Filed under: 2008 Election, Amero, angela merkel, asia, bailout, Bank of America, Big Banks, brad sherman, Britain, C-Span, Canada, Carroll Quigley, central bank, CFR, China, civil liberties, civil rights, CNBC, Congress, corporations, corporatism, Credit Crisis, DEBT, Dictatorship, Dollar, ECB, Economic Collapse, economic depression, Economy, Empire, Europe, european central bank, european union, Fascism, Federal Reserve, France, g8, George Bush, Germany, glenn beck, global economy, global elite, global government, Globalism, gordon brown, Great Depression, Greenback, Habeas Corpus, henry paulson, Hitler, House, hyperinflation, imf, Inflation, interest rate cuts, internationalist, internationalists, job market, John McCain, liquidation, london, Martial Law, Media, middle class, morgan stanley, mortgage, national socialism, Nazi, New World Order, paris, Paulson, peter schiff, Police State, Posse Comitatus, rate cut, Sarkozy, Senate, single currency, socialism, sovereignty, Stock Market, tax, Taxpayers, unemployment, United Kingdom, US Economy, us sovereignty, US Treasury, Wall Street, World Bank, WW2, Zimbabwe | Tags: Ewald Nowotny, fiat currency, global currency, global currency system, global financial order, globalists, globalization, international order, Jean-Claude Trichet, Jeffrey Garten, John Mack, José Manuel Barroso, new global monetary authority, one world currency, Timothy Geithner, weimar republic, world economic crisis, world financial system, world monetary system, world money system, world order
Globalists Exploit Financial Meltdown In Move Towards One World Currency
Paul Joseph Watson & Kurt Nimmo
Prison Planet
October 20, 2008
The swift and ruthless exploitation of the economic meltdown on behalf of globalists and central banks revolves around their drive to move towards a one world currency system and an unprecedented centralization of global financial power.
Statements on behalf of world leaders and central banks over the past two weeks have made it clear that the agenda to further collate economic power and control of currencies into the hands of the few is rapidly accelerating – all in the name of solving a financial crisis that was caused as a result of the same fiat money system that the elite themselves created and maintained.
The original Bretton Woods agreement in 1944, spurred by the depression of the 1930s and the second world war, created the International Monetary Fund, the World Bank and laid down common standards for markets around the world. Now with the current financial crisis EU leaders see another opportunity to impose global regulations on sovereign economies.
As the crisis reached its peak at the end of September, British Prime Minister Gordon Brown led the call for “a new global financial order” in which the world financial system would be built around a centrally coordinated policy of international regulation.
Morgan Stanley Chief Executive John Mack has also called for a new global body to oversee the financial crisis, warning that it is like nothing he’s ever seen before.
The sentiment echoes those of elite figures such as CFR member Jeffrey Garten and Timothy Geithner, president of the Federal Reserve Bank of New York, who have both recently called for a “new global monetary authority”, a de-facto global financial dictatorship, operating across borders and forcing nations and corporations to register and adhere to strict monitoring and regulations.
European Central Bank council member Ewald Nowotny told Bloomberg yesterday that the centrality of the U.S. dollar was in question and that a “tri-polar” global currency system is in development between the U.S., Asia and Europe to replace it.
This followed a call by French President to question whether a “worldwide currency system” should be introduced in response to the financial crisis.
“Another subject in tomorrow’s world is that of the great currencies. How many should there be? What should the agreement between these great currencies be? Should we organize a discussion? Should a country like India one day have a global currency?” Sarkozy told a news conference, reports Reuters.
Any discussion would be purely academic, as the ruling elite long ago decided to force a global currency down our throats. In fact, a global currency is at the very core of their plan to dominate the world. Control money and you control the destiny of states, you eliminate national sovereignty. “The control of money and credit strikes at the very heart of national sovereignty,” A.W. Clausen, president of Bank of America once observed.
As Georgetown professor and CFR historian Carroll Quigley noted, the goal of the banking families and their minions consists of “nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole… controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences.”
It remains to be seen if the EU will realize its “solution” to the world economic crisis. In 2007, Robert Mundell, “the father of the euro,” noted that “international monetary reform usually becomes possible only in response to a felt need and the threat of a global crisis.”
Certainly, the elite cooked up an appropriate global crisis, now they will engage in a full court press to establish a global currency and eventually a global government.
EU Leaders Call for Global Currency
Kurt Nimmo
Infowars
October 18, 2008
If we are to believe the Washington Post, French president and current EU leader Nicolas Sarkozy has pledged to save us from nameless “freewheeling bankers and traders” who get the blame for the current economic crisis.
Sarkozy, Gordon Brown, and EU honcho José Manuel Barroso are talking up an international summit to discuss an “urgent overhaul of the world’s financial architecture,” that is to say a new Bretton Woods to establish a brand spanking new international economic order. Sarkozy has managed to grab George Bush’s ear and he will travel to Washington on Saturday to lay the groundwork for a conference.
In 1944, 44 allied nations met at a resort in Bretton Woods, New Hampshire, to fiddle with monetary standards, fix exchange rates, and create the IMF and World Bank. “Launching a remake of this old model — particularly in such a short time, with so many new participants — would represent a daunting challenge at any time, but particularly during the twilight of the Bush presidency and the crisis that is still jolting banks and stock markets around the world,” reports the Post.
Sarkozy and the EU leaders would have us believe this new Bretton Woods will call for “globally coordinated regulation of the financial industry, elimination of tax havens and a compensation system in which traders are not rewarded for dangerous risk-taking,” among other things.
It was the demise of Bretton Woods in 1971, insists European Central Bank president Jean- Claude Trichet, that led to the abandonment of regulation and subsequent market turmoil. “The explosion of the first Bretton Woods in a way could be interpreted as a rejection of discipline,” said Trichet, reports Bloomberg.
Gordon Brown, the former Chancellor of the Exchequer, wants to fix that turmoil with a new spate of regulations aimed at international finance. On October 13 in London, Brown said “we must devise new rules for a world of global capital flows” just as the founders of Bretton Woods “devised rules for a world of limited capital flows.”
“We now have global financial markets but what we do not have is anything other than national and regional regulation and supervision,” Brown lamented from Brussels.
All of this is nonsense. It should be obvious by now the bankers engineered the current crisis in order to consolidate their hold on the global economy and all the talk about rogue traders, tax havens, and over-compensated executives is merely that — talk, or more specifically a sales pitch, a slick parlor trick devised to fool the commoners.
Glossed over in all the corporate media coverage is the global elite demand that a global currency be established. “Europe wants to present a blueprint for a new worldwide currency system,” reports the AFP in the video here.
“Another subject in tomorrow’s world is that of the great currencies,” Reuters reported Sarkozy musing on October 16. “How many should there be? What should the agreement between these great currencies be? Should we organize a discussion?”
Glenn Beck On One World Currency
“There is a global meltdown coming, it is a global depression, a One World Currency and One World Financial System is the ENDGAME! China said last week said they want One Global Currency, France said yesterday or the day before that they want One World Order a New World Order at the end of this event!” – Glenn Beck
CNBC: The New World Order is in effect on wall street
http://www.prisonplanet.com/calls-for-new-global-financial-order-increase.html
Tri-Polor Global Currency A Possibility
http://www.bloomberg.com/apps..&sid=apjqJKKQvfDc&refer=home
http://www.nationalpost.com/news/story.html?id=885494
G-8 Announces Global Summit On Financial Crisis
http://news.yahoo.com/s/a..t=Ah6wNwIX5KlE5B1m5eFoDXlbbBAF
Bush & Allies Pledge Joint Action On Economy
http://www.youtube.com/watch?v=InFBnX87lzU
Brown: Use This Crisis To Create New Financial World Order
http://www.prisonplanet.com/..new-financial-world-order.html
Filed under: 2-party system, AIG, bailout, Bank of England, Bear Stearns, Big Banks, Britain, Central Banks, Credit Crisis, DEBT, Derivatives, Dictatorship, Dollar, ECB, Economic Collapse, economic depression, Economy, Empire, Europe, european union, fannie mae, Fascism, Federal Reserve, foreclosure, freddie mac, G7, global economy, Great Depression, Greenback, henry paulson, housing market, hyperinflation, Inflation, interest rate cuts, Japan, JP Morgan, liquidation, london, middle class, mortgage, mortgage companies, mortgage lenders, Nancy Pelosi, national socialism, nationalization, neocons, Neolibs, Paulson, rate cut, real estate, scotland, socialism, Stock Market, subprime, subprime lending, switzerland, Taxpayers, UBS, United Kingdom, US Economy, US Treasury, Wall Street | Tags: Nouriel Roubini, run on banks, swiss central bank
Potential Cost For Bailout is $5 Trillion or $43K Per Household
Steve Watson
Infowars.net
October 15, 2008
The total potential cost of the financial bailout to the U.S. taxpayer is already rapidly approaching $5 trillion, over seven times as much as the meaningless $700 billion bailout bill figure.
Analysts have previously marked out the $5 trillion figure as the actual cost, now those predictions are becoming demonstratively accurate.
Meanwhile, Hank Paulson has defended government intervention, stating “There’s no doubt that the way to get the maximum bang for the taxpayers here was to invest in banks.”
Based on this Reuters summary and the sources linked within the table, here is a breakdown of the bailout’s cost to taxpayers so far.
|
Bailout Type
|
Cost To Taxpayers |
|---|---|
|
|
$300 billion |
|
|
$250billion |
|
|
$25 billion |
|
|
$150 billion |
|
|
$700 billion+ |
|
|
$29 billion |
|
|
$200 billion |
|
|
$85 billion (+ extra request of $35 billion) |
|
|
$300 billion |
|
|
$4 billion |
|
|
$87 billion |
|
|
$200 billion+ |
|
|
$50 billion |
|
|
$144 billion |
| POSSIBLE TOTAL | $2.56 trillion+ |
| NUMBER OF HOUSEHOLDS PER U.S. CENSUS |
105,480,101 |
| POSSIBLE COST PER HOUSEHOLD |
$24,26
|
In addition, the U.S. government has said it will temporarily guarantee $1.5 trillion (£856 billion) in new senior debt issued by banks, as well as insure $500 billion (£285 billion) in deposits in non-interest accounts, mainly used by businesses.
These figures take the potential cost to $4.559 trillion+ – or $43, 221 per household.
Furthermore, when you account for the fact that the credit default swap market is around $62 trillion, and that derivatives worldwide are worth between between $1 and $2 quadrillion, the numbers start to become meaningless.
Fed To Offer Unlimited Dollars
Bloomberg
October 13, 2008
The U.S. Federal Reserve led an unprecedented push by central banks to flood financial markets with dollars, backing up government efforts to restore confidence in the banking system.
The ECB, the Bank of England and the Swiss central bank will offer unlimited dollar funds in auctions with maturities of seven days, 28 days and 84 days at a fixed interest rate, the Washington-based Fed said today. The Bank of Japan may introduce “similar measures.’’ The dollar declined and some money-market rates fell.
Policy makers from the Group of Seven nations pledged at the weekend to take “all necessary steps’’ to stem a market panic after the MSCI World stock index plunged 20 percent last week. Central banks last week cut interest rates in tandem for the first time since 2001, the U.S. plans to buy $700 billion in distressed assets from banks and in Europe, the U.K. is leading a push to keep lenders afloat with taxpayers’ money.
“By providing unlimited dollar funds they are acting on the back of the G-7 plan to ensure the system is fully liquidized,’’ said Lena Komileva, an economist at Tullet Prebon Plc in London. “We’re going to see even more liquidity provided and more aggressive rate cuts are coming.’’
http://www.reuters.com/article/newsOne/idUSTRE49F97920081017
Millionaire Hedge Fund Trader Thanks Idiot Traders
http://www.guardian.co.uk/business/2008/oct/18/banking-useconomy
Treasury Black Out Key Parts Of Bailout Contracts
http://www.huffingtonpost.com/..136030.html
Wall Street banks in $70bn staff payout
http://www.guardian.co.uk/business/2008/oct/17/executivesalaries-banking
Homeless Numbers Alarming
http://www.usatoday.com/news/nation/2008-10-21-homeless_N.htm
House prices ‘to plummet by 35%’ – the biggest ever fall in Britain
http://www.dailymail.co.uk/news/..–biggest-fall-Britain.html
Royal Bank Of Scotland Nationalized
http://business.timesonline.co…g_and_finance/article4932250.ece
Switzerland Pumps Billions Into Bank System
http://biz.yahoo.com/ap/081016/eu_switzerland_banks.html?printer=1
UBS Gets Bailout From Swiss National Bank
http://www.chicagotribune.com..7,0,4057853.story
Dow Jones Bloodbath Mirroring 1929 Rout
http://www.prisonplanet.com/dow-jones-bloodbath-mirroring-1929-rout.html
Two More Banks Closed By Regulators
http://money…00397x1211373371x1200675175
U.S. Stocks Plunge Most Since Crash of `87 on Recession Concern
http://www.bloomberg.com/apps/news?pid..er=home
Roubini Sees Worst Recession in 40 Years, Rally’s End
http://www.bloomberg.com/apps/news?..efer=home
JPMorgan Responsible for the Destruction of U.S. Financial System
http://www.marketoracle.co.uk/Article6826.html
World May Be Lucky to Get Worst Recession Since 1983
http://www.bloomberg.com..OAeSWBCY&refer=home
Stocks On Track For Worst Year Since 1937
http://www.chron.com/disp/story.mpl/nation/6050283.html
Former Fed chief says U.S. now in recession
http://www.reuters.com/article/newsOne/idUSTRE49D2QB20081014
Filed under: Britain, Central Banks, Credit Crisis, DEBT, Dollar, ECB, Economic Collapse, economic depression, Economy, Europe, european central bank, european union, global economy, gold, gold shortage, Great Depression, Greenback, hyperinflation, Inflation, london, silver, silver shortage, Stock Market, United Kingdom, US Economy, us mint, Wall Street | Tags: CTFC, gold bars, gold bricks, sweden, switzerland
Reuters
September 25, 2008
The U.S Mint said Thursday it was temporarily suspending sales of American Buffalo 24-karat gold one-ounce bullion coins because strong demand depleted its inventory.
“Demand has exceeded supply for American Buffalo 24-karat gold one-ounce bullion coins, and our inventories have been depleted. We are, therefore, temporarily suspending sales of these coins,” the Mint said in a memorandum to authorized American Buffalo dealers.
The Mint also told dealers that it would work to build up its inventory to resume sales shortly.
FT
September 29, 2008
European central banks have cut their sales of gold to the lowest level in almost a decade, reversing the practice of recent years when hefty sales helped depress prices.
Institutions bound by the Central Bank Gold Agreement – the banks of the eurozone plus Sweden and Switzerland – sold about 343 tonnes of gold in the year that expired on Friday, the lowest amount since the first CBGA was signed in 1999.
This compares with 475.8 tonnes in the year to the end of September 2007. Under the agreement, the banks are allowed to sell up to 500 tonnes of gold each year.
The European trend is part of a global movement of reduced central bank selling and increased investor buying that is helping to underpin high prices at a time of turmoil in financial markets.
GFMS, the precious metals consultancy, estimates global central banks will sell 269 tonnes of bullion in 2008, the lowest since 1995.
Much of the selling by European banks took place between October and December last year.
As central banks sell less, investors are rushing into bullion-backed exchange traded funds to such an extent that some analysts refer to the ETFs as the “people’s central bank” because they are now bigger than most countries’ official reserves.
Rich investors are snapping up gold bars
September 30, 2008
Investors in gold are demanding “unprecedented” amounts of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen.
Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich.
“There is an enormous pick-up in investment demand. I have never seen a market like this in my 33-year career,” said Jeremy Charles, chairman of the LBMA. “The gold refineries cannot produce enough bars.”
Gold and silver dealer reports an ‘unprecedented’ shortage of metals
The Post
September 28, 2008
A surge for demand in gold and silver has resulted in an unprecedented shortage of the metals for retail investors in recent days, according to Gold and Silver Investments, a Dublin-based firm that allows retail investors to speculate on movements in the value of precious metals.
Gold and Silver Investments director Mark O’Byrne said the supply of gold and silver available for small retail investors suffered a dramatic deterioration within hours on Friday, as wholesalers reported that government mints and refiners, the primary suppliers of the metals, had stopped offering new supplies.
‘‘It’s absolutely unprecedented,” said O’Byrne, who said the shortages were likely to drive up the costs of gold and silver in the secondary market.
‘‘This did not happen even in the 1930s and the 1970s, and will result in markedly higher prices in the coming months.”
According to O’Byrne, gold and silver were now only easily accessible in the primary market, which consisted of central banks and other major traders of the precious metals.
However, he said that minimum transaction sizes in this market were out of reach for most retail investors – at approximately $350,000 for gold and $135,000 for silver.
Analyst: Dollar May Sink, So Look to $1,500 Gold
http://www.cnbc.com/id/26970932
Central banks favor gold as crisis unfolds
http://www.reut..02?virtualBrandChannel=10338&pageNumber=2
CFTC Relents and Probes Silver Market
http://endthefed.blogspot.com/2008/09..rket.html
Filed under: bailout, bernanke, Big Banks, Central Banks, Congress, Credit Crisis, DEBT, Dollar, ECB, Economic Collapse, economic depression, Economy, european central bank, Federal Reserve, global economy, Great Depression, Greenback, henry paulson, house senate, housing market, hyperinflation, Inflation, interest rate cuts, liquidation, middle class, mortgage, mortgage companies, mortgage lenders, nationalization, Paulson, rate cut, real estate, Ron Paul, Stock Market, subprime, subprime lending, tax, Taxpayers, Uncategorized, US Economy, US Treasury, Wall Street
Banks borrowed $940 Billion Last Week
Bank Borrowing From Fed Already Exceeded Bailout Total in Last Week
Steve Watson
Infowars.net
September 26, 2008
U.S. banks borrowed $188 billion per day on average in the latest week from the Federal Reserve, meaning that the Fed loaned out more money than the Treasury’s proposed bailout in just one week, still barely managing to keep the economy afloat.
Federal Reserve data showed on Thursday the total amount banks borrowed nearly quadrupled the previous record of $47.97 billion per day notched just the week before, Reuters reports.
$188 billion per day on average over the course of five days means that the total amount borrowed from the Fed in the week ending the 24th September stood at $940 billion – a figure that easily eclipses the proposed $700 billion bailout.
As we have already reported, the $700 billion number was simply pulled out of thin air by the Treasury.
The Treasury’s fact sheet about the bailout states, “The Secretary will have the discretion, in consultation with the Chairman of the Federal Reserve, to purchase other assets, as deemed necessary to effectively stabilize financial markets.”
This gives the government and the Federal Reserve carte blanche to do whatever they want to long as it is done in the name of stabilizing financial markets, they can nationalize any company or industry and use taxpayer money, above and beyond the initial $700 billion, for whatever purpose is deemed necessary, without any oversight. Paulson’s bailout plan is also unreviewable by any court, it will remain in perpetuity.
Paulson’s draft bailout plans says: “The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time.”
As Chris Martenson writes, “This means that $700 billion is NOT the cost of this dangerous legislation, it is only the amount that can be outstanding at any one time. After, say, $100 billion of bad mortgages are disposed of, another $100 billion can be bought. In short, these four little words assure that there is NO LIMIT to the potential size of this bailout. This means that $700 billion is a rolling amount, not a ceiling.”
If the bailout bill passes it is just the beginning of something much larger. $700 billion is a meaningless figure that will do nothing to shore up the economy. It is not a bailout, it is a giveaway that will allow insiders to purge themselves of bad bets and free to continue where they left off. The real reason for the bill is the unprecedented transfer of power to the Executive Branch and into the hands of the global corporate elite.
Fed Pumps $630 Billion Into Global Banking System
Bloomberg
September 29, 2008
The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.
The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed’s emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.
The Fed’s expansion of liquidity, the biggest since credit markets seized up last year, comes as Congress prepares to vote on a $700 billion bailout for the financial industry. The crisis is reverberating through the global economy, causing stocks to plunge and forcing European governments to rescue four banks over the past two days alone.
“Today’s blast of term liquidity will settle the funding markets down, and allow trust to slowly be restored between borrowers and lenders,’’ said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. On the other hand, “the Fed’s balance sheet is about to explode.’’
Stocks around the world plunged the most since 1997 today and credit markets deteriorated further as authorities scrambled to save more financial institutions from collapse.
Bailout by Stealth
While the public is distracted by the “bailout bill” and its rejection, trillions are pumped in to keep financial balloon inflated
James Corbett
The Corbett Report
September 30, 2008
The media is falling all over itself to report on every minutiae of the so-called Wall Street “bailout bill” and its rejection by Congress yesterday (just a few of the thousands of examples can be seen here and here and here and here). And why not? The media’s breathless coverage of the bill has produced a furious backlash by the public and hysteria on Wall Street in a self-justifying feedback loop that makes the media attention seem merited.
The startling truth which the controlled corporate media is not reporting, however, is that a bailout is actually taking place right now, completely out of the public spotlight. This program has already pumped trillions of dollars into Wall Street (compared to the mere $700 billion proposed in the legislation that the media is focusing on) to help prop up the faltering investment banks and promises to pump in even more, every dime of it to the detriment of the taxpayer though the public will have no stake in its success. Why, then, is this program not being talked about in the media?
Slipping under the radar last week amidst the hullabaloo in Washington over the bailout bill was this story noting that in the past week alone, the Federal Reserve had pumped an astonishing $188 billion per day into the system in the form of emergency credit. This means that in just four days, the Fed injected as much money into the system as the entire $700 billion bailout proposal. After the proposal was rejected, the Fed responded by immediately announcing it would pour another $630 billion into the global financial system.
The Federal Reserve, of course, is America’s central bank and although the above story conjures the reassuring image of a national bank lending out some of its vast reserves to help Wall Street weather the storm, the fact is that the Federal Reserve is not Federal and has doubtful reserves. In fact, the trillions of dollars that have been lent to the banks in the last few weeks were created out of nothing by the privately-owned Federal Reserve. When the Federal Reserve “lends” money to a bank through repurchase agreements (repos), credit auction or other method, it is not actually lending out money from its vaults. It is simply creating the money it “lends” out as electronic credits created in the recipient banks account. It is literally money out of thin air.
That the general public is on the hook for this money created out of nothing is not an exaggeration. It is paid for in a dimly-understood mechanism often known as the “inflation tax.”
Inflation is nothing more than an indication that the ratio of money to products that can be purchased with that money has been increased. Since the overall number of dollars has gone up without any corresponding increase in economic production (as happens when the Federal Reserve creates money out of thin air), the value of each individual dollar goes down. That means that the value of the money in each individuals’ bank account (not to mention their pension and social security dividends) can be reduced simply by the flick of a pen of a Federal Reserve paper-pusher. (Unless of course that individual just happens to be a billionaire investment mogul or a Vice President who can divest themselves of U.S. dollars in time for this inflation not to affect them.) This is sometimes known as an inflation tax because its overall effect is the same as if the government came in and took that value out of the individuals’ bank account. Watch Ron Paul explain the inflation tax in the video below:
The most insidious part of this inflation tax is that the inflation does not begin until the new money begins to circulate in the system. In other words, the first person (or, more likely, giant corporate conglomerate) to use the money receives its full value, while those at the bottom of the pyramid retrieve the diminished returns of a devaluing dollar.
Why, then, is the public not furious about this stealth bailout, now taking place at the blistering pace of nearly $1 trillion a week, and all to the taxpayer’s detriment? The obvious answer is that the media is not whipping the public into a frenzy about it, instead focusing its attention on a $700 billion program and allowing the public to feel like they scored a blow against Wall Street when the program gets rejected. If so, it’s time the public got wise to how the system is really being run by and for the benefit of private bankers and at the expense of the average taxpayer. Otherwise, the fleecing of the public will continue unabated even as the public thinks they’ve won the battle.
Filed under: AIG, bankruptcy, Big Banks, Britain, Credit Crisis, DEBT, ECB, Economic Collapse, economic depression, Economy, Europe, european central bank, european union, Federal Reserve, foreign aid, foreign banks, foreign investors, global economy, Goldman Sachs, Great Depression, Greenback, hyperinflation, Inflation, interest rate cuts, london, rate cut, Stock Market, Taxpayers, United Kingdom, US Economy, Wall Street | Tags: run on banks, swiss national bank
U.S. Taxpayers Paying To Bail Out Foreign Banks
George Washington’s Blog
September 21, 2008
We all know that the Fed is trying to stick the American taxpayers with trillions of dollars in debt (direct or through inflation) to bail out the Wall Street robber barons.
But did you know that they are also trying to get you to bail out foreign gamblers?
An article in the Telegraph states:
“The Fed has also just offered another $125bn of liquidity to banks outside the US that are desperate for dollars and can’t access America’s frozen credit markets”
“Another” $125 billion? How much has the Fed already given to foreign banks?
Why are American taxpayers who are already drowning in debt due to U.S. gamblers also being asked to also bail out foreign speculators?
This isn’t a pro-America anti-everyone-else post. If I lived in England, or Canada or Japan, I would resent being asked to bail out America, too.
Central Banks Offer Extra Funds to Calm Money Markets
Bloomberg
September 18, 2008
The Federal Reserve almost quadrupled the amount of dollars central banks can auction around the world to $247 billion in a coordinated bid to ease the worst crisis facing financial markets since the aftermath of the 1929 Wall Street crash.
The Fed increased the amount of dollars that the European Central Bank, the Bank of Japan and other counterparts can offer from $67 billion “to address the continued elevated pressures in U.S. dollar short-term funding markets.’’ The Bank of England, the Bank of Canada and the Swiss National Bank also participated. Several of them lent funds in their own currencies as well with the Fed adding a record $105 billion in temporary reserves.
Policy makers have struggled to revive confidence in markets this week as investors stockpiled money on concern more financial institutions would fail after the bankruptcy of Lehman Brothers Holdings Inc. and the U.S. government bailout of American International Group Inc. The cost to hedge against losses on U.S. government debt climbed to a record yesterday.
“There’s a complete lack of faith in the markets,’’ said Jim O’Neill, chief economist at Goldman Sachs Group Inc. in London. “There’s a lot of cash hoarding and people losing trust in banks, so the central banks are acting to relieve that. This might not be the last time they have to act.’
http://news.yahoo.com/s/nm/20080921/bs_nm/financial_bailout_paulson_dc
Bailout Eligibility Expanded to Foreign Institutions
http://calculatedrisk.blogspot.com/..oreign.html
Filed under: bernanke, Big Banks, BIS, Britain, central bank, Credit Crisis, DEBT, Dollar, Dow, ECB, Economic Collapse, economic depression, Economy, Euro, Europe, european central bank, european union, Federal Reserve, food prices, Fox News, gas prices, GDP, general motors, global economy, gold, Great Depression, Greenback, imf, Inflation, interest rate cuts, Iran, job market, neil cavuto, Oil, Paulson, peter schiff, Petrol, rate cut, Ron Paul, Saudi Arabia, Stock Market, United Kingdom, US Economy, US Treasury, utah, World Bank | Tags: indymac, inland empire, starbucks
Fed Auctions $75 Billion to Big Banks
AP
July 1, 2008
The Federal Reserve has auctioned another $75 billion in loans to squeezed banks to help them overcome credit problems and announced it will provide a fresh batch of the loans this month.
The central bank on Tuesday released the results of its most recent auction — the 15th since the program began in December. It’s part of an ongoing effort to ease financial turmoil and credit stresses.
In the latest auction, commercial banks paid an interest rate of 2.340 percent for the 28-day loans. There were 77 bidders. The Fed received bids for $90.88 billion worth of the loans. The auction was conducted on Monday with the results made public on Tuesday.
The Fed also said it will conduct two auctions in July. Banks will have an opportunity to bid on a slice of $75 billion in short-term loans in each auction.
In mid-December the Fed announced it was creating an auction program that would give banks a new way to get short-term loans from the central bank and to help them over the credit hump. A global credit crunch has made banks reluctant to lend to each other, which has crimped lending to individuals and businesses.
Europe May Push The Fed To Raise Rates
CNN
July 1, 2008
The fireworks may come a day early for the financial markets if the European Central Bank, as expected, raises interest rates on Thursday.
If the ECB, Europe’s counterpart to the Federal Reserve, hikes rates, that could put even further pressure on the anemic dollar and send commodity prices even higher.
The ECB will announce its decision on interest rates early the morning of July 3 and will hold a press conference shortly thereafter to discuss the decision.
Global economy faces deep slowdown and deflation threat, BIS warns
Telegraph
July 1, 2008
The global economy may be heading for a far deeper crisis than is expected and a bout of deflation in the world’s biggest economies is now a possibility, according to one of the world’s most highly regarded economic institutions.
The Bank for International Settlements has warned that many in the City and elsewhere may have underestimated the scale of the coming economic downturn in one of its most sombre portraits yet of the international financial system.
The Swiss institution – known as the central bankers’ bank – issued the alert in its annual report, released today.
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Filed under: central bank, Credit Crisis, DEBT, Dollar, ECB, Economic Collapse, economic depression, Economy, energy, Euro, european central bank, Federal Reserve, gas prices, Great Depression, Greenback, Inflation, interest rate cuts, Oil, OPEC, Petrol, rate cut, Saudi Arabia, spain, Stock Market, US Economy, Venezuela | Tags: Jean-Claude Trichet, Rafael Ramirez
OPEC Leader Says Dollar Will Drive Oil to $170
Bloomberg
June 28, 2008
OPEC President Chakib Khelil predicted that the price of oil will climb to $170 a barrel before the end of the year, citing the dollar’s decline and political conflicts.
“Oil prices are expected to reach $170 as demand for fuel is growing in the U.S. during the summer period and the dollar continues to weaken against the euro,’’ Khelil said today in a telephone interview. The leader of the Organization of Petroleum Exporting Countries also serves as Algeria’s oil minister.
Political pressure on Iran and the depreciation of the U.S. currency have caused a surge in oil prices, Khelil said. New York- traded crude has more than doubled in a year and touched a record $142.99 a barrel yesterday on the New York Mercantile Exchange.
OPEC ministers generally say that oil output is sufficient, even as Saudi Arabia, the biggest producer, pledged to pump an extra 200,000 barrels a day next month to calm the market. “The market is completely supplied,’’ Venezuelan Oil Minister Rafael Ramirez said yesterday. Libya announced possible production cuts, calling the market oversupplied.
The rising cost of crude is not linked to supply, Khelil said today. “There is more than enough oil in the market to meet the international demand,’’ added the OPEC president, who will take part June 30 in an international energy forum in Madrid.
Prices, which are up 38 percent this quarter, are heading for the biggest quarterly gain since the first three months of 1999, when oil traded between $11 and $17.
Declining Dollar
“The decisions made by the U.S. Federal Reserve and the European Central Bank helped the devaluation of the dollar, which pushed up oil prices,’’ Khelil said.
Oil may extend gains if the ECB boosts rates on July 3, further weakening the U.S. currency. The dollar has declined 15 percent against the euro in 12 months.
ECB President Jean-Claude Trichet reiterated June 25 that policy makers may increase the main refinancing rate by a quarter-percentage point next month to contain inflation. The Federal Reserve left the benchmark U.S. rate at 2 percent on June 25. On Sept. 18 the Fed began cutting rates to bolster an economy already reeling from the credit crisis.
Filed under: bernanke, BIS, Britain, central bank, China, Credit Crisis, DEBT, ECB, Economic Collapse, economic depression, Economy, Europe, european central bank, european union, Federal Reserve, food crisis, food market, food prices, food shortage, gold, Great Depression, Greenback, housing market, imf, Inflation, Japan, morgan stanley, real estate, Stock Market, United Kingdom, US Economy | Tags: corn, OTC, royal bank of scotland
RBS issues global stock and credit crash alert
London Telegraph
June 18, 2008
The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.
“A very nasty period is soon to be upon us – be prepared,” said Bob Janjuah, the bank’s credit strategist.
A report by the bank’s research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as “all the chickens come home to roost” from the excesses of the global boom, with contagion spreading across Europe and emerging markets.
BIS Warns Of Great Depression
Banking Times
June 11, 2008
The Bank for International Settlements (BIS), the organisation that fosters cooperation between central banks, has warned that the credit crisis could lead world economies into a crash on a scale not seen since the 1930s.
In its latest quarterly report, the body points out that the Great Depression of the 1930s was not foreseen and that commentators on the financial turmoil, instigated by the US sub-prime mortgage crisis, may not have grasped the level of exposure that lies at its heart.
According to the BIS, complex credit instruments, a strong appetite for risk, rising levels of household debt and long-term imbalances in the world currency system, all form part of the loose monetarist policy that could result in another Great Depression.
The report points out that between March and May of this year, interbank lending continued to show signs of extreme stress and that this could be set to continue well into the future.
It also raises concerns about the Chinese economy and questions whether China may be repeating mistakes made by Japan, with its so called bubble economy of the late 1980s.
Notional Value Of Derivatives Hits One Quadrillion
Jim Sinclair
JS Mineset
June 11, 2008
The notional value of all outstanding derivatives now totals approximately $1.144 QUADRILLION.
This appears to be Bank of International Settlement Spin to announce the largest gain in derivatives outstanding since they started to report. As of the last report it appeared that both listed and OTC derivatives was under $600 trillion. Now listed credit derivatives alone stood at $548 Trillion. The OTC derivatives are shown as $596 trillion notional value, as of December 2007. One can only imagine what number they are at now.
Well we hit a QUADRILLION. We have more than $1000 trillion dollars in all derivatives outstanding. That is simply NUTS because notional value becomes real value when either counterparty to the OTC derivative goes bankrupt. $548 trillion plus $596 trillion means $1.144 quadrillion.
It would be an interesting piece of research to see what the breakdown is of listed derivatives according to exchange to see if it adds up to the reported number. Spin is now everywhere.
This means that no OTC derivative house can be allowed to go broke. This means that whatever funds are required to rescue failing international investment banks, banks and financial entities will be provided.
Keep this economic law in mind. Monetary inflation proceeds price inflation and is its primary cause in economic history from Rome to present.
Nothing can stop the juggernaut of price inflation heading towards every nation like a runaway freight train down a mountain.
Gold is going to at least $1650. I am probably way too low with that estimate.
The US dollar will trade down to at least .5200 as measured by the USDX.
Policy-makers around the globe declared soaring inflation a top threat on Monday, with pressure rising for central banks to raise interest rates amid protests against higher costs of living.
Gold is the easiest market to trade for the aggressive investor. Sell 1/3 when the market looks like a Rhino Horn which you will see with your French Curves at the point of the rollover.
Buy 1/3 back when the price of gold looks like a fishing line hanging off a fishing rod. Your maximum power down trend line will give you this.
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Filed under: Big Banks, central bank, Credit Crisis, DEBT, Dow, ECB, Economic Collapse, economic depression, Economy, european central bank, fannie mae, Federal Reserve, freddie mac, Great Depression, Greenback, Inflation, interest rate cut, interest rate cuts, liquidation, rate cut, Stock Market, US Economy, US Treasury, Wall Street | Tags: swiss national bank, Term Securities Lending Facility, TSLF
Fed pumps up liquidity in funding markets to ease credit crunch
AP
March 11, 2008
Fed Announces Further Steps to Ease Credit Crunch WASHINGTON (AP) — The Federal Reserve on Tuesday ramped up efforts to provide more relief to squeezed financial institutions, a coordinated action with other central banks aimed at easing a global credit crises that threatens to push the U.S. economy into its first recession since 2001.
The Fed said it will make up to $200 billion in Treasury securities available to big Wall Street investment houses and banks. The new action is designed to ensure that there is an ample supply of Treasury securities. With strains in financial markets, demand has grown for Treasury securities, considered the safest investment in the world because they are backed by the U.S. government.
On Wall Street, the Fed’s action propelled stocks upward. The Dow Jones industrials jumped more than 250 points in morning trading.
The move comes as banks and other financial institutions face cash crunches.
“Pressures in some of these markets have recently increased again,” the Fed said in a statement. “We all continue to work together and will take appropriate steps to address those liquidity pressures.” The other banks involved are the Bank of Canada, the Bank of England, the European Central Bank and the Swiss National Bank.
The Fed announced the creation of a new tool, called the Term Securities Lending Facility (TSLF), geared to provide primary dealers — big Wall Street investment firms and banks that trade directly with the Fed — with 28-day loans of Treasury securities, rather than overnight loans. They would pledge other securities — including federal agency residential-mortgage-backed securities, such as those of mortgage giants Fannnie Mae and Freddie Mac — as collateral for the loans of Treasury securities.
“This will not turn the economy around or fix all the problems in the markets but it should reduce the liquidity issue, at least for now,” said Ian Shepherdson, chief economist at High Frequency Economics. The odds of a deep, three-quarters of a percentage point cut in the Fed’s key interest rate next Tuesday have dropped sharply as the Fed’s new relief seemed to calm market turmoil, he said.
http://www.nytimes.com/2008/03/11/b..ef=slogin&oref=slogin
Global central bank liquidity injection no long term cure for dollar
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Fed gives shot in arm, but recession looms
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Filed under: bernanke, Britain, central bank, Credit Crisis, Dana Perino, DEBT, ECB, Economic Collapse, economic depression, Economy, Euro, Europe, european central bank, Federal Reserve, food prices, gas prices, George Bush, global economy, Great Depression, Greenback, Inflation, interest rate cut, interest rate cuts, Iraq, marc faber, Oil, Petrol, rate cut, russian mafia, S&P, Stock Market, United Kingdom, US Economy, Wall Street, War On Terror, Warren Buffett, Yen | Tags: Standard & Poor
Dollar Declines, Fed May Cut Rates 75 Points
Bloomberg
March 10, 2008
The dollar weakened against the euro and approached an eight-year low versus the yen as traders bet the Federal Reserve will lower interest rates by at least 75 basis points to avert a recession.
The currency traded within a cent of a record low against the euro as futures indicated 96 percent odds the Fed will cut its benchmark rate to 2.25 percent on March 18, 175 basis points more than the Bank of Japan’s and 175 basis points less than the European Central Bank’s. The U.S. currency weakened against a basket of major trading partners to near the lowest since the index began in 1973.
“What’s been driving the market is U.S. economic developments and expected interest-rate differentials,” said Thanos Papasavvas, head of currency management at Investec Asset Management in London. “This is a weak-dollar story. We would expect the Japanese yen and euro to continue appreciating.”
The dollar fell to 102.33 yen by 7:24 a.m. in New York, from 102.67 yen on March 7, when it slid to 101.43, the lowest since January 2000. It dropped to $1.5364 per euro, from $1.5355 at the end of last week, when it declined to $1.5459 a euro, the weakest level since the European single currency’s debut in 1999.
The yen advanced 0.4 percent to 157.20 per euro as the Cabinet Office said Japan’s equipment orders jumped 19.6 percent in January, the fastest pace in more than seven years.
The U.S. currency declined to $2.0197 against the pound, from $2.0134 on March 7, after a government report showed factory-gate in February inflation matched the fastest annual pace since 1991. The dollar also dropped 0.2 percent to 1.0233 against the Swiss franc and 0.5 percent to 5.1361 Norwegian krone.
Faber: Bernanke Will Destroy Dollar
Market Watch
March 9, 2008
Federal Reserve Chairman Ben S. Bernanke will “destroy the U.S. dollar” by cutting interest rates, investor Marc Faber said.
Bernanke’s reduction in the target rate for overnight loans between banks to 3 percent has spurred a rout in U.S. stocks and gains in oil and gold prices, said Faber, the Gloom, Boom & Doom report publisher who told investors to buy gold at the start of its six-year rally.
The U.S. is now in a “de-leveraging” phase where banks make fewer loans, stunting economic growth, Faber said. He estimated that a U.S. recession began two or three months ago.
“In the U.S., they pursue essentially economic policies that target consumption, which in my opinion is misguided,” Faber said in an interview with Bloomberg Television from Chicago. “They should pursue economic policies that stimulate capital investment and capital formation.”
The Standard & Poor’s 500 Index is down 9.7 percent since Sept. 18, when the Fed began cutting the fed funds target to 3 percent from 5.25 percent. The dollar has lost 9.2 percent of its value versus the euro, crude oil futures gained more than 29 percent and gold added 34 percent during that time.
Further interest-rate cuts may spur inflation and reduce the value of 10- and 30-year Treasuries, Faber said, calling the bonds “a disaster waiting to happen.” Ten-year notes fell to a four-year low of 3.44 on Jan. 22.
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Filed under: Big Banks, Britain, carlyle group, central bank, citigroup, CNN, Credit Crisis, DEBT, ECB, Economic Collapse, economic depression, Economy, Euro, Europe, european central bank, Federal Reserve, food prices, gas prices, global economy, gold, Great Depression, Greenback, housing market, imf, Inflation, interest rate cut, interest rate cuts, job market, JP Morgan, New York, Oil, OPEC, peter schiff, Petrol, rate cut, Stock Market, subprime, subprime lending, trilateral commission, United Kingdom, US Economy
Golds Hit Record $992, Current Price is $979
Goldseek
March 6, 2008
THE PRICE OF PHYSICAL gold bullion moved in a tight 0.8% range early Thursday, re-touching yesterday’s new all-time high above $992 per ounce as the US Dollar sank once again.
As the opening drew near in New York – where a small bomb damaged an army recruitment center in Times Square overnight – crude oil jumped to a new record above $105 per barrel.
European stock markets meantime ticked 0.3% lower as the Euro single currency leapt to a new all-time high of $1.5345 after the central bank in Frankfurt kept its interest rates on hold at 4.0%.
“We could see Gold Prices spike this year and hit $1,500 per ounce,” reckons Jay Taylor, editor of the Gold & Technology Stocks newsletter.
Peter Spina of Goldseek.com, also speaking to Reuters, agrees that $1,500 or even $2,000 gold is “definitely possible” in the next year, while Peter Schiff of Euro Pacific Capital says “gold has a shot at $1,200 or even $1,500 this year.
“It is a measure of the value of currencies and will go up as long as central banks continue to devalue currencies.”
Euro Breaks $1.54 Mark, Drops back to $1.53
AP
March 7, 2008
The euro on Friday exceeded US$1.54 for the first time, after the European Central Bank left its benchmark rate unchanged a day earlier and signaled that rate cuts are not expected in the near term.
That sentiment pushed the euro to a new high in European morning trading; it reached US$1.5429 before dropping back slightly to US$1.5395, above the US$1.5370 it bought in New York late Thursday. It was the latest in a string of records for the 15-nation euro this week.
“The euro-dollar has taken another significant level this morning, having breached US$1.5400, and although this may be initiating a degree of profit-taking in the short term, many will remain mindful of Trichet’s hawkish stance and tacit acceptance of a stronger euro at yesterday’s ECB rate-setting meeting,” said James Hughes of CMC Markets, referring to ECB president Jean-Claude Trichet.
European Union businesses said they were starting to feel the pinch, notably from U.S.-based buyers who assert that the high euro makes European goods more expensive.
Meanwhile, the British pound stayed above the US$2 mark for a second day, buying US$2.0132 in European trading, above the US$2.0092 it bought in late New York trading the night before. Like the euro, it jumped higher after the Bank of England kept its own interest rate unchanged at 5.25 percent.
The dollar drifted lower to 101.96 Japanese yen from 103.09 yen on Wednesday.
Oil Prices Hit Record Near $106, Steadies at $105
AP
March 7, 2008
Oil prices were steady Friday after jumping to a trading record near $106 a barrel in the previous session as the dollar’s slide to new lows prompted investors to pump more money into commodities.
Analysts believe the steadily weakening dollar is the reason oil prices have jumped to a number of new inflation-adjusted record highs this week. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling.
“There are expectations that the dollar will go lower, and that’s driving money into commodities,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. “Traders now have this mantra: sell the dollar and buy oil, or buy commodities.”
Light, sweet crude for April delivery fell 3 cents to $105.44 a barrel in Asian electronic trading on the New York Mercantile Exchange by midafternoon in Singapore.
The contract rose 95 cents Thursday to settle at a record $105.47 a barrel after earlier spiking to a trading record of $105.97.
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Filed under: bernanke, Credit Crisis, DEBT, ECB, Economic Collapse, economic depression, Economy, Euro, european central bank, Federal Reserve, food prices, foreclosures, gas prices, George Bush, gold, Great Depression, Greenback, housing market, Inflation, interest rate cut, interest rate cuts, Iraq, Oil, palladium, Petrol, platinum, rate cut, silver, south africa, stagflation, sterling, Stock Market, US Economy, wheat
Gold powers to record on oil, eyes $1,000
Reuters
February 29, 2008
Gold powered to a new high near $980 an ounce on Friday after crude oil set an all-time high of above $103 a barrel, igniting inflation worries and another round of buying from investors and speculators.
Palladium jumped to its highest level in more than six years and silver hit a 27-year peak. Platinum rebounded from its lows but given the absence of new developments in South Africa’s supply problems, gains are likely to be capped.
Gold jumped as high as $975.90 an ounce, up from $968.90/969.70 late in New York on Thursday. Gold has gained more than 16 percent this year, and the next upside target pegged by dealers is $1,000.
Record high oil and expectations of more interest rate cuts in the United States add to inflation pressures, elevating gold’s appeal as a hedge against rising prices, while volatile stock markets have encouraged investors to shift some of their money into gold and other precious metals.
“The target is $1,000. I personally hope it will be $1,000 within a month,” said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo, adding that gold was likely be driven by movements in oil in coming weeks. Crude oil rallied to another record above $103 a barrel as Ecuador shut a key export pipeline and a fire hit a major European natural gas plant.
While oil is at a record price in inflation-adjusted as well as nominal terms, gold has lagged. According to analysts at GFMS gold’s inflation-adjusted record is $2,079 an ounce.
“Most of the funds are buying inflation hedges such as gold, silver and oil. It’s still a bull market, where hedge funds and banks buy precious metals,” said William Kwan, a dealer at Phillip Futures in Singapore.
“I think inflation is really getting out of hand. I am looking at $955 for support and resistance at $985,” said Kwan, who pegged upside target for silver at $20.
Silver rose as high as $19.92 an ounce, its highest in 27 years, up from $19.74/19.79 an ounce in New York.
Oil Tops $103 For The First Time In History
AP
February 29, 2008
Oil prices briefly surpassed $103 a barrel for the first time Friday as persistent weakness in the U.S. dollar and the prospect of lower interest rates attracted fresh money to the oil market.
Light, sweet crude for April delivery on the New York Mercantile Exchange jumped to a new trading record of $103.05 a barrel in electronic trading before slipping back to $102.02 a barrel, down 57 cents, by midday in Europe.
On Thursday, the contract jumped $2.95 to a record settlement price of $102.59 a barrel.
Prices were supported by comments Thursday from Federal Reserve Chairman Ben Bernanke, who said the American economy is not immediately threatened with stagflation, a combination of economic weakness and rising inflation.
Investors chose to see the comments as confirmation of their beliefs that the Fed will continue cutting interest rates to try to shore up the economy.
“It seems that further interest rate cuts, additional dollar weakness and more investment buying will anchor oil to higher prices,” energy risk management firm Cameron Hanover said in its daily report. “It can’t go on forever, but it looks like it can go on for a while.”
Euro hits fresh high against dollar
Financial Times
February 29, 2008
The dollar hit another record low against the euro on Friday, as data continued to support the view that the European Central Bank will keep interest rates on hold for the foreseeable future.
Headline inflation in the eurozone stood at 3.2 per cent in January, tallying with earlier estimates and market expectations as food and energy prices leapt. Meanwhile, unemployment in the eurozone held at a record low of 7.1 per cent in January.
“With headline inflation running at a 14-year high and the lingering threat of second round effects, it is premature for the ECB to switch to an easing bias in their policy stance just yet,” said Martin van Vliet at ING.
While the ECB remained unlikely to cut eurozone interest rates at its next policy meeting on Thursday, markets were fully pricing in a cut of 50 basis points at the US Federal Reserve’s meeting on March 18.
“Markets are probably wisely bracing themselves for further monetary policy divergence between the US and eurozone over the next few months,” added Mr van Vliet.
The euro rose to a record high of $1.5238, before retreating to $1.5206, little changed on the session.
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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.”
Read Full Article Here
Purchasing Power Of The DOW
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Filed under: Alan Greenspan, central bank, China, Credit Crisis, DEBT, ECB, Economic Collapse, economic depression, Economy, european central bank, Federal Reserve, gas prices, gas tax, global economy, gold, Goldman Sachs, Great Depression, Greenback, housing market, Inflation, interest rate cut, interest rate cuts, job market, john paulson, Northern Rock, Oil, Petrol, rate cut, Stock Market, subprime, subprime lending, unemployment, US Economy, US Treasury, Wall Street, Yen
Greenspan joins firm that made billions betting against the housing market
Reuters
January 15, 2008
Hedge fund manager John Paulson, who earned billions of dollars last year by betting against the housing market, said on Tuesday that former Federal Reserve board chairman Alan Greenspan will advise his firm.
Greenspan, whose words can still move financial markets, will advise Paulson on the global economy for an undisclosed amount of money, the hedge fund said in a statement.
By joining the New York-based fund, Greenspan becomes the latest former Washington insider to work in the fast growing $2 trillion hedge fund industry. Former Treasury Secretaries Lawrence Summers and John Snow provide advice to D.E. Shaw and Cerberus.
Goldman Sachs Hints at $1000 Gold and $135 Oil
24/7 Wallstreet
January 16, 2008
Goldman Sachs is RAISING ITS 2008 GOLD FORECASTS factoring for a recession in the U.S. in both Q2 and Q3 2008, leading to a weaker U.S. Dollar target of $1.51/Euro (up from $1.35) over the next six months. The prior $800/ounce gold target is now put at an average of $915/ounce for all of 2008, with an exit 2008 commodity price of $850 (up from $825 prior). The call is based on support from investment demand, purchases from emerging market central banks, and the ongoing declining mine supplies.
Goldman Sachs is also raising its 2009 and 2010 gold prices:
2009 prices are now expected to be $870/ounce (up from $852);
2010 prices are now expected to be $940/ounce (up from $907);
Near-term Goldman Sachs notes a possibility of a spike past $1,000.00 that could be the effect of further credit events and increases in oil prices.
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Filed under: Benazir Bhutto, Big Banks, Britain, central bank, China, Chrysler, credit card, Credit Crisis, DEBT, ECB, Economic Collapse, economic depression, Economy, Euro, Europe, european central bank, FBI, Federal Reserve, gas prices, gold, gold confiscation, google, Great Depression, Greenback, housing market, Inflation, interest rate cuts, Iraq, liberty dollar, Oil, Pakistan, Petrol, pound, rate cut, Rawalpindi, Saudi Arabia, Stock Market, subprime, subprime lending, United Kingdom, US Economy
Gold rises above $830 over Pakistan
The Times
December 28, 2007
Gold put in a stellar performance again after fears of political instability in Pakistan in the wake of the assassination of opposition leader Benazir Bhutto sparked a flight to safety.
Gold has traditionally performed well in times of uncertainty and has maintained its reputation as a safe-haven investment despite recent price volatility.
The precious yellow metal was trading $11.47 firmer at $836.77 at 17:35 after safe-haven buying triggered a new test of previous multi-decade highs.
Spot prices had been languishing well below the US$830 an ounce mark when they were jolted from a month-long slumber yesterday afternoon as news of Bhutto’s death aroused concerns over heightened geopolitical tension.
The metal climbed to US$830.50 on the news but a brief round of profit taking saw it finish slightly easier yesterday at $827.50.
Bhutto died when an attacker shot her and then blew himself up as she left a political rally in Rawalpindi, a city near the capital where Pakistan’s army has its headquarters.
It was the second suicide attack against her since her tumultuous homecoming from an eight-year exile in October.
Her assassination has sparked nationwide grief and fury, while unrest risks tipping the volatile country into chaos.
Bhutto was buried earlier today and along with her the promise of restoring democracy in Pakistan.
“For the moment resistance at the $830 level appears to be capping gold, however with the dollar under pressure and violent protests seen in Pakistan it is likely that gold could see further safe-haven investment demand, and potentially rise to challenge this years high around $845.60,” said James Moore of TheBullionDesk.
With political tensions providing the environment of uncertainty that gold enjoys, the momentum in gold prices remains to the upside for now.
Oil steady near $97 on lower US stocks, Bhutto
Reuters
December 28, 2007
Oil rose on Friday on U.S. supply concerns, the slumping dollar and mounting tensions in Pakistan and northern Iraq.
U.S. crude traded up 23 cents to $96.85 a barrel by 12:05 p.m. EST. London Brent gained 12 cents to $94.90 a barrel.
A U.S. government report on Thursday showed unexpectedly large draws in crude and distillate inventories in the world’s top consumer. U.S. crude inventories are now at their lowest level in nearly three years, adding to winter supply worries that helped push oil to nearly $100 in November.
“Escalating geopolitical tensions, tightening oil supplies and a weakening dollar would seem to stack the deck in favor of further upward movement,” said Mike Fitzpatrick, vice president at MF Global.
The assassination of Pakistani opposition leader Benazir Bhutto on Thursday stoked geopolitical concerns, although Pakistan is not a major crude producer and unrest is unlikely to directly affect oil flows.
“The Bhutto story will keep being a factor into next week, and it should help keep a floor under the market, along with the other geopolitical uncertainties,” said a New York broker.
Forex – Dollar falls continue on weak US data; Euro at record high vs pound
Thompson Financial
December 28, 2007
The dollar fell across the board, coming under further pressure after a string of weak US data, while yet another disappointing report on the UK housing market pushed the euro to fresh record highs against the pound.
Yesterday’s unexpectedly weak US durable goods orders data added to fears about the state of the US economy and increased the likelihood that the Federal Reserve will need to cut interest rates further next year.
‘US economic data continues to disappoint the market with yesterday’s worse-than-expected durable goods orders for November adding further downside pressure to the greenback,’ said James Hughes, market analyst at CMC Markets.
The European Central Bank by contrast is not expected to temper its hawkish rhetoric any time soon, particularly with regional German inflation figures suggesting that the inflation pressures it warned of have not gone away.
The euro rose to a 15-day high against the dollar of 1.4682 usd, but it also staged fresh gains against the pound, hitting a new record high of 0.7350 stg.
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Filed under: central bank, Credit Crisis, DEBT, Dow, ECB, Economic Collapse, economic depression, Economy, european central bank, fannie mae, Great Depression, Greenback, housing market, Inflation, Stock Market, subprime, subprime lending, US Economy, Wall Street
Housing construction drops
AP
December 18, 2007
WASHINGTON – Housing construction fell in November with single-family activity dropping to the lowest level in more than 16 years. Analysts said the recession in housing showed no signs of a turnaround.
The Commerce Department reported Tuesday that construction of new homes and apartments dropped by 3.7 percent last month to a seasonally adjusted annual rate of 1.187 million units.
Construction of single-family homes fell by 5.5 percent to an annual rate of 829,000 units. It was the eighth consecutive drop in single-family starts, pushing activity in this area to the lowest level since April 1991. Apartment building rose last month by 4.4 percent to an annual rate of 332,000 units.
In an ominous sign for future activity, the government reported that applications for building permits fell for a sixth straight month, dropping by 1.5 percent to a seasonally adjusted annual rate of 1.15 million units, the slowest pace for building permits since June 1993.
On Wall Street, investors were buffeted by the continued bad news on housing and an encouraging move by the European Central Bank to inject the equivalent of $500 billion into the European banking system to combat the global credit crunch that has been triggered by the meltdown in subprime mortgages in the United States. After a rollercoaster day, the Dow Jones industrial average finished up 65.27 points at 13,323.47.
The overall construction decline left home building 24.2 percent below the level of activity a year ago. After five straight years of record sales and soaring prices, housing has been in a serious downturn for two years.
Analysts expect the weakness to intensify in coming months, possibly becoming enough of a drag to push the country into a full-blown recession.
“The housing recession continues to grind away,” said Brian Bethune, an economist at Global Insight. “The housing market is now navigating through perfect storm conditions.” He said a downward spiral in sales is being exacerbated by the severe credit crunch and rising mortgage foreclosures which are dumping more homes on an already glutted market.
U.S. Housing Crash Deepens in 2008 After Record Drop
Bloomberg
December 14, 2007
For U.S. homeowners, builders, bankers and realtors, the crash of 2007 will only get worse in 2008.
Everyone from mortgage-finance company Fannie Mae to Lehman Brothers Holdings Inc. expects declines next year. Existing home sales will drop 12 percent and existing home prices will fall 4.5 percent, Washington-based Fannie Mae says. Lehman analysts estimate almost 1 million mortgage loans will default in 2008, up from about 300,000 this year.
“We’re only halfway through the housing shock,” said Ethan Harris, chief U.S. economist at New York-based Lehman, the fourth- biggest U.S. securities firm by market value. “It’s just a matter of time before the weakness spreads to the rest of the economy.”
The housing market collapse has been anything but the “soft landing” that Federal Reserve Bank of San Francisco President Janet Yellen and David Lereah, former chief economist at the National Association of Realtors in Chicago, predicted for real estate at the start of 2007.
Median home prices declined in the U.S. this year, the first annual drop since the Great Depression, according to forecasts from the National Association of Realtors.
“I’m not going to sit here and tell you it’s going to turn real strong next year,” said Jim Gillespie, chief executive officer of Coldwell Banker Real Estate LLC, the largest U.S. residential brokerage, according to Franchise Times. “It’s not going to turn real strong next year.” Gillespie said he doesn’t make housing market forecasts.
Filed under: central bank, Credit Crisis, DEBT, ECB, Economic Collapse, economic depression, Economy, Euro, european central bank, global economy, Great Depression, Greenback, Inflation, interest rate cut, rate cut, Stock Market, United Kingdom, US Economy
ECB Injects $500B into Euro Money Markets
CSF
December 18, 2007
“Money market rates tumbled after the European Central Bank injected an unprecedented $500 billion into the banking system as part of a global effort to ease gridlock in the credit market.”
The ECB injected $500B into the euro money markets which brought down the rates on euro loans through the end of the year. Or the banks should now have enough cash at reasonable rate to get them through the end of the year (accounting period). With all that said, the central banks in the UK and US have not had that level of luck yet. Text in bold is my emphasis. From Bloomberg:
The cost to borrow in euros through the end of the year plunged after the European Central Bank added an unprecedented $500 billion to the banking system as part of a global effort to ease gridlock in the credit market.
The amount banks charge each other for two-week loans in euros dropped a record 50 basis points to 4.45 percent, the European Banking Federation said today. The rate had soared 83 basis points in the past two weeks as banks anticipated a squeeze on credit through year-end.
“These are strong-arm tactics intended to show the market they’re seriously committed to breaking the deadlock,” said Marc Ostwald, a fixed-income strategist at Insinger De Beaufort SA in London. ``The ECB is helping to bankroll banks out of a problem that they themselves created.”
MAD MONEY: ECB $502 Billion Money Bomb
Economics Briefing
December 18, 2007
ECB has lent an incredible €348.6 billion ($501.7 billion) for two weeks at below market interest rates.
The big question, of course, is what happens in two weeks when the funds are to be paid back. If the money is simply paid back in two weeks, the operation is a Christmas joke. If a sizable amount of the loans are extended in some fashion, central banks have clearly signalled they will risk major inflation to protect financial institutions in trouble.
There is some need for additional reserves to be added during the holiday season, given the way central banks currently operate, but how can this half-trillion money bomb be viewed as anything but MADNESS?
Filed under: Arnold Schwarzenegger, Bank of England, California, Canada, central bank, Credit Crisis, DEBT, despotism, ECB, Economic Collapse, economic depression, Economy, european central bank, Federal Reserve, gas prices, global economy, gold, Great Depression, Greenback, housing market, Inflation, interest rate cuts, Iran, Northern Rock, Oil, OPEC, Petrol, rate cut, Russia, Stock Market, United Kingdom, US Economy, Venezuela
World stocks plummet after global banks take action in bid to avoid recession
Daily Mail
December 13, 2007
Stocks worldwide have plummeted in the wake of yesterday’s unprecedented decision by leading central banks to pump billions into money markets in a bid to avoid a worldwide recession.
The Bank of England has joined the U.S. Federal Reserve, the European Central Bank and their counterparts in Canada and Switzerland to pump at least £55billion into money markets.
However this morning the FTSE 100 fell more than 70 points to 6458.7 and the markets in Japan, Hong Kong and Taiwan all suffered nervous starts to the day’s trading.
Investors are worried that the shock decision by the world’s banks could mean that the credit crisis is likely to get worse.
It is hoped that the loans – £ 22.7billion of which will go to the UK – will help make lending between banks easier, avoiding any repeat of the Northern Rock crisis.
The Rock ran into trouble because the current economic climate has encouraged banks to hoard their cash, rather than lend it to each other.
Russia to dump waning dollar
Press TV
December 14, 2007
Russian oil firm Rosneft will follow the lead of Gazprom and LUKOIL to sell crude in rubles amid the ongoing depreciation of the dollar.
“Our specialists are looking at all possibilities that could be beneficial for the company,” Rosneft Spokesman Nikolai Manvelov said. “Everything depends on economic viability.”
Russia’s largest independent oil producer, LUKOIL earlier announced that the company will switch to the ruble in its gas and crude deals within two years.
“Selling for rubles is much more attractive,” Deputy Chief Executive Officer Leonid Fedun said on December 12. “Gazprom is considering introducing ruble-denominated contracts and I think that technically Russian companies can do it by 2009 if the banks are ready.”
“We consider the idea of selling our resources for rubles to be quite possible,” Gazprom’s Vice President Alexander Medvedev said at a recent conference in New York.
Last month, Iran and Venezuela proposed to the Organization of Petroleum Exporting Countries (OPEC) to switch to a basket of currencies in its oil deals.
Iran, the world’s fourth most prolific oil exporter, has already abandoned the dollar, Iran’s Oil Minister Gholam-Hossein Nozari said on December 9, describing the currency as unreliable.
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Filed under: 9/11, Alan Greenspan, central bank, China, Credit Crisis, DEBT, ECB, Economic Collapse, economic depression, Economy, european central bank, Federal Reserve, foreclosure, GAO, global economy, Great Depression, Greenback, housing market, Inflation, interest rate cuts, New Hampshire, pound, rate cut, Stock Market, subprime, subprime lending, United Kingdom, US Economy
Central Banks to Pump Billions into World Financial System
NY Times
December 13, 2007
A day after the Federal Reserve disappointed investors with a modest cut in interest rates, central banks in North America and Europe on Wednesday announced the most aggressive infusion of capital into the banking system since the terrorist attacks of September 2001.
Most market specialists and economists welcomed the effort but concluded that it would probably have only limited success in addressing broader problems in the global economy and the credit markets.
In response, stocks initially surged in New York, but most of the early gains dissipated in afternoon trading as the market moved wildly up and down through the day.
The effort to grease the wheels of bank lending suggested that policy makers were increasingly concerned about the risk that economies could fall into recession because of failures in the credit markets, which have seized up again in the last couple of weeks after they overcame a bout of panic in August and September.
Economists and market specialists say policy makers are trying to reassure bankers that they will stand firm as the lenders of last resort. The coordinated action is being led by the Fed, which will lend $40 billion this month. The European Central Bank, the Bank of England, the Swiss National Bank and the Bank of Canada will lend $50.2 billion this month and next.
GAO: “USA is living beyond its means”
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Filed under: Credit Crisis, DEBT, ECB, Economic Collapse, economic depression, Economy, Euro, european central bank, eurozone, Federal Reserve, foreclosure, gold, Great Depression, Greenback, housing market, Inflation, interest rate cuts, Oil, rate cut, Stock Market, subprime, subprime lending, US Economy, Wall Street
Fed Pumps $8 Billion More Into market
The Independent
November 27, 2007
Central bankers are becoming nervous that a renewed credit crunch could destabilise financial markets around the end of next month, and the US Federal Reserve has pumped an initial $8bn (£3.9bn) into the market to help ease the mounting pressure.
Wall Street banks have been hoarding cash rather than lending it out, fearful that losses on US mortgages and related products are undermining the strength of their balance sheets.
And the Federal Reserve said that the problem could become acute before 31 December, when many institutions close their books on the financial year and when many important accounting calculations are made.
In a highly unusual move, the Federal Reserve Bank of New York said yesterday that it was putting an additional $8bn into the financial system through 43-day loans, money that won’t have to be paid back until 10 January. The duration of the loans is substantially longer than that in normal market operations by the Fed.
If Wall Street’s banks become unwilling or unable to lend to each other, there could be knock-on consequences throughout the financial system, with high street lenders and other businesses finding it impossible or punitively expensive to find the short-term money required to fund their operations. It was just such a credit crunch that led to the problems at Northern Rock at the height of the crisis in the summer.
ECB injects £35bn into markets
Telegraph
November 29, 2007
The European Central Bank pumped a further €50bn (£35bn) into the money markets yesterday but it did little to alleviate funding fears, pushing the inter-bank lending rate back towards record highs.
At auction, the ECB lent banks less than half the amount they bid for to cover their funding needs as the year-end credit squeeze intensified. They paid an average 4.65pc, the highest in six-and-a-half years, and well above the ECB’s base rate of 4pc.
Despite the move, three-month inter-bank lending rates in the eurozone climbed for the 11th consecutive day to 4.75pc.
Banks are reluctant to lend across the New Year period as they do not want to jeopardise their year-end figures by exposing themselves to further shocks. To date, banks have revealed writedowns of more than $50bn (£24bn) related to US sub-prime mortgages.
The US Federal Reserve plans a series of repurchase agreements into 2008, starting with an $8bn operation yesterday.
Gold Slips Under $800, Oil Plummets $94 on Firmer Dollar
Reuters
November 28, 2007
LONDON (Reuters) – Gold slid under the $800 mark in increasingly volatile conditions on Wednesday, as softer oil prices and a firmer dollar against the euro dented the metal’s wider appeal for investors.
Spot gold hit an intraday high of $815.30 but later fell sharply, losing more than 2 percent at one point to a low of $792.10.
Bargain hunters stepped in at the lower levels to pare losses to $798.05/798.75 an ounce by 1150 GMT from $811.90/812.70 quoted late in New York on Tuesday.
The dollar edged up to one-week highs against the euro on Wednesday as investors took profit from the U.S. currency’s tumble to multi-year lows, while oil prices softened to below $94 a barrel .
A stronger dollar makes gold dearer for non-U.S. buyers while easing oil prices take the heat out of gold’s role as a hedge against oil-led inflation.
“Selling today was initially triggered by the strengthening dollar and increased speed after pivotal chart points were broken,” said Alexander Zumpfe, precious metals trader at Heraeus in reference to gold dipping below support at $800.
However, traders generally remained confident on the metal’s ability to contain losses below $800 due to expectations for further dollar losses as investors anticipated cuts in U.S. borrowing costs that would dent the dollar’s yield appeal.
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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.
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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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Filed under: bernanke, canadian dollar, central bank, credit card, Credit Crisis, DEBT, ECB, Economy, Euro, Federal Reserve, George Bush, gold, Greenback, henry paulson, Inflation, interest rate cuts, Ron Paul, subprime, US Economy, Yen
Strong silence from U.S. on dollar’s weakness
Herald Tribune
October 10, 2007
The U.S. dollar is slumping near all-time lows against the euro and has weakened considerably against several other major currencies, but officials in Washington are reacting with almost contented silence.
Less than two weeks before finance ministers from the Group of Seven industrialized countries meet to discuss economic policy, European officials are grumbling about the weakened dollar because it makes U.S. exports cheaper in world markets.
Jean Claude Trichet, president of the European Central Bank, reiterated Monday that he was paying “great attention” – a week ago he spoke of his “extreme attention” – to U.S. statements in support of a “strong dollar.”
But while the official mantra of the Bush administration remains that a “strong dollar is in our nation’s interest,” this formulation has not changed during the past five years as the dollar gradually lost about a third of its value against the euro.
On Wednesday, the dollar was trading at about 1.408 against the euro – slightly off its all-time low earlier this month. In January 2002, the dollar was worth about 0.89 per euro.
Indeed, when the dollar’s slide accelerated after the U.S. Federal Reserve Baord lowered interest rates on Sept. 18, U.S. officials barely even repeated the mantra.
“They don’t really care what the dollar does, at least within a fairly wide range,” said Adam Posen, deputy director of the Peterson Institute for International Economics in Washington. “What the U.S. government cares about above all is that the changes are orderly.”
Since the most recent decline began three weeks ago, the U.S. Treasury secretary, Henry Paulson, has mentioned the strong dollar only once.
That was on Sept. 21, during a trip to Canada, just as the U.S. dollar was dropping to parity against the Canadian dollar for the first time in three decades.
“I feel very strongly that a strong dollar is in our nation’s interest,” Paulson said back then, “and we believe that currency values should be set in a competitive marketplace based on underlying economic fundamentals.”
In practice, analysts said, the administration’s position has been, effectively, that a “strong” dollar is whatever value the foreign-exchange markets settle on.
By contrast, Paulson has repeatedly expressed satisfaction that U.S. exports have climbed by about 15 percent over the past year – a trend that has been helped by the weaker dollar.
Analysts see little mystery in the U.S. position: At the moment, a weaker dollar offers more benefits than a stronger one.
The cheaper dollar offers a lift to American exporters by making their products more competitive in many parts of the world. And while a weak dollar usually makes imports more expensive, import prices have climbed far less than the other currencies so far because foreign producers have kept prices low in order to preserve market share in the United States.
“Implicitly, Paulson and the Federal Reserve are happy with a gradual fall in the value of the dollar,” said Nouriel Roubini, an economist at New York University and president of Roubini Global Economics, a consulting firm that also operates a popular economics Web site. “They’ll never say they favor a weak dollar, but the benefits to the U.S. in terms of competitiveness are significant.”
Though Paulson has primary responsibility for U.S. exchange-rate policy, officials at the Fed have also made it clear that they are not worried about any imminent inflationary dangers posed by a weaker dollar.
The Fed chairman, Ben Bernanke, recently told a congressional hearing that the dollar’s value remains “strong” in other respects.
“The value of the currency can also be expressed in terms of what it can buy in domestic goods, the domestic inflation rate,” Bernanke said in response to questions about the dollar from Representative Ron Paul, a Republican of Texas, a long-shot candidate for the Republican presidential nomination. Noting that inflation remains low, Bernanke suggested that the dollar’s weakness was not a source of concern to the Fed.
Democratic lawmakers, who have been quick to attack the Bush administration about most other economic policies, have said almost nothing at all about the currency’s decline.
To at least some European officials, worried that the soaring value of the euro will hurt European exports, the U.S. silence has been thunderous.
“I would like very much to hear U.S. Treasury Secretary Henry Paulson repeat loud and clear that a strong dollar is good for the American economy,” said Christine Lagarde, the French finance minister, in an interview last week with the French business newspaper Les Échos.
Paulson has yet to respond. Left with his taciturnity, European officials have resorted to reminding Paulson about the one statement he did make.
“We agree with Mr. Paulson,” said Miguel Ángel Fernández Ordóñez, the governor of the Bank of Spain and a member of the European Central Bank board, after a meeting Monday in Luxembourg.
Yet even as European and U.S. officials warily circle each other on the currency, a bigger issue for both the United States and Europe is China, which continues to tether its currency, the yuan, closely to the dollar even as the Chinese trade surplus swells further.
According to recent data, the Chinese foreign reserves have been climbing at the pace of $40 billion a month – twice as fast as last year.
In recent days, European officials like Trichet have begun to focus more on demands that China allow its currency to float more flexibly.
That would be in line with long-standing efforts by the United States. But thus far, those efforts have had very limited effect on Chinese policy.
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Filed under: Australia, bernanke, canadian dollar, central bank, ECB, Economic Collapse, economic depression, Economy, Euro, Federal Reserve, G7, Great Depression, Greenback, housing market, Inflation, interest rate cuts, job market, Stock Market, subprime, US Economy, washington mutual, Yen
Dollar falls, unable to shake gloom despite jobs report
Reuters
October 5, 2007
NEW YORK (Reuters) – The dollar fell on Friday as a solid U.S. employment report was not enough to convince investors the U.S. economy is growing fast enough to keep the Federal Reserve from cutting interest rates again.
The greenback rose sharply after the data showed September U.S. jobs growth of 110,000, the highest since May, and upwardly revised numbers for August and July, but the rally petered out ahead of the long Columbus Day holiday weekend.
“Even if you get some better news in terms of the employment report balancing out some of the doomsday scenarios for the U.S. economy, we still have a situation in which the Fed has eased and will likely ease further because of the risks to growth, while other central banks are on hold or tightening policy,” said Sophia Drossos, currency strategist with Morgan Stanley in New York.
In late afternoon trading in New York, the dollar index, a gauge of the greenback’s value against a basket of major currencies, was down 0.2 percent at 78.324 (.DXY: Quote, Profile, Research). After the jobs data, the index rose as high as 78.819. On Monday it had dropped to an all-time low of 77.660.
The euro fought back from earlier losses to trade little changed at $1.4140. The dollar rose 0.3 percent to 116.85 yen.
Commodity-related currencies were the biggest movers among the world’s most liquid.
The Australian dollar climbed to a 23-year high of US$0.9004 and was last up 1 percent at US$0.8970. The U.S. dollar tumbled to a three-decade low against the Canadian dollar of C$0.9816, falling 1.5 percent, the biggest daily decline in three years, after data showed the Canadian unemployment rate was the lowest in 33 years.
Despite the strong jobs report “it didn’t take long for the market to refocus on the overall fundamental weakness that remains for the U.S. dollar,” said Camilla Sutton, a currency strategist at Scotia Capital in Toronto.
G7 ON ITS WAY
While the jobs report reduced the chances of a cut in the Fed’s benchmark federal funds rate this month, it did not eradicate them. The futures market reflected a 50 percent perceived chance of a cut in the benchmark rate, down from a roughly 70 percent implied chance prior to the payrolls report.
Since mid-August when a crisis in the U.S. subprime mortgage market practically froze bank lending, the dollar has been on a one-way road downhill. The sell-off accelerated after the Fed slashed the fed funds rate by a half percentage point to 4.75 percent last month.
But this week’s U.S. economic data, as well as less-than-hawkish comments from European Central Bank President Jean-Claude Trichet, have at the very least introduced more two-way traffic.
“The jobs report makes what the Fed will do in October a very close call,” said Nick Bennenbroek, head of currency strategy at Wells Fargo in New York.
The focus in the market has shifted to an upcoming meeting of finance ministers and central bankers from the Group of Seven rich nations this month and a Fed policy meeting at the end of the month.
Growing complaints by European politicians about the euro’s strength have added the risk in the market that the dollar could find firm footing in the run-up to the G7 meeting.
On Friday, French President Nicolas Sarkozy’s spokesman said France’s position on the euro’s surge is increasingly finding wider backing in Europe.
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Filed under: Alan Greenspan, Bank of England, bernanke, canadian dollar, central bank, China, citigroup, Credit Crisis, DEBT, Dow, ECB, Economic Collapse, economic depression, Economy, Euro, european union, Federal Reserve, George Bush, global economy, gold, Great Depression, Greenback, housing market, Inflation, Northern Rock, Oil, Sarkozy, Stock Market, US Economy, Wall Street
Greenspan Warns Good Times Are Over
Short News
October 2, 2007
Alan Greenspan has announced the end of the good times for the world economy and that the economic future is a gloomy one, due to many factors including a slow down in the US economy which will have repercussions across the globe.
Greenspan predicted the boom of the 90’s following a “new economy”,a high-tec boost to productivity whose effects have been prolonged by the economic rise of China although he now claims that these have only given a temporary respite to the economy
He warns that government intervention to counteract the economic slowdown often do more harm than good citing the Bank of England intervention to help Northern Rock, a move that triggered the run on the bank.
Source: news.bbc.co.uk
Dollar Crunch Puts Gold Centre Stage
Telegraph
October 2, 2007
The dominoes are toppling. What began as a credit crunch has turned into a dollar crunch. We are witnessing a run on the world’s paramount reserve currency, an event that occurs twice a century or so, and never with a benign outcome.
The US dollar has fallen through parity against the Canadian dollar and plummeted to all-time lows against a basket of currencies. This is dangerous. None of the mature economic blocs seems able to take the strain, let alone step in to restore order.
Ultimately, Europe and Japan are in worse shape than the US. A mood of sauve qui peut is taking hold.
Is this what gold is sniffing as it breaks out against all currencies, smashing through €500 an ounce against the euro, and vaulting to a 28-year high of $743 against the dollar?
“Central banks have been forced to choose between global recession or sacrificing control of gold, and have chosen the perceived lesser of two evils,” said Citigroup in a fresh report.
“We believe that the policy resolution to the credit crunch will take the form of a massive, extended ‘Reflationary Rescue’, in a new cycle of global credit creation and competititive currency devaluations. This could take gold to $1,000 an ounce, or higher.”
The report’s authors, John Hill and Graham Wark, say the avalanche of central bank bullion sales earlier this year was “clearly timed to cap the gold price”.
They do not explain this explosive allegation, long promoted by the gold group GATA. But it would not surprise me if the European Central Bank’s motive for selling 37 tonnes in April and May was to hold the euro price of gold below €500.
Citigroup said the game was up once the Federal Reserve slashed rates a half point and opened the liquidity floodgates.
Talk of “competitive devaluations” is a new twist, although Bernard Connolly from Banque AIG has been warning for a long time that this would be the denouement. Gold bugs often prattle about the dollar’s demise – condign punishment for a country that has amassed $3 trillion of net liabilities abroad, slashed its savings rate below zero and spent itself into a debtor’s gaol – but they rarely ask what currency it is supposed to collapse against.
China is a leveraged play on US shopping malls. Japan is already buckling. Its economy contracted 0.3pc in Q2. Wages have fallen for eight months in a row. The Abe government has fallen – the first sub-prime victim, but not the last.
Until now, the euro has served as the “anti-dollar”, the default choice for Asians and petrodollar powers wary of US assets. This cannot last.
A rate of $1.43 (it was 83 cents in 2000) will combine, after a one-year lag, with deflating property bubbles in the Club Med bloc to cause a crisis in 2008. It will then become clear that the needs of the Germanic and Latin zones are incompatible and that a coin with no treasury, debt union, or polity to back it up cannot displace the dollar – if it survives at all.
Airbus is already underwater, unable to meet its dollar contracts unless it shifts plant from Europe. Every 10-cent rise in the euro costs €1bn.
French President Nicolas Sarkozy is in guerrilla warfare against the ECB, threatening to invoke Maastricht Article 109, which gives EU politicians power to set a fixed exchange rate (by unanimity) or a “dirty float” (by majority).
The mood is moving his way. Eurogroup chair, Jean-Claude Juncker, has stopped pretending that all is well. “We have begun to have great concern about the exchange rate of the euro,” he said.
Europe will not let America export its day of reckoning to the rest of the world. It will counter with its own devaluation.
No doubt Ben Bernanke will use all means to avert disaster, including the “printing press” he invoked in November 2002. By this he meant that the Fed could inject unlimited stimulus by purchasing as many bonds and assets as it wants. He believes the Fed could have avoided the Depression if it had been more creative in 1931.
Even so, I am not sure that the Bernanke Fed will move fast enough, given fears of moral hazard, or, indeed, whether the rate cuts on offer are enough to head off an insolvency crisis. The chart of S&P 500 looks eerily similar to October 1987, the last time a tumbling US dollar set off a crash.
A Bundesbank rate rise was the trigger then. If the ECB’s hawks are pig-headed enough to ram through one last rise on October 4, we might see a replay.
Large parts of the global credit system are still shut. The $2.2 trillion market for commercial paper has shrunk by $368bn over the past seven weeks as lenders refuse to roll over loans. The $2.5 trillion market for “structured finance” remains frozen.
US sales of new houses are down 21pc in a year. Median prices have fallen 14pc since March to $225,700. Builders are having to slash tariffs to move stock at all.
We wait to see what happens as “teaser rates” on some $1.5 trillion of mortgages jump with a venomous kick in coming months. The Fed should have thought about this three years ago when rates were 1pc. It is too late now.
How do you play gold rally? Citigroup says the mining shares are poised to surge after lagging badly, offering a “Gold beta” leverage of 2.36. “The market is likely to be shocked at how much cash the major Golds generate at $700 an ounce,” it said.
It certainly looks as if gold has at last “decoupled” from the stock markets, regaining its role as the ultimate store of value. Whether the mining equities have decoupled is another matter.
If Wall Street takes a beating this autumn, the safest play is pure metal.
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Filed under: Alan Greenspan, Ann Coulter, Britain, China, ECB, economic depression, Economy, Euro, european union, Federal Reserve, Fox News, Globalism, Greenback, housing market, Inflation, Iran, Northern Rock, Russia, Sarkozy, Stock Market, Tony Blair
Greenspan Says China Will Determine World Economic Fate in 2030
Scott Lanman
Bloomberg
September 17, 2007
Former Federal Reserve Chairman Alan Greenspan said China will be the U.S.’s major competitor by 2030 and the world’s economic fate depends on how much more Chinese leaders embrace markets.
“Much of how the world will look in 2030 rests on this outcome,” Greenspan wrote in “The Age of Turbulence: Adventures in a New World,” his memoir released today. “If China continues to press ahead toward free-market capitalism, it will surely propel the world to new levels of prosperity.”
The prediction comes in the 531-page book’s final chapter, devoted to the author’s vision of the future after two decades running the world’s most powerful central bank. He also predicts faster U.S. inflation, slower productivity growth and interest rates of at least 10 percent that will lead politicians to challenge the Fed’s independence.
Praising the leadership of former U.K. Prime Minister Tony Blair and his successor Gordon Brown, Greenspan predicted that Britain “should do well.” Continental Europe must welcome immigrants and reduce welfare, Russia needs to “fully restore the rule of law” to develop further, and India has “great potential,” he added.
Japan’s $4.5 trillion-economy, now the largest after the U.S., may find it hard to counter the loss of its ranking, given that it has an “even less promising” demographic future than Europe’s, Greenspan said. The country will still remain a “formidable force.”
Primacy of Markets
The success of every nation — big or small — will depend on the extent to which it allows free trade and open markets, Greenspan declared.
“Even as nations as mighty as the United States and China vie for economic supremacy in that new world, they may find themselves partially bending to a force more powerful still: full-blown market globalization,” Greenspan wrote.
Greenspan, 81, served as Fed chairman from 1987 until his retirement in January 2006. Before that, he was a private economist in New York, advising many of the biggest U.S. companies, and worked for about two years as chairman of the Council of Economic Advisers under President Gerald Ford.
Greenspan helped guide the longest economic expansion in U.S. history, lasting from 1991 to 2001. Growth averaged a 3 percent annualized rate during the former Fed chief’s tenure. The $13.8 trillion-U.S. economy will probably slow to a pace of less than 2.5 percent on average from now until 2030, Greenspan forecast in the book.
The former chairman isn’t as specific in his predictions for other countries. He doesn’t mention any besides China, the U.K., France, Germany, Japan, Russia and India, spending about five pages in his final chapter on the outlook beyond America.
`Political Freedom’
In China, Greenspan sees economic growth in the context of capitalism and democracy potentially replacing Communist rule. Already, the country’s “embrace of free-market competition” has it “on the path to greater political freedom.”
China’s economy grew 11.9 percent in the second quarter from a year earlier. The world’s most populous country surpassed the U.K. in 2005 as the fourth-largest economy. The value of China’s gross domestic product is $2.6 trillion.
“No matter what official rhetoric may be, the tangible lessening of power from one generation of leaders to the next gives hope that a more democratic China will displace the authoritarian Communist Party,” he wrote.
Greenspan devotes the most space to the U.K., which he praises for a “remarkable renaissance” since former Prime Minister Margaret Thatcher took office in 1979. London, he said, is “arguably the world’s leader in cross-border finance,” though New York remains the financial capital of the world.
British Leaders Praised
He also commends Blair and Brown for tempering the Labour Party’s “historical Fabian socialist ethos,” allowing foreign investment and acquisitions of major British companies. The Fabian Society was founded in the late 19th century to advocate for gradual socialist change.
“If Britain continues its new openness (a highly reasonable expectation), it should do well in the world of 2030,” Greenspan concluded. Greenspan is an adviser to Brown.
For Continental Europe, either output per hour needs to speed up to a rate that may be “out of reach,” or attitudes toward immigration must change. The outlook for the region “will remain unclear until it concludes it cannot maintain a pay-as-you-go welfare state that requires a growing population to finance it,” Greenspan opined.
Merkel, Sarkozy
Still, new leaders including French President Nicolas Sarkozy and German Chancellor Angela Merkel have views that make a “resurgence appear more likely,” Greenspan wrote.
He is less bullish on prospects for Japan, Russia and India. Japan is “strongly resisting immigration” and will have difficulty raising productivity growth, Greenspan wrote.
Russia is benefiting from its energy resources, yet with a falling population and President Vladimir Putin’s “selective enforcement” of laws, the country “has a long way to go before it joins the club of developed nations,” Greenspan said.
India is fettered by bureaucracy and still has three-fifths of its workforce in agriculture. That may keep the country from becoming as prominent as China, though the “glitter” of India’s services industries “is just too evident to dismiss,” he said.
Greenspan Says Euro Could Replace U.S. Dollar as Reserve Currency of Choice
Report: Former Fed Boss Says Euro Could Replace U.S. Dollar As Favored Reserve Currency
International Herald Tribune
September 17, 2007
FRANKFURT, Germany (AP) — Former U.S. Federal Reserve chairman Alan Greenspan said it is possible that the euro could replace the U.S. dollar as the reserve currency of choice.
According to an advance copy of an interview to be published in Thursday’s edition of the German magazine Stern, Greenspan said that the dollar is still slightly ahead in its use as a reserve currency, but added that “it doesn’t have all that much of an advantage” anymore.
The euro has been soaring against the U.S. currency in recent weeks, hitting all-time high of $1.3927 last week as the dollar has fallen on turbulent market conditions stemming from the ongoing U.S. subprime crisis. The Fed meets this week and is expected to lower its benchmark interest rate from the current 5.25 percent.
Greenspan said that at the end of 2006, some 25 percent of all currency reserves held by central banks were held in euros, compared to 66 percent for the U.S. dollar.
In terms of being used as a payment for cross-border transactions, the euro is trailing the dollar only slightly with 39 percent to 43 percent.
Greenspan said the European Central Bank has become “a serious factor in the global economy.”
He said the increased usage of the euro as a reserve currency has led to a lowering of interest rates in the euro zone, which has “without any doubt contributed to the current economic growth.”
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Dollar Hits 15 Year Low
Reuters
September 7, 2007
NEW YORK (Reuters) – The dollar fell to a 15-year low against major currencies on Friday as data showed U.S. payrolls fell last month for the first time in four years, raising recession fears and pressure for an interest-rate cut.
Traders dumped the dollar after the government said the United States shed 4,000 net jobs last month, the first contraction since August 2003. It also reduced estimated June and July job gains.
The payrolls data followed a larger-than-expected decline in July pending home sales reported earlier this week — more evidence that a credit crunch that began with losses on bonds tied to risky U.S. mortgages was starting to put the brakes on growth.
“Today’s employment report and the revisions are enough to justify several interest rate cuts by the Federal Reserve,” said David Kotok, chief investment officer at Cumberland Advisors in Vineland, New Jersey. “It is clear from this report that the U.S. employment situation is worsening.”
Markets are now pricing in a 74 percent chance that the Fed slashes its 5.25 percent benchmark interest rate by half a percentage point when it meets on September 18.
“The Fed cannot keep ignoring the fact that the subprime and credit crisis has indeed hit the real economy,” said Kathy Lien, senior currency strategist at DailyFX.com in New York.
“Americans are feeling the pain and this will translate into weak consumer spending, which will drive speculation for a possible recession,” she said.
The dollar index, which measures the greenback against a basket of major currencies, tumbled to a 15-year low <.DXY>.
The low-yielding yen was the biggest beneficiary, at one point rising 1.8 percent to a three-week high of 113.28 yen per dollar as investors fled risky trades funded by borrowing the Japanese currency at low interest rates. The dollar also fell 1.1 percent to 1.1890 Swiss francs.
The euro was up 0.6 percent at $1.3765, near a session peak of $1.3799, according to electronic trading platform EBS.
Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut, called the payroll report “one of the bigger real surprises we have had for some time, and (it) can only add significantly to building negative dollar sentiment.
In August, when rising defaults on subprime home loans, made to borrowers with poor credit, began causing market turmoil, the dollar initially benefited from safe-haven flows as investors fled risk for U.S. Treasuries and Americans repatriated funds.
But the greenback has looked increasingly vulnerable this week as liquidity remained scarce and housing and employment data sagged.
Analysts said a Fed rate cut could further weaken the dollar, and yields spreads have moved decisively in favor of the euro in recent sessions.
That’s despite the European Central Bank’s decision to hold interest rates at 4 percent on Thursday, citing increased market uncertainty as reason for its wait-and-see approach.
But ECB President Jean-Claude Trichet said inflation remains a top concern, suggesting hikes may resume in the future.
The Bank of England, Bank of Canada and Reserve Bank of Australia also held rates steady this week; only Sweden’s central bank broke ranks and lifted interest rates to 3.75 percent on Friday.
With Fed rate cuts now firmly priced in, “expect the euro to retest highs near $1.3850 ahead of a rally to $1.40 and above in the coming months,” said Nick Bennenbroek, chief currency strategist at Wells Fargo in New York.
Gold Rallies Past $700
FX Street
September 7, 2007
LONDON (Thomson Financial) – Gold rallied sharply in afternoon trade, breaking through the 700 usd level for the first time since May 2006, after US payrolls fell for the first time in four years, sparking a drop in the dollar.
The precious metals surged through 700 usd per ounce within minutes of the data being released, and later set a fresh 16-month high of 704.60 usd.
“It was a rather unexpected figure. With it we’ve gone through that 700 usd figure quite easily so it seems gold is off to the races,” said Commerzbank analyst Rory McVeigh.
“Gold has been gunned to take on its position as an inflationary hedge. With the numbers we’re seeing today we could see it push up higher, but it is rather choppy out there.”
At 1.43 pm, spot gold was trading at 703.30 usd an ounce against 695.70 usd in late New York trade yesterday.
Gold rose sharply yesterday, bolstered by strength in crude oil and safe haven buying after reports the Syrian military had fired on Israeli warplanes.
Prices eased this morning as investors booked profits from the gains, but rallied around midday as strong demand and safe haven buying pushed prices through technical resistance levels.
The market is optimistic physical demand for the metal will firm going into the seasonally strong fourth quarter, while recent turmoil in the financial markets has increased its appeal as a safe haven asset for speculative investors.
“People were looking for cash, but now people are looking for a safe haven for money. They are not happy with currencies, they are not happy with the banks, so gold is providing them with that opportunity,” said Simon Weeks, an analyst at Scotia Mocatta.
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Economic Expert: We Are Already In An Engineered Recession
China is not the Problem
Heavy losses sweep world markets
Wall Street Pulls Off Late Comeback
Paulson says U.S. economy can withstand turmoil: report
Fed Poised To Dump More Money Into Market
Stock Market Brush Fire & Run On The Banks
Food prices rising in double digits
Existing Home Sales Fall In 41 States
Banks Add More Funds To Stabilize Markets
Economic Meltdown Favors The Elite
China’s “Nuclear Option” Is Real
Central Banks Add Cash To Avert Crisis
Stocks End Mixed After Raucous Week
China dollar attack would be ‘foolhardy’: Bush
Fed Adds $38 Bln in Funds, Most Since September 2001
The “Plunge Protection Team” Working Overtime to Save US Stock Market
China threatens ‘nuclear option’ of dollar sales
World stocks slide on fresh US credit concerns
Dow Plunges 387 On Subprime Fears
Credit Crunch In U.S. Upends Global Markets
Uncle Sam Your Banker Will See You Now
American Home to Declare Bankruptcy, Employees Told by Managers
Mad Money Cramer: Bernanke, Wake Up
Wall Street shaken by late-day market surges
Filed under: DEBT, ECB, economic depression, Economy, european union, Federal Reserve, Greenback, housing market, Inflation, Stock Market, Wall Street
Fed Injects 31.25 Billion Into Market
AFP
September 6, 2007
The Federal Reserve added 31.25 billion dollars in temporary reserves to the US money markets Thursday in three different operations, the latest move to keep credit markets from drying up.
The New York Fed added 7.0 billion dollars in 14-day repurchase agreements, 16 billion in seven-day repurchase agreements and 8.25 billion in one-day repos.
The Fed has injected some 200 billion dollars into the financial system since August 9 in a bid to boost credit flows which have seized up due to problems linked to the distressed US mortgage market.
The US central bank typically buys billions of dollars worth of securities from major banks, pumping extra cash into the banking system, which the banks are obliged to repurchase at a later date.
ECB Injects €42.2BN Into Money Markets
Financial Times
September 6, 2007
The European Central Bank has injected €42.2bn into euro money markets in its latest emergency liquidity-boosting operation that came as the bank’s governing council met for its monthly interest rate setting meeting.
The operation, making extra cash available for one day, followed a surge in overnight interest rates this week that has set back the ECB’s hopes that conditions in money markets were normalising.
The timing appeared to make it almost impossible for the central bank to announce on Thursday that it is lifting its main interest rate. “There is little for the ECB to gain by raising rates at this point but plenty to lose,” said Ken Wattret, economist at BNP Paribas.
The ECB launched emergency liquidity boosting operations on August 9, when it injected an unprecedented €94.8bn. Until this week it had succeeded in bringing down overnight interest, and Jean-Claude Trichet, ECB president, sought to signal a return to business as normal. But a later injection into the market for three-month money failed to have the same effect and on Wednesday overnight interest rates approached the 4.7 per cent peak seen on August 9.
So far, the ECB has seen a clear distinction between its main monetary policy decisions – aimed at combating long term inflation dangers – and operations aimed at ensuring the proper functioning of markets. But an increase in interest rates this afternoon would be hard to explain so soon after another emergency liquidity boosting operation and with financial market turmoil continuing,analysts said.
Although the central bank signalled at the start of August that a quarter-point rise in its main rate to 4.25 per cent was likely in September, Mr Trichet last week indicated that it had reconsidered its options. A rise today would shock markets.
On Thursday afternoon Mr Trichet is to express confidence in the underlying strength of the eurozone economy and signal that the ECB’s bias remains towards increasing interest rates at some point. But it is likely to wait for calm to return to financial markets before acting.
Since the end of 2005, the ECB has raised its main interest rate eight times by a quarter percentage point, most recently to 4 per cent in June.
noworldsystem.com 