Nouriel Roubini's Global EconoMonitor

RGE Monitor – Weekly Roundup

Check out all the great contributions that were published during the past week on RGE’s Nouriel Roubini’s Global EconoMonitor, RGE Analyst’s EconoMonitor, Finance & Markets Monitor, Peterson Institute for International Economics Monitor, Global Macro EconoMonitor, U.S. EconoMonitor, Emerging Markets Monitor, Asia EconoMonitor, Latin America EconoMonitor and Europe EconoMonitor.

On Nouriel Roubini’s Global EconoMonitor, Nouriel looks at the club of emerging market economies and considers whether Russia really deserves to be included among the BRIC countries.  Purely from the standpoint of economic potential and fundamentals, countries like Indonesia, South Korea and Turkey make a more compelling case.  Please read BRICkbats for the Russian Bear .


On the RGE Analyst’s EconoMonitor, Adam Wolfe and Rachel Ziemba examine whether China’s loose monetary policy is likely to fuel a property price bubble and what effect it will have on industrial overcapacity.  See Chinese Monetary Policy: Little Effect on Overcapacities, and Risks of Blowing a Property Bubble.

In Eastern Europe: Out of the Danger Zone? Mary Stokes and Jelena Vukotic argue that despite some encouraging signs Eastern Europe is not out of the woods yet. They note that the specter of a Latvian devaluation still looms, banking stress continues, and rising political risk in several countries with IMF programs is a concern.

In Fine-Tuning Australian Monetary Policy, Mikka Pineda demystifies the Reserve Bank of Australia’s decision to begin raising its interest rate ahead of other major central banks. She then outlines the trajectory for Australian interest rates for the rest of 2009 and 2010 in line with an outlook for a gradual global economic recovery and tame inflation in Australia.


On the Finance & Markets Monitor, Joseph Mason notes that it is difficult to disentangle financial fundamentals from hype.  Due to certain pressures “most institutions have not yet come to terms with their losses, instead continuing where possible to bury those under accounting rules and adjustments.  Hence, any recently-announced earnings need to be subjected to several “fudge” adjustment factors that reflect the propensity for additional hidden losses.”  Hence Mason asks Why Would Anyone Believe Bank Earnings Yet?

In Why the Dow Broke 10,000, and Why You Should Still Watch Your Wallet , Robert Reich argues that the Dow can hit 10,000 while the rest of the economy struggles because there is not much of a relationship between the two, and Reich sees these rallies as “temporary fluff.”

Mark Thoma presents a piece by Howard Davies which contends that Public Trust has Economic Consequences, and thus “it would seem that rebuilding confidence in the Federal Reserve and the Securities and Exchange Commission is economically more important than rebuilding trust in Citibank or AIG.”

Also on the Finance & Markets Monitor:

The Banking System Is Still Broken by Ann Lee

Dow 10,000, We Hardly Knew Ya! by Barry Ritholtz

Something is Wrong with Wall Street by Mark Thoma

Is the WH Finally Taking Regulatory Reform Seriously? by Barry Ritholtz

The Snowball of Derivatives: The Specter of a Second Black Swan by Ricardo Lago


On the Peterson Institute for International Economics Monitor, the important discussion on U.S.-China relations continues.  Don’t miss The United States–China Economic Relationship and the Strategic and Economic Dialogue by C. Fred Bergsten and A US-China Trade Blowout Over Tires by Nicholas R. Lardy and Steve Weisman.


On the Global Macro EconoMonitor, Otaviano Canuto asserts that if monetary policy makers are to succeed in their macroeconomic stabilization mission, complacency with respect to asset price cycles will have to be left behind.  Please see The Arrival of Asset Prices in Monetary Policy.

In Cognitive Dissonance and Global Macroeconomics, James Kwak considers some of the logical inconsistencies in the rhetoric of certain countries regarding global imbalances.

In Munchau: Next Crisis Coming Sooner Than You Think, Yves Smith features a piece by Wolfgang Munchau, which asserts that instability is the inevitable result of an overly large financial sector.  Accordingly, instability should continue to grow and get worse making exit strategies that much more perilous for central banks to orchestrate.

Also on the Global Macro EconoMonitor:

US Angling to get Chinese to Revalue Renminbi by Edward Harrison

Should G-20 Members Join the Fight Against International Commercial Bribery? by Ethan S. Burger

What Must We Do to End World Poverty? At Last, an Answer by William Easterly


On the U.S. EconoMonitor, Robert Reich notes that once Big Pharma, Big insurance, and doctors are paid off, the bill will be left with middle-class Americans who are already riddled with debt.  Reich continues to urge the Obama administration to fight for real cost containment. See Why Obama Has to do What Letterman Did: Refuse to Pay Hush Money .

In Plosser: The Fed Must Stop Qualitative Easing, Edward Harrison acknowledges that the Fed took unconventional measures in response to the financial crisis, but Harrison notes that if the Fed wants to remain independent, it needs to get rid of the toxic assets and stay out of fiscal policy for good.

In An Important Letter Sent to the President about the Danger of Climate Change, Fabius Maximus sparks the debate about climate change by presenting some little known history.


On the Emerging Markets Monitor, Michael Pettis understands China’s September data to mean that real imports are weaker than we thought, as opposed to demand being stronger than anticipated.  Pettis notes that “the basic problem is that there are very powerful policies that force a discrepancy in production and consumption growth, and the only way to eliminate overcapacity is by reversing these policies,” which aren’t sustainable especially in a world of rising trade tensions.  Don’t miss China’s September Data Suggest that the Long-Term Overcapacity Problem is only Intensifying.

In Rapid Revision, Marcus Svedberg points out that most economic forecast models are rather static, as they are more quantitative than qualitative, which works well in the midst of business cycles but can be more adventurous with turning points.


On the Asia EconoMonitor, Barry Ritholtz considers economic data out of China which he deems to be “non-transparent, well managed, and remarkably consistent over time.”  See Who Believes China’s ‘Bernie Madoff’ Data?

Ajay Shah discusses the Movement on Corporate Bonds in India.


On the Latin America EconoMonitor, Alejandro Schtulmann provides detailed analysis on President Calderon’s decision to eliminate Luz y Fuerza del Centro (LFC), the state-owned electricity company.  See The End of Luz y Fuerza: Recap, Analysis, and Ramifications.


On the Europe EconoMonitor, Sebastian Dullien considers Germany’s creative accounting approach in German Public Finances: Accounting Tricks in Conflict with the SGP.

As the next Bank of England monetary policy committee meeting quickly approaches, David Smith considers “too big to fail” banks at King on the Banks.

Don’t miss Aurelio Maccario’s thoughts on the eurozone.  Please read Who is Afraid of the Global Rebalancing? and “Did we miss something?” Pros and Cons for a sustainable and strong eurozone recovery after 3Q 2009. Euro Thoughts October 19 -23 2009.

120 Responses to “RGE Monitor – Weekly Roundup”

PeteCAOctober 23rd, 2009 at 10:28 am

Repeating a lost from last thread …These’s still a school of thought out there – that says the minimum value of the Dow will be around 5,000. That’s in inflation-adjusted dollars. Please see the following chart …Inflation Adjusted DowThanks to the folks at Chart of the Day for posting this data.This is probably a scenario that Ben Bernanke and Obama don’t really want to hear about. Come to think about it – Prof. Roubini doesn’t seem too fond of this potential outcome either. But it can’t be dismissed out of hand.And 2 quick follow-up points:1. The above chart should not be taken as direct advice to take a SHORT market position today. The timing of the up’s and down’s is quite unpredictable, of course. But the chart certainly does give basis for the argument that the recent “recovery” in 2009 is just an intermediate upleg in a larger bear market.2. As I pointed out a long time ago, anyone who invests should be using inflation-adjusted dollars to check ANY asset that they are tracking.PeteCA

softwarengineerOctober 23rd, 2009 at 12:01 pm

Yes PeteI’d add too that the run up in stocks with concurrent horrifying unemployment increases has also fueled the phony bull market, that is, until even selling less products with less employees to reduce costs becomes an impossibility too.This phony rally can not go on much longer, IMO. Its doomed, without a full American population employed again.

GuestOctober 23rd, 2009 at 1:34 pm

market price is justified by profit growth. mean doesn’t matter, only the end result matter. meaning, this bull market has leg. sorry bear, you lose.

PeteCAOctober 23rd, 2009 at 1:57 pm

There is no US profit growth. It’s too early in the Q3 season for earnings reports for you to possibly conclude that profits are soaring – or even that they are up substantially on average. Where’s your data???

MM CAOctober 23rd, 2009 at 2:04 pm

look at the data of companies reporting “decent” profits this quater and compare it to 3rd quarter of 2007. 06, 05 and you will see this qtrs profits are horrendous… any profits exist the past few qaurters only because of massive job and salary cuts. and look at revenues and they are tanking…. As GDP goes down so does revneue and profits and we have lost well over 8% of our GDP in the past 18 months. Take at all the stimulus and our GDP is down over 12%…

SoftwarengineerOctober 23rd, 2009 at 3:14 pm

I’m With Pete and MMOnce you take the meat employees out of the company and start cutting the skeleton too; there is no company.Besides, how are we going to accomodate the 100-200K new American arrivals/guests each month with jobs too?I see, “Guest” wants to fire all the existing Americans and replace them with Slave Shop Labor? The FBI used to make arrests for companies attempting that crime, now its legitimate business as usual? LOL

HubbsOctober 23rd, 2009 at 10:28 am

Reposted from Last thread:These’s still a school of thought out there – that says the minimum value of the Dow will be around 5,000. That’s in inflation-adjusted dollars. Please see the following chart …Inflation-Adjusted DowThanks to the folks at Chart of the Day for posting this data.This is probably a scenario that Ben Bernanke and Obama don’t really want to hear about. Come to think about it – Prof. Roubini doesn’t seem too fond of this potential outcome either. But it can’t be dismissed out of hand.PeteCAHide replies Reply to this comment By PeteCA on 2009-10-23 09:34:11This is a very important point, which begs the questions:Inflation adjusted Dow/S&P vs:1.)Gold/Silver/Platinum?2.)Oil/Natural Gas/Coal/ ?3.)Corn/Wheat/Soybean/Rice?Reply to this comment By Hubbs on 2009-10-23 10:04:10Oops, forgot maybe the most important:4.) waterReply to this comment By Hubbs on 2009-10-23 10:05:42

MM CAOctober 23rd, 2009 at 11:19 am

As Michele always says, Liquidity, liquidity…Nouriel Roubini: Big Crash ComingWritten by Dave Nadig – October 23, 2009 00:00 AMDr. Nouriel Roubini, professor of economics and international business at the Stern School of Business at NYU and chairman of RGE Monitor, is perhaps best known for his prescient predictions of the financial market collapse in 2005.Dr. Roubini will be the keynote speaker at IndexUniverse’s upcoming “Inside Commodities” conference on Nov. 4 at the New York Stock Exchange. We sat down with Dr. Roubini ahead of the conference to take his temperature on global markets, the role of oil (NYSEArca: USO) and gold (NYSEArca: GLD) and the impact of regulation.Index Universe ( You’ve said that you’re worried we’re already sowing the seeds of the next crisis. Where do you see that most directly?Dr. Nouriel Roubini (Roubini): Well in commodities, I look at oil prices. They fell from $145 last summer, came down to $30 earlier this year and now they’re back close to $80. But if I look at the fundamentals of demand and supply, demand is down to 2005 levels, supply and inventories are at all-time highs. In my view, the movement in oil prices is not fully justified by the fundamentals.There are improving fundamentals. There is a global recovery. But that justifies oil going from $30 to maybe $50. I think the other $30 is all speculative demand feeding on it—speculators and herding behavior. Last year, when oil was at $145, that killed the global economy. I worry that oil is going to go up above $100 for reasons that have nothing to do with the fundamentals of supply and demand. Oil at $100 would have the same negative effects on the global economy as oil did at $145 last year.Last year, when oil was at $145, the global economy was still growing. Right now it has collapsed, and is recovering. Oil pushing above $100 would have nasty, negative real trade effects and real disposable-income effects on all importing countries: U.S., Europe, Japan, China, India; all the countries that were hit by the oil shock last year. So that’s an element that is in my view totally speculative, and dangerous to the global Is that true elsewhere?Roubini: I could make a similar argument for other commodity prices. In my view, rising commodity prices are not justified by the fundamentals.There’s a huge bubble, because we have zero rates in the U.S., zero rates around the world and a huge carry trade. Everyone is borrowing at zero interest rates in dollars and getting a capital gain because the dollar is weakening, so they are borrowing at negative rates. And then they invest in risky assets: commodities, equities, credit. We’re creating a bigger bubble than before.It’s going to go crashing down, in an ugly way. That’s the basics of the Is there a regulatory solution to the speculation issue? Is the CFTC tightening and enforcing position limits a step in the right direction?Roubini: I think it’s an idea worth considering. I’m not usually in favor of position limits, but I think the swings in the value of oil have been extremely dangerous for the global economy. Oil at $145 was the reason—more than Lehman or anything else—that the global economy tipped into the worst recession in the last 60 years. After the collapse of the global economy, oil collapsed to $30. At $30, there can be investment in new capacity. But now it’s back at $80 and soon enough it’s going to be at $100.If position limits are going to be effective—and I don’t know that—I would not be against them. Because these swings in value of oil, on the way up and on the way down, are extremely damaging to global economic activity. They are dangerous. They are not justified. And if they can be controlled, so be You recently co-authored a report in which you and your colleagues ranked the U.S. third in world financial markets, after London and Australia. Was regulation a big component of that?Roubini: The U.S. might have been No. 3 overall, but it was ranked No. 38 out of 55 in financial stability, because we’ve had a disastrous banking and financial crisis. That was in part due to poor regulation and supervision of financial institutions. That’s one of many factors and reasons why the U.S. was ranked so low on that particular pillar. Certainly there has been a massive failure of regulation and supervision of the financial system. But the regulatory failure was more in the direction of unwillingness by regulators to apply regulations. The Fed had all the powers to regulate toxic underwriting of mortgages, but they believed in laissez faire markets, and they created a How does this get fixed?Roubini: I don’t believe in market discipline. It doesn’t work. That was the ideology of the last 10 years; self-regulation means no regulation. Market discipline doesn’t exist with irrational exuberance and reliance on internal risk management models that don’t work. Nobody listens to risk managers, because it’s risk takers that make the profits. The reliance on ratings agencies that have their own conflicts of interest, the reliance on soft-touch regulation, the focus on principles instead of rules—that particular regulatory philosophy has been a disaster, and we’ve learned it the hard way. We have to go to simpler rules, tougher rules and more binding rules. That’s the right You’ve been clear that you think most assets are currently overvalued. Do you think there are opportunities for investors in certain asset classes or certain geographies?Roubini: Well, there is a wall of liquidity chasing assets. That liquidity can chase those assets higher for the time being until the huge carry trade—the asset bubble and the wall of liquidity—comes crashing down. You can still have all the risky assets going higher. Of course, the higher they go, the more they diverge from fundamentals, and the riskier the situation becomes. But eventually, if the recovery of the economy is going to be anemic, sub-par, below-trend and U-shaped, there is going to be a correction. And therefore my view is to stay away from risky assets. Stay in liquid assets. I don’t know when the correction is going to occur, it could be a while longer, but eventually it will be a pretty ugly correction, across many different asset When you say “stay away from risky assets,” many people hear that and think, “Aha, gold!”Roubini: I don’t believe in gold. Gold can go up for only two reasons. [One is] inflation, and we are in a world where there are massive amounts of deflation because of a glut of capacity, and demand is weak, and there’s slack in the labor markets with unemployment peeking above 10 percent in all the advanced economies. So there’s no inflation, and there’s not going to be for the time being.The only other case in which gold can go higher with deflation is if you have Armageddon, if you have another depression. But we’ve avoided that tail risk as well. So all the gold bugs who say gold is going to go to $1,500, $2,000, they’re just speaking nonsense. Without inflation, or without a depression, there’s nowhere for gold to go. Yeah, it can go above $1,000, but it can’t move up 20-30 percent unless we end up in a world of inflation or another depression. I don’t see either of those being likely for the time being. Maybe three or four years from now, yes. But not anytime Thanks for taking some time with us today. We look forward to seeing you in November.

GuestOctober 23rd, 2009 at 4:14 pm

“Yeah, it can go above $1,000, but it can’t move up 20-30 percent unless we end up in a world of inflation or another depression. I don’t see either of those being likely for the time being. Maybe three or four years from now, yes. But not anytime soon.”Professor, you told Faber he may be correct, and now “Maybe three or four years from now, yes.”I hereby expect the likes of Schiff and Mish to be correct with regards to stimulus and bailouts for TBTF resulting in only delaying the inevitable, and it appears you are coming to the same conclusion. This may be of interest to you.

The AlarmistOctober 26th, 2009 at 3:30 am

Don’t know why the professor doesn’t see that it is indeed just simple supply and demand at work. A lot of investable assets looking for homes among relatively few good investment opportunities.AMZN was a ‘sure short’ on Friday when it popped up over 20%, but by the end of the day it had only gone higher despite a downdraft in the general market, not because the Kindle will deliver the earnings that will support that kind of jump but because there were very few other winners out there in which people could place their money rather than eeking out 0.5% or less in so-called safe investments.It is just a matter of time ….

The AlarmistOctober 26th, 2009 at 8:58 am

No, inflation is a general increase in the price level. It might be caused, temporarily, by too much liquidity chasing assets, but that sort of pull is often arbitraged away in a somewhat efficient economy, although it is often masked my monetary mismanagement that leads to the general increase in price levels.

GuestOctober 23rd, 2009 at 11:40 am

another depression??????Why is Joe Bidden say we are in a depression?Oh right, he is not an economist.He can not know.More and more I doubt about Mr. Roubini.

PeteCAOctober 23rd, 2009 at 12:18 pm

I found that quip by Biden to be interesting too. And it does look like someone made an effort to get Joe Biden’s remark’s out of the mainstream of the US media. It could be that Mr. Biden is expressing his own personal opinion about the economy. But it’s also possible … that he inadvertently revealed the real opinions of government economists who are watching our economy very closely.PeteCA

kilgoresOctober 24th, 2009 at 6:19 am

Take a look at these graphs and think again; Guest: to the same site: “September Unemployment Rates: U.3 = 9.8%, U.6 = 17.0%, SGS = 21.4%.” If the latter value is a correct reflection of the unemployment rate, then we are close to the 25% rate of unemployment hit during the nadir of the Great Depression.As I believe President Reagan said, if another guy has lost his job, it’s a recession; if you’ve lost your job, it’s a depression.SWK

The AlarmistOctober 26th, 2009 at 3:32 am

Joe apparently eats in a diner that hasn’t been open for years, or at least he said that the people in that diner had been giving him their thoughts just last year.Hypothetical diners are the stuff of which only economists can conceptualise, so he must know what he is talking about.

GuestOctober 23rd, 2009 at 12:52 pm

As long as no one probes behind the curtain, and the masses listen to the great and powerful Oz, everything will be ok. I think.The methods of Wallstreet are insidious for our nation.

GuestOctober 23rd, 2009 at 1:52 pm

Making it easier to trade out of the dollar!They’re ComingThe skyrocketing interest of U.S. investors in gold, silver, oil, and other tangible commodities, and the falling dollar that makes international assets even more appealing, should translate into an increasing number of U.S. brokerage firms trying to get in on the action by building global trading platforms for their customers. Scottrade has already done so, as has E-Trade, though both offerings are still relatively rudimentary.At first glance, it appears that the new international trading service announced by Fidelity Investments today takes things to a new and improved level, opening the door for their millions of customers to join the worldwide party.In addition to allowing stock trades in 12 foreign markets and eight currencies, the new Fidelity platform also allows you to decide whether you want to settle your foreign trades in U.S. dollars or the local currencies.It is, of course, the Canadian market that interests us the most – as that is where many of the best resource companies are found. The physical proximity of the Canadian market, its homogeneity with the U.S., and its heavy weighting on gold and energy companies will make it especially attractive to the new wave of U.S. resource investors – especially now that they have increasingly more efficient and easy ways to trade the shares.

wethepeepleOctober 23rd, 2009 at 3:38 pm

More from Garet Garett in The People’s Pottage:The fourth line was a doctrine invented and promulgatedby New Deal economists—the doctrine ofperpetual unlimited public debt. What difference didit make how big the debt was? It was not at all like adebt owing to foreign creditors. It was something weowed only to ourselves. To pay it or not to pay it meantonly to shift or not to shift money from one pocket toanother. And anyhow, if we should really want to payit, the problem would be solved by a rise in the nationalincome.Many infuriated people wasted their time opposingthis doctrine as an economic fallacy. But whether itwas a fallacy or not would be entirely a question of thepoint of view. From the point of view of what the NewDeal has called the fetish of solvency it was a fallacy.But from the point of view of scientific revolutionarytechnic it was perfectly sound, even orthodox. Fromthat point of view you do not regard public debt as aproblem of public finance. You think of it only inrelation to ends. A perpetual and unlimited debt representsdeficit spending as a social principle. It meansa progressive redistribution of wealth by will of governmentuntil there is no more fat to divide; afterthat comes a level rationing of the national income. Itmeans in the end the cheapening of money and theninflation, whereby the middle class is economically70 THE PEOPLE’S POTTAGEmurdered in its sleep. In the arsenal of revolutionthe perfect weapon is inflation.

blindmanOctober 23rd, 2009 at 3:52 pm Crime DataIntroduction”For most people, it is hard to imagine how we got ourselves into this mess: eternal states of war overseas and a military industrial complex that helps sustain it; a bankrupt economy; a healthcare system that doesn’t provide quality health, and; a financial services industry that plays by its own rules, while taking enormous risks with astronomical rewards, but when it fails, it demands the middle class pay for its losses and make it whole again.We incredulously look at how our legislators—in the Senate and the House, as well as the 50 state legislatures—are influenced by lobbyists representing nothing but private industries, especially the pharmaceutical, insurance and hospital complexes. We witness laws written entirely, not by members of Congress, but by Think tanks that are controlled and funded by special interest groups. These new laws, designed to repeal regulations, restrictions and old laws, are then presented by elected officials as necessary for the American public: the Franks, the Backus’, the Dodds, the Rockefellers and virtually 95 percent of Congressional members serve corporate interests rather than their civil constituents. We observe a new president, who made campaign promises and has broken nearly every one since coming into office. However, he is not unique in doing the opposite of the platform he campaigned on.So we have decided to investigate the character and integrity of individual corporations, from Wall Street to insurance firms, from hospital associations to the pharmaceutical industrial complex. We have spent nearly half-a-year with a full time team of lawyers, interns and specialists who gathered the data to capture the criminal legacy of American medicine today. What we have found is shocking……”

blindmanOctober 23rd, 2009 at 6:40 pm

John Prine, Souvenirs(Steve Goodman)All the snow has turned to water,Christmas days have come and gone.Broken toys and faded colours are all that’s left to linger on.I hate graveyards and old pawn shops,For they always bring me tears.I can’t forgive the way they robbed me of my childhood souvenirs.Memories, they can’t be boughten.They can’t be won at carnivals for free.It took me years to get those souvenirs,And i don’t know how they slipped away from me.Broken hearts and dirty windowsMake life difficult to see.That’s why last night and this morningAlways look the same to me.And I hate reading old love lettersFor they always bring me tears.I can’t forget the way they robbed me,Of my sweetheart’s souvenirs.Memories they can’t be boughten,They can’t be won at carnivals for free.Well it took me years to get those souvenirsAnd i don’t know how they slipped away from me.. great pain, a formal feeling comes—The Nerves sit ceremonious, like Tombs—The stiff Heart questions was it He, that bore, And Yesterday, or Centuries before?The Feet, mechanical, go round—Of Ground, or Air, or Ought—A Wooden way Regardless grown,A Quartz contentment, like a stone—This is the Hour of Lead—Remembered, if outlived,As Freezing persons, recollect the Snow—First—Chill—then Stupor—then the letting go..Emily Dickinson

blindmanOctober 23rd, 2009 at 10:47 pm

ps.”first-chill-then stupor-then the letting go.”.transition, death or birth? she leaves it upto the individual reader / internal or external voice holds sway.only an individual decision completes theverse. ? the moment is always available.

Michael Fabisiak: Stern NYUOctober 23rd, 2009 at 6:11 pm

Technically, the DOW (and the SP500 as well) needs a more definitive 2nd leg down in order to form a “base” for a true recovery.Perhaps this “hope” may not materialise and (after the short-term market euphoria) and both the DOW and SP500 head sluggishly side ways at best!The fundamentals are artificially pumped up with stimulus money, which cannot last forever! And the big risk ahead is a premature withdrawal of the stimulus, which is already started in Oz with the hike in interest rates and there is more to come. The next big shoe to drop is when the premature withdrawals of stmulus (by many countries) are perceived by the markets as a policy mistake!The more I think about the market prospects over the next 12 months, the more I fear the likelihood of a double dip either in 2010 or 2011. Even China cannot continue to pump up its economy at the current rate; there must be a pause soon!

GuestOctober 24th, 2009 at 1:38 pm

Answer me this, please.Without hefty increases of income here in United States and increases of equity down payment on real estate purchases, how can we avoid re-creating the real estate bubble? USDA Loans with 0% down, FHA with 3% down and incomes going down seems to be a recipe for a mess. Therefore, please tell me how long does stimulus need to go on, and without large increase in income inflation how do we return to a healthy balance of income and real estate values?hlowe

MorbidOctober 23rd, 2009 at 6:39 pm

A well written piece.It’s His Rubble Now

The problem isn’t his personality, it’s his policies. His problem isn’t what George W. Bush left but what he himself has done. It is a problem of political judgment, of putting forward bills that were deeply flawed or off-point. Bailouts, the stimulus package, cap-and-trade; turning to health care at the exact moment in history when his countrymen were turning their concerns to the economy, joblessness, debt and deficits—all of these reflect a misreading of the political terrain. They are matters of political judgment, not personality. (Republicans would best heed this as they gear up for 2010: Don’t hit him, hit his policies. That’s where the break with the people is occurring.)The result of all this is flagging public support, a drop in the polls, and independents peeling off.In this atmosphere, with these dynamics, Mr. Obama’s excuse-begging and defensiveness won’t work.Everyone knows he was handed horror. They want him to fix it.At some point, you own your presidency. At some point it’s your rubble. At some point the American people tell you it’s yours. The polls now, with the presidential approval numbers going down and the disapproval numbers going up: That’s the American people telling him.

I truly hope Obi will find his courage to break with the herd mentality of all that surrounds him and become a true INDIVIDUAL.

GuestOctober 23rd, 2009 at 7:46 pm

Let’s see, he could have the government directly issue currency against the Federal Reserve.Oh, wait the last president that tried that was Kennedy and we know how that work out for him.

GuestOctober 24th, 2009 at 12:57 am

so true, yes, he was handed a mess, but people expect him to fix, not to whine about about for next 4 years. god forbid, kid whines, but man owns his responsibilities. so far, Obama is a boy, not a man.

GuestOctober 24th, 2009 at 2:00 pm

Other than Ron Paul, what other politician would have allowed the “system to clean itself out. Can you imagine the lack of sleep for MM CA if stimulus and propping up TBTF was not the direction politicians took? Of course many republicans now agree with their old fiscally conservative ways now that a democrat is in office and want him (Obama) to fail. It will be interesting to see what they do after regaining power, should the can be kicked down the road.hlowe

The AlarmistOctober 26th, 2009 at 3:35 am

I would hope for a government that occasionally operates within the framework of the Constitution, but that train left the station a long time ago.

blindmanOctober 23rd, 2009 at 10:34 pm governor sees some light! and he is blind!another case of fraud being the going currency.i’m noticing an ongoing but tiresome trend asfraud and b.s. are increasingly being exposedas the substance behind accepted impressions ofauthority and “power”, but who would know?.” just give ’em the 9 billion, i don’t care.just tell ’em don’t hurt anybody. ” dr. david geiger. two. lots of information in these two hours.disturbing. fraud as currency is ultimatelyunsatisfying, it cannot work. universal principle.and ben bernanke thinks those at the bottom of hisponzi pyramid financial scheme need to be bettereducated as to their position in the scheme ofthings, as if they didn’t know. nothing in hisremarks about zirp or zombie security churning,derivative frauds or financial insurance fraud,all “legal”? and designed to gut the savings of theworking class in the name of extending credit tothe poor and speculators resulting in a shadowcredit printing press they use to finance thecapture of the governments of the world.decanting by design. the unconscious faith inthe power of fraud is seductive and has a decantingeffect on the populations me thinks.fraud is o.k.? we will see that it isn’t, noteven at the exalted levels where it is called byother names.” there is no success like failure and failure isno success at all. ” remember that one?the idea that we can conform to fraud to makemoney to do good is a seduction that fails. ithas been tried and that is part of the storyof how we got to this place where fraud is asystemic fundamental and honest informed peopleare certifiably insane.

PeterJBOctober 24th, 2009 at 4:39 am

Speaking of the Trillions being made available to “leadership” these days and the assumption (public) er. expectation, sic, that all those them tha’r “economists”, bureaucrats and “experts” (add “neocons” as well), et al, would be focussed of the state of the “economy” (global) then the following should really not be the case, particularly where the faith-based economic religion (du jour) is so well under academic, er, model, control – or so we are told by all the above::Oct. 23 (Bloomberg) — U.K. gross domestic product unexpectedly dropped in the third quarter as enduring slumps in services, manufacturing and construction kept the economy mired in its longest recession on record. The pound tumbled.GDP fell 0.4 percent from the previous three months, the Office for National Statistics said today in London. Economists predicted a 0.2 percent increase, according to the median of 33 forecasts in a Bloomberg News survey. None forecast a contraction. The economy has now shrunk over six quarters, the most since records began in 1955.Keywords: “unexpectedly”, “predicted”.Key Phrase: “None forecast a contraction”.Comment: Fact – None in charge know – except of course, all of them.Recommendation: Prepare for a Dark Age, as aforesaid. It is time to panic ;-)>Ho hum

MorbidOctober 24th, 2009 at 7:37 am

Watched this interview on Charlie Rose last night. Lew has an interesting perspective. Concerned about USD decline.Video hour with former Prime Minister of Singapore Lee Kuan YewTranscript of Lee Kuan Yew Interview

To hold government position, you must not let your fiscal deficits and your dollar come to grief. If it comes to grief in the short term and there’s a run on the dollar for whatever reason, because the deficits are too big and the financial community and the bankers and all the hedge funds and everybody come to a conclusion that you’re not going tackle these deficits and they begin to move their assets out, that’s real trouble.

MorbidOctober 24th, 2009 at 7:43 am

Opps, meant to include this snippet as well.

CHARLIE ROSE: But I just read today an announcement by your sovereignwealth fund in Singapore of over $1.3 billion in new investments, nonecoming to the United States, going to China, to India, to Brazil, and I’veforgotten where else.LEE KUAN YEW: That’s just $1.3 billion out of $300 billion.CHARLIE ROSE: But none to the United States, mostly going to allthe…LEE KUAN YEW: Yes, but the United States at the moment is in somewhatof an unstable state. Is the dollar going to decline? Yes, it is cheap,but supposing you buy and the deficits grow and Ben Bernanke is unable,your federal chairman, is unable to draw enough liquidity out of the marketand you have hyperinflation. Wow. You go down and you lost money.So everybody’s hedging, and it’s a very…

Anyone have an opinion on Lew? I see he is in the US right now talking to Kissinger, Larry Summers, Rubin, etc.

blindmanOctober 24th, 2009 at 10:15 am

m,he sounds smart and funny,(but) i didn’t see theinterview. he has a long term view and appears honest about his true concern, singapore’s place in the global market.he seems to accept log growth as sustainable forthe next 100 years? even with all the conflicting demands for oil. the two things that stuck outfor me were the pharma experiments on “racial types” being conducted in singapore and the commentabout two sets of laws in china. also the “sausage” comment. he doesn’t get around much herein the states i imagine, at least not amongst the “sausage”. i think “sausage” is arelative term. the chinese don’t sit around looking at each other saying to themselves”what am i doing with all these “sausages” aroundme?” do they? i suspect they can discern differences where outsiders just see “sausage”.i think this is a racial and urban perception rather thana legitimate national insight, but what do i know, i’m just a “sausage” too. maybe i missed his point as charlie rose repeatedly seemed to do. but itgoes to the question of social advancement, status..power…yew’s interest..”LEE KUAN YEW: We figured there were smart fellows around and so manyof them, whatever we do they will do in time and better. But there aresome areas where they will take a very long time to be able to do whatwe’re doing, and that’s to change the system from opacity to transparency,from no protection from copyright to protection of copyright and rule oflaw.There are two rules of law in China, one for the ordinary citizen andthe other for 76 million members of the Communist Party. And the judgeswill do what they know what the leaders require to keep the country stable.So would you — look, we got all the big Pharma companies inSingapore.CHARLIE ROSE: Yes, because you have protection and you have rule oflaw and you have protection of patents.LEE KUAN YEW: Yes. And we’re doing joint research with them on theeffect of these new drugs on various racial types of the population. “.human rights? not part of the conversation? isthis the language of fascism. rule of law regarding patents andno mention concerning the nature of the drug experiments on the “racial types”. are thesepeople rats? this needs further inquiry and charlie could not care less, apparently? oh, well.back to the “sausages” comment..Tom Waits – Goin’ Out West Lyrics.Well I’m goin’ out westWhere the wind blows tall’Cause Tony FranciosaUsed to date my maThey got some money out thereThey’re giving it awayI’m gonna do what I wantAnd I’m gonna get paidDo what i want andI’m gonna get paid.Little brown sausagesLying in the sandI ain’t no extra babyI’m a leading manWell my parole officerWIll be proud of meWith my Olds 88And the devil on a leashMy Olds 88And the devil on a leashWell I know karate, Voodoo tooI’m gonna make myself available to youI don’t need no make upI got real scarsI got, hair on my chestI look good without a shirtWell I don’t lose my composureIn a high speed chaseWell my friends think I’m uglyI got a masculine faceI got some dragstrip courageI can really drive a bedI’m gonna change my nameTo Hannibal or maybeJust RexChange my name to HannibalOr maybe just RexI’m gonna drive all nightTake some speedI’m gonna wait for the sunTo shine down on meI cut a hole in my roofIn the shape of a heartAnd I’m goin’ out westWhere they’ll appreciate meGoin’ out westGoin’ out west ……ps. comment: charlie sometimes looks like sausage too..” (LAUGHTER)So there’s no comparison. They are two, and there is chalk (ph) andcheese (ph) between the two societies, especially for young children whocan see how independent American children are and grow up and becomeanything if you want, beatniks if you like.CHARLIE ROSE: To use an old expression.(LAUGHTER)LEE KUAN YEW: Or whatever in China, you come out like sausages.CHARLIE ROSE: Yes, exactly.”….

MandarinOctober 25th, 2009 at 2:40 pm

When I was in China the local press reported that one of the biological institutes had just detailed the genome of the “yellow race.” The promised benefits included race-specific drugs including, presumably, antihistamines and aspirin. I assumed this was some underqualified post-Doc’s idea of lifetime funding, to be vetted and ultimately rejected by real scientists. The problem with Lee Kwan Yew is that he’s a (former)national leader operating in a top-down system that equates personal uniformity with economic efficiency. I wouldn’t say his reliance on stereotypes is typical of elites in the Tiger economies, but it’s widespread enough to be addressed and squarely contradicted. Not the job for a Charlie Rose.

The AlarmistOctober 26th, 2009 at 3:42 am

OK, so how is your criticism not applicable to Barak O et al? Only the systems are different. BTW, Singapore was a nice place to live under LKY … clean, safe, prosperous. Wish I could say that about a number of cities in the US.

blindmanOctober 24th, 2009 at 11:11 am

Obama Declares Swine Flu a National EmergencyBy THE ASSOCIATED PRESSPublished: October 24, 2009Filed at 11:23 a.m. ETWASHINGTON (AP) — President Barack Obama has declared the swine flu outbreak a national emergency.The White House on Saturday said Obama signed a proclamation that would allow medical officials to bypass certain federal requirements. Officials described the move as similar to a declaration ahead of a hurricane making landfall.Swine flu is more widespread now than it’s ever been and has resulted in more than 1,000 U.S. deaths so far.Health authorities say almost 100 children have died from the flu, known as H1N1, and 46 states now have widespread flu activity.The White House said Obama signed the declaration on Friday evening.…….. News Washington Unplugged: H1N1 Cases Exaggerated?The U.S. Centers for Disease Control and Prevention (CDC) states on their main flu Web site that flu activity is increasing in the United States, with most states reporting “widespread influenza activity.”The CDC goes on to say, and I quote:”So far, most flu is 2009 H1N1 flu (sometimes called “swine flu”).”But wait stop the presses.A three-month-long investigation by CBS News, released earlier this week that included state-by-state test results, revealed some very different facts. The CBS study found that H1N1 flu cases are NOT as prevalent as feared. A CBS article even states:”If you’ve been diagnosed “probable” or “presumed” 2009 H1N1 or “swine flu” in recent months, you may be surprised to know this: odds are you didn’t have H1N1 flu. In fact, you probably didn’t have flu at all.”Obviously CBS News and the CDC are completely contradicting each other. So who is right?Well, CBS reports that in late July 2009 the CDC advised states to STOP testing for H1N1 flu, and they also stopped counting individual cases.Their rationale for this, according to CBS News, was that it was a waste of resources to test for H1N1 flu because it was already confirmed as an epidemic.So just like that virtually every person who visited their physician with flu-like symptoms since late July was assumed to have H1N1, with no testing necessary because, after all, there’s an epidemic.It’s interesting to note that at the same time as the CDC decided the H1N1 epidemic warranted no further testing for cases due to its epidemic status, Finnish health authorities actually downgraded the threat of swine flu.In late July the health ministry and the National Institute for Health and Welfare (THL) in Finland actually removed swine flu from a list of diseases considered dangerous to the public because the majority of cases recovered without medication or hospital care!And, as the CDC continues to use fear to motivate and control Americans with their worst-case swine flu scenarios, they say nothing of the experience of those in the southern hemisphere, which just finished their flu season and found it was not as bad as expected.CBS News Finds H1N1 Tests “Overwhelmingly Negative”Before beginning their investigation, CBS News asked the CDC for state-by-state test results prior to their halting of testing and tracking. The CDC did not initially respond so CBS went to all 50 states directly, asking for their statistics on state lab-confirmed H1N1 prior to the halt of individual testing and counting in July.What did they find? CBS reported:”The results reveal a pattern that surprised a number of health care professionals we consulted. The vast majority of cases were negative for H1N1 as well as seasonal flu, despite the fact that many states were specifically testing patients deemed to be most likely to have H1N1 flu, based on symptoms and risk factors, such as travel to Mexico.”As you can see from this CBS News graphic, not only are most cases of suspected flu-like illnesses not H1N1, they’re not even the flu but more likely some type of cold or upper respiratory infection!…….anddd… Gary Null Show – 09/21/09Vaccines: Efficacy and Safety – Scientific ReviewDr Viera Scheibner is a retired Principal Research Scientist in Australia. She is one of the world’s leading experts on the faulty science and adverse effects of vaccines in general, and their individual ingredients in particular. Frequently she serves as an expert witness in court cases related to deaths and injuries caused by vaccines.Dr Scheibner has published two major books on vaccines – “Vaccination: 100 Years of Orthodox Research” and “Behavioral Problems in Childhood: The Link to Vaccination”, as well as 90 scientific peer-reviewed papers……

PeteCAOctober 24th, 2009 at 1:26 pm

Our family just had that cold that’s been going around. It’s a fairly mild cold – but does produce some coughing and sneezing. There are no reall chills, body aches, or body weakness that are typical of the real ‘flu. However, this current cold is a little strange because it hangs on for a long time – you don’t shake the symptoms off fully for 2-3 weeks. And sometimes there is a recurrent fever in the 2’nd week, esp. with younger kids.There’s a lot of confusion about what this bug really is. I think it’s just a cold. The physician who treated our youngest daighter said he thought he “suspected” swine ‘flu. But I think your report is right on the money – it’s some other kind of cold virus and it’s getting mis-diagnosed. I don’t see how the virus that our family had could kill anybody.PeteCA

The AlarmistOctober 26th, 2009 at 3:44 am

Yeah, my mother told me that 38k people die each year from the flu as a basis supporting the Big O’s declaration. As if that will make a difference. The real national emergency is the fact that Big O is prez

Winston SmithOctober 26th, 2009 at 9:34 am

nah the fault lies not with Obama. Everybody blames Obama for EVERYTHING. It’s almost hilarious and a cop out . the real problem dear forum members is that the American people are asleep or too busy or too diverted or too lazy to exert the power vested in them by the Constitution.

PeteCAOctober 24th, 2009 at 1:58 pm

Here’s a quote from Rocky Vega at the Daily Reckoning …”10/23/09 The Atlanta Fed’s macroblog has compiled a roundup of evidence showing that the economy is in a jobless recovery. It shows that jobs are scarce, that a higher than average number of jobs have been lost in small businesses (which is a bad sign), and that many workers have been forced into part time status.However, the data point that really jumps out is this one — the dominant reason for unemployment in the current economy is permanent separation. Permanent separation is when a job is cut and it’s never coming back…versus temporary layoffs, quitting, and other types of job losses.It’s a unique point because the percent of permanent job losses haven’t been this high in over 30 years, and as the article goes on to say, “Never, in the six recessions preceding the latest one, did permanent separations account for more than 45 percent of the unemployed. The current percentage stands at 56 percent as of September and appears to be still climbing.”——————-My Comment:Exactly what I said earlier on this forum. America is now in a “job-loss” recovery. If you can ever call such a situation a “recovery”. Sounds more and more like the kind of economic dislocation that produces a depression in the western hemisphere economies.The USA is now in a situation where our economy no longer justifies the high wages that were once paid to our workers. There are two basic ways that this can resolve.1) All our wages are reduced in real value: Either because of real wage reductions (we get paid less), OR because we lose high paying jobs (they migrate overseas), OR because our wages stay constant in dollars and the US dollar actually drops in value. All these factors cause a “reduction in real wages that are paid”.2) Or alternatively, we simply see a situation where a significant number of US workers lose their jobs permanently (so less of our workforce is still working), or more people can get part-time jobs only. This amounts to reduction in “average hours worked” by the US labor force.All these issues are actively taking place in our economy. How long before Washington DC gets honest and admits we’ve got a real problem here?———–Meanwhile, Mike Shedlock had an excellent article this week about problems at Citigroup. They are slicing their credit cards with low interest rates, and jacking up rates to as high as 30% on other cards that they issue. WHY? Because the real situation with losses on their off-balance sheet assets is much worse than their execs are admitting. Again – this is something that has been speculated here on this forum before. Bank of America also just took a major hit in earnings because of higher chargeoffs on loands. How long – before the Wall Street banks are back asking for more handouts again???America is in the middle of the biggest “jobs bust” and the biggest “credit bust” that we have ever seen. It’s not over by any stretch of the imagination.PeteCA

ex VRWCOctober 24th, 2009 at 6:55 pm

Pete did you see Denninger’s next Market Ticker on the subject, where he points out more evidence that this may be related to a credit dislocation:- Homes being sold at a discount for cash buyers when higher financed offers were made. I have seen evidence of this myself on realtor blogs.- The aforementioned tactics by banks to intentionally drive off borrowers and be able to book their interest owed onto their phony-baloney asset sheets.- Others like Meridith Whitney have also said credit is deteriorating.Prepare to be in a cash posture folks. Its going to be necessary very soon. All that liquidity fueling the so-called recovery will not trickle down to you and me or our employers. Its reserved for trading (which most erroneuosly call investment) by the privileged class. ex VRWC

GuestOctober 25th, 2009 at 6:38 pm

is not just “real wage reductions” is required, but also “real benefits reductions” + “corporate tax reductions” are required for 1) or 2) permanent loss of job oversea.

Winston SmithOctober 26th, 2009 at 9:45 am

He is? He’s got a job for the next three years, free housing plus health care and a great retirement package. I imagine some book deals already in the works.

GuestOctober 24th, 2009 at 4:15 pm

Citigroup’s “Hail Mary Pass”: How To Know Citigroup Is In Serious TroubleCitigroup is in serious trouble. It’s easy to tell by what they are doing.Inquiring minds note that Citi Abruptly Shutting Down Gas-Linked Credit Cards.Citi (C) is abruptly shutting down credit cards linked to gas station partners.The bank is offering few details:The bank said in a statement it “decided to close a limited number of oil partner co-branded MasterCard accounts.” That includes not only Shell, but Citgo, ExxonMobil and Phillips 66-Conoco cards.The close date was Wednesday, and letters were sent out Monday to customers informing them of the change, a Citi spokesman said. The bank would not say how many cards were shut down or how much available credit they represented.In a followup article the Business Insider notes ….Citi Jacks Credit Card Rates To 29.99% On Unsuspecting Customers.Yesterday, we reported on how scores of people across the country had found their gas station-linked credit cards from Citibank had been canceled.One reader, Rachel, emailed us and explained her frustration.I received two letters by mail from Citibank yesterday. One said that because I always paid my account on time and that I was such a great customer they were increasing my credit limit. The next letter I opened stated that Citibank was raising my interest rate from the current 18.99% to 29.99%.My husband and I have good credit and are making a genuine effort to get out of debt by purchasing next to nothing on credit.While I am ashamed to admit this to you we owe $25,000 to Citibank, our choices at this time are very limited. I have made some calculations and in order to pay the balance before they forcibly close my account, my husband and I must make payments of $1400 per month, this is a substantial increase from the minimum balances they require of $665 per month. I have not opted to pay Citibank the 29.99% interest. …Now admittedly having a $25,000 balance is a sign of a problem. On the other hand, the account seems to be in good standing, so let’s dig further.Citigroup Pressure BuildsKarl Denninger gets straight to the heart of the matter in Hisssss (Citibank Overpressure Warning?)Citibank’s average yield year-to-date (consumer and plastic) was about 12%. But they’re suffering 10% defaults, making their true margin about 2%. That’s still a positive number…. if it’s accurate.This spread, of course, has a lot to do with previously-issued fixed-rate 12.99% cards (they and everyone else had a lot) that were handed out like candy to everyone and their brother, frequently with $10,000, $20,000 or even $50,000 credit lines.Huge numbers of small business owners – especially sole proprietors – use these cards as a means of financing operations. They relied on that 10 or 12% interest rate, and most of them have huge balances outstanding.I have since confirmed that this letter is not just going to people who have had credit “challenges”. Indeed, this appears to be a blanket change on the part of Citibank. I now have multiple copies from people who assert that they have 750+ FICOs and have never missed a payment on this or any other obligation – the “paragon” of so-called “responsible” credit use. All of the letters are identical.The problem should be obvious – for someone with one of the 12.99% cards that is now 30%, this is a radical change that more than doubles monthly interest expense. Of those who have sent me copies of this letter and disclosed their previous rate, none were over 20%, meaning that these changes represent 50% or greater interest rate increases. If you’re anywhere near the edge of being unable to pay, this will shove you off the bridge and into the deep, shark-infested water of bankruptcy.Perhaps what we’re really seeing is a business reacting to hidden deterioration of asset bases that are not known by investors and the public due to the legitimation of bogus accounting that happened this last March, but which is known by company executives!This sort of “terms change”, which is an effective declaration of default even against those who haven’t defaulted (see above; the same 30% rate is being applied to defaulted and non-defaulted accounts!), will drive two consumer behaviors that could ultimately destroy Citibank’s credit card business and perhaps the bank as a whole:1. Those who can transfer balances out somewhere else and/or pay them off will immediately do so. Nobody is going to pay a 30% interest rate and an imposition of default rates on non-defaulted balances willingly and on purpose unless they have no other choice.2. A significant number of people, on receipt of this notice and understanding what it means (a declaration that non-defaulted accounts are being charged the same penalty rate as a defaulted account!) will immediately go out and charge up the entire unused balance on their card and then intentionally default.In short, this looks to me like a “Hail Mary” pass. So long as this remains a Citibank-only story my interpretation is that Citibank is in a lot worse financial shape than is being let on – perhaps poor enough that they’re at risk of imploding anyway, “too big to fail” or not.In case you missed it, please take a look at Karl’s post from yesterday Recovery? How, Given THIS? where he showed some nice Citigroup statistics and an actual “jack letter” from Citigroup to its customers.Here is the key paragraph in all of these articles.Perhaps what we’re really seeing is a business reacting to hidden deterioration of asset bases that are not known by investors and the public due to the legitimation of bogus accounting that happened this last March, but which is known by company executives!Ding! Ding! Ding!We have a winner. Citigroup needs money, and needs money badly. Moreover, there is no reason to believe this is all credit card related. In fact, there is every reason to believe Citigroup (and other banks) are in trouble on multiple fronts.Citigroup’s Shadow AssetsCitigroup is still stuck in $800 billion in off-balance-sheet SIVs of highly questionable value. That’s exactly why it’s Not Practical To Tell The Truth.The Financial Accounting Standards Board postponed a measure, opposed by Citigroup Inc. and the securities industry, forcing banks to bring off-balance-sheet assets such as mortgages and credit-card receivables back onto their books.FASB, the Norwalk, Connecticut-based panel that sets U.S. accounting standards, voted 5-0 today to delay the rule change until fiscal years starting after Nov. 15, 2009. The board needs to give financial institutions more time to prepare for the switch, FASB member Thomas Linsmeier said at a board meeting.”We need to get a new standard into effect,” Linsmeier said, though “it’s not practical” to begin requiring companies to put assets underlying securitizations onto their books this year.Enquiring minds may wish to consider Citigroup’s $1.1 Trillion in Mysterious Shadow Assets.If Citigroup is looking for an award, it can take the blue ribbon for greed, arrogance, and stupidity in the off balance sheet category. There are plenty of other categories and more blue ribbons will be awarded. Nominations are being taken now.At the time I penned that, Citigroup’s shadow assets were $1.1 trillion. They are now down to a mere $800 billion or so.Note that the FASB voted to postpone mark-to-market until Nov. 15, 2009. That time is approaching, but have no fear. The FASB has postponed mark-to-market rules once again.The reason is obvious: It’s Still Not Practical To Tell The Truth.Mike “Mish” Shedlock

blindmanOctober 24th, 2009 at 9:19 pm

g,it may not be practical to tell the truth formany people, maybe most, maybe all? but it issometimes necessary for survival and “sanity”.consciousness demands it i think.illusion, lies, and deception are tolerated aswe, or many of “we”, live in a very forgivingmorphogenic field or milieu but it isdynamic and not infinately forgiving and seemsto be less and less forgiving by the i found this to inspire and perhaps amuse?. Auditory hallucinations that are viewed by patients as positive and useful may be barriers to treatment-seeking. The aim was to assess prevalence, impact, and course of, and attributions to, these voices in psychotic and non-psychotic patients.Method: One hundred thirty-one patients of a Voices Clinic and 65 members of the Dutch Resonance Foundation were assessed with the Positive and Useful Voices Inquiry. Data were analyzed using Pearson’s chi-square, one-way anova, and Crohnbach’s alpha statistics.Results: First voices are most often reported as negative. Positive voices occur more among non-psychotic subjects, but the specific characteristics and diagnosis are not significantly associated. Lifetime prevalence of positive and useful voices ranged between 40% and 60%, with varied prevalence rates over time. Positive voices are experienced by subjects as direct addresses in the third person. Perceived control of voices is significantly associated with the wish to preserve them. Attribution of protective power to positive voices has the strongest association with positive experience.Conclusion: Many patients express a desire to preserve these voices. Voice characteristics do not allow for validly discriminating psychotic from non-psychotic disorders.Accepted for publication May 16, 2008.and then there is this insight. i think of italso in relation to markets and speculation and theevolution of these as they may relate to consciousnessand it’s potential? our evolution..Wednesday, December 06, 2006Audio HallucinationBefore I knew what was happening the television said “I want to kill myself..”. Then another voice on the television said “Just give it another 24 hours.” This had nothing to do with the movie, it was what I was hearing…an auditory hallucination. Then the first voice (who seem to be a man) said “I feel like I’m being punished for something.” And I said “Like what?” The man went on and said “Conspiracy,…, I see faces, punishments…”He went on describing all the symptoms I had went through with schiz…I thought he was making a joke out of it then…but I didn’t say anything. Can’t very well punch out the television set now can I?! Instead I said you are having symptoms of schizophrenia and need to see a psychiatrist; the medicine will help you. And I left it at that deciding I was having an hallucination again. Boy, you try to help some people, whether they exist or not…oh well…intentions are good!11 Merry Christmas!!!.Posted by Jennifer at 12/06/2006 09:50:00 PM.comment: ” Boy, you try to help some people, whether they exist or not…oh well…intentions are good!”…i love that line. reminds me of the state ofaffairs we see today in our “world”. helpingpeople who don’t exist and ignoring the realpeople or real “person” or persons.this is the core of ideology. me thinks. ?

The AlarmistOctober 26th, 2009 at 3:47 am

I said sometime in 1992 that if I had a nickle for everytime someone said city was doomed I would use it to buy its stock. I did in 1992 and things turned out roses. I did this time and so far nothing. This time might be different.

Average JaneOctober 24th, 2009 at 5:20 pm

Wells Fargo just ratcheted up my interest rate three full points, from 11.65% to 14.65%. When I called the company to ask why, the woman went into a scripted excuse, the gist of which was “it’s because of adverse business conditions.”Adverse business conditions? I told her that WF had just reported record earnings for the past three quarters. What adverse business conditions was she talking about?To which she had no answer. And so it goes.

PeteCAOctober 24th, 2009 at 7:20 pm

And so it goes …we had a great sruggle with a BoA credit card some time ago. The same circumstances as yours – they jacked up interest rates to an enormous level, even though our credit score was excellent. All the protests from my wife did no good, and I spent quite some time explaining to her that the problem was really the credit rating of the banks – and not the people holding the cards. After all, a great many of these Wall St banks are essentially insolvent – if they would be forced to take on the off-balance-sheet assets they have and value them in a realistic way. We eventually tackled the problem by paying down the debt on the card – and we are committed to NEVER accumulating any significant debt again.The only way for Americans to be free men and free women – is to never again be held as prisoners for ransom by these credit agencies!!!PeteCA

GuestOctober 24th, 2009 at 9:08 pm

These interest rate increases are self-destructive from a business perspective, sothere must be something else much more serious going on here. It could mean thatbanks have used up their TARP and are crashing.* JP Morgan’s “cash position” was analysed by a writer who published on SCRIBD,which showed its cash has deteriorated radically. By more than half in the last year.The deterioration is continuing, not slowing.* There are anecdotes from multiple areas that foreclosed property held by bankswith multiple full-price offers that bundle financing requirements are, instead,being sold to buyers with cash at radical reductions from the lending price.This suggests that financing contingencies are moribund; it’s as if thebanks know that the credit pipeline will close within weeks or months. There isno other rational explanation for taking deep discounted cash offers.* Citibank’s credit-card terms change implies a willingness to accept and evenprovoke a complete and intentional destruction of their credit card businessgiven that nobody, with an alternative, will accept a 30% interest rate. Theobvious implication is that only those who can’t transfer balances out willremain and if your credit is that impaired there’s a good chance you will defaulteither strategically or otherwise. This too implies foreknowledge of anear-complete impending freeze in the credit markets.* Changes in credit terms is NOT confined to Citibank. Infibank is makingsubstantially identical terms, in which both the standard and penalty ratewas adjusted to 29.99%. This implies that whatever Citibank smells, it isnot confined to them.* In the credit card “adjustment” letter fine print, it’s are marginal rate changes.That is, they are based on the PRIME rate. So, if you are dependent on credit accessand these anecdotes are indicating impending credit lock-up and you are at gravefinancial risk.

The AlarmistOctober 26th, 2009 at 3:53 am

Would have been better said as “That’s just the cost of using other people’s money, my friends.” Until you can directly source that capital, you have to pay the piper his due.

PeterJBOctober 24th, 2009 at 10:17 pm

Speaking about how to handle the “regulators” that is to say, the “let’s do Lunch” crowd that don’t ever pick up the tab:How concerned are they about any new regulations on the financial industry? Not much. In a copy of the notes Barclay is putting out on the meeting, and obtained by, Goldman told Barclay that it is educating the regulators.Barclay advised that senior Goldman management are spending an, “exorbitant amount of time thinking about potential regulatory and policy outcomes and educating regulators and policymakers on the intricacies of financial markets.”The only picture I can conjure up is Blankfein and company educating,Gene Sperling (“Counselor” to Geithner) who last year took in $887,727 from Goldman here in Oz with the Telecom crowd; The chief Ombudsman/woman/person says that 52% of users are now complaining about the operators – not because the scam has been going on for years with every bodies knowledge but because hard times are making customers (victims) frugal. She recommends that the operators “communicate” with their victims: Fat Chance of that!!!The closest a victim can come to talking with their Service Provider in Australia is India on a “help desk” who promises everything after first declaring, “You understand that we are not admitting liability in any terms” – but does nothing and never calls back!The Ombudsman Office is mandated to direct communication between the victims and the operators but continues its abysmal failures as the operators (the scammers, skimmers and scalpers) just ignore the Ombudsman a priori – “toothless”.And the “regulators” you may ask? “Let’s do lunch”! Same tactics:Operating Maxim in Caveat Emptor land – The Land of the Gouger!””It is more profitable to say sorry that to ask permission!”Ho hum

GuestOctober 24th, 2009 at 10:35 pm

October 23, 2009 – Peter Schiff issues a Red Alert: “Get out of the US dollar”Peter is ranting, but it’s a great rant! “You gotta believe me now.” he pleads”Get out of the dollar.”Would you get on a plane if the pilot did not know how to fly? Well, thegovernment has proven it does not know how fly the economy, so get outof the dollar.The dollar been dropping 5%/week, will it snap back? Maybe, but then itwill keep going down.But the longer we continue monetizing, the more difficult it will be to fixthe problem. If the politicians can’t take the pain now, how can thepoliticians take twice or four times the pain in the future? They are NOTgoing to fix this problem.No one, NO ONE, is buying Treasuries, in fact, foreign investors are sellingTreasuries back to the Fed. The Fed is only one buying Treasuries. The Fedis buying back old treasuries and selling $2 trillion of new ones to itself!

PeterJBOctober 24th, 2009 at 10:44 pm

Joke of the Year AwardHeard on an Australian radio news program last week:Banks are refusing to lend to small business which is leading to a glut in commercial property availability as small businesses shut down – and unemployment. A commentator interviewed a Bankers representative and asked why Banks were not lending to small businesses:Reply: ‘It is because Banks are required to lend responsibly!’ I paraphrase.My estimation is that the Australian Banks have received almost ~20 billion recently, if not far more when it comes to guarantees of depositors (hah) accounts – from government coffers, directly and indirectly.And seen last week on the counter of a local Bank, a hand printed sign offering ~6+% interest for short term GOLD deposits and ~9+% interest on long terms deposits of 12 months to 2 years. BTW Fiat savings deposits attract almost no interest rate.’Come in Spinner’ if you think that you will get your bullion deposit back, Hah!From the Land of the GougerHo hum

PeterJBOctober 25th, 2009 at 5:12 am

Talking about Peter Schiff issues a Red Alert: “Get out of the US dollar”:@ Guest (who else?)The assumptive choices:1. The Authorities know what they are doing and comprehend the dark arts of “economics”2. The Authorities don’t know what they are doing, see the looming abyss and are filling their boots (hedging that God will understand) and screw the unwashed masses.3. Both 1 & 2 above where the mileage varies4. Schiff is playing his book.I go with 3 above as there is no possibility that “leadership” has any idea what they do, know anything about “socio-economics”, and care much about anybody outside their circle of influence.I also go with Peter Schiff. But this dynamic is gaining velocity and the trend is destructive for “order”, which is already done. Guns and wars are the tools or morons er, “leadership”.Ho hum

Wild BillOctober 25th, 2009 at 6:36 am

It seems as though Obama is suffering from reverse Midas touch. Every attempt he has made to fix something, has blown up in his face and made things worse. Cash for Clunkers, the first time home buyer tax exemption, the attempts to regulate compensation, the attempts to reform the rating agencies, TARP,etc., etc.Stimulus money that can’t get out the door, more and more emphasis on jobs saved rather than jobs created, banks refusing to lend, banks playing fast and loose with credit card interest and no good consumer protection. No change at all worth talking about. Fraud and corruption surround each and evey attempt at intervention and reform.In Afghanistan, everything we do makes things worse for the people there. There are more opium poppies being grown than when the Taliban was in power. Fraudulant elections are the rule. Innocent civilian deaths are rampant. The experiences of past military incursions are being ignored with regard to Afghanistan.It seems the Obama administration is learning-disabled. Weimar and Zimbabwe have no impact on them. The great depression doesn’t mean anything in spite of the erudition of Bernanke.On and on they press, leaving worse disasters in their wake. Hand and hand the Fed and Treasury stroll down Pennsylvania Avenue, seeing what they can screw up next with their reverse Midas Touch. Now it is health care’s turn. Like obsessive control freaks, they can not accept the fact that often the best course of action is to do absolutely nothing for the immediate future, and let the markets do their work, free of criminality, with solid moral underpinnings.The current economic and foreign policies can have only one outcome. We will be plunged into a war of unspeakable horror. The most casual student of history can see this. Will the learning disabled advisors to the president be able to understand this in time? Intelligence is often defined as the ability to profit from experience. Washington is badly in need of a team of special education experts to help them overcome their learning disabilities.

Wild BillOctober 25th, 2009 at 6:38 am

I apologize for the lack of paragraphs. I put them in but they disappeared when my comments were saved. Wild Bill

Average JaneOctober 25th, 2009 at 10:38 am

With much respect to you, dear Wild Bill, the “markets” for health insurance have been doing their “work” for 30 years. I know because I’ve been there.The result? Double-digit increases in premiums every year. Less and less coverage for preventative care. Doctors who are paid for volume, not quality of care. (I personally know of an eye surgeon who schlepps 60+ patients a day through his practice. Think he provides quality care to his patients? But he’s quite well off, to be sure.)And my employer, a small business owner? We have 11 employees and the only insurance the two owners can afford is basically catastrophic insurance. Premiums up every year in the double digits. Deductible of $2,500 a year per employee with zero prescription coverage. No vision. No dental. And I might add that one of the owners doesn’t even bother to sign up for the employer plan; he gets his family coverage through his wife, who is a school nurse. Why? Because she has union benefits. While he votes Republican year after year, and we all know how Republicans feel about unions.That’s what the “market” has done for my small business employer.The answer, to be sure, is more competition, right? The same way I can only choose from one cable company in my major metropolitan city? Or one power company?That’s my reality, WB.

Wild BillOctober 25th, 2009 at 10:55 am

Dear Average Jane,The market has never been allowed to work freely due to one monopoly after another. Eleven year drug patents, limiting medical school enrollment, HMO’s and the AMA all vying to see who can influence legistlation more in their favor, captive audiences in hosptals getting charged 15 bucks for an aspirin, etc.

Wild BillOctober 25th, 2009 at 6:43 am

It seems as though Obama is suffering from reverse Midas touch. Every attempt he has made to fix something, has blown up in his face and made things worse. Cash for Clunkers, the first time home buyer tax exemption, the attempts to regulate compensation, the attempts to reform the rating agencies, TARP,etc., etc.Stimulus money that can’t get out the door, more and more emphasis on jobs saved rather than jobs created, banks refusing to lend, banks playing fast and loose with credit card interest and no good consumer protection. No change at all worth talking about. Fraud and corruption surround each and evey attempt at intervention and reform.In Afghanistan, everything we do makes things worse for the people there. There are more opium poppies being grown than when the Taliban was in power. Fraudulant elections are the rule. Innocent civilian deaths are rampant. The experiences of past military incursions are being ignored with regard to Afghanistan.It seems the Obama administration is learning-disabled. Weimar and Zimbabwe have no impact on them. The great depression doesn’t mean anything in spite of the erudition of Bernanke.On and on they press, leaving worse disasters in their wake. Hand and hand the Fed and Treasury stroll down Pennsylvania Avenue, seeing what they can screw up next with their reverse Midas Touch. Now it is health care’s turn. Like obsessive control freaks, they can not accept the fact that often the best course of action is to do absolutely nothing for the immediate future, and let the markets do their work, free of criminality, with solid moral underpinnings.The current economic and foreign policies can have only one outcome. We will be plunged into a war of unspeakable horror. The most casual student of history can see this. Will the learning disabled advisors to the president be able to understand this in time? Intelligence is often defined as the ability to profit from experience. Washington is badly in need of a team of special education experts to help them overcome their learning disabilities.

PeteCAOctober 25th, 2009 at 11:01 am

Bill: I think the problem is that the USA needed real fixes by the time Obama took over. The problems had spiralled to such big levels that cosmetic surgery wasn’t good enough to fix them. It required someone with real guts who was prepared to go completely against the mainstream of thought in Washington DC, and completely against the powerbase that funds (i.e. buys out) our politicians. So if you think about it – you can see just how difficult that is for a politician to do.At this stage – I think Obama will become a “transition President”. He will do a little bit, but he won’t be able to make the really decisive changes. I suspect that in the future he will look back at his own term in office and regret that he didn’t do more to shake down the whole system of corruption in America.PeteCA

Wild BillOctober 25th, 2009 at 11:20 am

Dear PeteCA,You are absolutely right. Reform must come from outside of the existing power structure. The insidious evil is that the complexity and ubiquitousness of the existing corruption makes the thought of a powerful autocrat seem very appealing. The situation is ripe for the emergence of a new fascism that unites frightened citizens and provides punitive policies that appeal to those who feel disenfranchised by the current power structure. We already have an amalgamation of corporations and government that is capable of forming the framework of an autocracy that would have Mussolini grinning in his grave.

PeteCAOctober 25th, 2009 at 11:42 am

Bill – I also think that you are right. I am concerned that the citizens in our country today are not (nearly) ready for some of the deprivations that we could all go through. Sometimes I remind myself that America has seen all kinds of hardships in the past (civil war, world wars, the Great Depression) and yet people managed to survive and maintain our democracy. Nevertheless, I do agree with you that a real risk exists that we could see political change than moves us toward some other kind of non-democratic government. That would be the ultimate tragedy … if we lose the democracy and the constitution that has blessed this country for so long.More than anything else – this factor is probably what exasperates me the most about Washington DC right now. By running such outrageous debt levels, they are sowing the seeds for a possible radical shift in our country’s political system. That marks an about face on all the ideals that our Gov’t is supposed to be defending.PeteCA

GuestOctober 25th, 2009 at 12:50 pm

he didnt do anything. and he doesnt deserve that noble prize. Obama is just talk talk and not gut to do real action. And his Treasury Geithner is a Tax CHEAT.

CitizenOctober 25th, 2009 at 8:28 am

SCHIFF IS A FOOL. The renminmbi is tied to the US Dollar and unless it is freely floated nothing major is ever going to happen to the US Dollar or have you guys forgotten CHIMERICA.We should be asking what does he plan to gain from making us dump dollars. DO NOT BE FOOLED, the temporary devaluation of the dollar is to stimulate local industries and create jobs. BE WARNED

PeteCAOctober 25th, 2009 at 11:10 am

Peter Schiff is not a fool – he just recognizes that a future is eventually coming where the US dollar will be trashed. It may take a few years, but our country will have gone from “riches to rags” by the time this all plays out.You are quite right to highlight the importance of the China-America economies, which are virtually one economy linked by the “umbilical cord” of the peg between the renminbi and the dollar. The Chinese will come under greater and greater pressure to loosen this peg for two reasons:1) It is causing them serious inflation problems in their own country2) As the dollar goes lower, so does the yuan relative to the yen and the euro – which puts tremendous pressure on the Japanese and European communities. Hence Japan and Europe will pressure the Chinese to loosen their currency controls … this political pressure is already starting to happen.A soon as that renminbi-dollar peg is lifted (or loosened), expect to see rising inflation inside the USA.PeteCA

GuestOctober 25th, 2009 at 12:48 pm

dont expect Asia countries to import inflation for West anymore as they turned to boost Asia economic infrastructure development and consumption.

GuestOctober 26th, 2009 at 8:57 pm

moron. you keep saying moronic thing like is kinda of religious faith thing. create industries with higher debt, higher tax on individuals, small businesses, and corporations will growth USA economy. i dont think you realize the obvious, moron.

Little SaverOctober 25th, 2009 at 9:07 am

To cheer up your weekend: Bohemian Bankruptcy way the cash flows…Obama, Oooh, I don’t wanna cry…

The AlarmistOctober 26th, 2009 at 4:01 am

Did the Republicans pave too? No, they merely did the grading and laid the foundation. Gave Big O et his ilk a good basis for the paving of the Road to Serfdom.

MONEY, MONEY, MONEYOctober 25th, 2009 at 2:09 pm

WHY THERE IS NO DEBT CRISISTHE BACKGROUND-Every major economy in the world is FUBAR. The Brits and US are mired in hopeless debt.The Euro zone is a disjointed accident waiting to happen. All of the exporters are screwed cause there isn’t anyone who wants there stuff anymore. The Chinese economy is a bubble supported only by massive government spending. Japan is a dead debt burdened economy.THE RESULT-Everyone is going to print, print, print, including large scale buying in order to keep interest rates from rising (more of what is going on now)WHY IT DOESN’T HURT-Everyone is going to money print together. Hyperinflation only occurs when a country goes off this deep end by itself. With everyone doing it together, money printing has no deleterious effect.WHY IT WILL HELP-Government debt will decrease, even as stimulus is added to the economy softening the depression and eventually reversing it.In other words-more government debt, extinguished by subsequent monetization on a global scale is the answer. The experiment has worked so far. Let it continue!!!

PeteCAOctober 25th, 2009 at 3:18 pm

Are you really Ben Bernanke – and have you been drinking Scotch all night???Anyway … a toast to the printing press. The printing press is dead … long live the printing press.PeteCA

GuestMONEY, MONEY, MONEYOctober 25th, 2009 at 3:56 pm

Well, I’ll give you a hint: my name isn’t Ben! But seriously, think about it. What will happen if there is simutaneous retirement of debt through money printing?

Little SaverOctober 25th, 2009 at 4:23 pm

5 minutes of exstacy for borrowers (in debt again after their 5 min high), savers and prudent citizens beaten into extinction, zillions down the drain. That’s all. Any other suggestion?

PeteCAOctober 25th, 2009 at 4:47 pm

all monetary currencies sink into the bottomless pit … savers in banks suffer significant losses (with risk of bank runs) … fixed value assets (gold, oil, hard assets) soar in price … economies that are very sensitive to the oil prices get pounded … cost of food soars and riots break out in poor third world countries … possibility exists of round of global currency devaluations. See any of this stuff starting to happen lately???You might want to give Ben a call and have him mail you that bottle of Scotch – before it’s all gone.PeteCA

blindmanOctober 25th, 2009 at 7:28 pm

pca,. an anthropological slant on you say “the king is dead, long live the king.”or thereabouts. “press / press”.so, as jaynes surmised, the voice of the king,the content of his speech (wisdom: logos, pathos,ethos; or lack thereof) were internalized neurologically by hisfollowers or “subjects”. these impressions, integrated symbolic utterance re-sounding,( word ), ritualized as memory and vocal hallucination, were then recalled by the living as the voice of the king in the people. this inner voice is where the king lives long as in “long live the king”,(god). for the printing press to “live long” it would have to die and become a god. this could happen, ? , if individuals internalized the power of the printing press and then printed their own currency / extended their own credit. ( this is the position of the global financial sector, “we are the soverign”gods” in the flesh, have internalized this kingly power, creative production of “our” required financial instruments.” i suppose in the kingdom the edict of the king is never fraud, but only bythe kings set of definitions. would seem the oligarchs have to killthe king, sovereign nations, to become king, orcontinually manage the unmanageable, that is attempt to obfuscate the essential and ongoingneeded absolute control of the treasuries and printing presses of all the currencies. flagrantly feeding on the blood of the masses, ongoing..for the analogy to be complete this wouldimply the death of the national treasuries in local economies. global currency ensues or localcurrencies proliferate. ?pjb could clarify / correct content?ps. a fetish, the dollar?, becomes a powerlessartifact when it fails to resonate with theinternal voices or dialogue of it’s creator orpossessor/user.

blindmanOctober 25th, 2009 at 6:18 pm

m,”The experiment has worked so far. Let it continue!!! “.depends on your definition of the words “experiment”and “worked”.worked:transfer of wealth from the responsible to thecriminal. fraud glorified, continuing thedegradation of decency and responsibility..they could retire bad debt without destroyingthe last vestiges of rule of law or perhaps youare correct and it is too late and there reallyisn’t anything left that is worth preserving?that seems to be the question. is there anythingleft in this culture that is worth saving, worthasserting as valuable, of critical value?the population thinks so, it is our lives,but our representatives do not recognizethat value, not “enough” money in it? i guessdue to the inflation caused by extra sovereigndebt creation redeemable in control of markets,governments, etc. ..inverted totalitarianism. ?

The AlarmistOctober 26th, 2009 at 4:04 am

The debasement cycle has happened in nearly every major power in history. The French debasement ended in the reign of terror. Wonder how this one will play out?

blindmanOctober 25th, 2009 at 5:52 pm

…. and speaking of immunity and vaccines there is this interview, viera scheinbner …homo stupidisimos: “humanity is the stupidest specieson this earth. animals don’t do stupid things..bacteriadon’t do stupid things…”. : if we could learn from our mistakes we would be brilliant as we have made every possible mistakeand have a tendency to formalize the worst of them in law.

GuestOctober 25th, 2009 at 8:46 pm

The Dollar Will Not Crash – By MIKE WHITNEYThe Dollar Will Crash – By MeThe dollar is not going to crash. There may be grumblings in foreign capitals and “secret meetings” between finance ministers but, for now, the dollar appears to be safe.Well, there you go, fifth column puff piece stating opinion as fact.Foreign countries don’t trade in dollars because they like America. They do it because they have no choice. If they want oil, they need dollars; it’s as simple as that.Everyone has a choice. Right now the dam holding the dollar back is leaking.Countries are slowly pulling back out of the dollar. Do it too fast and you willspook the other countries. Too slow and you will be holding the dollar bag whenthe dam breaks.It’s great to talk about a “basket of currencies” replacing the dollar, but that’s still a work-in-progress. It might happen, or it might not; no one really knows. What’s clear, is that we still live in dollar-centric world where paper claims on wealth are arbitrarily increased at will by a handful of unelected officials at the Federal Reserve. It’s a process which relies more on Gutenberg than moral authority.Reserve currency is way of hedging, it’s not an obligation. There are manyways to hedge outside of dollars, a basket of currencies is one, gold & silveris another, buying commodities is another, and special drawing rights on theIMF is yet another way to hedge. China and others are doing this, but slowly.And that’s why I think the price of gold & sliver will not go down.There’s no sign that the dollar is about to lose its position as the world’s reserve currency. For that to happen, central banks would have to start unloading US Treasuries, which they are not. Despite record government spending and mushrooming deficits, there is still a strong appetite for US debt. Treasury data show that foreigners purchased $28.6 billion more in US assets in August than they did in June. The flows are not enough to offset downward pressure on the dollar, but that could change in the months ahead. As capital flows increase, dangerous imbalances will reemerge, and the prospect of another financial calamity will become more likely. The Fed is rebuilding the system that just blew up using the same blueprint as before.Really? How about a fall in the dollar index below 72? Data suggest justthe opposite of “a strong appetite for US debt.” What assets – Land? The CBsand the Fed are the same organization! The Fed is not “rebuilding.”World leaders and central bankers mutter about Fed policies, but do nothing. There’s been no resistance to the secrecy, the bailouts or the money printing. The bottom line is that the people in power really don’t want change. They just want to make speeches and blame America. It’s all just empty posturing.Does not deserve a comment.The financial crisis hasn’t hurt the dollar a bit. The dollar isn’t getting weaker because people are dumping it, but because Fed chief Bernanke is managing its value downward to increase exports and reduce the true cost of household and financial sector debt. What doomsayers are calling a “crash” is really just part of the Fed’s plan.Surprisingly, the first sentence is correct, but for the wrong reason.The financial crisis is the result of a debt bubble and subsequent insolvency.They were “buying” in the above paragraph and now they are “dumping” in thesecond sentence. The rest is golden, the Fed is slowly debasing the dollar ina manageable fashion. Ignoring the fact that this has never been done before.The rest of the world should have chucked the present system more than a year ago when Lehman Bros. collapsed. But they didn’t, because they were afraid to face their own future without holding onto Uncle Sam’s hand. If they really wanted to stand on their own two feet, they’d pile their Treasuries and greenbacks in a heap and set them ablaze. That’s what freedom looks like.Oh, that’s good. The rest of the world should give the USA a jubilee. Becausewhy? They want to hold hands?The reserve currency system sucks. It creates a de facto international currency which elevates one country above all others giving it special access to credit and implicit control over the global economic system. It inevitably leads to exploitation, abuse of power and systemic instability.Granted, many countries hold dollars, but there is no “reserve currency system”Mr. Whitney. It’s up to each country to decide how it wants to hedge its cash.And if there is exploitation, abuse of power and systemic instability it’s becausethe Fed, IMF, and CBs are doing just that.The dollar should have been crushed when the opportunity presented itself. Now, the the window has closed and it’s back to business as usual.Just exactly do you mean “crushed”? Abandoned? Debased? Did you forget thetitle: “The Dollar Will Not Crash”? Sir, you are an idiot.

The AlarmistOctober 26th, 2009 at 4:07 am

Oh, come on now. The dollar really won’t crash. As if oft quoted here, “Not with a bang, but a whimper,” it will simply wither away, as is the case now.

GuestOctober 26th, 2009 at 4:24 pm

I had a conversation with Whitney once and, unfortunately, he turned out to be made of straw. I’d pointed out that he was completely ignoring growth: it was a “if we could just fix the system we’d be OK” sort of mentality.

GuestOctober 25th, 2009 at 10:25 pm

A forum full of idiots? everyone is running around criticizing the FED crying for a strong dollar bla bla. The U.S has run up gigantic trade deficits and maintained a strong dollar too, a giant paradox destined to correct itself. Anyone arguing a strong dollar doesn’t understand gravity, in a system of free trade given the context a strong dollar will impoverish the working class, a weak dollar will correct the excessive greed and wage exploitation that’s gone on so far, we need a weaker dollar we can’t stop a weaker dollar!

11b40October 26th, 2009 at 11:50 am

Warning Shot? (another one)Exerpt from Ron IanieriContributing EditorThe Tycoon Report 10-26-09″Out of the ‘Shadows’A couple of weeks ago, David Faber of CNBC reported on something called “Shadow Inventory.” Shadow Inventory refers to the amount of homes that have mortgages that are behind on payments and are facing potential liquidation.These are all homes that are currently 90 days in arrears. In 2005, that number was around 1.2 million units taking an average of 15 days to sell. A study today shows that number at around 7 million units with an average of 50 days to move.When you combine this with the current unemployment rate and the future outlook on unemployment, it is the belief of the study that most of the loans on these homes will be of little value with a high percentage of them being worth nothing.If this is accurate, and I believe that it is, the banking industry’s balance sheets are in BIG trouble!Even More Bad News for BanksMany regional banks, and some big ones, are going to have trouble and will need to raise even more capital to keep their doors open. We have seen the clues to this in the current earnings of every bank that has reported numbers so far this quarter.They ALL have declared larger losses in the mortgage-based-debt securities market than last quarter and are increasing their loan-loss provisions for next quarter to the highest levels they have been yet.Added to this is the story that came out on Friday, predicting another fall in home prices as much as another 30% in the hardest-hit areas and a 12% drop in median home prices overall.106 Failed Banks … and CountingThe accompanying story was on the banks themselves and the amount of failures predicted next year. On Friday, the number of bank failures eclipsed the 100 level. Projections have more like 300 going under next year.The FDIC is already overwhelmed and trying anything it can to get refunded as-is. If 100-plus bank failures this year got it into trouble (that is, out of money), then 300 next year should put the proverbial last nail in the coffin.You may say that, with all this bad news out there, how could the banks have rallied like this? Well, it is because of the government. According to reports, many of the regional banks, along with a few money-center banks, should be seized.The only reason they haven’t been seized yet is because is the government does not want a large group going under in a short amount time, thus creating another (and bigger) panic. At some point in time, however, there must be reality!A Troubling PatternThe final piece of this puzzle is in the technicals. Although the technicals have not shown a break in the current uptrend, (at least, not yet), a disturbing pattern has started to form.It is the same pattern I noticed in the summer of 2007. It is a divergence between the market and the banking sector.Take a look at your charts. In this last rally off of 9,500 in the Dow Industrials (Symbol: INDU), a 600-point rally, the banks have not really participated. In particular, the regional banks have definitely not participated!The divergence has occurred; now all that is needed is for the technical break to occur.”That was from early this morning, and as I look at the markets now, I am reminded that we still have a full trading week before October is over. Plenty of time for an October surprise.Independent Contractor

GuestOctober 26th, 2009 at 8:45 pm

“106 Failed Banks … and Counting”LOL, when can we close FED, consider FED’s balance is all toxic waste by now.

11B40October 26th, 2009 at 2:17 pm

I saw this on another blog. Anyone else hear about it?”Gold Fraud UK Style Certain central banks such as the Bag Lady of Threadneedle Street (nickname of the Bank of England) has rushed to the rescue of her agents, the bullion banks, trying to bail them out by offering substandard (22 carat) gold in settlement of contracts at the verge of being defaulted. There seems to be circumstantial evidence that this month the gold exchanges are unable to honor their expiring contracts for which delivery notices have been issued in September. It has occurred in spite of a robust, even increasing, contango. Furthermore, circumstantial evidence exists that counterparties to these expiring contracts for future delivery – bullion banks, to be precise, the name of J.P.Morgan and Deutsche Bank being prominently mentioned – have offered bribe money up to 125 percent of the quoted spot price to holders of long contracts if they would take settlement in paper, on condition that the embarrassing affair will be kept secret. If true, these maneuvers are motivated by the desire to conceal the real gold basis, and to deny that gold is in or approaching backwardation. If the truth were widely known, then there would be a run on the bullion banks. The “let’s get physical” movement would trigger a chain-reaction culminating in all offers to sell physical gold being permanently withdrawn around the globe. “Gold would not be for sale at any price”, whether quoted in US or in Zimbabwe dollars – or, for that matter, in any irredeemable currency – the only kind of money people are allowed to have nowadays. The curtain would fall on the “Last Contango in Washington”. The day of permanent gold backwardation would dawn. The chapter on a reactionary episode of history, irredeemable currency, allowing the Treasury and its central bank to create unlimited liabilities out of nothing which they have neither the means nor the intention to honor, but could use them for check-kiting purposes to mesmerize gullible people around the world, would be closed and become but a bad memory. Central banks are aiding and abetting the plunder of the sovereign assets of their countries to bail out their agents or friends in an attempt to “sweep the whole bloody mess under the carpet”. Toronto analyst Rob Kirby’s recounting of the behind-the-scenes activity that recently drove up the price of gold is but one example of this on-going battle. On the last day in September, Kirby reported large buyers of gold entered the futures market and demanded immediate physical delivery on the September contract. The counterparties, allegedly JP Morgan Chase and Deutsche Bank, both complicit in the central bank suppression of gold, counter offered with premiums 25% above spot if the contracts could be settled with paper money instead of physical gold but the buyers refused, sending gold to record highs as the banks scrambled to deliver gold they did not own. Questions were also raised about the quality of the gold bars delivered. Evidently, the bars provided by the Bank of England had to be re-cast as to meet the .999 quality necessary for delivery”SIGNED BY – YAHOO FINANCE USERIndependent Contractor

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