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Forget 1987, This Could Be 1929 All Over Again

January 27, 2008, 3:28 pm
Filed under: Alan Greenspan, bernanke, black monday, Britain, Canada, central bank, Credit Crisis, DEBT, Dow, ECB, Economic Collapse, economic depression, Economy, Europe, european central bank, european union, global economy, gold, Great Depression, Greenback, Inflation, interest rate cut, interest rate cuts, John McCain, liquidation, Paul Craig Roberts, platinum, rate cut, Stock Market, United Kingdom, US Economy

Forget 1987, This Could Be 1929 All Over Again
Analyst says economic winter could last 8 years, worst is yet to come

Paul Joseph Watson
Prison Planet
January 24, 2008

The huge debt bubble, which has artificially propped up the stock market since the turn of the millennium, could cause a new great depression according to one expert, who also predicts that investors will flock to buy gold as the dollar continues to plummet.

Financial analysts have been drawing comparisons between this week’s chaos and the October 19 1987 crash, known as Black Monday, when the Dow Jones Industrial Average dropped by over 22 per cent and markets sunk worldwide.

But Vancouver-based investment adviser Ian Gordon has gone a step further, seeing clear parallels between current events and those that foreshadowed the 1929 crash and ensuing depression.

“We’re really seeing a mirror image of what happened following the [19]29 peak in equity prices in the United States, and the subsequent crash in equities,” Gordon told the Georgia Straight. “We’re seeing really the mirror of…the huge debt bubble that was built into the economy in the ’20s in the United States. We’re now seeing the collapse of the debt bubble that was built into the world economies, but principally in the United States.”

Gordon levels the blame at Alan Greenspan for creating a huge bubble by injecting too much money into the system in an attempt to offset the “economic winter” that inevitably arrives as part of the boom and bust cycle of the fiat money system, arguing that the realistic peak in the stock market occurred in 2000.

Gordon predicts that the “economic winter” will last another 7 or 8 years and that the worst is yet to come, with the continued meltdown of the dollar causing people to flock to the safe haven of gold.

“As this whole collapse in paper assets begins to unfold, causing tremendous strain on the banking system, we will see a tremendous rush to gold, to own gold,” he said. “But I think the worst is definitely in front of us, and not behind us.”

Gordon slammed the huge 75 points rate cut as ineffective, arguing that neither banks or consumers want to engage because of the crippling problems of their existing debts.

The analyst’s conclusions are in line with those of Paul Craig Roberts, the father of Reaganomics, who on Tuesday warned that the mess could result in the dollar losing its status as the world reserve currency.

Roberts also cautioned that the rush to diversify into gold could make people’s assets a target for government confiscation, as happened in 1933, four years after the great depression.

SocGen raises questions over Fed rate cut

FT
January 24, 2008

The Federal Reserve had no inkling about Société Générale’s firesale of stock futures following the discovery of a rogue trader when the US central bank made its emergency interest rate cut.

The question being asked by some in the markets is: was the Fed duped into a clumsy and panicked move by the clean-up operation for Jérôme Kerviel’s mammoth losses for the French bank?

There are many prepared to believe that, without SocGen’s huge derivatives sales, the mood in the stock markets would not have been half as bleak.

“It is now clear that the Fed was panicked into a 75 basis point rate cut by the actions of a rogue trader and the bank’s unwinding of his positions,” said one London-based hedge fund manager. “The action also clearly suggests that their French and ECB counterparts did not tell them what had happened at SocGen.”

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Purchasing Power Of The DOW

http://www.youtube.com/watch?v=SjS60TaD_J8

US slides into dangerous 1930s ‘liquidity trap’
http://www.telegraph.co.uk/money/m..01/24/bcnstig124.xml

A full-blown, prolonged recession in America is now inescapable
http://business.timesonline.co.uk/tol/business/markets/article3239801.ece

Crisis far from over, even with emergency cut
http://www.reuters.com/article/reutersEdge/idUSN2254342920080123

Home Prices Fell in ’07 for First Time in Decades
http://topics.nytimes.com/top/..michael_m_grynbaum/index.html?inline=nyt-per

Central Bankers Confront A New Inflation Calculus
http://online.wsj.com/article/SB120120201437714141.html

John McCain: ‘Underpinnings Of Economy Are Strong’
http://thinkprogress.org/2008/01/23/mccain-economy-strong/

Offers Buyouts In U.S.
http://lfpress.ca/newsstand/Business/2008/01/25/4792939-sun.html

Power Cuts Hits Platinum Production
http://www.platinum.matthey.com/media_room/1201266015.html

Bernanke In Hot Seat As Turmoil Spikes
http://www.breitbart.com/article..0057.eedjec8e&show_article=1

U.S. budget deficit likely to hit $250 billion this year as economy weakens
http://canadianpress.google.com/ar..kEBzG_OtLzsyA

Mad Money Cramer Wants Investigation of Federal Reserve
http://youtube.com/watch?v=Uj5t-O2mHH0

Top Economist Warns Of “Serious Breakdown” In World Financial System
http://www.prisonplanet.c.._serious_breakdown.htm

Bank of England Governor hints at rate cut as global markets bounce back
http://www.dailymail.co.uk/pages..489&in_page_id=1770&ct=5

U.S. Economic Collapse News Archive

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Fed Cuts Interest Rates 75 Basis Points

January 23, 2008, 4:07 pm
Filed under: 9/11, Australia, Bank of America, Bear Stearns, bernanke, Big Banks, bilderberg, black monday, bonds, Britain, central bank, CFR, Credit Crisis, DEBT, Dow, Economic Collapse, economic depression, Economy, engineered recession, Europe, european union, Federal Reserve, foreign buyout, FTSE, gas prices, George Bush, global economy, gold, Great Depression, Greenback, hong kong, housing market, Inflation, interest rate cut, interest rate cuts, Merrill Lynch, Northern Rock, Oil, Oppenheimer, Petrol, rate cut, Russia, S&P, Stock Market, tax rebates, US Economy, Wall Street

Fed Cuts Interest Rates 75 Basis Points

AP
January 22, 2008

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The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession, slashed a key interest rate by three-quarters of a percentage point on Tuesday and indicated further rate cuts were likely.

The surprise reduction in the federal funds rate from 4.25 down to 3.5 percent marked the biggest funds rate cut on records going back to 1990.

Federal Reserve Chairman Ben Bernanke and his colleagues took the action after an emergency video conference on Monday night, a day when global markets had been pounded by rising concerns that weakness in the world’s largest economy was spreading worldwide.

Despite the Fed’s bold move, Wall Street plunged at the opening. The Dow Jones industrial average was down 311.99 points in the first hour of trading.

In a brief statement explaining its move, the Fed said that “appreciable downside risks to growth remain” and officials pledged to “act in a timely manner” to deal with the risks facing the economy. The action was approved on an 8-1 vote.

Analysts said the fact that the Fed did not wait until its meeting next week to cut rates underscored the seriousness of the situation.

“The world’s stock markets are in meltdown so the Fed came in with an inter-meeting move to try to stop the panic,” Christopher Rupkey, senior economist at Bank of Tokyo-Mitsubishi.

The Bush administration, which had announced on Friday that President Bush supported a $150 billion economic stimulus package, said Tuesday that it was not ruling out doing more than the $150 billion proposal if necessary.

Many analysts said if the carnage continues in stock markets, the Fed will move to cut rates again at its Jan. 29-30 meeting.

“This move is not an instant fix,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics. “The economy is still staring recession in the face, but at least the Fed now gets it.”

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‘Fed may keep cutting interest rates’

Western Mail
January 23, 2008

There could be more interest rate cuts to come as the US Federal Reserve tries to head off recession.

Howard Archer of Global Insight said the prospect of a US recession suggests the Fed may keep cutting rates.

Yesterday’s surprise decision to cut US rates by 0.75% helped rally London’s FTSE-100 index, after £76bn had been wiped off its value on Monday. The index of leading shares closed 161.9 up at 5740.1, a gain of 2.9% after Monday’s 5.5% fall.

The Fed’s cut to 3.50% was its first emergency move since 2001 and the largest single reduction since 1984.

Mr Archer of Global Insight said “The Fed did not directly reference Monday’s global stock-market meltdown in its announcement, merely noting that ‘broader financial market conditions have continued to deteriorate’. It focused upon the weakening outlook for growth.”

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US rates ‘heading for 2.5% by the spring’

The Scotsman
January 23, 2008

American interest rates are set to tumble as low as 2.5 per cent by early spring as US policymakers battle to restore stability to a faltering economy.

Economists said they expected the Federal Reserve to have shaved another full point off borrowing costs by its scheduled April meeting.

The prediction came after yesterday’s surprise three-quarter-point cut to 3.5 per cent – a move that appeared to have only limited success in restoring investor confidence.

Bonds jumped sharply, with two-year notes falling to their lowest in nearly four years, as investors prepared for still more rate- cutting.

In London, the benchmark FTSE 100 index of Britain’s biggest companies closed 161.9 points or nearly 3 per cent higher at 5,740.1 following a rollercoaster session and the previous day’s 323-point battering.

Nigel Gault, chief US economist at forecasting body Global Insight, said the prospect of “at least a mild US recession” suggested the Fed was “far from done cutting rates”.

He added: “We now expect the Fed to cut another cumulative 100 basis points off interest rates. The next instalment will probably come at the formal meeting on 30 January – another 25 or 50 basis points. We would expect to hit 2.5 per cent by the April meeting.”

Yesterday’s decision to slash interest rates came a week before the US central bank’s regularly scheduled meeting, a sign that it acknowledges that the global financial situation is serious.

David Jones, chief economist at DMJ Advisors, said the Fed could move again between meetings, should conditions deteriorate further, and predicted the Fed would lower interest rates to 3 per cent by the end of March.

Earlier this month, leading investment bank Merrill Lynch said the US economy was already in recession.

Some analysts pointed to a panic move by the Fed, which is headed by chairman Ben Bernanke. Michael Metz, chief investment strategist at Oppenheimer in New York, said: “Unfortunately the Fed] have no power to reverse what in my opinion is the worst post-war recession.”

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New credit crunch looms

October 26, 2007, 1:19 pm
Filed under: black monday, Britain, California, central bank, Credit Crisis, DEBT, Dow, Economic Collapse, economic depression, Economy, Euro, european central bank, european union, Federal Reserve, foreclosures, global economy, Goldman Sachs, Great Depression, Greenback, housing market, imf, Inflation, interest rate cuts, liquidation, Oil, Paulson, pound, subprime, subprime lending, US Economy, US Treasury, Wall Street

New credit crunch looms

Telegraph
October 24, 2007

Fresh turmoil in the global debt markets has set off sharp falls in commodity prices and high-risk assets as investors scrambled for safety.

Blog: Is there really a sea of limitless liquidity?
German team damn UK economic ‘miracle’ as a sham

The dollar soared as US investors liquidated foreign holdings, ending at $1.4129 against the euro and £2.0276 against the pound, in one of the most dramatic currency moves this year.

Libor spreads in Europe’s interbank market jumped to 64 basis points, roughly the level that set off the credit crisis last summer and prompted a liquidity rescue by the European Central Bank. The iTraxx Crossover index that measures spreads on corporate bonds has jumped 100 basis since last week to 364 yesterday.

“It’s the summer that won’t end,” said Peter Berezin, a strategist at Goldman Sachs.

He said investors were shaken by last week’s drop in US home-builder sentiment to an all-time low and by fresh falls in the ABX index for sub-prime debt. “We continue to learn that it pays to respect the sell-offs in ABX and housing-related credit. This has elements of the February and August sell-offs, where credit markets signalled problems,” he said.

The lowest tier of ABX debt has fallen to a record low of 20.72 – from par of 100 – pointing to huge losses that have yet to surface.

Wall Street yesterday avoided a repeat of Black Monday, eking out a recovery after the Dow’s 368-point dive on Friday. The fall-out triggered tumbles in Tokyo, Shanghai, Hong Kong, Indonesia, Korea, Taiwan, and Turkey. Lead, copper, zinc, and nickel all fell hard on growing fears of a global economic slowdown, while gold dropped $13 to $754 an ounce. Brent crude fell 61 cents to $83.18.

There are concerns that a $75bn (£37bn) rescue operation put together by US Treasury Secretary Hank Paulson to stabilise the sub-prime market is intended to mask the scale of the crisis.

“This rescue has back-fired,” said Hans Redeker, currency chief at BNP Paribas. “The central banks don’t want anything to do with it. There is a fear that the big four US banks are trying to hide their debts,” he said.

The US market for asset-backed commercial paper (ABCP) contracted a further $11bn last week as lenders refused to roll over short-term debt. This form of paper has shrunk by 25pc since August, cutting off almost $300bn of funding.

Dr Suki Man, an analyst at Société Générale, said “shutters” had gone up across the debt markets. “Has it just got ugly again? The jury’s out, but it’s enough to make one feel the chill. All this is offset by a US economy still expected to grow by more than 2pc, and China and India still growing at breakneck speed,” he said.

Mr Redeker said yesterday’s dollar spike was caused by US investors pulling money out of Turkey, South Africa, Hungary and other emerging markets. They had invested $300bn in bonds and stocks over the last year.

“This is just profit-taking on risky assets. The dollar is going to fall further because long-term funding for US assets has collapsed since the sub-prime crisis,” he said.

Outgoing IMF chief Rodrigo Rato warned yesterday that the adjustment may be brutal. “An abrupt fall in the dollar could either be triggered by, or itself trigger, a loss of confidence in dollar assets,” he said.

Existing U.S. homes sales plunge in largest decline since 1999
Sales of Existing Homes Fall by Largest Amount on Record in September

AP
October 24, 2007

WASHINGTON (AP) — Sales of existing homes plunged by a record amount in September as turmoil in mortgage markets added more problems to a housing industry in its worst slump in 16 years.

The National Association of Realtors reported Wednesday that sales of existing homes fell 8 percent in September, the largest decline to show up in records dating to 1999. The seasonally adjusted annual sales rate of 5.04 million existing homes was also the slowest pace on record.

The weakness in sales translated into further pressure on prices. The median price — the point at which half the homes sold for more and half for less — fell to $211,700 in September, down by 4.2 percent from the sales price a year ago. It marked the 13th time out of the past 14 months that the year-over-year sales price has decreased.

The 8 percent decline in sales was bigger than the 4.5 percent decline that had been expected.

Analysts blamed the bigger-than-expected slump on the turmoil that hit credit markets and mortgage markets in August as worries increased over rising mortgage foreclosures.

Those worries resulted in a drying up of the availability of so-called jumbo mortgages, loans over $417,000, which are particularly important in high-cost areas such as California.

“Mortgage problems were peaking back in August when many of the September closings were being negotiated and that slowed sales notably in higher priced areas that rely more on jumbo loans,” said Lawrence Yun, senior economist for the Realtors.

By region of the country sales were down 10 percent in the Northeast, 9.9 percent in the West, 7 percent in the Midwest and 6 percent in the South.

The slowdown in sales meant that the inventory of unsold homes rose to 4.4 million units in September. At the September sales pace, it would 10.5 months to eliminate the overhang of unsold homes, a record length of time.

Economists are worried that the huge levels of unsold existing and new homes will put further downward pressure on prices.

Yun said that the price declines should be put into perspective in that they are occurring after a five-year housing boom which pushed prices up to record levels.

He forecast that prices will decline by about 1.5 percent this year. That would be the first annual price decline on Realtors’ records going back four decades.

The troubles in housing have been a drag on overall economic growth, increasing worries that the housing slump and related credit market troubles could become so severe that they will push the country into a recession.

However, many private economists believe that the Federal Reserve, which cut a key interest rate for the first time in four years last month, will continue cutting rates in a campaign to make sure that the weakening economy does not tumble into a full-blown recession.

Analysts said the price declines will worsen in coming months until inventories are reduced to more sustainable levels. Ian Shepherdson, chief U.S. economist at High Frequency Economics, predicted that the housing troubles will prompt the Fed to cut rates by a quarter-point at its meeting next week.

“The housing crunch is accelerating. The Fed can’t stand by and watch,” Shepherdson said.

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Oil Jumps Over $90 a Barrel

October 20, 2007, 1:46 pm
Filed under: Abu Dhabi, black monday, China, Credit Crisis, Dow, ECB, Economic Collapse, economic depression, Economy, Euro, european union, Federal Reserve, G7, gas prices, Germany, global economy, gold, Great Depression, Greenback, housing market, Inflation, interest rate cuts, Japan, Oil, OPEC, Petrol, Sarkozy, Saudi Arabia, Stock Market, UAE, US Economy, US Treasury

Oil jumps over $90 a barrel, dollar sinks to new low against the euro

FT
October 19, 2007

Crude oil prices on Friday rose to a fresh all-time high above $90 a barrel as the US dollar sunk to a new low against the euro.

Persistent worries about tight supplies ahead of the winter peak season and fresh geopolitical tensions also helped to push prices higher.

Nymex November West Texas Intermediate hit $90.02 a barrel in overnight trading. It later was 10 cents higher at $89.57 a barrel, extending Thursday’s $2.07 price jump. It is the sixth straight trading day that oil set a record high.

Edward Morse, chief energy economist at Lehman Brothers in New York, said that financial flows betting on further US dollar weakness ahead of the Group of Seven meeting and the US Federal Reserve meeting were propping up the oil price.

The dollar traded on Friday to $1.4303 against the euro, after touching earlier a record low of $1.4311 per euro. Investors are betting on a further interest rate cut when the Federal Reserve meets on October 31.

A lower dollar cuts the purchasing power of the barrel, suggesting that producing countries, such as Saudi Arabia, would try to keep the oil price higher to compensate for it. The strength of the euro, the sterling pound and other currencies also mean that some countries, particularly in Europe, are partially insulated from the oil price rally.

David Moore, a commodity strategist at the Commonwealth Bank of Australia in Sydney, said: “The dollar fell to new lows overnight. That fact has been a boost to all commodity prices.”

The Nymex December West Texas Intermediate contract which will become the oil market benchmark early next week traded at $88.01 a barrel, after hitting $88.49 a barrel.

Nauman Barakat, senior vice president at Macquaire Futures in New York, warned that traders have built massive December options calls -rights to buy oil at a certain price- at $90 and $100 a barrel, providing the backdrop for “additional upward impetus.”

Kevin Norrish of Barclays Capital said that the issue no longer seems to be whether oil will reach $100 a barrel, but when.

“Until there is a clear prospect of the [supply-demand] gap being filled, then the course is set for the market to take out $90, $100 and $110 in fairly quick succession,” Mr Norrish said.

Low inventories crude oil inventories ahead of the winter season are also supporting prices, traders said.

OECD crude oil and products stocks have fallen below their 5-year average, after the inventories suffered a counter-seasonal drop in the third quarter.

The IEA estimates that between July and September inventories fell at a rate of 360,000 barrels a day, sharply diverging from a 10-year average of increases in that period of about 260,000 b/d.

Inventories at Cushing, Oklahoma, the delivery point for the New York Mercantile Exchange crude oil contract are running 19 per cent below last year.

The Organisation of the Petroleum Exporting Countries, which controls 40 per cent of the world’s crude oil output, denies that the market is tight, instead blaming speculation, the weakening of the dollar and Middle East tensions for the 13 per cent jump in prices in the past week.

The price jump could force Opec to call for an emergency meeting ahead of its head of state summit in Riyahd, Saudi Arabia, in late November, and its ministerial meeting in Abu Dhabi, United Arab Emirates, in early December.

Saudi Arabia, the cartel’s leader, has remained silent on whether to increase production further, but at the last Opec meeting it pushed for a production boost in spite of strong opposition from other countries, suggesting the kingdom is concerned about the impact of high oil prices on the global economy.

Opec officials said the cartel’s ministers were just returning from holidays after the end of the Ramadan, implying it may take extra time for the group to discuss a new production increse.

Dollar dives as US slump spreads

Telegraph
October 20, 2007

The dollar has plummeted to all-time lows against both the euro and a basket of global currencies amid growing fears of a disorderly rout as the US property slump spreads to the broader economy.

Ambrose Evans-Pritchard: Is there really a sea of limitless liquidity?

The greenback dived after the US ‘Philly’ business index dropped 10.9 to 6.8 in October, with a shock fall in new orders and inventory, raising the chances of further rate cuts by the Federal Reserve this month.

The dollar crossed the barrier of $1.43 against the euro; the broader dollar index fell to 77.478, the lowest since the series began in 1973.

The plunge follows data released this week by the US Treasury showing a record $163bn (£80bn) exodus from all forms of US assets, led by unprecedented levels of US bonds sales by Japan, China and Taiwan.

Bundesbank chief Axel Weber gave the euro an extra lift by hinting strongly at more rate rises in Europe to head off inflation, expected to reach 2.6pc in Germany.

The growing belief the European Central Bank may keep tightening despite the credit crunch has caused traders to shift gear, renewing bets on the euro. But the surging currency has hit confidence in Europe, where industries in France, Italy and some German firms are warning of serious knock-on effects.

Airbus says each one cent move costs the group $100m in profits.

Ernest-Antoine Seilliere, head of the EU-wide lobby BusinessEurope, called for “political intervention” by the G7 club of economic powers at today’s meeting in Washington.

Rodrigo Rato, head of the International Monetary Fund, offered little hope of relief. “Our view regarding the euro is that the euro stays in line with medium-term fundamentals on a multilateral basis. It is true the euro is close to historic highs in real terms, but it is also true the euro-area current account is in broad balance,” he said.

French president Nicolas Sarkozy has called for EU action to force a shift in exchange rate policy, if necessary by strong-arming the ECB to halt its campaign of rate rises.

Germany has a huge trade surplus, but France faces the biggest deficits in its history. Spain’s current account deficit is 9pc of GDP.

The US has adopted a policy of benign neglect towards the dollar slide, seeing it as a way to correct a huge current account deficit, but there are now concerns the process may be getting out of hand.

The Manufacturers Alliance/MAPI said in its quarterly outlook the soft dollar was complicating life for America’s key trading partners and risked triggering a global slowdown. “Global sentiment against the dollar is gaining traction, generating daunting challenges for the short-term economic outlooks of major US trading partners.”

Mitul Kotecha, an economist with Calyon, said: “The United States will do no more than repeat that markets determine exchange rates and will oppose any sort of intervention. There is every chance the aftermath of the G7 meeting will see the dollar resume its weakness.”

Paul Robinson, an analyst at Barclays Capital, said the prospect of Fed rate cuts had knocked away a key prop for the dollar, warning it could slide to $1.50 against the euro.

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