states, the average negative equity share was 40 percent; compared to 14 percent for the remaining states.First American made these points in its report:–The rise in negative equity is closely tied to increases in pre-foreclosure activity. Borrowers with equity tend to have very low default rates.–The default rate for investors with negative equity is typically 2 to 3 percent higher than owner-occupied homes with similar degrees of negative equity.–Upside down borrowers typically financed their properties between 2005 and 2008.–Many purchased new homes. For homes built between 2006 and 2008, the negative equity share nationwide was 40 percent.–Many borrowers relied on adjustable rate mortgages (ARMs)–Many bought less-expensive properties. The average value for all properties with a mortgage is $270,200, but properties in negative equity have an average value of $210,300. The average mortgage debt for properties in negative in equity was $280,000 and borrowers that were in a negative equity position were upside down by an average of nearly $70,000.”Negative equity continues to be pervasive and to impact almost every segment of the housing market. The recent improvement in home prices this past spring and summer has slowed the increase in negative equity, but it will take a significant rebound in home prices, which we are not expecting, to offset the dampening effects of negative equity in the most depressed states,” Mark Fleming, chief economist with First American CoreLogic, said in a statement.

    • Guest   December 3, 2009 at 8:08 am

      By Julie HavivNEW YORK (Reuters) – The meltdown of the U.S. housing market is not over yet, and home prices will soon start trekking downward again as a flood of foreclosures looms, a well-known economist said on Wednesday.Mark Zandi, chief economist at Moody’s in West Chester, Pennsylvania, said in an interview with Reuters home prices will resume their decline by early next year as foreclosure sales pick up again.”The housing crash is not over,” he said.The U.S. housing market has suffered the worst downturn since the Great Depression, and its impact has rippled through the recession-hit economy as well as the rest of the world.A setback for the hard-hit housing market could portend problems for the U.S. economy.Home prices, as measured by the Standard & Poor’s/Case-Shiller U.S. National Home Price Index, will trough in the third quarter of 2010 after declining 38 percent, Zandi said.The index peaked in the second quarter of 2006 and hit a trough in the first quarter of 2009, a drop of about 32 percent.

  18. Winston Smith   December 3, 2009 at 8:52 am

    Quote from new opinion piece titled-“The Obama Puppet by Paul Craig Roberts – Assistant Secretary of the Treasury in the Reagan administration.”…for decades now the federal government has been funding its wars and military budgets with the surplus revenues collected by the Social Security tax on labor.To claim, as the right-wing does, that we can’t afford the only thing in the entire budget that has consistently produced a revenue surplus indicates that the real agenda is to drive the mere citizen into the ground.The real entitlements are never mentioned. The “defense” budget is an entitlement for the military/security complex about which President Eisenhower warned us 50 years ago. A person has to be crazy to believe that the United States, “the world’s only superpower,” protected by oceans on its East and West and by puppet states on its North and South, needs a “defense” budget larger than the military spending of the rest of the world combined.The military budget is nothing but an entitlement for the military/security complex. To hide this fact, the entitlement is disguised as protection against “enemies” and passed through the Pentagon.”

    • FEDup   December 3, 2009 at 9:34 am

      sadly, Mr. Roberts is right-the military/security complex continues to increase in size and requires more money year after year as we send off our young to be mamed or killed or traumatized for life. It has become a country run by those devoid of morality, justice and equality and turns even the most jaded atheist into a grieving child praying for a day of judgement by a higher power!

      • Winston Smith   December 3, 2009 at 9:50 am

        it is maddening isn’t it Fedup? I walk down my cities streets and the downtown is literally lined up with poor, homeless, mentally ill folks some of whom are war vets. There is no reason on earth for this to be happening. Why can’t we house and care for these people? It would cost probably the price of a B-1 bomber to care for these wretched of the earth each year. We are cut off from our souls in this environment and I can’t help but think that the higher power you allude to is doing quite a number on the psyche of the masters of war as we speak.

        • FEDup   December 3, 2009 at 10:25 am

          agree! Do our illustrious leaders not realize that America will become the most dangerous country on the planet when when most of the hardworking middleclass lose everything they’ve worked for and join the ranks of the poor while the elite continue to prosper? Forget about fighting wars abroad; we are on the path to creating a 100 million middleclass revolution in this country and yet, as you observe, the amount we spend on worldwide military adventures would more than cover our domestic expenses; in fact, the amount saved on MEDICAL CARE of our military by not going to war would easily cover our domestic programs! What do we tell our kids?!

        • Guest   December 4, 2009 at 6:10 am

          Ah, but if we were to do that then we’d have real metrics with which to assess the horrors of militarism. TPTB are good at externalizing, this is a perfect example of them at their best/worst!

    • Pecos Banker   December 3, 2009 at 1:17 pm

      Thank you for mentioning the unmentionable. Has anyone every heard the professor mention the military budget? It should at least be talked about during the greatest budgetary crisis in US history.

      • Winston Smith   December 3, 2009 at 4:47 pm

        Bingo! Pecos Bill”At least “is a perfect way to put it for it is in fact the military budget which is the largest part of the pie chart. For DECADES our military budget has been astronomical and for what and for whom?According to Dwight David Eisenhower-the military complex and the armaments industry.

  19. Guest   December 3, 2009 at 8:54 am

    10% Of Americans Don’t Have Jobs… So Why Should Ben Bernanke Keep His?Dylan Ratigan|Dec. 3, 2009, 9:34 AMYou want to do something about jobs? Well, considering a different Fed Chairman might be a good place to start.Nothing would more clearly display the inability of our leaders to deal with the disastrous state of our economy than easily reconfirming Ben Bernanke for another round at the Fed on the same day that they hold a “job summit” in a harebrained attempt to try to figure out how to create jobs in this country.So far in his tenure, Chairman Bernanke has already told us that housing prices won’t go down, the subprime market will be “contained”, unemployment won’t get to 10% and that instead of regulation, those responsible Wall Streeters who used credit derivative swaps could just be trusted to use them “properly”. Of course, he thinks this performance should be rewarded with more power and utter secrecy.If the definition of insanity is doing the same thing over and over again and expecting different results, does that make Bernanke crazy for still basing our nation’s economic policies on his terrible predictions? Does it make Congress crazy for reconfirming him? Or does it make us crazy for voting these people into office??Defenders like to point out what a fantastic job Chairman Bernanke has done “rescuing” our economy from supposed CERTAIN DOOM, utilizing his formidable expertise on the Great Depression as his guidance (or cover) for providing an infinite supply of money to our most culpable banks with no strings attached. Dropping the future wealth of America from the sky is a pretty easy way to put out almost any economic fire, but in this case our superstar fireman also happens to be one of the primary arsonists.So what does Bernanke’s failure to be a proper steward of our nation’s banks have to with jobs?Unlike any other business, banks and insurance companies are the only companies that do business with the wealth of others. Banks are also the only business granted a list of special privileges and responsibilities. This was done to encourage banks to take the savings of others and lend it out to American businesses and individuals, with the goal of helping grow new ideas and businesses that serve the current and future needs of society and, in the process, create jobs that help fulfill those needs.But our banks haven’t been serving the interests of the broader economy for quite some time.Instead of being incentivized by the government to lend money to all the innovators, investors and workers in this country, our banks are either hoarding cash, playing the spread between low interest government loans and higher yields or just flat-out gambling through the giant and ongoing insurance fraud that is the derivatives market.The Federal Reserve and other government programs are literally pouring a potential $23.7 trillion of taxpayer money into bucket with a giant hole in the bottom and wondering why there are no jobs.Would you work if you could steal money without consequences? Would you do the hard work of lending money to the small businesses of America if you could just make more gambling it in swap markets of New York and never have to worry about the losses?This economic model is not geared towards jobs. This is not capitalism. This is not American. This is a crime.So when the very same government proclaims today at a so-called “jobs summit” that, by golly, they really want to try and come up with some ideas to help you get a job, tell them a good place to start would be to deal with the recent job performance of one of our economy’s chief arsonists.

  20. Capone   December 3, 2009 at 10:42 am

    Congrats to Professor for being cited in the Bernanke hearing a few moments ago!I want to say something about jobs. In the hearing, one Senator stated all that Bernanke, the Fed and the Congress has done so far has failed to stimulate job growth. He then asked “What can we do?” to Bernanke moments ago.One idea is abundantly simple and clear. Instead of a company buying back $5 billion in their own shares with one hand while they fire thousands of employees with the other, maybe they should consider retaining the employees! Not to mention any names – IBM. There is so much discussion about banks lending to small business to drive job growth. This discussion distracts, detracts, steers away from the one true source of job growth being passed on by many companies CEOs and Boards of Directors. Oh shoot, we just got back to the aweful truth. This country is run and owned by greedy CEOs and Boards of Directors. Even if it means 20% unemployment for the masses of fools named Americans, their primary goal is to increase their substantial personal wealth and power. There does not appear to be one iota of interest in doing anything for the people in this nation.Certainly, there must be some consequence for the greedy actions of these individuals in leadership. That is not for me to know or to say, but something I have read before comes to mind.Repay no one evil for evil, but give thought to do what is honorable in the sight of all. If possible, so far as it depends on you, live peaceably with all. Beloved, never avenge yourselves, but leave it to the wrath of God, for it is written, “Vengeance is mine, I will repay, says the Lord.” To the contrary, “if your enemy is hungry, feed him; if he is thirsty, give him something to drink; for by so doing you will heap burning coals on his head.” Do not be overcome by evil, but overcome evil with good.—Romans 12:17-21

    • Guest   December 3, 2009 at 12:22 pm

      Love casts out all fear. If we loved ourselves well, we would become completely unafraid to take our money back from the thieves. But we do not love ourselves anymore. We are not ‘for’ ourselves anymore.If all the world’s wealth that is being sucked up into the bank accounts of the 1% were being sucked up into alien spaceships instead, people would immediately unite in agreement to do something about it.We would have acted by now. We would be unafraid to love ourselves enough to take our money back from aliens.The elites don’t wish us to start loving ourselves again as we should. They rely on our masochism to keep them enthroned.

  21. economicminor   December 3, 2009 at 11:00 am

    Interesting piece written about the FED.. contains history of the FED and inflation. Most of us know these things but it is still a nice piece putting together much of what the bloggers here have said over the last few years in one piece.Others are spreading the word. Not that it has done much good so far. It is one thing to know and another to have some vehicle by which to act responsibly. For those with the power are using it to protect their positions and not to change the dynamics. I personally don’t think they know what else to do and things will only change after Average Joe and his friends get mad enough to march in the streets. That isn’t yet. May not be until this time next year. But as the article points out and I have said here before, inflation transfers wealth upward. Main Street has been hammered with declining real incomes for three decades. This trend has been an accelerating trend and Average Joe was forced/conned into using credit to fill in the gaps.The gaps became untenable around mid 2007 and the collapse started. Nothing the government or the FED have done has altered this and defaults on all sorts of loans are at record highs. This will continue until the debt overhang has been rebalanced. This is not going to happen with higher inflation. It will only get worse…At some future point, Main Street is going to finally get angry enough. That is when change will start IMHO. Not until then.

  22. Guest   December 3, 2009 at 11:18 am -> “sell $74 billion of notes and bonds next week” wuaHAHAHAAAA

  23. Guest   December 3, 2009 at 1:12 pm miss Sen Bunning grilling Bernake. We still have one real man left on the committee.

    • blindman   December 3, 2009 at 6:36 pm

      g,it was nice to see that. bunning is direct.

  24. Guest   December 3, 2009 at 1:32 pm

    GreenShoots my butt…. housing tanking, Forclosures mounting, Homelessness mounting, Hungry americans mountin, Americans without insurance mounting, Consumption tanking, Emoloyment tanking, Wages tanking, Dollar tanking, Debt mounting, Gold rising, Manufacturing tanking and Wall Street Proftis exploding again…Nothing has been fixed, in fact it is far worse than it was a year ago… you have been warned….Final November Retail Sales Are A Huge DisappointmentDavid Bodamer|Dec. 3, 2009,Retail Forward, ICSC and Retail Metrics have all done their monthly numbers crunching. The verdict is not very good. November same-store sales disappointed. According to ICSC sales were down. Retail Metrics and Retail Forward, however, reported that there was a slight year-over-year raise. What’s interesting is that there usually is not this much divergence between the three sources.According to Retail Forward, sales-weighted same-store sales excluding Walmart increased 0.9 percent in November for the approximately 31 retailers that reported numbers. (A pdf with each retailer’s results can be downloaded here.) Frank Badillo, senior economist at Retail Forward, said in a statement, “Shoppers continue to give signs that they are ready to loosen the grip on their spending plans, but at the same time remain very cautious and deal-focused in their spending.”ICSC’s tally of 32 retailers is that same-store sales fell 0.3 percent in November in comparison with last year after rising in both September and October. Here are ICSC’s results going back to 1993. According to its report, “These data suggested that the holiday season got off to a weak start in November for retailers–though the tail-end of the month saw relatively strong sales for electronics and online spending, but that seemed to be at the expense of some in-store performance and apparel demand, in particular.”Retail Metrics, meanwhile, reported that same-store sales increased 0.9 percent–results the firmed called “a giant miss”. Retail Metrics’ numbers include 37 retailers. Of those, 14 posted gains, two had flat sales and 21 posted same-store sales declines.JPMorgan: The Global Recovery Stalled In NovemberVincent Fernando|Dec. 3, 2009,JPMorgan’s aggregate global manufacturing and services indicators both tell the same unfortunate story — the global economic recovery slowed down in November.JPMorgan: “The global economic recovery continued in November, but a growth pause in services hit the overall rate of expansion. However, new business is still rising and this should support growth looking ahead. In addition, official activity data continue to advance, suggesting the underlying recovery remains intact.”Yet while both the global services and manufacturing indices are slightly above the 50-level, which indicates continued expansion, it’s clear that the up-trend in the data has lost steam.They also aren’t far from suddenly dropping below 50 next month.CHART OF THE DAY: The Services Sector Turns Sharply LowerVincent Fernando and Kamelia Angelova|Dec. 3, 2009, 1:45 PMThe U.S. services sector is once again contracting according to the Institute for Supply Management’s (ISM) Non-Manufacturing Index.The latest November index value came in at 48.7, surprising consensus economists who expected it to be 51.5. Any value below 50 indicates a contraction of activity, according to the ISM.This makes it very clear that the services sector improvement we’ve seen all year has suddenly reversed, after only briefly breaking above the key 50-level. See detailed tables about the latest November report here.10% Of Americans Don’t Have Jobs… So Why Should Ben Bernanke Keep His?Dylan Ratigan|Dec. 3, 2009, 9:34 AM | 659 |18Fire the bastard!Read »

  25. Guest   December 3, 2009 at 1:48 pm

    Henry C.K. Liu″Make the cost of wage increases deductible from corporate income tax and make the savings from layoffs taxable as corporate income.”

  26. Guest   December 3, 2009 at 3:02 pm

    climate change debate both sides toronto canada

    • ChrisL   December 4, 2009 at 2:51 am

      The US economy has been destroyed by 30 years of reckless spending and living beyond our means.Finger- pointing at Obama won’t change a thing.

  27. Octavio Richetta   December 3, 2009 at 3:14 pm

    Most markets—beyond the most exposed local markets—have shrugged off the news this week as the size of exposures became clear and hopes of support from Abu Dhabi rose….This has been true so far, but The Teflon markets are starting to look bery bery cansados. Take a look at charts of the three US equity indices today:^GSPC&l=on&z=m&q=l&c=&c=^IXIC&c=^DJIVirtually flat all day followed by nosediving in the last 45 minutes of trading.BTW, I came across a nice site that I now include as par of my daily reading tour: of great stuff about everything. Check out the Dubai material

    • Octavio Richetta   December 3, 2009 at 3:20 pm

      BTW, if you are a regular reader, you are familiar with my recent call for a mild recovery/DD instead of a strong one in the near term (my previous view). The level of certainty on this call is still low as the evidence is still developing. So far the data seems to point in favor of my call (Black Friday sales, Service ISM data, employment, Dubai, please add to the list both in favor and against). I am trying to be one step ahead of the pack but perhaps I am too far ahead:-)! For example, XLU and VPU have rallied almost 3% since I sold them:-)Let’s see what the WLI does tomorrow.

      • Octavio Richetta   December 3, 2009 at 3:58 pm

        CHART OF THE DAY: The Services Sector Turns Sharply Lower

      • Little Saver   December 3, 2009 at 4:32 pm

        May I add the debt looming everywhere and people getting more aware about it? The notion of debt as a liability that has to be serviced is slowly sinking in. That prevents any growth based on more debt accumulation, although the Fed is doing everything and more to inflate it. Alas, no living souls except those of politicians and banksters buy it. Helicopter Ben, real people don’t swallow your policy anymore. Your only adepts left are politicians (if sponsored) and banksters (with thanks for the zero interest money). Incest.

        • Guest   December 4, 2009 at 6:14 am

          Ah, but they were well taught by Edward Bernays!

          • Guest   December 4, 2009 at 6:22 am

            “The organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country” – Edward Bernays

    • Guest   December 3, 2009 at 4:16 pm

      Total money market fund assets fell $8.9 billion to $3.330 trillion. The ytd decline has been 14.5% or $501 billion, or 10.4% yoy.Dubai’s debt woes may worsen to become a “major sovereign default” that roils developing nations and cuts off capital flows to emerging markets, Bank of America Corp. said.“One cannot rule out — as a tail risk — a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s,” Bank of America strategists Benoit Anne and Daniel Tenengauzer wrote in a report.A default would lead to a “sudden stop of capital flows into emerging markets” and be a “major step back” in the recovery from the global financial crisis, they wrote. Two-thirds of small-business owners surveyed last month by Toluna Research at the behest of Angrisani Turnarounds (which specializes in what its name implies) said that they are concerned or extremely concerned about their firms’ surviving for two years. Their fears aren’t unfounded, considering that small-business bankruptcies rose 44% in the third quarter of this year, from the same quarter in 2008, according to Equifax, a credit-reporting agency.”Our survey data over the last three months concludes that we’re going to be looking at an acceleration of the failure rate,” says Al Angrisani, head of the turnaround firm, who was chief employment advisor to President Ronald Reagan during the last Great Recession, in the early 1980s. Angrisani worries that small businesses not only haven’t seen much benefit from the $787 billion stimulus plan, but will be further squeezed by rising state and federal taxes, particularly if health-care reform passes. Another survey, by Employers Holdings, a workers’ compensation provider, found that 50% of small business decision makers won’t start hiring again for another six months.Teacher Retirement System of Texas, the seventh-largest U.S. public pension fund, will invest $200 million in private equity in Asia, whose economies are leading the world out of a

      • Guest   December 3, 2009 at 6:42 pm

        blablabla, you talking lunatic. sovereign default, worry about USA first.

  28. Guest   December 3, 2009 at 4:10 pm

    In the final analysis the game is in the process of ending. The game of bookkeeping entries is over. Reality is in the process of taking command. Zero loans from the Fed to their owners in the form of money made up out of thin air, then turned into interest bearing deposits is ludicrous on its face. How can any educated person believe in such chicanery? We give the banks money and then pay them for holding it for them. We call that free money – a gift – that no one else in the nation gets, except for these anointed banks. No jobs are created, less money is loaned and the malefactors are rewarded. What kind of a system is this? Few say anything for these elitist control the media as well and are shamed into silence even newsletter writers.America’s military force is become less and less as a factor. The world markets are simply reflecting the reality of the monetary and fiscal problems. No military in the world can defeat this reality. You cannot conquer bankruptcy. America can never pay its debt. The powers behind government blinked and their bluff have been called. The problem is there will be no winners. Every person on this planet will be a loser. 2010 will signal the beginning of the end for the world financial system. The US and world economy will begin spiraling out of control. First by official devaluation and default, and by an implosion into violence. There won’t be money to keep the system afloat

  29. PeterJB   December 3, 2009 at 4:18 pm

    Speaking of “Global Warming”:Has anybody else noticed that the mainstream and normally loud and intrusive ie impositional pundits of the failed faith-based weather theory, have now switched to using “Climate Change” in lieu of “global Warming” in their usual sermons to the hopefully still gullible ‘unwashed’, from their milk crates er, mounts?Ho hum

    • Guest   December 3, 2009 at 4:39 pm

      One bad tsunami can waste $$$billions spent in “countering” man-caused climate change.

    • Stopthewaste   December 4, 2009 at 5:34 am

      If all humans were to consume per capita only half of what americans consume today in energy, that would mean multiplying by 3 out total energy consumption.If Germans, Swedes or French can manage to maintain a similar standard of living as americans whilst consuming only half the amount of energy per capita, I don’t see why Americans can’t drastically reduce their consumption in the future.It doesn’t matter whether you call it climate change or global warming, one thing is sure, Americans are going to have to change their wasteful habits.And there is nothing in your Aynrandish libertarian dogma that’s going to help.

    • Guest   December 4, 2009 at 6:23 am

      Spoken like a true Creationist!

  30. blindman   December 3, 2009 at 5:49 pm ANNIVERSARY:ONE HUNDRED YEARS OF LEGAL TENDERAn AddressbyAntal E. FeketeAuckland, New ZealandOctober 28, 2009…We are left to second-guess history. Would the senseless killing and destruction ofproperty have come to an early end in the absence of legal tender laws, just as soon as thebelligerent governments had run out of gold to finance it? Most contemporary observers hadpredicted that it would have. There was no way to finance a conflict of this magnitude out oftaxes. People did not understand that legal tender was an invisible form of tax to pay for thegreatest war up to that point in history. They did not understand the power of credit that wouldenable governments to expend blood and treasure freely, without any restraint. People did not seethe Moloch behind the façade of legal tender ― the god that was preparing to devour his ownchildren….

    • FEDup   December 4, 2009 at 7:11 am

      yes-if no legal tender laws, no UNLIMITED credit, abuse, power, corruption, injustice, war and ultimately, self-destruction!

  31. blindman   December 3, 2009 at 10:31 pm BUBBLE THAT BROKE THE WORLD by Antal E. Fekete Professor, Memorial University of Newfoundland June 25, 2003…Please note that falling interest rates hit all productive enterprise at the same time, by making new demands on their capital structure. The burden of doing business is increased across the entire economy. Few firms go out of business voluntarily. Most choose to retrench. They downsize. This means cutting inventory and debt, hoping against hope that they can get away without cutting wages. We have already observed that as they cut inventory, prices fall; and as they cut debt, rates of interest fall. When all this comes to naught, firms must cut wages and jobs. Demand weakens further. The pit of depression is dug, ready to swallow the national economy. The initial push comes from the central banker giving the green light to speculators. That Greenspan has done. The rest, the sliding down through the chute of the deflationary spiral, is automatic.It is, of course, incredible that Greenspan refuses to see the potential threat to the economy. To add insult to injury, he has the cheek to pretend that he is fighting depression (of his own making) by cutting interest rates, the very act that will activate the deflationary inferno. The only explanation for his lack of insight is the extraordinarily low level of scientific understanding which managers of the regime of fiat currency have, or must have. That regime is capable of unleashing the most horrendous forces of economic destruction: deflation or hyperinflation. Managers qualify for the job only if they have a demonstrated ability to remain blind to these dangers. Incidentally, hyperinflation is also caused by unlimited bond speculation, in this case, on the short side of the market. We have reached the point where deflation and hyperinflation are separated only by the knee-jerk reaction of the marginal bond speculator. The regime of fiat currency has a congenital disease, namely, its complete lack of immunity against destabilizing speculation which will ultimately destroy it. The only thing managers can do is to try to put off the evil day by hook or crook. The grandiose act of Greenspan to go out on one limb and climb the yield curve must be seen as a desperate effort to postpone the day of reckoning.To summarize, falling interest rates fatally overload the capital structure of productive enterprise across the board by imposing new demands on it. These new demands have to do with the inescapable fact that at alower rate of interest it will take a higher capital sum to generate an undiminished income-stream expected of productive enterprise. These new demands crowd out net worth in the balance sheet. Bereft of capital, productive enterprise goes down in defeat. Collapsing demand is not the cause of deflation. It is the effect. The cause is collapsing capital forwhich the falling interest-rate policy of the central bank alone is responsible….

  32. Guest   December 4, 2009 at 6:25 am

    “When there is a gap between perception and reality, it is only a matter of time until the gap is reconciled. But since reality is so stubborn and tolerates no gamesmanship, it is impossible for reality to rise to meet perception. So it follows that perception must decline to meet reality.” – From the book “Supermoney”

    • Guest   December 4, 2009 at 6:53 am

      that is a good one.

  33. Morbid   December 4, 2009 at 6:44 am