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QUICKENING
NEWS
PREPARATIONS
1.
Food
2.
Manna
Meals
3.
Water
4.
Sanitation
5.
Medical,
health
6.
Kerosene heaters and cookers
7.
Lighting
8. Wood
cooking and heating
9. Communi-cations
10. Essential
Tools
11. Home
built items
12.
Electrical; generators
and power
13. War
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HOME
RADIATION
INDEX & JET STREAM
PROPHECY
COMMENTARY
BY MILES
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Miles Stair's SURVIVAL
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REAL ECONOMIC NEWS
For
fear of upsetting the sheeple, the mainstream media
in the US rarely reports hard economic news. To
discover what is happening in the US we have no
choice but to look overseas for a reality
check. There are actually real investigative
reporters in Canada, England and the Continent who
report the true financial situation facing the
world! Shocking, but true. American
reporters long ago had their gonads neutralized and
were inoculated with extreme political correctness
while simultaneously filtering all information
through their Druid (green) worldview to arrive at a
predetermined conclusion before setting a word on
paper.
~~~~~~~~~~~~~~~~~~~~~~
Time Is Up Congress - And
America
by Karl
Denninger, Oct. 8, 2008
http://market-ticker.denninger.net/
But the worst news is not in the stock market. It
is in fact in some of the other indicators in the
market which were indicating potential capital
flight, along with still-extreme levels of
stress.
I must caution everyone - if you are not
prepared for six months to two years of
unemployment, you need to be. If you are dependent
on credit to survive (that is, if you couldn't make
it without your credit cards) you need to fix that
now.
Like today now.
Several times I have said "raise cash, get out of
debt, be prepared."
I must reiterate this advice and emphasize it, as
we may see a bond market dislocation and concurrent
stock market crash at any time, without warning. It
could be as early as today, in fact.
No, what happened the last three days isn't a
crash, although it has now hit my full "bear
market" target - 1070 - and in fact exceeded
it.
Unfortunately what happened the last three days
forces me to reset that target to the 2003 lows,
and perhaps as low as four hundred on the S&P
500, 4000 on the DOW.
Needless to say if that happens it will be on the
back of an economic catastrophe of a scale similar
to the 1930s.
Bernanke's latest load of crap with an "SIV" for
commercial paper is just another example of "more
of the same" stupidity.
Bernanke and Paulson need to be indicted and jailed
for criminal negligence (at best) and put in the
stocks where the people can serve up some rotten
tomatoes.
This evening we were "treated" to both political
candidates shooting their mouths off on matters
economic, but saying nothing of substance. Neither
candidate was willing to admit the truth - that
this "bailout" hadn't worked, that in fact the
market had crashed by 15% since it was voted on,
and that there is a zero chance of it having any
positive impact on one American household.
But no, not even the "moderator" was willing to ask
those tough questions, nor was anyone present.
These "debates" are a sham, a fraud and a gigantic
waste of time.
Never mind that McCain embarrassed himself by
claiming to be a "maverick" and "against pork",
when he had just gotten done voting for over $150
billion of it in the Bailout Bill - pork that was
not present in the original house version.
Was that claim of being "against pork" good for a
"no" vote? Nope. He voted yes, as did Obama.
To those who dismissed the six petitions (you can
go over to http://supportedthebailout.org
and see the old ones) over the last year, how do
you feel about it now?
To those who said that "subprime was contained",
how contained is it now?
To those who said that deterioration in consumer
credit wasn't going to be a big deal, would you
like to revisit that belief?
To those who said that "the nation would not have a
recession", do you have any regrets, apologies, or
perhaps an outright retraction?
To those who told people to buy buy buy all the way
down, how do you feel now that they've lost 30% of
their money?
To those politicians from both parties who voted
for the ESSA on the claim that it would "stabilize
markets", can you show me where it has been, in
fact, stabilized? If this is "stable" I'm somewhat
curious as to your definition of "unstable".
There is chatter circulating, apparently, that
"global equity markets will be closed after the
emergency G7 meeting this weekend." That ought to
induce confidence - just ask the Russians or
Indonesians, both of whom have tried this and it
has resulted in an instantaneous crash when they
reopened (the Indonesian market was just closed
AGAIN this evening, after literally imploding -
down by more than 10% - within an hour of starting
to trade.)
This is no longer a US problem, but the United
States continues to refuse to lead. We continue to
"trust" the idiot savants Bernanke and Paulson,
both of whom have sung the same song since this
crisis began more than a year ago, have been wrong
100% of the time, and yet have found an ear in
Congress repeatedly willing to listen to and follow
their insanity.
By allowing this action and indeed following the
advice of these two each and every one of the 535
members of that body has taken unto themselves the
responsibility for the calamity that now faces
American investors and the public, as our economic
system literally "folds back" and consumes itself.
Americans will not be able to retire and have no
economic security, and now are losing their jobs in
increasing numbers. This will continue.
For more than a year I have tried to get the
attention of Congress with petitions, phone calls
and faxes. I have been ignored, as have others who
have been consistently right in our expectations
and beliefs, including "Mish" Shedlock, Nouriel
Roubini, Charles Hugh Smith and others. Over 200
degreed economists urged that the "Bailout Bill"
not be passed as submitted, including two Nobel
Lauretes; all were ignored.
The people of this nation have sat on their hands
and watched American Idol, now turning into the
NFL, while lapping up the slop from Paulson,
Bernanke and Bush about how the "economy is
fundamentally strong", instead of showing up in
Washington DC to protest or flooding the fax and
phone lines demanding that Congress act to reign in
the fraudsters.
Let me know how "fundamentally strong" the economy
is when you're walking the unemployment line and
waiting for your turn at the soup kitchen for
something to eat.
Entitlements? Forget 'em. They're gone. Social
Security? Medicare? Done. Not today, but in the
not-distant future. China, having gotten its money
from the $700 billion "bailout", will ditch our
Treasuries and refuse to buy more, as they will no
more need to sterilize export dollars as our
economy collapses. We in turn will be left to
twist.
We deserve it, because we could have (but didn't)
stand up to their demands that we cover a private
dispute instead of handing over $700 billion we
don't have. When (not if) the foreign flow of funds
inward disappears due to the lack of need for these
nations to recycle dollars, we will suddenly find
that we have a nearly $800 billion a year hole in
our federal budget - a hole that can only be filled
by chopping Social Security, Medicare and the
Military. Congratulations Congress (and America in
general); you didn't really think you'd get away
with that, did you?
George W. Bush will go down in history as the
President who held the office while we drove our
nation's financial system off the cliff, laughing
all the while about flipping houses. And despite
his protests to the contrary, the history books
will record that it was his administration that
removed the 12:1 leverage limits, sued New York to
prevent them from clamping down on predatory
lending, and willfully stuck its head in the sand
while Bear Stearns prepared to blow up, never mind
ignoring the problem after Bear detonated in
February.
Henry Paulson will go down in history as the
Treasury Secretary who sold out our nation to the
Chinese and London Bankers, then fled the country
with $500 million he "earned" creating and selling
the very credit instruments that later blew up and
sunk the nation.
The members of the House Financial Services
Committee, the Senate Banking Committee and the
Joint Economic Committee will each have special
places reserved in the history books for refusing
to deal with Ben Bernanke's raw power grab after
Bear Stearns, an act that will ultimately be judged
to be the single most important element of the
crisis, as it forever put the market in a mood to
expect "rule changes" at any time, precipitously
damaging trust and liquidity.
The "no short" rule will ultimately be cited as the
reason that the market crashed, being that there
were no shorts to cover and thus hundreds of
stocks, on that fateful day, went "no bid" and had
their prices collapse to zero - all at once.
Oil will collapse in price to $20/bbl.
Unfortunately nobody will have any money to buy
gasoline, or a car, so it won't matter. As in The
Depression millions of automobiles will be scrapped
after being abandoned by their owners for lack of
insurance and registration fee money. Cheap
scooters will become the dominant form of
transportation for those with jobs, as they will be
all most people can afford.
As credit collapses distribution of food and other
essentials will break down. Unable to access
credit, trucking companies will be unable to get
goods to market. The current distribution system
for food requires travel of over 500 miles from
production to consumption; this is untenable in a
market where stable credit is unavailable. Food
distribution will be severely impacted and in some
areas may break down below critical levels.
Unemployment will reach 25% within two years.
Median income will fall by 30% nationally.
Foreclosures will reach 20 million homes. The
government will step in with HOLC-style remediation
but it won't matter - the unemployed won't be able
to pay irrespective of the price.
House prices will fall to well under $100,000
nationally on a median basis but with lending all
but non-existent you'll need 50% down. A few people
will make out like bandits near the bottom, being
able to buy up homes for $10,000 each in blocks of
10 at a time - for cash. 60% of America will be
renters; nearly half of all homeowners will
ultimately lose their homes to foreclosure.
Civil unrest will break out in major cities when
incomes fall but the cost of food and essential
services fail to come down materially, leaving
millions of Americans hungry, broke and homeless.
Unlike in the 1930s America will not quietly stand
in soup lines - instead they will riot, loot and
burn. The National Guard will be called up but will
find it impossible to exert meaningful control
without shutting down all commerce in the affected
areas. The decision will be made to cordon off the
cities and deny entry to anyone who does not live
in that specific neighborhood, essentially shutting
down commercial activity. GDP will fall by 30%.
The S&P 500 will fall to 150 and flatline, a
90% loss. CNBC and Bloomberg will cease
broadcasting. Volume will fall to 10% of former
levels.
Bleak outlook?
Yep.
Quite possible?
Yep.
Can it be stopped?
Yes, but not for much longer.
The markets are perilously close to a tipping point
where they will collapse, after which all of the
above will come to pass, and Congressional action
(or inaction) will be irrelevant.
Congress will then have to face the people, as will
President Bush and his Cabinet, and may God have
mercy on our Republican form of government, because
history shows that when government mismanages
things to this degree and refuses to respond to the
will of the people, a "messiah" generally appears
with a "solution" - but there will be
"compromises."
Like your freedom.
To fix the problem trust must be restored. To
restore trust you must stop the lying, expose the
liars, prosecute and jail them all, and stop
changing the rules in the middle of the game.
This must happen now. Today. Immediately. Not
tomorrow, not next week, not after a series of
hearings.
Right now.
Market participants must be able to know that when
they engage in a transaction it will be
transparent, handled fairly, and their rights will
be protected.
Our politicians must stop demanding the impossible
- that home prices "levitate." House prices cannot
be maintained at more than 3x incomes - it simply
can't be done. We must encourage home prices to
contract to sustainable, affordable levels quickly
and efficiently.
Mortgages must return to 30 year fixed notes, 20%
down, no more than 36% DTI. No government-linked
paper in any GSE may issue outside these
guidelines. We must reliquify the mortgage market,
and this is the only way to do it - by writing only
sustainable mortgages.
Strong consumer protection laws must be written
that bar negative balance auto and home loans. The
practice of "rolling over" an old car loan into a
new one, producing an instant 20% or more
deficiency against the vehicles value, must
end.
Usury laws must be re-imposed, limiting credit card
and other consumer loan interest to no more than a
reasonable spread over funding costs. Yes, this
will limit credit to less-worthy borrowers. So be
it. Unbridled credit got us here, and we must
prevent it from happening again.
The excess, unsustainable debt in the system must
be defaulted. Whether held by corporations or
individuals, it must be purged from the system.
Those firms and individuals that are bankrupt must
be so declared and their assets liquidated, so they
can start over and the market can clear.
People will say that what I ask is unreasonable,
unable to be achieved, or "needs study."
You're free to study all you want, but if these
actions are not taken immediately, right now,
today, the above forecast will come to
fruition.
You are seeing the global credit markets unravel in
front of your eyes, and it is happening precisely
because the fraud, avarice and outright theft has
gone unpunished and left in place to siphon off
wealth from the average American for more than 20
years, and our President, in that environment, went
on national television and threatened the world
with a global Depression unless his Treasury
Secretary got a $700 billion blank check.
The markets, correctly perceiving there was a
problem, did exactly what they did when this same
gambit was run during the Fannie and Freddie
debacle - they called the bluff.
The check is now on the table and we have but two
choices - either pay it or suffer the
consequences.
http://market-ticker.denninger.net/
~~~~~~~~~
Go look at the other video, and
the other Ticker referenced in
there.
Now understand that there is no
solution to this fast and vicious
destruction of America's financial
markets and financial companies
until and unless the lying
stops.
It has
NOT
stopped and in fact has gotten
materially
worse.
Folks, this meltdown will not stop
until either:
- ALL
financials mark
everything to the market,
ALL OTC
derivatives are traded on an exchange
or declared
void, and
ALL balance
sheets are transparent so we can
determine who is broke and
who is not.
OR
- The market has
completely imploded with every
financial stock worth zero as the
hedge funds and others short each in
turn into the ground, forcing each to
be bailed out in
turn.
Those are the ONLY TWO
CHOICES.
Nothing else HAS
WORKED and nothing else
WILL
WORK. With each
bailout you simply give people
another target
and a new way to kill the next company
in line. This process will
proceed from firm to firm until
NONE ARE LEFT
and credit availability in the economy
is ZERO.
The Fed has expended
more than
half of their balance
sheet, in excess of four
hundred billion
dollars. It has
not stopped the cascade.
The Government has spent
nearly a trillion dollars we
do not have in bailouts
and other miscellaneous nonsense.
It has not stopped the cascade.
Indeed, all that has
happened is that
the velocity of the crash
has accelerated
dramatically.
There is NO
WAY to fix this through
adding "more liquidity" - the problem
IS AND HAS BEEN THE
LIQUIDITY in that this
allows BANKRUPT
companies to continue to operate and
LIE
instead of forcing them into the open
where they can be liquidated under
Chapter 11.
We are here precisely
because of the intentional provision of
far TOO MUCH liquidity by
Alan Greenspan and now by Ben
Bernanke.
You cannot solve someone's
drinking problem by giving them another
bottle of whiskey!
THE LIQUIDITY
SWAMP MUST BE
DRAINED.
We cannot have a "financial system"
that is based on fraud and theft.
We cannot have "financial institutions"
that claim to be solvent when they in
fact are not
unless they are
able to make up values that
are much higher than the REAL value for
their so-called
"assets".
Wayne Angell was on "Fast Money"
tonight claiming that the balance sheet
of The Fed is "infinite" and that "they
can't be downgraded."
Wayne, you need to be
charged with treason for spewing
that crap on national
television.
Sure, "in theory" The Fed's balance
sheet is infinite - they can coordinate
with Treasury to print as much
money as they want.
So was Weimar
Germany's.
The word for what Wayne was
promoting on Fast Money this evening is
HYPERINFLATION where you find
that a wheelbarrow is worth more
than all the $100 bills you can
stuff into it.
Does anyone remember
how hyperinflation worked out for
them? I seem to remember a
gentlemen with the first name of
"Adolf" that the world got out of that
little exercise of an "infinite
balance sheet."
Why does this path
inevitably
lead to political failure?
Because as soon as lenders discern that
this is occurring they shut
off credit entirely.
Think about it - you have $1,000 to
lend out. You detect that the
government is printing and
intentionally devaluing your
money. If you lend it out at 10%
interest but the government is
hyperinflating at 100% a year,
you lose about half of the
money's value every
year! So if you
lend me that $1,000 when I pay you back
you can only buy half as much as you
could before! For obvious reasons
you're not going to allow that - you
will instead immediately
spend your $1,000 on
something of physical value such as
land before it can be
debased.
Hyperinflation kills all
credit availability instantly for this
reason and any credit-based
economy immediately
implodes. This results in
enormous and immediate mass
unemployment and a resulting rupture of
the social and political fabric of a
nation.
As for not being able to be
downgraded, you obviously
didn't hear S&P
today, which stated quite
clearly that the United States "AAA"
credit rating is not a
right and must be
earned. Can't be
downgraded eh? Oh yes The Fed can
be - along with everything
else.
Folks, we require over
$2 billion a day in foreign investment
in order to pay our
bills.
This is what came out from
China
today:
"BEIJING, Sept 17
(Reuters) - Threatened by a
"financial tsunami," the world must
consider building a financial order
no longer dependent on the United
States, a leading Chinese state
newspaper said on Wednesday.
"The eruption of the U.S.
sub-prime crisis has exposed massive
loopholes in the United States'
financial oversight and supervision,"
writes the commentator, Shi
Jianxun.
"The world urgently needs to
create a diversified currency and
financial system and fair and just
financial order that is not dependent
on the United States."
"Infinite Balance Sheet" eh?
See what foreign governments think of
that sort of garbage?
Please understand - if
foreign governments withdraw their
support of our government
funding via either scaling back
their Treasury purchases or outright
refusal to buy (or worse, they dump
them on the market into this "fear
spike" we're seeing now), we are
absolutely and instantaneously
screwed.
Michael Bloomberg, one of the few
intelligent commentators out there (and
a billionaire by his own hand) said exactly the same
thing today:
"WASHINGTON (AP) New York Mayor
Michael Bloomberg is warning a 'next
wave' of financial pain may come when
foreign entities stop buying U.S.
debt.
The billionaire mayor is speaking
to an audience at Georgetown
University, telling them it's not
clear who is going to continue buying
U.S. debt as financial firms try to
cope with a crisis of confidence on
Wall Street."
Mr. Bloomberg sees the same thing I
do, but he's a bit more polite than I
am about it.
Then there was S&P which made this quite
clear as well:
"The $85 billion bailout of AIG on
Tuesday by the U.S. Federal Reserve
"has weakened the fiscal profile of
the United States," S&P's John
Chambers told Reuters in an
interview.
"Lack of a pro-active stance could
have resulted in further financial
stress and put pressure on the U.S.
triple-A rating," Chambers said.
"There's no God-given gift of a AAA
rating, and the U.S. has to earn it
like everyone else."
Is that clear enough?
Congress MUST ACT RIGHT
DAMN NOW.
Congress
MUST stop The
Fed and Treasury from printing
any more
money. The institutions that are
insolvent must be forced into the open
and put through bankruptcy.
We CANNOT
wait until the next Congress and the
election to stop this nonsense; that's
five months in
the future. By then The United
States could easily be quite literally
broke and forced into a
hyperinflationary spiral!
Debt that cannot be paid
must be defaulted.
Yes, this is painful.
Yes, it will hurt.
But as you can see it is
already hurting plenty; the
"alternative" isn't working and CAN'T
WORK, as I've been pointing out for
over a year!
We CANNOT get a true
value on the market until this
occurs.
It is NOT
POSSIBLE.
In the BEST CASE if
we do not act
NOW, take your
salary and assets and cut them by
30%. Everything else - cost of
food, gas, electricity, etc - remains
the same.
Worst case? Divide your salary
and assets by three,
but again, your costs remain the
same.
If you are in the lower income
echelon, you will go broke and become
homeless.
If you are middle class, you will be
living in a tenement or trailer.
If you're lucky. If you currently
own a home, you won't any more.
If you are upper-middle class, you
will fall to lower-middle class, and
all your luxuries will disappear.
No more Lexus or nice vacations.
If you are "well off", you will be
living in a modest home, what we now
call "middle class", and some of you
will go broke outright, because your
"well off" status has been achieved
with leverage - which will blow up in
your face.
If you find this
unacceptable you must act TODAY
to stop the government from proceeding
down the path we are
on.
Your choices are:
- DO
NOTHING and your
employer and you will lose access to
credit. As he or she does,
you will lose your job and
ultimately everything you
own.
- GET ACTIVE RIGHT
NOW - on the phone with
Congress, Treasury, The President and
the Candidates. Take to the
streets. Organize a general
strike with your friends and
neighbors, and buy
nothing for a day or
even a week. Make clear to your
representatives that you
INSIST that
they stop this fraud and nonsense,
forcing all
of the fraudsters and phony balance
sheets and lies into the
open, along with
removing all of the
regulators who intentionally turned a
blind eye to this mess,
including but not limited to
Geithner, Bernanke and Paulson.
If you do nothing, you will get #1,
or worse, The Government will continue
to face bailout after bailout until the
printing reaches a point that foreign
governments say "no mas" - at which
point our government's ability to fund
itself - and our current way of
life and representative
government ends.
|
~~~~~~~~~~~~~~~~~~~~~~
STANDING UP TO THE BANKS:
If you get foreclosed, make them produce the
note!
~~~~~~~~~~~~
Barclays warns of a financial storm as
Federal Reserve's credibility crumbles
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/27/cnbarclays127.xml
Last Updated: 12:30am BST 27/06/2008
US central bank accused of unleashing an inflation
shock that will rock financial markets, reports
Ambrose Evans-Pritchard
Barclays Capital has advised clients to batten down
the hatches for a worldwide financial storm, warning
that the US Federal Reserve has allowed the inflation
genie out of the bottle and let its credibility fall
"below zero".
"We're in a nasty environment," said Tim Bond, the
bank's chief equity strategist. "There is an
inflation shock underway. This is going to be very
negative for financial assets. We are going into
tortoise mood and are retreating into our shell.
Investors will do well if they can preserve their
wealth."
Barclays Capital said in its closely-watched Global
Outlook that US headline inflation would hit 5.5pc by
August and the Fed will have to raise interest rates
six times by the end of next year to prevent a
wage-spiral. If it hesitates, the bond markets will
take matters into their own hands. "This is the first
test for central banks in 30 years and they have
fluffed it. They have zero credibility, and the Fed
is negative if that's possible. It has lost all
credibility," said Mr Bond.
The grim verdict on Ben Bernanke's Fed was
underscored by the markets yesterday as the dollar
fell against the euro following the bank's dovish
policy statement on Wednesday. Traders said the Fed
seemed to be rowing back from rate rises. The effect
was to propel oil to $138 a barrel, confirming its
role as a sort of "anti-dollar" and as a market
reproach to Washington's easy-money policies.
The Fed's stimulus is being transmitted to the 45-odd
countries linked to the dollar around world. The
result is surging commodity prices. Global inflation
has jumped from 3.2pc to 5pc over the last year. Mr
Bond said the emerging world is now on the cusp of a
serious crisis. "Inflation is out of control in Asia.
Vietnam has already blown up. The policy response is
to shoot the messenger, like the developed central
banks in the late 1960s and
1970s," he said.
"They will
have to slam on the brakes. There is going to be a
deep global recession over the next three years as
policy-makers try to get inflation back in the
box."
Barclays Capital recommends outright "short"
positions on Asian bonds, warning that yields could
jump 200 to 300 basis points. The currencies of
trade-deficit states like India should be sold. The
US yield curve is likely to "steepen" with a
vengeance, causing a bloodbath for bond holders.
David Woo, the bank's currency chief, said the Fed's
policy of benign neglect towards the dollar had been
stymied by oil, which is now eating deep into the
country's standard of living. "The world has changed
all of a sudden. The market is going to push the Fed
into a tightening stance," he said.
The bank said the full damage from the global banking
crisis would take another year to unfold. Rob McAdie,
Barclays' credit strategist, said: "The core issues
have not been addressed. We're still in a very large
deleveraging cycle and we're seeing losses continue
to mount. We think smaller banks will struggle to
raise capital. We're very bearish - in the long-term
- on high-yield debt. The default rate will reach 8pc
to 9pc next year."
He said investors had taken their eye off the
slow-motion disaster engulfing the US bond insurers
or "monolines". Together these firms guarantee $170bn
of structured credit and $1,000bn of US municipal
bonds.
The two leaders - MBIA and Ambac - have already been
downgraded as the rating agencies belatedly turn
stringent. The risk is further downgrades could set
off a fresh wave of bank troubles. "The
creditworthiness of many US financial institutions
will decline in coming months," he said.
The bank warned that engineering and auto firms we're
likely to face a crunch as steel and oil costs surge.
"Their business models will have to be substantially
altered if they are going to survive," said Mr
McAdie.
A small chorus of City bankers dissent from the view
that inflation is the chief danger in the US and
other rich OECD countries. The teams at Soci t
G n rale, Dresdner Kleinwort, and Banque AIG all warn
that deflation may loom as housing markets crumble
under record levels of household debt.
Bernard Connolly, global startegist at Banque AIG,
said inflation targeting by central banks had become
a "totemism that threatens to crush the world
economy".
He said it would be madness to throw millions out of
work by deflating part of the economy to offset a
rise in imported fuel and food prices. Real wages are
being squeezed by oil, come what may. It may be
healthier for society to let it happen
gently.
~~~~~~~~~~~~~~~
American financial fiasco
could take down world economy
Posted By BERT HIELEMA - June 25, 2008
http://www.intelligencer.ca/ArticleDisplay.aspx?e=1087226
Triple warnings this past week:
the Royal Bank of Scotland fears a steep fall in the
world stock market; the bank of all banks in the
world, the BIS, Bank of International Settlements, in
Switzerland, said that a worldwide depression is
now a distinct possibility; Morgan Stanley, a
leading American Investment firm, signaled similar
pessimistic messages.
So what's happening out there? Frankly, all financial
institutions are in deep trouble, and the
reason is the American dollar. The situation is so
dire that it's not going to make a hoot of difference
who becomes the next president of the United States:
it's beyond the power of the rulers of the American
political and economic system to curtail severe
damage to its entire economic enterprise.
Neither Obama
nor McCain can do anything to stem the disaster that
will be fully employed by the end of this
year.
Part of the cause is that the USA happens to be the
most indebted nation on the planet and its people the
least prepared to cope with peak oil and peak food.
Even now Americans throw away up to 40 per cent of
the food they buy, their high-powered and
fuel-thirsty automotive park cannot be converted to
more efficient vehicles for many years, while their
exurban lifestyle makes car-sharing and mass
transport impossible for most.
So what's so inevitable of the current monetary
scene?
The world's entire Gross domestic product is some $50
trillion, of which the USA accounts for about $13
trillion. However, it owes more than $2 trillion to
foreigners, of which Japan and China carry about half
and Great Britain some 10 per cent with the remainder
divided over many countries. Canada has less than one
per cent. The American public carries $9 trillion in
credit-card debt and even more in mortgages. Its
national debt is close to $10 trillion while its
Social Security and Medicaid has a future liability
in excess of $50 trillion, burdening the average USA
household with debt totaling more than $600,000.
And then there are the outstanding derivatives! They
grew from $100 trillion 5 years ago to $500 trillion
in 2007. Warren Buffet -- the world's richest man
after Bill Gates and a most savvy investor -- wrote
in 2002: "We try to be alert to any sort of
mega-catastrophe risk, and that posture may make us
unduly appreciative about the burgeoning quantities
of long-term derivatives contracts and the massive
amount of uncollateralized receivables that are
growing alongside. In our view, however, derivatives are financial
weapons of mass destruction, carrying dangers that,
while now latent, are potentially lethal."
Now, when everything that can go wrong is going
wrong, this financial WMD, this weapon of mass
destruction, is no longer latent but out in the open
ready to kill the American economy.
According to the LEAP think tank, based in Europe --
subscriptions cost 200 Euro or $300 per year -- in
the next six months all factors affecting the economy
will converge, and create a perfect socio-economic
hurricane.
The root of the problem is always money, basically
the US dollar of which there are trillions too many
in circulations, so many that its value is
decreasing, and the world doesn't know what to do
with them. It's this flood of money that drives up
the price of all commodities, including oil, of
course. Nobody wants more US dollars, unless its
value increases.
But that can only happen when the US pushes up
interest rates, which will cause the US economy to
die within a few weeks, as the real estate market
falls to zero by lack of affordable credit, interest
on Adjustable Rate Mortgage loans skyrockets,
drastically shrinking consumption, and corporate
failures multiply exponentially and stock markets
collapse.
No, higher interest rates are not the solution.
However, to do nothing is not an option either,
because soon nobody will accept U. S. dollars
anymore.
Basically the
US has lost the ability to govern its own economic
policy. Thanks to its trillions of debts, it is now
powerless to avoid disaster. No wonder banks are
getting nervous.
The immediate consequence of America's economic
collapse will be the end of the war in Iraq, because,
suddenly, as the greenback disappears as the world
currency, the US will be forced to live within its
means. Since the war is the most costly of all its
undertakings, the troops will abruptly go home.
Curiously the WMDs -- the weapons of mass destruction
-- were not in Iraq: they are in the heart of
America, right on Wall Street. Pity the veterans and
the wounded; there will be no money to look after
them -- no pensions, no jobs, no medical care.
Eventually a
new financial system will emerge, but only after a
period of tremendous turmoil and
pain.
http://www.intelligencer.ca/ArticleD...aspx?e=1087226
~~~~~~~~~~~~~
Stock slumps to a 53-year low; Bloomberg TV
analyst recommends bankruptcy for
automaker.
By Jeff
Poor
Business & Media
Institute
6/27/2008 8:10:07
AM
General Motors has been an American fixture for 111
years, but some warn that might be ending. The
Michigan automaker faces tough obstacles ahead
critical to its survival.
Brian Williams raised the
possibility of General Motors (NYSE:GM) going out of business on the June 26 NBC
Nightly News to Jim Cramer, host of CNBC s Mad
Money.
[J]im, I know you talk about
this, think about this everyday for a living and
have a formula regarding this, Williams said. But
first, what s going on out there? I heard one
analyst today said, GM will go out of business,
though I know a lot of people disagree with that
and it s a scary thought.
Goldman Sachs
(NYSE:GS) downgraded GM s stock earlier in the day
and that forced GM to a 53-year low and put it at
a risk of default.
Goldman Sachs also downgraded Citigroup s
(NYSE:C) to a sell on June 26.
I think GM is a huge part of
the problem, [and] as you said, Citigroup, Cramer
replied. These are companies that need much more
cash than they have right now or they can raise
so their stocks keep going lower. Unless we get a
break in oil which keeps going up, food which
keeps going up, or houses which keep going down
Brian, it s going to get worse, not
better.
The drop in GM and Citigroup
sent the Dow plunging to its worst June since the
Great Depression, according to Bloomberg on
June 26. A
June 26 Dow Jones
story said some
interpreted Goldman Sachs' downgrade to mean the
automaker is going out of business.
We re going to move in the
opposite direction of oil, and General Motors is
going to go out of business, at least according to
Goldman Sachs, Art Hogan, chief market strategist
at Jefferies & Co. said to Dow
Jones.
Analyst James Chanos, president
of Kynikos Associates Ltd., appeared on Bloomberg
Television on June 25 and said that GM should consider
bankruptcy.
I think both of them [GM and
Ford] have issues and as I told an elected official
from Michigan, I mean arguably, one of the better
things these companies could do is go bankrupt,
Chanos said. I m not saying liquidate, I m saying
go bankrupt and reorganize. I think that then they
would have a fighting chance, but of course the
board and the management works for the shareholders
and their viewpoint might be a little
different.
Chanos, a renowned short seller,
has been known for his ability to smell blood in
the water. In 2001, he became one of the first to
short Enron and profited greatly from the company s
demise. In 2002, Chanos testified in front of the
House Committee on Energy and Commerce. He told the
committee he saw the fall coming nearly
a year before its ultimate collapse.
http://www.businessandmedia.org/arti...627063413.aspx
~~~~~~~~~~~~~~~
You Can t Eat
Gold,
Robert
Morley
April 29, 2008 From
www.theTrumpet.com
How
good is money when you can t buy food? The Japanese
are finding out and Americans are only a drought
away.
Robert Morley The world teeters on the edge of
economic crisis. The main question now seems to be
how big and how long. Numerous financial experts warn
of a Great Depression repeat. But surviving the next
Great Depression won t be so easy. Last time, few
people had money, but if they did, for the most part
there was food available. This time, the depression
may well be accompanied by widespread food shortages.
As the Japanese are coming to realize, when there is
no food, the value of money rapidly approaches
zero.
Many economic analysts clearly see the economic
problems facing America: the crashing housing market,
insolvent banks, massive monetary inflation, the
devaluing dollar, falling real wages, rising food and
oil prices, and so on. Many also see the danger in
the global food shortages. But at the same time, it
is amazing how many think that all you need to do is
invest in gold, or silver, or buy some agricultural
commodity stocks, and you will be okay.
There is a fatal flaw in this thinking. Yes, as the
United States continues to unravel, the price of gold
may temporarily soar into the stratosphere.
But no matter
how many gold coins you have, if food supplies run
out, bars of gold won t quell the hunger pains. You
can t eat gold.
TheAge.com reports that Kazakhstan, the world s
fifth-biggest wheat exporter, is the latest major
country to prohibit grain exports. If Kazakhstan were
alone, it might not be a big deal but unfortunately
Kazakhstan is joining a growing list of other
countries, including Russia, Ukraine and Argentina,
that are also limiting wheat exports.
At the same time, America s wheat stockpile is at
dangerously low levels levels not seen in over 60
years. And 60 years ago, America had a population of
less than 150 million. That figure has more than
doubled since that time.
The Department of Agriculture says that in the year
ending May 31, U. S. wheat inventories could be down
47 percent to 6.6 million tons. That means there is a
U. S. emergency wheat reserve supply of only about 43
pounds per person.
Expecting
record-low food reserves to provide for record-high
populations is asking for record-breaking
hunger.
But wheat is only one of many foods in short supply;
rice, corn and other agricultural commodities are
near multi-decade lows too. All it would take is one
bad global harvest and America, along with the rest
of the world, would be in big trouble. Just one bad
year! We had seven of them in a row during the
1930s.
It wouldn t
matter how much money a person had; money can t buy
what doesn t exist.
Take Japan for example.
Japan is the world s largest net food importer. The
nation imports 86 percent of its wheat and
approximately 60 percent of its daily food
requirements.
Japan s problems began when countries such as
Thailand, Vietnam and China imposed export curbs on
rice to conserve food for domestic populations. Then
Japan got hit again when global shortfalls in cattle
feed led to a butter shortage, and again when global
wheat prices went through the roof.
Food shortages have intensified to the point that, as
Bloomberg reports, Japan will ask the World Trade
Organization (wto) to introduce rules to prevent
countries from restricting exports of wheat, rice and
other grains. Japan may be about to find out that wto
rules don t mean much when people are at risk of
starvation.
The shortages have come as quite a shock to many
Japanese who, like Americans, are accustomed to being
able to buy whatever they want as long as they have
the money. Until now Japan could rely on purchasing
food from anywhere in the world because consumers can
afford to pay, relates Yasuhiko Nakamura, head of
the government s food education council. In the future, it may be
impossible to import even if we have money
(emphasis mine throughout).
There is nothing like a food shortage to wake up a
nation.
Obviously, America isn t Japan we don t import two
thirds of our food. But we are much more vulnerable
than many realize.
In 2005, the Wall Street Journal reported that
America had become a net importer of food. Bill
Bonner, writing for the Daily Reckoning, confirms:
If we understand that correctly, there is no longer
enough food Made in the USA to feed Americans
appetites (February 25). That means that even if
America cut all exports, it would still need to
import food to maintain current consumption
levels.
America used to be the world s breadbasket. Now, as
is the case in just about every other former category
of production, America is becoming a gigantic
food-consumption sinkhole.
[O]utsourcing your supply of food and water
depending on unfriendly or unreliable trading
partners to keep sending fresh fruit and poultry or
thinking the global system of trade will forever
expand and never again contract these are all
dangerous assumptions that could leave you with an
empty national stomach at night, warns the Daily
Reckoning (ibid.).
Yet for the most part, Americans remain on the
sidelines of the current food shortages at least so
far. Besides some comparatively minor rice and
cooking oil rationing at a few Costcos and Sam s
Clubs, most Americans are content to grumble about
rising food and fuel prices and watch the food riots
in Haiti, Indonesia, and elsewhere so far.
But the fact
that there is rationing at all should be a big
wake-up call!
Living in the Breadbasket of the World, it is hard
for most Americans to even conceive of the idea that
food could become scarce in this country, writes
author Monica Davis. Even America, she says, is not
immune from the potential for food shortages, food
riots and food insecurity. We re just blind to the
possibility.
America s days of comparative economic prosperity are
ending. Most Americans look at the world and think
that they are rich and increased with goods, and in
need of nothing. But they don t realize that all that
separates the U. S. from becoming poor, destitute and
hungry is one big drought. What good will riches be
then?
America only has 43 pounds of wheat per person in
case of emergency. That s just four and a half
months worth.
A page out of the Bible is applicable here: Joseph,
when he was in Egypt, prepared the nation to
withstand seven years of drought. When drought came,
not only did Egypt have food for its entire
population, but for the surrounding nations as well.
In that case, money bought food because Joseph had
stored it up. In fact, that drought made Egypt a
global power.
Today, the world lives from one harvest to the next.
There are no significant global food reserves, and
America doesn t even have enough to handle one really
bad year. What would happen if another multi-year,
1930s-style drought occurred again?
Load up the pantry, says Manu Daftary, one of Wall
Street s leading investors and the manager of the
Quaker Strategic Growth mutual fund. I think prices
are going higher. People are too complacent. They
think it isn t going to happen here. But I don t know
how the food companies can absorb higher costs.
Unfortunately, loading up the pantry isn t more than
a short-term stop-gap. And in the long-term, neither
is stockpiling treasure chests of precious
metals.
The Bible
talks of a future time when people will throw their
gold and silver into the streets a time when money
won t be able to buy food (Ezekiel
7:19).
The current global food shortages are the first
rumbles of thunder from the approaching storm.
But shelter from the coming food storm can be found.
God promises to not only protect those who obey Him,
but to bless and magnify their food supplies even
when everyone else is being pummeled with
agricultural curses. God challenges you to test
Him to see if He will not open to you the windows of
heaven in time of need.
To see how a country with such vast agricultural
resources could get itself into such a food dilemma,
read The United States and Britain in
Prophecy.
How
Far is the US From Food Shortages and Food
Riots?
"....this artificially
generated food crisis has not yet peaked."
by Monica Davis
Saturday Apr 12th, 2008 2:37 PM
Even the United States is not immune from the
potential for food shortages, food riots and food
insecurity. We re just blind to the possibility.
As Americans complain over high gasoline and food
prices, many third world countries are experiencing
food riots over price and scarcity of food. In some
parts of the word rice is so expensive that it is
transported in heavily guarded convoys and farmers
guard their fields from thieves.
What has put many world
leaders on notice is the fact that this artificially
generated food crisis has not yet peaked. As of this
writing, no one knows when the situation will reach a
crescendo, or to what extent this demand will affect
food security and political stability in the world.
Many believe that the food crisis is in its infancy
and they worry about increasing food-based political
instability worldwide.
Food riots are becoming more common, as more land and
crops are being diverted from the food chain by the
world biofuels industry. According to an investment
magazine, the crisis shows no signs of weakening.
Food, the bread of life, is fast becoming the gold
of the Twenty-first century.
The face of food security is rapidly changing around
the world and there are no quick fixes experts say.
What worries many is that food stockpiles are at
historic lows. In the United States alone, stockpiles
of wheat hit a 60-year low in the United States as
prices soared. Almost all other commodities, from
rice and soybeans to sugar and corn, have posted
triple-digit price increases in the past year or
two.
Experts say the high
prices will continue for years, putting billions of
people at risk for malnutrition or starvation. World
leaders continue to cast fearful eyes at the
burgeoning bio-fuels industry, noting that the
competition generated by the industrial biofuels
industry and food agriculture is pushing up food
prices and making it more profitable to grow fuel
crops for industrialized countries than it is for big
farmers in Third World countries to grow food for
their own citizens.
So far, Americans have
been able to weather the storm. While rising fuel and
food prices have generated grumbling from the
populace and hand wringing from the politicians, this
country has yet to experience the level of social
unrest and rioting that high food prices have
generated in other parts of the world.
A few analysts believe
that the United States is on the verge of a major
economic revolution, a process, which will change
where we live, what we eat, and how we view
agriculture. Looking at the rumbles from around the
world we are already seeing wars over oil and energy
resources, not to mention the violent eviction of
traditional farmers in South America and other parts
of the world by the industrialized bio-fuels
industry.
A few analysts believe that the United States is on
the verge of a major economic revolution, a process,
which will change where we live, what we eat, and how
we view agriculture. Looking at the rumbles from
around the world we are already seeing wars over oil
and energy resources, not to mention the violent
eviction of traditional farmers in South America and
other parts of the world by the industrialized
bio-fuels industry.
Economist Dr. Hazell has
said that filling an SUV tank once with ethanol
consumes more maize than the typical African eats in
a year.
The food riots in Haiti are mirrored by riots in
parts of Africa and Asia, sending shock waves
throughout the Third World. According to a report
from the United Nations, the 60 per cent price
increase in the price of corn and feedstock over the
past two years can be directly traced to the
increased demand on corn and soybeans made by the
biofuels industry. The United States, as the world s
largest exporter of corn, has diverted millions of
pounds of corn and soybean crops to the growing
biofuels industry, creating a market that makes fuel
crops more profitable than food crops. National
surpluses of grains have give way to increased demand
for biofuels, driving up the price of corn and grains
around the world. (World Bank)
So far, Americans are mostly bystanders in the game,
content to grumble at the gas pump and complain in
the grocery aisles. As a First World nation, the
United States so far has not been subject to the food
riots, which we have seen in Haiti and other parts of
the world. Americans have more per capita income than
much of the world; hence the crisis of the Third
World, so far, is inconvenience in the First World
and in developed nations such as the United
States.
That said, however, we must understand that this
situation is not sustainable. While Americans do have
more disposable income than the rest of the word,
that income is not unlimited and our food supply is
much more vulnerable than we think. When it comes to
food security, both in terms of supply and
accessibility, this country is much more vulnerable
than we think.
As one retired grain salesman noted, most of the
nation s grain is moved around the country by just
TWO railroads. Little is stored in the event of
disaster and the whole system is extremely
vulnerable. While we in the United States look at the
food riots in other countries with a sense of
disbelief, we are not immune. Under the right
circumstances, we could be in the same boat.
(Ibid)
In order for riots to break out the whole food supply
doesn't have to be wiped out. It just has to be
threatened sufficiently. When people realize their
vulnerability and the fact that there is no
short-term solution to a severe enough drought in the
Midwest they will have no clue as to what they should
do. Other nations can't make up the difference
because no other nation has a surplus of grain in
good times let alone in times when they are having
droughts and floods also. (Robert Felix, US Food
Riots Much Closer than You Think )
The concentration of food processing, cultivation and
distribution into the hands of a few companies is
wrecking havoc around the world. A Canadian reporter
noted the connection between market concentration and
price increases around the world: In Mexico and most
other countries, a handful of international companies
is controlling more and more of the food production
line from growing crops to purchasing crops from
farmers, to warehousing, processing and
distribution.
Carlsen said investigations following the tortilla
crisis found that huge stores of corn in warehouses
had cut down the supply and led to a jump in prices.
(Matthew Little, Epoch Times, Food Prices Skyrocket
Amidst Growing Shortages. )
Even the United States is not immune from the
potential for food shortages, food riots and food
insecurity. We re just blind to the possibility.
The author is an activist/writer/public speaker based
in the Midwest. She has written articles on the
mortgage crisis, land theft, mis-education of ethnic
youth and food security. Books include: Land, Legacy
and Lynching: Building a future for Black America,
and Urban Asylum: Politics, Lunatics and the
Refrigerator Woman.
http://www.Lulu.com/davis4000_2000
The
Coming Financial Collapse of the U. S. Government:
Fed papers reveal what's in store for
Americans
March 24,
2008
Black Swans Everywhere
Kunstler http://www.kunstler.com/index.html
After a one-day reprieve from total meltdown
in the financial markets, news media cheerleaders for
the most reckless gang of bankers in world history
declared the crisis over on Good Friday (with the
markets safely closed). Whew, that's a relief. Problem
solved. And just in time for baseball season, too, so
none of the Banker Boyz have to sell their sky box
leases.
Commodities
Drop, Rally in Dollar, Stocks Vindicate
Bernanke
What is meant by "meltdown," by the way, since the word
is used so promiscuously by myself and others. I'd
define it as the shock of recognition that many big
institutions are worse than flat broke and are
therefore powerless to conduct normal operations. By
"worse than flat broke" I mean they are so deep in hock
that all the accountants who ever lived, in the life of
this universe and several others like it, using the
fastest parallel processing computers ever built, could
not keep up with their compounding accelerating losses
(now approaching the speed of light).
The current vacation from reality on Wall Street may
last a few more days, or even a couple weeks, but it
seems as though a whole flock of black swan events is
circling the sky over Financial-land and is about to
blot out the sun. By black swan, I refer to the concept
popularized by Nassim Nicholas Taleb in his recent book
of that name, namely unexpected events of great power
that tend to change the course of history.
For the moment, with the crisis "contained," and the
Boyz getting ready to air out their Hampton villas for
the coming season, we are once again primed to be
blindsided by potent random events that nobody saw
coming. The trouble is, there are enough potent
potential fiascos already visible on the horizon.
<snip>
Outside View: The end of capitalism as we know
it?
Independent.co.uk Web
By Phillip Blond
Sunday, 23 March 2008
"The trouble is that nobody
in power recognises this crisis for what it is an
asset insolvency crisis brought about by massive debt
leverage. Neo-liberals are still reacting as if the
emergency was one of liquidity. They are wrong.
Governments should bail out not banks and speculators
but the customers who now have every reason to fear for
the future."
The Western world is in an economic crisis similar in
scale to the oil shock of 1973. What we are seeing is
nothing less than the unravelling of neo-liberalism
the dominant economic and ideological model of the last
30 years.
The disintegration of Anglo-Saxon-inspired markets has
come about largely because of the confluence of two
tendencies of the "free market": speculation and
monopoly capitalism. Contrary to received opinion, free
markets unless subject to civil regulation, asset
distribution and persistent intervention always tend
to monopoly.
Similarly, there is nothing inherently efficient about
free markets they do not of themselves promote sound
investment or wise management. Rather, when markets are
conceived wholly in terms of price and return, and when
asset wealth and the leverage that this provides
becomes as concentrated as it was in the 19th century
(which is a scenario we are approaching), then markets
encourage nothing other than gambling masking itself as
sound investment.
For example, before 1973 the ratio of investment to
speculative capital was 9:1; since 1973, these
proportions have reversed. So huge have the numbers,
leverage and derivative instruments become that their
value now far exceeds the total economic value of the
planet. For instance, in 2003 the value of all
derivative trading was $85 trillion, while the size of
the world economy was only $49 trillion.
These ratios have risen with the latest estimates that
the value of all traded paper instruments exceeds the
underlying value of the assets on which they are
written by 3:1. The fact that these assets may
themselves be devaluing by up to 50 per cent (US
housing values have declined by 25 per cent in two
years) means that the overall ratio of global paper
value to its leveraged base may indeed double.
This average global figure itself masks even more
extreme levels of leverage. The Carlyle Group
de-faulted on $16.6bn ( 8.4bn) of debt last week. The
private equity firm had been speculating assiduously on
its AAA-rated mortgage base by some estimates, at the
end of its life, Carlyle's loan-to-value ratio and
hedge exposure was at 36:1. There are, of course, many
other private equity firms in a similar position.
This incalculable level of speculation is abetted by
the huge concentration of wealth that has occurred
since 1973. Why? Because if markets tend to monopoly
then smaller groups of people control larger amounts of
assets. The latest figures demonstrate this admirably:
the richest 10 per cent of the UK population increased
their share of the nation's marketable wealth
(excluding housing) from 57 per cent in 1976 to 71 per
cent in 2003. Over the same period, the speculative
capital that could be deployed or invested by the
bottom 50 per cent of the British population fell from
12 per cent to just 1 per cent. Indeed, the wealthiest
1 per cent of the population, on current government
figures, now control more than a third of all the
marketable wealth and this ignores the vast sums held
in offshore tax havens.
The New Economics Foundation has shown that global
growth has not aided the poor. In the 1980s, for every
$100 of world growth, the poorest 20 per cent received
$2.20; by 2001, they received only 60 cents. Clearly
neo-liberal growth disproportionately benefits the rich
and further impoverishes the poor.
Real wage increases in the top 13 countries of the
Organisation for Economic Cooperation and Development
(OECD) have been below the rate of inflation since
about 1970 a situation compounded in Britain as the
measure of inflation massively underestimates the real
cost of living.
Thus wage earners rather than asset owners have
faced a 35-year downward pressure on their standard of
living. Indeed, the golden age for the salaried worker,
as a share of GDP, was between 1945 and 1973 and not
this vaunted age of liberalisation.
The trouble is
that nobody in power recognises this crisis for what it
is an asset insolvency crisis brought about by
massive debt leverage. Neo-liberals are still reacting
as if the emergency was one of liquidity. They are
wrong. Governments should bail out not banks and
speculators but the customers who now have every reason
to fear for the future.
~~~~~~~~~~
IT AIN'T OVER 'TILL THE FAT
LADY SINGS
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_U/threadview?m=tm&bn=18771&tid=97738&mid=97738&tof=10&frt=2
By John Spence Last update: 11:35 a. m. EDT March 21,
2008
BOSTON (MarketWatch) -- Standard & Poor's Ratings
Services on Friday revised its outlook on the U. S.
brokerage industry to negative, saying despite
"relatively good" earnings from the group this week, it
has become more worried about the general profit
outlook for broker/dealers as a result of "increased
unpredictability of business trends." The firm said its
ratings factor in a 20% to 30% fall in revenue for the
industry as a whole, and there is the risk that revenue
could fall even further.
~~~~~~~~~~~~
Five reasons to start
worrying
http://www.thestar.com/printArticle/349667
TheStar. com - Canada -
David Olive Financial world's woes are spilling over
to Main Street, and threatening Canada
March 22, 2008 David Olive Columnist
"The basis for optimism is sheer terror." Oscar
Wilde
This week began in trauma.
It was announced Monday that one of the world's largest
securities firms, Bear Stearns & Co. Inc., had
effectively gone bankrupt. And that, in a most unusual
step, the U. S. Federal Reserve had hastily arranged a
forced marriage between Bear Stearns and the larger JP
Morgan Chase & Co., America's third-largest bank.
Stock markets worldwide plunged in response.
The week ended with traumatized speculation about which
illustrious bank or brokerage would be next to go toes
up, and whether the Fed, other central bankers
worldwide, and cool heads at the financial institutions
themselves had the collective wit to stave off a
meltdown in the global financial system.
Oh, and the United States appears to be heading into
the worst recession in a generation.
<snip>
~~~~~~~~~~
U.S. crashes - China breaks
By Michalis Firillas
Ha'aretz--Israel
http://www.haaretz.com/hasen/spages/966762.html
News from America is bleak. Earlier this
week the Federal Reserve came to the rescue and backed
a deal for the sale of a paragon of Wall Street
culture, Bear Stearns, to JP Morgan Chase, for a mere
$2 per share. Lehman Brothers, another major investment
bank, was also felt to be tottering. Responding to the
crisis of liquidity - the availability of money for
banks to loan, primarily to other smaller banks and
then on to Joe in the street - the Fed dropped the rate
by a further 0.75 percent. After weeks of dire
financial instability, and months of efforts by Fed
Chairman Ben Bernanke to stem the downward spiral
sparked by the subprime collapse, mostly by repeated
cuts in the interest rate, the question on everyone's
lips is one of anticipation: How long will this go on?
Perhaps they should also be asking, "How much worse can
this get?"
Even the most optimistic forecasts do not exclude the
possibility that a recession, or worse, stagflation
(high prices on top of no jobs), will go on for many
months. Realists will also tell you that unless the
legacy of former Fed chief Alan Greenspan, primarily of
averting recession by adding cash to the economy
through interest-rate manipulation and lax lending
regulation, is adjusted to the current international
conditions, we are all in for lean times. The condition
of the number one economy in the world will obviously
affect the rest of the world. But as you watch America
tumble into what may be the biggest economic crisis
since World War II, from an international perspective,
China is the one to keep an eye on.
<snip>
Michalis Firillas, an editor at the Haaretz English
edition, blogs at
http://firillas.blogspot.com.
`````````````
Silver Shortage gets Worse, Price Drops
Again!
(If you don't hold it, you don't own it)
Silver Stock Report
by Jason Hommel, March 20, 2008
Three more major silver dealers are reported to be out
of silver today: The U. S. Mint, Kitco, and Monex.
This, on top of the major dealers yesterday, Amark,
Perth Mint, CNI Numismatics, and APMEX, all reported
sold out. Further, nearly all of Canada is reported to
be out of silver, from Vancouver to Toronto.
This is unprecedented, and is a perfect case of market
manipulation in the paper market at COMEX and other
futures exchanges to see silver prices continue to drop
down to below $17/oz. today. Paper promises can be
created endlessly, but real silver cannot.
This is NOT a case of the dealers getting spooked, and
selling out to the refiners just in time, at peak
prices. This is a case of the public buying up the
stock at coin shops across the world ever since gold
hit $1000/oz.. That event finally sparked a little of
the public's buying of silver and gold. Thus, the
typical coin shop flow of silver to the refiners just
stopped in the last few weeks, and especially the last
two days.
This is NOT a case of the public creating a top with
'everyone' in silver, because nobody's in silver yet.
In 2006, only $1 billion was spent on investment
silver, which is 0.007% of the $13.5 trillion of money
in the banks. As I have long reported, the silver
market is so small, there is no room for new investor
demand, not even 0.1% of money could be spent on
silver, because that would be $13 billion, which would
push silver prices to $200/oz., and we are seeing only
the tiniest beginnings of that.
$13 billion would be almost enough to buy all the
silver produced by the mines in one year, which would
leave nothing for industry. It would essentially double
demand, but supply would remain the same.
Furthermore, this is not a top because the public
continues to get to the coin shops, and is now getting
on waiting lists for silver. The public is not yet in,
so how can the price drop?
This is a case of price fixing and manipulation, like
communism. Sausage is reported to cost 1 link per
ruble, but there is no sausage. Silver price is quoted,
but there is little to no silver.
Shortages are evidence of price fixing. Price fixing
results in shortages. They are price fixing silver at a
below market price over on the paper exchanges in New
York and around the world.
How long can it go on? Until people stop trusting the
paper exchanges, which could be after they default and
fail to deliver silver. Or we could see a severe
backwardation, as people refuse to trust and buy
futures contracts, which would thus sell at a discount
to real silver. Then, the spot price will really go up,
maybe about double or more very quickly.
Regarding Monex and Kitco:
Monex has a shortage of 100 oz bars and silver eagles.
They say that they are 5-7 days behind on orders for
100 oz bars and at least 10 days behind on silver eagle
orders.
"This message has been placed on KITCO's buying board
in large red letters. TT
IMPORTANT: Due to the volatility of the market, we are
experiencing a significant increase in the volume of
products that are being sold to Kitco. Although Kitco
and HSBC Bank are working hard to stay on top of this,
you may experience a delay in your package being
processed. We apologize for any inconvenience this may
cause, and appreciate your patience and
understanding."
bulliondirect says:
High Activity Market Alert The precious metals industry
is experiencing a substantial surge in activity which
may increase the possibility of logistical delays;
including customer service response time and product
processing (incoming and outgoing). Our goal is to keep
our prices competitive while still delivering an
exceptional transaction experience.
I now have 4 pages of reports that I posted to my
member's forum, from people saying that dealers around
the world are out. Here is a summary of their
comments:
Apmex out.
CNI out.
One in the UK.
One in New Port Richy, Florida.
Ebay is selling silver over spot.
Toronto out except overpriced Eagles and Maples.
Kitco in Montreal is out of Silver Maples.
Local shop in Victoria BC is out of all bullion.
Mexico City's "Consultoria casa de cambio" is out of
bullion.
There is no silver for sale in eastern Canada.
Perth Mint is out.
A world class gold and silver bullion dealer in Dubai,
Lakhoo Jewelry, is almost out.
Most Utah coin shops say there is a critical shortage
of silver available for purchase
in Utah.
(Johnson Matthey, the largest refiner, is in Utah!)
www.argentarius.de , there where 637 Mexican Libertad
still left. Now, two hours later:
nothing.
We could not find silver in canada from two days
now.
Conejo Coin and Stamp run out of 100 oz silver bars
too.
I just cleaned out the last 25 oz. of silver at my
local coin shop.
scotia bank told me that they have no silver for about
2 days now.
Camino Coin of Burlingame, CA says, There seems to be a
silver shortage.
In the Detroit, Michigan area, very few coin shops have
any, I got the last 2 bars at
one shop.
Bulliondirect having trouble mostly with Silver Eagles
and Canadian Silver Maple Leafs.
The US Mint has said they are out of silver eagles - at
least for a few weeks.
Portland, OR, Alder Gold Exchange., just a few bars,
bought them out.
The dealers in Vancouver are offering 100 oz bars at
$1875 preorder, but we wont get
them for months.
==============
Paul Mladjenovic, author of Precious Metals for
Dummies, said to me today, the following about the
current price manipulation and shortage of real
silver:
Outside of Oil, there is no other commodity with more
diversified uses. Silver will probably hit $50/oz.
within 3 years, and exceed its all time high on an
inflation adjusted basis ($150-$350/oz.) and hit
tripple digits by the early part of the next
decade.
Everything has a natural and artifical price, and an
artificial low price stimulates demand, and creates
shortages, but the false appearance of plenty, which
will blindside those in the paper markets.
Artifical intervention only works in the short term,
whereas natural supply and demand forces always triumph
in the long term.
==============
I want you to be able to buy on this dip, and not be
discouraged by sold out coin shops. This is why I asked
people to report to me who had silver in quantity,
ready to sell.
"If you don't hold it, you don't own it" (And can't
sell it!)
Yesterday, Robert Mish was slammed by my mention of his
shop in my report. Next time, he says he can only
handle orders for $10,000 or more at one time.
Here is the specific page at their website: www.austrianmint.at/silberphil?l=en
Sources sent by the owner of:
www.alchemianova.com
===============
Sincerely,
Jason Hommel
www.silverstockreport.com
www.miningpedia.com
_________________
Leery lenders demand more from borrowers
The Associated Press March 20, 2008, 8:37PM ET
http://www.businessweek.com/ap/financialnews/D8VHG7NO0.htm
By ALAN ZIBEL and J.W. ELPHINSTONE
WASHINGTON
Just when consumers and the U.S. economy need banks to
lend more freely, the mortgage industry is making it
harder to borrow -- even for those with good
credit.
Mortgage insurers, whose backing is required for
borrowers who can't afford the traditional 20 percent
down payment on a home, have already flagged nearly a
quarter of the nation's ZIP codes where they refuse to
insure some home loans.
That encompasses a wide variety of neighborhoods:
McMansions in Scottsdale, Ariz.; luxury Miami condos;
1960 ranch houses in Flint, Mich.; and early 20th
century kit homes in Metuchen, N.J.
The entire states of California, Florida, Arizona,
Michigan, Ohio and Nevada -- which have seen the
highest foreclosure rates and the worst price declines
-- are blackballed on some mortgage insurers'
lists.
Banks that have lost billions because of bad bets
during the housing boom are now reverting to strict
lending standards not seen in nearly 20 years,
according to industry data and interviews with
lenders.
For new home buyers and those seeking to refinance, it
can mean higher down payments and a higher bar for
credit scores, among other requirements. The toughest
restrictions are in markets where home prices are
falling, though regions where property values are
rising are not immune.
"We're in the midst of an epic, broad, sweeping change
in the mortgage industry," said Chris Sipe, a loan
officer with America East Mortgage in Frederick,
Md.
The reluctance to extend credit comes despite a flurry
of government initiatives, including steady interest
rate cuts by the Federal Reserve, intended to make it
easier for would-be borrowers and those facing
interest-rate resets on their mortgages.
Lenders' growing leeriness threatens to dampen sellers'
already soggy prospects for the spring home-buying
season -- and that means more pain for the already
battered housing sector and the broader economy.
In recent weeks, mortgage insurers have flagged more
than 9,600 ZIP codes in at least 34 states where they
won't insure certain types of home loans -- those for
investment properties or second homes, those with
riskier adjustable-rate or interest-only mortgages, or
for buyers making down payments of less than 3
percent.
With banks and mortgage insurers pulling back, state
and federal programs for first-time buyers and people
with poor credit are attempting to fill the void.
Don Brekke, an equipment operator from Colorado
Springs, Colo., tried to buy a bank-owned 1950s ranch
home for $113,000. At first he couldn't get a loan
because the house was in a potentially declining
market, and lenders required a 10 percent down payment,
more than he could afford.
Ultimately, he was able to qualify for a 100 percent
loan from Colorado's state financing authority, and he
plans to close in the coming days.
"It was a bunch of headaches -- going around and around
to get this done," Brekke said.
The combination of sinking home prices and tighter
lending standards has been a major aggravation for Ron
Broussard, a 38-year-old sales representative for a
home builder.
Broussard took advantage of soaring Southern California
property prices three years ago to refinance a loan on
a house he had owned since the late 1990s. Today he's
still stuck with a $720,000 mortgage and has been
renting it out since moving with his family to Texas a
year ago. Once appraised for $1.1 million, Broussard's
lender now says it's worth about $300,000 less.
He does not yet owe more than the property is worth,
but Broussard worries that is a possibility.
"The way the market's going, you know, who knows?" he
said.
Broussard has found little sympathy from his lender,
Countrywide Financial Corp. While Broussard accepts
responsibility for taking out a mortgage whose monthly
payments are due to skyrocket once the unpaid principal
exceeds the home's value by 15 percent, he feels
betrayed by the lender's unwillingness to negotiate
better terms.
The stinginess of banks is showing up in home loan
statistics: The value of all new mortgages plummeted to
$450 billion in the fourth quarter of 2007, down 38
percent from a year earlier, according to trade
publication Inside Mortgage Finance.
Subprime loans, made to borrowers with poor credit,
virtually disappeared from the market, plummeting 90
percent to $13.5 billion in the October-December
quarter.
There is a silver lining: The Federal Reserve has
repeatedly cut interest rates, helping borrowers whose
mortgages were just about to reset to higher rates and
people with student loans. Reflecting the Fed's
efforts, rates on 30-year mortgages dropped below 6
percent this week for the first time in more than a
month.
But the long-term impact of the Fed's move is far from
certain, and the central bank's actions could end up
feeding inflation and pushing up long-term rates.
"The credit crunch is much like the movie villain that
refuses to die," said Greg McBride, a senior financial
analyst at Bankrate.com. "The effects are spilling out,
far beyond what was originally seen."
Amid the turmoil, the mortgage industry is playing
hardball with borrowers.
Wells Fargo & Co. now requires a 25 percent down
payment in the most distressed markets, according to a
document sent to mortgage brokers last month. A company
spokesman said in an e-mail message that Wells Fargo is
"focused, as we've always been, on fair and responsible
lending and sound credit risk management."
Some borrowers who took out home-equity loans or second
mortgages are being blocked from refinancing. The
problem is most common among consumers using two
different lenders.
Companies that made second mortgages are now denying
requests -- common in a refinancing transaction -- to
take secondary status in the event of a foreclosure.
Especially in markets where prices are declining,
holders of those loans want to be paid off before a
loan is refinanced rather than take on the risk of
default, industry experts say.
Lenders' changes have removed 30 to 40 percent of the
borrowers who could have qualified in recent years,
estimated Tom LaMalfa, managing director at Wholesale
Access, a Columbia, Md.-based mortgage research
firm.
Lenders and mortgage insurers are also requiring proof
of income and employment, something they didn't always
do during the housing boom.
"It's no longer people buying pools of loans, strictly
written by a computer, and no one knowing what's in a
pool," said Marc Schwaber, chief executive of Preferred
Empire Mortgage Co. in New York. "The loan is going to
have to make sense."
Many in the real estate industry hope that the economic
stimulus legislation signed by President Bush earlier
this year allowing Fannie and Freddie to back loans
larger than their former limit of $417,000 will
kick-start the housing market.
And while this week's interest rate cut by the Federal
Reserve could tempt banks to lend more, experts say
they are likely to remain skittish for months to
come.
"It's going to take time for banks to tiptoe back into
the water," said Jefferson Harralson, a banking
industry analyst with Keefe, Bruyette & Woods
Inc.
~~~~~~~~~~~~~~
~~~~~~~~~~~~~~
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contained in the news links above.
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