Dregs of the Future

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2009-04-02T18:08:00.000-05:00

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Can you say "Pakistan"?

2009-03-24T09:11:00.003-05:00

What happens when you have a country with a huge army, nuclear weapons, religious fanatics, an unstable government, and a starving population? Can you say "Pakistan"?

WASHINGTON: The Pakistani state could collapse within six months if immediate steps are not taken to remedy the situation, warned a top adviser to the US Central Command. David Kilcullen, who advises CENTCOM commander Gen. David H. Petraeus on the war on terror, urged US policymakers to focus their attention on Pakistan as a failure there could have devastating consequences for the entire international community. Asked to explain why he thought Pakistan was so important, Kilcullen said: “Pakistan has 173 million people, 100 nuclear weapons, an army bigger than the US Army, and al-Qaeda headquarters sitting right there in the two-thirds of the country that the government doesnít control.” (Source.)

Let the free press die?

2009-03-23T10:20:00.003-05:00

Journals ranging from Time, The New Yorker, The Atlantic and The New Republic to the New York Times and the Los Angeles Times concur on the diagnosis: newspapers, as we have known them, are disintegrating and are possibly on the verge of extinction. (Source.)

Newspapers are increasingly filing bankruptcy. Why is there no clamour to bail them out? Can government do that? Perhaps the government would be better off if some of the free press went away?

The GIVE Act

2009-03-19T22:03:00.011-05:00

In July 2008, Obama told a rally in Colorado Springs, “We cannot continue to rely on our military in order to achieve the national security objectives we’ve set. We’ve got to have a civilian national security force that is just as powerful, just as strong, just as well funded.”

The Generations Invigorating Volunteerism and Education Act, known as the GIVE Act, was passed yesterday by a 321-105 margin and now goes to the Senate. The GIVE Act includes language indicating young people will be forced to undertake mandatory national service programs, President Barack Obama’s promised “civilian national security force.”

Section 6104 of the bill, entitled “Duties,” concerns, “a workable, fair, and reasonable mandatory service requirement for all able young people.” Section 120 of the bill discusses the “Youth Engagement Zone Program” and states that “service learning” will be “a mandatory part of the curriculum in all of the secondary schools served by the local educational agency.” The Senate is also considering a similar piece of legislation known as the “Serve America Act,” which also includes language about “Youth Engagement Zones”. (Source.)

The hippies were right

2009-03-18T22:37:00.001-05:00

The hippies were right. http://www.youtube.com/watch?v=iKEZoY-TMG4

The Goldman Sachs-burg Address

2009-03-17T15:08:00.006-05:00

Four or five years ago our Investment Bankers helped bring forth on this continent, and around the world, a new banking system, conceived in Leverage, and dedicated to the proposition that all persons working for Investment Banks can create enormous Wealth for themselves with almost no Risk except to Taxpayers.

Now we the Investment Bankers of Goldman Sachs are engaged in a great Scam, testing whether that Nation of Bankers can get paid without Tipping Off the Taxpayers to that Scam.

As we proud bankers cash our checks we promise that government of Goldman, by Goldman, and for Goldman, shall not perish from this earth. (Source: Jeff Matthews)

UK, the next Iceland? part 2

2009-03-17T14:04:00.005-05:00

Britain is showing signs of heading towards 1930s-style depression, the Bank of England says today for the first time. (Source.)

Personal debt in the UK, £1.5trillion, is larger than the country's GDP. British corporate borrowing adds up to another £2 trillion. By next year the government will owe over £4 trillion. Total UK public debt and obligations come to a staggering 282% of annual GDP. British house prices could fall by another 55%, and there is a non-negligible chance that the whole country will go broke. (Source.)

What can’t be paid, won’t be paid

2009-03-17T13:21:00.012-05:00

Recently in the news:

The Chairman of the US Federal Reserve, Ben Bernanke, made an unprecedented TV appearance on 60 Minutes last night. (WashingtonPost.com)

President Barack Obama will take his economic strategy to Jay Leno's comic couch on Thursday in the first appearance by a sitting U.S. president on a late-night TV talk show. (Source.)

Here is what they will NOT tell you:

What can’t be paid, won’t be paid.

The total American debt of $75 trillion ($250,000 for every American man, woman and child) is too great to ever be repaid in full. As a nation, we can’t pay our debts; not all of ‘em; not even most of ‘em. Individuals are currently holding [paper] debt instruments with a number like “$10,000,” “$100,000” or “$1 million” written on them and believe that those pieces of paper are assets actually worth their declared face value. (Source.)

Those waiting to hear the "D" word from economic experts, talking heads and TV anchors before taking action will most certainly regret their indecisiveness.

By the way, Anglo American has sold its remaining 11.3 percent stake in South Africa's AngloGold Ashanti for around $1.3 billion to Paulson & Co, the hedge fund run by John Paulson. You know, John Paulson, the same guy who shorted subprime two years ago and made an unearthly fortune.

Trust me . . . "This is your captain speaking, everyone remain calm, everything is under control."

Financial crisis becomes political crisis

2009-03-17T12:25:00.008-05:00

Public outcry could derail future bailout plans. AIG on Sunday took out another $165 million from public funds for "executive bonuses." AIG, after imploding due to making stupid bets and demanding only $170 billion from US taxpayers, is giving these "retention" bonuses so it can keep "the best and brightest talent." The Federal Reserve still refuses to answer specific questions about where $2 trillion in bailout funds has gone, a subject that Bloomberg News sued the Fed simply to try and discover.

The Obama administration is increasingly concerned about a populist backlash against banks and Wall Street, worried that anger at financial institutions could also end up being directed at Congress and the White House and could complicate President Obama’s agenda. "The danger, aides said, is that if he were to become identified as an advocate for the banks and Wall Street, people could take out their anger on him." (Source.)

[Well, duh . . . how do you like being played for a fool?]

According to the NY Times: "A Charming visit with Jay Leno won’t fix it. A 90 percent tax on bankers’ bonuses won’t fix it. Firing Timothy Geithner won’t fix it. . . 'President Obama may not realize it yet, but his Katrina moment has arrived.'” (Source.)

Here is some info on the recent AIG bonuses: 73 individuals received bonuses of $1 million or more; 11 of the individuals who received "retention" bonuses of $1 million or more are no longer working at AIG, including one who received $4.6 million. (Source.)

Global trade collapsing

2009-03-14T09:23:00.002-05:00

The global economy is likely to shrink this year for the first time since World War II, and trade will decline by the most in 80 years, the World Bank said this week. "The global volume of trade has collapsed," said Christopher Low, chief economist at FTN Financial.

U.S. gross domestic product is forecast to contract again this quarter after shrinking at a 6.2 percent annual pace from October to December, the most since 1982. U.S. imports and exports both slumped for a sixth straight month in January in what may be the biggest collapse of world trade since the 1930s, raising the threat of protectionist measures to shield domestic industries. The figures may add to pressure on the Obama administration to rework international agreements and include protections for U.S. workers and the environment. (Source.)

Chance coincidence?

2009-03-13T11:32:00.002-05:00

U.S. unemployment will approach 10 percent as the country endures its worst recession since World War Two, leaving more than 13 million Americans jobless, according to a Reuters poll of economists. (Source.)

The number of U.S. home mortgages that are delinquent or in foreclosure has climbed to a record high of 11 percent, according to a report Thursday from the Mortgage Bankers Association. (Source.)

The MBA

2009-03-13T11:22:00.002-05:00

MBAs today are haunted by the thought that the tag really stands for Mediocre But Arrogant, Mighty Big Attitude, Me Before Anyone and Management By Accident. For today’s purposes, perhaps it should be Masters of the Business Apocalypse.

Harvard Business School alumni include Stan O’Neal and John Thain, the last two heads of Merrill Lynch, plus Andy Hornby, former chief executive of HBOS, who graduated top of his class. And then of course, there’s George W Bush, Hank Paulson, the former US Treasury secretary, and Christopher Cox, the former chairman of the Securities and Exchange Commission (SEC), a remarkable trinity who more than fulfilled the mission of their alma mater: “To educate leaders who make a difference in the world.” It just wasn’t the difference the school had hoped for.

You can draw up a list of the greatest entrepreneurs of recent history, from Steve Jobs at Apple, to Larry Page and Sergey Brin of Google and Bill Gates of Microsoft, to Michael Dell, Richard Branson, Lak-shmi Mittal – and there’s not an MBA between them.

Yet the MBA industry continues to grow, and business schools provide vital income to academic institutions: 500,000 people around the world now graduate each year with an MBA, 150,000 of those in the United States, creating their own management class within global business. Applications to business schools in America and Europe are broadly up, as people search for a safe haven from the recession.

What are they thinking? Many MBA jobs will not be coming back. (Source)

Meanwhile, in another study . . . "A study of cheating among graduate students, published in 2006 in the journal Academy of Management Learning & Education, found that 56 percent of all M.B.A. students cheated regularly - more than in any other discipline. The authors attributed that to "perceived peer behavior" - in other words, students believed everyone else was doing it." (Source.)

US assassination ring?

2009-03-13T09:45:00.001-05:00

Am-Bushed: Seymour Hersh claims that under Bush/Cheny (1) The CIA "was very deeply involved in domestic activities against ... enemies of the state." (2) The Joint Special Operations Command operates without oversight by DoD or Congress, reported directly to Cheney's office, and operated as " an executive assassination ring". Mr. Hersh always cites multiple sources for his reporting.

Japan's economy in trouble

2009-03-13T09:34:00.001-05:00

Japan's 4Q GDP revision confirms deep recession
Japan's economy shrank a bit less than first estimated in the fourth quarter, but the revised government data Thursday is hardly good news, serving only to underscore the increasingly grim picture for the world's second-largest economy. Export demand has collapsed, corporate profits are swerving into losses, and job losses are accelerating nationwide amid Japan's steepest slump since the end of World War II. Analysts say the current downturn — and the response of Japanese companies to it — have combined into a new kind of recession, that's swifter and deeper than ever before. "The Japanese economy was simply collapsing and nose-diving toward the end of last year," said Kyohei Morita, chief economist at Barclays Capital in Tokyo.

The People versus the Oligarchs

2009-03-11T09:18:00.002-05:00

Former chief of the IMF Simon Johnson believes we have been and continue to be ravaged by the business elites in the US (source). Just look at the large number of Goldman alumni who have taken over positions of immense political-economic power. Can you say "coup d’état"?

Global Reset: Did it ever really exist, or was it just on paper?

2009-03-11T08:59:00.003-05:00

The CEO of Blackstone says 45 percent of world's wealth destroyed. "Between 40 and 45 percent of the world's wealth has been destroyed in little less than a year and a half," Schwarzman told an audience at the Japan Society. "This is absolutely unprecedented in our lifetime."

Follow the money. Money was borrowed and spent and ends up in someone's hands--who's?

Mexico: governed soon by a drug cartel?

2009-03-10T08:34:00.006-05:00

Mexico: A Collapse Update

Predicting the collapse of the Mexican Nation-State. Mexico is once again in the headlines. Oil production continues to fall, border violence is up, and the government is preparing for a showdown with the drug cartels. The Mexican state will collapse, ushering in the beginning of the end of the Nation-State. The US military’s Joint Forces Command issued their Joint Operating Environment 2008 report recently that listed Mexico and Pakistan as the most likely states to collapse in the immediate future (PDF, see p.35 for analysis of Mexico). Even 60 minutes ran a segment about the rising drug violence. Root causes of the problems in Mexico are the precipitous decline of Mexican oil production, declining remittance incomes being sent home by migrant workers in America, declining tourist revenues, and lower revenue per barrel of oil exported. Clearly the drug cartels smell blood—-and tactics like forcing the resignation of the Juarez police chief by killing one or more police officers every 48 hours demonstrate their desire for a decisive engagement. Additionally, the motivation behind a recent truce among rival drug cartels may be to facilitate a joint offensive against the government.

Overt Ops: : The US military has briefed the president on the US military capability to influence or intervene, presumably on the side of the government, in the growing civil war between the Mexican government and the drug cartels that control large portions of the country.

According to the The Washington Post, March 22, 2009, "Obama Pledges American Agents to Fight Mexican Drug Cartels. President Obama is finalizing plans to move federal agents, equipment and other resources to the border with Mexico to support Mexican President Felipe Calderón’s campaign against violent drug cartels." (Source.)

Are you scared yet? . . .Why not?

2009-03-10T08:24:00.002-05:00

Downsized: Global financial assets (stocks, bonds, used bikes...) lost at least $50 trillion in 2008, an amount equal to an entire year's global output in goods and services.

Thought Experiment: The current economic crisis seems intractable, with no easy solution in view. Think how much harder solving the economic crisis will be after the global food system collapses; for food is but petroleum converted to carbohydrates, protein and fat through the catalytic application of credit.

What's Dead (Short Answer: All Of It)

2009-03-09T17:46:00.001-05:00

What's Dead (Short Answer: All Of It)

All pension funds, private and public, are done. If you are receiving one, you won't be. If you think you will in the future, you won't be. PBGC will fail as well. Pension funds will be forced to start eating their "seed corn" within the next 12 months and once that begins there is no way to recover.
All annuities will be defaulted to the state insurance protection (if any) on them. The state insurance funds will be bankrupted and unable to be replenished. Essentially, all annuities are toast. Expect zero, be ecstatic if you do better. All insurance companies with material exposure to these obligations will go bankrupt, without exception. Some of these firms are dangerously close to this happening right here and now; the rest will die within the next 6-12 months. If you have other insured interests with these firms, be prepared to pay a LOT more with a new company that can't earn anything off investments, and if you have a claim in process at the time it happens, it won't get paid. The probability of you getting "boned" on any transaction with an insurance company is extremely high - I rate this risk in excess of 90%.
The FDIC will be unable to cover bank failure obligations. They will attempt to do more of what they're doing now (raising insurance rates and doing special assessments) but will fail; the current path has no chance of success. Congress will backstop them (because they must lest shotguns come out) with disastrous results. In short, FDIC backstops will take precedence even over Social Security and Medicare.
Government debt costs will ramp. This warning has already been issued and is being ignored by President Obama. When (not if) it happens debt-based Federal Funding will disappear. This leads to....
Tax receipts are cratering and will continue to. I expect total tax receipts to fall to under $1 trillion within the next 12 months. Combined with the impossibility of continued debt issue (rollover will only remain possible at the short duration Treasury has committed to over the last ten years if they cease new issue) a 66% cut in the Federal Budget will become necessary. This will require a complete repudiation of Social Security, Medicare and Medicaid, a 50% cut in the military budget and a 50% across-the-board cut in all other federal programs. That will likely get close.
Tax-deferred accounts will be seized to fund rollovers of Treasury debt at essentially zero coupon (interest). If you have a 401k, or what's left of it, or an IRA, consider it locked up in Treasuries; it's not yours any more. Count on this happening - it is essentially a certainty.
Any firm with debt outstanding is currently presumed dead as the street presumption is that they have lied in some way. Expect at least 20% of the S&P 500 to fail within 12 months as a consequence of the complete and total lockup of all credit markets which The Fed will be unable to unlock or backstop. This will in turn lead to....
The unemployed will have 5-10 million in direct layoffs added within the next 12 months. Collateral damage (suppliers, customers, etc) will add at least another 5-10 million workers to that, perhaps double that many. U-3 (official unemployment rate) will go beyond 15%, U-6 (broad form) will reach 30%.
Civil unrest will break out before the end of the year. The Military and Guard will be called up to try to stop it. They won't be able to. Big cities are at risk of becoming a free-fire death zone. If you live in one, figure out how you can get out and live somewhere else if you detect signs that yours is starting to go "feral"; witness New Orleans after Katrina for how fast, and how bad, it can get.

One in five U.S. mortgage borrowers

2009-03-05T12:25:00.005-06:00

One in five U.S. homeowners with mortgages owe more to their lenders than their properties are worth, and the rate will increase as housing values drop in states that have so far avoided the worst of the crisis, a new study shows. » Full Story on Yahoo! News

Help?: The Treasury Department claims its mortgage relief plan will help 9 million homeowners ~~temporarily~~ avoid foreclosure. What they really mean is that it will serve to trick these people in continuing to make payments while the house keeps losing value.

Sacrifice the environment--maybe that will help?

2009-03-03T12:59:00.000-06:00

Microcosm: Citing the state's economic problems, Florida politicians are rushing to gut environmental laws and growth-management regulations in favor of re-inflating the economy.

FDIC Insured -- backed by the full faith and trust of the US Government

2009-03-02T06:53:00.005-06:00

FDIC: $19 billion now backs over $4.8 trillion

There’s nearly $5 trillion worth of insured deposits in the American banking system. But the FDIC’s Deposit Insurance Fund (DIF) is less than 1% of that total: $18.9 billion. And it’s falling fast, down from $52.4 billion (-64%) at the end of 2007. [Having trouble seeing the red highlighted area in the first chart? Then you see my point. I use constant dollars so readers can see the inflation-adjusted growth of insured deposits. Click to enlarge]

FDIC doesn’t have the resources to bail out the depositors of even one large failed bank, much less the entire banking system. And let’s not kid ourselves: The entire banking system remains very much at risk. Source

Joke or Deadly Serious?

2009-03-01T11:47:00.002-06:00

If you can get into a cushy government job, you'll be on easy street through this depression while your poor neighbors in the private sector really struggle. Here's the ideal positioning for the depression. Obviously, not everyone will be able to achieve all of these, but work toward as many as you can (Source):

* Government job
* Own a home with a 30-year-fixed mortgage (because those dollars will be worthless by the time you pay them back
* 12+ months of expenses saved, equally split between cash and gold
* Canned and dry bulk food stockpiled
* Guns and ammo stockpiled

Downturn, Recession, or Collapse?

2009-03-01T10:34:00.013-06:00

The economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond. Source = Warren Buffett, Republican billionaire investor

The turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union. Source = George Soros, Democrat billionaire investor

The global economy may be deteriorating even more precipitously than it did during the Great Depression. Source = Paul Volker, former Federal Reserve Chair under Democrat President Carter and under Republican President Reagan, and current economic advisor to President Obama

The late Rudi Dornbsuch of MIT knew a huge amount about financial crisis, and could distill a lifetime of study and involvement in collapses succinctly: “it always takes longer than you think; but when it happens, it always happens faster than you can imagine.” Source

BREAKING NEWS: Factory output is collapsing at the fastest pace everywhere. The figures for the most recent month available are, year-on-year: Taiwan (-43pc), Ukraine (-34pc), Japan (-30pc), Singapore (-29pc), Hungary (-23pc), Sweden (-20pc), Korea (-19pc), Turkey (-18pc), Russia (-16pc), Spain (-15pc), Poland (-15pc), Brazil (-15pc), Italy (-14pc), Germany (-12pc), France (-11pc), US (-10pc) and Britain (-9pc). Norway sails blissfully on (+4pc). What do they drink up there?

This terrifying fall has been concentrated in the last five months. The job slaughter has barely begun. Social mayhem comes with a 12-month lag. By comparison, industrial output in core-Europe fell 2.8pc in 1930, 5.1pc in 1931 and 3.9pc in 1932, according to RBS.

Stephen Lewis, from Monument Securities, says we have been lulled into a false sense of security by the lack of "soup kitchens". The visual cues from Steinbeck's America are missing. "The temptation for investors is to see this as just another recession, over by the end of the year. But this is not a normal cycle. It is a cataclysmic structural breakdown," he said. Source

China: The Great Fall

2009-03-01T09:49:00.004-06:00

Judging by the latest Merrill Lynch survey of fund managers, investors have a touching faith that China is going to rescue us all and re-ignite the commodity boom. How can this be? Taiwan's exports to China fell 55pc in January, Japan's fell 45pc. These exports are links in the supply chain for China's industry. Manufacturing output in the Shanghai region fell 12pc in January. Source

China nears deflation trap as rail freight collapses
Railway freight in China’s Shanghai region plunged 31pc in January and industrial production fell 12pc, dashing hopes that Beijing’s stimulus policies will soon begin to fuel recovery.

The Credo (abridged)

2009-03-01T08:44:00.007-06:00

I believe it is divine justice that those who cause financial catastrophes are rewarded with public money, while innocent bystanders are punished in their stead. I believe that central banks can print all the money anyone will ever need. I believe that if one stimulus package does not work, the next one surely will.

I believe in worldwide Ponzi schemes and universal gullibility. I believe that reckless lending can be cured by reckless borrowing and that fraudulent borrowing can be healed by fraudulent lending. I believe that each trillion of hallucinated dollars that disappears in a puff of Wall Street smoke then always reappears magically from behind a Treasury Department mirror.

I believe that economic stability and confidence will return when every failing business is bailed out, with no failure too small to be left behind.

I believe that the end of days shall come when there is only one institution left, comprehensively unified, far too big to fail, owning everything and controlling nothing. It is in this one true financial institution that I put my faith, truly gigantic, truly bankrupt, amen. Source

UK: the next Iceland?

2009-03-01T08:20:00.007-06:00

The top five U.K. banks have $10 trillion of [debt] assets and their [UK] GDP is only $2.13 trillion. The whole country could fall into the ocean. The top five U.S. banks [debt assets] represent only about 60 percent of GDP by comparison. Source

What is the capital of Iceland?
Answer: $25

"asking an economist to predict the future is like asking the Christmas turkey what's for dinner on Christmas: based on its entire lifetime of experience, the turkey expects to be fed on Christmas, not to be eaten. As far as the turkey is concerned, Christmas is a black swan-type event." Source: Taleb

Asian economies in trouble

2009-03-01T07:49:00.003-06:00

Dire growth data fuel Asian fears

Weak growth data from India and Malaysia on Friday provided fresh evidence of the deepening impact of the global recession on developing Asia.

Japan’s manufacturing output suffered a record 10 per cent month-on-month drop in January. New job offers in Japan also plummeted 18 per cent to complete an abysmal set of recent figures from the world’s second-largest economy, including a record 45.7 per cent fall in exports in January.

The collapse in Asian exports over the fourth quarter was “nothing short of breath-taking”, said Frederic Neumann, Asia chief economist at HSBC. “Economic models and experience suggest that financial turmoil tends to transmit far more gradually into the real economy than has occurred this time around. In fact, the severity and rapidity of the fall in output exceeds anything we have ever seen before.”

The bailouts: EXPLAINED!

2009-02-27T10:33:00.005-06:00

Here's the Plan: The administration [i.e., Timmy the Tax Cheat and Zimbabwe Ben] intends to give unlimited amounts of taxpayer dollars to the 19 largest banks. Treasury folks will go door to door asking the banks how much stress they feel, the banks will lie, and then the Feds will back up the truck and shovel dollars into the banks until they feel better. Or something like that.

At some point, a boondoggle event horizon is reached, like the light event horizon that exists at the surface of a black hole. Beyond that horizon, the only possible course of action is to create more boondoggles. Source: Orlov

"when you see that money is flowing to those who deal, not in goods, but in favors--when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you--when you see corruption being rewarded and honesty becoming a self-sacrifice--you may know that your society is doomed" - an excerpt from Atlas Shrugged, by Ayn Rand

What is needed, of course, is a concerted effort to build a new, vastly different economy, not squander remaining resources on attempts to resuscitate the current, moribund one. But politicians are never willing to dismantle the system that got them into power, and, like Gorbachev before him, Obama will do all he can to restart the current economy instead of letting it shut down and concentrating on planting the seeds of a new one. Source: Orlov

California economy in trouble

2009-02-27T09:28:00.001-06:00

California’s Newly Poor Push Social Services Network to Brink
In California’s Contra Costa County, 40,000 families are applying for just 350 affordable-housing vouchers. Church-operated pantries are running out of food. Crisis calls have more than doubled in the city of Antioch, where the Family Stress Center occupies the site of a former bank.
The worst financial crisis in seven decades is forcing thousands of previously middle-income workers to seek social services, overwhelming local agencies, clinics and nonprofits.

Armageddon West: Beginning today, the federal Central Valley Project has shut off the water to farmers in California's Central Valley. It is estimated that 80,000 agriculture related jobs will be lost.

Food crisis hits developing world farms

2009-02-26T15:23:00.002-06:00

Farmers in developing countries are struggling despite recent rises in the price of commodities they produce, the Fairtrade Foundation says in a new report. The report, which interviewed farmers' groups in Uganda, Malawi, Nicaragua, India, Sri Lanka and the Caribbean, reveals that many families are spending up to 80% of their entire household budget on basic food items. The rocketing cost of food, fuel and fertiliser prices have had a devastating effect on their livelihoods. In some cases, families have been forced to cut out meals, take children out of school and reduce the amount of land they plant, the report says. Some farmers have even sold their land because they can no longer afford to farm it or buy fertilisers to keep up production.

Home prices crash

2009-02-26T15:07:00.001-06:00

Home Prices Post Biggest Drop in 21 Years

The S&P/Case-Shiller U.S. National Home Price Index plunged 18.2% during the final quarter of 2008, the biggest annual decline in the closely watched index's 21-year history. The most severe declines were in Phoenix, Las Vegas, and San Francisco, which all dropped by more than 30% in December compared with December 2007.

Japan's economy in trouble

2009-02-26T15:01:00.001-06:00

Trade deficit hits record as Japan's exports fall 45%
By Chris Oliver, MarketWatch

HONG KONG (MarketWatch) -- Japanese exports contracted 45.7% in January, surpassing the previous record decline, set in December, and stoking a record trade deficit, as the deepening global recession crimps overseas demand for Japanese goods. The deficit swelled to 952.6 billion yen ($9.92 billion), up from 320.7 billion yen in December, the Ministry of Finance said Wednesday. The trade gap was the largest in a data stream dating back to 1979.

China consumer markets are shrinking

2009-02-26T14:36:00.003-06:00

China Taxes Reveal Spending Slowdown, Goldman Says

By Chua Kong Ho and Paul Panckhurst

Feb. 26 (Bloomberg) -- China investors should be “defensively positioned” as a decline in the nation’s tax receipts signals a steeper slowdown in spending than retail sales figures show, according to Goldman Sachs Group Inc.

“Tax data show much sharper deceleration in income and consumption in the past few months than suggested by official retail sales or income growth figures,” Goldman Sachs analysts Joshua Lu, Caroline Li and Fiona Lau wrote in a note today.

Value-added tax has “de-linked sharply” from retail sales figures, the analysts wrote. VAT rose 1 percent in the fourth quarter from a year earlier, while retail sales gained 21 percent, according to the note.

China is trying to boost domestic spending to shore up its economy as recessions in the U.S. and Europe smother demand for its exports. The nation’s growth has slowed for six straight quarters, while outbound shipments slumped 17.5 percent in January, the most in almost 13 years, customs bureau data showed this month.

Growth in China’s individual income-tax receipts “slowed down significantly” in the second half and shrank in December and January, the Goldman Sachs analysts wrote. This compares with nominal wage growth of 21 percent in the third quarter, the report said.

“We think the government’s fiscal stimulus package announced so far may help create jobs, but may not necessarily help boost wages which, in our view, is the key driver of consumption growth,” the note said. “As such we are not hopeful that China’s consumption slowdown will bottom out soon.”

Thousands queue at New York job fair

2009-02-25T07:56:00.001-06:00

Published: February 24 2009 21:49

Throngs of unemployed New Yorkers braved sub-freezing temperatures on Tuesday in hopes of finding new work amid rising job cuts.

Wrapping around block of the Sheraton New York Hotel for hours, more than 5,000 people - many in business attire - waited in single-file lines for a chance to submit resumes and chat briefly with recruiters. There were 41 companies hiring, according to Women for Hire, who sponsored the job fair and allowed men to attend for the first time, with a total of 1,000 openings to be filled. At the last such event in November just 1,500 people attended.

China equity market set to crash ( even further)

2009-02-21T14:40:00.005-06:00

US mutual funds cannot invest in short positions. They must invest in long positions. But where in the world can they place their funds?

Like a flock of birds fund managers seem to have decided in 2008 that a safe place to land (for now) is in China. As long as more and more mutual fund managers keep putting more and more funds into China equities the equity markets defy gravity and don't fall. Lol! It's a repeat of mutual funds flocking into commodity equities in 2007--which crashed in 2008.

Where in China is the good news? China’s exports are falling and, due to rising unemployment, domestic demand will be difficult to stimulate. How long until the mutual funds fly away and the flock follows?

China Stock Gains to End as Profit Drops, Xie Says

(Bloomberg) -- China’s stocks rally, having turned the Shanghai Composite Index into the world’s best performer this year, will falter as profits are “non-existent,” said Andy Xie, former chief Asian economist at Morgan Stanley.

The Shanghai measure has gained 22 percent this year, the most among 90 global stock gauges tracked by Bloomberg. The index is valued at 17.4 times earnings, the most expensive among the so-called BRIC markets of Brazil, Russia, India and China.

The rally will run out of steam as “profits are non- existent and valuations are still expensive,” Xie, who is now an independent economist, said in an interview yesterday.

Investors opened 427,460 new accounts to trade stocks last week, according to data posted on the Web site of China Securities Depository & Clearing Corp. yesterday, almost double the number in the previous week and the most since the five days to March 28.

"This is your captain speaking, everyone remain calm, everything is under control. "

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Chinese Firms Turn to Pawn Shops as Loans Dry Up

2009-02-20T09:55:00.004-06:00

(Source: Reuters, 19 Feb 2009)

With China's economy stumbling along at its slowest growth in seven years and banks wary of lending as defaults rise, small business operators are hocking belongings and company assets for loans from pawn shops.

"Banks are reluctant to lend," said Huang Jing, deputy business manager at Shanghai Oriental, the city's second-biggest pawn shop. "But we have a lower threshold and can provide loans much more quickly and with shorter terms".

From gold bullion to houses and factory equipment, customers are offering all sorts of assets to get loans from pawn shops. An auto dealer pawned his downtown apartment against a 4 million yuan ($585,000) credit line to secure funds for his business. A real estate developer gave his unsold properties as collateral to get an emergency loan while waiting to secure bank funds. And a construction company owner hocked his villa to get a loan to pay workers' salaries.

"This is your captain speaking, everyone remain calm, everything is under control. "

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Violent unrest rocks China as crisis hits

2009-02-19T11:24:00.004-06:00

Bankruptcies, unemployment and social unrest are spreading more widely in China than officially reported, according to independent research that paints an ominous picture for the world economy.

On January 15 there were pitched battles at a textile factory in the nearby city of Dongguan between striking workers and security guards.
On January 16, about 100 auxiliary security officers, known in Chinese as Bao An, staged a street protest after they were sacked by a state-owned firm in Shenzhen, a boom town adjoining Hong Kong.
About 1,000 teachers confronted police on the streets of Yangjiang on January 5, demanding their wages from the local authorities.
In late December, 2,000 workers at a Singapore-owned firm in Shanghai held a wage protest and thousands of farmers staged 12 days of mass demonstrations over economic problems outside the city.
In southern China, hundreds of workers blocked a highway to protest against pay cuts imposed by managers. At several factories, there were scenes of chaos as police were called to stop creditors breaking in to seize equipment in lieu of debts.
In northern China, television journalists were punished after they prepared a story on the occupation of a textile mill by 6,000 workers. Furious local leaders in the city of Linfen said the news item would “destroy social stability” and banned it.
A legal advocate for migrant workers, Xiao Qingshan, told a tale of violent intimidation by the state in collusion with unscrupulous businessmen. On January 9, Xiao said, 14 security officers from the local labour bureau broke into his office . . . "That evening I was ambushed near the office by five strangers who forced a black bag over my head and then threw me into a shallow polluted canal,” he said.

China Fears Tremors as Jobs Vanish From Coast
Although the government has not released updated information about rural unrest, officials have been strategizing about how best to keep large protests and riots from spreading, should the dispossessed grow unruly. This week, more than 3,000 public security directors from across the country are gathering in the capital to learn how to neutralize rallies and strikes before they blossom into so-called mass incidents. At a meeting of the Chinese cabinet last month, Prime Minister Wen Jiabao told government leaders they should prepare for rough times ahead. "The country’s employment situation is extremely grim," he said.

"This is your captain speaking, everyone remain calm, everything is under control. "

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Meet the New Boss, Same as the Old Boss

2009-02-19T08:49:00.008-06:00

Obama orders 17,000 more troops to Afghanistan In a brief written statement issued by the White House, President Obama signaled that the escalation in Afghanistan would be combined with an intensified military intervention across the border in Pakistan.

Obama, not Bush, now seeking delay of Rove deposition Former Bush Deputy White House Chief of Staff Karl Rove has a new president urging Congress not to force him to testify next week. President Barack Obama.

Obama administration defends telecom immunity. The Obama Justice Department continues to stand behind a Bush era law meant to prevent lawsuits against telecommunications companies accused of illegally sharing private customer information with intelligence agencies.

Crass Warfare: The rich claim that Obama's plan to tax the top 2% of Americans - those making over $250,000 - is the beginning of class warfare. The other 98% of Americans certainly hope so. The GOP claims this will pit the have-nots against the haves, instead of their plans, which have always pitted the haves against the have-nots.

Under executive orders issued by Obama just two days into his tenure, the CIA still has authority to carry out what are known as renditions, secret abductions and transfers of prisoners to countries that cooperate with the United States, the Los Angeles Times reported.

"This is your captain speaking, everyone remain calm, everything is under control. "

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Europe in trouble

2009-02-16T12:22:00.007-06:00

Europe’s banks face a $2 trillion dollar shortage
European banks face a US dollar “funding gap” of almost $2 trillion as a result of aggressive expansion around the world and may have difficulties rolling over debts, according to a report by the Bank for International Settlements.

Europe's economic situation:

Eastern Europe, along with Russia and the Ukraine, are toppling over the edge. Austria, whose banks have lent them €230bn (75% of its GDP) will go with them.
Eastern Europe owes $1.7 trillion, $400 billion is due this year.
Russia has a $500 billion tab it may not be able to cover.
60% of Polish mortgages are in Swiss francs, against which the zolty was just halved.
Hungary, the Balkans, and the Baltics are in the same boat.
Nearly all this debt is owed (and won't be paid) to Austrian Belgian, Greek, Italian and Swedish banks.
In addition, Europeans hold 74% of the nearly $5 trillion of emerging markets' debt.
The German economy will shrink nearly 10% this year, so Berlin will not be rescuing anybody either, not even partners Greece, Italy Ireland, Portugal or Spain.
The coming economic stress is the stuf that makes for pitchforks in the street.

Source: http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/4623525/Failure-to-save-East-Europe-will-lead-to-worldwide-meltdown.html (as summarized by CKMichaelson at http://ckm3.blogspot.com/)

Meanwhile Ukraine's gross domestic product has contracted by 20pc over the last year, apparently worse than early Bolshevism or the Stalin famine . . . if Ukraine defaults on its foreign debt – or lets its private companies default on their dollar and euro loans – it will lead to near instant contagion through much of Eastern Europe.

Source: http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/4691850/Ukraine-must-be-rescued-from-tragi-comedy-for-Europes-sake.html

"This is your captain speaking, everyone remain calm, everything is under control. "

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Asia in trouble

2009-02-13T10:16:00.016-06:00

The US economy: Crash the plane to steal the cargo

2009-02-08T10:01:00.006-06:00

An airline as metaphor for the crash of the US economy: money is fuel in an airplane, financial institutions are fuel lines, and macro-economic statistics are the gauges.

February 8, 2009

We're in the middle of an unfolding economic disaster. Why are we so calm? Lol! Our captain reassures us that it's all under control. He asks everyone to remain calm. Our captain has told us, "we're experiencing a little difficulty up here, but nothing to worry about." Who are we going to believe, our own feelings or the captain? We all know what any good captain has to do about any passengers who persist in upsetting the other passengers--quiet the troublemakers. So we remain calm.

Once upon a time . . .

An airline pilot discovers that the plane's main tanks have run out of fuel. The captain switches over to emergency reserves. He knows the plane won't make it to a safe airport. They'll have to ditch in a field.

The captain doesn't want to panic the passengers, so he says, "we're experiencing a little difficulty up here, but nothing to worry about." He shuts down all but one engine to conserve fuel. He tells his co-pilots that they are not to blame because "no one could have predicted it."

When the reserve tanks are empty the last engine shuts down. The plane keeps flying, but in a steep descent. The passengers realize something is terribly wrong, but what could they do anyway?

The crew prepares for an emergency crash landing. As they get close to the ground the captain wishes he could use the engines for 1 minute--to make a safer, more controlled emergency landing. But alas, too late, he realizes he used up all the reserves, the engines can't be used during the final approach. The emergency landing is much rougher because of it.

No one applauds the landing, many people are injured. Passengers use emergency exits and leave the plane. Outside everyone sees the plane is damaged--beyond the point of ever being flown again. The captain tells everyone to remain calm and that help will arrive soon.

Soon trucks arrive. Men from inside the trucks threaten the people with guns. They unload the plane's cargo and drive away.

Years later, after the crash, investigators prove the fuel lines and gauges were tampered with so the plane would crash and the cargo could be stolen. The thieves were never identified--despite the fact that many similar crashes all occurred worldwide at about the same time.

---------------

Let me ask an outrageous question: Is this economic crash intentional and planned--"in order to steal the cargo"? If so, who are "they" and "how they are doing it"? Answer: it's the same old financial techniques used by IMF/World Bank to take-over and control lesser developed countries in order to steal their assets. It's a tried and proven method for extracting maximum resources from a country. The techniques are now being used against the developed world--corruption so huge that it's beyond belief. Lol! Maybe even economic coup d'état?

Never fear, with large enough bailouts, "It is as if there has been a silent coup d'état - instead of the taxpayers owning the banks, the banks now seem to own the taxpayers. They have been given access to the present and future earnings of the public, which will plug their mind-blowing losses." http://www.spectator.co.uk/coffeehouse/3358846/the-banks-reverse-takeover-of-britain.thtml

If you have no idea what I'm talking about please read this (and hundreds of other posts like it):

"This is your captain speaking, everyone remain calm, everything is under control. "

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