The bailouts: EXPLAINED!

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

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

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

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

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

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

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)

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. "

Cheers

Chinese Firms Turn to Pawn Shops as Loans Dry Up

(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. "

Cheers

Violent unrest rocks China as crisis hits

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. "

Cheers

Meet the New Boss, Same as the Old Boss

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. "

Cheers

Europe in trouble

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. "

Cheers

Asia in trouble

Recent news from Asia:

• Japanese exports fell 35 percent in December from a year earlier. Industrial production plunged a record 9.6 percent, month on month, in December.
  
  
• Chinese exports declined for the third consecutive month in January, falling 17.5 percent from a year earlier, after a 2.8 percent decline in December. Imports plunged even further—43.1 percent, twice as much as December's 21.3 percent year-on-year drop.
  
  
• More than 20 million Chinese migrant workers have lost their jobs so far, with some analysts warning of 50 million more job losses if the economy deteriorates further.
  
  
• India exports fell 24 percent in January. According to official data, one million Indian workers in the export sector have lost their jobs since September. Another half a million workers are expected to lose their jobs by March.
• New Delhi's public debt stands at 75 percent of its GDP, compared to just 18.5 percent in China, leaving less room for large stimulus packages.
  
  
• South Korea's exports, the main driving force of the economy, plunged 32.8 percent in January. Finance minister Yoon Jeung-hyun warned on Tuesday that the fourth largest economy in Asia would shrink by about 2 percent this year. Credit Suisse has projected as much as a 7 percent contraction.
  
  
• Taiwan, the sixth largest Asian economy, saw its exports fall 44.1 percent in January from a year earlier—the biggest fall since records began in 1972. Imports plunged 56.5 percent in the same month. For an economy where exports account for 70 percent of GDP, the impact is devastating.
  

More discussions of Asia's economic problems:

• http://mpettis.com/2009/02/more-terrible-trade-numbers-from-china/
• http://blogs.cfr.org/setser/2009/02/13/a-truely-global-slump/

Think "domestic demand" will be easy to stimulate in China? I doubt it. China has huge unemployment problems. Unemployed people just don't have money to spend. Want more evidence that domestic demand will be difficult to stimulate? Then please read this:
http://globaleconomicanalysis.blogspot.com/2009/02/inside-china-sculptors-view.html

Comments:

1. To the extent that imports are necessary inputs to Asia & China's production process then falling imports may be a leading indicator of even greater declines in production and exports.

2. Falling imports may also be an indicator of much greater unemployment than is being reported--unemployed people don't buy imports.

3. If unemployment is under-reported or accelerates it becomes doubtful that domestic demand can be stimulated and domestic demand may actually fall.

Implications:

- China's exports seem destined to fall and domestic demand will be difficult to stimulate.
- China's economy appears to be a bubble about to pop.
- If/when the China bubble bursts, China's equity markets will crash.

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.


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

Cheers

The US economy: Crash the plane to steal the cargo

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):

• http://www.dunwalke.com/gideon/privatization030402.html
• http://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit_Man
• http://counterpunch.org/hudson02172009.html

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

Cheers