Wall Street Journal: New credit hurdle looms for banks

U.S. and European banks, already burdened by losses and concerns about their financial health, face a new challenge: paying off hundreds of billions of dollars of debt coming due.

At issue are so-called floating-rate notes – securities used heavily by banks in 2006 to borrow money. A big chunk of those notes, which typically mature in two years, will come due over the next year or so, at a time when banks are struggling to raise fresh funds. That’s forcing banks to sell assets, compete heavily for deposits and issue expensive new debt.

The crunch will begin next month, when some $95 billion in floating-rate notes mature. J.P. Morgan Chase & Co. analyst Alex Roever estimates that financial institutions will have to pay off at least $787 billion in floating-rate notes and other medium-term obligations before the end of 2009. That’s about 43 percent more than they had to redeem in the previous 16 months.

The problem highlights how the pain of the credit crunch, now entering its second year, won’t end soon for banks or the broader economy. The Federal Deposit Insurance Corp. said on Tuesday that its list of “problem” banks at risk of failure had grown to 117 at the end of June, up from 90 at the end of March. FDIC Chairman Sheila Bair said her agency might have to borrow money from the Treasury Department to see it through an expected wave of bank failures. She said the borrowing could be needed to handle short-term cash-flow pressure brought on by reimbursements to depositors after bank failures.

Read moreWall Street Journal: New credit hurdle looms for banks

World’s Largest Gold Refiner Runs Out of Krugerrands

Aug. 28 (Bloomberg) — Rand Refinery Ltd., the world’s largest gold refinery, ran out of South African Krugerrands after an “unusually large” order from a buyer in Switzerland.

The order was for 5,000 ounces and it will take until Sept. 3 for inventories to be replenished, said Johan Botha, a spokesman for Rand Refinery in Germiston, east of Johannesburg. He declined to identify the buyer.

Coins and bars of precious metals are attracting investors as a haven against a sliding dollar and conflict between Russia and its neighbor Georgia. The U.S. Mint suspended sales of one- ounce “American Eagle” gold coins, Johnson Matthey Plc stopped taking orders for 100-ounce silver bars at its Salt Lake City refinery and Heraeus Holding GmbH has a delivery waiting list of as long as two weeks for orders of gold bars in Europe.

“A lot of people are worried about the dollar, they’re worried about inflation and now we have geopolitical risk with what’s happening in Russia,” said Mark O’Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin. O’Byrne said his company’s sales are up fourfold this year, heading for a record since its founding in 2003.

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Rat meat in demand in Cambodia as inflation bites

PHNOM PENH (Reuters) – The price of rat meat has quadrupled in Cambodia this year as inflation has put other meat beyond the reach of poor people, officials said on Wednesday.

With consumer price inflation at 37 percent according to the latest central bank estimate, demand has pushed a kilogram of rat meat up to around 5,000 riel (69 pence) from 1,200 riel last year.

Spicy field rat dishes with garlic thrown in have become particularly popular at a time when beef costs 20,000 riel a kg.

Read moreRat meat in demand in Cambodia as inflation bites

The United States of America is the Next Argentina

DON’T CRY FOR ME ARGENTINA SAVE YOUR TEARS FOR YOURSELF – While bankers do control the issuance of credit, they cannot control themselves. Bankers are the fatal flaw in their deviously opaque system that has substituted credit for money and debt for savings. The bankers have spread their credit-based system across the world by catering to basic human needs and ambition and greed; and while human needs can be satisfied, ambition and greed cannot-and the bankers’ least of all.

I have a bad feeling about what’s about to happen. The Great Depression is the closest that comes to mind. I, like most, was not alive during the 1930s when it happened. Nonetheless, what once was feared in private is now being discussed in public. It’s going to be bad. It’s going to make high school seem like fun.

THE UNITED STATES OF AMERICA THE NEXT ARGENTINA

This Time is Different: A Panoramic View of Eight Centuries of Financial Crises by University of Maryland‘s Carmen Reinhart and Harvard’s Kenneth Rogoff makes for perfect reading when flying between the US and Argentina.

There is perhaps no better analysis than Reinhart and Rogoff’s on the history of sovereign defaults; and, as such, Reinhart and Rogoff’s paper was ideal reading material when traveling between the US and Argentina , for the sovereign defaults that happened in the past to Argentina will soon be happening to the US .

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FDIC: 117 troubled banks, highest level since 2003

WASHINGTON (AP) – The number of troubled U.S. banks leaped to the highest level in about five years and bank profits plunged by 86 percent in the second quarter, as slumps in the housing and credit markets continued.

Federal Deposit Insurance Corp. data released Tuesday show 117 banks and thrifts were considered to be in trouble in the second quarter, up from 90 in the prior quarter and the biggest tally since mid-2003.

Read moreFDIC: 117 troubled banks, highest level since 2003

Moscow Dismisses Economic Threats

Attempts to isolate and punish Russia for its military actions in Georgia will backfire, given Russia’s economic muscle and key role in mediating international disputes, senior Russian officials said Friday.

Top officials in President George W. Bush’s administration have said Russia’s continued military presence in Georgia could jeopardize its membership in the Group of Eight and its bid to join the World Trade Organization, among other things.

“We are a big economy today,” said Vladislav Reznik, chairman of the State Duma Financial Markets Committee. “Whether they like it or not, we have to be reckoned with.”

Yevgeny Fyodorov, chairman of the Duma’s Economic Policy and Entrepreneurship Committee, was even more blunt.

“It’s a political bluff,” he said. “It’s an absolute certainty that the Americans won’t [impose any sanctions] because they themselves would suffer.”

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Backlog of US homes for sale is worst on record

The number of unsold homes on the market in the United States is at levels not seen for at least 40 years, and prices are continuing to slide, according to a disheartening new survey.

With participants throughout the financial system saying that the credit crisis cannot end until the US housing market stabilises, the monthly data from the National Association of Realtors (NAR) failed to show any unequivocal improvement.

The July figures did show an increase in the number of buyers, lured by the prospect of getting a long-term bargain. However, two out of every five sales are now distressed sales – such as foreclosed homes put on the market by banks – and desperate sellers are continuing to drop their prices.

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Inflation in consumer prices is actually running at over 13%!

It was when “official government-approved” inflation figures were released that I really lost it last week, as that particular rate of inflation is now a staggering 5.6%. This is – as you can probably tell by the look of panic and terror on my face – Terrible, Terrible News (TTN).

And when you look at what John Williams at shadowstats.com calculates as inflation, according to the time-honored method of actually looking at real prices instead of the “qualified estimates” that are used today, you will see that annual inflation in consumer prices is actually running at over 13%! Some of the worst in American history! We’re freaking doomed!

Read moreInflation in consumer prices is actually running at over 13%!