June 2009 – Page 6 – Infinite Unknown

Rising US bond yields may spark Credit Crisis II

June 1, 2009 by Infinite

NEW YORK (Reuters) – The global financial crisis may morph into a second, equally virulent phase where borrowing costs rise again, hobbling an embryonic economic recovery, debilitating cash-strapped banks, and punishing investors all over again.

Early warnings signs of this scenario include surging government bond yields, a slumping U.S. dollar, and the fading of the bear market rally in U.S. stocks.

Related article: Black Swan Hedge Fund Makes a Big Bet on Inflation (Wall Street Journal)

Optimists hope that a fragile two-month rally in world stock markets, a rise in U.S. Treasury yields from record lows during the depths of the crisis in late 2008, and some less scary economic data all signal that a recovery is around the corner.

But gloomy analysts insist that thinking is delusional.

Once Credit Crisis Version 2.0 ramps up, foreign investors may punish the U.S. government for borrowing trillions of dollars too much by refusing to buy its debt until bond prices plunge to much cheaper levels.

The telling harbinger is benchmark Treasury note yields’ surge to six-month highs around 3.75 percent this week, as investors began to balk at the record U.S. government borrowing requirement this year.

The U.S. Treasury plans to sell about $2 trillion (1.2 billion pounds) in new debt this year to fund a $1.8 trillion fiscal deficit.

Chinese economists deem huge holding of US bonds RISKY

June 1, 2009 by Infinite

BEIJING, May 31 (Xinhua) — On the first day of U.S. treasury secretary Timothy Geithner’s visit to China, the Beijing-based Global Times published a survey of 23 famous Chinese economists on Sunday, saying that the majority of them deemed the vast holding of U.S. bonds “risky.”

Among the 23 experts polled, 17 said they believed that U.S. equities pose great risks to China’s economy.

Geithner will begin his first visit to Beijing as US treasury secretary in an attempt to assure the U.S.’ biggest creditor that its large holding of purchased US bonds is safe.

The visit also highlights Geithner’s comments made earlier this year alleging that China has manipulated its currency.

Li Wei, an expert with the Institute of Ministry of Commerce, and Tian Yun, a scholar at the China Macro Economics Institute, expressed concerns over the risks, saying that the United States may export its deepening crisis to China “by printing U.S. dollar notes uncontrollably.”

Jimi Hendrix murdered by his manager, says former aide

June 1, 2009 by Infinite

John Bannister, the surgeon who dealt with Hendrix at hospital, has said he was convinced the star had drowned in red wine, despite having very little alcohol in his bloodstream.

“I recall vividly the very large amounts of red wine that oozed from his stomach and his lungs and in my opinion there was no question that Jimi Hendrix had drowned, if not at home then on the way to the hospital,” he wrote in 1992.

Source: The Independent

Star ‘stuffed with pills as part of insurance scam’

The rock legend Jimi Hendrix was murdered by his manager, who stood to collect millions of dollars on the star’s life insurance policy, a former roadie has claimed in a new book.

James “Tappy” Wright says that Hendrix’s manager, Michael Jeffrey, drunkenly confessed to killing him by stuffing pills into his mouth and washing them down with several bottles of red wine because he feared Hendrix intended to dump him for a new manager, according to a report in the Mail on Sunday.

In his book, Rock Roadie, Mr Wright says Jeffrey told him in 1971 that Hendrix had been “worth more to him dead than alive” as he had taken out a life insurance policy on the musician worth $2m (about £1.2m at the time), with himself as the beneficiary. Two years later, Jeffrey was killed in a plane crash.

Ireland set to go bust, claims Harvard professor and author Niall Ferguson

June 1, 2009June 1, 2009 by Infinite

A dire warning that the Republic is a prime candidate to go bust has come from one of the world’s leading economic historians.

“The idea that countries don’t go bust is a joke,” said Niall Ferguson, Harvard professor and author of The Ascent of Money.

“The debt trap may be about to spring” he said, “for countries that have created large stimulus packages in order to stimulate their economies.”

His chosen prime candidate to go bust is “Ireland, followed by Italy and Belgium, and UK is not too far behind”.

Argentina is top of his list of shaky countries but “the argument that it can’t happen in major western economies is nonsense”.

Professor Ferguson believes the economists are ill qualified to analyse the current economic situation since they lack the overview of historians such as himself.

“There are economic professors in American universities who think they are masters of the universe, but they don’t have any historical knowledge. I have never believed that markets are self correcting. No historian could.”

The historian does not subscribe to the theory of the “Great Depression” repeating and says this scenario is unlikely because the Federal Reserve has “massively expanded the monetary base which is the opposite of what happened in the 1930s”.