. March 17, 2008 SouthAmerica: It seems to me that the Fed is in total PANIC mode right now. The Fed is sending a message to the market that they probably know of more bad news that it is on the pipeline and they are acting accordingly â in total Panic. ******** Fed Takes New Steps to Ease Crisis Monday March 17, 3:42 am ET By Jeannine Aversa, AP Economics Writer Associated Press Fed Takes Steps to Ease Crisis, Cuts Lending Rate to Financial Institutions to 3.25 Percent WASHINGTON (AP) -- Worry about the damage a growing credit crisis is inflicting on an ailing U.S. economy led the Federal Reserve to make a rare weekend move, lowering a key lending rate before Wall Street opened Monday. The central bank approved a cut in its emergency lending rate to financial institutions to 3.25 percent from 3.50 percent, effective immediately, and created a lending facility for big investment banks to secure short-term loans. The new lending facility will be available to Wall Street firms on Monday. "These steps will provide financial institutions with greater assurance of access to funds," Federal Reserve Chairman Ben Bernanke told reporters in a brief conference call Sunday evening. The Fed acted just after JPMorgan Chase & Co. agreed to buy rival Bear Stearns Cos. for $236.2 million in a deal that represents a stunning collapse for one of the world's largest and most venerable investment banks. Just on Friday the Fed had raced to provide emergency financing to cash-strapped Bear Stearns through JPMorgan. Days earlier the Fed announced a set of other unconventional steps to thaw out a credit market in danger of freezing shut. "It seems as if Bernanke & Co. are pulling out all the stops to avoid a serious financial market meltdown," Richard Yamarone, an economist at Argus Research, said Sunday evening. However on world financial markets, Asian stocks plunged early Monday after the JPMorgan and Fed announcements. Markets in Australia and New Zealand were also off. Oil prices hit a record in Asian trading as the value of the dollar continued its free fall and U.S. stock index futures were down sharply, suggesting Wall Street would open lower after sinking Friday. "There is persistent credit uncertainty. Market players have been repeatedly let down which shows the subprime mortgage problems are so deep-rooted," said Atsuji Ohara, global strategist of Shinko Securities in Tokyo. President Bush has scheduled a White House meeting Monday afternoon with his Working Group on Financial Markets, which includes Bernanke, Treasury Secretary Henry Paulson and Securities and Exchange Commission Chairman Christopher Cox. Paulson said Sunday, "I appreciate the additional actions taken this evening by the Federal Reserve to enhance the stability, liquidity and orderliness of our markets." The new lending facility -- described as a cousin to the Fed's emergency lending "discount window" for banks -- is geared to give major investment houses a source of short-term cash on a regular basis -- if they need it. It will be in place for at least six months and "may be extended as conditions warrant," the Fed said. The interest rate will be 3.25 percent and a range of collateral -- including investment-grade mortgage backed securities -- will be accepted to back the overnight loans. The "discount" rate cut announced Sunday applies only to the short-term loans that financial institutions get directly from the Federal Reserve. It doesn't apply to individual borrowers. The Fed's actions are the latest in a recent string of innovative steps to deal with a worsening credit crisis that has unhinged Wall Street. The action comes just two days before the central bank's scheduled meeting on Tuesday, where another big cut to a key interest rate that affects millions of people and businesses is expected to be ordered. That key rate is now at 3 percent and is expected to be cut by at least one-half percentage point on Tuesday. Analysts said the Fed's new steps may lessen pressure for a super-sized cut to that rate. The Fed said in a statement that the steps are "designed to bolster market liquidity and promote orderly market functioning ... essential for the promotion of economic growth." Even with the Fed's aggressive moves, economic and financial conditions keep deteriorating. An increasing number of economists believe the country already has slipped into its first recession since 2001. Many economists think that the economy is shrinking now in the January-to-March quarter. The first government figures on first-quarter economic activity will be released in late April. The Fed on Sunday also approved the financing arrangement through which JPMorgan will acquire Bear Stearns. JPMorgan said the Fed will provide special financing for the deal. The central bank has agreed to fund up to $30 billion of Bear Stearns' less liquid assets, according to JPMorgan. Source: http://biz.yahoo.com/ap/080317/fed_credit_crisis.html .
. March 17, 2008 SouthAmerica: On Saturday I was watching the BBC News and they reported some news that the US mainstream media is staying away from â by not saying a word about the new problem. The BBC was showing what is happening today to thousands of people who lost their homes to foreclosure â These people have started living in Bushvilles (favelas American style) in the Los Angeles area just like during the Great Depression. The Bushvilles are already here and probably it will spread to other large cities around the country in the coming weeks, months and years. .
. March 18, 2008 SouthAmerica: Reply to eusdaiki Bushvilles are here with the compliments of the Bush administration. When I saw the BBC News on television they mentioned the Hoovervilles during the Great Depression, and they were trying to imply with their reporting that these are the new Bushvilles. I checked the BBC website and I found the story, and if you go to the source of that article they also have pictures of a few of these Bushvilles. You need the BBC (foreign media) to show this kind of stuff today, the US mainstream media it is completely worthless these days in almost every sense with very few exceptions to the rule â they are all specialized on entertainment. ********** âTent city highlights US homes crisisâ BBC News - Friday, 14 March 2008 The meltdown in the US mortgage market has led to record foreclosures and forced thousands from their homes. In few places is it worse than southern California, where the BBC's Rajesh Mirchandani reports on an extreme consequence of the downturn, but one that some observers fear could grow. Forty miles east of Los Angeles, on a patch of waste ground, is the place they call Tent City. Sandwiched between the local airport and the railway line, this really is the wrong side of the tracks. We are on the outskirts of Ontario, a functionally pleasant commuter-city in southern California. Last summer, local officials established this camp as a temporary base for the city's homeless population, then around two dozen. But word spread and now some 300 people live here. It has an air of scruffy permanence, and indeed, city officials say there are no current plans to close it down. Varied histories Most residents live in tents, some in mobile homes in various states of disrepair, their possessions crammed in with them or spread out on the ground. Amenities are basic - no mains electricity, no plumbing, no drainage. Portable showers offer a chance to wash, but there is nowhere to prepare food, apart from makeshift tables in the open air. Dogs and children scratch around in the dusty earth. What is striking is the range of people here: whites, African-Americans, Hispanics, the old and young including some with babies. And they tell a variety of stories too. Benson Vivier, a Vietnam veteran, said a leg operation allowed him to walk after years of being in a wheelchair. But as a consequence his disability benefits were cut, and he could not afford his rent Others told tales of family disputes or houses burning down. Some were addicts, some fresh out of prison. 'Home or food' But one man, who did not give his name, said he and his family were living in Tent City because they were victims of America's foreclosure crisis. It came down to "feeding my family or keeping the house", he said, "so I got rid of the house". The property he lost is nearby in Ontario, which, in places, offers a middle-class suburban dream - green lawns, wide pavements, garages big enough for two cars. Yet it is in an area known as the Inland Empire, where the rate of foreclosure is the third highest in the entire US. No longer able to afford his mortgage payments, this man saw his lender repossess the property, and now someone else lives there. "It's hard for me to see it, when someone else owns it and I am homeless with nothing," he said. There are thousands like him across California - people whose inability to finance their mortgages has cost them their homes; many thousands more across the US. But in Tent City, at least, he is in a minority - few are here as a direct result of the housing crash. However, Mike Dunlap, who runs a volunteer group providing supplies to Tent City's dwellers, thinks that could change. "People lose their homes through foreclosure," he says. "They go and live in the hotels, and the homeless people who were in the hotels end up back on the streets." He fears that, as more people lose their homes in what appears to be a deepening housing market collapse, more former homeowners could end up in places like Tent City. Source: http://news.bbc.co.uk/2/hi/americas/7297093.stm .
. March 24, 2008 SouthAmerica: The Federal Reserve is in total Panic mode, and today they are throwing another $ 50 billion US dollars into the pot to try to stop the financial meltdown. It seems to me that the Titanic has finally hit the iceberg: Treasury Secretary Henry Paulson is quick to pull the trigger on bailouts for Wall Street cronies such as Bear Stearns but opposes any big lifeboat for homeowners. http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/03/22/INUNVMBE3.DTL Right now Ben Bernanke canât figure out fast enough new ways on how to open the wallet of the American taxpayer to bailout a bunch of people on Wall Street who believe that the US government should stay away from their business. The US economy is supposed to be a free market economy, at least is what they used to say. Today the US economy has become the Bailout economy so inefficient and Pathetic that the Zimbabwe economy model has started looking good as a future model for Wall Street to adopt on the coming years. Now that the Titanic has finally hit the iceberg and the water alarm sounded inside the ship, the large-capacity emergency pump has started throwing water overboard â Ben Bernanke, Henry Paulson and company are also doing their best in helping throw the water overboard with their drinking cups. If you saw the movie Titanic just picture on your head in that scene when the Titanic is sinking: Ben Bernanke and Henry Paulson would be moving as fast as they can with a cup on their hands throwing water overboard on their hopeless effort to save the ship. Here is a small example of articles about what is happening in the US financial markets, not only in the US but also in other countries from around the world. Basically this financial meltdown is snowballing and becoming a self-fulfilling prophecy. Key words to keep in mind: Panic, Meltdown, and Financial Crash. ***** âFailing banks, plunging shares.. it's starting to sound like a new Wall St crashâ By Matt Roper Mirror (UK) â March 22, 2008 Banks in crisis, the world teetering on the brink of financial disaster, tycoons looking down the barrel of bankruptcy, millions on the breadline... The year is 1929 and America's Wall Street has just crashed, bringing the US economy to its knees, with the rest of the world not far behind. Fast forward to 2008 and the picture looks depressingly familiar. After another week of turmoil as America slides towards recession, we all hope desperately that Britain isn't following. Back then, in just one devastating October day, America lost more money than it spent in the whole of the First World War. By the time the market hit absolute rock bottom, 75 per cent had been wiped off the value of the nation's shares. The human cost was even greater as millions faced financial ruin, unemployment and hunger. Some saw it coming quicker than others. Days before the crisis hit, a vice president of the Earl Radio Corporation jumped from the window of a New York Hotel. His suicide note read: "We are broke. Last April I was worth Ã100,000. Today I am Ã24,000 in the red." Winston Churchill, visiting the city less than a week after Black Thursday, October 24, 1929, awoke to the noise of a crowd outside the Savoy-Plaza Hotel. "Under my window a gentleman cast himself down 15 storeys and was dashed to pieces, causing a wild commotion and the arrival of the fire brigade," he later wrote. Clerks in downtown hotels were said to be asking guests whether they wanted the room for sleeping or jumping, while two men with a joint account jumped hand in hand from a window in the Ritz. And the parallels with today's economic uncertainty are striking. Just like the current crisis, the Wall Street Crash came after a period of economic success. The Roaring Twenties was a time of unmatched prosperity in the US. If we look back to only a year ago, bankers needed a wheelbarrow to cart their bonuses home. Now, since the credit crunch chaos caused by the collapse of the US sub-prime mortgage market, they're lucky to keep their jobs. One of the causes of the 1929 Crash was short-selling - borrowing shares from a broker to sell at a high price and buy back - hopefully - at a profit when the market plummets. Come back up to date and you notice that old habits clearly die hard as rogue traders tried to bring down HBOS in Britain this week, sending its shares tumbling 20 per cent. The Financial Services Authority is now on the hunt for the greedy City traders who triggered the £3billion fall. Short-selling is not illegal, but it is against the law to spread false rumours about a company in order to make a profit. The HBOS scandal comes on the back of £50bn being wiped off the value of the UK's biggest companies as the FTSE 100 Index crashed nearly four per cent to its lowest level since 2005. Following the collapse of Bear Stearns, one of America's biggest investment banks, this week the US Federal Reserve attempted to ease the credit crunch by offering billions of pounds of support to other financial institutions at risk. It was the first time the Reserve, the US version of the Bank of England, had been forced to take that sort of action since the terrible days of the Great Depression in the 1930s. Only a decade earlier the picture in the US had been so different. After the First World War, unemployment was low, production high, prices stable and stocks and shares soaring. Between 1924 and 1929 the New York stock market quadrupled in value, fuelled largely by share dealing funded with borrowed cash. That was all to change on Black Thursday in 1929 when 13 million shares changed hands in a frantic scramble to sell, many at prices that shattered the lives of their owners. By 11.30am there was panic and by 12.30 the New York Stock Exchange closed its visitors' gallery as traders collapsed in tears or fell to their knees in prayer on the exchange floor. But worst was to come the following week. By Tuesday's close, the Dow Jones had fallen a massive 23 per cent, and shares in radio company RCA, once worth Ã420 each, were now selling for just Ã26. By the end of the day the market had lost Ã14bn, bringing the loss for that week to Ã30bn - 10 times more than the annual budget of the US government. The equivalent figure today would be an unimaginable £15trillion. A trillion is a thousand billion. But the market kept falling, day after day, month after month. The founder of General Motors lost Ã40m while the banker JP Morgan lost up to Ã60m. THE head of Rochester Gas and Electric Company gassed himself, while another investor poured petrol on himself and set it alight. Historian William K. Klingaman wrote: "In Milwaukee, one gentleman who took his own life, left a note: 'My body should go to science, my sympathy to my creditors'." When the market finally bottomed out in 1932, average stock prices had fallen more than 75 per cent and people had lost an estimated Ã45bn in wealth. A total of 20,000 firms and 1,616 banks had gone bankrupt and 12 million Americans had been left unemployed. The knock-on effects were felt in Britain almost immediately. Demand for our products collapsed, and by the end of 1930, unemployment had more than doubled from 1 million to 2.5 million, while exports had fallen in value by more than 50 per cent. It created a period of appalling poverty across the the world - which in Germany aided the rise of the Nazis - and only ended for the US when its economy was rescued by Second World War production. Almost eight decades later, and the world's markets are in turmoil again as the credit crunch threatens to plunge us into recession. Bear Stearns survived the Wall Street Crash but this week it had to be rescued by rival JP Morgan Chase, and also required £15bn of taxpayers' cash to complete the deal. Gordon Brown has urged Britain not to lose faith in the Government in the face of the looming economic crisis and vowed to avoid a recession by making "tough decisions". But if the worst predictions come true and a stock market crisis on the scale of 1929 were to happen, then we're all in for a bumpy ride. CRASH IN NUMBERS 12.9m shares were traded on Black Thursday, October 24, a record in its time. 16.4m shares were traded on Black Tuesday, October 29, beating the record five days earlier. 23,000 Americans committed suicide in the following year - the highest number ever 20,000 companies and 1,616 banks went bankrupt 12m people became unemployed and 12,000 were made redundant every day. Source: http://www.mirror.co.uk/news/topsto...ound-like-a-new-wall-st-crash-89520-20358766/ ***** âFed's rescue halted a derivatives Chernobylâ Telegraph (UK) â March 24, 2008 We may never know for sure whether the Federal Reserve's rescue of Bear Stearns averted a seizure of the $516 trillion derivatives system, the ultimate Chernobyl for global finance. "If the Fed had not stepped in, we would have had pandemonium," said James Melcher, president of the New York hedge fund Balestra Capital. "There was the risk of a total meltdown at the beginning of last week. I don't think most people have any idea how bad this chain could have been, and I am still not sure the Fed can maintain the solvency of the US banking system." Source: http://www.telegraph.co.uk/money/ma...3/23/ccfed123.xml&posted=true&_requestid=3335 .
. âThrowing money at a crisis wonât prevent meltdownâ By Colin Donald Sunday Herald (Scotland) â March 24, 2008 THERE IS a scene in the nuclear accident film The China Syndrome when the plant manager's coffee quivers on his desk. The fact that he has been praising his plant's safety record up until then heightens the drama. Last weekend was such a moment for American finance, and last Wednesday the shudder was transmitted to Edinburgh, where only a calm counter-offensive by HBOS's communications team prevented something unthinkably worse than even 17% slump in the share price. Denial of the scale of the global financial crisis is becoming less and less possible by the day. President George W Bush made a characteristically goofy-but-cynical stab at it in a Pentagon speech last Tuesday, implying that economic salvation and the defeat of al-Qaeda in Iraq were intertwined. In fact it is hard to see the latter having much effect on the former, and the closest connection between the bursting of the US property bubble and the Iraq war is the grim coincidence that each has cost the US economy $3 trillion ($3 million million). The war figure comes from the Nobel Prize winner Joseph Stiglitz while the credit crisis figure is a three-fold revision of the one produced by Nouriel Roubini of New York University late last year. Despite his reputation as academic king of the bears, it has so far not been seriously challenged. What is clear from the events of last week is that there is very little faith within the markets in the Federal Reserve Board's capacity to deal with this problem. So far the Fed's interventions have enabled JPMorgan Chase to rescue Bear Stearns and have dispensed $200 billion of treasury bonds in exchange for suspiciously undervalued collateral. The Fed's intervention was intended to solve the liquidity problem, presuming that this is what the problem is, and counterparty risks should have contracted as a result. They haven't. It is not that surprising that monetary policy tools are not sufficient to tackle the problem as nobody is quite clear what the problem is. Sub-prime is unwinding at the same time as a massive and accelerating compression in US property prices. Recent US polls show that three quarters of US citizens think they are entering a multi-year recession, a state of mind that will depress consumption even further. Are there any lifelines out there for optimists to grab on to? Yes, there is the one about how this is going to be as bad as Japan, which has seen only fitful and anaemic emergence from recession since its bubble burst in 1991. The Japan scenario is held up as being beyond the worst-case scenario, and even if it gets that bad, Japan is still a functioning and in many ways comfortable economy, so how bad can it get? There are some points of comparison between the US's problems and those of Japan, but in more significant respects the equation doesn't work. Japan's economy got into trouble at a time when conditions in the outside world were quite helpful. By the mid-1990s, the US economy was booming, sustaining Japan with a huge export market. There is also the fact that Japan's problem was concealed debt, whereas in this case it is debt that can't be assessed even by those responsible for it. So the Japan comparison is akin to those proverbial generals preparing to fight the last war, as Ben Bernanke, a scholar of the Japanese bubble experience as well as the Great Depression, knows well. For now the Fed seems to have shot every bolt it canâ¦. Source: http://www.sundayherald.com/busines...risis_wont_prevent_meltdown.php#comments_form ***** âMeltdown on Main Streetâ By Mike Colpitts OpEdNews, PA - March 23, 2008 ⦠The U.S. economy is battling the most severe economic crisis since the Great Depression, and now the meltdown on Wall Street may be averted with further actions by the Fed. But the meltdown on Main Street may just be beginning. Deregulation triggered the U.S. Savings and Loan Fraud Crisis in the late 1980âs. But it seems we didnât learn from history. Deregulation of the financial markets and mortgage lenders has caused the economic meltdown. Investment banks and other lenders have no way to determine the extent of the crisis since their risk-management models do not take unprecedented events like the nation is currently experiencing into account. As a consequence, the banks have not only been caught off guard, but have been amazed at the speed at which the crisis is accelerating. ⦠The White House and the Fed are finally in Emergency Crisis management mode. The bailout of one of the nationâs oldest and once most powerful investment banks, Bear Stearns is another sign that the Fed may be out of touch with what has really been going on in the national economy. ⦠The crisis is dragging down the national economy, and the rest of the worldâs financial markets, which have been thrown out of whack since the economic crisis blew up more than a year agoâ¦. Source: http://www.opednews.com/articles/genera_mike_col_080323_meltdown_on_main_str.htm ***** âAmerica lives in shadow of 1929â BY: Harold James is professor of international affairs at Princeton University Financial News - March 24, 2008 The countryâs financial past is a wide and threatening gulf The US stock market crash of October 1929 is indisputably historyâs most famous financial collapse. It is evoked wherever and whenever financial sentiment becomes nervous. Policy recommendations for the following 80 years have been made on the basis of analyses or presumptions of what went wrong in 1929. And like todayâs financial crisis, which accelerated last week with the near collapse and fire sale of Bear Stearns, 1929 was utterly and completely an American phenomenon. The crisis in 1929 had world-historical consequences, the Great Depression, even perhaps the Second World War, but had no obvious causes. Suggested explanations can only be very poorly fitted (if at all) into the prevailing paradigm of the âefficient markets hypothesisâ, according to which stock prices accurately reflect all the publicly available information about a security. The US experience of crash and the Great Depression is uniquely inexplicable. Other large industrial countries had equivalent financial disasters around this time. In April 1927, Japan was shaken by a series of bank panics. Germany was brought down by the failure of Danat Bank on July 13 1931. Britain was pushed off the gold standard on September 21 1931. But in each case, it is possible to give a relatively clear account of what caused the panic. The Japanese failures were the result of a political controversy over the âearthquake billsâ held by the Bank of Taiwan that had been given special treatment after the disaster of the 1923 Kanto earthquake. The German banking crisis followed a political crisis after the announcement of the Austro-German customs union and the difficulties of a textile producer. The British panic came after a political crisis over the budget and after an unprecedented mutiny of the Royal Navy. The unique feature of the American panic is that no one has ever been able to explain what caused it or even say what the specific trigger for the panic might have been. When he was still an academic, Ben Bernanke wrote that âto understand the Great Depression is the holy grail of macroeconomicsâ. Social scientists, and maybe also policymakers, are thus in an endless quest. Is it â like the grail quest â a futile one? British economist John Maynard Keynes made the Wall Street crash the centrepiece of his indictment of American capitalism. From his perspective, the problem lay in a system of valuation in which values had no necessary or direct correspondence to long-term productivity. America was uniquely volatile because of the extent of popular participation in the stock market, while more exclusive or âaristocraticâ markets were less vulnerable. Keynes concluded: âEven outside the field of finance, Americans are apt to be unduly interested in discovering what average opinion believes average opinion to be; and this national weakness finds its nemesis in the stock market.â On October 24 1929, and during the subsequent slide, commentaries emphasised the abnormality of the market responses over the previous days. The only way they thought they could explain the breakdown was by referring to past crises. The day after the October 24 collapse, The New York Times explained: âComparisons most frequently made by older members of the Stock Exchange yesterday were with 1920, 1907 (the âpanic yearsâ), 1903 and 1901.â In the panic of October 1987, the same principles applied. As in 1929, there was no obvious trigger or news item, with the possible exception of the news that the US had attacked an Iranian oil station (announced in the early morning of October 17). So the only explanation was to conjure up the historical image of 1929. In consequence, patterns of behaviour are also drawn from the past. In October 1929, the New York market expected JP Morgan to rescue it because it had done so in 1907. So, it sent Richard Whitney on to the floor of the exchange on Black Thursday to make his famous bid for US Steel. When he did not repeat the action on the next Monday there was a real panic. And in 2008? Again, the market looked to JP Morgan to rescue Bear Stearns. What about subsequent rescues? A further continuity is that reassurances from experts or authorities become irrelevant or counter-productive. In 1929, President Hoover said the âfundamental business of the country is soundâ⦠Source: http://www.financialnews-us.com/?page=uscomment&contentid=2350136013 .
. âWeathering the fallout from a global meltdownâ By: Kwon Soon-woo JoongAng Daily â South Korea March 24, 2008 The financial crisis, which began unfolding in earnest in August 2007, has been deepening in 2008. The current financial volatility has intensified and is lasting longer than previous market turmoil. Stock markets have plummeted around the world and the dollarâs depreciation has accelerated. Investors have become more risk averse as shown in a new record hit by the Emerging Market Bond Index Plus. This is because subprime mortgage woes have begun to rapidly affect not only subprime mortgage products but also mortgage-related derivatives and bond insurers that guarantee those derivatives. Thus, subprime-related losses are increasing, with the present estimate up to $600 billionâ¦. Source: http://joongangdaily.joins.com/article/view.asp?aid=2887749 ***** âHow to invest in a time of panicâ Seattle Post-Intelligencer â Seattle, WA THE ECONOMIST March 23, 2008 If the world is going to hell in a handcart, what should you buy? With newspaper headlines dominated by the credit crisis, and with big banking names perceived to be under threat, this is a question all investors need to consider. Much depends on what form you expect the apocalypse to take. In recent weeks investors have been flocking to buy Treasury bonds, relying on the unimpeachable credit of the American government. But with the dollar falling almost every day, foreign investors may feel the government's credit is about as unimpeachable as Richard Nixon; they will be paid back only in devalued paper. ⦠Perhaps index-linked Treasury bonds would be a better safeguard? After all, they provide protection against inflation. The problem is that other people have already thought of that. Earlier this month, the real yield on America's five- year issue was briefly negative; investors were willing to see their investments not quite keep pace with prices. That does not make them look great value. Then there is cash. Fortunes have been made by being a cash buyer at the end of a bear market. But where to keep the money? Given the nervousness about banks, many savers will want to keep their holdings below the ceiling for deposit insurance (in America, $100,000 per saver per bank). ⦠In a complete meltdown, for example during world wars and revolutions, it is hard to find anything that keeps its value. Stock markets collapse. Governments default on their debt. Private property is no longer respected, either because governments seize the assets or because goods cannot be protected from criminals. ⦠It would be a nice irony if the best hedge against a collapse of the post-industrial economy turned out to be a return to the agrarian past. Source: http://seattlepi.nwsource.com/opinion/355966_investorsonline24.html .
. March 24, 2008 SouthAmerica: This timely article published by The New York Times on March 23, 2008 said a few things that needs further clarification as follows: The article said: âSome innocent bystanders might be forgiven for wondering why that last word â âdepressionâ â has started popping up. Is it possible our economy could speed past a recession into a full-blown depression like that of the 1930s, when American unemployment reached 25 percent? There is a simple answer regarding the unemployment figures in the United States since the US government has fixed that problem permanently, and Wall Street it doesnât have to worry about that problem anymore. It is called American ingenuity and innovation, and the US government fixed the unemployment figures in a way that the unemployment rate never again goes beyond a number the US government knows that they can get away with. By the way, this is how Americans fix most problems today. How to keep a stable unemployment rate around 5 percent when everything else is going to hell? A little imagination and voila â the US government creates a new category on its statistics to stick the undesirable number of unemployed people: âDiscouraged workers.â At the same time that the unemployment figure looks stable the number of âDiscouraged workersâ explodes into a mushroom cloud. Basically the âDiscouraged workersâ category is the equivalent of a nuclear weapon of mass deception. But if you want to believe that the unemployment rate is around 5 percent in the United States then good for you, and you probably also believe that we are on a bull market for housing and the stock market. The good news for Wall Street is that today we can have 20 percent of the actual population unemployed in the United States, and the government statistics still be showing some kind of employment growth â it is a real fools paradise. The article also said: âBut whatever name economists give the current downturn, we are unlikely to see the bread lines, shantytowns and dust bowl of the Great Depression.â I guess the author of this NYT article has not looked deep enough to notice that Bushvilles are already flourishing around the country in the US, and food banks of all kinds on major cities and smaller towns are running out of food to help the increasing number of people who are in desperate trouble. ***** âDepression, You Say? Check Those Safety Netsâ By CHARLES DUHIGG Published: March 23, 2008 The New York Times The stock markets are spiraling like whirling dervishes, one of the nationâs largest financial institutions has flirted with bankruptcy and the former Federal Reserve chairman Alan Greenspan invoked the ghost of past calamities when he wrote that the current economic turmoil is likely to become the âmost wrenchingâ since World War II. Meanwhile, home foreclosures are at their fastest pace in at least 30 years and in a survey conducted by USA Today and Gallup, more than half of respondents indicated that they had fears the downturn could become a depression. Some innocent bystanders might be forgiven for wondering why that last word â âdepressionâ â has started popping up. Is it possible our economy could speed past a recession into a full-blown depression like that of the 1930s, when American unemployment reached 25 percent? Well, the economists are here to say that you can dig up the family silver and stop training the kids how to jump onto a moving train. While many who study the nationâs economic health agree that a recession has probably already begun, and that it may be long and severe, they also say the odds of a full-blown depression are almost nonexistent. Why? Because so many of them have spent so much time studying the Great Depression and trying to figure out how to react more effectively if things turn really bad again. Take last week, for example. âI used to give a lecture explaining that the Great Depression could never happen now because of the regulations that emerged from that crisis,â said Barry Eichengreen, an economist at the University of California at Berkeley. âBut weâre learning that there is a shadow banking system, of hedge funds and investment banks, that are outside of those safety nets. What happened to Bear Stearns last week looked a lot like a 19th-century run on the bank. And thatâs why the Fed reacted so quickly.â Indeed, when the government moved last weekend to help save Bear Stearns, the fifth-largest securities firm on Wall Street, from bankruptcy, policy makers were motivated by concerns that the investment bankâs failure could start a chain reaction of collapses at other investment houses. Stopping those dominoes was such a priority that the Federal Reserve helped broker the sale of Bear Stearns to its rival JPMorgan Chase. A century ago, such government hustle would have been unthinkable. Even the distinction between a recession (a significant decline in economic activity that lasts more than a few months) and a depression (a decline that is much longer and deeper) didnât really matter, because turmoil in the economy was often taken for granted. Between 1857 and 1929, while regulators largely stood idle, the American economy swung through 19 national boom-and-bust gyrations that sometimes threatened to wipe out whole industries within months. But in the wake of the Great Depression, American policy makers began actively managing the economy with a handful of tools, including adjusting interest rates and using massive government spending to spur growth. Since 1945, there have only been 10 boom-and-bust cycles, most of them much shallower than earlier ones, and the unemployment rate has never topped 9.7 percent. Much of that stability, economic historians say, stems from reforms designed to calm consumers during downturns, like the Federal Deposit Insurance Corporation, which guarantees most checking and savings accounts up to $100,000 if a bank fails. â¦âThe biggest difference with this recession is that itâs starting in the housing market,â said Victor Zarnowitz, an economist at the Conference Board who is also a member of the National Bureau of Economic Researchâs business-cycle committee. For the first time in more than 50 years, the nation faces a broad risk âthat peopleâs most important asset, their home, will lose value,â he said. As homeowners see the value of their homes decline, they become more likely to delay purchases of the big items â like automobiles, electronics and home appliances â that are ballasts of the American economy. When those purchases decline, large manufacturing firms, suddenly short on funds, could begin laying off employees. Those workers, uncertain about the future, might in turn stop buying Starbucks lattes and movie tickets, and in a worst-case scenario, that could spur coffee shops and theaters to begin layoffs of their own. Such a chain reaction was one reason unemployment during the Great Depression was so persistent and widespread. But today, say economists, fundamental changes make such contagion unlikely. For one thing, incomes are more stable. Many more Americans hold jobs in service sectors, like medicine or education. And more Americans work for the government, which is less inclined to fire people just because the economy turns gloomy. Moreover, there are safety nets that can be traced to the Great Depression, like Social Security, unemployment benefits, food stamp programs. These âgive people a sense of security even when theyâre out of work,â said the Harvard economist Benjamin Friedman. âThat establishes a floor for how panicked consumers become.â Even if consumer confidence hit rock bottom, that most likely would not be enough, by itself, to cause a depression. For things to become really dire, the nationâs financial institutions would have to fail at the same time that unemployment began significantly rising. Only if banks suddenly closed, or it became impossible for companies to access short-term lines of credit, would things begin spiraling out of control. A credit shortage, in fact, has played a significant role in todayâs economic turmoil, and was the reason some economists began invoking the Great Depression. But those comparisons were more to stress how differently policy makers are behaving today than their counterparts did in 1930, when a wave of panics started that eventually caused one-fifth of the nationâs banks to fail. Today, the Federal Reserve is so cautious about the stability of major financial institutions that regulators sometimes jump into action almost immediately, as they did in the Bear Stearns case. One goal of such an intervention, say economic historians, is to slow down the turmoil as much as possible. In the 1920s and early 1930s, policy makers became overwhelmed by a cascade of crises they were unable to temper. â¦Of course, all of these techniques do not guarantee an easy path to rosier times. Some economists and financiers say itâs likely that the current recession will extend for at least a year. Others think the American economy will suffer from an extended malaise as Japan did in the 1990s. But whatever name economists give the current downturn, we are unlikely to see the bread lines, shantytowns and dust bowl of the Great Depression. More likely, these economists say, would be a sudden increase in the number of people selling belongings on eBay. â¦âTo understand the Great Depression is the Holy Grail of macroeconomics,â Mr. Bernanke wrote in a 1994 paper, when he was a professor at Princeton focused on analyzing the financial cataclysm that began in 1929. While economists have made great progress, he continued, âwe do not yet have our hands on the Grail by any means.â Source: http://www.nytimes.com/2008/03/23/w...l?_r=1&scp=2&sq=depression&st=nyt&oref=slogin .
Excellent Commentary As Usual .............................................................................................. One way to look at current conditions is to try to visualize what the world will be like in the next several years.... Thus consider the following.... The US Dollar goes to a 1 to 1 basis with Brazilian Currency.... The Chinese currency appreciates 150%.... The Indian Currency appreciates 100%.... The US adopts the Amero.... Canadian, Mexican, and American Labor come into line.... Oil goes to $250 because of the War in Iran....and the dollar devaluation.... 25% of all vehicles are electric.... Honda cracks the Solar Hydrogen solution for cars and houses.... By 2021....15% of all cars and houses run on Solar Hydrogen.... Fossil fuel vehicles are banned in cities.... The IRS is abolished.... Medicine becomes nationalized.... Education is accomplished via the internet.... Government is run via the internet.... ............................................................................................ The government still holds the Bush housing bonds, and balks on Medicare, Medicare, and Social Security.... .............................................................................. The electronic stock exchange is setup by a worldwide consortium which will be domiciled outside of the US because of heavy legal largesse.... .................................................................................. BRIC labor costs come into line with the US.... .................................................................................. Trading will be so cheap....it will be like making a phone call.....there will be a small monthly debit to have the World Stock Internet Line....where transactions costs are the same for everything..... One can choose either levered products or the actuals.... The list goes on and on.....
. March 30, 2008 SouthAmerica: When the economy of a country is in the early stages of implosion, and the economy is descending into a New Great Depression I am not surprised to find out that Americans are feeling hopeless and depressed. The New York Times article said: âBut the amount of optimism that things will get better is as low as it has been in the four decades that the Conference Board has been asking questions. Why is that? It is not just the decline in home prices and the increase in mortgage defaults. Nor is the seemingly interminable war in Iraq the major cause, although it, too, is probably playing a role. Instead, it is evidence that America is no longer a leader, or perhaps even competent, in one area in which we believed it excelled. That area is finance. Only months ago, American financial institutions were pre-eminent in the world economy. We were the country that invented all the new financial products and that made lots of money from them. It was our investment banks that were called upon to advise companies and governments in other countries, and then to arrange the financing they needed. Now that reputation lies in tatters.â In my opinion, many Americans are going to feel even more depressed when they find out how much money of their pension investments have been lost by the Hedge Funds - these investments were supposed to generate superior returns for the pension funds to make up for their underfunding. . There are many negatives that are already in motion that it will help this slow economic implosion process to develop that the mainstream media have not even started considering and it has not reached their radar for them to alert the public. At this point the economists, the mainstream media, and the US government are not even scratching the tip of the iceberg. Just wait until they start figuring out what is below the surface of the water. ***** âFor Americans, a Bit of the Swagger Is Goneâ By FLOYD NORRIS Published: March 28, 2008 The New York Times Americaâs self-confidence is on the wane. It is not just that the economy seems to be in a recession, although that is no doubt a big part of it. Foreign policy reversals and worries that the United States cannot compete in a changing world also play a role. Similar fears have arisen before and have eventually been proved wrong. But that has always taken time, perhaps because such deep fears can be self-fulfilling as both businesses and consumers cut back spending â something that appears to be happening now. Evidence of the loss of confidence came this week when the Conference Board released its consumer confidence survey for March. What stood out was how far economic expectations have fallen. The amount of pessimism â as shown by people who forecast that things will get worse â is not quite at record highs. But the amount of optimism that things will get better is as low as it has been in the four decades that the Conference Board has been asking questions. Why is that? It is not just the decline in home prices and the increase in mortgage defaults. Nor is the seemingly interminable war in Iraq the major cause, although it, too, is probably playing a role. Instead, it is evidence that America is no longer a leader, or perhaps even competent, in one area in which we believed it excelled. That area is finance. Only months ago, American financial institutions were pre-eminent in the world economy. We were the country that invented all the new financial products and that made lots of money from them. It was our investment banks that were called upon to advise companies and governments in other countries, and then to arrange the financing they needed. Now that reputation lies in tatters. Our big banks have been forced to turn to places like China and Abu Dhabi for capital as losses have mounted. But no similar angel turned up for Bear Stearns, and the Federal Reserve Board had to step in to avert disaster. The Fed, which only months ago seemed omniscient, now seems to be making it up as it goes alongâ¦. Source: http://www.nytimes.com/2008/03/28/b..._r=1&scp=4&sq=Floyd+Norris&st=nyt&oref=slogin .