noworldsystem.com


Federal Reserve Plans To Nationalize All US Banks

Federal Reserve Plans To Nationalize All US Banks

Telegraph
March 31, 2008

The US Federal Reserve is examining the Nordic bank nationalisations of the 1990s as a possible interim solution to the US financial crisis…

The Fed has been criticised for its rescue of Bear Stearns, which critics say has degenerated into a taxpayer gift to rich bankers…

A senior official at one of the Scandinavian central banks told The Daily Telegraph that Fed strategists had stepped up contacts to learn how Norway, Sweden and Finland managed their traumatic crisis from 1991 to 1993, which brought the region’s economy to its knees…

It is understood that Fed vice-chairman Don Kohn remains very concerned by the depth of the US crisis and is eyeing the Nordic approach for contingency options…

Scandinavia’s bank rescue proved successful and is now a model for central bankers, unlike Japan’s drawn-out response, where ailing banks were propped up in a half-public limbo for years…

While the responses varied in each Nordic country, there a was major effort to avoid the sort of “moral hazard” that has bedevilled efforts by the Fed and the Bank of England in trying to stabilise their banking systems…

Norway ensured that shareholders of insolvent lenders received nothing and the senior management was entirely purged. Two of the country’s top four banks – Christiania Bank and Fokus – were seized by force majeure…

“We were determined not to get caught in the game we’ve seen with Bear Stearns where shareholders make money out of the rescue,” said one Norwegian adviser…

“The law was amended so that we could take 100pc control of any bank where its equity had fallen below zero. Shareholders were left with nothing. It was very controversial,” he said…

Stefan Ingves, governor of Sweden’s Riksbank, said his country passed an act so it could seize banks where the capital adequacy ratio had fallen below 2pc. Efforts were also made to protect against “blackmail” by shareholders…

Mr Ingves said there were parallels with the US crisis, citing the use of off-balance sheet vehicles to speculate on property. All the Nordic banks were nursed back to health and refloated or merged…

The tough policies contrast with the Fed’s bail-out of Bear Stearns, where shareholders forced JP Morgan to increase its Fed-led rescue offer from $2 to $10 a share. Christopher Wood, chief strategist at brokers CLSA, says the Fed’s piecemeal approach has led to “appalling moral hazard”…

“Shareholders have been able to lobby for a higher share price only because the Fed took over the credit risk on $30bn of the investment bank’s dubious paper. The whole affair also amounts to a colossal subsidy for JP Morgan,” he said…

 

Federal Reserve SWAT Teams To Police The Economy?

NY Times
March 3, 2008

WASHINGTON — The Treasury Department will propose on Monday that Congress give the Federal Reserve broad new authority to oversee financial market stability, in effect allowing it to send SWAT teams into any corner of the industry or any institution that might pose a risk to the overall system.

[…]

Under the Treasury proposal, Fed officials would be allowed to examine the practices and even the internal bookkeeping of brokerage firms, hedge funds, commodity-trading exchanges and any other institution that might pose a risk to the overall financial system.

Read Full Article Here

 

Real Estate Price Collapse, Paradise Lost in SW Florida

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

 

Recession: The Movie – Now playing everywhere

http://www.youtube.com/watch?v=x4OOCReeLWo

Recent News:
U.S. & UK To Deal With Financial Crisis
http://www.ft.com/cms/s/0/991194..000077b07658.html?nclick_check=1

Fed Bailout Of Bear Streans Looks Like Investment
http://www.businessweek.com/..4/b4078000069548.htm

German watchdog eyes $600 bln global bank losses: report
http://biz.yahoo.com/rb/080329/germany_banks_losses.html?.v=1

Weak dollar not at odds with policy: ex-US official
http://www.reuters.com/article/ousiv/idUSHKG3018120080331

Dollar Falls to Near Record Low Against Euro on Inflation Data
http://www.bloomberg.com/apps/news?pi..4V7YusRk&refer=japan

Market Plunges, Fed Acts
http://norris.blogs.nytimes.com/2008/03/31/market-plunges-fed-acts/

Paulson Claims Stimulus To Create 600K Jobs
http://news.yahoo.com/s/nm/2008.._nNh3mLV3UPKb.HQA

Paulson warns US house prices must plunge; Orders for Durable Goods in U.S. Unexpectedly Fell
http://business.timesonline.co.uk/tol/b.._finance/article3627054.ece

Paulson Backs Regulatory Overhaul, Broader Fed Role
http://www.bloomberg.com/apps/new..sid=a9LEWNdBhrf8&refer=home

Is Cheney betting on Economic Collapse?
http://www.informationclearinghouse.info/article13851.htm

Fed Auctions Another $50 Billion To Banks
http://news.yahoo.com/s/ap/200..vxGaVFf7P_qKL62bAV9mpv24cA

Paulson To Visit China Next Week
One In Six West Virginians On Food Stamps
Bush: Rebate Checks Will Make Economy ‘Stronger Than Ever Before’
Eurozone Struggles With Inflation
USA 2008: The Great Depression
Fed Official: U.S. Slipping Into Recession
Investment Firms Tap Fed For Billions

U.S. Economic Collapse News Archive

 



The Federal Reserve Is Destroying America

The Federal Reserve Is Destroying America

Lee Rogers
Funny Money Report
March 17, 2008

It is incredible to see the rampant devaluation of the U.S. Dollar. The Federal Reserve just hours ago made a rare cut of 25 basis points during the weekend which will cause even more inflation. Gold immediately moved up $20 an ounce and the U.S. Dollar Index plunged under 71 in international trading. If this type of market activity continues the U.S. Dollar will have no value in a few months. While it is probably unlikely that we will see a hyper-inflationary collapse of the U.S. Dollar within the next few months, these policies are entirely unsustainable. If the Federal Reserve does not move to defend the value of the U.S. Dollar we will eventually see a hyper-inflationary collapse and worldwide financial turmoil. This view is also shared by other well respected financial analysts. Peter Schiff recently raised concerns about a hyper-inflationary collapse of the U.S. Dollar, Robert Reich a former Clinton cabinet member believes we are facing a depression and Alan Greenspan the man who caused this whole mess wrote in the Financial Times stating that we are facing the worst financial crisis since World War II. What’s amazing is that the Federal Reserve isn’t even trying to protect the U.S. Dollar because all they care about is saving the power of their private banking cartel. They don’t care about the U.S. Dollar nor do they care about the country itself. They are destroying this country through their actions and there needs to be an investigation into the controllers of this bank.

Read Full Article Here

 

A Time For Caution

321 Gold
March 16, 2008

I wrote a piece 10 days ago suggesting caution on the part of my readers. Gold and silver are at bullish extremes; the dollar is at a bearish extreme. In any normal time, we would expect to see a correction, probably violent. I still believe we will have a correction shortly but we may no longer control anything. While the metals and the dollar are showing extremes of emotion, the shares of mining companies still seem to be very bullish based on my read of the XAU over gold.

My readers are smart enough to realize we are not in normal times. We are in a Domino Depression where we can expect two or three hedge funds to collapse every day, banks to go under on a regular basis. Northern Rock collapsed last fall, I for one, cannot understand how the rest of the banking system has not failed.

It’s starting again; we are in uncharted waters where no one quite understands where we are; we’ve never been here before. Bear Sterns crashed on Friday last. On Monday March 17th, President Bush meets with the infamous Plunge Protection Team. The alternatives are everything from a Bank Holiday to a nuclear attack on Iran to Bush declaring a “National Emergency” and naming himself Fuhrer.

One of the very real alternatives is Weimar style inflation. That’s what the government would like to do; it’s a question of if the rest of the world will go along with it. All it would take for a total and immediate failure would be for China or Russia or Japan or Saudi Arabia to dump the dollar.

It’s a time for caution. We SHOULD have a violent correction in gold and silver and the dollar based on emotion and government intervention but we could see $3,000 gold in a week or the start of a living nightmare brought to you by the Gang of Fools in Washington. No one knows.

I’m tempted to say the government’s ability to deceive is far greater than I ever imagined and the stupidity of Americans equally unimagined. We may well coast into Armageddon at a nice measured rate or we could see a freeze-up next week. The time will come when there is a total freeze-up in the banking system and all the banks will close. I just don’t know if it’s next week or not.

It’s a time to be cautious. We are not entering a recession; it’s a full-blown Domino Depression. It’s not a time to be in CDs or Real Estate or speculating in the stock market. You need to own real things of some real value. Our world is changing at an ever-increasing rate. Own some physical gold and pay attention to what is going on.

 

Leading Economic Writer: Financial Meltdown A “Gigantic Fraud”

Steve Watson
Infowars.net
March 17, 2008

A leading economic journalist has described the current financial crisis as a “gigantic fraud”, the fallout of a deliberate and preconceived profit agenda to enslave the middle classes in a debt bubble.

The economics editor of the London Guardian, Larry Elliott, has hit out at the global financial elite in a refreshing piece that marks a rare shift away from the establishment hackery we are used to from the corporate media.

In an article titled America was conned – who will pay? Elliot writes:

Indeed, it is somewhat surprising that there is not already rioting in the streets, given the gigantic fraud perpetrated by the financial elite at the expense of ordinary Americans.

[…]

Business, of course, needs consumers to carry on spending in order to make money, so a way had to be found to persuade households to do their patriotic duty. The method chosen was simple. Whip up a colossal housing bubble, convince consumers that it makes sense to borrow money against the rising value of their homes to supplement their meagre real wage growth and watch the profits roll in.

As they did – for a while. Now it’s payback time and the mood could get very ugly. Americans, to put it bluntly, have been conned. They have been duped by a bunch of serpent-tongued hucksters who packed up the wagon and made it across the county line before a lynch mob could be formed.

Elliot also states that the debate is now not about whether the US faces a recession, but is about how deep it will be and how long it will last, comparing the downturn to the South Sea Bubble crisis in 1720, and declaring that the “Ponzi securitisation scam has been exposed.”

A Ponzi scheme, named after Charles Ponzi, is one that offers abnormally high short-term returns in order to entice new investors. The high returns that a Ponzi scheme advertises and pays require an ever-increasing flow of money from investors in order to keep the scheme going, meaning it is inevitable that it will eventually collapse.

Read Full Article Here

Stock Guru Granville: We Are In A Crash
http://www.bloomberg.com..p;sid=aMVeMY2hvYUI&refer=home

Not Just Recession, Clinton Appointee Talking ‘Depression’
http://www.businessandmedia.org/articles/2008/20080314131851.aspx

Oil plummets on economy worries
http://news.yahoo.com/s/ap/20080317/ap_on_bi_ge/oil_prices

Bernanke May Run Low on `Ammunition’ for Loans, Rates
http://www.bloomberg.com/apps/news..amp;refer=exclusive

Who Is Responsible for the World Food Shortage?
http://www.larouchepub.com/other/1995/2249_food_intro.html

NZ market hit by US meltdown
http://www.newstalkzb.co.nz/newsdetail1.asp?storyID=134130

House, Senate endorse tax hikes
http://www.rawstory.com/new..enate_endorse_tax_hikes_03132008.html

Dollars Tough To Sell On Amsterdam
http://www.reuters.com/article/ousiv/idUSL1758265520080317

Gulf States Creep Away From Plunging Dollar
http://prisonplanet.com/articles/march2008/031708_creep_away.htm

IMF, OECD hit alarm buttons for crisis-hit global financial system
http://news.yahoo.com/s/afp/200803..Aj6Sk0_nk7A4Wj6bi0U.nq7.ucsA

Goldman Sees $175 Oil & Explosive Commodities
http://www.bloomberg.com/app..newsarchive&sid=aUmQ3MBOkx_0

 



Fed Cuts Interest Rates 75 Basis Points

Fed Cuts Interest Rates 75 Basis Points

AP
January 22, 2008

Fbiiraqisbein_mn

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

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

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

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

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

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

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

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

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

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

Read Full Article Here

 

‘Fed may keep cutting interest rates’

Western Mail
January 23, 2008

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

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

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

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

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

Read Full Article Here

 


US rates ‘heading for 2.5% by the spring’

The Scotsman
January 23, 2008

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

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

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

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

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

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

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

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

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

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

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

Read Full Article Here

Recent News:

Dollar finds support from rising stocks, but confidence remains shaky
http://www.forbes.com/markets/feeds/afx/2008/01/23/afx4561857.html

Gold steady $890 amid rebounding equity mkts but sentiment remains fragile
http://www.forbes.com/afxnewslimited/feeds/afx/2008/01/23/afx4561918.html

Let Market Crash Now Or Face Financial Train Wreck
http://www.prisonplanet.com/articles/january2008/012308_crash_now.htm

Market’s Wild Ride Ends With Dow at 15-Month Low
http://www.nytimes.com/2008/01/22/business/23cnd-stox.html?hp

Fed Rate Cut Seen As Once In A Generation
http://www.iht.com/bin/printfriendly.php?id=9418610

Federal Reserve slashes US rates on day when ‘chaos reigned supreme’
http://www.guardian.co.uk/business/2008/jan/22/useconomy.marketturmoil1

World’s Largest Bond Insurers Collapsing!
http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=1381

Tuesday Could Bring 1,000 Point Drop in Dow
http://www.247wallst.com/2008/01/a-1000-point-dr.html

All signs point to U.S. consumers hunkering down in recession bunkers
http://www.theglobeandmail.com/serv.ZA18/TPStory/Business

Foreigners Buy Stake In USA At Record Pace
http://www.nytimes.com/2008/01..partner=MYWAY&pagewanted=print

Bank of America net sinks 95 percent
http://www.reuters.com/articl..r=1&virtualBrandChannel=0&sp=true

Oil falls below $89 as stock markets plunge
http://biz.yahoo.com/rb/080121/markets_oil.html?.v=1

Horror day for Australian stock market
http://www.news.com.au/story/0,23599,23089611-2,00.html

Russian shares tumble as panic grips world markets
http://www.russiatoday.ru/business/news/19933

Current financial crisis was topic of Bilderberg 2006
http://rinf.com/alt-news/new-world-..s-topic-of-bilderberg-2006/2277/

The Coming Global Depression
Bear Stearns: The Fed Will Cut Rates AGAIN Next Week
World stock markets fall
Hopes of global rate cut sparks FTSE revival after early morning slump
Black Monday: recession fears spark global share crash
Biggest fall in shares since September 11
When governments print money, buy gold
Gold rallies back to the 890 usd mark after emergency Fed rate cut
Stocks Plunge Despite Fed Rate Cut
Surprise rate cut sparks dollar sell-off
Global markets dropped 5% overnight
Market drops on recession fear
Wall Street set to open lower
Wall St execs collect $US33b bonuses
Asian Markets Continue Slide
Futures plunge on U.S. recession fears
US recession fears wipe £77bn from London shares
Recession fears weigh on markets
Emergency: Global Financial Markets Collapsing
HK shares dive, China plays in worst day in 10 yrs
Will the Economic Crash Wake People Up?
U.S. slide an expanding threat
Britain Unveils Northern Rock Buy Out Plan
CFR: The ‘Historical Anomaly’ of the Dollar
Banks to suffer into ’09 as credit crunch drags: S&P
Tax Rebates Urged To Rescue Economy
U.S. economy teeters on the brink
7-Year Plan Aligns Europe With U.S. Economy

U.S. Economic Collapse News Archive

 



Gordon Brown calls for New World Order

Gordon Brown calls for New World Order

ITN
January 21, 2008

Fbiiraqisbein_mn

The Prime Minister has called for a radical reform of international institutions ranging from the United Nations to the World Bank.

In a speech to business leaders in the Indian capital New Delhi, Mr Brown said the UN Security Council should be expanded to include places for nations such as India, and the International Monetary Fund (IMF) should have a new “early warning” role to head off crises such as Northern Rock.

“To succeed now, the post-war rules of the game and the post-war international institutions must be radically reformed to fit our world of globalisation” – Gordon Brown

He also said the World Bank should focus more on increasing clean energy and the environment.

He said: “To succeed now, the post-war rules of the game and the post-war international institutions must be radically reformed to fit our world of globalisation.

“We can and must do more to make our global institutions more representative and I support India’s bid for a permanent place, with others, on an expanded UN Security Council.

“And I support changes to the IMF, World Bank and the G8 that reflect the rise of India and Asia.”

Mr Brown went on to suggest all countries strengthen networks of global law enforcement authorities, intelligence agents, police and financial regulators, in a bid to combat terrorism worldwide.

And to tackle the problem of struggling states, Mr Brown propsed a UN envoy be appointed to failing nations to coordiinate peacekeeping and recovery after conflict.

The speech was billed by aides as a “significant” statement of his views on a new world order.

They also said that the UK believes Brazil, Japan, Germany and an African country should be allowed to join the UN Security Council.

After the speech, Mr Brown was awarded an Honorary Doctorate of Letters at the University of Delhi – a sprawling campus with 250,000 students.

The Prime Minister joked: “I was once, before I descended into politics, a university lecturer myself. Universities should always stand for objectivity, for rationality, for the honest pursuit of the truth: all the qualities you have to leave behind when you go into politics.”

Gordon Brown and U.N. to Create New World Order
http://news.independent.co.uk/world/article3356210.ece

Brown Prepares to Sell UK Out to Globalist EU
http://www.truthnews.us/?p=1740

World Leaders in Secret Talks to Create ‘New World Order’
http://news.independent.co.uk/world/article3356210.ece

Elite To Attend World Economic Forum
http://news.independent.co.uk/world/article3356210.ece

Conference Promotes Global Citizenship
http://www.wausaudailyherald.com/apps/p..1210466/1981

New World Order Quotes
http://nwsarchive.wordpress.com/2007/09/30/new-world-order-quotes/

 



Greenspan Joins Firm That Bet Against US Housing Market

Greenspan joins firm that made billions betting against the housing market

Reuters
January 15, 2008

Fbiiraqisbein_mn

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.

Read Full Article Here

Related News:

Shares in freefall a Dollar tumbles to 2-1/2 year low vs. yens recession hits
http://money.cnn.com/200..llar.ap/index.htm?postversion=2008011605

Shares in freefall as recession hits
http://www.financemarkets.c..s-in-freefall-as-recession-hits/

ECB warns crashing dollar may stop Fed cuts
http://www.telegr..14/bcnfedcut114.xml&CMP=ILC-mostviewedbox

Top economist blames Fed for sub-prime crisis
http://www.telegraph.co.u..=/money/2008/01/13/ccschwartz113.xml

Inflation Up by Largest Amount in 17 Years
http://www.foxbusiness.com/mar..se-03-december_438734_3.html

Citigroup May Write Down Up To $24 Billion, Lay Off 20,000 Workers
http://www.cnbc.com/id/22639976/

Wall Street braces for more losses
http://money.cnn.com/..m?postversion=2008011608

Shadow spreads across the US economy
http://www.theaustralian.new..197,23046413-5015025,00.html

Transit Panel Urges Gas Tax Increase
http://news.aol.com/story/_a/tran..rease/n20080115033009990021

Bankers Throw In Towel On Northern Rock
http://www.telegraph.co.u..oney/2008/01/12/cnnrock112.xml

“U.S. Economy Screwed”: Henry Blodget
http://www.alleyinsider.com/2008/01/us-economy-screwedexperts.html

Largest Saudi Bank Urges Dollar Depeg
http://www.ft.com/cms..ac.html?nclick_check=1

Crisis may make 1929 look a ‘walk in the park’
Wholesale Prices Up 6.7% In 2007
Breaking phase ahead for the global financial system in 2008
Traders betting oil will hit $200 a barrel in 2008
Gold Futures Rise to Record $900.10
Weaker dollar likely to push gold over $1,000-mark

U.S. Economic Collapse News Archive

 



Fed promises as much money as the banks want

Fed promises as much money as the banks want
Fed Has Auctioned Another $20B in Funds to Commercial Banks to Combat Credit Crunch

AP
December 21, 2007

The Federal Reserve, working to combat the effects of a severe credit crunch, announced Friday it had auctioned another $20 billion in funds to commercial banks at an interest rate of 4.67 percent. Fed officials pledged to continue with the auctions “for as long as necessary.”

The central bank said it had received bids for $57.7 billion worth of loans, nearly three times the amount being offered, indicating continued strong interest in the Fed’s new approach to providing money to cash-strapped banks.

It was the second of four scheduled auctions. The first auction, on Monday, of $20 billion resulted in loans being awarded at an interest rate of 4.65 percent. There were 93 bidders seeking $63.6 billion at the first auction and 73 at the second.

Two more auctions will occur in early January. In a statement Friday, the central bank said it would continue with further auctions “for as long as necessary to address elevated pressures in short-term funding markets.”

The new auction process was announced by the Fed last week in a coordinated action with central banks around the world trying to address a global credit crunch.

Federal Reserve Chairman Ben Bernanke and his colleagues decided to try the new process because their efforts to inject funds into the banking system through the Fed’s discount window, which makes direct loans to banks, had proven less successful than Fed officials had hoped.

Many banks had avoided using the Fed’s discount window out of concern that investors would see the move as an indication of underlying problems at their financial institutions.

The auction process was developed as a second way to get money into the banking system with the hopes that it would not carry the stigma of the discount window.

The Fed said Friday that it would announce on Jan. 4 the sizes of the next two auctions which will be held Jan. 14 and Jan. 28. Officials have said the Fed will evaluate the interest in the auctions after the initial four and determine whether more auctions will be scheduled.

The new auction results cover short-term loans for 35 days.

The global credit crisis has made banks reluctant to lend to each other even as the Fed has been lowering its federal funds rate, the interest that banks charge each other for overnight loans.

The rate currently stands at 4.25 percent, a full percentage point lower than it was in September when the Fed began slashing rates in the wake of a severe credit squeeze that had roiled global markets in August.

The 4.67 percent rate for the second $20 billion in funds and the 4.65 percent rate for the first auction means that banks who are using the auction process to get needed reserves are getting them at a rate slightly below the 4.75 percent rate they could get in direct loans through the discount window.

The Fed cut the federal funds rate and the discount rate by a quarter-point at its last meeting on Dec. 11, disappointing investors who had hoped for a bigger half-point reduction in the funds rate.

Many economists believe the Fed will keep cutting rates with three more quarter-point reductions expected in the funds rate at the Fed’s first three meetings of the new year.

Analysts believe that a serious slowdown in overall economic growth will force the Fed to continue cutting rates even though some Fed officials have expressed worries that the rate cuts could exacerbate inflation pressures, which have flared up again, reflecting a renewed surge in oil prices.

 

People & Power – Death of the dollar

http://www.youtube.com/watch?v=54MUm2P1jOU

http://www.youtube.com/watch?v=HdrNbhdl7uU

Growing number of Americans expect recession: poll
http://www.reuters.com/article/ousiv/idUSN1821436620071219

Gold climbs above $800 in London as dollar drops; silver gains
http://www.tehrantimes.com/index_View.asp?code=159758

Northern Rock Rescue Cost $100B
http://www.fmnn.com/WorldNews.asp?nid=52822

US Inflation Soars – Largest Rise in Producer Prices Since 1973!
http://www.marketoracle.co.uk/Article3128.html

US foreclosure filings up 68 pct in Nov.
http://news.yahoo.com/s/ap/20071219/ap_on_bi_ge/foreclosure_rates

U.S. Dollar’s Credibility Being `Stretched,’ UBS Economist Says
http://www.bloomberg.com/apps/news?pid=20601…o4&refer=home

US Federal Reserve’s subprime regulations shield Wall Street banks
http://www.wsws.org/articles/2007/dec2007/mort-d21.shtml

Economy teeters on brink, says Resler
http://www.marketwatch.com/news/mailto.a…&siteid=mktw

GAO Says Government Failed Yet Another Financial Audit
http://www.govexec.com/story_page.cf…2&dcn=todaysnews

One in Five Americans Must Borrow to Heat Homes This Winter
http://www.alternet.org/blogs/peek/71071/

Morgan Stanley secures $5bn from China
http://www.telegraph.co.uk/money/main.j….9/bcnmorgan119.xml

CNN: Ron Paul Says U.S. Going Broke
http://www.youtube.com/watch?v=lP6MtMq5cBw

ECB Offers Banks Unlimited Funds
http://news.bbc.co.uk/2/hi/business/7149329.stm

Overstock.com CEO warns of depression
http://www.youtube.com/watch?v=m-TLfmLTiqA

U.S. Economic Collapse News Archive

 



World Stocks Plummet Despite Infusion

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.

Read Full Article Here

 

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.

U.S. Stocks Decline as Fed Fails to Assuage Recession Concern
http://www.bloomberg.com/a…yi2xynL0&refer=us

Report Says That the Rich Are Getting Richer Faster, Much Faster
http://www.nytimes.com/2007/…ThcWg&oref=slogin

LA Times Says Gold For Conspiracy Theorists
http://www.latimes.com/wireless/avantgo/la-fi-gold16dec16,0,465745.story

Fed To Announce New Mortgage Rules
http://www.washingtonpost.co…007121401875.html

‘A financial tsunami is upon us’: Schultz sees an apocalypse now
http://www.marketwatch.com/new.34-A49..dist=TNMostRead

Mortgage Crisis Inflicts Collateral Damage
http://www.msnbc.msn.com/id/22246203

Schwarzenegger To Declare Fiscal Emergency
http://www.nbc11.com/news/14858065/detail.html

Russia may dump weakening US dollar in its energy deals
http://www.dailyti…2007%5C12%5C15%5Cstory_15-12-2007_pg5_43

Money-Market Rates Fail to Respond to Bank Measures
http://www.bloomberg.com/apps/news?…d=a9anSVhH.NOQ&refer=home

November Consumer Prices Rise More than Forecast
http://www.bloomberg.com…4BNlo&refer=home

Greenspan: Odds of recession ‘clearly rising’
http://noworldsystem.com/2007/…ession-clearly-rising/

Central Banks to Pump Billions into World Financial System
http://www.nytimes.com/200..8-8QuVU5oMlm5w8E6dIl7JlQ

GAO: “USA is living beyond its means”
http://www.youtube.com/watch?v=KjZBOCAgR64

U.S. Economic Collapse News Archive

 



Economic Expert Says Global Crash Imminent

Economic Expert Says Global Crash Imminent
Echoes former world bank leader with prediction of global recession

Steve Watson
Infowars.net
November 20, 2007

A leading economic expert has warned that a global crash and recession is imminent on the back of record highs in real estate, stocks and energy, combined with a devaluation of the dollar and continued “speculative bubble thinking”.

Robert Shiller, the Stanley B. Resor Professor of Economics at Yale University told an audience at the annual Dubai International Financial Centre (DIFC) Week that a sharp downward correction is due in the global markets.

Shiller stated:

“Perhaps we have gotten a little too confident in the global economic growth,” said Shiller. “The problem is high oil, stock and real estate prices. I believe that a substantial part is speculative bubble thinking. We have gotten too confident of the prices in these markets,”.

“The unwinding of these markets is the most serious risk facing these markets today,” Shiller added.

With the effects of the credit crunch hitting more and more lower level lenders, it is clear to see that the fallout is spreading and propagating a general decline. We are seeing the unfolding of an overall meltdown that represents a gutting of the United States by neo-mercantilist institutions bent on the formation of a new global monopoly.

Shiller also pointed to the futures market, such as that of the CME in Chicago, which now predicts a major, ongoing decline over the coming four years.

We are witnessing the unfolding of a crash exactly as predicted by Former World Bank Vice President, Chief Economist and Nobel Prize winner Joseph Stiglitz last year.

Stiglitz agreed that the process of hijacking and looting key infrastructure on the part of the IMF and World Bank, as an offshoot of predatory globalization, has now moved from the third world to Europe, the United States and Canada.

Stiglitz warned that the signs were there with plummeting real estate prices in the U.S., stating that a global economic depression could only be avoided if a correction was made.

But no correction will be made because the World Bank/IMF/Globalist doctrine betrays a focused agenda to deliberately foment economic turmoil, riots, and then enforced bondage to eternal debt. We have witnessed this time and time again, their own documents even confirm this as the chosen method of social control.

The shareholders of Federal Reserve, part of the same group of elite families that owns the bank of England, created the IMF and World bank to siphon government funds. Then they effectively steal the real assets of the third world countries that take their loans in some cases at 42% interest. These global loan sharks secure the water, power and roads which are then handed over to private, piratical, letter of mark companies.


China Voices Alarm at Dollar Weakness

Financial Times
November 19, 2007

China on Monday expressed concern at the decline in the dollar, joining a growing chorus of global policymakers alarmed by the weakness in the world’s main reserve currency.

Premier Wen Jiabao told a business audience in Singapore it was becoming difficult to manage China’s $1,430bn foreign exchange reserves, saying that their value was under unprecedented pressure.

“We have never been experiencing such big pressure,” Mr Wen said, according to Reuters. “We are worried about how to preserve the value of our reserves.”

China keeps the currency composition of its reserves a state secret, but some analysts believe that more than two-thirds are probably still held in dollars.

Mr Wen’s comments came as top international economic officials spoke out in support of a strong dollar in the aftermath of the weekend’s Group of 20 summit in South Africa and Opec meeting in Riyadh.

Hank Paulson, US Treasury secretary, told reporters in Ghana: “A strong dollar is in our nation’s interest.”

He said the US economy had its “ups and downs” but he believed that “our long-term economic strength will be reflected in currency ­markets”.

Mr Paulson and other top US officials, including President George W. Bush, have become increasingly vocal on the dollar in recent days in an apparent effort to signal that they are not indifferent to its fate.

Zhou Xiaochuan, China’s central bank chief, said Beijing wanted a strong dollar because it would help to ensure an orderly resolution of the recent market instability caused by US mortgage lending problems.

“So in this sense, actually we hope to see a strong dollar,” Reuters quoted Mr Zhou as saying. “We support a strong dollar.”

Jean-Claude Trichet, president of the European central bank, told reporters that Mr Zhou’s remarks “echoed what has been said by the monetary authorities of the US”.

“What we are witnessing is unco-ordinated verbal intervention,” said Stephen Jen, head of currency research at Morgan Stanley. “This is useful as in the absence of it, investors and speculators would have interpreted it as the authorities condoning what was going on in the currency markets.”

The Japanese yen rallied against a range of currencies on Monday, notably commodity-based rivals such as the Canadian and Australian dollars. The prospect of China allowing its currency to appreciate against the dollar drove sentiment, traders said.

The dollar was largely unchanged in early US trading. The US currency has shown some tentative signs of stabilisation in the past few days, but many analysts remain bearish.

Related News:

Global crash imminent, warns expert
http://www.arabianbusiness.com/50…inent-warns-expert

As dollar weakens, Gulf nations look at currency pegs
http://www.iht.com/articles/2007/11/19/bloomberg/bxatm.php

Food pantries struggle to meet increasing demand
http://news.yahoo.com/s/ap/200711…ood_pantries_shortage

Loonie shouldering heavier share of greenback’s decline: IMF
http://www.canada.com/nation….5a&k=90145

Asian Leaders Sign Regional Economic Pact
http://www.nytimes.com/2007/11/21/w…html?hp

Saudi Riyal Touches 21-Year High
http://www.arabnews.com/?page=6&s….=Business

Central bank governor says China supports strong dollar
http://www.iht.com/articles/2007/11/19/business/yuan.php

$38B In Wall Street Bonuses As Stocks Decline
http://www.bloomberg.com/apps/new….worldwide

Goldman Sachs Behind Sky-High Oil Prices?
http://mparent7777-2.blogspot.com….h-oil.html

The Crash of 2008
http://www.humanevents.com/article.php?id=23465

Taxpayers to foot the Northern Rock bill
http://timesonline.co.uk/tol/news/….e2903877.ece

Global Gold Stocks May Beat Bullion, Baker Steel Says
http://www.bloomberg.com/apps/news….2k&refer=europe

Weak Dollar Wrecks American’s Dreams
http://www.reuters.com/article/lif…142820071119

OPEC Interested in Non-Dollar Currency
http://ap.google.com/articl….D8T0AC6G0

Saudi minister warns of dollar collapse
http://www.telegraph.co.uk…17/cndollar117.xml

Chávez sees oil at $200 if Iran invaded
http://www.ft.com/cms/s/0/3e346fdc-923f-11dc-8981-0000779fd2ac.html

Dow Down 200 Amid Banking Concerns
US September net foreign capital flows -14.7 bln usd
The Discipline Of the Dollar
Dollar Decline “Irreversible”
Goldman Sees Subprime Cutting $2 Trillion in Lending
Opec unites behind higher prices
Oil rises over $95 on weak dollar
Oil rises ‘Kill the cable, kill the cable,’ Oil leaders’ private debate televised by mistake
Opec nations clash over weak dollar
OPEC agrees to dollar talks after forex basket proposal
‘Greener, reliable’ OPEC wraps up politically-charged summit
Chavez starts OPEC summit with 200-dollar oil warning

U.S. Economic Collapse News Archive

 



Dollar Decline “Irreversible”

Dollar Decline “Irreversible”

The Independent
November 17, 2007

The decline of the dollar, symbol of US global hegemony for the best part of a century, may have become so entrenched that some experts now fear it is irreversible.

After months of huge and sustained turmoil on the money markets, lack of confidence in the world’s totemic currency has become so widespread that an increasing number of international traders are transferring their wealth to stronger currencies such as the euro, which recently hit its highest level against the dollar.

“An American businessman over here who is given the choice would take anything but the dollar,” David Buik of Cantor Index said yesterday. “I would want to be paid in yen, and if not yen then the euro or sterling.”

Matthew Osborne, of Armstrong International, added: “The majority would say sterling. There are a few dealers in the City who may take the view that they’ll take dollars now, while they’re cheap, and hold on to them for 12 months.

“But the problem is so serious that there are people who in July or August might have been thinking, ‘I’m paid in dollars, how annoying’ for whom it’s now a question of, ‘Do you have a job; do you have a bonus?’ “

The collapse of the sub-prime mortgage market in the US, which is fuelling the dollar unrest, has already brought down one British bank, Northern Rock, and has forced others to declare vast losses. Yesterday, just as it appeared that the dollar might have finally reached its floor, there was another warning that the sub-prime crisis is going to get worse. The US Treasury Secretary Henry Paulson, warned an international business summit in South Africa: “The sub-prime market, parts of it will get worse before it gets better.” Huge numbers of US homeowners are still cushioned by introductory interest rates set when they took out loans in 2005 or 2006, he said. When these introductory offers run out, their interest payments will increase, setting off another wave of defaulting and repossessions. And the dollar is enduring its rockiest spell in recent memory.

Read Full Article Here

 

Goldman Sees Subprime Cutting $2 Trillion in Lending

Bloomberg
November 16, 2007

Nov. 16 (Bloomberg) — The slump in global credit markets may force banks, brokerages and hedge funds to cut lending by $2 trillion and trigger a “substantial recession” in the U.S., according to Goldman Sachs Group Inc.

Losses related to record home foreclosures using a “back- of-the-envelope” calculation may be as high as $400 billion for financial companies, Jan Hatzius, chief U.S. economist at Goldman in New York wrote in a report dated yesterday. The effects may be amplified tenfold as companies that borrowed to finance their investments scale back lending, the report said.

“The likely mortgage credit losses pose a significantly bigger macroeconomic risk than generally recognized,” Hatzius wrote. “It is easy to see how such a shock could produce a substantial recession” or “a long period of very sluggish growth,” he wrote.

Goldman’s forecast reduction in lending is equivalent to 7 percent of total U.S. household, corporate and government debt, hurting an economy already beset by the slowing housing market. Wells Fargo & Co. Chief Executive Officer John Stumpf said yesterday that the property market is the worst since the Great Depression.

Citigroup Inc., the biggest U.S. bank, and Merrill Lynch & Co. have led companies writing down more than $50 billion on securities linked to subprime mortgages. The risk of further losses by banks has pushed their borrowing costs above the average for investment-grade companies, according to Merrill Lynch indexes. Citigroup paid bondholders the highest yield relative to benchmark interest rates in its history this week.

Read Full Article Here

Related News:

Will Dow-gold ratio hit one-to-one again?
http://www.thestar.com/Business/article/276972

Markets poised for severe fall: Bank of England
http://www.telegraph.co.uk/mon….cnking115.xml

Stiglitz: Greenspan To Blame For Crisis
http://www.bloomberg.com/apps/news?…6mHrJk&refer=us

Wells Fargo: Housing worst since Great Depression
http://www.guardian.co.uk/feedarticle?id=7080215

China State TV To Viewers: Dump The Dollar
http://mparent7777-2.blogspot.com/…p-dollar.html

Cost Of The Crunch $2 Trillion, Says Goldman
http://www.forbes.com/2007/11/16/gold….ed=rss_news

Goldman Sees Subprime Cutting $2 Trillion in Lending
http://www.bloomberg.com/apps/new…A&refer=home

Suddenly ‘world’s biggest financial institutions are paying more to borrow in the corporate bond market than the average company’
http://www.bloomberg.com/apps/…fqw&refer=home

Investors Should Spank Banks for Betraying Trust
http://www.bloomberg.com/apps/news….4&refer=home

Pound Poised for Biggest Weekly Drop Against Dollar Since 2005
http://www.bloomberg.com/apps/new…8&refer=uk

Warning over rate rise by ‘devious’ lenders
http://www.telegraph.co.uk/news/main.j…1/17/nrates117.xml

Fed Pumps $47bn Into System, Goldman Sachs Warns Recession
http://noworldsystem.com/2007/11/17/fed…s-recession/

Gold falls below $800 and Oil Slides $94 a Barrel
http://noworldsystem.com/2007/11/16/g…-a-barrel/

Jim Rogers Urges People To Sell Dollars
http://www.bloomberg.com/apps…d=aXH9wCx1oydw

Gold steadies as bargain hunters resurface
Gulf states’ dollar peg comes under threat
Pound hits fresh 4-yr low vs euro after weak data
Economists in poll expect credit turmoil to continue: WSJ
UK: Fastest rise in food prices for 14 years
Forex – Pound sinks as Oct retail sales show flagging sentiment
Bank’s grim warning over UK economy
Consumer inflation posts increase
Inflation, gold: Back to the 1970s?
Goldman Sachs bets credit crisis will worsen
British taxpayers face paying £730 EACH to cover Northern Rock in plans to ‘nationalise’ bank
Carnage on Wall Street as loans go bad
Treasury Market Inflation Anxiety Renewed
‘Sub-prime black hole is getting scarier’
California, Ohio, Florida Cities Lead U.S. Foreclosure Filings
US dollar will get stronger: Bush
Dollar to stay anchor of China’s reserves: Chinese official
When I start seeing Jay-Z flashing euros instead of the dollar, I know our economy is in trouble
Talk of Worst Recession Since the 1930s
Recession fears grow as inventories swell
Recession fears grow as inventories swellOECD Says the Full Effect of the Sub-Prime Mess is Still in Front of Us
MBIA, Ambac Downgrades May Cost Market $200 Billion
Paulson Becomes Boxed-in by `Strong’ Dollar Chant
88% Erosion and Purchasing Power
Bear Stearns Cuts Subprime Assets, Limits Writedown
Orlando Foreclosure Filings Up 184%
Judge rules against the banks!?
Crude Oil = $98; Gold = $845
Wall Street Sees Worst Weekly Point Loss Since 9/11
Gold bounces above $800 after 1 percent drop
It’s the FIRE Economy, stupid
Dollar Crisis: None dare call it ‘conspiracy’
Subprime Losses May Reach $300/400 Bil
Sterling falls as risk aversion leads to carry unwind
Time for the White House to Rescue the Dollar?
Bets against the dollar unlikely to slow this quarter
Even a weakened dollar still rules
World stocks hit 8-week low
With the dollar’s fall, intervention idea gains force
Currency Controls Return as Central Banks Fight Gains
The Risk of a Systemic Shock to the System is “Alarmingly High” – Morgan Stanley
Wall Street’s money machine breaks down
Oil Price Rise Causes Global Shift in Wealth
Global credit crisis intensifies
Ron Paul to Bernanke: How can we solve inflation with more inflation?

U.S. Economic Collapse News Archive

 



Jim Rogers Urges People To Sell Dollars

Jim Rogers Urges People To Sell Dollars

Bloomberg
November 15, 2007

Nov. 15 (Bloomberg) — Investor Jim Rogers urged people to get out of the dollar and says he expects to be rid of all his U.S. currency assets by summer next year.

“If you have dollars, I urge you to get out,” Rogers said in an interview from Singapore. He is chairman of New York-based Rogers Holdings, formerly known as Beeland Interests Inc. “That’s not a currency to own.”

The dollar fell 9.5 percent this year against a basket of six major currencies as a housing slump slowed the economy and losses stemming from subprime mortgage defaults spread among U.S. banks. Rogers, who said last month he was shifting out of all his dollar assets, plans to buy commodities, Japan’s yen, the Chinese yuan and the Swiss franc.

Interest rate futures traded on the Chicago Board of Trade show a 72 percent chance that the central bank will lower its target rate for overnight loans between banks to 4.25 percent on Dec. 11, its third reduction this year.

Rogers, who predicted the start of the global commodities rally in 1999, criticized Federal Reserve Chairman Ben S. Bernanke for comments on the currency before a congressional committee on Nov. 8.

“He is a total fool,” Rogers said. “He said Americans who buy only American goods are not affected if the value of the U.S. dollar goes down. I was terrified.”

Bernanke said the only effect of a weaker dollar on a typical American with their wealth in dollars, buying consumer goods in dollars, would be “their buying powers, it makes imported goods more expensive.”

Rogers said that’s not right.

“If you only buy American products and the dollar goes down, the price of oil goes up, copper goes up, wheat goes up,” he said. “That affects you. He doesn’t understand the economy as far as I can see.”


Pound hits fresh 4-yr low vs euro after weak data

Reuters
November 14, 2007

Sterling fell to a new four-year low against the euro on Thursday, while British shares timmed losses after UK retail sales data showed an unexpected monthly fall in October, boosting the case for Bank of England rate cuts.

Retail sales fell 0.1 percent on the month versus expectations for a flat reading.

“It suggests that the economy is slowing down in the fourth quarter and it’s looking like there is going to be a rate cut in February which will mean cable (sterling/dollar) will go lower,” said Geoff Kendrick, currency strategist at Westpac.

Sterling fell to a session low of $2.0472, down about half a cent from pre-data levels .

The euro rose as high as 71.52 pence, highest since July 2003 .

The FTSE 100 .FTSE trimmed losses, down 0.46 percent after the UK retail sales data.

Related News:

Gulf states’ dollar peg comes under threat
http://www.ft.com/cms/s/0/14499…9fd2ac.html

Economists in poll expect credit turmoil to continue: WSJ
http://investing.reuters.co.uk/news/articleinves….EY-DC.XML

UK: Fastest rise in food prices for 14 years
http://www.telegraph.co.uk/news/main.jht…s/2007/11/13/ncosts113.xml

Forex – Pound sinks as Oct retail sales show flagging sentiment
http://investing.reuters.co.uk/news/ar….EY-DC.XML

Bank’s grim warning over UK economy
http://www.guardian.co.uk/business/2007/nov/15/economy1

Consumer inflation posts increase
http://biz.yahoo.com/ap/071115/economy.html

Inflation, gold: Back to the 1970s?
http://www.canada.com/nationalpost/colu…dc6fb7b9ca1&p=2

Goldman Sachs bets credit crisis will worsen
http://news.independent.co.uk/business/news/article3157810.ece

British taxpayers face paying £730 EACH to cover Northern Rock in plans to ‘nationalise’ bank
http://www.thisislondon.co.uk/news/article-2342105….nk/article.do

Carnage on Wall Street as loans go bad
http://news.bbc.co.uk/2/hi/business/7086909.stm

Treasury Market Inflation Anxiety Renewed
http://www.bloomberg.com/apps/news?pid…er=home

‘Sub-prime black hole is getting scarier’
http://news.independent.co.uk/business/news/article3155150.ece

California, Ohio, Florida Cities Lead U.S. Foreclosure Filings
http://mparent7777-2.blogspot.com/200….-lead-us.html

US dollar will get stronger: Bush
http://news.yahoo.com/s/afp/2007…113234035

Dollar to stay anchor of China’s reserves: Chinese official
http://afp.google.com/article/ALeqM5ibhPYyc-ifNr4ni18X_R6ekczbuw

When I start seeing Jay-Z flashing euros instead of the dollar, I know our economy is in trouble
http://noworldsystem.com/2007/11/15/is-jay-z-signaling-a-recession/

Talk of Worst Recession Since the 1930s
http://www.nysun.com/article/66268

Recession fears grow as inventories swell
Recession fears grow as inventories swellOECD Says the Full Effect of the Sub-Prime Mess is Still in Front of Us
MBIA, Ambac Downgrades May Cost Market $200 Billion
Paulson Becomes Boxed-in by `Strong’ Dollar Chant
88% Erosion and Purchasing Power
Bear Stearns Cuts Subprime Assets, Limits Writedown
Orlando Foreclosure Filings Up 184%
Judge rules against the banks!?
Crude Oil = $98; Gold = $845
Wall Street Sees Worst Weekly Point Loss Since 9/11
Gold bounces above $800 after 1 percent drop
It’s the FIRE Economy, stupid
Dollar Crisis: None dare call it ‘conspiracy’
Subprime Losses May Reach $300/400 Bil
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Time for the White House to Rescue the Dollar?
Bets against the dollar unlikely to slow this quarter
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The Risk of a Systemic Shock to the System is “Alarmingly High” – Morgan Stanley
Wall Street’s money machine breaks down
Oil Price Rise Causes Global Shift in Wealth
Global credit crisis intensifies
Ron Paul to Bernanke: How can we solve inflation with more inflation?

U.S. Economic Collapse News Archive

 



Big Banks Trying to Avoid Global Economic Crash

Big Banks Trying to Avoid Global Economic Crash

Cryptongon
October 13, 2007

How these banks are going to juggle so much filthy, festering, hemorrhaging debt is a mystery to me. Maybe governments will eventually wind up eating it, like with Northern Rock in the UK. Maybe hyperinflation will make paying these debts down much easier. Maybe… Hmm. How much opium is Afghanistan producing???

This is an astonishing article. These firms are admitting that the thing is about to go off the rails. They need to cling together and absorb the fallout from this subprime thing, or it’s game over.

Via: Wall Street Journal:

In a far-reaching response to the global credit crisis, Citigroup Inc. and other big banks are discussing a plan to pool together and financially back as much as $100 billion in shaky mortgage securities and other investments.

The banks met three weeks ago in Washington at the Treasury Department, which convened the talks and is playing a central advisory role, people familiar with the situation said. The meeting was hosted by Treasury’s undersecretary for domestic finance, Robert Steel, a former Goldman Sachs Group Inc. official and the top domestic finance adviser to Treasury Secretary Henry Paulson. The Federal Reserve has been kept informed but has left the active role to the Treasury.

The new fund is designed to stave off what Citigroup and others see as a threat to the financial markets world-wide: the danger that dozens of huge bank-affiliated funds will be forced to unload billions of dollars in mortgage-backed securities and other assets, driving down their prices in a fire sale. That could force big write-offs by banks, brokerages and hedge funds that own similar investments and would have to mark them down to the new, lower market prices.

The ultimate fear: If banks need to write down more assets or are forced to take assets onto their books, that could set off a broader credit crunch and hurt the economy. It could make it tough for homeowners and businesses to get loans. Efforts so far by central banks to alleviate the credit crunch that has been roiling markets since the summer haven’t fully calmed investors, leading to the extraordinary move to bring together the banks.

In recent weeks, investors have grown concerned about the size of bank-affiliated funds that have invested huge sums in securities tied to shaky U.S. subprime mortgages and other assets. Citigroup, the world’s biggest bank by market value, has drawn special scrutiny because it is the largest player in this market.

Citigroup has nearly $100 billion in seven affiliated structured investment vehicles, or SIVs. Globally, SIVs had $400 billion in assets as of Aug. 28, according to Moody’s.

Such vehicles are formally independent of the banks that create them. They issue their own short-term debt, usually at relatively low interest rates reflecting their high credit rating. The vehicles use the money to buy higher-yielding longer-term assets such as securities tied to mortgages or receivables from midsize businesses seeking to raise cash.

Many SIVs had trouble rolling over their short-term debt in August because of concerns about the quality of their assets. That contributed to the broader seizing up of credit markets.

The Financial Services Authority, the United Kingdom’s markets regulator, has suggested that U.K. banks consider participating in the plan, a person familiar with the situation said. HSBC Holdings PLC, the largest U.K. bank, has an affiliate SIV called Cullinan Finance Ltd. with $35 billion in senior debt. An HSBC representative wasn’t immediately available to comment.

If the banks agree, the plan could be announced as early as Monday, people familiar with the matter said. Citigroup announces third-quarter earnings Monday. The tentative name for the fund is Master-Liquidity Enhancement Conduit, or M-LEC.

 



Congressman: Dollar Could Collapse To Absolute Zero


Congressman: Dollar Could Collapse To Absolute Zero

Presidential candidate Ron Paul warns of coming global economic depression

Paul Joseph Watson
Prison Planet
October 8, 2007


Presidential candidate Ron Paul has made a dire prediction that the dollar could collapse to absolute zero – precipitating hyper inflation, soaring oil prices and a global economic depression if current policies are continued.

“Once they realize the American people have awakened to the con game that’s been going on – I think those people running the banking and monetary system aren’t going to be too happy,” Paul told the Alex Jones Show on Friday.
The Texas Congressman forecasts that if current policies are prolonged, the dollar could crash all the way to nothing and be forced to start over.

“If Bush is foolish enough to start bombing Iran, that might precipitate such a crisis as oil going to $200 dollars a barrel and really dampening the enthusiasm of the whole dollar,” said Paul.

“If they continue what they’re doing, it’s gonna go to zero, we’re gonna have runaway inflation, all paper currencies eventually self-destruct and are ruined, and we’re in uncharted waters right now – this is the first time in the history of man you’ve had no solid currencies around the world and this has been going on for 35 years.”

Paul agreed that elitists would seize upon a global depression by posing as the saviors and offering more control, police state and big government as the solution.

“This was the whole thing that started in the last depression,” said Paul, “Scare people to death instead of blaming the Federal Reserve for the depression and the financial bubble of the 20’s, they said ‘well capitalism failed, it was that stupid gold standard’, therefore we have to have welfare and of course everything they did prolonged the depression.”

Paul said his warnings about the impending collapse of the U.S. economy, which stretch back years, were helping his campaign gain credibility due to the unfolding crises in the market and the credit crunch.

“When the people understand how the Fed screws up the economy and causes all the bubbles and all the changes that have to come from that, I’m getting a lot more calls,” said Paul.

The Congressman also discussed the continued success of his campaign and the establishment’s attempts to stifle its importance.

The presidential candidate said the reason that the Democrats and Republicans are trying to speed up the primaries is because they don’t like competition from third party and grass roots candidates and are trying to prevent them from gaining traction.

“The move right now is to try to close the primaries – do you think they’re sincere when they say they want to have a big tent and invite new people in? They can invite a lot of new people in but they don’t want constitutionalists evidently because they want to make it tough to vote in a Republican primary,” said the Congressman.

“It confirms the fact that the control of this whole system has been one party so to speak, it’s one group of people that control both parties and right now I think the people are getting disgusted with it and they’re starting to wake up,” he added.

The Congressman stated that the popularity of his campaign outstripped even his expectations and slammed the establishment networks for attempting to skew Paul as a fringe candidate.

“It doesn’t discourage our supporters, it enrages them,” said Paul, “They always claimed that there were just a few of us out there that cared and that they were bloggers manipulating the Internet – well you can’t manipulate to the point where you get 35,000 new donors who average about $40 dollars a piece and raise $5 million dollars and outpace many of the other candidates.”
Paul said the other candidates had initially tried to ignore his platform, before ridiculing it, to the point where they are now being forced to adopt constitutionalist rhetoric in order to compete with his burgeoning popularity.

Related News:

Gulf funds drift away from dollar
http://archive.gulfnews.com/articles/07/10/07/10158647.html

Merrill Lynch Posts Huge Loss
http://news.yahoo.com/s/ap/20071005/ap_on_bi_ge/merrill_lynch_guidance_15

The (un)charitable core of Northern Rock
http://ftalphaville.ft.c….the-uncharitable-core-of-northern-rock/

Australian Dollar at 23-Year High Against U.S. Dollar
http://www.economicsbriefing.com/200…at-23-year-high.html

The Slow Motion Recession
http://www.gcnlive.com/AGLDoffer.htm

Dollar falls, unable to shake gloom despite jobs report
http://www.reuters.com/article/hotStocksN….pageNumber=2

Washington Mutual 3Q Earnings to Tumble
http://ap.google.com/article/A…of-wD8S3BM0G1

For home builders, the worst is to come
http://articles.moneycentral.ms…orstIsToCome.aspx?page=2

Homebuilders Liquidate Assets in Desperation Sales
http://www.bloomberg.com/apps/ne….refer=realestate

Merill Lynch loses $5 Billion on subprime loss
Washington Mutual Sees About 75% Drop In Q3 Profit
Ohio Bank Fails
Canadian Dollar Reaches 31-Year High Against U.S. Dollar
Dollar’s double blow from Vietnam and Qatar
US economy, housing crisis to worsen
Weaker US Dollar is Good for the United States and its Trading Situation – Economic Myth Busters
Greenspan’s Dark Legacy Unmasked
JPMorgan, Bank of America May Write Down Buyout Loans
New data show housing market ‘in freefall’
Is the credit crisis over? Not so fast
Weak Dollar Prompts Record Foreign Buyouts of U.S. Companies
Europe Urges Tough Line on Dollar
Indian economy ‘to overtake UK’
Business calls for euro action
Why the US Dollar Will Continue Its Downward Trend
Weak dollar prompts record foreign buyouts of U.S. companies
Dollar Peggers to Stretch the ‘Impossible Trinity’
China $200B Superfund To Drain Dollars
Pending Home Sales Index Hits Record Low
Iran Slashes Oil Sales In Dollars
Greenspan Says Solution to Inequality is to Lower U.S. Wages
The Con That Turned the World Against America
U.S. Pending Home Sales Fall to Lowest Level in More Than Six Years
The Alarming Parallels Between 1929 and 2007
Big chill looms for the economy as new mortgages fall sharply
Greenspan Warns Good Times Are Over
Dollar Crunch Puts Gold Centre Stage
Euro Bursts To Fresh Dollar High
Dow surges to record high
The Worst Recession in 25 years?
Largest U.S. Bank: Profit Down 60%
U.S. $10 trillion in the red
Fears over cracks in Britain’s gold stock
Gold hits 28-year peak, platinum near all-time high
Gold rises as dollar sinks like a rock
How Economy Could Survive $100 Oil
Bush Disappointed Spending Bills Not Passed
Private Student Loan Bubble Could Burst
Greenspan on market upheaval
ING Direct steps in as US bank collapses
35K state workers get layoff notices
As Prices Soar, U.S. Food Aid Buys Less
Freddie Mac chief warns of recession
Oil Prices Rise As Dollar Falls
FDIC Shuts Down NetBank Due to Defaults
Gold Hits 28 Year High
EU’s Almunia Worried By Dollar’s Fall
New-Home Sales Tumble to 7-Year Low
U.S. Government About to be Broke

 



Greenspan Warns Good Times Are Over

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.

Related News:

Euro Bursts To Fresh Dollar High
http://news.bbc.co.uk/1/hi/business/7021479.stm

Dow surges to record high
http://www.reuters.com/article/newsOne/idUSL2779753320071001

The Worst Recession in 25 years?
http://www.mises.org/story/2728

Largest U.S. Bank: Profit Down 60%
http://www.bloomberg.com/ap….&refer=home&sid=axRdVDp1bdZk

U.S. $10 trillion in the red
http://www.miamiherald.com/news/nation/story/256336.html

Fears over cracks in Britain’s gold stock
http://www.telegra….9/30/ngold130.xml

Gold hits 28-year peak, platinum near all-time high
http://www.reuters.com/article/hotStocksNews/idUST9797320071001

Gold rises as dollar sinks like a rock
http://www.gcnlive.com/AGLDoffer.htm

How Economy Could Survive $100 Oil
http://online.wsj.co….31.html?mod=googlenews_wsj

Bush Disappointed Spending Bills Not Passed
http://www.voanews.com/english/2007-09-29-voa26.cfm

Private Student Loan Bubble Could Burst
http://www.businessweek.com/ap/financialnews/D8RVU0J82.htm

Greenspan on market upheaval
http://www.reuters.com/news/video?videoId=67579&videoChannel=1

ING Direct steps in as US bank collapses
http://www.msnbc.msn.com/id/21036518/

35K state workers get layoff notices
As Prices Soar, U.S. Food Aid Buys Less
Freddie Mac chief warns of recession
Oil Prices Rise As Dollar Falls
FDIC Shuts Down NetBank Due to Defaults
Gold Hits 28 Year High
EU’s Almunia Worried By Dollar’s Fall
New-Home Sales Tumble to 7-Year Low
U.S. Government About to be Broke

 



Fed Projects a Four Year Long Recession

Fed Projects a Four Year Long Recession

Mike Swanson
Wall Street Window
September 24, 2007

Aside from the dollar and long-term bonds all markets went up last week as the Fed demonstrated that it is more fearful of a slowing economy and banking woes than inflation. In fact, it is willing to sacrifice the dollar to save the banks. Just last month, the Fed was saying that the threat of inflation is just as great as the threat of a slowdown in the economy. Now it is cutting rates in a huge way as the DOW is near its all-time high, gold is making new highs, and the price of oil is exploding.

The Fed is obviously terrified. I have noted in the last podcast that Bernanke built his career on a doctoral thesis that claimed that the Fed didn’t cut rates fast enough during the 1929 stock market crash. But if you look at a chart of the Depression bear market with an overlay chart of interest rates you’ll see that the Fed cut interest rates as the market topped. A few years later when the market finally bottomed you’ll see that they had been lowering rates all of the way down.

What Bernanke believes is that the Fed should have cut rates all at once during the start of the bear market instead of gradually over two years. He seems to be putting this belief to work right now. It means that he is gravely concerned about the state of real estate and banking in the United States.

As the NYT reports:

Those wanting to understand the Fed’s reversal can profit from reading two papers by Fed officials which were released this summer as the credit squeeze was worsening.

Taken together they constitute an admission that the Fed was surprised by the housing and borrowing boom on the upside, and now it fears it will be surprised on the downside.

One paper, by Karen E. Dynan, a Fed economist, and Donald L. Kohn, the Fed’s vice chairman, asked why a strong economy had left Americans deeper in debt than ever before.

“The most important factors behind the rise in debt and the associated decline in saving out of current income have probably been the combination of increasing house prices and financial innovation,” they concluded. In other words, Wall Street and rising home prices made it easier to borrow more money, and consumers did so.

That led to more consumption than would have been expected. Now, the authors say, “an unexpected leveling out or decline” in home values could have the opposite effect.

And, Frederic S. Mishkin, a Fed governor, said in the other paper that this leveling or decline could, in turn, have a bigger effect on the economy than the Fed anticipated.

“Although I generally do not place the housing and mortgage markets close to the epicenter of previous cases of financial instability,” he wrote, “I would note that the current situation in the U.S. could prove to be different.”

Mr. Mishkin said he had modified one Fed economic model, concluding that a 20 percent fall in home prices could cause consumer spending to fall by 2 percent within two years, about twice what the old model forecast.

But that was not the point Mr. Mishkin wanted to emphasize. Instead, his model showed that much of that damage could be averted if the Fed acted rapidly to cut rates — as it is now doing.

When Alan Greenspan was at the Fed he often had Fed governors write papers to rationalize and justify changes in Federal Reserve policy. One should read the Mishkin paper mentioned above to understand what the Fed is doing now. If the credit markets don’t revitalize in the next few weeks you can expect to see the Fed lower rates again by another 50 points at their October FOMC meeting no matter where the Dollar, Gold, or the DOW are. They have signaled that they don’t give a damn about the Dollar. All they care about is Wall Street.

One could look at this another way though. One could say that they don’t care about inflation because they see a total bust in housing that will create deflationary pressures in the economy. Mishkin’s paper projects negative GDP growth for the next five years, a Federal Funds rate falling two full points lower, consumer spending shrinking for five years, and the CPI going down and staying negative if housing prices decline by 20%. These negative trends are expected to begin now and accelerate for two and a half years.

He sees such a housing price decline as very likely as house prices fell by 16% from late 1979 through late 1982. Contrary to people who believe that real estate is the best investment you can buy because it never drops, it has dropped in the past. And with bubbles leading to busts it is happening right now. The question remains, when will it stop? When the Nasdaq topped in March of 2000 it didn’t bottom for two full years. Real estate topped out a year ago.

Mishkin isn’t just a normal Fed governor. He is one of Ben Bernanke’s closest friends. The two served at Columbia university together and in 1997 they wrote a book together calling on central banks to make public targets for inflation. Mishkin’s views dovetail with Bernanke’s.

According to Mark Zandi, co-founder of Moody’s Economy.com, housing prices will decline by at least 11% in the next 3 1/2 years. Zandi sees prices in New York city falling from between 1 percent and 7 percent for each of the next five quarters so there is a lot of leeway in his projections. Hey, if we only get an 11% decline and you cut the Fed model projections in half we’re still facing a horrible recession.

Mishkin argues that “the task for a central bank confronting a bubble is not to stop it but rather to respond quickly after it has burst.” Instead of lower ratings as economic conditions deteriorate as his models do, and show practically a depression coming as a result, he advocates cutting rates all at once just as Bernanke’s doctoral thesis about the 1929 stock market crash argues.

What I have to wonder though is what happens if the Fed lowers rates by one percent or more in the next three months and real estate doesn’t rebound? These theories have never been tried before by a Central bank. We don’t know if cutting rates all at once will prevent the damage caused by a bursting bubble. It has never been tested. Even when the tech bubble burst in 2000, Alan Greenspan didn’t lower rates until almost a year later and after the Nasdaq fell to almost half its value.

The problem is real estate is still overvalued just as tech stocks became overvalued in 2000. One would think that real estate will have to drop and return to a normal valuation before it can bottom out, so simply lowering interest rates may not have the wonderful effects that Mishkin and Bernanke hope they will.

What I do know for sure, which is all you need to know to make money, is that they are setting up an inflationary trend. As the Fed prints more money it has to go somewhere. Of course this is bullish for gold and commodities which are now leading the stock market. But it is possible that the DOW and broad market could also continue to go up too.

Related News:

US economy kills American middle class
http://english.pravda.ru/busines….rican_middle_class%20-0

Ron Paul: The Money Has To Come From Somewhere
http://www.house.gov/paul/tst/tst2007/tst092307.htm

IMF: Global Financial Crisis To Be Long Lasting
http://news.independent.co.uk/business/news/article2996170.ece

U.S. Severe poverty rate at highest in three decades
http://thescribblersweb.com/us_severe_poverty_rate_at_highest.htm

Fall-out at the top reveals French finances in freefall
http://news.independent.co.uk/europe/article2996110.ece

Home sales, prices continue to fall
http://www.msnbc.msn.com/id/20970287/

Borrowers told to lie about wages
http://news.bbc.co.uk/1/hi/programmes/file_on_4/7010415.stm

Northern Rock still lending ‘recklessly’
http://business.timesonline.co.uk/tol/business…cle2512384.ece

Dollar at lifetime low vs euro
http://www.reuters.com/article/hotStocksNews/idUST19472920070924?sp=true

Dollar Falls to Record Low Against Euro as U.S. Growth Falters
http://www.bloomberg.com/apps/news?pi…Yk&refer=japan

Taking Cues From Fed, Speculators Bid Up Oil
http://www.washingtonpost.com/wp-dyn/content/articl….usiness

Premier Says France Bankrupt
http://www.forbes.com/feeds/ap/2007/09/21/ap4144493.html

Israel asks U.S. foreign aid be paid in EUROS
Northern Rock gets 2.9 bln stg
Greenspan Confronted By Activists, Flees From Angry Mob
Greenspan Admits Fed Is Above The Law
Ron Paul Slams Bernanke For Dollar Meltdown
Kissinger Admits Iran Attack Is About Oil
Bernanke panics by ‘launching a nuclear missile into the financial system’
Canadian Dollar at Parity with USD, Bernanke and Saudis Abuse US Dollar
$200 Dollar a Barrel Oil Is Bilderberg Plan To Destroy Middle Class
Oil hits high over $84
Abu Dhabi takes ownership stake in Carlyle Group
Gold hits 28-yr high as dollar touches record lows
Home Price Falls Hit 26% Of U.S. Homeowners
Greenspan: House Prices To Drop Much Lower
Jon Stewart to Alan Greenspan: Why Do We Need the Fed?
Recession Too Mild a Word
Canadian Dollar Trading At Parity With USD
Borse Dubai Gets Stake In Nasdaq
Federal Workers Owe Billions in Unpaid Taxes
UN Global Taxes Before U.S. Senate
Saudi Currency De-Peg To Dollar Inevitable
Inflation fears end rally, sending stocks down
Analyst: Mystery Trades Were Profit Scam For Fearmongers
Dollar hits new low against euro
US expert warns of fresh shocks
Northern Rock: ‘One in 10 chance of property crash’
Congress Asked To Lift Debt Ceiling
Zimbabwe Close To Economic Collapse
Home foreclosures triple in Hawaii
Bank of England doubles emergency loans available to British banks
Fears of dollar collapse as Saudis take fright
China’s Ultimatum: Let Us Invade Taiwan Or We’ll Dump The Dollar
Rogers: Fed Rate Cut Will Trigger Recession
Greenspan Working To Destroy US Economy
Alan Greenspan Defends Himself
Greenspan says euro could replace U.S. dollar as reserve currency of choice
EU Warns China Of Trade Imbalance
Oil hits new high over $82 after Fed rate cut
U.S. gold futures hit 28-year peak
Failed Lender Makes Grab for Employee Funds
Greenspan predicts falling house prices, rising inflation
Greenspan Says China Will Determine World Economic Fate in 2030
Alan Greenspan warns of UK house prices drop
Greenspan alert on US house prices
Credit turmoil set to benefit big banks
Northern Rock: ‘One in 10 chance of property crash’
Hopes of UK interest rate cut ‘before Christmas’ after FTSE rises follow Fed’s swoop to cut rates
Relief as Northern Rock shares up
Treasurys Fall Ahead of Fed Decision
Fed Announces Big Rate Cut
Subprime Fallout: More Companies Slammed
Prepare for prolonged turmoil, says US Treasury Secretary
Oil industry ‘sleepwalking into crisis’
Oil Trades Near Record on Speculation of Reduced U.S. Supplies
Mystery Trader To Collect On Financial Meltdown?
Ron Paul Sees Crisis Ahead For Country
Bankers Fear £12bn Run On Rock
Oil Trades Near Record on Speculation of Reduced U.S. Supplies
Oil industry ‘sleepwalking into crisis’
U.S. Banks Brace for Storm Surge as Dollar and Credit System Reel
“Business Expert” (?) Ann Coulter: It’s Good for Wall Street to Bomb Iran
Britons Withdraw Billions in Bank Run
Northern Rock besieged by savers
Pound slides, yen up on N. Rock jitters
New saver queues at Northern Rock
E*Trade Cuts Earnings Estimate 25% on Mortgage Losses
Fears Rise Over Online Banking
Stocks may rise on expected interest rate cut
Fears grow for British economy as panic over Northern Rock spreads
World’s banks hit for $30billion in credit crunch
Oil Hits $80 A Barrel For First Time
Senate panel okays $850 billion debt increase
Dollar’s retreat raises fear of collapse
Further signs of US economic pain
British Bank Rocked By Bank Run
Forecast: Housing woes pose risk of recession
Mortgage Lender’s Bankruptcy
US dollar hits record lows
Foreclosures gain on sales
American economy: R.I.P.
US Heads for Recession as Foreign Investors Rush for the Exit from US Dollar Holdings
Dollar Hits 15 Year Low
Gold Rallies Past $700
Greenspan: Turmoil Like 1998
Bad News Puts Political Glare Onto Economy
US economy loses jobs for first time in 4 years
ECB Injects €42.2BN Into Money Markets
Is China quietly dumping US Treasuries?
Markets Brace For Seismic September
Fed Injects 31.25 Billion Into Market
Credit Crisis Has Hallmarks of Classic Bank Run
U.S. at risk of recession from housing
Analysts Dismiss Suspicious “New 9/11? Trades
Credit Crisis Compared To 1930
Bank Warns Emergency Borrowers
Bush Unveils Mortgage Proposals
Congressman: Stock Market Will Eventually Collapse
Comptroller: U.S. Facing Economic Collapse
BIS Warns of Great Depression Dangers from Credit Spree
Market Crash Forecast Suggests New 9/11
U.S. Recession Risk Highest Since 9/11
Economy, credit worries drive Wall St down sharply
Fed Injects 17.25 Billion In Market
Foreclosures Up 93% In One Year
After Foreclosure A Big Tax Bill From The IRS
After Fed’s Rescue, Volatile Days Ahead
Warren Buffett Sees Opportunities In Chaos
Run On The Banks in Los Angeles
Zimbabwe Inflation Rate Hits 7600%
Yields On T-Bills Down Most In 2 Decades
Bruised investors suffer as market continues to swing
The Dow Plunges, FOX Reports Happy Economic News
World Stocks Plummet Yet Again
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
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
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
American Home to Declare Bankruptcy, Employees Told by Managers
Mad Money Cramer: Bernanke, Wake Up
Wall Street shaken by late-day market surges

 



Bernanke panics by ’launching a nuclear missile into the financial system’

Bernanke panics by ‘launching a nuclear missile into the financial system’
“By lowering interest rates by half a point while the market priced in a quarter point drop and the US dollar index is under 80 Bernanke is doing the equivalent of launching a nuclear missile into the financial system.”

Mike Swanson
Commodity Online
September 20, 2007

I was shocked by yesterday’s decision by the Federal Reserve to lower interest rates by 50 basis points and then signal that there is more to come in its statement. The Fed is in a tough bind. I know there are frightening things happening in the credit markets and banks and Wall Street is clamoring for rate cuts. We saw the near collapse of Countrywide Financial a few weeks ago and England’s Northern Rock has experienced a full fledged bank run. At the same time though inflation is accelerating as oil prices hit all-time highs and gold breaks through $700 an ounce and the DOW is only 1.7% off of its all-time high.

Look the Fed saved the stock market from crashing on August 16th by intervention. We’ve since seen a rally going up into yesterday’s expected Fed announcement while the credit markets continued to deteriorate. The move down in July was the first act of a financial crisis – and normally those unfold in two stages. The first being when people realize there is a big problem causing huge frightening losses the extent of which are unknown and are forcing institutional investors to selling due to margin calls and redemptions.

The second act is when the market finds out how big the losses are and who has them. This is what happened in 1998. The market fell hard in August of that year due to turmoil in the international bond market, bounced, in September, and then dropped hard again to form a double bottom when the Long-Term Capital hedge fund blew up.

If the Fed hadn’t lowered interest by .50 basis points yesterday the market most likely would begin a correction by the end of this week that would bring it down to retest the August lows by the middle of October. The market most likely would have then made a double bottom and be geared up to up through the end of the year. If the Fed had to it could have even intervened again to force a bottom.

Just about everyone expected the Fed to lower rates by a .25 basis points yesterday. To me this seemed like the logical thing to do. This way the Fed would save some ammo for later and deliver a message that it was there to step in if needed, but things weren’t too serious.

But by lowering rates by .50 points the Fed not only surprised the stock market, which forced shorts to close out positions and caused people to react to the news and create an outsized rally, but sent a very powerful message: The Fed will not allow the market to have a pullback of any sort. The Fed will not allow banks that made bad loans to go under and simply doesn’t care about inflation or the value of the dollar at this stage of the game.

I know many people reading this are excited to see the market go up, but you need to step back and think about things for a minute. Why did the Fed do what it did yesterday? What the Fed did is dire, because it is lowering interest rates in a huge dramatic way when the DOW is only 1.7% off of its all-time high and inflation is accelerating. Not even Alan Greenspan did anything like this.

This is one of the most shocking things I’ve ever seen in the markets. August 16th was shocking. And if you listened to my podcast the following weekend you know it troubled me. I thought the stock market almost crashed that day and I took it as a sign that the macro big picture was changing – that subprime was a true problem in the markets that could lead to a wipeout in the coming weeks. I did not know what was going to happen, but I decided to actually stay out of the markets for the most part until the picture became more clear.

Well, past history suggested that we would see a retest of the lows and the success or failure of that retest would tell us the depth of the credit problems and give us a good idea of what the market would do the rest of the year.

Yesterday the Fed lowered rates by .50 points to shock the markets and force a rally to prevent such a retest. Yesterday is just as dramatic as the market action on August 16th, because it does indeed tell us that the macro picture is changing in a big way. A way that I didn’t anticipate, because it is incredibly reckless and dangerous on the part of the Federal Reserve. It is almost insane. It would be the equivalent of George Bush saying “I am losing in Iraq and I need to win a war somewhere so I am going to launch nuclear strikes on Iran so I can go out a winner. Dick Cheney says it is a good idea so it must be.” By lowering interest rates by half a point while the market priced in a quarter point drop and the US dollar index is under 80 Bernanke is doing the equivalent of launching a nuclear missile into the financial system.

When the stock market went bust in 2000 Greenspan didn’t lower rates to almost a year later and with the Nasdaq almost cut in half. During the 1998 Long-Term Capital Crisis he first cut by a quarter point and then lowered rates later when the market dropped again. The Fed is supposed to lower rates as you approach the trough of a business cycle, not right up near the top when there is inflation. To do so is very dangerous and if Bernanke continues this course he will destroy the value of the dollar. The Fed is saying that it will now print money like mad to prevent any sort of market pullback of any kind and it doesn’t care about the value of the dollar. The US Dollar index is trading below its 30 year support level and will eventually collapse if the Fed continues upon the course that it announced yesterday.

And he is sending a message that he is willing to do this.

I can think of only two reasons:

1)The problems in the mortgage markets are worse than we know and the entire banking system is bankrupt. In other words the mortgage securities that banks hold are worth nothing. The Fed in turn is going to print money and lower interest until housing prices go back up, so mortgage securities will rally, and if inflation explodes and the dollar becomes worthless it is worth the cost, because the banks must be saved. And the banks own the Fed.

Of course this seems crazy. Yeah there is turmoil in the banking system, but can it really be that bad? But it would have to be to justify such action on the Fed and even then some would argue that its not worth jeopardizing the dollar to save the banks.

Just because the Fed panics doesn’t necessarily mean there is anything to fear. If you recall at the end of 1999 Alan Greenspan pumped the money supply in fears of a phantom Y2K menace. That action helped create the final blow-off for the Nasdaq bubble and made the ensuing bear market worse than it would have been. It was a huge mistake.

If the banking system isn’t about to go bankrupt then to cut interest rates at this pace is a mistake that makes the Y2K menace look like a little bruise on a knee.

2)Ben Bernanke has a PH.D in economics and is obsessed with the idea that the Fed caused the Great Depression, because it didn’t lower interest rates fast enough. He’s an academic who is putting the theories he learned as a young man to use.

I can understand this. I was an academic once. I was in a university PH.D history program and left with a Master’s Degree. I know what academic life is about. When you go through graduate school you have to write a doctoral thesis, which will start your real career. Usually those thesis – if they are successful – lead to books and then more writings that branch off of the original thesis. Creative minds, and there is a difference between being imaginative and smart, then investigate new avenues of thought throughout their careers and come up with innovative theories and groundbreaking research.

The unimaginative though spend the rest of their career circling around the theories behind their doctoral thesis. They remain anchored to it and don’t actually come up with any new ideas the rest of their lives that amount to anything. They may be successful professionally, but deep down they aren’t anything but a one hit woner.

That is essentially what Bernanke is. He wrote a thesis claiming that the Great Depression happened because the Fed didn’t lower interest rates fast enough after the stock market topped out in 1929. I don’t believe this at all, but to explain why is a subject left for another time. What is important though is that if you look at a chart of the stock market between 1929 and 1932 and look at what the Fed did you’ll see that the Fed lowered interest shortly after the market topped out and continued to lower rates in the following years and the market fell anyway. Rates and the stock market fell together.

What this means though is ff you believe the Fed didn’t lower rates interest fast enough as Bernanke does then you think the Fed should have lowered rates all at once instead of doing so as the market dropped.

It appears that Bernanke is putting that theory to test right now. At the very least he is trying to prevent the market from reaching phase two of this crisis, in which the extent of the subprime losses are revealed, by restoring the balance sheets of troubled hedge funds with a big stock market rally of his creation.

Based on Bernanke’s Depression thesis it seems that he is going to lower rates dramatically and quickly over just a few months, because he believes that if he doesn’t the banking system will collapse, the stock market will crash, we’ll have a Depression or who knows what. In the end this probably won’t make any bit of difference and will cause a hyperinflation of consumer prices and a collapse in the value of the dollar – and may not be even needed at all. He’s fearing that the credit markets and banking problems justify such a course of action, but that isn’t a 100% certainty. Maybe the problems aren’t as bad as he fears. But we won’t know that.

Instead a year from now if he continues this course we’ll have a different set of problems – a dollar that has collapsed in value and eventually a huge spike in interest rates as foreign investors flee the dollar and the US government bond market.

I almost wish I had no money in my brokerage account or my banking accounts right now and just had a closet full of gold bullion. One could sell everyone one has and put it in gold and not have to worry about a thing right now. But of course gold stocks will go up huge over the next 6-8 months so there is more money to be made in them. I’ll just have to buy the next pullback or 1-2 week period of consolidation in them and get on board that ride. But at some point it will be prudent to take profits and move the money into pure gold or a foreign currency as I fear that the dollar could actually become worthless when Bernanke’s is done.

Look even Bloomberg has a headline that states “FOMC now stands for Friend of Market Committee” on their website this morning.

Here are some more must read reactions:

Billionaire Jim Rogers before the rate cut in a must see Bloomberg video:

““Every time the Fed turns around to save its friends on Wall Street, it makes the situation worse if Bernanke starts running those printing presses even faster than he’s doing already, yes we are going to have a serious recession. The dollar’s going to collapse, the bond market’s going to collapse. There’s going to be a lot of problems in the U.S.”

In an article on Financialsense.com Frank Barbera writes:

“Forget about any ‘Moral Hazard,’ and forget about the purchasing power of those hard earned Dollars. Clearly, that is the message that the Fed is sending to the International community with today’s action. A shocking, potentially reckless move, where will the Bid be found on the greenback, and at what point will foreigners decide that a 4.48% yield on a 10 year Bond doesn’t cover the bet? (Heck, it ticked up a whole basis point today.) Only time will tell, but for now, the Fed’s stark message seems to be re-inflate at all costs. In pursuing this arguably high-risk path, the Fed is opening the door to a potential Pandora’s Box. Conspiracy theorists may argue that Central Banks are working together, and that despite a lower value for the Greenback, foreign money will continue to be recycled into US Dollars. Yet, what if that is wrong? What if foreign money decides to flee the Dollar market? In that reality, this high stakes gambit by the Fed could blow up in its face, as exiting foreign capital hammers the Dollar and begins to send long term rates sharply higher. At that point, we face a melt down, as rising long term rates would be another nail in the coffin for the US Residential Market, and could continue to generate chaos in credit markets. A marked departure from the Greenspan gradualism, the Fed appears to be leaving its equilibrium at the political alter of an election year, and at the special interest alter of Wall Street investment banks. How ironic that if presumed foreign cooperation is renounced, the Fed could end up standing alone in a long suffering melt down. Looking back at past interest rate cutting cycles, we see that the trend in the US Dollar has not been anything but ugly. Now, with the US Dollar on the verge of all time record lows against most major currencies, is it possible that today’s aggressive rate cut will be seen as anything but an Admiral Farragut style “Damn the torpedoes, full speed ahead” decree of a global “we don’t care” weak dollar policy?”

The Fed lowered interest rates with the DOW only 1.7% off of its highs. How low will they lower interest rates if the economy continues to slowdown and real estate prices don’t rebound? When will it end? We know the trend now. It is clear what the macro picture has become – the Fed is going to print money like mad and inflation is going to explode. You buy gold, gold stocks, and other commodity stocks to profit from that trend. And at the same time you pray that the trend doesn’t run to its final destination.

Everytime that Fed has lowered interest to bail out a segment of the financial markets it has created another financial bubble somewhere else until that bubble had a blow off stage and collapse of its own. When Greenspan lowered rates in 1998 to bail out Long-Term Capital a bubble in tech stocks formed the next year. When that bubble burst in 2000 and he lowered rates to stop the carnage he created a bubble in housing prices. That bubble ended a year ago and when banking problems and the collapse of mortgage securities hit the market as a result in the past six weeks Bernanke lowered rates.

The next bubble to come appears to be gold, commodities, and inflation. If that bubble runs it course and has a blow-off stage it will end with the collapse of the dollar and a panic on the part of foreign investors when it comes to anyone holding US debt and dollars. We may have a time over the next couple of months in which the stock market goes up in dramatic fashion, but at the end game anyone holding their savings and assets in US dollars will be wiped out.

The Fed signaled yesterday that it is willing to take that risk in order to save a bunch of Wall Street banks and hedge funds. Welcome to socialism for the rich. If the dollar goes to nothing hundreds of millions of people will lose their saving to bail out a few Wall Street bankers. It will one of the greatest transfers of wealth in history of money from the poor to the rich.

 



Analyst: Mystery Trades Were Profit Scam For Fearmongers


Analyst: Mystery Trades Were Profit Scam For Fearmongers
So-called Bin Laden trades used to chill confidence in market before rate cut

Paul Joseph Watson
Prison Planet
September 20, 2007

A financial analyst has slammed the so-called “Bin Laden trades” as part of a fearmongering scam that was used to chill confidence in the markets and enable insiders to reap huge profits after stocks plunged earlier this week.

As we reported last month, an anonymous investor placed a bet of 245,000 put options on an index of Europe’s top 50 stocks falling by a third to a half before September 21st. In addition, unusual options were placed betting on a big drop in the S&P 500.

This led many to speculate that the trader was exploiting foreknowledge of a new 9/11 or another imminent catastrophe that would send markets tumbling.

However, market analyst Clif Droke of SilverSeek.com has slammed the trades as being part of a “summer of fear,” a scare tactic used by insiders to profit from consequential dips in stocks as the credit crunch sunk its teeth in.

“These high-profile “mystery” trades were just some of the fear tactics used by several independent and mainstream media outlets to conjure up images of another 9/11-type terrorist episode. Indeed, Halloween was early in coming this year for many,” writes Droke.

“I predict the promoters of this particular fear campaign will simply put their hands in their pockets, walk away and whistle a rousing rendition of “Dixie,” all the while conveniently forgetting they ever made such dire predictions in the first place. Their mission was accomplished: they convinced millions of everyday investors and observers to hit the panic button and run for cover while they, the fear promoters, profited immensely on the very fear they engendered.”

The fact that the massive put options were placed is not in doubt. Dow Jones Financial News confirmed the trades in their August 16th article, ‘Mystery trader bets market will crash by a third’.

But was this part of a broader strategy to chill confidence in the markets and make a more widespread profit after stocks dipped following the Northern Rock bank crisis at the end of last week before the Fed cut interest rates?

 



US expert warns of fresh shocks

US expert warns of fresh shocks

Eoin Callan

Financial Times
September 20, 2007

Fresh economic shocks on the scale of the current credit squeeze will occur if US house prices continue to fall, one of the country’s leading housing experts warned on Wednesday.

Robert Shiller, a Yale university economist, told a US congressional panel that he feared “the collapse of home prices might turn out to be the most severe since the Great Depression”.

“The decline in house prices stands to create future dislocations, like the credit crisis we have just seen,” he told the Senate’s joint economic committee.

The warning underlines an increasingly widespread view that the turmoil in financial markets and tightening lending conditions are early consequences of a slump in the US housing market that is gathering momentum.

Mr Shiller, who designed the respected Case-Shiller house price index and predicted the bursting of the dotcom bubble in a bestselling book, said that while there had been a focus “on lax and irresponsible lending standards, I believe that this loss in housing value is the major ultimate reason we see a crisis today.”

Alan Greenspan, former Federal Reserve chairman, told the Financial Times this week that double-digit falls in house prices from their peaks would not be surprising. A fall in house prices on that scale would be unprecedented in US history and would have an economic cost several times greater than the meltdown in the subprime mortgage market that triggered the current financial crisis.

The Center for Responsible Lending has predicted that foreclosures on subprime loans will lead to a cumulative loss of $164bn (€118bn, £82bn) in home equity. Investment banks have suggested the costs to financial institutions could be more than $300bn.

The joint economic committee heard from experts who said a 15 per cent fall in house prices would wipe out $3,000bn of household wealth.

Alex Pollock, a fellow at the American Enterprise Institute, said: “Residential real estate is a huge asset class, with an aggregate value of about $21,000bn, and is of course the single largest component of the wealth of most households.

“A year ago it was common to say that while house prices would periodically fall on a regional basis, they could not on a national basis … Well, now house prices are falling on a national basis,” he said.

Mr Shiller said it was “difficult to predict the depth, duration and all of the consequences” of the worsening housing slump.

“The Federal Reserve will undoubtedly take aggressive actions, which will mitigate its severity. But, if home price deflation persists or intensifies, they may discover that the Achilles’ heel of this resilient economy is the evaporation of confidence that can accompany the end-of-boom psychology,” he said.

Senator Charles Schumer, chairman of the joint economic committee, criticised the handling of the subprime crisis by the Fed and the Bush administration.

“Despite all the reassuring statements we’ve heard from the administration that the impact of this mess would be ‘contained’, it has not been contained, but has been a contagion that has spread to all sectors of the economy,” he said.

 

Northern Rock: ‘One in 10 chance of property crash’

London Telegraph

September 19, 2007

The Northern Rock crisis will spread to the housing market, with a “one-in-10 chance” of a 1990s-style price crash, a leading property expert warned.

The Northern Rock crisis will spread to the housing market, with a “one-in-10 chance” of a 1990s-style price crash, a leading property expert warned yesterday.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (Rics), said he thought house prices across Britain in the next 12 to 15 months would stagnate, down from an earlier forecast of three per cent growth. He said talk of a “crash” was legitimate and not irresponsible.

Mr Rubinsohn warned there was also a one-in-five chance that house prices in London would fall by 10 per cent during the coming 12 months. Earlier this week, Alan Greenspan, former chairman of the US central bank, the Federal Reserve, told The Daily Telegraph that Britain’s housing boom would soon be over.

Martin Weale, head of the National Institute for Economic Research, said that Northern Rock’s woes could be the “straw that breaks the camel’s back” and warned that there was a chance of sharp falls.

Mr Weale said: “Northern Rock may well be the trigger that shakes confidence. The market looks in a precarious position.

“It is creating a feeling that there is something wrong with the housing market – even though the two are not directly related. Demand is likely to falter.” He added that it was “perfectly possible for prices to fall”, comparing house prices with the rise in share prices during the dotcom boom.

“After such sharp rises you’d have to be very brave to predict there could be no fall. You could easily have a soft landing, where prices stagnate for a few years. But then even if that happened four or five years ago we’d still be in a position today where prices are very high by historic standards. There are as likely to be sharp falls as there is to be a stagnation.”

House prices have more than doubled across the UK in the past decade and increased by even more in the South East, as demand has always outstripped supply.

However, demand is expected to fall as households face the biggest mortgage burden since the tail end of the last crash in the early 1990s. The financial crisis means that banks are less willing to lend to each other and to customers.

Both the Royal Institution of Chartered Surveyors and the property website Rightmove have reported a sudden dip in prices.

The Bank of England has raised rates five times since last summer and the average standard variable rate on mortgages has jumped to a nine-year high. The number of homes being repossessed has jumped dramatically in recent months.

Research for The Daily Telegraph by the City analysts Lombard Street Research has shown that housing is now at the most overvalued level in 16 years.

Meanwhile, the rise in taxes and mortgage payments has meant households’ disposable incomes rose last year at the slowest rate in a quarter of a century – adding to homeowners’ financial difficulties.

Related News:

Congress Asked To Lift Debt Ceiling
http://biz.yahoo.com/ap/070919/debt_limit.html?.v=2

Zimbabwe Close To Economic Collapse
http://news.independent.co.uk/world/africa/article2976689.ece

Home foreclosures triple in Hawaii
http://www.honoluluadvertiser.com/app….01/709190409

Bank of England doubles emergency loans available to British banks
http://www.iht.com/articles/2007/09/18/business/money.php

Fears of dollar collapse as Saudis take fright
http://www.telegraph.co.uk/money/main.jh….7/09/19/bcnsaudi119.xml

China’s Ultimatum: Let Us Invade Taiwan Or We’ll Dump The Dollar
http://prisonplanet.com/articles/september2007/190907_dump_dollar.htm

Rogers: Fed Rate Cut Will Trigger Recession
http://moneynews.newsmax.com/m….omo_code=3A25-1

Greenspan Working To Destroy US Economy
http://infowars.net/articles/september2007/180907Greenspan.htm

Alan Greenspan Defends Himself
http://www.youtube.com/watch?v=m6b4qX_qm40

Greenspan says euro could replace U.S. dollar as reserve currency of choice
http://www.iht.com/articles/ap/2007/09/17/bus….nspan-Euro.php

EU Warns China Of Trade Imbalance
Oil hits new high over $82 after Fed rate cut
U.S. gold futures hit 28-year peak
Failed Lender Makes Grab for Employee Funds
Greenspan predicts falling house prices, rising inflation
Greenspan Says China Will Determine World Economic Fate in 2030
Alan Greenspan warns of UK house prices drop
Greenspan alert on US house prices
Credit turmoil set to benefit big banks
Northern Rock: ‘One in 10 chance of property crash’
Hopes of UK interest rate cut ‘before Christmas’ after FTSE rises follow Fed’s swoop to cut rates
Relief as Northern Rock shares up
Treasurys Fall Ahead of Fed Decision
Fed Announces Big Rate Cut
Subprime Fallout: More Companies Slammed
Prepare for prolonged turmoil, says US Treasury Secretary
$200 Dollar a Barrel Oil Is Bilderberg Plan To Destroy Middle Class
Oil industry ‘sleepwalking into crisis’
Oil Trades Near Record on Speculation of Reduced U.S. Supplies
Mystery Trader To Collect On Financial Meltdown?
Ron Paul Sees Crisis Ahead For Country
Bankers Fear £12bn Run On Rock
Oil Trades Near Record on Speculation of Reduced U.S. Supplies
Oil industry ‘sleepwalking into crisis’
U.S. Banks Brace for Storm Surge as Dollar and Credit System Reel
“Business Expert” (?) Ann Coulter: It’s Good for Wall Street to Bomb Iran
Britons Withdraw Billions in Bank Run
Northern Rock besieged by savers
Pound slides, yen up on N. Rock jitters
New saver queues at Northern Rock
E*Trade Cuts Earnings Estimate 25% on Mortgage Losses
Fears Rise Over Online Banking
Stocks may rise on expected interest rate cut
Fears grow for British economy as panic over Northern Rock spreads
World’s banks hit for $30billion in credit crunch
Oil Hits $80 A Barrel For First Time
Senate panel okays $850 billion debt increase
Dollar’s retreat raises fear of collapse
Further signs of US economic pain
British Bank Rocked By Bank Run
Forecast: Housing woes pose risk of recession
Mortgage Lender’s Bankruptcy
US dollar hits record lows
Foreclosures gain on sales
American economy: R.I.P.
US Heads for Recession as Foreign Investors Rush for the Exit from US Dollar Holdings
Dollar Hits 15 Year Low
Gold Rallies Past $700
Greenspan: Turmoil Like 1998
Bad News Puts Political Glare Onto Economy
US economy loses jobs for first time in 4 years
ECB Injects €42.2BN Into Money Markets
Is China quietly dumping US Treasuries?
Markets Brace For Seismic September
Fed Injects 31.25 Billion Into Market
Credit Crisis Has Hallmarks of Classic Bank Run
U.S. at risk of recession from housing
Analysts Dismiss Suspicious “New 9/11? Trades
Credit Crisis Compared To 1930
Bank Warns Emergency Borrowers
Bush Unveils Mortgage Proposals
Congressman: Stock Market Will Eventually Collapse
Comptroller: U.S. Facing Economic Collapse
BIS Warns of Great Depression Dangers from Credit Spree
Market Crash Forecast Suggests New 9/11
U.S. Recession Risk Highest Since 9/11
Economy, credit worries drive Wall St down sharply
Fed Injects 17.25 Billion In Market
Foreclosures Up 93% In One Year
After Foreclosure A Big Tax Bill From The IRS
After Fed’s Rescue, Volatile Days Ahead
Warren Buffett Sees Opportunities In Chaos
Run On The Banks in Los Angeles
Zimbabwe Inflation Rate Hits 7600%
Yields On T-Bills Down Most In 2 Decades
Bruised investors suffer as market continues to swing
The Dow Plunges, FOX Reports Happy Economic News
World Stocks Plummet Yet Again
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
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
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

 



Mystery Trader To Collect On Financial Meltdown?


Mystery Trader To Collect On Financial Meltdown?
Suspicion increases about so-called Bin Laden trades as markets tumble after bank run

Paul Joseph Watson
Prison Planet
September 17, 2007

A run on the Northern Rock bank in Britain has increased the possibility that a mystery trader could stand to collect around $2 billion should a panic send markets tumbling during the course of this week, as investors have predicted.

Last month, we reported on the mystery trader who risks losing around $1 billion dollars after placing 245,000 put options on the Dow Jones Eurostoxx 50 index, which led many analysts to speculate that a stock market crash preceded by a new 9/11 style attack or another catastrophe could take place before or during the third week of September.

The anonymous trader only stands to make money if the market crashes by a third to a half before September 21st, which is when the put options expire.

Following the run on the Northern Rock bank in Britain, specialist investors are now warning of an imminent and severe correction in the markets.

“The credit cycle has turned, bad debts are soaring, banks will go bust and stock markets will fall much further,” Ken Murray, the founder and chief executive of Blue Planet Investment Management, told the Financial Times today, shortly after selling half the equities in his portfolio.

The Northern Rock crisis was followed by Alan Greenspan’s warning that both the US and UK housing markets are on the verge of a major downturn as Prime Minister Gordon Brown holds an emergency meeting with US Treasury Secretary Hank Paulson today.

Thousands of people around Britain queued for hours at Northern Rock branches throughout Friday and Saturday attempting to withdraw their money as the global credit crunch sunk its teeth in again following the sub-prime mortgage fallout in the US.

Analysts from TheStreet.com dismissed last month’s so-called Bin Laden trades as nothing out of the ordinary, but still noted that the transactions outstrip anything else seen in a year.

Though the current climate will undoubtedly send stocks tumbling, to see a downturn of a full third within a week is unlikely bar a catalyzing outside event like the announcement of military operations against Iran or a terror attack in the west on the scale of 9/11.

 



Bankers Fear £12bn Run On Rock

Bankers Fear £12bn Run On Rock

Times Online
September 17, 2007

NORTHERN ROCK, the mortgage bank rescued by the Bank of England last week, could see as much as £12 billion – nearly half of its deposits – withdrawn by worried savers, experts say.

The run on the bank continued yesterday as police were called in to keep the peace when angry and desperate customers besieged branches across the country despite assurances from the Treasury and Bank of England that their savings were secure.

Branches due to close at midday opened until 2pm, but many hundreds of people were still trying to get their money when the branches closed and minor scuffles and arguments broke out.

Senior executives at Northern Rock spent yesterday at its New-castle head office monitoring events, but the lender is seen to have little future as an independent entity. It held talks about a possible takeover by Lloyds TSB before the crisis and is expected to be sold off cheaply to a rival.

The bank, which saw £1 billion taken out by worried savers on Friday and at least £500m removed yesterday, is prepared for a further flood of withdrawals when branches open tomorrow. Many will be by customers with nearly £10 billion in postal accounts, who can only make withdrawals by writing to the bank.

“The question is why wouldn’t you take your money out and put it somewhere else,” said one senior banker, who predicted £12 billion worth of withdrawals from the bank, which has £24 billion in deposits from savers. “Though Northern Rock is solvent, a lot of people have been gripped by the fear that they might lose some of their savings. It is a huge problem.”

One banking analyst warned: “It is not beyond the realms of possibility that they could lose half of their deposit base, if not more.”

“We have not had a decent run on a bank for many, many years. The difference now is the internet and that means you can get your money out very quickly. Banking is about confidence and that has gone from Northern Rock in a spectacular way.”

This weekend there was criticism from backbench MPs and economics experts over the authorities’ failure to avert the crisis. Mervyn King, the governor of the Bank of England, faces a grilling from a parliamentary committee on Thursday.

Gavyn Davies, the former BBC chairman and Goldman Sachs economist, questioned whether the authorities had been tough enough in monitoring financial institutions. “Once we get into this sort of problem some sort of rescue becomes inevitable,” he said. “Authorities need to impose tougher risk controls when times are good. They have few palatable choices during the meltdown.”

Critics believe that regulators should have curtailed Northern Rock’s activities earlier. The former building society used to account for 2% of the total mortgage market a decade ago, but its share now stands at about 9%.

In the first six months of this year, it was responsible for one in five new mortgages and offered generous loans – up to 125% of the value of the property – to first-time buyers.

David Cameron, the Conservative leader, accused Gordon Brown of having “presided over a huge expansion of public and private debt without showing awareness of the risks involved”.

Writing in a newspaper today, he says: “Though the current crisis may have had its trigger in the United States, over the past decade the gun has been loaded at home.”

Whitehall officials said the decision to prop up Northern Rock was agreed by the Treasury, the Bank and the Financial Services Authority, the regulator. “We expected this, but there is no need to panic,” said a Treasury official. “It is a solvent institution.”

But George Mudie, a Labour MP on the committee that will question the Bank of England governor, said: “I’m wondering where it leaves Mervyn King in terms of credibility. Northern Rock’s business model is similar to the private equity industry, which we have been looking at, and there are now a lot of very worried people.”

Michael Fallon, a Tory member of the committee, said: “It seems very odd that Mervyn King was saying there would be no bail-out, then he sets out how to do a bail-out and then he does the bail-out. We need to understand much more clearly how the decision was taken.

Yesterday, Professor Willem Buiter, a former member of the Bank of England’s monetary policy committee, became the first insider to criticise the Bank’s intervention. “A bail-out has occurred that should not have occurred and moral hazard has been injected into the financial markets — into the financial system — that wasn’t necessary,” he said.

However, other senior former Bank insiders rallied to King’s defence. Sir Alan Budd, who was chief economic adviser to the Treasury during the last Tory administration, said: “My general thoughts are that it is always easy to be wise after the event. I think Mervyn King and his colleagues will have been reluctant to offer assistance until they judged it was absolutely necessary.”

Budd also predicted a cut in interest rates to help calm nerves.

Police were called to help bank staff deal with ‘boisterous customers’ at branches in Glasgow and Sheffield yesterday, advising at least one store to close its doors. In Manchester staff handed queueing customers chocolates to placate them.

Ernest Floate, a retired civil engineer whose pension was hit when Equitable Life almost collapsed four years ago, was one of hundreds of people at a branch in Kingston, southwest London, from 6am yesterday. “When I heard the news I just thought, ‘Oh no, not again’,” he said.

One couple from Islington, north London, tried to withdraw £250,000 in savings from the Golders Green branch. The wife, a retired nurse, said: “I don’t trust the bank. I feel I need to close the bank account and take my money elsewhere.”

Outside the Bolton branch, Janet Walker, from Atherton, said: “I’ve completely lost confidence in Northern Rock and just want to get my money out.”

 



Greenspan Says China Will Determine World Economic Fate in 2030

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.”

Related News:

U.S. Banks Brace for Storm Surge as Dollar and Credit System Reel
http://www.counterpunch.org/whitney09182007.html

Alan Greenspan warns of UK house prices drop
http://www.telegraph.co.uk/money/main.jhtml;….cngrspan117.xml

“Business Expert” (?) Ann Coulter: It’s Good for Wall Street to Bomb Iran
http://www.newshounds.us/2007/09/16….bomb_iran.php

Britons Withdraw Billions in Bank Run
http://www.cfnews13.com/News/…._bank_run.html

Northern Rock besieged by savers
http://news.bbc.co.uk/2/hi/business/6997765.stm

Pound slides, yen up on N. Rock jitters
http://www.reuters.com/articlePrint?articleId=USN0634655920070917

New saver queues at Northern Rock
http://news.bbc.co.uk/1/hi/business/6997765.stm

E*Trade Cuts Earnings Estimate 25% on Mortgage Losses
http://www.bloomberg.com/apps/news?p….refer=home

Fears Rise Over Online Banking
http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/09/18/nrock918.xml

Stocks may rise on expected interest rate cut
Fears grow for British economy as panic over Northern Rock spreads
World’s banks hit for $30billion in credit crunch
Greenspan alert on US house prices
Oil Hits $80 A Barrel For First Time
Senate panel okays $850 billion debt increase
Dollar’s retreat raises fear of collapse
Further signs of US economic pain
British Bank Rocked By Bank Run
Forecast: Housing woes pose risk of recession
Mortgage Lender’s Bankruptcy
US dollar hits record lows
Foreclosures gain on sales
American economy: R.I.P.
US Heads for Recession as Foreign Investors Rush for the Exit from US Dollar Holdings
Dollar Hits 15 Year Low
Gold Rallies Past $700
Greenspan: Turmoil Like 1998
Bad News Puts Political Glare Onto Economy
US economy loses jobs for first time in 4 years
ECB Injects €42.2BN Into Money Markets
Is China quietly dumping US Treasuries?
Markets Brace For Seismic September
Fed Injects 31.25 Billion Into Market
Credit Crisis Has Hallmarks of Classic Bank Run
U.S. at risk of recession from housing
Analysts Dismiss Suspicious “New 9/11” Trades
Credit Crisis Compared To 1930
Bank Warns Emergency Borrowers
Bush Unveils Mortgage Proposals
Congressman: Stock Market Will Eventually Collapse
Comptroller: U.S. Facing Economic Collapse
BIS Warns of Great Depression Dangers from Credit Spree
Market Crash Forecast Suggests New 9/11
U.S. Recession Risk Highest Since 9/11
Economy, credit worries drive Wall St down sharply
Fed Injects 17.25 Billion In Market
Foreclosures Up 93% In One Year
After Foreclosure A Big Tax Bill From The IRS
After Fed’s Rescue, Volatile Days Ahead
Warren Buffett Sees Opportunities In Chaos
Run On The Banks in Los Angeles
Zimbabwe Inflation Rate Hits 7600%
Yields On T-Bills Down Most In 2 Decades
Bruised investors suffer as market continues to swing
The Dow Plunges, FOX Reports Happy Economic News
World Stocks Plummet Yet Again
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

 



Stocks may rise on expected interest rate cut

Stocks may rise on expected interest rate cut

Herbert Lash
Reuters
September 16, 2007

Wall Street expects Federal Reserve policy-makers to cut interest rates next Tuesday to help ease a global credit squeeze, a much anticipated event that spurred stock prices higher this week and could boost them next week.

Investors expect the Federal Open Market Committee to cut the federal funds rate in response to growing concerns that the U.S. economy is slowing and may be heading into recession.

Short-term interest rate futures on Friday indicated investors believe a half a percentage point cut in the federal funds rate is slightly more likely than a quarter percentage point cut when the FOMC meets.

Some investors say the stock market has priced in a quarter-percentage point rise, limiting any upside. But if the past is a guide, investors will react to the actual event, said David Bianco, chief U.S. equity strategist at UBS in New York.
“I think the market’s going to have a positive reaction to it, I really do,” said Bianco, who expects a 25 basis point cut in the federal funds rate and a 50 basis point cut in the discount rate.

“It will signal a response to what’s going on, to try to prevent credit market troubles from spreading to the real economy,” he said.

Reuters polls showed on Thursday that economists see about a 30 percent chance that the United States enters recession in the next 12 months should the effects of a housing slowdown continue to seep into the wider economy.

Major U.S. stock market gauges moved up this week in anticipation of a rate cut, with the Dow Jones industrial average (.DJI: Quote, Profile, Research) posting its best week since April.

For the week, the Dow rose 2.5 percent, the benchmark Standard & Poor’s 500 Index (.SPX: Quote, Profile, Research) gained 2.1 percent and the Nasdaq Composite Index (.IXIC: Quote, Profile, Research) rose 1.4 percent.

On Friday, the Dow closed up 17.64 points, or 0.13 percent, at 13,442.52; the S&P 500 closed up 0.30 points, or 0.02 percent, at 1,484.25, and the Nasdaq closed up 1.12 points, or 0.04 percent, at 2,602.18.

OPTIONS EXPIRATION TO STIR VOLATILITY

Investors will want to see if the subprime mortgage trauma has worsened for four big investment banks — Lehman Brothers (LEH.N: Quote, Profile, Research), Morgan Stanley (MS.N: Quote, Profile, Research), Bear Stearns Cos. Inc. (BSC.N: Quote, Profile, Research) and Goldman Sachs Group Inc. (GS.N: Quote, Profile, Research) — when they release fiscal third-quarter earnings results over three days next week.

The release of third-quarter earnings for most companies doesn’t begin in earnest until October.

The banks have diversified business models and are able to profit from worldwide economic growth, which will alleviate any downdraft of credit market issues, said Michael Cuggino, chief investment officer of the Permanent Portfolio family of funds in San Francisco.

“We may be surprised to find the negative impact was not as great in the third quarter as people may have expected,” Cuggino said.

Volatility is likely to intensify at week’s end because of the expiration of four different options and futures contracts, a quarterly event known as “quadruple witching.”

Investors also will be parsing inflation data for August, information on housing starts and building permits, also for August, and unemployment claims for the week ending September 15.

According to a Reuters poll of economists, producer prices, which are a measure of prices paid at the farm and factory gate, are expected to decline 0.2 percent in August when the Labor Department releases data on Tuesday.

The following day, a Labor Department reading for the Consumer Price Index, a key inflation gauge, is expected to be unchanged from July.

Also on Wednesday, housing starts for August are expected to decline to 1.35 million and building permits are expected to decline to the same amount, 1.35 million.

On Thursday, a Labor Department report on U.S. workers signing up for jobless benefits is expected to show initial claims of 321,000.

Although the labor market has shown recent softness and the housing sector is clearly suffering, both Bianco and Cuggino said the overall U.S. economy is not in that bad shape.

“It’s been almost astounding how good things have been outside of the financial economy,” Bianco said. “For the most part the energy companies, the industrial companies and the technology companies are on the verge of a full recovery of the dip.”

Cuggino said that “for every financial service firm that’s having difficulties, there’s a technology firm that’s experiencing pretty good earnings growth and pick-up in business.”

 

Fears grow for British economy as panic over Northern Rock spreads
Experts warn that a decade-long borrowing binge has left Britain dangerously exposed to the fallout from the global liquidity crisis

London Observer
September 16, 2007

US Treasury Secretary Hank Paulson flies in to London tomorrow to discuss the worsening global credit crisis with Chancellor Alistair Darling, as fears intensify that the lending squeeze could be the last straw for Britain’s buy-now-pay-later economy.

Thousands of anxious customers queued outside branches of Northern Rock to withdraw their savings this weekend, ignoring calls for calm from Darling, after he helped broker an unprecedented emergency loan from the Bank of England to rescue the bank.

City economists warned that a decade-long borrowing binge had left the UK economy dangerously exposed to the fallout from the credit crunch. ‘I think the UK is extremely vulnerable to this,’ said Danny Gabay, director of consultants Fathom. ‘The UK has a double vulnerability. We are vulnerable because of our hugely over extended consumer sector, and because of our large financial services sector.

‘This is a financial market event; but the longer it goes on, the greater the risk that it becomes a real economy event – and I think we are at a tipping point.’

As the Federal Reserve prepares to cut interest rates – perhaps by as much as a half percentage point – to restore confidence in financial markets, Darling and Paulson will discuss proposals for better transparency, to prevent a recurrence of the ‘contagion’ that has spread the impact of bad loans in the US housing market around the world.

But analysts are still scrambling to calculate the potential impact of the current squeeze. Ross Walker, UK economist at RBS, said: ‘We were already looking for a noticeable slowdown next year, and now there are further downside risks.’ He predicted that the Bank would have to cut interest rates twice by the end of next year, to prevent the downturn becoming too severe with growth slowing to 2.2 per cent, from almost 3 per cent this year.

Richard Donnell, head of research at property data firm Hometrack, said the latest evidence of the severity of the sub-prime crisis would rock confidence in a housing market already struggling to absorb five interest-rate rises.

‘It’s taken a good year for the impact of higher rates to reach London but, finally, the whole market’s feeling the pain.’

It emerged this weekend that several financial institutions have run the slide rule over Northern Rock in recent weeks, as its advisers Hoare Govett and Merrill Lynch battled to avert a Bank of England bailout by finding a buyer.

However, most potential bidders have privately ruled themselves out of the frame. Lloyds TSB has been the favourite candidate, but banking sources indicated it was unlikely to be interested. HSBC – under fire from institutional shareholder Knight Vinke for failing to capitalise on its emerging-markets interests – is also thought unlikely to bid, despite its relatively small share of the UK mortgage market. Other leading banks, including HBOS, RBS and Barclays, are also seen as unlikely to be interested.

One bank executive questioned the logic of bidding for a bank whose name has been tarnished by the Bank of England bailout and whose customers – seen as higher risk -are paying low rates on their largely fixed-rate loans and therefore likely to move elsewhere when these expire. Rival banks are instead likely to focus on poaching that business. Nor is there much scope for cutting costs, as Northern Rock is already the most efficient mortgage bank.

‘What do you get with Northern Rock?’ asked the banking executive. ‘You get a load of customers who are probably also ours already, and you do not get a branch network to speak of.’

Northern Rock’s plight has also raised concern about the prospect of heavy losses among Bradford & Bingley’s buy-to-let loans, which account for more than half of its mortgage book. James Hamilton, banking analyst at Numis, thinks the increasing threat that the credit crunch will spread into an economic slowdown means that the housing market will be hit – and buy-to-let is likely to be the first area to suffer rising defaults.

An analysis by Jon Kirk at Redburn Partners shows that B&B has the second highest ratio of loans to deposits after Northern Rock, with loans accounting for 1.8 times its savings and deposits base, compared with 3.1 times for Northern Rock. While B&B was quick to reassure on Friday that it is financially secure, securitisations and wholesale markets account for 42 per cent of its funding.

Financial disasters

2002
Investors lose millions in split capital investment trusts, devised for paying school fees

2001
Insurer Equitable Life is brought to the brink of collapse and the value of policyholders’ investments crumbles

1995
Barings Bank brought down by rogue trader Nick Leeson

1992
Southdown building society forced to merge with Leeds Permanent

1991
Fraudulent bank BCCI becomes insolvent causing investors to desert smaller banks, some of which go bust

1991
Town & Country building society brought to its knees by bad loans

1988
Investors lose life savings after Barlow Clowes group closes
1973/5
Bank of England organises ‘lifeboat’ for small banks hit by widespread secondary banking crisis

Related News:

World’s banks hit for $30billion in credit crunch
http://business.timesonline.co.uk/to….e/article2459578.ece

Greenspan alert on US house prices
http://www.ft.com/cms/s/0/31207860-647f-11dc-90ea-0000779fd2ac.html

Oil Hits $80 A Barrel For First Time
http://biz.yahoo.com/ap/070912/oil_prices.html?.v=34

Senate panel okays $850 billion debt increase
http://www.reuters.com/article/politicsNews/idUSN1225097720070912

Dollar’s retreat raises fear of collapse
http://www.iht.com/articles/2007/09/13/news/econ.php

Further signs of US economic pain
http://news.bbc.co.uk/1/hi/business/6995115.stm

British Bank Rocked By Bank Run
http://www.breitbart.com/article.php?id=070914172730.btxyggv4&show_article=1

Forecast: Housing woes pose risk of recession
Mortgage Lender’s Bankruptcy
US dollar hits record lows
Foreclosures gain on sales
American economy: R.I.P.
US Heads for Recession as Foreign Investors Rush for the Exit from US Dollar Holdings
Dollar Hits 15 Year Low
Gold Rallies Past $700
Greenspan: Turmoil Like 1998
Bad News Puts Political Glare Onto Economy
US economy loses jobs for first time in 4 years
ECB Injects €42.2BN Into Money Markets
Is China quietly dumping US Treasuries?
Markets Brace For Seismic September
Fed Injects 31.25 Billion Into Market
Credit Crisis Has Hallmarks of Classic Bank Run
U.S. at risk of recession from housing
Analysts Dismiss Suspicious “New 9/11” Trades
Credit Crisis Compared To 1930
Bank Warns Emergency Borrowers
Bush Unveils Mortgage Proposals
Congressman: Stock Market Will Eventually Collapse
Comptroller: U.S. Facing Economic Collapse
BIS Warns of Great Depression Dangers from Credit Spree
Market Crash Forecast Suggests New 9/11
U.S. Recession Risk Highest Since 9/11
Economy, credit worries drive Wall St down sharply
Fed Injects 17.25 Billion In Market
Foreclosures Up 93% In One Year
After Foreclosure A Big Tax Bill From The IRS
After Fed’s Rescue, Volatile Days Ahead
Warren Buffett Sees Opportunities In Chaos
Run On The Banks in Los Angeles
Zimbabwe Inflation Rate Hits 7600%
Yields On T-Bills Down Most In 2 Decades
Bruised investors suffer as market continues to swing
The Dow Plunges, FOX Reports Happy Economic News
World Stocks Plummet Yet Again
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