Are you scared yet? . . .Why not?

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.

Joke or Deadly Serious?

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?

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

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.”

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

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